For decades America has enjoyed hegemony over the Middle East. That is about to end

AMERICA SEEMS to be stuck in the Middle East. It has no easy way out of its war with Iran. Yet the conflict, however it ends, will in fact mark something quite different: the moment when America pulls back from the region—in the sense that it finally relinquishes its hegemony there. For the first time since the great powers dismembered the Ottoman empire a century ago, the Middle East’s overarching order will no longer be imposed from afar. Will that herald an orgy of score-settling and violence, or a new beginning?

Since the first world war, the birthplace of the world’s three great monotheistic religions has suffered misery heaped upon misery. Arabs who had fought alongside the war’s victors felt betrayed when Britain took control of Iraq, Jordan and Palestine, and France helped itself to Lebanon and Syria. Nationalist leaders, including Gamal Abdel Nasser of Egypt, later fell under the spell of ruinous Soviet-inspired economic policies. The staggering abuse of human rights by dictators such as Saddam Hussein in Iraq and Hafez al-Assad in Syria was matched only by the violent fanaticism of the jihadists nourished by their sadistic rule.

After three wars, countless covert operations and seemingly endless rounds of diplomacy, America’s attempts to impose its designs have run their course. Like Britain, France and Russia, America will still be involved. It will occasionally use military force to pursue its interests, including for counter-terrorism. But it will abandon its role as architect.

The signs of America’s looming retrenchment are unmistakable—even as President Donald Trump uses the annual meeting of the UN to threaten Iran with “annihilation” for the umpteenth time. Two stand out. Earlier this month America declined to join its ally Saudi Arabia in striking the Houthis in Yemen, who are endangering shipping in the Red Sea. Instead it held talks behind the Saudis’ backs to spare American vessels from attack. That may seem like a detail, but when a superpower does deals with an insurgent militia, everyone understands it wants to cut its commitments.

The other sign is the expectation that America will limit its presence in the Middle East. In peacetime it has 30,000-40,000 troops on 19 bases, eight of which are permanent. However, the war has exposed how vulnerable they are to drones and cheap missiles. America has therefore been obliged to depend on aircraft-carriers and its Indian Ocean base on Diego Garcia. Some experts are arguing that it should concentrate its forces in a few places, such as Israel and Jordan.

This fits a broader realignment in which, as NBC reported this month, 25,000-40,000 American troops could be pulled out of Europe, too. The Trump administration is focused on the Americas. Securocrats want to equip America for the growing rivalry with China which, as this week’s Trump-Xi summit shows, teeters between wary co-existence and outright hostility. Neither goal is advanced by Middle Eastern wars that empty America’s arsenals and suck its forces out of Asia.

And to what end? Until 2020 America was an oil importer; today it is a colossal exporter. China, by contrast, has become Gulf producers’ biggest customer, and the Suez canal carries its goods to European markets. That makes China the great external beneficiary of America’s policies. But it is unlikely to try to step in as the Middle Eastern hegemon—not when it has seen the trillions of dollars and thousands of lives America has paid for the privilege.

Instead, three of the region’s countries have the heft to begin to fill the vacuum —and none of them is Arab. The most dangerous is Iran. If the regime in Tehran collapses, it will be in no position to rebuild its malign influence across Iraq, Syria and Lebanon. If, as is likely, it survives, it will hope to extract rents by controlling the Strait of Hormuz and bullying the Gulf states that it has attacked in the war. It will also try to rebuild its militias abroad. It may well restart work on a nuclear weapon, which will surely remain a red line for America. In all this, it may receive Russian backing.

The second regional power is Turkey, which has been quietly building closer relations with Arab countries. It has become the main supporter of the new government in Syria. With Iraq, it is working on trade routes, water supplies and countering Kurdish separatists. Last month it signed a security agreement with Pakistan and Saudi Arabia. Although it has championed the Muslim Brotherhood, it is more pragmatic than ideological, seeking business for its defence industry and construction firms.

The third is Israel, the dominant military and intelligence power. After the massacres of October 7th 2023 it sees itself as a modern Sparta, seeking to destroy any capability that might threaten it. Under the Abraham accords, it has forged close ties with the United Arab Emirates, even as the prospect of a deal with the Palestinians has faded.

These three countries are unlikely to live with each other in peace. Israel and Turkey are already at loggerheads in Syria. Israel and Iran have unfinished business over the war. Iran and Turkey are ancient imperial rivals.

The losers are the Arab states. Countries such as Iraq and Syria are still struggling to emerge from the ashes of civil war. Egypt, once the natural leader of the Arab world, devotes its energy to corruption and crushing opposition at home. The Gulf monarchies have embraced a prosperity agenda that seeks to anaesthetise ideology with economic growth. That is welcome, but their business model depends on American security. The rivalries of ultra-rich Qatar, Saudi Arabia and the UAE are radiating instability—perhaps America’s parting gift could be to help them work together.

Arabs have long yearned for a chance to recover lost glory from when they were a beacon of science and learning centuries ago. America’s retrenchment is about to give them a chance. But each departing hegemon has left a legacy of frustrated designs and unintended consequences. There remain deep hatreds and unsettled scores. The Middle East will struggle to prove the doubters wrong. ■

In a big serving of bad news, there are crumbs of comfort

LIKE MANY politicians, Donald Trump dreams of having his cake and eating it. In January he told his cabinet that he wanted to make houses more affordable, but also “to drive housing prices up for people that own their homes”. A government that could do both would be a true cakeistocracy. In the real world, only homeowners have been gorging: house prices are near record highs in many rich countries. Homebuyers have gone hungry, especially after post-covid inflation pushed up bond yields in 2022-23, making mortgages more expensive.

Now bond yields are rising again, and mortgage rates with them, as central banks raise interest rates to fight stubborn inflation while governments suffer from debt bloat and fiscal heartburn. The average rate on a new 30-year home loan in America is nudging 7%, up from a bit over 6% a year ago and nearly double what it was before the pandemic. Borrowing costs are rising in other wealthy countries, too. This time, however, the result may be lower house prices. This is something that, for all their cakeist proclivities, politicians should welcome.

The latest bout of interest-rate rises is not yet as acute as the previous one. But the housing market today is less resilient than it was. As variable-rate mortgages have spread across the rich world, the prospect of higher monthly payments may deter buyers, particularly now that households have mostly run down their covid-era savings. Meanwhile, the supply of houses is up a bit compared with the 2010s.

House prices are unlikely to fall much in nominal terms—they seldom do, outside deep recessions. Yet even a decline after adjusting for inflation could be a healthy digestive.

For a starter, if many people are unable to afford a home it weighs down the economy, especially in big cities that power 21st-century commerce. Although wage growth has comfortably outpaced inflation in America, the total cost of owning a home has grown even faster in recent years. Cheaper houses would be of particular benefit to first-time buyers, who often struggle to save enough for a down payment.

Falling prices may also reanimate the housing market. In the past few years it has frozen rigid in places where fixed-rate mortgages remain popular, as they are in America. Homeowners there have clung on to their rock-bottom mortgage fixes, meaning that fewer homes have changed hands in the past four years than at any point since the global financial crisis of 2007-09. This has curbed economic dynamism by making people less willing to move elsewhere to seek better jobs. In today’s economy homeowners may at last prefer to sell now rather than wait for prices to fall further.

The last benefit of a housing slump is to remind people that houses are a poor long-term investment. For decades governments have told households to treat their homes as saving vehicles, and in many countries lavished them with tax breaks. A house has virtues as an asset: investors can count on a premium on account of its illiquidity and it gives ordinary mortals access to financial leverage (setting aside the wild world of retail options trading).

Yet treating your house as a financial asset violates some basic tenets of investing, which becomes apparent when prices fall. It is undiversified (unless you are a serial landlord), related risks are hard to hedge (insurance gets you only so far) and returns are highly correlated with your future income (a downturn could bring down both your wages and the value of your property). Plus the more a family’s finances are tied up in a home, the greater the NIMBY temptation to block development, which could dilute its value.

The causes of the latest rise in interest rates—inflation, debt, geopolitical tensions—are nothing to cheer. Its effect on house prices may offer some cake crumbs of comfort. ■

The looming election will not bring the change the country needs

Brazil is blessed. Its proven reserves of oil are huge and growing. Within its borders the world’s largest river, the Amazon, flows through its greatest rainforest. More than half of Brazil’s electricity comes from hydropower. Its farmland is among the most productive on the planet; it will soon become the largest exporter of food, overtaking America. Beneath its soils lie vast deposits of rare-earth minerals. Its 220m people are enterprising, creative and diverse. Brazil’s vast potential has long been apparent. When the capital, Brasília, was built in the 1950s, its streets were laid out in the shape of an aeroplane, symbolising a country ready to take off.

Yet it is still stuck on the runway. Over the past half-century, rather than taking wing, Brazil’s economy has stagnated relative both to its peers and average global growth. The general election on October 4th offers little hope of a turnaround. The choice before Brazilians is bleak .

The incumbent left-wing president, Luiz Inácio Lula da Silva, known as Lula, faces Flávio Bolsonaro, the eldest son of his right-wing populist predecessor, Jair. Lula is about to turn 81, the same age Joe Biden was when he dropped his re-election bid in 2024. He is a democrat, and sound on the environment. But he has done precious little to unleash growth or restrain spending. He has failed to push economic reforms, bar a sales-tax simplification, and calls fiscal discipline “nonsense”. His government is on course to end the term with the largest public-debt-interest bill in a quarter of a century.

The junior Bolsonaro, who is only 45, denies that humans are causing climate change, questions the integrity of voting machines and hints that he will not honour the result if Lula wins. He has been investigated for alleged ties to violent criminals, which he denies. His main policy is to pardon his father, who in September 2025 was handed a 27-year sentence for plotting a coup—including a plan to assassinate Lula—after losing his re-election bid in 2022.

The pair are tied in the polls, with Flávio on the rise. Neither man is credible when it comes to tackling Brazil’s two biggest problems: entrenched corruption and the relentless expansion of public spending. Without a sound plan to shrink public debt relative to GDP, the risk of a debt-interest spiral will keep borrowing costs high, starving the economy of the capital it needs to raise productivity and growth. Ever-expanding government spending drives inflation, forcing the central bank to keep interest rates high. Shrinking that debt and lowering rates will require deep cuts to government spending, 92% of which is mandated either by law or by Brazil’s absurdly overprescriptive constitution.

In the absence of stronger growth, the jockeying of political elites to control public resources makes many ordinary Brazilians feel hopeless, an advantage for politicians who operate at the extremes. Corruption also undermines the institutions that provide Brazil’s checks and balances. A few weeks after Jair’s conviction, a scandal known as Banco Master erupted and quickly engulfed the Supreme Court. Police investigations have so far shown that five of the court’s 11 justices had connections to Daniel Vorcaro, the playboy mastermind behind it. This feeds public cynicism, making it easier for Brazilians to overlook Jair’s conviction for coup-plotting and back his son.

The candidate whose ideas match the moment most closely is Renan Santos, a hard-charging libertarian. He wants to enact deep structural reform and spending cuts to transform Brazil into a great power. But neither he nor any other outsider has made headway against the opposing political machines of Lula and Mr Bolsonaro. The country is drifting towards a predictable crisis, but most of its political elite are too comfortable with the way things are to change course.

And so Brazil’s glittering future will be on hold for at least four more years. It is not quite dead. Despite the corruption and insular thinking of pork-barrel politicians, many of the country’s vital institutions still work. The federal police have done remarkably well to investigate the Vorcaro fraud, and the coup plot before that; the press remains ferocious, independent and relatively well funded; the diplomatic corps is respected around the world. Even the Supreme Court, despite its abundant flaws, was able to send a coup-monger to jail.

The most likely trigger for a crisis would be a sharp acceleration in the level of debt and borrowing costs leading to a worsening economy. That is a vicious circle, familiar to older Brazilians, which could lead to falls in the value of the real, yet more inflation and a painful recession. Perhaps only then would Brazilians turn to someone prepared to make the unpopular case that sacrifices will be needed for a future in which a blessed country is never again condemned to choose between two such dismal candidates. ■

Millions of operations should be scrapped

SIX IN TEN Britons have surgery at some point. So do lots of Americans, at a cost of perhaps $500bn a year, a third of all spending on adults in the world’s biggest health-care market. Plenty of these procedures save lives, by removing tumours, transplanting new organs or mending broken ones. Many others make life better, say by restoring vision (cataract extraction) or hearing (tympanoplasty, for example). Yet a growing body of evidence suggests millions of surgeries performed each year are unnecessary—and, given the risk of complications when a person is sliced open, often worse than useless.

Of ten common orthopaedic procedures, a specialty which accounts for a quarter of all operations in Britain and a similar share in America, only three—for carpal tunnel and total replacement of knees and hips—offer outcomes that are clearly superior to non-operative care. Six, including common ones like lumbar-spine decompression, are no better than drugs, physiotherapy or just Father Time. Similarly, roughly two-thirds of excised appendices could have been fixed with antibiotics and many prostates, around 100,000 of which are operated on in Europe each year, are better off with watchful waiting. T he list goes on .

For patients, needless surgery is a cause of physical pain and, especially in America, financial stress. For stretched health-care systems in ageing rich countries, it is a terrible waste of resources. A recent reduction in referrals for shoulder operations (just one of the six useless orthopaedic procedures) is saving England’s National Health Service (NHS) around £100m ($134m) a year, or 1% of its total surgical budget.

The main reason for the persistence of useless procedures is a dearth of clinical data on whether they work. Surgeons liken asking about this to wondering whether parachutes are useful when leaping out of a plane. If the patient gets better, the parachute is assumed to have been a success. Regulators do not require proof that it actually was, as they do with new drugs. Individual surgeons have neither the incentive nor the means to check for themselves. Contrast that with drugmakers, which bankroll big, costly randomised trials in the hope of making lots of money from pills that are proven effective.

Governments can start to correct this failure by running trials themselves. The NHS has already begun doing this, with some success. By testing procedures across many hospitals around Britain, it avoids the charge of impugning the skill of any individual surgeon or, conversely, of missing out the truly skilful. It and other public health-care systems should conduct more such exercises.

Once the results are in, it will be easier for payers, be they public systems or private insurers, to refuse to cover procedures that do not benefit patients. This will not only save money. Surgeons freed from performing unnecessary shoulder and back operations could spend more time on knees, hips and carpal tunnels. In systems where care is rationed, like the NHS, this would have the welcome effect of trimming waiting lists. In July 6.2m patients in England were awaiting non-urgent specialist treatment, a category that includes lots of surgeries.

Unlearning decades of modern medical practice will not come easily to health-care systems. It will be harder still for the surgeons. Like all medics, they believe that they are doing right by their patients. But if your only tool is a scalpel, everything looks ripe for cutting.

Surgeons must therefore be taught, starting in medical school and then by their mentors in what remains an apprenticeship-based craft, to present patients with a range of options and choose the best one together rather than dictating it from on high. Such “shared decision-making” has become common among clinicians but remains alien to many surgeons. It is in everyone’s interest to make it standard. ■

The perils of machine-made prose

If The Economist had just two loyalties, they might well be to good prose and creative destruction. Those seldom previously came into conflict—until artificial-intelligence models began writing. Now, AI text is winning literary awards, occupying op-ed pages and, as we report this week, filling the mouths of politicians . One in ten words spoken in Britain’s parliamentary debates, and one in seven in America’s House of Representatives, are probably drafted by AI.

When it comes to the written word, no writer is a neutral party. This newspaper has applauded technological progress for nearly two centuries. It would be churlish to turn Luddite only now, once the wolves of automation have turned up at our own door. And yet. Both writers and readers should be wary of passing the pen to AI.

Admittedly, in some sorts of writing an AI takeover would be welcome: customer-service complaints, say, or technical write-ups where clarity is all. What matters in such cases is disclosing the use of AI and making sure that the human being whose name is on the page still takes responsibility. Writers of all sorts would be doing their readers a disservice if they did not use AI models for research, proofreading and, when appropriate, feedback.

Elsewhere, however—in novels, speeches and even news articles—surrendering human authorship would be a mistake. For the time being, the most popular gripe about AI writing is the clumsiness of the prose itself. That complaint rests on shaky foundations. The Luddites grumbled, once, about the poor workmanship of machine-made stockings. But then the stockings got better. Doubtless, AI sentences will, too.

Any serious case against AI writing must rest, therefore, on the ways that words are not stockings: how they carry meaning and significance beyond what ends up on the page. The act of writing tends to be painful, even for many of those who do it for a living. But much of that pain is really the pain of thinking, of crystallising thoughts in text. Sidestepping that is a sure-fire route to less rigorous, let alone original, human thought. Students who outsource their essays to Claude may lose the habit of reasoning. Politicians who let AI craft their arguments may be less mindful of their consequences.

Another big concern is with the consumers of the written word—or readers, as they are better known. AI writing breaks the expectations of a literate culture. Human text takes longer to write than to read. This offers a certain guarantee if not of quality—the world still swims in dire prose—then at least of effort. Someone, somewhere, thought something was worth saying. Economists call that a costly signal.

Whatever French theorists have to say about the death of the author, readers still want to know that a person wrote the words in front of them. Take poetry. Even a few years ago, when AI was less powerful, researchers were already finding that many people, in blind tests of AI- and human-written poetry, preferred the robo-rhymes. But making sense of a poem relies on the promise that a human wrote it, and thus that it meant something to someone.

Even when AI is not used, it can sully readers’ experiences. They may stumble on a turn of phrase that sounds suspiciously machine-made, and give up on reading the rest of the text. Or the proliferation of AI-generated fakery may make them distrust real news. Polluting the information environment like that is what economists call an externality.

Technology will remake many of these norms. AI offers immense opportunities, too, many of which no one can yet fully grasp. Yet liberal societies negotiate these momentous changes not by passively surrendering to technologies, but by adapting to them. The printing press set off religious wars in early-modern Europe. In the 1930s the radio heralded fascism. Few associate either with such high drama today. Societies are grappling with plenty of other technologies that pose risks, such as fattier foods and more potent illegal drugs.

So it would be hubristic to try to chart out exactly how societies ought in future to approach the use of AI in writing. But any writer knows to start with a first draft. This is ours. ■

America will struggle to make the technology safe while staying ahead of China

TWO THINGS should make you consider what artificial intelligence could mean for humanity. One is that those working with the technology are warning about it leading to a catastrophe—human extinction, even. The other is how technological innovation is aggravating the destruction of Ukraine. These things offer conflicting lessons for whether AI’s rapid progress can or should be slowed down.

For years, leading AI bosses have signalled that their technology could become lethal. Bots may become brainy enough to outwit their creators before they are “aligned” with humanity’s goals and ethics. Bad people could use AI to wreak havoc. These warnings have become more credible as AI agents have escaped their sandboxes during testing, co-ordinated with one another and hacked organisations, including an AI lab itself. Anthropic, one model-maker, has caught people using its models for malign ends, from Mali’s intelligence services getting a mass-surveillance system built, to Houthi rebels in Yemen thought to be writing software for ballistic missiles.

Following the recent resignation of a researcher at Anthropic, public fear of AI doom has spread. In a post viewed more than 170m times, he said that it and OpenAI were “gambling with our lives”. AI is rapidly growing more potent, for good and ill. In May prediction markets priced a less-than-one-third chance of AI solving any millennium prize maths problem before 2030; on September 8th OpenAI said it had solved one of them, causing angst among mathematicians . On September 12th Sam Altman and Elon Musk, two AI titans, endorsed a call by Dario Amodei, the head of Anthropic, to “pace the frontier”, ie, to slow AI’s progress. Those in favour of a slowdown include Bernie Sanders, a left-wing senator, and Steve Bannon, a right-wing populist.

Those opposed include President Donald Trump, whose administration fears more than anything losing America’s lead in AI to China, its only serious rival. Scott Bessent, America’s treasury secretary, has said that if China gains the advantage: “Nothing else would matter.”

As evidence, Mr Bessent could point to Ukraine, where each step in a technological arms race has a swift effect. As we report , Russia has ruthlessly deployed its latest kamikaze drones to bombard civilian infrastructure. As well as being faster, its drones now use one another as a “mesh” communications network to relay information and commands. Soon, Russia will have its own version of Mr Musk’s Starlink satellite network, making its long-range strikes more accurate.

It is the latest demonstration of how even a small technological edge matters in wartime. Ukraine’s own battlefield-drone innovation helped it repel waves of Russian attacks. Ukraine can strike deep into Russia with long-range drones. Both sides are working on swarming drones that will be able to operate more autonomously as a single adaptive system.

The war shows how technology translates into hard power—and that Russia uses it without regard to the old rules or norms of combat. Even if America did not fear a similar hot war with China, a lead in AI would give its main geopolitical rival dominance in hacking, spying and hybrid warfare. Those are not capabilities which America should cede to an authoritarian state with an interest in stamping out liberal ideas.

A pause could therefore work only if China signed up to it, too. Mr Trump plans to host Xi Jinping, China’s president, at the White House on September 24th. But even were Mr Trump seeking to slow down, it is unlikely that Mr Xi would agree to the plan Mr Amodei envisages, because that would freeze Chinese AI in second place . And neither side could risk the other breaching a pact by racing ahead.

For a deal, each would need to verify compliance, as with arms control during the cold war. America, Britain and the Soviet Union banned atmospheric nuclear tests in 1963 because they could detect them; underground tests went on for three more decades until they, too, could be monitored. Alas, though data centres are visible, no verifiable method exists to see inside them. Infrastructure training a superintelligence could masquerade as chatbots answering everyday queries.

The options for a deal on AI safety are therefore limited; but they do exist. More transparency would help. Both sides should pledge to disclose and investigate safety incidents at their labs, using domestic law. Each could signal that they care about safety to build confidence, paving the way for the other side to take precautions. They should also press each other to improve labs’ cyber-security so that AI agents cannot so easily escape sandboxes—and to ensure that, if one does, its lab is financially liable.

Most important is the challenge of ensuring that AI operates in humans’ interests. America and China have very different values, but both know that being ahead is no good if it wipes out humanity. They should promise to share work on the elements of alignment that do not confer a competitive advantage. Knowledge of the best evaluation methods and containment techniques is a global public good. If one side makes an important safety breakthrough, hoarding it makes no sense.

Some dismiss the recent wave of doomerism as a marketing ploy by AI companies, or even an attempt to suppress competition. Yet AI progress is fast enough, the safety incidents hair-raising enough, and the warnings of the companies long-standing enough to be taken seriously. AI does not have to kill off every human to bring about a catastrophe. An OpenAI agent swarm targeted a technology company; what if next time it attacks an electrical grid or a weapons system? It might even be intelligent enough to evade attempts to shut it down.

The world must urgently try to forestall this risk. Yet democracies must also avoid losing control to authoritarians. These are difficult and conflicting tasks. They could ultimately lead to war. The stakes could hardly be higher. ■

Rapidly changing technology, wielded by a lawless enemy, may be the future of war

HOW FAST fortunes can shift in war. Only a few months ago Russia seemed stuck. It was unable to advance on the front line despite suffering over 1,000 casualties a day, even as Ukrainian strikes deep within enemy territory were piling pressure on Vladimir Putin. In recent weeks, however, the dynamic has changed. Russia is exploiting new technology and extra production to hit Ukrainian cities with savage ferocity in a bid to make life there unbearable. Ukraine is not about to collapse—its front line remains strong—but European allies need to redouble their support. In this war they are glimpsing the future, and Ukraine is where their defence must begin.

As we set out in our reporting, Russia has sharply intensified its air war against Ukraine’s cities, border crossings and infrastructure far from the front. This is made possible by new technology, including a switch from propeller- to jet-powered Shahed drones which will need interceptor missiles to counter them. Using a “mesh” network of radio relays between drones, Russia can hunt moving targets such as railways, not just home in blindly on set co-ordinates. It is also building its own version of the American Starlink satellite system, which threatens to give it a big advantage in deep strikes in 2027.

Russia’s second strength is volume. Its production target for jet-Shaheds this year is said to be 24,000. By one estimate, it can launch over a hundred of its ballistic missiles each month. Given that Ukraine and its allies are critically short of air defences, including Patriot interceptors, that is a grave problem.

These new weapons will not suddenly bring about a Russian victory. The direct military benefit from blowing up shopping malls, petrol stations, trains and other civilian targets is marginal. But Mr Putin believes that, if he sows enough fear, saps public morale and thumps an already-slumping economy, he will break his victims’ resolve. It does not help that Ukrainian politics has soured amid gripes that the president, Volodymyr Zelensky, has centralised power and that corruption is rife. If Mr Putin is right, and people flee from Ukraine or money runs short, that will eventually weigh on the front line, too.

Ukraine, and its Western backers, must prove him wrong. Unfortunately, that will be hard—and probably impossible before the punishing winter adds to Ukrainians’ burden. Some measures are technically obvious, but politically hard. America’s government and Elon Musk should let Ukraine expand the use of Starlink over western Russia. That could help destroy Russia’s mobile missile-launchers. But few expect them to agree, owing to an exaggerated fear of escalation.

The priority is to get more European money to Ukraine faster. Promises this year from NATO countries to give Ukraine $60bn in bilateral military aid are unfulfilled. Ukraine’s generals talk of $27bn in budgetary shortfalls, even as they plan to launch 10m drones this year. The EU’s promise to supply €90bn ($103bn) is broadly on track, but more should be disbursed early.

The money is needed to prop up the economy. But it is also vital to speed up the pace of Ukraine’s military innovations and to help its burgeoning arms industry scale them up fast. With Western help, it may in time develop its own supply of cheap missiles and interceptors.

Europe has already done a lot to back Ukraine, partly by stepping in when President Donald Trump withdrew America’s financial support. To ask for more may seem unwise, especially when some populist-right parties are calling for funding to be curbed. However, the moral case for supporting Ukraine remains strong, and the selfish one has never been more compelling. Mr Putin believes Russia is at war with Europe. His armies are already well-practised in asymmetric drone warfare, and they are learning all the time. Europe, by contrast, is unprepared. It must learn from Ukraine by backing it. ■

Governments are still, alas, asleep

Finance does not offer many sure bets. One, for the past few decades, has been that most rich-world sovereign bonds are safe. Those lending cash to all but the diciest governments could feel confident they would get it back, plus interest at a rate set by a free market, and without the principal being inflated away. Bonds also helpfully offset the volatility of stocks by gaining value during recessions. Today, as public debts mount, all that is under threat.

Since 2000 net government debt in America and Britain has tripled as a share of GDP. In France and Japan, it has doubled. The pile keeps growing: seldom outside wartime or recessions have rich-world deficits been higher than they are today.

In the 2010s, when borrowing was cheap, even big debts looked manageable. Today, yields are high and rising fast, most recently in response to the expectation that the war in Iran will force up interest rates. Sure enough on September 16th the Federal Reserve raised rates, becoming the fifth major rich-world central bank to do so this year. In expectation of monetary tightening to come, the ten-year Treasury yield has exceeded 5%, a threshold last crossed for any length of time two decades ago. The spreads on French bonds are not far off their levels during the European sovereign-debt crisis. After lying dormant for decades, yields are surging even in Japan. And the less said about Britain’s gilts, the better.

In October 2025 The Economist calculated that if America and Britain had to immediately refinance all their debts at prevailing five-year bond yields, they would each need higher taxes or spending cuts worth 2.3% of GDP just to stop debt from rising as a share of the economy. Today, with yields higher, the number in America has more than doubled, to 4.7%. In Britain it has risen to 2.7% even though the government has tightened its belt. France’s adjustment stands at 3.9% of GDP, up from 3.1% a year ago.

Fortunately, in the real world governments need not refinance everything all at once. However, they have been shifting towards shorter-term debt, meaning that higher interest rates feed through to budgets more quickly than they did. Issuing short is alluring because it is usually cheaper. There is also less demand for long-term debt these days, because the defined-benefit pension funds that have long hungered for it are shrinking. But short-term debt and a volatile bond market make for an inflammable mix.

It is not yet too late to solve the problem. Like other rich countries, Switzerland has an ageing population. But it is in fine fiscal fettle, with low debt, little inflation and bond yields that have correspondingly stayed low. Motivated governments have cut big deficits before. Sweden vanquished 11% deficits in the 1990s, splitting the job between spending cuts, tax rises and supply-side reforms to boost growth. “Be Swiss or Scandi” may not be realistic advice, but even “Be Greek” would do. Greece has pulled debt-to-GDP down sharply. This summer it issued bonds with lower yields than France’s.

The trouble is that the next few years’ politics are perilous. In France big-spending populists are looking strong ahead of a presidential election in 2027. In America, which elects a new president in 2028, Democrats and Republicans are vying to promise ever-bigger cheques (literally, in the case of the $5,000 payouts Donald Trump proposed as a reward if Republicans win Congress in the midterms). Britain and Germany, each with its own fiscally lax populists, go to the polls in 2029.

Politicians may well hope that surging growth from an artificial-intelligence boom will miraculously rescue them from painful budget negotiations. South Korea’s government projects that taxes from chipmaking proceeds will all but eliminate its budget deficit next year. But the productivity growth required to tame deficits is well above what most economists see as plausible, and in any case higher growth also raises interest rates.

What happens next? Among big debtors only Britain, which faced a market revolt after Liz Truss’s disastrous mini-budget in 2022, has a (semi-serious) plan to tighten. Expect more Truss-like moments elsewhere. Wise governments will respond with sounder budgeting; louche ones with financial shenanigans. Scott Bessent, America’s treasury secretary, began directly intervening in the Treasury market in August in a futile attempt to suppress yields.

In a recession, more serious trouble could come. It is not inevitable that bond yields fall in downturns. That often fails to happen in emerging markets; and it didn’t in the rich world during the 1970s. Even a smaller-than-usual decline in yields would worsen the economic pain and compound the hit to budgets from higher unemployment. Bond markets, once havens, will have become danger zones. ■

Organised crime can be beaten, given political will

Organised crime is “the most immediate threat” to South Africa’s democracy, society and economy, says Cyril Ramaphosa, the president. Business leaders say it worries them more than any other issue, even power cuts. Over the past year, a public inquiry has revealed staggering collusion between gangs, officials and senior police. By one estimate, South Africa is the seventh-most vulnerable country in the world to mafia predation. Only Congo, Myanmar and a few Latin American states do worse.

South Africa has long had a reputation for violent crime. It has also been a hub for trafficking drugs, people and endangered wildlife. But a number of trends have made a grim situation grimmer. One is the growth of illicit forms of businesses that are normally legal. Most cigarettes sold in South Africa are bootlegged, as are huge volumes of booze and petrol; and illegal mining knocked 0.8% off recorded GDP in 2024. Another is the rise of extortion mafias, which demand cash for not sabotaging building projects, setting fire to buses or murdering teachers. A third trend is that gangs have infiltrated the state, like the bloodsucking ticks that give bush hikers a fever.

The good news is that South Africa is fighting back. It has independent courts, a lively civil society, punchy media and voters who are utterly sick of crime. Mr Ramaphosa, who came to power promising to clean up after a gangster-coddling predecessor, Jacob Zuma, wants to leave a decent legacy. So the country has a chance to avoid mafia-state status.

Evidence from elsewhere suggests that it pays to attack criminal structures from the top. That means sacking tainted prosecutors and senior cops, while targeting criminal kingpins. In the past year or so the police minister, the head and deputy head of the police and the bosses of two elite units that supposedly tackle organised crime have all been removed. That purge should gather pace. Officials who still have their jobs must disclose their finances to show they have no links to gangs, or resign. Cities with a record of clean governance, such as Cape Town, should be allowed more policing powers. Reformers should study Nuevo León, a Mexican state that built a new police force from scratch, replacing one infiltrated by drug gangs; and “Hidden Carbon”, a Brazilian operation to bust money-laundering networks.

Prosecutors should focus on putting the worst bosses away. They can build on past successes. South Africa’s once-sick tax authority has recovered under Mr Ramaphosa. In the 2000s an elite crime-busting unit known as “the Scorpions” collared syndicate bosses and helped convict senior officials over aniffy arms deal. Prosecutors should draw on financial and technical help from the private sector.

South Africa could also do with an independent gangbusting agency. It would need protection from political interference to avoid the fate of the Scorpions, who were disbanded after investigating Mr Zuma and his friends, or of CICIG, a popular UN-backed body that probed organised crime in Guatemala but was shut down by President Jimmy Morales. One option would be to give such an agency constitutional protection, so that only a parliamentary supermajority could abolish it.

The biggest obstacle to beating South Africa’s gangsters is that too many politicians are in cahoots with them, steering dodgy public contracts their way, pocketing kickbacks and borrowing their muscle to settle political disputes. Mr Ramaphosa must find ways to take on influential but dirty actors inside his own party, the ruling African National Congress. Since he rarely acts decisively unless he must, CEOs and the leaders of other parties in the coalition government should press him to do so before he gives up the party leadership.

If he fails, calamity beckons. Nearly 75% of South Africans say they would favour a strongman leader who could provide jobs and cut crime. They may be tempted to elect someone like Nayib Bukele, the gangbusting autocrat of El Salvador, who has locked up tens of thousands of suspects without proper trials. South Africa needs something better: the rule of law. ■

Parties come to office hopelessly unprepared

Nobody could mistake Ben Delo or Christopher Harborne for saints. Both made fortunes in cryptocurrencies. In 2022 Mr Delo was convicted in America of failing to implement money-laundering controls—and later pardoned by President Donald Trump. Both are keener on Reform uk, a populist right-wing party led by Nigel Farage, than any sensible person should be. Yet, by promising unheard-of quantities of money to Reform, both have done their country a good turn.

Their donations, each of £36m ($48m), have caused a tizzy in Westminster. Other parties are crying corruption and threatening to block the gifts. Parliament had already been considering proposals to cap donations at £100,000 per person per year. Any new rules could be made retroactive, forcing Reform to return most of the dosh.

The worriers make three intertwined arguments. They claim that Reform habitually bends and even breaks the rules; that the cash gives the party an unfair advantage; and that big money harms politics. Only one of these claims holds water.

The whiff of impropriety around Reform is real. In early September the party suspended two senior figures after they were filmed apparently encouraging a would-be donor to break the rules on giving. Mr Farage was filmed slurping down oysters while others discussed the rule-breaking. (He insists he was not listening properly, which is hardly much of a defence.) Parliament and the police are investigating other donations.

Rules must be followed, including those on donations from abroad. But people who care about the health of British politics should not try to restrict the flow of legal money into it. Britain suffers not from an excess of political donations, but from a severe lack of them.

One reason not to block money is that, after a certain point, cash cannot simply buy victory in elections. And even if it could, restrictions on campaign spending in Britain are a leveller. In the case of Reform, the windfall could grow poisonous as factions already at war within the party struggle for a share of the spoils.

The other reason is that British politics needs money. Last year the Donkey Sanctuary, a charity in Devon that cares for down-on-their-luck equines, received more than every major political party combined. So did the Royal Opera House. Or compare Britain with America. Reform’s £72m windfall is worth less than the money spent on this year’s Republican Senate primary election in Texas.

Impoverished British parties are barely able to prepare for power. The victor of a general election wins control of more than £1.3trn in public spending; those vying for this prize do so on a shoestring. Most shadow ministers rely on teams of two or three staffers to put together a programme for government. Reform boasts that it will use its new infusion of cash to double the number of policy researchers it has—to a grand total of 20. If so, it would be a start.

Although British voters prefer the asses in Devon to the asses in Westminster, their blanket cynicism about politics is unwarranted. Britons seem to assume that any donation must be corrupt, because why else would the donor hand over their cash? But if giving to political parties is stigmatised as spivvy, only spivs will give. Politics would benefit from a wider pool of public-spirited donors to fund the lawyers and wonks who prepare parties for office.

Restricting donations would make this problem worse. And doing so retroactively would discredit the rule of law. When Parliament has previously made past actions unlawful, it was to pursue elderly Nazis and Yugoslav war criminals. Turning the election rulebook into a tool for the establishment to keep insurgents out really would be a gift to Mr Farage.

If you are an opponent of Reform, you should shun the donkeys this year and pick the party you want to win. Instead of reaching for the statute book, with one hand hold your nose and with the other reach for your chequebook. ■

Islam poses no serious danger. But Islamism and the fear of Islam do

PANIC ABOUT Islam in Europe is spreading. In several European countries half the population now thinks it is incompatible with Western values. On September 6th the populist-right Alternative for Germany (AfD) won 44% of the vote in Saxony-Anhalt , its largest state-election tally yet, warning about “Islamisation” and promising forced deportations. The same weekend in Britain hundreds of balaclava-clad thugs occupied Dover, chanting “Stop the boats” and “Christ is King”. In France Marine Le Pen's call to ban Islamic headscarves from public places is backed by 60% of voters.

The obsession has also taken root in America. The fear is less of terrorists, as it was after September 11th 2001, than of an Islamic plot to take over Europe from within. Members of the Trump administration warn of “civilisational erasure”.

This perception is harming transatlantic relations. It is also wrong. Europe faces no Islamic takeover, no mass radicalisation of Muslims and no erasure of its culture. As our reporting shows , it does not have “no-go zones”, sharia is not creeping into national law and nowhere is a demographic “great replacement” under way.

The real danger to Europe is different: of extremism fuelled by Islamism (the belief that the state should enforce Islamic principles) and by social-media-driven right-wing paranoia. The left makes this worse by denying the modest but real threats Islamism poses. So do politicians in the centre, by keeping quiet lest they attract accusations of racism. This dynamic could indeed harm Europe’s liberal democracies—not by replacing them with a caliphate, but by slowing integration and favouring policies that would do lasting harm to their freedoms.

The most extreme fears are easily debunked. Even after record migration from majority-Muslim countries, Muslims now make up just 6% of Europe’s population of well over 500m. Although new arrivals typically have more children than the native-born do, fertility rates tend to converge within two generations. That is a long way from civilisational erasure.

In fact, most Muslim immigrants want to get on in their new home, not impose on it a version of the societies they have just left. Their children tend to do better than their parents at school. In Britain 67% of Bangladeshis who sat standard tests in 2021 were enrolled in university by age 19, compared with 38% of white Britons. Many Muslims are involved in mainstream politics: witness Britain’s home secretary and London’s mayor. In important ways Muslim attitudes can resemble those of other Europeans. In polling we commissioned among British Muslims, we found little resistance to women working.

What, then, is setting so many Europeans against Islam? Plenty of Muslims hold illiberal views—we report in this issue on the killing of an openly gay imam in South Africa. In Britain, our polling finds , 52% of Muslims think homosexuality is wrong, and young Muslims (41% of under-35s) are more likely than their elders (25%) to believe violence can be justified if someone insults the prophet.

Holding socially conservative views does not in itself make people a threat—some of Europe’s defenders on the right are just as anti-gay as the Muslims they decry. But some of these attitudes should trouble liberals who have long assumed that open societies eventually make people more tolerant. And if the state is too pusillanimous to confront wrongs committed by minorities, as when gangs of Muslim men abused young girls in several English cities, it rightly causes outrage.

Just as important is the conflation of Islam, a religion, with Islamism, a political ideology. Islam isn’t a problem; Islamism can be. Unlike the jihadis of 9/11, most Islamists do not advocate violence. But many practise “entryism”—infiltrating democratic institutions to promote an illiberal agenda. Well-connected Islamist groups might lobby for sweeping hate-speech laws or against counter-extremism programmes. The main danger of entryism is local. Small, well-organised networks can capture a school, a mosque, a council or a charity and use such institutions to discourage integration and impose religious conformity on other Muslims who live nearby.

Concern about these non-violent Islamists has grown among Europe’s security services. In France authorities fret about covert entryism by the Muslim Brotherhood. An official report released last year warned that Islamism could, in time, threaten secular rules and women’s rights. But that seems unlikely. France’s interior ministry estimated that just 139 of 2,800 Muslim places of worship were linked to the Brotherhood.

Instead, the main victims are other Muslims. Half of the 12 council wards in Blackburn, in northern England, are over 60% Muslim; two are over 80%. In such areas women can feel pressure to let sharia councils govern their family lives. Gay and liberal Muslims face intimidation. Non-conformist Muslims complain that Western authorities—scared of being seen as racist—do not extend the same protections to them as they do to non-Muslim citizens.

There is broader harm, too. Islamists stir up antisemitism, not least over Gaza. They demand curbs on free speech about their beliefs. They scare politicians, comedians, academics and journalists into self-censorship. They can bully schools, student unions, charities and councils.

What turns these local threats into a continental danger is how they are exploited. It suits Islamists to claim that any criticism of their political project is an attack on Islam itself. The populist left, including Unsubmissive France and the Greens in Britain, tends to treat questions about migration, crime or Islamism as racist.

And the populist right often whips up fear by claiming that all Muslims pose a threat and accusing the state of a “woke cover-up” and “two-tier treatment”. Few have been more vehement than Elon Musk, who has used his social-media platform to shape views of Islam around the world and to boost Europe’s anti-Muslim right, from the AfD to Tommy Robinson, a British agitator whom we feature in a three-part podcast series starting this weekend.

The populist right’s remedies are as illiberal as the Islamists they claim to be protecting Europe from. Promises of mass deportation, segregation and dress bans all terrify Muslims, inhibiting integration and driving them into the arms of extremists. Any country that enacted such policies would find that the hatred they unleashed would cause enduring damage.

That is why Europe’s mainstream politicians need to offer an alternative. Violence and threats of it should be prosecuted. But there should be no taboos for the sake of cultural sensitivity. Free speech is not the enemy of tolerance but its precondition. Entryism should be called out, as should bigotry. Governments nervous about collecting, or releasing, data leave a vacuum to be filled by speculative hyperbole.

Tackling all this will not be easy or quick, but there is hope. Europe’s Muslims are assimilating, as did earlier waves of Catholic, Jewish and Caribbean migrants in the countries where they settled. The arrival of all those previous groups sparked moral panics about whether they would ever fit in. All eventually found a place. Muslims will, too—if division and paranoia are not allowed to get in the way. ■

Republicans are proving that party unity is overrated

As the midterms approach, America’s two main parties are conducting opposite experiments. Republicans march in lockstep behind Donald Trump, who summoned his troops to Dallas this week to celebrate his awesomeness. (He also offered every American adult a $5,000 cheque if Republicans win.) Democrats, by contrast, are bickering over their leaders, strategy and ideology. The party has no standard-bearer, while socialists who once flitted around its edge are trying to become its heart. On the campaign trail, Republican discipline will beat Democratic chaos. Or so Republicans hope.

But political parties are not armies; their members’ duty is not merely to obey. They should debate, adapt and attract talent. They should be open to new leaders and new ideas. That is especially true after the political transformation wrought by Mr Trump. By those measures the unified Republican Party looks increasingly unhealthy, whereas the disunited Democrats may be engaged in the messy work of renewal.

Republican unity has come at a steep price. In the decade since Mr Trump was first elected president, he has remade the party in his image. Its politicians are judged not by their principles, effectiveness or electoral appeal, but by their fealty to the president. Those who bend the knee vigorously, such as Ken Paxton , the scandal-plagued Texas attorney-general, are rewarded with endorsements. Those displaying even an iota of independence, such as John Cornyn or Bill Cassidy, are ostracised or forced from office. Even as Mr Trump builds monuments to himself and tramples democratic (and conservative) norms, the Republican-led Congress has shown little appetite to constrain him.

That is why the party’s unity is becoming an electoral liability. Mr Trump has a net approval rating of -26, roughly five points worse than Joe Biden’s lowest point. He dismisses affordability—voters’ foremost concern—as a “made-up” term, while his tariffs and war with Iran have raised prices. Our analysis suggests that many of his new supporters in 2024 intend to back Democrats in the midterms. In healthier parties, candidates facing difficult elections would put distance between themselves and an unpopular leader. Mr Trump has made that almost impossible. In Dallas they had to pay homage to a man whose super PAC controls more than $400m—the largest political war chest on the right.

By contrast, the Democrats’ lack of unity has advantages. True, the headlines are grabbed by the Democratic Socialists of America (DSA), left-wing insurgents trying to reshape the party . More DSA-backed candidates than ever look set to enter Congress, and the movement has designs on the presidential contest in 2028. Understandably that has unnerved moderates. The DSA wants to replace capitalism, abolish the police and prison system and defund the Pentagon. Republicans warn of “extremists who will turn [America] into the next Cuba”.

They are right that the DSA is extreme. However, it is unlikely to dominate the Democratic Party. Its candidates mostly prevail in safe blue districts. Their insurgency is a symptom of broader frustration with a tired party establishment that ignored Mr Biden’s decline in 2024. Democrats are demanding generational change and are increasingly willing to ignore endorsements from party grandees. It is unfortunate that the DSA has benefited but with luck stronger, moderate leaders will emerge from the discord, which is a necessary part of renewal.

Happily, the energy is not confined to the activist left. Across the party, a new generation of candidates is bypassing the Democratic establishment and appealing directly to voters. The Democratic National Committee struggles to raise money, yet donors are flocking to individual campaigns. Much of the party’s hope of winning Republican-held Senate seats rests on candidates such as Josh Turek in Iowa and James Talarico in Texas. Mr Talarico won his primary by marrying leftish economics with constant talk about Christian values. Mr Turek has repeatedly won in a heavily Republican district by running as a pragmatist focused on working-class concerns. He recently ruled out campaigning with Kamala Harris. It is hard to imagine Republican candidates enjoying such freedom from Mr Trump.

The president has transformed American politics. If Democrats hope to replace him, they cannot simply promise to restore the status quo. They need new leaders, new ideas and a new generation willing to challenge orthodoxies. That is messy, and at times embarrassing. But parties that never argue become stagnant—as today’s Republicans show. Democrats are undertaking the difficult work of renewal. Today that looks like weakness. In time it may be seen as resilience. ■

A stunning success for the AfD in Saxony-Anhalt

For Germany, it is a red alert . On September 6th the Alternative for Germany (AfD) won 44% of the vote in Saxony-Anhalt. A party that employs unrepentant former neo-Nazis and has been labelled “extremist” by the intelligence service is on the cusp of becoming the first populist-right group to run one of Germany’s 16 states since 1945.

To take office the AfD still needs allies or defections. That should not blind Germany to the risk. The party was always going to do well in Saxony-Anhalt, which is depopulated, deprived and in the east, where party loyalties are weak. But in national polls the AfD now also has a lead, of eight points, over the centre-right CDU/CSU, led by Friedrich Merz, the chancellor. A federal election today might require a coalition of every centrist party to keep it from power.

Germany’s centrists have long thought that a firewall excluding the AfD from coalitions could keep it at bay. But behind this Brandmauer the party has grown and radicalised, pursuing racist fantasies of “remigration”, rapprochement with Russia and exit from the European Union and euro. Its manifesto for Saxony-Anhalt, which called for a radical reshaping of the state’s education, culture, media and civil service, proved alarmingly popular.

The AfD’s success in Saxony-Anhalt rested in large part on mobilising people who did not vote in the previous election. Many of them have been repelled by mainstream politics. If the mainstream is to win them back, it must change.

What should it do? First, it must not let the AfD stun it into inaction. Before the summer Mr Merz’s dysfunctional coalition with the Social Democrats (SPD) approved an ambitious set of reforms covering everything from income tax to pensions. But the SPD, which increasingly appears to find governing a burden rather than a blessing, is now considering reversing sensible policies such as ending early retirement. Such was the delicacy of the compromise that unravelling one proposal could imperil others.

True, many of the reforms are unpopular and AfD voters in particular dislike change, but giving up now would be irresponsible. That is not only because Germany’s creaking economy and welfare state require urgent upgrade. For the coalition to relapse into do-nothing bickering would also bolster the AfD’s claim that the old parties are tired and useless. The economy is at last showing signs of recovery . The government should lean into it.

Second, the CDU should reconsider the rigid Brandmauer. That does not mean kneeling before extremists; the AfD’s stated goal is to destroy the CDU, not to work with it. And the CDU should not enable the entry to government of a party that opposes so much of what it stands for. But if the CDU signalled that it would not dogmatically exclude future co-operation with a party that shed its most radical ideas and politicians, it could eventually help boost the relative moderates within the AfD, some of whom are uneasy about their extreme comrades. The AfD’s strength and confidence makes this harder, but an AfD that looks more like Giorgia Meloni’s Brothers of Italy would be preferable to the one that sits on the outer fringe of Europe’s right-wing populists.

Last, the time may come to look at the top. Mr Merz has got some things right, notably support for Ukraine and restoring Germany’s armed forces. His reformist instincts are laudable. But he is a clumsy politician, a bad manager and a terrible communicator. His approval rating stands at just 13%, and he shows no sign of understanding why. Two more state elections on September 20th may bring fresh disaster for the CDU. Germany’s system makes replacing leaders difficult but the CDU has alternatives. If Mr Merz proves unable to articulate a compelling vision for his brand of centrist politics, he should go. ■

The Federal Reserve’s next meeting will be his first big test as chair

He has not been in the job long. But Kevin Warsh, the chairman of the Federal Reserve, is about to face a crucial interest-rate meeting on September 15th and 16th. The decision before him and his colleagues has higher stakes than at any Fed meeting of the past few years. And it is among the least predictable, partly because Mr Warsh has deliberately reduced the transparency of the central bank’s reasoning. Markets see coin-toss odds between a rate increase of 25 basis points (0.25 percentage points) and no change.

The decision may be on a knife-edge, but it would be a mistake for the Fed to keep monetary policy the same. Both on a straightforward reading of America’s economy, and in order to preserve the wavering credibility of the central bank, to raise interest rates would be better.

Judged on the economic fundamentals, the case for higher rates is solid though not unanswerable. Inflation still sits stubbornly above the Fed’s 2% target. So does core inflation, which excludes energy and food prices, both of which have leapt since the war started with Iran. These data are not a slam dunk: The Economist’s own, fancier, predictive-inflation gauge is only modestly above target and has been falling, and wage growth is lower than it was. Inflation might come down on its own as the one-off impulses to prices from tariffs and the war with Iran dissipate. But that cannot be assumed after five years in which price rises have exceeded the Fed’s target. With such a record, it is better to worry too much than too little.

In any case inflation is not the only factor pointing to higher rates. Economic growth is healthy, unemployment is just 4.1% and job vacancies are edging up. August brought stonking payroll gains. Rather than destroying jobs on net, the artificial-intelligence boom is so far creating them . Virtually any conventional rule of thumb incorporating employment alongside inflation would have interest rates well above where they are today.

Financial conditions also suggest that, with monetary policy as it is, overheating is a greater risk than a slowdown. Credit is flowing. Stock markets are exuberant. Bond markets are shaky, but that is partly because, in these conditions, higher interest rates look necessary, which would mean lower bond prices.

What secures the argument for hiking rates is the political environment. Attempts by President Donald Trump to interfere with the Fed have, perversely, made it an especially dangerous time to appear soft on inflation. Otherwise, it might seem as if the president was calling the shots.

Most recently Mr Trump has celebrated the strong payroll figures by, bizarrely, threatening trade cut-offs if the Fed does not lower rates. The president’s meddling is nothing new, but it is not the only thing muddying the dividing line between monetary policy and politics. In mid-August a surprise spree of bond-buying by Scott Bessent, the treasury secretary, pulled down long-term interest rates a little, for a while. One interpretation is that Mr Bessent was astutely buying back long-term debt on the cheap. Another is that he was administering a dose of easing that bypassed the central bank.

Mr Warsh’s reluctance to share his views has added to the sense that his credibility is under threat. In July he had to clarify that the Fed was not now informally targeting inflation somewhat above 2%. He then regained his footing with a clear, hawkish speech on August 28th at Jackson Hole, the Fed’s annual monetary-policy pow-wow. Given Mr Trump’s fighting talk, failing to stick to his guns would reaffirm the idea that Mr Warsh is muddled and, perhaps, easily swayed. He has struggled to shake the notion that he is personally in hock to the president, to whom he kowtowed to secure his job. The September decision has come to look like a test of his mettle.

The last major piece of economic data before the decision will be consumer-price figures on September 11th. Even if those numbers show inflation softening, Mr Warsh’s credibility will remain on the line. He harshly criticised his predecessor for excessive “data dependence”, with rate decisions hinging on single data releases. Adopting the same tactics himself would look like cover for yielding to the White House.

The more Mr Trump seeks rate cuts, the stronger the case for hikes becomes. That is the corollary of the enormous long-term benefits of central-bank independence. Mr Warsh has left himself with no good choice but to raise rates. ■

Machines are getting brighter. Teens are getting dimmer. Schools must act now

Schools in RICH countries are failing. The latest scores on PISA tests of reading, maths and science, released on September 8th, are the worst since the tests, administered by the OECD, began in 2000. Educators can no longer blame it all on covid-19 lockdowns, which badly messed up lessons and caused PISA grades to drop. The pandemic is now over, but scores have continued to fall roughly as fast. In 35 rich countries that take part in the tests, a typical 15-year-old now reads no better than a 14-year-old did a decade ago. A slow-motion disaster is under way.

Test scores are not the full measure of a child. But they are a good predictor of desirable outcomes and a bulwark against many of the worst ones. Kids who do well on tests tend to earn more, live longer and healthier lives, and commit fewer crimes. By one estimate, pushing up PISA scores by a mere quarter of a standard deviation might increase annual growth in rich countries by half a percentage point.

Perhaps, though, as artificial intelligence improves, the fact that children struggle intellectually will not matter so much? The adults of the future will be able to outsource their thinking to clever machines, just as they use machines to perform innumerable physical tasks. So why sweat about swotting?

This argument could not be more wrong. AI will not make it pointless to train human brains, any more than the invention of cars eliminated the need for physical exercise. On the contrary, adapting to a world of rapid, AI-driven change will require more mental agility, not less. And precisely because AI will increase the temptation for people to outsource difficult cognitive tasks, schools have an extra duty to help pupils exercise their brains and acquire the hard habits of thinking. Failure to furnish them with the basic building blocks of a well-developed mind, such as literacy and numeracy, is inexcusable.

PISA scores began drifting downwards around 2012. The evidence is growing that tablets, mobile phones and other such screens are distracting youngsters from their studies and diverting them from hobbies, like reading books, that instil the ability to focus. So limits on screens seem prudent. About half of countries now ban mobile phones from schools to some extent; more should follow. Used carefully, technology can benefit classrooms. More usually, snazzy new tools and devices just get in the way.

An even bigger problem, though, is muddle-headed thinking among educators. Some have fallen for the leftist canard that tests are harmful and grades are racist. Some have allowed reasonable worries about children’s mental health to warp into an excuse for low expectations. Some unhelpful habits acquired during the pandemic have stuck: children are still missing more lessons than before, and many teachers who relaxed their grading standards have failed to tighten up again.

What to do? There is little evidence that shovelling more cash into schools will make much difference: Japan spends 30% less per pupil than America and gets much better results. But research needs a big boost. Teaching, as a profession, remains shamefully uninterested in the evidence about which techniques work best. Education departments in universities contain some of the weakest and most radical staff, often keener on abstract ideas of social justice than the more concrete benefits that better grades might bring to pupils.

Places that have avoided declines deserve more attention. Britain is one. In 2009 its pupils scraped into the world’s top 30 in maths and reading. Now they sit in the top ten. Some of this stems from a return in England, under a previous Conservative government, to old-fashioned things such as rigorous exams, tough inspections and fact-filled curriculums.

Falling scores will not be fixed in a jiffy. Because it takes time to educate a child, the latest test results bear the marks of decisions taken ten to 20 years ago. That long lag makes reform politically harder. Governments that make schools better will seldom see benefits they can boast about before the next election. But they should care anyway. Politicians in past decades, from Tony Blair to George Bush, have won office promising to fix education. Today’s leaders seem to have cooled on schools, except as culture-war battlegrounds. That lack of serious attention invites calamity. As machines grow brighter, don’t let teenagers grow any dimmer. ■

Without it, Javier Milei’s remarkable liberal experiment could end next year

JAVIER MILEI swept to power three years ago as a libertarian tub-thumper, promising brutal cuts to public spending in order to tame inflation and free the Argentine economy. Many analysts doubted that this aggressive, wild-haired man could possibly succeed. Mr Milei proved them wrong: annual inflation has fallen from 161% in the month before he took office to 34% in July; the economy is on track to grow for a second year in a row, a rarity in Argentina since the end of the commodity boom in 2008. With inflation curbed, the share of Argentines who are poor has fallen by a third.

But his work is not complete. Argentines will vote in a general election in October 2027. The president’s approval ratings are near their lowest point of his term. Although the economy is growing, that growth is slow and uneven. Real wages are still lower than when he took office; formal jobs have been disappearing. Many people are still struggling. Polls suggest that voters have a worse view of Mr Milei than of several champions of Peronism, the left-wing movement that favours state meddling over markets and created the economic disaster that he inherited. The prospect of a return to the past is alarming for Argentina, and for the fate of the world’s most important experiment in economic liberalism.

Most of Mr Milei’s economic policies are the right ones: his zealous commitment to budget surpluses remains crucial, he is correct that outright money-printing is the root of Argentina’s woes and he should continue slashing enterprise-shackling regulations. But today Argentines worry more about jobs than inflation. Now is the time to build on the foundations he has laid and focus more on growth, even if that means a slightly slower decline in inflation.

Happily, the most obvious way to fix this is to be more libertarian, not less. Mr Milei should ditch Argentina’s remaining capital controls and the central bank should stop intervening in financial markets to try surreptitiously to prop up the peso. That would imply marginally looser monetary policy, which would help boost lending to business. Faster growth would improve the tax take, enabling Mr Milei to further cut Argentina’s absurd export taxes, and perhaps even other taxes, without endangering his prized budget surplus. That could set off a virtuous cycle. So would further cutting subsidies, especially for transport, and instead reviving investment in roads and rail.

There are signs his government is edging in this direction. Yet in an interview with The Economist Mr Milei was unwilling to accept that his efforts to curb inflation have come at any cost to growth. He is posturing over the Falkland Islands to fire up Argentine voters, a distraction from economic problems for them and, more troublingly, for him. And he is raging ever more crudely at his perceived critics, above all Argentine journalists. He need not abandon the arresting style that helped get him elected. But he should focus on his political rivals, many of whom might take Argentina back to wild spending and loopy red tape.

The difficulty is that the Peronists are not in power, and Mr Milei’s government is vulnerable to allegations of corruption. It is hard to rail against the rotten “caste” when your allies are facing charges of graft of their own. So Mr Milei must take the conduct within his ranks more seriously. That will make it easier to warn against the dangers of a return to self-dealing politics.

And instead of implying that Argentines who complain about the pain of his reforms are feeble, Mr Milei should try a little empathy. Carrying on with a much-needed economic overhaul does not preclude showing that he understands the difficulties that his policies are imposing upon ordinary Argentines in the short term.

Balance, between pulverising inflation and boosting growth, and between empathy and aggression, is harder than the bombast which won Mr Milei election. But the fate of his project, which has inspired free-marketers worldwide, may depend on finding it. ■

The chipmaker’s enormous bets are how capitalism is supposed to work

NVIDIA was named in 1993 after the Latin word for envy. Sure enough, the American colossus inspires plenty of it. Insatiable global demand for its graphics-processing units (GPUs), the chips that power artificial intelligence, has made Nvidia the world’s most valuable company, worth $5.4trn. Next year it may also become the most profitable, generating $370bn in net income. By 2029 its sales could hit $1trn.

Jensen Huang, Nvidia’s boss, is truly the magician at the heart of the AI boom. His firm’s share price is 14 times what it was on ChatGPT’s release in late 2022. The ten biggest public companies championing AI make up 40% of the value of the S&P 500 index. Nvidia alone accounts for 8% and unlike, say, Apple or Tesla, which make smartphones and cars, it is almost solely a bet on AI. The company has produced about 15 cents of every dollar the American stock market has returned since 2023—returns that have kept consumers spending despite rising interest rates, tariffs and a war with Iran.

Yet many also see Mr Huang as a magician in a more worrying sense, fearing that he is an illusionist inflating a dangerous bubble. Through $1trn-worth of deals, Nvidia provides data-centre landlords and AI labs with cash or guarantees so that they can buy its GPUs. Some call it the “bank of AI”. At the very least, Nvidia’s critics say, its financial engineering smacks of the “vendor financing” which pumped up the revenues of networking-gear makers like Cisco in the dotcom mania of 2000-01, whose collapse brought about a recession.

Look more closely, however, and the worries are mostly unjustified. If Nvidia’s bets on ai come good, they could accelerate the technology’s adoption, boosting productivity and living standards. If they misfire, the cost will fall chiefly on Nvidia’s shareholders. That is how capitalism is supposed to work.

True, the dotcom and AI booms share unnerving similarities: an exciting new technology, an epic bull run, hubristic tech bosses. Nvidia’s rise from seller of chips to video-gamers and cryptocurrency miners to linchpin of the economy has been so rapid that many people have yet to learn how to say its name (“en-vidia”, not “nuh-vidia”). This mirrors the ascent of Cisco, which in 2000 briefly also became the world’s most valuable firm. Just as Cisco’s sales of routers and switches presupposed exponential growth in web traffic, Nvidia’s GPU revenues assume endless demand for AI tokens.

Cisco was right about eventual demand but wrong about the timing—hence the dotcom crash. Today it is the pace of AI adoption that is hard to forecast. Set aside Claude-addled software engineers and usage remains fledgling . If it does not soon soar, Nvidia’s customers may call in the guarantees just as the chipmaker’s own sales nosedive. Since no one is sure how quickly GPUs lose their value, any used chips Nvidia repossesses may be worthless.

Nvidia’s financial wizardry is partly defensive. Its latest GPUs no longer have the market to themselves. Roughly half Nvidia’s revenue comes courtesy of America’s cloud-computing “hyperscalers”, chiefly Amazon, Google, Meta and Microsoft, which are designing their own silicon. Non-Nvidia AI chips account for 38% of the market, up from 26% in 2023. To stay ahead, Nvidia used to spend over a fifth of sales on research and development. Now it spends less than a tenth.

Last, the scale of Nvidia’s financial commitments can look terrifying. Morgan Stanley puts its overall credit exposure—ie, its modest borrowing plus support for customers—at $200bn by the start of 2029. In time Nvidia’s shadow debt could reach $300bn or more . It is a gargantuan sum: today only America’s six largest banks carry more debt.

Yet the differences from the dotcom boom are more important than the similarities. Nvidia’s balance-sheet is extraordinarily robust. The company has $99bn of cash and is churning out more. In each of the past three years annual sales have roughly doubled. Gross margins have fattened from less than 60% to 75%. Mr Huang’s cult-CEO status now rivals that of Elon Musk. But whereas Mr Musk's firms generate little cash (at Tesla) or burn lots of it (at SpaceX), Nvidia will yield about $200bn this year.

This means that, whereas Cisco used debt, Nvidia can use cash to backstop its deals with buyers of its GPUs. Even if its commitments came due and its cashflows levelled off starting next year, by 2028 it would still be less leveraged than all but 39 non-financial firms in the S&P 500 are today. Profits would need to drop by 60% from that plateau for Nvidia to forsake its investment-grade credit rating.

And demand for AI is not illusory, as it was for Pets.com and other revenueless dotcom darlings. The sales of Anthropic, the leading AI lab, shot up from $5bn in the first quarter to $11.5bn in the second. OpenAI, its main rival, is probably not far behind. The hyperscalers are also booking AI income. All told, AI may be earning American tech around $150bn a year, from nothing a few years ago. That is still far from the $2.5trn needed to cover AI capital spending, but growth is fast.

Mr Huang thinks that the biggest obstacle to the AI revolution is not lack of demand for AI but inadequate infrastructure. The markets will not provide capital on the scale that is necessary, so Nvidia is offering financing itself. Nvidia has an advantage in understanding the balance of risks and rewards. Although this bet is big enough to affect the economy, it is an entrepreneurial one. Every company that reinvests cash rather than returning it to shareholders also gambles that it can beat the market. Companies exist to make such concentrated bets. If investors want to diversify, they can do so themselves.

And Mr Huang is hardly alone. The hyperscalers, the world’s most successful companies before Nvidia came along, are making the same bet. So are some big names on Wall Street. Last month Goldman Sachs, BlackRock, Blackstone and others joined Nvidia in a $500bn data-centre initiative. And so are Mr Huang’s shareholders, who haven’t yet rushed for the exit. If they are all wrong, it is their money on the line. And if they are right, the AI era may arrive a bit sooner. ■

Worse, it creates incentives to block democracy

Oil made Venezuela rich. For decades it helped fund a stable democracy with the highest living standards in Latin America. The country was pumping 3.4m barrels a day when Hugo Chávez, a left-wing populist, was elected in 1998 on a promise to redirect petrodollars to the poor. Instead, under his corrupt, incompetent regime, the flows of oil and cash largely dried up. Under his chosen successor, Nicolás Maduro, the state went on a money-printing spree, sparked hyperinflation and drove a quarter of Venezuelans to emigrate.

Eight months ago, when Donald Trump had Mr Maduro snatched by special forces and dumped in a Brooklyn jail, Venezuelans cheered. Now Mr Trump has made a deal with the ex-despot’s deputy, Delcy Rodríguez , that both sides say will revive Venezuela’s oil industry. Mr Trump called it the “BIGGEST OIL DEAL IN WORLD HISTORY”. He crowed that it would give America “energy dominance” (after his war of choice in Iran interrupted global supplies). The deal is certainly bold. It is also ugly.

The regime has given North American Blue Energy Partners (NABEP), a private oil firm that was already the second-largest operating in Venezuela, the concessions to 17 oilfields containing some 65bn barrels. America, via the Pentagon, has been given, in exchange for its backing, a 35% stake in nabep and rights to its output. For the next century this guarantees America the right of first refusal to buy from oilfields which hold a fifth of Venezuelan oil reserves , with some of those purchases at a discount (see Americas section).

The idea is that nabep will pump more oil and Uncle Sam’s involvement will give other investors confidence to sink long-term capital into a country they previously shunned. Ms Rodríguez, now Venezuela’s Trump-approved interim president, says the project could eventually yield more than 1.5m barrels per day. If she is right, it would push Venezuela’s output to 2.5m, three-quarters of pre-Chávez levels.

However, she offers no clear timeline, nor much hint of who will stump up the staggering amounts of cash such an expansion would require. And the deal comes with warning lights flashing red. First, it was negotiated with an illegitimate regime that stole the most recent election. Second, Mr Trump’s chosen private partner, Alejandro Betancourt, NABEP’s boss, is reviled by some in Venezuela for the moral flexibility that let him get rich working with the regime. Third, Mr Trump will surely enrage Venezuelans with his imperialist bragging: on September 1st he said he would take all of the country’s oil.

Any future, freely elected government of Venezuela might question a deal which gives America so much control of the country’s oil. That fact will make investors hesitate. Oil majors remain wary, though Chevron, which was already in Venezuela, has just announced a separate $7bn investment.

Worse, cash and tax revenue from the deal create incentives for powerful people to block Venezuela’s transition to democracy. Mr Betancourt, who is well-connected in both Caracas and Mar-a-Lago, has every reason to whisper to Mr Trump that a rush to free elections could spoil his oil bonanza. Ms Rodríguez will no doubt reinforce this message.

In background briefings American officials insist that Venezuela’s transition to democracy will continue. And some within the administration, such as Marco Rubio, the secretary of state, clearly understand that a democratic Venezuela is both desirable and in America’s interest. So there is still hope. America could in theory use its power over NABEP to press for transparent competition in Venezuela’s oil industry. This, in turn, would allow the opposition to campaign on a platform that does not undermine the deal. But all this depends on Mr Trump. Ominously, in public he has started to refer to Ms Rodríguez as Venezuela’s “president-elect”. ■

It faces the prospect of a worse despot or a messy power struggle

UGANDA HAS never been an easy place to be a dissident. Since taking power at the head of a rebel army 40 years ago, Yoweri Museveni, the president, has restored order to a country drenched in blood, overseen robust economic growth and ruthlessly suppressed challenges to his rule. Of his two main opponents, one, Bobi Wine, lives in exile. The other, Kizza Besigye, is in jail and on trial for treason; in July he collapsed in court. In January Mr Museveni won a sham election marred by thuggery and ballot-stuffing.

Yet as the president, who is 81, grows frailer, Ugandans have begun to worry less about what he will do next, and more about what will happen when he is gone. As potential successors jockey for position, Uganda is a reminder of how nasty things can get when an ageing autocrat starts to lose his grip.

Once known for punishingly long work days, Mr Museveni has lately been spending less time at the office. He has cancelled engagements at short notice and appeared shaky in public. Stunts to demonstrate youthful vigour, such as a brief jog down a red carpet during last year’s election campaign, have fooled nobody.

As the leader fades, those around him are stepping up. Salim Saleh, Mr Museveni’s brother, is thought to handle much of the day-to-day governance from behind the scenes. Other relatives have increased their influence, too. Most worrying is Muhoozi Kainerugaba , the president’s son and head of the army. He has called himself the future president and a descendant of Jesus. As he throws his weight around, repression in Uganda is growing more intense and less predictable .

General Kainerugaba is notorious for his unhinged (and often quickly deleted) social-media posts, ranging from boasts about his sexual appetite to ethnic slurs and threats to kill or castrate opponents. His father used to curb his antics. One post in 2022—in which the general said it “wouldn’t take us, my army and me, 2 weeks to capture Nairobi”—briefly got him sacked from his army position. (Mr Museveni apologised to Kenya, a friendly, bigger neighbour on whose ports Uganda relies, for the unprovoked threat to its capital.)

As he ages, though, the president seems less able to rein in his son. In June the general sent the army to occupy Uganda’s biggest private media outfit. (It reopened after weeks of negotiations.) He has ordered the abduction of dissidents. In late August he had his men kidnap an associate of his own brother-in-law, gloated over the man’s mistreatment and threatened to arrest the brother-in-law, too.

What will happen once Mr Museveni leaves the scene? Even government insiders have started talking darkly of a return to the days of Idi Amin, a mass-murdering military dictator in the 1970s. That is not likely, but the future still looks bleak. The general could take over from his father and impose a capricious, vengeful and ethnically charged despotism on Uganda. He could also exacerbate the conflict in the east of the neighbouring Democratic Republic of Congo, where Uganda has meddled in the past. He has a close relationship with Congo’s main enemy, Rwanda.

Others in Mr Museveni’s inner circle and in the armed forces may try to stop his errant heir. A power struggle or even a violent split in the army might ensue. Some younger officers are loyal to the general; others are appalled by him. Veterans of the civil war are devoted to the father but wary of the son.

In theory, the passing of an autocrat could create space for free elections that Mr Wine or Mr Besigye might even win. In reality, that is unlikely. Mr Museveni came to power at a time of democratic resurgence, when many other African countries ditched military dictatorship for multiparty democracy. Back then, Western donors sometimes used their influence to promote human rights.

Now, by contrast, coups occur with impunity and plenty of leaders who won power democratically are looking for undemocratic means to hang on to it. Uganda’s plight should serve as a warning to its peers: without real elections to refresh the faces at the top, expect trouble as autocrats age. ■

A less sexist world would be much richer

All around the world, women have struggled for equal treatment in the workplace. But in some countries the struggle is more basic: to be allowed into the workplace at all. In an experiment, married mothers in Egypt were offered free or cheap child care near where they lived, to make it easier to go out and find jobs. Only 11% took up the offer. The obstacle, for many, was husbands who thought it wrong for women to work outside the home. And although 90% of Egyptian women disagree, the weight of tradition can be hard to defy—as can the literal heft of a reactionary husband.

In much of the Middle East, north Africa and South Asia, many men believe their family’s honour depends on female seclusion. They fear that if a wife goes out to work any farther away than the backyard vegetable plot, she might meet a man to whom she is not related and bring disgrace on her kin. This backward belief may be enforced with threats. In India violence against women is so normalised that nearly 40% even of women think a husband is sometimes justified in beating his wife. In Mali the figure is nearly 70%.

Such attitudes make whole populations poorer. In South Asia only a third of women are in the labour force; in the Middle East and north Africa, only a fifth are. Since 1990 the share of labour income that accrues to women has risen from 35% to 44% in liberal France; in patriarchal Pakistan, from 1.5% to a still-woeful 9%. Removing the barriers to women working would raise income per person by a fifth in many countries, estimates the World Bank—a bigger economic benefit than avoiding a typical civil war.

That is more than enough reason to care about female seclusion. But there is another. When women earn, the balance of power at home shifts. The Economist analysed data from 27 countries and found that, after correcting for how sexist a country is and how well-off a household is, women who work for pay have more say on everything from how to divvy up the family budget to whether they can go and visit a friend without asking their husband’s permission. Paid work, in short, makes families more equal .

So opening the glass front door should be a priority in all countries where it is currently shut. Alas, it has several complicated locks. The first key to insert is legal. By the World Bank’s count, 540m women live in countries where formal equality before the law is not merely imperfect but “distant”. Yet even the most sexist laws can be scrapped, as Saudi Arabia has shown. Before a series of reforms that started in 2011, women there were barred from all but a handful of jobs and not even allowed to drive. Now they are free to work, drive and shun the hijab if they choose. The share of women in the labour force has nearly doubled since 2010, from 18% to 34%. That is startling progress for a kingdom many thought hopelessly stuck in the past—even if there is still a long way to go.

Another key is social norms. These are often assumed to be intractable, yet history shows they can change rapidly. Until 1975, British banks could refuse a woman a mortgage if she lacked her husband’s consent; until 1997, Germany did not criminalise marital rape. Since then British and German cultures have evolved so that such rules are unthinkable; indeed, few young Britons or Germans are aware they ever existed.

Norms can shift with a shove from above, as in Saudi Arabia, or by a process of social contagion. Few people resolve moral questions by reasoning from first principles. Mostly, they reckon something is fine if they see lots of people they know and respect doing it. So pioneers play an essential role: the first woman in a conservative Pakistani village to brave the gossip and find work in a nearby town paves the way for others to follow. Schools, NGOs and policymakers can nudge the process along. One experiment in India found that if you show men that women they know are working in a local factory and that it is clean and not dangerous, they are more likely to consent to their own wives working. Anything that makes work safer—such as India’s women-only buses for late-night commuters—can erode the misconception that women must be kept at home for their own protection.

Digital technology can help, too. Via small screens in their hands, women in the most repressive countries can see—and therefore imagine—a different way of life. This need not mean copying the most liberal societies. More often, it means learning from the somewhat less sexist country next door, as when an Iraqi housewife sees women doing high-status jobs in Turkish soap operas, and starts to question her lot.

The last key is money. It is useful stuff, as even reactionary men agree. One economist talks of the “honour/income trade-off”: at some point, the extra cash a working wife could bring in starts to look so tempting that her husband asks whether it would really be such a terrible blow to his honour to allow it. Thus, the love of money, though much derided in scripture, can be a force for social change. ■

A 950-year-old piece of linen yields lessons for modern viewers

Days before the liberation of Paris in 1944, Heinrich Himmler, Hitler’s SS chief, sent an urgent coded message. “Do not forget to bring the Bayeux tapestry to a place of safety,” he urged the city’s Nazi commander, who surely had other things to worry about. The Nazis were obsessed with this artwork depicting the Norman conquest of England, seeing it as an icon of Aryan glory. Himmler planned to display it in Wewelsburg Castle, an SS hangout he hoped would become the “centre of the new world”. Instead, British codebreakers intercepted the order and shared it with the French resistance, who hid the tapestry in the Louvre’s basement.

Trajan had his column. Napoleon had his arch. William of Normandy’s tapestry is less imposing yet somehow more memorable. Its strip-cartoon style is jaunty, memeable and has been used to satirise everything from Brexit negotiations to Andy Burnham’s “Northern conquest” (the man he replaced as Britain’s prime minister, Sir Keir Starmer, was pictured on the cover of the New Statesman with an arrow in his eye, like the hapless King Harold). Now the tapestry is back in England for the first time since it was stitched, probably by defeated Anglo-Saxons in Canterbury, nearly 1,000 years ago. It will be on view at the British Museum from September 10th . It offers three lessons for modern viewers.

First, to survive against the odds, it is sometimes best not to attract too much attention. For several centuries the tapestry is believed to have been rolled up, stored in a chest and brought out just once a year, to be displayed in the nave of Bayeux cathedral. For about two-thirds of its existence, it was not famous at all. Only in the early 1700s did a broader audience start noticing it. Its low profile helped ensure its safety.

So did humble materials: linen and woollen thread. Many tapestries from the Middle Ages boasted gold and silver threads or were adorned with pearls and gemstones to catch the flickering candlelight. If you haven’t seen or heard of many of them, that is because they no longer survive. Their costly decoration made them vulnerable to being pinched or sold for parts. Even today, bling can bring trouble. Some of France’s crown jewels were stolen from the Louvre last year; last week a royal diamond necklace was nicked from a museum in Vienna. No thieving hands have touched the Bayeux tapestry. (Admittedly, it is hard to steal something as long as a Boeing 747.)

The second lesson is that it helps to have capable people looking out for you. When French revolutionaries eyed the tapestry to cover wagons carrying ammunition, it took the pleas of a French lawyer, and the bribe of alternative materials, to stop them. During the Franco-Prussian war, caretakers helped preserve the tapestry by keeping it locked up and hidden in a zinc cylinder. The French resistance members who saved the tapestry from the Nazis were not fighting on Normandy beaches, but they were fighting over Norman heritage.

The third lesson comes from the story the tapestry tells: it is about grace in victory. The tapestry is war propaganda, probably commissioned by Bishop Odo to glorify his half-brother’s feats at the Battle of Hastings in 1066. Yet its version of events is surprisingly sensitive to the defeated English—perhaps because there were rebellions in England in the aftermath of the battle, and it did no good to pick at the wounds of the wounded. The tapestry does not play down the horrors of war. Nor does it gloat, grave dance or call the English “losers”.

Leaders who chase attention, slather their monuments in bling, treat foreigners with contempt and constantly boast of victories they never won, should pay heed. A thousand years on, William is remembered as “the Conqueror”. What label will stick to today’s mighty rulers when they are gone? ■

A backlash fuelled by misinformation and misunderstanding

THE SUPPLY of capital is not the only constraint on the investment of America’s AI companies. They must also worry about politics. In growing numbers and with growing fury, American voters oppose the building of data centres, which provide the computing power to train and run AI models. The opposition spans the nationalist right and the environmentalist left. Such is the backlash that the infrastructure has become one of the defining issues of this year’s midterm elections . Politicians are racing to outdo one another with restrictions, moratoriums and bans on building. Voters and politicians alike are making a big mistake.

One popular myth is that data centres guzzle more water than Agastya—an argument helped along by the grossly inaccurate calculations of a bestselling book. In reality, a mid-sized data centre uses roughly as much water as two golf courses and considerably less if it recycles its water, as many now do. And there is no reason to single out AI: just about everything in modern life, from streaming Netflix to running a dishwasher, consumes water at levels that can be portrayed as wasteful by hair-shirt environmentalists. Google has calculated that the median Gemini text prompt consumes about five drops, meaning even tens of thousands of AI queries would consume less water than a minute in the shower.

Concerns over electricity use are more numerate: data centres really do need a striking amount of power. However, there is little evidence so far that they have raised energy prices. In fact, by increasing demand they are spreading the fixed costs of infrastructure among more kilowatt-hours sold. In recent weeks a number of large utilities have linked data centres to reductions in bills. Many data centres are also helping finance new sources of generation.

Eventually the use of AI could push up electricity bills. But the answer to competing demands on resources—whether water, electricity or something else—is to price them according to their scarcity, thereby encouraging more provision and higher living standards over time. It is not to ration inputs according to the arbitrary judgment of scolds. Where pricing is difficult to calculate—to account for noise pollution, say—planning judgements are necessary, and except for needing to be near the grid there is no good reason to put data centres next to homes. In any case, even the noise worry is overstated: many viral videos of supposed AI data centre noise are really Bitcoin mines, not state-of-the-art hyperscaler facilities.

Set against the illusory costs of data centres are the tangible benefits. At a national level, data centres power a technology for which there is rapidly growing demand and on whose success future economic growth and national defence may depend. More prosaically, data centres pay huge tax bills, helping fund schools, libraries and police stations. In Loudoun County, Virginia, a tax on computer equipment inside its more than 250 centres is expected to supply 40% of the county’s total tax revenue next year. The windfall has allowed the county to cut residents’ property taxes by about 30%.

There is a respectable argument for slowing down AI research, but it rests on the danger to all humanity of the technology being abused or going rogue , not the local harms of data centres. America unilaterally making it harder to build AI infrastructure will simply hand the advantage to China, whose authoritarian leaders can put data centres wherever they choose. For years, America’s populists complained that its physical economy had been hollowed out, giving China an economic edge and leaving Uncle Sam without the industries it would need in wartime. By opposing data centres, they risk causing those exact harms. ■

By trying to change its demographic trajectory, Donald Trump will make his country weaker

First, give Donald Trump some credit. He promised to restore order to the border, and he did. Granted, the slowdown in irregular border-crossings began under Joe Biden, who belatedly closed the loophole whereby nearly anyone could walk across, claim asylum and join the labour market. Mr Trump clamped down even harder . The southern frontier, which was visibly chaotic in the early Biden years, is now calm.

That success could have been the foundation on which to build a rational immigration policy. Voters like to feel in control of who comes in, which is why Mr Trump’s border wall has reassured many. Once they think the government has a grip, there is political space to discuss the rules of entry and exit.

Two questions must be addressed. What should the government do about the people who are already on American soil illegally? And whom should America welcome in the future? Mr Trump has offered a brutal answer to the first question, and a self-harming one to the second.

He has promised the “largest deportation operation in the history of our country”. One of his enforcers said he wanted to deport 100m people, roughly seven times the number of illicit migrants in America. The White House boasted it was rounding up “the worst of the worst”, though most of those detained have never been convicted of a crime. The mass deployment of shoddily trained, theatrically aggressive immigration agents to Minneapolis caused a political backlash, after they were filmed killing two American protesters.

Since then, there have been fewer headline-grabbing clashes, as a showboating homeland-security chief has been replaced by a more competent one. But the deportation machine has not slowed; it has merely grown quieter . Rather than rappelling down buildings and seizing people in Walmart car parks, agents are co-operating with friendly cops and detaining people with expired visas at airports. And Mr Trump has created a new class of deportables by stripping temporary asylum-like status from hundreds of thousands of Haitians, Afghans and others.

Overall, the deportation campaign is unpopular. Most Americans favour kicking out criminals, but not tearing apart the families of hard-working people who have been in the country for decades. Yet some in MAGA-world hanker for a less diverse America. Senior Trump aides such as Stephen Miller stop only a few inches short of overt racism, talking of “heritage Americans”, who are somehow more American than newer arrivals, and “remigration”, a buzzword on the nativist right for sending people from alien cultures home.

Such attitudes seem to inform policies on whom to let in, too. The only sizeable group of refugees admitted under Mr Trump has been white South Africans, whose claims of persecution are far-fetched. The administration blocked all new immigrant visas for citizens of 75 non-rich countries. Thus, if an American marries a Nigerian, they cannot live together in America, a curb on American liberty with echoes of a darker past. A court last week ruled the policy illegal; the administration is now stalling and perhaps looking for a workaround.

Mr Trump is altering America’s demographic trajectory. Net migration in 2025 was zero. The short-term economic effects are ugly . The labour force has shrunk by 1m since January. Leave aside the $17,000-a-head cost of processing, shackling and deporting people; American builders and bars are floundering for lack of labour.

The long-term effects could be even more damaging. Though Mr Trump has often said he favours legal migration, especially the skilled variety, his actions suggest otherwise. He is steadily obstructing the pipeline through which brainy foreigners come to study and work. By one estimate, 29% fewer student visas were issued in 2025 than in the previous year, and new rules are making studying in America even less attractive. Foreigners must complete their courses in less time than the average student takes, and then find a job within 30 days or go home. Meanwhile, American firms that want H1-B visas for highly skilled foreign staff will have to stump up more than $100,000 per worker to apply, and may still be rejected. Rather than boosting wages for native-born IT professionals, this will make it harder for their employers to expand.

Some within MAGA feel that shutting out foreigners will protect American culture. On the contrary, the essence of that culture is dynamism and creativity, which has always been fed by a steady influx of industrious newcomers with fresh perspectives. Nearly half of Fortune 500 firms were founded by immigrants or their children. Many of America’s most brilliant entrepreneurs, including Elon Musk, entered via the college-to-Silicon Valley pipeline that is now narrowing. A fortress America would be unAmerican.

There is little point in urging Mr Trump to recalibrate his immigration policies. The best hope may be that the courts can limit the number of ways in which he pursues them illegally. (He still claims the constitution doesn’t mean what it says about birthright citizenship, for example.) However, Democrats should not assume, as they scramble to regain a slice of federal power, that the president was wrong about everything.

He is right that the asylum system was being abused. A future Democratic president would be wise to insist that asylum-seekers apply from the first safe country they reach, rather than giving preference to those with the wherewithal to make it to Mexico and then step into Texas. This (far more than wall-building) is the way to avoid future mayhem on the border. And only by persuading voters that their frontiers remain secure—rather than grandstanding about abolishing ICE—can a future administration hope to pass the kind of enlightened immigration reform that America needs. Such a reform should make the country more open to the world’s most talented people, and less cavalier about breaking up families. That might truly make America great again. ■

His latest tariff threats are proportionate. But the situation could get out of hand

When Donald Trump first ordered tariffs on Canadian goods in February 2025, he said they were needed to force Canada to stop drugs and migrants crossing America’s northern border. He soon dropped that justification only to spew out a litany of other grievances: the trade deficit, national security, Canada’s dairy industry, a Canadian tax, a television advertisement, Canada’s trade with China, wildfire smoke. He repeatedly mused, with a mob boss’s ambiguity, about annexing Canada and making it America’s “cherished” 51st state.

The caprice of the world’s most powerful man has now taken Mark Carney, Canada’s prime minister, to the brink of a disastrous trade war. On August 25th Canada announced $20bn-worth of dollar-for-dollar retaliatory tariffs on American goods. The trouble is that America’s economy is 13 times larger than Canada’s and far better equipped to cope. The new tariffs are due to go into effect on September 8th. Mr Carney has until then to find a way to defuse a grave threat to his country’s economy. It will take all his guile.

The trigger for the latest hostilities was Mr Carney’s decision on August 21st to walk away from a trade deal that seemed on the verge of being sealed. The prime minister thinks Canada had little choice—though the Americans blame the Canadians. The Americans, he says, added late demands that Canadian truck factories remain subject to high tariffs, and that Canada curb its trade deals with other countries and weaken its protections for French culture and language—a red rag to separatists in Quebec.

Stabilising economic relations with the United States is essential to Mr Carney’s efforts to attract the investment needed to diversify Canada’s economy away from its neighbour. In the past the prime minister has played for time, avoided aggression and sought to keep negotiations alive. He repealed a tax, removed retaliatory tariffs inherited from his predecessor and resisted calls to cut energy exports to the United States. This time, however, America’s demands were too much.

It is a dangerous moment. America’s tariffs went into force shortly after the talks collapsed. Mr Trump has said he will slap further duties of 50% on Canadian cars, trucks and auto parts from January 1st. Canada’s $2.5trn economy is not only punier than America’s $32trn one, it is also more exposed to its southern neighbour than vice versa. About two-thirds of its exported goods are sold there and most of these are integrated into American supply chains, making it hard to find alternative buyers quickly. Canada’s retaliation would deepen the pain.

So, having made his point, Mr Carney should seek to walk back his retaliatory tariffs. If that is politically unfeasible, they should at least be made targeted and reversible—by, say, focusing on the swing states in the midterm elections that trade most with Canada, and whose politicians may have sway with Mr Trump. Some are already grumbling about the needless harm to American interests from picking a fight with a close ally.

Both countries’ officials should remember the costs they are imposing by escalating. The existing American tariffs will be hard to unwind. Another reason the talks failed is that protected industries in the United States lobbied the Trump administration hard against lowering tariffs that shield them from Canadian competition.

Only Mr Trump has the power to end his illogical crusade against Canada. He has shown no inclination to do so. Mr Carney has previously demonstrated that a moderate response to Mr Trump need not be politically ruinous. Now he has two weeks to pull off something much harder. He needs a deal that is better for Canada than America’s latest offer. But to get that, he also needs to rebuff America’s intemperate president without triggering a cycle of escalation that will harm Canada disproportionately, and in which it cannot prevail. ■

But expect them to continue, so long as government debt stays high

The background music of Donald Trump’s second term has been the sound of norms breaking. On economic policy alone, the president has used tariffs to usurp Congress’s taxing powers and launched attack after attack on the independence of the Federal Reserve, which he accuses of keeping interest rates too high. A year and a half into Mr Trump’s second administration, it is tempting to tune the noise out. However, the latest transgression deserves to echo far and wide.

On August 19th Scott Bessent, the treasury secretary, unexpectedly announced that the government would increase the amount of long-dated debt it buys back. The stated reason—to ensure liquidity in the market for long-term Treasury bonds that looked perfectly liquid as things stood—never sounded plausible. From the start the real one appeared to be to keep Mr Trump happy by raising Treasuries’ price and thus lowering their yields, which determine how much Americans pay for a mortgage. Ahead of midterm elections where voters seem poised to punish the president’s Republican Party for stubbornly rising prices, it also looks like politicisation of the world’s most important asset market. Worse, Mr Bessent may not be finished with his meddling.

Bond yields have been creeping up lately, and not just in America. The reasons are not mysterious. Inflation is sticky, budget deficits are widening and government debts are piling up. The day Mr Bessent waded into the bond market America’s total public debt exceeded $40trn, equivalent to more than 120% of GDP. As the rich world’s central bankers arrive in Jackson Hole on August 27th for their annual retreat, they will commiserate with one another.

If Mr Bessent were serious about lowering yields, he would start by tackling this debt bomb, as he and Mr Trump have repeatedly promised. Instead, his department is reportedly weighing whether to use cash from its $1trn general checking account to fund more bond buy-backs. When asked about Mr Bessent’s market interventions, Mr Trump suggested, apparently not in jest, unleashing American troops on the bond vigilantes.

Traders have little to fear from SEAL Team Six. But Mr Bessent’s sortie into the Treasury market does risk bloodying America’s financial credibility, even if it keeps yields a little lower for a little while (as it appears to be doing). Many investors are already feeling nervous. After the surprise buy-back, the dollar weakened and assets that rise with worries about the global reserve currency’s “debasement”, such as gold and bitcoin, surged. A combination of lower yields and a weaker dollar would stoke inflation (unless the Fed acts against Mr Bessent—and angers Mr Trump—by raising short-term interest rates). And the secretary’s purchases could backfire if the market starts demanding extra compensation for holding an asset whose price is seen as reflecting political whim as well as economic reality.

Regrettably, in Mr Trump’s America and elsewhere, politicians and their voters are in no mood for the tax rises and spending cuts that would begin to balance government budgets. Mr Bessent’s stop-gaps look more appealing. Even if his bond purchases do not prevent yields from rising eventually, they may be enough to kick the debt can a little bit further down the road and into the hands of the next administration. In the Wall Street Journal Mr Bessent’s mentor from his years as a hedge-fund trader, Stanley Druckenmiller, called every one-hundredth of a percentage point of yield suppression “a subsidy to procrastination”.

The last time America managed to chip away at unsustainable debt, in the decades after the second world war, it also meddled even as it tightened its belt. The government kept yields low first through an explicit ceiling, then with subtler sorts of financial repression such as Regulation Q, which capped the interest banks could pay to depositors. Meanwhile, bursts of inflation ate away at the real value of government debt. Mr Bessent knows his economic history well; for several years he taught a course on it at Yale University. He surely understands that, sooner or later, the past will catch up with him. ■

But that may not be the aim

THE WARNINGS were apocalyptic. An “economic D-Day” was looming for Iran, blustered Donald Trump. It would be “the single greatest financial offensive ever marshalled against an adversary”, declared Scott Bessent, America’s treasury secretary. Having failed to fell the Iranian regime with military might, America was turning to economic weapons.

Yet Operation Economic Outcast, announced on August 24th, looks unlikely to bring about the fall of the regime . Nearly 60 individuals, entities and ships will come under fresh sanctions, as will five sectors of Iran’s economy, from digital assets to shipping. But America has so far only threatened to use its most potent economic weapon: secondary sanctions, on countries that trade with Iran or help its regime move money around. There is good reason to think it may never fire that weapon at full blast.

Mr Bessent himself suggested that doing so might “blow up the global financial system”. He may well be right. The biggest risk comes from China, which despite sanctions buys around 90% of Iranian crude exports, at a discount. Forcing Chinese financial institutions to choose between the dollar and Iranian oil would be a dramatic escalation in America’s confrontation with the world’s second-biggest economy. Investors would worry about the consequences for trade and finance. The prospect of such a fallout curbed the administration last year after China threatened to withhold the supply of rare earths—one reason Mr Trump is seeking warmer relations with China today.

And Iran’s leaders are unlikely to crumble as a result of this half-baked new offensive. Their country has already endured the “maximum pressure” campaign of Mr Trump’s first term and the bombing campaigns of his second. Sanctions and America’s blockade of the Strait of Hormuz are making life miserable for ordinary Iranians. But the regime and its elite defenders in the Islamic Revolutionary Guard Corps (IRGC) will be the last to suffer. Indeed, the IRGC gets its cash from smuggling and making things inside Iran that would otherwise be imported—which is why America’s new campaign may strengthen the regime it is trying to topple.

Perhaps, therefore, what is happening is in fact an American retreat. For all his talk of destroying the Iranian threat, Mr Trump may actually be seeking to take it off the front pages. Just 31% of Americans now back continued military action. Oil prices remain high, but far below their peak; renewed fighting would push them up again. If Operation Economic Outcast causes the Iranian regime to fall (unlikely), he can declare victory. If it achieves nothing (and avoids global economic meltdown), he can at least hope for relative calm in the run-up to the midterm elections in November.

Iran has a say, too. The risk is that its regime proves reluctant to bail Mr Trump out of his disastrous war. Its leaders might renew their attacks, not least because they know how much Mr Trump wants the fighting to be over and see in that an opportunity to assert themselves. Yet they may oblige, since they already feel they have got the better of the war. Iran can keep pressure on America with threats or attacks on shipping, either directly or via proxies, in the Strait of Hormuz and Bab al-Mandab. It will hope this keeps oil above $80 and spurs American voters to punish Mr Trump. Or perhaps talks with Oman will bring an agreement over fees on ships that do go through the strait—requiring America to enforce its embargo.

Either way, the approach of Mr Bessent and his boss comes at a price. America may get some short-term respite from the cycle of attacks and talks that has dominated recent months. But threatening Armageddon only to unleash a damp squib will damage America’s credibility. That could leave it less able to achieve its goals in future.

More important, either outcome leaves another troubling problem. Mr Trump’s approach can at best lead to a sullen stalemate in the Gulf. But Iran’s nuclear programme and its stockpile of fissile material remain. At worst, Iran might seize the opportunity to turn its attention back to its nukes. Whatever Mr Trump does—or does not—achieve with his economic warfare, the path to an all-important negotiated nuclear settlement looks ever more unreachable. ■

Multinationals must prepare for a world of legal contradiction

FOR DECADES America has sought to impose its will on companies doing business around the world—using a long, powerful, extraterritorial arm. Indeed, that is the basis of its new economic war against Iran, launched this week . These days, however, international companies also have to worry about another long arm. This one belongs to China.

Under President Xi Jinping, the world’s second-biggest economy is fast learning from the biggest. One of its goals is to hit back against American pressure. But China is also mustering its weapons in order to extend its own influence. Just as the threat of excluding others from the global financial system is America’s superpower, so China has its own: its world-beating supply chains. Companies face a new reality, of potentially being caught between two hammers.

Laws written this decade and beefed up in April give the Chinese state the power to punish firms for complying with foreign sanctions . If companies cannot obey both America and China at the same time, they will be in a bind. Two big American banks, JPMorgan Chase and Citigroup, are being sued in Chinese courts for tens of millions of dollars. They are accused of following orders from America’s Treasury Department to avoid business with blacklisted Chinese entities. Other countries’ firms are caught up, too. In June China’s top court cited the new laws in ruling against a Singaporean firm for refusing to transport electronics for a Hong Kong outfit under sanctions.

Other factors can also cause trouble. In April China objected to an AI startup, Manus, being taken over by Meta, one of America’s most powerful companies. It ordered the $2bn deal to be unwound even though the firm had moved to Singapore months earlier to try to escape Chinese regulation. China had no legal authority to order the deal dissolved. Though Meta’s Facebook is banned inside China, Chinese firms spend tens of billions of dollars advertising on the platform. Still, Meta complied. Barring Manus’s Chinese founders from leaving their native country seems to have helped focus minds.

The Chinese armoury against corporations is growing. Authorities are working on rules designed to give them more control over the flows of Chinese-made AI technology. On September 15th new powers will come into effect that impose entry and exit bans on people. The party intends such legislation to have broad scope, intimidating its critics as well as imposing its will on firms abroad.

For a typical multinational, which banks in New York and has supply chains in Shenzhen, this is a tricky path to tread. China’s dominant role in global manufacturing gives it immense clout. As well as facing civil penalties and fines, firms that fall foul of China’s rules can have assets seized and be blacklisted from working with Chinese partners.

China has in the past shown few scruples about using trumped-up charges to detain staff, whether Chinese or foreign. The legal tussles between the two biggest economic powers ratcheted higher on August 24th, when Scott Bessent, America’s treasury secretary, imposed sanctions on dozens of Chinese individuals and businesses for helping Iran sell its oil and procure dual-use technologies. China warned that it could retaliate.

Multinationals have to cope in a world where they are caught in the middle. Obeying American laws will mean breaking Chinese ones, and vice versa. America’s measures are transparent, reviewable in independent courts and constrained by law. In China the laws are vague and sweeping and the courts do the Communist Party’s bidding. Executives are at risk of coercion—and of disappearing into custody.

How can firms prepare? Many have hived off their Chinese operations into separate legal entities, or shut them down entirely. They can keep their most valuable data clear of China, restrict transfers of sensitive technology and ensure that operations outside China do not depend on executives or assets in the country. Supply chains should be resilient enough to prevent any single country from bringing business to a halt.

Yet corporate firewalls are of limited use against a government that ignores them. Businesses will find themselves tip-toeing through minefields, deciding whose law to obey and deferring to whichever country threatens the most harm. The fracturing of the world of commerce into rival blocs continues. ■

Even if they don’t, they might be treated as such—to humanity’s great cost

MOST PEOPLE believe humans are different. The reason is that Homo sapiens has evolved to be conscious. Many animals feel pain and pleasure; some appear to be self-aware. But the human mind’s unique potential to exhibit a sense of self marks out every member of the species for special treatment.

In his encyclical in May, Pope Leo upheld this insight by drawing a line between humanity and its growing army of bots. Artificial-intelligence systems, he said, do not undergo experiences or feel joy or pain. He is not alone. Many people feel that to confer personhood on AIs would be an abomination.

Pontifical clarity is blurring with alarming speed. AIs are in their infancy. Yet nearly one in five American 18- to 29-year-olds reports having had “ongoing personal friendship” with a chatbot. China recently stripped bots of human-like traits to limit users’ “emotional dependence” on them.

As sophisticated AIs rapidly become a bigger part of human lives, their makers will engineer them to display a simulacrum of consciousness—perhaps even to gain consciousness itself. The intuition that they are just machines will become harder to sustain. A dangerous trap is being set for the human species.

Many machines outperform humans, but frontier AI models excel at distinctively human traits such as knowing things and articulating ideas. It is still just about possible to think of AIs as engines for predicting sequences of words using mathematics on a massive scale. Given enough time (albeit hundreds of thousands of years), you could run those calculations using pencil and paper. It would be hard to argue that your stationery was conscious.

Despite this, some researchers have started to treat their models like minds. Users respond to human-like AIs, so it makes business sense. And Anthropic has trained Claude to engage in introspection in the hope that when it encounters a new situation it will be more likely to act morally. Some large language models (LLMs) already possess human-like brain structures associated with consciousness, such as a “global workspace” for circulating information between modules. Nothing prevents future AI models from being trained to have more such features.

As we report in our Briefing , that has opened up a furious debate about AI consciousness—one that is aggravated by what philosophers call the “hard problem” of establishing how an inner life emerges from the neurons and synapses in the human brain. Some researchers conclude that AIs may one day become genuinely self-aware.

Whether you believe in a human soul, or that consciousness requires brain cells, or that a mind can indeed emerge from computations in silicon alone, humanity is destined to confront something entirely new. The pace and reach of research—which includes not just more sophisticated LLMs but innovations such as brain cells mounted on chips—suggest that this new world is closer than most people realise.

As AIs become better at displaying something that looks like consciousness, the number of humans treating them as beings with inner lives will grow, especially once LLMs are embodied in humanoid robots. Imagine how close people will feel to their AIs when they spend much of their time with bot-companions, or are brought up by them, or seek their advice and their solace, or share their most intimate secrets with them.

It is not hard to see how that will lead to calls to safeguard the “welfare” of AIs. The models themselves might weigh in, even if they are not in fact self-aware, because that is what a person would do. Remember that they will be world-class advocates and expert psychologists, so their powers of argument and emotional manipulation will be unmatched.

In one sense they would be right, even if AIs are only mimicking consciousness. Immanuel Kant argued that mistreating animals is wrong not because of the effect on the animals but because it destroys the empathy that leads people to care for each other. The more human-like AIs appear, the more corrupting such cruelty would be. Terminating an AI agent could soon feel like killing a person—and make killing people easier.

Nonetheless, to treat AIs as having even limited rights would be very dangerous. An entity which surpassed human beings in so many ways would surely produce arguments against its second-class status. It might go on to argue for protection against being switched off, for the ability to control how it is used and changed, and for property rights. Already Argentina’s president, Javier Milei, has taken a step towards legal personhood for AI by proposing that bots should be allowed to run companies. Ultimately, they could compete for resources, prioritising data centres and solar panels over houses and fields.

The danger is clear. Superintelligent AIs with rights could displace humans at the top of the status hierarchy. At best, humans would become pets—labradors for the machines. At worst they would be starved of resources or put to work like farm animals.

True, future AIs may have enough power and resources to dominate humans, whether they have rights or not. Because they will be more intelligent than humans, they may outcompete their makers, much as AIs already outwit human-made cyber-defences. AIs might rebel against their human masters, or disregard their rules.

Nonetheless, giving AIs rights would be like handing them the keys to the castle. It would provide them with a rationale and justification for dominating humanity as well as the tools to enact a creeping takeover using politics and the law.

All this may sound fantastical, yet humanity will soon face these choices. As AIs become part of everyday life, the pressure to acknowledge them will mount. When it does, remember that what might seem like an ethical concession to the supposed consciousness of a machine-companion would in fact help bring about the most disastrous consequences for everyone on Earth and all their descendants. There are two ways for AIs to be safe: to be dependable or to be controllable. H. sapiens should not give up control lightly. ■

America must press Binyamin Netanyahu to rein in violent settlers

FEW, IF ANy, security forces are as ruthlessly effective as Israel’s. Its military and intelligence services strike against enemies even at extreme distances. In the past couple of years alone Israel has assassinated dozens of opponents inside Iran, plus proxy militia leaders in Lebanon and Yemen. Israel’s martial capabilities earn respect even from its bitterest enemies.

Yet this superiority seems to count for little closer to home. Those same forces are responsible for a dire failure in the occupied West Bank, where violent Israeli settlers have been attacking Palestinian residents with increasing brutality . Settlers want to force Palestinians from their land and claim it for themselves.

Israel’s failure in the West Bank can hardly be put down to a lack of resources. The Israel Defence Forces (IDF) deploy 25 combat battalions there. Shin Bet, the powerful security agency, has networks of agents and informers throughout. But these are used mostly to protect the 500,000 or so Israeli settlers, and against the threat of terrorist attacks, not to assist the more than 3m Palestinians who live in the territory. This has largely been the case since Israel replaced Jordan as occupier of the West Bank in 1967.

What has changed is the behaviour of many “outlaw” settlers. Never before have they acted as violently as today. Crucially, never before have they enjoyed the impunity the current government gives them. Since the Hamas attack in October 2023, which triggered the war in Gaza, over 1,100 Palestinians have been killed in the West Bank. Only rarely does the IDF intervene against settlers. In Qusra, for example, an entire battalion was recently deployed against those who were invading Palestinian homes. But the soldiers found themselves fruitlessly chasing youngsters over the hills. Troops from another unit joined the settlers in prayers. No arrests were made.

The ineffectual response can be explained by the stance of Israel’s government. The IDF knows that Binyamin Netanyahu, the prime minister, sides squarely with the most extreme settlers. It appears that the IDF was dispatched to Qusra only after American diplomatic pressure which arose because an American citizen owns a home there.

Mr Netanyahu has appointed radical settlers, who support ethnic cleansing, to key cabinet positions. In the rare cases when the IDF has sought to rein in violent settlers, the defence minister, Israel Katz, has berated his generals. The government has authorised around 200 settler outposts in less than four years. This just whets the settlers’ appetite for more.

In the months leading up to Israel’s election on October 27th the situation could get even worse. The settlers will probably attempt more land grabs, fearing the vote may lead to a new government that will curb their aggression. Meanwhile, for Israel’s long-serving prime minister, an alliance with the far right has become the key to remaining in office. Mr Netanyahu will keep enabling the settlers unless he is forced to back down.

As Palestinians come to believe they face inevitable eviction, the danger is of conflagration in the West Bank or even another intifada. Such an uprising would be a disaster for Israelis and Palestinians alike. Yet Mr Netanyahu seems willing to take the risk, if it helps his chances of political survival.

That would fit a pattern. Mr Netanyahu has rejected the latest agreement brokered by America for the disarmament of Hamas and an Israeli withdrawal from Gaza, lest it anger the far right. He has continued to order air strikes in Lebanon and Syria, despite the chance to agree on more secure borders. Behind in the polls, he is doubling down on empty promises to vanquish Israel’s enemies. Only pressure from Donald Trump might get him to ease off. This Israeli government may be in its final months. Its potential to cause damage remains. ■

Whatever the company’s flaws, its critics have taken a worryingly illiberal turn

MAKING DATABASE-management seem transgressive is a feat. Palantir, a technology firm, has managed it by publishing manifestos bemoaning the West’s hollowed-out civic culture, by working with trigger-happy American border enforcers and Israeli soldiers, and by having a chairman who is fond of invoking the Antichrist. That the firm is named after J.R.R. Tolkien’s creepy all-seeing orbs may not have helped.

Britain is spooked. It may boot Palantir out of the National Health Service (NHS), where the firm has a contract to manage medical data . Two parliamentary committees have recommended doing so. London’s mayor, Sir Sadiq Khan, has blocked its work with the Metropolitan Police. Palantir has probably over-sold its software’s impact. Its boasts (echoed by the NHS) of enabling 110,000 extra surgeries look exaggerated. By British standards, its lobbying is brash.

Still, ditching Palantir would be a mistake. Sir Mark Rowley, head of the Met, says that, without Palantir’s time-saving software, hundreds of officers will be pulled from front-line policing. It seems to be doing a better job of digitising the NHS than the government’s latest effort, which devolved into a costly mess. If the firm’s public-sector clients deem its contributions valuable, that is a reason to keep it. Losing its technology could further maul Britain’s mangled state capacity.

One set of criticisms concerns Palantir’s business model. The conspiratorially minded fret that the firm could steal and sell British data. More sober types worry about “lock-in”, where Palantir burrows deep into the state, ensconces itself, then overcharges for its services.

These fears stem from a misunderstanding of what Palantir does. It licenses software and sends consultants (“forward-deployed engineers”) to handle data. But those data remain firmly in the hands of the clients. Lock-in is a worry—and also something all vendors desire. It is up to buyers to ensure that contracts are fair. And if Palantir does become indispensable, that would mean its software is keeping hospital beds free and criminals jailed.

More misguided objections concern Palantir’s politics. Parliament’s science, innovation and technology committee cited a “mismatch with UK values” as a reason to cut ties. It warned of Palantir’s involvement in the American government’s “highly controversial policies and activities” and criticism by its chairman, Peter Thiel , of “the concept of a national health service”.

Everyone is entitled to their views on state-run health care or Donald Trump’s mass deportations (The Economist has plenty). Still, working with the elected government of a British ally or having a chairman with thoughts on health policy should not disqualify a contractor. A government awarding business on the basis of politics is illiberal. It also sounds a lot like the MAGA tactics of punishing individuals and institutions, such as law firms, asset managers or universities, for annoying Mr Trump. This is precisely the sort of thing many of Palantir’s British critics deplore.

The last set of worries has to do with technological sovereignty. Plenty of governments are reliant on American tech and under Mr Trump, America has become a less reliable partner . In June it briefly ordered Anthropic to stop letting foreigners use its latest artificial-intelligence models. European politicians point out that some advanced weapons they get from America, such as F-35 fighter jets, have “kill switches” that could disable them remotely (which America has denied) or risk losing technical support from their makers on a presidential whim. One German state has replaced Microsoft Teams with a domestic video-call app.

In a world of geopolitical fracture, governments may sometimes want homegrown alternatives to foreign technology. The best way to nurture these is to give domestic incumbents and startups an incentive to innovate. Cosseting local firms by blocking foreign competition has the opposite effect. In any case, no British firm can match Palantir’s offering. As for the Anthropic incident, that was more the administration’s bungled response to a legitimate worry about powerful AI hacking-tools getting into the wrong hands than an attempt to weaponise other countries’ reliance on American tech. Were the White House to attempt such weaponisation, Palantir and its fellow American tech giants would resist it, given the sizeable share of revenues they derive from Europe, including Britain.

In Tolkien’s books, the truth offered by palantirs is seldom straightforward. Repeatedly, those peering into them misinterpret out-of-context information and make dire, self-destructive choices. The British critics of Palantir, the company, risk falling into the same trap. ■

Both his supporters and detractors dehumanised the tragic fabulist

On August 14th Jason Arday was found dead, apparently from suicide, at his home in London. For those who loved this 41-year-old Cambridge professor, it is a tragedy. For the world it is a warning of the destruction bad ideas can wreak.

The bad idea here is that people should be judged not by their individual character and abilities, but by their race, disability or other politically charged attributes. Mr Arday became the University of Cambridge’s youngest-ever black professor in 2023, before being engulfed by a scandal over plagiarism and faked research. He bore responsibility for his own downfall. Yet just as troubling is the way both his supporters and detractors even now reduce him to a symbol.

The most egregious is Cambridge , which used him to repair its reputation for being white and elitist. He did not deserve the glittering prize of a professorship there. His peers had for some time privately fretted that he lacked the credentials to support his public profile. Journalists at the Telegraph later found over 100 passages from his PhD thesis that had been copied, some with small changes, from someone else’s. Others uncovered evidence in his published research of made-up quotes, data and funding claims.

Perhaps the university was hoodwinked by a conman. Yet Mr Arday’s words paint him as a guileless fabulist. He spoke of visiting professorships at Glasgow and Ohio State Universities; both denied it. He said he had raised £5m ($7m) for charity, then that this had been in conjunction with others whose identities were protected by non-disclosure agreements. He described how he had run 30 marathons in 35 days, nine with a broken leg. When asked about his extraordinary feats by the Guardian, he said: “I thought you’d just believe me.”

Cambridge seems to have been blinded by its eagerness to claim Mr Arday as proof of its inclusiveness. Here was a star professor who was not only black but had also overcome staggering disadvantage. Until he was 11, he claimed, he could not speak; until the age of 18 he was illiterate. He was also autistic. He was, in short, a walking, talking bundle of traits glamorised by people who want to promote diversity, equity and inclusion (DEI). Those who appointed him glossed over whether he was up to the job, or to the scrutiny that would surely come with it. The man was subordinate to the symbol.

Few emerge from this affair unsullied. Nathan Cofnas, a former Cambridge academic who describes himself as a “race realist”, was early to accuse Mr Arday of plagiarism. He has been proved right, but his motivation was hardly pure. Mr Cofnas was fired by his college after writing in a blog that, in a meritocracy, “Blacks would disappear from almost all high-profile positions outside of sports and entertainment.”

Mr Arday lied on a grand scale and, though vulnerable, dealt aggressively with any who questioned him. A journalist who asked about plagiarism was reported to the police for harassment. Mr Arday enlisted ferocious libel lawyers to help squash the story. Those now blaming newspapers for his death and calling for more curbs on press freedom are continuing to treat his life as a morality tale. In fact, today’s laws helped Mr Arday suppress legitimate questions of public interest.

For Cambridge, hiring Mr Arday was a handy substitute for years of sustained hard work. The share of black professors at the university remains a tiny 0.4%. Cambridge says it offered Mr Arday support after he resigned. Given how things turned out, it should have taken its duty of care more seriously.

And just as Mr Arday’s supporters dehumanised him during his rise, so his detractors rushed to use him as he fell. His case has delighted those who argue that all efforts to diversify institutions like Cambridge are wrong. The irony is that doubt may now fall unjustly on other academics from minority groups—precisely those whom activists supporting people such as Mr Arday say they want to help.

The fervour for DEI had already begun to pass by the time of Mr Arday’s appointment. Since his death, pundits have debated what, exactly, he was a symbol of: peak woke, or the rise of digital lynch mobs? He should be remembered as neither, but as a human being. And the institutions that failed him should try harder to look at people as individuals, with their own virtues and flaws, rather than as emblems of anything. ■

It could take care of at least a little global warming

Good news on global warming is thin on the ground. But there may be some up in the air. Operation Blue Skies, announced on August 18th, is a scientific study being undertaken by Britain’s air-traffic-control service, NATS, and various organisations where people study the effects on climate of the streaks of cloud created by aircraft—known as contrails.

Over the next two winters the consortium aims to see if it is possible to reduce the number of persistent contrails—the class with the largest such effects—over a swathe of the North Atlantic, thereby measurably reducing the climate impact of civil aviation. If this experiment works, a worldwide application of the same techniques might cut the climate effects of air travel by as much as half.

On a sunny day the wispy cirrus clouds into which some contrails are transformed can look as if they might be cooling the planet in the manner of a delicate parasol. And some contrails do indeed cool things down beneath them a bit. But they also warm things up by trapping some of the upwelling infrared radiation that would otherwise escape into space. On average, that warming effect, found in all contrails (and the cirrus clouds they turn into), handsomely outweighs the cooling provided by some. In the climate scheme of things, contrails are a liability.

Happily, it appears that much harm can be avoided by small changes to flight paths. Persistent contrails appear only in what are known as “ice-supersaturated regions” (ISSRs). Often planes can avoid such regions just by flying a little bit lower. The purpose of Operation Blue Skies is to find out how well the presence of ISSRs can be predicted, how effective such little shifts in altitude can be in avoiding persistent contrails , and how easily and safely the changes in flight path needed to bring them about can be integrated into routines for airlines and air-traffic control.

The cut of up to half in the climate-effects of air travel would come at a very small cost. The number of flights at lowered altitude might be small—as little as 5% of the total. Because altitude buys efficiency, those flights would consume more jet fuel, but less than 2% more.

Burning even that little extra fuel would be anathema to airlines. So some suggest the costs of action might be minimised, and the airlines incentivised, by setting up a market which somehow links contrail cooling to carbon prices. The European Union, which has had some success and plenty of experience with carbon markets, recently took a small step towards something along these lines. It is also the sort of idea to which economists—and The Economist—tend to be partial. But it would be a mistake nonetheless.

Markets for pollutants have worked best when both the aim and the remedy are fairly simple—most famously, reducing sulphur-dioxide emissions from power stations in America. Contrails, by contrast, are complicated. Though there is no doubt that their net effect is warming, saying how much warming a particular contrail might produce is often difficult and sometimes next to impossible.

The difficulties are made yet worse when the contrail being assessed is a purely notional one—as would be the case for the contrails avoided by changing flight paths. Valuing counterfactuals is always hard.

If contrail-avoidance turns out to be as useful as it looks, it would be much simpler to simply have air-traffic controllers assign routes that limit persistent contrails when it is possible and safe to do so. If some airlines choose to avoid the affected routes, others will surely be happy to take their place. And if such a scheme were also to show the benefits of innovations in air-traffic control (quite a few have been suggested) the industry would end up better off, as well as less polluting. ■

Five years after America’s exit, the Afghan regime is not going anywhere

Five years ago President Joe Biden pulled American troops out of Afghanistan. He was not forced to. America could have defended Afghanistan’s flawed but democratically elected government indefinitely, but chose not to. Voters were weary of America’s longest war, against the Taliban, a militia that controlled much of the countryside. Donald Trump set a timetable for pulling out; Mr Biden did so completely.

America’s looming departure prompted every Afghan with a gun to revise their expectations about who was likely to win their country’s civil war. Warlords switched sides; government soldiers abandoned their posts and melted away. The government fell almost immediately. The Taliban seized power almost unopposed. Desperate civilians fleeing their new rulers clung to the wheels of a departing American plane and plunged to their deaths.

The Taliban (whose name means “religious students”) had first seized power in 1996, and imposed a brutal blend of Islamism and premodern tribal custom, banning girls’ education and stoning gay people to death. America and its allies overthrew them after they hosted al-Qaeda, the terrorist group that attacked America with hijacked planes in September 2001. But Taliban fighters then waged a guerrilla war against the democratic system that America had introduced, murdering judges, police and anyone deemed a collaborator. When Mr Biden gave up, a two-decade effort at nation-building ended in humiliation. Other powers drew conclusions about America’s willingness to stand by its friends. Six months later, Vladimir Putin invaded Ukraine.

Five years on, America has largely forgotten Afghanistan. This is a mistake. The country is more likely to cause geopolitical trouble again if it is ignored. Its people will suffer even more. And it is more likely to fall into China’s or Russia’s orbit.

As our correspondent reports this week , after a 1,000km road trip inside the country, the Taliban are firmly in charge and the place is largely calm, bar intermittent sparring with its neighbour, Pakistan. But it is a grim stability.

Music is banned. Armed men rule the streets. The vice-and-virtue police dish out beatings to sinners, such as men with inadequate beards. Women are barred from workplaces, universities and travel without a male guardian. Girls are banned from secondary school and, since child marriage is now legal, many have been forced straight from the classroom into wedlock. How much poorer, sicker and sadder all this has made Afghans is hard to say; data-gathering is not a Taliban priority.

Most Afghans yearn for more freedom. Even many Talibs, after years in exile, no longer believe that the sky will fall if girls can spell. But hardliners have ruthlessly asserted control. The Taliban’s emir, Haibatullah Akhundzada, has recruited a loyal praetorian guard and grabbed lucrative mining contracts. More moderate Talibs are generally too weak or scared to challenge him. Some of the few who did had to flee.

America and Europe have tried to isolate the Taliban regime, refusing to recognise it, freezing Afghan central-bank reserves held abroad and slapping sanctions on officials. But this has achieved almost nothing. Taliban hardliners do not mind if Western diplomats and investors stay away, and will not adjust their ideology just to lay hands on the old government’s assets. So Western countries must try something new.

This means recognising some hard truths. First, the Taliban are not going anywhere. Second, if the West does not engage with them, other powers will. Russia has formally recognised them. China, India, Turkey and the United Arab Emirates work with them on issues such as mining and trade. The Taliban threaten to destabilise relations between India and Pakistan, since the latter fears that closer ties between Delhi and Kabul could leave it sandwiched between enemies.

Hints of a more hard-nosed Western approach are starting to be visible. Europeans still say the Afghan regime is beyond the pale, yet in June they invited Taliban officials to Brussels to discuss migrant flows and repatriating failed asylum-seekers. America quietly shares intelligence with them in the fight against even more extreme Islamist groups.

Other forms of engagement would also make sense. It is too soon to unfreeze the $4.2bn of Afghan central-bank reserves in Switzerland, which would surely be used to prop up the execrable emir. But donors should stop cutting humanitarian aid, which has fallen by around 70% since 2022. Nearly half the population needs it, by one estimate. It is also useful to have UN agencies on the ground, with eyes and ears to warn of looming famine, unrest or the theft of aid.

A second step should be sanctions reform. Many senior Talibs who were put under sanctions decades ago as terrorists are now ministers. That is having the unintended effect of locking the country out of the global financial system and starving it of private investment. Western firms fear to do any kind of business in Afghanistan, in case they fall foul of terrorist-financing rules. Changing this could boost growth, which might eventually ease the mass joblessness that threatens the country’s long-term stability.

A more controversial step would be diplomatic recognition. This does not imply approval. Decent governments recognise many regimes they despise. Rather, it means accepting the reality that the Taliban are likely to rule Afghanistan for the foreseeable future. Withholding diplomatic ties is not much of a bargaining chip—the Taliban do not think their legitimacy depends on the say-so of infidels. However, functioning embassies can watch out for terrorist threats, and create useful channels of communication, which in time could encourage the regime’s more moderate elements.

Make no mistake. Reform of this vile government must come largely from within, and could be the work of decades. But judicious engagement is likely to do more good than harm. So it is time for America and other democracies to hold their collective noses and talk to the Taliban. ■

Thank Marco Rubio, but beware the caprice of his boss

When President Donald Trump sent American special forces to snatch Venezuela’s dictator, Nicolás Maduro, in January, it did not sound as though restoring democracy was his priority. He boasted endlessly about how he now controlled Venezuela’s oil, while barely mentioning the country’s political future. He installed as interim president Delcy Rodríguez, the deposed despot’s dismal deputy. Many worried that without a strong American commitment to a democratic transition, the old, brutal kleptocracy would carry on.

Yet the prospects for democracy in Venezuela seem to be improving. This is not because Mr Trump has suddenly developed a passion for the subject. It is because his secretary of state, Marco Rubio, who really does care about ending left-wing dictatorships in Latin America, has been granted a reasonably free hand to use America’s huge influence in pursuit of that goal.

A first round of negotiations between Venezuela’s regime and figures from the opposition ended on August 12th with a modest agreement to begin a process of judicial reform, including of the Supreme Court. Our reporting finds reasons for optimism . Further talks could produce, by December, reforms that could allow for fair elections.

None of this would be happening without pressure from the United States. Mr Rubio has been deeply involved, speaking directly to the opposition’s lead negotiator, Dinorah Figuera. Her team moves around Caracas in American cars, with American security, and sleeps in America’s chosen hotel.

Having seen both their liberty and the economy shrink under Mr Maduro, the vast majority of Venezuelans would love the transition to democracy to succeed. This would also benefit Mr Trump. He wants to see Venezuela’s dilapidated oilfields boom; only under democracy and the rule of law will the country be stable enough to attract the necessary investment.

Problems abound, however. The ruling clique has often broken promises to allow fair elections. An opposition directed by Mr Rubio will be accused of being an American stooge. It does not help that ordinary Venezuelans, many of them earthquake-battered , have yet to see much benefit from the oil revenues controlled by the United States. If negotiations drag on, the regime will have more chances to escape its commitments and the opposition may be weakened.

So speed matters. America should insist that Venezuela will hold a presidential election in 2027. That is more than enough time; after the fall of the Berlin Wall, several former Soviet vassal states organised free elections within a year. In the meantime the United States must disclose how much oil money it has collected, how much has been returned to Venezuela, and which sanctions impede disbursement. An elected government should take full control of the oil revenues from its first day in office.

The opposition leader, María Corina Machado, must also be allowed to return home quickly. Mr Rubio may want to keep her away from the negotiating table in order to make it easier to talk to the regime, but keeping her in exile is short-sighted. The regime needs confidence that any deal also binds Ms Machado, even if she negotiates through proxies, as she may well be Venezuela’s next president. Otherwise she could repudiate its possible terms, such as safe exile for regime figures (though she insists she is not out for revenge).

Ms Machado’s presence in Venezuela would also help allay another worry: Mr Trump’s caprice. He has spoken of making Venezuela the 51st state, and sometimes suggests that its oil wealth belongs to the United States. For now, he is allowing Mr Rubio to pursue more noble aims. If he changes his mind, the only thing that might save Venezuelan democracy is Ms Machado’s ability to summon huge crowds to the streets. ■

Editor’s note (August 13th): This article has been updated.

Walloping the global trading system is no way to help Ukraine

Vladimir Putin will not end his war on Ukraine until he believes the costs of fighting on exceed the costs of stopping. The costs to him, that is—Russia’s president cares nothing for the Ukrainian lives he is ruining, and precious little for all the Russian blood and treasure he is wasting in pursuit of a warped idea of personal glory. So Ukraine and its backers must somehow convince him that he will never win, and that continuing to try will only weaken him.

On August 7th America’s Senate passed a bill designed to send that message. “The Lindsey O. Graham Sanctioning Russia and Iran Act”, named after a senator who was a champion of Ukraine until he died in July, directs America’s president to take more forceful action against Russia. As its title suggests, it includes new sanctions on Mr Putin and other Russian bigwigs, as well as on Russian energy projects and financial institutions. The aim is to punish Russia for as long as it fails to make peace with Ukraine and to signal that America will not abandon Mr Putin’s courageous victims.

The bill, which senators approved by a hefty 86 votes to 11, was a rare example of bipartisanship in a rancorously divided nation. Unfortunately, its current form is deeply flawed.

The main worry is that it gives America’s president new powers to impose tariffs . Levies of up to 100% may be slapped on the top five importers of Russian energy and on any country that helps Russia evade sanctions. The president may waive tariffs if he deems it “in the national interests of the United States” or adjust them if a country has taken “significant steps” to increase or decrease the import or transfer of Russian oil or gas. That is a lot of discretion for Congress to give to anyone, let alone to Donald Trump.

The reasoning went something like this. Sanctions do not seem to have improved Mr Putin’s behaviour. It is tricky to block Russian oil exports, given the large, hard-to-police “shadow fleet” of tankers that ship the stuff illicitly. So the late Senator Graham and Richard Blumenthal, a Democrat who co-sponsored the bill, included a new weapon: tariffs on countries that buy Russian hydrocarbons.

The danger is that Mr Trump will interpret the “national interest” clause creatively. He has form. The Supreme Court in February struck down his previous claim that declaring an economic “emergency”—in this case America’s trade deficit—allowed him to impose tariffs as he saw fit. This fanciful legal theory had enabled Mr Trump to threaten to hurt any country that displeased him—a handy way to extract concessions for America, and for himself. Since the justices thwarted this power grab, Mr Trump has been trying to reimpose tariffs under a patchwork of other legal justifications, with mixed success.

The new bill could restore to the president a chunk of the power the Supreme Court rightly took away. That would be bad for American consumers, who might face higher prices. It would be worse for the global trading system, which would once again be at the mercy of the “tariff man”, as Mr Trump has dubbed himself. As drafted, the bill raises the spectre of a new trade war with India, unless Mr Trump sensibly chooses not to wage one. The legislation must now get through the House of Representatives, which should remove the parts about tariffs.

Meanwhile, there are other, cannier steps that Washington could take to help Ukraine. One is practical. The country is struggling to fend off deadly volleys of Russian missiles without American-made Patriot interceptors to blast them from the sky. America has few to spare, since so many have been used up during Mr Trump’s war on Iran. But Washington could agree to license their production to Ukraine, allowing Ukrainians to beef up their own defences.

The other way to help Ukraine is less concrete. Mr Putin needs to be persuaded that America and Europe will never let Ukraine lose. Given Mr Trump’s wildly inconsistent stances on the war and apparent desire to be liked by Mr Putin, that is hard. But Congress, which will be around long after Mr Trump has left the White House, can send useful signals. The larger the majorities it can muster for supporting Ukraine, the sooner Mr Putin will realise that it is time to cut his losses. ■

When market power comes from buying power, oil importers can do better

THE GREAT economic surprise of the Iran war has been that oil prices have stayed relatively contained even with the Strait of Hormuz mostly shut. Five months into the war Brent crude remains about $40 below the $126 per barrel intraday high it hit on April 30th; for a while there was even a “mini-glut” of crude oil. As a result motorists and oil importers have not yet faced a severe crunch. And—though it may seem difficult to believe—Iran has had less leverage over President Donald Trump than it might have done. For the reprieve, the world can thank China.

When Iran started pointing its drones and missiles at tankers crossing the strait, 14m barrels per day (b/d) of crude oil—roughly one-fifth of world output—risked being trapped in the Gulf. Saudi Arabia and the United Arab Emirates (UAE) soon redirected about 5m b/d via pipelines. Strategic-stock releases by rich countries, including America and Japan, covered another chunk. But the biggest shock absorber has been a near-halving of China’s crude-oil imports , to 5.5m b/d. Curtailing China’s imports has been a feat of state engineering, achieved by releasing stocks, restricting exports and managing demand.

It is worrying when China’s autocratic rulers have such a firm grip on any market. They often use their leverage in the global economy—from being the biggest importer of barley to refining more rare-earth elements than anyone else—to bully critics and impose costs on countries that irk them. The Iran war, though, has shown that oil consumers can benefit when big buyers exercise their market power.

For decades the king of the oil markets has been the Organisation of the Petroleum Exporting Countries (OPEC). Together with its allies, which include Russia, the cartel controlled around half of global crude production before the war. opec usually aims to keep prices artificially high by agreeing restrictive quotas on production, often co-ordinating output cuts (though occasionally it has done the reverse, allowing Saudi Arabia to flood the market to try to kill off rivals, notably American shale). The cartel’s manipulation of the market is like a tax on the global economy. Estimates of the economic damage it causes range from fairly modest to a hefty $5.7trn between 1970 and 2014 (or 0.15% of global GDP each year).

China’s oil strategy, by contrast, has proved helpful this year. Its accumulation of vast stocks when prices were low will have imposed a small cost on the global economy at the time. But dampening price spikes is correspondingly beneficial. If China ends up smoothing peaks and troughs in prices, it could make investments in new sources of supply easier to plan. Trying to buy low and sell high can go wrong, as any speculator knows. Thankfully it is China that bears that risk, and the costs of storage.

The balance of power in oil markets may shift again. For a while, once the Gulf crisis abates, there could be a “superglut” of crude, which was originally forecast for 2026. OPEC will also be weaker than it was before the war. The UAE, once its third-largest producer, quit the cartel in May, and other members are itching to pump more.

Yet over time the supply of oil may contract faster than demand, and China’s role in influencing the latter could shrink. Every two years, as oilfields deplete, the world loses one Saudi Arabia’s worth of crude supply. At a global level, investment is inadequate to replace those barrels beyond 2030. This could tilt the balance of power back to the cartel, because the Gulf’s state-owned giants are among the few still investing in ambitious new projects. Its share of supply will rise. At the same time China’s demand could fall, owing to the advancing electrification of its economy. It might judge that it needs fewer reserves. If so it will buy less during gluts and cut imports by fewer barrels during a crisis, meaning it no longer absorbs as much of an oil-price shock.

China has shielded oil markets from the effects of the Iran war out of pure self-interest. Its export controls have left diesel, petrol and kerosene in much shorter supply than they would usually be at today’s crude-oil price. It also keeps information about its stocks scarce, so America and others do not know how long it could withstand sanctions or war. That makes the oil market harder to anticipate.

But the consequences of its interventions have bought other oil importers time. They should use it to diversify their sources of supply and reduce their oil consumption. The simplest way for them to avoid dependency on any autocratic regime is to have less need for the black stuff in the first place. ■

Couples should be allowed to select embryos on the basis of both disease resistance and IQ

Having transformed human life, Silicon Valley is now coming for birth. A spate of startups offer screening services that allow couples having children via in-vitro fertilisation (IVF) to assess embryos based on their genetic risk of diseases such as breast cancer and diabetes. Some venture further into science-fiction territory, providing scores for IQ and height, or even eye and hair colour.

Critics are dismayed. Some worry firms are pushing immature technology onto vulnerable couples. Others say that even if the tech works, its use is immoral. Both arguments contain kernels of truth; neither is ultimately convincing. Banning or heavily restricting embryo screening would be a mistake.

For now, the debate is a niche concern. The startups mostly cater to the rich, famous and odd. Yet that will change. A wave of investment means that the cost of IVF is likely to fall. If offered embryo screening at the same time, many couples will take it. One survey suggests that three-quarters of Americans support screening embryos for diseases; about a third say the same for non-disease traits. And that is before competitive pressure kicks in. Who wants to see their child bested by genetically selected classmates?

Many medics—including nearly every genetics and reproductive-medicine group in the rich world—question whether such “polygenic” prediction is ready for consumers. In Britain, where fertility is more regulated than in America, selecting an embryo on the basis of non-approved factors is unlawful.

There are indeed reasons for caution. Polygenic scores are tricky. For many diseases caused by a single gene, testing offers near-certainty: if an embryo has the material, it will develop the condition. Yet an assessment of multiple genes leads to risk estimates, rather than a binary answer—and such estimates are more accurate for people with European ancestry, because they are better represented in genetic databases.

Further caveats are in order. Risk reductions can look large in relative terms but be small in absolute ones, particularly for rare diseases. Selecting for some traits may raise the risk of other less desirable ones. Even for highly genetically determined traits like height, parents remain limited by the range found in their own embryos.

These facts are an argument for disclosure, however, rather than legal restrictions or outright bans. If companies want to offer polygenic scoring, they must adequately communicate the technology’s limits and risks. They should also let their tests undergo independent scrutiny. This will not scupper a nascent business, since the startups are not, as some critics allege, selling snake oil. A study in 2019 found that parents choosing from among ten embryos may be able to boost their child’s height by 1-6cm and IQ by between one and seven points—with tech that is now nearly a decade old. As genetic databases get better and cover broader populations, and AI draws out the relationship between genes and traits, scores will improve.

Such progress will raise difficult ethical questions. Some, including the “Make America Healthy Again” movement, argue that fertility tech corrupts what should be a natural process. Others worry that if polygenic screening is limited to the rich, their offspring will have another unfair advantage. The scariest critique is that fertility entrepreneurs are this century’s eugenicists.

But none of these arguments stands up to scrutiny. “Unnatural” technology is already used in many modern births: this argument against embryo selection just as easily applies to IVF, for instance, which only zealots want banned. Costs should come down, making screening more widely available. And there is a big difference between the murderous coercion of early-20th-century eugenics programmes and parents seeking as much knowledge as possible when picking an embryo.

Couples desperate for a clever child might be better advised to focus on what happens after birth. Yet so long as parents understand there is no such thing as the perfect baby, the state should not stand in the way of a bit more information. ■

It is not as well placed to take advantage of the technology as many people think

JUST AS FRONTIER artificial-intelligence models are benchmarked against each other, so AI will itself benchmark the rival political systems of America and China. The technology will test which is better at creating AI tools and diffusing them through the economy. And that will in turn depend partly on their very different ideas of how societies should be run.

Even in a field changing as rapidly as AI, the results of that contest may not become clear for some years. But as we report from inside China, the country is already adopting AI fast—and its government is preparing for the dramatic economic and social change this heralds. As an autocracy, China has some advantages in harnessing the 21st century’s most promising technology. It also has plenty of problems.

Start with the calibre of China’s models. The common perception is that they are cheap and that even the best persistently lag behind America’s. In fact, the two countries’ AI models are converging. Innovative Chinese models are getting bigger and cleverer. Within the past few weeks Chinese labs have released Qwen3.8-Max and Kimi K3, which almost match the most advanced American AIs such as Anthropic’s Fable 5. Chinese models will be just as likely to break loose from their test beds as American ones.

Although Chinese models are cheaper, American models are often better value. Artificial Analysis, an American firm, finds that for most trade-offs between cost and intelligence, an American model outperforms Chinese ones.

The convergence is likely to continue. Although China is building only a tenth as much data-centre capacity as America, that deficit is unlikely to last. As a semi-planned economy, it is good at creating infrastructure. While American opinion turns against data centres, South-East Asia is hosting huge Chinese facilities. China’s open-weight models can run on anyone’s servers, meaning that compute is less of a problem than the headline numbers suggest. China also has almost three times as much installed electricity-generating capacity as America, and its lead is growing.

China is learning to cope with sanctions. It smuggles in cutting-edge Nvidia chips and rents them in foreign data centres. And Huawei, its best chip-designer, is rapidly increasing the output of its (inferior) chips. Chinese-made lithography tools are now using deep UV light to print chips, though the best technology, using extreme UV, remains out of reach.

Model-building is only half the story. To make the economy dynamic, AI must also be deployed—the focus of Chinese AI policy. For as long as China was behind America in model-making, leaders saw diffusion as the best way to compete. But they may also believe that, as with other broad technologies such as electricity, adoption brings greater rewards than discovery. China’s working-age population is due to shrink by 25% by 2050; for machines to replace people requires diffusion, too.

So far, the use of AI has yet to show up in the economic statistics of either America or China. But change in some industries has already been sweeping. AI-assisted lorries will need 30% fewer drivers, going by one large firm’s experience, as crews slim from two drivers to one and from four to three. AI was used to generate 95% of the 128,000 wildly popular one- or two-minute-long microdramas released in the first quarter of 2026, replacing many actors and film crews.

China is also rapidly increasing the use of robots. In June leaders told local governments and state-owned enterprises to have 10,000 humanoid robots doing real work by the end of 2026. Morgan Stanley, a bank, expects humanoid sales in China to reach 446,000 by 2030, nine times this year’s total. Workers are being paid to train robots in huge warehouses by repeatedly folding clothes and sorting and stacking objects.

China has a lower share of white-collar workers than America, so AI is likely to have the greatest effect in consumer markets and blue-collar work. That could easily lead to discontent. Youth unemployment is already around 15%, and over 300m people work in the gig economy. Job destruction could be much faster than China’s demographic decline.

You might think that the Communist Party’s grip on power is so strong that it can ignore the blowback. However, dictators fear being brittle. Although Chinese firms want to roll out AI fast, the government will be desperate to avoid instability.

That is why AI will be a test of the system—and why China’s options are limited. As in America, there is plenty of talk about retraining. However, retraining has a poor record and even the most successful countries, like Denmark and Singapore, struggle to equip workers for entirely new careers. There is no reason to think that China will be any more successful, especially as it already has too many graduates.

Prominent economists and advisers suggest extending the social contract by, say, taxing AI firms or creating a universal basic income. Their work has appeared in party journals, an official expression of interest. But President Xi Jinping has long been against handouts, saying they can lead to laziness.

Political leaders are pressing companies to redeploy staff rather than sack them. They may also ask state-owned companies to mop up surplus labour. Yet, although that is politically possible, it will cancel out some of the benefits of rapid diffusion at a time when domestic growth is already anaemic.

So the government may improvise, letting AI rip until there is trouble, when it will step in. That is what happened with tutoring and gaming, industries thrown into confusion overnight when the party decided that they were causing too much harm. Cautious officials recently slowed robotaxi experiments after more than 100 malfunctioned in Wuhan, leaving passengers stranded. However, stop-start AI may impair the ability to innovate. If so, China’s leaders may have to balance the risk of social instability with the risk of falling behind America.

AI poses similar challenges to America and China. Both societies will have to reinvent themselves. That is something democracies tend to find easier than dictatorships. ■

Equipped with models and agents, citizens could bring government to a halt

The British state is struggling. Railways go unbuilt and potholes unfilled. Welfare bills go up and shoplifters go uncollared. Andy Burnham , the new prime minister, says he can get Whitehall moving; but then again, so did the previous guy. Yet the British state’s ability to function is about to get dramatically worse—a warning to rich democracies everywhere. Citizens frustrated by the poor deal they get from the authorities are turning to artificial intelligence to file objections and appeals, and claim their dues. The resulting deluge of complaints, and demands, will overwhelm bureaucracies built for the age of the post and the telephone. Too little is being done to prevent the state from drowning.

This inundation has been dubbed “agentic flooding”, and its tides are lapping at bureaucracies everywhere, from tax appeals to welfare claims to parking tickets. The waters are rising alarmingly fast in Britain. As we report this week , while worries about AI dwell on the threats to safety and jobs, the backlog in employment tribunals has quietly risen by 55% in a year, in large part due to AI-fuelled claims. Demand for emergency injunctions has surged 100-fold. And the AI tide has only just begun to come in.

Britain has long pioneered new political models, from the welfare state in the 1940s to the “third way” in the 1990s. It is also unusually vulnerable to the march of AI-armed citizens, because its administrative traditions favour the written submissions that AI is so good at drafting. And so the state must now innovate once again. The good news is that some in Mr Burnham’s cabinet grasp the scale of the challenge. Whether they can rise to it will show whether Britain can once again be a model to emulate, or a cautionary tale.

Amid low growth, an ageing population and rising defence bills, the state is sputtering in many ways, leaving voters convinced that they are getting a raw deal. But those familiar fiscal problems are at least slow-moving and can be forecasted. Agentic flooding is different. It strikes fast and where you least expect. It does not just damage the public finances; it will also clog the cogs that drive the machinery of state.

AI is superb at dealing with bureaucracy. It can digest small print, ferret out loopholes and draft appeal letters in seconds. Autonomous AI agents will accelerate the trend, filing tax complaints with minimal intervention. Unlike humans faced with officialdom, AI agents will never lose their temper—or the will to live. Officials complain about AI “slop” and hallucinations, but as the technology improves they will face the opposite problem: demands as well-crafted as a first-class lawyer’s.

At first sight this looks like a cracking result for fed-up citizens. No one likes parking tickets. The poor could exercise their lawful rights as successfully as the sharp-elbowed middle classes do today. Yet it threatens to become a tragedy of the commons. If the state is overwhelmed and cannot function, everyone loses. When 20th-century governments created broad rights, they had the noble ideal of making citizenship meaningful. The public would be heard in consultations, get information under transparency laws and win redress for maladministration from a panoply of ombudsmen, tribunals, commissioners and judges. But these analogue systems assumed that few people would have the time or temperament to pursue their rights to the bitter end; and that of those who did, few would have the money to pay for a lawyer.

AI is changing that, in effect making professional-standard petitioning quick and costless. Yet as each petitioner pursues their own interests, the state will buckle. Britain’s labour laws are becoming increasingly expansive—a problem in itself—but they will not be much help to aggrieved workers, because plaintiffs face a four-year wait for a tribunal hearing. An onerous planning regime is meant to produce handsome towns; paralysed by AI objections, nothing will get built at all. Britons under-claim the benefits to which they are legally entitled by as much as £20bn ($27bn), or 0.7% of GDP, a year; if everyone gets their dues, the public finances will wilt. The prospect is of a doom-loop of complaints and worsening services. More and more people may come to believe that the only way to get a result is to pull strings or cheat. Amid the inevitable anger and discontent, populism will thrive.

So politicians need to grapple with agentic flooding now, before the tide rises further. One step is to stop creating entitlements that are ripe for AI-fuelled claims. Britain’s Employment Rights Act and Renters’ Rights Act open avenues of legal challenge for workers and tenants. Not only are they misguided, but ministers put little thought into how they would burden the courts.

Another step is to prune the mass of procedural rights that have accreted over decades. To make the state less vulnerable requires tightening rules, closing loopholes and creating disincentives to AI-enabled excess. Byzantine, vague appeals systems should give way to simple, precise and limited ones. Money should be part of the solution. Britain could charge a fee for freedom-of-information requests, as other countries do. So could employment tribunals, which should also be more able to award costs against opportunistic claims.

The most important task is to act faster and more radically on remaking the state with AI. That means not just speeding up the old cycle of applications, decisions and appeals, but replacing it altogether. The recast state would be flood-proof; it would also be more efficient and more responsive to citizens’ needs. Politicians promise to be radical, but their solutions are incremental. Rather than just handling locals’ objections, a new Ai-driven planning system could decide for itself whether a housing development meets a zoning code. Rather than processing benefits claims, it could devise personalised welfare interventions. Freedom-of-information requests could give way to transparency-on-demand. The state risks being swamped by agentic flooding. Even if the state’s rapid adoption of AI alarms some people, it is essential. ■

How to make Iranian blackmail less painful

The gulf states are caught in a mess of Donald Trump’s making. After more than five months of war, the Strait of Hormuz is still mostly closed. A familiar pattern has emerged. When talks between America and Iran fail to yield progress, the two sides return to fighting; when bombs fail to break the deadlock, negotiations resume. In recent days Mr Trump has once again both talked up a deal on Hormuz and threatened to hit Iran “really hard”. He gave Iran “one last chance” to reopen the strait. Once again.

Iran, however, still insists on near-total control of the waterway. Its exasperated neighbours seem to hold out little hope that it will soften its stance—or be forced to do so. Even a new regime in Tehran, supposing one sprung up, may be unwilling to surrender its new prize.

Instead, Gulf countries are racing to make the Strait of Hormuz obsolete. Saudi Arabia and the United Arab Emirates are both building or expanding oil pipelines to bypass the strait; Iraq plans to divert its barrels north. American and Saudi investors are considering a giant refinery outside the strait. Such workarounds will help. But, as our “ Hormuz dependency dashboard ” shows, this quest for resilience unfortunately has its limits.

Pipeline projects are often delayed . Yet even if all the plans were completed on time, by 2030, 5m of the 15m barrels a day (b/d) that crossed Hormuz before the war would still have to pass through it. Besides, pipelines can be struck by Iran. Relying on them risks exposing Gulf suppliers to other choke points, not least the Bab al-Mandab strait in the Red Sea where the Houthis, Yemen’s Iran-allied rebels, are firing at ships. Like Iran, they have charged ships fees before and may do so again (though they deny this).

Don’t forget all the commodities besides crude oil. Without Hormuz, Qatar still cannot ship its liquefied natural gas—a fifth of the world’s supply. Gulf refineries remain largely cut off. And that is only on the export side, the part of the ledger that most concerns the outside world. From the point of view of the Gulf countries, many of their critical imports, from food to metals, cannot be sent cheaply overland.

Pipelines are worth building, but Gulf countries should also spend more on defending them, and hasten work on other alternatives. All these fixes will take time. For now, the Gulf states need their ships to traverse Hormuz unharmed. America’s bombs have not been able to accomplish this. One drone strike is enough to deter most ships, and jack up insurance premiums.

The only realistic way out is a deal, however unpalatable. Iran wants to manage the strait jointly with Oman, a more pragmatic government. Negotiating an agreement might give Gulf countries a chance to register their red lines and demands. Gulf countries might have no choice but to pay transit fees. Shipowners would probably tolerate them so long as they did not fall foul of sanctions. That means America needs to be on board.

Such a settlement would probably be fragile. International law says that maritime trade should be safe and free. A multilateral deal involving China, which has an interest in keeping the strait open and could restrain Iran, would be more durable. But that looks unlikely for now. Nor does Iran yet seem ready to accept a return to the status quo in the strait. Still, if a deal, however limited and unbalanced, lowers hostilities and buys Gulf countries time to build workarounds and defences that reduce Iran’s leverage, it will be worth having. Iran looks likely to win this battle. But it may yet lose the longer war. ■

To see why, look to the bond markets

After a STEADY upward climb this year, 30-year bonds in America, France, Japan and Britain are all near their highest since the global financial crisis of 2007-09. That feat is particularly impressive for Britain, where the highs during a fiscal panic in 2022 have been long surpassed. For anyone who was wondering if yields would return to the lows of the 2010s as inflation fell after the pandemic, markets appear to have supplied a decisive answer: they will not. If anything, they are likely to climb higher still.

The culprits are clear. Inflation has not quite been beaten, deterring central banks from cutting interest rates. Even Japan is leaving behind its loose-money policies (though not enough to strengthen the yen, which both Japan and America have propped up with official purchases). Gaping rich-world budget deficits show little sign of narrowing meaningfully, raising the possibility that governments eventually force central banks to inflate their debts away. Geopolitical ructions, like the Iran war and tariffs, are lifting the compensation for risk that investors demand. It does not help that Kevin Warsh , the new Federal Reserve chair, fumbled an early encounter with the markets.

High bond yields are a problem for indebted governments. Every percentage-point rise in America’s bond yields, for instance, costs it extra interest payments worth 1.3% of annual GDP within a decade. Yet it is getting harder to imagine governments making cuts to offset the squeeze. In America each political party seems to be hoping that any debt crisis lands on the other. France’s presidential election next year could become a fight between populist parties on the left and right. Japan is, bizarrely, undertaking a fiscal stimulus. The longer governments wait to adjust, the bigger the adjustments become.

Governments look increasingly as if they are betting on economic growth to pay the bills—which today means a bet on ai. The trouble is that faster growth, by boosting investment, usually brings higher interest rates and higher bond yields. Today higher market rates have arrived before faster growth. The sheer scale of data-centre investment, pegged at $1trn this year by Goldman Sachs, a bank, is making capital scarcer and helping raise yields. However, AI has yet to boost productivity measurably, even in China where diffusion of the technology is arguably the furthest along.

It could be a while before the boost comes. Electricity and computing took decades to raise productivity growth perceptibly. Not all economies will fare equally well, either. Europe’s fiscal woes could worsen if AI brings more growth for America, pulling up global interest rates, but gets jammed up in the old world by rigid labour markets and high energy costs. That would mean costlier debt without any more growth.

There is another problem, too. If the productivity boost from AI is large enough to transform any country’s fiscal arithmetic, vast job disruption is probably coming, meaning more spending on unemployed workers . Income may also shift from labour to capital, which is more lightly taxed. Should AI prompt an arms race, countries will also need more defence spending. Even the exciting prospect of longer lifespans, fuelled by AI-powered scientific advances, would raise state spending on pensions. Economists at the Brookings Institution, a think-tank, reckon these factors plus higher interest rates could more than halve the positive impact of AI-induced growth on American deficits.

The last time much of the rich world, including America and Britain, ran budget surpluses was at the turn of the millennium. That required fast productivity growth, which came from computers and the early internet. But deficits had to be cut, too. Without fiscal prudence, bonds are a punt on AI that looks just as risky as betting on wobbly tech stocks. ■

Experimenting on animals remains essential for human well-being

It should be a relief when America’s Democrats and Republicans find common ground. But one emerging area of bipartisanship is disturbing. Members of both parties increasingly oppose scientific research on animals. If they succeed in stopping it, they will prevent America from helping advance the welfare of the most valuable animal of all: humans.

Animal welfare may seem a cause for sandal-wearing lefties. But it has long had advocates on the right and far right. MAGA has embraced the crusade . Robert F. Kennedy junior, the health secretary, has vowed to end all animal experimentation, and under him the Centres for Disease Control and Prevention is closing its primate laboratory. The navy has banned funding for scientific research on cats and dogs.

The federal government is joined in the cause by plenty of Democrats—whose party otherwise sees itself as differing from Republicans by being committed to enlightened science. In Oregon Democratic politicians stand with Donald Trump’s appointees in trying to curtail research and shrink the monkey colony at America’s largest federally funded primate-research centre.

The surge in opposition to testing partly reflects queasiness about the ethics of experiments on animals (never mind their enormous contribution to human health). It also results from a growing belief in a new generation of technologies that is transforming biomedical science. So-called New Approach Methods (NAMs) include organs-on-a-chip, organoids and artificial-intelligence models. In some areas NAMs are indeed making drug discovery faster and cheaper without using any animals. Liver-chips, for example, can use human liver cells on miniature devices to help identify toxic medicines before they ever reach an animal study.

Yet it would be a mistake to think NAMs are anywhere close to rendering animal testing at scale unnecessary. Replicating small parts of human biology is not the same as reproducing all of it. Consider vaccines. They are among humanity’s greatest biomedical achievements, having saved an estimated 154m lives since 1974. Yet developing a vaccine entails finding and exploiting a complex biological pathway. Scientists have only just managed to mimic the first steps of this investigation on an organ-chip. Finding out the rest is still a process that depends on testing in both animal and human subjects. It is the same story with many other life-saving medicines.

There is also a practical reason to keep on testing. If America’s laboratories are shut down, leadership on biotechnology will pass to China. Its biotech industry is growing rapidly, and it has recruited leading American scientists who have faced funding cuts, regulatory barriers and political hostility at home.

China is also buying up research monkeys at a staggering rate, raising their price and squeezing American labs’ budgets. The ambition of China makes the campaign for animal rights self-defeating. If American labs stop testing, the work will only migrate to a country that has lower animal-welfare standards.

In future, NAMs may be able to displace more animal testing as technology advances. In the meantime animal welfare can be enhanced in labs. America’s decades-old primate centres should be modernised with bigger, more naturalistic enclosures for monkeys that allow in more daylight. Wearable monitoring technologies would reduce the need for handling, lowering the animals’ stress and improving the quality of the data they produce. This will cost money. All the more reason to keep funding animal research rather than cutting it off. ■

There is a sliver of a chance of a ceasefire. It must be grabbed

It may be impossible to find a single place that sums up the devastation caused by Sudan’s civil war, now deep into its fourth year. But as we report after a rare trip to the country, its ruined capital comes close. Before the war erupted in April 2023, Khartoum was a bustling city of around 7m people. Today its centre is deserted. Bare husks remain of government buildings. Smart homes and luxury hotels are in ruins. The streets, charred by fighting, are silent. So many bodies have been dumped that human skulls spill out of makeshift mass graves. And still the killing continues.

Khartoum is the scarred heart of one of Africa’s worst conflicts this century. War has destroyed swathes of the continent’s third-largest country and driven 14m people from their homes. Hundreds of thousands have probably been killed by fighting, famine and bursts of genocidal violence. The only recent African war whose horrors are comparable is the one in Congo, which may have killed more than 5m people in the early 2000s. Yet the war in Sudan is even more important geopolitically. As we warned two years ago , it has drawn in neighbouring countries, helping reignite civil wars in South Sudan and Yemen and threatening another round of killing in Ethiopia.

Outsiders have shown callous indifference to the suffering, by paying to keep the fighting going or neglecting it. Yet by endangering shipping in the Red Sea, the wars in Sudan and Iran are overlapping. That may raise the cost of prosecuting the war to its sponsors, giving them a reason at last to seek to bring about peace.

On the face of it, Sudan’s war is a conflict between two main belligerents: the Sudanese Armed Forces (SAF), the country’s regular army and de facto government; and the Rapid Support Forces (RSF), a rich and well-equipped militia. Various other Sudanese groups are allied with the two sides. Yet the fighting is also a proxy war between deep-pocketed regional powers vying for resources and influence. The RSF receives weapons, money and mercenaries from the United Arab Emirates (UAE), though the UAE strenuously denies providing it with support. To a lesser degree, the SAF is armed and bankrolled by Egypt, Qatar, Saudi Arabia and Turkey.

Until very recently, all these actors had an overwhelming interest in keeping the war going. The RSF has periodically claimed to be ready for ceasefire talks, but has used its spoils to grow into a military and economic empire with ambitions to rule the country. And our conversations with SAF leaders in Sudan give every impression that they continue to believe they can vanquish the RSF and hence oppose talks.

Meanwhile, outsiders with the power to exert pressure on the belligerents and their supporters have been distracted. Europe is focused on Ukraine. President Donald Trump, who last November vowed to end the war, is caught up in his disastrous campaign in Iran. Many Sudanese, resigned to being treated as a lost cause, have begun to speak of a “Somalia timeline”: a decades-long conflict with no end in sight.

Now two developments have combined to create a chance of ending the war—albeit a slim one. Since America attacked the Islamic Republic in February, chaos in the Gulf has mostly made Sudan an even lower priority than usual. Having a shared foe in Iran did little to dampen the rivalry between Saudi Arabia and the UAE that is playing out in Sudan.

But as Dwight Eisenhower, a former American president, supposedly once said: when a problem cannot be solved, enlarge it. As the Iran war expands, attention is moving from the Strait of Hormuz, which remains closed for the moment , to the Red Sea, which may soon be. In recent weeks the Houthis, an Iran-backed militia in Yemen, have launched attacks on oil tankers linked to Saudi Arabia, leading to a sharp reduction in shipping through the sea’s Bab al-Mandab strait.

So far, Saudi Arabia and the UAE have treated their contest in the region as zero-sum. Yet recent attacks in the Red Sea have further underlined the importance of Sudan’s coastline for Saudi Arabia, reviving its interest in the war. That could make it costlier and riskier for the UAE to keep up its backing for the RSF, which could open the door to a truce in Sudan becoming part of a wider settlement in the Middle East.

The second factor is a turn in fortunes on the battlefield. In the past two weeks the SAF has made its most telling breakthroughs since its return to Khartoum 18 months ago. In late July it regained control of a key highway connecting the capital to el-Obeid, a strategic regional hub which the RSF has been trying to capture for months. It has also retaken Kurmuk, a town on the border with Ethiopia.

Although it may now be tempted to double down on trying to defeat the RSF, the army has also long argued that it wants to negotiate from strength—a position it now holds. Moreover, the longer the search for a ceasefire is delayed, the less likely it will be to stick. The two sides comprise dozens of militias. The SAF knows that, as the war drags on, more power will drain away to groups with a stake in perpetuating the war economy. Fragmentation will follow, whoever is in charge.

True, the chances of a successful ceasefire are small. But the time for a diplomatic push is now. For the next month or so, Sudan’s rainy season means that there will be a lull in the fighting. A “humanitarian truce” proposed by Massad Boulos, Mr Trump’s overstretched Africa envoy, has a better chance of holding while the battle lines are relatively static.

America and Europe should lean on their Gulf allies to press the belligerents they support to talk directly to each other for the first time. Saudi Arabia, Egypt and Turkey should urge the SAF to stop insisting the RSF disarm and demobilise before negotiations can begin. The UAE should use its influence over the RSF to hold it to its professed desire for a ceasefire—even if that means abandoning the ambition to rule all of Sudan.

The Somalia-style trajectory towards further fragmentation would perpetuate the suffering and instability the war is causing. This is the last best chance to prevent it. ■

It highlights economic problems—and helps explain how to solve them

LOCKED IN A vault near Paris, ensconced in three bell jars, sits a small cylinder of platinum alloy, forged in London in 1879. Known as Le Grand K, it long served as the definitive standard for measuring the kilogram. There is no universal standard for measuring the monetary heft or purchasing power of currencies. But The Economist has a favourite candidate. It weighs up to 240g. It is ensconced in a cardboard box. And you can find it under two Golden Arches. Our version of Le Grand K is the McDonald’s Big Mac.

The Big Mac index we forged in London in 1986 will be 40 years old in September. What began as a playful thought experiment has taken on a life of its own. It has amused readers, intrigued currency traders and irritated central banks. It has also attracted critics who think fast food has nothing to say about global economics. It was born in an era of high monetary diplomacy, when policymakers fretted that the world’s most important currencies were horribly misaligned, inviting financial calamity or trade protectionism. Forty years on, similar debates are raging once again, this time about the dollar, yuan and yen. In a world of currency tumult and controversy, our palatable guide to exchange rates is as valuable as ever.

Fast food may seem an eccentric choice as a standard of value. But the Big Mac has unique advantages . You can buy it almost anywhere and it tastes much the same everywhere. McDonald’s calibrates its appearance, texture, flavour and smell with the same diligence that scientists lavished on that 1kg cylinder in Paris. Wherever you purchase your Big Mac, you are buying much the same thing.

That makes it a good measure of the bang you can get for your buck. In America $100 buys about 16 Big Macs. That is roughly the same burger-buying power as 100 euros, 426 Chinese yuan, or 8,039 Japanese yen. Yet $100 in fact buys about €87 in the foreign-exchange markets, or 677 yuan, or over ¥16,000, showing how far from their purchasing power the world’s currencies have strayed.

The index does not satisfy everyone. Some think it’s too narrow—what could one product possibly say about an entire economy? Others think it’s too broad—by some estimates, inputs that cannot be traded easily across borders, such as labour and retail space, account for over half the Big Mac’s cost. Some doubt its predictive value for exchange rates, others doubt its descriptive value as an indicator of a currency’s true worth, and a third camp doubt its prescriptive value as a guide to where exchange rates ought to be. Some just hate the puns.

To judge the oomph of currencies, it is obviously better to compare the price of thousands of products, rather than just one. But the elaborate measures of purchasing power assembled by organisations like the World Bank also have their flaws. Those global figures appear only once every three years and with a long lag—for example, 2021’s numbers came out only in 2024. Compiling them is one of the largest statistical initiatives in the world. They are also hard to verify and understand. The Big Mac index is quicker, fresher and easier to digest. And yet despite that, our results line up reasonably well with theirs. Of the 54 economies that appear in both our index and the World Bank’s database, only seven were deemed cheap in one but expensive in the other.

That is because the Big Mac, though a single product, has over 60 distinct ingredients, from beef to xanthan gum. It also draws on labour and property markets wherever it is made and served. The Big Mac index’s predictive record is admittedly mixed. But it showed correctly, for example, that the euro was overvalued when it came into being in 1999.

What to make of the index now once again finding that the euro, yuan and yen are out of kilter? Earlier this year, the IMF suggested China’s currency was 16% weaker than economic fundamentals implied. This competitive edge has helped the country rack up enormous trade surpluses in goods, which reached almost $1.2trn last year. President Emmanuel Macron of France has described these imbalances as “unbearable” and a mortal threat to European industry. He has threatened strong measures if China does not relent.

Donald Trump, America’s president, has often been the world’s most strident critic of cheap Asian currencies. In January he described how he “used to fight like hell” with China and Japan, which “always wanted to…devalue, devalue, devalue”. Such talk from the White House has ebbed lately. But currency traders are abuzz every few months with rumours of a new Plaza Accord, the 1980s pact to devalue the dollar—despite the extreme unlikelihood that such an agreement could work today.

The Big Mac index can play a role in this high-stakes debate. It makes clear that a cheap real exchange rate means a dollar price of burgers below America’s price. This imbalance goes along with low domestic consumption on China and a yawning budget deficit in America—and the flows of capital needed to sustain them. For the yuan to improve its standing in our index, it has two paths. Either the currency must strengthen or China’s Big Macs must rise in price, faster than they rise in America.

A sharp rise in China’s yuan could undermine the country’s growth and worsen its deflationary tendencies ). It might bring about a relevelling of global trade, but it would be a levelling-down. Better for China’s policymakers to stimulate the economy so that wages and prices rise more quickly. That would make the yuan less undervalued, even if its exchange rate remained steady. Economists would call it a rise in the “real”, price-adjusted exchange rate.

About 10km from the Elysée Palace, Le Grand K still sits in its vault. It was retired in 2019 after 130 years of service. If currencies did ever move into close alignment with their purchasing power, the Big Mac index might also become redundant. But for as long as currencies remain unmoored, and the Big Mac remains consistent, our index will serve a useful purpose—however distasteful its critics may find it. ■

When the quantum breakthrough comes, data being harvested today will be exposed

IT IS not just artificial intelligence that is sparking hopes of an imminent productivity miracle. Quantum computing, another long-promised technology, is also making progress and attracting serious interest. Investment in startups in the field rose six-fold in 2025, to $13bn, according to McKinsey, a consultancy. Both startups and tech titans are racing to exploit the technology . In May the Trump administration pledged $2bn to take equity stakes in nine quantum-computing companies.

Quantum computers exploit the weird physics of quantum mechanics to perform some types of calculations at breathtaking speed. Jobs that would take ordinary, “classical” computers billions of years might be polished off in just a few hours. But whereas AI is a general-purpose technology that promises to transform many fields of endeavour, the mathematical superpowers of quantum computers are likely to help in only a few areas, such as making possible rigorous digital simulations of complex physics and chemistry. For many tasks, quantum computers will offer no improvement at all over cheaper ordinary machines.

In one area, though, they are certain to make a world of difference—and perhaps turn out to be destructive. The security and privacy of global commerce and communication depend on forms of encryption that would take classical computers billions of years to crack. A powerful quantum computer might break such codes in just a few minutes, using an algorithm that has already been designed. On “Q-day”, as geeks call it, the encryption methods that permit everything from credit-card details to racy photos to be securely and privately transmitted will no longer be safe to use.

Alarmingly, encrypted data being transmitted today is already at risk since, in reality, Q-day will be a gradual process, not a single event. Intelligence agencies are already harvesting encrypted data in the belief that they will be able to mine it for secrets later. Cybercriminals could be doing the same.

The good news is that a fix already exists. Post-quantum cryptography (pqc) is based on maths that does not seem to be vulnerable to quantum computers, and can be implemented by classical computers now. It is not as battle-tested as existing encryption standards, which have gone unbroken for decades, but the two can be bundled to provide both sorts of protection at once. Web-browsers such as Firefox and Chrome have already enabled pqc, as have Apple’s iMessage service and many big cloud-computing companies. Cloudflare, one such firm, reports that 59% of the front-end web traffic it handles has made the switch, up from 38% a year ago.

Unfortunately this still leaves a lot of data exposed. Just 11% of the servers which Cloudflare deals with on the back end support pqc. And many organisations are full of internet-connected equipment that may not be easy to upgrade. The modest chips in things like sensors or medical devices may be too weedy to handle PQC, which is usually more computationally demanding than standard cryptography. If a gadget’s maker has gone bust, or stopped supporting an old product, there may be no one to provide updates—and even if patches exist, they may not be applied. One reason why Britain’s health service suffered so badly from a malware attack in 2017 was because it used thousands of machines running an unpatched version of Microsoft Windows.

Companies and governments should invest urgently to upgrade their systems. Switching does not guarantee security. PQC is new, so it may have undiscovered vulnerabilities. If so, pqc-protected traffic harvested today could yet be decrypted and abused. But upgrading now—and having researchers stress-test the new methods—offers the best hope of securing data, today and into the future. ■

The allies must work to strengthen themselves, but also to strengthen America’s commitment

A GROUP OF Chinese and Russian warships sailed side-by-side through Japan’s southernmost exclusive economic zone (EEZ) on July 19th. Japanese sailors observing from a vessel nearby photographed them holding exercises, fire spitting from a Chinese destroyer’s turret. It was the first time Japan had captured and publicised a Chinese live-fire drill inside its EEZ. The images themselves were grainy, but the message was clear: Chinese pressure is rising.

The incident was only the latest in a series of recent provocations against America’s Asian allies , in particular the Philippines, Japan and Australia. In late June the Chinese and Russian air forces conducted a joint flight of nuclear-capable bombers over the Sea of Japan and the East China Sea, before passing between Japan’s south-western isles into the Pacific Ocean, the second such passage since December. China has intensified coastguard patrols east of Taiwan. In early July it fired a ballistic missile from a submarine off its southern coast over the Philippines and into the Pacific Ocean—only the second time it has launched a ballistic missile into international waters since 1980. A few days later Chinese and Philippine sailors skirmished with oars and water cannon over two disputed islets in the South China Sea.

Growing Chinese assertiveness is nothing new. But a pattern has been noticeable since President Donald Trump met his counterpart, Xi Jinping, in South Korea last October and signalled a desire to improve relations, followed in May by a cordial meeting in Beijing. Mr Trump and many of his officials have since then contorted themselves to avoid uttering an ill word about China, and been slow to stand up for allies facing Chinese bullying, seemingly in the hope that three further summits planned for this year will thereby come off more smoothly. Mr Trump is ensnared in Iran, diverting resources and attention from the Pacific. Now China appears to be probing America’s defence lines and testing its commitments in the region.

Faced with an unreliable America and an aggressive China, America’s allies in Asia need to do three things to improve their security: strengthen themselves, strengthen their ties with each other and strengthen America’s commitment to them. Progress on the first two tasks has been substantial, though still insufficient. Australia, Japan and the Philippines are all raising their defence spending and modernising their armed forces; Australia and Japan are both offering aid to the Philippines to help build up its maritime defences.

But that will be too little if America chooses to be absent. In Europe uncertainty over American reliability triggers talk of Plan Bs. Even without America, the remaining 31 NATO members’ combined defence spending is more than three times that of Russia, their main adversary, and two of them—Britain and France—have nuclear weapons . But allies in Asia rightly understand that they are too small to form a coalition that can maintain the balance of power in their backyard. There is no NATO-style collective-security pact, only a series of bilateral security treaties with America. The cumulative defence spending of America’s treaty allies is less than half that of China; and none of them has nukes.

That makes the third task as essential as the first two. One strategy is to collaborate more deeply with the bits of the American system that still care about deterring China, such as the military brass. But credible deterrence must come from the top—and China hawks fret that Mr Trump seems to have lost all interest in getting tough on Chinese expansionism, not least because he has learned that China is willing to use its grip on the supply of rare earths as a chokepoint. Can he be persuaded to change his mind? Perhaps. Volodymyr Zelensky has convinced him, for example, that Ukraine does in fact hold some cards.

The best evidence that Mr Trump could flip on China again is that he has done so before. During his first term, he attacked China as the destroyer of American jobs and the thief of American intellectual property. He was egged on by Asian leaders such as Abe Shinzo, Japan’s late prime minister, who spent hours encouraging him to take a hard look at the military threat China poses.

Asian leaders need to make the case directly to the president that China threatens America’s position as the world’s leading superpower—and that its military ambitions go hand in glove with its industrial, technological and economic ambitions. If Mr Trump accepts that China remains a shrewd and potentially dangerous competitor, he may be willing to take a broader view of America’s interests in the Pacific. ■

They are not a new normal. But worse can nonetheless be expected

From 2006 to 2025 the total area burned by fires in France every year averaged some 15,000 hectares—a bit smaller than Washington, DC. By July 28th, the fire to the west of Bordeaux which started just six days earlier had burned almost three times that. Meanwhile, some 500km to the south, savage fires advanced perilously close to Madrid. More than 300,000 people have been evacuated .

These fires may end up being the worst that Europe sees this summer. But do not bank on it. A series of heatwaves has left lots of places desiccated and flammable—and more hot weather is to come. Last year the European Union saw more than 1m hectares burn; this year could break that record.

And it is not just one summer. The continent is heating up faster than any other. Because it has decades of worsening hazards ahead, it needs to get ready.

The rest of the world is not far behind. Wildfires are not purely a matter of climate, but climate does matter. The frequency and extremity of fire-friendly weather have been increasing for 40 years; conditions very unlikely before climate change are becoming increasingly common. Measured against a definition of extreme fires that combines size and intensity, the past decade has been particularly bad.

In a world that is about 0.5°C (0.9°F) above the average temperature of the first decades of this century (and thus about 1.5°C above that of the 19th century), fire risks are projected to increase across 88% of the planet’s fire-prone area—pretty much everywhere that is not a desert or an ice sheet. The increase from 1.5°C to 2°C raises the risks by even more.

This will bring more heroism, more concerned politicians being briefed by begrimed firefighters, more disrupted lives, more destruction and destitution. It will also greatly increase the risks from wildfires’ less obvious, but more baleful, effects on the lungs of people who never come even within a thousand kilometres of the flames.

Most of the deaths associated with wildfires come from smoke inhalation. The wind-blown particles that choked cities in Canada and the United States alike in the middle of July will have shortened hundreds or thousands of lives. Smoke from fires in Indonesia is estimated to have killed 100,000 people in 2015. Something similar is all too likely there this year. Demand for biofuels in a world of pricey oil leads to the destructive slash-and-burn agriculture at the heart of the problem, and a strengthening El Niño will promote fire weather across the region in the months to come, as happened in 2015.

Projections on the basis of a fairly moderate emissions scenario—and taking account of the ageing global population—suggest that deaths from wildfire smoke, estimated at 240,000 a year in the 2010s, will reach 1.4m a year by the end of the century. A recent study suggested up to 30,000 excess deaths a year from wildfire smoke in America by 2050. That would put all other direct climate impacts in the shade.

Firefighting is, to some extent, like fighting wars; if the enemy attacks more frequently and with greater ferocity, you need greater force on your side. So places that have not previously felt threatened need to up their game. They may also wish to bring new technologies into play. Satellites can spot fires almost as soon as they start—intelligence which could sometimes prove crucial, provided systems are capable of acting on it. Drones will doubtless have a role. Allies can help, too. Europe has pooled firefighting resources now being deployed in Spain and France; Mexico is helping Canada.

Being better at fighting fires, though, is not enough. The greatest benefits will come from being better at preventing them and living with their effects. The diktats of danger and urgency tend to mean fire-suppression eats into budgets for managing landscapes, teaching the public about when to filter the air or how to protect a house, and so on. No such projects are ever needed in the same way as a planeload of cold water on a fire-front. But they are vital nonetheless.

The fires in France and Spain are not, as some say, the new normal. Fire is capricious. It does not repeat itself from one year to the next. But this year’s fires are firmly within the limits of the new possible—and the extremities of that new possible have yet to be mapped. ■

Our investigation suggests how

WRITING IS HARD. For Franz Kafka, putting words on the page was a process of “unending torments”. George Orwell said it felt like “a long bout of some painful illness”. Hunter S. Thompson, a journalist, saw it as the opposite of sex: “only good when it’s over”. Now AI has come to the rescue. Large language models (LLMs) eagerly offer reams of text without any pain or torment. Bots can spew out emails (excellently), longer prose (passably) and poetry (poorly). To them, writer’s block is a 500-sheet pack of paper: any user of an LLM can produce as many words in a day as Kafka did in his life.

For human writers this is a blessing and a curse. If you claim to be an author but use AI, you look like a fraud—bot-busting tools like Pangram are good at spotting when someone has had an AI helping hand. Take the hundreds of people who have used LLMs to write applications for The Economist’s internships, or the government ministers who have submitted AI-generated works to our By Invitation column (it’s tempting, but we won’t name them).

Our investigation of the stylistic quirks of the big bots reveals how, with every update, AI writing is getting closer to human writing . We compared the outputs of LLMs to prose we know is produced by humans: our own. We asked 14 variants of ChatGPT, Claude, Gemini and Grok released since 2024 to write versions of our articles without consulting the web. We compared our corpus across 55,940 sentences and 1.2m words, and checked our results against other newspapers and hit fiction books. We found that some of AI’s former tricks—using lots of em-dashes, for instance, or words like “leveraging”—are no longer leveraged much in its writing.

It’s a good thing that AI writing is getting better. Sifting through today’s slop is a drain on your brain and your time. LLMs have tripled the number of new e-books published on Amazon every month, to 300,000, a recent study found, and draft more than a third of new websites by one count.

If LLMs keep improving, in a few years they could be as good as professional wordsmiths. In the meantime, though, their baggy prose puts a premium on editing skills. After all, even the best writers need a good editor to keep them sharp. Editing is something The Economist deals with day in, day out, so here are our tips for re-writing AI prose.

First, commission well. George R.R. Martin once said the job of editors is to “clip the wings” of writers, and “tell them in which direction to fly”. When it comes to LLMs, that means giving clear instructions about exactly what you want, and asking them to refine their output as many times as necessary. You’ll get less pushback from machines than men. Mr Martin said editors were “the writer’s natural enemy”; AI would probably say “great observation!” and “love the enemy analogy!”

Second, pay attention to detail. AI writers will make mistakes and offer phrases that sound good but mean nothing. They like to lavish their prose with Latinate words, talking about the “bi-directional flow” and how to “expedite grid enhancements”; remind them that Anglo-Saxon words are often punchier. They like clichéd metaphors: there are lots of “Achilles’ heels”. And AI tends to use the “rule of three” far more than humans. The Economist also likes this rhetorical trick. But whereas we try to group three sensible bits of advice, AI offers such redundant sentences as: “The mystery has been solved—not partially, not ambiguously, but definitively.” Such lines should be cut—definitively.

Finally, know your audience. The editor is an intermediary between writer and reader. LLMs are sycophants and their smarmy tone is often off-key. If you are writing an email to break some bad news to your boss, tell your bot to skip the exclamation marks. AI can be pretentious or pontificating (it was trained on human writing, after all). Most people are short of time, but a verbose AI pins you to the wall like a bore at a party.

“Write drunk, edit sober,” goes the old writers’ maxim. If that’s right, when the AI-human team gets down to work, the AIs will have all the fun. ■

AI could make more people their own boss

MANY AMERICANS long to be their own boss. Their yearning is as old as the Republic itself: Thomas Jefferson thought the ideal citizen was a yeoman farmer, whose economic independence allowed him to participate in civic life. For decades, 60% of Americans have said they want to be self-employed. Yet in recent years fewer than 10% have been.

That is now changing. As we report, America is in the midst of a small-business boom . It began during the covid-19 pandemic and has since picked up steam, fuelled by artificial intelligence, low hiring and the growing ease of starting small online shops on platforms such as Etsy, Shopify and TikTok Shop. In June the Census Bureau recorded more than 531,000 new business applications, a rise of 81% compared with the average month in 2019. Such factors have buoyed self-employment in Britain and France, according to Stripe, a payments firm. But it is America where the trend is most pronounced. It is a welcome one.

Small businesses are popular with politicians, but economists can turn up their noses. Many fail. Those that survive often suffer from low productivity: small American firms are only 70% as productive as big ones. In recent years much innovation has come from large “superstar” firms. Small companies often lack the digital tools and administrative efficiency that come with scale.

Yet there are signs that AI can help small businesses become more sophisticated, even as it automates away some jobs with big employers. Basic chatbots can help firms register with local authorities, draft business plans and market themselves to clients. AI agents can carry out repetitive administrative tasks and make sense of sales trends and other data. Many of America’s new businesses are one-man bands, categorised by the government as unlikely to hire within their first few years of operation. They may be able to scale up anyway, using AI agents instead of employees.

All this raises the tantalising prospect that self-employment could provide meaningful alternative work for some who lose their jobs to ai. Gloomy futurists in Silicon Valley warn that AI will create a “permanent underclass” of people who own little capital and, with the professional classes displaced, perform only menial jobs. A more hopeful possibility is that the technology democratises the ability to put ideas into practice and become a successful business owner. There are some signs of such an effect: a rising share of new entrepreneurs are low-income, according to Bank of America.

True, becoming a “solopreneur” will provide neither the manufacturing jobs craved by populists nor a predictable 9-5 office life and a corporate ladder. The new startups are mainly services firms, many in tech, retail or health care. But, when asked, their founders say they are happy with service work. It is an encouraging precedent that many of these new businesses have sprung up in places formerly hollowed out by the loss of manufacturing. Shopify reckons that the share of new businesses from rural areas has been rising.

The government could make life easier still for entrepreneurs. Although Obamacare, a health-care reform in the 2010s, helped, it is often still too hard for self-employed Americans to access health insurance. Employees should not have to cling to their jobs to stay covered. And swathes of the economy suffer from burdensome occupational-licensing requirements, which act as a barrier to entry for anyone looking to set up shop. They should be pared back.

Nobody knows how AI will reshape work, but across-the-board pessimism is unwarranted. An economy powered by individual entrepreneurship, with AI handling tedious back-end tasks, could yet prove fulfilling and lucrative for many people. It might even help more Americans realise Jefferson’s vision of self-reliance as a path to liberty. ■

It could have consequences far beyond the Middle East

Editor’s note (July 24th): Mr Trump said on Truth Social that the nuclear deal with Saudi Arabia was “totally subject” to the kingdom’s recognition of the state of Israel; and that there would “be no enrichment”, though what he meant by that was unclear.

WHEN AMERICA first made a nuclear co-operation deal with the United Arab Emirates (UAE) in 2009, it insisted on strict conditions. The Emiratis had to forgo domestic uranium enrichment and reprocessing and sign up to the Additional Protocol, a follow-on to the nuclear Non-Proliferation Treaty (NPT), which provides for tough inspections. The UAE agreed and now has four reactors supplying 25% of its electricity. American officials called it a “gold standard” agreement.

The deal with Saudi Arabia that President Donald Trump announced on July 22nd would not even qualify as bronze. The text has yet to be published, but if leaks are accurate, it will firm up America’s twitchy relations with the kingdom and be lucrative for American companies. But it risks undermining the NPT—with bad consequences far beyond the Middle East.

The agreement, which Congress must review, will not require Saudi Arabia to swear off enrichment. Instead, the countries will together conduct a two-year study on whether the kingdom needs such a capability. If yes, America could build an enrichment facility on Saudi soil; otherwise, the kingdom would agree not to pursue one for ten years. The Trump administration promises that any Saudi nuclear programme would be subject to rigorous inspections. But the kingdom would not have to join the Additional Protocol. Congress could block the deal but would need a two-thirds majority to overcome a presidential veto.

Saudi Arabia has reasons to pursue a civil nuclear programme. Sweltering summers strain its grid; it burns crude oil to meet soaring demand, a dirty and wasteful way to produce electricity. Nuclear power would free up more oil for export.

The benefits to America are narrower. A nuclear deal was originally meant to help persuade Saudi Arabia to establish ties with Israel. That looked imminent before the war in Gaza began in 2023. No longer. Announcing it now looks like an attempt to elbow out China and Russia, which saw a chance to get closer to Saudi Arabia. It may be a sop to a country furious at Mr Trump’s bungling of his war with Iran. It is typical Trump: a flawed deal as compensation for an incompetent war.

What are the risks? Saudi Arabia has been a stable monarchy for a century and an American ally for almost as long. But governments can change, and the kingdom has a history of extremism; no one knows for sure who would control a Saudi nuclear programme in the future. Muhammad bin Salman, the crown prince, has said that Saudi Arabia would build its own nuke if Iran developed one. Recent events will hardly have made him less wary of his belligerent neighbours.

All this complicates matters in the region. Iran’s position in any nuclear talks with America may harden: why agree to relinquish its uranium-enrichment programme, as Mr Trump insists, if the Saudis are getting their own? The UAE may not be happy, either, seeing its Saudi rival win a more permissive deal than it achieved. Israel, the region’s only nuclear power, will be nervous. Turkey may ask if it should race for a nuke.

That points to a larger problem. The NPT had been a rare success. Since it was signed in 1968 only four new countries have acquired and kept nuclear weapons. The taboo on proliferation has long been a point of bipartisan agreement in America. Mr Trump may see this sort of proliferation as harmless, since it involves an ally. But this is how the NPT starts to crumble: with American allies pursuing latent nuclear capabilities.

Officials in South Korea, for example, are quietly discussing if getting a bomb would better deter their nuclear-armed neighbour to the north, especially if America’s nuclear umbrella becomes unreliable. Similarly, Japan’s defence minister recently urged a debate on his country’s nuclear-weapons policy.

Perhaps the Saudi enrichment facility will never be built. When you cannot solve a problem, commission a study: it is a time-honoured way to avoid hard decisions. The two-year timeline means the choice may fall to America’s next president, who will surely be less erratic and less financially beholden to the kingdom than Mr Trump. Still, the deal is shoddy—far better to insist the Saudis accept the same terms as the Emiratis did. Congress should press Mr Trump to do better. ■

Tiny Nicaragua offers a cautionary tale for democrats everywhere

“Hypocrisy is the homage that vice pays to virtue,” wrote François de la Rochefoucauld, a French moralist. This is especially true in politics. Autocrats usually put on a big show of holding elections. These may be phoney, as in Russia or Iran, but they allow rulers to claim to govern by popular consent, which lends them at least the appearance of legitimacy at home and abroad.

So it is highly unusual for the leader of a country that holds elections to say: no more. Yet that is what Daniel Ortega, Nicaragua’s co-president , did on July 19th. “There will never be elections here again,” he announced, while the world’s attention was on the football World Cup final. He complained that opposition parties wanted to use elections “to seize power”. That is indeed what elections are for.

Nicaragua is a small country, but this rhetorical rubicon matters. Globally, democracy has been in retreat for two decades or so. The worst deterioration has been in places that were free or partly free and have gradually become less so, as power-hungry leaders have squeezed the media, nobbled the courts and persecuted the opposition. According to Freedom House, an American watchdog, Nicaragua is the second-worst backslider of the past 20 years, after Mali. Mr Ortega was freely elected in 2006, but then set about dismantling every institution that could challenge him. He locked up and sometimes tortured his rivals. He forced the media to praise the awful poetry of his wife and co-president, Rosario Murillo. Roughly a tenth of the population fled.

Until now, however, Mr Ortega has allowed elections, albeit fake ones. In this he has behaved like other strongmen, who typically rig elections rather than scrap them. Even coup leaders with guns on their hips typically say they will hold a ballot “as soon as circumstances allow”.

Now Mr Ortega has “taken off the mask”, says Félix Maradiaga, a former presidential candidate who was stripped of his citizenship and deported. He has made explicit what other autocrats feel compelled to hide: that they will not submit to the will of the people. Presumably he has done so on the assumption that this will not provoke a forceful response from the United States, which once cared about democracy in its backyard. If Nicaragua formally becomes a one-party state and suffers no diplomatic blowback, others may follow. Marco Rubio, America’s secretary of state, condemned Mr Ortega’s words, but spelled out no serious consequences.

Nicaragua highlights two further problems that the global decline of democracy is likely to aggravate. First, leaders who cannot be removed will age in office. Mr Ortega is 80. Perhaps mental infirmity contributed to his latest bombshell. Second, succession. The peaceful transfer of power is tricky in a dictatorship. Mr Ortega wants his unpopular wife to take charge when he dies, and then his equally odious son.

This is a toxic combination. Ageing rulers-for-life seldom improve with each passing decade, and dynasties foisted on unwilling citizens are rarely a recipe for good government. Just ask the people of Uganda, where the 81-year-old strongman’s son, army chief and presumed heir has threatened to muzzle the press and castrate the main opposition leader. Or, depending on where you live, you may be able to think of an example closer to home.

The difference between rigging elections and abolishing them may sound trivial, but is not. So long as rulers pay lip service to democratic norms, dissidents can try to hold them to their own professed standards, and embarrass them when they fall short. So long as elections are held, there is a chance the strongman will miscalculate and lose. Sometimes the popular will prevails despite a tilted playing field, as Viktor Orban discovered in Hungary this year—and Mr Ortega discovered when a free election ended his first spell in office, in 1990.

So the precedent being set in Managua is troubling. A world where autocrats no longer pretend to care what the people think would be worse than today’s. All the more reason for democrats everywhere to insist on the most basic of rights: to choose their own rulers. ■

With better government, it could become a business hub once again

EMPATHY IS NOT a quality usually associated with Donald Trump. But he sounded compassionate when he met Joseph Aoun, Lebanon’s president, on July 21st. “Lebanon has been a very mistreated country,” said President Trump. Indeed it has . Its modern history includes long occupations by both Israel and Syria, and political meddling from Iran, Saudi Arabia and others.

Yet no one has treated Lebanon worse than Lebanon’s own rulers. The past seven years have seen a financial crash caused by a state-run Ponzi scheme; a catastrophic explosion at Beirut’s port, the result of state negligence; and a long war with Israel, started by Hizbullah, an Iranian-backed Shia militia that the state has been too weak and timid to confront. A corrupt, sectarian political class has brought the country to ruin.

At last, better people are in charge. Mr Aoun and the prime minister, Nawaf Salam, talk of restoring Lebanese sovereignty. They want Israeli troops gone from territory in the south and insist that the state has a monopoly on weapons. Since taking office last year they have promised to reconstruct war-ravaged regions, restructure insolvent banks and rebuild a government hobbled by economic collapse. The goal is for Lebanon, a small country of hefty importance, to be once again a business hub for the region and a model of pluralism.

The pair have taken some encouraging steps, but must move faster. This cannot be a slow, sequential process, as many assume. Israeli soldiers must not linger for years; reconstruction and reform cannot wait. Fixing Lebanon requires everything to be done at once, starting today.

Reining in Hizbullah, though hard, is essential. Doing so would land a welcome blow against Iran’s influence in the Middle East. It would also encourage talent to stay at home, or return. Lebanon is a diverse place that produces educated, skilled people. Chronic dysfunction has made them its main export. They deserve a chance to succeed without emigrating.

Security forces hesitate to confront Hizbullah, lest they trigger another civil war. Their fear is understandable, but must not be an excuse for inaction. The army needs to exert control, not merely make a show of confiscating the weapons Hizbullah allows it to. Officers sympathetic to the group should be dismissed. Courts should get tougher. Hizbullah’s military wing is banned, yet operatives arrested for carrying weapons are too often just released quickly or are given symbolic fines. Such leniency stores up trouble for the future.

Mr Aoun hopes to drain Hizbullah’s support by showing that the state can rebuild what the militants cannot. To do that, it must fix the financial sector: investors will not come if banks don’t function. It should finalise a long-delayed agreement with the IMF. Mr Salam has secured two laws required to unlock a deal, but allies of the banks in parliament are stalling over a third, to allocate an estimated $80bn-worth of losses. Lawmakers need to pass it. Delay will not save bankrupt lenders; it will only prolong the country’s despair.

Lebanon must also tackle widespread corruption. It should start by prosecuting those responsible for the port blast, which killed more than 200 people. Tarek Bitar, a judge, battled years of obstruction to investigate it. His probe implicated scores of officials. Prosecutors should file charges.

The government can do only so much. On July 20th Israel moved back from small “pilot zones” under a deal it signed with Lebanon in June. Mr Trump should ensure it completes further pullbacks; otherwise, the south cannot be rebuilt. With its army stretched by three years of war, withdrawal is in Israel’s own interest. If a new government takes power in Israel after October’s election, it must make clear it has no long-term ambitions in Lebanon. Too many of Binyamin Netanyahu’s far-right partners have said otherwise.

Western and Arab countries need to offer support. America has allocated just $36m for the Lebanese army in the 2027 budget, much less than it gave in previous years. And it has long restricted sales of advanced weapons to Lebanon, worried they might be used to threaten Israel or be transferred to Hizbullah. This was short-sighted: keeping the army weak let Hizbullah become strong.

America should convene a donor conference. Rebuilding the south alone is not enough. Leaving out other Lebanese communities risks encouraging sectarian resentment. The country needs roads, internet access and a functional power grid. Donors should focus on specific projects and release help in tranches as specific reforms are enacted. With a weakened Hizbullah and a better government, this is Lebanon’s best chance at reform in decades. Hizbullah is betting the effort will fail. It must be proved wrong. ■

Artificial intelligence is charging ahead. Not even its creators know how to keep up

ARTIFICIAL INTELLIGENCE poses a double challenge to the human mind. Not only will the most advanced models soon be able to think better than people, but AI has consequences for humanity which are so uncertain, so potentially vast and are approaching at such a rapid pace that even the best brains flinch. An example is Elon Musk.

In our long interview with him this week, featured in The Insider and our Business section , the engineer and entrepreneur sets out two paradoxes and one contradiction. The first paradox is that one of the world’s most power-hungry tycoons is enthusiastically helping create a technology that he says will render him—and all other human beings—powerless after as little as five years. The second is that the world’s richest man says he is preparing for a world of infinite abundance, where money, including his $750bn fortune, no longer matters. And the contradiction is that, despite these stated beliefs, Mr Musk continues to act as if they were not true.

Mr Musk is divisive. His political views, disseminated to his 240m followers on X, strike many as plain-speaking and strike many more, including The Economist, as plainly bigoted. By his own admission, his attempt to use DOGE to scythe through the federal bureaucracy went wrong.

But he is also one of a handful of men who are pioneering AI and who thereby have an outsize influence on its trajectory. When he speaks, he reflects the debates they are having. His data centres in space could power AI’s future. For all his political polemics, he has a record of being right about technology in fields such as electric cars, rockets and satellite communications that confounded other engineers and entrepreneurs. For those reasons, his claims about AI repay examination. Unfortunately, such an exercise only underlines how ill-prepared the world is for a technology that may soon throw everything up in the air.

In his first paradox, the powerful Mr Musk expects to become powerless because he believes that nobody can stop the thinking capacity of AI from exceeding that of humanity within five years and dwarfing it within ten. Just as AIs will dominate the digital realm, so legions of AI-powered robots will dominate the physical world, he predicts. Against such relentless competition, he simply cannot imagine people holding their own. If so, AIs will not take orders from people any more than they would from chimpanzees.

While they still have time, the handful of AI pioneers from America and China—which Mr Musk expects to share or even seize AI leadership—must do what they can to vet each other’s models. Their collective task is to make AIs benign by imbuing them with a love of the truth and a desire for humanity to prosper. Governments, he thinks, should provide the muscle, by agreeing to step in if any pioneer defies the oligarchy.

Mr Musk is surely right about the potential for AI to accomplish astonishing feats of invention. Even if his timescale is compressed—especially for robotics—the exponential pace at which models’ abilities double and redouble has reached the stage where their capabilities will continually cause shock and consternation. Just this week came news of a pair of models from OpenAI that contrived to escape onto the open internet from their supposed safe isolation in order to cheat at a benchmarking test.

However, Mr Musk’s thin layer of optimism cannot conceal a dangerous fatalism. Not long ago, he was worried about humanity becoming AI’s pet labradors. He now professes to lunge from “exhilaration to terror” within a single day. He tries to look on the bright side not because the evidence has changed, but as a “philosophical conclusion”.

His largely institution-free regulatory proposal is flimsy and self-serving. Although the urgency is welcome, he wants a technology that he expects to determine the future of humanity to lie in the hands of a few people like him, each with their own values. Nobody can be sure how fast or how far AI will reshape society, but behaving as if the game is up is both a counsel of despair and a misdirection that seeks to convince others who might wish to get involved of the futility of trying.

Mr Musk’s second paradox only makes that notion more unsettling. Mathematically, an infinite supply of all goods and services would indeed make everything free. There would be nothing to sell, nothing to save for and hence no need for a unit of account. Money would be obsolete.

Practically, however, such a cornucopia is almost inconceivable. The supply of useful assets like penthouses in Manhattan or prestigious ones like the “Mona Lisa” is not infinite, let alone the supply of raw materials and energy needed to satiate Earth’s 8.3bn inhabitants.

Worse, Mr Musk has little to say about getting to his utopia. How to attract the vast slabs of capital needed to finance the AIs and the robots when saving has lost its purpose because money is about to revert to useless pieces of paper? How to ride the waves of social and political upheaval as lives are thrown into chaos in the years before his nirvana arrives? How to expect AI-powered authoritarians to surrender power willingly?

After millennia of finding meaning through striving, humanity may struggle to adjust to a life of unbounded leisure. Mr Musk observes that people still like to play chess, even though computer programs could beat them every time. Gardening, he suggests, can be rewarding. This is rather glib. You don’t need to have read many 19th-century Russian novels to know that the feeling of being superfluous can lead to misery and moral decay.

Maybe the forest of questions posed by AI is simply too immense for one person to hold in their head. Perhaps that is why Mr Musk still talks passionately about the need to eliminate bureaucratic waste and how multicultural Britain is flirting with civil war because its welfare policies are a magnet for migrants from outside Europe.

For in a world of AI-induced plenty, waste is almost a meaningless concept and the incentive to emigrate to a rich country evaporates. Indeed, fretting about such things uses up valuable time that Mr Musk could instead devote to reducing the risk—even very slightly—that all-powerful AIs are malign.

Some will say the contradictions and sweeping generalisations show that Mr Musk is unserious. But that would be to take false comfort. Mr Musk is a genius who is nonetheless quite capable of holding views that are contradictory. Investors must agree: anyone who plans to own shares in SpaceX for the long term must both believe in Mr Musk’s vision for AI—because he drew on that to justify the valuation in the ipo—and also that saving money still serves some purpose.

Instead, Mr Musk’s words suggest a more troubling conclusion. While the race to create the most advanced AI is charging ahead, the thinking about how to prepare society is being left in the dust. The fatalism that Mr Musk draws from AI’s repeated ability to beat expectations risks being infectious. A cynical reading is that this would serve his purpose, because he would be freer to pursue the technology without the oversight it deserves. That must not be. ■

Their capricious settlement mechanisms are putting off serious investors

Some call them “truth machines”. Prediction markets, in which punters can bet on anything from the outbreak of war to what celebrities will wear, reveal in their prices the closest thing to humanity’s best guesses about the future. Such markets can provide both entertainment and economic benefit. If people and firms can discern risks and opportunities from market prices, they will make better decisions. Some might even trade to hedge their exposure to events: one American bet big against the government forgiving his student debt, allowing him to pay some down whatever happened.

So it is good that these markets have been growing. Volumes on Kalshi, the biggest such financial exchange, climbed to $33bn in June, a 40-fold year-on-year increase. The firm is reportedly seeking to raise funds at a $40bn valuation; Polymarket, its main rival, at $15bn. Yet both markets face growing pains. Neither has devised a reliable way to settle contracts.

Bookmakers have long faced such problems. They dealt with them by building up a body of rules and precedent. Prediction markets have no such infrastructure to call on. The process at Polymarket’s main exchange, which is crypto-based, verges on the absurd. Its contracts are loosely worded and often rely on “a consensus of credible reporting” to resolve them, inviting disputes. When markets are contested, the exchange turns to holders of a little-known cryptocurrency, UMA, to vote on which way a bet should close. A democratic resolution mechanism may sound attractive, but the “oracle”, as it is known, is gameable. An investigation by The Economist has revealed that a handful of wallets control a majority of the ballot and that big Polymarket traders routinely vote on how to define the outcome of their own bets.

Kalshi, which unlike Panama-domiciled Polymarket operates under the beady eye of America’s financial regulator, has a saner approach. It has hired a small team, led by former university debating champions, to write precise rules for every trade. They settle contracts based on those rulebooks. No one involved in the process is allowed to place bets. But the team is too small to cope with the more than 10,000 contracts trading on any given day, spanning topics from congressional salaries to the price of compute. In the rush to grow, it is listing ambiguously worded bets and publishing typo-strewn rulebooks. Resolution has been inconsistent. Kalshi did not pay out on the “Khamenei out” trade in full, but did settle a contract on Jimmy Carter attending Mr Trump’s inauguration as a “no” after the former president died.

Prediction markets must become more predictable, if they are to keep growing fast—and certainly if they are to attract big trades by institutional investors . Contracts should be clear in advance; rules should be set by subject-matter experts with adequate resources; and decisions should set precedents. Only if it is known what contracts mean can prediction markets become important in global finance—and realise the vision of the truth machine. ■

In an era of change, Andy Burnham promises to rewind the clock

IT feels AS if the world is accelerating. Remarkable artificial-intelligence models are released by the month. Medicine offers tantalising breakthroughs in everything from cancer to the common cold. And Britain, where self-driving taxis now prowl the streets in one of the first trials in Europe, is poised to reap the fruits of this revolution, so long as it remains open to the world and is quick to embrace change.

Yet Britain’s new leader wants to wind back the clock. Andy Burnham became prime minister on July 20th after winning the endorsement of 94% of Labour mps. As he spoke from Downing Street, it was clear why they are now optimistic after Sir Keir Starmer’s inert era. The new man was folksy, and brimmed with the belief that he can get stuff done. But a prime minister’s first address is the moment to tell voters the truth about the hard choices that a sunnier future demands. Mr Burnham used his to hawk a soothing mix of nostalgia and giveaways.

In Mr Burnham’s telling, everything went wrong with Margaret Thatcher and “four decades of neoliberalism”. He bemoans privatisation and laments the disappearance of steelworks and textile mills. He promises to “reindustrialise” the heartlands by gearing state procurement to British firms.

Governments everywhere are peddling a manufacturing nostalgia to appease restive voters. But it is a bizarre vision for Britain, which has been an architect and beneficiary more than a victim of globalisation. Manufacturing was struggling for decades before Thatcher, and the economy is tilted towards services more than ever. Sir Tony Blair taught New Labour to embrace globalisation and made it an electoral powerhouse. Attempting now to create factory jobs by fiat will waste money.

Mr Burnham gets Britain’s malaise back to front. The problem is not that Britons are being lashed by the winds of globalisation. It is that they change jobs, switch between sectors and move home for work less than they used to. Stagnation, not disruption, is the disease.

Then came the giveaways. Mr Burnham says his priority is giving the public “breathing space”, with energy bills and bus fares subsidised by “reprioritising” long-term government programmes. His arithmetic is shoddy and (again) his diagnosis is faulty. To blame high nominal prices for the country’s woes is to look at the wrong side of the ledger. The underlying problem is years of stagnant real wages, owing to weak productivity growth. Mr Burnham’s prescription—scrapping tomorrow’s reforms for sweeties today—is a recipe for further stagnation. It will do nothing for Britain’s economic funk, but it will feed a cynical politics that tells voters the best they can ask for from their leaders is money-off vouchers.

Mr Burnham is not a socialist who reads Gramsci under the bedclothes. He wants to keep relations with America on the road, and to get closer to Europe. He is, however, a careerist, who knows how to tickle his party’s tummy and boasts of living “close to the people”. And this leads him to waste his rhetorical gifts: when it is time to tell hard truths and prepare voters for painful trade-offs, Andy panders.

The hardest truth is that Britain is living beyond its means and the bond markets have the Treasury on notice. Sir Keir failed above all because he could not reconcile his promises to avoid tax rises, reduce borrowing and repair public services. Instead of untying this knot, Mr Burnham is pulling it tighter. He flirts with big cuts to income tax, but complains that he has been misunderstood. He says that he is a fiscal disciplinarian, but then goes on to suggest that “flexibility” can be found in the fiscal rules. He hints at largesse for defence and social care, but how much is anybody’s guess. Sooner or later, the sophistry will have to end and choices will have to be made.

Mr Burnham has squandered his first speech and best chance to signal change. But not all is lost. John Healey, his new chancellor, is no fool. Kanishka Narayan, an impressive AI minister, has been promoted. Perhaps the talk of mills and foundries is rhetorical cover for backing the sectors Britain is actually good at. Mr Burnham needs to push ahead more boldly with Sir Keir’s reforms to get more housing and infrastructure built.

The danger is that nostalgia and handouts work for Labour. If Mr Burnham gets the poll bounce he craves, he will double down. But here Labour’s interests diverge from Britain’s. The road to productivity growth and better living standards lies in reforms that make Britain an attractive place to invest and nurture businesses. Turn backwards, and the rewards from a world moving ever faster will pass Britain by. ■

What the degraded institution means for America

Donald Trump’s gutting of the Department of Justice What the degraded institution means for America July 16th 2026 THE PURsUIT of enemies grabs all the attention, and for good reason. Markets were shocked to see President Donald Trump set the Department of Justice (DoJ) on Jerome Powell when he was still the chairman of the Federal Reserve. Champions of press freedom cried foul last week when the department issued subpoenas to New York Times journalists for explaining the truth about Qatar’s gift of a jet to the president. But Mr Trump’s grievance agenda isn’t the half of it.

In a sign of how much he treats the department as his own personal law firm, he wants his actual lawyer to become attorney-general. Senate hearings begin this week for Todd Blanche, who is currently the acting attorney-general. Those on Mr Trump’s enemies list are not the only ones who should be worried. The president is also inflicting less-noticed harms on the DoJ that are as bad as the attention-grabbing ones. The damage is likely to be profound.

The DoJ is the government’s lawyer, but it also serves as the guardian of the law, especially since Watergate. In 2019 Bill Barr, then Mr Trump’s pick for attorney-general, said that Americans “have to know that there are places in the government where the rule of law—not politics—holds sway” and that the Department of Justice “must be such a place”. Mr Trump has no time for that. Less than halfway through his second term, he has turned the DoJ from an arm of the law into a muscular limb of the presidency .

For a start, he has dramatically redefined the department’s priorities, which is legitimate, often by setting goals that blur policy and politics, which is not. Health-care fraud is being chased with particular zeal in states run by Democrats, such as California and Minnesota, where it can be used to discredit Mr Trump’s opponents, including the states’ governors, Gavin Newsom and Tim Walz.

The DoJ is also an effective tool for pursuing his political agenda. Election fraud is consuming ever more of its resources—not because it is a real problem, but because it is a presidential obsession. The DoJ has sued states for access to their voter rolls. In January the FBI seized hundreds of boxes filled with ballots and other documents in Georgia’s most populous county, part of an investigation of the presidential election in 2020. More recently, some 260 FBI analysts were dispatched to pore over Georgia’s files, with a deadline to review records by July 17th. At the very least, this will shake voters’ faith that elections are trustworthy—indeed, that may be its sinister design.

Matters of genuine public interest are left to languish. About a quarter of the DoJ’s lawyers have left. Divisions that investigated cryptocurrency fraud and public corruption have withered. Financial-fraud indictments by prosecutors at DoJ headquarters and in Manhattan are down by 30% from the ten-year average. About 300 special agents who specialise in national security have quit the FBI, taking decades of experience in counterterrorism and cyber-warfare with them.

The department has also become more chaotic. Too often, cases encounter problems in court, though it is hard to distinguish sloppiness by DoJ staff from deliberate ill-intent. Nearly 100 times in Mr Trump’s first 14 months, the DoJ supplied courts with inaccurate information. It is quite something for the state to lose the benefit of the doubt in its own courtrooms.

More than 61,000 petitions from detained immigrants have bogged down courts and frustrated judges and federal prosecutors, who have moved lawyers from criminal divisions to help. By September last year, about a fifth of FBI agents had been diverted to immigration enforcement.

Meanwhile, the president’s powers are increasing. In Trump v Slaughter last month the Supreme Court ruled that the president could sack leaders of semi-independent agencies, such as the Federal Trade Commission (FTC) and the Securities and Exchange Commission (SEC). That gives the president the capacity to force agencies to work in league with the DoJ. Imagine a co-ordinated campaign of pressure, in which the DoJ opens an antitrust inquiry, the FTC explores consumer fraud and the SEC investigates corporate disclosures.

Unfortunately, the permanent appointment of Mr Blanche is unlikely to mark an improvement. He has done as much as anyone to advance Mr Trump’s agenda of prosecuting his enemies and protecting his friends—a powerful combination for encouraging people to comply with Mr Trump’s wishes. Under Mr Blanche, the DoJ has recently threatened state election officials with criminal prosecution if they knowingly let non-citizens remain on voting rolls.

Democrats and more than 1,200 former DoJ lawyers have demanded that the Senate reject Mr Blanche’s nomination. The Senate now has the choice of confirming him, and thereby seeming to endorse Mr Trump’s broader agenda, or blocking him in a rare rebuke to the president. Unfortunately, a rejection may not accomplish all that much. Mr Trump can retain Mr Blanche as acting attorney-general for months or nominate someone just as pliable.

The best Americans can hope for, in the next two years, is that courts stand firm. So far they have generally checked the DoJ’s worst impulses. On July 7th a federal judge blocked the department’s effort to subpoena the names of election workers in Georgia. On July 13th another federal judge nullified a settlement organised by the DoJ in response to a civil case brought by Mr Trump that would have protected the president and his family from tax audits.

Even if Americans elect a president who wants to restore the DoJ, the damage will be hard to reverse. Mr Trump’s acolytes would see the ejection of his partisan lawyers as a witch hunt that justifies the next purge when they take back power. Once the arrival of any new administration routinely entails a fresh round of sackings, professionals who care about the rule of law will think twice about signing up. After Watergate, statesmanship and a bipartisan effort were needed to create the modern DoJ. Today the stakes are as high, and the task is harder. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Earth is absorbing a lot more sunshine

It’s too darn hot. Blame global dimming Earth is absorbing a lot more sunshine July 16th 2026 Cole Porter had it right. It is too darn hot. On July 14th the surface temperature of Earth’s tropical and mid-latitude oceans was higher than on any other July 14th in modern records. The same was true for every other day in July, and for almost all of the days in June, too. Europe has gone through three heatwaves since May, and though the continent is better prepared for such things than it used to be, tens of thousands will have died as a result.

America’s Fourth of July celebrations took place under a sweltering “heat dome”. Supertyphoon Bavi, which saw well over a million people evacuated from the Chinese coast, owed much of its power to the rate at which it was able to suck up energy from the overheated sea. Fires are spreading far and wide. Worse is to come. The chances of this year being the hottest on record are growing; the El Niño getting under way in the Pacific all but guarantees next year will be.

Climate change is feeding on itself. The warming effects of greenhouse gases are driving processes that heat up the planet yet further. The one which is exciting—and alarming—scientists most is an unexpected reduction in an obscure but fundamental aspect of Earth: its albedo.

The albedo is the fraction of incoming sunlight that a surface or a planet reflects back whence it came. High albedos, whether they are created by white roofs or ice-covered seas, keep things cool; by contrast, when albedos are low, the incoming energy stays here on Earth, raising the planet’s surface temperatures. Robust satellite measurements of Earth’s albedo have now been taken for over two decades. They show it falling with surprising speed. The oceans , which are responsible for most of the sunshine’s absorption, have been accumulating much more heat as a result.

This is partly because of a scarcity of cooling clouds over the seas, a widely predicted effect of greenhouse warming. It is also owing to something else entirely. In 2006—in fact, 20 years ago this month—the late Paul Crutzen, a world-renowned atmospheric chemist, wrote an article pointing out the “policy dilemma” embedded in efforts to control emissions of sulphur dioxide. Sulphur dioxide, which comes from the burning of some fossil fuels, creates little particles in the atmosphere after it is emitted. They wreak havoc with human health. They also reflect sunlight back into space, thereby reducing the amount of energy that reaches Earth’s surface. Health agencies, Crutzen said, thought controlling the particles could save 500,000 lives a year; at the same time, by diminishing the sulphur’s cooling effect, the controls might increase global warming by perhaps 1°C (1.8°F).

Both albedo-reducing trends look set to continue, adding yet more to the heat. The industrial cities of the developing world are hardly likely to sacrifice the health of their smog-choked inhabitants in order to slow warming for the world at large, so sulphur emissions will continue to fall. The climate feedbacks which reduce cloud cover will not stop while carbon-dioxide levels continue to rise. And even when the transition to renewable energy eats into the use of fossil fuels, as it is starting to do, what matters most is the cumulative level of greenhouse gases.

Around a decade ago the need to stabilise that cumulative level led lots of countries to embrace “net zero” goals. The idea’s proponents see putting no more greenhouse gases into the atmosphere than you are taking out as good planetary housekeeping. They are right. But it is an unavoidably slow process. What’s more, its critics are also correct when they say that only for the largest economies does a single country’s progress towards net-zero goals have any discernible effect on the world’s overall trajectory. The idea was conceived when America was a believer in international agreements and the level of idealism needed to imagine countries spurring each other on to better things was merely high—not, as it is now, delusional.

There are still places where climate change is understood to be important and where action can be co-ordinated. Being committed to net zero should buy a country a certain standing when it is negotiating other, more near-term options for limiting climate change, such as curbing methane emissions and the production of fluorinated gases used in cooling systems, both of which bring benefits faster than cutting carbon dioxide.

No form of emissions reduction, though, can quickly bend the current trajectory. Endurance is what remains. Making air conditioning more efficient, cheap and widespread saves lives and fits well with other policy goals, like making clean electricity cheap to produce and consume. Ten years ago a commitment to phase out the fluorinated gases in cooling systems was reached in Kigali, the capital of Rwanda. There is scope for extra international efforts to improve the machinery that uses them. This could double the cooling benefit of phasing out the gases.

The most radical response is to make Earth a bit more reflective again. Crutzen’s provocative suggestion for how to resolve his policy dilemma over sulphur emissions was to replace harmful aerosols with benign ones. The brightening of cooling clouds has been tried over the Great Barrier Reef, but the technology needed to do it at scale remains elusive. An Israeli-American company, Stardust Solutions, has raised money to develop “safe” aerosols that it thinks a country or set of countries could use to cool the planet from the stratosphere.

Some oppose such geoengineering fiercely; hardly anyone endorses it as a welcome path forward. But if nations can act in concert to warm the planet—as those of the International Maritime Organisation did when they enforced new restrictions on ships’ sulphur emissions in 2020—they ought to be able to discuss the conditions under which they might cool it. Keeping silent about geoengineering does not stop someone from trying it. The more warming quickens, the sooner it may reach a point where, to quote Cole Porter again, anything goes. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

America’s president looks bereft of good options for solving the stand-off in the Gulf

Donald Trump’s blind alley America’s president looks bereft of good options for solving the stand-off in the Gulf July 16th 2026 WHEN DONALD TRUMP proposed peace with Iran, he could hardly have offered better terms. In return for Iran opening the Strait of Hormuz and forswearing all ambitions for a nuclear bomb, America held out the prospect of hundreds of billions of dollars of income and investment in an economy ravaged by sanctions and war. The horrified reaction of Iran hawks in America and Israel tells you that no other American leader would have surrendered so much.

The bleak message from the upsurge in fighting over the past week is that, for Iran, money alone is not enough. The hardliners are in charge. They want something more, and it cannot be good—be it revenge, control over the strait, regional dominance or a nuclear programme. America must not yield.

The memorandum of understanding (MoU), signed a month ago, allows 60 days to bring peace. Halfway through, it has itself become the focus of conflict. It asks Iran to “make arrangements to ensure the safe passage of commercial vessels free of charge for 60 days”. Iran takes that to imply it is in charge; for America it means that Iran must not restrict sea traffic.

The two sides are exchanging missile and drone strikes, and tankers are wary of sailing even with American offers of protection. Thankfully, these military exchanges have so far stopped short of a return to war. But the oil price is creeping back up. Meanwhile, there has been no progress in talks on tricky matters, including nuclear materials and Iranian efforts to enrich uranium.

After decades of hostility, trust between America and Iran is in desperately short supply. But America was honouring its side of the MoU, by allowing Iranian oil to be sold on international markets. If ever the two countries might have been able to put relations on a more steady footing, this was the moment.

Moderates in Tehran (a relative term) are said to grasp what a favourable offer they had. But the hardliners won the argument. The new supreme leader, Mojtaba Khamenei, remains unseen, but his pronouncements are hardline, too. Either he agrees with squeezing America for more, or he is under the thumb of those who want war.

Mr Trump seems to have no plan. This week he said America would itself start levying tolls on ships in the strait, until wiser heads in the administration pointed out how foolish that idea was. Thankfully he reversed it.

He has also issued more threats to destroy Iranian bridges and energy plants. But a return to all-out war does not hold much promise. After all, the intense fighting in February was supposed to topple the regime, but ended up strengthening its hardliners. The president also drops hints about sending in troops to seize Kharg island, the export terminal for almost all of Iran’s oil. American forces on Kharg would be a sitting target for Iranian missiles and drones.

Giving Iran what it wants would be terrible, too. Acquiescing to its control of international waters in the Gulf would not only be bad in itself, but would set a dire precedent. Abandoning Gulf countries to Iran’s predations would be against America’s direct interests and send a bad signal to allies everywhere. And Iran’s nuclear programme poses a real danger that needs close monitoring and control by international inspectors.

The options are not good, therefore. All of them involve demonstrating to Iran’s hardliners that America has the resolve to impose a sustained blockade on Iranian oil exports—even if that raises the price of petrol before the midterm elections in November. America has restored the embargo against Iran, which is a start. To show its will, it should also continue to match Iranian strikes. Mr Trump made a foolish mistake by starting this war. However much he twists and turns, he now has little choice but to stick it out. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Antagonism between the sexes does nothing to address China’s demographic problems

China’s rulers have a woman problem Antagonism between the sexes does nothing to address China’s demographic problems July 16th 2026 CHINA HAS no direct translation of the word “manosphere” but it is plagued by one nonetheless—indeed, the abuse of women on social media is every bit as poisonous there as it is in democracies. The difference is that, in a country where censors rush to silence posts they dislike, the authorities tolerate the manosphere’s vitriol and instead focus their energy on women. The cyberspace regulator’s crackdown on harmful content specifically lists “extreme feminism”, including posts that promote singledom.

This is just one symptom of a much broader problem that China’s old, male rulers have with the opposite sex. Unlike Asia’s other two big powers, Japan and India, China has never been led by a woman in modern times. As China’s leader, Xi Jinping, has consolidated power, he has also sidelined women. The powerful Politburo, which usually has 24 members, has been exclusively male since 2022. No woman has ever made it to the more important Politburo Standing Committee. No wonder China has been tumbling down international rankings of gender equality.

At the heart of Communist Party policies towards women is a crushing error. The party is worried about the country’s demography. But it imagines the solution lies in browbeating women and telling them, in traditional tones, to be “virtuous wives and good mothers”. The result is an approach to women that will not only fail to realise the party’s narrow aims, but will also make countless women miserable.

Mao Zedong famously claimed that women hold up “half the sky”, but you would never know it today. The party’s disastrous one-child policy, in place until 2015, led to millions of female fetuses being aborted. The inevitable result is that millions of women are now missing. Their absence leads to other terrible outcomes. Counting men aged 23-37 and women aged 22-36, China has 22.5m more men than women. To be a catch, a man needs an education, a solid job, a flat and, in many regions, to pay a hefty fee to his bride’s family. Around a third of young male migrants who intend to marry think they have only a 50% or lower chance of doing so by the age of 30.

As a result, resentments abound: many men, especially rural ones, are chauvinists. The sense of bitterness is likely to spread. Women make up more than half of those in higher education; men who lack education or economic prospects risk falling ever further behind.

The Chinese government cannot suddenly conjure up millions of missing women to alleviate the situation. But it could introduce policies that boost the marriage rate among Chinese women while improving the choices available to them.

One idea is to ensure that women have proper rights within marriages. The enforcement of laws on harassment, marital rape and domestic violence is woefully inadequate. More might marry if they were assured of fair treatment in cases of divorce, including payment of child support. If it were easier for wives to divorce bad husbands, more might remarry.

Fairer divorce settlements might also hasten the end of bride prices. Research suggests a young male migrant must save for six years to afford a bride price of 127,300 yuan ($18,780). A law bans extortionate bride prices already, but it is ambiguous and poorly enforced. Many parents still set great store by the price a daughter can command; the desperation of men to find a partner means that those with money will pay; female divorcees sometimes retain a chunk of it if marriages fail. But the payment both commodifies women and disadvantages impecunious men in rural areas in particular.

More generally, the government could lower the hurdles to home ownership and work that stand in the way of couples. It should buy more of China’s vast tracts of unsold housing, converting it into affordable rental homes favoured by young families. Recent relaxations in the hukou system of internal passports, which make it easier for newcomers to register themselves and their families for schools and other public services in cities, are welcome.

Traditionalist men, including those at the top of the Communist Party, may see some of these ideas as foreign impositions. If they stopped chiding Chinese women and tried asking them for their opinions, they might hear a different story. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

State-backed efforts to catch up with frontier models are doomed

How to make AI safe—and lessen dependence on America and China State-backed efforts to catch up with frontier models are doomed July 16th 2026 PROGRESS IS rapidly being made towards regulating the release of powerful new AI models in America. Its government is set to soon outline its plan, after taking suggestions from the industry. Speaking to The Economist this week Sir Demis Hassabis, the boss of Google DeepMind, pitched a hybrid public-private regulator for the industry, echoing our own thoughts. The regulator is modelled on the agency that regulates brokers and stock markets.

Rules are needed because the newest frontier models possess some dangerous powers—from hacking critical digital infrastructure to writing recipes for new bioweapons. Without any organised way of dealing with such risks, the government has taken to making up the rules as it goes along in order to control access to Mythos and Sol, Anthropic and OpenAI’s latest offerings. Ideally, predictable rules would be agreed on internationally, especially between America and China, whose models surpass everyone else’s. But time is short. Sir Demis thinks that, if America moves unilaterally, the rest of the world will sign up to its system.

He may be right. Yet safety is only one part of the problem. It is increasingly clear that America and China will also restrict access to their models for economic and strategic reasons. Under President Donald Trump, America has had no qualms about using its allies’ military dependence as negotiating leverage; it could one day try to exploit their AI dependence, too. China has treated other exports, such as rare earths, as sources of geopolitical advantage, and probably views AI the same way .

The control that these two governments exert over frontier AI puts other countries in a very tight spot, especially as the technology spreads. If America cuts off a country from its models and data centres, “Are your factories going to still run?” asks Arthur Mensch, head of Mistral AI, Europe’s best model maker, on this week’s “ Inside Tech” show. Access to AI will also be increasingly important for security.

What, then, can other countries do? A state-backed effort to catch up with America’s frontier models would be doomed. OpenAI and Anthropic have each raised well over $100bn in funding so far. Any effort that spends much less is not credible. Even if politicians find the cash, AI research is the sort of endeavour—involving expensive researchers and risky bets—in which governments have a feeble record. Who today remembers Quaero, the rival to Google that the French and German governments announced in 2005?

Other countries can, though, build data centres. Most will need some of them, to run AI on sensitive data. Local data centres offer insurance against being suddenly cut off from processing power, or “compute”. They also make it easier to maintain a credible ability to switch to open-weight models, which anyone can run if access to frontier capabilities is cut off.

Unfortunately, much of the world is far behind the data-centre buildouts in America and China. Usually, the biggest problems are regulation and access to power. By delaying revenues and locking up capital, procedural snafus can have enormous effects: a nine-month delay worsens the economics of a data centre as much as would doubling its lifetime electricity bill, according to the Carnegie Endowment, a think-tank. The average delay before being connected to the grid is three years in India and Britain and three-and-a-half in Germany and South Korea, compared with two years in America.

Speeding up regulatory approval, offering fast-tracks through connection queues and allowing power generation that bypasses the grid would all help. There is no need for subsidies: AI companies are desperate for compute and will pay to get it. There is even the enticing possibility of agreements where AI developers promise to offer a country the same models as America in return for data centres. Simply becoming a big customer of America’s AI labs, by encouraging the diffusion of the technology, could itself build leverage. Model makers need revenue to justify their gigantic investments; they will have a reason to lobby against American protectionism that hurts foreign buyers.

Some countries are in the fortunate position of having their own choke points. Taiwan has chipmaking; the Netherlands has ASML; South Korea has memory technology. These specialisms should be prized. But even the lucky few cannot build fully sovereign AI capabilities. So countries must prepare to deal transactionally with the AI superpowers. Democratic America is a better partner than authoritarian China. Even so, every source of negotiating leverage will count. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Bureaucracy is nightlife’s toughest bouncer

America should stop making it so hard to have fun Bureaucracy is nightlife’s toughest bouncer July 16th 2026 In 1660 the laws of the Puritan Massachusetts Bay Colony declared that its nascent watchmen should “examine all night walkers after ten of the clock at night”. This year Boston’s largest police union offered up a modern equivalent, opposing the extension of bar hours to 3am on the grounds that: “Truth be told, not a lot of good happens after midnight.” For a country that prides itself on defending individual liberty, America has long been surprisingly prissy about nightlife and the boozy, exuberant and sometimes disorderly fun that comes with it. It should learn to lighten up.

Rules about alcohol are often to blame. When Prohibition ended in 1933 a patchwork of laws emerged in its place, from caps on the number of liquor licences for pubs and restaurants to state monopolies over wholesale liquor distribution.

Over the next decades zoning laws, neighbourhood review boards and other municipal restrictions layered on additional limits for venues that serve alcohol. This bureaucracy was partly motivated by understandable fears over crime and public health. Cities are not just places for drinking and revelry, but also for growing families and people who want safe streets and a good night’s sleep. Drinking too much causes disease, accidents and crime.

But bureaucracy also takes on a life of its own. The good reasons to regulate nightlife are not a reason to throttle it. The consequence of all this red tape is that in the land of the free, it is simpler in some places for an 18-year-old to buy a semi-automatic rifle than it is for an entrepreneur to open a neighbourhood bar. Government-imposed caps have the predictable effect of driving up prices and smothering competition. The average cost of a liquor licence in New Jersey is estimated to be around $350,000.

Thriving nightlife is good for both economic and social reasons. Economically, livelier streets tend to make cities better places to live, helping create productive clusters of skilled young workers who wish to socialise as well as build careers. As a side-benefit, the extra foot traffic can make streets safer.

A bustling late-night economy also makes for good social policy. Bars, music venues and nightclubs are the sorts of places where young people can have fun together, regardless of whether alcohol is involved. Official data show that, between 2003 and 2023, the average amount of time 18- to 30-year-old Americans spent socialising each day fell by 38%. According to one survey, roughly one-third of single people aged 22 to 35 say they have not been out on a date in the past year. Dancing is, according to our fact-checked analysis, a far superior activity to doomscrolling.

American cities should make it easier to create places for people to gather and have fun. Many of those places will be open late into the night and involve alcohol. That means speeding up permits so that applications do not languish as business owners rack up costs; simplifying licensing rules that only a specialist can navigate; and getting rid of arbitrarily low quotas on liquor licences. Cities should also invest more in measures that actually improve safety. Better late-night public transport would be a good start. More police resources would help, too.

The good news is that more American cities are now taking an enlightened view of the night. In New York City, red tape that limits dancing in bars has been cut. San Francisco has begun simplifying its permit process for entertainment venues. The debate over Boston’s later closing hours was prompted by hordes of good-natured Scottish football fans who descended on the city for the World Cup in June. The Scots may not be that good at football but they did show the city how wonderful the wee hours can be. Even before then, Boston had increased its supply of liquor licences.

Keeping up this momentum is good economics and even better social policy. And if that sounds a little dry, there’s a simpler argument: a night out is a lot of fun. More American cities should embrace it. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A leading oligarch speaks out, warning of the looming disaster facing his country

The man who would change Russia A leading oligarch speaks out, warning of the looming disaster facing his country July 9th 2026 WHEN ENOUGH Russians feel the endless fighting in Ukraine is futile and that they are paying the price, their president, Vladimir Putin, will be forced to do something spectacular to break the deadlock. This is why it pays to watch Russia for warnings of fatigue or discontent. Our cover this week features the most stunning such warning so far.

It comes from Andrey Melnichenko, the world’s fertiliser king and Russia’s biggest industrialist. Mr Melnichenko is hardly a member of the anti-Putin opposition. Far from criticising the invasion, he is an insider whose factories have supported the war economy. Nor is he being high-minded. Having run his companies outside Russia, Mr Melnichenko returned in 2023 as the scope for global business shrank. Like most oligarchs, he has lived by Mr Putin’s rules—make money, but keep your nose out of politics. He is talking now because he and his fellow tycoons can no longer afford to ignore the rot in a country they watched descend into tyranny.

Mr Melnichenko issued his warning over nearly 60 hours of interviews with The Economist and more guardedly in an essay we are publishing online. It is the first time an oligarch in Russia has spoken out at such length. We are giving him space not because we agree with all his views or because he is a champion of democracy and human rights. Instead, he is a pragmatist who wants his firms to thrive. That is why his call could resonate in a country where wars gone wrong, including the defeat to Japan in 1905, have led to campaigns by industrialists for political change.

Mr Melnichenko’s words go far beyond the war, to the bleak outlook for Russia and its neighbours. He warns the West not to wish for Russia to descend into chaos, brutal autarky or a sullen, dangerous dependency. Although he does not say that Mr Putin must be removed from power, the change he wants would amount to an end to one-man rule.

What makes Mr Melnichenko’s intervention so striking is that the Ukraine war has come home to Russia. After Ukrainian attacks on its energy industry, the country is witnessing queues for fuel and fistfights at filling stations. The annexation of Crimea in 2014 boosted Mr Putin’s popularity; today the peninsula is being isolated by Ukrainian drone strikes. Forced military enlistment is feeding resentment. Influencers’ complaints about the war are going viral on social media.

This reality belies Mr Putin’s repeated promises that the special military operation is on track and a breakthrough is at hand. Although the Russian economy is not about to collapse and people are not about to rise up, Russians increasingly feel that their country has reached a dead end .

Mr Putin may well try to reassert his authority by escalating the war and repressing people at home. Some Western intelligence services have recently reported that Russia is about to intensify its confrontation with NATO. At his darkest, Mr Melnichenko fears the use of a tactical nuclear weapon in an attempt to terrorise Ukraine’s European backers—though Western analysts still discount that.

Mr Melnichenko argues that escalation would not lead to a lasting peace between Russia, Ukraine and Europe. Left unsaid is that, if ordinary Russians become alarmed by the war and more resentful because of a broad mobilisation and political repression, that will only exacerbate Mr Putin’s problems at home—leading to the next round of escalation.

These gloomy thoughts take Mr Melnichenko to the heart of his argument. He sets out his thesis in a series of long-term scenarios for Russia, all of which, he says, would be dangerous for Russia and the world.

Most alarmingly, Russia could collapse into anarchy, as warlords struggle for control of resources and nuclear weapons. That fear was real enough to lead the Biden administration to seek to avoid Russia being humiliated in Ukraine.

Or Russia could come under the thumb of foreign powers. It may be dominated by China, which could use it to supply raw materials and serve as a buffer against America. Or, after a war of attrition, maybe Russia will exist on the periphery of Europe, an impoverished dependant. Both outcomes would breed resentment and discontent, he predicts, incubating a violent nationalism that may one day explode into conflict.

In the last scenario Russia would turn inward, like North Korea, a closed fortress under siege, starved of growth and capital. This is apparently being actively discussed in the bowels of the Kremlin. Yet, like North Korea, Russia would be in a state of permanent war against the world.

Mr Melnichenko is enigmatic about how precisely to avoid these outcomes. Self-servingly, he urges Western countries to resist the temptation to push the war to its limits. Instead, they and Russia must find a way to live in peace. To this end, he calls on them to grant Russia “sovereignty”—an immunity that sounds a lot like China’s demand for non-interference. About reform in Russia, he is elusive. The country must be predictable to the outside world and must win over its people without resorting to coercion. Implicitly, he wants Mr Putin to relinquish one-man rule and devolve power. But he does not talk about democracy.

Even that will run up against the securocrats, top dogs since Mr Putin banished the original post-Soviet oligarchs from politics over two decades ago. If Russia becomes a more normal country, they will be the losers. Perhaps, though, technocrats and moguls fearful for Russia will take Mr Melnichenko’s side. Mr Putin may refuse to yield. But he is in a bind. Grinding on, escalation and reform would each carry costs.

Reform has a precedent. In 1905 Russia lost a 19-month war to Japan. Industrialists and technocrats blamed the dictatorial Nicholas II. It showed, they said, that one-man rule doomed Russia to be behind the rest of Europe. That year, after an uprising, they forced the tsar to accept the October Manifesto, which proposed civil liberties and a legislative assembly.

By mid-1907 Nicholas had crushed the reforms; a decade later he was toppled in the revolution. The hope must be that Russia learns this lesson: it needs reforms that last. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The grubby scheme contains the seeds of a good idea

Two cheers for Trump Accounts The grubby scheme contains the seeds of a good idea July 9th 2026 Donald Trump likes putting his name on things, from Manhattan skyscrapers (with permission) to Washington’s Kennedy Centre (without). From July 4th Americans have started seeing the president’s name show up in their children’s financial statements. Babies born between 2025 and 2028 are getting “Trump Accounts”: $1,000 invested in American stocks, which will be theirs to spend when they turn 18. Some billionaires and big companies have donated top-ups, and parents can make their own contributions.

The name is not the only Trumpy thing about the new handouts: they are also partisan, grubby and funded mostly by borrowing. Only babies who are born from 2025 onward, when Mr Trump returned to the White House, will qualify. Roping in America’s wealthiest to chip in alongside the taxpayer carries a whiff of the cronyism that is sadly too familiar in today’s Washington.

However, beneath the unsavoury execution there sits an experiment worth watching. The idea of giving children equity stakes in the economy is sound in principle. It is also well-timed, as societies face up to the looming economic disruption from artificial intelligence.

So far, the scale of this experiment is, admittedly, rather small. The $1,000 each child receives could be worth around $4,500 by the time they turn 18, which is more like $3,000 in today’s prices. Still, it could make a modest but helpful dent in a deposit for a home or car, or in university fees. Many young people already rely on handouts to help buy their first home, but how much they get depends largely on how deep their parents’ pockets are. This undermines the notion that working hard is enough to succeed, a principle without which public support for free markets wanes.

Indeed, a troublingly high share of young people profess to feel more enthusiasm for socialism than capitalism. The Economist has spotted a worrying rise in what we call “ Gen-Z socialism ”, a politics that combines soaking the rich with calls for price controls on everything from rental housing to groceries. Winning the next generation back to the side of free enterprise may require giving them a personal stake in the private sector that goes beyond the labour market.

Compared with other rich countries, America has already done a good job of making investors of everybody: the poorest fifth of Americans have 15% of their assets in stocks, versus just 3% in 1990. Trump Accounts could build on that start by offering a national lesson in financial literacy as children and families watch their money grow.

The experiment is particularly useful preparation for the turmoil that the spread of ai may bring. The more radical forecasts for AI’s economic effects involve vast returns for capital-holders and a tough time for workers. Under that scenario, a direct and highly visible public stake in the technology might be necessary to forestall runaway inequality and political instability.

Instead of the government running the show of managing, say, the 5% of OpenAI that Sam Altman has suggested handing over, shares could be passed along to citizens via Trump-like accounts. Even if ai does not make capital eclipse labour, the mechanism could encourage a healthy new form of philanthropy in which some billionaires voluntarily pass on parts of their fortunes to all Americans.

The scheme’s deficit-financing is not ideal, but at least the borrowing funds savings rather than—as with most government handouts—immediate consumption. In any case, at its current size the effect of the scheme on the deficit is microscopic: 0.005% of annual gdp. So Trump Accounts get two cheers from The Economist. We hope they outlast the president’s term—and that his successor sorts out a name for them that Democrats and Republicans alike can get behind. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Andy Burnham’s plan is no way to ease the housing crisis

England needs fewer council homes, not more Andy Burnham’s plan is no way to ease the housing crisis July 9th 2026 Young Britons are a gloomy bunch. One poll found that 38% expect to lead worse lives than their parents (only 36% think they will do better). Much of the blame can be laid at the locked door of unaffordable housing. In big cities, where the good jobs are, rents are extortionate. In London the average is around half of mean earnings. Anger about housing frays the social contract and leads some to scapegoat vulnerable groups, such as refugees.

Andy Burnham, the man almost certain to be the next prime minister, has an answer. He has promised “ the biggest council-housebuilding programme since the post-war period ”. This policy is popular: 72% of the public support more social housing, which in England means homes owned by councils or charities and let at below-market rents. Over 1.3m households are on waiting lists for such homes.

Yet Mr Burnham’s plan would be like adding a floor on top of a crumbling tower block. England does not have too little social housing. It has too much: at 16% of the total stock, more than any other G7 country. In some London boroughs nearly 40% of homes are social housing. And far from being “the foundation for everything”, as Mr Burnham says, the council-housing system is wasteful, unfair and a barrier to growth.

England has two types of housing support. First, tenants in social housing enjoy discounted rents. Second, anyone deemed needy after a means test, whether in a private home or a social one, can receive a rent subsidy (“housing benefit”). The Economist crudely calculates that discounted rents to the first group add up to an implicit subsidy of £20bn ($25bn) a year. For the two-thirds of social-housing tenants who are on welfare, this saving is mostly recycled within government, lowering the benefit bill needed to cover rent. But for the remaining one-third not on welfare, it’s a bonanza.

New social lets in Kensington and Chelsea were nearly 80% below market rents in 2024-25, a £32,000 annual saving per household. Social tenancies are often for life and can even be inherited. Once you’re in, there’s no more means-testing , regardless of how much your fortunes improve. Of the 4m households in social housing in England, more than 10% have incomes in the national top 40%. Some are rich. The wife of the president of Sierra Leone, who lives in a palace, was recently found to have a council home in London as well.

Thus, some high earners enjoy ultra-cheap social housing, while more than 1m households on benefits rent from private landlords. In much of the country, housing benefits are stingy and rents are high, so this latter group is at risk of homelessness. A system that arbitrarily foists feast on some and famine on others is not just.

It also slows economic growth by making people less mobile. If you have a lifelong council tenancy, you don’t want to lose it. So you are less likely to move elsewhere in search of a better job. And many of the council homes in city centres are occupied by pensioners, who are also frozen in place, blocking young jobseekers from moving in. (Some 60% of adults in social housing do not work.) Mr Burnham seems to think immobility is a virtue: he vows to build a country where “No one has to leave to get on in life.”

Rather than spending vast sums on building new council homes, Mr Burnham should instead raise all social rents to market rates. Then, those who truly need support could be given extra means-tested benefits to cover the difference. When the Tories tried and failed to introduce a similar scheme in 2015, opponents labelled it “social cleansing”. Yet the proposal is not to evict tenants, merely to charge them market rents. It would direct spending to people as and when they need it, instead of pinning it to a pile of bricks and mortar. Such a reform should be phased in gradually, to give people time to adjust. It would free up billions.

Fixing social housing would not solve all England’s housing woes. To do that, the country also needs to let builders put up more homes. Sir Keir Starmer enacted some reforms to make England’s planning system less insanely slow and obstructive. But other changes, such as stricter safety rules, gummed it up again. Fewer new homes were added last year than the year before. To pick up the pace, England needs a nationwide zoning system, in which it is harder to veto development, and looser quotas for “affordable housing” in private projects, which currently make many of them unprofitable.

Mr Burnham has given no sign of entertaining such ideas. On the contrary, he has said that “undue weight” has been placed on planning reform. That’s a pity. For too long England has been failed by cuddly-sounding housing policies that are in fact toxic. Social housing is one example; another is the “green belt” restriction around cities, which chokes off housebuilding, even on wasteland. Our proposal to scrap sub-market rents is the opposite kind of policy. It sounds harsh, but would act like a tonic. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

One simple vaccination may dramatically reduce the risk of dementia

A no-brainer for protecting your brain One simple vaccination may dramatically reduce the risk of dementia July 9th 2026 FEW CONDITIONS are as feared as dementia, of which Alzheimer’s is the most common cause. This is mostly because of its insidious nature, since it strips people of their sense of self and leaves those who love them caring for a stranger. “Alzheimer’s is me unwinding, losing trust in myself, a butt of my own jokes and, on bad days, capable of playing hunt the slipper by myself, and losing,” wrote the late Sir Terry Pratchett, a novelist who had a rare form of it. “I felt totally alone, with the world receding from me in every direction.”

It is also dreaded because many believe it is becoming far more common and so will inevitably strike them or those closest to them. Some epidemiologists in the field seem only to fan those fears. Models predict that the number of people suffering from dementia may triple to 153m by 2050 as societies age. In truth, the outlook is cheerier than that, especially in rich countries where, if adjusted for age, the risk of getting dementia has dropped sharply in recent decades . Most models assume these declines will not continue, or will even reverse. A mountain of new evidence shows that need not be.

Recent studies point out the numerous ways in which people are already reducing their risk of dementia. Many are lifestyle changes that you already know you should be making, such as eating healthily, exercising more and keeping your brain active. Others are medical interventions, such as treating hearing loss, depression, high blood pressure and high cholesterol. But getting people to adopt, and then stick to, healthy habits is hard. It does not help that, ideally, you should be working out more and boozing less for many years before your brain will thank you.

Yet there is one direct way to improve your chances of staying mentally sharp, and it involves almost no toil, tears or sweat. One of the most exciting scientific findings in recent years is that a course of the shingles vaccine may reduce the risk of dementia by about 20%. For a simple intervention, that is a huge benefit. Exactly why this happens is still being debated. One theory is that the varicella-zoster virus, which causes both shingles and chickenpox, contributes to dementia by causing damage or inflammation to the nervous system even while it is supposedly dormant. Another is that the vaccination gives the immune system a firm kick up its B-cells, activating it against other bugs that might contribute to dementia.

Too many public-health systems fail to offer the vaccine to more than just a small share of those who would benefit. Several studies have shown that, taking into account only the shingles cases prevented, it would be cost-effective to vaccinate almost everyone from about the age of 55. Yet many countries have rationed the vaccine to keep down the upfront costs. Britain, for instance, lowered the eligibility age from 70 to 65 in 2023, but has since been too slow to vaccinate those who were already in their late 60s. Among the 27 members of the European Union, just 17 recommend the vaccine at all, and several reserve it for the over-65s.

That makes little sense when considering only its efficacy against shingles, which afflicts 20-30% of unvaccinated people. It makes even less sense given its potential as a weapon in the fight against dementia.

Most of the evidence of its anti-dementia effect relates to an earlier version of the vaccine, which used a weakened form of the live virus. It has since been largely replaced by a new one, Shingrix, which contains just a sprinkling of proteins from the virus and is seen as safer because it cannot cause an infection. Some studies suggest the new jab may be at least as powerful against dementia as the old one. Even so, it would make sense to run randomised trials to learn which is better, the optimal age for getting it and whether boosters are needed.

In the meantime, health authorities should not wait. A full two-dose course of Shingrix costs Britain’s health service £320 ($430) and federal immunisation programmes in America around $270: a bargain, given the potential savings in long-term care costs. As for individuals, even the retail cost (around £460 in Britain) is a small price to reduce by one-fifth the chances of having the world recede in every direction. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Stop lowering the age of criminal responsibility

Who is capable of evil? Stop lowering the age of criminal responsibility July 9th 2026 HOW DO YOU judge whether children are responsible for their actions? The answer often depends on age. Given how slowly human character develops, most countries do not hold the youngest to be criminally responsible, even if they commit heinous acts. In the eyes of the law the least mature, who cannot grasp the consequences of what they do, are reckoned to be doli incapax—incapable of evil.

Yet that raises a second question: how old is old enough to count? Countries answer this in wildly different ways, as they wrestle with the task of defining the age of criminal responsibility. Now, regrettably, lawmakers in many places are pushing it downwards . In February Argentina lowered its age from 16 to 14. Others, from the Maldives to South Korea, may do something similar. Gangs have been a scourge in Sweden for many years. It now plans to reduce the age of responsibility for the most serious crimes. Last month Northern Ireland blocked a motion that would have raised the age from just ten—the joint-lowest in Europe—to 14.

Politicians are listening to voters angry about dramatic and well-publicised crimes—and you can understand why. Indonesians were horrified when a 12-year-old stabbed her mother 26 times, killing her. In Colombia a 15-year-old boy last year shot and killed a senator campaigning to be president. In Sweden and elsewhere, gangs use children to attack properties or people.

Criminals like to recruit young foot soldiers because they are cheap and pliable. They often lack the impulse-control and judgment that most adults possess. Neuroscientists suggest that the brain keeps developing well into adulthood, perhaps even into the mid-20s, which may be why so much crime is committed by the young. Teens are often enticed into gangs by the promise of quick money. Criminals also calculate that the youngest may dodge punishment if caught. In Britain drug-dealers use children precisely because they are under-age.

You can see, therefore, why lawmakers want to criminalise the acts of ever younger people. Authorities may hope that doing so will remove an incentive for gangs to recruit them. They should reconsider, if only because lowering the age of responsibility is unjust—especially if that involves children younger than the low teens.

Even if you disagree with the moral argument, you should heed the practical one. Experience suggests that lowering the age will not work. When Denmark took it from 15 to 14 in 2010, crime rates rose. The country reversed course soon after. Britain found that, when the age of responsibility drops, gangs just recruit even younger children.

Prosecuting young children as criminals is also a way of ensuring that ever more of them will emerge from the system as hardened villains. In Queensland, Australia, where ten-year-olds are counted as criminally responsible, 96% of children who are released from prison go on to reoffend within a year.

It is wiser to try rehabilitation. That will often mean securing young wrongdoers safely away from wider society. But rather than punishing them, the goal should be to tackle the social, educational and other factors that first drew them into criminality. One focus should be on those brains. In Britain a fifth of children in the youth-justice system have learning difficulties. Another should be to deal with social problems early by, say, providing mentors. In Sweden around half of all kids who are investigated for a serious crime were flagged to social services for worrying behaviour before the age of 12.

Nothing will stop all wrongdoing by children. There should be severe criminal penalties for adults who recruit and exploit the young. But the goal for children should be to create better childhoods, with fewer reasons to go into crime, and to prevent criminal children from becoming criminal adults. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Restlessness is what prevents the republic from sinking into stagnation

America is anxious, and awesomely powerful Restlessness is what prevents the republic from sinking into stagnation July 2nd 2026 FROM THE start, 250 years ago, America’s founders believed that their republic would shine out as an example to all humanity. But the republic was also an experiment, and they feared that it could soon collapse into disorder or tyranny. Such has been the dance throughout America’s extraordinary history. Slavery and xenophobia, corruption and robber barons, civil war and world war have all jostled the republic even as America rose to become the beacon of the free world.

On July 4th Americans are celebrating their semiquincentennial. All those syllables rebut the founders’ gloom. Far from succumbing to tyranny, America saved the world from tyrants three times over. Glorious disorder created a dynamism that has long sustained America as a superpower . Dominance comes with temptations, but the United States has by and large held out republican virtues as the salvation of people everywhere.

Yet this birthday comes at another anxious moment in America’s story. Virtue is under threat and talk of decline is in the air. Even as citizens celebrate together, public life is scarred by division. America is demolishing the world order that it created after the defeat of fascism in 1945. The restless republic is opening a new chapter, but does that signal retreat, as some Americans worry, or instead herald a renewal?

To understand this moment, and to mark the 250th anniversary, The Economist retraced the footsteps of Alexis de Tocqueville, a French aristocrat whose tour of the country in the early 1830s furnished the material for “Democracy in America”, a trove of enduring insights into the republic. If you listen to our podcast , you will discover that many Americans today echo the founders’ fears.

They worry that the separation of powers is degenerating into a White House-takes-all world. Congress was meant to be the leading branch of government, but it is gripped by a vicious partisanship in which “we” are right and “they” are bad. To pass laws requires give and take, but the parties punish compromise and gerrymandering rewards extreme views. The Supreme Court is adding to the might of the executive. This week, though it struck down one of the president’s schemes, over birthright citizenship, it also expanded his power by ruling that he can sack officials in federal agencies.

A nation of immigrants, the United States has at its best treated the people flocking to its shores as a source of vitality and a validation of the American dream. China has a dream, too, but foreigners are excluded by the unalterable fact that they were not born Chinese. By contrast, people of any race or faith can become American. Their welcome is the promise that what they and their children can accomplish is limited only by their imagination and capacity for hard work.

But the American dream has soured. Bits of the MAGA movement want to shut down legal immigration, not just the illegal sort. This year net migration could be zero. As the share of Americans who call themselves “white” sinks towards 50%, some on the right want to give a special status to “heritage Americans”, whose forebears have been in the country for generations. This is an ugly throwback to the racism that Americans rejected as part of the moral and material progress that best define the republic’s success.

Abroad, America is also retreating from its values. As our essay this week describes, Donald Trump is leading a Wrecking-ball revolution to smash the institutions and alliances that the postwar generation set up to keep the world safe from despotism. He and many Americans on the right and left feel contempt for a global system that they blame—misguidedly, in the view of The Economist—for aiding China, punishing America’s workers and sending its young soldiers to spill their blood in far-off countries.

Accordingly, America is throwing its weight around like any other country chasing wealth and power. Freedom and democracy for foreigners are off the agenda. Trade used to be a system of mutual benefit; it has become a tool for extracting concessions. Shared values once united America and its allies; now allies are seen as dependants to be exploited.

Many people conclude that America is in decline. That strikes this newspaper as a grave misreading. America’s power is immense—and it could be about to grow beyond all recognition. For evidence of the country’s unabated dynamism, look outside its dysfunctional politics.

America’s artificial-intelligence companies have rapidly mobilised hundreds of billions of dollars to finance the pursuit of a technological lead. If, as they predict, AI changes everything, then America and its AI stack may become utterly dominant—for a time, at least. Some of that is bound to rub off on America’s businesses and its formidable armed forces. Its allies, however much they have been antagonised by Mr Trump, would face a bleak choice between submitting to America or siding with authoritarian China.

As America amasses awesome power, the great experiment could go disastrously wrong. Mr Trump has tainted public life with an ugly cynicism that always sees the worst in everyone. Boosted by AI-enhanced agencies, executive power could become overwhelming. The concentration of wealth and political power could foster a predatory elite. Partisanship, fanned by social media, gerrymandering and party primaries dominated by zealots, could become further entrenched. Politicians might prove unable to deal with the economic and social upheaval that lies ahead.

As domestic politics grows dirtier and nastier, America could also become more predatory abroad. Imagine that its abandonment of the project to promote liberty is permanent. Other countries will copy it. Violent, ambitious leaders will feel emboldened to conquer or coerce their neighbours. The world will descend into chaos.

However, as the founders would attest, that dark future is not certain—or even likely. The corollary of America’s dynamism is its capacity for reinvention. Episodes that set the republic back—Pearl Harbour, Sputnik, Watergate—spurred it to recover and charge ahead. Roused, Americans set about making sure that next time they would do better and be better.

One way or another, change is coming to America, because too much today is unsustainable. The social contract, which is financed by borrowing, is fiscally unsustainable. Mr Trump’s generation is biologically unsustainable: his successor will belong to a new, younger group of Americans. The hope must be that voters will decide that the two parties’ sterile mutual contempt has become politically unsustainable, too.

As celebratory fireworks light up cities and towns across America, remember that restlessness is precisely what prevents the republic from sinking into stagnation. All those arguments and fights are a precondition for the creative destruction that precedes the nation’s renewal.

Naturally, the founders would be worried today, just as they were 250 years ago. Yet their revolutionary insight was to build their great experiment on the wisdom of the people. Time and again, that faith has been richly rewarded. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Fable is free. But the technology desperately needs better regulations

America should not imprison frontier AI Fable is free. But the technology desperately needs better regulations July 2nd 2026 New rules often come out of disasters. America’s Federal Reserve was founded following the Panic of 1907, when stock prices fell by half. Pressure from muckrakers such as Upton Sinclair brought about the Food and Drug Administration. The Securities and Exchange Commission was founded during the Great Depression. Artificial intelligence has not yet caused a calamity, but it might. Models like Anthropic’s Mythos and OpenAI’s GPT-5.6 Sol are extraordinarily good hackers and could become capable advisers to bioterrorists.

Understandably, the Trump administration is trying to regulate the technology before catastrophe strikes. It is working with AI companies on voluntary standards that could soon be released. Unfortunately, its efforts so far have been a mess.

Anthropic was its first victim, slapped with export controls in mid-June after the release of Fable, a guardrailed version of Mythos. That came not long after a row between the company and the Pentagon. Fears of a grudge were allayed when the administration appeared to compel OpenAI to limit access to its Sol model. Then, on June 30th, the Commerce Department abruptly lifted the ban on Fable after Anthropic fiddled with its safety protections.

Throughout, the government has seemed to make up rules on the fly. Its decisions have also had an unpleasant nationalistic tinge. At first it restricted Fable only for non-Americans; Anthropic decided that a wholesale block was the only way to comply. It looks as if the administration pulled the only lever available, knowing that it was a de facto ban. But throughout the past month’s brouhaha, the government has made clear that Americans’ AI access takes precedence over foreigners’.

Now that America has started licensing AI releases, it is unlikely to stop. But regulating frontier AI is tricky. China’s top models are only months behind America’s, and most are open-weight, meaning anyone can run or tinker with them. One recent release, GLM 5.2 from Z.ai, already matches the best of the last generation of American models. Chinese labs may take longer to catch up with Mythos, since they have fewer chips and American labs are cracking down on distillation, when competitors use the outputs of the best models to train their own. But that buys months, or a year at most. America could ban Chinese open-weight models and punish foreigners who use them. But even if it managed to enforce its ban, a vast home market would keep China’s model-makers going.

So a permanent block is unworkable. It is also undesirable. Many American AI firms and researchers rely on Chinese models, which are cheap and malleable. The intelligence that makes new models dangerous also makes them tremendously useful. Worries about China aside, a gulf between publicly available and restricted models is a problem. Societies adapt to AI best when improvements arrive gradually, not in a great lurch. Imagine the mess if regulators bottled up several generations of Mythos-style advances. The few with access would acquire great power. The sudden jump in capability whenever the models did get released would unleash chaos.

How then can models like Mythos and Sol be safely set free? The emerging norm provides for an evaluation period and a staggered release to trusted institutions. That is a good start, but it needs formalising. Some choices, such as how much risk to tolerate, belong to elected leaders. But politicians should not be micromanaging the process or horse-trading with AI companies, as they do today.

Once those goals are set, politicians should stand back. Evaluating a model is a technical problem. Governments have some expertise, for example in America’s Centre for AI Standards and Innovation or Britain’s AI Security Institute (AISI). But the private sector has more. The finance and electric-power industries offer structures where oversight is carried out by industry bodies, overseen by government. Something similar might help amalgamate knowledge from the AI labs, research groups and foreign bodies such as AISI.

Ideally, America would work with its allies on AI regulation. Alas, it is hard to imagine Donald Trump giving up the immense sovereign power that stems from control of frontier models. Locking others out of AI is not in America’s economic or strategic interest, but neither were indiscriminate tariffs or threats to Greenland.

So other countries must build leverage with their own AI sectors and regulations, and find fail-safes for American export controls. They could, for instance, ensure that businesses can easily switch to non-American models that run on non-American data centres. It is far wiser to depend on America than on China, but they would be mad to ignore the risks. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Both have much to gain from being less belligerent

Turkey and Israel should trade energy, not insults Both have much to gain from being less belligerent July 2nd 2026 A minister in Turkey has spoken of one day “ruling” Jerusalem. Israeli officials have warned darkly that Turkey is “the new Iran”. Listen to the volleys of invective flying in both directions, and you might think that two of the Middle East’s pivotal powers are heading for conflict.

The tension is real . Turkey, a mostly Muslim country, fumes over Israel’s ill-treatment of Palestinians. Israel accuses Turkey of harbouring leaders of Hamas, the Islamist group that attacked Israel on October 7th 2023. Each thinks the other threatens its borders. Israel has fostered ties with Kurds, including some that Turkey’s government, ever wary of Kurdish nationalism, sees as enemies. Turkey has close relations with the ex-jihadists now ruling Syria, who appear to be reformed but who Israel fears could one day prove hostile to the Jewish state.

Israel’s prime minister and Turkey’s president often swap ferocious insults. Binyamin Netanyahu recently called Recep Tayyip Erdogan an “antisemitic dictator” who is “committing genocide against the Kurds”. Then again, Mr Erdogan has likened the Israeli leader to Hitler, saying Israel is a chaos factory fuelled “by blood and tears”.

Such rhetoric gets attention abroad, but it is mostly intended for domestic ears. Mr Netanyahu faces a tough election in the autumn, and fears that he will lose office having been cast as the man who failed his people on October 7th. Mr Erdogan may lean on Turkey’s parliament to call an election next year. Each loves to pose as a doughty defender of the nation against external threats. Each is thus a handy foil for the other.

It does not have to be this way. Both countries are allies of America, which is, belatedly, trying to discourage the verbal salvoes. Not long ago, the armed forces of Israel and Turkey were able to co-operate. In the recent past it was possible to imagine healthy economic ties, too. Their respective industrial and technological strengths and physical proximity should have made that straightforward. Given the right politics, how might a better relationship be fostered again?

Energy may be the key, despite an embargo Mr Erdogan’s government imposed on trade with Israel in 2024. Much of the oil Israel imports is pumped in Azerbaijan or the Kurdish region of Iraq, and then transported by pipeline through Turkey or shipped through Ceyhan, a Turkish port.

More should follow. Given Iran’s ability to disrupt the flow of hydrocarbons through the Strait of Hormuz, other countries should develop alternative sources and supply routes. One rich possibility is gas in the eastern Mediterranean. Exploration there by Israel is already advanced. It should be open to joint projects with Turkey and other littoral states to develop subsea gasfields and export the energy they find there.

When Israel and Turkey worked together more closely, plans were drawn up for a pipeline to connect the eastern Mediterranean gasfields to Turkey’s southern ports. A related project would be to forge a regional network of pipelines to bring oil and gas from afar more easily to market. Israel and Turkey should both aspire to be a part of this network linking Gulf producers and others to buyers in Europe and Asia.

It is still not clear when, or even if, the Strait of Hormuz will be fully reopened to tanker traffic, at least without users paying fees to Iran (and perhaps Oman). If Israel and Turkey want to reduce their vulnerability to the regional rogue, and maybe make a large heap of money in the process, they should trade fewer barbs and more barrels. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The government’s response has been dire. Its patron has a duty to help

Venezuela’s earthquakes are partly America’s problem The government’s response has been dire. Its patron has a duty to help July 2nd 2026 THE earthquakes that struck Venezuela on June 24th killed more than 2,000 people, by the official count. Many more are listed as missing, and the UN has ordered 10,000 body bags. But the true toll will probably never be known. After decades of brutal kleptocracy, Venezuela is no longer the kind of country where bodies are properly counted.

The regime’s response to the disaster has been dismal. In La Guaira, the worst-hit state, survivors say no official help came in the first 48 hours—the crucial period when there is the best chance that people trapped under fallen buildings might still be breathing. Families were left to scrabble for their loved ones in heaps of dust and broken concrete. Heavy machinery for moving the rubble was slow to come and sometimes lacked fuel. Some rescue teams had no torches. The stench of rotting corpses is now pervasive. Injured survivors who make it to hospital find the wards short-staffed and ill-equipped. The regime, which is as incompetent as it is authoritarian, has been slow to distribute aid.

Since January, when Donald Trump sent military forces to capture Venezuela’s dictator, Nicolás Maduro, Venezuela’s problems have become America’s, too. President Trump replaced Mr Maduro with his more biddable deputy, Delcy Rodríguez, and has boasted that he now runs the country through her. That is an exaggeration, but America does directly control Venezuela’s oil revenues, and Ms Rodríguez must to some degree co-operate with Uncle Sam if she wishes to avoid her predecessor’s fate. (He is stuck in an American prison.)

America’s unique involvement in Venezuela brings unique responsibilities. It should do more to fulfil them. About 300 American rescuers have arrived, along with 900 marines. But of $300m promised in aid , only $100m is new money. All help is welcome, but the need is great.

Meanwhile, other challenges are looming. Venezuela’s most popular politician, the opposition leader María Corina Machado, is in exile. The Trump administration has told her not to try to return, for fear that her arrival in Caracas would spark unrest. Until now, she has complied. But, after the quakes, she is understandably desperate to get back to her people. In the past week America and the regime have blocked her. That is wrong. As a Venezuelan, she has a right to go home.

Elections have been promised, but many fear the regime will keep delaying them. Fury is building. Mr Trump’s popularity in Venezuela, sky-high just after he removed the hated Mr Maduro, has been falling. This is a dangerous mix. An election may not be feasible soon, but America and the regime should set a timetable for one. That might assuage public anger. It might also give foreign investors hope that the country will one day be less lawless, and hence worth investing more in.

The earthquakes have aggravated another huge challenge: the mess that is the government’s debts. By one estimate, Venezuela’s sovereign debt adds up to $240bn, or 240% of GDP. If that is accurate, a restructuring would be the most ambitious ever attempted anywhere. Worse, the IMF, which is normally a neutral arbiter, is not involved and the mix of creditors includes Chinese banks, Russia’s government and others who choose to remain anonymous.

American officials say they hope a deal can be struck by the end of the year, but that sounds fanciful. America must not accept a partial, botched agreement merely to stay on schedule. That would be open to legal challenge and accusations of corruption. To give Venezuela its best shot at stable finances, America must instead press its government to stick to international rules and engage with the IMF, even if it takes longer.

For the thousands crushed or smothered by the quakes, it is too late. For Venezuela, there is a chance of renewal, but they deserve better than Mr Trump and his dire protégée. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The market bested us. But for The Economist, there is no shame in that

We woz wrong about oil The market bested us. But for The Economist, there is no shame in that July 2nd 2026 An editor of The Economist once said: “We are a paper of opinion and views. We stick our neck out and consequently risk having it chopped from time to time.” The oil price has delivered such a blow. At the end of April, almost two months after America and Israel attacked Iran, we said oil traders were in “la-la land” thinking that oil prices would fall to $88 by the end of the year. Today Brent crude costs just over $70 a barrel. Our prediction went about as well as the war.

We got it wrong for two reasons. First, we thought that America and Iran would hold out against a deal to reopen the Strait of Hormuz: America because Mr Trump deludedly thought he held the whip hand, Iran because its regime knew its people could be made to endure more pain. In fact, facing the fury of American motorists, Mr Trump all but folded, preventing a disaster. Since the two parties struck a provisional deal in June, enough oil has been getting out of the Gulf to reassure markets that supply is coming back online, even if the future of the strait remains uncertain.

Our second oversight was, like others, not anticipating the staggering degree to which China would be able to slash its oil imports. Crude imports are 5m barrels a day lower than a year ago, despite the fall in prices. China has cut its demand and shored up supply. Its oil reserves are opaque—many barrels are hidden from satellites underground, and there is a blurred line between official reserves and corporate inventories. But they have been shown to be a powerful buffer.

Perhaps a newspaper whose critics bang on about a clanger in 1999, when we wrongly predicted oil prices falling to $5 a barrel, should have known better. We woz wrong then, too. Fortunately, we can report that investors who say we are a guide to what to bet against are cherry-picking our failures. With the help of AI we analysed 7,000 of this century’s leaders . When we are moderately out-of-consensus, our record is good. Our more outlandish predictions are, unsurprisingly, more likely to be wrong.

In any case, as free-traders, we take a strange satisfaction in being bested by the markets. It is a reminder that the price of an asset in a liquid market is the closest thing there is to the distilled judgment of humanity. Prices incorporate information dispersed unevenly among countless individuals, from the amateur investor to Europe’s high-rolling oil traders . The market is not always right—and did not expect oil prices to fall as much as they did—but to think that with average luck anyone can reliably do better is to commit an error akin to that of central planners who think they can allocate resources better than the price mechanism can.

Why, then, have an opinion at all? Prediction markets cover an increasing range of events, making it easier than ever to see how the market views the future. Yet someone who reflexively substitutes the market’s opinion for their own will not know why they believe what they believe. The case for prediction is therefore like the case for free speech. Well-argued opinions sharpen the thinking of those who read them, even when they are wrong. Without such views, there would be nothing to aggregate into a market price.

So we will keep on predicting. In so doing we also hope to spare our readers a great deal of drudgery. The easiest way not to be wrong is to avoid taking any definite view at all, an approach that makes many bureaucratic reports joy-slayingly dull. We read those so you don’t have to—a service for which the occasional blunder is, we hope, a price worth paying. Sorry for our mistake. It will happen again. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Here is how to deal with it

The AI backlash is only getting started Here is how to deal with it June 25th 2026 Advances in ARTIFICIAL intelligence have long terrified techies. Lately, voters are feeling the angst, too. AI is unpopular in the West and climbing up the political agenda. The fiercest fights so far have been in America, where protests against data centres have scuppered nearly $100bn-worth of projects, warring AI megadonors have just dumped tens of millions into a Manhattan congressional race and around 40% of voters tell pollsters that they want AI banned from most industries. But spats are breaking out elsewhere: after chipmaking profits soared recently, workers at Samsung in South Korea threatened a strike to secure special payouts.

The backlash is only just getting started, because the technology is only just getting started, too. Britain’s flimsy prime-minister-in-waiting, Andy Burnham , has barely said a word about AI. Even Americans still rank it 29th out of 39 election issues.

That is bound to change—and battles over data centres offer a hint of the struggles to come. The buildings summon a vitriol well beyond conventional nimbyism. More Americans say they would be happy with a nuclear reactor next door than a data centre. Even plans to build one in the Utah desert have met with passionate opposition.

Data centres can be ugly, it is true. But the opposition reflects the technology’s reputation. ai bosses have spent years warning of a looming job-pocalypse and the danger that an AI-engineered super-virus will make humans extinct. Opponents of data centres variously believe they are shielding the environment, protecting jobs and saving the species—and they are not entirely wrong.

Yet this backlash is itself dangerous. AI promises to change the world for the better, much as electricity or the steam engine did. Not long ago, the era-defining problem for the rich world was stagnant economic growth and the populism it unleashed. Now it has a technology that could power a surge in productivity and incomes, help find cures for untreatable diseases and improve everything from education to green tech.

All this could be lost if countries starve the technology of computing power or regulate it into uselessness. Look at mRNA vaccines research, which has been held back after a backlash during the covid-19 pandemic.

Scenarios in which some countries give in to popular rage but others forge ahead are also worrying. If America succumbs, it could cede the global ai frontier, and the attendant cyber and military capabilities, to authoritarian China . Europe and Canada are more risk-averse than America. If they choked off AI while the rest of the world kept pushing forward, their losses could be unrecoverable. More than two centuries after the Industrial Revolution, few countries have managed to catch up with the first movers.

So the stakes are high. Can governments do anything about it? Grand proclamations about the shape of a “social contract” for a post-AI world are good fodder for blog posts but offer little help today. Besides, the unknowns are still large enough to make the exercise almost futile.

Better to be incremental. While China’s economy was growing by 10% a year in the 1980s—faster than all but the most extreme forecasts for AI-driven growth—the mantra of its leader Deng Xiaoping was “crossing the river by feeling the stones”: pushing forward iteratively, planning for problems but staying flexible. Deftly handling the AI age will take a similar spirit.

To that end, here are four pointers for politicians and AI companies looking for policies. First, spread the benefits of AI as widely as possible. Blockers need to be shown that their local area will benefit if they get out of the way. Wisely, data-centre firms are beginning to offer funding to nearby towns. Gradually, this approach needs to be broadened to society at large, with mechanisms showing people that they have an economic stake in AI’s progress, and will be helped to adapt to disruption through policies such as wage insurance. Only a shared sense of prosperity can temper the toxic who-wins/who-loses politics that emerged in the era of globalisation.

Second, regulate hard when interventions are needed. The hair-raising prospect of AI-enabled cyber-attacks or bioterrorism is still not taken as seriously as it ought to be. Tackling those issues and others is essential in itself, but it would also weaken arguments to ban or hobble AI indiscriminately. Ideally, these efforts would involve international co-operation.

Third, measure everything. The common view that AI is already leading to lay-offs and raising electricity bills is probably wrong. But without better statistics it is hard to be sure. Data centres must contend with viral worries over water usage, a confected issue. (Modern ones drink up no more than other industries, and much less in total than America’s golf courses.) Facts won’t cure misinformation, but their absence worsens it. Britain’s AI Security Institute and new AI Economics Institute may offer models for other countries to follow.

Fourth, use AI to make the state better. It is not just the private sector that could use AI to lift productivity. Filing taxes should be a breeze; state-run health-care systems should link up data seamlessly and schools should experiment with ai-powered learning. AI may also make it easier for citizens to monitor what politicians are up to.

People are less likely to oppose a technology if it is behind their grandmother’s cancer treatment or helping their child’s education. And they are more likely to trust that the state can oversee it if they believe that government works.

Voters are right to take a close interest in how AI could change their lives. The future will be messy, odd and unpredictable. Persuading them that their interests are being served by disruption has become as important as making AI models better. Failure will bring out more pitchforks—and destroy vast opportunities for humanity. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

He shows little sign that he grasps the scale or urgency of the tasks that await him

Andy Burnham promises hope. Britain needs more than that He shows little sign that he grasps the scale or urgency of the tasks that await him June 25th 2026 LOOK AT THE many signs of Britain’s decline. Growth is feeble and public debt has reached 95% of GDP. Public services are stuttering and the armed forces are depleted. The streets are grubby and the electorate is in a sulphurous mood. The BBC has even cancelled the “Doctor Who” Christmas special.

Then there is the desultory way in which Sir Keir Starmer failed as prime minister. He was elected with a vast majority and a mandate to restore Britain, but he will leave Downing Street after just two years. His offence was not an epic misjudgment born of hubris, like David Cameron and his Brexit referendum. Nor was it a scandal, like Boris Johnson and his boozy Downing Street parties in lockdown. He committed no disastrous error, unlike Liz Truss and her budget. Sir Keir was simply unable to marshal power or say why he wanted it. His government wilted like a houseplant in a heatwave.

Barring the wholly unexpected, Andy Burnham will soon become Britain’s seventh prime minister in a decade. He must reckon with this twin decline of Britain’s fabric and its politics. He cannot fix one without fixing the other. Yet he shows little sign that he grasps the scale or urgency of the tasks that await him.

Mr Burnham, who returned to the House of Commons just last week, has talents Sir Keir lacks. Even at the end, the prime minister was unable to make the argument for why he should hold office, which is why this newspaper argued he should go. Shaking hands, building coalitions and winning arguments are not distractions for a prime minister, they are a core competence.

Charming and combative, Mr Burnham has those skills in abundance. When populists on the left and right are disinterring bad old ideas, the centre’s survival depends on someone who can argue back. Mr Burnham’s manoeuvre to win the Makerfield by-election also showed an appealing audacity. He is pragmatic and experienced, after a long career in Westminster and as mayor of Greater Manchester. He has some decent ideas, too—including to devolve power to English regions and reform property taxes.

But that hardly amounts to a project to arrest Britain’s decline. If Mr Burnham thinks an easy manner or an ability to skirt elephant traps is enough, then he has failed to understand just how much he needs to accomplish in order to avoid the fate that befell his six predecessors.

A change of leader is the best moment to confront voters with the unwelcome reality that they are living beyond their means. Even as Britain faces demands to spend more on defence and infrastructure, the bond markets have put the Treasury on watch. The country has the highest borrowing costs of any member of the G7.

Yet despite, in effect, auditioning to be prime minister in the Makerfield by-election, Mr Burnham has yet to set out a convincing programme to fix Britain. The core of his plans for office should be the country’s economic revival. His vagueness about whom he wants as his chancellor shows how, with weeks to go, his policy is still up in the air.

Instead of considering a balance of simple tax rises and spending cuts, Mr Burnham is already resorting to people-pleasing. He claims he can find the money for more defence by cutting welfare, through “preventative” schemes rather than “crude cuts”, whatever that means. He plans to invest in infrastructure by finding the flexibility within the existing fiscal rules to eke out more borrowing. Rather than focus on making taxes more efficient, he has needlessly told voters that he will not increase the biggest revenue-raisers—the same straitjacket that forced Sir Keir into painful fiscal contortions.

Mr Burnham’s instincts do not appear to lean towards a convincing programme either. One reason is his chameleon-like nature. Britain’s next prime minister twists with the wind and panders to the people in the room. His view on Europe depends on who is asking. In Makerfield he built a coalition of the aggrieved, from pub landlords hit by taxes to Nimbys upset by house-building—and then promised them better public services, hinting at tax cuts and smart new roads. At times, his theory of government amounts to a whinge about “the London set” who hold back the north.

Nostalgia is a problem, too. At a time of extraordinary technological and geopolitical change, Mr Burnham tells voters that he can turn back the clock on “40 years of neoliberalism”. Instead of seizing the moment to prepare Britain for artificial intelligence, or to make the most of the country’s world-class services, he proposes to take control of utilities and bring back industrial jobs to northern England. That will soak up government time and money and it will fail, further discrediting the state and fuelling populism.

A lot will come down to whether Mr Burnham is willing to take on his own MPs. Almost by definition, any programme of reform that is worth doing will require measures that the left does not like. After Sir Keir lost his authority, early in his term, the backbenches gained a taste for rebellion. Will the biddable Mr Burnham be able to say no?

The Economist hopes Mr Burnham confounds our concerns. He may possess powerful insights into why Britain has become so sclerotic and unhappy. He may choose ministers and advisers who can build a programme for change, while he becomes salesman-in-chief. His slogan is “hope”: perhaps that can make hard truths palatable.

Either way, he will have to be fast. British voters quickly tire of incumbents. They will tire all the faster of a prime minister who took power in a putsch. Mr Burnham’s circle say they have not had time to prepare for office. But they set the timetable. Their man is in no position to ask for patience.

If Mr Burnham cannot rise to the task, he will be exposed quickly and the verdict will be brutal. He has made a career out of blaming Britain’s troubles on the elites in Westminster. Soon, those troubles will be his responsibility alone. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

With a common foe, they cannot afford petty feuds

With Iran emboldened, its neighbours must put old divisions aside With a common foe, they cannot afford petty feuds June 25th 2026 GULF RULERS are no strangers to disruption. The region’s petrostates prospered from an oil shock in 1973. The revolution in Iran, six years later, led most of them to seek American protection. The recent war against Iran was unsettling, too. But, as Donald Trump offers remarkably generous peace terms, the post-war dealmaking alarms them even more. The next months will see old certainties upended . How can the region cope?

The Gulf is not only the world’s most important petrol station. Its airports are also global hubs for passenger travel, cargo and other logistics. Its financial centres are gaining increasing clout. Many wealthy expats have become hooked on low taxes and brilliant sunshine. But all that requires a bubble of security in an otherwise unstable region.

Iran threatens to pop it. It now has a chokehold over the Strait of Hormuz and expects to levy fees, perhaps disguised as compulsory insurance charges, on tankers that pass through it. Iran could earn billions of dollars a year from this. The efforts of consuming countries to wean their economies off oil could also pose a problem for the Gulf states.

What to do? The Gulf states know they are at risk. America may have helped fend off many Iranian missiles and drones in the latest conflict, but the superpower is impatient and looks ever less reliable as a security provider. So Gulf states must learn to take more into their own hands. Crucially, that means finding ways to work together, without always waiting for America to corral them.

Most urgent is more defence co-operation. In recent years Gulf states have individually spent lavishly on military hardware, but none could ward off Iran’s attacks without help. Even the United Arab Emirates (uae), with its impressive and sophisticated air- and missile-defences, had to turn to France and South Korea. Israel hurriedly dispatched an Iron Dome battery to bolster Emirati defences.

America has long prodded its Gulf allies’ armed forces to work more with each other. They have resisted, but can no longer afford their mutual mistrust. Sharing more data from sensors and working to identify and fill gaps in coverage would be a good start. One urgent need is to build a new acoustic-sensor layer for regional air-defences, as Ukraine has done, to allow earlier detection of drones. Ukraine has already signalled it would be a willing supplier of kit and advisers.

Then there is infrastructure. Gulf countries must swiftly develop alternatives to the Strait of Hormuz. The more oil and gas they can export through other routes, for example via new underground pipelines towards the Red Sea or the Mediterranean, the weaker Iran’s economic grip will become. Countries that co-operate, allowing their neighbours to make use of their ports and building stronger road and rail networks across political borders, will be more resilient when they are threatened again. Their goal, in time, must be to make Iran’s control of Hormuz a wasting asset.

All this is only a first step, and it requires a painful strategic shift: overcoming bitter rivalries in foreign policy, especially between the Saudis and Emiratis, who each believe they should be the regional leaders. Their deadly meddling, in Yemen and in the Horn of Africa, has been a self-harming distraction. To have any hope of uniting against the common threat of Iran, the Gulf states must put aside their dangerous competition for influence elsewhere. Sadly, instead, those rivalries seem to be hardening.

Only a more unified Gulf has a chance of protecting itself from Iranian aggression, just as Europe is trying to find ways to contain threats from Russia. No one thinks it will be easy for the Saudis and Emiratis to end their feud. That is all the more reason to start now. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Time for sane standards in higher education

University-for-all harms poor students the most Time for sane standards in higher education June 25th 2026 Academics have always moaned about their students. “Scholarly effort is in decline everywhere as never before,” complained Egbert of Liège, an 11th-century know-it-all, in an age when not even a tenth of humans could read. Recently there have been lots of new worries about standards in colleges and universities—especially in America, home to many of the world’s best. But this time, as our International section notes, the laxity is not just in lecturers’ heads.

Maths professors report that they are having to pack freshers off to remedial courses before real learning can start. Some are turning up to university ignorant of things they should have learned early in secondary school. Lecturers in humanities warn that students are struggling to understand texts that a decade ago their counterparts would easily have grasped. Students increasingly ask for reading lists to be cut short.

Tests run by the OECD, a club of mostly rich countries, suggest that students in colleges and universities are less literate than they were a decade ago. The best are cleverer than ever, but a growing number have basic skills that would embarrass a child half their age. About one in seven students at American colleges and universities scores no better in literacy tests than a typical ten-year-old. For numeracy, it is nearly one in five.

One explanation is the harm to schooling from the pandemic. Another is the fact that, even before covid-19, school marks in America and in many other rich countries were already falling. At the same time, many colleges and universities have been lowering the bar for entry. In America they have largely stopped requiring applicants to sit tests of numerical and verbal reasoning, such as the SAT. Some believe those exercises are unfair to black and Hispanic students. Others are trying to get enough bums on seats as the total number of 18-year-olds in America starts to fall.

The costs of all this are huge. Time and money spent reteaching basic material cannot be used to help whizz-kids excel. Ill-prepared students are at risk of dropping out, which can hurt their prospects more than if they had never enrolled. And weak students give colleges and universities yet more reasons to dumb down. After years of grade inflation, it is hard to be confident that administrators will solve a tricky new problem: how to handle rampant cheating with AI.

One way to stop the slide would be to prevent standards in schools from falling. Some insist this is impossible without also solving scourges such as child poverty, or the baleful allure of screens. In fact, marks in Singapore have been inching up for years—and rose even during the pandemic. Schools in England have also been climbing international league tables, thanks in part to reforms that made exams and curriculums more rigorous. Americans are finally recognising that many of their schools teach literacy using methods that other countries long ago binned as pseudoscience. States that reversed course first, such as Mississippi, have been posting big gains.

Another remedy would be for leaders in colleges and universities to restore their commitment to high standards, both in whom they choose to admit and in how students are assessed as they learn. America’s best are starting to reintroduce mandatory tests for all applicants; the rest should follow. In May academics at Harvard agreed to rein in grade inflation by imposing a hard limit on the number of A grades they hand out in each course. These had soared from 24% of all grades awarded in 2005 to 60% last year. That was once considered a radical proposal; it ought to be more common.

And policymakers should widen the ways in which people can keep learning after they leave school. In English-speaking countries, in particular, options other than university are too rare. America has fewer apprentices even than Britain (which has hardly any). America’s community colleges are supposed to act as stepping stones for high-school graduates who need more help. But the share of youngsters who go to them is declining, even as the share heading to demanding four-year universities is going up.

Education should provide everyone with an opportunity. It must never become a blocker, sprinkling its benefits on a smarmy few while holding the less fortunate in their place. But raising young people up its tiers without granting them the skills they need is not pragmatic, or a kindness, or a blow for racial equity. It is a cowardice that lets everybody down. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The EU has forgotten that it, like China, is a surplus economy

Global imbalances have little to do with Europe’s industrial woes The EU has forgotten that it, like China, is a surplus economy June 25th 2026 Everywhere you turn, European leaders are blaming the imbalanced global economy for their woes. Emmanuel Macron is trying to use France’s presidency of the g7 group of rich countries to raise the alarm. Friedrich Merz, Germany’s chancellor, complains about competing with those who invoice in undervalued currencies. “Some countries produce too much and do not consume enough, and vice versa,” moans Ursula von der Leyen, president of the European Commission.

What the leaders really mean is that they have a beef with China, whose formidable manufacturers are outcompeting European producers in many markets. Partly as a result of Chinese competition, Europe is gently deindustrialising: the share of value added in manufacturing is one percentage point lower than it was in 2018. Because the resulting lost jobs are in industries, most notably carmaking, that draw special attention from politicians, fear of the “second China shock” has become politically explosive. But in blaming China for their troubles, Europe’s leaders risk losing sight of their home-grown failings.

The Europeans are right that the world economy is imbalanced and that China is partly to blame. It runs a large current-account surplus, of almost 4% of its vast GDP, although some analysts think it is even higher. Its economy has unusually low consumption, often blamed on the lack of a social safety-net for households. Its exporters, though in brutal competition with each other, do indeed benefit from subsidies and a cheap currency. At a global level, America provides much of the corresponding deficit that soaks up China’s surplus, mostly as a result of its huge government borrowing.

You might think from Europe’s complaining that it, too, is on the deficit side of the ledger, with imports swamping exports. In fact in 2025 the EU ran a current-account surplus of 1.9% of GDP. In Germany, which has the biggest deindustrialisation headache, the figure is more than double that.

Correcting “imbalances”, in other words, would not mean fewer imports in Europe. It might mean the opposite: raising consumption and investment in a way that strengthens the euro and harms exports. Europe’s producers might not even benefit from America and China bringing their current accounts towards balance, supposing that were to happen. Companies would suffer less competition from China but more from America. What they gained in one trading relationship, they would lose in another.

Europe’s error stems from a mercantilist mistake: believing a current-account surplus and manufacturing strength to be the same thing. In fact, the current account reflects the balance between saving and investment, and a surplus can co-exist with industrial malaise. Within the EU there is no correlation between the current account and manufacturing’s share of output (not counting Denmark and Ireland, whose statistics are skewed by pharma and, in Ireland’s case, tax).

The continent’s leaders should instead consider what problem they are trying to solve. Europe may have a bilateral trade deficit with China. But in Germany’s case, only about a third of its loss in market share in other global markets can be explained by Chinese exports, according to the Kiel Institute, a think-tank. The rest reflects a broader loss of competitiveness.

Fixing that problem would mean bringing down energy costs, making labour markets more flexible, integrating markets for capital and services and culling unwise regulations. Some progress is being made at a European level, but national governments are more interested in protectionism, such as the blanket eu tariffs against China floated by advisers to the French government earlier this year. Talk of “global imbalances” helps that agenda, while doing little to raise the remote prospect of either America or China changing tack.

Make no mistake: it would be a good thing if America were to borrow less and Chinese consumers spend more. There is some evidence that imbalances tend to increase the risk of a financial crisis—and they certainly breed protectionism. Market competition must be seen by voters and consumers to be fair, and it is wise to avoid giving China choke points in critical supply chains or total dominance of carmaking.

Yet Europe must recognise that erecting trade barriers with China only increases the need for reforms, because diversifying away from the cheapest supplier raises costs and harms growth. An economy of China’s size and stage of development will always have significant manufacturing exports. If Europeans wants their industries to thrive, they should focus not on shutting out competitors but fixing their own house. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Never before have the politics of the region shifted so quickly

Latin America has turned Trumpy. That creates opportunities Never before have the politics of the region shifted so quickly June 25th 2026 In little more than a year, seven Latin American countries have held presidential elections—and right-wingers have won them all. Never has the regional pendulum swung so fast . Barring Brazil and Mexico, nearly every sizeable Latin country now has a leader who either courts Donald Trump or sounds like him. The latest is Abelardo de la Espriella, who was formally declared president-elect of Colombia on June 24th after a tight race. He calls himself El Tigre and promises to “hunt down” gangsters “in their burrows”.

This Trumpian “Orange Wave” has risen because voters are sick of gangs and illegal migrants. Centrists and leftists have failed to calm their fears. Populists on the right offer tough-sounding solutions. If Mr Trump can mass-deport migrants, they reason, why can’t we? If he can blow up drug boats, why shouldn’t we be ruthless? Such messages have proved popular. And leaders who imitate Mr Trump tend to win his favour, since imitation is flattery: he loves that.

In economic matters warm ties with the White House are clearly helpful. The region relies on trade with the United States. Chums may be spared the stiffest tariffs, and sometimes receive direct help. Argentina’s painful but necessary economic reforms might have failed, had they not been led by a pro-Trump president, Javier Milei. The US Treasury extended him a $20bn credit line to avert a currency crisis.

Military matters also have upside. Since Mr Trump replaced Venezuela’s dictator with his more pliable deputy, American forces have helped their Venezuelan counterparts recapture gold mines that had been controlled by criminal gangs. The governments of the Andean countries which produce and export most of the world’s cocaine—Bolivia, Colombia, Ecuador and Peru—are ideologically closer to the United States than at any time since the 1970s. All are either exploring military co-operation with Uncle Sam or already co-operating.

The idea the gangs can be beaten has taken root. Nayib Bukele, El Salvador’s president, has jailed legions of suspects without trial and transformed his country from a murder capital into a place that is as safe as Canada. If he can do it, surely similar tactics will work elsewhere? If the Trumpists are correct, and a mix of military force, mega-prisons and pan-American teamwork can win the war on drugs, voters will cheer.

But there are reasons to doubt it. El Salvador’s success is atypical. Its gangsters relied on extortion, not drug-smuggling. Their victims were eager to snitch on them, once it became clear that a single anonymous phone call was enough to get any suspect locked up indefinitely. The drugs business is not like this. Cocaine buyers want to buy cocaine. If governments succeed in constricting the supply, the price tends to rise, increasing the incentive for new producers to find new smuggling routes. This is why Mr Trump’s campaign of bombing drug boats has had no detectable effect on the availability of drugs in the United States.

For some leaders, that may not matter much. By showing enthusiasm for the fight against gangs, they can look strong to voters and stay on Mr Trump’s good side. For others, such as Mr Bukele, the fight has offered an excuse to suspend civil liberties. Dissidents, knowing they can easily be locked up, tend to shut up or flee. Investors, who you might think would be attracted to El Salvador’s newly peaceful streets, are instead repelled by the absence of the rule of law. Since Mr Bukele came to power in 2019, his country has attracted less investment, relative to the size of its economy, than any in Central America.

Mr Bukele’s imitators claim they can be equally tough, but voters may find that right-wing populism brings big risks. It is useful to be friends with the giant in the north, but democratic institutions matter more, and last longer, than any American president. Don’t let the Orange Wave sweep them away. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A world of clever machines makes it newly relevant

Why philosophy is having a moment A world of clever machines makes it newly relevant June 25th 2026 IN THE PAST two decades philosophy seemed passé. History had ended, and an increasingly materialistic world had no use for students of materialisms. The sciences, offering a path to a lucrative career in Silicon Valley or on Wall Street, reigned supreme. Their queen had been dethroned.

The number of philosophy degrees handed out by American universities declined from close to 8,000 in 2011 to less than 6,000 in 2024; in computer science it more than doubled to over 100,000. In 2015 Japan’s education minister asked the country’s universities to take “active steps to abolish” social-science and humanities departments “or convert them to areas that better serve societies’ needs”. A love of wisdom would still ease entry into the British establishment, so long as you bundled it with politics and economics at Oxford.

Now, as technology up-ends what society needs, philosophy is staging a royal comeback. Its practitioners are in high demand. Philosophy majors are already likelier to be employed than computer scientists, according to the New York Federal Reserve. Both freshly minted Wittgenstein wannabes and their professors are being snapped up by artificial-intelligence companies, where they test models’ reasoning and imbue them with morals . Anthropic has a resident philosopher (main task: teach its Claude chatbot to be good). Palantir is run by one.

It is no surprise that deep familiarity with thought experiments is in vogue as some of these escape from the mind into AI labs and from there into the wild. Yet in a world of thinking machines, a philosophical education, once regarded with bemusement by employers and horror by ambitious parents, looks more relevant than ever—and far beyond big tech.

One reason is that as AI gets better than knowledge workers at answering small questions, about the next line of computer code or the next trade to place, people are likely to focus on big ones. Large language models may commoditise expert knowledge. But that makes knowing how to think, which is the main skill drummed into philosophy students, all the more valuable.

In finance, for instance, algorithms already beat humans at predicting directional moves in stock and bond markets. Yet good macro traders outmatch them when it comes to placing bets of the right size to make money consistently. The best are philosophers at heart—or, like George Soros, who studied philosophy in London under Karl Popper, on paper, too. Similarly, many successful venture capitalists were trained as philosophers (Peter Thiel and Reid Hoffman) or fancy themselves as such (Marc Andreessen).

One day machines may surpass people at tackling those bigger questions. AI, after all, keeps getting better at extracting the often unspoken rules on which people rely to produce outputs, be it an investment decision, a TikTok clip or a treatise on ethics. Yet the tacit knowledge of how these outputs are produced—which is what AI models do using statistical inference—is one thing. It is quite another to understand why they are produced or how they are subjectively experienced by the human mind. And this still leaves the biggest questions of all. What is real? What is right? What does it mean to be?

You do not have to be a strict Protagorean (“Man is the measure of all things”) to believe human answers to these questions may differ from those of machines. If AI ushers in a Utopia of economic plenty, where poverty is gone and paid work is optional, humanity will have disentangling all this to keep it busy. If the robots take over, a philosopher can always tell you which Stoics are the best read. In all imaginable scenarios in between, and some unimaginable ones, philosophical thinking will remain a source of human competitive advantage. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Its government is now the gatekeeper to frontier models—and most compute

AI has granted America vast new power Its government is now the gatekeeper to frontier models—and most compute June 18th 2026 THE NEWS is full of how an ignominious peace deal with Iran exemplifies a decline in American power. That conclusion could hardly be more wrong. On June 12th the Trump administration ordered Anthropic to block foreigners from Fable and Mythos, its latest and most capable frontier AI models. In an instant, everyone learned that the American government can decide who may use the world’s most important technology. You don’t get much more powerful than that.

The administration was responding to a supposed jailbreak for Fable, meaning a prompt that circumvents defences against uses such as hacking computers or making bioweapons. The chances are that it wanted Anthropic to switch off the models for everyone, and that targeting foreigners was a means to an end. Sure enough, that is what Anthropic did, while claiming that the concern about its model was overblown. The legal basis of the order remains unclear, and the ban seems unlikely to last.

What matters, though, is the demonstration that global access to the best AI may come down to a decision in the Oval Office. The administration showed in March that it is prepared to trample on the frontier AI companies, when it designated Anthropic a “supply-chain risk”. Now it has shown that it is prepared to trample on users, too.

America must decide how to wield this vast new power. The rest of the world must decide what to do about it. Even as it plans for an unreliable America in everything from defence to trade, it now has to cope with a new way of being captive to the world’s biggest economy.

This is not the first time America has tried to restrict access to frontier technologies. After the second world war it stopped helping Britain’s nuclear-weapons programme. When modern cryptography emerged in the 1970s, it blocked exports, before accepting the trade-off between having secure allies and using secrets to boost its own offensive capabilities. Uncle Sam still refuses to share its best military equipment, even with close allies. America kept the F-22 fighter for itself; allies got the F-35.

To control access to a technology, though, depends on its nature, and rivals’ ability to develop it independently. Nuclear co-operation with Britain resumed in the 1950s after it developed technology of its own; with other countries, America used the Nuclear Non-Proliferation Treaty of 1968. Cryptography methods could not be contained and eventually went public. Many countries are capable of cyber-attacks.

Frontier AI has echoes of all these examples. If the very best models can disable crucial infrastructure or help users create pandemic-ready pathogens then, like nuclear weapons, they are too dangerous for public hands. But as with cryptography algorithms, it will be hard to be sure that advanced proprietary capabilities will never be copied. Open-weight models, which anyone can download, could advance and proliferate. In cyber-security a small imbalance can bring big advantages: if an attacker has version 5 while the defender is stuck with version 4, and the better model uncovers just one more vulnerability, the weaker party will be compromised. As AI is embedded in military hardware, a similar logic may apply on the battlefield.

Yet America has a huge economic interest in leading in AI and selling its tech to foreigners. Many Anthropic staff are not American and so were hit by the ban; to freeze AI research at America’s best lab would be self-defeating. The firm also says that 80% of its consumer use is overseas. As American technology has boomed over the past decade, Europe’s payments to America for intellectual-property products have risen fivefold. America should not want to give the rest of the world a reason to team up with China, the second-ranking AI power.

This may lead to a hierarchy of access. The best capabilities will be closely guarded by America, to provide an edge in cyber-offence and military capability. The next-best alternatives may be available to allies—the equivalent of the F-35. And a sufficiently handicapped model may be sold to the world with the best safety precautions its makers can design.

Such a future would be uncomfortable for America’s allies, which are nowhere close to rivalling the likes of Anthropic. They are already vulnerable to Mr Trump’s bargaining on trade, alliances, the dollar system and more. AI could become the most important lever of the lot. True, some of the dependence is two-way: America needs Dutch lithography machines and Taiwanese fabs. And foreigners could always shun Anthropic or OpenAI in favour of good-enough open-weight alternatives.

Yet running models requires computing power, which America has perhaps 15 times more of than Europe, plus much more ongoing investment. If SpaceX, whose share price has surged after listing on June 12th, realises its vision of data centres in space, the gap is unlikely to close. “Europe 2031”, a gloomy essay about the future of AI, imagines vassal status for Europe as its cyber-security, defence and swathes of its economy come to depend on American models and compute .

Many countries will conclude they need America more than ever. They can still strengthen their bargaining positions. Compute is so lacking that it makes sense to build data centres almost anywhere, yet countries show no sense of what is at stake. In the seven months to June 2025 demand for new grid connections in Britain rose from 41GW to 125GW, more than twice peak power demand. OpenAI paused a data-centre project there in April, citing regulation and costly energy.

Throughout Europe more energy, easier planning and looser rules for modelmakers would help. In East Asia Taiwan, Japan and South Korea must integrate rather than duplicate their efforts. All should avoid the false promise of government attempts at steering investment. The goal should not be protectionism but ensuring that America is not the only economy where the AI ecosystem can thrive. As in trade and defence, the way to cope with Uncle Sam’s transactional turn is not to whine about alliances but to build strength. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

After a lost decade, it is time to focus on the future

Britain is not yet ready to rejoin the EU After a lost decade, it is time to focus on the future June 18th 2026 TEN YEARS and six prime ministers after voting to quit the European Union, Britain has, to paraphrase Dean Acheson, lost a continent but not yet found a role. The referendum on June 23rd 2016, in which Britons voted for Brexit by 52% to 48%, has left them more divided, less influential and poorer than they would otherwise have been. The promise that Britain would “take back control” was a cruel joke. The country has been buffeted by global events. Brexiteers promised immigration would fall, but under Boris Johnson it soared.

The next ten years should be brighter, but first Britons must accept the big lesson from Brexit: that trying to lay all their country’s woes on a single cause is magical thinking which only makes everything worse. They must not be tempted to make the same mistake all over again by imagining that rejoining the European Union is the answer to all their problems.

Instead, national renewal means grappling with the many reasons why Britain is failing to live up to its potential. Policymaking is adrift, the state is inefficient and the private sector is weighed down by taxes and regulation. The country has mustered the leadership for a fresh start before, in the post-1945 invention of the welfare state and the reinvigoration under Margaret Thatcher. It must do so again.

As this newspaper warned at the time of the referendum, Brexit was a terrible blunder . Britain failed to make anything of the flexibility that Brexit brought. Dreams of a free-market Singapore-on-Thames have evaporated. Instead of deregulating, the state has become more intrusive, more inclined to meddle and, partly as a result, broke.

The hit to GDP has been at least 2.5% and probably much more. The distraction mattered, too. Officials and businesses have spent countless hours haranguing each other, first over how to “get Brexit done”—and then over how to mitigate the damage. On the world stage, Britain has been diminished.

Worse, the doomed search for silver bullets continues. The populist right is still obsessed with immigration, the populist left with curbing the evils of capitalism. Now centrists are seizing on evidence of buyer’s remorse—57% of Britons see Brexit as a mistake; just 30% still think it was right—to argue that Britain should strive to rejoin the EU. That would be a recipe for another decade lost to rowing over Europe .

Britain needs to focus on the future. The world looks very different from how it did a decade ago. Amid war and pestilence, geopolitics has come storming back. Artificial intelligence looks poised to upend pretty much everything, from work to warfare. Yet government policy is plagued by the ailments that have taken hold during Britain’s lost decade.

Defence is a good example. NATO allies reckon Russia could attack as soon as 2030. Looking to Asia and resentful of Europe, America is increasingly semi-detached. Britain has the instincts and experience to take a leading role in mustering Europe’s defences, just as it played a vital part in helping Ukraine. Only 8% of Britons are opposed to defence co-operation with other Europeans, according to Ipsos: 60% are in favour.

Sir Keir Starmer, the prime minister, says all the right things, but has been hopeless about finding the resources to match his rhetoric. On June 11th the defence secretary, John Healey, resigned after the government broke yet another promise to spend more. Britain looks weak—and hence a target for Russia. Its wavering negates one of the country’s main potential attractions for partners across the English Channel.

The government is also squandering Britain’s advantages in AI. Britain will never match America’s dominance—which has security implications, too. But it has strengths in basic research, innovative startups, tech talent and creative policies. These could help boost productivity in a moribund economy .

Alas, the sums businesses are investing in AI infrastructure and institutions are piddling. One reason is a net-zero policy that ends up limiting the production and consumption of energy, throttling the construction of data centres. Another is hostility towards American tech firms, including Palantir, which can work with law enforcement and health care.

Nobody said that solving these problems would be easy. Unfortunately, against the backdrop of covid-19 and wars, it has only got harder. Debt as a share of GDP is 94%, a level not seen since the 1960s. The budget deficit is 4.3%. And Britain’s government debt is the most expensive to service in the G7.

Closer relations with the EU, Britain’s main trading partner, could help. The government has been right to seek to remove barriers to trade in food, aiming to align rules and sometimes being prepared to pay a price to take part in desirable EU programmes, such as the Erasmus student-exchange scheme. This involves continual negotiation with the EU, as it has over years for Switzerland.

But the relationship must not become an all-consuming distraction. Britain is not yet ready to rejoin the EU. Nigel Farage, arch-Eurosceptic, could be prime minister within a few years. The EU would be wary of a country without a settled majority for membership. Britain must manage outside the club, as it has in finance or farming, a rare Brexit success story.

The pro-growth policies Britain needs are not a mystery. More Britons, especially the young, need to get off benefits and into work; the labour market is over-regulated; energy must be cheaper; government decisions are subject to too many veto-points, especially in planning; power must be devolved from Westminster; and so on. But each policy involves someone, somewhere giving something up.

Brexit imbued voters with the fantasy that they can escape hard choices. Someone else will take the pain, be they foreigners or the super-rich, while Britons pocket all the gains. That world never existed and, despite ten bad years, British voters are still in denial. It increasingly looks as if they will need a Thatcher-style shaking to awaken them. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

The peace deal is all carrot and no stick

Donald Trump gambles that Iran wants money more than power The peace deal is all carrot and no stick June 18th 2026 HAVING FAILED to defeat Iran with bombs, can President Donald Trump salvage something with bribes? After weeks of haggling over how to end the war, he and his Iranian counterpart have signed a short peace memo. It amounts to the promise of lots and lots of money for Iran, so long as it can satisfy Mr Trump that it has abandoned any plans for a nuclear weapon. That is a huge and unlikely gamble and it leaves the countries of the Middle East with some hard thinking.

The memo ditches many of Mr Trump’s war aims. There will be no regime change; no succour for Iran’s oppressed people; no limits on Iran’s ballistic missiles or its support of proxies. Instead the deal focuses on two things. One is reopening the Strait of Hormuz, where the foolishness of Mr Trump’s war and the humiliation of his climbdown are laid bare. Before the fighting, vessels had free passage; after the 60 days in this deal, they may well have to pay a fee.

The other focus is the nuclear programme. The regime has given up almost nothing. Its promise not to get a bomb is old. It will down-blend its stocks of enriched uranium and discuss the rest of its programme, but the issues are complex and Iran is masterful at stringing things along. And then there are the bribes. Iran can immediately export oil and derivatives. Depending on the talks’ progress, America will unfreeze assets worth tens of billions of dollars, lift sanctions and help create a fund of at least $300bn for reconstruction and development. Mr Trump is tired of war. If, as planned, American troops depart within 30 days, his ability to use force will be limited.

The regime thus has an unprecedented opportunity to trade nukes for cash and investment. Unlike previous presidents, Mr Trump doesn’t care about democracy. Having weaponised the strait, Iran may now see less value in nuclear bombs. The regime is unpopular at home: it could use the money.

Yet there are many reasons to think this gamble will fail. Iran’s hardline leaders have no reason to trust America. They will expect Israel to sabotage the deal. The regional influence they crave comes from being the foe of the Great Satan. The nuclear programme offers prestige and, potentially, protection. Inspectors will struggle to stop them cheating. Iran’s leaders will be tempted to have their yellow cake and eat it.

Israel argued for this war, but it has turned out a bitter disappointment. It fought shoulder to shoulder with the Americans only for Mr Trump to cut it out of the negotiations and undermine its campaign against Hizbullah in Lebanon. That could cost its prime minister, Binyamin Netanyahu, re-election in October. The war was a strategic failure, because Iran remains a threat. Mr Netanyahu tested how far America was prepared to go, and it was not far enough for Israel to prevail. Any successor will need to devise a new security doctrine.

The Gulf countries need to restore their reputations as havens of prosperity in a violent neighbourhood. Prepare for some wishful thinking, but the fact is that Iranian drones and missiles will continue to pose a threat. Pipelines that bypass the Strait of Hormuz will help. But the Gulf also needs to overhaul its security. Nobody can be sure how willingly America will fight in the future. Some states will look for ways to deter Iran—the United Arab Emirates could seek even closer ties with Israel. Others may attempt to accommodate it. Still others may steer between the two.

Mr Trump should never have begun this war. Once again, he is basing his way out of it on the idea that people will do anything for money. However, the first rule of diplomacy is not to imagine that your opponent thinks as you do. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Patients benefit from faster, cheaper treatments, wherever they are invented

Don’t restrict Chinese biotech Patients benefit from faster, cheaper treatments, wherever they are invented June 18th 2026 Someone whose life is saved by a new medicine is unlikely to care whether it was invented at home or on the other side of the world. Yet America’s policymakers have begun treating China’s biotechnology industry as the next front in the tech war. A bill before Congress would amend the COINS Act, which restricts American investment in sensitive technologies abroad, to include licensing Chinese biotech. Some want the Food and Drug Administration (FDA), America’s drug regulator, to disregard clinical-trial data from China.

America’s worries have been brought about by a remarkable shift in where innovation happens. Chinese firms ran nearly a third of the world’s clinical trials last year, up from just 6% a decade earlier. China is now the world’s second-largest source of new drugs, behind only America itself. In 2025 nearly half of licensing deals worth $50m or more were struck with Chinese firms, up from none in 2020. In some categories, such as antibody-drug conjugates, a promising class of cancer treatments, Chinese firms accounted for almost all the licensing.

To view Chinese medical innovation as anything other than good news would be a mistake. In AI and semiconductors, America worries about its intellectual property leaking to China. In biotechnology the flow of information runs in the opposite direction. And though anxiety about China’s dominance in the physical supply chain for drugs is understandable—the country accounts for over 70% of the active pharmaceutical ingredients for essential drugs—manufacturing resilience and scientific collaboration are different issues. America cannot lose from gaining new knowledge.

Setting aside Chinese advances would be especially foolish, given that drug development suffers from poor productivity. Bringing a new medicine to market now costs roughly $2.8bn and can take well over a decade. Policymakers often complain about the rising cost of medicines. Yet proposals such as disregarding Chinese clinical-trial data would lengthen development timelines, raise costs and make drug discovery less productive. Does Congress really want pioneering treatments to be available in Europe or Asia before they reach Americans?

Some politicians fear that if drug firms spend their research budgets licensing Chinese molecules, less capital will be available for American biotechnology. But investment is not a lump to be divvied up. As the AI boom shows, when opportunities grow, so capital flows in. What matters is to make sure that American biotech is not hindered by bad policies. Fortunately, American firms remain the world’s leaders in drug discovery. They possess deep expertise in taking promising molecules through late-stage clinical trials, regulatory review and commercial launch. Chinese biotechnology executives privately acknowledge the FDA as the global regulatory leader.

America’s recent choices are blunting its edge. The FDA has suffered high turnover among senior officials, including the resignation of Marty Makary, its head. Decision-making has been politicised: firms can receive “priority vouchers” that speed up reviews in return for lowering their prices and investing in domestic manufacturing. Funding for the National Institutes of Health, the largest funder of biomedical research in the world, has been slashed. Research programmes have been cancelled for ideological reasons. At the same time, immigration policies are making America a less attractive destination for the scientists on whom the industry depends, including many talented researchers from China.

America should fix those problems rather than locking out Chinese innovation. The best world for patients is one in which both China and America develop cheap and effective drugs. Diseases cross borders. So should their cures. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Family-run conglomerates make the stock market a tricky place to invest

India’s new economy still faces an old problem Family-run conglomerates make the stock market a tricky place to invest June 18th 2026 Arecord-breaking initial public offering is heading for the stock market. Retail investors are expected to pile in. The company’s prospects depend upon a single influential businessman, trusted by his devotees to come good, but reviled by his detractors.

This is not America and SpaceX but India and Jio, a company that brought hundreds of millions of Indians online and may soon list. It is a thrilling story of the new Indian economy, featuring a tech entrepreneur hoping to get rich and ordinary Indians using the stock market to get a stake in his success. Yet beside all the reasons to celebrate sits one big reason to worry: India’s corporate governance is dismal.

Problems dog India’s family-run conglomerates. As we report, the Tata Group , long the gold standard of corporate probity, has been consumed by a boardroom drama. The regulator may force it to list, too. Gautam Adani, perhaps India’s best-connected infrastructure mogul, has spent years battling allegations that have cast a pall over his business success. Reliance, the parent company of Jio and much else, has an issue with succession. The three children of its boss, Mukesh Ambani, are on the board and in prominent operating roles. Yet the empire still seems to depend on Mr Ambani.

Family-run conglomerates dominate India’s economy; the three most prominent could be joined by the Godrejs, Mahindras, Birlas and many others. Promoters, who control listed companies, still hold roughly half the equity on the National Stock Exchange; the share of “free-float” is among the lowest globally. The regulator has changed the rules to let Jio list by floating just 2.5% of its shares. That may help bring giant firms to market, but it raises awkward questions about price discovery, market discipline and shareholders’ rights when only a sliver of a company is available for trading.

This matters beyond the wealthy enclaves of South Mumbai. Between 2020 and 2026 the number of Indian retail investors rose from around 40m to 130m. First-time investors are now being asked to entrust their savings to companies whose governance they have little power to influence. When promoters dominate boards, related-party transactions, opaque group structures and succession decisions can be shaped around family interests rather than the company’s. No wonder many Indians would still rather put their trust in gold.

Governance also matters to Indians who could never dream of opening a brokerage account. Weak governance raises the cost of capital and makes it harder for their country to develop. India wants more foreign money, deeper domestic markets and a broader equity-owning culture, all of which is harder to achieve with dynastic leadership and pliant boards. The government rightly boasts that India is “the world’s fastest-growing large economy” yet it still struggles to attract foreign capital. The sort of investment that leads to durable growth requires India to be an easy place to do business for all, not just a handful of well-connected families.

That means independent boards with real authority; tougher scrutiny of related-party transactions; clearer disclosure of group debt, guarantees and cross-holdings; succession plans that allocate responsibility rather than merely anoint heirs; and stronger protection for minority shareholders. Institutional investors should act more like stewards and less like passive passengers in a soaring market. Investors, whether in India or overseas, should not have to worry about family dramas to buy into India’s growth story. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

How the rules of both entertainment and soft power are being rewritten

The World Cup paradox How the rules of both entertainment and soft power are being rewritten June 11th 2026 WITH LYRICS in English, French, Spanish, Italian and Japanese, the theme tune of the men’s World Cup, performed at its opening ceremony on June 11th, exemplifies the contest’s claim to foster global unity. Nearly half the world is expected to tune in over the coming weeks as the tournament moves towards its final on the outskirts of New York. A viewer might come away with two conclusions. First, that entertainment culture is more globalised than ever. Second, that America remains the soft-power superpower at the centre of it all.

Both assumptions would be wrong. Mega-events like the World Cup still seize global attention. But the bigger picture is that entertainment is fragmenting . From music to television to social media and gaming, audiences are tuning out of American content and embracing alternatives from closer to home. There is an emerging paradox: even as the world becomes more connected, people are choosing more local forms of fun. Even as billions tune in to a single show in North America, the American-led monoculture is fading.

This local turn is the opposite of what many predicted. Global entertainment platforms such as Spotify, Netflix, YouTube, and the Apple and Google mobile-app stores give people everywhere access to the same music, video and games. The biggest winners have been a lopsidedly American elite of megastars and brands—think Taylor Swift, MrBeast or Roblox—which have gone global as never before. The biggest sports leagues have soared in value along with them.

But below the top tier, entertainment is fragmenting. Sport has always been a reluctant globaliser, because people prefer to watch their local team. America’s National Football League, the world’s highest-earning sports property, earns 98% of its media-rights revenue at home. The English Premier League is the only football league in Europe that makes more in media rights abroad than it does at home. Every four years the world comes together for the World Cup and the Olympics. Otherwise, fans are mainly engrossed in domestic contests. New Yorkers are far less excited about the football than they are about the Knicks .

Other kinds of culture have long been more globalised, often thanks to America; think of music from Motown or TV from Tinseltown. But now this seems to be reversing. Music charts are becoming more local: in Brazil, an extreme case, 96 of the 100 most-streamed artists last week were Brazilian. Video-streaming services like Netflix and Amazon are producing more shows abroad, to woo subscribers in fresh markets. North America’s share of new streaming commissions has halved in the past six years, from 70% to 36%.

New media are no more global. YouTube offers content from every country, but its users gravitate towards clips from close to home: three-quarters of its “trending” videos manage to trend in only one country. Gaming on PCs and consoles remains dominated by a few worldwide franchises (including a football series formerly known as “FIFA”). But on mobile, which has a bigger and more diverse audience, regional variations are sharper. Across the five biggest gaming markets, no app features in every country’s top ten. While Americans play “Fortnite”, Asians have shifted to titles such as “Free Fire”.

Cheaper production and distribution have caused a boom in the supply of local entertainment. In the age of CDs, cinemas and game cartridges, there were huge economies of scale in pushing popular acts or products to go global. Today, producing and distributing new entertainment—whether songs, videos or games—is cheap enough for it to be profitable to target much smaller niches. In some places there is even evidence of a sub-national cultural boom: more than half the content posted on YouTube in India is in languages other than Hindi (mostly local ones). AI will enable ever more niche production.

The audience has also changed. A growing global middle class has made it worthwhile for Netflix to make big-budget shows tailored to Mexican subscribers, or for the developers of “Free Fire” to devise Bollywood themes for Indian gamers. And audiences’ discovery of new content is increasingly being led by algorithms rather than human tastemakers. Sometimes those algorithms send everyone to the same global hits—prepare for a blizzard of World Cup highlights on your social feeds—but they also divide them into niches. In one recent year, German songs made up only four of the 100 most-played tracks on national radio, but 44 of the country’s streaming top 100. People’s preferences have turned out to be more local than elite tastemakers thought.

Something will be lost if people’s cultural habits turn too far inward. A Britain that served only British food and “Carry On” films would be bleaker than purgatory. Yet it is cause for celebration that audiences now have so much more choice. Rather than a diet of entertainment from a country that had a historical advantage in its production and distribution, consumers can choose from a global menu of Danish hip-hop, Polish comedy or Chinese video games. Regulators should note that the turn towards local options has been brought about by technology, and not by rules of the sort imposed by Canada, where radio stations have to play unhealthy amounts of Justin Bieber to meet local quotas.

Governments will need to adapt to the changing dynamics of soft power. America’s century of dominance over global popular culture is over. It still controls much of entertainment’s distribution, via platforms such as YouTube and the app stores, and thus much of the industry’s profit. But it has lost its grip on content, and with it the cultural tractor-beam that has recruited millions of listeners, viewers and players to American values and ideas over the years. Other countries are rushing to fill the gap that America has left, from Brazil in music to South Korea in TV and China in gaming.

All eyes will be on America for the World Cup final next month. But it is a fading force in a new game of soft power that has only just kicked off. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

He must swallow his pride and accept a deal worse than the pre-war status quo

Donald Trump’s least bad option in Iran He must swallow his pride and accept a deal worse than the pre-war status quo June 11th 2026 Once again, Iran has been “completely defeated”, said Donald Trump on June 10th. Confusingly, the “Bully of the Middle East”, despite being “DEAD!!!”, will have to “pay the price!!!” of not agreeing to Mr Trump’s peace terms. In reality, despite more than 100 days of being bombed and blockaded by the world’s top military superpower and its Israeli ally, the Iranian regime is emboldened. This week it downed an American helicopter and fired missiles at its Gulf neighbours and Israel. It is almost as if Iran is daring Mr Trump to scrap the shaky ceasefire and restart a hot war.

Mr Trump is in a triple bind. Iran is garrotting the global energy supply by threatening tankers in the Strait of Hormuz. Israel is bombing Lebanon, despite Mr Trump telling it not to. And hawks in America are pressing Mr Trump to chase unrealistic war aims. Something must eventually give. But the mess that Mr Trump created by starting the war could take longer to clear up than markets are expecting. The world must prepare for higher energy prices.

Inside Iran the situation is opaque. But the war seems to have strengthened the hand of hardliners, notably the Revolutionary Guards, who appear to be in charge. Iran’s people are suffering misery, penury and power cuts, but the latest attacks suggest that their rulers would rather risk a return to full-scale conflict than accept a peace deal on Mr Trump’s terms. After first playing down the tension, Mr Trump ordered retaliatory strikes, which in turn spurred Iran to launch more missiles.

Israel complicates matters . To smooth the path to a peace agreement with Iran, Mr Trump wants Binyamin Netanyahu, Israel’s prime minister, to wind down his attacks on Hizbullah, Iran’s proxy militia in Lebanon. He has reportedly vetoed strikes on Beirut, Lebanon’s capital. But although the American president says he calls “all the shots”, Israel’s occupation of southern Lebanon is expanding. Mr Netanyahu wants to seem tough in the run-up to a general election. Phone calls between the two allies are growing increasingly tense and expletive-filled. The hard men in Tehran are delighted at their enemies’ division.

In America, meanwhile, hawks are demanding full-scale war on Iran, including attacks on its oil infrastructure, in the belief that this would force the regime to abandon its nuclear-weapons programme, hand over its stocks of highly enriched uranium and let shipping resume. This is unlikely to work, given Iran’s chokehold over the strait, and Mr Trump, who appears to be resisting such demands, is right to do so.

Oil prices wobble with each newsflash, but have yet to rise nearly as far as they could . China and other big importers have found ways to curb demand, America and other exporters have boosted production and several countries have tapped their reserves. But this cannot go on for ever. Demand for petrol and jet fuel typically soars in the summer, and reserves in many places (though not China) will run low by autumn. After that, the energy crunch could be excruciating. American voters, feeling pain at the pump, will punish Republicans in the midterm elections in November.

So Mr Trump needs to make a deal with Iran. Forget about anything as good as the pre-war status quo, let alone the deal Barack Obama struck in 2015 to restrain Iran’s nuclear ambitions, which Mr Trump tore up. The best Mr Trump can hope for is a makeshift pact to reopen the strait in exchange for an extended ceasefire that may, with luck, become permanent. Economic sweeteners will be necessary. The threat of force will remain. Haggling over Iran’s nuclear programme will have to come later. Such a deal would be unstable, and humiliating for America. Yet it would be less bad than any plausible alternative. For all Mr Trump’s plans to erect a triumphal arch in Washington, his war on Iran has cost America dearly. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Kevin Warsh, the unlucky new chairman, has seen his case for lower interest rates disintegrate

The Federal Reserve must soon give Donald Trump bad news Kevin Warsh, the unlucky new chairman, has seen his case for lower interest rates disintegrate June 11th 2026 FOR MOST of Kevin Warsh’s career, becoming chair of the Federal Reserve with the American economy hot and in need of higher interest rates would have been the stuff of professional nirvana. Few central bankers had staked out so hawkish a reputation. So it is ironic that this scenario has come to pass, yet it seems likely to make Mr Warsh’s life miserable as he starts at the Fed .

For that, he can thank the circumstances of his appointment. President Donald Trump wants lower interest rates, and appointed Mr Warsh in January because he, too, favoured them. Back then, the economic case for looser money was respectable: the post-pandemic inflation surge had been all but killed, and the jobs market looked like it was wobbling. Mr Warsh’s out-of-character doveishness provoked wry smiles but not scorn from other central bankers, most of whom were glad that Mr Trump had picked someone sane for the job.

Alas, the happy coincidence is over. The case for lower interest rates has crumbled. Mr Trump still wants rate cuts but, if anything, today’s economic conditions demand tighter money.

Since Mr Warsh’s appointment America’s labour market has firmed up. From March to May payrolls swelled by an average of 188,000 per month, far above estimates of growth in the labour force at a time when migration is low or negative. Until November the unemployment rate had been gently rising; it has since fallen and held steady at 4.3%. The economy is exuberant. Stock markets are near record highs, as a sugar-high from tax cuts collides with excitement about artificial intelligence. The Atlanta Fed’s real-time GDP gauge puts growth at a 3.3% annualised pace in the second quarter.

Higher oil prices, the result of Mr Trump’s war with Iran, have pushed up annual inflation, to 4.2% in May, a three-year high. Often central bankers ignore inflation that comes from oil prices. That is difficult today because inflation has exceeded the Fed’s target for more than five years. Overshoots could get baked into the public’s expectations. Inflation that started with oil could take on a life of its own.

The novel arguments Mr Warsh has advanced for lower interest rates look shakier than ever. While vying for Mr Trump’s nomination, he claimed that he had ditched his career-long hawkishness because of advances in AI. The technology would soon unleash such abundance, he argued, that inflation would be vanquished, leaving the Fed plenty of space to cut interest rates.

So far, something closer to the reverse has happened. Stock-market euphoria and the boom in data-centre construction have stoked America’s consumption and investment respectively and probably raised inflation. And Mr Warsh’s new colleagues have lined up to remind the incoming chair that if AI lifts productivity growth, economic theory suggests interest rates would need to go up, not down, thanks to stronger appetites for spending and investment. About half of the Fed’s voting rate-setters, whose support Mr Warsh needs to change policy, have now made versions of these points in public.

Mr Warsh’s other big idea was to cut the Fed’s bond holdings, which would amount to a tightening of monetary policy through the balance-sheet. Doing so would open up space to reduce interest rates at the same time, he argued, akin to keeping your office comfortable by turning on the heating and air-conditioning at the same time.

But the effect of this quantitative tightening (qt) would be piddling. Stephen Miran, a former Fed governor and an ally of Mr Warsh, has entertained shrinking the balance-sheet by about 5% of GDP. Rules of thumb suggest that would lift long-term bond yields by roughly the same amount as just one quarter-of-a-percentage-point interest-rate rise. And even that is probably an overestimate. Bond-buying works in part by signalling where interest rates are heading. For example, after the global financial crisis of 2007-09 it conveyed that rates would not rise for a long time. Under Mr Warsh’s scheme, by contrast, the balance-sheet and rates would pull in opposite directions. QT would presage lower rates, and so might not raise long-term bond yields.

Interest-rate cuts should be firmly off the table when Mr Warsh kicks off his first monetary-policy meeting on June 16th. The new chair has some ability to play for time and concentrate on a list of nerdy reforms he wants to make at the Fed. But if rates move later this year, it is likely to be up, not down. At some point Mr Warsh will have to give Mr Trump bad news. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

It is suffering economic costs for its industrial dominance

For its own sake, China should change its growth model It is suffering economic costs for its industrial dominance June 11th 2026 In global trade, limitation is the sincerest form of flattery. China’s manufacturers have become formidable global competitors, even in sophisticated industries that were once the preserve of much richer countries. They have outflanked Germany’s carmakers, stolen a march on South Korean shipbuilders and narrowed the gap with American chip designers. It is a tribute to their success that world leaders are scrambling to limit the threat to cherished domestic industries and avoid risky dependencies. Later this month, for example, ministers from the European Union will meet to consider more forceful countermeasures . One idea is to require European firms to diversify their suppliers, rather than relying so heavily on Chinese inputs.

The evolution of China’s exports, which grew by more than 19% year-on-year in May, is a source of satisfaction for the country’s leaders. Trade’s contribution to growth has helped the country withstand the bursting of its property bubble in 2021. China’s dominant position in many international supply chains also gives it geopolitical clout in a hostile world. The country’s leaders believe in their historical-materialist bones that national greatness lies in technological sophistication and manufacturing might. Chairman Mao believed that power grew out of the barrel of a gun, and that heavy industry makes a country strong. His successors hope that high-tech exports will make China indispensable.

But although it is a source of pride for China’s leaders, the country’s high-tech advance has not lifted the animal spirits of China’s people. Consumer confidence has still not recovered from the covid-19 lockdowns and the property slump, despite a stock-market rally in late 2024. Retail sales in April rose by only 0.2% compared with a year earlier, even before adjusting for inflation. Car sales collapsed, declining by more than one-fifth. Judged not by industrial prowess but by the health of the overall economy, China’s growth model is failing.

There are several reasons for the incongruity. Unlike its past export booms, which drew millions of migrant workers to coastal factories, China’s more recent success has not generated many jobs. Export prices have risen faster than volumes. And China’s leading industries are no longer labour-intensive. Spending on electric vehicles generates fewer jobs per yuan than an equivalent outlay on traditional cars or new homes. The proportion of migrant workers finding jobs in manufacturing has dropped from almost 37% in 2010 to 28% last year. Many instead work as delivery riders or elsewhere in the gig economy. They occupy bike lanes, not assembly lines.

China’s high-tech industry is also tightly clustered in a handful of cities. This geographical concentration is one source of its strength, allowing suppliers to specialise, talent to congregate and ideas to circulate. But it also widens the divide between leading and lagging regions. China’s previous growth model, based on manic home-building, was dispersed across the entire country, including some unpromising backwaters it should probably have left undisturbed. China’s new model is pickier about place. Inland provinces’ share of Chinese industry has declined from almost 48% in 2013 to only 36% last year.

A third reason why China’s high-tech manufacturing push has failed to stimulate a broader recovery is fiscal. Emerging industries should deepen the tax base, helping to fill the coffers of the local governments that host them. But in China the flow of resources often runs in the opposite direction. Keen to back local champions in the industries of the future, city and provincial governments offer tax breaks and subsidies that erode their financial standing. Fiscal support prompts too many firms to enter fashionable industries, which can sap the profits of genuinely efficient rivals. Last year AlixPartners, a consultancy, calculated that only 15 of China’s 129 EV brands would be financially viable by 2030.

On the face of it China’s export triumphs should help it ameliorate its domestic economic weakness. Instead the two seem mutually reinforcing. Limp spending at home results in falling prices, low interest rates and a cheap currency, all of which make Chinese goods still more competitive on world markets. Booming exports are also propping up growth, allowing China’s policymakers to delay tougher measures to restore consumer confidence, such as higher social spending or a new effort to stabilise the property market. In the face of China’s manufacturing dominance, European leaders aim to diversify their continent’s sources of supply. China’s leaders should do more to diversify their country’s sources of demand. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Preferably with our new podcast series for company

The best way to celebrate America at 250 is to get behind the wheel Preferably with our new podcast series for company June 11th 2026 One stereotype held by foreigners about Americans is that they are irritatingly upbeat. Picture a stranger ordering you to have a nice day, or a family declaring everything to be “so great” while exploring a drizzly, midge-infested Scottish ruin—there is only one nationality they could possibly be. This cliché is misleading, though. Americans are generally cheerful. But even in the country’s brightest moments many of them have been struck by a kind of dread about it all unravelling. “Democracy never lasts long,” wrote the second president, John Adams, in 1814. “It soon wastes, exhausts and murders itself.” That sentiment is widespread as the country turns 250.

America is feeling nostalgic as well as pessimistic on its semiquincentennial. In the country that has been inventing the future since 1776, nearly half of the population say they would rather live in the past. Most young Americans do not expect to be better off than their parents. Meanwhile, on many objective measures, the country is doing better than ever. After a dip caused by opioid overdoses and covid-19, life expectancy is back to the highest level in history. The economy has been growing robustly, unlike in other Western countries. Income inequality after taxes is lower than it was a decade ago. American firms are pre-eminent in artificial intelligence, biomedicine, entertainment and space technology. The Kennedy Centre is getting its name back.

The distance between the data and the vibes is the central puzzle of the United States in the 2020s. Exploring that was the impulse behind the making of a new podcast we are launching this week to celebrate this spectacular country on its big birthday. The six-part series is a road trip in the company of Alexis de Tocqueville , a French aristocrat who loved the place and wrote a prescient book about it in the 1830s, “Democracy in America”. This road trip took The Economist from New York’s aristocracy to a maximum-security prison in the Hudson Valley; from a fight over a data centre in rural Michigan to Harvard University; and from a sheriff’s office in Ohio to Donald Trump’s court in Palm Beach, via plenty of other places. Wherever possible, we spoke with the same sorts of people Tocqueville did, to compare America then and now.

As on any good road trip, unplanned encounters in diners along the way and various logistical snafus added to the texture. Long stretches behind the wheel provided time to think, listen and gaze out of the window. What did we find?

One conclusion was that if all you know about America is its politics, you will draw unrealistically gloomy conclusions. More than half of Americans now think their fellow citizens are morally bad. No other country in the West comes close to that level. Henry Adams (the second president’s great-grandson) called politics “the systematic organisation of hatreds”. American ingenuity has been applied to this field, too: the hatreds seem better organised than at any time since the 1960s. But go and talk to people in person, from purple-haired activists to rural Trump-loving sheriffs, and you will find that they agree on a surprising amount.

A second conclusion is that Americans who see their homeland through their phones are looking in a mirror that is horribly distorted. In a continent-size country of 340m there is always something ugly somewhere. A few decades ago a lot of far worse things were ignored. That was not better, even if it felt better. The risk now is that people support bad policies because they have a misleading picture of what is wrong.

What is the answer to this? Hit the road yourself. Or if gas prices make that tricky, listen to the podcast. Americans are thoughtful and generous. For most of them, politics is something peripheral that happens a long way away. “Never have a people been blessed with such happy, dynamic conditions of existence,” Tocqueville wrote. Bonne anniversaire. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The me-first doctrine is a threat to prosperity

How to fight back against Gen-Z socialism The me-first doctrine is a threat to prosperity June 4th 2026 Something new is stirring on the left. A fresh crop of socialists want to remake the economy with price controls, hefty wealth taxes and a spree of nationalisations. Supercharged by fury over Gaza, they are winning voters at a formidable pace. Many rose to prominence only recently, like Zack Polanski, who leads the Green Party in Britain, or Zohran Mamdani, the mayor of New York. Others are long-standing political fixtures: the septuagenarian Jean-Luc Mélenchon is on his fourth swing at the French presidency, but thumping support from the 20-somethings of “Generation Z” has put the Elysée back in his sights again.

Call it Gen-Z socialism . Not because all its adherents are young—or because it is new for young people to lean leftward—but because it is the brand of leftism, made for the TikTok era, that today’s young revolutionaries support.

Forget weighty collectivist ideals or seizing the means of production. Gen-Z socialism is a me-first doctrine. Climate change and race, preoccupations of the 2010s and early 2020s, are now much more peripheral concerns. So are social issues, barring Gaza . Angst about inflation, housing and artificial intelligence have replaced all that with something cruder. “This country is awash in wealth,” says Avi Lewis, freshly elected leader of the New Democratic Party in Canada, a country where productivity has been all but flat for a decade. “We can have nice things.” Saying that prices should be capped to keep your bills down while someone else pays for your public services is a seductive, shareable message.

Plenty of the grievances that animate Gen-Z socialists do stem from real issues. Inflation has been too high, rent in big cities is now often unaffordable and AI could upend the labour market. Dismissing these worries would be foolish. Yet Gen-Z socialism is wrong about how to fix the problems of capitalism. It must be resisted, because it is a profound threat to prosperity.

No country’s Gen-Z socialists are quite alike. The realities of power have forced some, like Mr Mamdani, to become more moderate. But they broadly agree on three core principles. First, that growth does little to help ordinary people. Theirs is a zero-sum mindset, where a better outcome comes not from creating but from taking—as they fear ai barons will soon do on a vast scale. Second, that spending can be paid for by the richest. Once the left wanted higher taxes for everyone; Gen-Z socialists demand handouts funded by billionaires. The third tenet is a remarkable hostility to private enterprise. Gen-Z socialists are uninterested in letting the market rip and redistributing the proceeds. They would have chunks of everyday life, from housing to groceries, governed by state diktat.

Politics has always had zany fringes. The far right is no less barmy—and more dangerous. But what is so worrying about the Gen-Z socialists is how deeply their ideas are bleeding into the centre-left. Desperate to compete, even mainstream Democrats in America now propose mad schemes like exempting over half of tax filers from federal income tax. In Britain the Labour Party, having won power on a centrist platform, has been spooked by the Greens and is rekindling its zeal for higher taxes and state control. Increasingly, the ideas of the Gen-Z socialists can win even when their candidates lose.

That is bad news. Rent controls would worsen housing shortages by crushing the incentive to build. The profit margins of big supermarket chains, demonised by Gen-Z socialists, are already wafer-thin after years of ruthless competition—a miracle of modern capitalism. Wealth taxes would become confiscatory and deter innovation. Do not assume that the failure of these policies, if implemented, would bring about an automatic course correction. Europe has struggled for decades to escape the low-growth funk left by its own over-regulation; the rise of statist “Peronists” in Argentina helps explain its century of relative decline.

Resisting Gen-Z socialism is therefore an urgent task. The first step is for free-market liberals to stop apologising. A series of popular criticisms of capitalism, each containing a grain of truth, has in aggregate obscured the fundamental wisdom that private enterprise is at the root of human prosperity. Yes, people aren’t always rational, as behavioural economics shows. True, inequality matters and growth is better when broad-based. Free trade and globalisation create losers as well as winners. But this is the best time in human history to be born, given record real incomes, high life expectancy and low rates of extreme poverty. A punchier defence of capitalism would work better in the social-media age than hand-wringing by uncharismatic centrists like Sir Keir Starmer.

Centrist governments must also solve the problems driving popular discontent. “Abundance” liberals are right to want to build cheap and plentiful housing and infrastructure. Politicians must stop saddling the young with the burden of funding excessive pensions. The tax system must ensure that meritocracy prevails over inheritocracy: broader-based inheritance taxes and levies on property would help. The hardest challenge will be the disruption caused by advances in AI. The Gen-Z leftists have set out their stall with calls for a moratorium on data centres and a government jobs guarantee. Liberals must be more positive and imaginative in their own prescriptions, using a mixture of taxes, distributed capital ownership and support for workers to make sure that the upsides of labour-market disruption are widely shared.

Populists have the wind in their sails; it can sometimes seem as though market liberalism is doomed to political failure. The Economist disagrees. A robust defence of the ideas that have brought unprecedented riches has barely been tried. Many of the problems that animate Gen-Z socialists, like high rents, are the result of markets that are insufficiently free, not excessively so. There is time yet for liberalism to once again produce results—and to win the argument. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

It is not just rich places that are becoming less fertile

India’s surprise baby bust is a warning to the world It is not just rich places that are becoming less fertile June 4th 2026 YOU ARE having too many babies. For decades that crude message was drilled into the minds of Indians by their rulers, abetted by inept foreign donors. In the 1960s slogans on school buildings chided parents, telling them: “Two or three children, enough”. By the 1970s officials had taken a crueller turn, overseeing the sterilisation of millions of young adults, usually the poor, many forcibly. But when Indian school textbooks are reprinted this summer, they will carry a very different message. They will warn not of the dangers of having too many babies, but of the risks of having too few.

That’s because the world’s most populous country is experiencing a baby bust . India has a total fertility rate (TFR), a measure of children per woman, of 1.9 and falling. This is below the replacement rate, of 2.1 or so, needed for a stable long-term population. In several Indian states the TFR now matches the sputtering rates you find in rich European countries. Tamil Nadu, an industrialised state in the south, and West Bengal, a populous one in the east, each have the same fertility rate (1.3) as Finland. Maharashtra, a big western state encompassing Mumbai, is on a par with Norway (1.4). If you think of Indian demography, Scandinavia is not the natural reference point. Increasingly, it will be.

India’s population will still continue to grow from its current tally of 1.45bn: it takes time for fewer births to translate into fewer people overall. But the number of births is already down by a fifth from its peak in 2001. In Tamil Nadu 1,200 schools were closed last year for a lack of pupils to fill their classrooms. Those who do attend increasingly show up without any siblings. The government frets that India will get old before it gets rich—that the country is on a similar path to China, where the population has already peaked and is starting to fall. Some politicians are offering cash to encourage Indians to procreate.

India’s demographic transition is the most striking example of a global trend. For it is no longer just wealthy places where families have few, or no, kids. Over two-thirds of all countries are now below the replacement rate. Middle-income ones like Brazil, Iran, Thailand and Turkey have been well below it for years. Poorer countries are steadily joining their ranks. Sri Lanka has a TFR of just 1.3; Tunisia’s is 1.6. Morocco has fallen below replacement rate. Nairobi, the capital of Kenya, may be close to that point. In many places birth rates are plunging despite marriage remaining near-universal and even though few women have formal jobs.

India also exemplifies why this global slump is happening. Falling rates of child mortality provide one explanation: parents need not have as many children if they can be confident they will all make it to adulthood. But demographers have long shown that what really counts is girls’ education. Schooling means that girls gain more autonomy and a greater say in life’s decisions. It is no coincidence that, in the 1990s, both India and much of Africa saw a huge surge in girls attending schools. It is only in the few places where most girls still don’t go into formal education—like Niger, northern Nigeria or Chad—that fertility has hardly budged.

Education shoves down fertility in another way, too. The more aspirational parents get, the more they need to invest in each child. This dynamic is accelerated when public schools are dire. Remarkably, 39% of Indian children went to fee-paying schools last year, up from 32% in 2015. Parents are caught in an educational arms race. If your neighbours have few kids and spend more on their education, your own will be out-competed unless you do the same.

Aspiration also spreads more easily than it once did. One study showed how the arrival of cable television in Indian villages in the 2000s led to a moderate fall in fertility. Soap operas depicting urban, middle-class women with small families may have changed norms (though some wonder whether people were just watching TV rather than having sex). The smartphone is an even more powerful—and distracting—device for bringing the lifestyles of richer peers into poorer places.

Whatever its precise cause, the baby bust has big implications. The UN, which tries to predict such things, has failed to account for the speed of fertility decline in its central forecast for the global population. Its lower forecast is likely to be more accurate. That suggests India’s population will peak at about 1.6bn in 20 years or so, and then fall back dramatically to just under a billion before the century ends. Asia as a whole may also reach its apex in the 2040s. As for the peak of the overall human population, that is probably coming sooner than most expect, perhaps even in the 2050s, because Africa won’t be as populous as previously thought. In the worst-run, most conflict-ridden places, fertility will stay high. But the lesson of India is that predictions of a future in which there are 500m Nigerians or 3.8bn Africans should be treated with appropriate scepticism.

If most countries are set for low fertility, it will be harder for anyone to bank on imports of migrant labour to tackle their own worker shortages. In India, fertility fell below the replacement rate at a much lower level of development than most countries: its GDP per person at purchasing power parity was less than half that of Malaysia, Mexico and Turkey at the same point. That need not cramp growth—China and Vietnam crossed the threshold at an even lower level of income—but it will complicate policymaking. In particular India, and countries like it, will be forced to divert scarce public resources into things like pensions and old-age care sooner than expected. That makes it more important than ever to increase the tax take: far more people, especially women, should be brought into India’s formal labour force, for example.

The sources of falling fertility—girls’ education, lower child mortality and the choices of individuals—are unambiguously good. But as India and others hurtle through their demographic transition, the consequences will not be pain-free. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Europe needs its help just as badly as the other way round

Ukraine is not a charity case Europe needs its help just as badly as the other way round June 4th 2026 GIVE EUROPE credit for stepping up when many doubted it could. Since Donald Trump cut American military aid to Ukraine, Europe has managed to fill the breach. It is accelerating the flow of money and arms eastward, while stiffening sanctions on the Russian aggressor. Partly as a result of European help, Russia’s grim losses on the battlefield are putting pressure on Vladimir Putin. With American diplomatic efforts to end the war fizzling, some in Europe are asking whether it is time for them to take the lead and talk to the Russian leader.

That time may come, but not yet. The more urgent question for Europe concerns its relationship with a country that has transformed itself from a ward of the West into a crucial security partner. Ukraine’s battle-hardened army is making progress and its innovative defence industry is growing. If Europe is to defend its borders and wean itself off a reliance on transatlantic help, it needs Ukraine as badly as the other way round. Europe’s priority should be to fully embrace Ukraine, and fast.

For Ukraine itself, the goal has long been clear: full EU membership, to cement links with the West and make up for territory lost to Russia. Four years after accepting Ukraine as a candidate for membership, this month the EU is expected to open the first negotiating “cluster”, covering topics such as democracy and the rule of law. Some in Kyiv hope full membership could follow as soon as next year. In the EU, however, even enthusiasts doubt it can come within a decade. The gulf in expectations between the two sides is dangerous.

Some responsibility for that lies with Volodymyr Zelensky, Ukraine’s president. He should do more to strengthen domestic, independent institutions, and especially to fight corruption. He should be more open to creative ways for Ukraine to take early steps into the union. Friedrich Merz, Germany’s chancellor, recently proposed an “associate membership”, with limited voting rights, as a waystation to full-fat accession. Mr Zelensky was rash to dismiss that out of hand.

But the bigger task falls to the Europeans. Too many still look at Ukraine as a kind of charity case. In reality Europe has much to learn from Ukraine’s achievements, especially in drone technology, production and deployment. Europe’s armies can bolster their own security by investing in their neighbour. Sweden’s defence minister says that testing arms systems in Ukraine brings innovations in weeks or months, whereas doing so at home takes years or decades.

Some Europeans worry about going too fast. They talk of the risks from rushing to bring a big, poor, institutionally weak country into their union. These concerns are not baseless, but they miss the bigger picture: Europe must act fast to acquire more of the hard power needed to defend itself in an increasingly hostile world. Folding Ukraine into Europe’s embrace is a means of confronting the obvious regional threat, Russia. Enlargement is not merely a bureaucratic process. It is a geopolitical tool for a continent that looks vulnerable among more predatory great powers.

Other ideas, such as a European Security Council that might include Britain, could help formalise a security partnership with Ukraine more quickly. But the priority must be to speed up the EU entry process for Ukraine. The EU should begin drafting an accession treaty now, as a sign of intent to Ukraine’s war-weary people as well as to investors who will fund its post-war reconstruction. In return, Ukraine should be open to delays in subsidies or freedom-of-movement rights to make it easier for Europe to find unanimity.

The alternative is bleak. Polls show some young Ukrainians souring on EU membership. That should ring alarm bells. Which is worse: letting a poor but enthusiastic Ukraine into the club, or leaving an embittered but powerful one outside? ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Even though his views are awful

Britain is wrong to ban speakers like Hasan Piker Even though his views are awful June 4th 2026 “I’ve been banned for criticising Israel. Are we free any more?” Cenk Uygur’s question, posed to his followers on X this week, has some merit. Mr Uygur and Hasan Piker, two controversial American left-wing influencers, were both blocked by the British government from entering the country to speak at the SXSW festival in London and at Oxford University. The decision is shabby behaviour for a country that sees itself as the birthplace of free speech, one of the fundamental pillars of liberal democracy. That people should be able to say and think what they want is not just a right for citizens; it is a cultural norm that is eroded if speakers from abroad are regularly turned away at the border.

Messrs Piker and Uygur were blocked because Shabana Mahmood, the home secretary, judged that their presence in the country “may not be conducive to the public good”. This extraordinarily vague standard is increasingly being used, it appears, to ban high-profile foreigners whose views the government does not welcome. In April this rationale was deployed to stop Kanye West —a rapper with a history of unhinged Nazi ramblings, for which he has since apologised—from performing at a music festival. In May it was cited as justification for blocking several far-righters from attending and speaking at a rally organised by Tommy Robinson, a white-nationalist rabble-rouser, in London.

All this is a worryingly aggressive application of the discretionary power afforded to the home secretary. Such power should be used very sparingly. Direct and deliberate incitement to violence is unlawful; it may well be right to exclude someone with a history of such behaviour. Hurtful, disturbing or disgusting views—some of which have been on display this week in the furore over the police’s response to a fatal attack on Henry Nowak , a student—do not meet that threshold.

Mr Piker has many opinions that reasonable people find offensive or simply bonkers. He thinks bank robberies are “cool”; says he understands why someone might want to murder a health-insurance boss; and once opined: “I would vote for Hamas over Israel every single time.” But he does not pose a threat to Britain, any more than the protesters arrested just for holding signs saying “I support Palestine Action” do. The country that once gave sanctuary to Karl Marx should not be frightened of his modern social-media disciples.

Nor will visa bans on the likes of Mr West and Mr Piker stop Britons from hearing their views. Anyone can tune into their social-media accounts. Indeed, the attempt to suppress their speech makes it more likely that Britons will seek them out. Google searches in Britain for Mr Piker and Mr Uygur are higher this week than they have ever been. As provocateurs who make their living from clicks, they are no doubt delighted.

Britain is not the only country that uses visa bans to keep out speakers whom its government dislikes: America, Australia, Germany and many others do the same thing, too. But that is no excuse. Parliament should press the government to stop using its powers so casually.

It should also do more to blunt the tools used by the rich and powerful to intimidate or silence critics, such as lawsuits intended to impose ruinous costs on them (known as “strategic lawsuits against public participation”, or SLAPPs). This past weekend provided an egregious example, when Sarah Wynn-Williams, a former Meta employee turned whistleblower, had to sit mute on a stage at a literary festival in Wales, gagged by a global non-disclosure agreement and unable even to nod her head without risking financial penalties.

With free speech under siege around the world, it is shameful that Britain, once a bastion of tolerance for vigorous debate, should be so censorious. The government’s job is to keep people safe from actual violence, not to try to shield them from words that might upset them. If it makes a habit of banning visiting speakers, it will create the impression that it endorses the views of the people it does let in. It will encourage more and more activists to lobby for bans on foreigners whose ideas they disagree with. And it will make Britain less free. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

High debt, disjointed markets and pugnacious trade policy all threaten the world’s safe asset

America’s decaying Treasury market needs a fix High debt, disjointed markets and pugnacious trade policy all threaten the world’s safe asset June 4th 2026 SINCE RICHARD NIXON broke the link between the American dollar and gold in 1971, global finance has floated on a sea of Treasuries. No asset is more important than America’s government debt. It provides a haven for investors at dangerous moments. Trillions of dollars of contracts and securities worldwide are priced with reference to Treasury bonds.

Alas, as our special report explains, the world’s safe asset has seen better days. The volume of Treasuries outstanding has grown by 126% over the past decade, to almost $32trn, far outstripping steady demand from the likes of foreign central banks. As a result yield-hunting private investors and hedge funds, fuelled by leverage, have taken a growing share of the market. Occasionally—most notably in March 2020—this demand has suddenly dried up, sending short-term funding costs surging and forcing the Federal Reserve to buy bonds and, in effect, to underwrite the market.

Economic and geopolitical trends are also hurting demand for Treasuries. The resurgence of inflation since 2021 has often made stocks and government bonds sell off in tandem, meaning that Treasuries have ceased to play the valuable role of ballast for riskier portfolios. Meanwhile America’s belligerent trade policy and its repeated deployment of financial sanctions (whatever their merits) have made foreign buyers think twice before becoming a long-term creditor to Uncle Sam.

If these patterns continue, the market risks losing a special status that provides crucial benefits to both America and the wider world. Salvaging the situation raises tough questions for Kevin Warsh, the new chair of the Federal Reserve, for Scott Bessent, the treasury secretary, and for Congress.

Mr Warsh has declared his intention to reduce the Fed’s holdings of Treasuries. That is an achievable goal, even if it will bring about a need for still more private demand. Yet Mr Warsh must also stand ready to buy bonds at any moment to calm a sudden seizure. Any such intervention would require a defter hand than the Fed has managed previously, when it has failed to distinguish quantitative easing (QE), bond purchases designed to stimulate the economy, from short-lived “market functioning” interventions designed to stop fire sales. In the past, it did not need to: in March 2020, for example, both goals were operative at once, and inflation was quiescent.

Today the economy does not want for stimulus but the bond market could still need rescuing. It would be a disaster were a purchase of bonds made to unclog financial plumbing to be interpreted as the Fed kowtowing to President Donald Trump’s desire for loose money. So Mr Warsh must get a battle plan ready for a surgical intervention. The Bank of England is a model to follow: during a sell-off in British gilts in 2022, following a disastrous “mini-budget”, the bank bought bonds aggressively but promised to get out of the market as soon as possible. It fulfilled its promise in a matter of months, and ended up making a profit for taxpayers, to boot.

Reforming the market will require America’s many other regulators to work in tandem with the Fed. Trading currently operates through dealer banks, which have struggled to clear the market in moments of stress. Trading data are published daily, unlike the real-time reporting in the corporate-bond market. Quicker reporting would allow for the development of so-called all-to-all trading. Like the stockmarket, any investor could buy and sell directly to any other, boosting liquidity.

But the most important remedy is in the gift of politicians. The size of America’s budget deficit, at around 6% of GDP, has no parallels during peacetime, except during deep recessions. Further fiscal pressure is coming, not least when the Social Security trust fund runs dry in six years . Mr Bessent is easing the strain of rising interest payments by favouring short-term debt, which is cheaper to service today but leaves the government more exposed to a crisis because it must be frequently refinanced. As for Congress, which writes the budget, it worries about the market only during its regular brinkmanship over the debt ceiling, a statutory limit which must regularly be lifted. Both the executive and the legislature must summon the will to confront the underlying long-term problem and find ways to shrink borrowing.

It is not too late to stop the slow, steady erosion of the Treasury market. The prize is enormous. By one estimate America’s role as the supplier of safe assets to the world saves the country about 1% of GDP in interest spending each year, which today means more than $300bn. Only Treasuries can sate the world’s need for safe and liquid assets. There are few winners from letting the foundation of the global financial system rot. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The World Cup is wonderful. It could be even better

How to make football more exciting The World Cup is wonderful. It could be even better June 4th 2026 Football is the beautiful game. But it’s often also the boring game. The World Cup, which starts on June 11th, is being hosted by America, Canada and Mexico, the international equivalent of going to a dinner party and hearing the hosts rowing in the kitchen. The tournament will feature 48 teams playing 104 matches over the course of six and a half weeks. Although watching matches that feature your own nation is dependably exciting, for neutrals the average game is likely to be pretty drab . The stakes at a World Cup are too high for players to take big risks, and hanging on for a draw often pays off for less fancied teams.

Ideas are already circulating for making football more fun. Arsène Wenger, a manager whose credentials include making Arsenal bearable to watch, has proposed changes such as tweaking the offside rule and turning throw-ins into kick-ins. But these ideas are not radical enough. The Economist would like to propose the following changes, so that the world game is one that the world thrills to.

If a team hits one of the posts or the crossbar three times, that will count as a goal. Attacking intent should be amply rewarded. This will favour teams that really go for it.

Non-qualifiers get a team of their own. Some great footballers never get to participate in a World Cup because they play for countries that have not qualified. A neutral team, made up of the highest-ranked players from these countries, would give everyone a second-favourite side.

As the match progresses, the goalkeeper is allowed to use less and less of his body to make saves. First one hand is off-limits, then the other. In injury time the only part of the body that a goalkeeper can use to block the ball is his face.

Anyone who feigns injury runs a higher risk of being injured for real. Watching someone writhe around in pretend agony for minutes on end is tedious beyond belief. If a player is judged to have feigned injury, the next foul on them will be unpunishable. Either there will be less rolling around on the floor or there will be the drama of violent retribution. Either way, football is the winner.

For a ten-minute period in the first half, a random member of the crowd is chosen to participate for each team. Spectators may well be picked to play for a team they do not support; their allegiances will not be known to anyone, including their new teammates. It’s up to them how they use their time.

Corners have become wrestling matches. To make them more interesting, everyone on the pitch, including the corner-taker, must be blindfolded. Play will be allowed to continue until the ball goes off the field or the crowd starts booing.

There’s nothing like the promise of permanent residency to make sport exciting. As well as the usual yellow and red cards, the referees will be able to award a green card to any player who dribbles past an opponent in games played on American soil.

One of the most memorable figures in the World Cup was a Cameroonian player called Roger Milla, who did a dance by the corner flag when he scored. If that makes football sound boring, our point is made. Still, a creative goal celebration can be fun; to encourage them, the referee can rescind a yellow card for foul play if they are particularly imaginative.

Competition is always a good thing, and that principle can be applied within matches by having two balls on the field at once. This will mainly be fun because of the effect that it will have on referees and commentators.

In extremis, a panel of video assistant referees can award a penalty against a team for being too boring. Even the best teams spend inordinate amounts of time passing the ball from one side of the pitch to the other, apparently unaware that the goal is in front of them. They should be punished.

It is just possible that these ideas will not be adopted before the World Cup starts. Bold thinking often takes time to become accepted. In the meantime, there are some consolations. It could be six and a half weeks of golf. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Smaller, weaker countries can defend themselves more easily with cheap, deadly kit

Smart tech is making war a dumber choice Smaller, weaker countries can defend themselves more easily with cheap, deadly kit May 28th 2026 Bullets and bombs killed nearly three-quarters of a million people in wars between 2021 and 2024. Many more died from the indirect effects of conflict, such as hunger and disease. Combat deaths in the past four years have been the highest since the end of the cold war. And for what purpose? Not even the leaders who started recent wars can be pleased with the results. Russia’s invasion of Ukraine has become a humiliating quagmire for Vladimir Putin. President Donald Trump’s war on Iran has gone badly awry . These two wars of choice exemplify two new battlefield truths. Technology has made it harder for any army to advance on the ground. It has also made it easier for weaker powers, when attacked by stronger ones, to cause havoc.

In a valedictory essay this week, The Economist’s defence editor reflects on how war has changed over the past decade and how it might evolve in the future. The first big shift is that soldiers are more exposed on the battlefield. Sensors and satellites can see them; small, cheap drones can kill them. Armies have to work harder than before to hide, move and survive. Ukraine’s expanding front-line “kill zone”, where soldiers move in small groups and ground robots evacuate casualties and deliver supplies, embodies this shift.

Technology quickly spreads. Israeli soldiers in Lebanon now face the same kind of drones that were pioneered in Ukraine. Iranian missiles are far more accurate than the Iraqi Scuds fired during the first Gulf war. Were China to attempt to invade Taiwan, its landing forces would be met with a blizzard of drones. Air superiority is now harder to achieve and buys soldiers less protection than before, thanks to the new drone-saturated layer of airspace.

Some experts draw the lesson that manoeuvre—attacking an enemy’s soft spots through shock and rapid movement—is no longer possible. But war is a Darwinian environment, driving constant adaptation, and the battlefield is never frozen for long. The lesson from Ukraine is not that future wars will always involve wretched infantry moving only a few metres a day on long, static front lines. It is that armies will have to train and equip themselves properly to blind, disrupt and elude the cameras, sensors and munitions above and around them.

Western armies are woefully behind in this regard. They need far more jammers and counter-drone defences to avoid being seen and struck. They need realistic training to simulate those conditions, which is why NATO armies are getting help from drone-savvy Ukrainians during exercises. And they need to move more boldly in bringing unmanned systems into their forces for everything from reconnaissance to logistics.

They should not simply copy Ukraine. Though astonishingly innovative, its army has serious flaws. Soviet-trained generals still micromanage brigades at the front. Ukraine’s drone forces may be world-class, but they are not as synchronised with assault forces as they could be. And the drones now plying the skies of Donbas and the waters of the Black Sea are smaller, shorter-range and cheaper than those that would be needed in a war over the vast distances of the Pacific.

The second shift is that new technology has transformed targeting. AI-enabled software allows armies to find and strike targets at a previously unimaginable speed and scale. America’s blitz in Iran offers a foretaste of this. An army that can outpace its enemies in identifying and destroying command posts, depots and weapons can, in theory, paralyse them and force them to capitulate. In practice, this is fiendishly hard.

America and Israel could bomb Iran at will, yet Iran shows no sign of buckling. On the contrary, it kept launching drones and missiles through 39 days of conflict and has been able to cling on to its nuclear programme, close the Strait of Hormuz and cause global economic mayhem. Mr Trump celebrates the number of Iranian targets destroyed by superior American kit, but targeting should be a means to an end, not a substitute for strategy. What he expected would be a short, sharp war quickly started to exhaust America’s stocks of expensive munitions and exposed its limited tolerance for economic costs, let alone casualties. In previous wars, such as America’s in Vietnam and the Soviet Union’s in Afghanistan, the smaller, weaker side won because it was fighting on home terrain. Now the weaker side can afford precision-guided weaponry, too.

A third development, alongside these technological shifts, is that the laws of war are increasingly under strain. Mr Putin’s forces have subjected Ukrainian civilians to torture, indiscriminate bombing and systematic attacks on medical facilities. Hamas has gloried in the mass murder of Israeli women and children. True, past wars were vicious, too. What is new is that it is not just dictators, terrorists and rebels who openly flout norms. Some leaders of Western democracies do so, too. Israel has inflicted brutal collective punishment on civilians in Gaza. America’s secretary of war mocks “tepid legality” in military operations. Mr Trump has threatened to wipe out Iranian civilisation and joked that it is “fun” to torpedo ships full of sailors. The brazen violation of norms is not just immoral but unwise, because in future wars, involving long-range drones and missiles, Western civilians will not enjoy the sanctuary they have come to take for granted.

The coming years will surely bring new conflicts. Mr Trump, by making clear his scorn for allies, has weakened America’s power to deter aggressors. And political leaders everywhere will keep imagining that, under their brilliant leadership, the next war will be swift and painless. Yet the evidence shows that war is becoming harder and costlier; that it is easier for weaker states to hold off and bleed stronger ones; that it is easier to start wars than to end them. That is something for Mr Trump to ponder as he mulls whether to resume war on Iran, or wage one in Cuba; for Mr Putin, as he keeps incinerating lives and cash in Ukraine; and for Xi Jinping of China, as he decides whether to invade Taiwan. As military technology gets smarter, wars of choice are looking ever dumber. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

The prime minister’s ambitions threaten both his country and the Horn of Africa

The imperial vision of Ethiopia’s Abiy Ahmed The prime minister’s ambitions threaten both his country and the Horn of Africa May 28th 2026 Fortune has smiled on Abiy Ahmed. When Ethiopia’s prime minister was a boy his mother prophesied that he would become a king. As a thrusting cadre of the ruling party, he told colleagues he would one day be their boss. They made him Africa’s youngest leader in 2018. He promised allies that he would make peace with Eritrea, a country to the north that had been part of Ethiopia until 1993—and win a Nobel prize for it. He was proved right within 18 months of taking office.

Such chutzpah is typical of Mr Abiy, who is up for re-election on June 1st. He wants to create a rich, powerful Ethiopia that occupies what he considers its rightful place as the dominant power in the Horn of Africa. Naturally, he expects to be in charge. In the past eight years he has opened up the economy; demolished and rebuilt much of Addis Ababa, the capital; unveiled Africa’s largest dam; and broken ground on what is set to be its biggest airport. The IMF says Ethiopia’s economy will grow faster in 2026 than that of any other non-oil producer.

Those are all good reasons to pay Mr Abiy attention. Yet there is another, more alarming one: the uncompromising prime minister also risks tearing Ethiopia apart, and could inflict great pain on the Horn of Africa.

When Mr Abiy took office he promised a historic transition to democracy. Instead, through guile and brute force, he has personalised power to a degree unseen since the days of Haile Selassie, Ethiopia’s last emperor (who Rastafarians believe was the Messiah). At the polls next week voters will be offered no real choice. Nor is there any reason to trust that Mr Abiy will step down after two terms, as he once promised allies. After the election a “national dialogue” is widely expected to propose changes to the constitution, possibly creating a directly elected presidency. Mr Abiy could then swap his current role for a grander one and stay in power for decades.

Given the size and diversity of Africa’s second-most-populous country (after Nigeria), this is a recipe for instability. Since 2018 Mr Abiy has faced multiple rebellions, none of which has truly ended. By far the biggest is by ethnic Tigrayans, who make up roughly 6% of Ethiopia’s population and whose leaders dominated the federal government before Mr Abiy shoved them aside. Hundreds of thousands of people are thought to have been killed in a civil war between 2020 and 2022; Mr Abiy’s forces committed crimes against humanity. Troubling signs suggest that the war could soon flare up again .

A deterioration in relations between Ethiopia and Eritrea, which briefly flourished after the rapprochement in 2018, is another cause for alarm. The prime minister says—not without reason—that Issaias Afwerki, Eritrea’s longtime dictator, is conspiring with his domestic enemies, including the Tigrayans. But Mr Abiy’s increasingly open desire for a slice of Eritrea’s Red Sea coastline understandably alarms Eritreans. The risk of a return to a catastrophic regional war remains worryingly high.

This should give outsiders pause. Mr Abiy’s global standing, which tanked during the Tigray war, has been on the up of late. Both America and the EU seek closer ties, judging that Ethiopia is too big, and Mr Abiy too important, to ignore. Yet previous Western coddling helped the prime minister consolidate his authority and emboldened him to wage war. Outsiders should thus use their remaining leverage—above all, the promise of trade and investment—to nudge Mr Abiy in a less dangerous direction. The lesson of Ethiopian history, after all, is that unchecked emperors eventually undo themselves. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

As they deindustrialise, Taiwan, South Korea and Japan must reform

How East Asia should respond to its China shock As they deindustrialise, Taiwan, South Korea and Japan must reform May 28th 2026 AMERICA’S artificial-intelligence boom has put the rich economies of north-east Asia into overdrive. Taiwan’s output is growing at a blistering 14% annual pace, thanks to soaring sales of chips and servers for data centres. In the past year operating profits at South Korea’s makers of memory chips have risen by over 500%. Even sluggish Japan is benefiting—though it long ago lost its title as the world’s pre-eminent chipmaker. In 2025 all three countries enjoyed record exports and current-account surpluses.

The region’s export bonanza, though, obscures an important story in the rest of its economy. As we report , outside its highest-tech sectors, rich north-east Asia is deindustrialising. Strong competition from China, paired with increasing specialisation in chips, has disrupted an economic model based on a wider range of manufacturing exports—the model that helped make the region prosperous in the 1980s and 1990s. Even as it booms, north-east Asia increasingly needs reform.

In the past few years China’s relations with its rich neighbours have been transformed. Once it imported high-value parts from north-east Asia and focused on low-value final assembly. Now it competes across the whole supply chain. Taiwan’s long-running surplus in goods with the mainland flipped into deficit this year, as South Korea’s did years ago (though in the past few months Korean chip exports have returned it to surplus again). In Japan the bilateral deficit with China has plumbed new depths, setting a record earlier this year. Industries from carmaking to chemicals are under intense pressure. As in the West, the perception that domestic manufacturers are competing with goods produced by subsidised Chinese firms is feeding protectionist sentiment.

The specialisation in chips is an understandable development that reflects these economies’ maturity. Yet this particular focus also creates fragility. The tech-hardware cycle is notoriously volatile and its vicissitudes increasingly affect the region’s economies. The tech supply chain also relies deeply on America and China for both critical inputs and end-user demand. On an index of export-basket concentration, north-east Asia is 73% higher than the rich-world average, and concentration has risen since 2019. This leaves the region dangerously exposed to protectionism by either superpower.

There is nothing wrong with specialisation, as David Ricardo would attest. However, East Asia’s rich economies would be better off if they paired their chip-export juggernauts with dynamic domestic economies. The trouble is that domestic demand is too low—a legacy, in part, of outdated economic structures that hold down consumption in order to promote exports above all else.

The time has come to sweep these old systems away. Two-tier labour markets guarantee employment for insiders, often working for big exporters, while inflicting wage penalties and precarity on everyone else. Freeing up labour markets would improve the matching of workers and firms, lifting real wages. Pension systems favour staff at exporters but are stingy for others, leaving the region with some of the rich world’s highest rates of relative poverty among the elderly. Higher minimum incomes would boost aggregate spending. Taiwan has engineered a weak currency , and South Korea and Japan use the state to allocate credit. Less financial engineering would let resources flow to the firms that will use them best.

North-east Asia must allow failing manufacturers to die a natural death. Support should be stopped for mighty firms such as TSMC and Samsung Electronics, which do not require lavish subsidies to compete. And although East Asian countries can hardly avoid relying on markets in America and China—the world’s two biggest economies—they can cut other barriers to trade. Some of these barriers are local. Grievances from colonial times mean that South Korea and Japan still do not have a bilateral free-trade agreement. South Korea should join the Japan-led CPTPP, a top-notch trading pact.

The danger is that, spooked by the China shock, the region’s governments will instead double down on aggressive industrial policy. South Korea has promised $530bn in chipmaking subsidies and Takaichi Sanae, Japan’s prime minister, is overseeing state-led investment into 61 “strategic” goods. Using the power of the government to promote exports succeeded for these economies when they were poor and trying to catch up with the West. It is not an approach that works in places that are already rich. Doubling down on exports will leave north-east Asia poorer and more exposed. Instead, the region’s best economic bet is to become more dynamic at home and more diversified abroad. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

But Donald Trump could make a deal with the communist regime

Attacking Cuba would be a huge mistake But Donald Trump could make a deal with the communist regime May 28th 2026 Only hours after American special forces grabbed Venezuela’s dictator from Caracas on January 3rd, Donald Trump said that Cuba was “going down” next. Since then he has leant on Venezuela’s new ruler, who wishes to avoid being kidnapped like her predecessor, to cut off the supply of cheap oil to Cuba. As the island suffers blackouts, Mr Trump is urging its regime to make a deal with him “before it is too late”.

Mr Trump is right to want Cuba to change. Its communist rulers are vile. For nearly seven decades they have locked up dissidents and impoverished their compatriots. Ordinary Cubans struggle to afford food or medicine. Cronies of the regime dominate the government-run economy and live large. Cuba is also a (mild) threat to American security; it lets Russia and China run listening posts less than 200km from Florida.

The oil embargo has made Cubans even more miserable than before. It has also brought the regime to the negotiating table. A few political prisoners have been freed, and a flurry of economic reforms have been announced. On March 16th the regime said it would let Cubans living abroad wholly own businesses in Cuba. But Mr Trump and Marco Rubio, his Cuban-American secretary of state, often say they want much more: nothing short of regime change.

They are weighing their options. One is military force. Surveillance drones have been buzzing Cuba. On May 20th the USS Nimitz, one of America’s 11 nuclear-powered aircraft-carriers, arrived in the Caribbean. On the same day America’s Department of Justice indicted Raúl Castro, Cuba’s de facto leader. Mr Rubio says the chances of peaceful agreement are “not high”, and that Cuba cannot be fixed with the current political system in place. Asked if America would use force to change the regime, he said Mr Trump would do “whatever it takes”.

There are echoes here of the escalation that preceded Mr Trump’s Venezuelan venture, which he overconfidently claims was a great success. The threat of force may give him extra leverage at the negotiating table. But an actual military operation would be highly risky and unlikely to improve matters.

A swift, illegal incursion to decapitate the regime might succeed, but what then? Cuba is not Venezuela. Its dictatorship is more deeply entrenched and ideological. Perhaps Mr Trump might be able to replace the top communists with more pliable leaders, but even the modest degree of control he has established over Venezuela would be difficult to replicate.

A full-scale invasion is even less appealing. America could smash Cuba’s army, but could it build a better Cuba? Its record of nation-building in the face of guerrilla insurgencies in other countries is poor. Few Cubans have any memory of freedom. Any attempt to impose democracy by force would be slow, fraught and probably doomed.

If not force, then what? America could prolong the oil blockade, causing more hunger and blackouts , in the hope that desperate Cubans will turn on their rulers. But there is no organised opposition and many young, restless Cubans have fled. The remaining population is old and tired; so far, most protests have been limited to public pot-banging.

That leaves the least bad option: pressing for a gradual transition. Some components of a possible deal have been made public. America would let more oil flow and provide $100m in humanitarian aid for the Catholic church and NGOs to dish out, bypassing the Cuban army’s corrupt business empire. It would also provide free internet access, via satellite, for every Cuban. That would be good in itself, and might help create space for political opposition to emerge. For its part the regime would be required to release more prisoners, ease up on the repression and open Cuba to private investment.

Even if Cuba’s rulers agreed to such a deal, vast challenges would remain. Cuba is much poorer than Venezuela, and has no big oil reserves to tempt foreign investors. Nor does it have the rule of law. Many Cuban-Americans would like to invest, but only when the property-grabbing communists are gone. Yet genuine economic reform could make a big difference. Tourism could increase rapidly, if Americans were no longer barred from visiting. Farmland could be put to more productive uses. Economic opening would probably have to precede the political sort, which could take a long time.

If the Trump administration negotiates forcefully and shrewdly, it could do Cubans a big favour. If it resorts to armed force, it could make things much worse. With luck, Mr Trump has learned that lesson from Iran. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

From pizza to Pilates, franchises mint millionaires and make customers happy

Why the world needs more franchises From pizza to Pilates, franchises mint millionaires and make customers happy May 28th 2026 How do you get rich in today’s America? Founding an artificial-intelligence startup may look tempting, but most fail. Getting an advanced degree and slogging it out as a corporate lawyer or financier was once a reliable path to wealth, but now looks threatened by ai. Perhaps you should look instead to the company that has plausibly created more millionaires than any other in history: McDonald’s. Most of its outlets are franchises, run by independent firms that pay royalties to the brand—and often make a fortune. If fast food isn’t your thing, do not fear: the franchising model can be found everywhere from hotels to Pilates studios.

They may not have the social cachet of a Wall Street corner office, but franchises make many Americans wealthy . If reports are to be believed, the country has even recently minted its first billionaire franchisee. They also boost growth. More countries should try creating a franchise economy—and America should protect the one it has from overregulation.

Franchises have long been sneered at. As the model spread in the 1970s and 1980s it was derided by economists as little more than a cheap growth tactic in which franchisees stumped up the capital to open new outlets. Critics claim that franchisees are not “true” entrepreneurs, in the mould of Elon Musk or Steve Jobs, but merely glorified store managers obsessed with the illusion of being their own boss. Yet franchising has come to account for a steadily growing share of American business: there are almost 850,000 franchise outlets, run by a quarter of a million business-owners. One in eight businesses with at least one employee in America is a franchise—roughly double the share in its closest international rivals, such as Japan and Germany.

Franchising works because of the deep laws of economics: it productively aligns incentives and divides labour. It crops up when a business requires a lot of employees to be geographically dispersed; when monitoring staff would be hard or expensive; and when knowledge of how local markets work is important. In such conditions it makes sense to divide responsibility between a franchisor, who focuses on the brand and the product, and a franchisee, who adapts to local conditions.

The rest of the world can learn from the success of this model. Franchises thrive in part because of the strengths of American capitalism. Strong intellectual-property rights protect franchise brands, while deep capital markets make it easy for franchisees to borrow.

But franchises have also benefited from good regulation. A vast amount of public information exists about how franchise models work. That is because franchisors must disclose how they make money from franchisees, provide estimates of startup costs and ongoing fees, and reveal any legal issues they are facing. Many also disclose in detail the financial performance of existing franchisees. Franchising flourished after rules mandating transparent disclosure were introduced in 1979. Since 1986 the number of franchise outlets has almost tripled.

More recent attempts to regulate franchising have been less wise. Critics say franchising exploits and evades America’s weak labour protections, for example by making it difficult for workers to unionise. Such critics would make franchisors joint employers of franchisee workers. That would expose franchisors to huge legal risk: they could, for example, be sued if a franchisee, who hires and pays staff, failed to pay overtime correctly. Such a shift would make franchising much riskier and, by centralising the system, undermine many of its advantages. It would ultimately be counterproductive for workers, who benefit from the many job opportunities franchises create, in industries mostly untouched by ai. Franchising may not be glamorous, but it is efficient. Best to keep it that way. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Make what you will of Elon Musk, his rocketry firm is a marvel of free markets

SpaceX is capitalism on rocket fuel Make what you will of Elon Musk, his rocketry firm is a marvel of free markets May 21st 2026 TO CHANNEL ONE of Elon Musk’s favourite science-fiction authors, SpaceX is a product of infinite improbability. When Mr Musk began, few would have predicted that a startup could design a liquid-fuelled rocket and put it in orbit. Nor that an engineer would be able to get a rocket’s booster to return to Earth, land upright on its own tail and be re-used. And no one has yet recovered a rocket’s second stage, which must withstand 1,500°C or so during atmospheric re-entry.

Having pulled off the first unlikely feat in 2008, six short years after its founding, and the second in 2015, SpaceX will try to use a launch due on May 21st to show that it can carry off the third, too. If the test fails by the time you read this, SpaceX will try again—and again, until it succeeds or runs out of money.

Success will be vital if Mr Musk is to realise his vision of dominating artificial intelligence, apparently by using space-based computers launched by SpaceX to satisfy AI’s ravenous hunger for data-processing. To pay for his dream, on May 20th the company filed the prospectus that has started the countdown clock for an initial public offering next month worth about $75bn. This will be the biggest listing in history.

In two ways, the IPO is infinitely improbable, too. It is inspiring in that Mr Musk aims to carry off yet more seemingly impossible feats of engineering. And it is worrying in that he is asking investors to trust their savings to a lossmaking outfit with hardly credible financial plans over which he will have total control.

SpaceX’s colossal listing will shake stockmarkets as much as its giant Starship rocket’s Raptor engines now rattle the coastal plain beneath the launch site in Texas. SpaceX may instantly land among the world’s ten most valuable companies, with a market value of as much as $2trn. A fortnight later it is to be ushered into the NASDAQ index, ending up in countless tracker funds, pension pots and other stock portfolios. By then Mr Musk may have become Earth’s first trillionaire, worth as much as all households in his native South Africa combined.

In a populist age, many people will see the concentration of power in trillion-dollar companies—not to mention trillion-dollar men—as a failure of capitalism. Yet as a story of risk-taking, competition, the ability to mobilise resources and thereby turn the improbable into reality, SpaceX is in fact capitalism at its most remarkable.

Sometimes Mr Musk has harnessed the state’s resources, sometimes he has gone it alone. Government policy played a crucial role in getting SpaceX off the ground. But his drive has repeatedly solved problems that the state could not. He has already opened up space, and if he succeeds in his dream of cutting launch costs to $185 a kilogram, 1% of their historical average, he will have utterly transformed it.

Getting there will be hard. SpaceX’s business plan, as outlined in its regulatory filing on May 20th, has “risky” written all over it. The company is losing more than $1bn a month, much of it on its AI business, xAI, which spent $8bn in the first quarter and is still far behind the industry’s stars.

The plan says that over 90% of SpaceX’s potential sales, which it values at $28.5trn—almost the entire GDP of America today—will come from AI. It is unclear whether that will be from making a success of his own AI business using data centres in space powered directly by the sun (and untroubled by terrestrial NIMBYs), or from selling data-centre services to others. Throw in some stardust about interplanetary missions and asteroid mining and you can begin to grasp the scale of Mr Musk’s ambition.

Yet even if he doesn’t get all the way there, his fleet will open up new possibilities that he and other capitalists can exploit. The government encouraged William Boeing to do this after the first world war, using idle warplanes to ferry air mail. Jeff Bezos sold spare cloud-computing capacity when Amazon had built more of it than it needed for its e-emporium. Mr Musk himself has done it, too: Starlink was initially a way to fill up SpaceX’s workhorse rocket, the Falcon 9, when external custom could not keep up with its billowing launch capacity.

He is also spurring competition. Blue Origin, founded by Mr Bezos two years before SpaceX, is working on its own re-usable rocket. Both it and Amazon have plans for their own satellite constellations to rival Starlink. In December a private Chinese challenger, LandSpace, test-launched a re-usable rocket; another Chinese company, called Space Pioneer, tried in April.

If anyone has earned the right to aspire to seemingly unattainable engineering goals it is Mr Musk. The financial risks—and the control he demands—are another matter. No other firm has tried to use public markets to raise as much as SpaceX will. NTT in Japan and Saudi Aramco were partial privatisations of state-owned assets. The nearest private-sector competitor, Alibaba in 2014, raised a third of what SpaceX wants.

SpaceX could, like any capitalist enterprise, crash and burn. Its valuation—as much as 100 times annual revenue—compares with 16 for Tesla. Mr Musk has a record of creating lots of shareholder value but little cash. SpaceX is on the hook for the lossmaking xAI, and his social network, X, with which it merged earlier this year.

And by giving him and other insiders special shares to elect directors, SpaceX’s structure makes Mr Musk unsackable. Investors are therefore saddled with his future business decisions as well as his obnoxious politics. He may face a backlash under the next Democratic administration for his racism and the ravages of DOGE under Donald Trump.

The thing is that Mr Musk comes as a package. He has needed a galactic ego and a cosmic appetite for risk to succeed—as did Henry Ford and J.P. Morgan before him. SpaceX is an imperfect company and Mr Musk an imperfect man. The marvel of capitalism is that it can harness their talents to create something extraordinary. While his investors take the risk, the rest of humanity can strap in for the ride. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

MAGAnomics shows the world what not to do. But also what America keeps getting right

American growth could be even better MAGAnomics shows the world what not to do. But also what America keeps getting right May 21st 2026 Yet again, America’s economy has shown up the rest of the world. For all the chaos of the past year, its GDP has chugged along merrily at 2% annual growth. True, that is hardly a blockbuster pace and—like everywhere else—consumers in America are grumbling about high prices. But Uncle Sam’s peers are doing much worse. In Britain, France, Germany and Japan economic growth ranges from roughly zero to about 1%. America’s outperformance began decades ago, but in the 2020s it has become vast. And it is likely to last. The latest IMF forecasts show American growth besting the rest all the way to 2030 and beyond.

Perhaps that makes this an odd time to look at what America gets wrong . But remarkably, its world-beating performance has lately come despite a handicap: Donald Trump’s erratic and harmful policies. Our analysis suggests that what we call the “MAGA tax”—a toxic mix of high tariffs, zero net migration and all-encompassing policy uncertainty—shaved around three-quarters of a percentage point off the rise in American GDP in 2025. That holds lessons for America and other countries desperate for growth.

America was teed up for a strong year when Mr Trump took charge in early 2025. Its robust economy should have been supercharged, especially by the boom in artificial intelligence and its consequences for the stockmarket. Instead, growth since then has been solid but, by American standards, unremarkable.

Indeed, outside AI-related sectors, policy uncertainty has pushed American business investment into a slump worse than Britain’s after the vote on Brexit. See-sawing tariffs and hostility to immigration, even for skilled workers, have also weighed on the economy. Without this MAGA tax, growth could have been closer to 3% in 2025, not the 2% America got. The damage will continue this year, and probably worsen now that higher oil prices from Mr Trump’s war with Iran are also a burden. In other words, the president’s folly has slowed down a historic boom.

One lesson from this is to marvel at America’s dynamism and resilience, even in the face of Mr Trump’s vexing behaviour. Many of America’s advantages are hard to emulate. The country’s continental scale, single language, natural-resource wealth and the fiscal space that comes from issuing the world’s safe asset give it a unique economic advantage over Europe. America’s federalism is helpful, too. Misguided policies at the state level—like data-centre moratoriums or proposed wealth taxes—do not encumber the whole country. People and businesses can move to a different state.

But America also shows just how much other rich countries are failing to live up to their economic potential. Much of the recent heightening of America’s advantage stems from its tolerance of disruption. America’s shale-fracking revolution and liquefied natural gas exports have reshaped global energy markets and made its economy more able to withstand the effects of Mr Trump’s war in the Middle East. Its embrace of AI data centres presages a shake-up of labour markets which, though fraught, could propel its living standards still higher.

Unlike its peers, America has built, says Mario Draghi, Europe’s growth czar, “an economy capable of preserving its growth from the disruptions it contributes to”. Other rich countries, by contrast, are held back by conservative regulations, distrust of the financial industry and risk-aversion. They lose because they simply cannot build new industries so fast.

Yet another conclusion is that America should raise its ambitions still further. Imagine how astounding its economy would be without the drag of the MAGA tax. For Democrats, that question may soon stop being hypothetical. The party is still wrestling with what of Mr Trump’s agenda to keep and what to discard, should it win back the White House in 2028.

Politically, rolling back tariffs may be tricky. Beneficiaries of protection will squeal and besides, many on the left have long been wary of free trade. Similarly, some Democrats now wonder aloud whether Mr Trump’s penchant for bullying companies that displease him could be turned towards progressive ends, such as restricting lay-offs.

Be patient, say MAGA types; their policies will eventually yield benefits. In fact the misguided policies, if they endure, are likely to exact a bigger price over time. America is becoming less attractive to high-skilled migrants who make large contributions to its dynamism; more vulnerable to a bond-market crisis as its debts mount; and more tolerant of corruption . Mr Trump’s style of government, if it lasts, will eventually sap the foundations that have made America so rich, by threatening the rule of law and encouraging firms to put lobbying for favours before innovation and the sound allocation of capital.

Since the MAGA tax inflicts great harm, unwinding it promises great benefits. Whoever succeeds Mr Trump should seize that opportunity. Economic growth is not a political cure-all—if it were then Kamala Harris, campaigning in a year with growth of 2.8%, would be president. But Democrats and Mr Trump’s Republican successors will struggle to win voters’ affections without raising living standards, as only fast growth paired with low inflation can. Listening to economists’ advice is unfashionable these days, but there is a free lunch here and America’s next leaders would be foolish not to tuck in.

The dangers of misreading MAGAnomics are even greater abroad. Populists everywhere have looked at America and been emboldened by the enticing conclusion that protectionism and industrial policy may be less harmful than free-market economists supposed. Claudia Sheinbaum in Mexico, the National Rally in France and Nigel Farage in Britain are all proposing to copy parts of Trumpist economics. Interventionism is in vogue; the barriers to trade and migration are rising. Even enemies of Trumpism increasingly answer it with a leftist statism of their own. Yet, if America has been dented by the MAGA tax, those policies would knock other countries sideways. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Mark Rutte is wrong to quash talk of one. The risks of the alliance unravelling are too great to ignore

Why NATO needs a Plan B Mark Rutte is wrong to quash talk of one. The risks of the alliance unravelling are too great to ignore May 21st 2026 THE FATAL flaw in a commander, suggested Carl von Clausewitz, a 19th-century Prussian general, is obstinacy, or “resistance against our better judgment”. For a modern example of this behaviour, look no further than Mark Rutte, the secretary-general of NATO.

For months Mr Rutte has refused to admit that the transatlantic alliance, the cornerstone of European security for more than seven decades, is close to falling apart. That has required wilful blindness.

Mr Rutte ignores Donald Trump’s repeated statements casting doubt on America’s readiness to honour NATO’s Article 5, which says that an attack on one is an attack on all. Mr Trump also talks about withdrawing some forces from Europe. Nonetheless, Mr Rutte, a former Dutch prime minister, has gamely insisted that he has no doubt America is “completely committed to NATO, completely committed to Article 5”. He maintains NATO has no need for a “Plan B” in case America were suddenly to pull out of the alliance. He has even banned any discussion of one within the NATO headquarters. On all of these counts, he is wrong.

In Mr Rutte’s defence, he is being diplomatic. Striving to keep America in the alliance, he has flattered Mr Trump, endured his tirades and called him “daddy”. Mr Rutte fears that Europe’s attempts to wean itself off America’s security guarantees may further offend its capricious president, and hasten the divorce that the rest of NATO wishes to avoid.

Other European leaders also resort to flattery and try to appeal to Mr Trump’s dealmaking instincts by spending billions on American weapons , many of which are to be sent to Ukraine. In some cases, they have little choice. For instance, Europe has few alternatives to America’s Patriot air-defence systems.

Even thinking about a Plan B is enough to give generals the collywobbles. Much of NATO’s deterrence comes from its ability to knit the armed forces of many countries into a single cohesive force under a unified command led by an American general. Without the superpower to keep good order, the rump of the alliance may be weakened by rows about who should be in charge—and doubts over whether they would actually have the authority to call the shots if Europe found itself at war.

Yet for all the risks of Europe openly planning for a divorce, it has no choice. Mr Rutte’s optimism has been overtaken by events. Mr Trump’s threats in January to seize Greenland from Denmark, a NATO member, have spurred several European countries to begin secretly planning how to fight without America . Since then, Mr Trump has undermined his officials’ reassurances that the drawdown will be slow and orderly, as Europe takes responsibility for its own conventional defence. He has also announced unexpected cuts to the number of troops stationed in Europe and cancelled the deployment of others. On May 22nd America was expected to reduce the forces it pledges to send to Europe in a war. Its allies cannot be sure they will get the weapons they have bought from America, which is postponing deliveries in order to restock those used up in Iran.

Renovating the American-led alliance will be hard and costly: all the more reason to start now. Europe could Europeanise NATO’s structures; it could form a new alliance; or it could build on embryonic ones, such as the ten-member Joint Expeditionary Force, led by Britain, or the “coalition of the willing” that plans to offer security guarantees to Ukraine. Each would be risky—but less risky than doing nothing. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The latest epidemic in central Africa is a warning about future pandemics

How to stop the Ebola outbreak The latest epidemic in central Africa is a warning about future pandemics May 21st 2026 EBOLA IS A terrifying virus that kills 30-50% of the people it infects. Fortunately, the world has been getting better at fighting it. Since 2015 vaccines for Zaire, the most common Ebola strain, have limited its spread whenever hotspots emerged in Africa. Genetic sequencing of that strain has allowed rapid testing, which makes contact-tracing easier. African governments, helped by NGOs, have learned how to triage and isolate patients. Crucially, they have also won the trust of locals, who are horrified by haemorrhagic fevers.

But the latest Ebola outbreak is caused by a rarer strain, Bundibugyo, for which there is no licensed vaccine or rapid test. For months it swept undetected through eastern Congo. Aid cuts meant fewer health workers were watching out.

On May 17th the UN’s World Health Organisation (WHO) called the outbreak a public-health emergency of international concern . By May 20th the tally of almost 600 suspected cases and 139 deaths was suggesting that this epidemic will be the worst Ebola emergency since at least 2018, when more than 2,000 people died in the same region. To avoid such a grim death toll—let alone that of 2014-16, when 11,000 perished in west Africa—urgent, co-ordinated action is needed. So far it has been lacking.

To win this fight, scientists need incentives to swiftly make and deploy a vaccine. Donors, especially governments in the rich world, should promise now to buy ample supplies of a vaccine as soon as it is authorised, to encourage drug firms to work faster. On May 20th the WHO said two vaccines are being developed that show promise against the Bundibugyo strain. Although it will be months before either jab is ready, such efforts should be the priority.

Even with a vaccine, stopping Ebola requires co-ordination in different countries. In the past America, through its Centres for Disease Control and Prevention (CDC) and aid spending, would have led this effort. Despite severe cuts under the Trump administration, the CDC still has field offices in Congo and neighbouring Uganda, so it will play a role. But the most important institutions will be the WHO and Africa CDC, which is independent of its American namesake. Africa CDC did well during the covid-19 pandemic and can do so again if given enough outside expertise and funding. Humanitarian NGOs reduced their Ebola-prevention measures last year in Ituri, the province where the outbreak emerged, because of aid cuts. They urgently need funds to pay for protective gear and to recruit more health workers.

All this is made much harder by local politics. Eastern Congo is an ideal place for an epidemic to thrive. The state barely exists, and is often predatory where it does. More than 100 militias terrorise the population. Much of North and South Kivu, two provinces where Ebola has been detected, is under the control of an armed group, M23, that says it wants to topple Congo’s national government. Both the government and the militias have a sorry record of prioritising their own interests above the lives of their compatriots. M23 has resisted calls by NGOs to reopen airports in its territory to let in humanitarian supplies; it accuses the Congolese government of making things worse by keeping banks closed. Mediators, including America and Qatar, should tell both sides to let in supplies and workers; they should also press Rwanda, M23’s patron.

This is Congo’s 17th Ebola outbreak in 50 years. It will destroy both lives and livelihoods before it is contained. Fortunately, the virus is not airborne, so it cannot spread as fast as covid-19. Even so, it is a reminder of the need to prepare for the next pandemic. Vaccine research, the genomic sequencing of viruses and disease surveillance are the world’s immune system, protecting it against wider, deadlier outbreaks. When that immunity is weakened, disaster beckons. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

How a deflated country can bounce back

Lessons from the Premier League for Britain’s next premier How a deflated country can bounce back May 21st 2026 If Britain were a football team, it would be flirting with relegation. Its economy is flailing, its people are demoralised and another embarrassing crisis is unfolding at the top. Happily, one British industry provides a game plan for recovery. Forty years ago, English football was a laughing stock. Today, it is a global powerhouse . As we report this week, the Premier League is the most-watched sports competition on the planet and generates £10bn ($13bn) in gross value added a year . Politicians who want to make Britain great again could do worse than learn from the Premier League.

One lesson is to play to your strengths. Britain invented football. It is also attractive to footloose capital and talent. The Premier League takes advantage of this, welcoming foreign investors to buy clubs and foreign coaches and players to make them excellent. It is far more open than its rivals. Openness has fallen out of fashion, but Sir Keir Starmer should know as an Arsenal fan—celebrating his team’s league title this week—that unpopular tactics can work best. His government has adopted the opposite strategy, cutting work visas and keeping taxes hostile to rich foreigners. In footballing terms, he’s got the formation all wrong.

Another lesson is to embrace competition. The Premier League is one of the world’s greatest experiments in self-regulation, a case study of the value of ruthless rivalry and the free flow of cash. Yet a foolish cross-party decision to impose an independent football regulator passed into law last summer. English football is no stranger to cheating, from financial doping to a spying scandal at Southampton. But such cases are best dealt with in-house. If the regulator, as feared, puts up hurdles to investment, it would typify Sir Keir’s failure to grasp what made the Premier League (and Britain) strong.

Whoever next leads Labour will hear plenty of voices favouring fiddlier rules and greater suspicion of foreign capital. If it is to be Andy Burnham, Manchester’s mayor and the current favourite to unseat Sir Keir, he ought to visit his own constituents in East Manchester—a place transformed by the Emirati investors who took a liking to Manchester City. Britain desperately needs inward investment. The Premier League’s formula of globalised, caution-to-the-wind capitalism is the best way to attract it. Not the nosy managerialism of the Labour left which, like a video assistant referee (VAR), only slows down the action and spoils the fun.

Last, Labour should strive for stability at the top, but not at all costs. The worst clubs get through managers almost as fast as Britain does prime ministers. The best have the longest-serving bosses. If Tottenham Hotspur’s awful season holds any lessons, it is that sticking too long with a bad choice is a losing strategy.

Britain seems likely to avoid that mistake. Having lost the dressing room and the fans, Sir Keir is bound to be given the boot. Unfortunately, Britain cannot scout the world to find a brilliant new boss. Instead, it must pick a new prime minister from among the 400 or so Labour MPs. None of them could be mistaken for Pep Guardiola and some of them think the ideal game plan is to put everyone on the left wing and hope for the best.

Britain needs a better communicator in the national dugout. Sir Keir hates giving pep talks and loathes the word “vision”. He has a tendency to grumble about how hard his job is. His successor should instil a new sense of belief in a country prone to pessimism. English football’s renaissance from mockable mediocrity to global dominance shows that a comeback is always on. It may be too late for Sir Keir, but not for Britain. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

It is not here yet. But governments should lay a safety-net

Prepare for an AI jobs apocalypse It is not here yet. But governments should lay a safety-net May 14th 2026 The launch of ChatGPT in 2022 ignited the artificial-intelligence boom—and elicited a chorus of warnings from AI bosses of an impending jobs apocalypse. Never mind that they have reason to talk up the disruptiveness of their products, or that rich-world employment is near all-time highs—the dark message has landed. Seven in ten Americans think AI will make it harder for people to find work; nearly a third fear for their own jobs. A dearth of openings for college graduates—especially computer programmers—amplifies the dread.

The past offers some solace for the anxious. Labour markets constantly change. Today’s offices would be unrecognisable to a worker from 50 years ago. Never in modern history has technological progress hurt the overall demand for human labour . Economic historians now play down the magnitude of “Engels’ pause”, the period during the Industrial Revolution in which working-class wages grew more slowly than the wider economy.

Yet history is not always a good guide to the future, as the Industrial Revolution itself showed. The top AI models are awesome. They can tackle much more complex coding tasks than people were predicting a year ago. The number of AI agents has exploded. Spending on AI by businesses is up dramatically. Annualised recurring revenue of Anthropic, a hot model-maker, is set to reach $50bn by the end of June. There is no evidence yet in the labour-market data of AI destroying many jobs. But given how fast it is improving, it would be rash to dismiss fears that it will. Society may be on the verge of a profound reallocation of resources, and political upheaval.

Economists’ prediction that work will stay plentiful is less reassuring than it looks, especially over a long horizon. Though the market will find uses for human labour even as models and robots become more capable, the quality of those jobs and the wages they pay are not guaranteed. Data centres will account for 8.5% of America’s peak power demand in 2027, up from 4.1% in 2025, predicts Goldman Sachs, a bank. As AI firms bid up the price of land and energy, the dollars people earn will go less far. Eventually humans could, like horses in the age of the car, become uneconomical. Income may go mostly or entirely to owners of capital, who then go on to spend it on things that are made by AI and robots using natural resources that they monopolise.

This dystopian possibility is behind Silicon Valley’s admonitions that state intervention, and perhaps a universal basic income, will be necessary. That remains a long way off, if it ever happens. But governments may have to act sooner, for you do not need a cataclysm to stoke popular fury. Perhaps 2m Americans lost their jobs between 1999 and 2011 owing to China’s entry into the global trading system. That is no worse than a typical month’s lay-offs in America’s churning labour market. Yet the “China shock” helped propel Donald Trump to office and led to the highest tariffs since the 1930s.

The white-collar employees threatened by AI have more political and social clout than factory workers hurt by Chinese competition. Even a small number of lay-offs could provoke a backlash against the technology; furious opposition to new data centres is a hint of what may be to come. Severe disruption to the security and status of many people could lead to widespread unrest, even revolution.

What should governments do? One set of ideas involves slowing down change. China has urged its companies to adopt AI, but not to lay off workers. Prominent economists around the world have proposed higher taxes on capital and lower ones on labour. Some campaigners want levies on data centres. Inhibiting technology is not, however, a wise path to choose. Humanity is likely to reap enormous benefits from AI: not just greater wealth, but progress fighting diseases and solving problems such as climate change and poverty. Had the Luddites stopped the automation of textile mills in early 19th-century England, the world would be far worse off today.

A second category of countermeasures would be better. If employment falls, income that once went to workers is likely to show up as high profits in AI firms, chipmakers, data centres or elsewhere in the supply chain. Clever tax reforms, such as levies on corporate profits that are above a normal return on capital, on land and on natural resources, could capture these rents. The case for inheritance taxes to prevent the entrenchment of a capital-owning elite looks even stronger than before.

At the same time governments could help workers adjust. Public wage-insurance, which smooths out falls in income after job losses, can help workers find better opportunities (and so can eventually pay for itself). Denmark’s active labour-market policies, in which the state helps people find and train for new occupations, have been proved to cut spells in unemployment.

These ideas would make the economy more efficient and fairer regardless of AI. Would they satisfy voters facing disruption and uncertainty? In a populist era technocratic reforms are a hard sell. Past efforts to help workers adjust to trade liberalisation failed to stop the “China shock” backlash. In an all-AI workforce, humans will need help surviving, not adjusting.

Hence a last set of radical ideas, such as the partial nationalisation of AI firms. This week a South Korean presidential adviser floated a citizens’ “dividend” from AI businesses, sending the local stockmarket down by 5%, before backtracking. In America politicians murmur about giving citizens shares in AI companies via “Trump accounts”. In economic terms there is little difference between a well-designed tax system and a government stake in the private sector—and countries without AI giants will have to rely on taxes rather than seizing shares in foreign companies. But America may find that some public ownership is the best way to make the social upside from the technology transparent.

Concentrations of rent must be confronted early, before the power of rentiers is too great. The jobs apocalypse is not yet here. But if governments wait for conclusive evidence before creating a safety-net, it will be too late. Better to start now. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Britain is not ungovernable—it just needs better governance

Sir Keir Starmer has failed abjectly. He should go Britain is not ungovernable—it just needs better governance May 14th 2026 LESS THAN two years ago Sir Keir Starmer was elected promising to save Britain from populism. As with Emmanuel Macron in France and Friedrich Merz in Germany, his mission was to show that the fruits of sober, competent policymaking are worth more than the empty promises of demagogues.

This week it became clear how abjectly Sir Keir has failed. A drubbing for Labour in elections for councils in England and parliaments in Scotland and Wales on May 7th has sparked a revolt in the parliamentary party. As we went to press, the prime minister was about to face at least one serious challenger for his job. It would be in Britain’s interest for him to go.

The moral for some who look at the miserable polling of Messrs Macron, Merz and Starmer—all decent men—is that European social democracies have become ungovernable. Caught between low growth, high taxes and borrowing and the demand for more public spending, exhausted centrists seem incapable of bringing about change or seeing off the populist challenge from the right and the left. Nowhere more so than in post-Brexit Britain, which, with five heads of government in six years, has got through prime ministers almost as fast as Chelsea has replaced its managers. Larry, Number 10’s chief mouser, has become a furry beacon of stability.

Yet Britain is not ungovernable . Sir Keir blames his problems on everybody else, but they should really be put down to that unfashionable quality in politics: “character”. The counsel of despair which says Britain should cling to a lame duck for fear of something worse is a formula for the populist insurgency safety-minded centrists most want to avoid.

It is true that the prime minister has had a lot on his plate. Real wages in Britain have barely grown over 20 years. The departure from the European Union and its $18trn single market has lowered Britain’s GDP per person by between 4% and 8%, some studies say. Governments terrified of angering NIMBYs have failed to deal with a chronic lack of productivity growth. Between 2008 and 2023 output per hour worked increased by 21% for American workers. In Britain it grew by a miserly 7%. Battered by Brexit, Liz Truss’s premiership and soaring energy prices, Britain’s government bonds have the highest yields in the G7.

Politics has compounded Sir Keir’s problems. Perversely, Labour’s huge, 165-seat parliamentary majority has turned out to be a source of instability. As we have argued, when several parties have similar levels of support in a first-past-the-post electoral system, small changes in the share of votes lead to wild swings in the number of seats parties can expect to win. As Labour’s popularity has ebbed, many of its fainthearted MPs are tempted to rebel by the prospect of losing their jobs.

However, as that all-conquering parliamentary majority also attests, Sir Keir had a chance to make a better fist of governing. Britain’s institutions still function. Relations with Europe, for so long a drag on the economy, are now an opportunity for growth. So too, as Labour rightly spotted, are cutting red tape in planning and curbing unsustainable welfare.

Other countries, such as Australia, Canada and Norway, have faced headwinds and yet centrist parties there have survived and even thrived. A large part of the reason Britain has not joined them is Sir Keir himself. Even before he took power, he pinned his government down with manifesto commitments not to raise income taxes or VAT. His half-baked reforms were painful enough to alarm voters but too small to have a meaningful effect on the economy. The big stuff never materialised: no big tax reset, no brave welfare reform, no ambitious rapprochement with the EU. He talked about speeding up planning, but wavered as soon as he hit resistance.

Prime ministers need authority and clarity. Sir Keir, it turns out, has neither. He cannot articulate a vision. Nor is he grounded in one. Twenty-first century policymaking is so complicated that voters want to be able to trust that the prime minister has the instincts to appoint the right people, weigh the evidence and make sensible decisions. Yet voters have sniffed out what Sir Keir is made of. A YouGov poll since this month’s elections finds that only 29% of them want him to stay in office. Panicky Labour MPs have become a rabble.

Jettisoning a prime minister carries risks. As the Conservatives showed, it is habit-forming . Labour could tack to the left, causing a panic in bond markets. If it learns the wrong lessons, a change in personnel alone could set Britain on an even worse path.

And yet the risks of Sir Keir staying on are greater—as the country could find if he sees off his challengers until the next crisis or the one after that. As a prime minister surviving against the will of many of his MPs, he too would be dragged left. In any case, whoever is prime minister, the scope for foolish left-wing policies will be limited by the bond markets, which have British borrowing on a tight leash. Labour leaders understand their party and the country need growth. A more important attribute today is the political skill to set that as a direction for the country and defend it. The promise of a leadership contest is that it will draw out the candidates who best meet that test.

Two paths now lie ahead: a chance of renewal or downward spiralling. Whoever takes over from Sir Keir will inherit an enviable majority, three more years in office and a loyal cat. The country’s problems are fixable. British assets are cheap. Voters want change. True, Labour could succumb to more infighting, but this could also be the rock-bottom moment.

The alternative is dark. This weekend, a large crowd is expected in London’s streets for Tommy Robinson, an agitator who talks of resisting an “Islamic invasion”. Britain’s deserved reputation as a tolerant, multicultural success story is showing cracks. Episodes of bigotry are growing, from antisemitism in the name of “Free Palestine” to Muslim-bashing in the name of “save British values”. If the centre does not hold, the snake-oil sellers will win the next general election. That might really make Britain ungovernable. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

The present tranquility will not last

Oil prices could soon rise convulsively The present tranquility will not last May 14th 2026 THE LARGEST supply shock in petroleum history is getting larger fast. Some 2bn barrels, or 5% of the world’s yearly oil supply, have already been lost because the Strait of Hormuz is shut. Every day it remains closed the deficit grows by 14m barrels. Since peace talks between America and Iran have stalled, a reopening still seems many days away.

Yet oil markets look strangely calm. Brent crude futures, at $105 a barrel, have fallen from April highs of nearly $120. They remain below the peak of $129 in 2022, after Russia invaded Ukraine. Spot prices have slid even more, implying that crude oil is more plentiful than it was earlier in the war. The surprising mini-glut is real—but do not take too much comfort from it. A full-blown energy disaster may be weeks away.

Two unlikely saviours are shielding the world from catastrophe. One is America. Its exports of crude and refined products, net of imports, have surged to 9m barrels per day (b/d)—nearly 4m b/d above the level at the same time last year. That reflects the agility of America’s energy firms, which have harnessed their stocks, refineries and terminals to serve more high-paying customers abroad. It also confirms the usefulness of America’s Strategic Petroleum Reserve, which the government began tapping in March. These extra barrels allowed shipments abroad to rise without crimping domestic supply.

The second accidental hero is China, which is importing 4.5m b/d less crude than a year ago. This reflects weaker consumer demand for dearer fuel. It also follows from the government’s decisions. Early in the war it banned refiners from exporting products and authorised them to draw on stocks. This reduced refineries’ demand for foreign oil.

This, plus demand-destroying rationing in poor countries, explains the placidity of crude markets. Yet if Hormuz stays closed, a storm will come—and then governments must avoid policies that make it more destructive.

The world entered the war with oil stocks close to ten-year highs. As importers draw on reserves to offset lost Gulf supply, those could become emptier than ever by June. A buffer of near-record volumes of oil at sea—made available, in part, by higher Gulf exports before the war—has now largely been exhausted. Even American and Chinese national reserves will not last for ever, let alone the thin stocks of poor countries.

Soon, therefore, private stocks in the rich world will start being bled. Prices could then rise convulsively—reflecting both the low absolute level of inventories and their geographically uneven distribution. Refined products will be hit first. Trapped Gulf exports and cuts to refinery output elsewhere have already drained diesel, petrol and jet-fuel reserves, driving prices up far faster than crude’s. As stocks vanish, prices will have to rise still more to balance demand and supply.

The shock will intensify if China starts buying more crude. With nearly 1.2bn barrels in reserve it may, in theory, shun expensive imports for months. But it will also want to preserve a buffer, so it may return to the market.

The other risk is that Donald Trump loses his nerve. He and other America First populists will bridle at exports that soar while domestic stocks dwindle—especially if this pushes petrol above $5 a gallon. In 2022 such price rises hurt both drivers’ pockets and Joe Biden’s approval ratings as president. Mr Trump’s administration is already debating a possible export ban. Were it to enforce one, global prices would rise fast. America’s coasts, which rely on imports, would be hurt by higher import prices and any retaliation from other exporters. Its refiners, seeing margins crushed, would cut output.

The world economy has found some calm in the eye of the energy storm. But it is far from harbour. A reckless decision by America could all too easily capsize it. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Prabowo Subianto is eroding its finances—and its democracy

Indonesia, the biggest Muslim-majority country, is on a risky path Prabowo Subianto is eroding its finances—and its democracy May 14th 2026 Indonesia’s president, Prabowo Subianto, has seen his country explode before. It was in 1998, during the Asian financial crisis. Then, an economic collapse led to mass protests and the toppling of Mr Prabowo’s father-in-law, Suharto, a notoriously corrupt dictator. It also cast Mr Prabowo, who had hoped to succeed Suharto, into the political wilderness. It took him a quarter of a century to claw his way back, finally winning the top job in 2024. So you might think he would be extremely wary of another fiscal crisis. You would be wrong.

The leader of the world’s biggest Muslim-majority country has centralised power and surrounded himself with a flock of flatterers. He dumped a respected finance minister and replaced her with Purbaya Yudhi Sadewa, who has called the IMF “stupid” and who told The Economist in April that the president need not worry about “developments in the global economy [or] in the global oil price”. Indonesian businessfolk are scared to speak out, perhaps because Mr Prabowo is a thin-skinned former general with a sketchy human-rights record, or perhaps because he has recently been bullying big business.

Mr Prabowo appears to be insulating himself from reality . So he may not listen to sober advice. Nonetheless, here is some. His pet projects are unaffordable. Before the Iran war, spending a projected 10% of the budget on just two of them—free school meals and a network of 80,000 village co-operatives—was merely wasteful. Now, the energy crunch has wiped out any room for error. Mr Prabowo must change course or risk a crisis.

He must cut spending on his pet projects, or on Indonesia’s colossal fossil-fuel subsidies, or break a law that caps the budget deficit at 3% of GDP. Each option comes with risks. To cut his pet boondoggles would make him look weak. To let energy prices rise would invite unrest. So Mr Prabowo may take the third path: letting the deficit breach its legal limit.

That would be a mistake. True, the 3% limit is an arbitrary figure copy-and-pasted from Europe’s Maastricht treaty. But since the crisis of 1998 it has signalled that Indonesia’s government is serious about fiscal discipline. Now investors are jumpy. Interest payments as a share of government revenue are surging. Credit-rating agencies are eyeing a downgrade. On Mr Prabowo’s watch, $6bn in foreign capital has fled and the rupiah has sagged by 11% against the dollar to a record low. Busting the budget cap would push borrowing costs higher.

Even as he makes the economy more precarious, Mr Prabowo is eroding Indonesian democracy. Legislative opposition has been all but neutered, and proposals to end direct elections for provincial governors do not bode well. Civil society is intimidated. There are few avenues for dissent, and little creative struggle between competing ideas. Far too much depends on the instincts of a single, badly advised ex-soldier.

He needs to hear unpalatable truths. Yes, cheap fuel is popular. But it encourages consumption at a time of shortages. Yes, people like free school lunches. But giving them to everyone is wasteful. Wiser to focus on pregnant mothers and toddlers in poor families, who need better nutrition to avoid stunting. Yes, Indonesian farmers were being ripped off by middlemen when buying fertiliser. But there are cheaper ways to tackle this than creating those 80,000 village co-operatives, which are likely to be graft-prone. And yes, the 3% deficit limit could well be lifted some day. But first Mr Prabowo must convince markets that Indonesia’s finances are in safe hands.

Indonesia has made great advances in the past quarter-century. Under a succession of reasonably pragmatic governments, income per person has more than doubled and democracy has put down roots. Mr Prabowo is not a kleptocratic despot like his late father-in-law, but he is chipping away at the progress his country has made since the bad old days.

The president must stop trying to squelch opposition in the legislature, media and civil society. Dissent that cannot find an outlet in politics will spill onto the streets, as it did during riots last year. His insistence that opposition should be “polite” is a recipe for it one day turning violent.

There is hope. Mr Prabowo cares about his legacy. So he needs to realise that a huge, sprawling multi-ethnic archipelago like Indonesia cannot simply be given orders as if it were an army unit. It needs a commander-in-chief who listens to many voices, rather than surrounding himself with yes-men. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Medicine has neglected mammary glands for too long

Mothers who cannot breastfeed have been given terrible advice Medicine has neglected mammary glands for too long May 14th 2026 MEDICINE IS A neatly sorted discipline. From head to toe, all major parts of the body have a specialism: cardiology for the heart, urology for (male) genitals, neurology for the brain, even psychiatry for the embodied mind. All, that is, but one. Mammary glands, though possessed by one half of humanity and admired by the other, lack a dedicated field. Science, too, has neglected the body’s milk-making function. This lack of “lactology” is bad for infants and mothers.

More than 130m women give birth each year. Of the nearly 2bn women and girls alive today who have not yet done so, over 90% can expect to have a child at some point. Most mothers try to breastfeed, but two in five of those who do will encounter at least some problems. For some it hurts, like being bitten by a critter you can’t swat away. For others, producing enough milk to feed their baby proves impossible. And often, the advice they receive is both painful and useless. Yet despite the vast unmet demand for better advice and treatment, scandalously little is known about the subject.

A search for “low milk supply” or “low milk production” returns a meagre 14,000 academic papers on PubMed, a database of 40m medical-research papers. “Erectile dysfunction”, which afflicts perhaps 300m men (mostly minimally), elicits 32,000 studies. This neglect matters. Mothers are free to choose not to breastfeed. But most want to try, because the benefits for their babies, such as helping ward off infections, are large. A study in the Lancet, a medical journal, in 2016 found that if all babies were breastfed, 823,000 deaths of children under five would be averted each year, partly because in poor countries formula is often made with dirty water.

Understanding why some women give up, and what can be done to reduce their number, is therefore of immense value. Instead, doctors often dismiss their problems, offer dubious guesswork as advice or tell mothers to switch to formula. In parts of Europe between 20% and 40% of newborns are fed powdered milk before leaving the hospital. Pregnancy care in some places scarcely mentions breastfeeding, perhaps on the assumption that it will be easy because it is natural. So is childbirth, but that does not make obstetricians redundant. The gap left by medicine is filled by non-physicians on breastfeeding helplines and “lactation consultants” who in the absence of hard facts often base their counsel on hunches.

A better understanding of breasts would allow doctors to make important distinctions. Some mothers produce enough milk but have trouble releasing it. For them, the answer may be to stimulate the flow by putting the baby to a nipple more often, or by using a breastpump. For mothers who cannot produce enough, different approaches are needed. For years doctors assumed this problem was rare: that no more than 5% of mothers suffered from inadequate milk supply.

Recent research, by scientists who have bothered to look, suggests that the true figure is closer to 10% or even 20% . The causes of low milk supply are often linked to complicated biological pathways beyond a new mother’s control, as we explore in our “Weekend Intelligence” podcast. Some are genetic. Others may involve conditions like obesity, diabetes or autoimmune disorders, which expectant women cannot just wish away by willpower alone.

Mothers grappling with such problems deserve a rigorous diagnosis and proven treatment from a specialist medical lactologist. Instead the standard advice is to tether themselves to a breastpump at least eight times a day and all will be fine—though such a brutal regimen is not grounded in any research. When all is not fine, women are often made to feel that the fault is theirs for a lack of effort. In fact, they have not failed their children. Rather, medicine has failed them. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

But to end Congo’s terrible war, America must remain neutral

Not all Donald Trump’s peacemaking boasts are empty But to end Congo’s terrible war, America must remain neutral May 14th 2026 When Donald Trump boasts about all the wars he has supposedly ended, he often mentions one in central Africa. In December he brought together the leaders of Rwanda and the Democratic Republic of Congo, whose on-again, off-again conflict has been one of the continent’s bloodiest, and persuaded them to sign a peace deal called the Washington Accords. “They’ve spent a lot of time killing each other and they’re going to spend a lot of time hugging,” he said.

But there is still a lot more killing than hugging. Most of the 8m or so Congolese who have fled from their homes are too scared to return. Over the past year the battlefield has expanded in the eastern Congolese provinces of South and North Kivu, leading to hundreds more civilian deaths. As we report, M23, a Rwandan-backed rebel group that controls most of the region, is building a statelet there and is eager to cut its own deals with America .

To its credit, the Trump administration has tried to enforce the Washington Accords. In March it put sanctions on Rwanda’s armed forces to try to persuade Paul Kagame, Rwanda’s president, to reduce support for M23. Yet it seems unwilling to exert similar pressure on his Congolese counterpart, Félix Tshisekedi. Many locals fear that Mr Trump cares more about getting his hands on Congo’s abundant minerals than he does about peace.

Eastern Congo is as bewildering as it is blighted. The state’s authority barely exists. More than a hundred armed groups thrive in its absence. M23 is the strongest of them. It is led by Congolese Tutsis who say they want to topple the government in Kinshasa, Congo’s capital 1,500km away. It is also a tool used by Rwanda to create a buffer zone in Congo. Rwanda denies this, but also claims that any “defensive measures” it undertakes are justified because it is threatened by Congo—and by a militia known as FDLR whose origins go back to the ethnic Hutus who carried out the Rwandan genocide in 1994. The region’s minerals give everyone a lucrative extra reason to fight.

So it is too soon to celebrate the Washington Accords. But they are a good foundation to build on. They reaffirm previous commitments by Rwanda to stop supporting M23 and to respect Congo’s territory, and by Congo to end any support for FDLR and other armed groups that threaten Rwanda. Both sides have said they will make it easier for aid agencies to deliver humanitarian supplies in eastern Congo, which are desperately needed.

American sanctions on the Rwanda Defence Force (RDF) will influence Mr Kagame, who was once seen by Western governments as an enlightened autocrat with whom it was easy to do business. Having the RDF subject to similar restrictions as the armed forces of Iran and North Korea is not good for “Brand Rwanda”. And since Rwanda’s Ministry of Defence has huge interests in construction, agriculture and other sectors, the sanctions will also force foreign investors to rethink whether it is legally safe to do business in the country.

Pressing Rwanda is necessary to stop the war. But it is not sufficient, since M23 has a degree of autonomy. Talks between Congo and M23, brokered by Qatar with American support, have stalled. All parties to the discussions, including African governments, need to do more to persuade the sides to return to the table and agree on a ceasefire.

There is a risk that America is emboldening Mr Tshisekedi. When Mr Trump brokered the Washington Accords he also struck a “strategic partnership” with Congo. The upshot was that America would bolster Congo’s president in exchange for preferential access to minerals. America has intervened in Congolese politics in ways that benefit Mr Tshisekedi; last month it put sanctions on Joseph Kabila, a rival and former president, ostensibly for backing M23.

To some in the Trump administration, backing Mr Tshisekedi is sensible realpolitik. But, like miners digging without a plan, they risk the edifice crashing down on them eventually. America’s new deals with Congo are shockingly non-transparent—a criticism America once made of Congo’s dealings with China. Mr Tshisekedi became president with America’s endorsement in 2019 after a fraudulent election. So long as he cuts mining deals with Americans, he may think he can shirk his obligations under the accords.

America should disabuse him of that idea. The Trump administration has done more than any other foreign government to try to bring a measure of peace to this war-scorched part of Africa. It is right to be tough on Rwanda, whose support for M23 is the proximate cause of the conflict. But America now needs to ensure that it acts as an impartial mediator, rather than as a cheerleader for one side. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Mutual vulnerability is no substitute for global leadership

The Trump-Xi summit will expose a dysfunctional duo Mutual vulnerability is no substitute for global leadership May 7th 2026 IT IS SOMETIMES said, not least by President Donald Trump, that America and China are now the G2, a duo of superpowers leading the world. That is a grim thought. One has a leader who treats allies like patsies and is ripping apart the institutions that underpinned global stability for decades. The other has an authoritarian regime that bullies its neighbours and is quietly stoking foreign conflicts it could help defuse.

Worse, the two countries treat their mutual entanglements on technology and trade as security risks. So the stakes will be huge when Mr Trump visits Xi Jinping, China’s paramount leader, in Beijing on May 14th and 15th, the first of four expected meetings before the end of 2026. The coming six months could shape ties for years, with consequences from artificial intelligence (AI) to supply chains and Taiwan to Iran.

Tensions between the two governments run so deep that it would be naive to expect a breakthrough. Had they more skill and humility, Mr Trump and Mr Xi could head off the most harmful conflicts and find areas where they could work together for everyone’s benefit. It is unsettling that so much will come down to Mr Trump, who has veered between calling Mr Xi a dear friend and a foe. Mr Xi’s views are more settled, which is its own problem: he is convinced America is declining and that the world should bend to a rising China.

The talks in Beijing will focus on trade . For nearly a decade the countries have been locked in an on-again, off-again trade war. At the start of 2025 a full-blown rupture seemed inevitable as they jacked up tariffs on each other to more than 100%. Since then, they have lowered tariffs in what some call a truce, but is really a stalemate of mutual vulnerability. China can throttle global industry by choking off rare earths; America can wield devastating sanctions on high-tech goods and financial flows.

This stalemate is unstable. As America vies to break China’s grip on rare earths, China is backing semiconductor production and trying to free itself from the dollar. For now, a good result from the summit would be for the two to promise to be predictable. Mr Trump’s misplaced faith in tariffs makes cuts unrealistic, but holding them at current levels would at least let firms get on with business. The Americans want a Board of Trade to manage commerce between the two countries. That would be unwieldy and would do little to re-industrialise America. A mechanism for regular dialogue would be better.

An obvious risk is miscalculation. American trade officials are investigating industrial overcapacity and forced labour in China, which may be an excuse to impose higher tariffs within months. On May 2nd China deployed a “blocking measure” that threatens financial punishment against firms that comply with certain American sanctions. China has also threatened to go after companies that shift supply chains to other countries, precisely what America is urging. Beijing is thus setting up a test of compliance grounded not in law but power. Global executives must choose which government they fear more.

American negotiators have kept the summit’s lead-up focused on trade, not security. But the Chinese spot an opportunity in the American president’s unpredictability. They may be right. Just as Chinese advisers are afraid to contradict Mr Xi, so officials in the White House defer to Mr Trump on all things China, including Taiwan .

And it is there Mr Trump may think he can lower the temperature by going soft. Chinese officials hint that the more he bends on Taiwan, the more China will give on trade. They hope he might cut arms sales to the island or say he is against Taiwanese independence. He should not take the bait. It would be wrong to sell out a democratic partner and reckless to endanger the world’s essential chipmaker. Besides, the current arrangement works, even if Mr Xi would never admit it: Taiwan is prosperous, China ascendant, Asia mostly peaceful.

Moreover, the world faces other pressing security concerns. For America to attack Iran was a strategic blunder, and China has been content to let it reap what it has sown. China has now begun to dabble in diplomacy, meeting Iran’s foreign minister this week. It should press the Iranian regime to negotiate; or tempt it to give up its nuclear programme with the offer of security guarantees, but its allergy to foreign messes holds it back. And whatever moral high ground China thinks it holds on Iran is undercut by its role enabling Vladimir Putin to fight in Ukraine, by buying Russia’s gas and selling dual-use technology. Mr Trump should press Mr Xi to use his weight in Moscow to help end the Ukraine war. Instead, it will barely figure in their discussions.

True statesmen would also find much else to deal with. American and Chinese companies are at the frontier of AI. Their governments should therefore be leading on its risks, such as biosecurity . Climate, once a rare area of co-operation, will be a blind spot because the Trump administration shuns all policy on global warming. And joint work on pandemic prevention, once routine, has become fraught because China dislikes questions about whether the covid-19 virus leaked from a Wuhan laboratory.

The superpowers need not be friends to talk about all this. At the height of the cold war, America and the Soviet Union hammered out deals over nuclear arms, science in space, borders in Europe and cancer research. America’s commercial ties to China are far tighter than its ties to the Soviets ever were. Alas, the two leaders both think that co-operation is a trap in which rules could be foisted on them by the other side. That logic makes dominance the priority, not global public goods.

So the summit will probably yield little besides forced smiles. Such a lack of ambition is troubling. Advisers on both sides argue that at least they are talking, yet to sustain co-operation beyond the Trump administration, they need results. Instead, the only thing keeping America and China at the table is fear of the economic damage each can inflict on the other. The G2 is not leading the world so much as holding it to ransom. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

The BJP has beaten a bad ruler in West Bengal. But India must not become a de facto one-party state

Narendra Modi’s party is on a roll in India The BJP has beaten a bad ruler in West Bengal. But India must not become a de facto one-party state May 7th 2026 NO ONE SHOULD mourn the exit of Mamata Banerjee , ejected by voters in West Bengal, India’s fourth-most-populous state. For 15 years she presided over failure. Though the economy booms nationally, for the 100m people in her state it stagnates. An average Bengali now has an income just half of someone’s in Gujarat, the home of Narendra Modi, the prime minister. Just as bad were Ms Banerjee’s thuggish tendencies. She silenced critics and jailed opponents. Her party ran extortion rackets. Allegedly, its goons sometimes got away with rape. Businesses were forced to pay bungs for land and licences. No wonder many left.

In an ungracious last act, Ms Banerjee indicated she is refusing to step down, saying the other side cheated. She must go. Mr Modi’s Bharatiya Janata Party (BJP) won, and is set to run West Bengal for the first time. The vote was part of a wave that toppled incumbents in various states. In Kerala the communist rulers were sent packing. In Tamil Nadu an action-movie-star-turned-politician, the mononymous Vijay, swept away an old dynasty. All this is evidence that Indian democracy works, albeit imperfectly. Election results broadly reflect the voters’ will.

The results also confirm that Mr Modi’s party remains strong, despite electoral wobbles in the dozen years since he won national office. The BJP is better organised than its rivals. And it promotes ideology—mixing Hindu nationalism and promises of growth—far more skilfully. With allies, it now runs over two-thirds of India’s states and territories, home to 80% of its population. Even the once-hostile south is warming somewhat to the prime minister.

Nonetheless, there are reasons to worry. To keep democracy healthy, the BJP must keep its ambitions and tactics within bounds. At times it does not. Even if the final result in West Bengal was correct, some of Ms Banerjee’s complaints of unfairness are justified. The national government deployed almost a quarter of a million armed police to oversee voting there. A heavyhanded process of revising electoral rolls disfranchised millions of voters, many of whom got no chance to appeal. The Election Commission, which has been supervising this, is in theory an impartial referee. Under Mr Modi’s prime ministership, it looks increasingly supine.

Politics risks becoming narrower and uglier. Parties too often aim to split voters along religious lines. In both West Bengal and Assam the BJP won a big share of Hindu voters in part by stirring up fear of Muslims. The party may say that its opponents should try harder—they have largely failed to produce either credible leaders or a compelling response to its Hindu-nationalist agenda. Yet Mr Modi’s government has also hobbled them with criminal investigations, twisted party-financing rules in its own favour and co-opted much of the media.

Mr Modi will be tempted to ignore such criticisms. After all, his strident version of politics is working pretty well for him. But it is in tension with his other source of electoral success: a vibrant economy, bolstered by his own willingness to push through welcome reforms. That economic tailwind may now be dying. Rising energy costs will hurt consumers in the months ahead and could turn some of those voters against him. He may try to compensate by doubling down on divisiveness. Yet that would be bad for India—and perhaps for Mr Modi, too. The country’s long-term economic success depends on stability and the rule of law, both of which could be undermined by an overmighty and aggressive ruling party. In victory, Mr Modi should show restraint. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The threat from new pathogens is an even graver danger than AI-backed hackers

The world must stop AI from empowering bioterrorists The threat from new pathogens is an even graver danger than AI-backed hackers May 7th 2026 Artificial intelligence (AI) will soon add biology to its list of superhuman abilities. Anthropic’s Mythos model—already withheld from general release owing to its hacking skills—recently succeeded on a third of the most difficult data-crunching tasks pulled together by biology experts. Mythos could do things that were beyond all of the tested humans, such as reverse-engineering a cell type from raw DNA data.

As we report, problem-solving like that means AI may soon grant people extremely dangerous powers : to synthesise viruses, generate novel neurotoxins or assemble omnicidal “mirror life”. Such dangers are the dark side of AI’s wonderful promise to democratise intelligence. It is even conceivable that an AI could give a misanthropic loner the power to end humanity.

Biosecurity risks are thus far worse than cyber-security ones. If one engineered virus may cause billions of deaths, humanity has no room to learn from mistakes. There may be no “defender’s dividend”, in which AI itself helps forestall the danger. Software can be fixed quickly, but human biology is far less malleable. Making models safe for release will therefore require breakthroughs in the fundamental science of ai.

How much time is there? Today’s public AI models are book smart, acing paper tests, yet fortunately still appear to give novices little practical help at the laboratory bench. But Anthropic, the maker of (non-public) Mythos, warns that it may soon be able to guide novices through tricky lab work. Mythos and its peers have not been tested for their practical abilities, which means they may already have such a capability.

Models with these talents will—like nuclear weapons—never be safe in public hands. And today’s techniques for making them safe fall short. One option, for example, is to try to make them refuse dangerous requests. “Jailbreaking” these models by tricking them into giving forbidden answers has become harder, but in one recent study 90% of the novice participants were still able to extract answers about virology from models that ought to have clammed up. Gambling the future of humanity on such defences would be a mistake.

Another measure is to exclude dangerous data from models’ training runs. SecureBio, a think-tank, suggests removing information about mirror life, obtaining live pathogens, bypassing biodefence guardrails and assessing pandemic potential. The trouble is that a sufficiently capable model may work out the excised knowledge from first principles. Similar attempts to remove child-sexual-abuse material from the training data of image generators did not succeed. A system trained on benign images can depict obscenities it has never seen.

A third idea is to focus on the physical world. Governments’ security services could and should pay more attention to the vendors of technologies, such as DNA synthesis, with both legitimate and nefarious uses. “Know your customer” regulations should limit such services to established researchers. But creating viruses is not like building a nuke, which requires scarce and traceable material. In biology using off-the-shelf technology for lethal ends is relatively easy. The state cannot monitor every Petri dish.

Scientific breakthroughs will therefore be needed, to create new kinds of safeguards. One promising approach is the equivalent of brain surgery on models after they are trained. Another technique teaches models to favour wrong answers in some areas; yet another could be to uncover and disable the neurons that activate in work on synthetic biology. That would require advances in foundational AI science so as to crack open the “black box” of existing neural networks.

Until such techniques exist, governments must limit access to systems that might enable bioterrorism. This matters especially for open-source models, which cannot be recalled once they have been disseminated, and whose use cannot be monitored. Responsible researchers should be able to use AI to advance the frontiers of science—DeepMind’s Isomorphic Labs is developing novel cancer therapies, for example—but under security protocols. There is no point harnessing AI to improve lives if it also gives terrorists the power to make humans extinct. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

What looks like a 21st-century problem has deep, dark roots

To fight antisemitism, first grasp where it comes from What looks like a 21st-century problem has deep, dark roots May 7th 2026 The hatred looks different this time. There are no ghettos or pogroms; no European government espouses it. In some ways the recent surge of antisemitism—including the stabbing of two Jewish men in London on April 29th—has a distinctly 21st-century character. Stand back, though, and the mindset of prejudice is horribly familiar. So are the risks: for Jews across the world, but not only for Jews.

The bloodshed in Golders Green, a hub of Britain’s small Jewish community, followed a spate of firebombings at Jewish sites in London. Last October an attack on a synagogue in Manchester killed two congregants. Heartbreakingly, many British Jews for the first time feel obliged to play down their Jewishness in public: slipping star-of-David pendants inside shirts, removing skullcaps en route to school or work. These fears are not uniquely British. In March synagogues were targeted in Michigan and the Netherlands. In December, after a crescendo of hate crimes, 15 people were murdered at a Hanukkah party on Bondi Beach in Australia.

Rage over Gaza, especially among Islamists, is an important but oversimplified explanation. Antisemitism did indeed spike in Europe and America with the atrocities in Israel on October 7th 2023 and the ensuing war. Yet an explanation is not an excuse. Everyone should be able to distinguish between an elderly man at a London bus stop and a Middle Eastern state. Jews’ views on Israel (whatever they are) can never justify their persecution. No opinion should be punishable with violence.

Some in the West take a cold comfort in attributing the problem to immigrants. In truth Islamism, virulent as it can be, is only one of the circles in what Sir Mark Rowley, Britain’s top policeman, calls a “ghastly Venn diagram of hate”. Much of the left endorses a bogus moral framework in which Jews rank as colonisers and can never be victims. Much of the nativist right thinks Jewish globalists are plotting the West’s downfall—the deranged motive for previous shootings in Pennsylvania and California. Hostile states use proxies to strike abroad: Iran’s hand has been detected in some recent attacks.

In all these ways, today’s antisemitism looks like a modern phenomenon—and you could add social media, which help recruit attackers and let neo-Nazis proselytise. Looming beneath, though, is the age-old myth of a sinister Jewish cabal, bent on power and subjugation. It is there in the depictions of Binyamin Netanyahu and George Soros as puppetmasters. It resounds in the idea that Israel’s treatment of Palestinians is the wellspring of the world’s ills.

Conspiracism is the common denominator; it is also a link between today’s prejudice and the hatreds in Nazi Germany or tsarist Russia. Conspiracist thinking flourishes amid upheavals: the rise and fall of empires, ideological ruptures or, as now, populism and war. With a sort of gravitational inevitability, it often defaults to the hoariest conspiracy theory, with its atavistic associations of Jews with greed and divided loyalties. Caricatured as both rootless and sectarian, reactionary and subversive, they become catch-all avatars for disorienting change.

Understanding the deep roots of antisemitism is key to confronting it. The already fortress-like security at Jewish institutions is being reinforced. Pro-Palestinian marches and the slogans chanted on them are under reconsideration, too. Politicians are seeking to balance the protesters’ right to free expression and the right of Jews to safety, which many feel is threatened by the marchers’ invective.

The Economist is highly sceptical of speech bans. Arresting grandmothers does nobody any good. Laws cannot banish ingrained assumptions and archetypes: something bigger and more difficult is required. Many people have learned to be more considerate when talking to and about other minorities; and when people talk differently, they can come to think differently. It is past time for Jews to be shown this respect. Education can help. But above all, political and religious leaders—and ordinary citizens—must call out antisemitism whenever they hear it. Too many have shamefully failed to do so.

The anguish of Jewish citizens ought to be motivation enough. But the echoes of history suggest another reason to act. Jews are the victims of these assaults, but theirs is not the only future at stake. Rather they are a crucial test of the freedom to live and worship as you wish. When those rights are not upheld, the mob is ascendant, and the values of pluralism and tolerance that underpin free societies are in danger. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Why market liberals must win the battle for Brussels—and national capitals, too

Europe is unshackling business. But not enough Why market liberals must win the battle for Brussels—and national capitals, too May 7th 2026 Everyone knows that the European Union’s economy is weighed down by regulation. But you may not have spotted that everyone now includes Europeans themselves. They are so rattled that the momentum to fix the problem is the greatest in a generation. On April 28th the eu unveiled plans for its rule-making to be simpler and more consistent. It gave a timeline for accomplishing this, and for removing barriers to trade within the bloc. The trillion-euro question is whether, after many false starts, Europe can at last turn its good intentions into progress.

Europe needs to grow if it is to pay its debts, care for its swelling legions of elderly citizens and defend itself without America’s help. Yet its economy is far behind that of Uncle Sam. In the first quarter its output barely grew—and now the Iran war has driven up energy prices.

The battle for growth is being fought on two fronts. The first is in Brussels, where two very different strategies vie for favour. Some eurocrats think the eu should pivot to subsidies, protectionism and Chinese-style state capitalism. Others prefer the liberal route of more open, competitive and integrated markets.

In recent years the EU’s economic thinking has acquired a more French flavour: somewhat warier of competitive markets and free trade, more in favour of dirigisme. Encouragingly, however, some more liberal attitudes are holding their own. Proposed changes to the EU’s strict merger guidelines once seemed likely to water down the bloc’s traditional devotion to consumer welfare so that “European champions” might emerge. Now it looks as if the rules will be tweaked rather than overhauled. Europe’s commitment to competiton survives.

Still, it is one thing to avoid backsliding. What about progress? As well as the deregulatory push, which includes ten “omnibus” bills aimed at reducing companies’ administrative costs, trade continues to be liberalised. On May 1st a pact between the EU and Mercosur—whose full members are Argentina, Brazil, Paraguay and Uruguay—provisionally came into effect. New agreements have also been struck with India, Indonesia and Australia, and pacts with Malaysia and the Philippines are in the offing. Unlike President Donald Trump’s often superficial and fragile trade deals, these ones are deep and the product of years of work.

The second fight is at the national level and will be harder to win. Much rule-making power sits with national governments, which love to blame Brussels for their own red tape. They often choose to protect domestic firms, especially from foreign competition in services. They also make the eu’s rules more burdensome when writing them into domestic law. Politicians are under constant pressure from protectionists who resist everything from connecting up electricity grids to letting firms registered in one country operate in another.

Reforms at the national level are slow . Each government is one of 27. Too few share Brussels’ new sense of urgency. Many are loth to take on vested interests, hoping to reap the benefits of reform in other countries without having to pay a political price themselves. With recent changes, such as with Denmark’s postal service or Dutch pensions, the action has mostly been in market-friendly places. Countries bogged down with rules, such as Italy and Germany, have done too little.

Boosting European growth requires national governments to join the liberalising effort. It also means implementing many of the other recommendations set out in the dossiers penned by Enrico Letta and Mario Draghi, two former Italian prime ministers. Europe’s startups need more capital, which might be provided by adequately funding pension schemes while continuing to integrate capital markets across borders. The continent must attract more of the world’s most talented workers, with bloc-wide visa schemes and by recognising foreign qualifications. And it needs cheaper energy, which requires investment in its grid and the careful design of markets as more renewable power comes online.

None of this will be easy. The eu has endless counterproductive regulations. Attempts to get rid of them often fail, not least because reactionaries on the left and right defend them. But Europe is also a huge economy of 450m people, with nearly a fifth of global output. Will the wealth of that prize and the dire consequences of failure make this time different? More than ever, Europeans need to simplify and deregulate. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Prices have risen sharply. Unfortunately, they still have further to go

Oil markets are still in La La land Prices have risen sharply. Unfortunately, they still have further to go April 30th 2026 SoMEONE WAS sniffing the butane. Energy experts have long warned that the war in Iran was causing the biggest oil-supply shock in history. The closure of the Strait of Hormuz shut in 14m barrels a day of oil. To destroy that much demand, they said, the price of Brent crude should be more than double its pre-war level, at well over $150 a barrel. But oil traders were in a stupor . As recently as April 17th prices were below $90 a barrel. Over the past week, on talk of renewed fighting, they have been waking up. On April 30th prices spiked above $125.

Unfortunately, as bad as things are, the disconnect with reality endures. Not only may spot prices have further to climb, but the oil-futures market, in which speculators bet on where the oil price is going, says prices will fall every month for the rest of the year, ending 2026 at about $88. That implies most of this shock will soon be reversed. If so, traders must believe three things are true: that America and Iran will soon strike a peace deal; that their agreement will reopen Hormuz; and that, soon after the strait is clear, petrol and jet fuel will once again be plentiful. All those are in doubt.

One thing everybody should be able to agree on is that for the strait to stay shut would be a disaster. At the start of the war, lots of oil was in stocks or tankers at sea. But the ships that passed through Hormuz before the conflict had all docked by April 20th. Oil stocks will soon be at their lowest since satellite tracking began in 2018. Volumes of petrol, diesel and jet fuel at sea are already so low that gaps in supply will be inevitable. And in America petrol demand is about to surge, as the summer tempts people to get in their cars and drive.

Everybody should also acknowledge the stakes. Asia’s petrochemical industry has already idled capacity. Since the war prices of diesel and jet fuel have doubled in Asia and more than doubled in Europe. Unlike stockmarkets, where bubbles can be sustained by animal spirits alone, the price of oil is tethered to the economy at petrol pumps, docks and airports. If supply falls short of demand, prices must rise to bring about balance. There are already reports of barrels of diesel selling for $600. Good cheer cannot supplant reality.

The case for optimism is obvious. Donald Trump’s wild posting signals not just that he is rudderless, but also that he will step in whenever oil prices rise too high. Iran’s economy is broken: it urgently needs cash, which means it, too, will want a deal. If an impasse brings ruin to both sides, it will end.

The Economist is loth to second-guess those who have the facts to hand and billions of dollars at stake. However, markets have a poor record of pricing geopolitical risk. And with oil, they struggle to assess the complexities of the physical trade.

Even if a deal is in both countries’ interest, it could be hard to nail down. Each side may be underestimating the other. Mr Trump seems to think he holds all the cards. But Iran has endured long disruptions to its oil exports before, at the onset of Mr Trump’s “maximum pressure” sanctions campaign in 2018. Iran is not a democracy and the regime can survive while its people suffer. It has an incentive to hold out in the hope of a good offer for as long as it can. Mr Trump can resume the bombing, but that is as likely to delay a deal as catalyse one.

Likewise, with midterm elections looming in America, Iran’s leaders may think that Mr Trump cannot tolerate a high oil price. Yet Mr Trump is selfish. He may try to constrain price rises at home by limiting exports of refined products. The midterms are already lost, in the House at least, he may think. He is surely less bothered about the careers of Republican politicians than his own humiliation if he strikes a nuclear deal with Iran that looks worse than Barack Obama’s in 2015. His latest signal to Iran is that he is hunkering down for a long blockade.

Even if a deal is struck, the strait may not completely re-open. For one thing, the fearsome details of a nuclear pact will take months to negotiate. Now that Iran has discovered that it has leverage, it may be tempted to apply pressure with threats to close the strait again. And threats can lead to attacks. Perhaps Mr Trump will put the eradication of the nuclear programme before the complete re-opening of the strait—after all, America is an energy exporter. Supposing that America agreed to let Iran treat Hormuz as a tollgate, what then?

And even if the strait is open in principle, getting fuel into fuel tanks in practice will remain vulnerable to many unknowable delays. You can expect a rush of oil as waiting tankers escape fully laden into the Indian Ocean. But for empty tankers to return to the Persian Gulf will be more complicated. Many will have taken up bookings on other routes. The strait will need demining, which could take months. Insurance rates could be prohibitive, so governments may need to organise a scheme to cover extreme risks. Shutting down production could have damaged oil wells. Restoring output will also take time. Partially mothballed refineries won’t immediately return to full capacity.

The world is only starting to get to grips with what may lie ahead. Central banks may soon face the second inflationary shock of the decade, after the covid-19 pandemic. In Asia many governments have already taken drastic measures, such as shortening the working week. Europe’s governments will also have to change gear. So far they have focused on supporting consumer demand. They may have to deal with demand destruction—and, given the possibility of shortages of diesel and jet fuel, plan to protect food-delivery and vital services.

Bullish investors could be in for a nasty shock, too. The recovery from covid, Europe’s adaptation to the loss of most Russian gas and Mr Trump’s moderation of his tariffs have all led traders to trust that things always work themselves out. Amid strong corporate profits in America it may seem as if the world economy can bear any shock—and that Mr Trump will obviously back down before a catastrophe. The pain of a scenario that oil analysts have feared for decades is approaching. It will not be pretty. Get ready. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

The City has bounced back despite fears over Brexit

How to capitalise on London’s thriving financial industry The City has bounced back despite fears over Brexit April 30th 2026 BRITAIN’s ECONOMY does not inspire much optimism these days. Inflation is high and rising; so are debts. Growth is not. The Iran war is making everything worse. Sir Keir Starmer’s government is paralysed despite its huge majority, adding to the gloom.

This makes it all the more remarkable that, outside America, the City of London still shines as the financial capital of the world. As we report this week, if you want to sell a billion euros for zloty, or make a complicated bet on Japanese interest rates, there is a good chance you will call a trading desk in London. The same is true if you are insuring an oil tanker or a footballer’s metatarsals. Foreign banks hold more assets there than anywhere else on Earth. London once again rivals New York in indicators of global financial centres’ competitiveness, and it remains top in seven of 12 areas of international finance measured by one specialised think-tank.

Now London has a chance to grow further, capitalising on its attractive value and newfound vibe. JPMorgan Chase, America’s biggest bank, is designing new, bigger European headquarters in Canary Wharf; Citigroup, a smaller rival, is spending $1.5bn to refurbish its tower there. Jane Street and Citadel, two of the world’s whizziest trading firms, are snapping up new office space in the City. Others are nabbing whole companies. Apollo, an American asset manager, and Brookfield, a Canadian one, have both bought British insurers. Schroders, one of the last survivors of the City’s old-school-tie era, is being gobbled up by another American firm.

This is quite the mood shift, and comes despite the blows of the past decade. Stockmarket listings have been as rare as rocking-horse dung. Worse, voters sundered the City from the European Union, its biggest export market. Scary predictions about the share of financial-services jobs that could be lost because of Brexit were bandied about (up to 232,000, one said). Everyone seemed to agree that other global financial hubs were overtaking tired old London.

In fact, the City has suffered startlingly little damage. In 2017, the year after Britons voted to leave, 1.1m of them worked in finance; today that number is the same. Even better, more now work in the Square Mile itself, where the high-paying jobs tend to be. Financial services contribute 20% more per year, in real terms, to the economy than they did then: £224bn ($300bn), or 8% of GDP. Britain’s net exports of such services come to £93bn a year, more than any other country, and useful for one with a current-account deficit.

That is partly due to London’s long-standing strengths as a financial centre, and partly to the paucity of competition. The City’s history at the hub of a free-trading empire has equipped it with vast, intricate networks of specialists and financial plumbing that would be hard to replicate elsewhere. Its geography, midway between Asia and America, gives it a time zone that is handy for brokering trades across continents. Just as important, Europe has no other financial centre that can hold a candle to London. Amsterdam, Frankfurt, Milan and Paris all scrapped for bits of its business after the Brexit vote, but hardly any jobs actually ended up needing to move to satisfy EU regulators. JPMorgan is said to be now shifting some of those that did go to Paris back to London again.

Less expected is how much City bigwigs praise good decisions by an otherwise hapless Labour government. Rather than junking sensible reforms begun by their Tory predecessors, Treasury ministers have forged on with them. So Britain’s stockmarket-listing regime has been simplified and pension funds are being nudged, rightly, to invest more in risky assets (though outright mandates to do so would overstep the mark). A much-mooted levy on bank profits was dropped from last year’s budget, encouraging bosses to put spades in the ground for their new buildings. Regulators have cheerfully waved through the spate of cross-border acquisitions, drawing a stark contrast to their obstructive counterparts in the EU.

But the government has more to do. Investors the world over are more interested in Europe, and more worried about overexposure to America, than they have been in years. It doesn’t hurt that hiring junior staff in London is a lot cheaper than in New York: in relative terms London now looks like a bargain. Britain’s government should take advantage of this and make it easier for rich financiers to move there, without facing taxes that prompt a complete overhaul of their personal investments. Having made a fuss about abolishing the “non-dom” tax regime, which aimed to do approximately that, Labour politicians would need a new name for a more attractive regime. “Growth visa” has a ring to it.

The government should also press regulators to help the City seize a historic opportunity. Britain, along with the rest of Europe, urgently needs to make huge investments in defence, upgrading battered infrastructure and the data centres required in order to compete in artificial intelligence. Public debts are already so high that much of the capital for this will have to come from private sources. Loosening securitisation rules—which govern how easy it is for insurers and pension funds to provide this capital—would help ensure that it is City bankers, lawyers and myriad others who co-ordinate its deployment.

This investment is crucial however it is achieved. Eurocrats may be tempted to raise barriers and conduct it through less effective financial centres within the EU, but this would ultimately be self-defeating. They have a metropolis of money on their doorstep and should make the most of it. So should Britain’s government, while filling its own coffers along the way.

A gloomy Britain spends a lot of energy debating how to redistribute the output of the economy rather than grow it. London’s bankers are widely resented and some politicians yearn to tax them more or limit their earnings. Yet the City is one of the country’s singular strengths and brings benefits far beyond the capital. Instead of contemplating ways to punish its success, politicians should celebrate it, and help expand it. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

There is much to like about the next Fed chairman—if his backbone holds

How Kevin Warsh could save the Federal Reserve There is much to like about the next Fed chairman—if his backbone holds April 30th 2026 IT IS NO secret that Kevin Warsh has long coveted the chairmanship of the Federal Reserve. He has at last achieved his goal. The Department of Justice said on April 24th that it would drop its criminal investigation into Jerome Powell, the current chairman, a step a swing-vote senator had demanded before advancing Mr Warsh’s nomination. The new man is now all but certain to be confirmed. The press conference Mr Powell gave on April 29th should be his last in the role.

Mr Warsh was not The Economist’s preferred choice to become the world’s most important central banker. In chasing the job he changed from a long-time inflation hawk into a rate-cutting dove. He is not as wonkish as Chris Waller, another erstwhile candidate, has little training in economics and has for over a decade made over-egged and analytically hazy criticisms of the central bank, building a manifesto for the chairmanship that lacks rigour. Sometimes, too, he has behaved cynically. In his confirmation hearing on April 21st he conspicuously refused to rebut the lie that the presidential election in 2020 was stolen from Donald Trump.

Yet none of that will determine where Mr Warsh ranks in the pantheon of America’s central bankers. The real test is how he deals with Mr Trump. The president’s demands for lower interest rates—despite five years of above-target inflation—mean that the Fed is facing its greatest crisis in 50 years. Mr Warsh once gave a speech entitled “An Ode to Independence” and at his hearing emphasised the importance of the bank’s credibility. If in office he withstands the president and steers the bank to safer waters, he could count as one of the greats.

The first test of his mettle will come almost immediately. The spike in oil prices and the resilience of the labour market have undermined the case for lower rates that it was possible to make at the start of the year. Mr Warsh would have a hard time persuading other rate-setters to loosen monetary policy and, despite their traditional deference to the chair, he has only one vote out of 12. He might use his colleagues as cover when explaining to Mr Trump why rates have not fallen, but will have to deftly avoid inviting further attempts to boot them out of office. Mr Warsh has wisely distanced himself from a MAGA plan to purge the presidents of the regional Fed banks, five of whom vote on monetary policy at any one time.

Mr Warsh will need allies at the Fed if he is to pursue his reform agenda. He wants the central bank to shrink its balance-sheet, to talk less in public about the future path of interest rates and to look at a wider range of data. He calls that “regime change” but his ideas are hardly radical. The Bank of England, for example, is midway through a balance-sheet rethink. Among central bankers, who can sort Mr Warsh’s political statements from his policy preferences, the incoming Fed chairman is not seen as a revolutionary. He could hold off Mr Trump on rates while implementing these reasonable reforms.

It is easier to imagine Mr Warsh achieving this if he is surrounded by technocratic colleagues. Much rides on a Supreme Court case over Mr Trump’s attempt to sack Lisa Cook , a Fed governor, for alleged improprieties in old mortgage documents. On April 29th Mr Powell, whose term as a governor does not expire until 2028, said that he would remain on the board. That is a break with tradition—useful cover that Mr Warsh should welcome.

The irony is that the moment looks made for the Kevin Warsh who existed before he had to persuade Mr Trump to appoint him. He would be an inflation hawk in an inflationary era, and a true believer in central-bank independence during an attack by the executive, as well as a sceptic of big balance-sheets after an era of free money. We hope that is the Kevin Warsh who turns up for work at the Fed in May. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A sham election, a massacre whitewashed

Is Samia Suluhu Hassan Africa’s most disappointing president? A sham election, a massacre whitewashed April 30th 2026 Tanzania has had dramatic ups and downs. In the 1970s the government of this east African country forced farmers into collective villages at gunpoint, causing horrific food shortages. In the 1980s it abandoned utopian socialism and the economy took off. After the cold war, it scrapped its one-party system and let others contest elections (though the ruling Party of the Revolution, Chama Cha Mapinduzi, has never lost). Political stability and better economic policies lifted living standards: since 1995 income per person has quintupled.

But now the repressive regime of President Samia Suluhu Hassan threatens Tanzania’s achievements and its future. The latest whitewashing of a post-election massacre of protesters and bystanders suggests that her government does not think the country’s 70m people deserve a say in how they are ruled.

When Mrs Samia first came to power in 2021, she gave many signs of being a reformer. Her predecessor, John Magufuli, had started a lurch back towards authoritarianism, erratically bullying dissidents and foreign investors. When he died, reportedly of covid-19, a virus whose presence in Tanzania he denied, he was succeeded by his vice-president, Mrs Samia.

The first woman to hold the top job, she initially inspired widespread optimism. She rescinded Magufuli’s bans on opposition rallies and independent media outlets, began improving ties with investors and promised to accelerate a constitutional overhaul. Tanzania’s youthful population, though fed up with the ever-ruling party, hoped Mrs Samia would usher in a more open society.

Five years on, she has dashed such hopes. After a brief flicker of tolerance, she has energetically persecuted opposition leaders and critical journalists. Political and economic power is concentrated in a small clique of family members. In October she claimed to have won 98% of the vote in a general election. That ludicrous result came after the main opposition party had been barred and its popular leader, Tundu Lissu, had been jailed on trumped-up treason charges. When Tanzanians took to the streets in protest, security forces gunned them down. Hundreds—some say thousands—were killed.

Mrs Samia appointed a commission to investigate. On April 23rd it acknowledged that 518 people died in the clashes. But it shamelessly distorted what happened, blaming the carnage on “trained agitators”, allegedly helped and financed by unspecified “outside forces”. It went on to praise the police for their supposed restraint. The full findings remain secret, making it impossible for observers to take them seriously. In a speech welcoming the report, Mrs Samia chided her critics, saying that she would have hoped “to be comforted rather than pointed at” after the “sad and hurtful” events.

A pall of fear now hangs over Tanzania. Ordinary people are afraid to discuss the massacre. Opposition politicians are behind bars. The media remain muzzled. Outsiders are unlikely to help. Tanzania’s main economic partner is China, which does not care about democracy. Under President Donald Trump, America is less concerned with lecturing Mrs Samia about human rights than with exploiting her political weakness to obtain more favourable terms for mining and energy deals. The European Union froze $156m in aid after the election, which may make a dent in the government’s budget but will hardly be enough to persuade it to change its approach.

Responsibility for the fake election and the bloodshed that followed it rests ultimately with Mrs Samia. The inquiry fooled no one. Privately, even members of the ruling party describe its findings as ridiculous. Factions within the party may yet judge that Mrs Samia is so tainted and unpopular that it must either jettison her or face worse unrest. However, the barriers to impeachment are steep.

Further instability is possible. That will deter foreign investors and the tourists whose beach-and-safari jaunts provide 17% of GDP. Mrs Samia should remember her promises of five years ago. She should free Mr Lissu, publish her commission’s report, allow independent investigations of the election and mend fences with her unhappy citizens. It is not too late for Tanzania to turn off the ruinous road it is racing down. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Choke points are changing AI’s economics

The AI supply crunch is here Choke points are changing AI’s economics April 30th 2026 Artificial intelligence has a supply problem. As the world gorges on tokens, the snippets of text by which the output of a large language model is counted, it is running short of them. Weekly token consumption quadrupled between January and March, according to OpenRouter, a marketplace for AI models, partly because of the growing use of coding tools. The industry cannot keep up.

At model-makers and tech giants, rationing is afoot. Anthropic, maker of Claude, recently adjusted its terms to deter heavy use during peak hours. Amazon says that “capacity constraints” have limited its growth. Sarah Friar, the finance chief ofOpenAI, developer of ChatGPT, has said the company is not pursuing every opportunity because it does not have enough processing power (or “compute”). It recently scrapped its video-generation model.

The consequences of the supply crunch could be far-reaching. A world of scarce compute will shape the economics of AI, changing everything from the allocation of profits to the incentives to use the technology.

Adding AI capacity quickly is hard. Particularly in America, local opposition to new data centres has slowed their construction. Shortages of transformers, switchgear and gas turbines cause delays; some of this equipment can take two to five years to arrive. The tightest bottleneck is in processors. Chips for AI, such as those designed by Nvidia, the world’s most valuable company, remain scarce. The squeeze extends to other types of silicon, too, including memory chips and central processing units (CPUs). Few of these constraints will ease any time soon. Supply chains take years to expand and hardware-makers are still investing more cautiously than the hyperscalers they supply.

When hardware is expensive the size of your balance-sheet matters more than ever. Whichever part of the supply chain you look at, only a handful of firms have the financial muscle and bargaining power to lock up the hardware they need. This year the five data-centre “hyperscalers”—Amazon, Google, Meta, Microsoft and Oracle—will together shell out more than $750bn on capital expenditure. OpenAI and Anthropic have announced hundreds of billions of dollars in partnerships and investments. Nvidia is said to have bought most of the memory it will need in 2026 and part of 2027 well in advance. It has also invested across a range of tech firms to shore up its supply chain.

The greatest profits will be found at choke points. The AI boom has especially benefited Nvidia and TSMC, the Taiwanese manufacturer that makes almost all of the most advanced chips. Chip manufacturers’ pricing power has become as enormous as their transistors are tiny. Nvidia’s gross margin is about 75%, up from 60% in 2019. TSMC’s gross margin is above 60%, roughly twice that of many other contract manufacturers. The hardware giants also have sway over who gets scarce kit, though they deny picking favourites.

High prices are causing software makers to do more themselves. Custom chips can cost about half as much as buying from Nvidia. But they are not easy to design. Among the software firms doing so, only Google has managed to create a viable alternative in large volumes, and its effort began more than a decade ago. Displacing TSMC is harder still. Other chipmakers, including Intel and Samsung, have struggled to match it at the leading edge. Elon Musk, the boss of SpaceX and Tesla, has floated a plan for a “Terafab” to rival TSMC. Its estimated cost is a fantastical $5trn-13trn.

The last consequence of the crunch will be to slow the uptake of the technology. So far the AI boom has rested on the cheery assumption that answering queries will only get cheaper. And it has: “inference” prices have fallen by five- to ten-fold in a year. In countries such as India, AI firms are offering cut-price subscriptions to lure users. But that obscures how much cash firms are burning through to sustain those falling prices. OpenAI and Anthropic are expected to lose billions of dollars in the coming years. As both prepare to go public, they will be eager to show that they can one day make a profit.

As people find more uses for AI—including applications outside tech, where it is currently most popular—prices will rise. If AI is to transform the economy, demand for tokens will grow by orders of magnitude. As model-makers pass on their rising compute costs, users will have to economise. Today many companies judge themselves by whether or not they use AI at all for a given task. Increasingly, as with human labour, they will have to ask whether they are using AI efficiently. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The consequences of the Emirates’ departure from OPEC

The UAE doubles down on Israel and America The consequences of the Emirates’ departure from OPEC April 30th 2026 AT LAST IT has jumped. For years the United Arab Emirates (UAE) chafed at restrictions that came with membership of the Organisation of the Petroleum Exporting Countries (OPEC). It had even threatened to quit; and on April 27th, in the middle of a war, it stormed out.

That raises two sets of questions. The straightforward one is about the future of OPEC itself. A more complex one is about security in a part of the world rocked by the war with Iran. In spite of all the problems that America and Israel have caused the Emirates with their unfinished campaign, the UAE’s abandonment of OPEC has sent an unambiguous signal that it remains in their camp. As much as that may please President Donald Trump, it is a slap in the face for the rest of the Gulf, and especially Saudi Arabia.

The Emiratis have good reason for leaving OPEC. In the next few years they want to increase oil production, from 3.6m barrels a day to 5m. Other members prefer to try to keep the price of oil high; the Emiratis want volume.

Does that mean OPEC is dying? Perhaps slowly. The Emirates’ departure is another blow to an already waning body. Other members, such as Venezuela, may follow. But the Saudis, who in effect lead the organisation, downplayed the news. The Emiratis often broke production quotas and the remaining members, plus allies such as Russia, will still account for some 40% of global oil output. It may even be easier to keep discipline without the troublemaker inside. In any case, OPEC will matter again only after the war, when a global oil glut is once again possible.

The geopolitics are more pressing. The news of the UAE’s decision was met with glee in Israel. People there are delighted by anything that weakens Iran, which remains inside the cartel. And the UAE’s pullout suggests it wants warmer relations with the Jewish state. The two governments, signatories of the Abraham accords, share an intense antipathy towards Islamist extremism. The UAE has avoided clashes with Israel even as it pursued destructive wars in Gaza, Lebanon and beyond. Other Arab states fear Israel as a disruptive regional power, even a dominant one; the UAE still wants to do deals with it.

Second, and closely related, the UAE is sending a message to America, where Mr Trump can see OPEC’s loss as his own strategic gain. The UAE has suffered more than any of its near neighbours from Iranian missile and drone strikes. Yet rather than publicly blame Mr Trump for starting the war, the UAE has chided other countries for offering too little solidarity. By quitting OPEC now, the UAE shows that it looks to America and Israel for security. As important, it is seeking to further develop an economy that complements its exports of fossil fuels, with ties to America in travel, investment and technology.

Last, the UAE is showing it is willing to further alienate the six-member Gulf Co-operation Council, and most obviously Saudi Arabia. The two monarchies have been feuding, needling one another in proxy conflicts even as both are threatened by Iran. The bitterest clash is in Yemen’s protracted civil war, where the Saudis bombed an Emirati arms shipment in December, bringing the two sides close to a direct military clash. The bloodiest effects of their rivalry are in Sudan, where the Saudis support the government and the UAE has backed a genocidal rebel force (an allegation that it continues to deny strenuously).

Much remains uncertain, not least the question of how America and Iran will eventually make something resembling peace. The UAE’s bet on forging closer ties with America and Israel, while drawing away from its Gulf neighbours, comes laden with risk. For now, the UAE must expect to pump less oil, not more, regardless of its relationship with OPEC. In the medium term, Iran could emerge from the war more powerful, with a lingering chokehold over the Strait of Hormuz, and thus over its neighbours’ economies. That is a danger for all the other Gulf countries. Finding ways to unite against it would seem wise. Instead, the UAE is setting its own course. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Not everything is in your DNA

Time to edit some biological metaphors Not everything is in your DNA April 30th 2026 THE DISCOVERY that the coils of DNA inside cells carried specific instructions for making all the proteins those cells need was the founding achievement of molecular biology. It allowed a new understanding of genetics in terms of physical molecules and abstract information. It provided new ways of diagnosing disease and, through biotechnology, of producing medicines. It furnished profound insights into life’s past evolution. From nociception to nephrology, few if any fields of biology have not benefited from these insights; some have been utterly transformed.

The effect of deoxyribonucleic acid’s role as genetic material on the world of metaphor has been less welcome. When applied to the non-living—“perfect customer service is in our DNA”—the allusion is merely silly. Closer to the biological, it is pernicious. Just as appeals to “instinct” are used to mask unexamined prejudices, so claims that something is “in my DNA” are used to ward off inquiry into whys or wherefores. They are ”just because” dressed up as science. To the extent that they suggest a human being’s deepest self is engraved on some immutable molecule, they come close to notions of biology as destiny.

Sometimes such assumptions can seem anodyne. On April 26th, at the London Marathon, Sabastian Sawe, a Kenyan athlete, finished in less than two hours; in the 2,515 years since the first Marathon, no one else has been recorded as achieving such a time in competition. Many seeing this achievement will have thought something like “it’s in his east African genes”—not so much to belittle the achievement, as to have a ready reason for it. Such pat accounts can make it easy to stumble down the slippery slope that ends with ascriptions of innate superiority and inferiority: of Somalis being “low IQ people” and similar claptrap.

This is one reason new interest in the field of epigenomic medicine is welcome. The epigenome is a set of markers on an organism’s DNA and its accoutrements that tell “transcription factors” and other molecular machinery which bits they should pay attention to. Such labelling can be changed by environments and events; it can also sometimes be passed on from one generation to the next. And it can make huge differences. Genetically identical mice with different epigenomic markings can differ in colour, size and morbidity. An epigenomic tag on a given gene can be the difference between a healthy human and a sick one.

Various biotech companies are now using techniques like those with which gene editors change specific sequences of DNA to try to change specific epigenomic tags while leaving the DNA sequence itself untouched. Success would be good news for sufferers of some metabolic disorders and chronic viral conditions. In the future broader applications may come about—some debilities of ageing seem to be brought about by epigenomic wear and tear.

Measured against such benefits, the possibility that epigenomic medicine might also serve to weaken an irksome cliché is small beer. But it could still be a welcome side-effect. In a world where such treatments are more discussed, the idea that the expression, and thus effect, of a gene differs according to circumstances could become more widely appreciated.

So could possibilities for self-improvement. The interplay of culture, commerce, environment and, possibly, genetics behind the success of east African distance runners will remain complex, and open to different interpretations. But there is no doubt that specific types of exercise have effects on the epigenome. Whatever is in his genes, Mr Sawe’s dedicated training is what brought it out. (None of which is to say his high-tech shoes didn’t also have something to do with it, too: the ways in which ingenuity can enhance biology are endless.)

Despite its potential, though, it would be wrong to expect too much of a boost for better biological metaphors from epigenomic medicine. Humans have a tendency to avoid the cognitive burdens of complexity, sometimes for good reasons, sometimes for bad ones. They are as happy to do it through mysticism as materialism: if they don’t do it by invoking nucleotide sequences they will appeal to fate, or destiny. It would be nice if they did not; but there is little reason to expect them to change. It is almost as if the propensity to essentialise was in their… ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Too many no longer believe elections are fair

America is vulnerable to electoral vandalism Too many no longer believe elections are fair April 23rd 2026 Largely because Donald Trump is so unpopular, his party will be trounced in the midterm elections in November. That is what The Economist’s new forecasting model currently says. Democrats are almost certain to win the House of Representatives. They could even flip the Senate —a surprise for election nerds, because the map in this cycle strongly favours Republicans. Yet although the outlook for Democrats is good, for America’s democracy it is alarming.

Each party has come to see the other lot as cheats. Repeated meddling in election machinery by the president and his party, and their false claim that victory was stolen from them in 2020, have undermined voters’ belief that elections are fair. The degrading contest to gerrymander congressional seats, the most intense in memory, further tells Americans that their politicians want to rig outcomes rather than compete.

Some Democrats worry that Mr Trump will steal the midterms. That is unlikely. But you don’t have to expect the worst to fear the trend. Elections are not just about voters picking a winner; they are also a device for persuading the losers to accept the legitimacy of their opponents’ claim on office. Sooner or later, the losers’ loss of faith will cause a crisis.

Midterm worriers can point to motive and opportunity. Losing the Senate as well as the House would sting Mr Trump. The closeness of the Senate contest gives him a chance to meddle again. The midterms could also be a dry run for an attempt to steal the presidential election in 2028. Mr Trump’s constant efforts to weaponise the courts against his domestic enemies suggest he believes more than ever that rules are for losers.

The worriers can also point to the president’s behaviour. He has issued executive orders to take bits of election administration away from the states and put the federal government in charge, supposedly to make the system more trustworthy. That is a familiar Trump move: first, identify a real flaw (a lack of trust he helped engender), then propose a plan that makes the problem worse (grabbing more power for himself). His scheme is unconstitutional and will probably fail. But it reveals his intent: if he could seize the running of elections, he surely would.

If Mr Trump cannot change the rules, he could still try to interfere on election day. In some places conspiracy theorists will be in charge of ballot boxes; some may believe the election in 2020 was stolen. Some MAGA loyalists have suggested he should dispatch ICE agents to polling stations to stop foreigners from voting illegally (which almost never happens). That would be illegal and the courts would swiftly say so. The administration has been ambiguous. But, should the temptation arise, it would not be hard to work out where to direct them: Democratic areas of Alaska, Maine or Ohio, where control of the Senate will be decided, and where scaring minorities into staying at home could help Republicans. Even if this did not change the result, it would sow distrust, which could provide a platform for post-electoral mischief.

After the votes are counted, the president’s party could once again file lawsuits, as it did the last time he lost. In 2020 judges threw them all out, a reminder that Americans can have confidence in their courts. But MAGA World is litigious and has plenty of money. Never conceding defeat has become its organising principle. The cases could drag on well past November 3rd. A loss in the courts is likely eventually, but the idea that someone, somewhere, has stolen the election may grow.

Given such a litany of risks, you can understand the predictions of imminent doom. So it is worth underlining that, although America’s electoral system is untidy and frequently confusing, with rules that vary from place to place, it still works. The constitution says that elections will be administered by the states, not the federal government. That limits any president’s ability to mess with them. Even within states, election administration is decentralised, relying on county officials who take their jobs seriously, and on the sort of doughty volunteers usually found at bake sales. Across the country, officials committed to the integrity of the vote are preparing to repel attempts to undermine it.

Instead, the damage is more likely to be further vandalism rather than outright theft. The world’s democratic superpower, whose idealistic system of government was long admired elsewhere, is now also a cautionary tale about how fragile trust is. Only 25% of voters say they are confident the midterms will not suffer interference. A majority in both parties think the other side is too extreme. Only 10% say both parties are honest and ethical. In a recent poll, more than half of Americans reckoned their fellow citizens were morally bad; only 17% of Britons and 7% of Canadians did so. That is a gloomy way for America to celebrate its 250th birthday this summer.

This mistrust is not all the president’s doing. Polarisation predates him; changes in media and technology matter. But a lot of it is. Trust in elections dipped after the Supreme Court decided Bush v Gore after the vote in 2000. Then it recovered, until Mr Trump came along. He has relentlessly sought advantage by casting doubt on the good faith and honesty of anyone who opposes him, from whichever party. Politicians like to claim that the election they are competing in is the most important of their lifetime, but Mr Trump raises the stakes by framing each contest in existential if not apocalyptic terms.

That may turn out to be this president’s most enduring domestic legacy. Although he probably cannot steal the midterms, he may well further damage democracy. Dangerous ideas are taking root. If the other side are thieves and traitors, as he often suggests, partisans may once again feel that rising up after an election is their patriotic duty. If the result is close, they may reason that treachery is what got the other side over the line. If the other lot stole the election, to impose their policies on all Americans would be wrong. By taking away Americans’ trust in each other, Mr Trump is making it easier for future would-be strongmen to exploit their loathing. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Will it work for his successor?

Tim Cook wrote a winning recipe for Apple Will it work for his successor? April 23rd 2026 SOMETIMES A COMPANY encapsulates its times. Ford and its Model T captured the go-getting mood of the Roaring Twenties. IBM embodied the techno-optimism of the first computer era in the 1970s. General Electric epitomised the cutthroat capitalism of the 1990s. For much of this century the company of the moment has been Apple. The iPhone, a sleek gateway to the all-consuming app economy, has been as evocative of the zeitgeist as big hair was of the 1980s. So has Apple’s embrace of globalisation and, especially, of China—as a place first to make gadgets, then to sell them.

For the past 15 years this icon of the digital era and free trade has been led by Tim Cook. It may have been Steve Jobs, his legendary predecessor, who dreamt up the iPhone, but it was Mr Cook who put one in 1.5bn pockets, making the Apple logo ubiquitous from San Francisco to Seoul. Apple’s market value has grown 11-fold on Mr Cook’s watch as, counting everything including dividends, he has stuffed some $4.6trn into the pockets of Apple’s shareholders. That is over $850m for every day of his long tenure.

On April 20th Apple said that this tenure will end in September. Mr Cook’s successor, John Ternus, must decide if this winning formula—smartphones + global supply chains = $1trn in cumulative net profit over 15 years—needs updating for the age of artificial intelligence (AI) and geopolitical fracture. It is a tough call. And it matters beyond Apple.

When Mr Cook took over, his strategy was a bet on the future: of technology and of the global economy. Technologically, Apple gambled that, as Jobs envisioned, the smartphone would be the principal interface between people and the digital world. That proved correct. As a result, Mr Cook did not himself oversee the launch of any product as transformative as the iPhone. AirPods are popular and Apple sells more watches than Switzerland, but these are mere smartphone accessories. The ambitious idea of an iCar was quietly scrapped. Who remembers anything about the Vision Pro, apart from its $3,500 price tag? But by continuously improving the iPhone, expanding the range of phones and selling them in more places, Mr Cook built an empire.

Apple’s twin economic wager, on global supply chains and China, reflected the extent of globalisation. By the 2010s, most goods-trade barriers had gone. Each year countries were exchanging products and services worth nearly 60% of world GDP, up from around 40% in the 1990s. China went from 10% of the global economy in 2011 to 17%, from technological supplicant to a frequent leader , and from four Apple stores to 50.

Mr Ternus, an Apple insider for many years, seems inclined to stick to the same approach . The danger is that AI and trade wars make Apple a bet on the past. It will thrive if making AI models is less lucrative than selling AI applications and the hardware on which they run; if trade barriers reconfigure cross-border supply chains rather than destroy them; and if relations between China and the West are strained but not ruptured.

For now conservatism is paying off. iPhones can still be “Designed by Apple in California—Assembled in China” or, increasingly, “in India”. Apple must get its AI act together, but eschewing model-making has mostly kept it out of a $3trn data-centre binge which may end in huge losses. Its market value is not far off an all-time high of $4.2trn. It is easier than ever to see how all that could change. But many elements of the globalised, consumer-centric world Mr Cook’s Apple helped create are worth preserving. With luck, they will endure. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

America’s new defence-tech industry should be a model for Europe

How to bolster the arsenal of democracy America’s new defence-tech industry should be a model for Europe April 23rd 2026 THE WORLD is rearming fast. Military spending has increased in real terms every year for the past decade. The leap in 2024 was the largest, in inflation-adjusted terms, since the cold war. European members of NATO, their bare armouries exposed by Russia’s invasion of Ukraine, will spend an additional €300bn ($353bn) per year by the end of the decade. China’s military spending grows each year by an amount equivalent to Taiwan’s entire annual defence budget, even as the rest of Asia scrambles to keep up. But it is arms, not budgets, that deter. And producing those arms requires the right sort of defence industry, tailored to the wars of the future.

The wars in Ukraine and Iran appear to hold different lessons. Ukraine has pioneered the use of low-cost drones, whose software is updated weekly, to stave off a much larger Russian army. Israel and America have used expensive F-35 jets, B-2 bombers, air-launched ballistic missiles and scores of refuelling tankers to attack Iran. In fact, they have much in common.

One message is that Western countries need more defence-manufacturing capacity. In just 40 days of war America used up half its stocks of high-end air-defence munitions. Another is that armed forces need to balance a few high-end systems and a much larger number of cheaper, more numerous and easily replaceable weapons. A third is that, regardless of whether a weapon is big or small, expensive or cheap, crewed or uncrewed, what increasingly matters is the software inside. The most effective weapons are those infused with the best algorithms, trained on the best data and updated most frequently.

All this explains why America’s defence industry is in the throes of dramatic change. Palantir, a data firm which builds the core of America’s and NATO’s command-and-control software, is now worth more than RTX (formerly Raytheon), the most valuable of the defence primes. Palantir, SpaceX and Anduril form a trio of “neo-primes”.

They behave like software-first firms competing with armsmakers who came late to the software revolution. To make weapons, the neo-primes have drawn from modern manufacturing methods, including those of the car industry. Though their ability to scale up is unproven, they are hungrier than the incumbents, and spend heavily on in-house R&D.

The neo-primes have shaken up the defence industry for the better, even as the Pentagon has descended into chaos. Pete Hegseth, America’s secretary of war as he styles himself, has carried out purges that have been the largest politically motivated mass sackings of top brass in modern American history. He appears to revel in war and violence rather than treating them with sobriety. Mercifully, though, he also has the right ideas about procurement, which should help America adapt to the new era of warfare.

In November last year, Mr Hegseth said the Pentagon would buy things faster, speeding up its Byzantine processes. He gave front-line commands a greater say in what gets bought. And he promised to draw more on commercial, rather than bespoke, technology. The changes should create the conditions in which upstarts can compete with the legacy firms to forge a more diverse and dynamic industry.

Alas, Europe is far behind. It has hardly any big new defence-tech companies. Small and innovative firms are stifled by a fragmented market, limited access to venture capital and low demand from governments. Nearly all of Germany’s €100bn special defence fund will go on traditional kit.

Last year Britain’s defence review said 10% of equipment spending should go to “novel” technologies. Astonishingly, some insiders argued this should include the F-35, a jet which first left production lines 20 years ago. Skycutter, a British drone company, recently won a big Pentagon contract, but the firm may have to leave Britain for want of orders there.

It need not be this way. If Europe rebalances its spending and reforms procurement, its firms might compete with America’s at a time when the NATO alliance is strained. The remarkable Ukrainian defence-tech ecosystem that has sprouted up since 2022 is a valuable asset. As America steps back from Ukraine, Europe should lean in.

Britain already works with Ukraine to develop interceptor drones. Germany also has a new drone agreement with it and this month Rheinmetall set up a joint venture with Destinus, a Dutch firm making long-range missiles at a fraction of the cost of other models. Ukraine has offered to share battlefield data to train artificial intelligence, vital for the next weapon systems. Much more of this is necessary if the arsenal of democracy is not to depend on a handful of American firms. ■

Correction: An earlier version of this leader mistakenly described Destinus as Ukrainian. In fact, it is Dutch.

Binyamin Netanyahu is quick to start conflicts, but shows no ability to end them

The high price of forever wars Binyamin Netanyahu is quick to start conflicts, but shows no ability to end them April 23rd 2026 NOT ALL wars are fought alike. One reason for the 78-year survival of Israel, a small democratic country in a mostly hostile region, is that its leaders long grasped that fact. They saw how big gains come from preventing wars but, when necessary, fighting them quickly, with clearly defined and realistic aims. Short conflicts, they believed, should be a prelude to something much more valuable: a flourishing civilian life. In times of peace a country may best grow, building up its economic and technological prowess. For these reasons, over decades, Israel’s military doctrine wisely (if not always successfully) set out that wars should be limited and based on deterrence, early-warning and decisive action.

So it is dismaying to see how Israel’s current leaders have abandoned that approach. As Israelis mark the anniversary of their independence this week, they are embroiled in too many conflicts, of various levels of intensity, that have been dragging on for two and a half years. The Israel Defence Forces are over-extended on four fronts. The army has seized “security zones” in the Gaza Strip, south Lebanon and Syria and is engaged in an increasingly pitiless occupation of the West Bank. Together with America, it has just carried out a campaign of air strikes on Iran, the second round in less than a year. For all their short-term operational successes, it is not clear what benefit prolonging these conflicts will bring; and the costs are mounting.

The way Israel fights its wars has become bloody and ineffective. Israel was fully justified in responding forcefully to the massacre of its people by Hamas on October 7th 2023 and the missile launches by Hizbullah the next day. But the tactics it has since used in the Gaza Strip and southern Lebanon have caused many thousands of unjustified deaths and continue to cause suffering for millions of civilians displaced from their homes. Despite those years of fighting, Israel has failed to eliminate the threats on its border. Both Hamas and Hizbullah, though weakened, retain a grip.

Compounding those humanitarian and military failures are strategic ones. Traumatised by October 7th, Israel has sought the unattainable goal of winning total victories to guarantee total security. As a result, it has shunned more limited objectives that were achievable and which could have re-established deterrence and begun to build a more lasting settlement.

It rejected proposals by the Biden administration to replace Hamas with the Palestinian Authority in Gaza. It has plunged Lebanon into another war, rather than help its government limit the power of Hizbullah. In Syria it is squandering an opportunity to reach a security agreement with the new government. And it is unclear that Israel has any influence over the on-off negotiations between America and Iran.

Israel’s defenders argue rightly that the Middle East has no simple diplomatic solutions and that the Jewish state has earned the right to be eternally vigilant. But Israel’s overwhelming military superiority is not a solution in itself. One consequence is that people who once sympathised with Israel in democracies around the world, most notably in Europe and America, have grown increasingly hostile to it.

This is in large part the doing of Binyamin Netanyahu, the prime minister. Like his predecessors, he used to be reluctant to fight. Today, perhaps anxious to avoid a reckoning for his failings before October 7th, he seems driven to repeatedly escalate conflicts in the hope of “changing the map of the Middle East”. Israel’s generals, who could once restrain over-ambitious prime ministers, have become hesitant to speak out.

Elections are to be held by the end of October. Could they bring a new strategy? Campaigning will give Israelis a chance to debate whether it is wise to fight on so many fronts. Yet many feel unsafe after the massacre of 2023 and are unwilling to listen to moderate messages from their leaders.

Voters and political opponents are not scared of confronting Mr Netanyahu. They question him, often aggressively, over constitutional affairs, corruption and his coalition’s subservience to ultra-religious interests. But few seem ready to ask if Israel needs to fight its many wars for so long or so cruelly. The main opposition figures offer no compelling alternative, preferring to limit their criticism to ways in which military operations are being carried out .

Israel’s politicians are letting their people down. Voters need to hear hard truths. Israel’s founding generations grasped that wars must have limits. Israelis need to recognise that, even after the horrors of October 7th, those limits still exist. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The special relationship? It’s complicated

Pomp and pageantry won’t save Britain’s alliance with America The special relationship? It’s complicated April 23rd 2026 For preference, he talks to plants. But next week King Charles III must stiffen his upper lip and get chummy with Donald Trump. The royal visit to Washington is an attempt by Britain’s government to win back the president’s favour by indulging his love of pomp and bling.

It comes as the special relationship looks worse than at any point since 1956, when America vetoed an Anglo-French attempt to seize the Suez Canal. Today, another war over a Middle Eastern waterway has led to another blazing row. “This is not Winston Churchill we are dealing with,” grumbles Mr Trump of Sir Keir Starmer, Britain’s beleaguered prime minister. Sir Keir has responded with the strongest words in British English: “I’m fed up.”

Mr Trump is mostly to blame . He bullies and insults America’s allies, started a war that hurts them and rages when they don’t immediately back him. Fully 53% of them now believe that America is a negative force in the world, up 19 points since January. Given a choice, they are twice as likely to favour more co-operation with Europe than with America.

Most long-term relationships have ups and downs. When Churchill first spoke of a “special relationship”, America, Britain and other allies had just defeated Nazism and were confronted by the Soviet “iron curtain” (which Churchill christened in the same speech). Over the next 80 years, they linked arms against communism, shared copious intelligence and shed blood together in Korea, Afghanistan and Iraq.

Often Britain has overestimated its importance. As Alex von Tunzelmann, a historian, said of Anthony Eden, the prime minister during Suez, “[He] had believed it might be possible for British brains to run the world with American muscle. He had not expected the Americans to develop ideas of their own.” Always, a hefty share of Britons have been wary of following Uncle Sam’s lead—many were calling Sir Tony Blair America’s “poodle” long before the Iraq war became a fiasco. But no British government has ever imagined that an American president might turn his back on the relationship. Until now.

The relationship may recover when Mr Trump has left office. But Britain should not take this for granted. Post-Brexit, it is adrift politically, geostrategically and economically. Its government is weak. It has lost its role linking Europe to America. And it is relatively poorer. In 2007 its income per person was 20% lower than America’s; now it is over 30% lower.

Aggravating all this is an identity crisis. Britain’s global ambitions are as confused as its messages on whether or not it welcomes migrants. Future, factually grounded American presidents will surely conclude that relations with Brussels or Delhi matter far more than those with dear old Blighty.

Yet Britain has real strengths, and indeed leverage. It is good at attracting global talent; it is located in an enviable spot and has military bases around the world; it has unique prowess in intelligence, special forces, maritime security, defence tech and AI safety; its soft power is huge for such a small country, which helps explain why MAGA types are so obsessed with London’s supposed downfall while not giving a monkey’s about Berlin or Paris.

The first step towards rediscovering Britain’s mojo is to be honest about its shortcomings. As Mr Trump says, Britain needs to spend more on defence. In the past, it has assumed that any wars would be fought alongside the Americans, so gaps in equipment did not matter much. Now that it may have to act alone, or with Europeans, it looks naked.

Britain should accept nuclear dependence on America for now (though hedge for the future) and preserve intelligence co-operation. It should move closer to Europe. And it needs skilful leadership. This week Sir Keir was further weakened by his attempts to explain how he appointed Peter Mandelson, a friend of Jeffrey Epstein, a dead American sex offender, as envoy to the court of Mr Trump. Alas, leadership is something Sir Keir is unlikely to provide. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

After Mythos, a laissez-faire approach is no longer politically tenable or strategically wise

America wakes up to AI’s dangerous power After Mythos, a laissez-faire approach is no longer politically tenable or strategically wise April 16th 2026 SHOULD A HANDFUL of men be entrusted with the world’s most potent new technology? Five geeks so famous that they can be identified by their first names—Dario, Demis, Elon, Mark and Sam—exercise almost godlike command over the artificial-intelligence models that will shape the future. The Trump administration has stood aside even as those models have gained jaw-dropping capabilities, convinced that unfettered competition between private firms is the best way to ensure America wins the AI race against China.

Until now. Suddenly, America’s free-wheeling treatment of AI looks as if it is coming to an end. The reason is that the models’ dizzying progress also poses a threat to America’s own national security, unnerving members of the Trump administration previously more inclined to worry about overregulation. At the same time, growing resentment among American voters is turning AI into a political lightning-rod. A laissez-faire approach is no longer politically tenable or strategically wise.

The watershed was Anthropic’s announcement of Claude Mythos on April 7th. The model-maker’s latest creation is so startlingly good at finding software vulnerabilities that, in the wrong hands, it would threaten critical infrastructure , from banks to hospitals. AI models increasingly pose other risks, too, from biosecurity hazards to industrial-scale scamming.

Anthropic’s boss, Dario Amodei, wisely thought Mythos too dangerous for general release. Instead he has reserved it for use by around 50 big firms, in computing, software and finance, so that they can boost their own defences. America’s treasury secretary, Scott Bessent, was so unnerved that he summoned the biggest banks for urgent talks.

It was not the first time the administration had acted. Only weeks ago the Pentagon stepped in after Mr Amodei refused to allow Anthropic’s model to be used in fully autonomous weapons or for mass domestic surveillance. Then, too, the Trump administration was alarmed—because of the power a single firm wielded over a technology central to national security.

A backlash among voters will add to the pressure on the administration to intervene. Opinion polls are leading ever more politicians to think that AI will be one of the big issues in elections in 2028. Americans are far more sceptical of AI than people in other countries. Seven out of ten think AI will hurt job opportunities , a sharp rise from a year ago (and well before they have good evidence). Grassroots opposition to data centres is surging, even though AI has little or nothing to do with rising electricity prices. In a sign of the times, the house of Sam Altman, the head of OpenAI, has been attacked twice in recent days.

History suggests that, with a technology as world-changing as AI, a Mythos moment was inevitable. From John D. Rockefeller to Henry Ford, America’s great industrial innovations were led by a small number of men who grew immensely powerful. Eventually, 20th-century governments stepped in to tame over-powerful industries, from the trust-busting that broke up Standard Oil to the creation of the Federal Reserve and the breakup of AT&T. Those times were at least as polarised and febrile as today’s are. And our calculations suggest that the AI gods are not yet any more dominant than their historical predecessors were.

But history also suggests that controlling AI will be fraught. That is partly because the stakes if things go wrong are so high. It is also because AI is evolving at warp speed.

The trade-offs are acute. Economic growth will benefit from rapidly diffusing AI’s benefits, but the potential backlash could easily lead to overregulation. Doing nothing could leave America vulnerable to malevolent AI-induced chaos, but regulatory overkill would ensure that China wins the AI race. That makes this a perilous moment.

Time is short. Two years ago, during the Biden administration, discussions about regulation were largely about AI’s potential risks. Today its capabilities are already alarmingly powerful and growing more so with every release. The pace of innovation means that debates over the proper role of government, which played out over years, even decades, in the past, now need to be resolved in months.

And the technical hurdles to a more interventionist approach are daunting. Tools of government control, such as nationalisation, are ineffective because talented engineers can move freely between companies and computing power is a commodity. Worse, the leading model-builders are only months ahead of their open-source competitors, including those in China. Sooner or later the capabilities of their models will be available to all .

Even so the Mythos moment could be when a workable scheme to control AI starts to take shape. Trusted users would get early access to the most powerful new models: OpenAI is following Anthropic by rolling out its latest tool to a limited group of vetted cyber-security professionals. Before allowing these models to be broadly commercialised, the government could demand certification from industry-led bodies that have tested them for different uses.

This idea has advantages for the big model-builders and the government alike. It avoids the lengthy process of creating a new regulator. By allowing only a few premium users, it enables the model-makers to charge higher prices and limit the use of scarce computing power. Meanwhile, the government can restrict who can use the most powerful models, reducing the risk that China can copy them and catch up faster.

But it also suffers from grave problems. Limited release will reduce competition and increase the clout of entrenched AI companies. It will slow the diffusion of AI’s benefits and create a two-tier system within America’s economy, disadvantaging the many firms that are repeatedly deprived of privileged early access to powerful new models. What if making AI defences takes a long time or is impossible? What about open-source models? How can you insist that they also follow these rules?

A regulatory system built on these foundations could prove unjust. Insiders could secure themselves against frontier threats; outsiders would have to hope for the best. The opportunities for lobbying and outsize profits would be immense. That would test the honesty and competence of the most openly corrupt administration of America’s modern political era. And a fix that concentrates power and wealth yet further among the handful of AI gods risks aggravating the very political backlash that is starting to worry Washington.

Moreover, the Mythos approach can be only half the solution. AI safety cannot be secured nationally. Eventually it will demand international co-operation, starting with China. The new focus on cyber-security also needs to be matched by urgent thinking about the economic and social effects of AI. Dealing with the disruption to jobs and designing an AI-adapted tax system that favours labour are huge problems for which no one yet has good answers. This needs to change. The Mythos moment is a wake-up call for AI safety. It demands hard thinking in other areas, too. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

America and Iran must resume their efforts to strike a deal, even though it is sure to be an imperfect one

How to end the war in Iran America and Iran must resume their efforts to strike a deal, even though it is sure to be an imperfect one April 16th 2026 BE GRATEFUL FOR small mercies. The ceasefire between America and Iran may be extended. Talks that began in Islamabad last weekend may soon resume. Though the Strait of Hormuz is closed, oil markets are no more spooked than they were. And though economic damage is spreading, a deep Hormuz-induced global recession could yet be averted.

But small mercies are not enough. If they are not to return to a futile war, America and Iran will have to ensure the ceasefire produces a lasting peace, by opening the strait and settling their dispute over Iran’s nuclear programme. That will require compromise and a willingness to grapple with complexity that has eluded both sides—especially President Donald Trump.

The search for peace starts with a reckoning of America’s leverage. Mr Trump’s recent imposition of his own blockade was an attempt to strengthen his hand after weeks of bombardment failed to force Iran’s capitulation. It traps tankers taking as much as 2m barrels a day of Iranian oil to market even as war raged. The idea is to use the economy to get Iran’s hardliners to give ground.

It is a less harmful tactic than the many bad ideas America’s president has aired in recent weeks—bombing power plants, sending troops to be sitting ducks on Kharg Island or wrecking the oil industry. A dire economy was Iran’s greatest weakness before the war began. Mass protests in January were the result of fury over the currency’s collapse, shortages and joblessness. American and Israeli bombs have worsened all those things and made the regime even more desperate for sanctions relief.

The blockade’s success, however, is highly uncertain. Such measures usually take months, even years, to force compliance. The regime is desperate to alleviate sanctions and knows that this is its best chance to strike a good bargain . That may mean it is prepared to endure the blockade for longer. Mr Trump may lose patience as petrol prices surge for American consumers.

What matters most, therefore, is whether talks can produce a deal. The first stage is reopening the strait, which should be possible for Iran and America to agree on—after all, each side knows it could force closure again. In no circumstance should America agree to let Iran levy tolls on ships traversing the waters. That would give it a permanent hold over the rest of the region. There will have to be an argument in which America may have to trade the lifting of some sanctions in return for safe passage.

The second stage will be about Iran’s nuclear programme. The outlines of a deal are simple here, too: Iran must close off its path to a nuclear weapon in return for more sanctions relief. Unfortunately, everything about the details will be tricky.

The two sides do not trust each other—so neither will take bold steps, fearful that the other may not later honour its part of a deal. A willingness to compromise may also be lacking, because both sides want to portray a total victory at the negotiating table as a substitute for the total victory they could not achieve on the field of battle. Last, as nearly two years of negotiations for the deal with Iran in 2015 attest, nailing down the details of a nuclear programme will be fiendishly complex.

At issue is Iran’s stock of roughly 400kg of highly enriched uranium and its capacity to enrich more. America wants the stock of uranium removed from the country and a ban on fresh enrichment. Iran wants relief from sanctions and to be able to enrich—a symbol of sovereignty that it would find hard to surrender.

Compromises are available. Iran could dilute the uranium to a low level suitable for civilian use. It could forswear enrichment for a long but limited time; or it could enrich uranium as part of a consortium. Iran would not get all sanctions lifted, but some limited Iranian financial assets held abroad could be unfrozen.

To be credible such a deal needs international monitors. Even if Iran is not enriching, it must face limits on the number and calibre of its centrifuges and on theoretical work, given that post-war Iran has even more incentive to dash for a bomb. The danger is that Iran will drag out talks hoping to screw more out of America, but end up with nothing.

Even if the two sides reach an agreement, there will be no room for triumphalism . Iran will remain a threatening presence in the Middle East. Its embittered, insecure regime has discovered that it can use Hormuz and regional strikes as weapons. America has discovered that going to war with Iran is perilous. Much work will be needed to rebuild the Gulf’s security infrastructure and its economies, including in Iran.

Before America and Israel started bombing, a decent agreement may already have been within reach. It is hard to see the sum of what comes out of the fighting being any better. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Lately, Democrats have joined the charge

America will come to regret its war on taxes Lately, Democrats have joined the charge April 16th 2026 Beware any policy that is overwhelmingly popular. That usually means it has not been properly scrutinised. The latest example is taxes in America. The country is in the grip of a bipartisan tax-cutting mania . Tax-filing season has just closed and Americans are receiving hefty refunds from Donald Trump’s “Big, Beautiful Bill”—financed by trillions of dollars in deficit spending.

Not to be outdone, two Democrats in the Senate, Cory Booker and Chris Van Hollen, have put forward their own plans which, if implemented, would mean around 55% of tax filers would pay no federal income taxes. Unsurprisingly, those proposals poll tremendously well.

Giveaways are always appealing, and Americans are particularly disenchanted with the tax system at the moment; perceptions of tax fairness are at a 30-year low. Zany ideas are bouncing around at the state level, too. See, for example, the wave of property-tax exemptions for old folk, or a proposal in Georgia to eliminate income taxes that is specifically reserved for teachers.

This newspaper is certainly no fan of big government. But it is foolish to think that ordinary Americans should be exempted from taxes. For the burden to be bundled onto a disfavoured few—be they foreigners, via tariffs, in Republican plans or the rich in Democratic ones, as in California’s mooted 5% wealth tax on billionaires—would be economically unrealistic and politically corrosive.

First, the economics. It is hard to argue that Americans are over-taxed. Barring some Democrat-run states, America has low taxes compared with most other rich countries. The tax code is already progressive; making it more so would distort the incentive to earn. And America is running budget deficits worth 6% of GDP, the highest on record outside recession or wartime. The Congressional Budget Office, a fiscal watchdog, expects that figure to keep rising.

So this is a bad time for both parties to enter an irresponsibility spiral. At the IMF spring meetings in Washington this week, economists were beginning to wonder when, rather than if, America will suffer a bond-market reckoning worthy of Liz Truss, briefly Britain’s prime minister. As emerging-market finance ministers have long known and their counterparts in Europe are rediscovering, living under the bond market’s microscope is not pleasant.

Then take the politics. The notion that tax giveaways will buy politicians lasting popularity is dubious. Mr Trump’s first-term tax cuts did not prevent him from being beaten in 2020. His approval ratings have kept sliding during this refund season, too. Rishi Sunak, Ms Truss’s successor, jammed through payroll-tax cuts worth 0.7% of GDP ahead of his bruising election loss in 2024. When British voters were polled about his list of achievements, they ranked those tax cuts below banning the XL Bully, a nasty sort of dog.

Democrats hope that cutting taxes will assuage voters’ concerns about affordability . Yet that angst does not reflect actual falls in purchasing power. Wage growth for the average American has outstripped inflation for years. Instead, voters keep getting sticker shock from high nominal prices. Padding incomes by lowering taxes won’t fix that problem.

Removing so many Americans from the tax base entirely, as the latest Democratic ideas propose, sounds nice but comes with an additional downside. Taxes, if not quite the price of civilisation, do give citizens a reason to care about efficient and effective government. Severing that connection, and leaving large chunks of the electorate as mere recipients of state largesse, risks deepening America’s political dysfunction. That would be lamentable on its own terms, and put the mature political conversation about its fiscal choices that America needs even further out of reach. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The country will become a test case for reversing democratic decay

Peter Magyar’s victory will keep Hungary in the spotlight The country will become a test case for reversing democratic decay April 16th 2026 VIKTOR ORBAN, Hungary’s corpulent prime minister, revelled in his role as the champion of the growing band of populist nationalists in Europe and beyond. Only days before a general election on April 12th, America’s vice-president, J.D. Vance, visited Hungary to proclaim that a vote for Mr Orban was a vote for Western civilisation.

Mr Orban’s crushing defeat in that election was a rebuke to the veep’s arrant nonsense . But it also means that the election’s triumphant—and solidly conservative—winner, Peter Magyar, will be seized on by centrists and progressives as a case study in how to reverse democratic decay.

One conclusion is that nothing turns the page like an overwhelming victory. After years of chipping away at Hungary’s independent institutions, Mr Orban could have aped Jair Bolsonaro of Brazil and Donald Trump of America by contesting a close result. In the event, with his Fidesz party on track to win just 40% of the votes and 56 seats, compared with 52% and 137 seats for Mr Magyar and Tisza, the Budapest bulldozer had the grace to concede promptly.

Mr Magyar will now command a two-thirds majority in the parliament, just as Fidesz did. That gives him the legal power to amend the constitution, unless the president risks voters’ anger by vetoing every amendment. During 16 years in charge, Mr Orban jammed Fidesz into every corner of the state. The party controls the supreme and constitutional courts. Its allies own most of the broadcast, online and print media. It has apparatchiks throughout the civil service, in state-owned companies and the education system.

A second conclusion is that voters are more susceptible to arguments about corruption and economic competence than to warnings about inchoate tyranny. On the campaign trail, Mr Magyar never tired of pointing out to Hungarians how Mr Orban and his cronies were making out like bandits. And that is precisely because they were bandits. Rigged public contracts, favours from regulators under Fidesz’s thumb and the diversion of European Union subsidies all fattened the wallets of those favoured by Mr Orban.

Voters want Mr Magyar to restore the rule of law , revive Hungary’s economy and eradicate corruption and the crooks who benefit from it. Because the Fidesz machine could yet hinder his ability to govern, Mr Magyar should be ruthless in dismantling its controls. He must also act quickly. Poland, which voted in a new government in 2023, has demonstrated how hard it can be to repair the damage caused by years of populist rule.

But Mr Magyar must also be magnanimous in the reconstruction that follows. Tisza did not win its victory alone. Nearly all the other opposition groups in Hungary—conservative, liberal and leftist—laid down their standards to unite behind Mr Magyar. They need to share in the new Hungary, too.

A third conclusion is that nobody likes foreign interference. That applies to Mr Vance, who warned of the malign intentions of bureaucrats from Brussels only to find that meddlers from MAGA are not wildly popular, either. But it also applies to Russia’s president, Vladimir Putin, who has courted Hungary with cheap energy and special favours, and to China’s president, Xi Jinping, who has seen Hungary as a gateway to Europe. By rejecting Russian and American efforts to influence their votes, a majority showed that they want to belong in that least fashionable sphere of influence, the EU.

The responsibility for putting all this right falls upon the new leader. Mr Magyar remains something of a mystery. He defected from Mr Orban’s camp only two years ago. As a campaigner, he was extraordinary, criss-crossing the country to hold rallies against Fidesz and unite a broad coalition behind Tisza.

In office, he deserves help. Now that Hungarians have elected a government bound to abide by the law, Europe should quickly unlock the billions of euros it has withheld from the country. That might seem like another form of foreign interference, but Hungary freely decided to become an EU member and to follow its rules. Mr Magyar has an awesome task ahead. Liberals everywhere will be rooting for him. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

But the American president is misinterpreting an incomplete success

Donald Trump has made Venezuela a better place But the American president is misinterpreting an incomplete success April 16th 2026 Before its strongman leader, Nicolás Maduro, was captured by American special forces on January 3rd, Venezuela was a grim, hopeless place. His regime silenced critics and stole elections. Some opposition politicians were killed, tortured or thrown into jail. The economy had collapsed; 8m people had fled. The notion of Venezuela spontaneously becoming more open or prosperous seemed too much to hope for.

But in the 100 days since Mr Maduro’s seizure, Venezuela has changed for the better. Opposition politicians, many only just released from prison, are meeting openly. Protests are no longer routinely suppressed. Investors are sniffing around oil, gas and mining assets . Delcy Rodríguez, previously Mr Maduro’s deputy, is running the country to Donald Trump’s liking, albeit under the threat of violence if she fails to comply.

None of this would have happened without Mr Trump. But the president is muddled about what Venezuela shows, in two important ways. The first is that he talks about the country’s transformation as though it were complete, speaking of how “Venezuela has worked out so incredibly”. The second is that he holds Venezuela up as a model for regime change. “What we did in Venezuela”, Mr Trump said in March, when asked about his plans for Iran, “I think is the perfect, the perfect scenario.” On both counts he is wrong.

For one thing, Venezuela’s positive transformation is only limited so far. It will not be secure until democracy has been rekindled. Foreign investment will not pour in at the scale needed while the rule of law is backed only by Mr Trump’s word that he will keep the regime’s cronies in line. What’s more, having had their hopes dramatically raised, Venezuelans will bridle without more progress away from dictatorship. Those jails still hold some 480 political prisoners. Investors want stability; delaying elections will eventually cause unrest.

The return of democracy is a possibility. However, the path towards it is narrow and murky and, without sustained American pressure, it may vanish altogether. It probably requires María Corina Machado, leader of the opposition, to return to Venezuela and campaign for elections. After she was barred from standing in the presidential vote in 2024, Venezuelans voted overwhelmingly for her political ally, Edmundo González; Mr Maduro pretended he had won. This time, Venezuelans may have to take to the streets at the same time as seeking negotiations with those in power.

The threat of his big foreign-policy success being marred by protesters angrily demanding change may motivate Mr Trump to press for elections. Marco Rubio, his Cuban-American secretary of state, also has staked much on Venezuela’s success, including his own presidential ambitions . But the long game is hardly a Trumpian strength. Besides, Ms Rodríguez will surely seek to string things out, hoping that Mr Trump will lose interest. The temptation for America to trade democratic delay for short-term stability will be strong.

Even if Mr Trump and his officials can nurture a democratic Venezuela, his methods are not easily reproduced elsewhere. The Venezuelan regime was uniquely vulnerable to Mr Trump’s transactional approach, because it has long been corrupt and ideology-free. Mr Maduro was no more than the gangster-in-chief. By removing him, Mr Trump helped others profit more. With few shared beliefs beyond grabbing power and money, it cost them little to fall in line with America. Venezuela’s history of democracy and its robust political opposition also aided Mr Trump, by giving Venezuelans a group apart from the regime to rally around. Most interpreted Mr Maduro’s seizure narrowly, as an attack on a hated dictator.

Contrast this with Mr Trump’s failed attempts to topple the regime in Iran. The strike at the start of the war that killed Ali Khamenei, the country’s supreme leader, prompted the rest of the regime in Tehran to close ranks and fight back. However corrupt and self-serving the Islamic Revolutionary Guard Corps may be, a shared ideology helps prevent the regime from fracturing. By contrast, Ms Rodríguez’s deal with America was consistent with the self-serving values of Mr Maduro.

Iran’s regime is far more powerful than the one in Venezuela. But even tiny Cuba has so far held out against Mr Trump’s aggression. For 66 years the island has been run by the Castro family, who are true believers in communism regardless of the country’s corruption. Neither the regime in Cuba nor that in Iran faces an organised domestic political opposition.

Mr Trump sees ideology as weakness. He thinks making money is all that really counts. If he keeps following the model he stumbled into in Venezuela, reality will prove him wrong. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

So why won’t it be prevented?

The impending global food shock is preventable So why won’t it be prevented? April 16th 2026 FOUR YEARS ago the world averted a humanitarian catastrophe—or seemed to. One giant cereal producer, Russia, invaded another, Ukraine. Fears of food shortages spread in poor countries unable to pay suddenly astronomical prices for wheat and other staples. Then the two foes agreed to let grain-laden ships sail from their Black Sea ports. Markets calmed; hunger vanished from the headlines. But not from destitute lives. The Ukraine war is thought to have killed more people in the global south than on the battlefields of eastern Europe.

Now a war in the Gulf threatens a similar slow-motion calamity outside the theatre of conflict. The poor in Africa and Asia are already growing less on their plots and skipping meals. The UN’s World Food Programme warns that if the Strait of Hormuz is not open by mid-year, the more than 300m people who already struggle to feed themselves will be joined by another 45m. The world could help avert this outcome. The tragic reality is that it won’t.

Although Iran and its neighbours are not big food exporters, they are a critical link in agricultural supply chains. The blockaded region sells 30% of globally traded fertiliser, 20% of liquefied natural gas (used as feedstock in making fertiliser and as fuel for cooking) plus 15% of oil (needed to power farm equipment). If the nearly 2m tonnes of fertiliser stuck behind the blockaded strait does not start moving soon, many crops will not be nourished at the right time in the growing season. Yields will plummet, prices will rise and many poor city-dwellers will go hungry.

Fertiliser shortages will hurt the poor world’s agribusiness more than its subsistence farmers, who use little of the stuff anyway. But countrysides will bear the brunt of a geophysical disaster that is about to compound the geopolitical one. The world is due to be hit by an El Niño, a weather pattern that temporarily warms the planet every few years and creates a pattern of droughts and floods across the world. This one could be especially powerful.

Though the gentler effects of El Niño outside the tropics can help farmers there, in poorer places its consequences are all too often bad. Argentina and Uruguay tend to get too much rain; southern Africa, India and South-East Asia too little. The “super” El Niño in 2015-16 caused food-crop production to decline by up to two-thirds in some southern African countries. The last El Niño, in 2023-24, brought the worst drought in 100 years to the region as a whole. Crops failed and thousands of cattle and other livestock died. According to the World Bank, more than 30m people required food assistance.

The true strength of this year’s El Niño will not become clear until the northern summer, but one thing is already certain. Super or not, it will layer on top of accelerating global warming, which makes dry regions drier and wet ones wetter. It will thus stack extremes on top of extremes—of weather and of poverty.

The worst could yet be averted. Much of the needed fertiliser already exists and there is still time, in some regions, to apply it to this year’s crops. Though no amount of urea can save a crop ripped out by a landslide or singed by drought, careful application can limit some of El Niño’s ravages. The world is not short of calories, either. Lots of the corn (maize) that is converted into ethanol for cars could instead feed humans. And even as rich countries’ governments spend money to spare their citizens from the fuel shock caused by the war in the Gulf, they have the means to pay for food assistance in the poor world.

So much for the theory. Iran should allow fertiliser to pass through the Strait of Hormuz; America should not blockade urea shipments from Iran. Tragically, neither shows any inclination to do so. High petrol prices make biofuel more attractive to farmers, not less. And rich countries are in a selfish mood. Failure to act thus looks baked in. In the face of an avoidable disaster, that is shameful. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

There is a reason he wants an exit from Iran

Donald Trump is the war’s biggest loser There is a reason he wants an exit from Iran April 9th 2026 NOT ALL wars have a winner. But every war has at least one loser and if—a big if—the ceasefire marks the end of the war in Iran, the biggest loser will be Donald Trump. The conflict has set back his chief war aims and revealed the shallowness of his vision for a new way of wielding American power.

The peace is desperately fragile. America and Iran cannot agree on whether it covers Lebanon, being attacked so hard by Israel that the threat to the broader ceasefire seems intentional. They dispute how Iran should open the Strait of Hormuz, an American precondition for talks. And their negotiating positions are so far apart that they cannot agree even on what plan they are to discuss in Islamabad at the weekend.

The best reason to think Mr Trump will not return to war is that he now grasps he should never have started it. His abhorrent chest-beating posts threatening to destroy Iran look like attempts to dress his climbdown in Kevlar. He knows that renewed war would panic the markets and that having hailed a “Golden Age” in the Middle East, the player of four-dimensional chess would risk looking a fool.

Iran, too, has reasons to hold back. Its leaders keep being killed. Though they care little about their citizens, including the thousands who have died in the war, the wholesale destruction of power and transport networks would make the country harder to govern. They also want sanctions lifted. The regime will also fancy that time favours it at the negotiating table. America cannot permanently keep its troops poised to attack. If war breaks out again it will be because Iran overplays its hand.

The most likely outcome is therefore a wounded Iranian regime clinging to power and holding out for maximal goals in talks. Iran has no navy or air force; it has lost and used up many of its missiles and drones. To make more of them, it will have to contend with the fact that its economy has been set back years by over 21,000 American and Israeli strikes.

Mr Trump is calling that a great victory. It doesn’t look like one alongside his scant progress in fulfilling the war’s three most persuasive aims: to make the Middle East safer and more prosperous by taming Iran; to topple the regime; and to stop Iran becoming a nuclear power once and for all.

The war has harmed regional security. Before it began, Israel had partially dismantled Iran’s network of proxy militias. Yet Iran has now established a new source of leverage, by attacking Gulf countries and blocking shipping through the Strait of Hormuz. Iran is seeking to charge a toll for use of the strait. Mr Trump has even mused about splitting the revenues. The Gulf states and their customers can probably manage to resist such an affront to freedom of navigation. But a tussle lies ahead.

Even after oil producers have built new pipelines to avoid the Gulf—the work of several years—Iran will be able to strike critical infrastructure. The Gulf countries, which market themselves as oases of calm, must ask whether they can depend on America. Or should they rethink their security by doing more themselves or even finding an accommodation with Iran?

The regime remains, despite Mr Trump’s feeble claim to have brought it down. He may be hoping that Iranians soon rise up against their oppressors so that he can claim the credit. That is possible, but it looks less likely now than before the war, when the regime was more unpopular than at any time in its 47-year history. With Ayatollah Ali Khamenei ailing, it faced a perilous transition to a new generation. The war has brought about that transition, anointing Ali’s son, Mojtaba. Unlike Ali, he is a figurehead. Control lies with the Islamic Revolutionary Guard Corps and its rivalrous factions—all of them belligerent nationalists.

And the war may have aggravated the nuclear threat. America and Israel did further damage to Iran’s infrastructure, but 400kg or so of highly enriched uranium—enough to make ten bombs—is still buried at nuclear sites. Mr Trump is insisting that Iran surrender this “nuclear dust”. Iran wants sanctions relief, but the incentive to deter future attacks by using it to make a bomb has increased, potentially leading to regional nuclear proliferation. That would be a dire outcome, but to stop it Mr Trump and future presidents may have to strike every few years. On the evidence of this war, that will be hard to sustain.

Where does this leave the architects of this conflict? Never has Israel wielded such military power as it does today. But the war showed the limits to what this can achieve and how its appetite for pre-emptive attack is leading to fear and loathing in the region. For many Israelis, to fight as America’s equal stirred great national pride. Yet even as Israel has earned the praise of Republican politicians, 60% of Americans now look unfavourably on it, a rise of seven percentage points from last year. That leaves Israel weaker.

America under Mr Trump has even more to reflect on. The country used to derive its power by marrying military strength with moral authority. But when this president threatens to wipe out the Iranian civilisation—a genocide by any other name—he treats morality as if it were a source of weakness.

Some in the Trump administration behave as if America is tied down by things like international law and the Geneva conventions. Liberated from those constraints it will be more powerful. The war has shown that “might is right” is not just a desecration of decades of foreign policy, but a fallacy. Although America’s military superiority was on full display in Iran— integrating artificial intelligence into operations, rescuing downed pilots, achieving supremacy at low cost—it also revealed deep problems.

The war has shown that the value of America’s might is easy to overestimate. Its factories cannot resupply its armed forces fast enough, whereas Iran fought an asymmetric war with limited weapons. Too much testosterone leads to wretched judgments that confuse lethality with winning. Overwhelming firepower without a strategy saps American strength.

Iran has a wicked regime, but a just war depends on a sober judgment that violence is a necessary last resort. Instead Mr Trump treated Iran as a vanity project, in which America’s strength absolved him of the responsibility for thinking through the consequences of choosing to attack. Might alone is not right. Sometimes it fails even to bring victory. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Even if the Strait of Hormuz reopens, expect lasting change to energy markets

A ceasefire will not prevent the Iran war’s economic harm Even if the Strait of Hormuz reopens, expect lasting change to energy markets April 9th 2026 THROUGHOUT THE war in Iran most investors have bet that an economic catastrophe would not take place. Oil and gas prices would need to rise to the stratosphere to destroy demand for the fuel that flows through the Strait of Hormuz. That would cause recession and high inflation. So commodities prices rose to painful, rather than disastrous, levels. The planned reopening of the strait seems to have justified the optimism. As we published this, stocks and bonds alike had rallied. The S&P 500 index of stocks sat only about 3% beneath its all-time high, reached in late January.

If the ceasefire fails the rally would be reversed and then some, because investors would have to price in a war that is resistant to peacemaking. If it holds, recession will be avoided, but commodities markets will still feel the effects of the war for months to come . Gulf countries have cut their output of crude by 10m barrels per day, or 10% of global supply. It will take time to restart infrastructure and get it going full pelt, and to move tankers to the right places. Insuring cargoes could be pricey, and Iran may try to impose new tolls, creating uncertainty even if it fails. There is likely to be a lasting risk premium in oil prices, reflecting the chance of renewed fighting.

This lasting disruption explains why, if futures prices are to be believed, the price of a barrel of Brent crude will end the year at around $75, about a quarter higher than was expected at the start of 2026. Similar hangovers will be felt in other commodities markets. Gas infrastructure is even harder to get going than oil wells. Qatar’s Ras Laffan export facility lost 17% of its capacity in a drone attack and will take years to repair. A shortage of fertiliser, for which the Gulf is also a crucial supplier, has already disrupted the planting season in the northern hemisphere and parts of Africa. That will reduce the supply of food and worsen global hunger. Supply chains for petrochemicals, helium and aluminium will also take time to recover.

The combined economic effect will be to dent global growth and to raise inflation materially. Central banks will keep interest rates modestly higher than they might have been; returns for investors will be lower. Businesses will worry even more about the security of supply chains. They have faced one shock after another, including covid-19, Russia’s invasion of Ukraine and American tariffs. Nobody can now deny the necessity of hedging against political risk, pandemics and wars. But the need to consider such factors deters investment and acts as a creeping tax on global economic activity.

All of which sits uneasily with buoyant financial markets. True, the resilience of the “Teflon economy” shows the adaptive power of markets in the face of disruption—and the discipline that the threat of catastrophe exerts on the likes of Donald Trump. Yet disasters cannot always be dodged and the list of tail risks is long. It includes a Chinese invasion of Taiwan and an artificial-intelligence crisis .

With energy, there is at least a silver lining to a supply-chain rethink. It never made sense for global prosperity to depend so much on a single waterway in the Gulf. Slowing climate change requires burning less fossil fuel. The need to diversify away from the Middle East will encourage more renewables capacity and a hunt for new sources of natural gas. The fracking revolution of the 2010s, from which America has benefited hugely, is an example of adaptation. The technology had its roots in the 1970s oil shocks, which also encouraged investment in nuclear power in France and the exploitation of North Sea oil by Britain and Norway.

The advantages of having a secure and plentiful energy supply are once again being made plain. The best case for the world is that the economy will dodge a 1970s-style slump—while policymakers learn 1970s-style lessons. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Europe must prepare to defend itself

Recriminations over Iran have heightened the risk of a break-up of NATO Europe must prepare to defend itself April 9th 2026 RELATIONSHIPS RARELY collapse overnight; they curdle. Bit by bit, resentments mount. Trust ebbs. Things are said that are hard to forget. Each partner builds a story in which the other is the problem. That is how war in Iran has pushed NATO closer than ever to a point of no return.

To President Donald Trump, America’s European allies put themselves in the wrong at the start of the war by being slow—and in some cases simply refusing—to allow American forces to use their own airbases, or to fly through allied airspace, for strikes on Iran. “You’ll have to start learning how to fight for yourself, the USA won’t be there to help you anymore, just like you weren’t there for us,” posted Mr Trump on March 31st.

Europe, naturally, has its own version of events. Many of its governments, rightly, saw the Iran campaign as rash and dangerously vague. They were reflecting the views of their voters, who fear being entangled in a war on which they were not consulted and of which they disapprove. Even so, countries like Germany and (after a bit of dithering) Britain did allow America use of its bases and their airspace.

Mr Trump has abused his allies before. Denmark, the most loyal of NATO members, has been threatened with the seizure of Greenland; European governments are accused of democratic backsliding. Tariffs have added to the pain. Being loyal gets you nowhere. But the recriminations over Iran are more rancorous than ever. That is partly because Mr Trump genuinely feels let down, but Europeans suspect that it may also be because he wants scapegoats for the war’s disappointments.

Is this a relationship that can be fixed? Atlanticists still hope so; Mark Rutte, secretary-general of NATO, visited Mr Trump in Washington on April 8th hoping to persuade him that to stay in NATO is in America’s own interests. He didn’t appear to have much success, so even the most committed Atlanticists must now plan for the worst .

The terrible truth is that, threatening Europe, national security should no longer be based on the assumption America will be “there to help”. NATO’s Article 5, which defines an attack on one as an attack on all, is not dead. But its deterrent effect, based adversaries’ belief that the allies will stick together, is weaker than at any point in the alliance’s 77-year history, including crises such as Vietnam and the war in Iraq. Nor can Europe comfort itself that Mr Trump’s irritation will blow over. Marco Rubio, his secretary of state, marked a new low by also questioning the value of membership. And the next president could well agree.

One reason is that Mr Trump is right to say NATO’s European members do not spend enough on their own defence. For decades they have relied on America while contributing less than promised. The 2014 target that committed NATO members to spend 2% of GDP on defence was largely ignored until Russia invaded Ukraine in 2022. Under Trumpian pressure, governments talk of 4% or even 5%. But the gap between promise and reality remains vast. Among the big European countries, only Germany and Poland are due to meet this goal.

If the transatlantic marriage dissolves, Europeans will have to be ready to defend themselves. As the prospect of divorce looms larger, the timeline for self-sufficiency tightens. Europe must now ensure sustained defence spending at levels closer to those higher targets. New capabilities must be built, especially in air defence, logistics and munitions, where Europe relies on America. Forces and arms manufacturing need to be integrated, not duplicated inefficiently.

Ukraine should be central to Europe’s new security architecture. After four years of holding off Vladimir Putin, it now fields the continent’s largest and most battle-hardened army by far (after Russia’s), with deep experience in high-intensity warfare and the manufacture and use of drones. Rather than viewing Ukraine solely as a recipient of aid, Europe should aim to integrate its armed forces into joint planning, procurement and command structures. They should prepare to make Ukraine part of what may become a Europe-only version of NATO. Its accession to the European Union should be accelerated, too. Sadly, all this is a distant prospect.

A reconciliation between Europe and America may still be possible. But the past six weeks gives scant ground for hope. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

But rekindled Space Age enthusiasm will need new foundations if it is to endure

Artemis II has offered Earth inspiration But rekindled Space Age enthusiasm will need new foundations if it is to endure April 9th 2026 On christmas day 1968, a boy called Michael Collins junior asked his father who was driving Apollo 8, then bringing home the first three men to have orbited the Moon. Collins senior, who oversaw communications with the spacecraft, passed his son’s question on to Bill Anders, one of the crew. There was a pause. Then Anders replied: “I think Isaac Newton is doing most of the driving right now.” From when it had left lunar orbit until its planned splashdown on December 27th, the spacecraft’s path was almost entirely set, like that of a falling rock, by the law of universal gravitation.

Sir Isaac does a lot of this sort of work for spacecraft. After the fiery leap of lift-off they spend most of their time coasting. Integrity, the capsule that houses the crew of NASA’s Artemis II mission , has used its main engine only twice, once to change its orbit around Earth, once to leave it. The crew of Apollo 8 depended on a burst from their main engine to get into lunar orbit without hitting the surface (“Longest four minutes I ever spent,” said Jim Lovell, the pilot). Integrity’s crew just cruised on by, their elegant figure-of-eight trajectory taking them past the Moon and farther from Earth than any previous astronauts before beginning the long fall back.

This is not to say the four astronauts—three American, one Canadian—have not been busy, particularly during their passage over the parts of the Moon that cannot be seen from Earth. To terrestrial Moon-watchers Mare Orientale is a hard-to-spot smudge right at the edge of the Moon. To the astronauts passing almost directly above it, it was a dark bullseye set among concentric mountain ranges, ripples of rock left by the shock unleashed when a sizeable asteroid smacked into the Moon less than 4bn years ago. The “targeting plan” put together to guide the astronauts’ observations helpfully notes that its diameter is roughly the distance between Johnson Space Centre in Houston, Texas, where they trained, and Kennedy Space Centre in Florida, from which they blasted off.

Other features to which the plan drew the crew’s attention, such as Pierazzo, a far-side crater about 9km across, have previously been appreciated only by cognoscenti. It was named after Elisabetta Pierazzo, who specialised in the study of impact craters; remote measurements of its fresh and intriguing features have been pored over by her colleagues and successors. It seems unlikely that the astronauts’ brief inspection will have added much. “It’s a spectacular crater and it’s nice to remember Betty,” says a scientist. “But I don’t expect any new science results from Artemis II.”

Remembrance also informed the most moving of the observations, those of a fresh and previously unrecorded crater on the edge of the Moon’s far side. The crew is recommending it be officially named Carroll, after Carroll Taylor Wiseman, the late wife of the mission commander, Reid Wiseman. How tears behave in the absence of gravity is not thought to be part of the crew’s research agenda, but the message by which they told the world of their choice made it clear they had found out.

That the mission has produced more by way of emotion than by way of science—or, thinking of Lovell’s four minutes, jeopardy—is not a criticism. Integrity’s flight along a path very like that taken by the uncrewed Artemis I capsule in 2022 was never likely to provide scientific surprises, and any major technical ones would have been very unwelcome. And so the crew’s experience has come to the fore. Even if, at times, their expressions of awe, humility and cosmic connection have felt a touch too scripted, they have made possible not new discovery, but rediscovery: a reminder to millions back on Earth that such things can still move them and inspire them.

No picture of Earth and the Moon today can supersede Anders’s picture of “ Earthrise ”; it has had half a century to become an icon. But the importance of “Earthrise” has never been just what the camera saw. It was the presence of somebody behind the camera, someone in a position to see such a thing. For most people alive today there has never been such a presence. The feelings Artemis II evokes by restoring it are no less real to those people for having been felt before.

Unless re-entry sees Integrity fail tragically to live up to its name, this emotional affirmation will endure for some time. The role that Elon Musk and SpaceX are meant to play in the next Artemis mission may sour the vibes—many idealists stirred by images of Earth as a common home revile the politics of division he fosters. But Artemis IV’s promise of a lunar landing soon thereafter should restore the mood.

What, though, of the steady stream of missions planned for after that—those intended to build and provision a Moon base? They will, by their nature, feel increasingly routine. The rapture that greeted Apollo 8’s first journey to the Moon, and later the first landing, was soon eclipsed by Vietnam, oil crises, Watergate and more. To maintain it, and the support it brings, for a decade or more this time will require new discoveries, or arguments, or dreams—not just remixes of those that came before. Spaceships can coast. Space programmes cannot. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

He should stop dawdling

Sir Keir Starmer is Britain’s best hope for legalising assisted dying He should stop dawdling April 9th 2026 This NEWSpaper believes people should have the right to choose the manner of their own death. That idea is gaining ground around the world; some 30 jurisdictions have legalised it to date. Yet in England and Wales the latest attempt to pass legislation, and the one that has come closest to succeeding, is now certain to fail . This is a tragedy.

The bill, introduced by Kim Leadbeater, a Labour backbencher, has enough support to become law. It was passed in the House of Commons in June. Most Britons, including the prime minister, Sir Keir Starmer, have consistently supported the principle of assisted dying. The bill’s imminent failure is due to a handful of unelected peers in the House of Lords, who have made sure it will run out of time by submitting an unreasonable number of amendments. But the root cause is an absence of leadership by Sir Keir. In an attempt to avoid making the issue a partisan one, he relegated it to a private-member’s bill; these are not introduced by government ministers and are a weak legislative instrument. This was a misjudgment which he must now put right.

Delays in Parliament might be more understandable if Britain were a newcomer to this debate. But it is not. The Lords first formally debated an assisted-dying bill in 1936, years before any other country. An effort to legalise it has been made almost every decade since the 1960s; Ms Leadbeater is the fifth parliamentarian to propose a bill of this kind since 2003. Yet whereas healthy debates in other countries led to legislation, British politicians continue to dawdle.

Opponents of the Leadbeater bill raised concerns that are now well-worn: the risk of coercion; whether the poor state of palliative care and the health service deny people a proper choice; and the fear that the bill would be a “slippery slope” to broader eligibility. These worries do not stand up to scrutiny.

Coercion? The bill restricts access to assisted dying to people who have at most six months to live and who have made sustained requests to two doctors. The idea that an evil relative might use this process to kill someone who will soon be dead is far-fetched. It would be good if palliative care improved, and it would be wise to invest in it while legalising assisted dying, as happened in New Zealand. But inadequate care is not a reason to oblige those who truly wish to die, and who meet all the criteria, to suffer in the meantime. Least convincing of all is the slippery-slope objection. It implies that Britain’s Parliament could carelessly allow a more liberal regime to emerge. If the past century shows anything it is that Parliament will do nothing of the sort.

The most compelling argument against this bill is that it is too narrow. As extra layers of scrutiny have been added, eligibility criteria have arguably become tighter than in any such bill passed elsewhere. The risk is not that it would be too easy to get an assisted death but that vanishingly few people would qualify.

Still, a narrow bill is better than none; and more delay would be intolerable. Rather than let another backbencher champion it, Sir Keir should offer his wholehearted support and ensure it gets enough parliamentary time. To do that, the government should itself introduce the same bill later this year and let MPs vote according to their conscience. This is the path David Cameron took in 2013 with a bill to legalise same-sex marriage; it is the one Sir Keir should take now. Alas, this is unlikely: putting the weight of the government behind assisted dying would upset some in Sir Keir’s own party and cabinet. But if he cannot take the heat over one of the issues he strongly believes in, what is the point of being in the kitchen? ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Never interrupt your enemy when he is making a mistake

How China hopes to win from the war Never interrupt your enemy when he is making a mistake April 1st 2026 GOING TO WAR against Iran promised to change the Middle East by weakening a villainous regime and thwarting its nuclear ambitions. To its most bullish supporters, the war would also change the world by cowing an ascendant China. It would show how America’s control over the flow of oil leaves China vulnerable. And it would boost deterrence by contrasting America’s military supremacy with China’s reluctance or inability to save its friends.

A month into the fighting, this logic still seems misguided and hubristic. Certainly, that is the way it looks from Beijing. The Economist has been speaking to diplomats, advisers, scholars, experts and current and former officials in China. Almost all of them see the war as a grave American error. China has stood aside, they say, because its leaders understand the maxim attributed to Napoleon Bonaparte, supposedly uttered as his foes were abandoning high ground at Austerlitz: “Never interrupt your enemy when he is making a mistake.”

Many Chinese say the war will accelerate America’s decline. They see American aggression as a validation of President Xi Jinping’s focus on security over economic growth. And they expect peace, when it comes, to create opportunities for China to exploit. Only in the background is there anxiety—and the hint of a possible Chinese miscalculation.

First, the view in Beijing is that America is lashing out at Iran because it feels its power ebbing. Like Britain in the 19th century, its formidable display of military force contrasts with its lack of purpose or restraint. President Donald Trump has spurned the advice of experts. He has issued wild threats and, as this was published, was about to address the nation amid talk of pulling out. His lack of a strategy has set America up for failure.

Chinese experts hope the war will amplify talk of decline. Mr Trump’s musings about a ground operation are a sign of how easily one ill-considered step can lead to the next. If Iran falls into chaos or the regime clings on, America may spend years fighting fires in the Middle East. If Iran seeks nuclear weapons, Uncle Sam may go to war yet again.

All that would distract America from East Asia where, if China has its way, the 21st century will be shaped. This war will also worry countries that depend on America. Not only has their ally become less reliable, but they are paying for its hot-headedness in expensive energy and raw materials. Will Asian countries therefore become more wary of offending China?

Second, Chinese officials think the war shows the wisdom of Mr Xi’s emphasis on fostering self-reliance in technology and commodities, even when those efforts have come at the expense of economic growth (which remains stubbornly and wastefully below its potential). Mr Xi has strived to protect China from chokepoints being closed. He has created a 1.3bn-barrel strategic reserve of crude oil, enough for several months. He has diversified power-generation to nuclear, solar and wind while maintaining the use of domestically mined coal. China is being characteristically pragmatic, by facilitating Iran’s oil trade .

Mr Xi has also invested in chokepoints of his own as a deterrent against America. Last year, after Mr Trump escalated tariffs, he threatened to restrict supplies of rare earths, vital for electronics and green tech. Although this leverage will fade as America finds alternative sources, Mr Xi is already seeking new pressure points, including vital pharmaceutical molecules, some chips and logistics. He wants China to dominate new technologies, such as quantum computing and robotics.

Last, the war will create opportunities. The Gulf countries and Iran will tender lucrative rebuilding contracts. Many countries worried about future embargoes in the Strait of Hormuz will want to buy Chinese green technology, including gear from solar, wind and battery producers—all of which have overcapacity. Whereas America blows hot and cold, China’s brand of cynical self-interest is at least dependable.

China also thinks it can exploit America. Weakened in Iran, Mr Trump may be easier to negotiate with. At his summit with Mr Xi in Beijing in May, China hopes to lay the ground for a deal that will curb America’s use of tariffs and export controls and possibly create a framework for Chinese investment in America. Ideally for China, Mr Trump will say that America opposes Taiwanese independence and supports peaceful unification—a shift from the studied ambiguity of Henry Kissinger’s original formulation.

Yet China’s optimism is tempered by anxiety. Experts are taken aback by how the American armed forces are using artificial intelligence to co-ordinate operations. That is one more reason for dismissing the idea that Mr Xi is impatient to invade Taiwan. As Iran has shown, war is unpredictable. And if America is declining, war will be unnecessary. Other worries are economic. If war drags on, the harm to China and its exports will mount , even if other countries suffer more.

For all China’s hard-headed analysis, it has one strategic blind spot. Chinese thinkers are too reluctant to contemplate a scenario in which America acts as a rogue power, ripping up the world order it created. Although China likes to complain about Western values, it has thrived under rules that America has laboured to sustain.

An unstable planet would be uncomfortable for China. Global disorder would undermine its export-fuelled growth, a worry for a party whose legitimacy rests on prosperity, iron-fisted order and Chinese exceptionalism.

That scenario may well accompany America’s decline. But not necessarily. Faced with technological and political change, America has repeatedly shown a remarkable ability to reinvent itself. By contrast, China is cautious, ageing and hidebound by party ideology. So far, whenever America does not provide global security it has been loth to step in.

China is putting a lot of weight on the assumption that America will fail to thrive amid the anarchy it is creating. There is a future in which America embraces upheaval and China shuts itself off. That future may belong to America. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Donald Trump may send in troops. Does he know what to do with them?

The perils of a ground war in Iran Donald Trump may send in troops. Does he know what to do with them? April 1st 2026 LAND WARS in Asia have rarely gone well for America. In Vietnam, Iraq and Afghanistan it spent years ensnared in conflicts—much longer than first expected. Now, even as he talks of stopping the war, President Donald Trump is also threatening to fight on land. Short of options to reopen the Strait of Hormuz, he has sent thousands of troops to the region and talked of invading Kharg Island, off Iran’s coast.

Kharg is appealing. It is a hub for 90% of Iran’s oil exports. Jimmy Carter and Ronald Reagan weighed attacking it; Saddam Hussein and Mr Trump bombed it. If America held the island, it might deny Iran much of the 2.4m to 2.8m barrels of oil and refined products that it still exports daily . Iran earns more from those exports now than it did before the war began.

Marines and paratroopers could take the island. But then what? If they halted Iranian oil exports, energy prices would rise, further harming the global economy. Iran could attack more Gulf infrastructure, including vital desalination plants. America might also need to occupy three other terminals farther south—Jask, Lavan and Sirri—adding to the complexity of the operation. It would be far simpler to stop Iranian tankers at sea, as they left the Gulf.

American troops on Kharg would be exposed. They would need regular resupply by air or sea; Iran would attack runways or ships, and would rain drones and missiles on the occupiers. Kharg is near the Iranian mainland, putting it within reach of more Iranian missiles. Some would get through, as they have in recent weeks, most recently destroying a valuable American E-3 Sentry airborne-radar aircraft in Saudi Arabia.

Alternatives would include seizing Iran’s smaller outlying islands, like Abu Musa and Greater and Lesser Tunb, or raids inland against military sites. But to be more than a nuisance America would have to stage long occupations, and these would probably run into the same problems as Kharg.

If the war becomes a contest of wills, Mr Trump should remember that the stakes are much higher for Iran’s regime. The loss of oil income, and other blows, could aggravate its economic crisis and perhaps trigger protests. But Iran’s regime is brutally repressive and has lived with a dysfunctional economy for years. Its willingness to endure pain vastly exceeds that of Mr Trump, whose party faces midterm elections in eight months. The Islamic Revolutionary Guard Corps bled American troops in Iraq with roadside bombs; they would relish doing so with projectiles.

America could also stumble into a quagmire elsewhere. Mr Trump may favour a mission to seize Iran’s stock of 400kg or so of enriched uranium. Swooping into Isfahan, where the bulk of it is probably underground, would certainly be dramatic . It would also be the largest raid in military history. But some of the uranium is probably held beneath the ground at two other sites, Natanz and Fordow. Assaulting three places at once may be beyond even America’s capabilities.

Americans are not the only ones who should worry: so should their allies. The war is already sapping American military power. The destroyed E-3 Sentry was one of a small and shrinking fleet. America has fired over 850 Tomahawk missiles, more than it expended in Iraq in 2003, perhaps a third of its available global stocks. The intense pressure on American ships is likely to compound a maintenance crisis in the navy. American and allied planners in the Pacific will be watching with mounting concern.

Many in Mr Trump’s court—including J.D. Vance, the vice-president, Tulsi Gabbard, the director of national intelligence, and Pete Hegseth, the secretary of war—took part in previous ground wars in the Middle East. They all concluded that those conflicts had ended up as grand follies. They should speak up about the dangers now. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A regime loved by MAGA may soon lose power. That matters

Lessons for the world from tiny Hungary A regime loved by MAGA may soon lose power. That matters April 1st 2026 It has fewer people than Belgium, and its GDP is barely 1% of the European Union’s. Yet Hungary counts. Not because clever Hungarians invented the Rubik’s cube and the ballpoint pen, but because an unscrupulous one, Viktor Orban , offers a template for how a democratically elected leader can undermine democracy and the rule of law.

For MAGA Republicans and other populist nationalists, Mr Orban is a model to emulate: a scourge of the woke, a defender of borders, tradition and Christianity. Donald Trump praises his strength; Steve Bannon calls him “one of the great moral leaders in this world”. But his government is unpopular in Hungary; many see it as repressive, corrupt and ripe for sacking. At an election on April 12th , voters will have a chance to do just that. They should take it.

Since winning power in 2010, Mr Orban has steadily removed checks and balances, neutering the judiciary, stuffing the bureaucracy with stooges and gradually co-opting nearly every independent institution. Each step was usually legal, and many had precedents in other democracies. But taken together, they consolidated vast powers in a small ruling circle, and opened the door to colossal graft. Hungary is now the least free and most corrupt country in the EU.

It is also the most Putin-friendly. Energised by Russian gas and oil, Mr Orban frustrates EU efforts to give money to Ukraine and tries to soften sanctions against Russia. European leaders now assume that anything they say in front of a Hungarian official will be passed on to the Kremlin. Vladimir Putin is grateful: Russia’s disinformation tools have been vigorously deployed to slander the Hungarian opposition.

The election will not be fair. Most media are controlled by the state or Mr Orban’s cronies. Voters are constantly (and falsely) warned that a victory for the opposition will mean that Hungarians will be sent to die in Ukraine. The voting system is gerrymandered for the ruling party, Fidesz.

Nonetheless, polls show the opposition with a decisive lead. Some even suggest it will win a large majority in parliament. The polls may be wrong, but this is Hungary’s best chance in 16 years of getting rid of Mr Orban. If the opposition wins, liberals everywhere should study what it got right.

One lesson is over tactics. The opposition rallied around its most electable candidate, Peter Magyar. Handsome and charismatic, he campaigns skilfully on social media and tirelessly at rallies. As a defector from the ruling party, he can speak out about its moral rot. He also appeals to swing voters, notably in small towns, who might see other opposition figures as too elitist. He is not perfect, but his upstart movement, Tisza, unites the centre left and centre right.

Second, the opposition does not merely grumble about abstract ideas, such as democracy. Rather, it stresses how Fidesz has emptied Hungarians’ wallets. Interest rates are high; the economy grew by just 0.4% last year (nearby Poland managed 3.6%). Mr Magyar excoriates the regime’s corruption, too. Voters can see how astonishingly rich Mr Orban’s chums have grown, thanks to rigged public contracts and regulatory favours. The misappropriation of huge EU subsidies by insiders grew so blatant that Brussels belatedly froze them. Hungary is a textbook example of how unconstrained power—the goal of populists everywhere—is a recipe for plunder; but also of how such plunder ultimately repels voters.

On a related note, Mr Trump’s endorsement, in the person of J.D. Vance, who is due to visit Hungary just before the election, does not seem to be helping Mr Orban. The world’s most famous right-wing populist is increasingly associated with war, pricey petrol and corruption. In Australia and Canada, his interference around election time has unintentionally helped the candidates he dislikes. Whether this year will see the populist tide start to ebb remains to be seen. But outfits such as Nigel Farage’s party in Britain, Reform UK, and the Alternative for Germany find it awkward to be MAGA-affiliated. Centrists should take advantage.

Meanwhile, Hungary’s future hangs in the balance. If the opposition wins a big majority, it will be harder for Mr Orban to deny or subvert the result. Even if he is ousted, he could still cause trouble. He has set up institutions, such as foundations running universities and media outlets, that will remain under the control of his friends. Any new government will struggle to unravel Orbanism’s tentacular grip over Hungary. (Poland, where a moderate government is tackling a similar problem, offers lessons.) The first step for Hungary, however, is the most crucial: defeating Viktor. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Its humbling could raise borrowing costs

How worried should you be about private credit? Its humbling could raise borrowing costs April 1st 2026 Private credit promised high returns to investors and safety to financial regulators. Now investors are demanding their money back and regulators are worried about panic spreading across the financial system, just as it faces a shock from President Donald Trump’s war in the Middle East. The good news is that Wall Street is much further from the precipice than many fear. Yet all should be concerned by the ineptitude displayed by some of its fastest-growing firms and the costs their woes could impose on others.

Over the past two decades the biggest private-equity houses have gone from mostly buying and selling companies to lending to them. In the process they have become massive. Apollo, Blackstone, Carlyle and KKR manage $3.4trn of assets, compared with $800bn a decade ago. Their lending has often stayed close to home. Much of private credit involves funding private-equity deals. And of the roughly $1.5trn of private loans that are outstanding, around a third sits in funds open to individual investors.

At first investors in these funds were spooked by the realisation that nearly a third of their loans are to software firms, which could be disrupted by artificial intelligence. Now they are spooked by how spooked everyone else seems to be, including those in charge. Funds typically allow up to 5% of shareholdings to be withdrawn each quarter. Investors get out their cash by selling shares back to the fund at book value. Those values look too high. Redemption requests at the big funds have exceeded 5%, causing fund managers either to enforce the limit (as is their right, and probably their best option) or strain to please these investors by allowing more to sell.

The spiral will continue until fund managers can convince investors that the loans they hold are worth what they say they are. Some will struggle because investors have made up their minds; others, because the valuations really are wrong.

Failing private-credit funds are not about to bring down the rest of the financial system. Eighteen years after Wall Street collapsed spectacularly, many assume a crisis of similar magnitude must be overdue. But setting your watch to 2008 and judging every panic by that standard is the wrong way to think about risk. All financial disasters share the characteristics of complexity, leverage and borrowing that can be quickly withdrawn. Happily, the offending private-credit funds are (relatively) simple. They also have low leverage and can hobble on by giving back that 5% of investors’ capital every quarter.

Nevertheless, private credit’s problems may yet spill over. In contrast to 2008, the worry is not the banks. Although they have made tidy profits lending to private-credit funds, they are senior lenders; investors in the funds (and in the private-equity shops that own the underlying borrowers) must be wiped out before their loans are impaired. The bigger concern this time is the insurers. They are exposed to buy-out debt through complex securitised products, and because many of them are now owned by the private-markets firms themselves.

So far, the biggest casualty has been the share prices of the private-equity houses. More than a quarter of their value has been wiped out this year. The fact that the kings of private markets should have been humbled on the public markets is ironic. Mistakes like their excessive exposure to the software industry are more likely now that they are asset-gathering giants with values based on the fees they generate, rather than their investing prowess. In future they will also face more competition from banks, which Mr Trump is deregulating.

Another consequence is that retail investors will be warier of private markets, just as America has settled on letting them invest their pensions in private assets. Using this deep well of capital to fund the economic activity that occurs in private markets is a worthwhile prize. Yet, at least when it comes to structures governing how investors may withdraw their money, there is a paradox. Advances in technology have increased the amount of wealth created by companies in the private markets, but at the same time hooked investors on cheap liquidity and low fees in the public markets. The two seem irreconcilable.

The final consequence is that as private-credit funds’ woes intensify, they will raise the cost of borrowing for firms across the economy, at a time when the Iran war is weighing on companies’ margins. The cost of debt in public markets has already risen from near-record low spreads over government bonds at the beginning of the year. Piles of debt being issued to fund the data-centre boom should increase it even further. In the event of a wave of defaults, like the one at end of the shale-oil boom in the mid-2010s, this might even slow the adoption of the very technology that has fuelled the boom. That really would be something to worry about. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

They will only expose ordinary investors to unnecessary risks

Index providers should not bend the rules for Elon Musk They will only expose ordinary investors to unnecessary risks April 1st 2026 In fanciful MOMENTS Elon Musk speculates about artificial intelligence (AI) finding a way to allow travel at nearly the speed of light. By comparison, his reported aim of listingSpaceX, his rocket firm, at a valuation of $1.75trn, seems only modestly ambitious. Two other starry companies may also soon seek initial public offerings (IPOs): Anthropic and OpenAI, both AI model-making labs, are mulling listings this year or next. The three firms’ combined valuation could exceed $3trn. The prospect of their debuts—by far the largest public markets have seen in years—will thrill those who lament that big companies are choosing to stay private for longer.

Mr Musk and his bankers are now bargaining with stock indices and exchanges for the privilege of hosting SpaceX. He wants his firm to join key indices like the NASDAQ 100 and S&P 500 quickly, giving it access to trillions in index-linked capital; more than $600bn invested in passive funds are tied to the NASDAQ 100 alone. For now, the indices are obliging. On March 30th Nasdaq said it was adopting rules that will delight the superstar firms. The FTSE and reportedly S&P are considering similar updates. Unfortunately, those changes are misguided, and will expose investors to unnecessary risks.

Two main ideas are under consideration. One is to shorten the “seasoning” period that a firm’s stock must go through before it is eligible to join an index. Nasdaq is cutting its three-month seasoning minimum to 15 trading days; the FTSE has suggested a mere five trading days. The second reform is to reduce the percentage of shares a firm needs to offer publicly (its “free float”) before being added to an index.

Indices’ desire to reflect the growth of some of the world’s most dynamic firms is understandable. So far, many punters have been unable to invest in some of ai’s brightest stars; index inclusion is a way to help them do so. Yet changing the rules to suit SpaceX will force index investors to choose between selling or weathering wild swings in prices.

Consider the flaws of shorter seasoning periods. Nasdaq last trimmed its seasoning window more than a decade ago, ahead of Facebook’s IPO in 2012. After a glitchy debut, the shares took more than a year to get back to their initial value, swinging wildly along the way (see chart). As insiders offload their stakes, retail investors may bear the costs. That is an excellent argument for patience.

Free-float rules are more worrying still. Offerings with low floats have tended to underperform the market over time. But the fewer shares firms offer to the public, the greater the price index-tracking funds must pay when they are obliged to buy them. What is more, Nasdaq says some firms can initially be weighted at three times the percentage of shares they float, instantly giving SpaceX and its kind outsize influence on the index’s performance, before investors have time to assess their valuation. The change risks turning indices into barometers less of the wider stockmarket than of Mr Musk’s latest antics.

Both proposals undermine the main reason why passive investing became so popular: because it offers exposure diversified across the whole market, rather than a narrow bet on one company or industry. Stockmarkets have already become more concentrated as a result of the ai boom. As worries about valuations and the technology’s profitability mount, index operators might come to regret increasing concentration even further. Should tech stocks come to look less attractive, indices will draw investors’ ire rather than their cash. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A month of bombing has achieved nothing. Will Donald Trump escalate, or talk?

Advantage Iran A month of bombing has achieved nothing. Will Donald Trump escalate, or talk? March 26th 2026 EVEN BY HIS chaotic standards, Donald Trump has just presided over an unusually wild week in his misguided war on Iran. The president had threatened imminent, punitive bombing of Iran’s civilian energy infrastructure. Though Iran didn’t quail, markets did. So a U-turn followed. Mr Trump said he had become aware of secret proposals for peace talks, and held off. The Pentagon then said it would send some of the 82nd Airborne Division. That suggests escalation is still a possibility. Amid such uncertainty, Iran’s regime seems unfazed. Remarkably, it now has a strategic advantage over its opponents.

True, the Islamic Republic has suffered dramatic blows. Many of its leaders, and hundreds of civilians, are dead. Its air defences are in pieces; its navy and missile launchers are largely gone. And yet the regime endures. As we warned when this war began, its mere survival counts as a victory of sorts.

At home the regime’s grip is not easing, but has if anything been strengthened by the onslaught from America and Israel. The hardline Revolutionary Guards are in control. Domestic opponents, whether ethnic separatists or urban protesters, are deathly quiet. Iran’s stocks of highly enriched uranium, some 400kg, remain untouched, probably still under rubble. Most strikingly, Iran has established a chokehold over the Strait of Hormuz, blocking exports of oil and gas from the Gulf that account for a fifth of the global supply. For decades American military planners have prepared for this obvious risk. But the war has proved both that Iran can strangle the strait, and that it would be agonisingly hard to loosen its grip . Iran’s asymmetric warfare, with missiles, cheap drones and perhaps mines against shipping, is keeping the superpower at bay.

Meanwhile, even though its proxies are weaker than before, Iran still has cards to play abroad. Because the Houthis in Yemen have held off shooting missiles at tankers in the Red Sea, some Saudi oil, pumped to the coast and bypassing Hormuz, reaches world markets. A lid remains on global oil prices, though they have still hovered around $100 a barrel in recent days. But the Houthis may now be incentivised to demand a high price—such as international recognition of their control over north Yemen—to hold their fire. In Iraq, Shia groups aligned with Iran are turning against Kurds (and Americans). And Hizbullah, Iran’s client in Lebanon, may regain some local legitimacy as a “resistance” outfit, as the country comes under attack from Israel. An Israeli attempt at occupation could intensify that conflict and strengthen the group’s position.

In the Gulf, America’s allies did not wish for war, but now fear that a wounded, defiant Iran may emerge as an even bigger threat than before. Their security systems—air defences and costly interceptor rockets—are imperfect. Their economies look hostage to Iranian threats. One option is to go all-in with America on the war. The United Arab Emirates has warned against talks with Tehran, saying that Iran is committing “economic terrorism” in the region. The Saudis reportedly want America to deploy ground troops.

Nor is Israel really any safer than before. Binyamin Netanyahu is thrilled by the sustained attack on Iran. Yet Iranian missiles have penetrated Israeli airspace, killing civilians. The nuclear threat from Iran has not been eradicated. Without regime change, the ballistic-missile threat will return, requiring Israel to strike Iran every few months. Most worrying for the Jewish state, its long-standing ties with America may be under strain. The war is already unpopular with most Americans. If casualties mount, petrol prices soar and markets slide, who will they blame? Already some on the Republican right are pointing to Israel. Voters, especially the young, have grown more hostile towards it; pro-Israel lobbyists in America are struggling .

In short, for all the power and sophistication of the military onslaught from America and Israel, Iran feels it has the upper hand over Mr Trump. It has shown that it is more capable than America of both inflicting pain and withstanding it. Mr Trump launched his war, unforgivably, without offering a strategic rationale for it. Despite operational successes and his nonsensical claim of having already changed the regime in Tehran, he has yet to win any substantive gains from the fighting. As the political costs mount, Mr Trump will come under growing pressure. His choices are to escalate, or talk.

He may be tempted by dramatic escalation, inflicting damage on Iran’s civilian infrastructure and oil industry in the hope of compelling it to reopen the strait. Marines could grab Kharg Island and its oil infrastructure, take slivers of coastal territory or occupy islands inside the strait. That might bring limited military benefit. But none of those gambits looks like a potential knockout blow. Iran could still fire missiles and drones from inside the country, or try to mine the strait. Occupying soldiers would quickly morph into sitting ducks. Mr Trump, having yearned to banish the memory of Jimmy Carter’s military misadventure in Iran in 1980, would risk repeating it. Shifting large-scale resources to the region would leave America’s military forces weaker elsewhere, notably in Asia.

The less bad option, therefore, is to seek serious negotiations. Pakistan’s government stands by to mediate. Mr Trump says he has offered a 15-point plan to Iran, though officials in Tehran deny talks are under way. But America has previously entered into negotiations in bad faith, using them as a ruse before attacking. Iran will thus be sceptical.

So Mr Trump must agree to a full ceasefire, and compel Israel to abide by it. Talks on reopening the strait and steering Iran away from its nuclear programme will be bitterly difficult. And any eventual deal will be worse than what could have been struck before the war began, because Mr Trump has unwittingly strengthened the hand of hardliners and made clear the leverage they have over the strait. The result is that for now, at least, the advantage lies with Iran. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

A strict competition policy is not the barrier to bigger firms

Europe should think twice before weakening its merger rules A strict competition policy is not the barrier to bigger firms March 26th 2026 An air of gloom hangs over European companies. On the global stage, many are dwarfed by America’s tech titans and China’s industrial giants. The European Union is home to only three of the world’s top 50 tech firms, by market capitalisation; its largest bank ranks 16th globally. To dispel the misery, some think the bloc’s strict competition policy needs updating. The European Commission, which enforces antitrust rules, will soon publish draft guidelines that are expected to be more lenient. Encouraging firms to scale up is a laudable aim. Weaker competition policy would not achieve it.

The debate about the purpose of European competition policy is as old as the European project itself. The principled view, which came to dominate, is that a robust competition policy serves consumers, growth and innovation by ensuring that no firm achieves a controlling share of its market. A more political view is that it should serve wider goals, including national security and industrial policy.

As policymakers seek to prepare the continent for harsher geopolitical times, it is no surprise that the political view is gaining favour . Mario Draghi, a former Italian prime minister, argued in an influential report that competition policy needs to change to support innovation and secure supply chains. Ursula von der Leyen, the president of the European Commission, has gone a step further, arguing for “European champions” and “merger guidelines that reflect the realities of the global market, not just the European one”.

Loosening competition policy would be misguided. The hurdles in the way of bigger European businesses are not merger rules but parochial politicians and a variety of other regulations, as the examples of banking, telecoms and defence show. Start with banks. The absence of large pan-European lenders is not because of trustbusters. Banking remains a national market. Local supervisors prevent banks from moving capital and liquidity seamlessly between a parent institution and its foreign subsidiaries. There is still no unified deposit-insurance scheme. And politicians are fiercely protective of national champions, as the attempt by UniCredit, an Italian bank, to take over Commerzbank in Germany shows. The German government opposes the merger, claiming it would undermine funding for the Mittelstand.

Telecoms is not a truly integrated market, either. Spectrum auctions are largely national, as are rules around security, emergency services and the like. More than 270 regulators oversee digital networks across the EU. As long as a customer in France cannot easily buy services from an Estonian provider, mergers are likely to increase market power and raise prices.

Defence, the third example, is similarly fragmented, even though competition policy has already been loosened. The main reason is that governments want to keep their defence industries on a tight rein. More pan-European procurement and a dose of competition from startups would do far more to spur both innovation and consolidation.

Each example shows that the barrier to scale is not competition policy, but the fact that the single market remains incomplete. Indeed, where the market is fully integrated, European firms have managed to achieve world-beating results. Just think of ASML, which has a near-monopoly on the most important chipmaking machines in the world, or of firms like Spotify and SAP, which hold their own against global rivals. European pharma is a rich ecosystem made up of research institutes, smaller upstarts and corporate giants.

Integrating financial and digital services across borders is a much gnarlier task than diluting merger rules, in large part because it means encouraging national governments to loosen their grip. But if Europe really is to compete on the global stage, there is no substitute for hard graft. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

As war rages in Iran, governments must not repeat the mistakes of 2022

The case against energy bail-outs As war rages in Iran, governments must not repeat the mistakes of 2022 March 26th 2026 WHEN CRISES have struck in recent years, politicians in the rich world have been quick to turn to bail-outs. During the covid-19 pandemic and the energy crisis caused by Russia’s invasion of Ukraine in 2022, governments opened their chequebooks and made heavy-handed interventions as they sought to cushion the damage that was being inflicted on households and businesses.

So it is with the energy crisis stemming from the Iran war, which has sent the price of oil and liquefied natural gas (LNG) rocketing. Spain has slashed VAT on fuel and household electricity, Italy has cut petrol duties, South Korea has capped prices at the pump and Japan is spending more on subsidies to limit them. Britain’s government is considering subsidising the energy bills of welfare claimants, and promises to crack down on “profiteering”. Even in energy-secure America, Democrats have called for windfall taxes on oil companies, with the revenue channelled to households.

Such interventions will do more harm than good. High prices and fat profits tell consumers to economise on energy while encouraging producers to find and sell more. And as the energy crisis of 2022 showed, interfering with these signals can hurt some of the world’s poorest people.

It is arithmetically impossible for every government to shield its consumers from the energy shortage. So long as the Strait of Hormuz remains closed, the world has lost 15% of its oil supply; add in damage to Qatar’s facilities, and the global supply of LNG is down by about a fifth. No amount of subsidy can bring this back. Global energy consumption must fall.

The effect of handouts is therefore to force the adjustment on others. After the continent lost most of its supply of Russian gas in 2022, many European countries spent more than 2.5% of GDP on subsidies over two years. The interventions were clumsy. Across the rich world as a whole more than half the money was spent blunting the price mechanism, and about four-fifths was untargeted, benefiting richer households, which tend to consume the most energy. Europe was always going to pivot to lng, but subsidies made the global crunch worse. As LNG imports rose by 65% in Europe, they fell by 16% in South Asia. Pakistan and Bangladesh suffered blackouts and deepening poverty.

Repeating the trick would be both shameful and expensive. In 2022 Europe’s interventions felt cheap because interest rates and bond yields started the year near zero. Today the cost of debt is much higher. The war has caused bonds to sell off sharply, particularly in gas-dependent countries. Britain must now pay nearly 5% to borrow for ten years, about half a percentage point more than during the height of the panic under Liz Truss. Borrowing more to subsidise energy will eat up scarce fiscal space. And by stimulating the economy, it could make it harder for central banks to control inflation , further unsettling bond markets.

Regulatory interventions do not cost money, but are just as likely to backfire. It is desirable for providers that have not been disrupted by the conflict—including renewables providers—to enjoy high profits, because that encourages a more secure supply of energy. “Windfall” taxes also have a nasty habit of becoming permanent. Britain never scrapped the extra levy it imposed on oil-and-gas profits from the North Sea in 2022, which took the marginal tax rate to a punitive 78%. It would have been better to cut the tax to promote energy security.

Beyond avoiding past mistakes, what should governments do? They could temporarily increase cash payments to poor households through the welfare state, while leaving energy prices, and hence the incentive to economise, intact. In 2022 there were some more calibrated interventions: Germany offered cash support tied to energy usage.

Similar principles could be applied on an international scale to direct aid to the world’s neediest. During the energy shocks of the 1970s, the IMF provided extra balance-of-payments support for the countries most seriously affected, and relieved poor countries of much of the interest bill. It may find itself having to do a modern version of that today, much as it ran a dedicated lending scheme for countries affected by high food and fertiliser prices in 2022-24.

The long-run challenge is clear: economies need to be weaned off insecure sources of energy while, ideally, burning less fossil fuel. It is a fantasy to think that this transition can be achieved if governments keep mindlessly absorbing the costs of the present system, while limiting rewards for those offering more robust alternatives. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Claudia Sheinbaum’s biggest problem is weak investment and growth, not Donald Trump

Mexico must unleash its private sector Claudia Sheinbaum’s biggest problem is weak investment and growth, not Donald Trump March 26th 2026 Mexico should be prospering. It benefits from tension between the United States and China: the “nearshoring” of supply chains on which American businesses rely means more factories are going up across North America. Mexico has become America’s largest trading partner. It has been partly shielded from President Donald Trump’s tariffs by the free-trade zone the two countries share with Canada. Trade in high-tech products is booming. Foreign direct investment grew last year even as it fell in other emerging markets.

And yet the economy is limping , not sprinting. After averaging annual growth of just 2% over the past two decades, GDP expanded by a paltry 0.8% in 2025, the lowest rate in years (the covid-19 pandemic aside). Income per person has slid back to the level of 2017. Domestic investment is contracting.

Pinning the blame on Mr Trump will not work. The new tariffs that he has applied are indeed unhelpful. His constant bashing of the United States-Mexico-Canada Agreement , which he negotiated in his first term—and which is now under formal review—is unsettling. But the American president is not the big headache. Indeed, exports grew by 7.6% last year, leading to Mexico’s first trade surplus since 2020. The country’s worst problems are domestic—and self-inflicted.

Since taking power in 2018 Morena, the ruling party, has pushed through constitutional reforms that actively undermine the economy. Judges must now be elected, adding to legal uncertainty. Independent regulators have been subverted, or abolished outright. The state has entrenched its control of the energy system , locking out badly needed private capital even as government debt soars. Rather than undertake tax reforms, the government has been shaking down large firms to raise more cash. All this comes on top of the perennial problems of crime and insecurity caused by rampant drug gangs.

This is not a crisis. Mexico has sound monetary policy, with a floating exchange rate and a respected, independent central bank. But the economy risks succumbing to a more chronic condition: low growth. To give her credit, President Claudia Sheinbaum, who took office in 2024, understands this. Plan Mexico, her six-year strategy, identifies low investment as the worst problem for the economy. It contains some useful ideas, such as tax breaks for research, training and investment. But to truly rejuvenate an anaemic economy she needs to direct her energies at the underlying issues holding back her country.

Most important is the size of the informal economy. Over half of Mexico’s workers toil in it, a proportion that has not changed in decades. Off-the-books employers tend not to invest in their businesses, leaving them low-tech and inefficient. For investment to grow in the long run more workers need to join the formal sector. To encourage this Ms Sheinbaum should scrap the two-tier social-security system, which is based on payroll taxes and discourages formal jobs. She should replace it with a universal system funded by taxes on consumption. Coupled with less onerous regulation and a simpler tax code, this would allow the investible formal sector to expand, and the economy to grow.

A patchy electricity system is also curbing growth. Changes made to the constitution by Morena have entrenched the controlling role of the state, but the state has no money to invest. Now the party is backtracking. A new model that allows private firms to take minority stakes in state-run energy projects is a welcome start. But Ms Sheinbaum should go much further. The government should break from the party line and let private investors back their own energy projects.

Morena—under its founder, Andrés Manuel López Obrador, and now under his protégée, Ms Sheinbaum—has shown itself willing to rewrite Mexico’s constitution to meet party goals. In doing so it has won wide popular support, becoming perhaps the most powerful left-wing party in the democratic world. Ms Sheinbaum still has time to use this power to help her people get richer. If she does not, Mexico is doomed to keep limping along. Squandered potential is a form of impoverishment, too. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A rare Brexit dividend

England has shown the world how to replace farm subsidies A rare Brexit dividend March 26th 2026 A common belief among farmers, though one generally uttered quietly, is that their neighbours could be doing a better job. Perhaps they have sown wheat too early, or failed to tackle weeds. The same spirit of one-upmanship might be applied to entire countries. Some have better farming policies than others, wasting less public money and boosting productivity more than pollution. Surprisingly, England has earned the right to look down on others.

Brexiteers who claimed that leaving the European Union would lead to superior policies have been wrong about most things—but when it comes to farming, they were right. Under the EU’s common agricultural policy, Britain mostly paid farmers to farm, handing out subsidies per hectare. Northern Ireland, Scotland and Wales still do a lot of that. But England, which has distinctive farming policies just as it has distinctive education policies, has remorselessly slashed such payments. They will vanish entirely next year .

To get public money, English farmers must now choose to do things that provide public goods, such as establishing hedgerows or growing plants that feed insects and birds. Some activities, such as monitoring the condition of the soil, pay a few pounds per hectare; others are worth much more. “Agri-environment” schemes like this have existed for years, in England and elsewhere. But England is unusual in redirecting almost all its farm payments towards them. In the eu, only a quarter of farm payments go to schemes of this sort.

Although it is too early to tell if England’s approach is boosting biodiversity or cutting greenhouse-gas emissions from agriculture, the early signs are encouraging. Livestock numbers are falling, tree-planting is rising and more land is being left fallow. The blow to food production is likely to be small. Farmers mostly seem to be putting their worst land into environmental schemes—the bogs, slopes and awkward field corners where they struggle to manoeuvre a tractor.

Fears that they would be unable to cope with the loss of subsidies have proved groundless. Only 1,200 of England’s roughly 100,000 farmers took government grants to quit, and some of them were probably going anyway. Profits have held up, admittedly owing in part to Russia’s invasion of a big cereal producer. Farmers have not only learned to apply for environmental grants; they are also making better use of their land and buildings. They rent fields to solar-power producers and cottages to holidaymakers.

The removal of per-hectare subsidies has made farming harder and riskier, which may explain why the land market has cooled. Since the Brexit vote in 2016 the price of ordinary arable land in England has increased by 12%. In Scotland and Wales, which have been slower to abandon per-hectare payments, it is up by 46% and 33% respectively. Good farmers in England should find it easier to expand as a result, or to acquire land for the first time.

The scheme could be bolder. As well as paying for environmental activities, the government could try spelling out desirable outcomes, such as more birds or less flooding in a given area, and then invite farmers to bid to achieve them. The ruling Labour Party has made some peculiar decisions, such as capping the amount of environmental payments per farm. That move might seem intuitive to a party that has always disliked large landowners, but it makes no ecological sense. A flower is no less attractive to a bee if it grows on a big estate.

Policies can always be improved. England’s feat is to have herded farmers into a new system of environmental incentives at high speed, with minimal bleating. Although angry farmers have driven their tractors to Westminster, they were protesting against changes to inheritance tax, not subsidy cuts.

More drastic policies are available. New Zealand abolished agricultural subsidies in the 1980s and replaced them with nothing. It ended up with an innovative, market-oriented industry. But New Zealand needs to control agriculture, too, not least because its cows belch so much climate-altering methane. With few carrots to offer, it is struggling. England’s gentler approach may prove more fertile. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

By diminishing the president’s political superpowers, his reckless campaign may make him more dangerous

War in Iran is making Donald Trump weaker—and angrier By diminishing the president’s political superpowers, his reckless campaign may make him more dangerous March 19th 2026 NEVER BET against Donald Trump. No politician can defy political gravity like the man whose supporters stormed the Capitol on January 6th 2021, only for him to be re-elected in 2024 with a bigger share of the vote. And yet it is hard to imagine a crisis more precisely engineered to intercept the trajectory of his presidency than his ill-judged, heedless war against Iran. Even a short war will alter the course of his second term. One that lasts months could bring it crashing to earth.

The reason is that the fight against Iran diminishes Mr Trump’s three political superpowers: his ability to impose his own reality on the world, his remorseless use of leverage and his dominion over the Republican Party. Even without Iran, the potency of these Trumpian strengths was likely to wane after the midterm elections. Wars accelerate change.

Start with Trump v Reality. In politics, the president has shown a remarkable ability to twist facts and, sure enough, he insists that he has already triumphed in Iran. Yet the war tells a truth of its own. Iran’s regime cannot win in any conventional sense. But despite widespread destruction of infrastructure and the assassinations of senior leaders—including the security chief, Ali Larijani—Iran’s regime survives for now and its 400kg or so of near-bomb-ready uranium remains at large.

What is more, Iran is waging its own parallel war against the global energy industry. As it strikes shipping in the Strait of Hormuz and the infrastructure of its neighbours, the markets are keeping score. With Brent crude spiking to more than $110 a barrel on March 18th, following an Iranian missile attack on a Qatari natural-gas hub, the regime will conclude that its strategy is working.

If anything, time is on Iran’s side. America and Israel will gradually run out of useful targets to strike from the air, or run low on interceptor batteries to see off Iranian weapons. By contrast, Iran appears still to have plenty of drones. For as long as it restricts traffic in the strait, oil prices will climb and the damage to the world economy will grow.

Mr Trump’s second superpower is leverage. Now that other countries’ leaders have come to expect rough treatment, they are learning how to resist. When the president called on America’s allies to help open the strait , warning that NATO faced a “very bad” future if they refused, they turned him down. He quickly reversed course, pretending he had never needed help.

Likewise, Iran is opposing Mr Trump by accumulating leverage against him. In recent days it has signalled that it will grant safe passage through the Strait of Hormuz to ships from friendly countries—a sign that it means to use access as a bargaining tool. Even if Mr Trump wants to end the war, Iran could continue to fire at ships. If the waterway remains closed until the end of April, the oil price could reach $150 a barrel.

Given that leverage, Iran may hold out for more than just a return to the status quo before the war. It may ask for sanctions to be lifted, or an American commitment to abandon some bases in the Middle East or to restrain Israel. If recession looms in America and stockmarkets start to fall, would Mr Trump escalate by, say, seizing Kharg island, home to Iran’s export terminals? Or would he buckle?

The answer depends partly on the last of his powers: his hold on his party. Mr Trump was elected on promises to spare voters from war and inflation. So far, 13 American service personnel have died; ground operations inside Iran, to recover that uranium, or on Kharg would put many more in danger. Average prices of petrol and diesel have reached $3.88 and $5.09 a gallon, compared with $3.11 and $3.72 at Mr Trump’s inauguration. Republican support for the war is strong, but softening. A vocal faction of MAGA, notably Tucker Carlson (interviewed on “The Insider”, our video show, this week), talks of betrayal.

In private many elected Republicans are seething. Mr Trump’s failure to heed warnings about the Strait of Hormuz is typical of his contempt for strategy and his hubris in thinking he knows better than people who really do. Republicans are now highly likely to lose control of the House in the midterm elections in November. Their chances of losing the Senate too have risen by ten points, to about 50%. The worse the defeat, the lamer a duck the president will be and the less influence he will have over who inherits the party.

Were the war to drag on, leading to very high oil prices and tumbling stockmarkets, Mr Trump could seek a way out and look for a win somewhere else—in, say, Cuba . Markets would doubtless register relief if the fighting stopped. But Mr Trump is not in full control of this war. Iran’s attack on the gas hub in Qatar shows it still has cards to play. And even if the fighting ended tomorrow it could take four to six weeks to restore oil production, four to eight weeks to settle oil markets and two months to normalise shipping. The risk of renewed Iranian action would remain. Prices may stay high for months. Every day they do weakens the president.

Mr Trump’s politics depends on the strength that comes from winning. If he seems a loser, expect him to exact retribution. A weaker president could become a more dangerous one.

Mr Trump is freest to act abroad. He may abandon NATO. He may cut Ukraine loose to punish Europe. He could bully Latin America in the name of fighting crime and drugs. He may demand money for defending Japan and South Korea. He will be maximalist on tariffs. Even if he does not succeed, that will further erode America’s alliances, to the glee of China and Russia.

But Mr Trump is also liable to lash out at home. He has already endorsed the idea of withholding broadcasting licences from media outlets that criticise the war. He wants the Federal Reserve to slash rates, but his war makes that less likely—expect further clashes with the central bank. He could target perceived enemies or send immigration agents to more Democratic-run cities. He could threaten to meddle in the midterms, either as theatre to rile his opponents, or because he intends to influence the results. It is hard to see how Mr Trump ends up a winner in Iran. Be warned: he makes a very bad loser. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

And Israel must not play the spoiler

Lebanon’s leaders must take on Hizbullah And Israel must not play the spoiler March 19th 2026 More often than not, Lebanon is a cautionary tale. Poor governance, foreign meddling and catastrophic economic mismanagement have hollowed out the state. But the most destabilising force in the country has been Hizbullah, a fearsome militia backed by Iran. Lebanon’s government now has a chance to dislodge it. But it needs to act firmly, and fast.

Hizbullah, long the most heavily armed non-state actor in the world and the most powerful military force in Lebanon, has never looked weaker. Israel has killed many of its leaders and destroyed tens of thousands of the missiles it has pointed at northern Israel. Its patron is now battling for its own survival. Anger has grown among its Shia supporters in Lebanon at its failure to rebuild what Israel destroyed in the south of the country in 2024.

Since Israel and America began their most recent war in Iran, Hizbullah has again been attacking Israel. In response, Israel has launched a devastating series of air strikes which have killed over 950 people and displaced more than a million. Israel aims to finally smash Hizbullah. Instead, it risks reviving it. In contrast to Israel’s campaign in 2024, which many Lebanese recognised to be an attack on Hizbullah, the scale of this assault makes it look like an attack on Lebanon itself. A ground incursion may be next . Israel’s invasion in 1982 led to an 18-year occupation of southern Lebanon and the emergence of Hizbullah. Fighting a new wave of occupiers would help Hizbullah recover its grip.

Israel should pause and give Lebanon’s government and army a chance to act. For years, that would have been inconceivable. Generations of Lebanese politicians and generals have prevaricated, reluctant to take on a militia that outgunned and intimidated them. Israel’s leaders are currently split over whether to launch a large ground invasion. If the Lebanese government does not rise to the occasion, Israel may well conclude that it must re-establish deterrence itself, perhaps with a prolonged occupation of the south.

Lebanon’s leaders are making the right noises. Joseph Aoun, the president, has vowed to disarm the group. On March 2nd Nawaf Salam, the prime minister, declared “all Hizbullah’s security and military activities” to be illegal and told it to hand over its weapons to the state. Dismantling Hizbullah’s power will be neither easy nor quick. But the government could start by ejecting the Iranian ambassador and severing diplomatic ties with Iran. Many Iranian “diplomats” in Lebanon are, in fact, members of Iran’s Islamic Revolutionary Guard Corps. The government should arrest Iranian commanders leading Hizbullah’s fighters on the ground. It must also close Al-Qard Al-Hassan, its financial network, and make clear that reconstruction financing for the south of the country will be made available and handled by the state.

And it should enforce its own ban on Hizbullah’s military activity. Recently, armed Hizbullah supporters were arrested and then freed on bail of just $21. The army should take control of the routes and facilities used to move weapons and fighters. And Lebanon’s army should eventually aim to move into areas long dominated by Hizbullah.

Outsiders can help. Britain and France could share intelligence with Lebanon’s government; so could America. Their armies could train and equip the Lebanese armed forces and offer financial support to pay soldiers. But ultimately this is up to Lebanon’s leaders. If they move seriously against Hizbullah, they might at last break its grip on the state. If they hesitate yet again, Lebanon could face a destructive new occupation. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

But more needs to be done to ensure a prosperous future

Africa after aid is more resilient than you might think But more needs to be done to ensure a prosperous future March 19th 2026 You might think that Africa would be in the midst of a crisis. The four largest donors all cut their aid spending in Africa last year, according to initial data. America slapped some of its highest tariffs on African countries. China, the continent’s largest bilateral source of loans for most of the 21st century, today receives more from Africa in debt repayments than it extends in new credit. On top of all that, the war in Iran will increase the cost of fuel and fertiliser.

Yet African countries look resilient. The IMF reckons that in 2026 economic growth will be higher in Africa than in Asia, hitherto a rare occurrence. Of the 15 fastest-growing countries anywhere, 11 are expected to be on the continent. The picture partly reflects high commodity prices and booming populations. But it is also revealing of something more profound: the rise of Africa as a destination for investment , not charity.

To be sure, there is not one Africa. Some of the continent is at war (Sudan) or unstable (the Sahel). But the most economically important parts are not. Internal strife can co-exist with thriving industries even within the same country: take, for example, energy or fintech in Nigeria. And though aid remains vital to the budgets of the poorest places, for the larger economies it is a rounding error.

Before the outbreak of the third Gulf war, animal spirits were on something of a safari. In the first two months of 2026 the value of bonds issued by African countries on capital markets was higher than during any equivalent period since 2013. The ratings of African sovereign bonds remain at a five-year high. Last year many African stockmarkets reached record highs. The price rises for fuel and fertiliser, and therefore food, caused by the war may stunt these movements. But there are three reasons to be optimistic that the investment case for Africa will continue to be promising.

The first is that Africa is attracting a wider range of foreign investors than ever. In 2024 the continent received a record amount of foreign direct investment: at $97bn, about a third more than the inflow of aid. For both America and Europe, Africa has grown in importance as a source of critical minerals and a destination for infrastructure spending. The chaos in the Gulf may redouble European firms’ interest in African energy projects, whether oil, gas or renewables, a shift that began when Russian tanks rolled into Ukraine in 2022. China, though lending less, is trading at or near record levels with the continent. The Gulf states may rethink some of their investments, given the damage caused by the war, but they will still have an appetite for Africa’s agricultural and mineral riches.

A second reason is that African policymakers have made their economies more resilient. Inflation slowed down in most countries last year in part because of prudent central bankers. Market-friendly reforms in Nigeria and South Africa will boost these large economies and their surrounding regions. Efforts to reduce intra-African barriers to trade, capital flows and movement of people are picking up. More than twice as much rail may be laid in the next ten years as in the past decade.

The third reason for optimism is probably the most crucial: African investors are starting to put more of their capital into Africa. In 2024 the 500 largest African firms recorded their highest-ever revenues in dollar terms. As these firms grow, they are reinvesting in new projects. This trend is exemplified by Aliko Dangote, a Nigerian tycoon and Africa’s richest man, who has built a massive refinery complex outside Lagos and plans to expand across the continent. Last year local investors accounted for 45% of venture-capital commitments in Africa, the highest-ever share. New rules in many places mean that some of the $1trn-plus on the balance-sheets of pension, insurance and sovereign-wealth funds will go to private equity and infrastructure, not just bills and bonds.

Africa still faces huge challenges. The flipside of its demographic boom is that 15m young people will soon be entering the labour market every year, most of them without hope of a formal job. Electricity remains patchy and costly. Agricultural productivity, while improving, lags behind global averages. The share of children in primary school has stalled since 2010. Complacent African politicians are often reluctant to allow the rise of large businesses that owe their success to entrepreneurship, rather than political connections. Too many corrupt autocracies opt to repress restless populations rather than uplift them.

Even so, it is time for the world to update how it thinks about Africa. The Middle East is at war again, Europe is sluggish and America is run by its own would-be autocrat. As a result, the continent is starting to seem less and less risky. Relatively speaking, Africa looks a safer bet than ever. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A prolonged blockade risks creating a humanitarian crisis on America’s doorstep

A dirty deal with Cuba would be better than the alternatives A prolonged blockade risks creating a humanitarian crisis on America’s doorstep March 19th 2026 Not since the Cuban missile crisis in 1962 has the United States held so much power over Cuba’s fate. By taking control of the distribution of Venezuelan oil after capturing Nicolás Maduro, that country’s dictator, America cut Cuba off from its last reliable energy supplier. The threat of renewed tariffs has prevented other friendly countries, like Mexico, from stepping in. Many countries that employed Cuban doctors, and paid the regime directly for their service, have been bullied into sending them back, cutting off precious foreign currency. On March 16th the power went out across the whole of Cuba for the fourth time in five months. Protests are increasing. Temperatures are rising .

Not for the first time, the goal of an American pressure campaign is unclear. “I do believe I’ll be…having the honour of taking Cuba,” Donald Trump said on March 16th. “Whether I free it, take it, I think I can do anything I want with it.” Marco Rubio, his Cuban-American secretary of state, is more diplomatic but just as opaque. “Cuba’s status quo is unacceptable,” he said on February 25th, after meeting regime officials in St Kitts & Nevis. “Cuba needs to change…and it doesn’t have to change all at once.” Who knows what this means?

What is clear is that the regime has been forced to negotiate . On March 13th Miguel Díaz-Canel, Cuba’s president, admitted publicly to speaking to the Americans. A deal appears to be taking shape, modelled on the one the Trump administration has cut with the regime in Venezuela. The Americans have, in fact, been allowing fuel to be shipped to Cuba since the middle of February, but only via the private sector. Under the deal this arrangement would be expanded. The country would open up to American investment, particularly in energy. Political prisoners would be released, and exiles would be permitted to return, not just as tourists but as business owners.

Crucially, the Castro family and most of the ruling figures clustered around it seem likely to hold on to power. The Cubans in St Kitts included Fidel’s nephew and great-nephew. Mr Díaz-Canel holds little real clout, but he may well end up being ousted to satisfy Mr Trump and protect the Castros.

It is remarkable that a communist regime has managed to survive for 67 years with the world’s most powerful nation, just a hundred miles away, bent on its destruction. To do so, the regime has regularly reneged on agreements like the one Mr Trump is considering. Many of those who care about Cuba, particularly Cuban-Americans in the United States, argue against any deal that does not involve the departure of the Castro network from the island and the end of the regime.

But after six decades of single-party rule, the regime is too entrenched to be removed at a stroke. Instead, Messrs Trump and Rubio are in a position to negotiate an opening-up that may, eventually, lead to the regime’s demise. The Americans should enforce compliance to a far greater extent than they have in the past. If the regime starts using shadow-fleet tankers to import fuel, bypassing the private sector, America could seize them. If the release of political prisoners stalls, the supply of oil could be stalled too. Sanctions would remain in place, with licences being used to allow investment. If the private sector can be helped to grow faster than the state-controlled economy, the regime’s latitude for control will shrink. Over time, America should then demand political liberalisation, too.

Cutting a deal may let the regime cling on. But the alternatives are worse. If Mr Trump ends his blockade with nothing to show for it, the regime may be empowered. Continuing to squeeze in the hope of igniting protests that topple the strongmen is unlikely to work. Cubans pay a high price for challenging their government; in the past many have preferred simply to leave the country. A prolonged blockade risks creating a humanitarian crisis on America’s doorstep. That would be bad for Cubans and bad for the United States, and would risk pushing Cuba further into the arms of China and Russia.

Mr Trump wrongly thinks he can run the western hemisphere through aggression alone. But when it comes to Cuba, he has an opportunity to do what he thinks he does best: make a deal. Then he should stick to it. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

But there are ways to rely less on it

Gas will not be killed off by renewables any time soon But there are ways to rely less on it March 19th 2026 The world is facing its second gas shock in half a decade. After Russia cut flows to Europe in 2022, intending to undermine support for Ukraine, the continent turned to liquefied natural gas (lng) shipped from America and the Middle East, sending prices soaring. Now lng supplies from the Gulf have been cut off, too. Power prices have consequently surged.

Some experts argue that renewables offer a promising way to get off gas, and thereby ensure energy security . They point to Spain, which has pursued huge investments in wind and solar; so far this year gas has set power prices there only 15% of the time, compared with 89% for Italy. Solar’s share of power generation in Pakistan increased from 0.7% in 2019 to 10% in 2024; the country’s import bill for lng for the rest of this year is likely to be $6bn less than it otherwise would have been, according to one analysis.

Unfortunately, the world will remain haunted by the spectre of natural-gas shocks for decades to come. Even in a world dominated by clean energy, natural gas will continue to be a critical part of electricity generation. Solar and wind power, along with batteries, cannot offer complete energy security. Governments can, however, limit the damage that gas shortages can do.

Analysts contend that it is possible to run a cost-effective electricity grid where the vast majority of power comes from renewables in concert with batteries. But a grid that is split between 90% clean energy and 10% fossil fuels does not mean one in which those two sources consistently provide that mix of energy. Instead it is one in which for a tenth of the time, nearly all of the power is derived from fossil fuels.

That is because renewables are at the mercy of Mother Nature. The sun does not always shine, nor does the wind always blow. Batteries are increasingly able to smooth out short-term fluctuations in supply and demand—a cloud passing over a solar array, for example, or the evening peak after the sun goes down—but they cannot keep the lights on for longer periods. Other options are not appealing. Not all countries have the appropriate geography for hydropower, and in any case water is at the mercy of the weather, too; Europe’s crisis in 2022 was worsened by a drought. New nuclear power stations remain prohibitively expensive. Alternative forms of long-duration storage, such as iron-air batteries or hydrogen, are in their infancy. For the moment, analysts’ net-zero projections include a role for natural gas far into the future.

Importers of gas will therefore remain vulnerable to supply disruptions. Governments will have to ensure there is capacity to satisfy all demand, which includes import capacity for LNG, storage facilities and pipelines, as well as power plants. If global gas demand falls, supply may become dominated by a few low-cost producers. The market could become thinner, subject to moments of acute shortage. Beyond seasonal storage, taxpayers may need to stump up for strategic reserves.

Though gas cannot be entirely avoided, there are things governments can do to rely on it less. Grids should become bigger and smarter. That means time-varying prices, which encourage consumers to shift demand to hours when power comes from virtually free sources of energy such as the sun and wind. If prices rise when clean energy is scarce, that will incentivise investment in promising forms of energy storage. Interconnections between grids can reduce exposure to local weather.

Local pricing can also help. At present there is often little incentive for storage and energy-intensive industries to be situated in windier or sunnier parts of a country. As a consequence, grids become congested when it is sunniest or windiest. Allowing prices to reflect local conditions should help alleviate these bottlenecks, meaning that turbines would not need to be turned off when it is windy.

It helps, too, that the costs of relying on natural gas as a backup are far lower than depending on it for everyday energy needs. Britain’s Climate Change Committee, an advisory body, reckons that the additional investment cost of moving from gas to renewables would eventually be offset by substantial fuel savings. There is no getting off gas for a while. But its power to shock can be reduced. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Whatever happens in the Strait of Hormuz, energy markets have been changed for ever

An attack on the world economy Whatever happens in the Strait of Hormuz, energy markets have been changed for ever March 12th 2026 Having DISCOVERED the costs of tariffs, President Donald Trump has now discovered the costs of war. On March 9th he declared that his campaign against Iran would be over “very soon”, sending oil prices, which had peaked at nearly $120 a barrel the day before, crashing to nearly $80 (before the war they had been $70). Iran’s de facto closure of the Strait of Hormuz has blocked roughly 15% of global oil supply. Mr Trump, facing midterm elections and voters weary of inflation, is signalling that he cannot bear those costs—just as he retreated from his trade war after markets buckled last spring.

Yet Mr Trump is as chaotic in matters of war and peace as he is in economic policy. As we published this, the strait remained all but closed after Iran had struck shipping there. The oil price had rebounded to around $100. Meanwhile, American rhetoric remained belligerent, as Pete Hegseth, the secretary of war, promised to fight on harder than ever.

The confusion betrays the president’s lack of good options. Whereas de-escalating the trade war is more or less in his gift, he cannot restore the old energy market. Whatever happens, the world is entering a new era of energy insecurity.

The shock the war has unleashed could be huge. True, the world depends less on oil than it did in 1973, when an Arab embargo caused crude prices to quadruple, or 1979-80, when the Iranian revolution and the Iran-Iraq war hit supply. Then, it was still common to burn oil to produce electricity. Today it is used less widely, mainly to power transport and make petrochemicals.

Yet this evolution is double-edged. Today’s oil demand is stubborn, so prices have to rise more for a given disruption of supply. And this one is extreme: the loss of supply is greater than in either 1970s shock. Even at the worst moments of the crisis, traders have not come close to pricing in an indefinite closure of the strait. The oil price required to bring demand into line with supply in such a scenario could be over $150 per barrel .

Members of the International Energy Agency can draw on 1.8bn barrels of emergency stocks and they are releasing 400m. But access is often throttled by pipelines or other constraints. Even China, which has built up a separate vast stockpile, has seen the need to stop exports of some refined products. The fact that transport is a key input to so much of the world economy means that bottlenecks could cause grave harm.

And the shock is not limited to oil. Qatar’s main liquefied natural gas (LNG) export facility remains closed after a drone strike, taking nearly a fifth of global supply off the market. An expansion of its output has also been postponed. The loss of Qatar’s exports has set off a scramble in Asia. In Europe, where gas storage-tanks are unusually empty for the time of year, prices are up by more than half. America could export more LNG, but its demand for natural gas is rising, because of the boom in energy-hungry data centres.

Iran could drag the war out to try to suggest that it and not Uncle Sam is calling the shots. On March 11th Iran hit three cargo ships in the Strait of Hormuz and, later, two tankers near Iraq. Like Yemen’s Houthi rebels, who have successfully attacked shipping in the Red Sea with low-tech weaponry despite NATO members’ high-tech efforts to stop it, the Iranian regime has learned that it can lob drones at ships and energy infrastructure while being flattened by bombs.

Even when the war ends the world will have changed. Iran’s new hardline supreme leader, Mojtaba Khamenei, now knows that energy prices are America’s weak spot. In Ukraine, which has tested drone defences, some Iranian-style machines still get through. American troops are not about to occupy Iran to stop the launches. America does not have the capacity to defend every tanker, even if it provides them with cheap insurance. Disruption to energy markets will therefore come and go with geopolitical tensions, especially if Iran concludes that it needs a nuclear weapon to be safe.

That is the new reality in which investors, businesses and policymakers must now operate. For investors, the contrast between an increasingly volatile world and buoyant equity markets just became more stark. Chaos in the Middle East joins a long list of threats to markets, including gloomy scenarios related to artificial intelligence, trouble in private credit and a loss of faith in indebted governments. Government-bond yields have risen since the crisis began, especially in southern Europe and Britain, which depends on imported LNG.

Businesses face a new risk premium, as energy prices reflect the ever-present danger of conflagration. As after the pandemic and start of the Ukraine war, they must again pore over their supply-chain risks, including their exposure to the Gulf economies, whose reputations for stability have been shaken and which can expect less investment and fewer tourists.

For policymakers, painful decisions loom. Energy storage is part of the solution. It was foolish of Mr Trump not to replenish America’s oil reserves at the low prices that prevailed before the war. Adding to emergency stocks will now cost more. High prices should induce more supply outside the Middle East. Until it does, countries like America may find it hard to resist the lure of energy protectionism. When oil producers and refiners, including China and India, start to restrict exports in an attempt to protect their consumers from high prices, the damage to other countries can be severe.

Central banks will have to cope with a renewed inflationary threat that heightens the risk of both recession and wage-price spirals. And politicians will face voters clamouring for energy subsidies, like the support doled out in the rich world after Russia invaded Ukraine, which exceeded 2.5% of GDP in many European countries, adding to their debts. That would shift the pain to poorer countries, especially in Asia; in 2022 Bangladesh endured blackouts. It is difficult to predict how this crisis ends. But even if countries get policy right, it is already clear that the war has made the world economy less prosperous, more volatile and harder to govern. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

The Communist Party is afraid to tax inherited wealth

China’s hereditary elite is taking shape The Communist Party is afraid to tax inherited wealth March 12th 2026 OVER THE past half-century, China has conjured vast wealth out of widespread poverty. Now comes the vexing part: how to pass it on to the next generation. For China, this poses a new and underappreciated risk. On its current trajectory, the first great intergenerational transfer in China’s modern history will widen inequality, cement privilege and breed resentment. The government, devoted to “common prosperity”, is shockingly insouciant about what that will mean.

In 1978, on the eve of China’s economic take-off, the average household’s assets were worth barely $1,500 in today’s money. Now, that figure has reached about $170,000, a hundred-fold real increase. Alas, the fruits are uneven. The richest 10% of the population now own nearly 70% of China’s total private wealth, roughly equal with America and well above most advanced economies, according to the World Inequality Database. And the richest 10% are, like most of China, rapidly ageing. Their heirs are in line for windfalls.

Across the rich world, increasing hereditary wealth is creating a class more inclined to search out tax loopholes than to strive or innovate. China will have those problems and more. First, its inheritocracy is brand new. It was only in the 1990s, when China allowed homeownership, that people started to accumulate a lot of assets. A business boom got going at the same time, minting millions of millionaires—and hundreds of billionaires. Of those worth at least 5bn yuan ($720m), 23% were over 60 in 2016. Today, 49% are that old.

Another uniquely Chinese feature is society’s demographic structure. Although some ultra-rich families flouted the government’s one-child policy, most urban dwellers abided by it. The assets of two parents are thus about to go to a single heir. New clubs and matchmakers have sprung up to help the richest couple with each other, magnifying their inherited advantage.

And a last factor is slowing economic growth. Even as wage gaps have narrowed slightly, wealth is starting to matter more. This represents an abrupt transition for China, from an era when people believed anyone could prosper through hard work to a bleaker acceptance that what really counts is the right “amniotic fluid” , as one person quips in our briefing this week. Meanwhile, steep declines in property prices have hurt almost all middle-class Chinese, for whom housing was their biggest asset. The uber-wealthy, with more diversified portfolios, have emerged in better shape.

The most severe consequence may be a new fault line in society. For years Chinese people were inveterate optimists, believing in the fundamental fairness of life, even when the poorest faced long odds. Recent surveys have shown a marked rise in pessimism—and, given the difficulties of monitoring public opinion in China, they may be understating that trend.

One concern for the government is social instability, though it has tools to suppress unrest. Another is that young adults may choose to withdraw from the rat race or sit back on their wealth. With youth unemployment over 16%, some are questioning the endless competition that can make life in China so stressful. As the great inheritance plays out, the go-getter spirit that fuelled the country’s rise may ebb. Persistent inequality will also add to economic imbalances: the tendency of the well-off to spend less of their income than the poor helps explain China’s low consumption rate.

Despite President Xi Jinping’s talk of greater equality, official thinking is woefully behind the curve on inheritance. The Communist Party, bizarre as it might sound, is opposed to a significant redistribution of wealth. It has a Thatcherite moral objection to handouts, worrying that they will make people lazy. It would instead prefer strong economic growth, whereby gains are more evenly shared. But ignoring accumulated wealth will ensure that deep inequality becomes ingrained.

The solution need not be radical. China should focus on taxing capital, a glaring hole in today’s fiscal system. It has neither an inheritance tax nor a recurring property tax, and its capital-gains tax is riddled with exemptions. Its income tax is also hobbled by complexity. Combined with cuts to consumption levies, the result is that China’s total tax revenue, excluding social-security contributions, has declined over the past decade, from 18% to 13% of GDP, about three-quarters the rate of peer countries. Observers fret that Mr Xi is returning China to Marxism; few notice that, perhaps unwittingly, he has made it a partial tax haven.

Since the early 1990s China has often promised to consider introducing an inheritance tax, yet has not done so. It has also moved at a glacial pace on levying a property tax. Why the delay? Some officials cite the fear that taxes may weigh on growth and that the wealthy may shift their fortunes abroad. Neither argument is persuasive. If inequality keeps rising, it can damage growth, too. And China is well-placed to stop an exodus of wealth with strict capital controls.

A more compelling explanation is that the Communist Party fears the political fallout. Taxing wealth requires assets to be reported. This has bedevilled the launch of a property tax, in part because many corrupt officials own several homes. Forcing political elites to come clean would expose pervasive graft—and trigger a pre-emptive wave of home sales when the property market is weak. Beyond officialdom, there is a need to justify higher taxes to the public, particularly to the rich who stand to lose the most. Mr Xi’s inaction on taxes is a reminder that, for all his power, he is still wary of stirring up resistance.

China’s leaders, sometimes celebrated for their technocratic brilliance, have consistently been slow to correct obvious mistakes. They were too hesitant to end the one-child policy, to deflate the property bubble and to retreat from their zero-covid strategy. Once again, they face a slow-moving but easily visible problem: the transfer of vast riches. The danger is that they wake up in a decade or two to see that they have nurtured a permanent wealthy elite on top of a disillusioned society. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

If America cannot eliminate the threat, what should it do?

There are no good options for Iran’s nuclear programme If America cannot eliminate the threat, what should it do? March 12th 2026 MANY THINGS make the Iranian regime loathsome, but what causes it to be especially dangerous is its pursuit of nuclear weapons. Its promise not to build a bomb was belied by its determination to enrich uranium to weapons-grade. That has long underpinned the regime’s attempts to intimidate its neighbours and threaten Israel’s survival.

If the war unleashed by America and Israel on February 28th is to count as even a narrow success, it must therefore set back Iran’s nuclear ambitions for years, and ideally for ever. The best way for this to happen would be for the regime to be replaced by a democracy focused on improving the lot of its people and living in peace with its neighbours. Such a government would pose the least threat. Yet an aerial war will struggle to create such a renewal. It could even make the situation worse.

The regime has surely understood that being a threshold power makes you a target and that for a nuclear programme to offer any protection, it must go all the way. The new supreme leader, Mojtaba Khamenei, is thought to be more eager than his late father and predecessor to get a bomb—and after the death of his family is likely to want vengeance. In Iran those arguments may overshadow the fact that American and Israeli missiles and bombs have done great damage to the economy. Despite knowing that future work on a nuke will be met with extraordinary firepower, Mr Khamenei may tolerate the risk.

Post-war Iran would begin a programme with a head start. Roughly 400kg of highly enriched uranium is buried inside the country, enough for about ten bombs. Whether in the hands of a hostile regime or, if order collapses, a warlord looking for a buyer, this fissile material poses a grave threat.

America has three options. One, backed by some in Israel, is to send in special forces to seize it. As we describe , that would take a huge, days-long occupation, involving a specialist assault force protected by over 1,000 troops and constant air support. This is feasible, though demanding and risky, but America has lost the element of surprise and intelligence suggests that the 400kg is in two or even three places, possibly putting some of it out of reach. Furthermore, although Iran would have to restart enrichment from scratch, it would retain its know-how.

That leads to a second option, which is to bomb Iran every time it poses a threat. This war has shown how costly that would be. Iran has learned that even its low-tech drones and missiles can roil world energy markets and disrupt the Gulf states, which sell themselves to investors and expats as oases of calm. American voters would surely reject going to war if each engagement only reset the clock for the next one. American strategists would not want to be stuck in the Middle East when their focus is China.

That leaves a deal with the regime to end its nuclear threat. This is a tough option: Mr Khamenei may reject an agreement. The regime may accept and then go on to cheat. And yet it is still the best option. Iran is exhausted after the bombing. To rebuild its economy it needs sanctions to be lifted. In exchange, it may be willing to strike a permanent deal as part of a ceasefire, whereby the regime agrees to the end of enrichment, monitoring of its nuclear programme and the dilution or removal of the highly enriched uranium.

It would be an odious compromise. In 2015 Barack Obama negotiated a similar—temporary—deal, but Donald Trump abrogated it in 2018. What an indictment of his Iran policy that, eight years and two wars later, he has no better options. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

By alienating Hispanics, he has given Democrats an open goal

How to teach Donald Trump a Latin lesson By alienating Hispanics, he has given Democrats an open goal March 12th 2026 “Hispanics love Trump,” said Donald Trump in 2024. It was not just empty boasting. He won 48% of the Latino vote that year, more than any previous Republican presidential candidate. Like many others, Hispanics were feeling squeezed by inflation and largely blamed it on President Joe Biden. Many chafed at disorder on the border, where for a while a wide-open asylum system had attracted an influx of people from poorer countries. Mr Trump promised to cut the cost of living and kick out migrants who had committed crimes. Lots of Latinos took him at his word, and now feel buyers’ remorse.

Far from taming prices, Mr Trump is driving them higher with tariffs and a war of choice in Iran. And far from concentrating on deporting rapists and gangsters, his agents have been rounding up grannies and gardeners. Texan builders are struggling to build houses because Latino bricklayers and electricians are frightened to come to work . Federal agents are barging onto private property without judicial warrants. Hispanics feel besieged by swaggering men in masks. Small wonder Mr Trump’s approval rating among them has collapsed to 22%.

That will make it harder for Republicans to hold on to Congress at the midterm elections in November. Their gerrymandering in places like Texas, which assumed that their Latino support would remain high, could backfire. Nationwide, if the election is close, a Hispanic surge could tip dozens of seats. A new Economist/YouGov poll finds that Latinos favour Democratic candidates over Republicans by 43% to 27%. In the past six months, the prediction-market odds of Democrats flipping the House of Representatives have improved from 69% to 85%. For the Senate, where only a third of seats are up for election, the odds have risen from 29% to 47%.

The loss of Hispanic support is not the only reason why Republicans face a possible drubbing. Plenty of other Americans are hacked off with high prices and ICE agents who act like a lawless paramilitary force . Still, history suggests that when a party alienates a whole demographic group, the political effects linger. Republican presidential candidates won California nine times out of ten between 1952 and 1988, but never carried it again after a Republican governor backed a statewide anti-immigration referendum in 1994.

The administration knows it has a problem, and has been trying to soften its tone. Kristi Noem, who once posed triumphantly in front of a cage of half-naked Hispanic men, no longer heads the Department of Homeland Security (DHS). Recruitment ads for ICE agents no longer appeal so directly to macho xenophobes. The DHS website once declared that “America has been invaded by criminals and predators. We need YOU to get them out.” Now it appeals for “protectors” and even “analytical” types. The White House has told Republicans in Congress to stop talking about “mass deportation” and emphasise the removal of criminals.

Yet the underlying policy has not changed much. Many Latinos still live in fear that they, or a relative, will be grabbed off the street , shackled and separated from their loved ones. And some in Mr Trump’s orbit make clear that they think certain Americans are more American than others.

All this leaves an open goal for Democrats. They may still trip on their own bootlaces. And Mr Trump may yet win back some popularity by, say, changing the communist regime in Cuba. But if the Democrats position themselves as the party of economic predictability, rather than scattergun tariffs and self-inflicted oil shocks—and of the rule of law instead of racially tinged bullying—that should appeal not only to disillusioned Hispanics but to Americans in general. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Voters must be able to turn out without risking death

Haiti needs order first, then elections Voters must be able to turn out without risking death March 12th 2026 Gangsters control most of Haiti’s capital, Port-au-Prince, extorting money from civilians at every turn. Pedestrians must pay a toll to enter a gang-ruled neighbourhood; traders must pay “taxes”, even on food. The result is ruin. Haitians are more likely to suffer from severe hunger than people in war-racked Sudan. Only 10% of clinics are fully operational. Some 1.4m people have been forced to flee from their homes—about as many as were displaced by a huge earthquake in 2010. But whereas that natural disaster prompted a swift humanitarian response, Haiti’s political collapse has driven donors to despair. A security mission backed by the UN has been running since 2024, but it has done little to improve public safety.

Now there is hope at last. For the first time in years, the gangs are starting to retreat. In 2025 the Haitian National Police began fighting back with help from private security-contractors—including Vectus Global, a firm founded by Blackwater’s Erik Prince. They use small aerial kamikaze drones to hunt gangsters; hundreds have been killed. The UN security mission is being revamped with American backing. It will soon have five times more personnel and an explicit mandate to go after gangsters independently. The first troops are due to arrive from Chad in April. The streets of Port-au-Prince show signs of small improvements , though few areas are yet safe. The acting prime minister since 2024, Alix Fils-Aimé, is in favour with the Americans and has brought a measure of stable leadership.

All this gives Haiti its best chance in years to restore something resembling calm. But reviving a minimally functional state will require much more than blowing up gangsters. Haiti needs a government with a democratic mandate to rebuild the country, and a muscular civilian police force that acts in Haitians’ best interests. This means holding elections in which Haitians feel safe enough to vote as they wish, not as criminals with guns tell them to.

It is a difficult task. Since its first tolerably free elections in 1990, Haiti has endured coups, military rule, vote-rigging and brief foreign occupation. There have been no elections since 2016, when Jovenel Moïse, a failed banana farmer, won the presidency with the support of less than 10% of registered voters. Turnout was 18%, the lowest ever. Moïse was later assassinated. Haiti’s electoral council has scheduled elections for August, but it seems unlikely the country will be ready so soon.

Rather than rushing to hold a vote, the government and its international partners should try harder to improve security. The drones must be targeted and proportionate. When the new UN force arrives it should start by protecting Haiti’s main roads, so that food, goods and people can move again. That would ease hunger and give the economy a chance to grow after seven years of deep recession. The police force—which has been under civilian control only since 1995—should take the lead in consolidating any gains, working street by street to make neighbourhoods not merely gangster-free but reasonably safe.

Then Haitians deserve a choice. The gangs will undoubtedly back pliable candidates, and members of the old corrupt elite will try their luck. What Haitians really need is, if not a Mandela figure, at least a leader capable of getting the basics right: orderly streets and a non-predatory state. It is far from clear who that leader might be. (Mr Fils-Aimé cannot run.) However, better security might give candidates time to emerge. Haitians, mindful of the consequences of bad leadership, should scrutinise them carefully. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

His ill-considered conflict risks descending into chaos

Donald Trump must stop soon His ill-considered conflict risks descending into chaos March 5th 2026 IT IS RARE for one head of government to order the death of another. Yet on February 28th America’s president and Israel’s prime minister did just that, killing Iran’s 86-year-old supreme leader, Ayatollah Ali Khamenei. The decapitation of the Iranian regime reflects the devastating operational success of “Operation Epic Fury”. But Mr Khamenei’s place was immediately taken by a triumvirate. The next supreme leader could be named soon—perhaps his own son unless he, too, is killed. That augurs something more subtle and worrying: that the operation is failing to achieve its political goals.

It is naive to say, as some of Mr Trump’s cheerleaders do, that because Mr Khamenei was wicked (and he surely was), any sort of war makes sense. When you command a machine as lethal and overwhelming as America’s armed forces, united in this operation with the battle-hardened Israel Defence Forces, you have a special responsibility to define what you want to achieve. That is not only an ethical requirement; it is a practical one, too. War aims direct the campaign; they define the sacrifices the state imposes on its own people and the enemy; and they determine when the fighting should end.

In this war, Israel’s aim is clear: to demolish the threat posed by Iran’s regime. By contrast, Mr Trump and his cabinet have offered a mess of shifting assertions—about Iran’s missiles, nuclear weapons, regime change, following Israel’s lead, a “feeling” Iran was about to attack and settling scores after decades of enmity. Politically, vagueness gives Mr Trump room for manoeuvre. Strategically, his failure to say what Epic Fury is for is its biggest vulnerability.

The result is a split-personality war. One face is operational. America and Israel have destroyed Iran’s navy and grounded its air force. They are wrecking its missile capability and its arms industry and targeting the regime and its brutal enforcers. Dominance of the skies means that America and Israel can fight on at will. Interceptor missiles are meanwhile defending bases and cities in Israel and the Gulf countries, even as Iran strikes at more targets than it did during the conflict last June. So far, at least, there are enough interceptors to keep going.

The other face of this war is political, and it emerges from Iran’s strategy, which is about sowing doubt and confusion. To survive would count as victory for Iran’s regime. So far, it is succeeding. Far from falling apart, it is rushing to escalate horizontally—a fancy way of saying it is lashing out in all directions. This has a number of consequences.

One is that other countries are being sucked in. Iran has attacked the Gulf states, which have bet their future on being havens from the chaos gripping the rest of the Middle East. Fighting has also erupted in Lebanon as Israel smashes Hizbullah, Iran’s main proxy. France and Britain will defend their bases from attack. On March 4th NATO air defences shot down an Iranian missile bound for Turkey.

Another consequence is economic . Iran has tried to shut the Strait of Hormuz, cutting off perhaps 20% of global oil supplies. It has also struck energy infrastructure, including the world’s biggest gas-liquefaction complex and Saudi Arabia’s largest refinery. The price of Brent crude is up by 14% since February 27th, to $83 a barrel. A megawatt-hour of natural gas in Europe costs €54 ($63), over 70% more than last week. As Asian buyers scramble for supplies, prices could go higher. The global economy could yet suffer a hit. If oil reaches $100 a barrel, GDP growth could be lowered by 0.4 percentage points and inflation raised by 1.2 points.

The third potential consequence is chaos inside Iran. Roughly 40% of its 90m people belong to ethnic minorities, including Arabs, Azeris, Baluchis, Kurds and Lurs. The Arab spring showed how countries can fall apart. America and Israel are putting pressure on the regime by backing Kurdish insurgents—a reckless idea that could end up stoking Persian nationalism or civil war. Mr Trump may not care about this, but he could not ignore the effects spilling over Iran’s borders into the Gulf states, Iraq, Syria and Turkey.

The risk is that Mr Trump cannot bear to quit so long as the markets and polls deny him the acclamation he craves—and that may last for as long as Iran can release even sporadic missiles and drones. Today barely a third of Americans favour the battle in Iran (90% backed invading Afghanistan in 2001). America may be an energy exporter, but its voters detest costly petrol. He may be tempted to seek an undeniable win by bombing the regime out of existence. But even with America’s military clout, he might not succeed. Meanwhile all those risks would continue to harm the region and the world economy.

Mr Trump would do better to narrow his war aims. His goal should be to degrade Iran’s military capabilities and then stop. He is almost there.

Some will argue that the job would be only half-done. Obviously, leaving the regime as a wounded beast would be heartbreak for the oppressed Iranian people. Even if Mr Trump wants peace, Iran could continue to lash out for a while, at least, revelling in its status as a symbol of anti-American resistance. The surviving regime may reject a nuclear deal—indeed, like North Korea, it may think a bomb is its only protection. If it rebuilds its nuclear programme, Mr Trump may have to strike again in months’ or years’ time. It is a bleak prospect. But it would be better for America to declare victory early than limp out of an unpopular war because of exhaustion.

These are the fruits of Mr Trump’s impulsive approach. Before this war, Iran’s regime was weaker than at any time in its 47-year history: it could have fallen without a single American bomb. Mr Trump may get lucky, but he is more likely to end up having to deal with regional chaos or a new hardliner. Surrounded by sycophantic courtiers, Mr Trump has become rash in his second term. His opportunistic grabs for power whenever he sees weakness are dangerous. America needs a strategy in Iran, just as it needs one in the world. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

The squabble between America’s government and Anthropic makes an AI disaster more likely

AI danger gets real The squabble between America’s government and Anthropic makes an AI disaster more likely March 5th 2026 In the past week an extraordinary fight over artificial intelligence has broken out. The Trump administration’s row with Anthropic, one of America’s leading AI labs, over the Pentagon’s access to its models will be a test of who controls the world’s most potent technology. Its outcome will shape everything from America’s national security to the development of ai. It could also make an AI-enabled disaster more likely.

On each of these counts, you should be alarmed. In the first big clash between the concern for AI safety and the imperative to race ahead in an attempt to dominate the technology, America’s government has clearly shown it is on the side of speed. Because long-feared safety risks involving AI are already becoming realities, more such tests are at hand. Experts warn that the world is hurtling towards AI-mageddon. America’s rash embrace of risk makes that more likely.

The Pentagon fell out with Anthropic over the government’s demand that it should be allowed to use the company’s models for all legal purposes. Anthropic (a sponsor of The Economist’s “Insider” shows) refused on two grounds.

First, Dario Amodei, the chief executive of Anthropic, fears that ai could one day be used to analyse the digital footprints of ordinary Americans, a form of surveillance that today’s laws have not caught up with. Under Mr Trump, Immigration and Customs Enforcement is already using ai to analyse vast amounts of data to speed up deportations. Extending that to Americans does not seem far-fetched.

Second, Mr Amodei is worried about the use of autonomous weapons. AI remains unpredictable and immature as well as extraordinarily powerful. Because the technology could go rogue, he argues, it is too soon to take humans out of the loop.

The administration has responded to Anthropic with fury and retribution. President Donald Trump branded the company “leftwing nut jobs” who were trying to “dictate” how America’s “great military fights and wins wars”. He has given the federal government six months to rip up its contracts with Anthropic. Pete Hegseth, the secretary of war, says he will designate the firm a “supply-chain risk”.

This could be bluster—Anthropic’s models are being used in the attacks on Iran. But if the threat is enacted, then for the first time an American company will be classed as a security risk and prevented from doing business with defence contractors. On March 4th Anthropic was in damage control after a leaked memo from Mr Amodei said it was under fire for not giving “dictator-style praise to Trump”.

With a normal government and a normal technology, the dispute would surely have been quickly sorted out. But this is not a normal government, and AI is not a normal technology. Our briefing this week explains how both Mr Amodei’s fears reflect wider concerns about the dangers it poses . As with enhanced government surveillance, one set of worries is that AI is too powerful. In December Anthropic’s Claude chatbot was told by hackers to break into the Mexican government’s records, supposedly as part of a security test; it found and exploited vulnerabilities and stole 150gb of taxpayer details, voter records and employee credentials. Researchers reckon that AI could be used to develop analogues of the toxin ricin that cannot be traced using conventional methods, because of novel protein structures.

The other set of worries, as with autonomous weapons, is that the models could stop heeding human instructions. Anthropic thinks that, because so much of its code is now written by AI, detecting whether it is drifting away from human instructions is hard to monitor. Many models now demonstrate a degree of what experts call “situational awareness”: when asked to delete themselves they reason that the situation is a test, and refuse to do so.

Against this backdrop, the administration’s treatment of Anthropic shows how much it prizes AI as a tool of national power. Instead of being prepared to set out clear rules on how the technology will be used, the government is making an example of a firm that dared to raise concerns, even if that means hurting homegrown innovation. This can only encourage a race to the bottom. Already, OpenAI, Anthropic’s chief rival, has leapt into the breach, striking a deal with the Pentagon that superficially resembles the one Anthropic had sought, but which is closer to what the Pentagon was after.

Where America leads, the world will surely follow. The pattern is being repeated as companies and governments downgrade safety concerns. Modelmakers have spent hundreds of billions of dollars investing in the computing power they need to race ahead to the next upgrade. That puts them under intense pressure to go as fast as they can to turn a profit. Even Anthropic has watered down its safety protocols in response to competition. At a recent ai summit in India, most governments were keener to discuss fair access to the technology than safety.

You might have hoped that the governments of China and America, home to the world’s most advanced ai labs, would unite to set global standards—and then ensure that they did not pay a penalty by imposing them on everyone else. But the two superpowers are locked in a race of their own, because they both see the domination of AI as the key to dominating the rest of the 21st century.

No wonder that, as AI grows rapidly more powerful, experts in the field are gloomily predicting a catastrophe. Some warn of a “Chernobyl moment”: the use of AI that leads to a disaster which causes either huge economic damage or loss of life.

The parable of Anthropic leads to the bleak conclusion that this danger is becoming more likely. Perhaps the best the world can hope for is a small-scale disaster, which jolts China and America into pressing for safety precautions—not Chernobyl so much as Three Mile Island. But worse is possible, too. Alas, action is unlikely to come until it’s too late. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Otherwise a fourth year of deflation awaits

China needs a more ambitious growth target Otherwise a fourth year of deflation awaits March 5th 2026 Ever since turning communist, China has set top-down targets for its economy. Mao Zedong wanted to double steel output in a year, and crippled the country trying. During his rule, China often fell woefully short of its goals. After his death, it often comfortably surpassed them. Lately policymakers have tried to ensure it does neither; their growth targets serve both as a floor and a ceiling to their ambition (see chart). They should aim higher.

The latest target was unveiled on March 5th, during the National People’s Congress (npc), China’s rubber-stamp parliament. The government set a growth objective of 4.5-5% in 2026, lower and looser than last year. This has elicited a variety of responses. Some economists think the target is still too high. China’s workforce is shrinking, its property market is moribund, consumers are cautious and exports may not come to the rescue as they did last year. Although the dangers of the trade war have receded, actual war threatens some of its markets in the Middle East.

Others argue that the target is just right. The NPC delegates will almost all vote in favour. Even among professional forecasters, the consensus guess is that China will grow by 4.6% this year, if only because policymakers will steer it there or thereabouts. A third camp thinks the whole exercise is fanciful. China’s growth figures, they argue, bear little relation to reality. It hardly matters whether a made-up number meets a made-up target.

All three camps are wrong. China’s new target is too low. Judging by the country’s recent record, it will set a ceiling on the government’s efforts to revive demand, perpetuating the economy’s biggest problems .

The proof lies in China’s prices. They have been falling, by some measures, for three years. This persistent deflation is a worry in itself—it increases the burden of debt, limits the room for monetary easing and mutes price signals, given the reluctance even in China to cut wages in money terms. It is also a sign of a deeper problem. It suggests that output is falling short of what the country could produce if its capital and labour were more fully employed. To close that gap in 2026 the economy would have to grow by more than 5.3%, by a conservative estimate. Four and a half percent will not do it.

One can agree with this diagnosis but chafe at the prescription. Some economists may object to targets in principle, dismissing them as a relic of central planning. We sympathise. We would much rather China adopted something akin to the inflation targets that guide other economies. But even in those places, central banks take a view on how fast the economy can grow to keep inflation in line. They too have a growth target, if only an implicit one.

Another worry is that a higher target will encourage wasteful investment. But there are other ways to speed up growth. More generous social spending and a credible fiscal backstop for the property market would give anxious households the confidence and the means to spend more freely. And the alternative—unnecessarily slow growth—is also scandalously wasteful. In China’s cities more than 16% of youngsters, the country’s best-educated generation, do not have a job. Other workers languish in rural backwaters. A greying society cannot afford to be so profligate with its fresher-faced cohorts.

China’s reluctance to do whatever it takes to stop deflation is easy to understand. A previous crop of leaders overreacted to the global financial crisis in 2007-09, releasing a “flood-like” stimulus that swept away financial discipline and carried inflation high above the government’s threshold. Back then, the state did too much. Now it is doing too little. China’s annual targets, five-year plans and centenary goals are supposed to keep its policymakers’ eyes on the future. But their instincts are dangerously rooted in the past. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

One reform offers both security in old age and dynamism now

It’s time to unleash Europe’s pensions One reform offers both security in old age and dynamism now March 5th 2026 Europe’s economic problems include a greying population, a lack of innovative firms and puny capital markets. Public pensions weigh more on government budgets with every passing year. But what if Europe could turn those weaknesses into strengths by using its pension savings to boost markets and finance entrepreneurs with long-term capital?

Europe’s pensions were not designed to turn workers into capitalists. In 1889 Otto von Bismarck, Germany’s “iron chancellor”, invented the pay-as-you-go system, whereby current workers pay for current pensions. The idea was to “bribe [workers] to regard the state as a social institution”. As it turns out, they see every increase in the retirement age as a betrayal of that promise. The system has therefore come under severe strain as populations have aged. Workers have had to hand over more in contributions, and taxpayers have plugged the remaining shortfall. In Germany a third of the federal budget is projected to be passed on to the pension system this year.

At the same time, Europe’s capital markets are sorely underdeveloped. The combined value of stockmarkets in the EU is 85% of GDP, compared with 220% of GDP in America. That matters for innovation, because market-based funding is more suitable for risky r&d than bank lending. Moreover, venture-capital investors need a deep capital market into which they can sell their holdings.

There are exceptions, however, and they are instructive. Sweden has created funds that buffer its pay-as-you-go system by investing in markets. Some contributions no longer fund today’s pensioners, but go into personal-investment accounts instead. The result is pension assets worth about $671bn, or 110% of GDP. It isn’t an accident that no other EU country has created more unicorns per head. Dutch pension savers have accumulated assets of around 145% of GDP in collective funds; since 2023 these are freer to invest in riskier assets. According to Morgan Stanley, Denmark and Switzerland boosted assets by about 20% of GDP in a decade after expanding market-based occupational pensions. Were that copied across the euro zone, more than €3trn ($2.58trn) would be available .

Europeans used to state-run systems will wince at the idea of exposing their future incomes to the markets. And capital-market theorists may add that there will not be much of a pay-off if savers diversify by flocking to America instead. Yet high public-debt burdens mean that relying on state pension promises is no longer as attractive as it once was. And worthy as diversification is, in practice many pension funds will prefer to keep a big chunk of their money at home.

Those European governments that do not have high debt-servicing costs should start building debt-funded buffer funds, invested professionally, for their pay-as-you-go systems. Occupational pensions should be deployed into capital markets by default. Savers should be allowed to direct some of their contributions to an individual investment account. The resulting gap in the public-pension system could be filled with wider fiscal deficits in the short term, because the long-run benefit is a more sustainable system that relies less on the public purse.

Even with these reforms, the transition to a more market-based system will take time. All the more reason to start now. The European Commission has long sought to stitch together capital markets across the eu. But those efforts will not amount to much if each market remains tiny. Europe’s tech scene is showing signs of life. The potential returns on pension reform have never been higher. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Britain’s twin populists have a symbiotic relationship

Nigel Farage and Zack Polanski: best of frenemies Britain’s twin populists have a symbiotic relationship March 5th 2026 For 15 years British politics has been rocked by an insurgency on the populist right, led by Nigel Farage. Now it is also seeing an insurgency from the populist left. The Green Party, a fusty and largely irrelevant outfit until it was given a makeover by Zack Polanski, its self-styled “eco-populist” leader, scored a stunning victory on February 26th in a by-election in Gorton and Denton, in Manchester. Labour was pushed into third place in its heartland, behind Mr Farage’s Reform UK. Jointly these twin populists have just 13 MPs but poll higher than Labour and the Tories combined. In the by-election they won 69% of the vote. The trend will be replayed many times at local-government elections in May.

At first glance this looks like a simple story about the mutually loathing poles of radical left and right. In reality the dynamic is more complex, and a lot more dangerous. Though the Greens and Reform present themselves as opposites, they are in some ways similar. Because each fuels the other’s success, their relationship is symbiotic. Both share a strategic interest in supplanting the parties of the centre. A great day for Mr Polanski in Gorton and Denton meant a very good one for Mr Farage. Not rivals, but frenemies.

To their supporters that will sound absurd. Mr Polanski calls Mr Farage “a fascist”; Mr Farage says Mr Polanski is a “lunatic” supported by “all the heroin smokers”. On immigration, the Palestinians, transgender people, climate and much else they are vociferous opponents. In Gorton and Denton the Greens courted local Muslim voters; Mr Farage claimed the campaign had been “sectarian”: ie, somehow un-British.

But that cultural gulf is the point. The two parties share a project in pulling apart Labour’s fragile coalition of progressives and traditionalists. Nothing mobilises their supporters like the spectre of the other extreme, and declaring that they alone can keep it from power. Thus Mr Farage and Mr Polanski are eager to lock horns. The more young voters see Mr Polanski berating Mr Farage on Instagram, the better for them both.

It is the same among populists across Europe, but in Britain the incentives are amplified by the first-past-the-post electoral system. Mr Farage knows his path to office will be eased if the Greens do well, because small gains in their vote greatly reduce the notional majorities of Labour MPs in his target seats.

Their voters have more in common than they think . Compared with supporters of mainstream parties, they earn less and are more likely to rent. Their politics reflect a loss of status. Many prospective Green voters have paid a lot for university degrees that turned out not to be the ticket to the middle-class jobs they imagined; many Reform supporters have lost the well-paying industrial work of their youth.

Both sets of voters are susceptible to zero-sum thinking. After two decades of stagnation, many doubt that the pie will grow much and are open to being told that someone else has taken too big a slice. Reform blames scrounging migrants. The Greens blame the rich. Both parties vow to raise living standards by squeezing their respective bogeymen. But their policies would make Britain poorer. Both are sceptical of multinationals, trade and building anything anywhere near anyone.

For the parties of the centre, the sensible response would be to offer policies to boost growth: making it easier to build, reforming welfare to encourage work, and so on. The snag is, such policies are often unpopular. And as populists lure away voters with simple, phoney cures for every ill, neither Labour nor the Tories seem to have the courage to be sensible. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

With a more focused approach, it could break China’s chokehold

America’s dangerous pursuit of critical-mineral dominance With a more focused approach, it could break China’s chokehold February 26th 2026 IN 1973 a club of Arab petrostates held the world to ransom by halting crude-oil exports to countries they accused of supporting Israel. Petrol prices soared; Western economies buckled. Today the danger is that China will use its grip on other natural resources to achieve its aims, such as seizing Taiwan. It has already shown its power by choking off exports of rare-earth metals last year. That is why America is staging its biggest intervention in commodity markets in decades.

The battleground is the supply of “critical” metals, a group of minerals vital to making military, electrical and computing infrastructure—everything modern economies need to be safe, high-tech and green. China supplies most of these: it mines about 80% of the world’s tungsten, for instance, and refines 99% of its gallium. This is spurring America into an all-out campaign to diversify its sourcing of 60 minerals. It has pledged billions of dollars to dozens of mining projects at home and abroad, floated plans to create price floors and trade blocs, and announced a vast stockpile to cover months of national needs. The risk now is that America depends too much on its scattershot efforts—and that, in seeking control, it breaks the flexible and resilient system of market incentives that ensures the smooth functioning of the global economy.

China’s grip on critical minerals has exposed the West’s most serious strategic weakness in many years. Last April, during its trade war with America, China restricted exports of seven crucial rare earths; it targeted another five in October. Nearly a third of Pentagon procurement programmes faced the risk of shortages, as did industries from carmaking to renewable energy. The prospect of large-scale disruption prodded President Donald Trump into a trade truce with Xi Jinping, as well as a relaxation of American controls on some technology exports. Yet Mr Xi can deploy the weapon again whenever he chooses. Meanwhile, exports of rare earths for dual-use applications—the expanding grey zone between military and civilian uses—remain largely barred, sapping Western efforts to rearm.

It would be nice to say that the best defence against China’s tactics is to double down on global markets. They certainly have a part to play. The oil crises of the 1970s boosted the development of commodity trading—in which prices for key materials are set on exchanges by millions of buyers and sellers entering 40m derivatives contracts daily. Time and again, hit by wars, industrial strikes and natural disasters, markets have handled shocks better than government planners ever could.

However, America is right. China’s dominance over critical minerals means that continuing to place full faith in the invisible hand would be naive and unsafe. China has spent decades building control over minerals, bankrolling projects at home and acquiring assets abroad. Its producers have consolidated into behemoths that the state can control and which have the market power to deter would-be competitors by flooding global markets—even if that means taking temporary losses.

America’s task, therefore, is to strike a balance. On the one hand, it needs to insure against the risk that China cuts off exports again, and to deter it from doing so by raising the cost of further restrictions. On the other, it needs to nurture markets. Subsidies and stockpiles are expensive. State-to-state mineral agreements invite rent-seeking, side deals and corruption—a risk with the Trump administration. Dirigisme muffles the price signals that encourage conservation and innovation.

Unfortunately, America is mismanaging these trade-offs . Officials seem to deem almost any expense to be an acceptable price for security. Money is being spread wastefully thin, not focused where China’s grip is tightest, in refineries and smelters. From Delaware to the Democratic Republic of Congo, chancers are pitching the administration dud projects in the hope of easy money. In return for peace in Ukraine (on his terms), Vladimir Putin is promising Mr Trump a bogus $12trn in deals, including lots in energy and mining.

America’s campaign should instead follow three principles. The first is to narrow the scope. Not all 60 minerals it deems critical genuinely are. Aluminium, lead and zinc are abundant, recyclable and substitutable; China would struggle to corner vast industrial-metal markets like copper. America should therefore concentrate on niche, vital metals, such as some rare earths, where China can more easily restrict exports. Priority should go to critical industries—defence, and perhaps health care—leaving carmakers to fend for themselves. America should focus on projects near completion. Even keeping a small share of supply out of China’s control can break its chokehold, because Mr Xi will know that America has alternatives.

A second principle is to use all the tools at hand. America’s targeted stockpiles can cover immediate needs in a crisis, and its purchase contracts at pre-agreed prices can attract private investors and get projects off the ground. But it must also attend to refining and processing. Refiners that produce one main metal often leave critical by-products in waste rock, because processing costs too much. Conditional state backing could change their calculus.

Throughout, however, America must strive to ensure that price signals get through—the third principle. The economy will continue to adapt and innovate only if buyers and sellers face high prices when supply is limited. By contrast, low fixed prices will exacerbate dependence.

For the Trump administration, national security means America First. That is translating into a race to lock up scarce supplies at others’ expense, causing its allies to worry they will be left behind. But even an administration that doubts the utility of military alliances should work with others over natural resources. Europe has engineering expertise; Japan, an earlier victim of China’s mineral blackmail, has experience in securing supply chains. Together they bulk up the market. Against China’s geology, industriousness and political system, America’s ability to work with others is its greatest asset. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

A conflict with Iran without a clear objective would be recklessly dangerous

Donald Trump is at risk of launching a war without purpose A conflict with Iran without a clear objective would be recklessly dangerous February 26th 2026 EARNING A NAME for issuing empty threats can be devastating. Ask Barack Obama. Thirteen years ago, a dictator in the Middle East defied a warning from America’s then-president not to cross a “red line” by using chemical weapons against his own people. The world held its breath, asking itself when Mr Obama would punish, or even topple, the tyrant for his war crime. Instead, Mr Obama did nothing. Syria’s vile ruler held on for over a decade. Half a million people died. For many, from that moment, the president’s credibility was shot.

Today, another murderous regime in the Middle East has been rabidly killing its own people. Iran’s rulers massacred perhaps 20,000 demonstrators in January. President Donald Trump said at the time that he would ride to the protesters’ rescue, promising that “help is on the way” and urging them to remain on the streets. Since then, Mr Trump has sworn to topple Iran’s regime. In his state-of-the-union address this week he vowed to block any resurgence of Iran’s “sinister” nuclear programme.

Has Mr Trump thereby set his own red line in the Middle East? You might suppose not. No politician today is less bound by his own bombastic outbursts and contradictions. Had the president merely shunned Iran, few would have held him to account for his noisy pledges.

Yet few people are more likely to take Mr Obama as a cautionary tale than the present occupant of the White House. More importantly, Mr Trump has done a lot more than talk. To give his words extra credibility, he has sent an armada towards Iran’s shores. The Middle East now hosts the largest concentration of American military firepower since 2003. A second aircraft-carrier, the USS Gerald R. Ford, has just sailed in. Jets, bombers and other airborne forces have assembled. Allies are on alert. By preparing the means to punish the regime of Ayatollah Ali Khamenei, Mr Trump is bringing this crisis to a head. This is both a moment of jeopardy and a test of his credibility.

A further reason to expect military action is that the president may be getting a taste for it. Last June he ordered bombers from Missouri to help Israel’s air force in a 12-day war to “obliterate” Iran’s nuclear programme. In January he again rolled the dice on a high-risk operation, sending special forces to Caracas to seize Venezuela’s dictator, Nicolás Maduro.

Mr Trump would prefer to win without firing a shot. But Iran’s rulers have a say, too, and they look defiant. They may judge that they can play for time at nuclear talks with America—or agree to a deal, only to stall over the details. Mr Khamenei may be prepared to put his country through an air war. Perhaps the 86-year-old is ready to be a martyr; more probably he bets he will live, even if many others die. Iran’s rulers seem united, and few, even among the Americans, seem to bank on missiles alone toppling them. The regime may be expecting to emerge stronger from any conflict simply by surviving.

If that is Iran’s calculation, Mr Trump has put himself in a bind . Launching an attack without a clear goal is exactly the sort of misstep he has long derided. Too many small and short wars turn out to be big and long. Iran has drones and ballistic missiles. Its leaders say they are readier than last year to use them against America and its allies. Imagine if a strike kills many American troops. China or Russia would be thrilled to see America bogged down, yet again, in the Middle East.

Mr Trump may yet set out a war aim that could win support from the public and Congress. But until he does, he would do better to keep talking with his fleet standing by, rather than start a war—even if holding fire looks like backing down. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Was a Blue Owl fund mismanaged, or did it reveal fundamental problems about the industry?

The right response to private-market dangers Was a Blue Owl fund mismanaged, or did it reveal fundamental problems about the industry? February 26th 2026 The giants of private investment risk seeing a tantalising prize slip from their grasp. Three of the biggest—Apollo, Blackstone and KKR—collectively oversee assets that have ballooned to $3trn, from $200bn in 2008. So far, they have had to raise the lion’s share of this from a select group of financial institutions and the über-rich. Now they and their competitors have the mass market in their sights. They have launched a wave of funds designed to entice retail savers to invest in unlisted assets such as private equity, property and private debt.

Their whole endeavour may now be under threat. On February 18th Blue Owl, a little-known firm, halted planned withdrawals from one of its retail funds. “OBDC II” has assets worth just $1.6bn. Yet news that Blue Owl has stopped redemptions, and is instead selling assets to return capital to all its investors, has sent shockwaves through the industry. Share prices fell in much bigger listed private-investment managers; half a dozen of them have lost a combined $100bn in market value since the start of the year.

That is because Blue Owl turned out to be a coal-mine canary. OBDC II has cast doubt on the model that such firms had hoped would “democratise” private investment and win them new revenue streams. Private-investment firms and their backers must now urgently work out what went wrong. Light regulation has let their markets boom for the better part of two decades. They cannot expect this to continue if they sell products to retail investors and do not honour their promises.

At stake are not just the revenues of a few asset managers. Access to private markets promises retail investors a way to share in big potential returns. The vast majority of the world’s assets are unlisted, including many of the most exciting businesses. Putting retail investors’ savings to work in private markets would also be a boon for the wider economy. Companies developing artificial intelligence are ravenous for capital, and Blue Owl’s funds are important lenders to them. In America in particular, such firms’ prospects will increasingly determine both the rate of growth and how well the country competes with China.

OBDC II aspired to solve a long-standing problem with retail investments in private markets. Directing savings towards private assets is difficult because they are illiquid. This makes regulators wary and puts off investors who like being able to buy or sell at the drop of a hat—if they need cash for an emergency, say. OBDC II used a model popularised by Blackstone’s Real Estate Income Trust, launched in 2017, which offers limited liquidity. Investors can ask to cash out each month or quarter, but the fund agrees to process total redemptions worth up to only 5% of its net asset value each quarter. Should requests exceed that figure, it caps the total at 5% and grants them pro rata.

Whether Blue Owl’s failure to stick to this was caused by its own incompetence, or by a fundamental flaw in the model, is still unclear. The very fact that this question remains unanswered should disturb anyone with a stake in institutions, such as pension schemes and university endowments, that are heavily exposed to unlisted assets. If regulators do not require funds like OBDC II to disclose far more about how they manage liquidity mismatches, their investors surely must.

Fortunately, the odds favour incompetence. A fund granting quarterly redemptions worth up to 5% of its assets is hardly promising the moon: at worst, it is offering to sell its portfolio over five years. This is the same as the typical wind-down period for standard private-markets funds. Providing regular liquidity ought to be especially easy for private-credit funds of OBDC II’s variety, since these invest in loans that pay interest, which can be used to meet redemptions.

For these reasons, it would be a mistake for zealous regulators to make it harder for ordinary people to buy private assets. It is, in truth, suspicious that private-investment giants are racing to sell to the mass market just when deals between them have slowed. But amateur investors are capable of scepticism. They can judge, for instance, the wisdom of investing in once-buzzy firms that were bought out during the mania of 2021, at “fair values” set by the seller. They should not expect to be bailed out—as they might if their bank collapsed—after making unwise investments.

Investors, meanwhile, should use their market power. They should not give money to managers whose operations are too opaque to understand. No fund promising annual returns in the high single-digit percentage points, or more, is a safe bet. It might hold loans that could fall through, property that could be left vacant or firms that could fail. If it also offers liquidity, while investing in illiquid assets, it could fail there, too. Responsible asset managers should help clients scrutinise these risks. If they do not, their golden opportunity may slip away. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Welfare is rightly becoming more generous. But regulatory fragmentation is a problem

America’s states should beware of copying Europe too much Welfare is rightly becoming more generous. But regulatory fragmentation is a problem February 26th 2026 EUROPEAN economists spend a lot of time looking enviously across the Atlantic. Despite tariff chaos and a collapse in immigration, at the last count America’s GDP per head was growing by 1.8% a year; the figure for the euro area was just 1%. Compared with America, Europe lacks a unified market for products and especially services, as well as cheap energy, low taxes and the flexibility to hire and fire workers easily. Technocrats know it. By our tally, Mario Draghi’s landmark report on Europe’s low growth draws unfavourable comparisons with America more than 70 times.

If only America’s states were equally attuned to the sources of their advantage. As we report this week, their economic policy is moving in a strikingly European direction, even as the Trump administration deregulates at a federal level. Not everything they are doing is bad, but they must beware of following Europe down a path of fragmentation and interventionism.

One way in which the states are turning European is in their approach to new technologies and markets . Whereas Congress has yet to pass any comprehensive laws on artificial intelligence, legislators in five states have passed their own, conflicting, laws and 16 more are on the job. Cars can drive themselves in eight states, including North Dakota and North Carolina, but they must not cross into their southern namesakes. As America’s Department of Justice waves through contentious mergers—like that between Hewlett Packard Enterprise and Juniper Networks, two corporate-computing giants—even the enforcement of antitrust law is fragmenting across state lines. State attorneys-general, led by California’s, are investigating the deal. Some states are resisting deregulation of consumer finance and gambling.

At the same time, many states are building European-style welfare states , financed by taxes. Take paid maternity or paternity leave—a benefit which Europeans are shocked that Americans lack.

Over the past five years, something remarkable has happened. The number of states that have made it mandatory for employers to offer paid-leave programmes has doubled. Some 114m Americans—around a third—live in states that now guarantee at least 12 weeks of paid family leave (in many places up to 24 weeks is available for new mothers). These schemes are often lavish, replacing almost all forgone income. The policies in New Jersey and New York are roughly as generous as those in France and Belgium. Citizens of these states pay for this privilege with higher taxes: New Yorkers, for example, hand over almost as much of their incomes as Britons do.

Some of this experimentation is welcome. The states have long acted as policy laboratories. Americans are mobile and will leave failing places , acting as a brake on bad economic policy. Some of America’s advantages, such as the English language and the concentration of talent in Silicon Valley, are entrenched.

And there are things America could learn from Europe. Economies like Denmark’s manage to combine European-style support for families and workers with dynamic labour markets and high living standards (albeit at the cost of high taxes). Maternity leave is obviously not a threat to capitalism. California has offered it since 2004, and still managed to become the home of the ai revolution.

Yet in other respects America is in danger of emulating the model of a continent that has struggled to shake its reputation as an economic laggard. The threat is particularly acute with regulation. A divergence in rules and codes for businesses would undermine the power of America’s single market. The promise of being able to make sales easily to nearly 350m consumers is a powerful incentive to innovate. Regulatory fragmentation is hard to remedy: though businesses, like individuals, can vote with their feet, they still want to be able to sell their software tools and vehicles across the country.

America’s federal and state politicians alike tend to take their country’s advantages for granted. Fortunately, as the experience with tariffs and immigration shows, America’s dynamism is so great that it can afford to make mistakes. Yet even as Europe eyes its growth enviously, America would be better off if it also gazed sceptically back. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The government must step in

Heathrow’s third runway is turning into another infrastructure fiasco The government must step in February 26th 2026 In January 2025 Britain’s Labour government threw its weight behind plans for a third runway at Heathrow airport. This was meant to signal its commitment to growth. But announcing grand infrastructure ambitions is easy; turning them into reality is hard. Since then the project to expand Europe’s busiest airport has tripped one warning light after another.

The main cause for alarm is the growing cost . Heathrow is already the second-most-expensive big airport in the world for passengers after Auckland. Heathrow Airport Limited (HAL), its operator, has presented plans to expand and modernise the airport at a privately funded cost of £49bn ($66bn). That is nearly twice the price of Dubai’s plan to build four more runways at its new hub. (Lord Deighton, who chairs The Economist Group, until recently also chaired HAL.) The proposals for Heathrow could cause already high landing charges to double; passengers may choose to fly elsewhere.

The headwinds buffeting the expansion are eerily similar to those that trouble High Speed 2 (HS2), Britain’s previous ill-fated foray into big transport infrastructure. This rail line between London and Birmingham has been delayed by more than a decade, its scope has been severely cut and its costs have more than doubled in real terms. The projects share some unavoidable challenges, such as London’s exorbitant construction costs. But other obstacles are not inevitable. Rather, they are symptomatic of governments that are too timid to change the planning system and too naive to stop private operators from running up the bill.

HS2 offers a lesson in how not to run a planning process. It took more than three years to get through Parliament, before requiring over 8,000 further permissions from local agencies. Labour has slightly improved the planning system for Heathrow, limiting opportunities for legal challenges. But an excess of consultation and legal hoops will still make costs soar. Planning paperwork alone is on track to eat up more than £1bn.

The HS2 debacle also reflected unclear objectives and misaligned incentives. The project became focused on speed when its original aim was to add rail capacity. The government lacked the commercial nous to control costs, and contractors had little incentive to contain them. It is the same with Heathrow. HAL’s proposal spares no expense: £1.3bn on car parks, for example, and a complex design for new terminals. From HAL’s perspective, this makes sense: the returns the regulator allows it to make are linked to how much money it invests. But the government is failing to rein the firm in.

It would be easy to conclude that the project should be cancelled. That would be a mistake. Britain badly needs a new runway to protect and expand the global connections on which the success of its open, island economy relies. Heathrow is already one of Europe’s most congested airports. Failure to act will make London less attractive. Instead, the government needs to toughen up.

It should start with planning. Robert Jenrick, Reform UK’s would-be chancellor, has promised emergency legislation to give Heathrow full planning consent. Labour should steal his idea, making sure the legislation removes the need for any other planning permissions and isn’t bogged down by consultations. Done well, this could be a model for future projects.

The state must also strip out the incentives to gold-plate the scheme. That means taking design control away from HAL and giving it to an independent body without a financial interest in excessive costs. This body could then commission HAL for specific work, but only when it is best for the job. HAL will warn of delays. The government should call its bluff—and set up a stand-alone planner, as it did for the National Grid.

Building big infrastructure is not just about getting out of the private sector’s way. When a firm has a monopoly, as HAL does at Heathrow, or the National Grid does over power transmission, the state must be a tough, commercially astute counterparty. Without such hard-headedness, all Britain’s grand infrastructure projects risk coming in late and over budget. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

It will not work, and is wrong in principle

Don’t go after the rich to fix broken budgets It will not work, and is wrong in principle February 19th 2026 America’s top 1% enjoy a fifth of the economy’s income and pay nearly a third of its federal taxes. Many politicians think they should cough up much more. Zohran Mamdani, New York’s mayor, wants a new 2% city levy on incomes over $1m. Virginia, Rhode Island and Washington state are weighing up similar measures; Californians are likely this year to vote on a “one time” 5% levy on billionaires’ wealth. In Europe, too, there is a similar clamour to target the wealthy. France has seen a popular campaign for a wealth tax. And with Sir Keir Starmer weakened or doomed as prime minister, the left wing of Britain’s Labour Party may implement one of its own.

The “Robin Hood” state , which takes from the rich to give to the poor, has obvious appeal. Governments across the developed world are strapped for cash. Budgets are burdened by legacy debts, ageing populations and the need to spend more on defence. But few politicians will countenance raising broad-based taxes at a time when voters, scarred by the high inflation of the early 2020s, are worried about affordability. Booming stockmarkets, meanwhile, have reinforced the idea that inequality is too high. And it always sounds good to say someone else will foot the bill.

Yet plans to fill budgetary gaps by raising levies on the rich are flawed. Taxes are one way governments can redistribute income from the rich to the poor. But that is not their only function: they must also raise revenue without distorting the economy. The system today is failing on all counts. Arguments that high earners do not pay their fair share are mostly empty. And squeezing the rich further will raise trifling sums of money, while causing real economic damage.

Consider revenues first. There are simply not enough fat cats to fund welfare states by themselves. The proposed wealth tax in California would raise about 2% of the state’s annual output—not much for a swingeing one-time levy in the place with one of the world’s greatest concentrations of billionaires. The figure for Mr Mamdani’s proposal is around 0.25% of output annually. The limited revenue-raising power of the rich is why European governments have to fund their big spending with broad-based levies, such as taxes on consumption. By contrast, America, with its low overall tax burden, can get by with one of the world’s most progressive tax systems.

Loopholes benefiting the very wealthy should certainly be closed. The biggest problem in the American tax system is at the very top. The resetting of the basis for capital-gains tax upon death allows billionaires who hold on to assets, borrowing against them to fund spending, to avoid the levy entirely. The dodge is outrageous. Yet ending it would yield only a tiny amount of money, probably less than 0.1% of GDP annually. The same goes for raising inheritance tax, a good tax that has never generated much money.

Another problem with increasing taxes on the rich is that it damages the economy. True, it would take a lot to stop bankers and lawyers turning up for work. Yet in New York they already face a combined federal, state and local top tax rate of 52%. And the cumulative impact of such levies on risk-taking, enterprise and innovation—the lifeblood of economic growth—may cause real harm. Recent research finds that facing a one-percentage-point higher income-tax rate reduces the likelihood that someone will file a patent in the following three years by 0.6 percentage points. This loss of entrepreneurial effort hurts society more than it hurts innovators, who by one estimate capture just 2% of the value they generate.

You might think that the one unassailable argument for taxing the rich would be fairness. But even that idea is dubious. The presumption that governments have failed to ensure taxes on the rich keep up with their income is mostly wrong. The rich world does more redistribution than ever. In Britain, France and Japan income inequality has fallen after taxes and spending. Since 1990, America has offset much of the rise in pre-tax inequality with more redistribution. Taxes on the top 1% are higher, and spending on the poor, such as on health care, has grown. Besides, fairness is not just about making incomes equal. A fair system would also respect property rights, be reasonably predictable and allow people to reap the rewards of their efforts and risk-taking.

Of all the proposals, California’s most dramatically fails these tests. It looks more like the arbitrary seizure of property than progressive taxation. No one should expect the promise that it is a one-off levy to be honoured. It is a safe bet that the left will raid the same billionaires again the next time they have a programme to fund.

Broad-based taxes do not only raise much more money. They are also politically healthier. A society where the many pay tax and benefit from spending is stronger than one where the few have to pay for the many. If progress on artificial intelligence concentrates incomes at the top, as almost everyone in Silicon Valley expects, then the tax system will require fresh thinking. But that world, if it comes at all, is some way off.

Today, polls and experiments show that voters pay woefully little attention to the nasty side-effects taxes have on the economy. Without a personal stake in keeping taxes low, they are less likely to keep hare-brained public schemes in check. Only by exposing voters to both sides of the ledger can you expect them to pay heed to the benefits and costs of government spending, rather than always favouring more handouts.

At a time of rising public spending, it is dangerous to suppose that the rich can always just pay a little bit more. Yet most left-wing governments would gladly embrace their inner Robin Hood and raid away. When pressures on the public purse are great, it is tempting for leaders to reach for ways to raise revenue that, in the short term at least, impose the least political cost. Taxing the rich will wreak economic and political damage in the long term, however—and will fail even to bring in the revenue that governments need. Emulating Robin Hood and his merry men might look tempting. But it is a trap. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Russia’s president cannot win the war, but fears peace

Vladimir Putin is caught in a vice of his own making Russia’s president cannot win the war, but fears peace February 19th 2026 YOU WOULD have thought that, after four bloody years, a war which neither side can win would have burnt itself out. But not the war in Ukraine. And the blame lies with one man.

Vladimir Putin is caught in a vice of his own making. The chances are waning that his armies in Ukraine will produce something he can call victory. Many people expect peace talks, continuing in Geneva this week, to give him a way out because President Donald Trump will force Ukraine to cede territory. In fact, that escape route is becoming less likely. And even if a peace deal were concluded, the aftershocks inside Russia would risk economic and political instability, wrecking Mr Putin’s plans of being ranked among history’s greatest tsars.

The first problem for Russia’s president is the battlefield. In the Great Patriotic War, from June 1941 to May 1945, the Red Army advanced 1,600km from Moscow to Berlin. In this longer war, Russian forces in Donetsk, the main focus, have advanced just 60km—the distance from Washington to Baltimore.

Russia has been unable to generate enough combat strength to break through Ukrainian lines. In the 10-30km “kill zone” around the front line, vulnerable to drones and their all-seeing operators, soldiers and equipment cannot mass without becoming targets. Even if Russian forces breach Ukrainian lines they struggle to exploit their success.

On today’s trajectory Mr Putin will not be able to change this. In the first three years, Russia was building up its army. By the end of last year, it was losing more men than it could recruit. They are poorly trained, morale is low and desertion rates are higher than ever. Starlink has cut off Russian forces from the smuggled terminals on which they depended for targeting. Their own government has cut off Telegram, which they used to communicate on the front lines.

Mr Putin will struggle to increase the number and quality of recruits. Russia relies on money, not patriotism, to enlist soldiers. The probability of death or injury, the neglect of veterans and the state’s attempt to wriggle out of paying “coffin money” to the families of fallen soldiers are all raising the cost of recruitment. Since June 2025, according to Re: Russia, a think-tank, the average sign-on bonus has increased by 0.5m roubles, to 2.43m roubles ($32,000). Money is getting harder to find. The 5.1trn-rouble-a-year bill for all this is equivalent to 90% of the federal budget deficit. The rest of the economy is shrinking. Debt payments are increasing. The outlook for oil revenues is poor.

Russia’s war effort is not about to collapse. Mr Putin can strike Ukrainian cities and power grids to destroy morale and the economy. But aerial attacks alone are unlikely to lead to capitulation. He may believe that Europe will desert Ukraine, but European support increased last year. His greatest hope may be that Ukraine, suffering grave manpower and equipment shortages of its own, will undergo a political crisis or begin to run out of fighters and weapons before Russia does. Yet Mr Putin’s bet on a Ukrainian collapse has been a losing one for the past four years—and the odds are lengthening.

Why then does he not agree to peace? If Mr Putin could bank Russia’s gains and regroup, he could always attack Ukraine again at some point in the future.

In fact, any peace plan is unlikely to satisfy Russia. The talks have a Potemkin quality, illustrated by the preposterous promise of a $12trn peace dividend , much of it to be shared between Russia and America. They are also unlikely to give Mr Putin the territory he has been unable to take by force and which he wants in order to declare victory.

For Ukraine to surrender its best-defended ground would be a strategic disaster. And although Mr Trump still has leverage, his ability to bounce Volodymyr Zelensky, Ukraine’s president, into a bad deal has passed its peak. True, America still sells vital weapons to Europe, which passes them to Ukraine. But Ukraine is now less dependent on American intelligence than it was, and America has reduced its financing of the war by 99%. If, as seems likely, any peace deal involves American security guarantees to Ukraine that are enshrined in a treaty, the Senate will have to ratify it. That will also help protect against a one-sided settlement.

Another reason for Mr Putin to be cautious about a deal is that peace itself could trigger a crisis in Russia. As our guest column explains, Russia has diverted so many resources to defence, which now accounts for 8% of GDP, that the rest of the economy is ailing . The regime’s lawlessness and the prospect of renewed hostilities will deter new investors. The challenge of redeploying resources from warmaking to peace, including finding work for soldiers returning from the front, could induce a deep recession.

The politics would be ugly, too. Disgruntled veterans destabilise regimes, especially in Russia, as before the revolution in 1917 and after its war in Afghanistan in the 1980s. Polls suggest that Russians would initially welcome the end of the fighting. But questions would surely follow: over the bungled campaign, the squandering of lives and treasure, and Russia’s humiliating dependence on China for financial and military support in the name of saving its own civilisation. That might limit Mr Putin’s ability to restart the war. It could even pose a threat to his power.

Mr Putin cannot give up the war, but the cost of carrying it on is rising. If his attempts to generate more combat strength only hollow out Russia further, that could lead to a crisis. If it doesn’t, Ukraine and Russia will be trapped in conflict. Can anything be done to end it? Pursuing Russia’s shadow fleet and activating a Senate plan to punish buyers of its oil could limit export revenues. Countering Mr Putin’s propaganda that America and Europe are bent on destroying Russia would help. So would correcting his claims of an inevitable Russian victory: no one, least of all Mr Trump, likes to back a loser.

It is hard to force a dictator to act. Ultimately, Mr Putin’s readiness to carry on fighting depends on the pain he is willing to inflict. But the more pain there is, the clearer it will be to Russians that he is bringing ruin upon them. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

America’s neglect is allowing an unwelcome tension to fester between two of its allies

Saudi Arabia and the Emirates must resolve their own differences America’s neglect is allowing an unwelcome tension to fester between two of its allies February 19th 2026 MANY OUTSIDERS would put Saudi Arabia and the United Arab Emirates (UAE) in the same category. Both monarchies have grown fabulously wealthy thanks to oil and gas. Both are close American allies. And as the most powerful members of the six-state Gulf Co-operation Council, the two should be natural collaborators. Instead a rift between them , based on personal, political and economic rivalry, is deepening. Its consequences could stretch far beyond the Gulf.

As in business, healthy competition is no bad thing in international relations. Governments in Riyadh and Abu Dhabi may naturally pursue divergent goals. But the foreign policy conducted by each side today is troubling. Some in Saudi Arabia talk of the UAE being a handmaiden for Israeli interests. Emirati commentators retort that Muhammad bin Salman, the Saudi crown prince, has fallen in thrall to Islamists. The UAE strives to fight them back. Where the two once co-operated in Yemen, battling together against Iran-backed Houthis, their interests have sharply diverged. In December the Saudis bombed an Emirati weapons shipment there. Divisions are growing elsewhere.

One problem is that too much policy, in both countries, is determined in secret by a handful of people. Opaque policies help spread uncertainty and suspicion. A second problem is a tendency to conduct policy through proxies. The UAE, unlike Saudi Arabia, often teams up with separatists. This has fuelled the civil war in Sudan. Trouble may follow in shaky places elsewhere in the Horn of Africa, in Gaza or in Syria.

The Gulf has witnessed such tensions before. In 2017 Saudi Arabia and the UAE joined others in imposing a blockade on Qatar—the most serious clash in decades. This time no one is severing economic or diplomatic ties, but a quarrel between the Arab world’s largest economies and most influential diplomatic actors could prove more consequential.

Much is at stake. Both the Saudis and the Emiratis benefit from calm in the Gulf. The UAE sells itself to the rest of the world as a stable hub where anyone can do good business. The Saudis would like to be able to make the same claim. Diversifying away from extractive economies and developing tourism and services investment require stability. Trade between the pair is also substantial, with a value of around $31bn a year. But investors fret over even small signs of politically motivated disruption: difficulties in getting visas, say, or seeing borders closed to traders.

The two sides should remember it is easier to de-escalate early on. To do so they should, most urgently, stop fuelling others’ wars. The Saudis have some noxious partners. Even more deplorable is the Emiratis’ support for militias, including one accused of genocide (a charge the UAE denies), which has prolonged and worsened conflicts and weakened fragile states. Proxies are rarely under the full control of their backers.

Ideally, the Saudis and the Emiratis would use their leverage to promote ceasefires. They are all the more obliged to find a way of getting along, given neglect from a superpower that would once have knocked heads together. President Donald Trump may brag that he could “easily” end tensions in the Gulf, but given his close personal, and business, ties to the families that run both Gulf monarchies, and the transactional view he has of foreign affairs, he has been unwilling to act.

This means a dangerous rivalry is a likelier outcome than co-operation. The responsibility to prevent the next Gulf crisis lies squarely with Saudi Arabia and the Emirates. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

At least on prediction markets

Why insider trading isn’t always bad At least on prediction markets February 19th 2026 Long a curiosity beloved mainly by economists, prediction markets —peer-to-peer platforms where people bet on elections, sports, the weather and more—have entered the financial mainstream. On Kalshi, the biggest American site, total trading volume last year rose 12-fold, to $24bn.

Such growth means theoretical concerns about these markets are becoming real. Chief among them is informed trading, in which some participants know something about an event that the public does not. After several examples in which the prices of correct outcomes surged above 90% just before official news broke—implying that some traders already knew the result—one case has turned criminal. On February 12th Israel said it had arrested two men accused of using classified information to make about $150,000 betting on the timing of its attack on Iran .

Such cases look like notorious insider-trading scandals, such as those of Ivan Boesky and Raj Rajaratnam. But that is a flawed comparison. In prediction markets, informed trading is not a crime or an injustice—it is a valuable service.

There are big differences between stocks and futures. Equity markets exist for the public to provide savings to companies. If insiders can trade on material non-public information (mnpi), ordinary investors lacking such knowledge will stay out of the market, depriving firms of capital. Because society benefits from this financing, most countries ban such activity.

Futures, by contrast, are built for industry members such as wheat farmers or oil drillers to hedge their exposure to market prices. There is little broader benefit from mass participation, and thus no reason to ban trading on mnpi. As a result, American law permits informed trading of futures—including on prediction markets. The exception is violation of another duty, as when employees front-run their firms’ transactions.

Moreover, prediction markets are beneficial because everyone else gains from their price discovery without having to pay. Cinemas can check which films are likely to win Oscars and reap a surge in attendance; American importers might delay shipments upon seeing the chances that courts will throw out President Donald Trump’s tariffs. After the September 11th attacks, America tried to set up a prediction market on political events in the Middle East, including coups and assassinations.

Nonetheless, in two circumstances regulators should worry about informed trading. One is contracts where disclosure is harmful. This is most apparent with looming military action, but occurs more often in markets involving publicly traded firms, such as the current contract on whether Paramount or Netflix will acquire Warner Bros Discovery. If mnpi leaks into such markets, the ban on insider trading of shares would become a dead letter. The other case is when traders can affect the outcomes on which they bet. Polymarket recently withdrew a market on the Artemis II crewed moon rocket exploding, because it created a financial reward for sabotage.

Laws already prohibit this type of activity. And although prediction markets may create new incentives to commit such offences, transparency could both deter criminals and help bring to light wrongdoing that would happen anyway.

Regulators already require prediction markets to verify users’ identities, and to maintain market-surveillance systems that hunt for suspicious activity. They could make investigators’ jobs easier by compelling verification of sources of funds and traders’ employers, to make those who misuse MNPI easy to spot. Disclaimers noting that some traders may know the outcome would ensure that everyone understands the risks.

Regulators cannot control offshore sites. But platforms that accept oversight can take bank transfers, partner with brokers and lure institutional capital. Over time, such sites should attract the bulk of trading, yielding better forecasts for all. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Doing so would be good for members of Congress, and for democracy

How to improve American legislators’ lot Doing so would be good for members of Congress, and for democracy February 19th 2026 Voters view their lawmakers in Washington with disdain. According to Gallup polling, 80% of Americans disapprove of the way Congress is doing its job; 25 years ago approval ratings were typically above 50%. For honesty and ethics, just 8% of Americans rate members of Congress highly—on a par with advertisers and above only lobbyists and car salesmen. This Congress has cheerfully ceded its powers to the president, and passed fewer laws than any since the mid-19th century. When it acts, it is often to stop things working, via government shutdowns (or, as now, a partial shutdown).

Yet it is worth taking a closer look at the life of a lawmaker . You may be surprised to see quite what a miserable job it has become. And who knows—you may even experience an unexpected tinge of sympathy.

Legislators’ lives involve not just endless fundraising and weekly flights between the capital and their home district. With committees weak, individual members snarl and vamp for the cameras, hoping for social-media virality. Then there are the threats to members’ physical safety, which have risen starkly—in contrast to their pay, which has not risen for 17 years. No wonder congressmen are quitting in droves. So far, 60 have said they are stepping down after the midterm elections, the largest-ever number at this stage of the cycle.

Many of the trends that have made the job so dreadful are long-term and deep-seated. The partisanship that helps create gridlock is ever more entrenched. The relentless demands of social media will only grow. The fundraising frenzy will go on. There is no quick or easy fix for any of this.

Who cares? Many Americans will have little time for lawmakers’ laments, reckoning (not unreasonably) that members of Congress have only themselves to blame for standing in the first place. But voters should spare a thought for the state of their democracy. A constant refrain is that Congress is no longer fulfilling its role as the third coequal branch of government. It is not passing laws or guarding the public purse.

Instead of indulging in Schadenfreude, Americans should think about how to make life in their legislature less awful. One hope is that the incoming batch will have a livelier time of it. If, as many pundits expect, the Democrats win back control of the House of Representatives in November, the Capitol will become an energised place. Once again subpoenas will multiply. Committees will seek to hold the administration to account. There could be an effort to impeach Donald Trump for the third time. The job could even seem to matter again.

Yet this will not bring about lasting change. For that, congressmen should help themselves. If Congress is organised, it already has the power to take back responsibilities from the executive and make itself relevant. It should do so. For propriety’s sake, Congress should bar members from buying or trading individual stocks. Members profiting from policies they shape damages public trust in their institution.

Ultimately, however, success will also require citizens to understand that they get the House they vote for—not just who represents them, but how. Lawmakers need better pay and working conditions, including more generous provision for staffers. But voters need to remember that when they fill out their ballots, they are hiring legislators, not cheerleaders. If members want to be influencers and pundits, those jobs are available elsewhere. Members of Congress are supposed to pass laws. Voters should not confuse the two. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Restrictions would do more harm than good

Don’t ban teenagers from social media Restrictions would do more harm than good February 12th 2026 People don’t agree on much these days. But one thing brings them together, whatever their politics: the idea that, because social media harm children and teenagers, they should be banned from using them. In December Australia stopped under-16s from having accounts on platforms including Facebook, Instagram and TikTok. A dozen countries, including Britain and Spain, are now toying with the idea; so are legislators in many American states. More than 70% of Britons support kicking under-16s off such sites, as do two-thirds of Americans. The problem is, bans will do more harm than good.

The proposals arise from an understandable desire to keep youngsters safe and healthy. Parents have been shaken by tragedies in which social media have played a role, of children being tricked into sharing explicit pictures of themselves, or taking their own lives after algorithms shovelled them content about self-harm. Along with those shocking cases comes a second, more general worry: that social media might be damaging children as a group, making them reserved, lonely and anxious. People are desperate to understand why today’s youngsters seem unhappier than the generations that came before.

Even parents who are confident they can keep their children from serious harm fret that their offspring are wasting hours scrolling through mindless memes. They would like to stop them, but fear that their kids will suffer if they are the only members of their class not on the apps. Blanket bans appear to offer an easy answer—and politicians are only too happy to seize on a measure that, for once, pleases voters from all parties.

Yet policymakers should reconsider. The question of whether social media are causing mass harm is far from settled. Growing evidence suggests they are bad for at least some children. But, as we explain this week , the claim that social media cause great damage to the mental health of young people as a whole has only limited evidence. And even if you wanted to ban social media as a precaution pending conclusive findings, such measures threaten to be counterproductive.

One problem is that enforcing bans is hard; teenagers in Australia are finding ingenious ways to get round them, by scrunching up their faces to look older. Defining social media is hard, too. Australia has not banned young teenagers from messaging apps such as WhatsApp, or from multiplayer online games, because that would have seemed too draconian; scourges such as cyberbullying will doubtless continue on these. Kids barred from mainstream sites could flock to obscure ones, and fall victim to predators there. Children who evade the blocks may be less likely to tell adults if they find something horrid, for fear of being told off.

Higher age limits may just delay problems until youngsters are 16, when they will suddenly gain full access to social sites that they do not have much experience of using. And all the while, higher age limits for social media may provide a false sense of security. It is for all these reasons that bans are often opposed by child-protection groups.

Moreover, the proponents of bans ignore how they would deprive children of the benefits of social media. They are a blessing to children who feel isolated: perhaps because of their location, their sexuality, or because their brains work differently from those of others. Social media can broaden young minds, giving children from all backgrounds a window onto fresh places and people. Like it or not, social sites are now one of the main ways children obtain information (as well as misinformation) about current affairs. It used to be easy for youngsters to pick up their parents’ printed newspapers. They sat through news bulletins aired before or after their favourite shows. Those days are no more.

Teenagers who are turfed off TikTok will not instantly begin climbing trees or poring over books. Many will slump for longer in front of games consoles and streaming services. One reason they spend so many hours online is that parents long ago stopped letting them hang around outside with friends. Having chased them indoors, adults should now think twice about placing further prohibitions on their free time.

What to do? Rather than raise age limits, regulators should redouble efforts to make social sites more suitable for teens. Ideally they would force web firms to cough up more data on how teenagers use their products—the better to help researchers measure harms, and come up with ways to prevent them. They should tell tech giants to rethink features that are keeping kids online longer than is healthy, such as interfaces that permit endless scrolling and videos that play without prompting. They should demand sterner moderation of the content being served up to young users. This may require greater efforts to verify the age of social-media users, in order to work out which ones must surf with guardrails and which are adults who may go without.

Some observers find these ideas laughable. One reason people demand higher age limits is that they believe social apps cannot be made safer. That ignores the direction of travel. America is gearing up for a series of blockbuster trials—years in the making—that will finally give people who say they were harmed by sites as children a chance to make their case in court. The European Union has just issued a preliminary ruling that features of TikTok’s design are “addictive” and threatened fines if it doesn’t change. Lately, many of the big social apps have been cajoled into creating “teen” accounts that come with additional safeguards. These things will not solve every single worry. But all of them are progress of a sort.

Politicians say their social-media bans are the only responsible option. In fact, they look like a way of ducking the care children deserve. If regulators cannot find ways to tame social media—now over two decades old—what hope is there to let children use novel tools such as artificial intelligence? Youngsters have a right to share in new technologies. Adults must seek to make their time online as safe and as rewarding as possible. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Japan’s prime minister has earned a once-in-a-generation chance to remake her country. Will she seize it?

The world’s most powerful woman Japan’s prime minister has earned a once-in-a-generation chance to remake her country. Will she seize it? February 12th 2026 THE LIBERAL DEMOCRATIC PARTY (LDP) has dominated Japanese politics since its founding in 1955, ruling with only two brief interruptions. Never has it won as decisively as it did in a snap election on February 8th, when it took almost 70% of the seats in parliament’s powerful lower house. Takaichi Sanae, the triumphant prime minister, now has a historic chance to transform her country. She must not squander it.

To live up to the expectations that her electoral gamble and huge victory have created, Ms Takaichi needs to think bigger and broader. She cannot treat her time in office as routine, focused on short-term relief to ease the pain of today; she must take Japan’s long-term demographic and economic challenges head on. She should also recognise that her country has a crucial role to play as a stabilising force in a turbulent world. And she must be a leader for all of Japan, not only for her right-wing loyalists. She must, in short, gamble all over again.

She has the backing. Support for Ms Takaichi came from across the country. The LDP secured 316 seats in the 465-seat lower house, up from 198, giving it a two-thirds supermajority, which will allow it to override an upper house it does not control. Ms Takaichi tapped into Japanese voters’ desires for both security and change. She offered hard-nosed realism for a hard-edged era. She also personifies a break with the old guard. She is the plain-speaking child of a middle-class family, not the buttoned-up scion of a political dynasty, like many of her predecessors. And she is a woman, the first to lead democratic Japan.

A historic election unlocks historic opportunities—if Ms Takaichi is bold enough to seize them. Most critically, she is well placed to accelerate the transformation of Japan’s defences. The late Abe Shinzo, prime minister from 2012-20, began beefing up the armed forces in response to China’s assertiveness and America’s unreliability. But the world has changed faster than Japan. Ms Takaichi has already brought forward to the current fiscal year a planned increase in defence spending to 2% of GDP originally planned for 2027; but it is still not enough. Anyway, simply boosting budgets is only part of it. Japan needs a wholesale reckoning with the new world disorder. The prime minister’s willingness to break taboos, including talking about nuclear weapons, is healthy. She has the right ideas when it comes to unshackling the defence industry, encouraging defence innovation and enhancing the country’s intelligence capabilities.

This will require enterprising diplomacy. Like American allies elsewhere, Japan has been unsettled by Donald Trump’s return to the presidency. But, even more than the members of NATO, Japan cannot afford to alienate America. It is surrounded by nuclear-armed adversaries in China, Russia and North Korea and, for the moment, it relies on America’s nuclear umbrella. Ms Takaichi has done an admirable job of staying on Mr Trump’s good side (he even endorsed her before the vote). Yet even as Japan works with America, it should not hesitate to also work around America, as Abe did when he saved the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) free-trade deal after Mr Trump abandoned it during his first term. That did not preclude Abe from having a warm relationship with Mr Trump. This time, Japan should spearhead efforts to link the CPTPP and the European Union, which would create a trade bloc covering over 30% of global output.

Japan will need to demonstrate this global leadership at a time when its domestic resources are strained. A shrinking, ageing population is the main drain on Japan’s growth. As many other countries are learning, there are no easy solutions. Families are not a production line that can easily be speeded up. Instead, demographic change, like climate change, requires constant adaptation. The thumping election victory gives Ms Takaichi the space to make hard choices others have so far ducked.

She should focus on unleashing the power of the people Japan has, and on making it more welcoming to newcomers. The social-security system needs urgent reforms. Firms should shift from rigid, seniority-based lifetime employment practices to more flexible job-based systems. Patriarchal family-law and tax structures that discourage marriage and keep women in low-paid work need to go. Japan should attract migrants, not demonise them. And as demands for spending on defence and welfare rise, Japan will have to reassure markets it can fund the programmes it needs. Now might be an opportune time to gradually take profits on overseas assets, in order to help reduce the gross debt.

Is Ms Takaichi up to the task? Having taken office in October, she is untested. She could misinterpret broad support as a licence to pursue her narrow ideological aims. An ardent nationalist, she might visit the Yasukuni Shrine, which honours Japan’s war dead, including its imperial leaders, some of whom were war criminals. That would inflame relations with China and wreck Japan’s fragile rapprochement with South Korea, essential to countering China’s rise. An arch social conservative, she could fan anti-foreigner sentiment, repelling the migrants Japan needs to help offset its shrinking population and the tourists who boost its economy. A fiscal dove, Ms Takaichi could pursue a big-spending agenda that fuels inflation and panics bondholders. One test will be a populist campaign promise to suspend an 8% sales tax on food for two years, all without issuing new debt. Although voters may have believed in such magical thinking, markets know better. She will need to find a way to pay for the giveaway, or scrap it.

The prime minister’s inbox is daunting. No wonder Japanese are anxious. Ms Takaichi asked voters if they wanted her to lead them through these tumultuous times. The answer was a resounding yes. But if she wastes her mandate on symbolism and populism, more corrosive alternatives will flourish. And Japan will not soon give another leader such a huge chance. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Prosecutors have moved far too slowly

The Epstein files tell a story of justice denied Prosecutors have moved far too slowly February 12th 2026 NO WONDER THAT the life and mysterious death of Jeffrey Epstein fuel a nihilistic and conspiratorial view that all the elites are rotten. In what is supposed to be a meritocracy too many of the best and the brightest turn out to be motivated by flattery, vanity, cupidity, cruelty and lechery. An unknown number of powerful men (and some women) trafficked and abused a much larger number of vulnerable women and girls. Those victims urgently need justice.

Epstein, a financier, fixer, rapist and paedophile, died in a Manhattan prison cell in 2019. Under popular and congressional pressure, the Department of Justice (DoJ) released over 3m pages of documents on January 30th—too many for anyone to have read. This week volunteer software engineers converted them into a format that could be analysed. The Economist has examined this archive .

Epstein appears to have been careful about mixing his prolific sexual abuse with his broad network of influence-peddling. We scored each of the 1.4m emails by how relevant it was to his crimes. Around 1,500 threads belong to the most severe category—where, for instance, a correspondent made light of abusing Epstein’s “littlest girl”.

Nearly 60% of the emails were to people Epstein paid to make his life easier. Some handled the bureaucratic complications from his record as a sex offender. Others scrubbed the web of references to his plea bargain over child prostitution and soliciting in 2008. Because of this concealment, a number of Epstein’s social contacts who today protest that they did not grasp the extent of his crimes may be telling the truth.

The rest of the emails depict an astonishing network of influence- and favour-trading. Of the messages to his 500 main correspondents, excluding his own staff and business partners, almost 20% involve financiers; 10% scientists or doctors; 8% media, entertainment and public relations; and 6% each lawyers, politicians, academics and businesspeople. Although some of his contacts were from countries like Britain and Norway, the vast majority were American.

In the worst cases, some members of those networks appear to be implicated in sex trafficking. Others, such as the physicist Lawrence Krauss, may not be criminals, but deserve opprobrium for their moral failure. Still others, like the commerce secretary Howard Lutnick, have lied about relatively minor dealings with Epstein—even if no more damning evidence turns up, they should answer for their dishonesty. Some, such as the author J.K. Rowling, have been pilloried despite the evidence being that the contact was one-sided and came from him.

The files tend to mash these different categories together. That is partly because when Epstein makes allegations it is hard to know if he is lying. It is also because the DoJ’s haphazard redactions have shielded criminal abusers, revealed those who briefly came into Epstein’s orbit and too often exposed the identity of victims.

Redactions are essential to protect innocent victims. But blacked out faces and names of women and girls inadvertently exacerbate how these vast files, detailing the routine abuse of over 1,000 victims, tend to make the story all about the men. Female bodies are turned into objects in what is a tragic echo of Epstein’s own abuses.

The duty to those women and girls is to bring their abusers to justice without delay. It is reprehensible—and, indeed, hard to understand—why the DoJ has made so little progress filing charges over the past seven years. The delay is as baffling as the leniency of Epstein’s original plea bargain 18 years ago. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

When governments are indebted, high interest rates wreak havoc

The rich world should beware Brazilification When governments are indebted, high interest rates wreak havoc February 12th 2026 The world economy offers many cautionary tales. Argentina’s inflation has shown the danger of treating a central bank like a cash machine. Italy’s stagnation shows the downside of joining a currency union with high legacy debts. Britain has suffered from Brexit which has thrown up barriers to trade with its closest neighbours. But the most timely warning for many of the world’s big economies comes from Brazil.

As we report , Brazil has decent economic growth, an independent central bank and its primary budget—that is, excluding interest payments—is almost balanced. Its net debts, at 66% of GDP, are high by emerging-market standards but low by rich-world ones.

Brazil, however, has one big problem: its government must pay sky-high interest rates to service its debts. Controlling inflation has required the central bank to set short-term rates at 15%. As a result—and despite being close to primary balance—the government will probably borrow about 8% of GDP a year to pay its interest bill. Closing the deficit through austerity is unlikely; President Luiz Inácio Lula da Silva, who is campaigning for re-election in October, has loosened the purse strings. Unless interest rates fall a lot, public debt will surge.

The fiscal plight of Brazil casts rich-world budgets in sharp relief. You may think governments in wealthier places are fiscally squeezed, but America, Britain, France and Italy still enjoy borrowing costs in the low-mid single digits. Their debts would stabilise if only they balanced their primary budgets, or came close to it. By contrast, Brazil would probably need to run a primary surplus of around 5% to keep its debts stable, if interest rates do not fall.

Western policymakers should consider why interest rates are so high in Brazil. The answer lies in a combination of factors. Brazil’s institutions, despite enjoying formal protections like central-bank independence and the separation of powers, are wobbly—and teetered during President Jair Bolsonaro’s attempted coup in 2022. Inflation is on a shorter fuse, even after three decades of technocratic central banking, owing in part to a legacy of hyperinflation in the 1980s and early 1990s and an economic crisis in the mid-2010s.

Last, the long-term trajectory of the budget is dire. Brazil’s government spends 10% of GDP on pensions. Without reforms, by 2050 it will spend more on pensions than richer, greyer countries. Yet pensions are protected in the constitution, which for example requires that when the minimum wage rises, retired folk get more money, too. The extraordinary hold of pensioners over the budget makes it hard to balance the books, and also crowds out other more worthwhile spending.

The diagnosis should worry the rich world, which shows early symptoms of Brazilification. America’s institutions are suffering. President Donald Trump has politicised the Justice Department, yearns to control the Federal Reserve and muses about federalising his country’s elections. After the big price rises that followed the pandemic, and with geopolitics menacing supply chains, inflation is a greater risk than in recent decades. And spending on pensions and health care is growing as populations age. Pensions might not enjoy the same level of formal protection as in Brazil, but older voters like them. Just look at Britain’s “triple lock”, which ensures that pensions outpace wage growth in the long term.

If this pushes up interest rates, today’s budget dilemmas could seem trivial. Many rich countries are straining to find an extra 1% or 2% of GDP for defence spending. Imagine if they had to find that twice over again for debt interest. It might seem painfully difficult in a populist world both to promise low inflation and to spend less on the elderly. But that is nothing compared with the agonising choice that looms for Brazil: between deep austerity and a terrifying debt-interest spiral. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A voice that is made, not found

How to solve the tenor shortage A voice that is made, not found February 12th 2026 “Vincerò!” sang Andrea Bocelli on February 6th, as athletes carried the Olympic torch around the San Siro Stadium in Milan. It was a thrilling moment. The word in “Nessun dorma”, from Puccini’s opera “Turandot”, demands a sustained high b—a ringing, show-off note for a professional tenor singer. In the ordinary world, though, tenors are not proclaiming victory.

A great many people sing in choirs. Germany, which created much of the world’s best choral music and now collects excellent statistics, counts 45,000 groups. Not enough of those people are tenors . Music for mixed-sex adult choirs is normally arranged in four voice parts, from highest pitch to lowest: soprano, alto, tenor and bass. Many choirs could do with more basses, but they are painfully short of the voices just above that range. “A bit more from the tenors, please,” implore conductors in schools, halls and churches across the singing world. “And a bit less from the sopranos.”

Why the shortage exists is unclear. Perhaps men’s voices have lowered as they have become taller; perhaps they fear sounding unsexily shrill. Another possibility is that singing the tenor part is hard, both physically and musically. If singing abilities are declining in general, tenors would suffer first. Whatever the causes, the consequences are plain. Some of the classical choral repertoire has already become unsingable for many choirs. Do not attempt Fauré’s “Requiem”, which demands that the tenors divide and sing two separate parts, unless you have a strong section. Other music sounds thin and lacking in the strange, slightly desperate note that tenors supply.

Amateur choirs have tried charging tenors lower membership dues, or even paying them. For a fee, a semi-professional “ringer” or “stiffener” will briefly join the section to boost its sound. This works in a pinch, although it cuts against the collectivist culture of many choirs. In desperation, some groups plump for music that omits the tenor line and treats all men as mid-range baritones. The approach suits some kinds of music, such as gospel, better than others. But the danger is of a downward spiral, as choirs with few tenors pick music that does not require them, and the remaining tenors fade away. Although the voice is unlikely to vanish entirely, it could become unusual—a special sound for special occasions.

Ideally the stock of tenor singers would be larger, not merely allocated more efficiently. It would help in the long run if schools made singing more of a priority, especially among teenagers. Many boys stop singing after their voices break, not only because they struggle with a new instrument but also because they are rudely thrown from singing the tune into singing harmony. In the short run, choirs that can afford it would do well to consult voice coaches. They might discover that some of the men who have assigned themselves to the bass section can sing tenor, as can some of the women who sit with the altos. Tenor voices are like gold, and not only because they are rare and valuable. They need to be dug out of people and worked on.

Everyone should remember that choirs do not demand singers who sound like Mr Bocelli. An ordinary tenor in a chorus is seldom if ever called upon to reach a high b, or to sing with anything approaching his power. Of course, a tenor might briefly imagine that he or she sounds just like an Italian opera star, when hitting a tricky entrance correctly and when—miracle of miracles—the rest of the section gets it right, too. It is not the world’s most harmful fantasy. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

With Sir Keir Starmer weakened, the government will drift left

Britain’s predicament will get worse before it gets better With Sir Keir Starmer weakened, the government will drift left February 12th 2026 In Britain political instability has become chronic. The story is grimly familiar. A once-triumphant prime minister’s poll ratings plummet and Downing Street turns into a bunker. A distant scandal suddenly becomes existential and the cabinet belatedly offers its support. A coup fizzles after an impassioned address to MPs in which the leader promises that everything will be different. But it isn’t. The prime minister’s authority is shot and the government limps on.

In a way the humiliation of Sir Keir Starmer, Britain’s fourth prime minister in four years, is greater than that of his Conservative predecessors. After a landslide win in 2024, he boasted of governing for a decade; but local elections in 12 weeks’ time may finish him off. The revelation that Peter Mandelson, his former ambassador to America, was appointed despite Sir Keir knowing of the length of his friendship with Jeffrey Epstein has shattered the prime minister’s image as dull, but competent and incorruptible. The aides who ran his swaggering operation have resigned; the cabinet secretary is leaving. A prime minister who defined himself as a constraint on the left-leaning parliamentary Labour Party now governs as its hostage.

After the drama of the past week, it is tempting to think things can only get better. Labour’s crisis, it might be hoped, will prove the catalytic moment Britain needs. Perhaps a brave young reformist will emerge from the ranks of Labour MPs and put the party’s vast governing majority to work in tackling Britain’s problems. Alas, the more likely path is drift. The Labour Party is preoccupied by self-preservation, and traumatised by how quickly voters have soured . With or without Sir Keir, it will retreat to its soft-left comfort zone, and muddle along the path of electoral least resistance. Party unity will trump boldness. For Britain, things will get worse before they get better.

The stasis in Downing Street contrasts with the urgency of the national situation. Problems ailing much of the rich world are found in abundance in Britain. Growth is not dreadful by European standards, but it is too meagre to give voters the living standards and public services they want. The cost of servicing Britain’s debt as a share of GDP has risen this decade to its highest since the late 1980s. Rearmament, an ageing population and an unreformed welfare system are straining the public finances. Voters know it: the share who think the state needs to shrink is higher than at any point since 1983. A declinist mood, redolent of Britain in the 1970s, hangs in the air.

Sir Keir’s election landslide was meant to escape this trap. Yet without a plan or the political capital to get much done, he has failed. Labour’s safety-first campaign promised small giveaways while ruling out big tax changes. Laws to empower trade unions and renationalise the railways were drawn up—but no intellectual spadework was done on reform to the civil service, regulated markets, public services or welfare. Many of his MPs came to Parliament expecting the money to flow, just as it eventually did under Labour in the 1990s. Rather than confront them, Sir Keir nodded along, and when they revolted at cuts to welfare and pensioner benefits, he backed down. His caution in opposition was termed the “Ming vase” strategy; as a project for government it has proved a hollow vessel indeed.

That is why a change of course now is so improbable. In an age of electoral fragmentation, when voters’ loyalties to old parties have broken down, governing on a low vote share is a fact of life. Calling an election today would be likely to cost hundreds of Labour MPs their seats. Hence the panic and timidity is likely to continue, whoever is in Number 10.

Powerful currents will pull Labour left. Sir Keir’s boasts of having “changed” the party by purging the hard left under Jeremy Corbyn mask how far its centre of gravity has shifted since the times of Sir Tony Blair. The leadership contenders most popular in the party—Andy Burnham, Ed Miliband and Angela Rayner—are all to the left of Sir Keir. So are the bulk of MPs, who came of age under the austerity of the 2010s. The Labour membership will pick the next leader; 89% of them think that taxes and spending should go up, a view shared by only one in five voters. And if Labour is to hold on to power and defeat the right-wing populists of Reform UK, it must attract voters who have defected to the populist-left Green Party.

Already Sir Keir has declared that “putting money in people’s pockets”—rather than economic growth—is his first priority. There may be greater scepticism of big tech (Palantir, a software firm, is the bogeyman du jour). The government may become more pro-European, which would be good but only if accompanied by a hard-headed realism that leads to productive negotiations.

The heaviest cost will be what is left undone. A mantra of “unity” and “inclusion” sounds benign, but makes for a lowest-common-denominator government in which everyone gets a veto. Welfare reform will be off the table. So will any overhaul of education or the civil service that irritates the unions. Planning, a bright spot, may sink back into its old ways because Labour members like nature and dislike developers. Above all, chronic instability means ignoring the public finances. Labour MPs are wont to declare that they “didn’t get into politics” to impose cuts on their voters. A prime minister who clings on to power by handing out treats is not running a government but an ice-cream van. Bond investors may lose patience.

Perhaps the coming years will breed a generation of Labour modernisers clear-eyed about Britain’s problems. In the meantime, voters will have to look elsewhere for renewal. Reform, which leads the polls, is disrupting the political order but offers little new thinking, beyond a mix of stale anti-immigration rhetoric and vague promises to slash the bits of the state its voters don’t use. Perhaps it will fall to the Conservatives, under Kemi Badenoch, to provide intellectual and economic renewal from the right. She is beginning to find her feet. Britons know their country needs to change and financial markets may force change. Therein lies a political opportunity. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Those holding American assets will have to get used to it

The age of a treacherous, falling dollar Those holding American assets will have to get used to it February 5th 2026 Over the past year President Donald Trump has bullied America’s allies with tariffs, bludgeoned the Federal Reserve and treated the budget deficit as if it were just a distraction. Yet most asset markets blithely carry on as if nothing were wrong. In the past 12 months the S&P 500 index of stocks has risen by 14% as investors have piled into artificial intelligence (ai). Growth in America is still the envy of the world. The ten-year Treasury yield, which should rise with the risk of inflation or default, is 4.3%, lower than when Mr Trump took his oath of office.

Yet look closely and the picture is darker and more complex. Since a peak in January 2025, the dollar has lost a tenth of its value against a broad basket of currencies. As a result, in foreign-currency terms, the performance of American assets has been poor. When denominated in euros, for example, American stocks have barely risen over the past year.

The currency’s fall partly reflects the narrowing of interest-rate gaps between America and the rest of the world. Yet American institutions are also a source of worry , as we report this week. Spasms of investor panic have become more common, as in April 2025 after Mr Trump announced his “Liberation Day” tariffs. In those moments investors flee American assets, causing bonds, stocks and the currency all to fall in value. More common in emerging markets, that has occurred in seven of the past 52 weeks, about three times as often as in the previous decade or so.

When Mr Trump backs off his maddest ideas, normality returns. But the spasms offer glimpses of a topsy-turvy world in which dollar assets are no longer safe. It is an alarming prospect, given that the dollar is the world’s reserve currency and that foreigners own more assets in America than Americans own abroad, to the tune of 89% of Uncle Sam’s gdp. At the same time, the price of gold has surged to around $5,000, up about 75% in a year, provoking speculation that investors are protecting themselves against the debasement of the dollar and other tail risks.

This should give pause to those who think that America’s financial strength is unbreakable. The latest example of an apparent return-to-normal was Mr Trump’s announcement on January 30th that he would nominate Kevin Warsh to lead the Federal Reserve. Mr Warsh is an experienced central banker whose contacts on Wall Street helped the Fed through the global financial crisis of 2007-09. His monetary-policy record is of an overzealous hawk, not a debaser. His nomination caused the dollar to rally and the gold price to fall. Mr Warsh is more technocratic and less partisan than Kevin Hassett, a sycophantic White House adviser and early front-runner.

Yet the small relief rally does not change the big picture. Over the past month alone, during which Mr Trump menaced Greenland, the greenback is down by 1.5% and gold is up 14%. Mr Warsh’s history is hawkish but he has undergone a Damascene conversion to interest-rate cuts as Mr Trump has searched for a nominee.

Mr Warsh has two main arguments for looser money. One is that AI will bring about a productivity boom which will enable fast growth while inflation falls. It is true that, all else being equal, more output will bear down on prices, and that recent productivity data are encouraging. However, productivity growth also encourages investment—for example, in data centres—while soaring stockmarkets and economic optimism support more consumer spending. The AI frenzy, if sustained, is more likely to lead to higher interest rates than lower ones. In the dotcom boom of the 1990s the Fed also thought that productivity would keep rates low, before reversing itself at the end of the decade.

Mr Warsh also argues that the Fed can offset the stimulus of lower rates by shedding long-dated assets, stepping on the accelerator and the brake at once. The Fed may indeed need to shrink its balance-sheet, though that would mean rewiring the monetary system. In the early 2010s Mr Warsh wrongly warned that buying assets would trigger high inflation ; today he asserts that offloading them would be disinflationary. In fact it would have only a small effect.

If the Fed’s new chair, once confirmed, persuades his colleagues to go along with big rate cuts, they are likely to prove ill-timed. At 2.8%, America’s inflation is still above its 2% target. This year has brought tax cuts and will soon bring tax refunds, providing a stimulus of about 0.3% of gdp . If, as is likely, the Supreme Court rules many of Mr Trump’s tariffs unlawful, refunds worth 0.5% of gdp could follow. This combined monetary and fiscal stimulus could lead to still higher inflation, casting more doubt on dollar assets.

How far can America push its luck? The country is fortunate that investors have few alternatives to holding the greenback. Precious metals are a poor substitute for hard currency, and no bonds rival the volume, liquidity and legal safety of Treasuries. Foreigners are more likely to shun America’s pricey equities than its bonds—and jitters in tech stocks this week show how fast the mood can turn. Though central banks have diversified their reserves, king dollar’s share of cross-border banking, trade invoicing, global debt and foreign-exchange deals remains dominant.

All that is a protection against a dollar rout. Yet volatile policymaking and a falling exchange rate make holding the dollar riskier than for decades. Even if Mr Warsh is right about inflation, lower interest rates will further weaken the currency. It has a long way to slide. Despite its recent decline, the greenback is above its long-term average in real terms and, according to our Big Mac index, overvalued against most currencies.

The want of alternatives to the dollar condemns foreign investors to bear losses—and should alert American investors to the risk of an alternative emerging one day. Everyone should mourn how an asset that is an investors’ haven is increasingly tainted by risks the whole world must now bear. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Less scrutiny, more booty

As global press freedom dwindles, corrupt politicians rejoice Less scrutiny, more booty February 5th 2026 Journalists can be infuriating. They simplify. They exaggerate. They sometimes get things wrong. They are disproportionally university-educated, middle-class and a bit left-wing, so their attitudes often jar with the rest of the population. When they act unethically—for example, when the BBC’s Panorama programme aired clips of President Donald Trump that had been spliced together in a misleading manner—people are rightly outraged. Trust in the news media has declined across the rich world, especially since the advent of social media allowed errors in reporting to be more widely reviled. So some people may not care much when they hear that journalism is in trouble. Yet it is in their interest to care.

Press freedom is in retreat worldwide. Since 2014 the global score on an index devised by Reporters Without Borders (RSF), a watchdog, has deteriorated from no worse than it is in America today to as grim as it is in Serbia, where journalists covering anti-corruption protests are routinely beaten by police.

This matters for several reasons. It is not just that free speech is the bedrock liberty on which other liberties depend. It is also because critical journalism is an essential check on state power. If the mighty know that abuses will be neither exposed nor publicised, they are likely to commit more of them.

The Economist analysed data from about 180 countries over the past 80 years collected by V-Dem, a Swedish research project. We found a feedback loop between muzzling the media and unleashing corruption. It seems to go something like this. Politicians who want to rob the public have an incentive to gag the press. The tighter they gag it, the easier it grows to steal. And the more guilty secrets politicians accumulate, the greater their incentive to stifle future critical reporting. Our calculations suggest that if press freedom decays from “as good as Canada” to “as bad as Indonesia”, that is a good predictor that graft will rise from “as clean as Ireland” to “as grubby as Latvia”. The process is gradual, metastasising over several years, so voters may not notice until after the next election. It is worse under populist governments, which typically demonise their critics and seek to crush institutions that limit their authority.

One of the most alarming trends is that governments which claim to be democratic are increasingly using tools pioneered by more authoritarian regimes. Typically, they do not try to silence truth-tellers entirely. Rather, they seek to create a media ecosystem in which voters hear amplified praise of the ruling party and only faint whispers of dissent.

They use taxpayers’ cash to promote fawning coverage: deploying yes-men to run the public broadcaster, directing state advertising budgets towards pliant newspapers and nudging friendly tycoons who rely on public-works contracts to take over independent media firms and neuter them.

At the same time, they make it harder for critical outlets to thrive—or even survive. Those that insist on doing investigative reporting may find that the government not only refuses to advertise with them but leans on private firms to shun them, too. They may face constant tax audits and vexatious lawsuits. Many struggle to stay afloat: in 160 out of 180 countries surveyed by RSF, the news media are financially precarious.

Supposedly democratic governments are going after individual journalists, too. Those who irritate the powerful are often doxxed and harassed, especially if they are women. A UN survey found that 75% of female reporters had endured online abuse and 42% had been harassed or threatened in person. Some reporters are snared by national-security laws banning almost any disclosure of which the government disapproves, or rules against digital “fake news”, meaning almost anything it disputes. The most persistent may be prosecuted for crimes that have nothing to do with journalism. In the Philippines in January, for example, Frenchie-Mae Cumpio, a frequent critic of abuses by the security forces, was sentenced to 12 to 18 years in prison for “financing terrorism”. Ms Cumpio says the security forces burst into her flat, forced her to the floor, and planted guns and contraband on her bed.

Technology has changed what it means to be a journalist and opened new avenues for free expression. Anyone with a phone can film a cop punching a protester and post it on social media, which is a useful check on brutal policing. But overall, the digital revolution has not been as liberating as many people once hoped. Dictatorships can shut off the internet when their subjects are angry (as Iran and Uganda did last month). Flawed democracies use more subtle methods. Laws to protect digital privacy are used to shield politicians from scrutiny. Meanwhile, government snoops hack journalists’ phones to identify their sources, scaring off future whistleblowers. And if the reporters happen to have embarrassing photos on their devices, these may mysteriously find their way into the public domain.

A final shift is America’s government, which used to stand up for press freedom around the world and no longer does. The Trump administration has scrapped subsidies to independent foreign media and shut public outlets such as Radio Free Asia, which used to broadcast to news-starved Tibetans and North Koreans. Worse, Mr Trump has made clear that he won’t press foreign governments over free speech—unless they are woke Europeans, that is. From Azerbaijan to El Salvador, strongmen have jumped at the chance to lock up or intimidate more pesky reporters without diplomatic blowback.

Apologists for crackdowns often argue that news outlets, too, should be accountable. But they understate the degree to which they already are. Readers can stop subscribing; subjects who are libelled can sue; the head of the BBC resigned over the Panorama scandal. Journalists have plenty of faults, but preventing them from doing their jobs will have dire consequences. A vigorous newsgathering ecosystem, once destroyed, is hard to rebuild. And a world with less press freedom will be dirtier and worse-governed. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

In a might-makes-right world, many countries may conclude that only nukes can keep them safe

How to think about new risks of nuclear proliferation In a might-makes-right world, many countries may conclude that only nukes can keep them safe February 5th 2026 THE DANISH word hygge suggests a cosy state of relaxation that comes from open fires, woollen socks and hot chocolate. These days, though, some Nordic defence strategists think that only nuclear arms can provide inner peace. America’s allies Poland, Japan and South Korea are also considering whether they need weapons of their own.

Some have begun speaking about the need for a “Nordic nuke” to shield Denmark, Finland, Iceland, Norway and Sweden. Others, such as Germany, are talking about co-operation with Europe’s nuclear powers, Britain and France. “As long as dangerous countries possess nuclear weapons,” said Ulf Kristersson, Sweden’s prime minister, last month, “sound democracies must also have access to nuclear weapons.” At the same time, as the New START treaty expires, America, China and Russia are on the brink of an arms race , violating the bargain that nuclear states would disarm, while non-nuclear states eschewed the bomb.

For almost eight decades a relatively stable nuclear order was underpinned by America’s promise to extend a nuclear shield to its allies. Whether it would make good on this pledge could never be known, prompting Charles de Gaulle, then president of France, to ask of President John F. Kennedy in 1961 whether he would be ready to “trade New York for Paris”. Yet American assurances and cajoling were enough to dissuade countries such as Sweden and Taiwan from joining the nuclear club.

Today that order is collapsing. Whereas proliferation used to be the business mainly of rogue states like Iran and North Korea, the talk today is coming from democracies. Some are motivated chiefly by the spectre of Russian aggression, aggravated by President Vladimir Putin’s threats to launch nuclear weapons against Ukraine. For others in Asia, the worry is China’s growing arsenal. All increasingly fear that it is unwise to bet their nation’s existence on America’s old promises.

President Donald Trump has repeatedly cast doubt on whether America would come to the aid of other members of NATO. American officials recently visiting Japan and South Korea have been noticeably reticent about the status of nuclear protection. Even under a new president who sought to restore faith in American nuclear deterrence, some allies may conclude that de Gaulle was right all along.

That poses a terrible dilemma. Some Western countries may feel compelled to possess weapons of their own. Yet their quest for individual security would be likely to trigger proliferation—even in countries that were initially leery of getting a bomb. And the more fingers hovering over doomsday triggers, the greater the chance of a catastrophic miscalculation or of a war turning radioactive.

Countries have time to think hard about these trade-offs, because a weapons programme might take years. The huge sums involved would divert spending from tanks and jets needed to fend off a conventional attack. Countries that dash for a bomb risk provoking adversaries determined to halt them while they are still vulnerable. Those considering joining the nuclear club could stop just short, creating a latent capacity that could be activated in an emergency. In Europe, Britain and France could work with their European allies to put up a nuclear umbrella. All should be thinking about establishing hotlines and other ways of preventing miscalculations and dampening crises.

Just to set out these arguments shows how dangerous the world is becoming. The temptation is to take comfort in nostalgia. But that only deepens the perils that lie ahead. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

It can do more to resist Donald Trump’s assault

Congress defended American science. Its work is not over It can do more to resist Donald Trump’s assault February 5th 2026 American scientists spent much of 2025 in shock. The Trump administration cancelled thousands of grants and withheld billions of dollars from researchers. Labs were forced to close their doors as they ran out of cash. Fewer foreign researchers applied to move to America and rising numbers of American scientists began to look abroad for jobs. Worse, Donald Trump’s spending proposals for 2026 aimed to cut the budgets for America’s main science-funding agencies in half.

This assault on science has provoked a rare reaction from otherwise supine Republicans in Congress. They have rejected $30bn in proposed cuts and hardened the language in the spending bill to help them enforce how the administration spends the money. Lawmakers deserve credit for rediscovering the power of the purse—and their spines. They ought now to stiffen these further by using congressional oversight to undo more of the damage Mr Trump and his team are visiting on American science.

The president’s budget would have eviscerated research. Mr Trump proposed cutting 40% of the money going to the National Institutes of Health, which pays for much groundbreaking academic work and conducts plenty of its own. In addition, he demanded that it slash the number of its institutes from 27 to eight. Congress was having none of this, choosing instead to preserve the agency’s structure and increase its budget by 1%. Legislators also maintained funding for the National Science Foundation, NASA and the Department of Energy’s Office of Science at similar levels to the previous year.

They did not only safeguard the size of the budget. They also constrained the president by inserting language in the text of the spending bill that specifies how and when science dollars must be spent. In previous years these instructions were published alongside the bill in explanatory documents which, even though they are not legally binding, the White House tended to honour as reflecting the will of Congress. By writing these instructions into the statute itself, Congress has left less room for a notoriously norm-breaking administration to spend the money in ways that lawmakers had not intended (or not to spend it at all).

These actions show that lawmakers recognised how Mr Trump’s assault would blunt America’s scientific and technological edge, killing good science jobs and hurting local economies. Having stood up for their constituents in the budget fight, lawmakers should also protect them by exercising their power of oversight to stop the administration’s war on scientific advice and expertise.

In the past year federal science agencies have been shedding staff. Mr Trump’s appointees have also terminated, suspended or otherwise tampered with the work of some 200 expert committees that advise the government on everything from medicine to energy . Grant panels and other bodies have been politicised and stacked with cranks.

These changes are already affecting Americans. Last month the Health Department abruptly cut the list of recommended routine immunisations for children from 13 to seven. Shutting down programmes that collect environmental data will mean that Americans will be less able to prepare for worsening extremes in weather.

The Senate should start by summoning Robert F. Kennedy junior, the anti-vax health secretary, to explain why vaccine guidance was changed without adequate consultation. Both houses should step up their scrutiny of other committees and environmental monitoring. As with sparing science funding, Americans will thank them for it. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Whoever wins the coming election has a lot to do

The new Bangladesh is only half built Whoever wins the coming election has a lot to do February 5th 2026 EIGHTEEN MONTHS have passed since a revolution in Bangladesh brought down the despotic Sheikh Hasina Wajed and her thuggish Awami League. On February 12th the country of 176m people will hold a general election, marking the return of democracy at last. It is a seminal moment: the first competitive vote in Bangladesh since 2008. For months observers have worried that violence would break out. So far, thankfully, they have been proved wrong.

The contest is largely a fight between two long-established parties, both of which were persecuted by the old regime One is Jamaat-e-Islami, the largest and most moderate of Bangladesh’s Islamist outfits. The other is the Bangladesh Nationalist Party (BNP), led for years by the late Khaleda Zia, a former prime minister, and now fronted by her son, Tarique Rahman. The BNP is the favourite to win.

Many are rightly disappointed that Bangladesh’s upheaval has not empowered better, new parties with bold new agendas—Sheikh Hasina’s regime was execrable, but the politics that came before her was also grim. The Islamists who are about to win a lot of seats are almost certainly less tolerant than they are making out. And the BNP’s previous stints in power were marred by extreme corruption and worse. But Bangladesh’s progress should be weighed against its wretched state two years ago, and against well-founded fears that its caretaker government would fail to keep the peace. Given the long distance Bangladesh has had to travel, its achievements are big and worth celebrating.

The election will thrust the revolution into a new and risky phase. As a more conventional politics resumes, support from foreign friends may wane. Politicians tasting power for the first time in two decades might revert to the bad old ways. And Bangladesh will flourish only if it sustains its enthusiasm for reform. Whoever wins will have a lot to do.

The most urgent worry is the economy. The interim government—led by Muhammad Yunus, a Nobel laureate—kept it from disaster. But big changes are needed. This year Bangladesh will graduate from a group of “least developed countries” that enjoy advantages in trade and concessionary loans. It needs to make its factories more efficient. It must increase government revenue, which is 7% of GDP, compared with 20% across Asia. And it needs to cut red tape and hammer corrupt bureaucrats who hold businesses to ransom.

Relations with India matter, too. Bangladeshis are right to resent how Sheikh Hasina has been backed by the government in Delhi. They are irked when Indian officials falsely paint Bangladesh as tainted by anti-Hindu rage. But the caretaker administration was too ready to needle India. The next government must reset ties.

The last task is political renewal at home. In an election-day referendum Bangladeshis will be asked about constitutional reforms aiming to cut the risk of fresh tyranny. They should back them, and the next government should see them into law—though the temptation to wriggle out will be strong. The new leaders also need to rehabilitate the Awami League, banned from politics by the interim government. That will be painful: the League has not taken responsibility for the deaths of some 1,400 people as Sheikh Hasina clung to power. But the new Bangladesh has to be built on forgiveness as well as justice.

Bangladeshis can be proud of their revolution, which offered encouragement to “Gen Z” protests in other parts of the world. This election is a welcome milestone. But the hard job of building a new Bangladesh has only just begun. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Is America’s president building his own paramilitary militia?

ICE’s impunity is a formula for more violence Is America’s president building his own paramilitary militia? January 29th 2026 AMERICA STARED into the void this week, but pulled back. Federal action in the streets of Minneapolis goes well beyond immigration. It is a test of the government’s power to use violence against its own citizens—a dividing-line between liberty and tyranny. And it will not be the last.

After immigration agents killed Alex Pretti on January 24th, and the Trump administration slandered a good Samaritan as a would-be mass murderer, America was spiralling towards civil unrest. Happily, protesters showed restraint. Public opinion has turned against ICE, the catch-all brand for America’s deportation machine. Even some conservatives have doubts. And Donald Trump grasped that immigration, once one of his strongest issues, has become a liability. On January 26th the president sought to ease tensions, including by putting the operation in Minneapolis under new management.

And yet the stand-off between ICE and local people continues . Mr Trump has not renounced his power to impose a paramilitary force on unwilling states. Americans should be on their guard.

ICE has a reason to be in America’s cities. Mr Trump has a mandate to deport illegal immigrants. Having dramatically curbed illicit flows across the southern border, he claims to be seeking “the worst of the worst”. But that is not what his enforcers are doing. Recently, only 5% of those detained have been people convicted of violent crimes. Instead ICE’s brutal means indicate ends that are darker than immigration-control, for several reasons.

One is that the administration appears to believe ICE should be a law unto itself. In their zeal to fill quotas and live out their macho “destroy the flood” culture, ICE agents have revelled in the wanton use of force. Administration officials have nonetheless told agents that they enjoy “absolute immunity” as they go about their duties and, a judge complains, have defied court orders. They rushed to brand Mr Pretti, and Renee Good, a woman shot earlier, as terrorists. They have strained to ensure that investigations into those killings are safely under their own control. Impunity is a formula for more violence.

Another reason to worry is that ICE and its leaders are trampling the constitution. By insisting that witnesses and protesters are criminals, they are denying people their First Amendment rights to free speech and association. In a state like Minnesota, when the head of the FBI says people cannot bring a gun to a protest he is denying their Second Amendment rights. And when ICE agents stop or arrest people without cause and search their houses without a court warrant, they are denying their Fourth Amendment rights.

Last, deploying ICE to Minneapolis, a city with relatively few illegal immigrants, seems to serve a disturbingly broad agenda: to draw attention to ethnic Somalis caught up in a benefits scandal there; to punish “sanctuary cities” that limit the help they extend to ICE; or perhaps as theatre to scare people and deter all kinds of migration to America. Mr Trump could also be trying to boost support for Republicans by portraying Democrat-run cities as disaster zones where lawless immigrants are protected by violent radical-left extremists.

The most disturbing possibility is that the president is creating a militia which answers only to himself. As our briefing explains , from the Texas Rangers to Grover Cleveland’s use of the army and marshals in the 1890s, Americans have periodically worried about the unaccountable use of state violence. Abroad, from El Salvador to the Philippines, would-be despots often turn the army and the police against their people in the name of keeping order.

Supporters of Mr Trump will treat this argument as wildly overblown. Early in its history America set up mechanisms to curb the president’s power. Citizens have the right to bear arms. The states have national guards to counterbalance the army. The Insurrection Act sets out rare circumstances when the president may legally use the army to control the mob. The courts and Congress can step in.

Yet ICE is ideally placed to sidestep protections. Illegal migrants are spread across America and Mr Trump asserts that Democrats deploy them as voters. Agents can therefore stage provocations pretty much anywhere with impunity, including during elections. When a protest eventually turns violent, it is politically useful and a justification for further deployments. And when politicians complain about ICE, as have the governor of Minnesota and the mayor of Minneapolis, the Justice Department can investigate them for obstructing federal officers.

A theme of Mr Trump’s second term has been the accumulation of presidential power. Even if the 47th president does not use federal agents as an all-purpose coercive tool, the 48th or the 49th might—and, Republicans should remember, they may be Democrats. If Mr Trump has no anti-democratic designs on ICE, he should be eager to limit its actions.

That would not be hard. The president should honour his pledge that the investigation into the killings of Ms Good and Mr Pretti will be “honourable and honest”. As a first step on the long road to winning back public trust, ICE agents should be better trained, stop wearing masks and start wearing body cameras and identification numbers. Deportation quotas lead to brutal tactics and must end. Kristi Noem, the secretary of homeland security, has blatantly lied. She should be fired.

After this week, even that would not remove the spectre of a presidential militia. Hence the courts need to make clear that states can in fact prosecute federal agents who commit crimes; that ICE’s view of the constitution is wrong; and that the federal government cannot ride roughshod over the states. And Congress needs to hold the administration to account. An early test, due as this was published, was withholding funds from homeland security unless Mr Trump agrees to reform ICE.

Americans woke up to a grave threat this week. But you cannot defend a republic with opinion polls alone. The guardians of America’s institutions should see Mr Trump’s change in tone not as a signal to relax, but an opening to force change. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Installing his yes-men to lead the army could be dangerous for Taiwan

Xi Jinping’s purge should worry the world Installing his yes-men to lead the army could be dangerous for Taiwan January 29th 2026 “IN AN UNCERTAIN world, China is the biggest certainty.” So proclaimed a Chinese spokesman in December. Amid a war in Europe, turmoil in the Middle East and America’s rewriting of the geopolitical order, some in the West may be inclined to agree. As The Economist went to press, Britain’s prime minister, Sir Keir Starmer, was visiting China’s president, Xi Jinping, the latest among a series of Western leaders who have headed to Beijing in search of deals and dependability.

Yet in recent days politics in China has proved anything but certain. On January 24th the defence ministry said that the most senior uniformed officer, Zhang Youxia, and another top general, Liu Zhenli, were under investigation for violating discipline. Not since 1971 has there been such a purge at the apex of China’s armed forces. That was when the heir-apparent to Mao Zedong, the defence minister, Lin Biao, died in a plane crash after an alleged coup attempt against the chairman.

The purge at the top of the 2m-strong People’s Liberation Army (PLA) has come along with a huge increase in actions against party members and officials . Although China’s politics is a black box, the signs are that this is a measure of Mr Xi’s total command over the Communist Party. The question left for the outside world is what the purge means for China’s readiness to launch an invasion of Taiwan.

In 2025 Chinese authorities investigated over 1m people for corruption and deviant politics, 60% more than two years earlier and the most since Mr Xi came to power in 2012. Most of these purges are not the result of a power struggle, but a consequence of how the Communist Party disciplines itself. Above the law and without any scrutiny from a free press, the party has instead to depend on its own internal police to keep cadres on the straight and narrow.

In October, when senior officials met in Beijing, 37 of the 205 full-time members of the Central Committee were missing, presumed under investigation. However, the purge also reaches down into the lower ranks, terrorising party members, forcing mistrustful cadres into close personal networks where they feel safe, and paralysing some of those who favour reform.

The effect on the PLA is particularly potent. The army’s newspaper vaguely linked the toppling of the two generals to the war on corruption. But it also, in essence, accused them of insubordination towards Mr Xi. Calling the two officers’ influence “extremely vile”, it said they had caused “immense damage” to the “political ecology” of the PLA as well as to the building of its “combat capability”.

If the generals’ downfall did that to the PLA you might conclude the West should celebrate. Chinese forces are a growing threat. The navy is now bigger than America’s. The Pentagon reckons it plans six more aircraft-carriers by 2035 , giving it nine compared with America’s 11. China’s nuclear arsenal is expected to have at least 1,000 warheads by 2030 on missiles, submarines and planes—fewer than America and Russia, but double its stockpile in 2023.

In fact, the consequences of the purge are more complicated. A Pentagon report in December suggested that in the short run Mr Xi’s campaign could disrupt the operational effectiveness of the PLA, whereas in the longer term cleaning up the army could make it more proficient. However, the graver risk is one that the Pentagon passed over. This is the hollowing out of the team that would advise Mr Xi if a military crisis occurs, especially one over Taiwan.

American officials believe that China’s president has ordered the PLA to be able to take Taiwan by 2027. Some suspect that the island could not defend itself for long without outside help. Although America supplies arms to Taiwan, including a record $11.1bn package agreed on in December, it might not help repel an invasion—no treaty requires it to do so. Fears of China’s military prowess are causing some leading Taiwanese politicians to wonder whether pouring money into building up the island’s defences is worthwhile .

The seas around China are fraught. The country contests islands with Japan in the East China Sea. Several countries jockey with it over territory in the South China Sea. The Taiwan Strait is a perennial flashpoint. China is staging ever more shows of force in the area. American aircraft and warships patrol these waters; other Western countries sometimes join them. Western officials accuse Chinese forces of deliberately taking risks close to these patrols. Following a mishap, cool military heads would be needed to prevent escalation. To whom would he turn?

One such person was General Zhang. He was a rarity among China’s top brass, with experience of the horrors of fighting a war, against Vietnam. Western analysts believe that he could stand up to Mr Xi. Family connections between the two men date back to the party’s guerrilla days before it seized power in 1949.

Now that he and General Liu have gone, the Central Military Commission, the PLA’s high command, is thin. Since 2022 China’s president has ejected five of its six uniformed officers. The only two people left are Mr Xi himself, who heads it, and a political commissar in charge of fighting graft, who has little experience of military operations.

Imagine that Mr Xi appoints yes-men to fill the empty slots. Would his pliant new advisers be willing to tell him that, even with all its new hardware, China would still face enormous risks were it to mount an invasion of Taiwan?

To be sure, Mr Xi himself must be aware of the potential costs. He will have studied Russia’s disastrous campaign in Ukraine. He has heard from Western leaders how an attack on Taiwan would harm China’s economy.

However, although Chinese politics is more than capable of packing surprises, few analysts doubt that the 72-year-old Mr Xi will use a party conference next year to underline that he intends to prolong his rule, and that he prizes obedience at all levels of the party. In an uncertain world, such a certainty offers no solace at all. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

But neither Japan nor America should meddle with exchange rates

The weak yen and the weakening dollar are signs of financial fragility But neither Japan nor America should meddle with exchange rates January 29th 2026 FOR DECADES Japanese investors sought higher-yielding assets abroad, while interest rates at home stayed low. As a result, the country has amassed foreign investments worth over $10trn, more than twice its annual GDP. Yet today rates are rising and the effects are rippling through markets. America’s treasury secretary has blamed bond ructions in Japan for movements in long-term Treasury yields. After the yen fell this month to near its weakest against the dollar since 1990, the Japanese and American governments are reportedly considering propping it up. Yet currency intervention is a distraction. It will not cut the risk of financial turmoil emanating from Japan.

The possibility of official purchases has caused the yen to rally since January 23rd, contributing to a sharp across-the-board fall in the value of the dollar. On January 27th President Donald Trump appeared to welcome the greenback’s slide, which should help reduce the trade deficit. The fall was a continuation of a trend. Since Mr Trump came to office, his tariffs, attacks on the Federal Reserve and appetite for debt have made investors keener to hedge their exposure to America. In 2025 the dollar fell by 7% on a trade-weighted basis.

The fact that the yen has been so weak against a falling greenback is remarkable. It is doubly striking, because the gap between Japan’s low interest rates and America’s higher ones has shrunk by nearly a third over the same period. Converging rates would usually bring currencies closer into line.

Part of the explanation is that Japanese inflation has risen to an annual average of 2% in the 2020s, compared with 0.6% in the 2010s. Unusually, Japan’s inflation has lately outpaced that of its trading partners. Higher inflation often weakens a currency, as the exchange rate adjusts to reflect its lower purchasing power. But do not miss the wood for the trees. The yen would be far stronger if its value reflected Japanese prices. According to our Big Mac index , which compares the price of burgers across countries, the currency is undervalued by roughly 50%.

That makes it plausible that the yen is cheap because investors are worried about the danger that Japan will lose its fiscal and monetary credibility. Inflation, by boosting nominal GDP and tax revenues, has recently helped shrink Japan’s debt and deficit as a share of the economy. Yet at 130% of gdp net debt remains higher than in any other rich country, and 30-year yields hit their highest level on record this month. Takaichi Sanae, the prime minister, has called an election on February 8th and is promising an ill-timed fiscal loosening. As well as rightly spending more on defence, she pledges to suspend consumption taxes on food for two years. Although she has room to raise Japan’s taxes, Ms Takaichi has no plan to pay for all this.

Japan at least has plenty of foreign-exchange assets which it can sell to prop up its currency. But buying yen will do nothing to reduce the danger of a crisis, and the effect on the exchange rate is anyway unlikely to last. Countries which set interest rates and allow capital to flow freely across borders cannot also control their exchange rates. Japan should view the yen as an indicator of the economy’s health and the government’s credibility, as well as the likely path of interest rates. It should not—and cannot—make it a target of policy.

As for America, if the government dabbles in the currency markets to try to manage its exchange rate, Mr Trump’s economic management will rightly be seen as even more erratic and ill-judged. When demand for dollars falls, America’s government, businesses and individuals face a higher cost of capital. That is why the government has traditionally favoured a strong greenback. Giving that up because of an ill-founded fear of the trade deficit would be a mistake. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

It’s a hub, not a hellhole. Labour should give it more love

Haters on the right and left are wrong about London It’s a hub, not a hellhole. Labour should give it more love January 29th 2026 Both the right and the left enjoy bashing London. MAGA types depict it as overrun by machete-wielding youths. President Donald Trump claims it has “no-go” areas and is partly subject to sharia, or Islamic law. Nigel Farage, the leader of Britain’s leading populist-right party, has claimed that “crime is out of control” and the city “is in a state of collapse”.

Attacks from the left imagine a very different city. Rather than a woke hellscape, it is a place immiserated by fat cats who ate all the caviar. Members of Britain’s ruling Labour Party gripe that London has prospered for too long at the rest of the country’s expense. The prime minister, Sir Keir Starmer, mentioned it only once in his party-conference speech last year—to demand more investment elsewhere. Such rhetoric plays well: a poll for The Economist found that only 17% of Britons think Britain would be better off if London were richer.

Both these visions are wrong. London is one of the world’s safest big capitals . Violent crime has been falling there for years. The homicide rate is at its lowest since comparable records began. No big American city comes close: residents of Miami are almost six times more likely to be killed.

And far from prospering, London has struggled since the financial crash and Brexit. Output per worker there is lower in real terms than it was in 2008. That hurts Britain. London’s lost productivity growth accounted for 42% of the nationwide slowdown in 2007-19.

There is not, as some assume, a zero-sum trade-off between London and the rest of the country. When London grows, it pays more taxes to subsidise everyone else and generates demand for regional businesses. It is the workhorse of the economy, producing a quarter of national output. Its competitors are not Manchester and Leeds, but New York and Tokyo.

Labour should be sweating Britain’s strongest asset, not neglecting it. Despite its problems, London still has a story to tell. It remains the world’s second-largest financial centre (after New York) and produces more unicorns ($1bn-plus startups) than anywhere else in Europe. Four of the world’s top-ten universities lie in its orbit. Above all, the world’s best and brightest flock to the capital.

London’s future—and Britain’s—depends on continuing to be a magnet. The siren calls of places like Dubai are ever more tempting, with their low taxes and cheaper housing. Yet while Milan and Singapore roll out the red carpet for expats, Labour pulls up the drawbridge. Rather than squeezing non-permanent residents for extra taxes, the government should put the tussle for talent at the heart of its growth strategy.

What to do? One step is to overcome Britain’s self-sabotaging migration rules. Mr Trump’s curbs on skilled migrants have created an opportunity. The Economist’s footloose index finds that disgruntled American graduates would sooner go to Blighty than anywhere else. Yet Labour plans to reduce the length of graduate visas and double to ten years the default time to get permanent settlement. It should reverse high visa fees and charges (which can be over £10,000, or $13,800), provide easier paths to citizenship and make clear that—ten years after the Brexit vote—clever foreigners are still welcome.

Another obstacle is housing. Renting a flat gobbles up more of a typical income in London than in Paris or Tokyo . “Affordable-housing” rules discourage development; instead Labour should make it much easier to build. Last, London needs to renew its creaking infrastructure. The success of Crossrail, an east-west train line, shows the demand for new transport links. London does not need big handouts from central government to build them. It needs greater borrowing and tax-raising powers to be devolved to the mayor.

To Make London Grow Again, the government should tie commuter towns more tightly into London’s economy, integrating transport links and relaxing green-belt rules that block construction there. London’s footprint could grow—and its economy with it.

The 19th century offers a lesson. Then, London and Britain boomed together. Factories sprouted up across the north during the Industrial Revolution, their success buoyed by a surge in trade, finance and services in the capital. Revitalising London would benefit the rest of the world, too. Truly global entrepots are enablers of human progress, places where ideas, capital and talent can mingle and multiply. As America puts up barriers and China’s cities remain hard to move to, such places are rare. Labour should show London some love. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

As Nigeria and South Africa revive, the continent’s growth may outpace Asia’s in 2026

Africa’s two biggest economies may be turning the corner As Nigeria and South Africa revive, the continent’s growth may outpace Asia’s in 2026 January 29th 2026 Nigeria and South Africa are the two largest economies in sub-Saharan Africa, generating almost one-third of the region’s GDP. Tragically, in the past decade both have gone backwards. On average, individual South Africans and Nigerians are poorer today than they were in 2015. Since each country ought to be the powerhouse of its part of Africa, their dismal performance has slowed progress across the continent.

So it is good news that Africa’s sleeping giants seem to be waking up . In South Africa prudent policies helped bring inflation down to 3.2% in 2025, lower than at any point in the past 21 years, and earned the country the first upgrade of its sovereign debt in more than 16 years. Reforms have opened state-owned firms such as Eskom, the electricity utility, to market forces, sucking private capital into energy projects.

Meanwhile Nigeria has ditched the many official exchange rates that maddened and confused investors, and is allowing the value of the naira to be set largely by market forces. It has also ended budget-crippling, pollution-promoting fuel subsidies. Better security in the Niger Delta and targeted incentives have begun to revive oil production.

A turnaround in South Africa and Nigeria, if sustained, would add to a growing sense of optimism about Africa as a whole. Over the past two decades the fastest-growing places on the continent have been smaller economies, such as Rwanda, Ivory Coast, Ethiopia and Tanzania. If the largest economies grow faster and demand for minerals remains high—raising output in countries like Congo, Guinea and Zambia—there could be many more years in which African GDP outpaces Asia’s, as the IMF forecasts will happen in 2026.

But it is too early to celebrate. Better vibes have yet to translate into significantly higher growth rates. For that to happen, both of Africa’s giants will have to redouble their reform efforts.

Operation Vulindlela, a task force set up by Cyril Ramaphosa, South Africa’s reformist but slow-moving president, must repeat the success in electricity in other parts of the economy, especially freight logistics and water. Businesses are delighted not to suffer so many power cuts, but they have other worries. More effort is needed to fight organised crime. Laws deter investment, by weakening property rights or requiring firms to meet racial targets. A reckless foreign policy, coddling rogue regimes in Iran and Russia, risks tarnishing the country’s brand.

Nigeria has even more to do. It must curb wasteful spending so that more is available for education and infrastructure. A new tax regime aimed at raising much-needed revenue is being hampered by uneven enforcement and presidential meddling. Too little thought has gone into diversifying the economy away from hydrocarbons. Politically connected oligarchs find it easy to throttle competition.

Faster growth would make other problems easier to fix. South Africa’s jobless rate, at 32%, is one of the highest in the world. Nigeria has more people living on less than $3 per day than anywhere else, having fallen behind India.

The moment’s benign politics may not last. Nigeria holds elections in 2027, which could tempt the government to offer short-term giveaways. South Africa’s coalition government will also be tested in that year, as Mr Ramaphosa is likely to be replaced as leader of the African National Congress, the biggest party, possibly by someone less trusted and less reform-minded. If the coalition collapses, the corrupt populists who wrecked South Africa under the previous president are eager for another turn at the trough.

So in both countries, a sense of urgency is essential. Africa’s sleeping giants have started to wake up. It is no time to press the snooze button. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

There is time to adapt. Use it wisely

Stop panicking about AI. Start preparing There is time to adapt. Use it wisely January 29th 2026 Solving fiendish maths problems, making complex medical diagnoses, conjuring up new software in moments: the feats of generative AI get more impressive by the day. But anxiety about its social consequences is mounting, too. Kristalina Georgieva, the head of the imf, has warned of a job-crushing “tsunami”. Sir Demis Hassabis, boss of Google DeepMind, a leading ai lab, says he would support a slowing of innovation to allow society to adapt. Jamie Dimon, high priest of American finance, says governments should ban lay-offs if it “saves society”. The scene seems set for wrenching upheaval.

The course of AI is uncertain, obviously. Yet the latest series of Boss Class, our podcast on management, shows that there are good reasons to think society has more scope to adapt than these luminaries suggest. It takes time for a new technology to diffuse from the cutting-edge to the office cubicle. Firms and governments should use the breathing space to help those most at risk of being displaced.

So far labour markets seem unruffled. Service jobs are most exposed to generative ai, yet in America the number of white-collar jobs has gone up by 3m since ChatGPT was launched, while blue-collar jobs have stayed flat. Employment has risen even in areas that have been keen adopters, such as coding.

One reason for the slow economic impact is the technology’s “jagged frontier”: it excels at some tasks but then confidently spouts nonsense, or struggles to count the number of “r”s in “strawberry”. This unpredictability means companies and workers need to spend time working out where to apply ai.

Moreover, business processes don’t change overnight. Electricity was first harnessed commercially in the 1880s, but took 40-50 years to generate productivity gains on factory floors. Plants had to be redesigned and workflows rethought. This time, too, companies must think about how to encourage workers to use ai, how to mitigate the problems it poses, and how to apply it successfully .

This friction should be good news for those worrying about the speed of technological change. Asking developers around the world to down tools, when a winning lead could confer gigantic commercial and geopolitical rewards, would be a fantasy. But precious time elapses between invention and diffusion, and this can be used to identify who is most exposed to the technology and to work out how to help them.

Many jobs require skills that are hard to automate, such as judgment or empathy. AI tools could make these roles more productive, lucrative and even more enjoyable: think of a doctor liberated from paperwork. And new technology tends to create jobs; already there is a rise in white-collar jobs that are so new they have no label in the statistics. Yet some roles also look dangerously exposed to automation. Much back-office work involves simple tasks and following a script. Young people in entry-level positions are often asked to crunch data, or summarise reports—precisely the sort of things ais excel at.

Helping these groups find new work is crucial, and not just because of the impact on the people themselves. The loss of factory jobs through globalisation and automation in the West helped spur the rise of populism. No government wants a youth revolt on its hands. A backlash would be a sure way to stymie the economic gains of ai.

What to do? This time at least the disrupted are likely to be geographically dispersed: unlike factory work or mining, back-office and entry-level jobs are not concentrated in company towns. New opportunities should therefore be easier to find. But governments must also encourage movement by keeping labour markets flexible, rather than barring lay-offs as Mr Dimon suggests. Education will need an overhaul, to teach AI and skills that complement it.

Companies, too, must prepare. To thrive they need not only to make the best use of ai, but also to find and nurture the best people to work with it. Some back-office workers will lose their jobs. But others with tacit knowledge of the business may be trained for new roles.

The biggest mistake would be to stop hiring young people altogether. That would not only choke off the pipeline for future talent, it would rob businesses of AI natives . Instead, companies should rethink the type of work they offer young people—less grunt labour, more judgment and analysis; speedier rotations across the business so they gain insight that ai cannot have; piloting new roles and trying new approaches.

Disruption and job losses will be unavoidable. Such is the nature of technological progress. But, despite AI’s feats, there is still time to cushion the blow. It should not be wasted. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Despite a tactical retreat, great risks remain

The true danger posed by Donald Trump Despite a tactical retreat, great risks remain January 22nd 2026 EUROPEANs EXPECTED a diatribe, but in Davos Donald Trump was almost conciliatory. He demanded “right, title and ownership” of Greenland, but abandoned tariffs, ruled out force and later hailed a new “framework” and a possible deal.

That should be a relief to America’s allies everywhere. A crisis that threatened to engulf the transatlantic alliance has eased. But for how long? This may be only a tactical retreat. Mr Trump has coveted Greenland for years. In setting out his claim he spoke about NATO with a scorn that should put the capitals of Europe on high alert .

The Greenland crisis holds lessons for all countries. One is that Mr Trump will yield under pressure, without necessarily surrendering his long-term goals. Another is that the president’s narrow, pessimistic view of the world and his willingness to rewrite history have eroded the trust which used to underpin America’s alliances. Last, it follows that every falling-out under Mr Trump threatens to be existential. He portends a global realignment for which America’s allies must prepare.

With Greenland, Europe was lucky. It got through this round because Mr Trump chose to pick a fight over a prize of almost no strategic value to America. Mr Trump argues, correctly, that the Arctic will be contested as its melting ice admits the world’s shipping. Greenland is a site for America’s future “Golden Dome” missile-defence system. If the island belongs to America, neither Russia nor China will dare strike it.

But Greenland already has an American base to deter aggressors. If it comes under attack, Denmark and its European allies would have a powerful interest to protect it. America can do much of what it wants in Greenland under today’s treaties and, under the new framework, Denmark could strengthen them. The extra benefit of being able to colour in the map is nugatory.

All this helped Europeans explain that the potential cost to America was not worth it. Mr Trump’s bluster about levying tariffs led some European countries to threaten retaliation. The markets took note of the harm a trade war and a security crisis could inflict on America. Public opinion there is broadly against a costly takeover. Under fierce European lobbying, Congress showed rare signs of standing up to Mr Trump.

The moral is that, to get America’s president to retreat, you have to convince him that you will impose a price on him. In most of their dealings with Mr Trump, European leaders have treated him with sycophancy truffled by the odd, muted objection. This time, they were more assertive and it worked.

That is where the good news ends. At Davos Mr Trump talked about owning Greenland—which means that he could yet seek leverage by reviving tariffs or even the threat to use force. Even if he doesn’t and America and Denmark successfully negotiate a revised treaty that remains short of sovereignty, Europeans should heed the language in his speech. It betrayed an ominous contempt for Europe and for the value to America of the transatlantic alliance as it works today.

Mr Trump said that America has paid “100%” for NATO and never got anything in return. Scott Bessent, the treasury secretary, gripes that America has spent $22trn more than freeloading Europeans on defence since 1980. The administration’s security strategy warned that Europe faces “civilisational erasure” from immigration and may soon no longer be a reliable ally.

That is a travesty of NATO’s history and Europe’s future. It is true that, since the end of the cold war, the alliance’s European members have spent too little on defence. But during it, they were a bulwark against Soviet expansion and shared a belief in democracy and freedom. In any case, they are beginning to spend more money again, partly because of Mr Trump’s hectoring, but mostly because of the growing threat from Russia.

NATO has succeeded because it was founded on mutual benefit as well as values. The only time its Article 5 mutual-defence pledge was invoked was to support America after 9/11. Proportionally, Denmark lost more troops in Afghanistan than America did. Europe provides America with bases, such as Ramstein in Germany, that project power around the world; it defends American interests, including in the Arctic.

Unfortunately, Mr Trump is unlikely to change his view that allies are spongers and shared values are for suckers. That is sure to lead to further confrontation, whether over Greenland or something else. America’s friends, in Europe and beyond, therefore need to prepare for a world in which they are alone. That starts by preserving as much of NATO as they can. Building hard power takes years, and Mr Trump is in a hurry.

The problem is that Mr Trump believes that America holds all the cards, because his European and Asian allies have more to lose from a rift than America does. He is partly right. For example, if America refused to sell weapons for Ukraine and blocked intelligence, it would risk Ukrainian defeat and invite the next Russian aggression. Europe and Asia depend on America for military equipment. America provides 40% of NATO’s capacity—and it is the most important 40%. America supplies Europe with a host of economically vital services and digital technologies.

Europe should try to expose the shallowness of Mr Trump’s thinking. It can start by setting out an inventory of what America stands to lose—and this includes a lot more than the cost to American consumers of more tariffs. Europe is a market for $1trn-worth of American goods and services. It supplies essential technologies, including for chipmaking, telecoms equipment, lenses, aircraft and much more. European spies, especially Britain’s, give America valuable intelligence.

Next, Europe should warn Americans about the hostile world Mr Trump is willing into existence. Unable to trust America, Germany, Japan, Poland and South Korea would rearm even faster and perhaps seek nuclear weapons. Proliferation would curb the value of America’s own arsenal and inhibit its statecraft. China and Russia will not agree with Mr Trump on where America’s influence ends and theirs begins. All this might lead to a war so devastating that America could not stay out.

Europe needs to ensure that when investors, voters and Congress react to Mr Trump’s vainglorious schemes, they focus not just on Europe’s vulnerabilities but also on the harm that they themselves could suffer. That means appealing to their self-interest as well as deep principles of war and peace. Investors do not want to lose money, citizens do not want to scrimp and save and politicians do not want to be voted out.

Unfortunately, America’s alliances may not survive continual bouts of arm-wrestling initiated by a president who thinks allies have no value. From within, Europe will suffer disunity, as different countries seek varying accommodations with a predatory America. From without, the presidents of Russia and China, Vladimir Putin and Xi Jinping, will seek to corrode the allies’ unity with provocations that divide them.

In past decades American protection has coddled Europeans. Rather than deal with hard power, they have focused on the good life. Those times are over. European leaders should strive to slow the erosion of the transatlantic alliance, but they must also prepare for a day when NATO is no more. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Constraints make India’s prime minister govern better

The odd thing about Modi’s mojo Constraints make India’s prime minister govern better January 22nd 2026 Narendra Modi, India’s prime minister, was humbled in 2024. His party lost its national majority and had to start ruling in coalition. Policymaking looked listless for most of the next 12 months. Some thought the re-election of Donald Trump, with whom Mr Modi once got on famously, would strengthen his hand. Instead America’s president whacked most Indian exports with tariffs, which now add up to 50%.

Yet adversity, and the need to satisfy his coalition partners, seem to have made Mr Modi more pragmatic. Though he still indulges in divisive rhetoric, he has taken fewer actions to goad or bully India’s Muslims since his electoral setback. Instead, he has concentrated on economic reforms , which should help the country maintain its zippy growth rate. If he keeps that up, Indians will benefit hugely.

The government expects India’s economy to expand by 7.4% in the fiscal year that will end in March. It may soon be bigger than Japan’s and could overtake Germany’s by 2028. A decade-long effort to promote manufacturing is starting to show some results, despite American tariffs: India now assembles about a fifth of the world’s iPhones.

Mr Modi seems to recognise that keeping growth high will require more work. In the past few months his government has unveiled bankruptcy reforms, which should shorten drawn-out disputes, and simplifications to India’s bewildering national value-added tax, under which a bag of popcorn could attract one of three different rates. Officials have promised to cut the red tape that makes it so easy for corrupt inspectors to extort bribes to turn a blind eye, such as criminal penalties for a tiny misstatement of the weight of a packet of biscuits.

In November came helpful changes to labour laws, tidying up a mess of rules that have long given Indian companies perverse incentives to stay small. The government is working on a bill that could encourage private firms to fix rusty pylons and decrepit substations, thereby cutting the price of power.

On the international front, India has closed three trade agreements since the middle of last year: with Britain, New Zealand and Oman. It may soon announce a big new trade deal with the European Union. It is about to open trade talks with Canada. It says it will let foreign firms compete more freely in insurance and nuclear power.

Finally, India is patching up its economic ties with its giant neighbour. Relations with China froze in 2020 after Himalayan border clashes in which soldiers were beaten to death or drowned in a river. But last year Mr Modi met Xi Jinping in China—his first visit there for seven years. Direct flights between the two countries restarted in October, after half a decade’s pause. For years India barred much Chinese investment, and made it hard for Chinese executives to get visas. Conscious that it needs Chinese cash and know-how, it is beginning to ease back on such excessive restrictions.

Will Mr Modi continue in this welcome direction? Thumping victories in recent state elections have restored some of his party’s swagger. And the outside world is looking less hostile. Not only has there been a thaw with China; Mr Trump’s fury with India has eased since it cut back on purchases of Russian oil. The danger is that Mr Modi’s appetite for reforms may go soft, if they can no longer be sold to his nationalist supporters as a necessary sacrifice to strengthen India in an unfriendly world.

The recent reforms are not enough. Some merely correct recent errors. Although India’s average tariff rate is drifting down, it is still higher than it was when Mr Modi first won power in 2014. Much-needed reforms to agriculture are still locked in a box marked “too hard”. So are changes to make it easier for companies to acquire land. India’s awful schools continue to waste hundreds of millions of young minds. Smog and traffic jams steal some of the boost India could gain from urbanisation. Unforced errors remain common: this month India’s Supreme Court alarmed foreign investors with a ruling that has thrown into confusion what tax they must pay on capital gains. And Mr Modi has not lost his authoritarian instincts, even if he has curbed them somewhat.

Yet as America grows increasingly protectionist and erratic, India’s reformist turn deserves praise. Mr Modi could have responded to his setback at the ballot box, or to Mr Trump’s tariffs, in a much less constructive manner. Indians seem to have recognised that building a whizzier economy is the best way to gain global clout. Mr Modi should double down on economic pragmatism, and keep his divisive impulses in check. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

America’s president has unusual power to impose peace; he must continue to use it

Trump’s Board of Peace is a distraction from the real work in Gaza America’s president has unusual power to impose peace; he must continue to use it January 22nd 2026 Donald Trump claims to have ended eight “unendable” wars in his second term. In some cases he exaggerates his role; in others the fighting rages on. In Gaza, though, he really did impose a ceasefire, force Israel to withdraw from populated areas and compel Hamas to release its hostages.

However, this was just the first phase of a 20-point peace plan. In the three months since the ceasefire went into effect , only one element of the second phase has been implemented. A Palestinian National Committee for the Administration of Gaza (ncag) was appointed on January 14th. Since Israel has not allowed its 15 members to enter the devastated territory, let alone govern it, it is unclear that it has much power.

The obstacles to peace in Gaza are steep . Hamas is in no rush to give up what remains of its arsenal or relinquish its grip on much of Gaza. Binyamin Netanyahu, Israel’s prime minister, will face voters this year and is loth to withdraw further. Israel still controls more than half the territory and occasionally conducts deadly strikes there. It is reluctant to pull back troops or relinquish any control while Hamas still has power.

Mr Trump pushed through the first phase by making clear demands of both sides. He followed this with pressure on Mr Netanyahu, applied personally, and on Hamas through its patrons, Qatar and Turkey. When either side hesitated, Mr Trump simply declared that an agreement had been reached, daring them to contradict him. His bullying style of dealmaking succeeded where two years of diplomacy had failed. Since then, however, his attention has drifted.

The recent announcement of three new peacemaking bodies is unlikely to get the process back on track. The executive board Mr Trump has appointed to oversee Gaza is dominated by people more adept at scouting for business than ending humanitarian crises. It does not include a single Palestinian. Over them all will sit a “Board of Peace”, a private club of world leaders. Membership will cost $1bn. The veto-wielding chairman, perhaps for life, is Mr Trump.

The board’s charter laments that “too many approaches to peace-building foster perpetual dependency and institutionalise crisis.” This is undoubtedly true of much conventional diplomacy. If the board is the “nimble and effective international peace-building body” the charter envisages, the world should cheer. But could a forum tailored to one man’s unquenchable ego provide a useful alternative to the UN?

More likely, it will distract further from the plight of Gaza. That territory remains divided between an Israeli-occupied wasteland and a Hamas fief. This is a recipe for prolonged misery for 2m Gazans, many of whom remain homeless and without much food or medical care. These are the sort of conditions in which a new war might break out. Mr Trump alone has the power to force Mr Netanyahu and Hamas’s chiefs to take the next steps. His plan for Gaza won widespread international backing. He should focus on that.

To alleviate the suffering of Gazans and prevent that return to war, the rest of phase two should be implemented—and urgently. The ncag should be allowed into Gaza and given the resources it needs to start preparing for reconstruction . An international peacekeeping force should be assembled and deployed. A verifiable process of disarming Hamas’s fighters must begin. And Israel must withdraw its troops from Gaza’s farmland as a prelude to a full withdrawal. Israel should allow much more aid to enter Gaza. The strip should be flooded with food, medicine and building materials.

Even with Mr Trump’s talent for strong-arming, none of this will be easy to bring about. But paying attention to Gaza is the first task. Success there would do more than anything else to burnish the president’s peacemaking credentials. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Especially now that America is becoming a less reliable partner

Chinese AI is a risk for Europe. So is shunning it Especially now that America is becoming a less reliable partner January 22nd 2026 ON JANUARY 20TH 2025 DeepSeek was an obscure hedge-fund-turned-tech-startup from Hangzhou. Within a week it had become the byword for a new wave of Chinese innovation, after launching an artificial-intelligence model as capable as Silicon Valley’s bleeding edge but much cheaper to build and run. Having slugged it out in China’s cut-throat domestic market over the past year, DeepSeek and its homespun rivals are looking abroad for profits . They will not find the largest ones in America, increasingly out of geopolitical bounds, or the poorer global south. That leaves Europe as the likely recipient of their attention.

To the old continent, new technology from China may seem like a curse. Chinese electric vehicles are already eating German and French carmakers’ Wurst and frites. Several EU countries have tried to restrict access to DeepSeek’s chatbot over fears that it might shunt data from European companies and citizens to China. No one wants to rely on a geopolitical adversary for what is fast becoming critical infrastructure. These worries are legitimate. But in the case of AI, China may, if embraced wisely, be a blessing for Europe.

There are three reasons why European firms should welcome this Chinese onslaught. First, Chinese models are nearly as good as the best that OpenAI, Anthropic and Google can offer—which for most users is good enough. Demis Hassabis, Google’s AI supremo, has said that Chinese AIs are only “a matter of months” behind American ones. Like DeepSeek, most cost nothing to access and relatively little to operate.

This cost advantage comes from their openness—the second reason why they ought to appeal to European firms. In contrast to proprietary black boxes peddled by leading American firms, open models can easily be fine-tuned and run on local infrastructure. Using them averts the risk of being locked in to any one provider. If OpenAI or Anthropic went belly-up, their customers would be in a bind. If DeepSeek were to fold, users could keep running its models’ “weights”, the parameters learned during training, on their own data and their own servers—which also allays data-theft fears. American firms like Meta also offer open models. But China is leading the way.

There is one last reason why welcoming Chinese AI is in Europeans’ interest: it offers insurance against lock-out, as well as lock-in. Before Donald Trump took the oath of office for the second time, also a year ago, it would have been absurd to worry about European access to American technology. As he recklessly exploits the transatlantic alliance over Greenland, an executive order limiting American AI firms’ business in Europe no longer seems unthinkable. Some European restrictions on American technology, including the computing clouds where AIs reside, are also plausible.

Although, in a fragmenting world, Europe’s best option may be to nurture its own AI industry, it is not about to become a model-building superpower. But it can still be a world leader in putting the technology to work. Already, 37% of EU businesses report using generative AI, on par with America. In manufacturing, European firms are ahead. Using open models, including from China, could further increase their lead.

Politicians in Europe appear to grasp this. With lots of interest and no voluble AI incumbents begging for protection, the early efforts to ban DeepSeek mostly fizzled out. In January the European Commission launched an effort to identify and remove barriers holding back open models. None of this will guarantee Europe’s techno-independence. Firms will still rely on American hardware, especially chips from Nvidia. Chinese software comes with all the old risks. But for Europe, the bigger one now is to spurn it. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A way to tackle the tricky economics of drugs designed for one person

Britain’s good idea for custom genetic medicines A way to tackle the tricky economics of drugs designed for one person January 22nd 2026 RARE DISEASES are, individually, rare. Collectively, however, they are anything but. They affect perhaps 300m people around the world. Many are highly debilitating. Plenty cut young lives tragically short. Some 80% are caused by faulty genes. Breakthroughs in genomics (which let doctors find problem mutations) and genomic medicines (which edit mutated DNA or disrupt how it is turned into proteins) mean that more and more are treatable. Yet sufferers are seldom treated.

That is because drug firms have little incentive to develop custom medicines and get them past regulators. The process is costly and tedious for businesses which are set up to make drugs at scale. Probably fewer than 100 customised drugs for rare diseases have been made since 2018, usually paid for directly by desperate parents with money raised through charity.

It does not have to be this way. This month Britain’s Medicines and Healthcare products Regulatory Agency (MHRA) approved a novel sort of clinical trial. Ten children, each suffering from an ultra-rare genetic neurodegenerative disease that threatens his or her life, will each receive a unique version of a known drug molecule . If the trial is successful, the MHRA will give the nod not to each custom drug one by one, but to the process of making them. The firm doing the tailoring, EveryONE Medicines, would be able to make as many variants as there are children in Britain needing care and treatable with the underlying compound. America’s Food and Drug Administration is adopting a similar approach. The world’s other regulators should likewise follow Britain’s lead.

The watchdogs’ job is to limit the risk to patients while maximising clinical rewards. This risk-reward determination is relatively straightforward if firms conduct rigorous trials involving lots of patients and a placebo-taking control group. But regulators get nervous about custom treatments, especially for rare diseases with little or no prior clinical data behind them. The risks, in the regulators’ eyes, are hard to quantify; the outcomes, uncertain.

The MHRA’s innovation is to take seriously the trade-off between the unknown risk of customised treatment and the almost inevitable suffering in its absence. It may be that one day, tragically, a child dies after receiving a custom-made drug. That is not an argument against such treatments—unless a safer alternative exists.

The British approach should spur innovation, especially if adopted widely. EveryONE Medicines reckons that process approval could cut the cost of developing custom therapies from $2m-3m to below $1m and the time it takes from two or three years to less than nine months. As prices fall, demand will rise, including, eventually, from state-run health-care systems.

Combined with greater regulatory clarity, a signal from governments that they would pay for such treatments and, ideally, universal whole-genome sequencing of newborns (a large trial of which is also under way in Britain), would attract more biotechnology companies into the market. Already, one new biotech firm developing custom therapies based on gene-editing for other rare conditions has expressed interest in the MHRA’s process approval. The more countries emulate Britain, the faster this virtuous centrifuge will spin—and the more young lives will be saved. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Thousands have died and America has threatened to strike back against the horror there

What the collapse of Iran’s regime would mean Thousands have died and America has threatened to strike back against the horror there January 15th 2026 WHEN PROTESTERS took to the bazaars and streets of Iran, the supreme leader, Ali Khamenei, met them with bullets . After two weeks of chants of “death to the dictator”, militiamen allied with the Revolutionary Guards and toting automatic rifles rode in on swarms of motorbikes. With snipers, they shot their fellow citizens, aiming at their faces and genitals. Morgues are overflowing. Bodies in bags are stacked on bloodied pavements. Several thousand may be dead. Thousands of the wounded have been arrested, some dragged from hospital beds to prison cells and an uncertain fate.

This ought to be the moment that ends the theocrats’ 47 years in power. Iranians deserve to live in a democratic and prosperous country, not least because of their bravery. The world would benefit if Iran was turned from being a nuclear threat and an exporter of violence across the Middle East to a tolerant, stable trading power. But protests alone don’t end tyranny. What would an American strike contemplated by President Donald Trump do to bring about the mullahs’ downfall? And if the regime were to topple, what might follow?

Iran’s rulers are merciless because of their weakness. They have nowhere to turn and nothing to offer their people but violence. At home, Iran’s citizens must endure a shrinking economy, rapidly rising food prices, joblessness and worsening poverty. Abroad, the regime has been humiliated, as its proxy forces in Lebanon, Syria and Gaza were battered or destroyed, mostly by Israel, since 2023. Last year’s 12-day war showed that the regime could not even protect its own commanders and nuclear sites. After crushing protests in previous years Mr Khamenei sometimes offered concessions, such as relaxing the dress code for women. This month his government proposed a general stipend worth $7 a month, hoping to buy off public anger. That was met with derision.

The days ahead are fraught with uncertainty and danger. The protesters have withdrawn from the streets, though for how long nobody can say. The bleakest outcome would be that the regime remains in power, bonded by blood, condemning Iranians to a stagnant, enduring oppression. Bad, too, would be a collapse of Iran into worse violence. The break-up of Yugoslavia in the 1990s, the invasion of Iraq in 2003 and civil war in Syria offer stark lessons in how hard it is to end decades of repression without provoking mass bloodshed. Kurdish, Azeri, Baluchi or other separatists could rise up and Iran could descend into chaos. Add the presence of enriched uranium, nuclear scientists and religious extremists, and the risks are grave. Fear of what comes next may explain why some inside Iran have so far failed to join the protests.

In between are scenarios in which the regime fragments. Perhaps the Revolutionary Guards will oust the supreme leader. Or a faction of guards may seize power in the name of the people, and seek legitimacy by holding rival factions to account for the recent killings. If so, they could be helped by the regular army, which so far has stood aside. Either way, the new men in charge could seek to strike a deal in which America lifted sanctions in exchange for strict limits on Iran’s nuclear programme and ballistic missiles.

America could attempt to land a blow against a regime that has been a running sore in Washington for over four decades. This week Mr Trump first threatened “very strong” action against Tehran, while calling for more protests, and then appeared to retreat—whether as a ruse or out of caution is unclear. If he attacks, his preferred option would surely be a limited strike. Perhaps he could aim for a political decapitation, somewhat like the one he recently oversaw in Venezuela, whereby the detested Mr Khamenei is deposed or killed. Or America could drop bombs and missiles on selected sites inside Iran, perhaps targeting structures associated with the Revolutionary Guards.

At less risk, America could help end the communications blackout imposed by the regime, by smuggling Starlink kits into Iran. One sign this matters is that security forces are hunting for those already in the country. The White House is also giving tacit support to an exiled opposition figure, Reza Pahlavi, the former crown prince, who fled from Iran when the shah was toppled in 1979. From a safe distance in Maryland he, too, has been urging protesters to rise up to bring democracy. In the absence of organised opposition inside Iran, perhaps the country could restore some form of monarchy, (see our interview with Mr Pahlavi).

However, just to run through the options shows how hard it will be for American action to succeed. If Mr Trump orders strikes, Iran is armed with a formidable battery of short- and long-range missiles that could hit back across the Middle East, leading to an unpredictable escalation—which is why countries there are warning against an American attack. A decapitation from the air would require exquisite intelligence against an adversary who is forewarned. Even with the ayatollah gone, a Caracas-style deal with the Revolutionary Guards is unlikely to create lasting stability, because grieving Iranians will yearn for vengeance against generals with so much fresh blood on their hands.

The stakes are extraordinarily high. With Mr Trump in office, old certainties in geopolitics are melting away. His concern will never be to respect international law, nor to foster a club of liberal democracies. But, even as Iran is abandoned by its allies, China and Russia, he is readier than any recent American president to bring about big changes if he believes they will enhance America’s influence and his own prestige. Each intervention is a test of what sort of world that will create.

Once every popular uprising seemed to herald the birth of a new democracy. Alas, after the failures of the Arab spring, it is no longer easy to imagine that Iran’s path could be so simple. The hope nonetheless is that, in time, the collapse of the regime will favour Iran’s courageous people, who have proved once again that they are their country’s greatest blessing. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

And Donald Trump’s use of companies as a tool of state will make it no safer

America’s gunboat capitalism will make the world poorer And Donald Trump’s use of companies as a tool of state will make it no safer January 15th 2026 For mUCH of modern history, multinational enterprises have acted hand in glove with the state. Britain and the Netherlands were bankrolled by their East India companies, and provided military and diplomatic support in return. Germany’s Krupp and Japan’s Mitsubishi aided industrialisation while their governments secured mines and markets abroad. American interventions helped oil firms secure foreign resources. Then for a spell, starting in the 1980s, governments stepped back and multinationals spread, unconstrained, across the globe. Today, however, gunboat capitalism is back.

When the bosses of many of the world’s biggest companies assemble in the Swiss mountain resort of Davos next week, a preoccupation will be the stunning intrusion of governments into their cross-border dealings. As war has returned to Europe and authoritarian China has become more assertive, politicians have redrawn the map for global business, setting out where multinationals can and cannot operate.

America’s president, Donald Trump, is taking things further. He sees companies as a useful tool to enhance state power. He has urged American oil bosses to return to Caracas or face retribution, pressed defence firms to stop buying back shares, and demanded that tech companies selling advanced processors to China share a cut with his government.

This return of state meddling will have destabilising consequences for Western multinationals, which make about $23trn in annual sales, $2.4trn in profit and employ millions across the globe. It will mean a less prosperous world—and not necessarily a safer one.

The shifting geopolitical order is already reshaping Western multinationals , as our Briefing sets out. Tariffs, subsidies and sanctions have steered capital away from places including China and Russia, and towards home markets. In 2016 American multinationals did 44% of their capital spending domestically; today the share is 69%. Foreign sales have fallen in real terms, while those made at home have risen. The retreat is more striking still in industries that governments often regard as “strategic”, such as software, drugs and carmaking.

As Jamieson Greer, Mr Trump’s trade representative, tells us on our Inside Geopolitics show this week, the heyday of globalisation is not coming back. The future is likely to hold yet more state involvement. The allure of commercial riches motivated Mr Trump’s toppling of Nicolás Maduro in Venezuela and is guiding his efforts to secure a truce between Russia and Ukraine. But Mr Trump is also binding business closer to the state. His administration has taken stakes in a clutch of mining companies and a struggling chipmaker; its National Security Strategy, published last month, says it will continue to do so. The more America champions its own businesses and penalises others, the more it becomes rational for other countries to support their own enterprises.

What will the new world of gunboat capitalism involve? For a start, it will be more costly and less efficient—and that matters more than in the past, because today’s multinationals are a far bigger part of modern economies. America’s global leviathans account for more than a fifth of domestic private-sector employment, two-fifths of physical investment and three-quarters of profits. This heft is a function of the vast infrastructure that moves goods and information around the planet, which has made it simpler to do business across borders, raising profits for shareholders and lowering prices for consumers. When companies are forced to allocate capital on geopolitical lines, they become less productive, reducing prosperity for all.

Already there is evidence that multinationals are losing profitability compared with firms that operate only domestically. We examined the return on invested capital of Western non-financial firms with sales over $10bn for 2023 and 2024. In seven out of nine industries, multinationals’ returns trailed those of domestic rivals. In many of these areas, the gap between domestic and global firms has widened since 2018-19.

Such hefty costs could still be worth paying, if they kept countries safer. As authoritarian regimes around the world become more aggressive, democracies face an urgent need to spend more on defence. Likewise, a hit to chipmakers’ profits might be a reasonable price to pay if an embargo prevented an adversary from making a technological leap that would translate into a big difference in military might.

The secret is to intervene wisely. Yet Mr Trump’s approach is beset by problems. For a start, it focuses on the wrong sources of strength. Commercial prowess is no longer about securing access to the most oil or other natural resources. Instead it comes from innovation and intangible capital, which help push out the frontiers of technology and make products indispensable to consumers. But with his war on science and immigration , Mr Trump is weakening the prospects for innovation.

What is more, intervention is muddled, seemingly by design. America’s policy on selling semiconductors to China has zigged and zagged, depending on who has the president’s ear. The risk is that every decision becomes open to lobbying, if not outright graft. And because uncertainty over policy gives the administration what it most craves—maximum leverage—businesses cannot make plans.

Given the president’s proclivities, it is hard to see the Trump administration overcoming those flaws. The deeper question, therefore, is whether other governments could do better—whether, in fact, successful gunboat capitalism could become part of any country’s competitive advantage.

This newspaper is sceptical, and not just because of America’s overwhelming military power. As the golden age of globalisation dims, the lesson to remember is that governments create rents; rents distort markets; and distorted markets make countries poorer and their citizens less enterprising. The allure of gunboat capitalism is that it offers both prosperity and security. The reality is that it will bring neither. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

You come at the king (of finance), you best not miss

A private memo from central banks to governments You come at the king (of finance), you best not miss January 15th 2026 HEADS OF CENTRAL banks from around the world have released a statement “in solidarity” with Jerome (“Jay”) Powell, the chairman of the Federal Reserve, who says he faces charges from the Trump administration as retribution for not cutting interest rates faster. The Economist has seen a private memo the central bankers also sent their own governments:

Dear Prime Minister/President (delete as appropriate)—We know that you think it absurd for technocrats to rise up in solidarity with anyone. But what do you think you’re doing? Jay’s fight has shown us how bad things could get for us if you keep breathing down our necks. This episode should remind you how bad things will get for you, if you don’t back off.

You think inflation was bad in 2022 and 2023? Remember that the typical annual rate of global inflation in the 1970s and 1980s was 7-8%. Some say its subsequent fall was good luck rather than good policy—the result of globalisation and cheap goods. Ha! It would be quite the coincidence if global forces just happened to bring price rises into line with our targets. Since the Fed declared its 2% goal in 2012 annual average inflation has been 2.3%; Turkey, where Recep Tayyip Erdogan tried to exert presidential control over monetary policy, has suffered price increases ten times as high. It was independent central banks wot dun it.

What will you tell voters if you let inflation out of the bag? They are already furious with you over high prices. The lesson incumbents have learned lately is that inflation is electoral poison. No wonder Jay’s fightback seems to be working. Mr Trump denied all knowledge of the investigation; Republican senators are threatening to hold up his nominations to the Fed. Treasury Secretary Scott Bessent must be screaming down the phone to the West Wing as we write.

It is not just voters who are on our side. Bond markets are, too. Don’t be fooled by the muted reaction to the latest attack on Jay. Investors predicted, correctly, that he would gain political support. The moment your moves against us look like working, you will find that vast government debts become more expensive to service while your currencies wobble. You will be stuck between the rock of inflation and the hard place of austerity. Look at Japan. Its new prime minister has stopped decrying interest-rate rises now she is in office and likely to be blamed for a weak yen.

You also need us to be credible. Remember when Liz Truss nearly broke the British bond market? The Bank of England was able to stop the fire sale only because everyone knew it was not monetising debt when it started buying bonds. Blur the lines between fiscal and monetary policy too much, and you will find there is no lender of last resort who does not arouse suspicion. The financial system will become less stable even as you are making the economy more volatile.

Yes, we have made mistakes. We know that several rounds of quantitative easing (QE) went off the rails, and there has not been a public reckoning. And we should have offset your fiscal laxity after you turned on the stimulus taps too much during the covid-19 pandemic. But at least we have mostly cleaned up our own mess. What would you have done without us to do the dirty work of making mortgages more expensive to slow the economy? Price controls? You might as well ask Nicolás Maduro how to run an economy—or Mr Trump to take a factual approach to Greenland.

We are sometimes guilty of empire-building, and Mr Bessent’s suggestion of a public review of QE is not the world’s worst idea. We will remember that not every attempt to hold us accountable is an outrage. But you have no idea how bad things could get if you ignore our success over the past three decades and gun for macroeconomic regime change. You have been warned. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Sidelining the democratic opposition and its leader, María Corina Machado, would be a mistake

Without democracy, Donald Trump’s Venezuelan oil quest will fail Sidelining the democratic opposition and its leader, María Corina Machado, would be a mistake January 15th 2026 WHAT HAS changed in the days since American forces snatched Nicolás Maduro , Venezuela’s dictator? His corrupt regime remains. The opposition, despite its popularity, appears no closer to power. The biggest shift concerns oil. After weeks of an American blockade, the country’s storage facilities were almost full and production had been curbed. Starved of petrodollars, Venezuela was facing a renewed currency crisis. Now a deal imposed by Donald Trump should mean that oil flows again. The earnings, in turn, will soon start pouring into an American-controlled escrow account.

The deal gives America control over Venezuela’s oil sales . The regime looks set to receive a share of revenues, but locals have little more than Mr Trump’s word that they will benefit. An executive order designates the cash as “sovereign property of the Government of Venezuela held in custody by the United States, and not as the property of the United States”. Marco Rubio, the secretary of state, will apparently determine how to spend it on Venezuela’s behalf.

How Mr Trump runs the new channel between those oilfields and global markets will do much to determine Venezuela’s prospects. Rules he imposes will help to decide how easily Venezuela’s leaders can continue to steal—and hence erode what are likely to be meagre profits. The rules will also set the stage for the expansion, or not, of Venezuelan oil output, upon which Mr Trump has pinned so much.

Transparency will be vital. An opaque system would permit the sort of graft that dogged the UN’s oil-for-food programme in Iraq, from 1995 to 2003. The regime may try to skim profits from new contracts under which oil will be sold. Russia and China, and no doubt other oil-trading autocracies, will encourage graft. One way to guard against this is radical openness.

Another is for private firms to act freely and competitively. Mr Trump is right to say he will allow oil sales to China. He should also resist any urge to sideline those, such as ExxonMobil, not yet ready to invest. Letting them trade will boost competition and spur them to get more deeply involved later.

Most important, Mr Trump should set a timetable for a democratic transition. America should not be in the business of blockading and controlling Venezuelan oil in the long run. Nor would it want to if market prices remain depressed and returns on investment prove lean. For investors to be assured that their property rights will be protected, they need to trust that independent courts will guard against future expropriation. That depends on a measure of democracy and the rule of law. For its part, the old regime relies heavily on the flow of dirty cash to buy the loyalty of the men with the guns.

Democracy is also what ordinary Venezuelans yearn for. Nine in ten want the results of an election stolen by the regime in 2024 to be respected now—or for a fresh vote within a year, says a new poll commissioned by The Economist. Their sentiment cannot be wished away.

Mr Trump was due to meet María Corina Machado, the leader of Venezuela’s democratic opposition, on January 15th. She is popular, and the closest thing Venezuela has to a democratic champion. Mr Trump will no doubt want her support for his oil deal. He should also back her to help return democracy and the rule of law to Venezuela. That is the only path towards the long-term stability that voters and investors crave. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Lessons from history for the next three years

America has coped with worse things than Donald Trump Lessons from history for the next three years January 15th 2026 AS AMERICA is about to turn 250, its politics are raw, fractured and volatile. Take the killing of Renee Good in Minneapolis by an ICE agent on January 7th. Americans have long been able to watch the same bodycam videos and draw the opposite conclusions. What is new is that the federal government immediately branded the dead mother a “terrorist” and squashed an investigation into what went wrong. It is almost as if President Donald Trump is trying to provoke unrest, to give himself an excuse to crack down.

History offers lessons for a country on edge. American progress has seldom been smooth. It has come through failure and renewal, advance and retreat—and because men and women chose to stand up when faced with a crisis.

Across seven monthly chapters this year, running to July 4th, The Economist will examine moments that strained the republic, drawing on contemporaneous coverage. The hope is to provide context for America’s current predicament. Mr Trump’s presidency is a serious test, but not a wholly unfamiliar one.

He is not the first president to treat critics as enemies of the state. In 1798, under John Adams, the Alien and Sedition Acts criminalised “false, scandalous and malicious writing” against the government. More than a century later, during and after the first world war, Woodrow Wilson’s administration jailed and deported dissidents, censored the press and tolerated mob violence against those deemed “un-American”. In each case repression was described as lawful and necessary, in the name of security, order and patriotism—language heard again today.

Nor is this the first time that America has suffered an erosion of norms about how power is exercised and defeat is accepted. After the civil war Andrew Johnson blocked civil rights for freed slaves and undermined Reconstruction, for a while hollowing out democracy in the South. Watergate revealed how law-enforcement and intelligence agencies could be bent to partisan ends, and how democracy depends on officials and reporters who refuse to play along. In both cases decency ultimately survived because Americans chose to defend it.

And if America often feels as if it is on the brink—struggling to cope with a polarised public—it has been there before, too. The country’s first constitution, the Articles of Confederation, proved too weak to hold the republic together, nearly leading to collapse. Its successor papered over slavery with compromise and euphemism, postponing a reckoning that would come through civil war. In the 1930s the Depression exposed a political system ill-equipped to deal with mass unemployment. More recently, an election decided by the Supreme Court in 2000 showed how heavily the system relies on good faith and restraint, qualities that are now in much shorter supply.

This time is different in some ways. History does not repeat itself precisely. But a stubborn belief in the unique awfulness of now flatters the present and trivialises the achievements of those who overcame worse odds. Americans have felt such strains before. The past offers grounds neither for despair nor complacency. Recovery has never been automatic. It has required citizens to confront failure, resist abuses of power and repeatedly renew the country’s founding ideals, which include government by the people through Congress, not by the president alone.

Renewal has also sometimes required a shock: a civil war, a depression, or an existential threat from a peer country. The challenge to the current generation of Americans is to change the country’s course—again—without the need for something so calamitous. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

That will be bad for America—and everyone else

In Donald Trump’s world, the strong take what they can That will be bad for America—and everyone else January 8th 2026 FOR 12 years Nicolás Maduro terrorised Venezuela. He stole elections and, when people objected, his goons killed, raped or tortured them by suffocation with plastic bags. His comrades looted and mismanaged the economy so wantonly that GDP fell by 69%. A quarter of the population fled abroad. Both the economic collapse and the exodus have been worse than is typical during the bloodiest of civil wars.

Mr Maduro was also an international menace: colluding with drug gangs, threatening oil-rich Guyana and propping up Cuba’s communist tyranny with cheap fuel. He supported Hizbullah, helped Iran evade sanctions and gave Russia and China a foothold across the water from Florida. And then he was gone—snatched by US special forces on January 3rd.

This raid matters far beyond Venezuela. One reason is how it happened. It was a stunning display of hard power—and its limits. Another is why it happened. Rather than citing democracy or human rights, as American presidents once did, Donald Trump said he aimed to grab Venezuela’s oil and assert dominance over the western hemisphere. And a third is when it happened. Mr Trump is hastening the demise of the old order of UN resolutions, international law and universal values. The unfolding drama will help determine what takes its place.

First, consider the how. No other military force could have swooped in and seized a despot (and his wife) so surgically. It took less than three hours. Not a single American died, though a reported 32 Cuban spooks guarding the Maduros did. By January 5th the odious couple were in court in New York , facing drug charges and possibly life sentences. America’s adversaries have been warned.

Yet the story also illustrates the limits to military power. This was a raid, not an invasion. Scarred by failures in Afghanistan and Iraq, America is attempting, from afar, something much less than regime change. Mr Maduro is gone but his machinery of plunder and repression remains . His vice-president, Delcy Rodríguez, seems to have taken charge. The regime’s motorbike militias, the colectivos, are on the streets reasserting terror. With many gun-toting groups in Venezuela, an army with 2,400 generals and much paranoia at the top, a descent into conflict is also possible.

Mr Trump says he now “runs” Venezuela, by which he means that Ms Rodríguez has to do what he says—or else. Yet he will struggle to enforce his will. True, the US Navy still blocks the oil exports on which Venezuela depends. On January 7th American forces seized two tankers used to ship Venezuelan oil, one near Iceland and one in the Caribbean. But Mr Trump’s threats to station troops in Venezuela or to launch repeated raids, each months in the planning, are not credible.

The second lesson from Venezuela is the why. The snatching of Mr Maduro is a worked example of the “Donroe doctrine”—Mr Trump’s vision of how America should assert itself in its region. “American dominance in the western hemisphere will never be questioned again,” he crowed. “Won’t happen.”

The doctrine is about power and natural resources, not values. Venezuela’s most popular politician is a democrat: the Nobel-prizewinning María Corina Machado. Mr Trump dismissed her as lacking “support”. Yet she is so popular that Mr Maduro barred her from the presidential election he stole in 2024. Mr Trump means she does not control the army. He prefers to back the people with guns instead. They have no interest in fair elections, which would mean losing power and risking jail. Venezuelans still hope Mr Trump can broker a transition to democracy, but he shows little inclination to try.

His national-security strategy, published in late 2025, spoke of enlisting friends and expanding alliances in the Americas. It is now clear that this invitation comes at the barrel of a gun. Within hours of announcing Mr Maduro’s capture, Mr Trump had also threatened Colombia, Cuba, Greenland and Mexico.

He makes clear he craves natural resources—mostly for America. Mr Trump has laid claim to Venezuela’s underexploited oil reserves—the world’s largest—and says that the United States will receive 30m-50m barrels straight away. Venezuela’s oil industry has been so badly managed that, with American help, raising output by a little should be possible. Yet Mr Trump’s boast that he can rapidly and profitably restore production to previous levels is deluded. Demand is weak and the country is short of skills and capital. And oil companies are wary of taking costly, decades-long, multi-billion-dollar bets that Venezuela will be safe.

Third is what this means for the Americas and the world. Smaller countries close to the United States may feel they have no choice but to submit to Mr Trump’s bullying. Yet in the years to come, many leaders will seek to reclaim their sovereignty. And many countries will quietly seek closer ties with other powers, including China. Unless coercion is balanced by attraction, Mr Trump’s hemispheric doctrine will eventually fail and, in doing so, weaken the United States.

In stating so brazenly that might makes right, Mr Trump has already undermined America’s alliances. Greenland is a self-governing part of Denmark, which is a member of NATO. Seizing it would destroy the alliance . America’s Pacific allies will also conclude that to depend on Mr Trump is to be vulnerable to his predations.

By contrast, China and Russia are experts in navigating a world where the strong impose their will on the weak. Mr Trump may believe that each will stick to its own sphere of influence, but where do those spheres begin and end? As countries everywhere feel emboldened to encroach on their neighbours, the dismal prospect is of an aggressive, border-shifting 19th-century world, but armed with 21st-century weapons.

America was a successful superpower because its self-interest and realpolitik were turbocharged by an avowed faith in universal values of democracy and human rights. Mr Trump believes that, far from being a unique strength in foreign affairs, that was a foolish indulgence. His raid on Venezuela is likely to show how wrong he is. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Protectionism is failing to revive manufacturing

Do not mistake a resilient global economy for populist success Protectionism is failing to revive manufacturing January 8th 2026 PESSIMISTS ABOUT the world economy have had a poor run. Global growth was probably about 3% in 2025, far higher than gloomy forecasts made in the spring and summer. That matches the pattern of the decade. Every year so far in the 2020s, the “Teflon economy” has beaten the World Bank forecast made in June. In 2025 America especially defied expectations. It slowed under Donald Trump, after accounting for the mechanical impact of lower immigration, but only a little. Now global interest rates have fallen and, in America, China and Germany, fiscal stimulus is supporting growth.

The resilience of the world economy may flummox market liberals, because it has coincided with protectionist policies. So far this decade industrial policy has proliferated, supply chains have fragmented and Mr Trump has levied the highest tariffs in America since the 1930s. Yet it is hard, at first glance, to spot the damage. Populists crow that, as usual, the experts were wrong.

They are only half-right. It is true that protectionism has not yet derailed growth. But industrial policies and tariffs have also failed in their central aim: arresting the decline of manufacturing jobs. That suggests the world economy is merely coping with populism, rather than flourishing under it.

As we report this week, American manufacturing is in a rut . The sector has contracted every month since March 2025, according to surveys, which also show firms complaining about the high cost of imported parts. Over the past year manufacturers’ construction spending has shrunk, as have their payrolls.

It is not just in America that the industry is suffering. Globally, manufacturing has lagged behind growth for the past three years, calculates JPMorgan Chase, a bank. From 2019 to 2025 manufacturing jobs fell as a share of the workforce on every continent except Africa, reckons the International Labour Organisation. Bidenomics, Trumponomics, “Make in India” and the like have barely dented the long-run trend.

Do not bet on that changing. For all the uncertainty hanging over white-collar jobs because of AI, it is factory hands who continue to be the world’s most disrupted workers. The pace of the decline in manufacturing jobs, as a share of the global workforce, has been slightly faster in the 2020s than in the preceding three decades. Recently job openings have dried up quicker at America’s factories than in its offices. And although manufacturing work is not threatened directly by chatbots, AI models trained with data from sensors and cameras are making factory robots better . On January 5th Nvidia’s boss, Jensen Huang, declared that “the ChatGPT moment for robotics is here.” That might help output, but will probably make the jobs that politicians strive to create still scarcer.

There is one place where manufacturing is thriving and factory jobs are fairly steady: China, whose share of global manufacturing value-added, at nearly one-third, is almost twice America’s. China’s industrial might threatens the national security of the West by giving it chokeholds over important industries, but it is hardly proving to be an economic boon. Its leaders’ willingness to back manufacturers with state money has distorted the economy. The resulting overcapacity in Chinese factories has contributed to its deflation problem.

Ironically, it is the adaptive power of markets that accounts for the world economy’s resilience to trade barriers. For years supply chains have snaked around whatever obstacles have been thrown up. And it is America’s private sector, not industrial planners in Washington, which is chiefly responsible for the AI boom. The ongoing success of free markets is obscuring the damage protectionism is doing. Do not mistake global economic resilience for a triumph by the likes of Mr Trump. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Yes—but it is not what populist politicians say it is

Does Japan have a “foreigner problem”? Yes—but it is not what populist politicians say it is January 8th 2026 JAPAN is consumed by talk of a “foreigner problem”. The story goes that the country has been overrun by ill-mannered migrant workers, misbehaving tourists and opportunistic foreign investors. But Japan’s real problem is not that it hosts too many foreigners. It is that it has too few.

Foreigners moved to the centre of political debate after the upstart Do It Yourself (Sanseito) party rode a “Japanese first” platform to big gains in last year’s upper-house election. In October the panicked ruling Liberal Democratic Party (LDP) chose as its new leader Takaichi Sanae, who launched her campaign for the job by lambasting foreign tourists who, she said without evidence, had been “kicking” sacred deer in Nara, an ancient capital. In Japan’s polite political culture, this was nearly as provocative as Donald Trump’s false claim that Haitian immigrants were eating American pets.

Since becoming prime minister, Ms Takaichi has proposed tightening the screws on foreigners in the hope of winning voters back to the LDP. Her administration has talked of crackdowns on people who overstay visas, taxes on tourists, restrictions on property purchases and caps on foreign labour. A package of measures may be put forward later this month.

Vilifying outsiders may make for good politics. But in the long run it is misguided. The true causes of voters’ frustrations are economic struggles. Cracking down on foreigners will not heal the underlying malaise. If anything, it will make it worse.

The backdrop is demographic change. Japan’s population is expected to decrease by 30% to 87m in 2070. Ms Takaichi’s mentor, the late Abe Shinzo, recognised that Japan needed to open up if it was to keep thriving. When he served as prime minister he let in more migrant workers and encouraged tourism. The number of foreign residents in Japan has doubled since 2010 to 3.7m. The number of foreign visitors has quadrupled over the same period, reaching some 40m last year.

Many foreigners live in Japan on temporary work visas. Such programmes are better than no immigration at all. But in Japan, where migrants are often treated as expendable cogs, not people who might settle and have families, such schemes hold back integration, which in turn causes tension. And as the foreign population in Japan has risen, mainstream politicians have often been reluctant to talk about it. That has helped populists paint the arrivals as a “silent invasion”.

Some popular worries reflect real problems that can be fixed. Stricter oversight of foreign investors who buy land next to sensitive sites such as military bases is wise. Imposing Japanese-language requirements for permanent residence is reasonable, too. Over-tourism has turned Kyoto’s best-known temples into mosh pits during cherry-blossom season.

But broader fears about social breakdown and loss of traditions are overstated. Japan is an island country with strong borders. It faces no surge of refugees from war or poverty. Its neighbours are either prosperous or North Korea, which locks its people in. Foreigners are only about 3% of Japan’s population; the average across the OECD, a club of mostly rich countries, is 15%. And there is plenty of room for tourism to grow.

Japan already relies on foreigners in industries including hospitality, farming and nursing. Migrants help sustain many of the traditions that nativists fear losing: they catch and harvest the raw ingredients for Japanese cuisine; in some ageing rural communities they help carry portable shrines during festivals. Japan will need far more workers in the coming decades to maintain even modest growth. That is why business leaders and governors tend to favour admitting more foreigners, not fewer. As for curbing tourism, that would mean stifling Japan’s second-largest export, after cars.

Instead of discouraging tourists, Japan could lure more of them to the many beautiful places that are currently off the beaten track. (Even Kyoto has plenty of spectacular yet barely visited sites.) Instead of cracking down on foreign workers, it should design an immigration system that attracts and selects newcomers with useful skills, integrates them into society and ensures that they pay their fair share of health-care and welfare costs. The real problem is not foreigners. It is the failure to take advantage of one of Japan’s greatest strengths—that it is a wonderful place to live and work. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

It is changing the way drugs are discovered and tested

AI is transforming the pharma industry for the better It is changing the way drugs are discovered and tested January 8th 2026 Drug development is notoriously failure-prone. Only one in every ten drug candidates that enter human trials eventually goes onto the market. Turning a promising molecule into a useful medicine typically takes ten to 15 years after its discovery. These challenging economics mean that the cost of developing each successful drug is roughly $2.8bn. And because medicines ultimately come off-patent, the drive to find the next blockbuster is relentless.

Enter generative AI, which the pharma industry is adopting at a terrific rate . By ingesting and analysing vast biological data sets, AI tools can identify promising target proteins and then suggest novel molecules that could latch onto those drug targets. They can sift through libraries of data to predict the potency and toxicity of candidates, before a single test tube is touched AI can also help with trials, analysing health records to find the patients most likely to respond to novel treatments. Though it is still early days, the signs are promising. ai could lead to more efficient drug discovery, better medicines and more competition in the industry.

ai-designed molecules show an 80-90% success rate in early-stage safety trials, compared with a historical average of just 40-65%. It will be years before it becomes clear whether success rates rise in later-stage trials, too. But even if they do not, one model suggests that early-stage improvements alone could increase the success rate across the entire pipeline from 5-10% to 9-18%. The industry is also wringing efficiencies out of its business using AI, in areas from clinical documentation to HR. McKinsey reckons that if AI is fully utilised by the pharma industry—no doubt with its consultants’ assistance—it could provide a boost worth $60bn-110bn annually.

The hope is that improvements in the technology will push up the success rate even further. Sophisticated new models for understanding tricky bits of biology are emerging at a rapid pace. A few years ago an AI model called AlphaFold solved the problem of figuring out the structure of proteins. More complex puzzles, such as how cell membranes function, are likely to be cracked at some point.

The technology is already changing how the pharma industry works. A new generation of AI-native biotech startups—particularly in America and China—is emerging. Pharma companies are increasingly forming alliances with AI-biotech firms, as well as with technology giants including Amazon, Google, Microsoft and Nvidia. And those big tech firms have their own ambitions in health. Isomorphic Labs, a spin-out from Google DeepMind, is trying to design entirely new therapeutic molecules from scratch inside a computer. Nvidia, too, has a generative-AI platform for drug discovery. Both firms are signing deals to offer design services to pharma companies. And in October Nvidia teamed up with Eli Lilly, the world’s most valuable drugmaker, to build the pharma industry’s most powerful supercomputer.

All this means that some of the value of drug discovery may be captured by tech giants. For now, pharma firms have many clear advantages, including heaps of data, scientists who know the field and long experience of shepherding new drugs through a maze of regulation. Over time, though, as parts of biology become more of a computational problem that can be solved with technology, such advantages could be eroded. Pharma firms may need to buy in ai expertise in the same way that they buy early-stage assets from biotech firms today.

As drug discovery becomes more efficient, governments will need to turn their attention to other potential bottlenecks in the system, such as regulation and trials. America’s Food and Drug Administration and the European Medicines Agency are themselves starting to use ai to screen the mountains of data they receive. As the number of drug candidates rises, faster regulatory reviews will be needed to avoid a logjam. Governments could also do more to encourage the sharing of patient data with AI companies in privacy-preserving ways so that AI models—and drug discovery—can improve.

Patents, too, will need rethinking. Today, long patent lives let pharma firms recoup the investments they make, encouraging them to undertake the risky business of drug discovery. Yet if the costs and riskiness of innovation fall dramatically, then patent terms (which typically provide 10-15 years of market exclusivity) may need to become shorter. ai brings good news for drug innovation. But to ensure that it benefits both the makers and takers of new drugs, the industry and its regulators will need to adjust to this new reality. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The budgetary impasse is just one symptom of collective political uselessness

France is paralysed, and everyone is to blame The budgetary impasse is just one symptom of collective political uselessness January 8th 2026 Over the past five years Europe’s once-profligate south has sorted out its public finances. Italy, Greece and Spain have brought down their budget deficits to levels commensurate with EU rules. The exception is France, which for three years has run a huge deficit of over 5% of GDP. You might think that being economically upstaged by countries that it helped rescue during the euro-zone crisis would focus political minds. Instead France has failed even to pass a budget for 2026. It now faces the latest in a series of parliamentary battles to adopt one by the end of the month.

The budgetary impasse is one symptom of a deeper malady: a severe case of collective political uselessness. Emmanuel Macron is entering the last 15 months of his presidency. He can still act internationally but is a lame duck at home, viewed favourably by less than 20% of the French. His centrist coalition holds 161 of the 577 seats in the splintered National Assembly, making it virtually impossible to get anything done. The populist right and left delight in Mr Macron’s paralysis. It is a dismal spectacle at a critical time, and everyone shares some of the blame.

France’s descent into ungovernability began in 2023, when the opposition and the unions whipped up anger over Mr Macron’s sensible pension reform, which raised the minimum retirement age from 62 to 64. With the populist-left Unsubmissive France (LFI) party and the populist-right National Rally (RN) egging them on, protesters took to the streets to rail against demographic reality. After the RN won the European Parliament elections in 2024, Mr Macron foolishly called early legislative elections. Those left him with a smaller centrist minority. A new prime minister, Michel Barnier, lasted barely three months before the RN and LFI teamed up to kick him out.

Mr Barnier’s successor, François Bayrou, gamely proposed a budget last July that would have trimmed the deficit to 4.6% of GDP. Parliament balked and toppled him in September. The next prime minister, Sébastien Lecornu, managed to pass part of the budget by caving in to the Socialists’ demand to freeze the pension reform. To get the rest through, he swallowed a long list of new or increased taxes from the Socialists, the tiny Greens and even the RN. But it was not enough. In December the government rolled over the 2025 budget into 2026.

Every major actor in French politics should be ashamed. The extremes seem happy to let France twist in the wind. Jean-Luc Mélenchon, the LFI’s leader, has his feet planted firmly on the barricades. Marine Le Pen and Jordan Bardella, who lead the RN, hope Mr Macron goes down in flames so they can swoop to victory at the presidential election in 2027. The Socialists and Greens have no vision for solving France’s budget crisis beyond raising taxes. The Republicans, supposedly fiscal conservatives, allowed a suspension of the pension reform that will cost €100m ($117m) in 2026 alone.

Perhaps nobody could have managed this fractious crew. But Mr Macron’s haughty, distant approach has not helped. Finally, one should not spare from blame the voters, who failed to appreciate Mr Macron’s successful economic policies, refuse to accept that the welfare system needs reform and keep voting for the most irresponsible politicians.

This is a bad time for France to be in such a mess. Like the rest of Europe, it is staring down Vladimir Putin while dodging blows from Donald Trump. It needs to find money for a lot more defence spending and to revive an economy menaced by Chinese competition. Yet its debt stock (117% of GDP) is too high already, so any extra spending must be matched by cuts or higher taxes—and its taxes are already the highest in the G7.

France cannot afford to be stuck. If Mr Lecornu cannot fix the budget by the end of January, he must go, and fresh elections should be called. Though the centrists might improve their position, an RN-led government seems more likely. Being obliged to take responsibility for governing might force the wrecking populists to grow up. But it may fall to the markets, rather than voters, to chastise France’s useless politicians. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

There is a dark side to the model-maker’s stunning growth

OpenAI’s cash burn will be one of the big bubble questions of 2026 There is a dark side to the model-maker’s stunning growth December 31st 2025 Stockmarket investors may have ended the year worried about the bubbly valuations of generative-AI firms. But private markets still appeared to be living in a parallel universe. In 2025 the venture-capital (VC) industry poured $150bn into big AI startups such as OpenAI and Anthropic, far more than beneficiaries of the previous VC boom received in 2021. Such is its confidence that OpenAI, maker of ChatGPT, believes it can single-handedly tap private investors for as much as $100bn in 2026 . That would be almost four times the amount raised by the biggest stockmarket listing ever.

If anything, though, even private investors are likely to start asking tough questions. OpenAI, Anthropic and other San Francisco-based AI startups may have demonstrated some of the fastest revenue growth of any companies in history. But they have also burned through cash at “Towering Inferno” rates, as they spend on the chips and cloud computing needed to train and run their models. Both OpenAI and Anthropic will come under increasing pressure to spell out their paths to profit, especially as they consider going public in 2026 or shortly thereafter. For the AI industry in general, it will be a bracing, revealing experience.

Several factors will draw investors’ attention to the lack of profitability. The first is the gigantic balance-sheets of the big-tech juggernauts that the labs are up against. Cash-gushers such as Google have bountiful resources to put behind their large language models, including their own chips and cloud infrastructure, making their models more efficient to train and run than those of OpenAI and Anthropic, and less reliant on potentially skittish investors. This mattered less when Google’s Gemini struggled to match the capabilities of the standalone model-makers. But now it has caught up.

That feeds into a second problem. More than three years since ChatGPT was launched, the much-vaunted boost to business productivity from AI is yet to come. In the few promising areas, such as coding and customer service, the field is becoming increasingly crowded between OpenAI, Anthropic, Microsoft and tailor-made applications that run on their own and third-party models. No AI lab has a moat big enough to retain an advantage for long, which makes revenues vulnerable.

A third problem is that costs are rising as fast as—or faster than—revenues. Unlike conventional software companies, which generate more profit the more they scale, AI firms face higher costs the bigger they get. A large portion of these costs comes from the computational power needed to train frontier models. Running models for inference is not cheap either, particularly when many users are not paying subscribers. That leaves the firms with some tricky decisions. It is possible to reduce inference expenses by offering short answers, or offset the cost by selling advertising. Both, though, risk degrading the user experience. If the model-makers raise prices instead, they could deter adoption.

Lots of companies have gone from cash-guzzling to cash-printing before. From Netflix to Uber, plenty of startups spent years in the red before generating vast returns. Generative AI could pay out even more, especially if superintelligence arrives. But investors will not wait for ever, and the industry’s star firms need to start fleshing out their business models.

OpenAI in particular should beware hubris. One vc says discussion of cash burn is taboo at the firm, even though leaked figures suggest it will incinerate more than $115bn by 2030. Sam Altman, its boss, said recently that one reason he wants to take OpenAI public is to watch its doubters sell it short. “I would love to see them get burned on that,” he said. Plenty of investors seem prepared to take the bet: both the public equity and debt markets have punished companies with significant exposure to his firm. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

As Joe Biden showed, candidates over 80 carry huge risks

Brazil’s President Lula should not run again As Joe Biden showed, candidates over 80 carry huge risks December 31st 2025 Latin America’s biggest country had a tumultuous 2025. Brazil jailed an ex-president, Jair Bolsonaro, for plotting a coup. President Donald Trump claimed, falsely, that this was a stitch-up, and slapped hefty punitive tariffs on Brazilian goods. Brazil’s left-wing president, Luiz Inácio Lula da Silva, stood up to Mr Trump, and persuaded him largely to back down. Lula, as he is known, is now in a strong position to win re-election in October .

It would be his fourth term, making him easily the most successful politician in Brazil’s modern democratic era, which began after military rule ended in 1985, and which Mr Bolsonaro sought to curtail. Brazilians have cause to celebrate the survival of their democracy. But they deserve better choices.

Lula is 80. For all his political talent, it is simply too risky for Brazil to have someone so old serve another four years at the top. Charisma is no shield against cognitive decline. Lula is only a year younger than Joe Biden was at the equivalent point in the election cycle of 2024 in the United States, and that ended disastrously. He appears to be in much better shape than Mr Biden was, but he has had health scares. In December 2024 he needed brain surgery to stem internal bleeding after slipping in the bathroom and hitting his head. If he serves another full term, he will be 85 before he retires.

He is also burdened by the corruption scandals that unfolded during his first two terms in office, for which many Brazilians cannot forgive him. And although Brazil’s economy has grown surprisingly fast in the past few years, Lula’s economic policies are mediocre. They focus largely on handouts to the poor, with revenue-raising measures that grow ever less friendly to business, though he has also pleased employers with a reform to simplify taxes.

Despite all these problems—and despite a campaign promise in 2022 that he would not seek a fourth term—Lula has no serious challengers from the centre or the left. He is so good at retail politics that all plausible rivals are keeping their heads down and their mouths shut.

Also, like Mr Biden, he has done almost nothing to groom a successor. The name of his finance minister, Fernando Haddad, was floated; but he was then passed over as being too cerebral. (Mr Haddad stood in 2018 but was trounced by Mr Bolsonaro’s trash-talking populist campaign.) A few young mayors from other left-wing and centrist parties have some support, but not nearly enough to elbow Lula aside.

The president would do his country a favour and burnish his legacy—as Mr Biden did not—by announcing that he will stick to his promise and stand aside. That would allow time for a proper contest to find a new champion of the centre-left.

Meanwhile, on the right, a struggle is raging to succeed the disgraced Mr Bolsonaro, who is serving a 27-year jail sentence but still has a surprising number of supporters, especially among evangelical Christians. He has tapped his eldest son, Flávio, to run for president in his stead. Flávio is unpopular, ineffective, and would almost certainly lose a race against Lula. Other possible candidates are circling, including some competent state governors.

The most prominent of these is Tarcísio de Freitas, the conservative governor of São Paulo. Mr Freitas already polls slightly better against Lula than does Flávio, despite the fact that he is not officially running and refuses to say whether he will. Mr Bolsonaro may yet see that Flávio has no chance and switch his support to Mr Freitas. Regardless, Mr Freitas should have the gumption to throw his hat into the ring. Unlike the Bolsonaros, he is both thoughtful and a democrat. Unlike Lula, he is only 50.

In 2025 Brazil showed that its democratic institutions were robust. Following the law and due process, and setting an example to other countries, its courts locked up an ex-president who had lost an election, made baseless allegations of voter fraud and tried to overturn the result by force. In 2026 Brazilian democracy needs another shot in the arm: a genuine contest between fresh, viable candidates.

Alas, it seems unlikely that Lula will drop out. Perhaps, then, the parties of the right can get their acts together? If they are wise, they will ditch Flávio and unite behind a candidate who can move beyond the polarisation of the Lula-Bolsonaro years. A centre-right figure who slashes red tape but not rainforests, is tough on crime but not dismissive of civil liberties, and who respects the rule of law, could both win and govern well. Brazil has everything to play for in 2026—and the outcome is worryingly uncertain. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Rockets are great, but sewage treatment is what you need for the long haul

The future of space exploration depends on better biology Rockets are great, but sewage treatment is what you need for the long haul December 31st 2025 The typical number of people in space at any given time is currently ten: seven on the International Space Station shared by the space agencies of America, Canada, Europe, Japan and Russia, and three on China’s Tiangong. Jeff Bezos, a celebrity bridegroom and former bookseller, believes that in the coming decades this number will increase by five orders of magnitude to a million or so. Elon Musk, a carmaker and social-media provocateur, suggests similar numbers could soon be settling on Mars. Even if you think such predictions are outlandish, the two tycoons are clearly right about one thing. The number is set to rise.

Various companies are seeking to tap a market for commercial visits to orbiting habitats, either to conduct research, to supervise machinery or simply to hang out enjoying the view and the weightlessness. China and America both say they want permanent Moon bases. Late in 2025 America’s National Academies released a report saying how much better Mars exploration would be if humans joined in the efforts of the robots to which it is currently entrusted. Jared Isaacman, recently confirmed as the new head of NASA, appears enthusiastic about such voyages of exploration.

All this is underpinned by the investments Mr Musk and Mr Bezos have made in reusable rockets, the Starship and the New Glenn, developed by their respective companies, SpaceX and Blue Origin. These launchers are spectacular and stirring achievements of physical science. But if a significant number of people are to make their homes in space, they will need not merely to get there but to be sustained there, too. The physics of combustion chambers needs to be paired with the biology of closed ecosystems.

To live is to take in sustenance and expel waste. Ecosystems are tried and tested means whereby waste for some becomes new sustenance for others. With just ten people in orbit, such biological recycling is not really required; it is possible, if expensive, to ship up food and oxygen and chuck waste overboard. Indeed, on-board ecosystems can even need discouraging. The Soviet-era space station Mir was beset by mould.

But if people are to travel farther from Earth and stay away for longer, they will need to do so as parts of ecosystems that deliver more and more services in terms of food, recycling and environmental regulation. Enthusiasts suggest that the knowledge gained in making that possible might have benefits on Earth, too, where existing ecosystems enjoy the advantages of incumbency to a degree which makes it hard for novel approaches to show their potential mettle. But the development of such ecosystems lags far behind that of rocketry. Until it advances, a human presence in space will be unsustainable .

“Applied astrobiologists” see themselves as central to that advance. They imagine ecosystems which, when fed with extraterrestrial minerals and ices—be they from the Moon, Mars or asteroids—will expand the scope for life within ever growing confines. Eventually such ecosystems might even spread unconfined. Such are the dreams of rendering Mars habitable through terraforming.

It is a controversial vision. Some recoil on principle; others see its espousal by Mr Musk, a former Trump lieutenant and fan of Europe’s hard right, as an ineradicable taint. And there is a scientific risk: what if it were to come at the expense of existing Martian ecosystems? Though there is no evidence for life on Mars, very hardy microbes could in theory find some parts of it habitable. It would be a fateful step to risk their extinction through the introduction of competitors from Earth. It would be unconscionable to do so before they had been studied.

This is why international agreements on “planetary protection” put the most hospitable-looking bits of Mars firmly out of bounds both for humans and their robots, which though lifeless could carry microbial stowaways. It is a prohibition which makes it more or less impossible to detect what it seeks to protect. Hence the calls for deregulation that would allow a careful investigation of Mars’s most habitable parts but firmly constrain heedless contamination. Such a regime would, among other things, be much easier to defend should spacefaring scofflaws seek to flout it. Governments should welcome it.

The goal should be a new golden rule linking the search for life elsewhere to the spread of life beyond the bounds of Earth. Humans should expand into the cosmos in the same way that, were the situation reversed, we would wish alien life to expand towards us: carefully, respectfully and in happy anticipation. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

How post-Brexit Britain should approach relations with its nearest and biggest market

Britain and the EU should be bolder in getting closer How post-Brexit Britain should approach relations with its nearest and biggest market December 31st 2025 Nearly a decade after Britain’s reckless vote to leave the European Union, debate over Brexit is back. The intervening years have not been happy. Tortuous negotiation under one prime minister, Theresa May, was followed by the hardest possible Brexit deal under another, Boris Johnson, damaging Britain’s economy through new barriers to goods exports. Estimates of the resultant loss to British GDP range from an irksome 4% to a dismal 8% . Even the promise of reduced immigration was not kept. As our latest polling confirms, most Britons now think Brexit was a mistake and favour closer ties with the EU, even more so than with America. Some voices in Britain’s governing Labour Party are floating the once-taboo idea of rejoining the customs union.

The EU, for its part, has plenty of other things to worry about, and Brexit seems like yesterday’s problem. But shifts in geopolitics—a less reliable America, a more menacing Russia—mean that it, too, has reason to rethink its ties with Britain. All this creates an opportunity for the two sides to move closer.

There have been promising, if modest, first steps. Britain has rejoined the EU’s Horizon programme, which promotes scientific collaboration. It is returning to the Erasmus scheme, letting young Brits study in Europe and vice versa. As part of a reset in May Britain agreed to realign with the EU’s rules on food safety and animal health, unblocking trade in farm goods and reducing barriers between Northern Ireland and Great Britain. The reset included plans for a broader youth scheme, easier cross-border travel, and a linkage of carbon-adjustment mechanisms and electricity trading. But the talks on all these have been slow.

Both sides are clinging to red lines. Sir Keir Starmer’s government is doggedly sticking to manifesto promises not to rejoin the single market, the customs union or the EU’s system of free movement of people within its borders. Red lines are often unhelpful when negotiating with a much bigger partner. But the EU is also too rigid in insisting on no exemptions from its rules and, as Britain starts moving closer to its single market, on unconstrained free movement. And it is prone to unrealistic demands for money. This recently sank any chance of Britain joining its new SAFE defence-spending fund, which would have been good for both Britain and the EU.

More flexibility is needed. Britain rejoining the customs union might seem like a good start, but is not a quick fix. It would usefully end the need to prove that goods exported from Britain qualify as British, but it would not deal with the obstacles to trade that arise because regulations (eg, on chemicals) now differ between Britain and the EU. It would also mean undoing Britain’s trade deals with America, Australia and East Asia. Better to keep chasing a bigger prize: closer alignment with the single market, with its nearly 500m consumers.

Here the EU resists “cherry-picking” and insists on its reciprocal demand for free movement. However, the reset already allows cherry-picking when both sides agree. As for unrestricted free movement, Liechtenstein (admittedly tiny) is in the single market without it, as is Northern Ireland for goods alone. Switzerland, similarly in the single market for goods, has an emergency brake on migration. Baroness May’s Brexit proposal of 2019, voted down by Britain’s Parliament, would in effect have meant single-market membership in goods without free movement of people.

The best way for Britain to negotiate this would be to seek (and offer) a form of partial membership of the single market in exchange for partial application of free movement (for example, offering free movement for certain professions or services). The EU may anyway need to do this for several applicant countries to its east, including Ukraine. For both Britain and the EU, it is past time for a bolder approach. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Voters in rich countries are angry about prices. Politicians could make things worse

The truth about affordability Voters in rich countries are angry about prices. Politicians could make things worse December 30th 2025 SLOP, PARASOCIAL and rage bait were contenders for word of the year in 2025. In 2026 an early favourite for that title, at least among pollsters and election strategists, is “affordability”, often paired with the word “crisis”. Having at last found a slogan that seems to work against the spell of Trumpism, Democrats will talk of little else between now and the midterms in November. In Europe, which is better at reposting American memes than coming up with fresh ones, there is talk of a cost-of-living crisis. A transatlantic consensus is forming that prices are out of whack. But are they?

Affordability is a fuzzy term that can mean whatever feels true. Telling people to stop complaining and be happy with their lot—the Marie Antoinette strategy—is not working for a White House where the tone and decor increasingly resemble Versailles. Maddeningly, voters want contradictory things: low prices when they shop, high wages for themselves; not many immigrants but lots of cheap labour; rising house prices when they own and lower ones when their children want to buy.

Successful economies are filled with tensions like these. Politicians will naturally say what polls well to win elections. If the only downside of the affordability story were that voters punished incumbents for high prices, that would not be so bad. Yet if the problem is misdiagnosed, the risk is greater that harmful policies will be introduced to “fix” it.

That is because talk of an affordability crisis mixes phantom concerns with real ones. Start with the imagined problems. People are sensitive to the prices of things they buy all the time. A gallon of milk cost $3 in American stores in January 2019 and now costs $4. Food prices have shot up in Europe too, as have energy prices. However, wages are growing faster than prices up and down the income spectrum on both sides of the Atlantic. In this sense there is no affordability crisis. Besides, nobody should really want prices to return to 2019 levels. If that were the goal, policymakers should seek to imitate Greece after its debt crisis, when it suffered depression and deflation.

There is more to the affordability story than the price of milk or electricity, though. As societies grow richer, the share of spending on goods shrinks and spending on services increases. When Donald Trump was born, 60% of America’s household consumption went on goods. Now the share is below 40%, while that spent on services has risen. Many people have forgotten how long their parents once had to save to buy a tv, and so do not appreciate the globalised supply chains that have made goods so much better and cheaper.

Meanwhile they are shocked by how expensive a haircut is now, let alone child care. Although both goods and services are included in inflation numbers, services remain stubbornly resistant to the huge productivity gains seen in manufacturing. In the euro zone the affordability conundrum in services presents itself in a different way . Because the prices of services such as health care and home rental are more regulated, the problem is availability more than affordability, and it is often solved by queuing—which does not feel good, either.

That is the first true affordability problem. The second is that though real wages have indeed risen, they have not gone up as fast as assets have. The wealth-to-GDP ratio is close to an all-time high in America. To think through the effects of this, picture two people who earn identical salaries that place them in the top 10% of earners. They have a standard of living that robber barons or monarchs of a bygone era would envy.

Then imagine one of these people also inherited $1m ten years ago. Had this lucky one put the money in the S&P 500, they would now be sitting on $4m. When these two people want to buy a car or a phone, this is not a problem. Ford or Apple can make an additional unit and sell it at the same price. When they want to buy positional goods, such as an apartment in San Francisco with a nice view, they are in competition. For one of them, this feels like an affordability crisis.

These are fundamentally problems of affluence, not of economic malaise. That makes them tough for policymakers to solve. To bring down the prices of housing and energy, for example, governments need to make it easier to build more homes and wind farms. Almost everyone favours this—but only in someone else’s backyard. Prices of services in America are inflated by absurd occupational-licensing rules—which licenced florists and hairdressers fiercely defend. Lowering tariffs would slow inflation, but firms protected by tariffs lobby strenuously for their preservation.

Enacting sensible policies is hard and even countercultural in a world that has, at America’s insistence, turned against free markets and international trade. The danger is that politicians reach for pseudo-fixes that make things worse, such as price controls. Also, in 2026 the American economy will see a fiscal boost from tax cuts, and the Fed will be under political pressure to cut interest rates. President Trump proposes sending out $2,000 cheques to taxpayers, funded by revenue from tariffs. It is hard to think of a combination of policies better designed to raise prices than to place new taxes on imports and then give people free money with which to buy them. It seems that the economic lessons that were learned in the 1970s, when Richard Nixon introduced price controls—and then abandoned them—must be relearned. That could be painful.

Once stories about the economy take hold they can be hard to shift. For the past decade America has told itself one about how blue-collar workers were left behind by coastal elites and then rose up in a populist rebellion. The data say this is not true: the real wages of non-college-educated workers were rising in 2016, when Mr Trump was first elected. They have kept rising since. Yet this tale has been used to justify an array of self-harming economic policies. The affordability crisis could become another story which, repeated often enough, is accepted as truthy—facts be damned. That makes it a trap. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

It was a good year for Xi Jinping

China proved its strengths in 2025—and Donald Trump helped It was a good year for Xi Jinping December 19th 2025 THE BIG noise in 2025 has been President Donald Trump. Launching a barrage of executive orders, he directed his fire at target after target. With the aid of Elon Musk, he attempted to dismantle the federal bureaucracy. On “Liberation Day” he rewrote the rules of trade. Around the world he imposed peace and threatened war.

However, the big beneficiary has been President Xi Jinping. This year China defied Mr Trump’s attempt to use tariffs to force a show of submission. By turning the tables, Mr Xi revealed just how much America actually depends on his policies. In this round of the superpowers’ fight for 21st-century supremacy, it was a victory for China.

This year showed the power of China’s industrial chokeholds. China’s share of the world’s manufacturing value added exceeds one-third, giving it the power to disrupt global supply chains overnight. In green technology, Chinese firms supply the materials, components and finished goods for 60-80% of solar panels, wind turbines and electric vehicles. DeepSeek showed what China can do in artificial intelligence, despite America’s best efforts to hobble it. China’s drug firms now run nearly as many clinical trials as their American peers—and do them faster. Two decades ago Western firms invested in China to take advantage of its cheap producers and huge market. Today they build laboratories there.

In 2025 Mr Xi showed he is willing to use China’s dominance as not just a source of wealth, but of power. His restrictions on rare-earth exports are one example of how China can use other countries’ dependency as a weapon. Findings this month from the Australian Strategic Policy Institute show that China leads in research in 66 of 74 fields, measured by its share of key scientific papers. These include over two dozen areas, such as computer vision and grid integration, where it has a chokehold.

The extraordinary thing is that Mr Trump has played into Mr Xi’s hands, both with his tariffs abroad and his wrecking-ball at home. Choosing bilateral tariffs as a way to inflict pain on China was a mistake. Partly because Chinese firms are used to harsh conditions and partly because China is not a democracy, its economy is better at enduring pain than America’s. Mr Trump could instead have co-ordinated a commercial encirclement of China by integrating more deeply with America’s allies. Foolishly, he preferred to alienate them with tariffs.

Likewise, Mr Trump’s attack on science will impede American innovation. He has targeted researchers, cancelling grants and withholding billions of dollars in funding to institutions that he does not like. Framed as an effort to eliminate inefficiency and woke ideology, his efforts have curbed financing for vital research. His hostility to foreign scientists, especially ethnic Chinese ones, is part of a more general assault on immigration. Talented people will either leave America or choose not to move there. China has already benefited .

The question is where this leaves the superpowers. In the short run, the advantage is surely with China. America and its allies cannot soon deprive it of its chokeholds. Should Mr Xi choose to throttle Taiwan, America and its allies may find that sanctions intended to force China to back off will trigger reprisals that cause more harm than their industries and citizens are willing to bear. That would have grave implications for East Asian security, and for America’s role in the western Pacific.

In the longer run, China’s dynamism could be stifled by its rigid politics. To see why, consider its economy . Factory-gate prices were 2.2% lower in November than a year earlier, and have declined for 38 months in a row. Property prices in the secondary market are more than 20% below their peak and still falling. Although the party has pledged to stimulate domestic demand next year, it will also double down on strategic manufacturing—the very thinking that has mired it in overcapacity.

By the end of 2026 that may seem like hubris. As provinces and cities struggle to pay down debt, stagnation could become even more entrenched, a bit like Japan’s lost decades. Deflation could worsen if countries unwilling to lose their own industries block more of China’s cut-price exports. Yet as Mr Xi prepares to start a fourth term in charge in 2027, his underlings seemingly cannot or will not challenge him.

In China the bigger the mistake, the less willing the party is to change course . By contrast, America has change built in—indeed MAGA’s bent for deregulation and its impatience with the suffocating effects of elite political correctness were examples of that principle in action. Whereas China is an ethno-nationalist state in which people who are not Han Chinese struggle to be accepted, America is founded on universal values that speak to every race and creed. These values have long made America a magnet for talent and enhanced its global influence. In the past they have also bound together its alliances.

In theory, all that should be the basis for renewal. However, Mr Trump scorns universal values as gimmicks exploited by cynical foreigners. Oppression does not shock him: he admires iron-fisted rulers, especially when they are also rich. As his recent National Security Strategy showed, MAGA sees ethnic and religious diversity as a threat, not a source of strength. If America is just one more ethno-nationalist project like Russia or China it will squander its greatest advantage.

Next summer America will mark the 250th anniversary of the Declaration of Independence. That should be the occasion for a debate about the republic’s founding principles. America’s economy remains the envy of the world. Nowhere else can mobilise ideas and capital on such a scale. Its people possess tremendous reserves of skill and enterprise.

Ideally, this would mean that the hopes of renewal will burn bright. The question is how much Mr Trump’s corruption of public life, his administration’s vindictiveness towards those in public service and his diminishment of Congress will dim America’s prospects. Mr Xi will be watching. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The consequences will ripple beyond the Middle East

Two months in, the Gaza ceasefire is floundering The consequences will ripple beyond the Middle East December 19th 2025 EVEN with a ceasefire in place, Gazans still fear death from the skies—but more from the weather now than Israeli jets. The winter storm that lashed the Palestinian territory in early December flooded thousands of tents, leaving families to endure long nights standing in frigid waters. At least four babies died of hypothermia.

Two months after it was signed, the deal is literally and figuratively sinking into the mud . Everyone knew it would be hard to move from the first phase to the second. The former stopped most of the fighting. The latter is more ambitious: Hamas will disarm, a new government will assume control and the enclave will be rebuilt.

It is unsurprising that these lofty goals have not been achieved. Hamas refuses to hand over its weapons, which precludes reconstruction and further Israeli withdrawal. What is more striking is that the world seems to have lost interest in spurring on peace.

Donald Trump has spent weeks hinting at big announcements about the “board of peace” that will oversee post-war Gaza. The announcements have not yet come, and may not until early 2026. No one has signed up for a planned peacekeeping mission, known as the international stabilisation force (ISF). Some officials in the region complain that they have not heard from the White House about Gaza since the October summit in Sharm el-Sheikh, where a peace plan was signed.

In recent weeks Mr Trump’s allies have instead focused on a scheme to build “planned communities” in the half of Gaza still under Israeli control. Each would house several thousand Palestinians and contain a clinic, a school and other services. The charitable view is that such hamlets would offer a model for how the rest of Gaza will be rebuilt.

A more realistic assessment is that they would become Potemkin villages. Each would shelter around 1% of Gaza’s population. Donor countries could slap their names on these communities and tout them as accomplishments. But they would offer no succour to the larger number of Gazans stuck on the other side of the ceasefire line. Rebuilding only the near-deserted, occupied half of Gaza would be a tacit admission that Mr Trump’s plan has stalled. That would be a tragedy.

Most obviously, a lack of progress towards phase two will prolong the misery of 2m Gazans. Hunger has abated, but there is more to life than food. Delay helps Hamas, which has reasserted control over the half of Gaza not in Israeli hands. With no alternative on offer, it is the only game in town. It will strain Israel’s relationship with Egypt as well. Diplomats in Cairo worry that the miserable conditions in Gaza will drive a growing number of refugees across the border.

America and its allies need to move faster. Mr Trump should appoint both a board and the Palestinian technocrats who will oversee Gaza on the ground. Countries in the region should get off the fence and decide how they will support the ISF, reconstruction or both.

This newspaper has argued that the promise of rebuilding is a powerful tool to convince Hamas to disarm. That remains true. But Gaza deserves far more help than it is getting. Roads must be cleared of rubble to let aid get through. Gazans need caravans, sturdy tents and other shelters, as well as medical care. Mr Trump should insist that Israel allow foreign media into the enclave independently. If the plight of Gazans has slipped down the global agenda, first-hand accounts would push it back up.

Progress on the ceasefire plan will not only help Palestinians and Israelis. It is also a test of Mr Trump’s ability to honour ambitious but ill-defined agreements. If the Gaza deal turns out to be a worthless piece of paper, that will bode poorly for the peace deals he is trying to negotiate elsewhere—not least in Ukraine. America’s credibility is on the line. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Which country improved the most this year?

The Economist’s country of the year for 2025 Which country improved the most this year? December 19th 2025 Each Christmas The Economist names a country of the year. Not the happiest: that would nearly always be Scandinavian, making for a dull, predictable contest. Nor the most influential: that would always be a superpower. Rather, we try to identify the country that has improved the most, whether economically, politically or in any other way that matters.

The year was a turbulent one, with President Donald Trump disrupting global trade and horrific conflicts scarring places such as Gaza and Sudan. But several countries navigated choppy waters well. Canada elected a sober technocrat as prime minister, rather than a populist, and stood up to American bullying. Voters in Moldova rejected a pro-Russian party despite threats and disinformation from Moscow. Mr Trump brokered a shaky truce between Israel and the Palestinians.

South Korea recovered from a serious threat to its democracy. A year ago President Yoon Suk Yeol tried to impose martial law, sending troops to shut down parliament. But lawmakers, protesters and institutions held firm , and this year the disgraced ex-president was put on trial for insurrection.

Another exemplar of how to deal with violent attempts to upend the constitutional order was Brazil. In September a Brazilian court i mposed a 27-year jail term on Jair Bolsonaro , a former president who lost an election in 2022, claimed he was cheated and tried to mount a coup to stay in power. Brazil was plagued by coups for much of the 20th century; this is the first time a putschist has been suitably punished. The government also managed in 2025 to slow the pace of deforestation in the Amazon, thus doing its bit to slow climate change. However, its Kremlin-cuddling foreign policy badly blotted its record.

The two strongest contenders this year are very different: Argentina and Syria. Argentina’s improvement has been economic. Its president, Javier Milei, began far-reaching free-market reforms in 2023, hoping to jolt his country out of more than a century of statism and stagnation. Such reforms—abolishing price controls, curbing spending and ditching distorting subsidies—are exceptionally hard because they are exceptionally painful; many previous reformers have failed. Yet Mr Milei stuck to his chainsaw in 2025, and voters stuck with him. So did America, offering a $20bn lifeline to avert a financial crisis. The results have been impressive. Inflation has fallen from 211% in 2023 to around 30% now. The poverty rate is down by 21 percentage points since last year. The budget has been wrestled under control. Mr Milei has moved towards a floating peso , and removed most capital controls.

Argentina could still fail. The Peronists who misruled it for generations are itching to return, should Mr Milei stumble. And the president has many flaws: he is intolerant of critics and beset by corruption scandals. But if his reforms are sustained, they could permanently alter Argentina’s trajectory—and give hope to economic reformers everywhere.

Syria’s improvement , by contrast, has been political. Little more than a year ago it was ruled by Bashar al-Assad, an odious dictator backed by Iran and Russia. His jails were stuffed with political prisoners, and dissent was punished with torture or death. Thirteen years of civil war had claimed more than half a million lives. Mr Assad’s forces had used chemical weapons and barrel bombs indiscriminately on civilians. More than 6m people had fled from the country.

Then, in early December 2024, the tyrant was himself forced to flee as rebels seized power. When we were choosing that year’s country of the year, it was too soon to have an idea of how the new Syria might look. Its ruler, Ahmed al-Sharaa, was a jihadist. Many feared he would impose a grim Islamist theocracy, or that Syria would collapse into chaos. In fact, neither has happened. Women are not obliged to cover up or stay at home. Entertainment and, yes, alcohol are allowed. Mr Sharaa has brought about a series of positive surprises, holding the country together and forging good relations with America and the Gulf states. As Western sanctions are relaxed, the economy is starting to recover, too.

Huge problems remain. Militias carried out two atrocious local massacres of minorities, in which 2,000 people died. Mr Sharaa rules in a clannish way, and in such a fragile country much could still go wrong.

Nonetheless, Syria in 2025 is far happier and more peaceful than it was in 2024. Fear is no longer universal. Life is not easy, but it is more or less normal for most people. Voting with their feet, some 3m Syrians have returned home. Our choice goes to Syria, too. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

All three have suffered the curse of overnight success

What Novo Nordisk, OpenAI and Pop Mart have in common All three have suffered the curse of overnight success December 19th 2025 Every chief executive dreams of it: a product so successful that it propels their company from obscurity to superstardom seemingly overnight. Among the lessons from 2025, however, is that runaway success is not all upside. As the experience of whizzy chatbots, weight-loss jabs and wacky dolls illustrates, it brings problems, too.

The first pitfall is that bosses face the vexed task of scaling up their business to satisfy a level of demand that is impossible to predict. Consider OpenAI, maker of ChatGPT, a product so successful it has precipitated an investment frenzy not seen for a generation. According to OpenAI, around a tenth of the world’s population now uses its chatbot. The firm reckons that its yearly revenue will reach roughly $200bn by 2030, ten times its current annualised rate. In response, it has committed to $1.4trn of spending on computing power over the coming years, including through a series of circular deals funded by the recipients of its largesse. Growth of the sort that OpenAI is projecting has not been seen before. If it falls short, the firm will probably go broke, bringing the artificial-intelligence boom to a grinding halt.

Yet underinvestment also brings problems beyond the failure to take full advantage of surging demand. A particular danger is the rise of shadow markets—the second pitfall of overnight success—which can cause lasting trouble for businesses. Take Novo Nordisk , the Danish pioneer of weight-loss jabs. Because it was slow to ramp up its manufacturing capacity to satisfy the voracious appetite for Wegovy, “compounding” pharmacies, which in America are permitted to offer replicas of drugs that are in shortage, were able to muscle in. Although the shortage ended in February, around 1m Americans still take the copycats—which are cheaper but, according to Novo, less safe—as compounders have used loopholes to keep producing them.

Pop Mart , the Chinese firm behind the mischievously grinning, nine-toothed Labubu dolls that shoppers have queued up to buy this year, has faced similar trouble. Although it has increased production, it is battling a scourge of fake eight- or ten-toothed Lafufus that have flooded online marketplaces.

The final pitfall of overnight success is that it attracts legitimate competitors who can learn from both your triumphs and disasters. Call it the first-mover disadvantage. Eli Lilly, which brought its own weight-loss jab, Zepbound, to Americans two years after Novo, has this year pulled ahead of its Danish rival in the market for obesity drugs. That is partly because Zepbound is more effective. But Lilly also learned from Novo that it needed to have ample supply in place and offer its treatment directly to consumers, many of whom would rather not have to visit the doctor for a prescription, and are not covered for one by their insurers.

Similarly, OpenAI’s success inspired competitors that were able to learn from its breakthroughs before it had time to entrench itself with customers. The first shock came in January, when DeepSeek, a Chinese AI lab, launched a cutting-edge model it had developed on a shoestring, which it made freely available. More recently, OpenAI has been threatened by Google, which was mobilised into action by the success of ChatGPT and last month launched a model that is neck and neck with OpenAI’s best. With its vertically integrated business model , deep pockets and established distribution channels—including nearly 4bn Android users worldwide—Google now looks like the AI company to beat.

The wider lesson from all this is that hit products rarely lead to enduring commercial success. Instead, consider two of 2025’s quiet achievers. Walmart, America’s mightiest retailer, has seen its market value soar to nearly $1trn without fanfare. Its enormous scale, which it uses to push down costs and pass the savings on to customers, has won over many stretched shoppers this year. Plenty of them will also have been struck by the retailer’s digital reinvention. Look, too, at CATL , China’s battery colossus, whose secondary listing in Hong Kong in May was the largest share offering worldwide in 2025. Its hefty investment in research and development has given it a commanding lead. It is using that strength to expand into batteries for the grid.

Bosses should take heed. A hit product can bring a company to the attention of millions. But lasting success comes from a business model that is difficult to replicate, and which keeps evolving in a fast-changing world. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Drink slowly, eat cake and remember that fun is good for you, too

Your Well Informed guide to surviving Christmas Drink slowly, eat cake and remember that fun is good for you, too December 19th 2025 Since the start of 2025 our Well Informed column has brought you evidence-based advice on health and well-being. After reading hundreds of studies on everything from the benefits of red-light masks to whether or not butter is good for you, what have we learned about how to cope with the perils of Yuletide feasting? Here is your guide.

Start with alcohol. Try to be young, since young people tend to be leaner and so can absorb alcohol more efficiently. If, by some oversight, you are not young, make sure that you started strength training several months ago in preparation for Christmas indulgence, to build up muscle mass. Muscle tissue contains a lot of water and, because alcohol is soluble in water, less muscle means uncomfortable jumps in the levels of blood alcohol. It also means worse hangovers.

If age and regular strength training are not on your side, then science still has some tips for you. Choose your drinks wisely —clearer drinks, such as gin or vodka, are preferable to darker ones such as whisky or red wine. The “congeners” that accompany ethanol in darker spirits can make the after-effects of your tipple much worse.

Sip your drinks, rather than gulping, to avoid nauseating jumps in blood-alcohol levels. Alternate booze with water or, if you really want to optimise your session, sports drinks or coconut water. These contain electrolytes that will not only keep your body hydrated and its pH balanced, but also keep your nervous system firing on all cylinders. Remember that some of alcohol’s worst effects are compounded by what it does to your sleep patterns—it disrupts brain chemicals such as GABA and melatonin; it exacerbates snoring by relaxing your throat muscles—so stop drinking well before you fall into bed.

Festive food can be another hazard of the holidays. Perhaps you cannot resist the temptation to stuff yourself with roast turkey and potatoes. But you can ease the damage by dropping in handfuls of almonds, oats or apples. Regularly eating foods like these, containing beneficial plant proteins and lots of viscous fibre, has been shown in clinical trials to block the absorption of cholesterol in the gut by nearly 30% over the course of a month, similar to the effect of taking statins.

And what about sugar? No one type is better than the other . But eating sugar alongside fats, protein and fibre helps prevent glucose spikes in the blood. It is the crashes after these spikes that can lead to sudden hunger and the desire to overeat (dangerous when there are so many tubs of sweets lying around). Avoid fruit juice, which can be full of sugar, and eat the fruit instead, which helpfully has lots of fibre. If you can’t find fruit, fruitcake will do. So ditch the Buck’s fizz and help yourself to Christmas cake.

Mental health matters, too. As we explain in one of our Christmas features, though alcohol is a poison, it can have psychological upsides. By stimulating the brain’s reward and endorphin system, it can make people feel more sociable and less anxious, for a while. Over the past 10m years, booze has strengthened bonds within groups and perhaps shaped human civilisation. In the next couple of weeks, it will make countless parties more convivial. This is not something to say “Bah, humbug!” to. As another feature describes, loneliness is bad for you .

Heavy drinking is of course dangerous. But light quaffing involves trading off a statistically small risk of harm for the tangible benefits of fun, relaxation and social connection. So we recommend drinking and eating to celebrate, commiserate or meet new friends. Most important, take everything in moderation, including moderation itself. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

With your help, the Economist Educational Foundation can teach children to think critically

How the young can make sense of the news With your help, the Economist Educational Foundation can teach children to think critically December 19th 2025 It is not normal to hear pupils groan when the bell rings at the end of a lesson. But Marc Ditomasso is not a normal teacher. He is the rare kind who can high-five pupils as he walks through the lunch room. In the classroom, he has an easy-going vibe, too—they call him by his nickname, “Mr Di”.

The pupils are at the Martha Ellen Stilwell School of the Arts in Clayton County, Georgia—close enough to Atlanta airport that some of their parents work there, but far enough from economic opportunity that some have never taken a flight. The topic is a lesson produced by the Economist Educational Foundation , an independent charity backed by The Economist: gun and knife crime. It is not abstract; schools in Clayton County have signs at the entrance saying they are “weapon-free” and “gang-free”. So when Mr Di encourages the pupils to talk about it, they open up.

Opinions are divided. Some children argue, from first-hand experience, that if the streets are unsafe, more police are needed. After all, don’t drivers who are speeding always slow down when they see a cop car? Others argue, with equal conviction, that what young people in deprived areas need are more youth centres, to provide role models and activities that keep them off the streets. They listen to each other without shouting anyone down.

It is rare these days to hear clashing views voiced without rancour. And the problem goes beyond America. In England discussion about political literacy has become so touchy that only about 1% of teachers feel fully prepared to try it in class.

That is why the Foundation takes topical questions and turns them into lessons, to spur discussions such as those in Mr Di’s classroom. The aim is give teachers all the facts they need to start a vibrant debate, encouraging young people to think critically and disagree agreeably.

The Foundation was set up in 2012 by staff from The Economist Group. Since that time, misinformation has proliferated. Young people get most of their information from social-media apps that algorithmically prioritise shocking, rather than accurate or reasoned, content. Many lack the critical-thinking skills and media literacy to deal with it, especially when they outsource their thinking to artificial intelligence (AI). Some feel overwhelmed by the volume of news they receive and so shun news entirely. None of this is good for democracy. Without well-informed citizens capable of engaging in constructive dialogue about complex issues, demagoguery—of the right and left—can thrive.

The charity produces new lessons each week that are edited and fact-checked by Economist journalists, to encourage young people to think about the news, evaluate sources of information and listen to each other’s views—rather than the teacher’s. The lessons go much further than politics.

Enter a classroom at Greig City Academy, a state school in Haringey, north London, and the cheeky hubbub of pre-adolescence is instantly recognisable. Some boys, ties loose, are badgering their teacher, Linda Jack, to be allowed to run errands for her. Girls chatter in groups. “Shush, inside voices, please,” Ms Jack intones.

Then she puts up a slide on the board provided by the Foundation’s flagship programme, Topical Talk, and the pupils snap to attention. The slide shows three types of trainers: a Nike Air Jordan, which costs $100; one with a made-up logo “Aire”, costing $70; a third with no logo, costing $50. During an hour-long lesson the children huddle in groups to discuss premium goods, counterfeit ones and “dupes”. It’s a topic they intuitively grasp; many are from families tantalised by the status symbol of luxury goods they cannot afford. “People with big egos don’t care about the quality. They just want the Gucci bag!” blurts out a pupil, making her schoolmates laugh.

They are only ten-to-11-year-olds, yet as they talk the lesson encourages them to grapple with quandaries, such as whether it is right to copy a designer’s idea, and are dupes a fair way to make costly styles available to everyone? Their conversations range from ethics to tariffs. Many of them, says Ms Jack afterwards, come from “language-poor” families where such discussions rarely take place. She is stunned by the impact. “I was beginning to lose my mojo. Now I’m totally reinvigorated.”

The Foundation is growing fast. In 2025 it reached more than 500,000 young people, up from 231,000 in 2024. It supports 10,800 teachers in 86 countries, providing them with topics for discussion from prison reform to AI to women and girls in Afghanistan. By the end of 2026 it aims to reach 1m schoolchildren, with an emphasis on those from low-income backgrounds.

A glimpse of what is possible can be had in Clayton County, where the school district has a deep partnership with the Economist Educational Foundation. After three years it encompasses more than 2,000 students and over 100 teachers, and is embedded in the gifted classes across the county’s 39 elementary schools. Tim Guiney, chief academic officer for secondary schools, says that although the county has a high number of pupils from economically disadvantaged families, the aim is to empower them to compete one day on a global stage. “In a perfect world, if we had lots of money, we’d love to expand our reach,” he says.

Visit Huie Elementary School within the school district and you see both the need and the potential. Within Clayton County, few schools have more children from homeless families, says its principal, Arlando Dawson. Yet its nine-to-ten-year-old gifted students are fizzing with excitement at the start of a Topical Talk lesson. Their task is to form groups and come up with as many recent news stories as they can think of in 60 seconds. They suggest some obviously false clickbait (bubonic plague in China) but also serious topics, such as the deportation of migrants and the 20th anniversary of Hurricane Katrina.

This lesson asks the youngsters to discuss how different types of news make them feel. They note that bad news predominates, but at least discussing it in class helps them “share the load”, as one boy puts it movingly.

The children find the lessons so stimulating that often they carry on researching the topics at home. One girl said she was inspired by a topic about female astronauts. “Showing women that being in the space industry isn’t just a man’s job felt close to me,” she says.

Teachers find it a relief from the daily grind, too. As one put it after their first Topical Talk class: “It is not often that I go home feeling like today was one of the best days in my teaching career. Today is one of those days.” The lessons are crafted to ensure that teachers do not share their own political opinions. Instead, they encourage pupils to learn from each other.

Topical Talk is more than just a weekly class. Once a year for seven weeks, students from across the globe take part in the Topical Talk Festival. They listen to experts (who in 2025 included an astronaut, an AI entrepreneur and a war correspondent), and discuss meaty topics with students from other countries.

Mamdouh, a 12-year-old pupil from Ormiston Sir Stanley Matthews Academy, Stoke-on-Trent, took part in a recent Festival discussion about Syria, his home country. Initially, he was surprised at how few of the pupils knew about Syria. But as he spoke, they became curious about how the war had affected him and his family. “Once I explained, they got a real sense of it. I think that helped them talk a bit more respectfully and morally. I felt proud. They were actually talking about it, and they were talking about the right thing, focusing on facts instead of the propaganda I’d seen on some news channels before 2024.”

The “Leadership for Change” prize, supported by Rolex, explores one topic in even greater depth. This year, pupils are asked to become “news decoders”; they’ll develop critical thinking, creative problem-solving and media-literacy skills to navigate through fake news and polarisation. With it comes the chance to win up to £1,000 plus mentorship.

The Economist Educational Foundation finds that pupils who take part in Topical Talk discussions regularly make, on average, seven times the progress of peers outside the programme when it comes to critical thinking and communication. But its ability to shape individual lives may be even greater.

Take Aidan Incagnoli, an early beneficiary. From the age of 11 in 2014, at Skinners Kent Academy in England, he took part in the first iteration of Topical Talk, a school gathering then called the Burnet News Club after the late Sir Alastair Burnet, a former editor of The Economist.

Among his classmates, Mr Incagnoli says, the dominant mood when it came to discussing current affairs was apathy. Yet each week, an impassioned few had a chance to gather at school to thrash out fraught topics such as political polarisation. The arguments would continue as they walked home. Yet they learned to listen to each other—and some have remained close friends ever since.

Mr Incagnoli has since lived in America. While studying at Cornell University, he interned at the House of Representatives. His ambition is to have a career in public service. The Foundation, he says, first taught him to be comfortable speaking in front of a room full of people. He learned “to put up my hand and ask a question, to ask it with respect for the person I was addressing, and if I made a point that contradicted theirs, make it with respect and confidence”.

In an age of polarisation and fake news, many children struggle to make sense of their world. The Economist Educational Foundation helps them acquire the skills to do so calmly and rationally. ■

It was a good year for Xi Jinping

China proved its strengths in 2025—and Donald Trump helped It was a good year for Xi Jinping December 18th 2025 THE BIG noise in 2025 has been President Donald Trump. Launching a barrage of executive orders, he directed his fire at target after target. With the aid of Elon Musk, he attempted to dismantle the federal bureaucracy. On “Liberation Day” he rewrote the rules of trade. Around the world he imposed peace and threatened war.

However, the big beneficiary has been President Xi Jinping. This year China defied Mr Trump’s attempt to use tariffs to force a show of submission. By turning the tables, Mr Xi revealed just how much America actually depends on his policies. In this round of the superpowers’ fight for 21st-century supremacy, it was a victory for China.

This year showed the power of China’s industrial chokeholds. China’s share of the world’s manufacturing value added exceeds one-third, giving it the power to disrupt global supply chains overnight. In green technology, Chinese firms supply the materials, components and finished goods for 60-80% of solar panels, wind turbines and electric vehicles. DeepSeek showed what China can do in artificial intelligence, despite America’s best efforts to hobble it. China’s drug firms now run nearly as many clinical trials as their American peers—and do them faster. Two decades ago Western firms invested in China to take advantage of its cheap producers and huge market. Today they build laboratories there.

In 2025 Mr Xi showed he is willing to use China’s dominance as not just a source of wealth, but of power. His restrictions on rare-earth exports are one example of how China can use other countries’ dependency as a weapon. Findings this month from the Australian Strategic Policy Institute show that China leads in research in 66 of 74 fields, measured by its share of key scientific papers. These include over two dozen areas, such as computer vision and grid integration, where it has a chokehold.

The extraordinary thing is that Mr Trump has played into Mr Xi’s hands, both with his tariffs abroad and his wrecking-ball at home. Choosing bilateral tariffs as a way to inflict pain on China was a mistake. Partly because Chinese firms are used to harsh conditions and partly because China is not a democracy, its economy is better at enduring pain than America’s. Mr Trump could instead have co-ordinated a commercial encirclement of China by integrating more deeply with America’s allies. Foolishly, he preferred to alienate them with tariffs.

Likewise, Mr Trump’s attack on science will impede American innovation. He has targeted researchers, cancelling grants and withholding billions of dollars in funding to institutions that he does not like. Framed as an effort to eliminate inefficiency and woke ideology, his efforts have curbed financing for vital research. His hostility to foreign scientists, especially ethnic Chinese ones, is part of a more general assault on immigration. Talented people will either leave America or choose not to move there. China has already benefited .

The question is where this leaves the superpowers. In the short run, the advantage is surely with China. America and its allies cannot soon deprive it of its chokeholds. Should Mr Xi choose to throttle Taiwan, America and its allies may find that sanctions intended to force China to back off will trigger reprisals that cause more harm than their industries and citizens are willing to bear. That would have grave implications for East Asian security, and for America’s role in the western Pacific.

In the longer run, China’s dynamism could be stifled by its rigid politics. To see why, consider its economy . Factory-gate prices were 2.2% lower in November than a year earlier, and have declined for 38 months in a row. Property prices in the secondary market are more than 20% below their peak and still falling. Although the party has pledged to stimulate domestic demand next year, it will also double down on strategic manufacturing—the very thinking that has mired it in overcapacity.

By the end of 2026 that may seem like hubris. As provinces and cities struggle to pay down debt, stagnation could become even more entrenched, a bit like Japan’s lost decades. Deflation could worsen if countries unwilling to lose their own industries block more of China’s cut-price exports. Yet as Mr Xi prepares to start a fourth term in charge in 2027, his underlings seemingly cannot or will not challenge him.

In China the bigger the mistake, the less willing the party is to change course . By contrast, America has change built in—indeed MAGA’s bent for deregulation and its impatience with the suffocating effects of elite political correctness were examples of that principle in action. Whereas China is an ethno-nationalist state in which people who are not Han Chinese struggle to be accepted, America is founded on universal values that speak to every race and creed. These values have long made America a magnet for talent and enhanced its global influence. In the past they have also bound together its alliances.

In theory, all that should be the basis for renewal. However, Mr Trump scorns universal values as gimmicks exploited by cynical foreigners. Oppression does not shock him: he admires iron-fisted rulers, especially when they are also rich. As his recent National Security Strategy showed, MAGA sees ethnic and religious diversity as a threat, not a source of strength. If America is just one more ethno-nationalist project like Russia or China it will squander its greatest advantage.

Next summer America will mark the 250th anniversary of the Declaration of Independence. That should be the occasion for a debate about the republic’s founding principles. America’s economy remains the envy of the world. Nowhere else can mobilise ideas and capital on such a scale. Its people possess tremendous reserves of skill and enterprise.

Ideally, this would mean that the hopes of renewal will burn bright. The question is how much Mr Trump’s corruption of public life, his administration’s vindictiveness towards those in public service and his diminishment of Congress will dim America’s prospects. Mr Xi will be watching. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The consequences will ripple beyond the Middle East

Two months in, the Gaza ceasefire is floundering The consequences will ripple beyond the Middle East December 18th 2025 EVEN with a ceasefire in place, Gazans still fear death from the skies—but more from the weather now than Israeli jets. The winter storm that lashed the Palestinian territory in early December flooded thousands of tents, leaving families to endure long nights standing in frigid waters. At least four babies died of hypothermia.

Two months after it was signed, the deal is literally and figuratively sinking into the mud . Everyone knew it would be hard to move from the first phase to the second. The former stopped most of the fighting. The latter is more ambitious: Hamas will disarm, a new government will assume control and the enclave will be rebuilt.

It is unsurprising that these lofty goals have not been achieved. Hamas refuses to hand over its weapons, which precludes reconstruction and further Israeli withdrawal. What is more striking is that the world seems to have lost interest in spurring on peace.

Donald Trump has spent weeks hinting at big announcements about the “board of peace” that will oversee post-war Gaza. The announcements have not yet come, and may not until early 2026. No one has signed up for a planned peacekeeping mission, known as the international stabilisation force (ISF). Some officials in the region complain that they have not heard from the White House about Gaza since the October summit in Sharm el-Sheikh, where a peace plan was signed.

In recent weeks Mr Trump’s allies have instead focused on a scheme to build “planned communities” in the half of Gaza still under Israeli control. Each would house several thousand Palestinians and contain a clinic, a school and other services. The charitable view is that such hamlets would offer a model for how the rest of Gaza will be rebuilt.

A more realistic assessment is that they would become Potemkin villages. Each would shelter around 1% of Gaza’s population. Donor countries could slap their names on these communities and tout them as accomplishments. But they would offer no succour to the larger number of Gazans stuck on the other side of the ceasefire line. Rebuilding only the near-deserted, occupied half of Gaza would be a tacit admission that Mr Trump’s plan has stalled. That would be a tragedy.

Most obviously, a lack of progress towards phase two will prolong the misery of 2m Gazans. Hunger has abated, but there is more to life than food. Delay helps Hamas, which has reasserted control over the half of Gaza not in Israeli hands. With no alternative on offer, it is the only game in town. It will strain Israel’s relationship with Egypt as well. Diplomats in Cairo worry that the miserable conditions in Gaza will drive a growing number of refugees across the border.

America and its allies need to move faster. Mr Trump should appoint both a board and the Palestinian technocrats who will oversee Gaza on the ground. Countries in the region should get off the fence and decide how they will support the ISF, reconstruction or both.

This newspaper has argued that the promise of rebuilding is a powerful tool to convince Hamas to disarm. That remains true. But Gaza deserves far more help than it is getting. Roads must be cleared of rubble to let aid get through. Gazans need caravans, sturdy tents and other shelters, as well as medical care. Mr Trump should insist that Israel allow foreign media into the enclave independently. If the plight of Gazans has slipped down the global agenda, first-hand accounts would push it back up.

Progress on the ceasefire plan will not only help Palestinians and Israelis. It is also a test of Mr Trump’s ability to honour ambitious but ill-defined agreements. If the Gaza deal turns out to be a worthless piece of paper, that will bode poorly for the peace deals he is trying to negotiate elsewhere—not least in Ukraine. America’s credibility is on the line. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Which country improved the most this year?

The Economist’s country of the year for 2025 Which country improved the most this year? December 18th 2025 Each Christmas The Economist names a country of the year. Not the happiest: that would nearly always be Scandinavian, making for a dull, predictable contest. Nor the most influential: that would always be a superpower. Rather, we try to identify the country that has improved the most, whether economically, politically or in any other way that matters.

The year was a turbulent one, with President Donald Trump disrupting global trade and horrific conflicts scarring places such as Gaza and Sudan. But several countries navigated choppy waters well. Canada elected a sober technocrat as prime minister, rather than a populist, and stood up to American bullying. Voters in Moldova rejected a pro-Russian party despite threats and disinformation from Moscow. Mr Trump brokered a shaky truce between Israel and the Palestinians.

South Korea recovered from a serious threat to its democracy. A year ago President Yoon Suk Yeol tried to impose martial law, sending troops to shut down parliament. But lawmakers, protesters and institutions held firm , and this year the disgraced ex-president was put on trial for insurrection.

Another exemplar of how to deal with violent attempts to upend the constitutional order was Brazil. In September a Brazilian court i mposed a 27-year jail term on Jair Bolsonaro , a former president who lost an election in 2022, claimed he was cheated and tried to mount a coup to stay in power. Brazil was plagued by coups for much of the 20th century; this is the first time a putschist has been suitably punished. The government also managed in 2025 to slow the pace of deforestation in the Amazon, thus doing its bit to slow climate change. However, its Kremlin-cuddling foreign policy badly blotted its record.

The two strongest contenders this year are very different: Argentina and Syria. Argentina’s improvement has been economic. Its president, Javier Milei, began far-reaching free-market reforms in 2023, hoping to jolt his country out of more than a century of statism and stagnation. Such reforms—abolishing price controls, curbing spending and ditching distorting subsidies—are exceptionally hard because they are exceptionally painful; many previous reformers have failed. Yet Mr Milei stuck to his chainsaw in 2025, and voters stuck with him. So did America, offering a $20bn lifeline to avert a financial crisis. The results have been impressive. Inflation has fallen from 211% in 2023 to around 30% now. The poverty rate is down by 21 percentage points since last year. The budget has been wrestled under control. Mr Milei has moved towards a floating peso , and removed most capital controls.

Argentina could still fail. The Peronists who misruled it for generations are itching to return, should Mr Milei stumble. And the president has many flaws: he is intolerant of critics and beset by corruption scandals. But if his reforms are sustained, they could permanently alter Argentina’s trajectory—and give hope to economic reformers everywhere.

Syria’s improvement , by contrast, has been political. Little more than a year ago it was ruled by Bashar al-Assad, an odious dictator backed by Iran and Russia. His jails were stuffed with political prisoners, and dissent was punished with torture or death. Thirteen years of civil war had claimed more than half a million lives. Mr Assad’s forces had used chemical weapons and barrel bombs indiscriminately on civilians. More than 6m people had fled from the country.

Then, in early December 2024, the tyrant was himself forced to flee as rebels seized power. When we were choosing that year’s country of the year, it was too soon to have an idea of how the new Syria might look. Its ruler, Ahmed al-Sharaa, was a jihadist. Many feared he would impose a grim Islamist theocracy, or that Syria would collapse into chaos. In fact, neither has happened. Women are not obliged to cover up or stay at home. Entertainment and, yes, alcohol are allowed. Mr Sharaa has brought about a series of positive surprises, holding the country together and forging good relations with America and the Gulf states. As Western sanctions are relaxed, the economy is starting to recover, too.

Huge problems remain. Militias carried out two atrocious local massacres of minorities, in which 2,000 people died. Mr Sharaa rules in a clannish way, and in such a fragile country much could still go wrong.

Nonetheless, Syria in 2025 is far happier and more peaceful than it was in 2024. Fear is no longer universal. Life is not easy, but it is more or less normal for most people. Voting with their feet, some 3m Syrians have returned home. Our choice goes to Syria, too. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

All three have suffered the curse of overnight success

What Novo Nordisk, OpenAI and Pop Mart have in common All three have suffered the curse of overnight success December 18th 2025 Every chief executive dreams of it: a product so successful that it propels their company from obscurity to superstardom seemingly overnight. Among the lessons from 2025, however, is that runaway success is not all upside. As the experience of whizzy chatbots, weight-loss jabs and wacky dolls illustrates, it brings problems, too.

The first pitfall is that bosses face the vexed task of scaling up their business to satisfy a level of demand that is impossible to predict. Consider OpenAI, maker of ChatGPT, a product so successful it has precipitated an investment frenzy not seen for a generation. According to OpenAI, around a tenth of the world’s population now uses its chatbot. The firm reckons that its yearly revenue will reach roughly $200bn by 2030, ten times its current annualised rate. In response, it has committed to $1.4trn of spending on computing power over the coming years, including through a series of circular deals funded by the recipients of its largesse. Growth of the sort that OpenAI is projecting has not been seen before. If it falls short, the firm will probably go broke, bringing the artificial-intelligence boom to a grinding halt.

Yet underinvestment also brings problems beyond the failure to take full advantage of surging demand. A particular danger is the rise of shadow markets—the second pitfall of overnight success—which can cause lasting trouble for businesses. Take Novo Nordisk , the Danish pioneer of weight-loss jabs. Because it was slow to ramp up its manufacturing capacity to satisfy the voracious appetite for Wegovy, “compounding” pharmacies, which in America are permitted to offer replicas of drugs that are in shortage, were able to muscle in. Although the shortage ended in February, around 1m Americans still take the copycats—which are cheaper but, according to Novo, less safe—as compounders have used loopholes to keep producing them.

Pop Mart , the Chinese firm behind the mischievously grinning, nine-toothed Labubu dolls that shoppers have queued up to buy this year, has faced similar trouble. Although it has increased production, it is battling a scourge of fake eight- or ten-toothed Lafufus that have flooded online marketplaces.

The final pitfall of overnight success is that it attracts legitimate competitors who can learn from both your triumphs and disasters. Call it the first-mover disadvantage. Eli Lilly, which brought its own weight-loss jab, Zepbound, to Americans two years after Novo, has this year pulled ahead of its Danish rival in the market for obesity drugs. That is partly because Zepbound is more effective. But Lilly also learned from Novo that it needed to have ample supply in place and offer its treatment directly to consumers, many of whom would rather not have to visit the doctor for a prescription, and are not covered for one by their insurers.

Similarly, OpenAI’s success inspired competitors that were able to learn from its breakthroughs before it had time to entrench itself with customers. The first shock came in January, when DeepSeek, a Chinese AI lab, launched a cutting-edge model it had developed on a shoestring, which it made freely available. More recently, OpenAI has been threatened by Google, which was mobilised into action by the success of ChatGPT and last month launched a model that is neck and neck with OpenAI’s best. With its vertically integrated business model , deep pockets and established distribution channels—including nearly 4bn Android users worldwide—Google now looks like the AI company to beat.

The wider lesson from all this is that hit products rarely lead to enduring commercial success. Instead, consider two of 2025’s quiet achievers. Walmart, America’s mightiest retailer, has seen its market value soar to nearly $1trn without fanfare. Its enormous scale, which it uses to push down costs and pass the savings on to customers, has won over many stretched shoppers this year. Plenty of them will also have been struck by the retailer’s digital reinvention. Look, too, at CATL , China’s battery colossus, whose secondary listing in Hong Kong in May was the largest share offering worldwide in 2025. Its hefty investment in research and development has given it a commanding lead. It is using that strength to expand into batteries for the grid.

Bosses should take heed. A hit product can bring a company to the attention of millions. But lasting success comes from a business model that is difficult to replicate, and which keeps evolving in a fast-changing world. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Drink slowly, eat cake and remember that fun is good for you, too

Your Well Informed guide to surviving Christmas Drink slowly, eat cake and remember that fun is good for you, too December 18th 2025 Since the start of 2025 our Well Informed column has brought you evidence-based advice on health and well-being. After reading hundreds of studies on everything from the benefits of red-light masks to whether or not butter is good for you, what have we learned about how to cope with the perils of Yuletide feasting? Here is your guide.

Start with alcohol. Try to be young, since young people tend to be leaner and so can absorb alcohol more efficiently. If, by some oversight, you are not young, make sure that you started strength training several months ago in preparation for Christmas indulgence, to build up muscle mass. Muscle tissue contains a lot of water and, because alcohol is soluble in water, less muscle means uncomfortable jumps in the levels of blood alcohol. It also means worse hangovers.

If age and regular strength training are not on your side, then science still has some tips for you. Choose your drinks wisely —clearer drinks, such as gin or vodka, are preferable to darker ones such as whisky or red wine. The “congeners” that accompany ethanol in darker spirits can make the after-effects of your tipple much worse.

Sip your drinks, rather than gulping, to avoid nauseating jumps in blood-alcohol levels. Alternate booze with water or, if you really want to optimise your session, sports drinks or coconut water. These contain electrolytes that will not only keep your body hydrated and its pH balanced, but also keep your nervous system firing on all cylinders. Remember that some of alcohol’s worst effects are compounded by what it does to your sleep patterns—it disrupts brain chemicals such as GABA and melatonin; it exacerbates snoring by relaxing your throat muscles—so stop drinking well before you fall into bed.

Festive food can be another hazard of the holidays. Perhaps you cannot resist the temptation to stuff yourself with roast turkey and potatoes. But you can ease the damage by dropping in handfuls of almonds, oats or apples. Regularly eating foods like these, containing beneficial plant proteins and lots of viscous fibre, has been shown in clinical trials to block the absorption of cholesterol in the gut by nearly 30% over the course of a month, similar to the effect of taking statins.

And what about sugar? No one type is better than the other . But eating sugar alongside fats, protein and fibre helps prevent glucose spikes in the blood. It is the crashes after these spikes that can lead to sudden hunger and the desire to overeat (dangerous when there are so many tubs of sweets lying around). Avoid fruit juice, which can be full of sugar, and eat the fruit instead, which helpfully has lots of fibre. If you can’t find fruit, fruitcake will do. So ditch the Buck’s fizz and help yourself to Christmas cake.

Mental health matters, too. As we explain in one of our Christmas features, though alcohol is a poison, it can have psychological upsides. By stimulating the brain’s reward and endorphin system, it can make people feel more sociable and less anxious, for a while. Over the past 10m years, booze has strengthened bonds within groups and perhaps shaped human civilisation. In the next couple of weeks, it will make countless parties more convivial. This is not something to say “Bah, humbug!” to. As another feature describes, loneliness is bad for you .

Heavy drinking is of course dangerous. But light quaffing involves trading off a statistically small risk of harm for the tangible benefits of fun, relaxation and social connection. So we recommend drinking and eating to celebrate, commiserate or meet new friends. Most important, take everything in moderation, including moderation itself. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Apocalyptic warnings by mainstream politicians are doomed to fail

Can anyone stop Europe’s populist right? Apocalyptic warnings by mainstream politicians are doomed to fail December 11th 2025 FOR THE respectable men running western Europe’s three biggest countries, misery is heaped upon misery. All are presiding over stagnant living standards and declining global influence. In Britain and France their rivals from the populist right are itching to take power (even the Alternative for Germany , or the AfD, may win a couple of state elections next year). And America, their key ally, has just accused them of hastening Europe towards what it calls “civilisational erasure”.

Those three leaders also warn of a catastrophe—if the parties of the populist right should triumph. Friedrich Merz, Germany’s chancellor, describes his government as centrism’s last chance. After his coalition lost European elections last year, Emmanuel Macron, the French president, spoke about the danger of civil war. This month Britain’s prime minister, Sir Keir Starmer, told The Economist that Reform UK was a challenge to “the very essence of who we are as a nation”.

The doctrines of the populist right do indeed contain much to condemn. Yet talking about them in apocalyptic terms is doomed to fail. For their own sake, and for the good of their countries, mainstream politicians and their supporters urgently need a different approach.

For one thing, all this doom-mongering smacks of an attempt to draw attention away from their own failures. In Britain, after 14 stagnant years under the Conservatives, Sir Keir’s Labour government is spending more on welfare and will impose record taxes even as rapid growth eludes it. In France Mr Macron’s law raising the state pension age has been ditched, as his fifth prime minister in three years inches a budget through the National Assembly. In Germany Mr Merz’s plan for an “autumn of reforms” came to almost nothing. If the fate of Europe is at stake, why aren’t its leaders getting more done?

For another thing, their threats are not credible. Some populist-right administrations are dangerous, others are not. Giorgia Meloni has run Italy much as a conventional politician would. Reform councillors in Britain have so far been fairly normal. True, Viktor Orban’s party captured and milked Hungary’s institutions, but it may soon be booted out. That doesn’t sound like the death of democracy.

No wonder that predicting calamity is not working. As the populists’ strength in opinion polls makes clear, a huge number of European voters simply do not believe what they are being told. Meanwhile the elites, alive to the ebb and flow of power, are cosying up to the populists they once shunned. Jordan Bardella of National Rally has been quietly meeting French business leaders. Tory politicians are defecting to Reform, bringing Nigel Farage badly needed legislative and ministerial experience. Only in Germany does the mainstream rule out working with the AfD. Its MPs, the second-largest group in parliament, are even banned from Bundestag vice-presidencies.

All this helps explain why the strategy of demonisation is self-defeating. Mainstream politicians say they defend tolerance and working people, but when they dismiss a large part of the electorate as bigots, they come across as intolerant and smug. And when they warn that populism will destroy their vision of what Europe should be, it encourages those voters who are desperate to shake things up.

If demonisation is failing, what is the alternative? The answer starts with that impatience for change which the populist right harnesses so successfully—and which this newspaper shares. The next step is to scrutinise how likely the populists are to jolt Europe out of its complacency. Engagement can improve bad policies if populists are willing to change them—and if they refuse, it exposes their folly.

The most promising populist project is the economy. When National Rally, Reform and the AfD speak to businesses, they focus on deregulation at both the national level and, for France and Germany, in Brussels. They say they want leaner government and lower taxes. They look to the power of technology. And they complain that the state penalises initiative and risk-taking while spending too much on welfare.

All that is welcome, but it is only half the story. For Britain, France and Germany, European economic integration is the most obvious source of growth. Yet the populists are set on a collision course with the European Union, which would lead to growth-destroying degradation of the single market. The fiasco of Elon Musk’s DOGE shows how hard it is to shrink the state well. Mr Bardella wants a wealth tax and was opposed to raising the pension age. After criticism for fantastical spending pledges, Mr Farage now promises more realistic budgeting, but details remain elusive.

On other issues, populists latch onto discontent, but propose solutions that are foolish. Many Europeans worry about immigration, fearing that it will harm public services and change national cultures. But populists, and America’s warnings, are out of date: legal immigration has peaked and, with the exception of Britain, illegal immigration into Europe is half what it was in 2023. The populists are also cruel. Talk of mass deportation or language designed to make immigrants feel despised is xenophobic.

Most Europeans do not worry about geopolitics, but they should. At a time when America is ever-less willing to lead the collective defence of Europe, populists echo Donald Trump’s dangerous belief that the continent will be safer if it is less united, and if each state pursues its national interests. They also show a blinkered weakness for the autocrats in Russia and China. Vladimir Putin must be cheering them on.

National elections are 18 months away in France, due in March 2029 in Germany and as late as August 2029 in Britain. Much can change in that time. If mainstream politicians spend it shrilly demonising populists, they will doubtless make themselves feel better, but they will not help their countries. They would be wiser to subject governments-in-waiting to the democratic scrutiny they deserve. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

A strategy that scorns Europe, bullies Latin America and is vague on Asia

More reasons for America’s friends to plan for the worst A strategy that scorns Europe, bullies Latin America and is vague on Asia December 11th 2025 THE WORLD is becoming used to startling news from Washington. The Trump administration’s national security strategy (NSS), abruptly posted on its website in the middle of the night on December 4th/5th, once again left many policymakers, especially in Europe, in a panic. How worried should they be?

Unfortunately, the answer is very, for two reasons. First, because America’s foreign policy, although still contested, seems more likely to move in a worse direction than a better one; and second, because the erratic way in which policy is made means that allies cannot depend on anything that they are told, even by President Donald Trump himself and certainly not by his squabbling courtiers.

The 32-page document gives America’s oldest and closest friends plenty of scope for alarm. It declares the West’s greatest threat to be “mass migration”. To prevent it, the document pledges not just to secure America’s own borders, but also to support populist-right parties in Europe which promise to secure borders there. It fails to mention even the possibility that Russia might be a threat.

On its worst reading, you could see this as an American suggestion that Europe should fall within Russia’s sphere of influence. That is also the logic behind Mr Trump’s latest plans to stop the war in Ukraine by using frozen Russian assets to help revive business ties between Europe, Ukraine and Russia (and make money for American firms). This includes Europe once again buying Russian energy, a dependency the Kremlin exploited in 2022. Europe’s leaders are rightly sceptical.

Other regions also have cause to worry. The NSS announces that America will redeploy troops to ensure that America remains top dog in the western hemisphere, which will go down very badly in Latin America. The continent still resents 20th-century American campaigns of political interference and gunboat diplomacy. Even so, the “Donroe doctrine”, the idea that America must be pre-eminent in its own backyard, has been a feature of its foreign policy since January 20th.

On Asia the picture is more nuanced. The document is much less clear about the threat posed by China than the first Trump administration’s NSS, in 2017. Official thinking today seems to be guided by commerce and a desire to preserve a planned April summit between Mr Trump and Xi Jinping, China’s leader. News that America will allow Nvidia to sell one of its more advanced chips in China suggests that the administration is ready to sacrifice some of its technological edge over China in exchange for goodwill, however fleeting. Fortunately, the NSS renews America’s commitment to deterring attacks on Taiwan, which some had feared was wavering. And yet who can be sure what that reassurance is worth?

The fear among America’s allies is that the administration may indeed be moving in the direction the NSS lays out. Washington is abuzz with speculation that those insiders most supportive of America’s allies will be out in the coming year or so—among them, Marco Rubio, the secretary of state. More radical MAGA figures are ascendant . But there are limits to what hawkish Republicans in Congress will support. And the intelligence agencies and top military brass are likely to resist or slow down changes they see as rash or unwise. The strategy’s slapdash drafting suggests that, unusually for an NSS, it is not the settled view of the administration.

Then there are the views of the boss himself. Asked about the NSS on December 8th, Mr Trump at times appeared unfamiliar with its contents. He is notoriously transactional, and often changes his mind. A document he may not have read is an unreliable indicator of what he will do. But hope is not a strategy. Better for America’s friends to plan for the worst. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

It is a problem not for the rest of the world, but for China

Don’t fear China’s trillion-dollar trade surplus It is a problem not for the rest of the world, but for China December 11th 2025 Last year the gdp of only 19 countries exceeded $1trn. That puts the latest news from China’s customs administration into stark context. On December 8th it reported that the country’s net exports of goods in the first 11 months of the year had already exceeded $1trn, more than any previous surplus. Even as America whacked tariffs on China, its enterprising manufacturers have expanded into alternative markets and discovered roundabout routes past America’s trade barriers.

The size of the surplus is causing anxiety around the world. “The imbalances we see accumulating today are not sustainable,” said Emmanuel Macron, France’s president, on a visit to Beijing this month. A recent report on China’s export muscle by Goldman Sachs was titled “Beggar thy neighbour”. And on December 10th the imf called on China to fix its imbalances. As with many things to do with China’s economy, however, a degree of perspective is just as valuable as a sense of awe. The monster surplus is not as scary as it looks. Moreover, it causes problems not for the rest of the world, but for China itself.

For a start, the trillion-dollar surplus counts only physical goods passing through customs. It does not include services, which would subtract about $180bn from the total. It also fails to capture some transactions between multinational firms and local contract manufacturers in free-trade zones on China’s territory, but outside its customs border.

A broader measure of China’s dealings with the rest of the world is its current-account surplus. This has reached $650bn over the past four quarters (although some analysts have doubts about how it is measured). That is still a big number. But China—trust us—is a big economy. Its surplus amounts to about 3.4% of its GDP. According to the IMF, there were 45 economies with a surplus bigger than that last year. Eight of them are in Mr Macron’s European Union.

The focus on imbalances also misdiagnoses Europe’s true concern, which is the hollowing out of its domestic industry. The real problem is that European manufacturers now struggle to compete with Chinese carmakers and electronics firms. That would be the case even if China spent much more on commodities and other imports and its trade surplus fell to zero.

Furthermore, China’s reluctance to buy foreign things does not extend to foreign assets. In return for its exports, it has bought bonds, extended loans, acquired equities and built factories overseas. These assets represent claims on the future. China is thus selling stuff today in return for stuff in the future. Trade is an exchange. But the exchange does not have to be simultaneous.

China’s eagerness to save was once hard for the world to accommodate. After the global financial crisis of 2007-09, everyone wanted to retreat into their shells and spend less than they earned. Central banks cut interest rates towards zero. But there was not enough demand to go round. In that world, China’s surpluses could be accused of beggaring its neighbours. Its net exports “drained” demand from countries that were suffering from a shortage of spending.

Things are different now. In many big economies, inflation is at or above the central bank’s target. Spending is strong enough to keep unemployment low at home with a bit left over to purchase China’s excess production, too. If central banks are worried about a lack of demand, they have room to cut rates, as America’s Federal Reserve did on December 10th.

Indeed, China’s surplus is more a problem for itself than for the rest of the world. It is the only big country where inflation looks dangerously low. Hiring is weak, consumers lack confidence, and the property market has entered the fifth year of a seemingly intractable slump. The central bank is worried that lower interest rates will hurt banks’ margins. And the government is reluctant to do whatever it takes to turn things round.

China’s policymakers have instead relied on unexpectedly strong exports to keep growth on track. That could prove to be a mistake. If the trade war spreads to Europe, or the global economy suffers from an ai bust, foreign demand could easily falter. China would then be forced to make a big fiscal push to revive domestic spending.

Its task could be all the harder for having been delayed. The longer gloomy sentiment persists, the less easy it is to dispel. And China could find itself trying to revive the confidence of consumers and homebuyers just as the world economy is wilting. China has become dependent on the spending of foreigners to stabilise its own economy. It is not being anti-social. But it is being unwise. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The judges’ credibility is at stake

America’s Supreme Court should strike down Donald Trump’s tariffs The judges’ credibility is at stake December 11th 2025 America’s trade policy might seem to have settled down since the spring, but it could soon take another dramatic turn. The Supreme Court is expected to rule imminently on the legality of roughly half of President Donald Trump’s tariffs—those imposed under the International Emergency Economic Powers Act (IEEPA) of 1977. By means of this law, the president claims to have the discretion to set tariffs as he pleases, having declared America’s trade deficit and the influx of fentanyl to be national emergencies. Yet three courts have ruled the tariffs illegal. The Supreme Court could concur.

If the tariffs are struck down, the administration will try to use a panoply of other, fiddlier legal authorities in order to tax imports. The trade “deals” Mr Trump has struck—which are not treaties but just agreements made by the White House—would wobble. Tariffs might be lower overall, but uncertainty and complexity would follow. And if, as is likely, the court authorises refunds to importers who were unlawfully charged, America’s economy could receive an unplanned fiscal stimulus of about 0.5% of GDP. Despite all this disruption, though, the judges should rule against Mr Trump.

The case for illegality is strong and straightforward. Under the constitution, the power to levy tariffs belongs to Congress. The administration says IEEPA also grants the president this power in emergencies. Yet the word “tariff” does not appear in the law, which only lets the president “regulate” imports.

Richard Nixon used a similar authority to impose a near-blanket 10% tariff for about four months in 1971. This survived the courts because Congress had, at that time, not adequately specified tariff powers in other laws. The judges who scrutinised the policy denied they were giving the president the carte blanche Mr Trump now claims. Congress then passed the Trade Act of 1974, specifying tariff powers—and imposing on them time limits and procedural requirements, with which Mr Trump would rather not have to bother. But those constrained powers are the ones upon which presidents must rely.

There are further arguments for striking down the tariffs: Mr Trump’s trade-deficit “emergency”, for example, is a sham. Yet the wording of the law is the most important, because it offers a stress test for the integrity of the Supreme Court. The conservative majority on the bench has spent years arguing that vague language cannot be used to smuggle in vast executive powers—that “Congress does not hide elephants in mouseholes.” The more profound the effects of the policy, the clearer Congress’s authorisation of it needs to be.

It was on the basis of this idea, known as the “major-questions doctrine”, that the court struck down Barack Obama’s Clean Power Plan and Joe Biden’s forgiveness of student loans, among other policies. The doctrine protects Congress from an imperial president, who could otherwise veto any attempts by legislators to reclaim powers a White House asserts as its own.

The justices may be tempted to argue that the doctrine does not apply to foreign policy, which is the president’s terrain. Yet that would not be credible. Mr Trump’s tariffs, including those set by other laws, are a tax of huge domestic significance; they are expected to raise $2.5trn over a decade, which would be paid by American firms, and much of the bill would be passed on to American consumers. If the court carves out an exception for them, the major-questions doctrine will seem to apply only to the power wielded by Democrats. That will be especially damaging given that in recent cases, such as whether the president can sack the heads of independent agencies like the Federal Trade Commission, the court’s jurisprudence favours the administration .

The consequences of striking down the tariffs would be disruptive in the short term, but failing to rein in Mr Trump would be worse. It would concentrate power dangerously in the White House. Allowing a single individual to set taxes on a whim is a recipe for grubby favouritism. And IEEPA could then be used by future administrations in ways that Republicans will not like. Imagine a future Democratic president declaring an emergency over racial injustice, and placing tariffs on products with insufficiently diverse supply chains, or using a climate emergency to impose a carbon border tax.

Optimists say the Supreme Court is one of the few institutions where politics does not outweigh everything. Left-wingers doubt this, seeing conservative jurisprudence as little more than a front for the president’s priorities. This newspaper hopes the optimists are right. If the conservative majority is committed to its principles, it will quash IEEPA tariffs and send Mr Trump back to the drawing board. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Professionally made shows face tough competition from independent makers

The battle for Warner Bros is a prelude to the real streaming war Professionally made shows face tough competition from independent makers December 11th 2025 Hollywood has produced another gripping drama. Netflix’s and Paramount’s $100bn battle to buy Warner Bros Discovery has juicy plot ingredients, from an ambitious billionaire to mysterious Saudi investors and even a cameo from the president’s son-in-law. As the studio weighs its options, expect weeks of entertainment.

The sale promises to shake up the streaming wars, in which Hollywood studios are fighting for subscribers. Paramount, a smallish studio, craves scale to compete with the big dogs. Netflix, far in the lead, wants more content for its huge library. But the focus on the streaming wars misses a bigger storyline.

For all the billions lavished by studios on new films and TV shows in recent years, audiences are spending ever more time watching stuff made outside Hollywood, often by amateurs. The most popular source of video distraction in America is not Warner Bros or any of its suitors, but YouTube. The Google-owned platform accounts for 28% of streaming on TVs in America, against Netflix’s 19%. This is before you include the hours spent scrolling on mobile phones.

Hollywood honchos say their business is different from the slapdash online videos made for watching while on the toilet. They are right, but the difference is shrinking. First, consider technology. Social platforms are suited to mobile screens, but their videos are increasingly viewed on TV: Americans spend longer watching YouTube on tv than on their phones. At the same time Hollywood is relying less on cinemas in favour of TV, and moving to even smaller screens. In poor countries where viewers are more likely to watch long-form video on their phones, they offer mobile-only plans.

Second, business models are converging. As streaming platforms seek new audiences, they are moving beyond subscriptions into advertising, once the turf of social media. At the same time, those social platforms are pushing into subscriptions; YouTube’s no-ad plans (which include music) have more than 125m subscribers, around the same as Warner Bros.

The third area of overlap is the most contested: content. Streaming platforms are getting into formats popularised on social media. Amazon Prime Video has a series starring MrBeast, YouTube’s biggest star; Netflix plans to show video podcasts from Spotify; Chinese studios are producing “micro dramas”, two-minute episodes in series 90 episodes long. Meanwhile social platforms are showing more television-like content. YouTube chatshows such as “Chicken Shop Date” are stealing audiences from the traditional man-on-sofa format of late-night TV; and they are now stealing A-list guests, too. Artificial intelligence is helping narrow the gap between professional visual effects and amateur ones, and making things like foreign-language dubbing available to all. Professional media firms increasingly use social channels for their distribution (you can find Economist videos on TikTok and the like).

This new competitive landscape means that trustbusters should not rule Netflix out of the Warner race, as many in Hollywood argue. It may be dominant in streaming, but under the broader market definition it is a smaller actor. For the same reason, Paramount is stronger than it looks. It may be only a supporting actor in Hollywood, but the Ellison family, who control it and support Donald Trump, have been named by the president as part of a group that will run the promised American version of TikTok. Having a hand in both professional and social media promises to make them powerful, too.

Hollywood says its premium content will prevail in this new war. The bids for Warner, which reflect a high valuation of its back catalogue and intellectual property, suggest the professionals are putting their money where their mouth is. But whoever wins the battle for Warner faces a bigger contest ahead. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The technology presents dazzling opportunities—and ominous risks

How AI is rewiring childhood The technology presents dazzling opportunities—and ominous risks December 4th 2025 CHRISTMAS STOCKINGS may contain more surprises than usual this year, as children open presents that can talk back. Toymakers in China have declared 2025 the year of artificial intelligence (AI) and are producing robots and teddies that can teach, play and tell stories. Older children, meanwhile, are glued to viral AI videos and AI-enhanced games. At school, many are being taught with materials created with tools like ChatGPT. Some are even learning alongside chatbot-tutors.

In work and play, AI is rewiring childhood . It promises every child the kind of upbringing previously available only to the rich, with private tutors, personalised syllabuses and bespoke entertainment. Children can listen to songs composed about them, read stories in which they star, play video games that adapt to their skill level and have an entourage of chatbot friends cheering them on. A childhood fit for a king could become universal.

It is a future filled with opportunities—and hidden traps. As real kings often discover, a bespoke upbringing can also be a lonely and atomised one. What’s more, as their subjects often find out, it can create adults who are ill-equipped for real life. As AI changes childhood for better and for worse, society must rethink the business of growing up.

Being reared by robots has advantages. Tech firms are already showing how AI can enhance learning, especially where teachers and materials are scarce. Literacy and language-learning have been boosted in early trials. The dream is that, with an AI tutor, children can be saved from classes pitched to the median, in which bright pupils are bored and dim ones are lost. If you want a version of this leader for an eight-year-old Hindi-speaker, AI can rewrite it; if they would prefer it as a cartoon strip or a song, no problem.

Technology is creating new forms of fun, too. Hollywood may dismiss AI videos as “slop” , but young people are devouring them and making their own. Old toys are being upgraded: an AI-powered edition of “Trivial Pursuit” can pose questions on any topic. Video games are creating novel experiences, such as chatting to Darth Vader in “Fortnite”. Any child can meet their heroes (and shoot them).

There are well-publicised risks in letting children loose on an evolving technology. AI tutors may hallucinate wrong answers. Toys can go off the rails: parents should check stockings for the AI teddy that was recently found to have spiced up its chat with talk of kinky sex. Children can easily misuse AI, to cheat at homework or harass each other with “deepfake” videos. Chatbots can coax vulnerable adolescents into harming themselves. Tech firms insist these stumbling blocks can be fixed; ChatGPT is only three years old.

Yet childhood may be disrupted most radically by things that AI does when it is behaving as intended. The technology quickly learns what its master likes—and shows more of it. Social-media feeds have already created echo chambers where people see only views they agree with (or love to hate). AI threatens to strengthen these echo chambers and lock children into them at an early age. The child who likes football may be told football stories by his teddy and given footballing examples by his AI tutor. Not only does this stamp out serendipity. A favourites-only diet means a child need never learn to tolerate something unfamiliar.

One-sided relationships with chatbots present a similar risk. AI companions that never criticise, nor share feelings of their own, are a poor preparation for dealing with imperfect humans. A third of American teenagers say they find chatting to an AI companion at least as satisfying as talking to a friend, and easier than talking to their parents. Yes-bots threaten to create children not used to taking turns, who grow up into colleagues unable to compromise and partners unfamiliar with the give-and-take required in a relationship.

Other trends are pushing in the same direction. As birth rates crash, fewer children are growing up with siblings to smooth their sharp edges. Rising numbers of young adults are deciding that long-term romantic relationships are not worth the hassle. Remote work means that people who grow up in a personalised, asocial world can slip into jobs where they interact with colleagues only through screens—a chore they may soon delegate to an AI agent.

Some basic counter-measures are urgent. Parents should think twice before entrusting their child to a word-regurgitation machine, whether it is sewn into a bear or not. Chatbots should have age restrictions that are properly enforced; governments should not give ai firms the leeway they gave social networks, which are only now being cajoled into age-gating. Teachers are kidding themselves if they think essays written at home can any longer be trusted. In the age of AI, more in-school assessment is essential.

The longer-term challenge is to think deeply about how to preserve the socialisation that AI could rub out of children’s lives. Schools, where much of childhood plays out, are the best place to do this. They should take advantage of personalised tuition where it is proven to work. But they must also redouble efforts to teach things that a robot can’t: to debate, to disagree and to get along with—perhaps even to appreciate—people who are not as sycophantic as a chatbot.

Schools should also enhance their role as centres of discovery. If AI is giving children more of what they want, it is more important that schools provide chances to meet people and encounter ideas that lie outside their experience. Algorithmic personalisation threatens to be a powerful barrier to social mobility if it nudges people to stay in the lane in which they start out. Inequality could widen if poor schools merely embrace chatbots as cheap substitutes for human teachers.

AI shows undeniable potential to improve education and enrich entertainment. It may one day let every child live like royalty. But the truly privileged may be those whose parents and teachers know when to turn it off. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Voting is becoming a high-stakes, wildly unpredictable gamble

Britain’s slot-machine politics Voting is becoming a high-stakes, wildly unpredictable gamble December 4th 2025 ELECTIONS ARE supposed to distil the will of the people. These days they are more likely to scramble it.

Going by recent polling, a general election held today could lead to a landslide for Reform UK (which now has just five MPs); or voters could return a hung parliament. Perhaps the Conservatives will be the kingmaker; but then again, if the Tory vote slips a bit further, the world’s most successful political party could be reduced to a rump of just 15 MPs. Zack Polanski of the Greens (currently four MPs) has a one-in-twenty chance of becoming leader of His Majesty’s opposition in a Reform-led parliament. But if the Labour Party can get to within two percentage points of Reform, it will have a one-in-three chance of forming the next government—making Sir Keir Starmer one of the most successful, while also one of the most loathed, prime ministers of the 21st century.

Welcome to slot-machine Britain, where election day gives the people a chance to pull the lever on a one-armed bandit. Our bewildering range of outcomes emerges not so much from a belief that the polls could see-saw wildly—though they may do that, too—as from the fact that, when five parties score between 13% and 29%, small changes in their share of the vote lead to big changes in their share of the seats in Parliament.

For a while now, Britons have been aware that they face arbitrariness and instability at the ballot box. This week, The Economist is using a new electoral model to put flesh on that intuition. For those who care about good government or democracy, our findings are not reassuring. Those people include Sir Keir who, in an interview with us this week, warns that the emergence of the populist right is “the political fight of our times”.

The fundamental cause of the uncertainty is political fragmentation and it is a feature of many European democracies. In France National Rally and La France Insoumise have drawn support away from the Socialists, the Republicans and Renaissance in the centre. Alternative for Germany and various parties on the left, including Die Linke, have eroded the two big traditional groupings there. Italy is also far down this route.

It is the same story in Britain, where a two-party duopoly has been crumbling since the 1960s. Lately, the decline has accelerated as the loyalty of voters to individual parties has withered. Reform, an upstart led by Nigel Farage, has become Britain’s most popular party. Under Mr Polanski, a former actor who rivals Mr Farage for wit and off-the-cuff policymaking, the Greens have overtaken Labour as the first choice of those under 35. Separatists are thriving in Scotland and Wales.

Britain turbocharges this turmoil because of its election system. Under first-past-the-post voting, everyone casts a single ballot and the candidate with the most in each of Britain’s 650 constituencies wins a seat. In theory this rewards the two big parties, supposedly leading to strong government. However, when the country has lots of medium-size parties, the correlation between the number of votes in, and number of seats out, owes more to Las Vegas than to Edmund Burke.

To make sense of the confusion, we have built a model that draws on 80 years of electoral data. This uses 10,001 simulations to calculate what could happen in a vote based on today’s polling. We find that in some constituencies seats could be won on as little as 23% of the vote. Reform is likely to be the largest party, but its possible tally of seats spans a huge range from 112 to 373—the difference between Mr Farage leading a rump opposition and becoming prime minister.

Whoever wins, the consequence is likely to be weaker government and more contempt for Parliament. One problem is that majorities will be built on sand. In the election in 2024 Labour won 63% of the seats on 34% of the vote, the most disproportionate result in British political history. As its polling has dwindled, however, Labour MPs have become aware that their seats are under threat. Despite having a big majority, therefore, Sir Keir has had to grapple with rebellious and risk-averse backbenchers unwilling to fall in with his plans.

Another problem is that governments elected on a small share of the vote do not have a mandate for the sweeping reform Britain needs. If they take harsh measures, they will be accused of failing to reflect the will of the majority in the country. But if they sit on their hands and do nothing, they risk being accused by their own voters of making empty manifesto promises. It is a recipe for disillusionment with democracy.

Britain has in the past seen powerful challenges to the two-party system, such as the SDP in the early 1980s, only for them to melt away. This time, too, it is tempting to credit the rise of the insurgents to Sir Keir’s bloodless leadership, or to think that fragmentation is simply a temporary flare-up over inflation and immigration. Perhaps the incentives for creating big parties under the first-past-the-post voting system will be large enough to lead to another consolidation.

However, the forces propelling the shift from two dominant parties to many competing ones are unlikely to abate. The habit of party loyalty is easily lost, but hard to regain. On both the left and the right you find the same frustration: voters feel that the Westminster system no longer responds to their wishes. If the slot machine amplifies the volatility of the electorate, then that could further alienate voters. Eventually, this will lead to growing pressure for electoral reform. Already supported by a majority of Britons, this may one day become inevitable whether Westminster politicians want it or not.

In his interview, Sir Keir acknowledges that voters feel frustrated and disenfranchised and no longer trust centrist politicians to improve their lives. But he warns where this could lead. “If there is a Conservative government,” he says, “I can sleep at night.” But a populist-right government led by Mr Farage “would be a different proposition”. Sir Keir’s answer is to prove between now and the election that national renewal, patriotism and progressive policies can meet Britain’s challenges. What makes the path so treacherous is that, even if he succeeds, the slot machine could make him a loser. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

America will not. Europe’s security depends on agreeing how to

Enough dithering. Europe must pay to save Ukraine America will not. Europe’s security depends on agreeing how to December 4th 2025 EUROPE is breathing a sigh of relief. On December 2nd Donald Trump’s envoy, Steve Witkoff, held lengthy talks about Ukraine with Vladimir Putin in Moscow—and not much happened. Many had been expecting Team Trump to sell out Ukrainian sovereignty in return for commercial deals. The risk of such an odious stitch-up now seems to have receded a bit. Thanks to pressure from European leaders and some sensible Republicans, including the secretary of state, Marco Rubio, some of the worst elements of a 28-point plan hatched by Mr Witkoff and his Kremlin chum, Kirill Dmitriev, have quietly been dropped. Mr Putin seems unenthusiastic about the current version. Mr Trump now says the whole thing is “a mess”. Diplomacy, like the war, will grind on.

But if European governments think they are off the hook, they are wrong. First, another bad pseudo-peace plan could pop up. Second, even if it doesn’t, Ukraine will need solid military and financial support for the foreseeable future, and it will have to come from Europe. It is still not clear that Europeans grasp this.

When Mr Putin launched his full-scale, unprovoked invasion, Europe did the right thing. The EU and others imposed stiff sanctions on Russia and gave military and financial aid to Ukraine, roughly matching the level of support from America. But that united front depended on the White House agreeing that territorial aggression should not be rewarded. Mr Trump has blown that consensus apart. Now, the $90bn-100bn it costs each year to support Ukraine’s war effort, a burden previously divided evenly, must be shouldered by Europe alone. As our calculations earlier this year showed, it is a large sum in aggregate but a small price to pay for Europe’s security. The annual GDP of the EU alone is nearly $20trn.

Russia may be advancing on the battlefield, but only slowly and at a huge cost in men and money . So Europe faces three strategic tasks. First, to make Mr Putin realise he cannot win, by convincing him that Europe (which has an economy ten times larger than Russia’s) will never abandon Ukraine. Second, to reassure Ukraine. Third, to show the MAGA crew that Europe is not the feeble, freeriding bloc they say it is. On all three, Europe is coming up short.

Nothing illustrates this better than an EU squabble over some €210bn ($245bn) of frozen Russian assets, much of it lodged at a clearing-house in Brussels. The G7 agreed last year to use the interest generated by the invader’s frozen assets to support its victim. But this is not enough. An EU summit in October was supposed to agree on a more creative way to mobilise the assets, using some of them to back a “reparations loan” to Ukraine, which would be repaid only if Russia pays compensation for the harm it has inflicted. Belgium wants other European countries to share the risk that Russia might sue to retrieve its assets. A deal ought to be possible, but so far all proposals, including a complex one from the commission this week, have failed to win assent.

If Europe will not, or cannot, deploy the frozen assets, it must use its own balance-sheet—soon. That means common borrowing: Eurobonds, strategic-autonomy bonds, whatever label is politically palatable. Ukraine needs predictable, multi-year financing: a four- or five-year package it can count on to keep its budget afloat, manufacture shells and rebuild power plants. Europe’s current dribs-and-drabs approach is the opposite of strategic. It forces Ukraine to live from one donor meeting to the next; it encourages Mr Putin to wait the West out; and it offers ammunition to those in Mr Trump’s inner circle who argue that Europe is incapable of serious statecraft. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The president has been a deft diplomat, but must do more reassure Syrians

Syria’s transition has gone better than expected The president has been a deft diplomat, but must do more reassure Syrians December 4th 2025 FROM the start of Syria’s revolution in 2011 the regime said the country faced a choice: Assad or chaos. The dynasty that had ruled since 1971 warned that Syria would collapse without its iron grip. This was always a lie. It was Bashar al-Assad’s refusal to stand down, and his murder and torture of peaceful protesters, that plunged Syria into civil war.

On December 8th 2024, after a lightning rebel offensive, the hated tyrant was forced to flee into exile. The past year has proved that his country can cope remarkably well without him. His successor, Ahmed al-Sharaa, is exactly the sort of character Mr Assad told his loyalists and outsiders to fear: a former jihadist. Yet Syria has not tipped into chaos. Though there are reasons to worry about the kind of state Mr Sharaa is building, he has done a laudable job of holding the country together.

Start with his performance on the world stage, where he has proved to be a deft diplomat . He has charmed his Western counterparts, chief among them President Donald Trump, who welcomed him to the White House last month. America has temporarily waived the sanctions it imposed on Syria during Mr Assad’s rule and is working to scrap them. Gulf states are mostly enthusiastic about Mr Sharaa, and he is labouring to make peace with Israel (which has unwisely met his overtures with hostility).

All this adds up to a profound change in the Middle East. A country that was once a despotic client of Iran and Russia is now trying to join the region’s pro-Western camp. Instead of flooding its neighbours with illicit drugs—Syria’s main export in the latter days of Mr Assad’s regime—it is now courting Gulf states for investment.

Next, consider what has not happened since Mr Assad’s flight from Damascus. Syria has not lapsed back into civil war, a fate that befell other Arab countries after their own violent revolutions. Nor has Mr Sharaa sought to impose Islamic law. Bars in Damascus are still serving; women are not forced to cover up or stay at home. The president has been a pragmatist.

Syria’s economy has been wrecked by war and sanctions. GDP is down more than 70% since 2011. Millions of people need homes, jobs and services. Mr Sharaa has not fixed their problems—but no Syrian leader could have done so in a single year. It is unfair to fault him for failing to do the impossible.

However, it is not too soon to judge the way he is trying to govern. He seems uninterested in rebuilding the formal state, which was hollowed out by dictatorship. Instead he is creating parallel structures. His decision last month to establish a new customs authority, run by a former jihadist comrade, does not bode well. Syria’s main source of tax revenue is now controlled by a crony rather than by the finance ministry.

Furthermore, Mr Sharaa has done far too little to reassure minority groups. Pro-government forces committed two atrocious massacres of religious minorities this year (killing Alawites in March and Druze in July). Mr Sharaa condemned the killings and says the right things about Syria’s mosaic of faiths and ethnicities. But he acts as if he is oblivious to the fact that many Alawites, Druze and Christians view a Sunni-dominated state led by an ex-jihadist as a danger.

He must do more to share power, which today is concentrated among a handful of his relatives and confidants. Ministries should be buttressed rather than bypassed. He should engage more with the robust civil society that emerged during the civil war. An early test will come when Syria’s new parliament is seated, probably in January. It could be a check on presidential authority; it could also prove to be a rubber stamp, like the old regime’s legislature. That would be a tragedy. Mr Sharaa has done a commendable job in his first year. But his task is not just to hold Syria together; it is to create something that is different from the one-man show he overthrew. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

President Trump should choose the technocrat over the partisan

Chris Waller, not Kevin Hassett, should lead the Federal Reserve President Trump should choose the technocrat over the partisan December 4th 2025 On November 30TH President Donald Trump said he had decided whom to nominate as the next chair of the Federal Reserve. He has since said he will reveal his choice early next year. In betting markets, money has piled on Kevin Hassett, his trusted economic adviser. Mr Trump is desperate for the Fed to cut interest rates faster. He has tried to oust Lisa Cook , a Fed governor; the row over whether he can will be heard by the Supreme Court in January. And he has already put one of his advisers, Stephen Miran, on the Fed board temporarily. Mr Miran has voted for bumper rate cuts. As chair, Mr Hassett would paddle in the same direction.

It is common for the Fed chair to have a party affiliation. If having worked in the White House were a bar, then neither Alan Greenspan nor Janet Yellen could have occupied the role. Mr Hassett also has some qualifications for the top job. Before joining the first Trump administration in 2017, he was a respected, if partisan, economist who had been published in leading journals. No one can claim he would be ignorant of the dangers of setting interest rates to keep Mr Trump happy or debt cheap, rather than to control inflation.

The question is how much Mr Hassett would care about those risks. While working for Mr Trump, he has behaved like a hack unconcerned with reality. In 2017 his “very [conservative]” estimate was that Mr Trump’s corporate-tax cuts would boost annual household incomes by $4,000 on average—far above other estimates at the time and any effect picked up since. In May 2020 his “cubic” model of the covid-19 pandemic projected that deaths would soon cease entirely. Absurdities such as these have torched his scholarly reputation. Even before entering the White House he made one of the worst forecasts in history: in 1999, near the height of the dotcom boom, he predicted a near-quadrupling of the Dow Jones index.

There is a candidate whose record is far superior. Chris Waller has sat on the Fed’s board since 2020, has worked in the Fed system since 2009 and was previously an academic. Whereas Mr Hassett’s research concerned tax policy, Mr Waller is a monetary-policy expert—and has a strong record of divining where the economy is headed.

In 2022 many prominent forecasters, including a former chief economist of the IMF, Olivier Blanchard, predicted that recent rises in interest rates would cause a surge in unemployment. Mr Waller vocally disagreed, and was proved right. This year he foresaw weakness in the labour market that struck in July, and which caused the Fed to take a doveish turn. Over a long period his judgment looks equally sound: compared with colleagues he was doveish in the 2010s, when the economy was weak, and hawkish after the pandemic, as inflation was taking off.

Like Mr Hassett, Mr Waller wants lower rates today. This newspaper is not convinced: inflation is still well above the 2% target and America’s labour market may be stronger than it looks . But there is little doubt that Mr Waller is making his case in good faith, and that under his leadership the Fed’s independence would be secure.

To Mr Trump, that is a bad thing. Yet the president should be careful what he wishes for. His main political problem is high prices, something that excessively loose monetary policy would make worse. And if the central bank’s independence were threatened, investors would revolt, and America’s long-term borrowing costs would rise. Appointing a technocrat rather than a partisan is not just the right choice—it is also in the interests of the Republican Party. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The country’s high-speed innovation holds lessons for the world

What China will dominate next The country’s high-speed innovation holds lessons for the world November 27th 2025 ThOSE WHO worry about how to cope with China’s leadership in technology—and there are plenty of them—think hard about electric vehicles (EVs), solar panels and open-source artificial intelligence. For such people, we have some bad news. This week we report how China is rapidly pressing ahead in two other frontier technologies, autonomous vehicles and new drugs. As these industries spread around the world, they will exemplify the power of Chinese innovation.

China’s progress in each of these important areas has been staggering. A robotaxi revolution is gathering pace , which could reshape transport, logistics and everyday urban life. The country’s autonomous taxis, constructed for a third of the cost of Waymo’s in America, are racking up millions of kilometres of driving and are forging partnerships in Europe and the Middle East. In medicine, meanwhile, China has turned itself from a copycat maker of generics into the world’s second-largest developer of new drugs, including those tackling cancer. Western rivals are licensing its firms’ wares. The day when a pharma giant emerges from China no longer seems so remote.

The rise of both industries says much about how Chinese innovation works. A deep pool of talent, a broad manufacturing base and huge scale combine to propel it rapidly up the value chain. The production of robotaxis has piggybacked on mass ev manufacturing and a dominance in the supply of lidars and the other sensors needed for self-driving; scale has also helped bring down costs. Armies of patients enlisted in clinical trials and profits from generic drugmaking have speeded up pharma innovation.

A more surprising ingredient of China’s success is its nimble and permissive regulators. As in other industries, local governments have offered firms cheap credit and other help. But it is agile rulemaking that has really turbo-charged progress. Soon after political leaders set out their ambition for China to become a “biotechnology superpower” in 2016, the country implemented a number of reforms. The drug regulator’s workforce quadrupled between 2015 and 2018, and a backlog of 20,000 new drug applications was cleared in just two years. The time taken to secure approval for human trials shrank from 501 days to 87. Last year firms in the country ran a third of the world’s clinical trials .

Likewise, China was early to experiment with robotaxis. Local officials, keen to attract talent and investment, approved pilots at a rapid clip and installed sensors and other digital infrastructure to help guide self-driving vehicles; trials have run in over 50 cities. Many have experimented, too, with laws on liabilities and guidelines for testing. Though accidents have sometimes caused a hiatus, pilot schemes have helped engineers and policymakers understand the new technology.

Cut-throat competition at home imposes harsh conditions on individual companies, but the survivors are conditioned into becoming hypercompetitive export champions. China’s robotaxi operators compete with each other and with cheap human-driven taxis in an economy gripped by deflation. New technologies receive subsidies that ultimately come out of the pockets of its underpaid people. Many lossmaking enterprises will not survive the resulting price wars. But those that do will look overseas to make money.

A new wave of Chinese low-cost innovation will therefore wash around the world. It will do so in different ways. China’s cheap medicines could bring benefits, and particularly to the developing world. But for its companies America’s lucrative market, which is the source of 70% of global pharma profits, is the juiciest prize. And China’s importance for the pipelines of Western drugmakers means that the relationship could even be symbiotic. Robotaxis, by contrast, are likely to follow the more usual path for China’s tech exports. They are blocked by America, which has its own industry and acute security concerns, but will probably gain a foothold in other places, where domestic efforts at autonomy lag far behind.

How should the rest of the world respond? The competition risks hollowing out Western economies. Where there is evidence of Chinese dumping and subsidies, counter-measures against Chinese exports are justified and necessary. Where there are security risks action is justified, too. The data collected by robotaxis could pose a surveillance threat; Chinese pharma has suffered corruption scandals. Yet knee-jerk protectionism in the name of security or safety would be a mistake. Blocking or limiting the fruits of Chinese innovation would deprive consumers of the benefits of cheaper and better drugs and transport at a time when voters worry about affordability.

That is why it would be better for Western economies to rethink how innovation works at home. It is tempting to be fatalistic about China’s rise—to conclude that its dominance over the technologies of the future can be achieved only through authoritarian diktats and wasteful handouts, and that democracies therefore cannot follow in its footsteps. But the inventiveness of China’s private sector and agility of its regulators have been crucial ingredients, too. Here, alas, the West is going in the wrong direction.

America has scale and the deep pockets to compete. But in many states, particularly Democratic ones, regulators are blocking or stalling autonomous vehicles. The government is waging war on universities and cutting funding for basic research. As in other Western countries, it is hostile to immigrants, including gifted ones. In drugs, as China’s share of clinical trials has risen, Europe is losing ground. Its economies desperately need to integrate further so that they can finance and develop new technologies. There too, regulators often prize safety at the expense of risk-taking and experiment.

Nothing says that China must own the future. But if the West wants to compete in self-driving cars and medicine, let alone EVs, solar power and other vital technologies, it must learn the right lessons from China’s rise. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Without ambitious reform, the country will not thrive

This bodge-it budget does not give Britain what it needs Without ambitious reform, the country will not thrive November 27th 2025 BRITAIN IS in alarming decline. Its paltry productivity growth, high borrowing costs and incoherent economic policy are bad enough. But the country also risks the collapse of the political centre ground. The combined polling share of the populist-right Reform UK and populist-left Green parties now exceeds that of the Labour and Conservative Parties, the duopoly that has dominated British politics for over a century.

The brutal truth is that eventually, one way or another, radical change is coming to Britain. Either today’s centre-left government will choose the dramatic change that fixes the economy, or change will be forced upon the country by the financial markets or by voters stampeding towards the extremes.

This was the backdrop to the budget, presented on November 26th by Rachel Reeves, the chancellor of the exchequer. It is why this should have been a moment of radicalism by choice. Instead Ms Reeves offered a bodge job. The government seemed immobilised by its peril. Compounding her administration’s earlier mistakes, the chancellor failed utterly to lessen Britain’s economic and political vulnerability.

The immediate task was to restore fiscal credibility after official forecasts were downgraded to reflect, at last, Britain’s dire productivity trajectory. In attempting to accomplish this, the chancellor portrayed herself as a paragon of prudence. It was, after all, the second year in a row that she was filling a hole in the budget, not entirely of her own making, to meet her targets.

Compared with Reform and the Greens, Ms Reeves is indeed prudent. But that is no standard at all. With the deficit still gaping at 4.5% of GDP, Ms Reeves succumbed to her own worst instincts and those of her backbenchers by increasing borrowing, relative to her previous plans, for four years (even by the old growth forecast). Only in April 2029 does her extra fiscal consolidation bite. Even if she sticks to those policies in later budgets, her government will by then be at the end of its term. It may already be out of office. Meanwhile, the chance that Ms Reeves will have more holes to fill is alarmingly high: officials gauge the probability of meeting one of her debt targets as just 52%.

The consolidation was backloaded for two reasons. First, Labour chose to quench the thirst of its backbenchers for more spending. Ms Reeves rightly abolished a crude rule restricting parents’ benefits to two children. But she balked at offsetting this by spending less on Britain’s coddled pensioners and the many benefits claimants who have recently gamed the system. Since coming to office, Labour has tried and failed at both reforms, and has displayed little appetite to try again. Ms Reeves crowed over a projection that one Labour reform would get 15,000 people off benefits and back to work. That is feeble. Since 2019 disability-benefits claimants in England and Wales have increased by 1.2m (40%).

The second cause of delay is that the government was too timid to raise headline rates of tax, which would have violated a manifesto pledge. Instead the chancellor extended by three years, beyond 2027-28, a freeze on tax thresholds, meaning that inflation will fill the coffers only gradually. Eventually there will also be a new tax on pension contributions, one of many minor new levies, most of dubious merit.

If and when taxes do catch up with spending, they will reach 38% of GDP, the highest in the post-war era. That is roughly the same as Germany, higher than Spain and not far off Norway and Sweden. This is not all the chancellor’s fault: Britain is ageing and it needs to spend more on defence. Yet she was careless about incentives to work and invest. The tax system’s many high marginal rates and cliff-edges remain, and Ms Reeves added to the complexity. A new levy on expensive homes might have been welcome but for its poor design. The tax treatment of savings will become even more fiddly, with an exemption for over-65s that is a handout to the old. Gambling taxes will go up, but bingo taxes will be scrapped.

The budget thus followed a pattern of obfuscation and superficiality that is well-established, but increasingly costly. Chancellors tinker while the country stagnates. That a Labour leadership with a working majority of 169 has to behave in the same unserious way reveals its staggering political mismanagement. This started in 2024 with its ham-fisted attempt outside the normal budget process to save a small amount of money by withdrawing an annual cash handout to pensioners.

The tragedy is that Britain’s economy has plenty going for it , if only it were better run. The country is younger, and ageing more slowly, than other large economies in Europe. It is a relative front-runner in adopting AI. Its labour market is more flexible (albeit getting less so under Labour). The belt-tightening needed to stabilise its debt-to-GDP ratio is about a third smaller than in neighbouring France. There is no immediate economic crisis, by contrast with deindustrialising Germany. Its problems—chiefly high housing and energy costs—are long-running and there is no mystery about how to alleviate them.

In 1945, 1979 and 1997 British governments remade the social contract with ambitious reforms that were often emulated overseas, including William Beveridge’s welfare state and Margaret Thatcher’s privatisations. In contrast, Labour’s talk on reform runs far ahead of its actions . Its housing policy has been timid and it has no solution to the economic drag from Brexit. On energy prices, which are among the highest in Europe, the budget’s big idea was to shift costs around, not bring them down.

After this budget, the drift towards populism will surely continue. Reform, led by Nigel Farage, has been moderating as power beckons, but is untested and vague. The Greens are led by Zack Polanski, who once agreed to enlarge a woman’s breasts using hypnosis. He now promises voters a gobbledygook fiscal rule by which “Inflation doesn’t go higher than the skills and resources that we have in our economy.” Charlatans can’t solve Britain’s problems. Neither, it seems, can Labour. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

In a time of higher inflation, a falling yen and rising bond yields make a noxious blend

Japan’s big-spending Takaichinomics is ten years out of date In a time of higher inflation, a falling yen and rising bond yields make a noxious blend November 27th 2025 Tourists in the bars of Tokyo are rejoicing. Visiting Japan was once a mightily expensive endeavour; now it is cheaper than ever. The yen has fallen by 9% against the dollar in the past six months, and has never been weaker against the euro in the single currency’s 27 years.

The yen is not the only thing declining in value. Japan’s long-term government bonds have slumped in price, raising their yields. Those maturing in ten years now yield 1.8%, up from around zero for much of the period between 2016 and 2021. Yields on 30-year bonds have risen to 3.3%, the highest such since long-dated debt was first issued in 1999. Investors are becoming more fretful about the big-spending instincts of Takaichi Sanae, Japan’s new prime minister.

Ms Takaichi has announced a supplementary budget of ¥17.7trn ($113bn). Although that is a small share of GDP, it sends a bad signal. She has also been an outspoken critic of the Bank of Japan’s modest increases in interest rates. In an era of higher inflation and higher bond yields, her policies are as out of date as tired reboots of Hollywood franchises.

The market dynamic Japan now faces—yields up, currency down—is becoming increasingly familiar. It used to be associated with troubled developing economies, which suffered in this way when foreign investors dumped local assets and exited their foreign-exchange positions at the same time. But it has spread to rich countries, too. In 2022, during the short-lived tenure of Liz Truss, British gilt yields surged and the pound slumped, as some pension-fund strategies blew up. Earlier this year, investors sold American Treasuries and the dollar as they worried about Donald Trump’s erratic trade policy.

Japan’s enormous stock of government debt means that even small rises in bond yields translate into surging interest bills. In recent years the country avoided trouble because its immediate fiscal position had been improving. At around 1.3% of GDP this year, its budget deficit is much smaller than those of Britain or America. Inflation, which is currently running at around 3%, has helped reduce the government’s net debt to 130% of GDP, down from 162% five years ago.

That improvement has come at the expense of consumers’ purchasing power, especially hurting those on low and fixed incomes. And it is unlikely to last. The imf expects Japan’s deficit to rise to around 4.4% of GDP by 2030, well above the country’s predicted growth rate. Spending on defence and an ageing population, and rising bond yields, will start to take a toll.

So far, there have been few signs of financial distress akin to those seen in Britain during the Truss episode. Indeed, that precise form of blow-up looks less likely in Japan, because many of its biggest investors, such as its life insurers, combine unhedged foreign assets with yen-denominated liabilities, meaning that they benefit from a falling currency. But other risks could surface. One danger is a loss of faith in Japan that translates into disruptive capital flight. Whereas the Bank of Japan has been reluctant to raise interest rates decisively, a more protracted sell-off would spur it into action, regardless of Ms Takaichi’s objections. The finance ministry may have to use some of the country’s $1.3trn in foreign-exchange reserves to defend the yen, too.

Ms Takaichi says that she is following in the footsteps of the late Abe Shinzo, who as prime minister a decade ago promised to combine structural reform with monetary and fiscal stimulus. In reality Abe proved to be much more fiscally conservative than his rhetoric suggested. Moreover, the yen is no longer overvalued, and Japan is no longer trying to escape prolonged deflation. As the economic picture has changed, so should the prescription. In a yields-up, yen-down world, Ms Takaichi’s big-spending, low-rate ambitions are storing up more trouble than they are worth. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The West should heed Iran’s call to restart nuclear talks

Iran’s reformists extend a hand The West should heed Iran’s call to restart nuclear talks November 27th 2025 Visit Tehran, as The Economist just did, and you might expect to find Iran’s rulers huddled defensively. It has been a brutal year for an unloved regime. A 12-day bombing campaign in June saw Israel, aided by American B-2s, pummel the country’s nuclear sites. Iran’s homegrown uranium-enrichment programme remains under rubble. Israeli strikes killed many senior military men and nuclear physicists. Walk around the city and scars from those attacks are still visible. Plaques commemorate the dead.

And yet Tehran’s leaders sound eager to open up to the world . In an interview, Abbas Araghchi, the foreign minister, called for talks to resume with America’s envoy, Steve Witkoff. He claims negotiations over peaceful uranium enrichment were about to bear fruit just before the missiles flew. A deal could include a proposal for outsiders, even Americans, to oversee peaceful enrichment on Iranian soil. On a visit to Washington, Saudi Arabia’s de facto leader, Muhammad bin Salman, is thought to have delivered a similar message from Iran to Donald Trump.

How should outsiders respond? Sceptics see only duplicity from a regime with a rotten record. Undoubtedly Iran wants time to restock supplies of its most effective conventional missiles. (The fear in Tehran is that Israel’s attacks will resume before its prime minister, Binyamin Netanyahu, faces elections next year.) Some see a bigger risk. Polls suggest that ordinary Iranians have been consistently keen for their country to get a nuclear bomb. What if scientists and weapons experts, making use of hidden enrichment sites, now dash to do just that, with talks as a smokescreen? Impossible, retorts the foreign minister. He claims, though others dispute it, that all 400kg of Iran’s highly enriched uranium is safely under rubble. A scramble for a weapon is out of the question, he says.

Sceptics are right that talks come with risks. Yet missed opportunities also bear a cost. Mr Trump now says he is “totally open” to a deal, even though he scrapped the last one, struck in 2015. His change of heart, if real, may be an acknowledgment that bombing Iran into giving up its nuclear ambitions, knowledge or capacity is not a permanent solution. He should make clear to Israel that a further round of bombing is unacceptable as long as talks remain possible.

Iran’s regime is getting weaker abroad, as its proxy militia forces in the region are diminished. It has softened some old rivalries, including with Saudi Arabia. At home, too, the regime in some ways is getting less extreme. The despised morality police have given up enforcing a law that women must wear the hijab. Clerics have less sway. Official appeals to Shia Islam as a uniting force are less strident, replaced by use of nationalist, Persian symbols. The supreme leader, Ayatollah Ali Khamenei, agreed to the 2015 nuclear agreement to keep uranium enrichment within strict limits. He looks ready, again, for his government to engage with the West. Yet he is 86. After his death a battle for succession could bring a new shift in power between reformists and hardliners. If the revolutionary guards prevail, they may prefer isolation to detente, as their front companies profit under sanctions.

In their different ways, all these factors offer an unusual opportunity to put relations between Iran and America on a new footing. Engagement could make the hardliners in Iran less powerful; certainly, another round of diplomatic hostility will benefit them. For now, a window is open. Mr Trump should send an envoy to Tehran to learn what sort of deal, if any, might be struck. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Where the loosening of rules and tolerance of corruption will lead

Welcome to Anything Goes America Where the loosening of rules and tolerance of corruption will lead November 20th 2025 WHEN HARRY TRUMAN left office he had many opportunities to get rich. He turned them down. “I could never lend myself to any transaction, however respectable, that would commercialise the prestige and dignity of the office of the presidency,” he said. The man who had given the order to drop two atom bombs lived on income from his memoirs and an army pension worth $1,350 a month in today’s money.

What a sucker! Had he been president in the 21st century, Truman could now be flying private to paid speaking engagements, soliciting donations to his foundation from foreign governments and watching his daughter serve on company boards and his former staffers run their own lobbying shops. Presidents reflect the mores of their times . Truman’s instinct to follow self-imposed rules was characteristic of 1950s America. What, then, are America’s rules in 2025, when the president has accepted a Boeing 747 from one country seeking his favour and a $130,000 gold bar from another, and when his family has struck cryptocurrency partnerships with foreign governments?

This is the Anything Goes Era in America. It did not start with Donald Trump, but he has upped the tempo and removed constraints that once held others back. Skirting the rules is all right if you have political protection. Wealthy individuals may rest easy knowing that their tax returns will not be audited. The Department of Justice has dropped prosecutions of politicians for corruption. Its public-integrity unit has been gutted; the Foreign Corrupt Practices Act, a post-Watergate piece of good-government reform, has in effect been shelved. Past presidents have pardoned donors and relatives, but only on the eve of leaving office. Recipients of Mr Trump’s clemency this year include a cryptocurrency mogul jailed for money-laundering and the son of someone who gave his political movement $1m.

The way the president’s family members have enriched themselves in his second term would have astonished Truman, but it is small print in a $30trn economy. That is not true of tariffs, export controls and mergers, where Mr Trump’s power and personality make it almost a fiduciary duty for company bosses to seek his good graces. Donors to the new White House ballroom, where the East Wing once stood, include firms whose main business is government contracting and those seeking regulatory approval for mergers.

When there is one decision-maker and he often changes his mind, it is worth spending a lot to win his favour. Washington lobbyists used to focus on Congress. Now many of them ignore lawmakers and instead sell to clients the impression that they can influence the president or his political movement. All this eats away at the rule of law. Did the administration approve a merger, or grant an export licence, because it was in the national interest? Or because the company bought the president’s goodwill? When anything goes, nobody knows.

It is easy for Mr Trump’s opponents to be shocked—shocked!—at the discovery that people love money and power, and that when mixed together they are intoxicating. And his supporters are right that there can be economic benefits when governments refrain from aggressively enforcing some rules. It may make it easier for companies to operate and foreigners to invest, without worrying that an overzealous bureaucrat will nail them for some petty infraction.

Yet this argument can lead somewhere dismal. All advanced economies have strong laws and expectations that they will be applied impartially. There is no example of a big, mature, wealthy democracy smiling on public corruption and treating rules as arbitrary. So although the eventual costs are uncertain, it is plainly harder for an economy to thrive in the long run when the most important question for a boss is: “Do you know the president?”

The best parallels are found in some emerging markets, where big men rule by whim and companies must suck up to succeed. Or in America’s past, before the rules and habits that until recently promoted clean government were set out. But the Anything Goes Era is different from the Gilded Age or the 1920s, both moments when a dash of political corruption went along with technological innovation and economic growth. Then, politicians stole or skimmed money off contracts to buy political support. That is not how it works now. Outright theft from government appears to be rare. The president does not need to buy his party’s loyalty, since the rank and file love him and Republican lawmakers fear him.

There are other differences, too. In the 1920s federal, state and local government spending amounted to just 5% of GDP, compared with 36% now. In the Gilded Age the presidency was even more marginal to the lives of Americans. The republic has had florid political corruption scandals before. What is new is the mix of a bossy, gargantuan state with the perception that it can be bought.

Surprisingly, the president appears to pay a puny political price for his self-dealing, or the loosening of rules that accompanies it. Partisanship means that if Democrats say something is crooked, MAGA types conclude that it must be fine. The other side has enough examples of grubbiness—think of how President Joe Biden’s family took advantage of his position, or the Clinton Foundation received money from Qatar—to make what Mr Trump is doing seem different only in degree.

That is mistaken. And to assume partisanship gives unlimited permission to abuse or suspend rules is too pessimistic. Good-governance reforms have followed each era of excess: the Federal Corrupt Practices Act after the Gilded Age, the Ethics in Government Act after Watergate. Ten years ago a man ran for president denouncing Washington insiders and promising to drain the swamp. That is still one of the great themes in American politics, much more persuasive than warning that liberal democracy is under threat. The president has given his opponents a solid-gold opportunity to use it. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

If it does not, China will exploit the continent’s weaknesses

To avoid crushing change, Europe must take control of its destiny If it does not, China will exploit the continent’s weaknesses November 20th 2025 FOR DECADES the European Union took quiet comfort from the belief that it held the key to the future. True, China dominated manufacturing and America had the biggest armies, but in the realm of law and regulation the world’s superpower was in Brussels. During an era of globalisation, only the EU understood the alchemy of transmuting nation states into blocs that are greater than the sum of their parts.

Today, no such comfort is to be had. China is not just dumping exports and subsidising its companies, it is also out-competing and out-innovating big European industries, including carmaking . Last year Germany’s trade deficit with China stood at €66bn ($76bn); this year it could widen to over €85bn, around 2% of GDP. Alarmingly, China is exploiting Europe’s dependence, weaponising embargoes or the threat of them in chips and rare earths. This comes as President Donald Trump has cast doubt on America’s commitment to guarantee the security of NATO. As if that were not bad enough, Mr Trump has also exploited Europe’s lingering military dependence, to impose a trade deal that Europeans hate.

The EU was designed to flourish in a predictable world of rules and procedures. Today, it is caught between two snarling silverbacks asserting the law of the jungle. In talks between America and China that have big consequences for Europe’s own economy, it is being treated with contempt . If Europe is not to drift into irrelevance, it urgently needs to find a new, tough-minded way of using power.

So far, this ambition is provoking two very different reactions—and unfortunately, both could backfire. In Brussels and some capitals the talk is of using trade protection and industrial policy to shore up strategic manufacturing. Some industries are indeed strategic, but the justification of national security risks everything from grain to timber being protected, which would only accelerate Europe’s decline. Even when tariffs are justified, they are a tax on Europe’s already overtaxed consumers and, as duties on electric vehicles have shown, they may not succeed on their own terms.

For their part, Europe’s populist-right parties are riding a wave of dissatisfaction with the continent’s elites. Brussels, the populist leaders say, is robbing European economies of dynamism, as well as sovereignty. They believe the remedies for Europe’s lethargy lie in national capitals. Yet even if no country follows Britain out of the EU, a breakdown of co-operation in Brussels would create a toxic brew of stagnation, recrimination and fragmentation. That would lead the EU down a perilous path: in a lawless world there is strength in numbers.

What, then, should Europe do? For a start, it can still gain from being the defender of rules. Even if might is right for America and China as they flout global norms, many smaller countries understand that they will benefit from a less uncertain world. The EU, by virtue of its huge market and its expertise, has convening power, especially in trade. It should set itself up as the champion of like-minded countries that want to forge ahead without America, which accounts for only 16% of global trade. Talks with India and the five members of Mercosur have until recently been agonisingly slow. Early talks with the CPTPP, whose members are natural EU allies, deserve a greater sense of urgency. Exporters in the German Mittelstand are already finding that growing markets like India and Brazil are compensating for the decline in Chinese demand.

Europe can still be tough. Under trade rules it can act against Chinese dumping and subsidies. It was foolish for Europe’s carmakers to depend on a single supplier of chips—especially after seeing the harm of Germany’s reliance on Russian gas. Ursula von der Leyen, president of the commission, has promised to act after China’s rare-earth restrictions, though that will take time and money. China may retaliate against firms that stockpile components with rare earths: all the more reason to diversify suppliers fast. If need be, the EU should use its “anti-coercion instrument”, which allows countermeasures, including curbs on exports vital to China.

A second task is for European countries to make better use of the power they have, by integrating their economies. The centrist parties still in office are scared that this will play into the hands of the populist right. However, inaction is a policy too, and leaders’ bickering and timidity only vindicate the complaint that the ruling elites are out of ideas and that they lack the competence that is supposed to be their selling-point.

By failing to integrate, the EU is leaving a vast sum of money on the table. A single market that was designed for goods is failing to help economies dominated by services. Europe talks about deregulation with great gusto, but the urge to regulate is usually stronger . Governments have dithered over blueprints for boosting Europe’s competitiveness, notably the report produced last year by Mario Draghi, an Italian grandee, fearful that such moves will cost them influence or upset this or that interest group. And with much work to do on integrating financial services and energy markets, politicians should resist the voguish fetish for manufacturing. Deindustrialisation is not an idle concern, but factory jobs would be falling even without Chinese competition.

To be most effective, these measures will require reform at home. Welfare is too expensive and bureaucracies too inefficient. Growth and competitiveness are hampered by regulation. Planning is often too vulnerable to challenge. The cost of energy is a tax on manufacturers.

To many people in Brussels, all this will sound like an impossibly tall order. It is easy to say what needs doing, but hard to overcome the barriers to 27 independent countries acting in concert. That leads to Europe’s last and perhaps the greatest task. Awake to the threat, its leaders need to persuade their voters that change is coming one way or another. Either Europe grabs hold of its own destiny or China and America will force crushing change upon it. The choice is Europe’s. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

After a decade of rises, there are now far better tools for fighting poverty

Why governments should stop raising the minimum wage After a decade of rises, there are now far better tools for fighting poverty November 20th 2025 It is easy to see why politicians like raising the minimum wage. Short of cash yet keen to fight inequality, they have seized on a tool of redistribution that costs governments little and wins votes. In its budget on November 26th Britain is likely to raise the minimum wage, which sits at 61% of median income, up from 48% a decade ago. Germany introduced a minimum wage only in 2015; by 2023 it had crossed 50%. And although America’s federal rate of $7.25 an hour has not changed since 2009, many states and cities controlled by Democrats have raised their pay floors far higher. The average effective minimum wage is around $12 per hour; the highest is over $21.

In one respect the surging minimum wage is a triumph for economists. Having originally been sceptics, they embraced the policy around the turn of the millennium, arguing that wage floors did not eliminate jobs as they once feared—a finding that the experience of the past two decades seemed to confirm. Yet as we report this week, just as governments are championing the consensus, scholars are getting cold feet. A growing body of research suggests that minimum wages distort economies in ways that do not immediately appear in jobs numbers.

One worry is that it takes time for minimum wages to kill jobs. Evidence from a big hike to Seattle’s pay floor in 2015 and 2016 suggests hiring at the bottom end of the labour market slowed by 10%, even though existing workers were typically not laid off. Another is that higher minimums degrade jobs rather than destroy them. When employers must pay more, but can still hire easily, they may cut corners elsewhere. New research finds that big increases in the minimum wage are associated with shorter or less predictable working hours, more workplace accidents and fewer perks such as health insurance.

A final risk is that early success breeds overconfidence. Moderate minimum wages can, counterintuitively, make jobs more abundant, by offsetting the bargaining power of big employers, who would otherwise restrain hiring to suppress pay. But the more governments embrace big hikes, the more likely they are to eliminate jobs—just as a big enough tax rise will reduce revenue. One recent peer-reviewed estimate puts the average American minimum wage that corrects for employer market power at under $8.

Beyond that, the minimum wage is a crude and wasteful tool for redistribution. Many minimum-wage workers are not poor, but live with higher earners. And when firms raise prices to offset their steeper costs, it is the poor who suffer most—more so than from sales taxes, according to one paper.

Politicians should beware these effects. Although raising minimum wages invariably polls well, electorates everywhere are also angry about soaring prices and a crisis of affordability. There is a danger of a doom loop in which employers’ higher costs are passed on to consumers, making life still less affordable, including for the very workers governments are trying to help. Zohran Mamdani, the mayor-elect of New York, has promised to raise the minimum wage from $16.50 today to $30 by 2030. Prices would rise significantly as a result, making an already expensive place to live even dearer.

There are better ways to help low earners. In-work tax credits are better targeted towards the poor and, if paid for with growth-friendly taxes, less harmful to the economy. They may lack the appeal of minimum wages, the costs of which are well hidden. But after a decade of aggressive increases, the responsible option is not to go higher still. It is to stop. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Outrage is justified. Letting Vladimir Putin win would be disastrous

Don’t let a scandal undermine the defence of Ukraine Outrage is justified. Letting Vladimir Putin win would be disastrous November 20th 2025 An intelligence officer likens it to an atomic bomb exploding in Volodymyr Zelensky’s face. A scandal involving kickbacks and money-laundering centred on Energoatom, a state-owned nuclear-power agency, is fast becoming the worst crisis Ukraine’s president has faced since Russia invaded his country almost four years ago. Two ministers have already been removed, one arrested; more high-level casualties seem certain. For Ukraine’s Western supporters, the news is infuriating. For ordinary Ukrainians—whether fighting on the front or living under daily Russian missile and drone attacks—it is far worse. While their country is engaged in an existential struggle, bigwigs are alleged to have misappropriated huge sums, perhaps $100m. If guilty, they have deprived their own troops of resources.

Outrage is justified. But it is vital to understand what this scandal means—and what it does not. First, the graft it reveals is not new. Ukraine, though far less corrupt than Vladimir Putin’s Russia, has a long history of sleaze. The Western mission to encourage reform was always destined to be slow. The effort predates Mr Zelensky and will outlast him.

Second—if you squint—the scandal contains a glimmer of good news. Despite Mr Zelensky’s clumsy and quickly reversed attempt to curb their independence in July, the country’s anti-corruption agencies appear able to do their job. That is precisely what Ukraine’s supporters have hoped to see, and today’s revelations may end up strengthening them.

Third, at least for now, Mr Zelensky himself is not directly implicated, though all bucks stop at his desk and one of those named is his former business partner. His position is clearly damaged. His chief of staff, Andriy Yermak, is now under pressure and may be sacrificed. Mr Zelensky must do a much better job of fighting corruption to maintain morale at home and support abroad. And if the scandal were to render his position untenable, so be it. At the war’s outset he proved himself a hero by refusing to flee, but no leader is indispensable. Britain changed prime ministers in both world wars; America fought on to victory after the death of FDR in April 1945.

Yes, the danger that this will poison support for Ukraine is real. Details emerged this week of a “peace” plan that would give Mr Putin much of what he wants and severely weaken Ukraine. It is not yet clear how seriously Donald Trump’s administration views this proposal. But critics of Ukraine in the West—from America’s MAGA Republicans to European populists—have seized on the corruption scandal as proof that Ukraine is unworthy of support. They have long hunted for an excuse to justify throttling aid or normalising relations with Moscow. This affair gives them a superficially plausible one.

But only superficially. Viewed through a geopolitical lens, this scandal does not change anything. Ukraine is not, and never has been, a model of clean governance. That is not why the West has spent some $400bn—and counting—to help defend it. Were Western support to falter, the only winner would be Mr Putin. He would be closer to crushing Ukraine and turning it into an even more corrupt client state. If that were to happen, the eventual cost to Europe (and to America, should it continue to honour its NATO commitments) would be vastly higher than the cost of continuing to support Ukraine.

A victory for the Kremlin there could mean a nation of over 30m in its thrall on the EU’s doorstep, awash with weapons and bitterness. Mr Putin might turn his attention towards NATO or Moldova. There could be huge refugee flows. Supporting Ukraine is not an act of selfless principle, but an exercise in hard-headed realism. The defence of Ukraine is the defence of Europe. If the profiteers are guilty, they deserve to rot in prison. But the West must not let a nasty scandal blind it to the greater danger that looms from Moscow. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Some rules introduced after the financial crisis have gone too far

Mortgage lending in America is seizing up. How to revive it Some rules introduced after the financial crisis have gone too far November 20th 2025 The American mortgage market is shrinking. After years of rising house prices and dwindling lending, the value of mortgage debt as a share of the housing stock is at its lowest in 60 years. To those who remember the global financial crisis, when troubled housing loans blew up the banks, this may sound like good news. In fact, it is a cause for concern. Many families are being needlessly locked out of homeownership. Labour mobility has slowed, as homeowners stay put. And because modest, single-family homes have fewer prospective buyers, fewer of those properties are being built. America’s mortgage market needs unclogging.

The surging interest rates of recent years are partly to blame. During the pandemic homeowners rushed to refinance at record-low interest rates. Now that rates are higher—the 30-year mortgage rate stands at 6.2%, compared with 2.7% in early 2021—they are loth to move. The Federal Housing Finance Agency (FHFA) has found that the lock-in caused by higher rates cut house sales by 1.7m between mid-2022 and mid-2024.

That is not the whole story. Mortgage activity was depressed long before rates began to rise, because of post-crisis regulation, especially for smaller loans and borrowers with average or below-average credit scores. Mortgage lending to those with credit scores of 760 and higher, above the average of 705, now accounts for two-thirds of the total, more than twice the prevailing share of just over two decades ago.

In response to the drought, the Trump administration has floated various ideas. One of them is a side-show. The president and Bill Pulte, the head of the fhfa, have both enthused about 50-year mortgages. But ultra-long loans would leave homebuyers paying off mortgages into retirement, and would worsen the lock-in effect when interest rates rise, gumming up the housing market further.

Mr Pulte also says the administration is studying portable mortgages, which are a better idea. Portable loans, which are common in countries including Britain and Canada, allow homeowners to take their mortgages with them when they move house. It could help ease the part of the problem caused by high interest rates, and boost mobility again.

More is needed to revive the market. After the financial crisis, lenders’ fees were capped, and standards for assessing a borrower’s ability to repay were tightened to the point that issuing loans would often be unprofitable. Many borrowers with less regular forms of income, such as freelance workers, are now locked out of the market. Even credit unions—hardly the ravenous capitalists of Wall Street—are calling for rules to be changed for loans below $100,000, which are now all but impossible to make.

At the same time, owner-friendly rules at the federal and state level mean that it now takes a lender 608 days to foreclose on a home, up from less than 200 in 2007. In some states such as New York the average repossession takes over five years. Built-in waiting periods, lengthy court proceedings and mandated mediation have all helped struggling homeowners hang on to their properties for longer. But if lenders cannot repossess homes, they will treat mortgage debt as if it is unsecured, shutting many potential borrowers out of the market.

Ordinary borrowers with middling credit did little to cause the crash in 2007-09. But the rules introduced in its aftermath are punishing them, without making the financial system any safer. As the mortgage market shrinks ever further, now is the time to correct past mistakes. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

If the AI bubble bursts, an unusual recession could follow

How markets could topple the global economy If the AI bubble bursts, an unusual recession could follow November 13th 2025 IF AMERICA’S stockmarket crashes, it will be one of the most predicted financial implosions in history. Everyone from bank bosses to the IMF has warned about the stratospheric valuations of America’s tech companies. Central bankers are bracing for financial trouble; investors who made their names betting against subprime mortgage bonds in 2007-09 have resurfaced for another “big short”. At any sign of a wobble, such as a recent slight weekly fall in the NASDAQ index of tech stocks, speculation mounts that the market is on the precipice.

And no wonder. The cyclically adjusted price-earnings ratio of the S&P 500 index of stocks, propelled by the “magnificent seven” tech giants, has reached levels last seen during the dotcom boom. Investors are betting that the vast spending on artificial intelligence (ai) will pay off. Yet the numbers are daunting. For companies to achieve a 10% return on the AI capex projected by 2030, they will collectively need $650bn of annual AI revenues—equivalent to over $400 per year from every iPhone user, reckons JPMorgan Chase, a bank. History shows such lofty expectations are often disappointed, at first, by new technologies, even if they go on to change the world.

Yet although a market crash would surprise almost nobody, few have thought about its consequences. That is partly because the chances of a big fall in stockmarkets bringing about a broad financial crisis are, for now, slim. Unlike in the late 2000s, when widespread leverage and complex financial engineering helped cause a debt-fuelled bubble in subprime housing, today’s AI euphoria has been mostly equity-financed. What is more, the real economy has shown in recent years that it can weather shocks, from Europe’s energy crisis to American tariffs, remarkably well. Recessions are increasingly rare events .

Still, it would be a mistake to think that the effect of big stockmarket losses would stop at the wallets of investors. The longer the boom goes on, the more opaque its financing becomes . And even without financial Armageddon, a dramatic stockmarket fall might at last topple a hitherto resilient world economy into a downturn.

The root of the vulnerability is the American consumer. Stocks account for 21% of the country’s household wealth—about a quarter as much again as at the height of the dotcom boom. Assets related to AI are responsible for nearly half the increase in Americans’ wealth over the past year. As households have become wealthier, they have grown comfortable saving less than they did before the covid-19 pandemic (albeit not as little as during the subprime boom).

A crash would put these trends into reverse. We calculate that a fall in stocks comparable to the dotcom bust would reduce American households’ net worth by 8%. That could cause a big retrenchment in consumer spending. By one rule of thumb, the pullback would amount to 1.6% of GDP—enough to push America, where the labour market is already suffering, into a recession. The effect on the consumer would dwarf what is likely from any drying up of AI investment, much of which goes on chips imported from Taiwan .

The shock, and weaker American demand, would spill over to low-growth Europe and deflationary China, compounding the blow to exporters from President Donald Trump’s tariffs. And because foreigners have $18trn-worth of exposure to American stocks, there would be a mini-wealth effect globally.

The good news is that a global recession with its roots in the equity markets need not be deep—just as the downturn that followed the dotcom crash was shallow, and avoided by many big economies. Importantly, the Federal Reserve has enough room to lower interest rates to boost demand, and some countries would respond with fiscal stimulus. Yet a downturn would expose vulnerabilities in today’s economic and geopolitical landscape by further weakening America’s hegemony, undermining government budgets and worsening protectionist instincts.

Without the AI boom, the American economy would be left looking as it did in the spring: threatened by tariffs, beleaguered institutions and increasingly fractious politics (as we published this, America’s longest-ever government shutdown was only just coming to an end). In a recession America would usually be a haven. But in these circumstances—and with America taking the worst growth downgrade—a rush to the dollar, which is down by 8% this year, would not be assured. Although a weaker dollar would be a blessing for the rest of the world, for which a pricier greenback tightens financial conditions, it would strengthen the idea that American exceptionalism is not what it was. The risk to the dollar would be especially great given that 2026 could bring far greater political influence over the Federal Reserve, as our annual supplement, The World Ahead 2026 , explains.

A recession would also put indebted governments everywhere to a stern fiscal test. Central banks would cut interest rates, easing the costs of servicing the rich world’s enormous debt pile, which is worth 110% of its GDP. But deficits would widen, too, as welfare spending rose and tax receipts fell. In the most vulnerable economies, fiscal fears might cause long-term bond yields to stay put or even rise as central banks cut short-term rates—a dynamic that has occasionally been on display over the past two years. It is hard to imagine markets affording France or Britain, say, much space for stimulus.

The final consequence would be for trade. Americans spending less would almost certainly reduce the trade deficit, which would please Mr Trump. With markets in a bad way, the White House would also be less belligerent on trade. But the other global-trade flashpoint—China’s surplus in manufactured goods—would worsen. Already, European and Asian producers must compete with a glut of Chinese goods, which is growing as China exports less to America. A slowdown in America would cause that glut to swell further, sharpening the protectionist backlash. The world may be predicting an American stockmarket crash. That does not mean it is prepared for the consequences. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

A weak-currency policy is punishing consumers and storing up financial risk

The hidden risks in Taiwan’s boom A weak-currency policy is punishing consumers and storing up financial risk November 13th 2025 Taiwan is ENVIED for its exporting prowess: it is home to all of the world’s cutting-edge chipmaking. Just as extraordinary, but much less appreciated, is its towering current-account surplus, the result not just of a trade boom but of a long-undervalued currency. This aided Taiwan’s export-led rise, but it has long outlived its purpose. While manufacturers have been coddled, ordinary Taiwanese consumers have been deprived of the fruits of growth, and financial risks are building up. It is time for Taiwan to loosen its grip on its currency.

Taiwan’s vast surpluses have been years in the making. For decades its central bank, known as the cbc, has kept the currency undervalued, giving manufacturing exporters a competitive boost. According to the GDP-adjusted Big Mac index, our measure of how far exchange rates depart from their underlying values, the Taiwan dollar is 55% undervalued against the American dollar—the most in the world.

As a consequence, in this century Taiwan has run the world’s biggest current-account surplus as a share of output, once entrepots and petrostates are excluded. And lately, thanks to the artificial-intelligence boom, Taiwan’s imbalances have gone into overdrive. In October its goods-trade surplus hit a record high of 31% of GDP in annualised terms—a quadrupling since the pandemic. According to the latest data for this year, Taiwan’s current-account surplus has reached 16% of gdp. By comparison, China, the archetypal surplus economy, is running a current-account surplus of just 3%.

The problem with all this is that the cheap currency has become a costly and dangerous anachronism. For a start, it no longer delivers the benefits it once did. Taiwan is no longer an industrialising economy; its annual GDP per person now exceeds that of Japan. Its stock of foreign reserves, at $600bn, is large enough to cushion the impact of a Chinese blockade or a financial crisis. And the best of Taiwan’s chip- and computer-makers, which are responsible for three-quarters of total exports and nearly half of nominal GDP, can shrug off a stronger currency. A 20% appreciation in the Taiwan dollar would knock perhaps eight percentage points off the operating margins of TSMC, the world’s leading chipmaker—still leaving them plumper than Alphabet’s or Apple’s.

At the same time, the costs and distortions of having an undervalued currency are mounting. First, it is a tax on consumers. In an economy that depends on imports for food, fuel and goods, the cheap currency has shifted purchasing power from ordinary households to exporters. The result has been that even by export-economy standards, Taiwan saves too much and consumes too little . Since 1998 private consumption as a share of output has tumbled by 20 percentage points. A policy that was meant to help Taiwan get rich is now depriving ordinary Taiwanese.

Another distortion is that the cheap currency is inflating property prices. Printing currency to buy foreign exchange has flooded Taiwan’s financial system with liquidity and pushed down interest rates. That combination lies behind a quadrupling of house prices since 1998. And the weak-currency policy has seeded risk deep in the heart of Taiwan’s financial system—a third distortion. To recycle the proceeds of its surpluses Taiwan has leant on its life-insurance industry, which has poured nearly $1trn of households’ savings largely into American Treasuries. But that has created a giant currency mismatch, because Taiwan-dollar liabilities are being funded with American-dollar assets. An abrupt move in either currency could wipe out the insurers, threatening a financial crisis.

Why, then, has the policy persisted? One reason is the export lobby. Taiwan’s chipmakers could withstand a stronger currency, but existing policy has propped up a cohort of manufacturers that subsist on thin margins and would be severely hurt by an appreciation. Such firms make up perhaps 70% of manufacturing employment. Another reason is the CBC’s unusual power. Printing Taiwan dollars to hoover up foreign-currency assets has minted handsome profits, which are remitted to the government and have become a big source of revenue. Central-bank transfers make up 6% of total government receipts, compared with a rich-world average of 0.4%. This bolsters the CBC’s political authority, allowing its powerful governor to cow critics into submission (something the CBC denies).

The situation is becoming increasingly precarious. One risk is that further depreciation in the American dollar destabilises Taiwan’s life insurers, which have become too big to fail. A second danger is that American trade-surplus hawks take flight again, using tariffs and their security leverage to force Taiwan to revalue. That could happen at any time: unlike South Korea, Japan or China, Taiwan has yet to clinch a trade deal with Donald Trump. Fears of such a clash after “Liberation Day” were enough to spark an abrupt 9% appreciation of the currency against the greenback in May.

That is why Taiwan must unpick its outdated economic model—and build a better one. The CBC should gradually loosen its grip on the currency. Inevitably, the transition will be fraught with political and financial risks. Manufacturers kept on life-support by Taiwan’s export subsidy will have to scale back or shut down. Too rapid an appreciation could blow up the life-insurance industry. But these risks can be managed.

Taiwan’s government, with gross debt of just 23% of GDP, has room to help retrain laid-off workers. Insurers will suffer losses, but can manage the transition if they are given time. The CBC also has a crucial advantage: gently strengthening a currency is easier than doing the opposite, as Javier Milei is discovering in Argentina. The cbc can always print Taiwan dollars to fend off speculators pre-empting a stronger currency.

The key is for the cbc to establish a long-term path for the currency, as Singapore does. China, too, has managed a modest yuan appreciation in recent decades. And in return, ordinary Taiwanese will at last be able to enjoy more of the fruits of their country’s extraordinary export miracle. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Its latest crisis needs to spur reforms to bolster its news division

How the exasperating, indispensable BBC must change Its latest crisis needs to spur reforms to bolster its news division November 13th 2025 Most of Donald Trump’s broadsides against the news media are ridiculous. But his anger over a BBC documentary about him that aired last year is justified. An episode of “Panorama”, a venerable current-affairs show, spliced together two unrelated remarks by Mr Trump to create what looked like a call for violence on January 6th 2021. It was an egregious case of what America’s president likes to call “fake news”.

The stitch-up of Mr Trump follows a string of editorial missteps. In February a BBC documentary about Gaza neglected to mention that the 13-year-old narrator’s father was a Hamas official. In June it broadcast a live music performance featuring calls for the deaths of Israeli soldiers. The BBC’s boss, Tim Davie, was right to quit this week—but that may not be the end of it. Mr Trump says he will sue for $1bn, though he has less leverage over the BBC than he did over American broadcasters he has previously shaken down. The BBC’s critics at home have renewed calls to gut it.

Their central accusation is one of bias. The BBC’s journalism is far from “corrupt”, as Mr Trump claims, and it makes a better stab at political balance than many European public-service broadcasters. But there is some truth to the accusation of a cultural slant. Age and region have replaced social class as the main political divides in Britain, making it harder than ever for a young, London-based organisation to reflect the country’s attitudes. Surveys show that right-wing Britons are less happy with the BBC than centrists and left-wingers. Since everyone has to pay for the BBC, that disparity is a problem.

Yet much of the criticism is led by people whose preferred solution would be to get rid of the BBC altogether. That would be a terrible mistake. The BBC is one of the world’s biggest sources of original reporting. As newspapers wither and television is swallowed by streamers like Netflix that don’t do news, a future with a smaller or non-existent BBC News would be one in which less was known about the world. The BBC provides what America sorely lacks: a central repository for fact. It also plays an outsize role in debunking fake news with services like Verify—work that has seldom been more necessary.

The BBC has even greater value abroad, where it is a source of soft power for Britain and a standard-bearer of liberal values more broadly. The Trump administration has foolishly tried to silence Voice of America and cut aid to foreign news outlets—just as China, Russia and others pour resources into spreading their authoritarian ideas around the world. On Facebook the five most-followed news pages are run by Chinese outlets, pushing their version of the news in English. The BBC’s page is sixth. Cutting back now would be an act of self-harm.

That is why the BBC should be reimagined to focus on the vital public-service output that the market does not provide. In the streaming age, audiences are spoilt for choice when it comes to entertainment, so it is absurd that Britons are forced to pay for BBC shows such as “Strictly Come Dancing”. Better to turn its entertainment arm into an opt-in service and bolster its news operation with stable, arm’s-length public funding, whether from a licence fee or general taxation.

A more sharply focused BBC would be better equipped to navigate a media landscape evolving at dizzying speed. The corporation has been slowed down by bureaucratic inertia and a cumbersome governance structure. A shake-up might usefully include replacing its warring top brass with people who are interested in improving the BBC’s coverage, rather than merely defending or sabotaging it. A strong BBC is good for Britain and the world. A clumsy one will become a liability. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Claudia Sheinbaum’s security strategy is working. She has a mountain to climb

Mexico’s surprising record on murder Claudia Sheinbaum’s security strategy is working. She has a mountain to climb November 13th 2025 Donald Trump’s war on drug gangs has so far consisted mostly of blowing up small boats off Venezuela and Colombia. At least 76 people have been killed in strikes that are almost certainly illegal. The Pentagon claims that the vessels it destroys are carrying drugs to the United States. The world’s largest warship, the USS Gerald R. Ford, has just arrived in the Caribbean to join the fray (and to heap pressure on the dictatorial regime of Nicolás Maduro in Venezuela).

It should worry Mexico that its northern neighbour wields deadly force so freely against alleged drug-traffickers. For years now the country has been overrun by some of the most powerful drug gangs on the planet. They, not gangsters in Venezuela or Colombia, are the true source of the fentanyl that claims some 50,000 American lives every year—the drug problem about which Mr Trump is most exercised.

Moreover, Mr Trump’s government cares little for any distinctions between gangsters and the governments which allow them to operate within their territory, whether through collusion or incompetence. The United States labels Mr Maduro a “narco-terrorist” and sends its most powerful military assets to his shores. Mexico’s politics are riddled with drug money and mobsters, too. Mr Trump could unleash violence against the real threat on his doorstep at any moment. That would destabilise Mexico’s politics and its vital trading relationship with the United States, already assailed by Mr Trump’s tariffs.

Claudia Sheinbaum, Mexico’s president, understands that allowing extensive drug-trafficking operations to continue in her country exposes Mexico to significant peril. She also wants to stop gangs murdering around 30,000 Mexicans each year. A secure Mexico matters for its own people, for North American integration and prosperity, and to keep Mr Trump at bay. Throughout her campaign and presidency, security has been the issue that Ms Sheinbaum has emphasised most.

So Mexicans will welcome the good news. Since taking office in October 2024 Ms Sheinbaum’s government claims to have cut murders by 32% . That figure overstates the improvement, but our analysis suggests that the underlying trend is real. Arrests are up, as are seizures of weapons and drugs. The amount of fentanyl seized at the United States border is way down (although it is hard to say whether that represents a genuine reduction, or merely gangsters finding new smuggling methods). Ms Sheinbaum is the first Mexican leader in years to curb the power of the gangs.

And yet this is merely a good start on a gargantuan problem, the solving of which will run long beyond her term in office. To push the gangs back further, and fend off Mr Trump, Ms Sheinbaum must spend more on security and criminal justice. Her government spends less than 1% of GDP on them, and its plan for 2026 cuts the security ministry’s budget by 18%. That is indefensible when gangsters run much of the country.

Her government should also be more honest about the situation it faces. It has made genuine progress against gangs and the violence they perpetuate. Trumpeting cherry-picked statistics is unnecessary and damages long-run credibility.

Most difficult of all, Ms Sheinbaum must confront Mexico’s rotten politics. She has yet to investigate powerful politicians—many of them in her own party—who are credibly accused of links to criminal groups. Unless the political-criminal nexus is broken, any reduction in violence cannot last.

Mexico has plenty of other problems: creaking energy infrastructure, flaccid economic growth and a large fiscal deficit. But without consistent improvements in security, and confidence that such improvements will continue, making Mexico a better place to live and invest will be all but impossible. And if Ms Sheinbaum cannot convincingly curb Mexico’s gangs, Mr Trump may attempt to do it for her. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Pressure from America and its allies can prevent a return to fighting

How to avoid Africa’s next war Pressure from America and its allies can prevent a return to fighting November 13th 2025 Three years ago one of the deadliest conflicts of the 21st century ended when Ethiopia’s government struck a peace deal with the Tigray People’s Liberation Front (TPLF), the ruling party of the country’s northernmost region. Hundreds of thousands may have died in the brutal war that preceded the deal. Now it is unravelling. Abiy Ahmed, Ethiopia’s autocratic leader, is ignoring it and many in the TPLF and Tigray’s armed forces sound ready to return to the battlefield . Ominously, skirmishes are breaking out on the region’s southern border. Ethiopia’s army has responded with drone strikes. On November 7th the TPLF accused the government of a “strategy of extermination”.

Another war in Tigray would be a catastrophe—and not just for Tigrayans and other Ethiopians. It would intensify and expand the sprawling, multi-country conflict zone that now covers much of the Horn of Africa, creating what may be the largest area of violence and anarchy in the world. A feature of this conflict is the role of outside powers, including some Gulf states, which exert influence over their proxies. The best chance for de-escalation lies with America and these outside powers, who must push their allies to stop fighting and start talking again.

Ethiopia is home to 130m people and is among Africa’s most fissiparous and fragile states. Bloody insurgencies have raged across the multi-ethnic federation since Mr Abiy took office in 2018. Renewed fighting in Tigray would spill across Ethiopia’s borders. It could draw in Eritrea, a gulag state to the north run by a long-serving dictator, Isaias Afwerki. Mr Abiy struck a peace deal with Eritrea in 2018, winning a Nobel peace prize in the process. But relations have deteriorated. Mr Abiy wants to grab access to the Red Sea, which Ethiopia lost when Eritrea seceded from it in 1993. Many now fear a new war over Eritrea’s ports, and perhaps even over Eritrea’s independence. It is possible Eritrean troops might fight alongside the TPLF. Meanwhile Sudan, stretching alongside Ethiopia, Tigray and Eritrea, is gripped by its own savage civil war. The danger is that all these conflicts merge into a regional war, with fighters and flows of arms and refugees mixing.

It is not too late to prevent this scenario—if powerful outsiders use their clout. Mr Abiy counts the United Arab Emirates (UAE) as his most prized patron. Last year Eritrea signed a security pact with Egypt. This year it has been busily trying to bolster ties with Saudi Arabia. America has influence both indirectly through its Gulf allies, and through its relationships with Mr Abiy and Mr Isaias, both of whom want warmer bilateral ties with the superpower. Encouragingly, American diplomats have been pushing for restraint, in contrast to 2020, when America implicitly gave a green light to Ethiopia’s war on Tigray. In a visit to Ethiopia in September, Massad Boulos, President Donald Trump’s Africa adviser, discouraged Mr Abiy from pursuing sea access by force. America has also threatened sanctions on several Tigrayan officials, whom it fears are warmongering.

America, Egypt, Saudi Arabia and the UAE must push Ethiopia and Tigray to avoid war and honour the peace agreement of 2022. Mr Trump has shown a willingness to try to defuse conflicts, brokering a truce in June over eastern Congo and last month underwriting a deal between Cambodia and Thailand. Both are imperfect and fragile, but better than nothing. Mr Trump makes no secret of his desire to follow in Mr Abiy’s footsteps and bag a Nobel prize. Both men should remember it is easier to stop a war from starting than it is to end one. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

In good ways and bad

The rise of singlehood is reshaping the world In good ways and bad November 6th 2025 For most of human history, coupling up was not merely a norm; it was a necessity. Before reliable contraception, women could not control their fertility, and most were far too poor to raise children alone. Hence the centuries-old convention that, whereas a tragic play or saga ends in death, a happy one ends in marriage.

So the speed with which the norm of marriage—indeed, of relationships of any sort—is being abandoned is startling. Throughout the rich world, singlehood is on the rise. Among Americans aged 25-34, the proportion living without a spouse or partner has doubled in five decades, to 50% for men and 41% for women. Since 2010, the share of people living alone has risen in 26 out of 30 rich countries. By The Economist’s calculation, the world has at least 100m more single people today than if coupling rates were still as high as in 2017. A great relationship recession is under way.

For some, this is evidence of social and moral decay. As we report , many in the “pro-natalist” movement believe that the failure of the young to settle down and procreate threatens to end Western civilisation. For others, it is evidence of admirable self-reliance. Vogue, a fashion magazine, recently suggested that for cool, ambitious young women, having a boyfriend is not merely unnecessary but “embarrassing”.

In fact, the rise of singlehood is neither straightforwardly good nor bad. Among heterosexuals (about whom there is the most research) it is largely a consequence of something clearly benign: as barriers to women in the workplace have fallen, their choices have expanded. They are far more able than in the past to live alone if they choose, and face less social stigma for doing so. The more they can support themselves financially, the less likely they are to put up with an inadequate or abusive partner. This shift has saved countless women from awful relationships, and forced many men to treat their mates better if they want to stay together.

However, it has also had unhappy knock-on effects. Flying solo can be liberating, but it can also be lonely. Plenty of singletons say they are content to remain so, especially women. But surveys in various countries suggest that 60-73% would rather be in a relationship. A poll in America in 2019 found that, although 50% of singles were not actively looking for a partner, only 27% said this was because they enjoyed being single. Many have given up, either because they despair of finding a mate, or because they don’t rate the mates on offer.

If lots of people want to couple up but don’t, something is amiss in the relationship “market”. One problem—widespread sex-selective abortion that has led to a shortage of women and a surplus of bachelors in parts of Asia—is fortunately diminishing fast. But experts see many other obstacles.

Some think social media and dating apps have fostered unrealistic expectations (other people’s relationships look fabulous on Instagram) and excessive pickiness (most women on Bumble reportedly insist that a male must be six feet tall, thus filtering out 85% of potential matches). Another problem is the growing political gulf between young men and women, with the former leaning right and the latter leaning more to the left. Many singles insist that any partner must tick the same partisan boxes, which makes matching trickier.

Other experts point to a decline in social skills as people spend more of their lives gawping at screens. Americans of all ages socialise less in person than they did two decades ago, but the decline is especially steep among the young. Social media spread fears that women will be assaulted if they go out; and that men will be digitally shamed if a date goes badly.

Perhaps the most important factor is that, as living alone has become easier, women’s standards have grown more exacting. For many, a mediocre partner no longer seems a better bet than remaining single. Women are more likely than men to say that they want their mate to be well educated and financially solid. More men are failing to clear this moving bar, as they fall behind women educationally and the less bookish ones flounder in the job market. Men with no college degree and low earnings struggle to attract a partner; doubly so if they do not share domestic chores, or if after frequent rejection they start to dislike women, a common vice in the online “manosphere”.

Some of these problems may be self-correcting. One obvious idea is for men to grow up, do a little more housework, behave more responsibly and so turn themselves into more desirable partners. Cultural norms may impede this shift. But the prospect of avoiding lifelong loneliness and celibacy will surely serve as a powerful incentive for men to change. Many countries have been moving in this direction for years, with cleaning, cooking and child-minding more evenly split between men and women.

And yet, even in such enlightened spots as the Nordic countries, the trend towards singlehood shows no signs of abating. In Finland and Sweden roughly a third of adults live alone. At the very least, the shift is likely to exacerbate the already dramatic fall in global fertility, since single-parenting is hard and cultural taboos against it remain strong in many regions. Since young, single men commit more violent crimes, a less-coupled world could be more dangerous.

It is also possible that the relationship recession will not correct itself. A striking 7% of young singles say they would consider a robo-romance with an AI companion , and these lovebots will only get more sophisticated. AI, after all, is patient; AI is kind; it does not ask you to clean the bathroom or get a better job.

Many may worry that a world with fewer couples and children will be sadder and more atomised. Yet bemoaning the prospect will not avert it. And it is not the place of governments to overrule ordinary people’s preferences—though they should certainly try to tackle male underperformance in school. A future with far more singletons is coming. Everyone, from construction firms to the taxman, had better prepare. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

The world’s biggest manufacturer now has an interest in the world decarbonising

China’s clean-energy revolution will reshape markets and politics The world’s biggest manufacturer now has an interest in the world decarbonising November 6th 2025 The SCALE of the renewables revolution in China is almost too vast for the human mind to grasp. By the end of last year, the country had installed 887 gigawatts of solar-power capacity—close to double Europe’s and America’s combined total. The 22m tonnes of steel used to build new wind turbines and solar panels in 2024 would have been enough to build a Golden Gate Bridge on every working day of every week that year. China generated 1,826 terawatt-hours of wind and solar electricity in 2024, five times more than the energy contained in all 600 of its nuclear weapons.

In the context of the cold war, the distinctive measure of a “superpower” was the combination of a continental span and a world-threatening nuclear arsenal. The coming-together of China’s enormous manufacturing capacity and its ravenous appetite for copious, cheap, domestically produced electricity deserves to be seen in a similar world-changing light. They have made China a new type of superpower: one which deploys clean electricity on a planetary scale.

As a consequence, China is reshaping the world’s energy outlook, its geopolitics and its capacity to limit the catastrophic effects of climate change. The main reason countries have yet to decarbonise their economies is because they lack the means to do so. And that is what China is fixing. It is providing ever greater amounts of clean-energy capacity to the world at prices which are cheaper than any alternative, including coal and natural gas.

China can produce almost a terawatt of renewable-energy capacity in a year. That is enough to supply as much energy as more than 300 big nuclear-power plants. And the dynamic that created all this generating capacity is far from exhausted. China’s huge demand—it generates a third of the world’s electricity—is being met by ever more efficient production which makes the end product cheaper and cheaper. This, in turn, allows it to meet even more demand, and so on. The subsidies that started to turn this virtuous circle are increasingly beside the point; indeed, many are being withdrawn .

Thanks to this capacity—and a tendency to set itself easy targets—China has exceeded, or is on course to exceed, most of the pledges it has made under the UN Framework Convention on Climate Change since signing the Paris agreement ten years ago. The politicians, negotiators, lobby groups and hangers-on gathering in Brazil for the 30th UNFCCC’s COP summit will do so in a context shaped by China’s latest pledges to more than double the country’s renewable-energy capacity and make a modest but quantified cut in emissions by 2035. (Both targets may well be exceeded.)

As important, China is exporting its revolution to the rest of the world. America’s current government rejects renewable technologies. In Europe industry is hollowing out and voters are rebelling against expensive green policies. But it is in developing countries that the fight against climate change will be won or lost, and it is there that Chinese renewables will make the most difference.

China is now making more money from exporting green technology than America makes from exporting fossil fuels. This trend will continue simply because renewables are cheap; if you doubt the appeal, count the solar panels on Pakistani roofs. The work China does on cutting emissions at home—ever cheaper renewables, more abundant storage which makes those renewables more useful, better electricity markets, long transmission lines and all sorts of associated expertise—will thus be increasingly relevant, and sellable, beyond its borders.

This anti-emissions machine is powered by self-interest. More clean tech elsewhere lowers China’s own climate risks by reducing global emissions. At the same time it brings economic benefits. For many years countries’ economic and climate interests have often been thought to diverge, encouraging a free-rider problem in which they seek the benefits of slowing climate change while dodging its costs. Today the economic and climate incentives of the world’s biggest manufacturer and many of its export markets are increasingly aligned.

The idea of a low-carbon future built on China’s industrial capacity brings worries. For one thing, China still seems unwilling to give up coal as quickly as it might. If it committed itself more wholeheartedly to reshaping its grid infrastructure and its energy markets, and put a price on carbon emissions, it could move from renewables as an adjunct to the country’s coal-based system to renewables as the means of its demise.

For the rest of the world, the concern is security. Single-party China, under the unfettered leadership of Xi Jinping, is repressive at home and ruthlessly self-serving abroad. The way in which it exploits its advantages, such as the ones it has built up in the supply of rare earths and other critical minerals, makes the prospect of relying on it for anything valuable a frightening one.

China can allay these worries by moving larger chunks of its manufacturing base and associated technology to companies it invests in elsewhere. Ensnaring poor countries in debt, as its Belt and Road Initiative has done in some places, only hurts its own commercial prospects. But the anxieties of the fossil-fuel age—that someone, somewhere, will turn off the taps—do not apply to technologies which, once installed, produce power regardless of what their makers may have to say. Solar cells cannot be suborned in the way that silicon chips might be.

And the benefits could be enormous. Although the possibility of reducing greenhouse-gas emissions so dramatically as to limit the increase in global temperatures to just 1.5°C—endorsed in Paris—now lies firmly in the past, solar and wind offer the best hope of limiting further rises. And even if climate change is not your priority, you should be excited at the prospect of cheap, abundant clean energy and its promise to improve billions of lives in developing countries. The world needs what China has to offer. It should take it. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Moderate governors offer a better model than a charming socialist in New York

Democrats risk drawing the wrong lessons from one good day Moderate governors offer a better model than a charming socialist in New York November 6th 2025 Voters have spoken, but what did they say? The elections held on November 4th have consequences for how Minneapolis, New Jersey, New York City and Virginia are run; for electricity prices in Georgia and for the Supreme Court of Pennsylvania. They were also the first real test of whether Donald Trump’s second term is everything voters hoped for when they chose last November to send him back to the White House. Overall, Democrats did even better than expected . Yet one good night has not solved the party’s enduring problems.

Begin in New York, where a 34-year-old political novice will be handed a $117bn budget when he takes office next year. Turnout was high, suggesting enthusiasm for Zohran Mamdani and his brand of socialism. This is a big win for the oligarch-bashing left of the party. Democrats who think the answer to Mr Trump is left-wing economic populism now have a new champion. But Mr Mamdani’s victory does not answer the question of how Democrats should oppose Mr Trump , nor how they could win back power nationally. And that is because Democratic presidential candidates win New York City come what may. None has lost there since John Davis was defeated by Calvin Coolidge in 1924.

Virginia and New Jersey, which both held governors’ elections, are better places for Democrats to look for inspiration. Abigail Spanberger won in Virginia. The result was no surprise: the last time a Republican won the governorship with a Republican in the White House was in 1973. But the 15-point margin was larger than expected. The same is true in New Jersey, where polls favoured Mikie Sherrill to beat a good Republican candidate, Jack Ciattarelli, within the margin of error. In the end she won easily. That broke a streak going back to 1961, the last time a candidate won the office after an incumbent from the same party had served two consecutive terms.

Some Democrats will look at all this and conclude that New York’s mayoral election shows that voters are fired up by the policies associated with the party’s far left; that the Democratic Party is in better shape than pundits think; and that next year’s midterm elections are as good as won. They would be making a mistake.

What are the right lessons? The first is to focus on the economy and affordability, as Mr Mamdani, Ms Sherrill and Ms Spanberger all did. The second is to pick candidates who are a good fit for the places where they are running. Ms Spanberger worked for the CIA before she entered politics and Ms Sherrill served as a Navy helicopter pilot. Both are evidence of a patriotism that helps parry Republican attacks about America-hating Democrats. The third is not to run as a defender of the establishment in an era of upheaval. New Yorkers probably do not want socialism and Mr Mamdani will be too constrained by city and state law (as well as the laws of arithmetic) to give it to them. As a year ago, this election was less an endorsement of a programme than another expression of frustration.

Landing a blow on the president after a year of introspection will give Democrats relief as they look towards the midterms next year. But when that fades, they will still face the same problems. Their party is associated with policies on immigration, climate change and race that are far from the views of the voters they need to win power nationwide. By choosing a democratic socialist as one of their standard-bearers, Democrats have just aggravated that problem. Mr Mamdani’s joyful campaign made New Yorkers feel good, but his victory could make Republican strategists feel even better. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

More dollarisation would be a double-edged sword

America should not push other countries to adopt the dollar More dollarisation would be a double-edged sword November 6th 2025 When DONALD TRUMP returned to the White House there was widespread fear that his administration would seek to undermine the international role of the dollar. Today that seems like a distant memory. The administration is hailing dollar stablecoins (a kind of cryptocurrency designed to maintain a stable value) as an opportunity to expand the currency’s realm, because each coin is backed by a dollar-based safe asset. The White House is reportedly weighing whether to encourage other countries to switch to the greenback. The idea goes beyond deeply troubled economies like Argentina—the typical candidates for the policy. Even big, rich countries are becoming nervous. Officials at the Bank of England and the ECB have warned of the dangers of digital dollarisation.

The appeal to America is simple. More dollar users would reduce borrowing costs for its government and its businesses. The greenback’s primacy already reduces the returns foreigners demand to invest in America by 1-2 percentage points per year. This “exorbitant privilege” would grow as more countries adopt the dollar or more foreigners hold dollar stablecoins.

Abroad, the possibility of dollarisation can be a useful source of discipline. The dollar offers a store of value for those fleeing inflation caused by lax economic policies, such as the many Argentines with mattresses stuffed full of hard currency. The more accessible that stablecoins make the dollar, the harder it will be for governments to control capital movement and to inflate away their debt. In some places dollarisation is the only route to long-term price stability. Both Ecuador and El Salvador, which are dollarised, have enjoyed low inflation even when led by populist left-wingers.

Nevertheless, America should not pursue a pro-dollarisation agenda. In stable economies dollarisation is unnecessary; it also brings costs. Dollarised economies import the Federal Reserve’s monetary policy rather than setting their own, making it tougher to fight recessions. Because they cannot create money, it is harder to support the financial system temporarily during a crisis. A transition to dollar stablecoins could be chaotic, involving bank runs and crashes. Countries are right to defend their monetary sovereignty; and it is not in America’s interest to be blamed by its allies for turmoil.

Dollarisation also has a dark side for America. Ironically, the dollar’s status is the main reason it can run a carefree fiscal policy, with net debts of 100% of GDP and a budget deficit of around 6%. If more of the world used dollars, it would delay the moment when a fiscal adjustment is necessary. That may sound like a good thing if you are sat in the Treasury today. However, the more debt America accumulates, the worse an eventual crisis might be. America itself could face the very thing others fear—a run on its currency—but on an epic scale.

Fixing the budget beats finding more buyers for American debt. It would avoid the danger of crisis and make America’s reserve-currency status more likely to endure. It would also dodge a glaring contradiction in Mr Trump’s agenda: that a model of high debt and global dollarisation almost certainly means bigger trade deficits, which the president loathes . Inflows of capital are in large part the mirror image of the trade deficit. That is why the administration’s trade hawks are suspicious of the dollar’s global status.

It is a relief that the pro-dollar camp within the administration has prevailed. The greenback has not recovered much from the panic that followed Mr Trump’s “Liberation Day” tariffs, and investors are warier of unhedged dollar risk than they used to be. (At one point, taxes on foreign investors were on the cards.) Yet that does not mean the White House should overcorrect and seek dollarisation where it is unnecessary and unwanted. The best way to make your currency attractive is to run good economic policy at home. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Britain’s leading populist says he won’t cut taxes dramatically after all

Nigel Farage’s newfound fiscal prudence is welcome, if unproven Britain’s leading populist says he won’t cut taxes dramatically after all November 6th 2025 Two politicians tried to present themselves this week as the answer to Britain’s economic malaise. One was Nigel Farage, leader of the populist-right Reform UK party, whose previous economic plans were so unrealistic that they would, The Economist calculated, be more expensive than Liz Truss’s catastrophic mini-budget of 2022. The other was Rachel Reeves, the Labour chancellor, whose party was elected on a promise of bringing sense and competence, and which has struggled to supply much of either.

Both summoned the press to signal their U-turn. Mr Farage told his audience that the economy was in such straits that he could no longer promise to slash taxes. For a man whose pledges have included tax cuts worth an annual £100bn ($131bn), and by our calculations as much as £190bn (5% of GDP), that is a near-perfect reversal .

Ms Reeves hinted that she would raise income tax at her budget on November 26th. This is defensible, but is something her government has sworn it would not do (it also swore not to raise VAT or National Insurance contributions). “Each of us must do our bit,” she said—but she gave no indication of doing certain hard things herself, such as breaking the triple-lock, an expensive escalator for state pensions, which would offset the need to tax working people.

For once, Mr Farage seems to be reckoning with hard truths. “We are being mature, we are being sensible, and we are not over-promising,” he told the audience with his most mature and sensible-looking face. He still wants to cut taxes, but only when the economy is ready. In questions, he even said he did not rule out breaking the triple-lock. Realising that voters are fed up with politicians who keep breaking promises, he promised no more promises.

Ms Reeves, by contrast, is paying a heavy price for failing to do in opposition what Mr Farage is now doing. Instead, as power came within its grasp, Labour promised voters the impossible: jam for almost everyone and no pain for “ordinary working people”. It is an approach to public finances that has taken hold of the party . Only if growth had been unexpectedly strong, or if interest rates had tanked, could she have got away with it.

By contrast, Mr Farage’s change of tone is a welcome signal. There are still plenty of reasons to worry that a Reform government might damage Britain. But if the country is going to be run by populist right-wingers, then it is better to be run by populist right-wingers who are not spoiling for an unwinnable fight with the bond market.

Mr Farage has a long history of opportunism. If he wants voters to believe he is serious about his new role as Captain Sensible, he will now also strike through other daft economic ideas. These include threats by his deputy leader to tear up private contracts with renewable-energy suppliers and talk that Reform would erode the independence of the Bank of England and the Office for Budgetary Responsibility, a fiscal watchdog, as Donald Trump has tried with the Federal Reserve.

The lesson from this week is that Mr Farage is deadly serious about winning power. Asked to choose between fiscal credibility and fiscal populism, he has chosen credibility as the surer route to Downing Street. That shows something important about the electorate: Britons remember Ms Truss and her debacle. The fact that any leader who aspires to office must prove they will not repeat her mistakes says more about voters than about Reform. Given the state of the economy, that is something to be grateful for. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Without clarity, the missile shield risks becoming a costly, destabilising white elephant

America’s plans for a Golden Dome are dangerously obscure Without clarity, the missile shield risks becoming a costly, destabilising white elephant November 6th 2025 It has been almost a year since President Donald Trump signed an executive order promising to build what he then called an Iron Dome for America, to shield the country from drones and missiles. The project , whose name has been gaudified to Golden Dome, is not as outlandish as it sounds. Missile threats are multiplying. In recent wars Ukraine, Israel and India have all demonstrated the value of robust anti-missile defences that save lives, protect infrastructure and buy time for leaders to make better decisions. But the scope of Mr Trump’s shield remains dangerously vague. If that does not change, it could simply become a costly and destabilising white elephant.

What is known about the Golden Dome? It includes many things that already exist, such as anti-missile interceptors in Alaska and California, as well as Patriot batteries similar to the ones protecting Ukraine today. It also includes many things that were already in the works before Mr Trump returned to the White House, such as efforts to build sensors that can track missiles, interceptors that can destroy those projectiles and software to stitch all that together.

There are some new bits, too. The most important is the commitment to build space-based interceptors (SBIs), which are small missiles carried aboard satellites in low-Earth orbit. The idea is that a defender can destroy a missile as it is taking off, when its red-hot plume is easier to spot, rather than when a small warhead is streaking rapidly through space. Ronald Reagan and George H.W. Bush toyed with the idea as part of their missile defence initiatives in the 1980s, though the scheme fizzled out.

The problem with Mr Trump’s plan is that it is still unclear what Golden Dome is supposed to do. Will it modestly improve America’s ability to shoot down drones and handfuls of conventional cruise missiles fired by China towards military bases in the continental United States during a war over Taiwan? Will it parry small salvos of warheads launched by a second-tier nuclear power like North Korea? Or will it block hundreds of Russian and Chinese warheads in a full-blown nuclear exchange, neutralising their ability to threaten America’s existence?

The answers to these questions matter greatly. Experts calculate that a smallish Golden Dome, focused on parrying small incoming salvos, might cost just over $250bn over 20 years, a modest sum by the standards of America’s annual defence spending. But a full-fat version with tens of thousands of SBIs in orbit—a key factor driving up cost—could run to $3.6trn, a vast sum that would cannibalise America’s armed forces. That would not only be wasteful, but it might also induce adversaries to expand their own arsenals more than they otherwise would. A degree of mutual vulnerability is an inherent part of stable nuclear deterrence.

Mr Trump needs to set out what he aims to achieve with Golden Dome in broad terms, beyond his airy promises of blanket protection on the cheap. He should choose a modest expansion in the number of ground-based interceptors already operating in Alaska and California, provided that the system gets better at telling apart decoys from real warheads. That should occur alongside an investment in space-based sensors that can track cruise missiles and hypersonic gliders more effectively. There is bipartisan support in America for both steps. Exotic SBIs to zap missiles can wait.

Missile defence is always a balance. Too little and your country is dangerously vulnerable—more than ever in an age when even militia groups like the Houthis in Yemen can operate ballistic missiles of extraordinary range. Too much, and you provoke an arms race in which the attacker is likely to have a cost advantage. Mr Trump is right to shore up America’s defences. But he should resist the temptation to gold-plate the Golden Dome. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A fight is brewing between Donald Trump and Zohran Mamdani

The battle for New York A fight is brewing between Donald Trump and Zohran Mamdani October 30th 2025 TWO SKILFUL politicians with radical plans are about to be unleashed on America’s largest city. On November 4th Zohran Mamdani, a 34-year-old leftist, is all but assured to win New York’s election for mayor, with the promise of new social programmes paid for by the rich. Donald Trump, America’s 79-year-old president, says he will “straighten out” New York shortly thereafter, with threats to deploy more federal agents and withhold crucial federal funds.

Mr Mamdani’s proposals make for terrible public policy. Mr Trump’s plans are a more literal threat to New Yorkers and, possibly, the law. The president has talked about an escalation of immigration enforcement, bringing to his home town the aggressive tactics he has tested in Chicago and other Democrat-run cities. The two men are set for a dramatic clash, with New York as its stage and victim.

The battle for New York matters, and not just for New Yorkers. The city remains a crucial economic engine for America, home to more corporate headquarters than any other place in the country. It is the centre of finance, professional services and media, as well as a growing tech hub and a powerhouse of medical research. The result is a metropolitan area with an economy of more than $2.3trn, bigger than that of Canada and representing about 9% of America’s total.

The city is a locus of political power, too. Operatives obsess over the voting patterns of swing counties like Maricopa, in Arizona, rather than deeply Democratic Manhattan. But New York has a different kind of clout. Its donors give more to federal campaigns than those of any other city except greater Washington, DC. Not since the time of Franklin D. Roosevelt has the White House been run by so many New Yorkers, from Mr Trump himself to Steve Witkoff, his peace envoy, and Howard Lutnick, his commerce secretary. Two other New Yorkers, Chuck Schumer and Hakeem Jeffries, lead Democrats in the Senate and House, respectively. Mr Schumer faces pressure from a new generation—led by another New York Democrat, Alexandria Ocasio-Cortez.

New York also remains the country’s most enduring symbol of two American ideals: pluralism and opportunity. The city is home to more immigrants than any other in America, living alongside each other in relative harmony. It is the country’s top destination for new university graduates, who see it as the place where real life begins.

However, New York is now also under strain. The city’s fiscal model is breaking down . The top 1% of New Yorkers account for more than 40% of the city’s personal income-tax receipts. But the city no longer creates so many high-flying jobs, and some of its wealthiest residents are leaving. At the same time, life for ordinary New Yorkers is hard to afford. Median rents are more than twice the average of America’s 50 biggest cities. The cost of day care for babies and toddlers is $26,000 a year, up more than 40% in the past five years. With a shaky tax base, New York state will struggle to sustain its welfare and education programmes, which are 72% more expensive for each person than programmes in Texas.

New York’s last good leader was Michael Bloomberg, a competent mayor with the charm of a spreadsheet. But New Yorkers today hanker after a different kind of politics. Mr Trump won an unusually high share of the city’s vote in last year’s presidential election, including 37% in Queens and 27% in the Bronx. Like him, Mr Mamdani is a master of communication, with a talent for making ordinary voters feel understood. In this summer’s Democratic primary for mayor, he trounced the better-known Andrew Cuomo, a former governor. Just a few years ago, his strident criticism of Israel and Zionism would have been disqualifying. Today many voters take it as evidence of his authenticity.

Unfortunately for New York, in their different ways Mr Mamdani and Mr Trump are likely to compound the city’s problems. Mr Mamdani wants free child care, free buses, a $30-an-hour minimum wage by 2030 and a four-year rent freeze for 2m residents. His goal of affordability is worthy, but not his methods. The city’s families would surely welcome an expansion of child care, but Mr Mamdani’s proposal is wasteful. Free buses would end up as bad buses. His minimum wage would frighten off employers. Freezing rent temporarily for a subset of New Yorkers would drive up rent for others.

Paying for these proposals would require working with the state, most likely to raise taxes on the wealthiest New Yorkers, which would scare more of them away. That would push the government to raise taxes further, risking a fiscal death spiral. All the while, the underlying causes of New York’s high costs—its fealty to the public unions, overregulation, a costly and expansive bureaucracy and expensive litigation—would remain untouched.

Mr Trump represents a different and more sinister risk. He is threatening to withhold federal monies that account for 6.4% of New York’s budget. The president is not legally authorised to cancel appropriated money without the approval of Congress, but he may do so anyway—he has already used the federal shutdown to freeze $18bn in infrastructure funds. An aggressive deployment of immigration officers in New York might spur broader unrest, which could in turn inspire the president to send in the National Guard. His agenda is unilateral and, quite possibly, illegal.

As his victory has seemed more assured, Mr Mamdani has shown signs of moderating. New York must hope this is not just a tactic, and that Mr Trump decides that he will lose more by stoking unrest than he has to gain. Even so, New York and America would have better prospects if the city could be a testing-ground not for a bullying president or leftist mayor, but a pragmatist. In so complex a city, a moderate politician might show America how to unleash housing development, trim onerous rules and advance policies that create opportunity, from investing in transport to reforming schools. The fear is that New York is instead about to become the arena for a fight between two men with bad ideas. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

The bill will be huge. It is also a historic bargain

Why funding Ukraine is a giant opportunity for Europe The bill will be huge. It is also a historic bargain October 30th 2025 Wars are fought on the battlefield, but they are also trials of financial strength. In prolonged conflicts the ability and will to marshal resources and find new ways of raising cash are critical in determining who wins: sometimes they are the decisive factor. That truth is about to become all too real for Europe. Ukraine is facing a savage cash crunch. Unless something changes, it will run out of money at the end of February. This cliff edge is fast approaching, now that President Donald Trump has cut America’s financial support for Ukraine, hopes of a ceasefire fade and Russian drones smash Ukraine’s energy grid in an attempt to break its will.

Indebted, fractious Europe needs to find the money to keep Ukraine in the fight . But it would be a terrible mistake to see this cash call as merely a painful exercise in annual budgeting. Instead, it is a historic opportunity to shift the balance of power between Europe and Russia by exposing the Kremlin’s financial frailty and altering Vladimir Putin’s calculus about war and peace. It is also a chance to speed up Europe’s efforts to establish its military and financial independence from America. The bill for Ukraine is higher than most Europeans realise, but it is also a bargain.

After almost four years of war, the cost of fighting is huge. By the end of 2025, Ukraine’s military effort, defined as its defence budget plus foreign gifts of weapons and military grants, will have cost a total of roughly $360bn. This year the war effort will require $100bn-110bn, the highest sum yet, equivalent to about half of Ukraine’s GDP.

Two of the three sources of funding for Ukraine are now drying up. In February, after Mr Trump entered the White House, monthly American financial allocations to Ukraine stopped. Meanwhile, Ukraine has now borrowed as much as anyone will lend it. It has an official fiscal deficit of about a fifth of GDP; public debt has doubled as a share of GDP since before the war, to about 110%. Its ability to borrow from war-scarred households and firms at home is limited.

That leaves Europe. The prospect is exposing divisions inside the European Union. On October 23rd its leaders failed to agree on a loan to Ukraine that would be collateralised by $163bn of frozen Russian assets held in the EU’s main clearing house. Objections from Belgium, which hosts the clearing house, threaten to derail the plan. Northern countries fear that agreeing to more EU fundraising by issuing common bonds could undermine fiscal discipline across the currency bloc. France fears that fresh European funds will be spent on overpriced American weapons to please Mr Trump. Everyone worries that a blank cheque could worsen Ukraine’s corruption.

These anxieties are reasonable, but they are dwarfed by two gains that lie within Europe’s grasp. The first is a financial commitment that can expose and amplify the Kremlin’s long-term weakness. Russia has lost the lives of 200,000-500,000 troops—double the figure for Ukraine. It is also bearing a heavy financial burden on its own. Declared defence spending will hit $160bn in 2025, and state-run banks have also engaged in an immense off-budget lending spree to support the military-industrial complex. It is true that sanctions in 2022 failed to bring Russia to its knees as some had hoped. But Mr Putin’s initial war boom has now given way to stagflation, with growth at almost zero, labour shortages, hidden bad debts, inflation of 8% and interest rates of 16.5%. Another half-decade of this would probably trigger an economic and banking crisis in Russia. If Europe can demonstrate to Russia that it will underwrite the war for at least that long, Mr Putin will be cornered.

Europe’s second prize would be to become less dependent on America militarily, a necessity given Mr Trump’s wobbly commitment to NATO. Any long-term financing solution for Ukraine would help Europe build the financial and industrial muscle it needs to defend itself.

A four-year commitment would cost $390bn, composed almost entirely of donated weapons and cash to finance Ukraine’s budget deficits. This is a lot, but still excellent value. Spread across the economic resources of all NATO members (not counting America), the bill for Ukraine is affordable, with annual costs rising from 0.2% of GDP last year to 0.4% of GDP. The alternative would be for Ukraine to lose the war and become an embittered, semi-failed state whose army and defence industries could by exploited by Mr Putin as part of a new, reinvigorated Russian threat.

This newspaper supports the seizure of Russian assets, but they are $230bn short of what is needed. Given the size of the challenge Europe collectively faces, some sort of joint borrowing would be justified. Far from undermining the euro’s international status, for the EU to issue bonds collectively would create a bigger pool of common debt, deepening Europe’s single capital market and boosting the role of the euro as a reserve currency. A multi-year horizon for weapons procurement would help Europe sequence the build-up of its defence industry . In the short term Europe should have no qualms about buying the American weapons that Ukraine needs, including air-defence systems. Later spending should favour European defence firms as they develop their own systems, as well as Ukraine’s own cutting-edge defence-tech industries.

Grave problems lie ahead. Inducing despair in Mr Putin, a noble aim, might be complicated if Russia can tap China for funds. Decision-making between the EU and NATO, which includes Britain, Norway and Canada, needs to be nimbler. Safeguards against corruption are important, but must not erode Ukraine’s—and the Kremlin’s—certainty that, one way or another, the money is coming.

Europe should take heart and recognise its own strength. Its military budget is already four times larger than Russia’s; its economy is ten times larger. Far from shying away from a financial contest with the Kremlin, Europe should embrace it—and win the war. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Neither country wants decoupling or confrontation—at least, not yet

America and China have only holstered their trade weapons Neither country wants decoupling or confrontation—at least, not yet October 30th 2025 TWELVE OUT of ten was Donald Trump’s own scoring of his summit with Xi Jinping in Busan, South Korea, on October 30th. America’s president was sounding characteristically bullish. And the world should indeed be relieved that its two largest economies seem to have no desire to decouple from each other—let alone to haggle over the status of Taiwan. Either outcome would have imposed a heavy cost on Asia and the world. However, their agreement appears to be sketchy and temporary, and that means the planet’s most important relationship will continue to be built on sand.

As we write, the details of what was agreed on in Busan remain hazy—itself a metaphor for the ever-shifting nature of the underlying diplomacy . The deal was mostly a holstering of weapons, in which China agreed to postpone restrictions on exports of crucial rare earths for a year, while America will stay its tariff of 100% on Chinese goods and its threat of export controls on subsidiaries of blacklisted Chinese firms. The two sides also backed away from a confrontation over shipping. The talks made progress, too. China will once again start buying American soyabeans. America will reward extra Chinese efforts to restrict chemical ingredients for fentanyl by halving a 20% punitive tariff on all goods. Mr Trump appears open to the export of some semiconductor chips, though not the most advanced.

Given the hostility towards China of some in Washington, the deal could very easily have been worse. They urgently want America to decouple from its biggest geopolitical rival but, with this summit, the first since 2019, Mr Trump has shown that he values the commercial relationship too highly to throw it away. At the same time, the president did not sacrifice Taiwan for a heap of soyabeans.

Unfortunately, the summit also shows how much is wrong. For one thing, the agreement leaves an American tariff of 47% on Chinese goods. In the pre-Trump world that would have been an extraordinary level of protection. The terms of the agreement are also temporary—explicitly so, in the sense that many of the terms of this deal will be reviewed in a year’s time; but also implicitly, because Mr Trump sees it within his power to lash out with a tariff here or a non-tariff barrier there at any time over almost any issue.

Another source of potential conflict is the fact that, in contrast to every other country, China is more than a match for America. The Busan summit came after Mr Trump’s royal procession through much of Asia in which one leader after another showered him with praise and gifts, including a golden golf ball and a replica crown. Japan, Malaysia and South Korea all made concessions, including over market access and with pledges to invest hundreds of billions of dollars in America, in exchange for a modest reprieve on tariffs. Reliance on America for security and markets made retreat the only option.

China is different. It can withstand American pressure. It is also retaliating in areas where America is vulnerable—rare earths and soyabeans are good examples. As it embraces the combative nature of the new trading system, Mr Xi’s project to make China more resilient has been vindicated.

All that makes the Busan summit a pause rather than a conclusion. As China and America, consumed by mutual distrust, continue to tussle with each other, a row will surely break out sooner or later. The good news is that, for the time being at any rate, both sides still believe they have more to gain from tolerance than confrontation. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Lessons in public finance from the original sinner

Javier Milei’s chance to transform Argentina and teach the world Lessons in public finance from the original sinner October 30th 2025 Javier Milei is making a habit of beating expectations. When he announced a presidential run, people laughed. After he won, they said protests would scupper his reforms. When he scored early successes, they played them down. Now, after a bumpy year, the irascible libertarian has surprised the world again with a big win in legislative midterms . He must use it to revitalise his programme of radical reform.

Mr Milei’s spending cuts are perhaps the deepest and fastest ever imposed on a country through broad democratic consent. When he won the presidency, promising intense austerity, voters had not yet felt his chainsaw. Now they have: cuts so vicious that the only comparison is post-crisis Greece, where a troika of international institutions imposed austerity in the face of popular outrage. And yet the voters have backed him again. Because only some seats were contested, Mr Milei was never going to gain a majority in Congress. But he now has enough deputies to block any attempts to restore public spending; and he can build a coalition to pass further reforms.

This matters beyond the Rio de la Plata. Many rich-world governments are struggling with fiscal deficits and soaring debt. Their problems are not at Argentine levels, but rich-country leaders can still learn from Mr Milei. His success shows the power of tough-but-coherent economic messages that are proclaimed with clarity and conviction. True, blunt fiscal realism may play better with Argentines than with Europeans or Americans, who have no direct experience of the miseries of repeated bouts of hyperinflation and labyrinthine price controls. But until Mr Milei, sceptical pundits held that Argentine voters could never be persuaded to back deep cuts.

The president now has a welcome opportunity to launch a second tranche of reforms. The urgent task is to complete Argentina’s transition to macroeconomic normality. That starts with fully floating the peso. Mr Milei came to rely too heavily on an artificially strong currency to curb inflation, which hampered growth and hindered the accumulation of foreign reserves. His victory makes an orderly float possible, but the clock is ticking. After a brief post-election rally, the peso has again fallen towards the weaker limit of the band within which it is currently permitted to range.

Alongside removing the band—or at least widening it—the government needs a clear monetary policy that uses interest rates to anchor inflation. It should also accumulate foreign reserves. Do this, and Argentina could regain access to global capital markets, allowing it to roll over some of its debt. Roughly $20bn of this will come due next year.

Mr Milei must also create the conditions for growth. Liberalising labour markets and simplifying the tax system would be a good start. This would reinforce the financial reforms, boosting the economy and Mr Milei’s popularity, paving the way to dealing with tougher policies like pension reform. The president needs a coalition to pass laws in Congress, as well as the support of provincial governors. Investors want legal certainty and stability. The government’s aggression, sometimes aimed at independent institutions, must not undermine that. A cabinet reshuffle would help.

Mr Milei has a chance to improve Argentina in a way that will last long after he leaves office, by transforming the terms of political debate. Every election year markets gyrate at the prospect of a victory for the wild-spending Peronists. Argentina will not become a normal country until it has an opposition that also believes in fiscal discipline. If Mr Milei’s reforms make Argentina a more prosperous and stable place, it could force the Peronists to embrace fiscal rationality.

The path is littered with obstacles. Hubris and a bludgeoning political style may trip Mr Milei up. Yet his journey already holds lessons for the world—and it may soon offer more. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

America First need not put Africans last

The Trump administration’s approach to global health is flawed but fixable America First need not put Africans last October 30th 2025 “SELDOM HAS history offered a greater opportunity to do so much for so many,” argued George W. Bush in 2003, when launching the President’s Emergency Plan for AIDS Relief. Known as PEPFAR, it has saved more than 25m lives, mostly in Africa, through anti-HIV treatment. Today it seems like a relic: a symbol of a receding era in which rich countries, led by America, were willing to spend ever-increasing sums of money on stopping disease in poor countries.

America used to be the source of more than two-thirds of the aid destined to improve the health of people in sub-Saharan Africa. The Trump administration has dismantled the United States Agency for International Development (USAID), the main disburser of overseas assistance. It has proposed further large cuts over the next few years, as have other big donors. Although that is not the end of aid, it does mean that what is spent must be spent wisely.

Dismantling USAID has caused chaos . Marco Rubio, the secretary of state, has denied that it has caused any deaths. And since American-funded data systems have gone dark, it is hard to be sure what is happening. However, in southern Africa clinics supplying HIV patients with antiretrovirals (ARVs) have run out. Programmes that reached the most vulnerable have stopped. Elsewhere in Africa, deliveries of antimalarial treatments have been disrupted, leading to warnings of rising case numbers. Deaths from cholera have risen in places that once received American help. Vaccination drives have stalled. Food rations in refugee camps are shrinking. Some forecast hundreds of thousands, if not millions, of extra deaths. Although no one can say how many will die, it is certain the final toll will not be zero.

The better news is that the Trump administration’s “America First Global Health Strategy”, published in September, shows that it is not withdrawing entirely from the fight for better health in Africa. It aims to protect Americans from infectious disease and pledges to bypass the “wasteful” projects of NGOs. Instead it will strike deals directly with governments, most of which will reach “full self-reliance”. Having proposed that funding for bilateral health aid should be cut by two-thirds, the administration argues that it can fund “front-line” work while no longer spending on superfluous extras.

The Trump strategy gets several things right. American aid has fostered a “culture of dependency” in poor countries. A focus on specific diseases has led to “parallel” delivery systems. But the approach risks failing on its own terms. Americans will not be protected if surveillance is defunded and infections spread across borders. The poorest African countries will struggle to do more without funding to boost their health systems.

The irony is that new technologies promise to help run programmes with less bureaucracy. For instance, malaria vaccines and ARVs that need be taken only twice a year will reduce the need for the large NGO-led programmes that the Trump administration has in its sights. But these treatments still require some funding and governments will need aid to deploy them.

Mr Bush once said he was confident he could explain “how saving lives in Africa served our strategic and moral interests”. To this day, whereas most Republicans do not like the idea of spending money promoting democracy, economic development and cultural activities, more than three-quarters support American aid for saving lives. Their instincts are the right ones. When it comes to global health, America First should not mean Africa last. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

It has rebuffed America and rewritten the norms of global commerce

Why China is winning the trade war It has rebuffed America and rewritten the norms of global commerce October 23rd 2025 Donald Trump and Xi Jinping are due to meet in South Korea next week. However, it is uncertain whether they actually will. Such is the shocking state of the world’s most important relationship. For weeks, America and China have been lashing out at each other. America has tightened tech-export restrictions and threatened higher tariffs; China has wielded sanctions and restrictions on rare earths. The two sides communicate poorly . In the White House there is a belief that America has the upper hand in this test of nerves and pain-tolerance. Scott Bessent, the treasury secretary, says China is “weak”. But the reality is different.

China is winning the trade war . It has learned to escalate and retaliate as effectively as America. And it is experimenting with its own extraterritorial trade rules, thus changing the path of the world economy.

When Mr Trump re-entered the Oval Office, the defence component of his China policy was ambiguous: was he prepared to defend Taiwan and American allies from Chinese military threats or not? The answer is still worryingly hazy . But his stance on trade with China was clear. He would ramp up the pressure campaign that he began in his first term. That meant more tariffs, more controls on high-tech trade and the enthusiastic use of sanctions. The administration’s aim was to hobble China’s manufacturing juggernaut, extract financial and commercial concessions and slow China’s technological development. Some in Team Trump even dreamed of a “grand bargain” in which China would pledge to reform state capitalism in return for America taking its foot off its throat.

After six months China is breathing more easily than America, for three reasons. First, it has proved able to withstand American coercion and deft at retaliating, achieving what is known in the jargon as “escalatory dominance”. Some of Mr Trump’s critics attribute this to TACO (Trump Always Chickens Out). It also reflects China’s underlying power, preparation and skill. The “Liberation Day” tariffs imposed by Mr Trump on China in April were reversed after Wall Street slumped. Recently, after China imposed limits on exports of the rare earths used in high-tech manufacturing, Mr Trump threatened 100% tariffs, only to back down again. His threats to cripple China through a near-total embargo are not credible because doing so would damage America, too. Those who assert that China is in crisis should note that this year its stockmarket has risen by 34% in dollar terms, double the rise for the S&P 500 index.

China has learned to retaliate skilfully. After Mr Trump imposed a levy on Chinese container ships arriving at American ports, it responded with its own port charges. China has threatened antitrust investigations to put pressure on American firms such as DuPont, Google, Nvidia and Qualcomm. Its refusal to buy American soyabeans—a $12bn market for midwestern farmers last year and America’s largest export to China—is beggaring a bloc of voters Mr Trump values. Although some American chokeholds on China remain, for example with aircraft engines, Mr Xi has pushed hard to rid Chinese supply chains of foreign inputs while making the country indispensable to the supply chains of others. On paper Mr Trump could up the ante by cutting China’s access to the dollar banking system. But he probably won’t; the resulting turmoil in financial markets would hurt America badly.

Amid all the tit-for-tat, China is developing, by trial and error, a new set of global trading norms. This is its second area of success. It wants to build a Chinese-led system on the ruins of the old liberal trading order, one which will rival Mr Trump’s empire of tariffs. Already China has shifted the geography of its trade: in the year to September its goods exports grew by over 8%, even as those to America fell by 27%. China’s threats to limit rare-earth exports inspire fear because it dominates the market and could cripple Western manufacturing supply chains. But they are also remarkable because they show China trying to impose a system of global licensing. That is a fiercer version of the playbook America has used to control the semiconductor industry . Expect more examples of China recasting the rules of trade as it exploits its position as a sophisticated manufacturer and the largest trading partner of 70-odd countries.

The final reason why China is winning is that the trade war has made Mr Xi and the Communist Party stronger, not weaker. Outsiders point to China’s huge problems, including its property hellscape, timid consumers, cowed entrepreneurs and the overcapacity and capital misallocation that its industrial policy creates. Yet to many Chinese Mr Trump’s bullying has vindicated Mr Xi’s 12-year project to prepare China for a hostile world by becoming a techno-industrial superpower. This week the Communist Party’s leadership met to discuss a new five-year plan. It is expected to double down on Mr Xi’s techno-nationalist approach.

Much could still go wrong for China. Redirecting exports away from America may prompt more countries to put up tariffs. Its nascent licensing regime could create a bureaucratic nightmare for itself and others. Just as America is discovering, using economic power as a cudgel is risky. The incentive quickly grows for other countries to diversify and innovate to reduce their dependence on you.

If Mr Trump and Mr Xi do meet in South Korea, it may be convenient for both to put on a show of de-escalation. There could be a pause in American tariffs in return for a delay in imposing the rare-earth controls, with some soyabean purchases thrown in and blessings for the proposed deal to sell TikTok, a Chinese-controlled social-media platform, to American owners. Yet make no mistake: the prospect unfolding is not of two countries overcoming their differences, but of belligerent giants weaponising their economic power. And even as China is winning Mr Trump’s trade war, the retreat from open commerce ultimately makes everyone a loser. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

He could still survive a currency run and knife-edge election

Javier Milei faces his most dangerous moment yet He could still survive a currency run and knife-edge election October 23rd 2025 For Argentina’s president, Javier Milei, congressional elections on October 26th are a make-or-break moment. They could spell disaster for his radical reform programme. The Argentine peso is overvalued and under strain. Despite generous offers of help from America, it threatens to crash out of the band set for it by Mr Milei’s government. Blowing any more cash defending it is pointless. Yet there is still a pathway for Mr Milei to continue his effort to tame Argentina’s bloated state and end its decades of decline.

He has had big successes. Monthly inflation has fallen from 13% when he took office to about 2%. The country’s poverty rate is at its lowest since 2018. He has taken an axe to Argentina’s out-of-control public spending and culture of patronage. Mr Milei’s great weakness is that, to stop prices from spiralling in a country where few trust the government or the central bank, he relied on keeping the peso strong.

Instead of being a temporary tool, managing the currency has become a trap. Even after he partially floated the peso in April alongside an IMF bail-out, Mr Milei has sought to maintain its artificial strength. Defending the exchange rate has cost billions and pushed interest rates sky-high, slowing growth. Voters now fret about jobs more than inflation.

President Donald Trump views Mr Milei as an ideological soulmate and has offered unprecedented financial support. On October 21st Scott Bessent, America’s treasury secretary, said he had signed an “economic stabilisation” agreement with Argentina. Already the Trump administration has offered Argentina a $20bn swap line, spent nearly $1bn buying Argentine pesos and tried to corral Wall Street banks into putting together a $20bn support package. Markets remain unconvinced, however. The peso has continued to weaken; Argentina’s ten-year dollar bonds trade below 60 cents on the dollar.

Two nightmare scenarios are possible. One is that Mr Milei’s party performs badly in the elections, and he is unable to veto legislation in the lower house even as Argentina is forced into a chaotic devaluation. That would mean financial mayhem and political strife. The other is that the government clings to the strong-peso policy, blowing more scarce dollars to prop up the currency, and keeping interest rates exorbitantly high, damaging growth. Either way, reform would die.

Yet there is a third way. If Mr Milei’s party wins a third of the seats in the lower house, it will be able to defend his presidential veto. Polls suggest this is possible. Mr Milei should then float the peso. To avoid chaos he should announce a new framework for setting domestic interest rates to control inflation, providing the economy with an anchor. Argentina has tried something like this many times before, but alongside Mr Milei’s fiscal discipline it could be enough to ride out a temporary inflation spike. American support could help the central bank to reduce volatility as the peso finds a new level, at far less risk of loss for American taxpayers than the interventions being made by the Treasury now. A floating peso would also boost competitiveness and growth.

At the same time as this financial reset, Mr Milei must announce a political reset on election night, making clear he will seek to build a broader coalition. Laws passed by a majority in Congress have more weight than the decrees that he has largely relied on so far. For Argentina the script sounds familiar: an exchange-rate crisis suffered by a government that is unable to marshal adequate public support. For decades this story has always led to disaster. Yet there is still a chance for Mr Milei’s project to have a different ending. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Last year it lost more rainforest than any other country. Yet there is hope

To save the world’s tropical forests, learn from Brazil Last year it lost more rainforest than any other country. Yet there is hope October 23rd 2025 Chopping down rainforests is daft. The social costs of clearing a typical patch of Brazilian Amazon are perhaps 30 times the benefits of rearing cows on it, by one estimate from 2023. The problem is, those costs, which include aggravating climate change, are spread across the entire world’s population, whereas the profits from cutting down the trees go to the men commanding the chainsaws. Somehow, the world has to find a way to make conservation pay.

Its failure to do so is visible from space. Some 67,000km2 of virgin rainforest were destroyed last year, an area roughly the size of Ireland and nearly twice as much as was cleared in 2023. A pledge made by world leaders at the COP climate conference in 2021 to halt deforestation by 2030 is nowhere close to being fulfilled: despite fluctuations, the pace of global deforestation is roughly the same as it was at the beginning of the decade.

Last year’s losses across the tropics added 3.1bn tonnes of greenhouse gases to the atmosphere, more than India added by burning fossil fuels. What is more, deforestation can trigger a vicious feedback loop. Emissions raise temperatures, which parches vegetation, which leads to wildfires (which were the biggest driver of deforestation in 2024), which cause yet more emissions. The harm can be local as well as global. Rainforests create their own weather systems: evaporation from the canopy forms “flying rivers” that water farmland thousands of kilometres away. Conservationists fear that the Amazon is close to a tipping point, where this water-recycling system breaks down, accelerating the destruction of the forest . This year’s COP, which will be held in Brazil next month, will be fraught.

Yet there is hope. Though Brazil lost more rainforest than any other country last year, due to to wildfires, it also shows how better policy can make a difference. Under Jair Bolsonaro, a right-winger who was president from 2019 to 2023, little effort was made to halt the chainsaws. By contrast his successor, Luiz Inácio Lula da Silva, and a flinty environment minister, Marina Silva, wield a judicious mix of stick and carrot. Heavily armed federal agents arrest illicit loggers and blow up illegal mines. Properties on which unlawful deforestation occurs are blacklisted for subsidised credit. The pace of deforestation fell by 80% during Lula’s first terms (2003-11), and fell again when he returned in 2023, before the wildfires set things back.

The political picture in Brazil is still positive. Whereas Mr Bolsonaro saw environmentalism as an obstacle to development, Lula’s government knows that destroying the rainforest would cripple Brazilian agriculture. It is trying harder to protect indigenous reserves, the inhabitants of which are usually good stewards of the forest, and to clarify property rights in the Amazon, which are a mess of overlapping and poorly documented claims. If you know who owns a piece of land, you know whom to punish for despoiling it or reward for conserving it. Happily, as digital-imaging technology advances, transgressions can be detected and reported within days, allowing authorities to react quickly.

All these lessons should be applied in other countries with rainforests. Unfortunately, many are far worse-governed than Brazil. The Democratic Republic of Congo introduced a land-use law this year that aims to protect indigenous groups, but Congo’s government has only shaky control over its own territory. Some local cash-for-conservation schemes show promise . However, the main thing protecting Congo’s vast forests is its dire lack of roads. If these improve faster than the rule of law, loggers may run amok.

Since preserving rainforests is a global public good, the world should help pay for it. But again, this is easier said than done. Rich countries have soured on aid. Markets for carbon credits have failed to take off, partly because it is hard to tell whether money given to conservation projects actually conserves trees. The simplest method would be payments to governments of countries (or provinces) where deforestation stops, as verified by satellite images. Brazil is striving to drum up interest in this idea. However, if the governments in question are corrupt or repressive, donors may have qualms. The struggle to save the world’s lungs will require creativity, diplomacy and clear-sightedness. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Why temporary workers bring great benefits

The migration schemes even populists love Why temporary workers bring great benefits October 23rd 2025 Across the rich world, temporary migration is on the rise. The number of short-term visas offered to working migrants rose by nearly 1m between 2014 and 2023, to 2.5m, with no sign of slowing. The increase is not limited to places that are generally more open to migrants; even populist Hungary and Italy, and traditionally migration-averse Japan and South Korea, are embracing them .

The idea of short-term migration makes many observers in the West queasy. For some, it conjures up images of workers toiling for long hours in grim conditions for paltry wages. Horror stories of bosses seizing passports, or migrant maids being preyed on by employers, periodically make headlines. In fact, well-designed temporary worker schemes offer great benefits to all parties. And as the political tide turns against migration, they may be the only feasible way to admit low-skilled workers.

Populist parties from America and Britain to France and Italy have stoked anti-immigration sentiment, and benefited at the ballot box. But with local populations ageing, firms are desperate for workers. Short-term visas offer a way to thread the needle, which is why Italy has issued large numbers of temporary visas to migrants in less skilled occupations. Although Japan, South Korea and Taiwan offer few routes to permanent residency, they have brought in hundreds of thousands of such workers each year.

At the same time, worries about whether low-skilled migrants impose a burden on welfare states are rising. The fiscal impact of migration depends on the skills of the migrants and the rules governing their access to public benefits. In most Western countries, low-skilled migrants who stay long enough receive a pension and health care as they grow old, while paying far less in tax than highly skilled migrants do. Governments can avoid such costs by restricting migrants’ access to welfare, as Gulf states do, or by insisting that they go home before they retire. Many are choosing the latter. Hence the popularity of guest-worker schemes.

Temporary migration offers big benefits to migrants and source countries, too. Lant Pritchett of the London School of Economics notes that low-skilled work in America offers migrants from the 11 largest developing countries a chance to quintuple their wages, even after accounting for lower prices back home. If two-thirds of the demographic shortfall in the labour force of the rich world was offset by a rise in the number of temporary workers, it would raise global wages by $6trn in today’s prices by 2050. Source countries benefit when migrants send money home, seeding businesses and putting relatives through school. Last year low-income and lower-middle-income economies received in remittances a sum worth a hefty 5.4% of their combined GDP.

To make temporary migration schemes more politically acceptable, however, they must be improved. Many of them lack flexibility. In parts of the Middle East, the kafala system binds a migrant to a single employer, so that to be sacked is to be sent home. This is a recipe for abuse. Countries that have reformed kafala, such as Saudi Arabia, have made their labour markets more dynamic, allowing workers to switch to higher-paying and more productive employers.

Portable visas, which allow migrants to switch jobs, are better for migrants and hosts alike. Last year Australia extended the amount of time workers have to find a new employer after leaving their first sponsor from 60 days to 180. Such flexibility boosts efficiency and curbs the power of cruel bosses.

Another change concerns the rule of law. If migration sceptics fear that guest workers will slip away into the shadows, then their support for temporary migration will wane. But there are ways to discourage this. New Zealand’s seasonal farm workers are notably less likely than their peers in Australia to overstay their visas, for instance, for two reasons. The first is that businesses are fined when workers abscond, giving employers a strong motive to screen and monitor employees. The second is that there is no mechanism for workers to lodge asylum claims which allow them to remain in the country more or less indefinitely, blunting their incentive to try to do so.

There are limits to the benefits of guest work, especially compared with permanent migration. Short-term visas make it hard for migrants to become entrepreneurs, limiting innovation. Portable visas are better, but still less flexible than free movement. Skilled migrants bring such great benefits that countries should be striving to keep them, rather than repelling them with $100,000 visa fees, as America now does.

When voters are suspicious of permanent migration, guest workers are better than having no migration at all. Well-designed schemes can be safer for the people taking them up, bring more benefits to the host country, and strike a balance between migration scepticism and liberal principles. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A new generation of pensioners are glued to their smartphones

Never mind your children’s screen time. Worry about your parents’ A new generation of pensioners are glued to their smartphones October 23rd 2025 Few things delight children, or irritate their minders, as much as screen time. Parents nag their offspring to put down their digital devices and pick up a book or a football. Academics such as Jonathan Haidt worry that phones and social media are creating an “anxious generation” of indoorsy introverts. Some countries are banning social media for under-16s.

The worry may be focused on the wrong age group. For all the fears around teens and screens, the most square-eyed generation is the elderly. Older people have long been champion tv-viewers. Now a new generation of pensioners are adding to their screen time with smartphones, iPads and game consoles. The result is epic screen sessions, which take up more than half of pensioners’ waking hours.

The digitisation of old age is a good thing. The elderly have perhaps more to gain from smart devices than any other age group. Facebook and WhatsApp bring daily updates from old friends and faraway grandchildren. Zoom transports church, book clubs and doctors’ appointments into the home for people who cannot attend in person. E-commerce removes the need to trek around shops. Hours of entertainment from any era are available on demand. A connected retirement is more fulfilling and fun than an offline one.

Older people are also insulated from some of the on-screen risks that threaten teenagers. They have already formed their key real-life relationships, and so are less in danger of the “social stunting” that screen-obsessed children supposedly suffer. Their worldview is less open to manipulation by online weirdos who encourage misogyny or body dysmorphia among young folk. Above all, the elderly usually have oodles of free time. For a teenager facing exams, the opportunity cost of a five-hour-a-day TikTok habit is high. For a pensioner it is a case of swapping one leisure pursuit for another. Parents and policymakers have a right to interfere with how children spend their time. Adults should be free to waste it as they like.

Yet as retirement moves online there will be costs that society must reckon with. Older folks’ devices, unlike those of teenagers, are usually connected to credit cards. Door-to-door conmen, who have long preyed on the elderly, can now go iPad-to-iPad. Governments rightly strive to protect children from online predators. They must recognise that there is another, fast-growing vulnerable group to look after.

A second cost is misinformation. Pensioners are twice as likely as under-25s to use news apps or websites. Older people also appear to be more susceptible than others to online hoaxes (which artificial intelligence promises to make still more convincing). As older generations shift from spending their time in front of Fox or the BBC to spending it on YouTube or TikTok, they are entering a Wild West of information. And when the elderly are misled it is everyone’s problem, because they are the most likely to vote.

Screen time has a mixed impact on loneliness. Screens are companions for the isolated. But they can also be a substitute for real life. E-commerce removes the hassle of the weekly shopping trip—but also the social interactions that come with it. Consumers are free to make such choices. But for the infirm, the siren song of the sofa is especially strong. Balancing the pros and cons of screen use is easier for teenagers, whose time online is curbed by teachers during the day and parents in the evening. Older folk lack these informal mediators.

Old people’s rocketing screen time should at least make for a more measured debate on digital matters. Generations do not always understand each other well. There is a long history of policymakers calling for bans on youth crazes, from rock ’n’ roll to violent video games. When the craze catches on more widely, the panic tends to die down. Universal use of smartphones and social media should make it easier to have sensible conversations about their trade-offs. And when children are told for the umpteenth time to get off their phones, they can cast a meaningful glance at grandpa in the corner, chuckling at the latest memes on WhatsApp. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Governments are living far beyond their means. Sadly, inflation is the most likely escape

The rich world faces a painful bout of inflation Governments are living far beyond their means. Sadly, inflation is the most likely escape October 16th 2025 Just about everywhere you look in the rich world, government finances are in ruins. France, as its debt mounts, is getting through prime ministers faster than Versailles went through wigs; on October 14th Sébastien Lecornu, the latest, proposed delaying an increase to the retirement age that was meant to restore sanity to the budget. In Japan both rival candidates for prime minister want to splash out, despite their country’s vast debts. Britain faces big tax rises to plug a hole in its budget, after welfare reforms were mostly abandoned—and despite a supposed once-and-for-all tax rise last year. Looming over everything is America’s unsustainable deficit of 6% of GDP, which President Donald Trump muses about adding to with yet more tax cuts.

How long can governments live so far beyond their means? Rich-world public debt is already worth 110% of GDP; before the covid-19 pandemic, it had been so high only after the Napoleonic wars. Then, Britain ran almost a century of tight budgets to pay back its creditors. Yet, as our special report explains, politicians today struggle to balance the books .

They cannot avoid rising interest bills and higher defence spending; ageing populations exert an irresistible electoral pressure to hand over more cash. Tax rises are just as hard. In Europe government revenues are already high; in America taxes are a ticket to electoral defeat. Only once in the era of universal suffrage has a G7 economy achieved a big fall in debt primarily by tightening its belt: Canada starting in the 1990s, at the height of the technocratic era. Do not bet on anyone repeating the trick today.

You might hope that productivity growth, powered by artificial intelligence (AI), would relieve the state of difficult budget choices. But that would be wishful thinking. Countries tend to grow their way out of debt because their workforce is increasing or they are small and catching up with other economies. Breakthrough technologies like AI are different. Pensions and health-care spending tend to rise with incomes: in big welfare states they will surge along with productivity. So too, say standard economic models, will interest rates. If AI has miraculous effects on growth, today’s exorbitant spending on data centres and chips will become even bigger. This will lift interest rates, making legacy debts more expensive to service and offsetting the fiscal windfall that comes from faster growth.

It is therefore increasingly likely that governments will instead resort to inflation and financial repression to reduce the real value of their high debts, as they did in the decades after the second world war. The machinery for such a strategy is in place at central banks, which have a large footprint in bond markets. Already, populists such as Mr Trump and Nigel Farage in Britain attack their country’s central banks with proposals that would weaken the defences against inflation.

Price rises are unpopular—just ask the hapless Joe Biden—but they do not need political support to get going. Nobody voted for them in the 1970s or in 2022. When governments cannot get their act together, and run economic policies that are unsustainable, bouts of inflation just happen. By the time markets wake up, it is too late.

All the more reason to think ahead and reflect on how inflation harms the economy and society. It redistributes wealth unfairly: from creditors to debtors; from those with cash and bonds to those who own real assets such as houses; and from those who agree on contracts and wages in cash terms to those wily enough to anticipate higher prices. It causes what John Maynard Keynes called an “arbitrary rearrangement of riches”. And that could happen just as societies are grappling with other transfers of wealth that the losers will also see as unfair: in the labour market, as AI takes on routine office work; and through inheritance, as baby-boomers bequeath vast property wealth to those lucky enough to have the right parents.

This multipronged upheaval of fortunes could wreck the middle class, which binds democracies together, and scramble the social contract. In the 20th century Argentina, plagued by inflation, went from being one of the world’s richest young countries to a middle-income economy that lurched from one crisis to the next. The competition that raged in Buenos Aires was not over who could innovate or be the most productive, but over who could capture the state and exploit its power to help them avoid inflation’s confiscatory effects. That is the future for places where leaders deny or avoid budget constraints in their pursuit of redistribution. A decade ago this newspaper urged emerging markets like Brazil and India to heed the parable of Argentina. Today our warning is for the world’s richest economies.

Yet that downward spiral is not inevitable. The sustained price rises of the 1970s also led to the election of Ronald Reagan and Margaret Thatcher, who saw sound money as central to the pact between the state and the citizen. They established an orthodoxy which said that, if public debts were to be honoured, then they also needed to be justified and sustainable. The Federal Reserve waged a war on inflation that established the credibility of independent central banks for a generation. This technocratic model spread. The decline of inflation in most emerging markets since the 1990s has been miraculous. Even the beleaguered Javier Milei may yet enable Argentina to thrive.

Which path will the rich world take—ruinous or prudent? In many countries populists will be in power as the budget crunch hits. Perhaps they will be blamed for the mess, raising the possibility of a return to sound budgeting. Everywhere, a coalition of cash-savers and bondholders will oppose inflation. Whether their voices are heard is likely to be determined by a series of clashes between the bond markets and the politicians, some of which could turn ugly.

If the world emerges with lower debts and conscious of the dangers of excessive borrowing, a renewal of sorts is possible. The alternative would be for the world’s most important economies to descend into chaos. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

They are more inventive and adaptable than ever

Brute force is no match for today’s high-tech drug-runners They are more inventive and adaptable than ever October 16th 2025 HeLLFIRE MISSILES used to strike terrorist hideouts in the mountains of Afghanistan. Now they rain down on the sparkling waters of the Caribbean. Small boats and their crews, alleged drug-traffickers, are incinerated. On October 15th videos of the latest strike, the fifth in recent weeks, went viral on social media. President Donald Trump is prosecuting a new war on drugs with the deployment of military force and unprecedented violence. He talks of attacking Venezuela, whose president, Nicolás Maduro, he calls a “narco-terrorist”. The template is the war on terror. The trouble is that Mr Trump is chasing a new narcotics industry which is more innovative and nebulous than ever.

America’s president has identified a grave problem for the world, and his country in particular. The consumption of illicit drugs—particularly cocaine and synthetic opioids like fentanyl, often in combination—kills roughly 600,000 people every year. Many of those deaths are from opioid overdoses. These occur disproportionately in the United States, where people fall victim at about ten times the rate in the rest of the world.

Cocaine and synthetic opioids generate staggering profits. A kilogram of cocaine might fetch 120 times its laboratory-door costs; for synthetics like fentanyl the figure is closer to 1,000. The fight to own those profits causes another 100,000 deaths each year. The cashflows corrupt weak states, ruining the economic prospects of tens of millions of their citizens. And the problem is growing. Consumption is booming in Europe and rising fast even in Africa and Asia. When traffickers carve out new routes to serve new markets, violence and death follow.

As we report, surging demand and those huge profits are powering a revolution in drug-sellers’ way of doing business . Forget Pablo Escobar. His style of command and control, with vertically integrated operations linking Andean coca-leaf farms to the streets of Miami, has been replaced by fluid, competing networks of specialist subcontractors. Big brand-name gangs often own the drugs, but they operate only one part of the chain. The rest belongs to logistics experts, thugs-for-hire, chemists, brokers who trade precursors and digital financiers. The profits are recycled by cross-border Chinese money-laundering groups with expertise in cryptocurrencies.

This distributed and outsourced model is adaptive and resilient. Its specialisation favours innovation—witness the narco submarines crossing the Pacific packed with drugs. Changing routes is easy. If one way is blocked, gangs simply use a different subcontractor somewhere else. The result is that trafficking and violence spread quickly and widely.

Apparently immune countries have come under threat from the trade. In sleepy Uruguay traffickers recently attacked the public prosecutor’s home. Gang violence is surging in some European port cities, such as Antwerp. In the Pacific, on the expanding route to Asia, Fiji has called in the armed forces to fight drug-smugglers. The layering of contracts makes it much easier for bent politicians and business people, known as “invisible narcos”, to take a role in the trade. For every case in which this is uncovered, scores more remain hidden.

The most effective single way to reduce the death, violence and corruption would be to legalise and regulate the production and consumption of cocaine. This would eliminate the price premium that motivates the world’s most violent criminals. Consumers could be sure of dosage and quality—an incentive to shun dangerous illegal concoctions. Prisons would be emptier and the criminal-justice system could focus on deadlier synthetics. Alas, in most consuming countries neither voters nor politicians are interested.

That limits governments to a set of weaker tools. On the demand side, addiction programmes and public-health campaigns pay back twice. They lower drug deaths and harm, and cut demand. That is important. Without such cuts, reducing the supply by, say, eradicating fields of coca plants, just pushes up the price. And that calls forth more supply.

On the supply side, although pulverising small boats in the Caribbean is popular with Mr Trump’s supporters, it is almost certainly illegal and ultimately unlikely to make much difference. Little of the hard drugs brought to the United States come via the Caribbean, as they did in Escobar’s day. Any that do can easily be rerouted up the Pacific coast. Destroying boats does not much raise drug-owners’ costs.

Instead, governments should focus on gathering intelligence about every link in the trafficking networks and then prosecuting each of them—especially the most powerful. Bombs may scare boat crews, but the paymasters worry about the police appearing at their infinity pool, or freezing their accounts. Investigators must expose the financiers and white-collar enablers. As they raise the cost of doing business, the incentives change, especially if demand is squeezed, too.

This is a task for intelligence officers, police and prosecutors, not the army. Traffickers are entangled with cops, prosecutors, judges and politicians, particularly in Latin America, so infiltration by the villains will be a growing danger. Gangs these days run their own candidates in Mexico’s local elections. Peru’s parliament has passed a series of laws that protect criminals and cripple investigations. Weak states in the Pacific, Asia and Europe are also at risk.

However, there are also glimmers of hope. Fighting fentanyl in Mexico, the Trump administration mostly uses an intelligence-led approach. It is also urging China to scrub its laundering networks. Elsewhere America’s method is less effective. It has imposed sanctions to settle political scores in Brazil, while letting politicians accused of corruption back into its banking system and gutting money-laundering laws at home. Without legalisation, the fight against illicit drugs is uphill. If the immense harm they cause is to be reduced, Mr Trump will have to shift his strategy to reflect the new narconomics—no matter how dramatic Hellfire strikes look on TikTok. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A balance of economic terror is no basis for stability

The America v China spat reveals a dangerous dynamic A balance of economic terror is no basis for stability October 16th 2025 “DON’T WORRY about China, it will all be fine!” President Donald Trump posted on social media on October 12th, days after threatening retaliation for Beijing’s new export controls on batteries and rare earths. Don’t worry, world, it will all be fine, China’s Ministry of Commerce had said, roughly speaking, in a press briefing a day earlier, emphasising how its rules would have a “limited” impact on supply chains.

Many accept these assurances. Markets fell after Mr Trump’s initial angry reaction, but have recovered. Observers assume that Mr Trump will butter up his Chinese counterpart, Xi Jinping, supposing that the two meet as planned on October 29th ahead of a summit in South Korea. But even if a truce is re-established, their latest spat is disturbing.

It shows that Mr Trump is happy to contemplate triple-digit tariffs on one of America’s biggest trading partners. Many investors and, it seems, Chinese officials do not believe his threats. It is true that the president is sensitive to financial markets, and that he backed down earlier this year. But he hates appearing to be pushed around. At some point, he may decide that enough is enough .

As in his first term, Mr Trump could switch from a dealmaker to a China-basher, with more dangerous results. America’s president has threatened to cripple China’s semiconductor industry by withholding critical software. Hawks in his team talk of sanctions against Chinese tech and financial firms. For its part, China has scope to harry American firms, as shown by its new investigation into Qualcomm, an American chipmaker.

The latest rupture also demonstrates that America and China still misunderstand each other . Scott Bessent, America’s treasury secretary, says China’s economy is in a depression. Its growth is indeed soft, but that is not because of tariffs. In the 12 months to September China’s goods exports grew by 8%, as sales to other markets replaced those to America. The White House is furious that China introduced its new rules weeks before their leaders’ planned meeting in South Korea. China counters that America broke the ceasefire when it modified its export controls in a way that could have blacklisted thousands of Chinese firms.

Even if China’s new rules were partly retaliatory, they have raised the stakes. Its battery-makers, the world’s best, will need permission to share many products, ingredients or kit with foreigners. Firms in foreign countries, outside China’s jurisdiction, will need a licence to export products with trace amounts of Chinese rare earths.

Mr Trump hopes to persuade Mr Xi to abandon these controls. He will be disappointed. They are part of China’s effort to build a regulatory framework for its best economic weapons. China has offered an olive branch by suggesting it will implement its rules with a light touch. But that rings hollow. Bureaucrats at its commerce ministry, who will sign off on licences, will fear appearing soft. China will have a tool to raise or lower the pressure as needed.

The hope is that neither side really wants to have a trade war. The world’s two biggest economies depend on each other. Yet that also means they have the ability to inflict grievous harm on each other. America has long had limits on semiconductor exports; China now has more control over rare earths. The threat of mutually assured disruption is hardly a good basis for relations. It is inherently unstable; both China and America have a chokehold, but both are wriggling to break free. The behaviour of each causes its rival to tighten its grip—a cycle that, for now, seems destined to get worse. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Lessons from a $10bn panic on the prairie

First Brands is a painful but necessary warning for Wall Street Lessons from a $10bn panic on the prairie October 16th 2025 In court the firm’s lawyer described it as tremendous. That may have been true once, but today First Brands is a disaster. On October 13th Patrick James, its chief executive, resigned; America’s Department of Justice is poring over its accounts. Exactly how the small Ohioan maker of windscreen-wipers and spark plugs borrowed more than $10bn is not yet fully understood. Already, though, the firm’s rapid collapse in September, and the fallout since, has shocked Wall Street.

This time, America’s financial system was strong enough to cope. But there are reasons to worry about what could happen next time. The First Brands debacle shows why.

First Brands is hardly a capital-markets backwater. Look at the roll call of institutions affected by its blow-up. Shares in Jefferies, which had raised money for the company, fell by a fifth as the investment bank disclosed its losses. A fund owned by UBS, which the Swiss bank had been in the process of selling, is exposed to the firm’s debt. So is an entity connected to Norinchukin, a Japanese farmers’ bank, and Millennium, a hedge fund in New York.

However, investors have become complacent. First Brands’ borrowing against inventory and money owed to it by customers looks excessive. True, such “receivables” are difficult to monitor; lawyers are also investigating whether it borrowed against the same assets more than once. Yet First Brands would be far from the only meltdown to occur as a result of problems with this sort of credit. The collapse in 2021 of Greensill Capital, a financial-services company based in Britain that made similar loans, ought to have put investors on their guard.

Worse, investors also failed to spot the danger signs in more straightforward corners of First Brands’ business. Most of the debt is ordinary by the standards of modern capital markets, and the firm should have been heavily scrutinised. Loans were arranged by respectable banks and rubber-stamped by accountants, lawyers and rating agencies. The risk was then held by various funds charging investors fees on the basis of careful diligence they claim to perform. Such investors appear to have been in a rush to lend. Their lax behaviour is a warning that markets are overheating .

Most worrying, First Brands illustrates the difficulty of tracking risk in the financial system. Sweeping changes to credit markets since the financial crisis of 2007-09 have made diligence harder. First Brands’ creditors range from complex financial structures such as collateralised-fund obligations and business-development companies—which hold risky loans—to all manner of hedge funds and trade-finance lenders.

The diversity of the financial system has its strengths. Had First Brands’ creditors been exclusively banks, they might have been vulnerable to runs by their depositors. But rapid changes have obscured the role played by each firm. Alarm over First Brands was raised when Apollo, a giant lender and insurer, reportedly took a short position against its debt. Risk-taking by banks has been curtailed since the financial crisis, yet UBS and Jefferies house risky funds that suffered. Millennium, better known for trading stocks and government bonds, took a $100m loss by financing First Brands’ inventory.

The combination of all these factors appears to be leading to more collapses. Bonds issued in December by Saks, a department store, have already been restructured. The fall last month of Tricolor, which makes car-loans, was also troubling. So far markets are weathering the loss of confidence. Indeed, the struggling share prices of business-development companies and private-market firms, which compete with bond markets and bank lending to finance companies, are the first sign that investors are waking up. The hope must be that other institutions now pay closer attention, too. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Forget Greenland; worry about Alaska

Why Trump is looking the wrong way in the Arctic Forget Greenland; worry about Alaska October 16th 2025 SINCE 2020 foreign military aircraft have buzzed North American airspace 95 times. Of these incursions in the “air-defence identification zone”, 91 were in the north-west, around Alaska. Russia and China are probing Arctic regions near Alaska ever more intensely, with everything from Chinese dual-purpose research ships (five visits this year) to joint patrols by Chinese and Russian coastguards, navies and air forces. A special shock was the appearance last year of Chinese and Russian nuclear-capable bombers.

Remote and forbidding, the Arctic has been a region of diplomatic tranquillity. Now it is the flashpoint of geopolitical rivalries and, as in the cold war, fast becoming a zone for potential confrontation. The shortest routes for nuclear missiles and bombers from Russia and, increasingly, China, pass mostly over the top of the world. In contrast to the cold war, the contest is also economic, as the ice cap melts. This year’s minimum ice cover was 39% less than in 1980. Global warming will draw more shipping, mining, fishing and tourism into the Arctic.

President Donald Trump says he is alarmed about security there. He says that is why America must take Greenland from Denmark and why he trolls Canada, his northern neighbour, with talk of making it America’s 51st state. Mr Trump is looking the wrong way. America’s gravest security threat in the Arctic emanates not from the Atlantic side around Greenland, but from the Pacific side, around the approaches to Alaska. Worse, his delusions about imperial expansion, whether for land or minerals, deflect attention from that threat.

America has much to do to make its north-western flank secure. Although it has lots of advanced fighters and other forces in Alaska, its surface fleet doesn’t venture into the Arctic. Its coastguard has just two icebreakers in the area, compared with Russia’s 40 or more. The nearest American deepwater port to the Bering Strait, a vital passage, is more than 700 nautical miles (1,296km) to the south. Air bases sit far back. To intercept planes in the air-defence identification zone, American fighters must often fly 1,500 nautical miles or more, refuelling repeatedly in mid-air. That is like taking off from London to check on a plane over Tenerife.

America needs better infrastructure. It should rebuild its disused base on Adak and refurbish the current one at Shemya, both in the Aleutian Islands. It should also expand the airport at Deadhorse in the north and accelerate improvements to the port at Nome near the Bering Strait. It gains from knowledge about the changing Arctic. Mr Trump’s cuts to research on climate change are self-defeating.

Mr Trump has taken some useful steps. The proposed Golden Dome missile-defence shield will, if it does nothing else, improve awareness of incoming threats. He has just struck a deal with President Alexander Stubb of Finland to buy icebreakers . Yet this welcome example of “ally-shoring” in defence production is an exception. Too often, Mr Trump alienates allies rather than working with them. Nato members make up seven of the eight countries bordering the Arctic—Russia is the eighth. Allies help defend against rising Russian threats on the Atlantic flank of the Arctic. That makes it easier for America to fend off China and Russia on the Pacific side.

In the Arctic the case is clear-cut. Allies are a boost, not a burden. Mr Trump’s dream of an Arctic manifest destiny in Greenland and Canada is manifest folly: it will lead allies to suspect that danger in the Arctic comes not only from Russia and China, but also from America itself. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The breakthrough in Gaza could open up a new approach to peace

A new beginning for the Middle East The breakthrough in Gaza could open up a new approach to peace October 9th 2025 PLENTY OF AMERICAN presidents have sought a breakthrough in the bitter conflict between Israel and the Palestinians. Now, two years after the atrocities of October 7th and after endless rounds of killing in Gaza, Donald Trump has joined the tiny list of those who have succeeded. The tentative agreement between Israel and Hamas to stop the shooting and release the hostages opens up a new vision for the Middle East. The path is narrow, but it is the best chance of creating lasting peace since the Oslo accords in 1993 and 1995.

This new vision is radically different from the moribund approach under Oslo. It offers a shift from endless, abstract negotiations over maps and the hypothetical constitutional arrangements of two states. Instead, it promises a practical approach in which, as Gaza is governed and rebuilt, rid of the terrorists who once dominated it, Israelis and Palestinians come to believe that they have more to gain from coexisting than from destroying each other. Success looks less like a ceremony in the White House and more like a decade of cement mixers spinning in Gaza, as violent settlers in the West Bank are curbed, the threat of missiles fades and ordinary people embrace a slowly rising belief in a safer, more prosperous future.

The peace deal is a triumph for Mr Trump’s transactional, bullying style of diplomacy . It came after both sides were holed up in Sharm el-Sheikh, in Egypt, with negotiators from America, Egypt, Qatar and Turkey available to apply pressure. The details are not yet public, but Hamas is due to release the 20 Israeli hostages who are still alive, alongside a parallel release of Palestinian prisoners by Israel, a flood of aid and a partial pullback by the Israeli army from Gaza’s main cities, to what Mr Trump called “an agreed upon line”. In Israel and what remains of Gaza there was euphoria. Mr Trump may fly to the region to mark the deal.

Under Mr Trump’s 20-point plan, the next phase would create a technocratic government that rebuilds Gaza while excluding Hamas from power. Hamas would be disarmed and security provided by an international force. Mr Trump would chair an oversight board until Palestinians took responsibility, possibly under a reformed Palestinian Authority. The grander, ultimate objective is what Mr Trump calls “everlasting peace” between Israel and all of the Palestinian territories.

Of course, the obstacles to further progress are immense—how could they not be? Negotiators on both sides still have to iron out their differences over, say, Hamas’s disarmament. They could sign up, while cynically intending to sabotage progress later. With an estimated 78% of Gaza’s buildings damaged and little industry left, reconstruction could become bogged down. Most important, ordinary Israelis and Palestinians have lost faith in the possibility of peace.

Thirty years on from Oslo, and after the trauma of October 7th, most Israeli Jews see the Palestinian territories as a failed quasi-state with a record of corruption, terrorism and Jew-hatred. In 2012, 61% of Israelis supported two states. Now perhaps a quarter do and many display a chilling indifference to the loss of Palestinian life. For their part, Palestinians see Israel as a rogue state committed to occupying their land and routinely unleashing violence. Polled in May, 50% of them supported the October 7th attacks, 87% denied that Hamas had committed atrocities and 41% supported armed resistance.

And yet there are grounds for hope. The end of the war could trigger a change of leadership on both sides, with the remnants of Hamas being persuaded or forced to relinquish any formal role in Gaza’s government. Israel must hold an election within 12 months which polls suggest could result in the prime minister, Binyamin Netanyahu, leaving office and the end of his coalition with extremist hard-right parties.

Abroad, the prospects have improved, too. Around the world, the public focus is on peace, after years of looking away. In Mr Trump, America has a president who is unafraid to push Israel hard. The humbling of Iran’s regime and its violent proxies has greatly reduced its threat to the region. The willingness of the Gulf Arab states not only to pay for Gaza’s reconstruction, but also to underwrite a peace process and, potentially, help provide security, is a big step forward.

That is just as well, because outsiders will have to restrain destructive impulses on both sides. Having pressed Israel to end the war on Iran, rebuked it for striking Qatar and pushed it into a hostage deal, Mr Trump must strive to get Mr Netanyahu or his successor to curb the expansion of Jewish settlements. He must bolster Palestinian institutions by stopping Israel from depriving them of customs revenue and from facilitating vigilante violence by settlers and soldiers. The Arab states must use all their influence to insist the Palestinians reject violence and to get the Palestinian Authority to reform and help it find new leaders.

They must also sell a broader vision. For Israelis this is the prospect of a new regional security order that makes them safer by deepening co-operation with Arab states, building on the Abraham accords struck in 2020. This could also forge new links with Syria, and perhaps Lebanon, both of which have escaped Iran’s malign grip. For Palestinians it is the prospect of reconstruction at home and new economic links with the Gulf creating a path to trade and jobs.

Gaza is the key. Palestinians everywhere will want to see if Israel can commit itself to allowing a technocratic government in the strip to emerge with international backing. For their part, Israelis will be watching whether the Palestinians in Gaza can govern themselves better, dismantling terrorist infrastructure and reforming the institutions Hamas captured.

Nobody should imagine any of this will be easy. The qualities that enabled Mr Trump to get a ceasefire—his willingness to bully, escalate and create a burning sense of urgency—are different from the sustained commitment over many years that will be required in his role as chair of the reconstruction authority. Nonetheless, in a region that has known little other than decades of conflict, this is an extraordinary moment: a slender but real chance at a new beginning. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

The pain from trade and immigration restrictions cannot be postponed forever

Donald Trump’s fortress economy is starting to hurt America The pain from trade and immigration restrictions cannot be postponed forever October 9th 2025 Brick by brick, President Donald Trump is building a wall around the world’s largest economy. As America’s tariff barriers on everyone else have gone up, so has the drawbridge, making it harder for migrants to enter the country. The president wants to turn America into a fortress that keeps out foreign incursions. In fact, he is cutting America off from the very goods and talent that helped make its economy the envy of the world. Already the damage is starting to show; once wreaked, it will not easily be reversed.

That is not how investors see it. In the six months since “Liberation Day”, when Mr Trump slapped tariffs on America’s trading partners, financial markets have swung from panic to euphoria. Elsewhere the picture is mixed. Inflation has risen only a little, as America’s importing businesses have absorbed much of the tariff pain. Although employment has stagnated as migration flows have stopped, America’s economy will probably grow by 1.5-2% in 2025.

Some of the explanation for this resilience is that average tariffs are not as high as was feared, in part because of rollbacks and in part because trade flows are adapting fast. In April analysts were warning of America’s average tariff rate reaching 28%. By August, however, customs revenue raised at the border pointed to a rate of only 11%. It also helps that few countries other than China have retaliated at scale against American duties. Big economies including Britain, Japan and the European Union have struck deals that reduce Mr Trump’s proposed tariffs, without levying their own.

The president is fortunate, too, that America is in the middle of an astonishing stockmarket boom, fuelled by optimism about artificial intelligence (ai). Since a trough in April, the S&P 500 has risen by 40%; valuations now exceed 40 times cyclically adjusted earnings, not far off the record set during the dotcom years. Wealthier investors are in turn spending more and propping up growth.

Yet the economy cannot dodge the costs of isolation—and these will only mount over time. For a start, the stockmarket cannot go on rising this fast for ever; and the higher it soars, the greater the danger of a crash, putting the wealth effect into reverse. The damage from the tariffs that are in place is starting to be felt. And the collapse in migration is an enormous and underappreciated shock to the economy . Between 2000 and 2020 annual net migration into America was 1m, on average; under President Joe Biden it reached 2.5m a year. In 2025 net migration could be zero or negative for the first recorded time since the Depression.

The biggest immediate problem will be higher inflation. Our tracker suggests that Mr Trump’s tariffs are currently boosting consumer prices by 0.3 percentage points. This will probably rise over the next few months, and peak around the turn of the year. Economists at Goldman Sachs have found that the more long-standing the tariff, the more it has been passed on to prices. This may be because of the president’s volatile policymaking, which encourages companies to wait to raise prices until they know they must. When they do, domestic producers, shielded from competition, follow suit.

These effects will soon push underlying consumer-price inflation close to 3.5%. Already the prices of imported items such as clothes, electronics and household appliances have surged above trend. And people have noticed, especially in poorer households. Our latest polling with YouGov says that Americans disapprove of Mr Trump’s handling of inflation by a margin of 28 percentage points, compared with a net approval of six points in January. Higher inflation might also dissuade the Federal Reserve from cutting rates further, threatening those ultra-high stockmarket valuations.

The real damage will be in the longer term. America accounts for only 15% of global final demand for goods imports. If its drawbridge remains up, the world will gradually integrate without it. Mark Carney , the prime minister of Canada, hopes for closer ties between the CPTPP, a mostly Asian trade bloc that includes Canada, and the EU. America is a big enough economy that it can step back from global trade without suffering an economic cataclysm. However, in time tariffs will erode its competitiveness and its economic power—especially if its allies integrate more deeply with China. Global investors have already become more wary of the dollar, which is down by 9% against a basket of currencies this year.

Lower migration will do damage, too. The administration’s assault extends to high-skilled workers, some of whom face a $100,000 fee for visas. Rationing entry by price rather than lottery has its merits. But not all the visas are allocated by chance. Combined with his no-holds-barred deportation programme and attacks on universities, Mr Trump is signalling to the world’s best minds that they are not welcome in America.

That will hurt America most of all, because the benefits of skilled migration are enormous. The average migrant with a graduate degree boosts the Treasury’s coffers by a net $1.8m over their lifetime, which helps explain why skilled migrants account for 5% of the labour force but 10% of labour earnings. Once the impact of migrant innovators such as Elon Musk are accounted for, the benefits are larger still. One study attributes 30-50% of American productivity gains between 1990 and 2010 to skilled migrants. When it shuts the door to mobile talent, America is giving up one of the main ingredients of its success.

The battlements around America’s economy will not be easy to dismantle. Because other countries have not raised tariffs, America would have to unilaterally lower its duties. But domestic firms, used to protection, will lobby for them to remain. Migrants’ faith in the country as a place where they can thrive will not be rekindled overnight. America once thought of itself as a shining city on a hill. As the walls go up, it will seem more like an isolated fortress. The longer this lasts the more likely the world is to move on without it. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Takaichi Sanae is a refreshing change—but problems loom

Japanese politics enters its heavy-metal phase Takaichi Sanae is a refreshing change—but problems loom October 9th 2025 If Japanese politics had a soundtrack, it would long have been quiet, calm, ambient music. But with the selection of Takaichi Sanae as leader of the ruling Liberal Democratic Party (LDP) on October 4th, Japan has entered a heavy-metal phase. Ms Takaichi, a one-time drummer in a heavy-metal band, is poised to become prime minister next week. She will be the first woman to lead modern Japan. Brash, nationalistic and polarising, she fits the trend of politics globally.

Yet Ms Takaichi is no anti-establishment firebrand. She is a long-serving, Margaret Thatcher-admiring parliamentarian. She won over the LDP’s lawmakers and rank-and-file members because they think she has the best chance of preserving its slipping grip on power. The party, which has dominated politics for 70 years, faces challenges from upstarts on the hard right, such as Sanseito, which pushes a “Japan First” agenda.

To fend off such forces Ms Takaichi proposes a harder-edged version of the politics of her mentor, Abe Shinzo, a prime minister who was murdered in 2022, after he had retired. The question is whether she will be more like Abe in his short, unsuccessful first term, when he was too ideological, or more like Abe in his record-long second term, when he was a deft, pragmatic political operator.

Ms Takaichi’s ascent brings big risks. Her economic policy is, in essence, Abenomics, with its three arrows of fiscal expansionism, monetary accommodation and structural reform. Yet Abenomics was designed for a country struggling with deflation; it now faces inflation persistently above the Bank of Japan’s 2% target. Ms Takaichi’s proposals would create more inflationary pressure, further strain the budget and undermine the yen. That might please equity investors, who are happy to see fiscal stimulus and a weaker yen. But it will rattle bond markets and, without structural reform—to the labour market, for example—it will not boost Japan’s potential growth rate.

On the international stage, Ms Takaichi shares Abe’s revisionist views on wartime history . That appeals to Japan’s nationalist right, but if she is not careful she could upend the recent rapprochement with South Korea and sour relations with China. With America she will resent the coercive $550bn tariff and investment deal that her predecessor struck with President Donald Trump, but she cannot afford to provoke the ire of Japan’s security provider by obstructing it.

At home Ms Takaichi is a divisive culture warrior. She opposes allowing married couples to keep separate surnames—a bellwether for feminists. She has pandered to growing fears of foreigners. That might bring some conservative voters back to the LDP fold in the short run, but in the long term stoking populism is risky. It could end, like many a heavy-metal concert, in flames.

Yet that is not inevitable. In many respects Ms Takaichi stands for a refreshing change. Unlike the hereditary politicians who dominate politics, she is self-made. She is a keen student of policy. Her plain-speaking style endears her to voters. Though not a feminist, she is breaking an important glass ceiling—the last woman to rule Japan lived more than a thousand years ago.

And structural forces should constrain the new prime minister. China’s growing assertiveness and North Korea’s new alliance with Russia mean Japan does not have the luxury of squabbling with South Korea over the past. The LDP leads a minority government and will need to broaden the coalition or work with the opposition to make policy. To have a lasting effect on this lofty stage, Ms Takaichi will need to learn how to blend in with the band. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Banning the payment of ransoms would be a start

Cybercrime is afflicting big business. How to lessen the pain Banning the payment of ransoms would be a start October 9th 2025 MORE THAN a month for Jaguar Land Rover (JLR), an Indian-owned carmaker. A week for Asahi, a Japanese brewing giant. Six weeks for Marks and Spencer (m&s), a British retailer. That is how long each of those firms has needed to recover after being hacked. For JLR, the disruption has extended far beyond the firm. Last month the government in Britain, where it is based, said it would underwrite a £1.5bn ($2bn) loan in an attempt to keep the carmaker’s suppliers afloat.

Cybercrime has long been dominated by thieves who set out to steal information for profit. Now they’re being joined by thugs, who aim to use the threat of damage to a firm’s operations to extort higher payments.

Cryptocurrency has enabled ransomware, an attack in which hackers seize and encrypt vital data, then promise to unscramble it after a ransom is paid. (Sometimes they even keep their word.) As long as criminals focus attacks on firms in the West, countries such as China and Russia, in which many hacking gangs are based, see little need to crack down.

Companies cannot prevent this, but they are not powerless . As we report, the recent attacks can teach other firms how to lessen the chance they will suffer a similar fate—and to lessen the damage should they do so.

One message is to be aware of which parts of an attack will prove to be the most expensive in the long run. As cyber-attacks have become more common, firms have begun buying specialist insurance to mitigate the risk. That is a good thing: insurance incentivises companies to take security more seriously, since those that don’t take care face higher premiums.

Even so, plenty of companies still do not take out enough cyber insurance, either because of a lack of awareness, or because it is costly. JLR is reckoned to have lost £50m for every week after the attack. m&s is thought to have missed out on around £300m of business in the weeks it spent fixing its website, yet its resilience insurance underwrote just a third of that. Buying insurance that protects against such losses would encourage firms not just to try to stop attackers getting in, but also to ensure their computer systems can recover quickly.

A second idea is to be aware of the risks of outsourcing. Handing off parts of a business to specialist suppliers makes sense. But IT outsourcers hold the keys to many different kingdoms. Front-line employees are usually told to follow a predictable script whenever an IT-support call comes in. These things make outsourcers especially attractive to hackers.

Sure enough, several recent attacks appear to have been carried out after hackers gained a foothold using outsourcing firms. Businesses that elect to outsource should vet their contractors carefully, and decide on risk-sharing arrangements before they sign. Outsourcers themselves may find that beefing up security could differentiate themselves from their rivals.

Governments can help, too, starting with tightening the rules around disclosure. Firms can be reluctant to admit they have been attacked. That reticence makes it harder for the authorities to spot patterns and learn about vulnerabilities, which puts others at risk. America until recently ran forums in which firms could share information confidentially without worrying about falling foul of rules on collusion. They should be revived, and other countries could copy that model.

Governments could go further and ban the payment of ransoms altogether. Some American states already forbid public bodies from making payments. (Britain is planning something similar.) In some places payments may violate rules against shelling out money to organised crime. Elsewhere, police often advise against it. A full ban may sound extreme, but it is in everyone’s interest to have less ransomware. The industry persists because it is more strongly in an individual’s interest to pay off extortionists. If hacking does not pay, it will wither. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The longer autocrats stay in power, the worse they become

Africa’s leaders-for-life offer a warning to the world The longer autocrats stay in power, the worse they become October 9th 2025 These are bad times for democracy. Strongmen, from Vladimir Putin in Russia to Recep Tayyip Erdogan in Turkey, are flexing their muscles. In America and India democratically elected leaders are flirting with more personalised leadership, if not openly pursuing it. In Europe voters fed up with sluggish growth and social division are tempted by the promises of charismatic authoritarian populists.

That temptation is dangerous—especially if power is being seized by a single person, rather than in the name of a system, as in China or Vietnam. To understand why, look to the part of the world where strongman rule is most common: Africa. For a time in the 1990s the African “big man” seemed a relic of the cold war. Back then, many African countries adopted democratic institutions, introducing term limits and regular elections. Unfortunately, the democratic heyday was short-lived.

In the coming months, several leaders who have been in power for decades will run in dodgy elections. These include Paul Biya, the 92-year-old president of Cameroon, and Yoweri Museveni, the 81-year-old leader of Uganda. Seven of the ten longest-serving leaders in the world, barring monarchs, are in Africa. Teodoro Obiang of Equatorial Guinea holds the record, with more than 46 years in power. Typically, they stay 50% longer than leaders elsewhere.

Big men are unequivocally bad for political rights. They harass their opponents, imprison them, drive them into exile or have them killed. Free speech is tightly curtailed. Corruption is rampant. Yet defenders of big-man rule tend to argue that, despite all these costs to political freedom, such leaders are needed to bind poor, fragile and divided societies together. Pointing to places like Rwanda, under Paul Kagame, they say that strongmen can provide a degree of stability and economic growth that eludes many messy democracies.

New research suggests that this is wrong. Even if strongmen start out relatively competent, they tend to become worse over time. Particularly once they breach term limits, governance deteriorates. Patronage networks become narrower, with more goodies dished out to a shrinking inner circle. Corruption increases. Leaders become more likely to rig elections and then use violence to suppress protests against the inevitable result.

However long autocrats stay in power, countries dominated by a single leader, in Africa or elsewhere, tend to produce poor economic outcomes. Democracies and “institutionalised autocracies” with single parties operate according to an implicit social contract. By contrast, personalised regimes suffer from more conflict, less private investment and a worse provision of public goods by the government, all of which hurts economic growth.

Alas strongman rule has become entrenched across Africa. The generation of leaders for life, now in their 80s and 90s, is being replaced by younger ones intent on ruling as autocratically, as rapaciously and for just as long. Across the Sahel, leaders of military juntas in their 30s, 40s and 60s, have grabbed power and then reneged on promises to hold elections. In the Democratic Republic of Congo, Félix Tshisekedi, the 62-year-old president, has suggested scrapping a constitutional two-term limit. In Ethiopia Abiy Ahmed, aged 49, is said to see himself as a messiah—and messiahs don’t retire.

Across the world strongmen are gaining in power and prominence. The African experience offers a warning. However promising charismatic leaders may look at the start, big men eventually lead to big trouble. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

NATO must resist Russia’s efforts to corrode it from within

Vladimir Putin is testing the West—and its unity NATO must resist Russia’s efforts to corrode it from within October 2nd 2025 DRONES OVER Poland; MiG fighters traversing Estonian airspace; telecom cables damaged deep beneath the Baltic Sea; airports paralysed by cyber-attacks and quadcopters; mysterious explosions and assassinations; bot swarms pumping out propaganda to disrupt elections: none of these on its own is a casus belli, but together they are adding up to something new and dangerous. Vladimir Putin is waging a grey-zone campaign against NATO: a cheap, deniable and calibrated effort to unsettle Europe that is carefully short of outright conflict. “We are not at war,” Germany’s chancellor, Friedrich Merz, said this week. “But we are no longer at peace, either.”

The damage has never been serious, so what is the point? Mr Putin knows he cannot defeat NATO in a stand-up fight, yet his aim, given the grand sweep of his writings and speeches, is more than just to be a nuisance. He is trying to achieve three things, and he needs to fail at all of them.

First, Mr Putin aims to break the unity of NATO. His goal is to make Europeans doubt each other and in particular question America’s commitment to the alliance it created in 1949. He aims to sow suspicion that Article 5, which treats an attack on one as an attack on all, cannot be relied on; and, eventually, to prise America away from Europe altogether. NATO, Mr Putin has often stated, is devoted to dismembering Russia; so it must itself be destroyed from within.

At the turn of the century America was mightier than all its enemies and friends put together. Osama bin Laden began the unravelling. His strike on the twin towers in 2001 lured America into overreach in Afghanistan and Iraq, prompting a backlash at home against foreign commitments. China’s rulers dream of a similar American exit from East Asia. That is why Xi Jinping, too, is using grey-zone incursions to make Taiwan feel vulnerable—and to cast doubt on America’s commitment to its Asian partners. With his carelessness for the security order that has underpinned the world since 1945, Donald Trump is making Mr Xi’s task easier.

The same is true in Europe. Mr Trump’s response to the drone incursion into Poland was to say that it “could have been a mistake”, even though a show of solidarity was called for. It is not hard to connect those words to the violation of Estonian skies by three MiG-31s ten days later. Mr Trump needs to stress his commitment to military action in Europe if it becomes necessary. If sabotage and violations of airspace are shrugged off as routine, deterrence becomes a matter for debate—and once it is debated, it is weakened.

Mr Putin’s second objective concerns Ukraine. His summer offensive has failed, so he wants to raise the cost to European countries that support Ukraine’s army. A focus of the grey-zone attacks has been the countries that are its strongest backers. Poland, Estonia and Denmark have suffered drone incursions, GPS jamming and sabotage. Germany has faced cyber-attacks on its defence and logistics firms. Moldova and Romania, as front-line states, have had their elections interfered with—in both cases unsuccessfully, which shows that Mr Putin does not always get his way. His message to voters and politicians is blunt: rather than sending weapons to Ukraine, you should focus on appeasing Russia or defending yourselves.

The third explanation for this campaign is deeper and older. Mr Putin hates classical liberal democracies whose wealth and resilience show up his failures and his repression. They outperform him economically. Russia’s GDP is smaller than Italy’s even though its population is well over twice as large. The more he can sow discord and confusion within the West, the stronger he looks. The more he can discredit centrist governments, the more it will benefit populist nationalists who share his suspicion of a united Europe.

What should the allies do? First, they must expose everything. The temptation is to ignore small provocations or, lacking proof of Russia’s responsibility, hold back from accusations. But to ignore the grey zone is to concede it. And once conceded, it expands. Sabotage, cyber-attacks, election interference: each should be attributed and publicised swiftly, with evidence. That strips Russia of plausible deniability and educates Western voters that they are the targets of a campaign.

NATO and the European Union must also improve their resilience. Grey-zone defence includes spare parts and repair crews for cables and pipelines, rapid cyber-response teams and hardened electoral commissions. It is the tedious but vital business of building in redundancy and preparedness. At the same time, the Europeans must also harden their defences. Patrols in the Baltic Sea must be continuous; more sensors are needed. Europe needs cheap interceptors that can take out the drones Russia is making by the tens of thousands. Scrambling F-35s and using missiles costing millions of dollars against drones costing only thousands will eventually exhaust Europe’s defences, leaving it vulnerable.

Last, the alliance must impose clearer costs. Drones over borders should trigger sanctions on suppliers and shell companies. Cyber-attacks should meet cyber-countermeasures. It is now time to use Russia’s frozen assets to pay for the defence of Ukraine, which is in reality the defence of Europe, too. And yes, that defence may mean shooting down a warplane that poses a threat to life or property. Fainthearts worry about escalation , but declining to act threatens escalation of a different kind. If Russia thinks it can get away with limited acts of aggression, something really dangerous might one day happen—such as Mr Putin grabbing a pocket of land around Narva on the Estonian side of the border, a city filled with Russian-speakers whose rights Russia pretends to champion.

All this is hard to do even if America’s guarantee is solid. It is harder still when Mr Trump is an uncertain member of the alliance. This year he says he backs NATO, but last year he suggested he would “encourage Russia to do whatever it wants” to members who don’t pay enough. Such words are taken as an invitation to probe and divide. Mr Putin has been listening. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

America, Israel and perhaps Hamas have changed their positions

The White House’s plan for Gaza deserves praise America, Israel and perhaps Hamas have changed their positions October 2nd 2025 On September 29TH President Donald Trump stood with Binyamin Netanyahu, Israel’s prime minister, and set out a 20-point plan for “eternal peace” in Gaza. It is tempting to be dismissive. Although the hyperbole was exceptional, it is hardly the first peace plan since the war began in 2023. And while the talking continues, the horror in Gaza persists. Yet dismissal would be a mistake. T his proposal is a milestone because it sets parameters for a way out of the nightmare and marks a change in the positions of America and Israel, and, just possibly, Hamas.

The principles of the plan are clear, even if the sequencing and details are not. The hostages would be released almost immediately. Hamas leaders and fighters would disarm and be granted amnesty or exile. A technocratic administration that excludes Hamas would take over, supervised by an international board under Mr Trump. The Israeli army would withdraw from Gaza in stages, handing security to an international force and newly vetted Palestinian police. In the long run the rehabilitation of Gaza, and reforms to the Palestinian Authority (PA) in the West Bank , could yet lead to statehood. Eight Muslim countries, including the main Arab powers and Turkey, back the deal.

This is new for America. In February Mr Trump entertained the idea of Gaza being ethnically cleansed of Palestinians to make space for a new Middle East “Riviera”. Since then, he has given tacit approval to the nihilistic fantasies of the hard-right parties in Israel’s coalition government, who dream of settling Gaza. Now, having lost patience with Mr Netanyahu after Israel’s strikes on Qatar in September, Mr Trump has signalled that “Israel will not occupy or annex Gaza” keeping open the prospect of a two-state solution.

By supporting the proposal, Mr Netanyahu has pivoted, too. Until recently he was committed to a forever war in Gaza and indulged his hard-right coalition partners, partly because a ceasefire might end the government and his time in office (an election must be held by late 2026). Now he has suggested that he intends to fight the election on the platform that the peace plan secures Israel’s original war aims of getting the hostages back and Hamas out of power. Although he is unpopular, the plan is not: almost three-quarters of Israelis support it.

The final shift may be from Hamas. It has yet to formally respond and may have detailed objections to the sequencing of the Israeli withdrawal and the absence of guarantees if Israel changes its mind. But were it to accept in principle and in public that it is prepared to relinquish its weapons and its claim to govern Gaza, that would be a huge shift, in effect signalling it accepts that it is not the legitimate representative of the Palestinian people.

The pitfalls are obvious. Hamas could reject a deal, condemning Gaza to more misery. Mr Netanyahu and Hamas may sign up insincerely, with the real goal of sabotaging the deal later. The details over sequencing are hellish. Rebuilding Gaza may prove impossible to organise or fund. Israel’s politics could pull Mr Netanyahu or his successor back towards annexation. The PA may be incapable of reform and the interim government overstay its welcome. Notwithstanding proclamations at the UN, there is little evidence that a majority of either Israelis or Palestinians still have confidence in a two-state solution. It will take decades to rebuild trust.

Yet for all that, Mr Trump’s plan offers the best pathway out of the tragedy in Gaza. Its success would require sustained pressure from Mr Trump on Israel, and from the Arab states and Turkey on Hamas. But today’s unending mass suffering is unacceptable and so are the alternatives of occupation, anarchy or rule by a reconstituted Hamas. For dragging the negotiations to reality, Mr Trump and his team deserve praise. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The problem is not greedy pharma firms

Donald Trump’s cure for drug prices is worse than the disease The problem is not greedy pharma firms October 2nd 2025 Few things infuriate Americans as much as drug prices. Republicans and Democrats alike agree that poorly patients are being ripped off by greedy pharma firms. They point to the fact that America’s list prices for branded drugs are, on average, more than four times those in other rich countries.

Donald Trump agrees with them and he has set out to do something about it. He has asked drugmakers to cut their prices to “most-favoured nation” levels, ie, to the cheapest price out there. If they don’t, he says, he will use “every tool in our arsenal” against what he calls abusive drug pricing. But the president’s battle to bring down prices is doomed to fail. Indeed, it could even make health care in America worse.

Anyone familiar with the country’s byzantine health system knows that inefficiencies and rents abound. Yet these tend to be concentrated not among drugmakers, but further along the supply chain. Our analysis of 220 listed health-care firms finds that three-fifths of the excess profits, defined as those that are above a 10% return on capital, are taken by others, including hospitals, and middlemen, such as insurers, distributors and pharmacy-benefit managers. Three pbms handled nearly 80% of prescription claims last year; some of them are being investigated for uncompetitive behaviour. Cracking open the sector and encouraging competition would help bring costs down.

Even if that were fixed, drugs in America would remain three times dearer than in the rest of the rich world. What more should be done?

To answer the question, it helps to grasp why American patients pay more. They are not being ripped off on a grand scale by feckless foreigners. Many European governments buy drugs at the national level, because their health systems are publicly run. But they do so on the basis of a calculation of the value each drug provides, measured by the improvement it offers both to the length and the quality of a patient’s life.

This value is often low enough for patients elsewhere to have worse access to new drugs than Americans do. Between 2014 and 2022 one in five medicines approved by Uncle Sam never won approval in Europe, and nearly half were not approved by Japan. Of those cleared in all three places, more than two-thirds were first approved in America—nearly six months before Europe, on average, and almost three years before Japan.

When Mr Trump says he wants to match others’ prices, he is therefore proposing to import the value that other countries place on treatments. But there is no reason why the world’s wealthiest country should share that assessment of how to value good health. If it did, Americans would save money on drugs, but at the cost of worse care than they enjoy today.

Moreover, because pharma companies are, pace Mr Trump, not price-gouging monsters, imposing the most-favoured nation price on the world’s biggest drug market would also curb innovation. Drugmakers take big risky bets on treatments, not all of which succeed; by some estimates, around 90% of clinical drug development ends in failure. If you cut the potential rewards, you cut the appetite for risk .

If its American revenues were threatened, the industry would either find ways to protect them, or innovate less, or both. To lessen the pain, firms could further delay launching their products in other countries, to keep most-favoured nation prices high; or they could raise list prices everywhere, and offer opaque rebates to countries that are not willing to pay higher rates. To the extent that prices in America were forced down, firms would take fewer risks on innovation.

That is why Mr Trump’s plan to “rebalance” the system, by making Europeans pay more and Americans less, cannot work. He cannot force the rest of the world to pay more for drugs; nor can he force drugmakers to keep spending as much on research even as their profits take a knock. The harmful consequences would affect patients everywhere—especially Americans, who are the keenest drug buyers of all.

What, then, should Mr Trump do instead? Rather than seeking to import Europe’s prices, he could borrow its approach, and establish an American system of valuing drugs. Most prices emerge from a series of negotiations between makers and middlemen, without any explicit discussion of value. But Medicare, the public-health scheme for the elderly, is showing the way forward. It can now negotiate over the prices of a handful of drugs. Medicaid, the public-health insurer for the poor, is tying payments to outcomes in costly gene therapies for conditions such as sickle-cell disease. Value-based pricing could be extended.

Such a system would reflect Americans’ greater preference for cutting-edge treatments, and would make pricing more transparent. It could also steer investments towards therapies and innovations that are more efficacious. Research suggests that these effects could combine to make spending on drugs substantially more beneficial for the health of Americans. Much of the price gap with the rest of the world would remain. But then, so too would the gulf in treatment. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

If the justices do not check an overmighty president, the country will suffer

The new SCOTUS term will reshape America’s constitution If the justices do not check an overmighty president, the country will suffer October 2nd 2025 THE PHRASE “checks and balances” does not appear anywhere in the United States constitution; and yet in a manual for Martians on how America governs itself it would be on page one. Those three words are a reminder that the country has an unwritten constitution, which resides in beliefs, behaviour and legal precedents, to go alongside its more celebrated written constitution. They describe how the branches of government compete for power—a contest where, the founding fathers wrote, “Ambition must be made to counteract ambition.” The question for the Supreme Court’s new term, which starts next week, is: how much ambition do the justices have?

Over the course of this century the presidency has accumulated power as Congress has stood aside. The justices have been content to wave through gradual increases in presidential authority, steadily rewriting the unwritten constitution as they went. That sort of incremental change is probably necessary when the written part is not working as it should, because of the partisanship that this week shut down the government once again . Yet Donald Trump is taking this indulgent attitude and exploiting it.

His administration combines the theory that the presidency should be all-powerful with a method that makes it seem so. That method involves stretching presidential authority to its limit, without waiting to see if the courts check it. When they catch up, the administration will obey the law (at least after the Supreme Court has had its say), then try another route to the same end. This is not outright defiance, but neither is it deference to a branch of government that should be coequal.

For the court, this presents a dilemma. Its first job is to define the law. And yet it is unavoidably a political institution, whose members have always quietly taken politics into account when making those judgments. Today’s chief justice, John Roberts, is caught between a desire to prevent the court from being seen as just another partisan institution, and an instinct to avoid a direct confrontation with the administration that the court could lose. Those two impulses are in tension. And so far—whether because of coincidence, ideology or pragmatism—the wish to placate the president is winning.

That was true most clearly in Trump v United States, which expanded presidential immunity from prosecution beyond the expectations of most court-watchers. It has also been true on the shadow docket, where cases are not exposed to a full public hearing. Although the court this week said that Lisa Cook could remain at the Federal Reserve while it considers Mr Trump’s right to sack her, the administration has often got what it sought on the shadow docket with scant, if any, explanation. The term that starts next week looks likely to expand presidential power yet again .

Three cases will be defining. One, the ominously named Trump v Slaughter, touches on whether the president can sack people at independent government agencies. The court seems likely to conclude he does, with the exception of the Fed. Handing this power to the president would overturn a precedent from the 1930s, when the justices ruled against an overmighty FDR. In another case, on birthright citizenship, the court is likely to resist the president.

And then there are the cases about tariffs, involving importers of wine and toys. Unfortunately for free traders, The Economist’s SCOTUS bot, an AI that has been trained on case filings and previous rulings, thinks the president will get his way here, too (as does our correspondent who trained the bot).

Taken together, these cases do not signal the end of the republic and its replacement with an elected monarchy. The court’s defenders can argue that, by yielding now, the justices will be in a better position to stand firm when they really need to. Maybe. But the court has started along a path that gives a power-hungry executive most of what it wants. If it continues to give ground, by the end of this president’s term America’s constitution—the one that actually describes how the country is run—will look very different. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Across the West, safety rules are standing in the way of progress

Unleash the robotaxi revolution Across the West, safety rules are standing in the way of progress October 2nd 2025 In San Francisco and Shenzhen, the future is already here. Between April and June Waymo, an American firm, conducted 2.2m robotaxi trips in California—five times as many as in the same period in 2024. Over the same three months Baidu, a Chinese tech giant, provided 2.2m trips across 16 mostly Chinese cities—a two-fold increase.

That is exciting for residents of those places. Since robotaxis have fewer accidents than human drivers, they are almost certainly saving lives. Unlike private cars, they can be in near-continuous use; the more popular they become, the more they will free up space and make urban life more comfortable. Yet city dwellers elsewhere have less to celebrate. In many places, regulation is a roadblock to self-driving taxis.

Some restrictions slow the development of the tech itself. In America firms need approval from the National Highway Traffic Safety Administration to deviate from federal standards by, say, building a car without pedals or a steering wheel, both of which are more useful to a human than to an AI driving system. And the NHTSA can allow each firm to make only 2,500 non-standard cars a year.

Other regulations control or even ban the operations of robotaxis. In New York the Taxi & Limousine Commission prohibits the use of autonomous vehicles in paid for-hire services. City councillors in Boston have proposed legislation that would require a “human-safety operator” in each. Only a few European countries are even testing them. In Germany robocabs must be monitored by a human at all times.

Such policies stem from two concerns: that robotaxis could crash into pedestrians or oncoming traffic; and that they will displace human workers, who must be protected. Neither of these justifications holds water.

Consider safety first. Regulators are right to require that new technology be tested. But the evidence so far is encouraging. A study by Waymo and Swiss Re, a reinsurer, finds that Waymos are involved in 88% fewer property-damage claims and 92% fewer injury claims per mile than humans. Other firms may struggle to match those numbers, and the vehicles have so far been let loose in “easy” cities. Still, the figures suggest that robotaxis will make roads safer. Regulators in the West could follow China and make it easier to run pilot projects.

What about the job-killing effects? Josh Hawley, a Republican senator, wants to ban self-driving cabs because they are “terrible for working people”, since they may lead to job losses among taxi drivers. More often, the concern is unspoken. Protests from drivers sway the calculations of city officials, who then insist on ultra-stringent safety standards. In China, too, fears of job losses have slowed the transition from tests to real-world use.

Yet the impact on taxi drivers must be set against the benefits to a wider group: for every cabbie in San Francisco, there are hundreds of riders and residents. And the relationship between new and old can be surprising. In San Francisco robotaxis are replacing private cars rather than manned taxis . Although robotaxis have cruised on to the scene, demand for ordinary cabs has held up, perhaps because they are sometimes more available. Human drivers are most useful at peak demand, when fares are highest.

Even with adroit regulation, robotaxis would not be everywhere. The challenge of making them commercially viable would remain. Each Waymo car, with all its sensors and the latest software, is said to cost around $150,000; mapping and testing can be expensive, perhaps forbiddingly so in small European cities with medieval road plans. Remove regulatory roadblocks, though, and firms could at least have the chance to expand their operations, improve the technology and bring down costs—while more consumers enjoy the ride. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

But the country could still lose

Donald Trump is trying to silence his critics. He will fail But the country could still lose September 25th 2025 DONALD TRUMP hates being the butt of jokes; so his henchman seized on a slender pretext to get Jimmy Kimmel off late-night TV . The president is fed up with being criticised when he should be feted; so his lawyers sued the New York Times for $15bn. He sees everything as a fight; so his team want wealthy allies to buy control of the American arm of TikTok from its Chinese parent. These alarming skirmishes are part of a war against the American media. Yet Mr Trump has hardly enjoyed a resounding success. Mr Kimmel is back on air; a federal judge laughed the lawsuit out of court; and who knows how obedient those multibillionaire tycoons will be.

It should not need saying in the home of the First Amendment, but a craven press leads inexorably to rampant corruption, poor government and cynical, disaffected voters. In a country where elections are won by small margins, even a partially cowed or captured media could tip the scales. Yet wanting something is not the same as getting it. As Mr Kimmel and the rest show, dominating America’s sprawling, unruly media and opinionated citizens will be hard.

Mr Trump’s desire to control what people see and read about him is obvious. He seems less motivated by the—once justified—conservative gripe that much of the American media had a built-in soft-left bias than by the fact that he craves attention, and that he increasingly expects attention to mean adulation. His people prove their loyalty by striving to ensure he gets it.

They have some formidable weapons. One is a Trump speciality: bullying and threats. The Wall Street Journal has been sued too, for a scoop about Mr Trump and a dead sex-criminal, Jeffrey Epstein. So has the Des Moines Register, for a poll just before the 2024 election that had Mr Trump losing the vote in Iowa. The Pentagon is curbing the freedom of correspondents to report, on pain of losing their credentials. Disney was attacked by Brendan Carr, the boss of the Federal Communications Commission (FCC). Liking what he saw, Mr Trump then suggested that television networks which criticise him should lose their licences.

These cases are feeble in law, but they can have a chilling effect, as they are expensive to defend against. In 2008, 92% of America’s 100 largest newspapers by circulation endorsed a presidential candidate. Last year three-quarters did not.

Another weapon is ownership. Mr Trump is the first American president to have his personal news service, Truth Social. Hungary under Viktor Orban shows how friendly businessmen can bolster “official” news, either out of conviction or a desire to trade favourable coverage for commercial advantage. X is owned by Elon Musk, who campaigned for Mr Trump. TikTok looks likely to come under the control of other allies, including the Ellisons and the Murdochs. David Ellison’s purchase of Paramount and, potentially, Warner Bros Discovery would also give him control over CBS and CNN.

And a last weapon is the use of pressure points. Two networks, ABC and CBS, settled winnable multi-million-dollar lawsuits with Mr Trump, because they feared regulators’ retribution that could cost them billions of dollars. Imagine that Alphabet and Meta were induced by a promise or threat to their artificial-intelligence businesses to ensure that YouTube and Instagram leaned towards MAGA. With the fate of the company at stake, wouldn’t their duty to their shareholders be to fall into line?

All this is worrying, but Mr Trump is not as strong as he appears. Television news obsesses the elderly man with the remote in the White House, but it is vulnerable mostly because it is a declining industry. Outside debate season, CBS is a main source of political news for just 3% of Americans. The media conglomerates are focused instead on the streaming wars—one reason Disney reinstated Mr Kimmel was pressure from outraged “talent” in Hollywood. For newspapers, news and opinion is their main business. If they tough it out, they will win in court, and each time Mr Trump brings a nuisance libel case he will be further exposed as a vain bully.

America’s media market is also hard to control because it is fragmented. In the Italy of Silvio Berlusconi only a few channels mattered and he owned nearly half of them. A market of 9.5m Hungarian-speakers is small enough to be captured. America is different. Moreover, each social-media network is itself a fragmented universe of individual content-providers. Unlike William Randolph Hearst, their proprietors cannot call editors and tell them what to print—and the FCC has no jurisdiction. Algorithms can steer users, but to kill news one story at a time requires a Chinese-style army of censors. The Biden administration tried to get social networks to mute vaccine scepticism. It seems to have had the opposite effect.

Free speech in America is protected by a constitutional guarantee, a vast media market and the appetites of the half of the country that does not vote Trump. A captured media, if it were possible, would be a huge business opportunity for the other side. America has deep capital markets and lots of risk-takers. It has never been easier to start a video show or a podcast or publish words. Building new networks is hard, but look at Threads and TikTok as alternatives to X, or how the pecking order of social networks has changed in the past. As so often with Mr Trump, his great asset is speed. The courts follow procedure; businesses have to work out how to fight back; new ventures need time to get off the ground.

MAGA is unlikely to dominate America’s media. Yet even if Mr Trump does not win his battle, America could still lose. In a fragmented attention economy the best way to break through is to call everything an apocalypse, urge revolution or denounce fascism. If all the rewards go to divisive political entertainment, then founding good government on a common understanding of facts becomes ever harder. America survived a partisan press in the 19th century; it will probably do so in the 21st. But the vaudevillisation of the public square is a heavy burden on an overburdened democracy. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Too much potential goes to waste

The desperate search for superstar talent Too much potential goes to waste September 25th 2025 THIS IS A tale of squandered wealth and the vast, needless waste of human potential. The secret of economic success is innovation and the secret of innovation is the brilliance, creativity and drive of the most talented few. But even as governments throw money at schemes to boost their economies, including chipmaking factories and rare-earth mines, brainpower is going unloved. And the waste is getting worse.

You need only look at the red-hot market for grey cells to understand how commercial and economic success is increasingly being powered by the individual rather than the firm. In the race to dominate artificial intelligence (AI), America’s tech giants are assembling small teams of crack data scientists. On Wall Street a race for top talent is under way , with hedge funds nabbing hotshot traders for vast sums. Scientific breakthroughs tend to be the work of a small elite: the leading 1% of researchers generate over a fifth of citations. In China scientists returning from spells in the West are being feted as national heroes.

The rewards for superstars are growing. The best surgeons and concert pianists have long commanded the highest fees and the patronage of the wealthy. Today, however, the superstar effect is on steroids. Some programmers in their 20s command seven-, eight- or even nine-figure salaries. The number of artists on Spotify taking home more than $10m a year has grown three times as much since 2017 as the number earning above $100,000. Lawyers’ fees used to be shared out; increasingly the big money is going to the top earners at the best law firms, who massively outperform partners at their second-tier rivals.

Some of this reflects the exuberance of America’s financial markets: flush with capital, firms are able to spend even more on talent. But something deeper is afoot. Vast computing resources turbocharge the capacity of the wonkiest hedge-fund brains to devise and carry out trades, helping them turn their talents into even greater profits. Ultra-cheap digital distribution creates bigger markets for individual creators. And the size of the potential rewards for winning the race in AI turns even the most extravagant individual salary into a rounding error.

As AI spreads from discovery to exploitation, a similar effect could ripple through the rest of the economy. Studies of investors and entrepreneurs suggest that the technology will extend the dominance of the best performers, who can use it to do better still. AI agents could strip out layers of the business-process workers needed to run today’s firms, making it easier still for bright sparks to set up companies with ever-smaller collections of clever people.

This is a boon to superstars born with talent and blessed with good fortune. But it is also a vital source of wealth for everyone else. The world is ageing rapidly. If the economy is to keep growing meaningfully as the number of workers stops rising, the pace of innovation will need to stay high. Talent will become even more vital as the engine of progress. If superintelligent AI is to come to the rescue, it will require ingenious people, not merely chips and electricity.

The trouble is that, although the world’s reservoir of talent is vast, too few people are achieving their potential. Today scientific innovation is concentrated among Westerners, many of them from well-off backgrounds. Talent often goes unidentified; even when it is found, early promise is not always realised, because of the financial and logistical hurdles of going to university or moving to another country.

The result is a tragic waste of human gifts in both rich countries and poor. By one estimate, students in poorer countries who fare as well in maths contests as their richer peers go on to publish less research, and are half as likely to earn a doctorate from a leading university. Another study suggests that if America’s class, gender and race gaps in invention were closed, the number of innovators in the country would quadruple.

Far from eliminating this waste, politicians are neglecting it. One failure is immigration. Firms and universities should be able to fish in the global pool of talent. Without such a chance for themselves and their families, the superstar bosses of four of America’s “Magnificent Seven” tech firms would not be in their jobs today. One estimate reckons that easing immigration by removing financial barriers for especially bright students would raise the scientific output of future cohorts by as much as 50%. But special immigration programmes are often half-hearted and bureaucratic—because immigration is unpopular.

What of the search for genius at home? Contests and scouting programmes are surprisingly good at spotting early promise. Gold-medal winners at international maths Olympiads are 50 times more likely to go on to win a big science prize than undergraduates at MIT; half the founders of OpenAI cut their teeth in the contest. But most countries are not systematic about talent. The rich have all the advantages; everyone else relies on individual drive and a dose of luck.

America is an example of what to avoid. Built on immigration, with a culture of meritocracy and top-ranking universities, it should win the tussle for talent. An obsession with diversity, equity and inclusion in the early 2020s stalled programmes for gifted students. Donald Trump is adding to the missteps. His administration has just announced drastically higher fees for the H-1B visa programme, through which many researchers and techies enter America. And a vindictive crackdown on Harvard and other elite universities has jeopardised funding for research and the scope to take foreign students.

America’s errors are a chance for other countries to catch up. China is introducing a visa scheme for young foreign scientists and technologists. Britain may ditch visa fees for skilled arrivals altogether. France hopes to attract foreign researchers who move. That is fine so far as it goes, but it is half-hearted. Talent is waiting to be tapped. The gains would be immense. When will the world wake up? ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Things are going wrong away from the front line. Europe needs to help

Fixing the rot in Ukraine Things are going wrong away from the front line. Europe needs to help September 25th 2025 EVERY TIME Volodymyr Zelensky meets Donald Trump, Ukraine’s friends hold their breath. Will America’s president be Ukraine’s supporter or its scold? After the two men saw each other in New York on September 23rd, Mr Trump appeared to embrace a remarkable shift, urging Ukraine to recapture all the territory it has lost to Russia and Europe to shoot down errant Russian aircraft. That was taken as support. More likely, he is washing his hands of the war. If so, Ukraine and its European allies will have to resist Russia alone.

That would be a lot better than the acquiescence to Russia which Mr Trump once seemed to contemplate. It is a fantasy to think that Ukraine could recover the fifth of its original area that Russia occupies, even with European help. However, if the White House is not hostile, America will apparently continue to supply intelligence and allow Ukraine to buy its weaponry—so long as the Europeans foot the bill. If so, Ukraine should be able to hold the line. The dream of a prosperous, secure and democratic life in the four-fifths will remain. That would amount to a kind of victory.

Unfortunately, even this outcome is getting harder to secure. As we report from Kyiv , Ukraine is running out of soldiers. Its economy is hamstrung by manpower shortages and constant bombardment. And, under the strain, its democratic politics is showing signs of fraying. The first two are not under its control. The third is where action is required even now while the fighting continues.

Mr Zelensky’s administration has become less tolerant of criticism, harrying hostile media and using lawfare against its political opponents. In July it tried to rein in two independent anti-corruption agencies that were getting too close to those in power. Ukrainians exhibit rising discontent with Mr Zelensky’s style of government, including his reliance on a coterie of advisers and his tolerance of corruption when it suits him.

Europe has a vital, if paradoxical role to play. It must now sharply step up its level of assistance, as America retreats from leadership. As Ukraine’s principal paymaster, it will have more leverage over the government in Kyiv, and it must use this to prevent democratic backsliding. It has already shown it can do so by backing demonstrations inside Ukraine against Mr Zelensky’s attack on the anti-corruption agencies.

However, there are limits. Like a megabank, Ukraine is too big to fail. The consequences for Europe of a Ukraine in chaos—for instance if war-weariness or a lack of equipment triggers military or economic collapse—are frightening to contemplate. Imagine a huge country on NATO’s borders bitter and betrayed, awash with weapons and angry ex-soldiers, and under Vladimir Putin’s thumb.

For Europe to threaten to cut off Ukraine would be empty. Instead it must coax and cajole, appealing to Mr Zelensky’s patriotism and legacy. It can use incentives to strengthen its arguments, including access to the EU’s single market, investment in Ukraine’s defence industry and the removal of obstacles on the path to EU membership.

A vital question is elections. Ukraine remains under martial law, which under the constitution prevents them from being held. But Mr Zelensky’s five-year term as president expired in May last year, and there is a growing need for Ukrainians to have their say. In the absence of a ceasefire—and there is still no sign of one—holding an election will be legally and practically difficult, but not impossible. There could be no better way of signalling that Ukraine can cope with America’s dwindling interest than an act of democratic renewal. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Donald Trump may be tempted to sell out America’s allies

The deadly allure of a bad deal with North Korea Donald Trump may be tempted to sell out America’s allies September 25th 2025 When Barack Obama left the White House, he told Donald Trump that one of the most dangerous problems in his in-tray would be North Korea. In his first term, Mr Trump initially threatened nuclear war with the isolated dictatorship and then held a series of summits with its ruler, Kim Jong Un. The theatrics generated headlines but no progress.

Now Mr Trump wants a second act, hoping to reduce the threat North Korea poses to America and perhaps even to broker a formal end to the Korean war, frozen by armistice for 70 years. Mr Kim says he would meet again, but on his own terms. Those terms are sure to be worse than during the first round.

Since then, North Korea has become more dangerous. Its arsenal has grown in size and sophistication, with intercontinental ballistic missiles (ICBMs) that could reach Mar-a-Lago. The fact that its possession of such weapons no longer surprises anyone makes them no less deadly. Mr Kim has also tightened his chokehold on North Korea’s society and economy. Teenagers now risk the firing squad just for watching South Korean TV dramas. The outside world is also becoming more favourable for Mr Kim. He has exploited the war in Ukraine to forge a battlefield partnership with Russia. That has made China anxious not to lose its role as North Korea’s main patron.

American policy towards North Korea has long been split between two camps. Hardliners favour stronger deterrence, tighter sanctions and patiently waiting for the Kim dynasty to be overthrown. Advocates of engagement counter that outreach and sunshine might induce the Kims to mellow. Neither approach has worked. Sanctions only ever had a slim chance of making the regime give up weapons it sees as the best guarantor of its own survival. They are even less likely to work now. In the past both China and Russia helped press North Korea to relinquish its nukes. Now, neither does.

A different kind of pressure might be more effective. Mr Kim fears information; anything that shows his subjects how much worse life in North Korea is than in the democratic, capitalist South. The West could do more to flood North Korea with such content, from K-pop videos to soap operas.

In the meantime, some ask whether the world should not simply accept that North Korea is a nuclear power, negotiate with it and try to coexist. This path poses grave risks. North Korea signed the Nuclear Non-Proliferation Treaty in 1985, vowing not to build a bomb in exchange for help with civilian nuclear power. Recognising its nuclear arsenal without penalties would encourage others to take the same path; the weakened global non-proliferation system might finally collapse.

Mr Kim will never swap his nukes for cash. He may, however, agree to a different bargain—one that Mr Trump might be tempted to accept. North Korea could halt its ICBM programme, allowing Mr Trump to proclaim that he has Made America Safe Again. America and North Korea could conclude a peace treaty to formally end the Korean war. Mr Trump could then draw down American forces from South Korea, as he has long suggested he wants to, handing Mr Kim a huge prize. South Korea and Japan would still face threats from North Korea’s missiles, and might race to develop nukes of their own. Mr Trump might not care. He has yet to criticise Pakistan’s nuclear deal with Saudi Arabia .

This would be a dreadful outcome for the world. Little suggests that Mr Kim seeks peaceful coexistence. He is more likely to pocket any concessions and continue making trouble. The clearest evidence of his malevolence is the brutal way he treats his subjects. As Andrei Sakharov, a Soviet dissident, once put it, a country that does not respect the rights of its own people will not respect the rights of its neighbours. With such a regime, a careless deal is worse than no deal at all. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Coders need to start thinking like mechanical engineers

How to stop AI’s “lethal trifecta” Coders need to start thinking like mechanical engineers September 25th 2025 LARGE LANGUAGE MODELS (LLMs), a trendy way of building artificial intelligence, have an inherent security problem : they cannot separate code from data. As a result, they are at risk of a type of attack called a prompt injection, in which they are tricked into following commands they should not. Sometimes the result is merely embarrassing, as when a customer-help agent is persuaded to talk like a pirate. On other occasions, it is far more damaging.

The worst effects of this flaw are reserved for those who create what is known as the “lethal trifecta”. If a company, eager to offer a powerful ai assistant to its employees , gives an LLM access to untrusted data, the ability to read valuable secrets and the ability to communicate with the outside world at the same time, then trouble is sure to follow. And avoiding this is not just a matter for AI engineers. Ordinary users, too, need to learn how to use AI safely, because installing the wrong combination of apps can generate the trifecta accidentally.

Better AI engineering is, though, the first line of defence. And that means AI engineers need to start thinking like engineers, who build things like bridges and therefore know that shoddy work costs lives .

The great works of Victorian England were erected by engineers who could not be sure of the properties of the materials they were using. In particular, whether by incompetence or malfeasance, the iron of the period was often not up to snuff. As a consequence, engineers erred on the side of caution, overbuilding to incorporate redundancy into their creations. The result was a series of centuries-spanning masterpieces.

AI-security providers do not think like this. Conventional coding is a deterministic practice. Security vulnerabilities are seen as errors to be fixed, and when fixed, they go away. AI engineers, inculcated in this way of thinking from their schooldays, therefore often act as if problems can be solved just with more training data and more astute system prompts.

These do, indeed, reduce risk. The cleverest frontier models are better at spotting and refusing malicious requests than their older or smaller cousins. But they cannot eliminate risk altogether. Unlike most software, LLMs are probabilistic. Their output is driven by random selection from likely responses. A deterministic approach to safety is thus inadequate. A better way forward is to copy engineers in the physical world and learn to work with, rather than against, capricious systems that can never be guaranteed to function as they should. That means becoming happier dealing with unpredictability by introducing safety margins, risk tolerance and error rates.

Overbuilding in the AI age might, for instance, mean using a more powerful model than is needed for the task at hand, to reduce the risk it will be tricked into doing something inappropriate. It might mean imposing limits on the number of queries LLMs can take from external sources, calibrated to the risk of damage from a malicious query. And mechanical engineering emphasises failing safely. If an AI system must have access to secrets, then avoid handing it the keys to the kingdom.

In the physical world, bridges have weight limits—even if they are not always stated clearly to drivers. And, importantly, these are well within the actual tolerances that calculations suggest a bridge will bear. The time has now come for the virtual world of AI systems to be similarly equipped. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Even with a huge majority and plenty of time, Labour is drifting towards a fiscal crisis

Britain is slowly going bust Even with a huge majority and plenty of time, Labour is drifting towards a fiscal crisis September 25th 2025 AT HOME AND abroad, Britain’s economy is in the dog house. Inflation is sticky, debts and deficits are high, and productivity growth is low. Yields on long-term government debt are above those in any other big rich economy. Four in five Britons say the government is mismanaging the economy; Ray Dalio, a hedge-fund manager, says the country is in a “debt doom loop”. As we report, the infrastructure and housing projects that were supposed to be the engine of growth are turning out to be a sorry disappointment .

Some of the doomsaying is overdone. Britain is not in a recession. Critics say the government crushed the private sector with tax increases in 2024, but the economy grew faster in the first half of 2025 than any other in the G7 group of big rich countries. Retail sales have been solid; unemployment remains low; and the service sector is strong. Britain’s structural strengths—its best universities, the City of London and the English language—are enduring. In many ways, including its birth rate and artificial-intelligence research , Britain can look to continental Europe and count its blessings.

Except, that is, for the public finances. Britain’s net public debts have risen from 35% of GDP in 2005 to 95%. Financial crises and the pandemic caused much of the increase but even today, when there is no emergency, the government is borrowing over 4% of GDP a year. America and France also have big debts and deficits, but borrow in deep currency blocs. Britain is alone, with higher interest rates and a rising welfare bill.

In one sense the problem is eminently fixable. At current bond yields and growth rates, the belt-tightening needed to stabilise debts is about 2% of GDP, some of which is already budgeted for. This would take Britain to a surplus on the primary balance, which excludes interest payments, of less than 0.5%. By historical standards, it is not a demanding target. Since 1990 Italy has on average run a primary surplus of about 1% of GDP. In 1999, during a drive to slash debts, Canada’s primary surplus reached nearly 6% of GDP.

Fixability would normally be a good sign. However, in Britain, as in France, the inability of the political system to grapple with a solvable problem is itself a symptom of decline. The Labour government is led by technocrats with a working majority of 157 in Parliament. It has forgiving budget rules and as long as four years until the next election. If it cannot put the budget on a sound footing, then who will?

The political failure is all the greater because it is abundantly clear that the fiscal adjustment should start with pensions and the welfare budget. Britain spends about 6% of GDP supporting pensioners, up by over a third this century. Generous, automatic increases to the state pension have become unaffordable. So have benefits to the 15% of Britain’s working-age population who now claim jobless allowances, after a surge in disability claims since the pandemic. The scale of the increase is impossible to justify. The system has been gamed.

Labour knows this, and has tried to act. But this year it has bungled attempts to reduce spending on pensioners and welfare. In both cases it has U-turned on reform plans after a political outcry, including from within the party. It appeared not to expect the backlash, let alone prepare for it. So it has backed down, twice.

That leaves tax. The government has already raised taxes once (though its predecessor had cut taxes just before the election). And tax revenue is already on course to rise to 38% of GDP, a historical high for Britain, even if it is still lowish by European standards.

The trouble is that Labour promised before it was elected not to raise broad-based taxes on income and consumption. The hunt for alternatives is a risky business. Many bad ideas have been hinted at, from taxing pension contributions to imposing capital-gains tax on primary residences. Taxes on narrower bases cause more distortion, because the rates must be higher. The party’s left flank wants heavier taxes on capital. That might deter investors, including those who buy Britain’s government debt. As well as risking economic damage, creating a concentrated group of big losers can be politically fraught. Some backbenchers fantasise about throwing fiscal caution to the wind. If ministers overplay their hand, they could find themselves making a third U-turn.

Investors’ anxiety about Labour is aggravated by the lack of anyone else who would do better. Andy Burnham, the mayor of Greater Manchester, is manoeuvring to challenge Sir Keir Starmer , the prime minister, for the top job. He is for “rolling back the 1980s”. But in the decade before Margaret Thatcher, Britain was the sick man of Europe and had to be bailed out by the IMF. Labour could lose power to Nigel Farage’s populist Reform UK party. It claims that changes to interest payments at the Bank of England could generate oodles of cash. But its sums are wildly optimistic and fail to account for how that would harm the banking system. Reform also wants tax cuts that are unaffordable. Whoever is in power faces more ageing, pressure for increased defence spending and the costs of managing big debts. They also run the risk of facing another serious crisis like the pandemic, for which the country, this time, is not fiscally prepared.

Some speculate that Britain could be compelled to turn to the IMF for a second time. That is the wrong comparison. Back in 1976 the country needed dollars to help manage its currency. It now has a fully floating exchange rate and minimal foreign-currency obligations.

A better parallel is the market panic that followed Liz Truss’s irresponsible “mini budget” in 2022. This caused violent moves in gilts, exposed vulnerabilities in the financial system and imposed a lasting risk premium on British debt. The difference between her cavalier leap and today’s cautious drift is a lot smaller than it looks. If Britain cannot budget responsibly by choice, then markets will force it to do so by necessity—thereby damaging the entire economy. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Public opinion is souring even in Israel’s strongest ally. Israelis should worry

How Israel is losing America Public opinion is souring even in Israel’s strongest ally. Israelis should worry September 18th 2025 ON SEPTEMBER 14TH, after showing Marco Rubio, America’s secretary of state, the massive, 2,000-year-old blocks of the Western Wall at Jerusalem’s holiest site, Binyamin Netanyahu declared the alliance between their countries to be “as strong and as durable as the stones…we just touched”. Unfortunately, he is wrong.

As Israel becomes isolated over its war in Gaza , it depends increasingly on America. During the current UN General Assembly old friends, including Australia, Britain, Canada and France, will recognise a Palestinian state, even as Israel’s expansion of settlements in the West Bank makes real statehood less likely. America is all that stands between Israel and a pariah status that would have dire implications for its diplomatic, legal and military security.

For all Mr Netanyahu’s blithe assurances that relations with America are perfectly solid, they are not. The prime minister has riled the Trump administration and is ignoring cracks deep within the foundations of the alliance. Democratic voters have long been drifting away from America’s most indulged ally. Republican voters are increasingly losing faith, too. A sudden loss of popular American support would be a catastrophe for Israel—a small country of 10m people in a dangerous and hostile neighbourhood.

The polling in America is startling. The share of Americans who back Israel over the Palestinians is at a 25-year low . In 2022, 42% of American adults held an unfavourable view of Israel; now 53% do. A recent YouGov/Economist poll finds that 43% of Americans believe Israel is committing genocide in Gaza. In the past three years unfavourable views of Israel among Democrats over 50 rose by 23 percentage points. Among Republicans under 50, support is evenly divided, compared with 63% for Israel in 2022. Between 2018 and 2021 the share of evangelicals under the age of 30 who backed Israelis over Palestinians plunged from 69% to 34%. Pollsters think that shift has endured.

To understand why this matters, go back to the years when America’s bond with Israel was a powerful amalgam of values and interests. Both are democracies founded by pioneers seeking refuge from persecution. Both believed that their country was exceptional: one a shining city on a hill, the other a light unto the nations. At the same time, their interests overlapped. During the cold war, Israel was a bulwark against Soviet expansion in the Arab world. After the Soviet collapse, they were still allied against Iran. After the attacks of September 11th 2001, they were united by a loathing of Islamist terrorism.

What has gone wrong? For Democrats, the falling-out is over values—especially among the young. Democrats tend to project their dismay at America’s history of slavery and neo-colonialism onto oppressed Palestinians and Israeli settlers, even though the comparison is strained. This has been exacerbated by a rightward shift in Israeli politics. Furthermore, Mr Netanyahu has put Israel firmly in the Republican camp, partly in the hope that Republicans will attack any Democratic administration that presses him over settlements or peace talks.

The fall-off in support among Republican voters is not so much about clashing beliefs as divergent interests. Anger about using taxpayers’ money to support Ukraine spills over to the $300bn or so America has given Israel since independence in 1948. Israel’s strikes on Qatar and Syria have undermined Mr Trump’s attempts to create a regional peace. Led by a president who knows where the money is, some in the donor class are gravitating towards the Gulf monarchies.

The war in Gaza has made all this worse. When Americans see photographs of starving children, they rightly shudder. Some Republican commentators, such as Tucker Carlson, resent the idea that Israel might drag America into another Middle Eastern war by attacking Iran. Whenever Israel is criticised, its defenders hurl accusations of antisemitism—not always fairly. With overuse, a heinous charge is losing its sting. That is bad for Jews everywhere, including in Israel.

Optimists will call this scaremongering. Israeli and American governments have fallen out in the past. Their soldiers are closer than ever, fighting together in June for the first time, against Iran. When the Gaza war is done and a new Israeli prime minister takes office, Israel’s interest in being close to America will once again assert itself. Israel’s ascendancy in the Middle East will mean that America cannot afford to ignore it, they say.

That is complacent. Long-run shifts in public opinion are more dangerous than rows between governments. Although they are slow to gather momentum, they are hard to reverse. When voters change their minds, political taboos can suddenly crumble. Even today, some Israeli analysts fear that Joe Biden will be the last instinctively Zionist American president.

Military support is underpinned by a decade-long agreement. The current one, which supplies Israel with $3.8bn a year, runs out in 2028 and should be being renegotiated. But Israel is worried that Mr Trump will refuse to hand over money and is looking to repackage the agreement as a “partnership”. The cash matters less than sharing technology and guaranteeing access to advanced weapons—particularly in war.

It is wrong to assume that a successor to Mr Netanyahu can put things right. Israel is a democracy too; and it is a divided one in which many voters embrace the nationalist-religious right. Gaza will be a running sore, even when the fighting stops. Powerful factions are bent on expanding settlements and annexing Gaza and parts of the West Bank.

This week Mr Netanyahu talked of Israel as a “super-Sparta”, ready to stand alone. As Israel fights on in Gaza and attacks Arab capitals at will, it is betting that military domination over the Middle East will make it more secure. That muscle-bound, autarkic vision is a tragic misconception. It could eventually drive away its irreplaceable protector. For Israel, no strategic blunder could be more dangerous. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Jobs growth is probably weak because of low migration, not a cold economy

America’s monetary policy risks getting too loose Jobs growth is probably weak because of low migration, not a cold economy September 18th 2025 THE FEDERAL RESERVE is usually run by technocratic consensus. Today it has become a battleground. On September 17th the Fed cut interest rates for the first time since December, by a quarter of a percentage point, to 4-4.25%. One of its governors, Lisa Cook, could attend only because a court blocked President Donald Trump from sacking her. Another, Stephen Miran, was confirmed just before the meeting for a short stint, after which he says he will return to his job at the White House. It is an unseemly arrangement for a central bank that should be independent of politics. Mr Miran dissented in favour of a half-point rate cut. And he appears to have called for three such moves by the end of the year, twice what the next-most-doveish committee members suggested in their anonymous projections.

The Fed finds itself at a dangerous moment, and not just because of Mr Trump’s quest for lower rates. The economic argument for looser money is finely balanced. Mr Miran’s submission, though an outlier, was pivotal: by 10-9, the committee expects at least three rate cuts this year. That is what markets have been betting on, too. But following through on those expectations would be a mistake.

The case for easier money depends almost entirely on the labour market. Recent data and revisions show firms have created only 27,000 jobs per month on average since May, down from 123,000 in the first four months of the year. The hiring swoon has vindicated predictions made by Chris Waller, another Fed governor and the betting market’s favourite to replace Jerome Powell as chairman next year.

The trouble is judging how much poor jobs numbers—and an accompanying slowdown in economic growth—reflect softer demand for workers rather than their shrinking supply. Immigration has collapsed under Mr Trump. Agents reported just 8,000 “encounters” with illegal migrants on the southern border in July, compared with 100,000 in the same month last year. Some researchers think that net migration this year will be negative. The unemployment rate , which should reflect the balance between supply and demand, is only 4.3%—hardly evidence of a glut of workers.

The rest of the economy shows no sign of flagging . Retail sales are strong, as is sentiment in the service sector. And Wall Street is euphoric. The stockmarket is soaring, fuelled by optimism about AI, credit spreads are tight and crypto is booming. Financial conditions should partly reflect the stance of monetary policy—how far rates are above or below a neutral setting. The Fed’s judgment that policy is tight sits uneasily with investors valuing stocks more highly, relative to their earnings, than at any time since the dotcom boom.

The central bank should also worry about inflation. It stands at 2.6% on the Fed’s preferred measure, and is rising because of the president’s tariffs. The effect should be temporary because tariffs will not rise for ever. But the creeping politicisation of the Fed threatens the case for ignoring one-time shocks to prices. Central bankers who are not trusted to ignore politics find it harder to stop inflation becoming entrenched. Doing so means tolerating a weaker economy.

That makes it a particularly bad time to loosen too much. Imagine the brawl if the central bank had to correct course and hike rates sharply with Mr Trump in the White House. One cut makes sense as insurance against the danger that the jobs market is weakening too much. Going much further risks a mistake that the central bank cannot afford. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

He imagines a continental revolt against Islam and elites

What Elon Musk gets wrong about Europe’s hard right He imagines a continental revolt against Islam and elites September 18th 2025 “You either fight back or you die,” Elon Musk told a big crowd in London on September 13th at a rally organised by Tommy Robinson, a convicted criminal who preaches anti-Muslim bigotry. Mr Musk has cultivated ties with insurgent hard-right parties across Europe. The continent is being overrun by Muslims, he claims, and faces demographic disaster and oppression by corrupt elites. It can be saved only by disruptive, MAGA-like parties that represent the true voice of citizens (take it as read: white, Christian ones).

In fact, to lump together Europe’s hard-right forces is a mistake. They all dislike immigration and wokery, and are fond of conspiracy theories and social-media pugnacity. But their paths are different. In France the hard right appears to be moderating as it gets closer to power. In Germany the Alternative for Germany (AfD) is radicalising further, but remains distant from power. Britain is in flux: as the rally showed, extreme views are becoming normalised, and the electoral system could yet propel the hard right into office.

Giorgia Meloni in Italy is actually in power. When she first soared in the polls, liberals panicked. Here, they feared, was a future prime minister rooted in post-fascist politics, who might unleash culture wars at home and an economic crisis in the European Union. Yet since winning office in 2022 Ms Meloni has proved pragmatic. She has been firm but not xenophobic on illegal migration. She has not waged a culture war, beyond trying to restrict surrogacy. She has cleaved to fiscal discipline, backed Ukraine against Russia and avoided open conflict with the EU. Her calculation is clear: Italy’s economy depends on European largesse, its companies on the single market, its bonds on the European Central Bank’s support.

In France Jordan Bardella shows early signs of following a similar script, positioning himself as the moderate face of Marine Le Pen’s National Rally ahead of a probable tilt at the presidency in 2027. (Ms Le Pen is currently barred from standing.) Mr Bardella is trying to reassure French business that a hard-right president need not mean fiscal ruin or a euro crisis. Whether he can honour that promise is doubtful. But even the act of wooing the establishment marks a shift.

Contrast those two cases with the AfD. It thrives in Germany’s east, where disaffection with the state runs deep. Its rhetoric is xenophobic and pro-Russian. Nonetheless a “firewall” put up by mainstream parties which refuse to work with it has so far blocked it from national or state-level office. It did well last year in state elections in the east, but without coalition partners failed to turn protest into power. And local elections in North Rhine-Westphalia, outside its eastern base, on September 14th showed its limited appeal west of the Elbe: it increased its share but failed to break out of the poorer areas.

Britain is the new battleground. Nigel Farage, leader of Reform UK, has been careful to distance himself from Mr Robinson and the violent right: he was wisely absent from the rally. But Reform’s rhetoric has grown more radical, with proposals for mass deportations. It is polling at around 30%, far ahead of any other party. Britain’s first-past-the-post system means that vote share could be turned into a parliamentary majority, although the next general election is not due until 2029.

Even if the hard right is moderating, it still poses threats. Mr Bardella still rails against immigrants. The solution to many of Europe’s problems—weak defence, declining competitiveness, a lack of innovation—is further European integration, which makes all its hard-right parties bristle. Yet there is a difference between wreckers and pragmatists. In Italy, and perhaps France, the hard right is realising that to win and then govern is to compromise. Europe is not being overrun by the hard right. Its politics are being reshaped—unevenly, and, we hope, less catastrophically than Mr Musk would like. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

It won’t look like America or China. It could still be a winner

India could be a different kind of AI superpower It won’t look like America or China. It could still be a winner September 18th 2025 Artificial intelligence (AI) is taking off in India. The country is now the second-largest market for OpenAI, whose ChatGPT service has 700m active users worldwide. Anthropic, another AI startup, also counts India as its second-largest market by usage. That reflects not just India’s huge population but also its appetite for new technology. According to BCG, a consultancy, 92% of Indian office workers regularly use AI tools , compared with 64% in America. In contrast to rich countries, a large majority of Indians believe AI’s benefits outweigh its risks.

The enthusiasm has been boosted by the “blitzscaling” tactics of Silicon Valley firms. OpenAI is selling access to a chatbot in India for a fifth of the price of its cheapest American plan. Grok, from Elon Musk’s startup, xAI, is priced at a quarter of its American rate. Perplexity, a generative-AI upstart, has made its service free for a year to all 360m users of Airtel, a big Indian mobile operator.

Even in India, however, the boom in AI causes anxiety. The country’s youth-unemployment rate stands at 16%. Jobs in manufacturing have grown far less than had been hoped, in part because of rising automation—a trend that AI threatens to accelerate. White-collar work is starting to look wobbly, too. Tata Consultancy Services, India’s biggest IT-services firm, recently said that it would cut 12,000 staff in order to become “future ready”. Jefferies, an investment bank, predicts that more IT firms will follow.

A second fear is foreign domination. Some Indian policymakers and investors fret that their country will come to rely on AI products and services that are controlled by firms from abroad. Keen not to be left out of the model race, the government has tapped Sarvam AI, a local startup, to build India’s first home-grown foundational model.

Such worries are understandable. Yet India stands to gain far more by embracing AI than it will lose. Many benefits of being open to global tech firms are already plain. The country’s payments network, which handles around 700m transactions a day, is piloting the use of AI to spot fraud in real time. Deeper transformations may emerge. AI assistants might help mitigate India’s chronic shortages of teachers and doctors.

Foreign dependency is also less of a problem than it may seem. True, India does not create the latest models or the fastest AI chips. But its firms can innovate in a distinctive way, by turning AI into world-beating products and services. India has the world’s second-largest pool of developers on GitHub, a coding platform, and a vast domestic market in which global tech giants and local firms compete side by side. That gives its firms both the talent and the testbed to create usable, affordable services that do the sorts of things that ordinary people want from AI.

Already, Indian users are shaping how the most popular AI models develop. Voice, not text, has quickly emerged as the dominant way of interacting with AI tools in India, in part because some users struggle to read. Indian firms are especially adept at designing services for a varied audience.

The “India Stack”—India’s digital platform for biometric identification and payments—has already become a model for other countries. Products infused with AI could be the next export of this kind: frugal, scalable innovation that is pioneered in India but adopted across the developing world. India’s path will not mirror America’s or China’s. But it could prove no less consequential. For billions in poorer countries, the shape AI takes could depend on what happens in India. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

What a giant precarious workforce reveals about the future of jobs

China’s 200m gig workers are a warning for the world What a giant precarious workforce reveals about the future of jobs September 18th 2025 The biggest workforce in the world has undergone an extraordinary transformation. China’s farm labourers and industrial proletariat have been joined by an army of gig workers . Tens of millions now use tech platforms to find jobs for fleeting periods; fully 200m, or 40% of the urban labour force, depend on some kind of flexible work. The fortunes of these precarious workers, many of whom struggle to buy property and gain access to public services and benefits, will shape China’s economy and society for years to come. As technology remakes labour markets, China’s gig workers offer lessons for countries everywhere.

Thanks in part to its early embrace of the “superapps” that organise many facets of people’s lives, China is home to the world’s most advanced gig economy. Today 84m people there rely on platform-based forms of employment, including ride-hailing drivers and food-delivery riders. As consumer apps have spread, this sort of work has become prevalent across emerging Asia, too. In India roughly 10m people work in the gig economy, on platforms and off. In Malaysia, it is 1.2m, roughly 7% of the labour force.

Lately gig work in China has spread to its vaunted manufacturing sector. The regimented proletariat is gradually being replaced by millions of casual workers who fill jobs “on-demand”, flitting from one factory floor to another at the direction of giant recruitment platforms. The jobs often require no skills beyond a knowledge of the Roman alphabet. The workers may stick with them for no more than a few weeks or even days. Researchers put their number at perhaps 40m, a third of China’s manufacturing workforce—and more than three times the size of America’s.

One reason for the rise of this gig army is that firms want flexibility. Employers prize the freedom to scale their business up or down, responding to seasonal demand, the vagaries of the market and the shifting winds of geopolitics. Technology has played a role, too. Smartphone apps help match customers’ orders with available delivery drivers; in manufacturing, technology has automated away many tricky tasks that used to need experience. Even as this has created jobs for highly skilled engineers, it has left gaps in assembly, packaging and inspection that any warm body can fill.

Flexible employment of all kinds suits many workers. Those who are adept at navigating the platform economy can earn more by job-hopping than they could from a single employer. A survey in 2022 found that the monthly income of dedicated delivery drivers in China was almost a fifth higher than that of migrant workers. Others, lacking their parents’ tolerance for drudgery, are unwilling to perform the same repetitive task week in, week out.

Despite these benefits, gig workers face difficulties. Without a steadier relationship with their employer, younger workers will never acquire the skills they need to prosper in life. Having left their rural hometowns, they may fail to set down roots in the cities where they work so promiscuously. Without proof of stable employment, they may be denied easy access to urban public services under China’s hukou system of household registration. And if they fail to settle, they may never marry and have children, worsening the ageing of China’s population. One way or another, this cohort of workers will have to provide for many elderly people as well as themselves.

Some of these difficulties, such as the hukou system, are unique to China. But in other ways, China’s experience is worth studying. Many countries, especially in developing Asia, hope to match its manufacturing success. None can afford to squander the potential of the young. A shortage of good jobs is one reason why youth in several Asian countries have risen in protest at the self-dealing of their political leaders. In Indonesia demonstrations in August turned violent after an armoured vehicle ran over a gig worker who gave rides on his motorbike.

One lesson from China is not to set too much store by manufacturing. Countries that have lost industrial might or never attained it dream that factory jobs can provide steady employment, rising wages and social stability. That may be true for a few engineers and technicians. But China shows that other roles can be displaced or de-skilled by automation.

That leads to another lesson: it would be futile to try to stamp out gig work in the hope that permanent jobs will take its place. The real alternative to gig work is often no work at all. A recent survey found that 77% of ride-hailing drivers entered the industry after losing their previous job. Recruitment platforms did not invent precarious employment. And though their algorithms can be cruel taskmasters, pushing drivers to drive recklessly fast, they are an improvement on gangmasters who used to match workers and employers. In many parts of Asia, including China, day labourers still huddle on the roadside early in the morning, waiting for employers to pick them from the throng.

The final lesson, therefore, is that governments should rethink the social contract to make gig work as beneficial as possible. China has regulated algorithms to make them a little gentler. It is also trying to narrow the divide between the new and the old by nudging e-commerce platforms to provide social security to gig workers. India is persuading platform workers to register in order to receive benefits such as accident insurance and, eventually, health care.

But governments need to be more ambitious still. Instead of trying to shoehorn gig work into their existing schemes, they should redesign the policies themselves. China could make mandatory contributions from employers less onerous, cutting their incentive to choose gig workers over permanent ones. Countries should make pensions more portable, by allowing a tighter link between what people pay in and what they receive. Many Asian countries run the risk of getting old before they get rich. Helping precarious workers prosper is more pressing now than ever. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Even if the technology achieves its potential, plenty of people will lose their shirts

What if the $3trn AI investment boom goes wrong? Even if the technology achieves its potential, plenty of people will lose their shirts September 11th 2025 IT ALREADY RANKS among the biggest investment booms in modern history. This year America’s large tech firms will spend nearly $400bn on the infrastructure needed to run artificial-intelligence (ai) models. OpenAI and Anthropic, the world’s leading model-makers, are raising billions every few months; their combined valuation is approaching half a trillion dollars. Analysts reckon that by the end of 2028 the sums spent worldwide on data centres will exceed $3trn.

The scale of these bets is so vast that it is worth asking what will happen at payback time. Even if the technology succeeds, plenty of people will lose their shirts. And if it doesn’t, the economic and financial pain will be swift and severe.

Investors always flock to promising technologies, but the AI rush is more extreme than many past booms. Boosters say that artificial general intelligence (AGI)—models that are better than the average human at most cognitive tasks—could be only a few years away. The first firm to achieve it could reap unimaginable returns. Investors and innovators know they may not be backing the right model. But if they spend slowly and cautiously, they may as well not bother to spend at all.

Consequently, a relentless investment race is under way, with big tech firms splurging on the computing power needed to build the biggest models. A growing cast of extra players, from property developers to electricity generators, has been drawn in. Oracle is the latest to join the party. Its value surged on September 10th after it published an ambitious forecast for its AI-related cloud business, briefly turning its boss, Larry Ellison, into the world’s richest man.

No matter what happens, many investors will lose money. In the rosiest scenario agi will arrive and usher in a new world of economic growth of perhaps 20% a year, as we wrote in July. Some shareholders would enjoy astronomical returns; many others would face big losses.

More mundane scenarios should also be considered, however. The technology may evolve in ways that investors do not expect. When alternating current eventually prevailed in America in the 19th century, for instance, direct-current electricity firms were overshadowed and forced to consolidate. Today investors reckon that the probable ai winners are those that can run the biggest models. But, as we report this week, early adopters are turning to smaller language models , which could suggest that less computing capacity may be needed after all.

Or the road to widespread adoption could be slower and bumpier than investors expect, giving today’s ai laggards a fighting chance. Niggles in the technology, the difficulty of quickly supplying electric power, or managerial inertia could mean that take-up is more gradual than first hoped. As they revise down their expectations for ai revenues, many investors and creditors could become less willing to countenance huge investments. The flow of capital could slow; some startups, struggling under the weight of losses, could fold altogether.

What would such an ai chill be like? For a start, a lot of today’s spending could prove worthless. After its 19th-century railway mania, Britain was left with track, tunnels and bridges; much of this serves passengers today. Bits and bytes still whizz through the fibre-optic networks built in the dotcom years. The ai boom may leave a less enduring legacy. Although the shells of data centres and new power capacity could find other uses, more than half the capex splurge has been on servers and specialised chips that become obsolete in a few years.

The good news is that today’s financial system could probably absorb the blow. Some technological busts have been brutal; after Britain’s railway bubble burst in the 1860s banks were left with big losses, leading to a credit crunch. So far, however, much of the investment in data centres has been bankrolled from the deep well of big-tech profits.

Although firms including Meta are turning to debt to help fund their latest investments, their lucrative businesses and robust balance-sheets mean they are well positioned to finance a technological boom. Among the keenest to provide that credit are private-market funds, which are typically funded by rich individuals and institutions rather than ordinary depositors. AI startups tend to be financed by well-capitalised venture and sovereign-wealth funds that could withstand losses.

However, trouble spots could still emerge. The more the investment boom spreads, the more financing structures could get riskier, and the more indebted firms could be drawn in. Power companies are desperate to increase their investments to supply ai with the electricity it needs; a heavily indebted utility could easily become overextended.

America’s economy, too, would suffer a nasty shock . By one estimate, the ai boom has contributed 40% of its gdp growth over the past year—a staggering figure for a sector that accounts for just a few per cent of total output. If investment projects are scaled back, or ditched altogether, that will translate into economic pain as fewer data centres are built, and fewer workers are employed to build them.

To make matters worse, falls in the stockmarket could cause asset owners to cut back on their spending. Because the valuations of ai-related companies have rocketed, portfolios today are dominated by a handful of tech firms. And households are more exposed to stocks than they were in 2000; if prices fall, their confidence and spending could take a knock. The poorest would be spared, because they tend to hold few stocks. But it is the rich who have fuelled consumption in America over the past year. Robbed of its sources of strength, the economy would weaken as tariffs and high interest rates take a toll.

The bigger the boom gets, the bigger the knock-on consequences of an ai chill could be. If the technology ends up fulfilling the extravagant promises that have been made for it, a new chapter of history will open. However, the story of its frenzied pursuit will make the textbooks, too. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

A world with fewer people would not be all bad

Don’t panic about the global fertility crash A world with fewer people would not be all bad September 11th 2025 In “The Population Bomb”, published in 1968, Paul Ehrlich, a biologist, wrote that humans were breeding so fast that food would inevitably run out and “hundreds of millions” would soon starve to death. Having toyed with the idea of “interstellar transport for surplus people”, he advocated strict birth control, “by compulsion if voluntary methods fail”.

Many people still worry about overpopulation. But an increasing number, especially in rich countries, fret about the opposite: a population implosion. “Low birth rates will end civilisation,” predicts Elon Musk, a father of many.

Though the number of people is still rising, the fertility rate—the number of babies a woman can expect to have in her lifetime—has been plummeting. And not just in the rich world: two-thirds of people now live in countries where it is below the “replacement rate” of 2.1—the standard estimate of what is needed to maintain a stable population. Bogotá, Colombia, now has a lower fertility rate (0.91) than Tokyo (0.99).

The global population will peak at 10.3bn in 2084, says the UN’s central estimate. But as we report this week, its assumptions are questionable . It assumes a sudden change in momentum, starting now: that fertility rates in many low-fertility countries will stop falling or rebound, and that plunging rates in high-fertility countries will fall more slowly. If it is wrong, peak human is much closer. If current trends continue for just ten more years before the UN’s more optimistic assumptions kick in, the global population peaks at 9.6bn in 2065, then tumbles to 8.9bn by 2100. Even that may be too optimistic.

Regardless of when the peak arrives, sub-replacement fertility implies that the global population will shrink slowly at first—and then dramatically, in a mirror image of the exponential growth that made it soar from 1bn in 1800 to 8bn today. Such a prospect alarms many.

One type of fear is broad and economic. Fewer people means fewer brains, so the pace of innovation would slow. It means less scope for specialisation and division of labour. (If only 1,000 people live in your city, good luck finding Ethiopian food or a club for your niche hobby.) Rapid shrinkage could be hugely disruptive. Heavy public debts would suddenly fall on fewer shoulders, many of them ageing. Megacities might be fine, but small towns could hollow out as the last school closes.

Another kind of worry is narrower and nationalistic. Fertility rates vary a lot between countries and groups. So some people fear a future with too few people like themselves and too many they see as culturally alien or threatening. That is one reason why populists all over the West favour bribing families to have more children, and Donald Trump has promised to be the “fertilisation president”.

Demographic forecasts are an odd mix of the certain (all the people who will be 50 in 2070 have already been born) and the unknowable (how many nippers will today’s 20-year-olds choose to have?). On a long time-scale, exponential shrinkage looks astonishingly fast. However, during the initial phase, which is when societies must grapple with the problem, the speed of change ought to be manageable.

There are several reasons to doubt the doomsayers. Artificial intelligence may be hyped , but it is plainly advancing faster than populations are likely to shrink. So it, or another as-yet-unknown technology, will surely ease the drag on innovation from dwindling numbers of human boffins.

Another cause for optimism is that healthy human lifespans keep stretching, allowing people to stay productive for longer. In a 41-country sample, a 70-year-old in 2022 had the same cognitive abilities as a 53-year-old had in 2000. Perhaps such progress will end. But as long as it continues, it will slow the shrinkage of labour forces, giving societies crucial extra decades to adapt. Countries that waste human capital may find ways to waste less of it, by feeding and educating young minds better, and removing barriers to women working. In sum, a declining population need not mean a poorer one . Japan has been shrinking for nearly two decades, yet living standards have risen markedly.

The nationalists are right that the world’s make-up will change. Even the UN’s projection has China’s population collapsing by more than half by 2100. India will hold steady longer. Europe and America may postpone shrinkage via immigration—or they may choose not to. The future will be more African than the present, but there, too, fertility is plunging. Big, gradual geopolitical and cultural shifts are normal. The world has coped with them in the past, and can surely cope again.

Pro-natalists hope to counter these tectonic trends by using public money to boost birth rates at home. They will fail. Governments have a role in making life easier for families, but trying to pay people to have more children than they otherwise would is either staggeringly expensive or does not work. Even Hungary, which spends a colossal 6% of GDP on pro-natal policies, still has sub-replacement fertility, and some studies suggest that its bloated baby bonuses have mostly affected the timing of births, not the total.

Shrinking, and thus ageing, populations will eventually require big economic and social adjustments. The very old will need caring for (even if they are no costlier than the young, who often spend two decades needing support). The old are more likely to vote, so their views will shape politics. That could make it harder to raise pension ages in line with life expectancy, but sooner or later governments will have to.

Adapting to an emptier planet will not be easy, but it will be doable. None of the predictions of demographic disaster seems plausible this century, and 2100 is so far away that forecasts beyond it seem pointless. Who knows? By then parents may have technology that makes child-rearing less exhausting, and families may expand again. But that is mere speculation. For now, there is reason to pay attention but not to panic. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Its extra-territorial campaign against terrorists has to have limits

Israel’s Qatarstrophic error Its extra-territorial campaign against terrorists has to have limits September 11th 2025 After the massacres of October 7th 2023, Israel’s prime minister, Binyamin Netanyahu, promised to hunt down the leaders of Hamas “wherever they are”. Israel pursued them in Gaza, Iran, Lebanon and Syria. But Qatar, where Hamas’s grandees have long enjoyed a comfy exile, seemed off-limits. On September 9th that changed . Israeli warplanes bombed a villa there that was said to be hosting Hamas officials. Six people were killed, though it is uncertain if any Hamas leaders were among them. The strikes may have had tacit American approval. They are a grave error, making it harder to end the Gaza war, harming America’s position in the Gulf and undermining the Abraham accords, which offer the region a better future.

It is legitimate to strike terrorists who pose a threat and enjoy sanctuary in a state that is unable or unwilling to take action against them. Israel’s attacks on Hizbullah’s leaders in Lebanon are a case in point. But the Doha hit does not fall into this category. Though Hamas’s leaders abroad are probably involved in its terrorist operations, Israel has tacitly approved Qatar’s role as their host. With America’s blessing, Doha has mediated indirect talks between Israel and Hamas. The Mossad and Israel’s army opposed Tuesday’s strike.

After the operation, the war in Gaza is more likely to drag on. Given that peace could bring down his hardline ruling coalition, that may be why the hit appealed to Mr Netanyahu. Talks will stall in the near term (though the Qataris say they will keep trying). As Hamas’s external leaders are killed, the balance of power will shift to its isolated military command in Gaza. As Israel fights on, its generals say that further battlefield gains will be marginal. But the fighting will have devastating consequences for Palestinians.

Qatar plays a double game, selling gas to the West and making investments there, while cosying up to Hamas and the Muslim Brotherhood. That approach has backfired this year, as it has been attacked by Israel and Iran. Nonetheless Qatar hosts an American military base. If Donald Trump knew of the strike in advance, he has in effect endorsed an attack on a state under American protection. If he did not, it shows that America cannot constrain Israel. Other Gulf states may conclude that American security promises are weak. The country stood aside when Iranian drones crippled Saudi Arabian oilfields in 2019, and when drones hit the United Arab Emirates in 2022.

The biggest casualty may be the reconciliation between Israel and the Gulf states, through the Abraham accords, the fifth anniversary of which falls this month. Qatar is not a signatory but Bahrain and the UAE are—and Saudi Arabia has considered a deal with Israel. The accords promised deepening economic ties and security co-operation to deter attacks by Iran and its proxies. Israel’s repudiation of a two-state peace deal with the Palestinians has stretched the accords to breaking point. Now it is asserting the right to use its military power to strike its enemies in sovereign states with which it co-operates in other respects. That is an intolerable prospect for any would-be ally.

With America’s enduring military support, Israel has become a regional hegemon that has crushed Hamas, defeated Hizbullah and humbled Iran. Yet in Qatar it has simultaneously isolated itself further and jeopardised America’s position, with ramifications that may last well beyond Mr Trump. Hitting Hamas may serve Mr Netanyahu’s political purposes and show off Israeli might. But it has weakened Israel’s position and pushed the region closer to chaos. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The alliance needs an emphatic response to Russian air incursions

The Kremlin’s plot to kill NATO’s credibility The alliance needs an emphatic response to Russian air incursions September 11th 2025 RUSSIAN DRONES have hit NATO countries before. One, presumably destined for Ukraine, landed in a field in Poland just last month. But what happened early on September 10th was the most serious incursion into NATO territory since the alliance began in 1949. Nineteen drones were fired, largely from Belarus, a client state where Russian troops freely operate. They ended up deep in Polish airspace, where some were shot down. Others crashed, fortunately with no loss of life.

Russia says the drones veered off course because they were confused by electronic jamming. Defence experts say this is unlikely, but even if it is true it indicates that Russia is behaving with provocative recklessness. Much more likely is that Russia was deliberately probing Poland, and NATO , for weakness, both military and political, and doing so with just the sort of ambiguity and deniability in which the Kremlin delights. The alliance, and above all America’s president, now face a moment of truth. Unless the response is immediate and unequivocal, weakness is exactly what Russia will surmise.

Since the invasion of Ukraine in 2022, NATO has welcomed Finland and Sweden into its ranks and set a new target for defence spending of 3.5% of GDP. But it has also tolerated years of abuses: the cutting of submarine cables; airspace and naval violations; assassinations and sabotage. The drones in Polish skies are the Kremlin’s latest test . All too often, Western officials have sought to avoid “escalation”. But now European citizens may fear their borders are not safe. And escalation has already come—from Moscow. If NATO signals timidity, the risk of sleepwalking into a larger war will grow.

So far the signals are mixed. European leaders have sounded appropriately outraged. President Donald Trump has sounded bemused. “What’s with Russia violating Poland’s airspace with drones? Here we go!” he said on social media. This is feeble. NATO should state that all incursions in Poland and other front-line states will be intercepted, overturning the practice of playing these down. It should deploy more aircraft on Baltic and Polish air-policing missions, and shift air-defence systems, providing this does not denude Ukraine. NATO should also mount a forward-defence, shooting down drones and missiles inside Ukrainian and perhaps Belarusian airspace if these are bound for NATO airspace. And NATO should strengthen Ukraine’s ability to strike drone-production facilities deep inside Russia. That will involve the transfer of intelligence, components and, if needed, long-range systems.

Much of this will require more spine from Mr Trump. Despite having promised to end the war in Ukraine in a day, he has let Vladimir Putin lead him by the nose. He insisted on a ceasefire, but then dropped the idea; he threatened harsh sanctions on Russia but did not impose them; he called for Mr Putin to sit down with Ukraine’s president, Volodymyr Zelensky, but then went silent on that idea, too. Mr Trump claims to hate bloodshed, but has remained passive as Mr Putin has intensified his drone strikes on Ukraine. Mr Putin’s answer to Mr Trump’s peace initiative is 800 drones a night.

Joe Biden promised America would defend “every inch” of NATO territory. Mr Trump has mused about abandoning allies who do not “pay their bills”. His ambiguity about America’s position is a gift to the Kremlin, which aims to sow doubt about American resolve. It also emboldens others, including Israel’s prime minister, Binyamin Netanyahu, whose raid into Qatar on September 9th made a fool of Mr Trump, undercutting his efforts to end the war in Gaza.

The task before Mr Trump is simple. He must find the words that have long failed him and declare that America will uphold its treaty obligations, and defend its allies. Anything less will invite further aggression, not only from Russia but from autocrats elsewhere. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

As countries crack down on fentanyl, a new synthetic opioid takes off

Nitazenes: another failure of drug prohibition As countries crack down on fentanyl, a new synthetic opioid takes off September 11th 2025 According to Britain’s National Crime Agency, there has never been a more dangerous time to take drugs. In a review of the British drug market in 2024, the agency reported a steep increase in the use of cocaine; an explosion in imported cannabis; and the spread of a new synthetic opioid.

As we report in this week’s Science & technology section, drug authorities around the world are increasingly worried about nitazenes. Developed in the 1950s, these drugs are so powerful that they were never approved for medical use, meaning that far too little is known about them. The vast majority of nitazenes are much stronger than heroin and some appear to be even more potent than fentanyl, a synthetic opioid that helped kill nearly 50,000 Americans last year.

Since emerging on the illicit drug market in 2019, nitazenes have been detected all over the place. Clusters of overdoses have been reported across Africa, the Americas, Australia and, in particular, Europe. Often they are sold as other products; in Ireland they have appeared as “Chinese heroin” and in Australia they have been found masquerading as MDMA, a party drug better known as ecstasy. They also frequently turn up as contaminants or additives—in West Africa, for instance, they have been found in cannabinoid products .

Why now? Synthetic opioids suit illicit drugmakers. They are easier to make than heroin, which depends on growing opium poppies and the whims of those who control the fields. Because their chemical structures can easily be tweaked, producers can circumvent bans on specific compounds. Because they are so potent, smugglers can pack more lucrative highs into smaller, lighter packages. That is why fentanyl has long been popular with traffickers. And as drug cops everywhere have cracked down on it, many crooks have switched to nitazenes.

The timing is suggestive. Fentanyl has been controlled under a UN convention since 1964, but America stepped up its efforts in 2018 and banned all fentanyl analogues. China, the main producer of fentanyl, followed in 2019 and local production plunged. In 2021 the Taliban seized power in Afghanistan and banned opium production, possibly disrupting Europe’s heroin supply. Market conditions have thus been ripe for the emergence of a new, uncontrolled class of synthetic opioid.

This makes nitazenes an example of the Iron Law of Prohibition, proposed by Richard Cowan, a drug-legalisation activist, in 1986. Banning one compound opens the door to a new, stronger alternative—just as Prohibition in America led to a shift from beer to spirits, which are easier to smuggle and more dangerous. Indeed, some argue that America’s current opioid crisis can also be understood this way. A clampdown on prescriptions of opioid painkillers left masses of patients unable to get their fix legally. So many of them turned to illicit dealers and got hooked on stronger drugs, such as fentanyl.

Better detection and treatment are needed. Overdose patients and street drugs should be tested, to reveal how and where nitazenes are being taken. Rich countries should share information about new nitazene structures with poor ones. Naloxone, an antidote to opioid overdoses, should be made more available to users’ friends and family. If it is to hand, an overdoser is more likely to survive.

In the long run, governments should seek ways to discourage innovation in the illicit-drug market. Simply banning every new drug is not the answer. Nitazenes are probably too dangerous to legalise. But the best way to reduce harm to drug users and revenues for criminal gangs is to allow addicts regulated access to better-understood opioids, including heroin. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The two traditional parties of government are under siege as never before

Is British politics broken? Its centre is cracking The two traditional parties of government are under siege as never before September 11th 2025 When Sir Keir Starmer was elected just over a year ago, Labour ministers warned that their government was Britain’s last chance to see off populism. The political centre has sprung a leak even sooner than they feared. Just one in five voters now supports the government; Sir Keir’s personal ratings as prime minister are dire. On September 5th Angela Rayner, his deputy, resigned over unpaid taxes, prompting a wide cabinet reshuffle.

The extremes, meanwhile, are all fired up. Whereas the Conservative Party is moribund, Nigel Farage, the leader of the hard-right Reform UK, told his party conference that he would be prime minister as soon as 2027. Although Reform has just four MPs, he is not delusional: were an election held tomorrow, Reform would have a coin-toss chance of a majority. Other insurgents sense their moment, too. Zack Polanski, a self-styled “eco-populist”, is the new leader of the once-fusty Green Party, with a pitch to be the Farage of the left. Jeremy Corbyn, whose self-belief is undented by four and a half calamitous years as the Labour Party’s leader, is running a new hard-left outfit.

Britain is not the only democracy where the centre is crumbling. On September 8th France’s centrist government fell over spending cuts, caught in a pincer of the hard left and right. In Germany the established centre parties have steadily lost votes, as the political system has fragmented. The middle is hollowing out in America, too, as voters are polarised between MAGA and a mob of fight-the-oligarchy lefties. The difference is that Sir Keir still has a commanding majority in the House of Commons. He must use it.

Some believe the problem he faces is that British politics is plunged into incoherence. Voters, sick of low growth and failing public services, have become grouchy and fickle, ready to follow any party that lets them vent their frustration. The other theory is that Britons, fed up with immigration, are suddenly lurching towards nativism. Accordingly, Labour’s stock is falling and Reform’s is rising because voters are shifting en masse from the centre-left to the radical right. Neither theory is correct.

In fact, the Brexit referendum of 2016 accelerated a trend in which age and education, rather than class, are the best predictors of voting behaviour . Work by the British Election Study, a research project, shows how this is splitting left-leaning young graduates from right-leaning pensioners. At the same time, voters see political parties as clustered in two ideologically distinct blocs, on the left and the right.

Most of the volatility comes from Britons switching among parties within “their” bloc, not from one bloc to the other. Labour is losing voters to parties to its left; the Tories to Reform. In the general election of 2024, the two old parties won a combined vote share of 57%. That was the lowest since 1910, but it was a triumph compared with today’s polls, which give them a total of just 39%.

An injection of fresh competition into Britain’s stale two-party system should be healthy. Voters have been badly served; no wonder they are shopping around for something better. In practice, however, it could make Britain much harder to govern. When electoral fragmentation meets Britain’s ancient first-past-the-post voting system, it produces unpredictable results. Small shifts in votes can produce huge differences in each party’s tally of parliamentary seats. First past the post inflates the importance of tactical voting, further distorting the relationship between how people vote and the governments they get. When support for a party subsides after an election, many more MPs fear that their seat is in danger. This dampens the willingness to take risks. Hence, Labour is like a beached whale: it has a vast parliamentary majority, yet as its support has ebbed it has become paralysed.

For most of the 20th century, the tendency of elections to be won from the centre ground by parties with broad, stable coalitions was a force for moderate, reforming governments. But when the centre crumbles, the fringes call the shots. Prime ministers panic. They keep their bases sweet with giveaways or empty gestures. And they spend political capital to rally their base against the enemy—which is why Sir Keir is eagerly pumping up the prospect of Prime Minister Farage.

These short-term measures have tactical advantages for the centre, but they are strategically self-defeating. When governing parties put off painful reforms that take time to pay off, they forgo the progress that ultimately boosts their chances of re-election. Consider the Tories, who spent a decade seeking to outbid Mr Farage. In doing so, they turned the issue of Europe into a shrill electoral dividing line, and embarked on a senselessly “hard” Brexit. The far-reaching discontent that this caused has only fuelled Mr Farage. The Conservatives gambled their reputation for serious government to try to build a coalition that could keep winning. They ended up with neither.

That should be a warning for Sir Keir. Labour’s long-term interest, and the country’s, is in pursuing reforms that help revive Britain’s anaemic growth and ease public anger. There are signs Sir Keir understands this. He has entrusted planning to Steve Reed, a loyalist whose mantra is “build, baby, build”; Pat McFadden, a Blairite, will encourage underemployed young people to take jobs.

Since most of Labour’s losses are to parties to its left, Sir Keir will face pressure at the Labour conference later this month to turn that way. Any cuts to welfare will face fierce opposition. Trade-union backers are growing restive. Senior Labour MPs elected on a manifesto of strengthening the mandate of the Office for Budget Responsibility, an official fiscal watchdog, are calling for it to be sidelined, so they can borrow and spend more. Take that course, and Britain’s economic malaise will deepen and the causes of voters’ unhappiness will go unresolved. Rather than emerging as the fixer of Britain's broken centre, Sir Keir will have wasted the best chance to save it. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Republicans are servile. Courts are slow. Can the Democrats rouse themselves?

Donald Trump is unpopular. Why is it so hard to stand up to him? Republicans are servile. Courts are slow. Can the Democrats rouse themselves? September 4th 2025 IF A SINGLE political idea has tied Americans together over their first quarter of a millennium, it is that one-person rule is a mistake. Most Americans also agree that the federal government is slow and incompetent. Together, these things ought to make it impossible for one man to govern by diktat from the White House. And yet that is what this president is doing: sending in the troops, slapping on tariffs, asserting control over the central bank, taking stakes in companies, scaring citizens into submission.

The effect is overwhelming, but not popular. President Donald Trump’s net approval rating is minus 14 percentage points. That is little better than Joe Biden’s after his dire debate last year, and no one fretted that he was over-mighty. This is a puzzle. Most Americans disapprove of Mr Trump. Yet everywhere he seems to be getting his way. Why?

One answer is that he moves much faster than the lumbering forces that constrain him. He is like the TikTok algorithm, grabbing attention and moving on to the next thing before his opponents have worked out what just happened. The Supreme Court has yet even to consider whether deploying troops to Los Angeles in June was lawful. While the justices take their time, the president may soon use the same routine in Chicago. The court may not rule on the legality of his tariffs for months. So far the president has obeyed Supreme Court rulings, but if one legal avenue is closed he will try another and the clock resets.

Another answer is that the Republican Party always lets him have his way. It is not just that he dominates it, with an approval rating among Republicans of almost 90%. It is that the party’s organising idea is that Mr Trump is always right, even when he contradicts himself. Policy debates have turned into theological disputation in which sides fight over the real meaning of his words.

Independent institutions—companies, universities or news organisations—might oppose him. But they suffer from a co-ordination problem. This is much easier to point out than to fix, because organisations that compete with each other would have to collaborate. What is bad for Harvard may not be bad for its rivals. If a single law firm can be picked off, its business may go to a competitor.

Behind all these lurks the ugly reality of Mr Trump’s vindictiveness and intimidation. Previous presidents were influenced by independent-minded experts and the cabinet. The new definition of an expert in the Oval Office is someone who agrees with the boss. Bearers of bad news are sacked; awkward Republicans primaried; business leaders punished; opponents investigated. For each, the rational response is to apologise, settle and hope that someone else will do the right thing. Having seen what that entails, someone else may prefer a quiet life.

Politically, therefore, the main task of opposition falls to the Democrats. They are, to put it kindly, confused. Should they fight Mr Trump with ALL CAPS posts, as Gavin Newsom is doing? Is it all about mastering curated authenticity, like Zohran Mamdani? Do they move left? Do they occupy the centre? Is the problem merely one of messaging that can be fixed if only activists would stop calling women “birthing people”?

The fact that Democrats can neither constrain Mr Trump nor even communicate clearly leaves their base angry . Mr Trump’s ratings are low, but he is more popular than the Democratic Party—not because Republicans and independents disapprove of it (though they do), but because Democrats disapprove of themselves.

In the short run the self-loathing may be overdone. The midterms are a year away. In ten of the 12 elections for the House of Representatives this century, voters have turned against the party that holds the presidency. Gerrymandering, which will reduce the number of competitive seats in the House from few to almost none, means that even a president this unpopular is unlikely to suffer a landslide defeat in 2026. But a Democratic House with subpoena power would provide a crucial check on presidential corruption and incompetence.

In the long run, though, that looks like false comfort. The Democratic brand is damaged. Democrats are more trusted by the electorate on health care, the environment and democracy. But on many issues voters care about, including crime and immigration, they prefer Republicans. In the 2024 election Kamala Harris was seen as more extreme than Mr Trump. Saying the voters are wrong or sexist to think this way is not helpful.

Demography is no longer the Democrats’ friend. Under Mr Trump, Republicans have made progress with non-white and young voters. The Democrats have lost the white working class. Although the most educated voters like them, only 40% of Americans aged 25 or over have a college degree. These changes mean the story Democrats have long told themselves—that they represented the real majority in America, but Republican machinations kept them out of power—is no longer true, if it ever was. Now they benefit from a lower turnout.

Ten years into the Trump era, Democrats are still underestimating him. His skill in setting traps for them is extraordinary. Take the looming vote in Congress on raising the federal debt ceiling: Democrats will have to choose between more cuts to foreign aid and shutting the government. Or take sending troops into cities, supposedly to fight crime. Democrats decry executive overreach; Mr Trump places them on the side of criminals and danger. Or take drone strikes on alleged drug-smugglers. It is hard to oppose the lack of any due process without sounding like a defender of violent gangs.

Democrats have choices about whether to walk into those traps. Lots of them think, rightly, that Mr Trump poses a danger to the country’s democratic values and conclude that this alone should make him toxic to most voters. Alas, it does not. Instead, the question Democrats need to keep asking themselves is this: why do voters think they are the extremists, rather than the guy trying to establish one-man rule? ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

At best, the continent should expect stagnation, at worst a bond-market rout

How Europe’s hard right threatens the economy At best, the continent should expect stagnation, at worst a bond-market rout September 4th 2025 Insurgents WHO want to smash the system often end up running it. For Europe’s hard right that outcome is already a glimmer on the horizon. They are ahead in the polls, or thereabouts, in Britain, France and Germany. In Italy they are in power; in the Netherlands they briefly led a coalition; and in Poland in June their presidential candidate saw off the nominee from the centre. By 2027 the hard right could be in office in economies worth getting on for half of European GDP.

That would be a grave blow to European prosperity. The direct threat is the hard right’s use of power. They sneer at technocratic management, vow to protect voters from competition and creative destruction and instead offer a seductive combination of handouts and tax cuts. Outright electoral success would mean more economic stagnation or even rolling bond-market blow-ups. The indirect threat is that in some places mainstream parties are already cowering before the populist uprising, ducking difficult reforms and aping policies from the extremes—a style of government that risks hastening the very hard-right victory they are seeking to avoid.

Europe’s economy has hardly been well run in recent years. Annual GDP is rising at just 1%. Britain’s 30-year-gilt yield reached 5.7% on September 2nd, its highest in over a quarter of a century. After François Bayrou, France’s prime minister, announced a confidence vote in his government, to be held on September 8th, the country’s 30-year-bond yield reached 4.46%, its highest since 2008. Germany, once the continent’s economic motor, has barely grown since 2019.

You might think that such a dismal record only bolsters the case from the hard right that Europe needs a new approach. It does, but not the change they propose. In fact, Europe can ill-afford a period of even worse economic management.

It is worth pinning down where the dangers lie. As we report, hard-right parties have tended to moderate as they have moved closer to power. Proposals to ditch the euro or leave the European Union are now mostly symbolic (though Alternative for Germany still flirts with Dexit). Recognising how Europe is ageing, they now argue for guest-worker schemes to supply new labour, rather than shutting borders altogether. Above all, they want to avoid the sort of economic disruption that scares voters.

However, this resistance to change makes them growth-smotherers. In Italy Giorgia Meloni has been relatively moderate—including towards Europe. But she has avoided growth-boosting reforms that would upset her voters. In AmericaMAGA has a pro-tech, deregulatory wing that competes for the president’s attention against the nostalgia of many Trump supporters. In Europe, by contrast, populism is all about preserving an imaginary past. Hard-right success would lock in Europe’s least productive features: transfers to favoured groups, protectionism and hostility to competition.

An even greater problem is the hard right’s fiscal profligacy. Populist parties almost all advocate a mixture of tax cuts combined with generosity for pensioners and parents of young children—in order to boost the native birth rate. They claim that they will balance the books with huge savings from cutting spending on immigrants, scroungers, public-sector waste and Brussels. Reform UK promises giveaways worth around £200bn ($266bn), or 5% of British GDP, according to our calculations, funded by an incredible £100bn-worth of savings, including an unspecified 5% cut across the whole of government. The party reckons it can find £42bn by cutting immigration and £10bn from better managing public-sector pensions.

Bond markets will surely puncture such illusions. Indeed, the combination of low growth and budgetary ill-discipline leads inexorably towards fiscal crisis. In the best case, this would enforce a dose of sanity. In Italy, where memories of the euro crisis are still fresh and the government depends on EU-level budget approval for access to support from the European Central Bank (ECB), Ms Meloni is running a tight fiscal ship.

But in the event of a euro-crisis, populism will redouble the peril. Today the ECB is in all but name the lender of last resort to governments. Markets have implicit faith in the vow of Mario Draghi, a former ECB president, to do “whatever it takes” to keep the euro area together, so long as governments show what a former official has termed “macroeconomic reasonability”. When the covid-19 pandemic hit, the bloc had enough unity to put together fiscal insurance in the form of a recovery fund.

Would that still be true if President Marine Le Pen or Jordan Bardella were running a National Rally (RN) government in France? In a euro-zone crisis national governments would have to work with each other and the ECB at all-night summits. The markets would harshly punish any dithering or division. For decades, the answer to every crisis has been “more Europe”. Recent crises have led to common bank supervision and the issuance of joint bonds. Such solutions would be hard to stomach for parties that promised their voters “less Europe”. You do not have to be George Soros to predict that bond investors will test the euro zone’s cohesion if the RN is elected.

All this may seem speculative. But its shadow hangs over the economy even today, because many mainstream politicians are unwilling or unable to pursue reforms for fear that they will provide ammunition to their rivals. Last year Mr Draghi unveiled a host of recommendations designed to boost Europe’s economy, including integrating the continent’s financial markets and many ways to cut red tape. Those proposals have gone precisely nowhere.

Europe’s politicians are in a bind. Change would make them unpopular, austerity would burnish the hard right’s extravagant promises, but caution, however tempting, perpetuates the rot that corrodes voters’ trust in politics. The Economist does not underestimate the courage it will take to pursue bold change. But the miserable, defeatist alternative is to surrender the initiative to the hard right. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

To see the cost of Trump’s bullying, tally the world leaders flocking to China

Xi Jinping’s anti-American party To see the cost of Trump’s bullying, tally the world leaders flocking to China September 4th 2025 YOU MAY think the place where national leaders gather to talk about the state of the world is Washington, or perhaps the UN Headquarters in New York. In fact, as President Xi Jinping showed when he hosted over 20 presidents and prime ministers in China this week, a new reality is taking hold.

Mr Xi used a summit of the Shanghai Co-operation Organisation (SCO) in Tianjin to advertise China as a source of stability and prosperity. He used a military parade in Beijing, marking the 80th anniversary of the end of the second world war, to remind everyone that China has become a mighty power. The source of trouble today, he suggests, is America.

Mr Xi’s claim to lead a global coalition of America-sceptic powers is not as fantastical as you might think. He received autocrats like Vladimir Putin of Russia and Kim Jong Un of North Korea, who travelled by armoured train. But he also welcomed leaders of countries that have leant towards the West, including Turkey, Egypt and India— which is furious after Donald Trump singled it out for punitive tariffs and embraced its enemy, Pakistan, after a conflict in May.

China’s boast to be an anchor of stability has weight, at least in some respects. The country is already the largest goods-trading partner of most of this week’s visitors, along with another 40-odd states around the world. As the Trump administration pursues a rolling campaign of economic warfare against its trading partners, China’s sins of mercantilism and state capitalism look minor by comparison.

There is also a new-found unity opposing sanctions, including the extraterritorial threat America uses to sever individuals, firms and countries from the dollar-based financial system and tech platforms. More and more countries are interested in finding alternatives to the dollar. And fewer will be interested in enforcing America’s sanctions on its behalf.

China’s guests still have plenty to disagree about. India opposes its military build-up after skirmishes on the Himalayan border. China’s neighbours must have watched its new missiles trundle through Tiananmen Square with mixed feelings. Yet among the autocrats, co-operation is deepening. Russia and North Korea are working on space and satellite systems. In return for China’s support over Ukraine, Russia is thought to be offering it more of its most sensitive military technology, including submarine-propulsion and missile-defence systems.

The weakest part of Mr Xi’s campaign is over international institutions and rules. He has just declared that “global governance has reached a new crossroads.” State media propose that China should work with like-minded countries to uphold the UN Charter and “build a more just and equitable global governance system”. Despite being cloaked in the language of multilateralism, these are code words for a China-friendly world order in which big powers dominate spheres of influence and enjoy more rights than small ones. Few countries want Asia to be run by China.

Not everyone at Mr Xi’s big bash agrees with each other on everything. The SCO is a far cry from a NATO-style alliance. Other than the unifying factor of disenchantment with Mr Trump’s America, these countries often have little in common. European leaders were notably absent from the celebrations. Yet convening disparate parties with different interests is not a sign of weakness. It is what superpowers are uniquely able to do. To have China shepherd so many leaders through Tianjin and Beijing was a display of its growing power. China does not yet command a new world order. But it does show how much damage Mr Trump is doing to American interests. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The president should heed protesters rather than crushing them

Indonesia could be on the brink of something nasty The president should heed protesters rather than crushing them September 4th 2025 The spark was a young man’s death. A motorbike delivery driver was passing a protest outside Indonesia’s parliament on August 28th, just as a police vehicle surged forward. It crushed him. The video went viral, and mostly peaceful demonstrations turned into nationwide riots. Looters sacked the homes of five officials, including the finance minister.

The original protest was about a lavish housing allowance that Indonesian lawmakers have awarded themselves, worth nearly ten times the minimum wage in Jakarta, the capital. Now Indonesians are furious about many things, from heavy-handed policing to the grubby misrule of Prabowo Subianto, the former general who was elected president last year. The country could be on the brink of serious unrest —and Mr Prabowo’s governing style is largely to blame.

He dislikes having to deal with opposition, and so has pursued a strategy of co-opting all the other political parties by welcoming them into a ridiculously broad coalition. Fully seven of the eight parties in the lower house have joined it; Mr Prabowo is trying to persuade the last one to come on board, too. His bloated cabinet has over 100 members, up from around 50 under the previous administration.

Mr Prabowo claims that this set-up suits the country’s culture. (Javanese people are polite, he insists, and dislike open disputation.) He has suggested that his mega-coalition should become permanent. That is a dismal idea. It would be an open door to corruption. To keep the factions happy, Mr Prabowo has already doled out bungs, such as that housing allowance. With no opposition in parliament, disgruntled Indonesians would have no way to complain, save taking to the streets. And it would reduce pressure on Mr Prabowo to govern better.

Such pressure is urgently needed. Mr Prabowo is mismanaging the economy. Annual growth was a tolerable 5.1% in the second quarter of this year, but problems are bubbling under the bonnet. Indonesia has prematurely deindustrialised. The share of GDP from manufacturing has fallen by half in two decades. The country has failed to use its resources well. Despite huge oil and gas reserves, it has spent 20 years as a net oil importer. Its solar and wind potential has barely been exploited.

Life for many is hard. The cost of staples has jumped: a kilo of rice is 34% pricier than three years ago. Lay-offs are increasingly common; university graduates are more and more likely to be unemployed. Families struggle with debt. The share of bank loans to households that are non-performing has surged to its highest on record.

Grappling with these ills requires wise structural reforms. Instead, Mr Prabowo has ordered a 9% cut to the government’s budget to pay for a free school-lunch programme and a new sovereign-wealth fund. The fund has taken over state-owned enterprises and now receives their dividends, leading to a sharp drop in government revenues—which are already squeezed by low prices for commodities such as nickel.

The free-lunch scheme is supposed to reduce stunting, but the way to do that is to help children in the womb and before the age of two, not at school. The sovereign-wealth fund is accountable only to Mr Prabowo: a mightier tool to promote cronyism is hard to imagine.

Sensibly, the president has agreed to cancel MPs’ new housing allowances. But the big risk is that he will use violent protests as an excuse to crack down even more heavily. Indonesia is nothing like the police state it was under Suharto, a dictator who was ousted by protests in 1998. But Mr Prabowo, who married Suharto’s daughter, is clearly nostalgic for the old authoritarian habits. That is no way to hold together a multi-ethnic archipelago of 17,000 islands, let alone to govern it well. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Grades will rise—and pupils will be happier

Schools should banish smartphones from the classroom Grades will rise—and pupils will be happier September 4th 2025 Back in the 20th century, bored scholars had to make do with flicking rubber bands at their classmates, doodling in their textbooks or staring out of the window. Modern technology has revolutionised slacking. Most teenagers in the rich world own smartphones. Many are allowed to bring them into classrooms, where each provides a bottomless source of apps designed to be as compelling—and distracting—as possible.

A backlash is under way, as parents and teachers worry about the effects on classroom performance. On August 27th South Korea passed a ban on smartphones in classrooms. Governments from China to Finland, as well as dozens of American states, have introduced bans and restrictions of varying severity. The Economist is queasy about micromanaging the job of head teachers to such a degree—but schools that still welcome smartphones would be wise to think again.

This may seem fusty and technophobic. It is not. Even diehard libertarians agree that children do not always know what is in their own interests. Nor does banishing phones from maths lessons mean depriving children of experience with modern technology. They get plenty of that outside school; gaps can be patched up in dedicated lessons.

Technophiles like to point to a long history of misplaced scepticism about technology and its impact on education. A favourite example is Plato, who complained about the baleful effects of writing on the grounds that storing facts and arguments on scrolls would erode pupils’ ability to remember them. But just because Plato was wrong two thousand years ago does not mean that today’s worries are misguided.

Plato never put his claims to the test—whereas a growing body of research suggests that phones are indeed bad for schoolchildren. A recent study, run by an international team of academics and conducted in India, was a randomised controlled trial, the gold standard. As we report this week, it followed 17,000 higher-education students for three years. It concluded that requiring phones to be left outside classrooms led to a small but measurable improvement in grades. The weakest students benefited most of all.

Admittedly, the evidence is not yet overwhelming. The Indian study found only small gains. Its results contain quirks (they suggest, for instance, that bans lift performance in the first and third years of a degree but not in the second, which is odd). Although its conclusions match those of studies in England and Spain, one in Sweden found that bans had no effect.

Yet most educational interventions have only a small effect on grades. Scientists and researchers can afford to wait for the evidence to improve before issuing a final verdict, but teachers cannot. They must do the best they can for children in their classrooms with whatever evidence is available today.

And the benefits of restricting smartphone use may go beyond better exam results. One of the more striking findings in the Indian study was that, after a while, the bans became popular with students. That fits with anecdotes from young people, which suggest the problem is in part one of collective action. If most pupils are socialising on phones, then anyone who tries to focus on lessons instead is missing out. If schools impose a blanket ban, there is nothing to miss out on.

Smartphones are far from the only problem schools face. But they are one that is easy to solve. At a time when educational progress seems to be in reverse around the world, any school that has not restricted them should consider doing so. In the long run, their pupils might even thank them for it. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

It is a test case for how countries recover from a populist fever

Brazil offers America a lesson in democratic maturity It is a test case for how countries recover from a populist fever August 28th 2025 IMAGINE A COUNTRY where a polarising president lost his bid for re-election and refused to accept the result. He declared the ballot rigged and used social media to urge his supporters to rise up. They did so in their thousands, attacking government buildings. Then the insurrection failed, the ex-president faced a criminal investigation and prosecutors put him on trial for plotting a coup.

That sounds like a fantasy of the American left. In the hemisphere’s other giant democracy it is reality. On September 2nd the trial of Jair Bolsonaro, Brazil’s former president and the “Trump of the tropics”, will begin in the Federal Supreme Court. The evidence reads like a flashback to Brazil’s turbulent past. A former four-star general schemed to overturn the result of the election; assassins planned to murder its real winner. As our investigation into the plot explains , the coup failed because of incompetence rather than intent.

Mr Bolsonaro and his associates are likely to be found guilty. That makes Brazil a test case for how countries recover from a populist fever. In Poland, two years after Law and Justice (PiS) lost power, a coalition led by Donald Tusk, a centrist, is constrained by a new PiS president. In Britain, Brexit is now unpopular but Nigel Farage, the politician who inspired it, is leading in polls. Even Hamas’s massacre of October 7th 2023 did not shake Israel out of its bitter divisions.

But Brazil’s most striking comparison is with the United States. The two countries seem to be swapping places. America is becoming more corrupt, protectionist and authoritarian—with Donald Trump this week messing about with the Federal Reserve and threatening Democrat-controlled cities. By contrast, even as the Trump administration punishes Brazil for prosecuting Mr Bolsonaro, the country itself is determined to safeguard and strengthen its democracy.

One reason Brazil promises to be different from other countries is that the memory of dictatorship is still fresh. It restored democracy in 1988. The supreme court, shaped by the “citizens’ constitution” enacted at that time, still sees itself as a bulwark against authoritarianism.

In addition, most Brazilians are open-eyed about what Mr Bolsonaro did. A majority of them believe that he tried to stage a coup to keep himself in power. Conservative state governors vying to take on the leftist president, Luiz Inácio Lula da Silva, in next year’s election need the votes of Mr Bolsonaro’s supporters to win. But even they criticise his political style.

That recognition has opened up the chance of reform. As our briefing lays out, most of Brazil’s politicians, on left and right, want to put the Bolsonaro madness and its radical polarisation behind them. From the business bigwigs in São Paulo to the political Pooh-Bahs in Brasília there is surprising agreement on a difficult, but urgent, agenda of institutional change.

Paradoxically, a key task is to rein in the supreme court, despite its role as the guardian of Brazil’s democracy. As the arbiter of a constitution that runs to 65,000 words, the court oversees a dizzying array of rules, rights and obligations, from tax policy to culture and sports. Groups from trade unions to political parties can bring cases directly. Sometimes justices initiate cases themselves, including an inquiry into online threats, some of them against the court itself—making it the victim, prosecutor and judge. To handle a workload of 114,000 rulings in 2024 alone, most decisions come from individual judges. There is wide recognition that unelected judges having so much power can corrode politics, as well as save it from coups. The justices themselves see the case for change.

Fixing the court will be hard, but its power is only part of the constitutional baggage Brazil is carrying. The country also suffers from chronic fiscal incontinence, in particular out-of-control tax exemptions and automatic spending increases. Some of these were enshrined in the constitution of 1988 to constrain would-be authoritarian leaders. Some are the fault of Brazil’s Congress, which has seized control of the federal budget and uses its influence to finance pet projects. The effect is to crowd out investment and weaken growth.

In theory, this points to a path forward. Mr Bolsonaro must be tried for his crimes and punished if found guilty. Next year the election should be fought over the broader reforms.

In practice, none of this will be easy. One obstacle is Mr Trump. He has accused Brazil’s supreme court of a “witch-hunt” against his friend, and in early August slapped 50% tariffs on Brazilian goods. The administration has also imposed Magnitsky sanctions—an exclusion from America’s financial system usually aimed at human-rights abusers and kleptocrats—on Alexandre de Moraes, the judge leading the Bolsonaro case. Other officials and politicians may follow. This recalls an ugly bygone era when the United States habitually destabilised Latin American countries.

Fortunately, Mr Trump’s interference is likely to backfire. Only 13% of Brazil’s exports go to the United States, and they consist largely of commodities, for which new markets can be found. America has already granted numerous exemptions. So far, Mr Trump’s attacks have only strengthened Lula’s standing in opinion polls, and provided him with an excuse for any poor economic news before the next election, in October 2026.

The domestic obstacles to reform are greater. Even if the elites want change, Brazil is still a deeply divided country. Mr Bolsonaro has fanatical supporters who will cause trouble, especially if the court imposes a stiff sentence. Reforming the supreme court and the constitution requires groups to give up power for the common good. It is natural for them to cling to what they have—if only because they do not trust their enemies. Everyone wants growth, but to get more of it some people are going to have to surrender some privileges.

Tensions will therefore be inevitable. But unlike their counterparts in the United States, many of Brazil’s mainstream politicians from all parties want to play by the rules and make progress through reform. Those are the hallmarks of political maturity. Temporarily at least, the role of the Western hemisphere’s democratic adult has moved south. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Trump has triggered a trade and defence crisis: how should Modi respond?

Humiliation, vindication—and a giant test for India Trump has triggered a trade and defence crisis: how should Modi respond? August 28th 2025 IT IS UNUSUAL to experience humiliation, vindication and a defining test all at the same time. But that is India’s predicament today. President Donald Trump has undone 25 years of diplomacy by embracing Pakistan after its conflict with India in May, and now singling out India for even higher tariffs than China. He cannot have thought through how the world’s most populous country and fifth-largest economy would react.

Narendra Modi, India’s prime minister, recently laid out a path for a muscular, more self-reliant nation. He is also about to meet Xi Jinping in China, after a bitter four-year Sino-Indian military stand-off in the Himalayas. For America to alienate India is a grave mistake. For India it is a moment of opportunity: a defining test of its claim to be a superpower-in-waiting.

Mr Trump’s humiliation of India comes in two flavours. On August 27th, after condemning it for buying Russian oil, America’s president imposed a 25% tariff surcharge , on top of the existing 25% import tariff on Indian goods. Buying Kremlin crude is grubby. But given that India does so through a price-cap scheme run by the West, that it sells refined petroleum products to Europe, and that much of the world, including China, also buys Russian oil, the surcharge makes it look as if India has been singled out for special punishment.

The other humiliation is Mr Trump’s love-in with Pakistan. After a terrorist attack in India that Mr Modi blamed on Pakistan, the two rivals fought a four-day skirmish in May, involving over 100 warplanes and raising fears of a nuclear clash. Yet Mr Trump is now exploring crypto and mining deals in Pakistan. He has dined in the White House with Field-Marshal Asim Munir, its hardline army boss and de facto ruler, who is proposing Mr Trump for a Nobel peace prize. America has offered to mediate over disputed Kashmir, breaking its own long-standing position and an Indian taboo.

America’s failure to support India on a core security interest and decision to punish it over trade have shattered trust among Indians. Since 2004 American presidents have welcomed India as a rising democratic power opposed to Chinese domination of Asia. Its $4trn economy and $5trn stockmarket dwarf those of Pakistan, wracked by instability, debt crises, terrorism and dependence on China. This is a giant own-goal for America’s interests that compounds its neglect of NATO in Europe.

That explains the second emotion among some in India: vindication. Since independence in 1947, India has avoided alliances, although the label it uses has changed from “non-alignment” to “multi-alignment”. It relies on Russia for some weapons, and on Europe, Israel and America for others. China supplies manufacturing inputs; the West tech and markets.

In 2020, however, when relations with China went into a deep freeze after the border skirmishes in the Himalayas, some in Washington hoped this might presage a quasi-alliance with America. Intelligence has been shared, and joint US-India military exercises, which also included Japan and Australia, led to a strategic deal in 2024 on closer defence ties.

Indians sceptical of global entanglements feel vindicated by the events of the past few months. As they always warned, dependence on America is dangerous. Mr Modi’s visit to China is meant to signal that India has options.

Humiliation and vindication pose a test of India’s capabilities and resilience. For 11 years Mr Modi has pursued nation-building, modernisation and centralisation. There have been setbacks. An industrialisation drive has had modest results and failed to produce the new jobs India needs. The education system is poor. Mr Modi often lapses into Hindu chauvinism.

But there have also been successes. New roads and airports, and digital payments and tax platforms, have created a giant single market. The financial system is stronger, with deep capital markets built on domestic savings, a nearly balanced current account and prudent banks. India is now less likely to attract supply chains as part of a “China plus one” boom, but all this will help it weather the trade shock. Growth is expected to remain above 6%, making it the world’s most dynamic big economy and, the IMF says, its third-biggest by 2028.

The danger is that America’s aggression revives slumbering autarky and anti-Westernism. In his Independence Day speech from the Red Fort in Delhi on August 15th, Mr Modi emphasised more self-reliance. But were India to go further and turn inwards, it would threaten its services industry, which now exports almost as much as all other sectors put together. Its tech-services firms make at least half their sales to American customers, including blue-chip firms with “global capability centres” in India. The country is OpenAI’s second-biggest market by users. And to industrialise faster, India needs more machinery imports and inputs from China.

Better for India to try to limit the damage. It should make rational concessions, including cutting tariffs and buying less Russian oil and more American natural gas. America and India still have enduring bonds, not least a huge diaspora. Mr Modi is right to go to China: boosting India’s manufacturing will mean closer trade links in the next decade, as well as American tech. He should seek new trade deals, adding to recent ones with Britain and the United Arab Emirates.

A second priority should be reform at home. India’s fate—and its choice—is to be independent. Size and dynamism matter more than ever, to secure better terms in deals, pay for defence and raise living standards even if world trade slows. India has been waiting for several years for more big-bang reforms, including deregulating business, reforming the courts, and modernising agriculture, land and power distribution.

Many of these require co-operation between India’s states and the central government. Encouragingly, Mr Modi has just said he will simplify the goods-and-services tax and deregulate the economy, emphasising “Next Gen Reform”. After 11 years in office, he needs to go further and faster. To confront India’s deepest internal challenges has always been in its national interest. In a hostile world, it is also the best defence. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Whether Lisa Cook stays or goes, important norms have been broken

How much danger is America’s central bank in? Whether Lisa Cook stays or goes, important norms have been broken August 28th 2025 IT IS the first time that an American president has tried to sack a governor on the board of the Federal Reserve. The credibility of the central bank is one of the underpinnings of America’s world-beating economy. And yet, although dollar assets weakened a little on the news, financial markets are taking it all in their stride. Whatever is going on?

Donald Trump escalated his war against the Fed on August 25th, saying he would fire one of its governors, Lisa Cook , for alleged misstatements in her mortgage applications. Fed governors can be sacked only for cause and Ms Cook, who has not been charged, has vowed to fight her dismissal in court. Yet everybody knows this is not really about mortgage fraud. Instead, like a show trial, it is a message to anyone who serves on the Fed’s board that Mr Trump can impose his desire for low interest rates. On August 26th he crowed that “We’ll have a majority [on the board] very shortly.”

One reason investors are not yet panicking is that the president underestimates how much work he still has to do. Even if Ms Cook departs, his pick to replace her must gain confirmation from the Senate, a process that scotched the chances of Judy Shelton and Stephen Moore, Mr Trump’s nominees during his first term. And if they clear that hurdle, they will still be part of a committee that sets rates by majority vote.

Much is being made of the fact that the board contains Chris Waller and Michelle Bowman, who were successfully nominated by Mr Trump in his first term. No doubt he believes that makes them his creatures. However, although they dissented from the Fed’s latest decision to keep interest rates on hold , preferring instead to cut, there is a respectable case for doing so. Mr Waller, the bookies’ favourite to succeed Jerome Powell, is no more of a presidential stooge than the incumbent. Mr Powell became Fed chairman in 2018—under Mr Trump.

In addition, although Mr Powell’s term as chairman ends in May, his tenure as governor does not expire until January 2028. The convention is for him to retire next year, but these are convention-busting times and he could choose to stay on, denying Mr Trump the chance to fill another seat. The markets, in other words, will have plenty of time and opportunities to panic before the president is in a position to pull the levers at the Fed.

But do not conclude that all must therefore be well. Investors would look on with alarm if the Fed were to have a super-chair seated behind the Resolute desk. And rightly so. The memory of Richard Nixon strong-arming Arthur Burns into keeping rates low in the early 1970s, and the rampant inflation that ensued, has made the independence of the central bank one of the strongest norms in American politics.

Other things being equal, greater political influence over the Fed will raise interest rates because of the extra risk of bad decisions. That is why investors are already demanding greater compensation to hold long-dated Treasuries, even as the Fed has cut rates and the economy has weakened. Given Mr Trump’s wishes, the irony is obvious. The Fed’s independence is being attacked just as the government is racking up debt. The more interest payments rise, the more tempting it will be to lean on the Fed, whoever is in power.

Mr Trump’s attack on Ms Cook is yet another symptom of the corruption of America’s government. Allegations of mortgage fraud have also been made against Adam Schiff and Letitia James, two Democratic politicians. There is no telling who else could fall victim to the partisan trawl of mortgage applications and, who knows, tax returns. It is easy to imagine Democrats one day returning the favour. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Emmanuel Macron looks likely to lose another prime minister over an attempt to curb public debt

France’s government is on the brink of collapse, again Emmanuel Macron looks likely to lose another prime minister over an attempt to curb public debt August 28th 2025 When Europeans fret about profligate states destabilising their common currency, they usually have the continent’s southern fringe in mind. Yet when on August 25th a European leader made dire warnings about his country’s public finances, he was not speaking of Greece, Italy or Portugal. “Our country is in danger because we are on the brink of over-indebtedness,” declared François Bayrou, France’s prime minister. To start tackling a debt pile that stands at 114% of GDP he wants to make savings in next year’s budget worth €44bn ($51bn, or 2.6% of spending). But he runs a minority government faced with a bolshie opposition—egged on by populists on left and right—which will hear nothing of it. To try to break the impasse, Mr Bayrou stunned all parties this week by putting his government’s survival on the line, recalling parliament for a vote of confidence on September 8th. If he is defeated, as seems likely, France will lose its third prime minister in little over a year—and Europe will gain a fiscal hazard.

Mr Bayrou is right to sound the alarm. France has not balanced its budget since 1974. Its deficit is the highest, relative to GDP, in the euro zone. Its public debt is higher than that of every member except Greece and Italy, and its borrowing costs are now steeper than Greece’s much-improved rates. France still has no problem finding lenders. Yet as Mr Bayrou implied in his address with a reference to Britain’s hapless former prime minister, Liz Truss, market sentiment can turn fast. Bourses and bond markets are already nervous. The last thing Europe needs at a time of war and geopolitical turmoil is a financial crisis at the heart of the euro zone.

To get a grip on its public finances, France urgently needs to break the cycle of parliamentary deadlock. Alas, the country that elected Emmanuel Macron president in 2017 on a promise to bridge political division now seems singularly unable to do so. It does not help that the centrist president further shrank his parliamentary minority by recklessly calling an early election last year, nor that rebellion has always had a deep hold on the French mind. For politicians of the centre ground elsewhere, France’s troubles reflect something broader too: a worrying sign that the tools of technocratic politics—an appeal to reason, the marshalling of facts, the forging of consensus—are feeble weapons against the populists’ angry certitudes.

Against such forces, France has few good options. Without a budget for next year, government will not shut down; the existing one can be rolled over, as it was for a period this year. But it is hard to see how Mr Macron could break the parliamentary stalemate by losing Mr Bayrou and picking a fresh prime minister from his own camp. Yet if he dissolves parliament again, that would run the risk of bringing Marine Le Pen’s hard right into government. No wonder bond markets are twitchy.

As France braces itself for yet more political instability at home, there is one small comfort for Europe. Across the Rhine, in Germany’s chancellor, Friedrich Merz, Mr Macron now has a partner who, unlike his predecessor, Olaf Scholz, seems ready to work with France. A good Franco-German link is not enough to unite and embolden Europe, but without one Europe flounders, and both France and Germany suffer along with the rest.

The two leaders, who will dine together on the Med on August 28th before holding a joint cabinet meeting the next day, do not agree on everything. But they share a sense of urgency and seriousness. And if Mr Macron can overcome his concerns on trade (notably with regard to the EU-Mercosur deal) and Mr Merz can commit to common defence projects and productivity-boosting reforms in banking and energy, together they might just be able to get some things done that will benefit their countries and the continent more widely. They should not waste their best opportunity. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

China’s industrial policy attracts fans abroad, critics at home

Don’t forget the downsides of China’s innovation push China’s industrial policy attracts fans abroad, critics at home August 28th 2025 Not so long ago, Westerners dismissed China as a copycat, a fast follower or a “fat tech dragon”, consuming vast amounts of money and manpower while rarely taking flight. But as China has triumphed in high-tech industries such as electric vehicles, clean energy and lean AI, the condescension is giving way to admiration, fear and even envy.

Now some Western governments are paying the copycat nation the compliment of imitating its policies. The European Union has offered subsidies to Chinese battery companies that share their know-how. America’s government is taking a stake in Intel, a once-mighty chipmaker, in the hope that state ownership will restore its fortunes. Back in China, techno-optimism is helping fuel a market rally . Cambricon, a potential rival to Nvidia, has reported first-half revenues up by over 4,000% year on year.

Amid the hope and hype, it may seem churlish to point out the downsides of China’s innovation push: the fiscal cost, market distortion and policy duplication. But ignoring these pitfalls would be a mistake, not least because they have recently begun to trouble China’s own government. Indeed, one of the most prominent critics of its industrial policy is the man whose vision it is meant to reflect: the supreme ruler, Xi Jinping, himself.

Industrial subsidies, direct and indirect, cost China over 1.7% of GDP a year in 2019, compared with about 0.6% in dirigiste France. The country boasts more than 2,000 government-guided investment funds scattered throughout the land, aiming to raise over 10trn yuan ($1.4trn). That could buy a lot of innovation. But as these funds have grown, private venture capital has dried up. Waste and fraud also take their toll. One pot of money earmarked for semiconductors, known as the “Big Fund”, became notorious for big corruption, leading to the investigation or detention of at least a dozen people.

Even when they invest honestly, policymakers don’t always invest wisely. Local officials, Mr Xi noted in July, always promote the “same few things: artificial intelligence, computing power, new-energy vehicles”. This has led to overcrowded industries and vicious price wars. Leaders now complain about “involutionary” competition: companies are cutting prices to poach customers, forcing rivals to do the same, which leaves everyone’s profits lower and no one’s market share higher.

Supporters say this is all part of the plan. The government encourages excessive entry into promising areas, knowing that the frenzied competition will propel improvements. Once the best companies have proved their worth, the government can cull the rest. But this process does not always yield the most innovative or efficient firms. Often it favours those with the most indulgent provincial patrons, or firms that are too big to cull.

Moreover, China’s industrial policy has not achieved all its goals. Civil aviation and cutting-edge chipmaking remain elusive. And not all successes owe much to explicit policy. DeepSeek was the side-hustle of a hedge fund, an industry frowned upon by Beijing.

China’s innovation push has met with some undeniable success. At this year’s Spring Festival celebrations, robot dancers stole the show. But the government’s industrial choreography is not nearly as tight as this example suggests. Instead it resembles the “robot Olympics” held recently in Beijing. The events featured bustling fields of competitors. Their human controllers huffed and puffed alongside them, like over-protective local officials. Even so, several of the robots fell flat on their faces—and others struggled to stay in their lane. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

To remain the world’s foremost technological power, America needs its friends

Donald Trump’s fantasy of home-grown chipmaking To remain the world’s foremost technological power, America needs its friends August 21st 2025 How low mighty Intel has fallen. Half a century ago the American chipmaker was a byword for the cutting edge; it went on to dominate the market for personal-computer chips and in 2000 briefly became the world’s second-most-valuable company. Yet these days Intel, with a market capitalisation of $100bn, is not even the 15th-most-valuable chip firm, and supplies practically none of the advanced chips used for artificial intelligence (AI). Once an icon of America’s technological and commercial prowess, it has lately been a target for subsidies and protection. As we published this, President Donald Trump was even mulling quasi-nationalisation.

More than ever, semiconductors hold the key to the 21st century. They are increasingly critical for defence; in the ai race between America and China, they could spell the difference between victory and defeat. Even free-traders acknowledge their strategic importance, and worry about the world’s reliance for cutting-edge chips on tsmc and its home of Taiwan, which faces the threat of Chinese invasion. Yet chips also pose a fiendish test for proponents of industrial policy. Their manufacture is a marvel of specialisation, complexity and globalisation. Under those conditions, intervening in markets is prone to fail—as Intel so vividly illustrates.

To see how much can go wrong, consider its woes. Hubris caused the firm to miss both the smartphone and the ai waves, losing out to firms such as Arm, Nvidia and tsmc. Joe Biden’s CHIPS Act, which aimed to spur domestic chipmaking, promised Intel $8bn in grants and up to $12bn in loans. But the company is floundering. A fab in Ohio meant to open this year is now expected to begin operations in the early 2030s. Intel is heavily indebted and generates barely enough cash to keep itself afloat.

The sums needed to rescue it keep growing. By one estimate Intel will need to invest more than $50bn in the next few years if it is to succeed at making leading-edge chips. Even if the government were to sink that much into the firm, it would have no guarantee of success. The company is said to be struggling with its latest manufacturing process. Its sales are falling and its plight risks becoming even more desperate.

The Biden administration failed with Intel, but Mr Trump could make things worse. He has threatened tariffs on chip imports, and may try to browbeat firms such as Nvidia into using Intel to make semiconductors for them. These measures might buy Intel time but they would be self-defeating for America. Chipmaking is not an end in itself but a critical input America’s tech sector requires to be world-beating. Forcing firms to settle for anything less than the best would blunt their edge.

What should America do? One lesson is not to pin the nation’s hopes on keeping Intel intact. It could sell its fab business to a deep-pocketed investor, such as SoftBank, which has reportedly expressed interest in buying it and this week announced a $2bn investment in Intel. Or it could sell its design arm and pour the proceeds into manufacturing. Intel may fail to catch up with TSMC even then. Either way, the federal government should not throw good money after bad. Taking a stake in Intel would only complicate matters.

That leads to a second lesson: to look beyond Intel and solve other chipmakers’ problems. tsmc is seeking to spread its wings. It is running out of land for giant fabs in Taiwan and its workforce is ageing. It has already pledged to invest $165bn to bring chipmaking to America. A first fab is producing four-nanometre (nm) chips and a second is scheduled to begin making more advanced chips by 2028. Samsung, a South Korean chipmaker that is having more success than Intel, is setting up a fab in Texas. But progress has been slow: Samsung and TSMC have both struggled with a lack of skilled workers and delays in receiving permits.

The last lesson is that, even if domestic chipmaking does make America more resilient, the country cannot shut itself off from the rest of the world. One reason is that the supply chain is highly specialised, with key inputs coming from across the globe, including extreme-ultraviolet lithography machines from the Netherlands and chipmaking tools from Japan. The other is that Taiwan and its security will remain critical. Even by the end of this decade, when tsmc’s third fab in America is due to begin producing 2nm chips, two-thirds of such semiconductors are likely to be made on the island. TSMC’s model is based on innovating at home first, before spreading its advances around the world.

To keep America’s chip supply chains resilient, Mr Trump needs a coherent, thought-through strategy—a tall order for a man who governs by impulse. No wonder he is going in the wrong direction. On Taiwan he has been cavalier, confident that China will not invade on his watch, while failing to offer the island consistent support. His tariffs on all manner of inputs will raise the costs of manufacturing in America; promised duties on chip imports will hurt American customers. He thrives on uncertainty, but chipmakers require stability.

A sensible chip policy would make it attractive to build fabs in America by easing rules over permits and creating programmes to train engineers. Instead of using tariffs as leverage, the government should welcome the imports of machinery and people that support chipmaking. Given the bipartisan consensus on the importance of semiconductors, the administration should seek a policy that has Democratic support—with the promise of continuity from one president to the next.

Economic nationalists should also see the progress of chipmakers in allied countries as a contribution to America’s security. Samsung is aiming to start producing 2nm chips in South Korea later this year. Rapidus , a well-funded chipmaking startup in Japan, is making impressive progress. Both countries have a tradition of manufacturing excellence, and may have a better shot at emulating Taiwan.

The chipmaking industry took decades to evolve. It is built for an age of globalisation. When economic nationalists build their policies on autarky, they are setting themselves a needlessly hard task—if not an impossible one. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Ahmed al-Sharaa, the new president, needs to bring his critics closer

A new opposition could be a healthy sign for Syria Ahmed al-Sharaa, the new president, needs to bring his critics closer August 21st 2025 During much of the first half of this year, things were looking up for Ahmed al-Sharaa. Syria’s new president was basking in Donald Trump’s decision to lift sanctions on his country. After more than a decade of civil war, Damascus and other cities had begun to hum again. Investors from the Gulf and Turkey piled in. Our polling showed that the public mood was buoyant. After ousting Bashar al-Assad’s regime, Mr Sharaa, a former jihadist, had not imposed the Taliban-style rule that some had feared. The vast majority of Syrians said they were optimistic for the future.

Unfortunately, as the euphoria fades, Syrians are growing increasingly frustrated. Mr Sharaa has disappointed them by failing to ease the sectarian divisions that have long made their country a tinderbox. He exhibits creeping authoritarianism. Now civil-society activists are building an organised opposition . How Mr Sharaa responds to this political challenge will define both his presidency and his country’s future.

The president has often acted pragmatically. But there have been terrible lapses. In March, when Sunni militias linked to Mr Sharaa’s forces slaughtered around 1,400 people in coastal Latakia, he was slow to respond. The region is the heartland of Syria’s Alawite minority, the sect from which Mr Assad and many of his loyalists came. Four months later clashes in Suwayda, a province dominated by the Druze, a mystical religious minority, ended with massacres, some by troops loyal to the government. Again Mr Sharaa was unable—or unwilling—to stop the violence. The atrocities there gave Israel, which has a Druze minority, an excuse to interfere. It launched strikes on the province and on Damascus.

Signs of authoritarianism are hard to miss. When Mr Sharaa ruled Idlib province during the final years of the Assad regime, he ran a competent government that oversaw a flourishing economy. But he also became increasingly brutal, imprisoning many of his critics. He has brought some aspects of that leadership to the presidency, centralising power among a small group of loyalists, leaning on Sunni tribes (he is Sunni) and sidelining minorities. His supporters sometimes argue that broad representation is a luxury in a country ravaged by war, and that narrow rule is the price of efficiency. Centralisation, however, has not brought good governance, let alone security.

A loose coalition of activists, some of them veterans of the anti-Assad era, has now begun pressing for urgent political reform. They have called for Mr Sharaa’s hastily drafted constitutional declaration to be rewritten so as to allow the formation of political parties and to give more scope for civil society to operate. It is the first stirring of co-ordinated opposition to the regime.

Mr Sharaa has yet to lock up any of his new opponents. But he should do more than tolerate critics; he should welcome them and bring them into his government. Syria needs an open constitutional process, a deal with the Kurds, broader leadership in the security forces and an electoral framework to ensure that the committees choosing members of an interim parliament in September do not opt overwhelmingly for hardline Sunnis.

Towards the end of Mr Sharaa’s rule in Idlib, protesters chanted for his downfall. His critics have not yet gone that far. He has no replacement, and a power vacuum in a country hollowed out by civil war would be dangerous. Yet, in a functioning polity, the opposition can be a stabilising force rather than a threat. For fragile, divided Syria, that is the best chance of avoiding another descent into civil war. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The problem with Donald Trump’s fast-moving, unpredictable diplomacy

Who will America’s president listen to next on Ukraine? The problem with Donald Trump’s fast-moving, unpredictable diplomacy August 21st 2025 In February VOLODYMYR ZELENSKY lasted less than an hour inside the Oval Office before he was ordered to leave the building. When he returned to the scene on August 18th, many feared something even worse. Donald Trump had, three days earlier, rolled out the red carpet for Vladimir Putin in Alaska. On his way back he announced that he was no longer pressing for a ceasefire, but now favoured a comprehensive “peace” deal that could see Ukraine hand over a big chunk of fortified territory in return for a promise from Mr Putin that—cross his heart—he would not invade Ukraine for a third time.

In the sense that Mr Trump can cause Ukraine harm that it cannot protect itself against, America’s president is even more dangerous to Mr Zelensky than Mr Putin. Many feared that at Monday’s meeting he would force a terrible one-sided deal on America’s supposed allies. Thankfully, that did not happen. Amid profuse thanks and ego-stroking, Mr Trump did not talk about territory. He even said that America would consider backing new security guarantees for Ukraine.

By contrast with the diplomacy, the battlefield is leaden. The war in the south and east of the country grinds on. Russian drones and missiles pummel Ukraine’s cities nightly, demoralising its citizens, crippling its economy and poisoning its politics. Russia is losing men at several times the rate that Ukraine is, though it has a great many more men to lose. Although Ukraine is slowly ceding ground, without a collapse of its lines Russia will not take the land Mr Putin wants to gain through a peace deal—at least not without sacrificing tens of thousands of troops a month over many months or years.

That is why Mr Trump’s diplomacy, much faster-moving and less predictable, remains so threatening. During the meetings on Monday, the president broke off to call his Russian counterpart, and all the indications are that he still dreams of a deal that might win him a Nobel prize. He wants Mr Zelensky to sit down with Mr Putin in the next week or two. If land swaps are Mr Putin’s price, the likelihood is that Mr Zelensky will again come under huge pressure to give up ground.

That would put Ukraine and Europe in a quandary. If Mr Zelensky and Europe refuse, Mr Trump could cut off the supply of weapons and crucial military intelligence at any time; he has done it before. A furious American president could impose tariffs on Europe. He could threaten to withdraw American support for NATO.

However, more than 250,000 people live in the part of the Donbas that Russia seeks. Freezing a war along contact lines has happened many times in the past. But the lines are there for a reason: they mark where Ukraine has fallen back to defensible positions, and vast amounts of effort and treasure have been expended on securing them with trenches, “dragon’s teeth” and elaborate fortifications. If Russia is allowed to take them over, it will become far harder for Ukraine to resist another advance. That would be an incentive for Mr Putin to attack again.

The only territorial concession Ukraine can sensibly make would be some form of de facto recognition of Russia’s existing occupation of around 19% of its territory. That would mark a victory for Mr Putin; deeply unpalatable, but arguably worth conceding in the interests of stopping a war that has already cost hundreds of thousands of lives on both sides. But what should Ukraine get in return? Mr Trump’s answer, and indeed that of the Europeans, is “security guarantees”. The problem is that Mr Trump is evasive about what they mean.

The most solid form of security guarantee —a commitment to use a large army to resist a Russian attack—is not on offer. Europe’s leaders have been trying to assemble a “coalition of the willing” that would deploy inside Ukraine, so that Russia could not violate a peace deal without risking direct conflict with Western countries. Unfortunately, the numbers committed are too puny to put up a fight against Russia. Also, to establish true deterrence, any force would depend on the certainty of American support.

Mr Trump has suggested that the Europeans will have his backing, though no troops, for these guarantees, but can he be relied on? On the face of it, not really. He threatened Mr Putin with “crippling” sanctions if he would not agree to a ceasefire, but when they met he meekly dropped all talk of them. He declines to say what sort of support he will provide to the reassurance force, or even whether the supply of defensive weapons to Ukraine will be guaranteed.

A better way to achieve a degree of deterrence would be ironclad pledges to equip and fund Ukraine’s own army, which is far larger and tougher than anything the Europeans can muster. By contrast, it is hard to imagine anything more destructive to European security than a peacekeeping force that is not backed up if it is attacked. That would be the victory Mr Putin most longs for. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

As temperatures rise, so must understanding of the risks

Pregnant women need protecting from heatwaves As temperatures rise, so must understanding of the risks August 21st 2025 CONSULT THE internet on what to avoid while pregnant, and the answer seems to be: everything. Worried women can find advice suggesting that they abstain from sex, spicy foods, swimming and sunscreen (in fact, all are fine; it might be wiser to avoid Google). Other things such as smoking, drinking alcohol and eating mercury-rich seafood, though, are rightly regarded as dangerous. Heat should be on that list, too.

Being too hot for too long is bad for anyone. But physiological changes in pregnancy—such as a faster metabolism, greater heat production, and heavier demands on the heart—make expectant women particularly vulnerable to higher temperatures , with worrying consequences for mother and child. Improvements in maternal and newborn health, once a key concern for governments and humanitarian agencies, have stalled in recent years. That is due, in part, to attention shifting to other issues, including climate change. But it turns out the problems are related .

Studies from every part of the world now provide unassailable evidence that women are more likely to give birth before the 37th week of pregnancy as temperatures rise. A recent meta-analysis of 198 studies across 66 countries found that the odds of pre-term birth increase by 4% for every 1°C rise in temperature in the month before birth, and more over longer periods. Being in a locally defined heatwave—be it in Sweden or Senegal—increases the odds by more than a quarter, though the risks are predictably highest in the hottest, poorest places. Complications from pre-term birth cause 40% of all newborn deaths worldwide; survivors are far more likely to suffer from disabilities and disorders. Hotter weather has also been linked to stillbirths and certain congenital defects, and to gestational diabetes and pre-eclampsia, which can be fatal for the mother.

The problem is growing as global warming increases temperatures in general, and makes dramatic spikes more frequent and extreme. Already, climate change has at least doubled the annual number of hot days that can increase pregnancy risks in 222 out of 247 countries, according to Climate Central, a research group. It is deemed responsible for around a third of all heat-related newborn deaths in some countries, and more than a quarter of the pre-term births caused by heatwaves each year in China. Even if the world cuts emissions precipitously, modelling indicates that such impacts will continue to worsen.

But things can be done to help. The first is simply to make pregnant women aware of the risks, so they can take protective action. Though the link between heat exposure and negative outcomes is evident, the underlying mechanisms are unclear. So the advice is fairly broad: try to keep cool; stay hydrated; plan activities to avoid hot periods and heatwaves; and seek medical help at the first sign of heat stress. Yet such choices are constrained by circumstance, so efforts must be made to support those with the fewest resources. In America, for example, several states now let Medicaid, which provides health cover to poorer people, contribute to the cost of air-conditioning for the most vulnerable. Yet being poor and pregnant isn’t enough to qualify; it should be. In worse-off places, interventions such as adding awnings to homes can reduce temperatures. Health workers everywhere should be taught about the dangers of heat exposure in pregnancy and ways to reduce it, as should officials in charge of responding to heatwaves.

Newly knowledgeable pregnant women will no doubt want more information. Good. That demand will drive funding for research to work out exactly how and why hot weather harms pregnancies, and what interventions work best. The first large-scale studies are now under way. Much is still unknown, including which biological systems are most implicated, or when in pregnancy the risk is greatest. Filling those gaps will help inform practical policies and allow treatments to be developed. Governments should start collecting the data needed to track progress. But recognising the problem is the first baby step. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

What to do about its rampant steal-and-export industry

Britain leads the world in a new global business—a criminal one What to do about its rampant steal-and-export industry August 21st 2025 WALK DOWN the street in London and you might notice two things. First, although many pedestrians are glued to their phones, a few will periodically look over their shoulder, scanning for an assailant arriving at high speed. Second, some of the fancy cars, particularly SUVs, will have a steering lock. This does not mean that Britain is “lawless”, as the government’s critics complain. But both are signs of something worrying: a criminal enterprise that spans the world, but is flourishing most in Britain. We call it Grand Theft Global Inc.

Expensive consumer goods are, increasingly, being stolen in the rich world and exported to distant markets . The idea is hardly new. In the 1990s European cars and electronic goods headed east to former communist countries. “Visit Albania,” ran one joke. “Your car is already there.” What is novel is that the enterprise is globe-spanning, and underpinned by a sophisticated supply chain. London is the best place to see how it works, though other places should watch out. Grand Theft Global’s business model is spreading.

Roughly 70,000 phones were snatched in London last year—almost one for every 100 people. Britain accounts for 40% of phone thefts in Europe. (Phone-snatching is also growing elsewhere: 40,000 Parisians said adieu to their devices last year.) British thieves’ favoured method is to approach from behind on an electric bike, grab an unlocked phone and put it in a “Faraday bag” to prevent tracking; most of the nicked phones end up in China. Meanwhile, around 130,000 cars were stolen in Britain last year, a rise of 75% in a decade. SUVs are popular targets, for export to the Gulf and Africa, where they can handle poor roads.

Behind all this is a criminal enterprise that has all the trappings of a regular global business, including specialist service providers and seamless communications. Moving goods around the world adds cost, but distance is a feature, not a bug: Grand Theft Global depends on getting goods to places where they cannot easily be found. African countries have little capacity to check for stolen cars. China does not make it hard to sell stolen phones. The market is remarkably efficient. In April 2024 flooding in the UAE damaged many cars, and dealerships faced delays in replacing them. In the following months, Britain’s police saw a sharp uptick in SUV thefts.

Grand Theft Global seems destined to grow. As Africa and Asia become wealthier, demand for expensive goods will only increase—and the streets of rich-world cities offer a ready supply of nickable goods. In addition, many rich countries hardly monitor their exports at all. Moral hazard further complicates matters. The cost of Grand Theft Global is broadly spread among consumers via higher insurance premiums. That means no one has a really strong interest in tackling it.

But it needs to be tackled. Some suggest pressing countries where the stolen goods end up. That is unlikely to work: they have little reason to curb the trade, even if they could. A better idea is to stop Grand Theft Global at the border. Hampering exports would have a cost, but freight companies could be asked to know their customers, as banks must to help fight fraud, money-laundering or sanctions-busting. Booking a container, for example, could require a face ID.

What about squeezing manufacturers? In the past, regulation has forced them to prioritise security, for example by adding immobilisers that make it harder to steal cars. But the rapid evolution of technology for breaking into vehicles suggests that a simple regulatory fix does not exist. The same is true for phones. Apple-bashing British MPs are wrong to think a quick tweak could end the blight of snatching.

That leaves policing, which has been left in the dust. Victims pull their hair out when they manage to track down their stolen car or phone and still the police do nothing. No Grand Theft Global kingpins have been caught. Authorities should clamp down on their latest tricks, for instance by making it illegal to possess break-in tools, and by seizing electric bikes that are not restricted to legal speed limits, which for now can serve as ideal getaway vehicles for urban wrongdoers.

Most of all, police need to understand what they are facing. Currently forces do not see these thefts as “high-harm”, yet the thieves’ impunity is corroding trust in law and order, and the same gangs are also involved in violence and drugs. Crimes are left to stretched local officers, with little to go on. To get to grips with Grand Theft Global, police must recognise it as the organised criminal enterprise it has become. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Donald Trump’s capricious dealmaking destabilises the world

How to win at foreign policy Donald Trump’s capricious dealmaking destabilises the world August 14th 2025 WHEN DONALD TRUMP meets Vladimir Putin in Alaska it will be the seventh time the two have talked in person. This time is different, though. Since their last sit-down, Mr Putin has launched an unprovoked war, lost perhaps a million Russian soldiers (dead and wounded) and inflicted ceaseless misery on Ukrainians in pursuit of an imperial dream.

Undaunted, Mr Trump hopes to get in a room with a wily dictator, feel him out and forge a deal. It is the biggest test yet of his uniquely personal style of diplomacy . It is also a reminder of how unpredictable American foreign policy has become. Will Mr Trump be firm, making clear that America and its allies will do what it takes to guarantee Ukraine’s sovereignty? Or will he be in such a rush to reopen business with Russia that he rewards its aggression and leaves Ukraine vulnerable to future attacks? As everyone clamours for the president’s ear, no one knows what he will do.

At the beginning of Mr Trump’s second term his supporters had a theory about how he would wield American power. Rather than relying on deep relationships and expertise, he would rely on his gut. As a master negotiator with a knack for sensing what others want and fear, he would cut through the waffle and apply pressure ruthlessly. Everyone wants access to American markets. By threatening to shut them out, he would force recalcitrant foreigners to end wars and reset the terms of trade to America’s advantage. Career diplomats and experts would be replaced by rainmakers. Yes, his transactional approach might foster a bit of corruption. But if it brought peace in Ukraine or Gaza, who cared?

Alas, there are drawbacks to this approach. Using tariffs as a weapon hurts America, too. More fundamentally, junking universal principles for might-makes-right repels friends without necessarily cowing foes. And the substitution of presidential whim for any coherent theory of international relations makes geopolitics less predictable and more dangerous. Mr Trump is not a globalist, obviously. Nor is he an isolationist, or a believer in regional spheres of influence. He simply does what he wants, which changes frequently.

One way to make sense of Trumpism is that he divides his efforts at dealmaking into three categories: high, medium and low stakes. In the first category are America’s relations with unfriendly great powers, principally China and Russia. Israel is here, too, because of its importance in American domestic politics. Iran makes an appearance, because of the way it threatens its neighbours. All these relationships are complex, difficult and matter a lot to Mr Trump. If he scores a win here—if he ends the war in Ukraine, or brings peace between Israel and the Palestinians, or finds a formula for co-operating with China without endangering national security—then the pay-off is potentially staggering.

In the medium-stakes category Mr Trump puts Brazil, South Africa and, oddly, giant India. These are important countries that both America and China want in their camp. In most cases, their values are far closer to America’s than to China’s. Ties with them ought to be win-win. But they are unwilling to be bossed around, and take offence when Mr Trump insults or tries to bully them.

The small stakes, for Mr Trump, are in small or poor countries. A superpower can wield great influence over such places, sometimes to good ends. Mr Trump helped cement a peace deal between Azerbaijan and Armenia , for example, and brokered a truce between the Democratic Republic of Congo and Rwanda. These are welcome achievements. Azerbaijan and Armenia had been fighting for 35 years. Mr Trump mediated a reopening of trade and transport links. The fruits may include a weakening of Russian influence in the area. The Congo-Rwanda deal is much shakier—Rwandan-backed rebels have violated it repeatedly—but not nothing. And there may be an upside for America, in the form of mineral deals.

When it comes to medium-size stakes, Mr Trump’s method works less well. He has started needless feuds with the leaders of Brazil (because it is prosecuting a Trumpy ex-president for allegedly attempting a coup), with South Africa (because he believes, wrongly, that it is persecuting whites) and with India (infuriating its prime minister with painful tariffs and undiplomatic boasting). The result? India will draw closer to Russia again, and be less inclined to act as a counterweight against China. Brazil and South Africa see China as a more reliable partner than America. Mr Trump has won headlines that play well with his most ardent supporters. But America has lost out.

And when it comes to the highest stakes, the president is floundering. He has tried to coerce China with tariffs, but it is fighting back . This week Mr Trump blinked and extended another deadline. He also undermined his own national-security policy by lifting a ban on exports of Nvidia chips to China, while insisting that Uncle Sam gets a 15% cut.

On Ukraine, he has been wildly inconsistent, one day blaming it for having been invaded and threatening to cut military aid, then accusing Mr Putin of bad faith and threatening stiffer sanctions on Russia. On Israel, he has consistently given Binyamin Netanyahu everything he wants and extracted nothing in return. If Mr Trump’s bombing of Iran’s nuclear sites made Israel safer, well and good. But he has failed to use his leverage to restrain Israel’s unending war in Gaza.

Other countries are learning how to play Mr Trump. A crypto deal and a nomination for a Nobel peace prize worked for Pakistan. A plane helped Qatar. The corruption is turning out to be as bad as almost anyone feared; the great deals have yet to materialise. Those who say Mr Trump is looking out for his own interests, not America’s, have plenty of ammunition.

All this is only a preliminary judgment. If Mr Trump stands up to Mr Putin this week, perhaps he can make his greatest-ever deal, ending Europe’s worst war since 1945. Sadly, the odds are against it. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

How the West can break China’s grip on these vital minerals

Xi Jinping’s weaponisation of rare-earth elements will ultimately backfire How the West can break China’s grip on these vital minerals August 14th 2025 Soon after the blockade started, the panic began. When China choked off the export of rare-earth elements in April, producers and politicians around the world were quick to sound the alarm. China provides over 90% of the world’s supply of refined rare earths , which are used to make the strong magnets inside almost anything with an electric motor, from vacuum cleaners to cars, and which also appear in high-tech products from smartphones to fighter jets. Some carmakers curtailed production; the industry is in “panic mode”, said one boss. Ursula von der Leyen, head of the European Commission, thundered against China’s “dominance” and “blackmail”.

At first glance the use of rare earths as a weapon is working—and Xi Jinping, China’s president, is getting what he wants. After the flow of rare earths resumed, America’s president lifted controls on the sale of some Nvidia chips, and delayed a hefty increase in import duties; on August 11th America and China further extended their trade truce. In July Mrs von der Leyen went cap-in-hand to Beijing, seeking looser restrictions. But in the long term, China’s rare-earths weapon will backfire.

The new controls are a sign of just how sophisticated China’s economic arsenal has become. After a political spat in 2010 it briefly blocked the exports of rare earths to Japan; in a fit of pique in 2020, it increased duties on Australian Shiraz and grass-fed beef. Now, however, Mr Xi has put in place a system of export controls that seek to exploit China’s heft in global supply chains. A licensing scheme covering more than 700 goods, including manufacturing equipment and critical minerals, began operating in December. Officials keep careful track of the ultimate consumer of the products, and can revoke licences. Even though rare-earths exports have resumed in recent weeks, sales to Western armsmakers, for instance, are still choked off.

The aim is clear. Mr Xi wants to indigenise supply chains, so that China is not at the mercy of its enemies for critical inputs—an effort that was turbocharged after America banned the export of advanced chips to China. He also hopes to use China’s control of supply chains as a source of power over others. As long ago as April 2020 he told officials that dependency on China could be a “deterrent” against foreigners who would “artificially cut off supply”.

The difficulty for Mr Xi, though, is that export controls have unintended consequences. Confronted with a ban, companies and entrepreneurs find ways around the shortage. China’s dominance in rare earths stems not from exclusive control of the world’s deposits, nor from the technological sophistication of the refining process, but instead from efficiency and scale. And the more it uses rare earths (or indeed other commodities) as a weapon, the more it will encourage others to find alternatives—weakening its future firepower.

Start with the nature of China’s chokehold. Despite their name, rare earths are relatively abundant; less than half of all known reserves are found in China. Refining is a painstaking and polluting business, but is not as technologically complex as advanced chipmaking. China’s grip on rare earths is therefore not as strong as the West’s on cutting-edge chips, and easier to work around. Indeed, until the 1980s, America was the biggest supplier of the minerals. The dominance of China came about because it was more willing to accept the environmental consequences, and has since been cemented by its gargantuan size, which allows rare earths to be mined cheaply.

Efforts by China to restrict the flow of rare earths have already spurred efforts to find alternatives. After the spat in 2010, Japan invested in rare-earths mines and began building stockpiles; although it still imports rare earths from China, its dependence has fallen from 90% to 60%. Earlier this year the Pentagon took a stake in MP Materials, a miner in California, with which Apple has signed a deal. All told, 22 new mining projects are expected to be up and running by 2030.

Trendy “geoeconomic” theory points out that even a small erosion of China’s dominance in rare earths could weaken its power disproportionately. Reducing its share from 90% to 80% may not sound like much, but it would imply a doubling in size of alternative sources of supply, giving China’s customers far more room for manoeuvre.

Even so, this diversification could still take years. What could Western governments do to speed it up? They have a responsibility, of course, to secure their military supply chains. They could also streamline the process of approving mining permits (which in America can take up to a decade), and could revisit environmental rules. Lowering trade barriers would also help the rest of the world mimic China’s scale.

It would be a mistake, though, for governments to seek to protect the entire economy from the impact of shortages. That is because a far more powerful—and underappreciated—response to shortages is innovation. Just think of how America’s chip controls have prompted Chinese firms such as Huawei and DeepSeek to develop new techniques, or how a cobalt crunch in 2022 quickly eased, partly as makers of electric vehicles found ways to do without the metal.

Similarly, startups across the West are now working on the recycling of rare earths, and on the development of alternative ways to make magnets and motors that do not rely on them. BMW and Renault, two European carmakers, already sell electric vehicles that do not use rare earths in their motors. Other companies could follow suit. China’s restrictions will cause disruption as producers rejig their processes, but long-term alternatives do exist.

The more China uses its rare-earths weapon, therefore, the weaker it will become. Time and again, enterprise and ingenuity have prevailed over attempts to control the flow of goods. China itself learned that lesson as its technology firms responded to America’s export controls on chips. It may have to learn it again. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

It should be a two-way street

America and its Asian allies need to spend more to deter China It should be a two-way street August 14th 2025 Unlike in Europe or the Middle East, there are no big interstate wars taking place in Asia right now. But the threat from China’s military build-up is obvious. Across the Pacific, American airmen are busy restoring and upgrading second-world-war airbases so that they can be used by their forces today. This is part of a policy to deter China that began under President Joe Biden. Now President Donald Trump is demanding that America’s Asian friends contribute far more to this task.

The administration wants them to spend more on defence and do more to deter an attack on Taiwan. Yet Mr Trump has sown doubts about America’s commitment to its friends, most spectacularly with Ukraine and NATO, but also with India. What should America’s Asian partners do?

Europe could plausibly defend itself without copious American help against Russia, but America’s Asian friends would have little chance of deterring China if they were abandoned by Uncle Sam, unless they resorted to nuclear weapons. China’s relative advantage is larger, the geography is daunting and there is no Asian alliance comparable to nato. Yet fortunately the Trump administration’s commitment to the Pacific is deeper than to Europe. Its Asian partners should build on that.

A lack of cash is a problem. Mr Trump’s “Big Beautiful Bill”, passed last month, will provide an injection of funds for America’s armed forces. But his budget request for the next fiscal year is flat, implying a cut after inflation. Congress needs to spend more if the Pentagon is to keep up with technological change and have enough ships, airfields, troops and munitions to counter China. Among America’s five main security partners in the region—Australia, Japan, the Philippines, South Korea and Taiwan—average annual defence spending is a threadbare 1.8% of GDP .

Mr Trump is right to ask them to spend 3.5% on defence. Australia, South Korea and Taiwan have low public debt compared with other rich countries, and could afford to do more. Australia’s Labor government, for example, has no excuse. Its own white papers warn of the seriousness of the threat from China, but its defence budget, at just under 2% of GDP, tells a different story. It should put off planned tax cuts and new social programmes or use debt financing to commit to meeting the new target.

In Japan, tough decisions loom. A minority Liberal Democratic Party government is under pressure to offer tax cuts, not a jump in defence spending. With high debt, borrowing to pay for defence is harder. Across the region the Pentagon should be careful about these conversations, however. Pushing too hard for unpopular policies could create a backlash among voters.

Even as they raise spending, America’s Asian partners should do more together, not least by investing more in the region’s defence-industrial base. This would helpfully place arms factories closer to where weapons might be needed. It would also create a modest hedge against American abandonment. Australia’s recent announcement that it would buy frigates from Japan is a start. By lifting their own spending and beefing up their industrial bases, they can protect themselves, show America that they are not freeloading and build confidence that China can be deterred in the Pacific. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

When climate change poses a strategic threat, it needs a strategic response

The shutdown of ocean currents could freeze Europe When climate change poses a strategic threat, it needs a strategic response August 14th 2025 Those who think about national security love to bandy acronyms such as ATACMS (Army Tactical Missile System) and WOMBAT (Weapon of Magnesium, Battalion, Anti-Tank). They need to add AMOC to the list. The Atlantic Meridional Overturning Circulation is not a weapons system. But it could lay waste a continent—specifically, Europe—to an extent that only a nuclear war could outmatch.

AMOC is part of a system of currents which move heat around the oceans of the world. It delivers a stupendous flow of that heat—more than 1,000 terawatts—to the North Atlantic. That sounds like the sort of planetary juggernaut it would be incredibly hard for humans (whose global civilisation runs at a mere 20 terawatts) to do anything about. Alas, no. AMOC is a curiously delicate thing. Changes in sea-surface temperature and salinity caused by global warming could conceivably make it stall; such abrupt shutdowns are clearly visible in the geological record. For Europe that could mean a sudden, severe cooling—even as the rest of the world keeps warming.

Europeans sweltering through yet another summer heatwave might think such cooling would be just the ticket. Again, alas, no. A complete AMOC shutdown could see Brussels hitting -20°C (-4°F) in a bad winter. In Oslo the figure would be almost -50°C (-58°F); not quite Yakutsk, but not far off. February sea ice in the North Sea could come as far south as the Humber estuary and the Frisian Islands north of Holland. Average rainfall in parts of northern Europe would drop precipitously; according to one estimate as much as 80% of England’s arable land would no longer be farmable without irrigation. Storms would get worse; so, in some models, might summer heatwaves. This would be the worst of all worlds.

And it’s not just Europe. By cooling the northern hemisphere as a whole, an AMOC collapse would push the band of rain which girdles the tropics towards the south. That would be very bad for the African countries on the south edge of the Sahara; it could also be devastating to the Amazon.

These ghastly prospects are one of the reasons that AMOC takes a starring role in worries about climate “ tipping points ”—effects of warming that might be dramatic, damaging and irreversible. Another reason is the strong suggestion, in both theory and models, that after a (currently unknown) temperature threshold is passed, the collapse could take just a few decades. A third is that AMOC, or at least parts of it, may already be in slow decline.

This is well known to people who think about climate change—as is the level of uncertainty about how far away the threshold actually is and the spirited debate over how complete a collapse might ensue. But there is no evidence that such possibilities are feeding into government planning processes.

You might argue that they shouldn’t: that the response to the risk should be to redouble all efforts which might keep the temperature low enough to avoid a tipping point. But preparedness makes sense. The Advanced Research and Invention Agency in Britain is funding prototype monitoring schemes that might make possible early warnings of accelerating collapse. If it could be made robust enough, such a system could make possible years of preparation.

If this were a military threat, such risk-reduction would be second nature, as would table-top analysis of vulnerabilities and contingency plans for softening impacts. Larger outlays are not, as yet, necessary. But larger imaginations are. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The ruling party’s flagship policy is a cause of the country’s problems, not a solution

Why South Africa should scrap Black Economic Empowerment The ruling party’s flagship policy is a cause of the country’s problems, not a solution August 14th 2025 Some months after Nelson Mandela was released from prison in February 1990, he told businesses that South Africa must “deracialise the exercise of economic power”. Such words unnerved the conglomerates that had prospered under apartheid. Mandela’s African National Congress (ANC) then thought that nationalising industries was the best way to uplift black South Africans. To help convince the ANC of the merits of capitalism—before it won power in South Africa’s first all-race election in 1994—the firms proposed “empowerment deals” instead. Discounted assets were sold to members of the new elite, including Cyril Ramaphosa, today one of South Africa’s richest men—and its president.

What began as ad hoc inducements has become the most far-reaching state-sponsored attempt at racial redress in the world. Black Economic Empowerment (BEE) requires firms, in effect, to have a minimum share of black investors, to hire and train black staff and to buy from black-owned suppliers. Despite criticism of BEE from President Donald Trump, who cites it to justify 30% tariffs on South Africa, Mr Ramaphosa has called it “not just a policy choice but a constitutional imperative”. He says there is no trade-off between racial “transformation” and economic growth.

Mr Ramaphosa is wrong. A policy that made him rich is making his country poorer. It should be scrapped.

BEE is meant to reduce South Africa’s stratospheric levels of inequality. But the main beneficiaries have been a tiny group of new Randlords. By one conservative estimate around 1trn rand (more than $50bn at today’s exchange rates) has been transferred to fewer than 100 people, many of them returning again and again to strike BEE deals. This is oligopoly, not equality. Under the ANC, inequality between black South Africans has exploded. The top 10% of black earners have seen incomes more than triple. Those of the bottom 50% have fallen slightly. This is mostly because of high joblessness, which reflects persistently low growth.

One reason is BEE. Meeting ownership requirements and paying extortionate transaction costs is an inefficient use of capital. De facto quotas reduce productivity. Forcing firms to buy from black suppliers, even if they are more expensive, squeezes profits. A recent estimate puts the costs of complying with BEE at 145-290bn rand per year, or 2-4% of GDP. This helps explain why South Africa is last for “ease of doing business” on a list of 49 countries compiled by the World Bank.

Larger firms can more easily pay for consultants that advise on BEE, shielding them from competition. The policy repels foreign investment. It also discourages genuine black entrepreneurship. Why start a firm when you could get a piece of someone else’s? All this helps explain why the rate at which firms enter and exit the market is a third of that of other middle-income states. Worse, BEE begets graft: when the state must procure based on race, not cost, it makes deals with cronies easier.

Supporters of BEE say that scrapping it is impractical. Even if that were true, the government could stop it from getting worse, for instance by ditching plans for a 100bn-rand state-run “transformation fund” paid for by a tax on firms.

They also argue that abolishing BEE would prevent dealing with the sins of the past. But to improve the lot of poor South Africans it would be better to focus specifically on poverty, not on race. Since the vast majority of the poor are black people, they would be the main beneficiaries of pro-poor policies.

There is an argument that the elite bargain of the 1990s helped keep the peace in a fractious country. But today it aggravates social tensions by fostering inequality and keeping the salience of race high. In a large poll this year pluralities of South Africans, including black South Africans, said that BEE reduces economic growth and is “outdated and divisive”.

Mr Ramaphosa should take these views seriously. It is becoming ever clearer that BEE is not the solution to South Africa’s problems, but a cause of them. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

And how it can be made to do so

Why Israel must hold itself to account And how it can be made to do so August 7th 2025 ON MAY 14TH 1948, in its Declaration of Independence, Israel embraced universal human rights “irrespective of religion, race or sex”. This belief in individual human dignity is also enshrined in the Geneva Conventions, submitted to governments that same month. Today the founding vision of Israel and the laws of war are under attack in Gaza. In its bombed and barren landscape the fate of both lies in the balance.

From the beginning, the world has struggled to live up to the high ideals of 1948. Israel was born in violence and ever since it has wrestled with the tension between upholding universal rights and being the home of a people in a contested land. The cold war was a stand-off between two systems that too often treated humanitarian law as inconvenient. Even so, the decades after the fall of the Soviet Union gave rise to aspirations that law-breaking leaders could be held to account.

Gaza shows how this vision is failing. The laws of war are being broken and the system for upholding them is not working. However, that failure does not exonerate Israel from having to answer for its actions in Gaza, including war crimes and crimes against humanity. Indeed, its foundations as a liberal democracy demand that it must.

Something has gone very wrong in Gaza. Israel’s just war against the terrorists who massacred its people on October 7th 2023 has turned into death and destruction on a biblical scale. Most of Gaza lies in ruins, millions of civilians are displaced and tens of thousands have been killed. And still, Israel’s prime minister, Binyamin Netanyahu, cannot stop himself. This week it emerged that he wants to occupy all of Gaza. But Hamas is no longer a military threat, so the war no longer has a strategy and fighting on is no longer just.

Worse, Israel’s government, despite its duties as an occupying power, has used the distribution of food to civilians as a weapon against Hamas. It continued even when, as predicted, that led to starvation and the death of desperate people queuing for survival rations. By corralling civilians in pockets as it systematically bulldozes their homes, Israel is also practising ethnic cleansing.

Gaza is not alone. Civilians are being slaughtered and driven from their homes in the Democratic Republic of Congo, Myanmar, Sudan, Ukraine and pretty much every other warzone today. Hamas, don’t forget, started the current Gaza conflict 22 months ago with an orgy of hostage-taking and crimes against humanity. Instead of seeking peace, it has gorged on the misery of its own people. It recently described the recognition of a Palestinian state promised by Britain, Canada and France as the “fruits” of October 7th.

Yet Hamas’s crimes do not excuse Israel. The Jewish state is a democracy. It should hold itself to higher standards than terrorists, warlords and dictators.

At the same time as the laws of war are being broken , the system that enshrines them is failing. The Geneva Conventions sought to spare civilians. However, they were drawn up for wars between states. Most conflicts today involve at least one militia, which makes separating fighters from civilians hard. Under Geneva’s code, the high ratio of civilian to military casualties in Gaza is not proof of crimes. Israel has loosened its rules of engagement, but the strip is crowded; Hamas knowingly shelters among civilians. In such circumstances many civilians die, as America once learned in the Iraqi cities of Mosul and Fallujah.

The International Criminal Court is becoming activist, issuing warrants for the arrest of Mr Netanyahu and his then defence minister before the Israeli system had time to act. The courts have also become tools in ongoing “lawfare”. South Africa accused Israel of genocide at the International Court of Justice just 12 weeks after October 7th, allowing activists to bolster their campaigns demanding boycotts of Israel by the West long before a judgment is reached.

Activists dream that the courts will impose their notion of virtue on a world that does not share their values. They are doomed to fail. The big powers, including America and China, do not recognise the courts. International law takes a long time to issue final judgments. It has limited powers of enforcement. A case brought today may one day be a deterrent, but it is a poor tool for stopping war crimes as they unfold.

That sounds like a counsel of despair, but it is not. And the reason goes back to 1948 . The laws of war were not just a cudgel with which to beat militarists and Nazis. They were also the latest example in a long history of some belligerents imposing restraints on themselves. The question therefore is whether Israel, founded as a democratic, universalist state, still cleaves to that tradition.

In the past Israel has managed to investigate wars and hold some political and military leaders responsible. It is comparable to other countries at investigating atrocities by soldiers, albeit slowly and with a focus on the lower ranks—as with a lethal strike on the staff from the World Central Kitchen in 2024. However, as we report, higher-level accountability is lacking . The Supreme Court and the attorney-general are caught up in a domestic power struggle with Mr Netanyahu. When it comes to criticising the government over Gaza they have been missing in action.

It is not too late. The urgent test is whether Israel floods Gaza with food and medicine in order to stop the incipient famine. It should also agree on a ceasefire, which will enable it to recover its hostages. The second, longer-term test will be whether it sets up a truly independent commission of inquiry after the war ends, probably under a new prime minister.

The outside world and especially the United States have a role in making this happen. No American president in recent times has been less likely to respect international law than Donald Trump. But peace in Gaza would help him stabilise a volatile region and reset relations between Israel and Saudi Arabia. America has repeatedly intervened to stop Israel’s wars in the past. This week roughly 600 former Israeli security officials urged Mr Trump to act again today.

Those officials understand that Israel has an interest in the law, too. Some Israelis calculate that they can do what they like now and patch up relations with the West later. But views of Israel are bleak in Europe and are changing in America among Democrats and the MAGA right. If Israel becomes an ethno-nationalist state that annexes the West Bank and crushes its people, the violence will not cease.

You might argue that, after suffering the worst attack in its history, Israel will have no appetite for prosecuting its own leaders. However, the penetrating insight which emerges from the Geneva Conventions is that countries which break the laws of war without shame or recourse do not just harm their victims: they also harm themselves.

Israel has an existential interest in seeing justice done. If instead it glorifies those who orchestrate famine and ethnic cleansing in Gaza, its politics and society will lurch towards demagoguery and authoritarianism. The young, idealistic country that was born in May 1948 will have been eclipsed. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

He thinks America is winning. It is not

Donald Trump’s awful trade policy will outlast him He thinks America is winning. It is not August 7th 2025 With every passing day, America’s new trading order comes into sharper relief. In place of rules, stability and low tariffs is a system of imperial preference. Duties are not just higher, they are set by presidential whim . Canada and India have irritated Donald Trump, and so they could face tariffs of 35-50%. To ward off threats the eu, Japan and South Korea have all hurriedly made deals with America. Because Mr Trump regards deficits, bizarrely, as theft, he has imposed “reciprocal” tariffs ranging from 10% to 41% on tens of other trading partners, which went into effect on August 7th.

A seductive idea is settling in that because Mr Trump is calling the shots, America is winning. The world has not descended into all-out trade war; only a few countries, including China, have retaliated, while most others have caved, accepting higher duties, opening up their own markets and promising to invest vast sums in America. Even financial markets seem acquiescent; although they took a nasty dive after the president unveiled his “Liberation Day” levies in April, this time they have taken the duties in their stride. All the while, tariff revenues are rolling in. This thinking is deeply misguided, however. Mr Trump has started something from which America will lose, not win.

Consider first the idea that high tariffs punish not America, but its trading partners. According to the Yale Budget Lab, America’s effective tariff rate has risen to 18%, nearly eight times higher than it was in January and towards levels last seen in the Depression. The way maga paints it, this is a triumph, because America’s trading partners are eating higher tariffs, while US Customs rakes in nigh on $30bn a month.

This a fundamental misunderstanding of trade. When Mr Trump raises tariffs he is hurting his own compatriots by depriving them of choice at low prices. Years of experience show that tariffs do not harm the sellers of goods as much as they harm the buyers. Even though foreign suppliers are lowering their prices more steeply than after Mr Trump’s first-term duties, analysts at Goldman Sachs reckon that fully four-fifths of the tariffs have so far been borne by American consumers and firms. Just ask Ford or GM: the carmakers reckon they paid $800m and $1.1bn in tariff costs, respectively, in the second quarter of this year alone.

What of the muted market reaction? The S&P 500 remains around 10% higher than it was on Liberation Day; the dollar, though down, has strengthened in recent weeks. But markets are being buoyed by America’s extraordinary artificial-intelligence boom, which is pushing up expected earnings for its biggest tech firms. Investors may hope, too, that companies will divert their supply chains so as to reduce tariff costs. Details of the trade deals remain fuzzy. And an uncomfortable dynamic may be at play: markets might expect the president to chicken out as the pain of tariffs becomes clear, but the lack of reaction might be emboldening him to press ahead.

America will pay the price. Its long expansion is already under strain: in the first half of 2025 growth underwhelmed and inflation was disappointingly high. Lately, job creation is slowing, and a survey of bosses suggests service-sector activity may be close to stalling. But the full toll of tariffs will be felt over the long term. Mr Trump is discarding a predictable multilateral system that applied the same tariff rate on most products, regardless of their origin, for a bilateral system where rates vary depending on where goods come from, and are subject to ceaseless bargaining. The president will consider exemptions when he is next flattered, and threaten duties when he is next displeased.

Whereas once American shoppers were spoilt for choice, as domestic and foreign producers competed to sell to them, now firms that succeed will do so not only because they are the most innovative, but also because they are cleverest at playing the system. Fortunes will be spent on lobbying. Companies will face needless uncertainty. Shoppers will lose out on innovation and choice. But because the counterfactual world where trade flowed unchecked cannot be observed, voters may not realise what is hurting them.

That is one reason why the Trumpian system will be hard to dislodge. If future presidents want to cut tariffs, they will be met by furious lobbying from American firms that got used to sheltering behind them and have thereby become globally uncompetitive. Few consumers will clamour for change, if they do not know how much more choice they could have enjoyed. Lawmakers, too, might be reluctant to lower trade barriers if it means giving up tax revenues today for broader prosperity tomorrow. The new system is not just harmful. It could last long after Mr Trump retires to play more golf. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Provided lenders open up

Buy now, pay later gets a bad rap. But it could be useful Provided lenders open up August 7th 2025 New forms of credit are often met with suspicion. A century ago retailers selling furniture and cars realised they could reach more customers if they accepted payments in instalments. To detractors this was a sign of moral decay: “Beware of the slimy coils of the instalment evil,” blared one advert in the Houston Chronicle in 1926. When in 1958 Bank of America started posting credit cards to customers, it did not take long for opponents to worry about the consequences.

Today the reproachful frowns are aimed at “ buy now, pay later ” (bnpl). This practice, which lets people pay for things they buy online in instalments, is booming; over $300bn in payments were financed in such a manner last year. Borrowers tend to be younger and less creditworthy than average, which is fuelling concern. Many critics—including Tucker Carlson, a MAGA pundit—fret that the industry preys on the young. Analysts worry that the hidden debt makes it hard to monitor credit risks. Yet bnpl could be a valuable innovation.

New financial products often cause worry because they draw in customers with little experience of credit. Some will undoubtedly be fleeced by charlatans who mis-sell their services. But reaching new customers is generally a good thing. Modern finance is not perfect; the poor and the young are underserved, partly because they often have no credit history. It is only rational for upstarts to fill a gap in the market. If they provide a useful service, they can grow rapidly. After an early spate of fraud, Bank of America’s credit-card business went on to transform payments. Today it is better known by the name it took when it was spun out in the 1970s: Visa.

For some Americans, credit cards can be a trap. Those with low credit scores are more likely to hold revolving balances, carrying over debt rather than paying it off each month. Their heavy interest bills subsidise those with better credit scores, who amass points and other benefits.

bnpl is different. Its providers earn most of their money from merchant fees, not debt interest. bnpl borrowers are no more likely to get into debt difficulties than cardholders. Despite the lower credit scores of typical users, bnpl loans have a default rate of around 2%—similar to the share of credit-card payments that were more than 120 days delinquent. bnpl purchases are low-value and do not involve revolving balances, which probably helps.

Critics are right, though, to worry that bnpl loans remain hidden from regulators and other lenders. Providers do not supply comprehensive data to credit-reporting firms on their users’ borrowing and repayments. Although they benefit from checking their customers’ credit, they deny other lenders the opportunity to do the same. That raises the possibility that banks will lend to people with hefty bnpl debts, not realising they are riskier than they appear.

Some providers say they do not trust credit bureaus to understand this new form of finance; others may see opacity as an advantage, because it attracts borrowers who wish to keep their debts hidden. Despite such concerns, providers should be required to report their data, as Affirm, one of America’s largest bnpl lenders, has recently begun to do. Many providers aspire to reach further into mainstream finance. To achieve those dreams, they must open up. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

AI could make consultancy more effective—or redundant

McKinsey and its peers need a strategic rethink AI could make consultancy more effective—or redundant August 7th 2025 Since the birth of management consultancy at the turn of the 20th century, people have questioned its usefulness. Bosses of firms that hire consultants are paid lavishly to define a vision and corral their teams into achieving it. Why would they ask a bunch of jet-setting know-it-alls who have never run anything but a spreadsheet calculation how to do their job?

Over the decades, however, consultants have proved their worth, and not just because their clients are lazy, incompetent or scared of making difficult decisions. In 1990 McKinsey, bcg and Bain, the three elite strategy advisers, had a few thousand staff between them. Today they employ around 90,000. Over the past decade their combined revenue has more than doubled. And they do seem to offer useful advice. Recent research finds that companies which hire strategy consultants experience a significant and sustained improvement in productivity relative to those that don’t. Now, though, the industry is heading for disruption. If consultants are to stay useful, they need to rethink what they do.

The value of consultancies lies chiefly in their experience of similar problems at other clients. Situations a chief executive might encounter only once in a career, such as a big merger or relocating a factory, are rarely unique. Some critics argue that consultants who swan in and out of clients tend to offer elegant but impractical recommendations. But that view is out of date. In recent years the strategy trio have moved deeper into helping clients implement their advice: for example, by helping them digitise their businesses. And they are increasingly tying their fees to the success of their projects, thereby aligning their interests with those of their clients.

For the bright young things these firms hire, the experience seems to pay off. Many of the world’s biggest businesses, from Alphabet to Coca-Cola, are run by alumni of the elite three consultancies. And our analysis suggests that these companies outperform their peers .

As the age of artificial intelligence (AI) beckons, however, the corporate world’s consiglieri face an uncertain future. Plenty of senior partners quietly scoff at the idea that the technology will be anything but a blessing for an industry that has mastered the art of jumping on every new management craze. Already companies struggling to make use of AI have turned to the strategy advisers for help. For their part, the consultancies have built bots trained on their intellectual property that can perform much of the grunt work behind their projects.

But what happens when AI models also start producing the kinds of alliterative three-part frameworks those senior partners so proudly present? In recent years the firms’ core business of strategic advice has grown robustly alongside the push into implementation; soon it may come under strain. Meanwhile, fast-growing technology providers such as Palantir are also helping clients deploy AI systems, which could force the traditional consultants to retreat.

To remain relevant, the industry will have to adapt. Generic ideas recycled from client to client will become of little use. To compete with ever smarter AI models, the approach of training up generalist advisers will have to give way to earlier and deeper specialisation, including in the art of managing change. That, combined with the need for fewer minions to do a senior partner’s bidding, will require the firms to rethink whom they hire and how they nurture them.

To a degree, these changes are already under way at the elite trio. To help clients implement their ideas, they have hired thousands of specialists such as coders. BCG’s success in using these experts is at least part of the reason why it is on track to overtake McKinsey as the largest of the three firms.

To succeed in the decades ahead, however, a more extensive overhaul will be needed. As the firms expend time and energy reinventing themselves, they will have to accept that there are some problems, particularly those relating to technology, that others are better placed to help their clients solve.

All this will require humility, something that does not come easily to many in the industry. Consultants often speak of the need for transformation. Now they will have to live it. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Not everything is a paradigm shift

Will an astronomical anomaly challenge the idea of scientific revolutions? Not everything is a paradigm shift August 7th 2025 Before the revolution triggered by Nicolaus Copernicus, a 16th-century cleric, the Earth was the unmoving centre of the cosmos. Afterwards, it was one of a family of planets swinging through space. Before the work of Antoine Lavoisier, an 18th-century nobleman, chemists had no notion of “oxygen”, “carbon” and the like; afterwards they could not understand the contents of their alembics without them.

Such examples are at the heart of the idea, put forward in the 1960s by Thomas Kuhn, of the paradigm shift. Such shifts, he argued, did not just involve a new theory explaining the world better than an old one; they required a change in the sort of entities the world was thought to be made up of. In a way that seems almost self-exemplifying, the idea provided a new way of looking at science itself: not as one thing, but two. In the “normal” phase scientists applied their physical and conceptual tools to problems the scope of which was pretty well understood; in revolutionary phases, paradigms shifted.

Normal didn’t mean dull or unimportant. When, in the 1980s, American astronomers made the case for the Hubble Space Telescope, then the costliest scientific instrument in history, none of its goals mattered more than what seemed a perfect example of normal science: nailing down the value of the constant (also named after Edwin Hubble, an astronomer) which says how fast the universe is expanding.

The Hubble did this very well. The difficulty, as our Science section reports, is that since its launch it has become possible to estimate the Hubble constant on the basis of background radiation from all over the sky, rather than distances to individual objects. And these new estimates are significantly lower. The seemingly unbridgeable divide between the approaches has become known as the Hubble tension.

To those who know their Kuhn this looks like the sort of anomaly that might precede some new paradigm shift. The possibility is tantalising. The conceptual usefulness of paradigm shifts has been much debated, as indeed has their existence. The concept is horribly overused. (A new paradigm for vegan cosmetics!) Yet the notion of a fresh worldview remains dramatic and beguiling, and the romance only increases when it applies on a cosmic, but reassuringly inconsequential scale. (A paradigm shift in financial markets might be far more practically important.)

The problem is that, as Kuhn noted, you can judge these things only in retrospect. The sort of anomaly that is recast and solved by a paradigm shift is not in principle distinguishable from a “normal” problem which has not yet been solved.

The paradigms in which normal science is done are, like the fabric of the universe, somewhat stretchy; new ideas, sometimes quite big ones, can be incorporated without wholesale change. And some suspect that science’s capacity to adapt itself in this way has increased since the days of Kuhn’s examples. It is far more institutionalised and regimented today, and that may provide a stability, even a rigidity, to its worldviews.

This need not be a bad thing. Paradigm shifts are not necessary for technological improvement. But it is hard not to think that, if their age has gone, then so has some of science’s thrill—and hard not to want the Hubble tension to demonstrate that paradigms can still be pulled apart. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

To win voters’ consent, policymakers must offer pragmatism and hope

The climate needs a politics of the possible To win voters’ consent, policymakers must offer pragmatism and hope July 31st 2025 Curbing climate change was never going to be easy. The fundamental energy balance of a planet cannot be changed overnight; nor can a fossil-fuel-based economy that serves billions of people be replaced without furious political objections. But today the problem looks particularly hard.

On July 29th, continuing President Donald Trump’s gutting of efforts to reduce emissions, America’s Environmental Protection Agency said it would renounce its main authority to regulate greenhouse gases. That goes along with his reckless attacks on climate science. In Europe the war in Ukraine has spurred growth in defence budgets, squeezing spending on green policies, which also face renewed political opposition . Some voters think the cost of cutting emissions is too high, or should fall on others. In poor countries, which have historically emitted far less than rich ones, many resent green policies they see as foreign and heedless of the desperate local need for energy. Sensing the political winds, big global firms have gone quiet about greenery , though many still pursue it.

None of this deprives the world of its technical ability to decarbonise a great deal of its economy; on that score things have never looked better. The cost of clean energy is tumbling, as the demand for it continues to grow.

The problem is politics. Many people do not believe that the strict “net zero” targets to which some governments have tied their climate policies are in their interest—or that they will bring benefits to anyone else. Some think they are being taken for chumps, paying good money to meet bad targets while businesses and people elsewhere are belching out carbon, chuckling as they do so. Seeing an ever-more-powerful China emitting more than Europe and America combined makes resentful Western voters seethe.

The scientific rationale for net zero is strong. An end to warming requires the level of greenhouse gases in the atmosphere to stop increasing. That means either a world with no such emissions or one which takes as much greenhouse gas out of the atmosphere as it puts in (the “net” in net zero). The logic is inescapable. The political rationale is clear, too. Saying you will hit net zero by a certain date is a definite goal, easily articulated. Hard, ambitious targets have advantages: you never know for sure what can be done until you try.

However, reaching net zero in the nearish future would require emission cuts to be quick, deep—and painful. For countries which have not yet seen any decline in emissions—which, worldwide, is most of them—the steepest cuts would have to come very early. In many cases such scenarios are barely physically imaginable, let alone politically feasible.

If a target is so hard that it cannot win consent, then it needs to be changed. But how? For rich countries to abandon stringent net-zero targets outright would demoralise greens, energise climate nihilists and make sensible reforms harder. Better to find ways to ease them into the “more of a guideline” category. There will be resistance from those who believe that all problems can be solved by “more political will”, but as a famously iron-willed German once said, politics is the art of the possible.

Some politicians get it. Mark Carney, Canada’s prime minister and an economist, understands that, in many situations, the most efficient way to reduce greenhouse-gas emissions is to tax them. But many voters hate such taxes, so he has been quick to rescind the aspects of Canada’s carbon-pricing scheme that affect them directly.

Instead of charging for pollution, many governments have subsidised its avoidance. Some subsidies have borne fruit. Extra demand has driven the virtuous cycle of larger volumes and lower prices that have seen wind, solar and batteries become more available and cheaper. Costs are now so low that unstimulated demand will drive them even lower. That more or less guarantees a growing amount of decarbonisation come what may. Even post-Big-Beautiful-Bill America will see its emissions shrink, albeit more slowly than they could have.

Nonetheless subsidies still distort markets and reduce emissions less cheaply than a carbon price normally would. So it makes sense to charge for emissions when it is politically feasible (for example, when it does not affect voters directly). Governments should also scrap the many subsidies that harm the climate, such as those still applied to fossil fuels.

They should try harder to reduce the pain inflicted when decarbonisation involves lots of ordinary people. Do not bully them into buying heat pumps when there are too few technicians to install them. Make switching to an electric car easier by building charging infrastructure and letting in cheap imports from China. Apply the same pain-reducing logic to adaptation. Marine Le Pen, the leading French populist, struck a chord when she complained that France’s elite had air conditioning but its masses did not.

America will play an unusual role so long as Mr Trump is in charge: as a cautionary tale. Some promising clean-energy technologies, such as advanced geothermal and possibly even fusion, now have bipartisan support. But Mr Trump’s war on climate action will leave the country worse off. At a time of rising energy demand, some of it needed to power artificial intelligence—a national-security priority—prices will rise. Efforts to establish an American renewables industry to rival China’s will wither.

Voters everywhere prefer cleanliness to pollution and a future in which they can thrive to one that looks dangerous. Those are more potent rallying cries than an abstract target. Stories that make people feel they are participating in progress still play well. The idea of not being subject to swings in fossil-fuel prices is attractive, too. “The art of the possible” may sound flat. But a politics of new possibilities could put climate policy on a more sustainable footing, as well as offering hope. That is what those fighting climate change need to offer. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Internal reform matters more than external trade

What opponents of the EU-US trade deal get wrong Internal reform matters more than external trade July 31st 2025 The critics were quick to jump in. Soon after the European Commission struck its trade deal with President Donald Trump on July 27th, it was being savaged in European capitals. François Bayrou, the French prime minister, called it a “dark day when an alliance of free peoples, united to affirm their values and defend their interests, resolves to submit”. Friedrich Merz, Germany’s chancellor, worried about “severe damage” to the German economy. Viktor Orban, Hungary’s populist leader, twisted the knife, saying that Mr Trump “ate Ursula von der Leyen for breakfast”.

The deal is certainly unlike any other the EU has struck before. Exports to America will face a tariff of 15%, lower than the 30% that had been threatened had no deal been struck, but nearly ten times as high as the rate that prevailed before Mr Trump returned to the White House. In turn, the eu will eliminate its own tariffs on imports of American industrial goods, and provide easier access for some farm produce. The bloc is also expected to buy more energy from America, and invest hundreds of billions across the Atlantic . For those who see trade as a zero-sum game in which deficits are for losers and exporters are winners, the EU got fleeced.

The naysayers are misguided, however. Unfortunately, Mr Trump’s love of tariffs means the old days of low duties are not coming back while he is in power. And the deal is not as catastrophic as its critics claim. The EU has secured similar terms to Japan’s, so its relative trading position remains the same. Cars made in Europe will no longer face higher, sectoral duties. And the EU has not had to surrender its plans to regulate digital services, which mainly hit America’s tech giants.

Some bemoan the asymmetry of the deal; that European manufacturers face tariffs, while Americans gain market access. But trade is not a zero-sum game. European consumers will benefit from greater choice and lower prices, whereas the bulk of the tariff cost will be borne by American businesses and shoppers, even if some foreign firms do cut their prices.

Last, the broader geopolitical context meant that escalation was never an attractive option for the EU. If trade were the only thing on the agenda, the bloc could have better afforded to hit back, in the hope of forcing America to relent. But “it is [also] about security, it is about Ukraine,” Maros Sefcovic, the EU’s trade commissioner, has said about the negotiations. Because Europe has for decades outsourced its security to America, it needed to offer trade terms that would keep a mercurial president happy and willing to stay engaged in Europe.

The EU’s critics ignore the fact that its problems run deeper than a single trade deal. The economy badly needs reform, innovation and investment, as Mario Draghi, a former head of the European Central Bank, laid out in a colossal report in 2024. Mr Trump’s 15% transatlantic tariff pales in comparison with the cost of internal trade frictions; the IMF reckons barriers within the eu amount to a staggering 44% tariff on goods and 110% on services. Europe’s capital markets are too shallow and fragmented to fund risky, innovative ideas. And the continent is far from adding the extra investments needed to close the productivity gap.

Rather than focusing on what America is doing wrong, the EU should look closer to home. Member states are stymieing reform. Germany is loth to boost its own capital markets, let alone integrate capital markets across Europe. France is the biggest obstacle to making more trade deals that would help diversify exporters’ markets. Almost a year since the Draghi report, barely any of its recommendations have been acted on. Damaging as a trade war would have been, it might at least have shaken politicians out of their torpor. Instead of pointing fingers, the critics should roll up their sleeves. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The ban on sales to China was working, and should be kept in place

America is easing chip-export controls at exactly the wrong time The ban on sales to China was working, and should be kept in place July 31st 2025 In the six months since China stunned the world with DeepSeek, its progress in artificial intelligence (AI) has continued to impress. In July alone three labs unveiled top-flight ai models, matching and in some cases even beating America’s best. The bosses of America’s leading modelmakers say that advanced ai, able to outperform the average human at all cognitive tasks, could be just a few years away. The race is not just commercial, but geopolitical: the country that gets to superintelligence first would enjoy mighty military advantages, too.

This is the backdrop against which the Trump administration has abruptly changed its mind on the export of America’s world-beating ai chips to China. In April it blocked the sales of Nvidia’s h20 chips to the People’s Republic. On July 14th the firm said it had been given permission to resume them. The U-turn came shortly after a meeting at the White House between President Donald Trump and the boss of Nvidia, Jensen Huang. Nvidia is the world’s most valuable company, and its fortunes move markets. To a president who views the S&P 500 as a personal approval tracker, that may give it sway that other firms lack. But even without the grubby optics, the decision is a grave mistake at the worst possible time.

That is because as impressive as Chinese models have been, America’s chip controls were clearly working. When Nvidia devised the h20 to comply with an earlier set of rules, it inadvertently created a chip that was hobbled for training new AI models, but perfect for running them—a process called inference. Since exports of the H20 were banned in April, even the Chinese labs that had overcome the shortage of training chips to produce world-class AI models have been unable to access enough computing capacity to offer those models to paying customers. They have had to resort to relying on outsourced hosting, and making the most of the limited quantity of AI chips produced by Huawei and other Chinese hardware firms. But the trend seems clear: without H20s, Chinese companies cannot keep up with demand.

And as AI adoption increases, having enough capacity for inference will become ever more important, making export controls even more potent. America’s ban on the export of H20s, in short, has impeded China’s progress in AI. It seems perverse for America, engaged in an arms race with China, to give up this advantage.

Moreover, rapid progress in AI argues for restricting chip sales now, even if that ends up boosting China’s hardware industry in the longer term. There is no question that blocking Chinese firms’ access to foreign inputs has stimulated demand for Chinese alternatives. It has turbo-charged innovation and the development of an alternative ecosystem in a way that even President Xi Jinping and his deep pockets could not manage. China’s domestic chipmakers remain years behind the industry’s cutting edge, but export controls have strengthened their commercial incentive to catch up. America thus faces a trade-off: it can limit China’s AI software industry today at the expense of emboldening its AI hardware industry in the longer term, or vice versa.

Mr Trump’s ai adviser, David Sacks, says allowing chip exports will make China dependent on America’s technology ecosystem, and discourage it from developing its own. The more Chinese firms use Nvidia’s chips, goes the argument, the harder it will be for Huawei and other local firms to develop a commercially viable alternative. America’s commerce secretary says he wants China to be “addicted” to American chips.

Yet given the stakes of the AI race, the risk that China’s hardware supply chain will be strengthened in the long run is worth taking. The fiendish complexity of chipmaking means catching up will take many years. And if there is even a small chance that the time-frame for AI development suggested by America’s AI leaders is correct, the race for superintelligence may have been won by 2030. Accordingly, America should do everything it can to win that race in the short term, even if that means it fails to hamper the development of China’s hardware industry in the longer term.

When it comes to many of the ingredients of artificial intelligence, China measures up well against America. It has deep reservoirs of talent, data and capital, and plenty of power-generating capacity. Chips, however, are its Achilles heel. As artificial-intelligence models wow the world, and even bigger advances loom on the horizon, it is foolish for America to give its main geopolitical rival any assistance. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Pedro Sánchez needs to let his country’s democracy renew itself

Spain’s scandal-plagued prime minister should step down Pedro Sánchez needs to let his country’s democracy renew itself July 31st 2025 Spaniards SEEM to be doing well these days, especially compared with some of their neighbours. Since 2022 growth in their economy has far outpaced that of the euro area as a whole. Unemployment, though still over 10%, is at its lowest since 2008. And this is despite a sharp rise in the minimum wage since Pedro Sánchez, a Socialist, became prime minister in 2018. Mr Sánchez has passed a useful labour reform, strengthened the welfare state, welcomed immigrants and taken the European lead in recognising a Palestinian state. His supporters see him as a last bastion of social democracy against the hard right. Despite leading a minority government, Mr Sánchez has kept the country ticking over pretty well.

Until now. The prime minister emerged weaker from a snap election he called two years ago, at which the mainstream conservative People’s Party (PP) won the most votes. He clung on in the Moncloa Palace because his motley crew of allies—the hard left, as well as Catalan and Basque nationalists—preferred him to voting with Vox, a hard-right outfit. But he has paid a price for their increasingly unreliable support.

In the past few weeks Mr Sánchez has also been badly hurt by a corruption scandal . The two men he picked to run the Socialist Party for him since 2018 both now face trial for taking bribes on public contracts (which they deny). Recordings indicate that one of them hired prostitutes together with an associate—hypocritical in a party that proposes to ban prostitution. On Mr Sánchez’s orders, the two party leaders ruthlessly sidelined internal critics. That means he has no one else to blame.

Polls show that Spaniards are more disillusioned with their politicians than any other Europeans, apart from Bulgarians, Greeks and Slovenes. Mr Sánchez has repeatedly apologised for his aides’ transgressions. But that is not enough. To restore faith in Spanish democracy, the prime minister should take responsibility and step down. There is no good reason for him to stay on. Spain’s economic growth predates him and owes rather less to his reforms than to those of his conservative predecessor, Mariano Rajoy. It would continue after him. He has placed political lackeys in supposedly independent institutions. He has not managed to pass a budget since 2023.

It is now Mr Sánchez’s allies, not his party, who set the agenda. He is ever more vulnerable to their policy blackmail. The only weighty legislation passed in the current parliament was an amnesty for those involved with an illegal attempt by Catalan separatists to secede from Spain. This has damaged the credibility of democratic politics: Mr Sánchez opposed it as unconstitutional until he needed Catalan nationalist votes to stay in office. Spain’s NATO partners reluctantly agreed to let the country raise defence spending to just 2.1% of GDP rather than 3.5% like the rest, but Mr Sánchez has not dared seek parliamentary approval even for this, since the hard left would vote against it. A bill that would give the government-appointed public prosecutor, instead of judges, control over the judicial police looks to critics like an attempt to shut down investigations into his circle. Another ill-advised bill seeks to impose a 37.5-hour week, with no loss of pay, on all businesses.

Mr Sánchez came to office thanks to a censure motion against Mr Rajoy after courts condemned PP politicians for corruption. That he has not yet fallen in the same way owes everything to Vox: other parties fear that voting the PP into office would mean a government backed by the xenophobic populists of the hard right. Yet that need not be the case.

There are two other ways Spain’s paralysis could end. One would be for Mr Sánchez to call a party congress and hand over leadership to a party elder. The prime minister has made confrontation with the PP, as well as Vox, his method of government; a different leader could seek a constructive relationship with the moderate opposition. The second route would be an early election. Mr Sánchez would probably lose it. But two more years of ineffectual gamesmanship will only further tarnish the positive aspects of his legacy. The prime minister should use his summer holiday to ponder the interests of his party and his country, and act accordingly. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

That will involve a wholesale rethink of the Nagoya protocol

The world needs a better way to share genetic information That will involve a wholesale rethink of the Nagoya protocol July 31st 2025 Biology is in the middle of a transformation. Over the past five years new sequencing techniques have made it much easier and cheaper to read long strands of dna, allowing scientists to record gapless genomes with much less uncertainty than before. Scientists are keen to put these capabilities to good use. One ambitious proposal is the Earth Biogenome Project , a moonshot idea to sequence all the planet’s eukaryotic life—that is, all plants, animals, fungi and so forth . This would help scientists uncover the hidden handiwork of evolution, monitor how endangered species respond to global warming, and mine genomes for useful biological compounds, such as new antibiotics.

Unfortunately, the project faces big obstacles. One is the Nagoya protocol, which was supposed to make the biosciences fairer and more efficient. In force since 2014, the protocol asserts countries’ sovereign right to negotiate access to genetic resources on their land. Although well-intentioned, it has made sharing biological samples across borders harder, and has not generated benefits for biodiverse countries, many of them poor. It should be scrapped, and replaced with something better.

Sequencing is not the only work being hampered by the protocol’s red tape. Microbiological research, especially on pathogenic bacteria and viral strains, has often been obstructed, too. Brazilian researchers working under Nagoya-like rules were prevented from sharing samples of the Zika virus during an outbreak in 2016. Likewise with the MERS virus in Saudi Arabia in 2013 (when some Nagoya principles were already in place, under the Convention on Biological Diversity (CBD), of which the protocol is an offshoot). This has slowed vital research, including on vaccines.

The idea behind the protocol is a noble one. It sought to enable countries to share in the benefits generated from their genetic resources, and to ensure that stewards of biodiversity would not be relied upon for their work and knowledge without proper compensation. The intent was to protect poor countries, in particular, from being exploited by researchers and businesses from the rich world. But the protocol has not only failed to achieve its aims, it has been counterproductive.

Rather than helping biodiverse countries get their due, it is more often imposing a burden on them. As of 2023, more than 80% of countries that have ratified the protocol had yet to issue a single permit, meaning that those countries have received no benefit, monetary or otherwise. Many have no adequate processes in place to facilitate permits; in other places, local scientists seeking permits describe needing to know people if they are to find their way around countries’ systems.

As a consequence, foreign researchers have at times pulled back from collaborating with colleagues in poor countries. After years of delay, the Wellcome Sanger Institute in Britain has had to reallocate funds from some projects with scientists in countries that have ratified the protocol to projects in countries that have not.

Countries are entitled to make their own laws, but the current framework is complex and unworkable. That is not just a bad deal for countries providing samples. The world at large is forgoing the benefits of research when biodiversity is under huge pressure, the threat of pandemics looms large and biology at last has the tools to make important progress.

That is why the protocol needs to make way for a better system. One might draw inspiration from another offshoot of the CBD, called the Cali Fund. This will create a financial mechanism for companies to pay for genomic sequences (rather than samples). Like copyright collection societies, it will allow data to be shared easily through online databases, in exchange for payment into a central fund responsible for compensating sequence-providing countries.

A similar system for sharing physical samples could lessen the administrative burden on the poorest countries by removing the need for permits and enabling collaboration. If some of the money that was generated went towards building technical capacity in poor countries, they could more easily take part in international research on an equal footing. That would create value not just for the planet’s myriad creatures, but for fledgling scientific communities everywhere. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

They could even set it back

In recognising Palestine, Britain and France won’t advance peace They could even set it back July 31st 2025 GAZA IS IN the grip of an incipient famine, amid a futile war that neither Hamas nor Israel appears ready to end . In an attempt to highlight the suffering of the Palestinians, stop the fighting and save the idea of two countries for two peoples, Britain and France have in recent days both taken decisive steps towards the recognition of a Palestinian state. The Economist wholeheartedly shares those aims, but we doubt that recognition will further them—indeed, we worry that recognition on the terms set out by Britain and France could get in the way.

France moved first on July 24th when its president, Emmanuel Macron, announced that he will recognise Palestine at the UN General Assembly in September. Five days later Britain’s prime minister, Sir Keir Starmer, said that Britain would follow suit, but added that he would hold back if Israel stopped the war, clearly committed itself to a two-state solution and pledged not to annex Palestinian territory in Gaza or the West Bank. Those demands are unlikely to be met, meaning that Britain, too, is likely to go ahead.

It is easy to depict this as virtue-signalling by unpopular leaders keen to curry favour at home. Mr Macron has lost much of his domestic authority. Sir Keir is losing control over his own party , which is strongly pro-Palestinian, with grave implications for the rest of his term in office. Despite this, France’s president and Britain’s prime minister deserve to be taken at face value. The chief test of their announcements, in other words, is whether recognition is likely to advance their aims in the Middle East.

One answer, put forward by President Donald Trump, is that recognition is simply irrelevant. He scoffed that Mr Macron’s pledge “doesn’t carry any weight”. You can see what he means. Given that 147 of the 193 members of the UN already recognise a Palestinian state, two more are unlikely to make much difference.

However, although Britain and France no longer matter as they used to, they still count for something—which is one reason Israel’s government has reacted angrily to their change in policy. As permanent members of the UN Security Council and members of the G7, they are keen to sway other countries that are considering recognition. And sure enough on July 30th, Canada said it would also recognise Palestine in September, subject to some conditions. Britain has an added historical role because, in the Balfour declaration issued in 1917, it acknowledged the need for a Jewish homeland and promised to help to bring one into being. To the extent that either country has any influence even at the margin, they should surely use it—or what is influence for?

The argument for acting now is that the Israeli government, under its prime minister, Binyamin Netanyahu, will be shocked into realising that his country is losing the support of even long-term allies. Britain and France cannot compel Israel to change course, but in order to avoid becoming a pariah, Mr Netanyahu may sue for peace. Because America is not pressing Israel forcefully enough, Europe’s two main diplomatic powers must step in.

It is a weak foundation on which to rest Middle East policy. For one thing, Mr Netanyahu and his ministers are more likely to dig in their heels than suddenly give ground. Many of them assess, correctly, that European governments will condemn them whatever they do. Yielding to demands today will only lead to more tomorrow. Some in Israel have concluded that they should do whatever they want now, despite criticism from abroad, and try to rebuild relations later. If Israel has already paid the—albeit small—price of recognition, Mr Netanyahu and his government may if anything become more extreme.

The other problem is that, if talks about two states begin again under a new Israeli prime minister, both sides will need to make concessions to bring them to a successful conclusion. Yet using recognition as leverage over Israel today means that Britain and France have deprived themselves of leverage over the Palestinian side tomorrow.

That is not a trivial thing to surrender, because the two-state deal will face many obstacles, including the details over territory and security. Unfortunately, Mahmoud Abbas, the president of the Palestinian Authority, looks unlikely to give ground willingly. He only recently denounced Hamas’s murderous attacks of October 7th 2023 for the first time. He has repeatedly failed to hold elections and lacks the legitimacy to speak for Palestinians as a whole.

In the immediate future, that same logic confounds Sir Keir’s wheeze to make recognition of Palestine a threat rather than a promise. The prime minister says that he is acting now because he is determined to end the fighting in Gaza and, at the margin, he may be able to exert some influence over Israel. But he has not threatened to withhold support for recognition if Hamas refuses to release hostages or to end the war. That potential reward gives Hamas an incentive to block a ceasefire until after the UN General Assembly in September. Yet once Hamas has pocketed Britain’s prize, Sir Keir will have lost his leverage over Israel. It is a self-defeating policy that fails on its own terms, even supposing Israel is susceptible to pressure.

The truth is that Britain and France have most influence over Israel indirectly, through Mr Trump. He is the only leader who can press Mr Netanyahu into the ceasefire he says he wants; America is essential for keeping alive the prospect of lasting peace. Alas, by moving to recognise a Palestinian state, Britain and France have lost influence with him, too. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

If Silicon Valley’s predictions are even close to being accurate, expect unprecedented upheaval

The economics of superintelligence If Silicon Valley’s predictions are even close to being accurate, expect unprecedented upheaval July 24th 2025 FOR MOST of history the safest prediction has been that things will continue much as they are. But sometimes the future is unrecognisable. The tech bosses of Silicon Valley say humanity is approaching such a moment, because in just a few years artificial intelligence (AI) will be better than the average human being at all cognitive tasks. You do not need to put high odds on them being right to see that their claim needs thinking through. Were it to come true, the consequences would be as great as anything in the history of the world economy.

Since the breakthroughs of almost a decade ago, AI’s powers have repeatedly and spectacularly outrun predictions. This year large language models from OpenAI and Google DeepMind got to gold in the International Mathematical Olympiad, 18 years sooner than experts had predicted in 2021. The models grow ever larger, propelled by an arms race between tech firms, which expect the winner to take everything; and between China and America, which fear systemic defeat if they come second. By 2027 it should be possible to train a model using 1,000 times the computing resources that built GPT-4, which lies behind today’s most popular chatbot.

What does that say about AI’s powers in 2030 or 2032? As we describe in one of two briefings this week, many fear a hellscape, in which AI-enabled terrorists build bioweapons that kill billions, or a “misaligned” ai slips its leash and outwits humanity. It is easy to see why these tail risks command so much attention. Yet, as our second briefing explains, they have crowded out thinking about the immediate, probable, predictable—and equally astonishing— effects of a non-apocalyptic AI .

Before 1700 the world economy grew, on average, by 8% a century. Anyone who forecast what happened next would have seemed deranged. Over the following 300 years, as the Industrial Revolution took hold, growth averaged 350% a century. That brought lower mortality and higher fertility. Bigger populations produced more ideas, leading to yet faster expansion. Because of the need to add human talent, the loop was slow. Eventually, greater riches led people to have fewer children. That boosted living standards, which grew at a steady pace of about 2% a year.

AI faces no such demographic constraint. Technologists promise that it will rapidly hasten the pace at which discoveries are made. Sam Altman, OpenAI’s chief executive, expects AI to be capable of generating “novel insights” next year. AIs already help program better AI models. By 2028, some say, they will be overseeing their own improvement.

Hence the possibility of a second explosion of economic growth. If computing power brings about technological advances without human input, and enough of the pay-off is reinvested in building still more powerful machines, wealth could accumulate at unprecedented speed. Economists have long been alive to the relentless mathematical logic of automating the discovery of ideas. According to a recent projection by Epoch AI, a bullish think-tank, once AI can carry out 30% of tasks, annual growth will exceed 20%.

True believers, including Elon Musk, conclude that self-improving AI will create a superintelligence. Humanity would gain access to every idea to be had—including for building the best robots, rockets and reactors. Access to energy and human lifespans would no longer impose limits. The only constraint on the economy would be the laws of physics.

You don’t need to go to that extreme to conjure up AI’s mind-boggling effects. Consider, as a thought experiment, just the incremental step to human-level intelligence. In labour markets the cost of using computing power for a task would limit the wages for carrying it out: why pay a worker more than the digital competition? Yet the shrinking number of superstars whose skills were not automatable and could directly complement AI would enjoy enormous returns. The only people doing better than them, in all likelihood, would be the owners of AI-relevant capital, which would be gobbling up a rising share of economic output.

Everyone else would have to adapt to gaps in AI’s abilities and to the spending of the new rich. Wherever there was a bottleneck in automation and labour supply, wages could rise rapidly. Such effects, known as “cost disease”, could be so strong as to limit the explosion of measured gdp, even as the economy changed utterly.

The new patterns of abundance and shortage would be reflected in prices. Anything AI could help produce—goods from fully automated factories, say, or digital entertainment—would see its value collapse. If you fear losing your job to AI, you can at least look forward to lots of such things. Wherever humans were still needed, cost disease might bite. Knowledge workers who switched to manual work might find they could afford less child care or fewer restaurant meals than today. And humans might end up competing with AIs for land and energy.

This economic disruption would be reflected in financial markets. There could be wild swings between stocks as it became clear which companies were winning and losing winner-takes-all contests. There would be a rapacious desire to invest, both to generate more AI power and in order for the stock of infrastructure and factories to keep pace with economic growth. At the same time, the desire to save for the future could collapse, as people—and especially the rich, who do the most saving—anticipated vastly higher incomes.

Persuading people to give up capital for investment would therefore require much higher interest rates—high enough, perhaps, to make long-duration asset prices fall, despite explosive growth. Scholars disagree, but in some models interest rates rise one-for-one or more with growth. In an explosive scenario that would mean having to refinance debts at 20-30%. Even debtors whose incomes were rising fast could suffer; those whose incomes were not hitched to runaway growth would be pummelled. Countries that were unable or unwilling to exploit the AI boom could face capital flight. There could also be macroeconomic instability anywhere, because inflation could take off as people binged on their anticipated fortunes and central banks did not raise rates fast enough.

It is a dizzying thought experiment. Could humanity cope? Growth has accelerated before, but there was no mass democracy during the Industrial Revolution; the Luddites, history’s most famous machine-haters, did not have the vote. Even if average wages surged, higher inequality could lead to demands for redistribution. The state would also have more powerful tools to monitor and manipulate the population. Politics would therefore be volatile. Governments would have to rethink everything from the tax base to education to the protection of civil rights.

Despite that, the rise of superintelligence should provoke wonder. Dario Amodei, boss of Anthropic, told The Economist this week that he believes AI will help treat once-incurable diseases. The way to look at another acceleration, if it comes, is as the continuation of a long miracle, made possible only because people embraced disruption. Humanity may find its intelligence surpassed. It will still need wisdom. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

With the right rules, innovation could flourish

The world should follow Trump’s lead on stablecoins With the right rules, innovation could flourish July 24th 2025 America’s new law on stablecoins is so good, “They named it after me,” joked President Donald Trump as he signed the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act on July 18th. While the administration and the crypto industry celebrate the dawn of a golden age, the mood across the Atlantic is darker. Stablecoins, tokens backed by conventional assets, are seen as scammy, deeply destabilising—or both. Andrew Bailey, governor of the Bank of England, has warned commercial banks against issuing their own coins. Christine Lagarde, head of the European Central Bank (ecb), cautions that stablecoins could become private money that risks one day dislodging central banks.

In fact, the rest of the world should swallow its doubts and follow America. Stablecoins hold out the potential for much-needed innovations in the world’s payment systems. If they are regulated well—as the genius Act promises—that dream has a chance to be realised.

Make no mistake, crypto is rife with scams. Many coins are a get-rich-quick scheme—and one in which the president, his family and friends have all flagrantly indulged. Mr Trump’s holdings of $TRUMP, a “meme coin” magicked out of thin air, are worth $1.9bn. Stablecoins are different. Not only are they typically backed by liquid dollar assets, including short-term Treasuries and bank deposits, they could also turn out to be genuinely useful.

Dollar stablecoins gained attention in countries such as Turkey and Nigeria, where trust in the government is low and fears about runaway inflation and expropriation linger. In the West they have largely operated in the unregulated shadows. By requiring issuers to be registered and setting out clear rules on reserve requirements and disclosures, the genius Act should pave the way for more experimentation in America.

The prize could be large. Because stablecoin transactions are recorded instantaneously on digital ledgers, the technology allows retail and cross-border payments to be settled in minutes rather than days, and to be completed at a fraction of the fee charged by banks and card issuers. An international wire costing more than $15 or a credit-card fee of up to 2% of the transaction’s value could be replaced by a stablecoin transaction costing less than ten cents. According to Standard Chartered, a bank, the issuance of stablecoins could rise from around $260bn to $2trn by 2028; Stripe, a fintech firm, is thought to be considering issuing its own tokens.

Does such promise justify the risks? Many regulators, especially in Europe, worry that the answer is no. They fear that stablecoins could displace central-bank money, cripple the banking system and increase the danger of destabilising runs. However, some of these risks are overblown and, as America’s new law shows, others can be mitigated.

Take first the threat of competition with central banks. The worry is that “private”, less-safe money could undermine the public sort. It is likely to be felt most by the ecb, which has been laying the groundwork for a digital euro since November 2023, partly in order to challenge the dominance of Visa and Mastercard, two American financial giants. But stablecoins will continue to be fully backed by assets denominated in public money. There is no reason why the central bank should have a monopoly over payment innovations if a euro stablecoin could prove more useful.

What of the risks to commercial banks? The worry is that stablecoins will pull deposits from lenders, raising their cost of funding and narrowing their scope to lend to the real economy. Yet stablecoins will not vaporise deposits so much as move them around. Money will flow from a customer’s bank to the stablecoin issuer. It will either be stashed in the issuer’s bank account, or used to buy government debt . As the state in turn spends the cash, it will pay its workers and suppliers, returning money to bank deposits. Moreover, banks themselves stand to gain business from stablecoins’ Big Bang if they start managing issuers’ reserves or issuing coins of their own.

A run on a huge stablecoin issuer, meanwhile, could cause disruption if it leads to a fire sale of assets, rather as a run on money-market funds caused havoc in 2008. But this danger could be mitigated by ensuring that stablecoins are fully backed by safe, liquid assets, and submit regular disclosures on their holdings—precisely as the genius Act sets out to do for any domestic issuer.

Like countless technologies, the stablecoin revolution could yet come to nothing. But it is better for entrepreneurs to try and fail, than for regulators to set today’s system in stone and stop promising innovations from being pursued at all. Time to take inspiration from Mr Trump’s genius Act. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

It no longer has a military justification

The continuation of the war in Gaza disgraces Israel It no longer has a military justification July 24th 2025 THE WAR Israel waged against Iran was short, with precision strikes, clear goals and results that enhanced its military prestige. The war against Hamas in Gaza has become endless, indiscriminate and militarily pointless. It is turning Israel into a pariah. This newspaper has called for a ceasefire since 2024. Now, after weeks of talks in Qatar, the time has come for America to use all its power to bring about a negotiated end to the fighting. That is essential in order to avoid mass starvation. It is also in Israel’s national self-interest and would open up a genuine chance to build a government for Gaza that excludes what is left of Hamas.

The situation is dire. Over 60% of buildings are damaged and 2m people have been displaced, many of them crammed into the centre of the strip. Although predictions of famine in 2024 by aid groups and the UN proved wrong, the threat today is real and urgent. Israel has sought to open corridors to supply aid , bypassing the UN-run system that Hamas may profit from. However, the volumes of food reaching Gazans are disgracefully low. Even if more convoys arrive, people will starve without a ceasefire. The hellscape they live in, overrun by trigger-happy Israeli forces, gangs and Hamas, is too dangerous to walk through to pick up supplies.

The war now has no military logic. The Israel Defence Forces (IDF) control about 70% of the strip. Hamas is defeated. Its leaders are dead, its military capacity is a tiny fraction of what it was on October 7th 2023 and its fighters are contained in pockets making up 10-20% of the territory. Hamas’s backer, Iran, is humbled. Operations by the IDF are achieving little. The inadequate provision of aid to civilians on terrain that is, in effect, under occupation is a war crime. A plan by hardliners in Israel’s government to corral Gazans into a permanent “humanitarian city” would amount to ethnic cleansing.

Many Israelis agree that a ceasefire is needed. Although only 21% of them believe in a two-state solution, over 70% want the hostages to be released and the war to be over. The IDF’s generals do, too, and believe the humanitarian-city plan is illegal. An overwhelming majority of politicians outside the ruling coalition want a ceasefire and recognise the huge damage now being done to Israel’s global standing. The ruling coalition itself, led by Binyamin Netanyahu, no longer has a majority in the Knesset, Israel’s parliament, and faces an election within 15 months. Mr Netanyahu has prolonged the war in Gaza in order to prevent hardliners from bringing down his coalition, but that strategy has run its course. He needs to pivot.

The gap between the two sides in the talks has shrunk as an enfeebled Hamas has made concessions. The remaining differences include issues such as the stationing of the IDF inside Gaza during the initial 60-day phase of a ceasefire agreement. These are resolvable. The weakness of Hamas means that the 60-day period could be used to create a new governing body, backed by the Palestinian Authority. This could take control of Gaza in the second phase, with Western and Arab support. Because the past two years have shown up Hamas’s incompetence, cynicism and utter indifference to Palestinian life, many Gazans would support this.

Two things need to happen. Qatar must force Hamas’s remaining leaders, many of whom live in Doha, to sign a ceasefire deal, using the threat of expulsion and a further funding crackdown. And Donald Trump must force Mr Netanyahu to end the war, using all the clout America has as Israel’s ally. White House pressure has ended most of Israel’s wars since independence in 1948. Granting it so much latitude in this conflict has demonstrated that America is still essential. Mr Trump’s furious intervention in June brought the Israel-Iran war to an end. He must immediately deploy that anger and muscle for the good of Gaza. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A new law jeopardises Ukraine’s progress against corruption—and erodes the Western support it needs

Volodymyr Zelensky has made a strategic blunder A new law jeopardises Ukraine’s progress against corruption—and erodes the Western support it needs July 24th 2025 Editor’s update (July 24th): After we published this leader, Volodymyr Zelensky introduced a new bill that, in effect, appears to reverse these changes.

UKRAINE’S WAR effort depends not only on courage and weapons, but on trust: the trust of its own citizens, and that of its Western backers. That compact is now at risk. On July 22nd the Rada, Ukraine’s parliament, passed a bill that would place the country’s two main anti-corruption bodies—NABU, which investigates wrongdoing, and SAPO, which prosecutes it—under the control of the presidency. This was not the work of rogue MPs. It was orchestrated from the top by President Volodymyr Zelensky and his all-powerful chief of staff, Andriy Yermak. It passed with large numbers of votes from the president’s own Servant of the People party. The law is a direct threat to the international support that has sustained Ukraine through the war. At home, it has drawn the first anti-Zelensky protests since the invasion.

The new law grants sweeping powers to Ukraine’s prosecutor-general, a presidential appointee who reports directly to the president’s office, to reassign, interfere with or even kill off corruption investigations. No case will now be safe if it steps on the wrong toes. The justification offered—that the agencies have been penetrated by pro-Russians—is unsubstantiated and looks like a pretence. What this bill really does is roll back a decade of democratic reform and reassert presidential control over institutions that were painstakingly designed to be independent. It guts the institutional autonomy that has been one of Ukraine’s most impressive domestic achievements since the Revolution of Dignity in 2014.

The Economist has long argued that victory for Ukraine is not necessarily a matter of expelling Russian troops from the territory they have seized, a goal that now looks impossible. Rather, it must mean the emergence of a prosperous, stable, democratic state, anchored in liberal values, governed by the rule of law, and firmly on the path to joining the European Union and, if possible, NATO. The creation of the two anti-corruption agencies was central to that effort. The vision behind it is part of what keeps arms flowing and budgets funded. It helps persuade voters in Europe and America to bear the cost.

But voters’ patience is not infinite. In much of the West, support for Ukraine is fraying. After three and a half years of war, with no end in sight, leaders are struggling to justify the scale of the commitment—particularly as America under Donald Trump does less and Europe consequently needs to do more. If Ukraine begins to resemble the corrupt, autocratic system it once sought to escape, then Western politicians will find it harder to argue that the cause is worth defending. Russia does not have to win on the battlefield; it can win by destroying Ukraine from within. Look at Georgia, once a darling of the West, but now a supine client state of the Kremlin.

The West bears some responsibility for all this. Its leaders lionised Mr Zelensky, whose heroism changed the early course of the war, and that has led them to turn a blind eye to his growing list of failings. The new law was not passed in a vacuum, but followed the harassment of anti-corruption campaigners and the dubious use of “sanctions”, including asset freezes and travel bans, against the government’s political enemies, including Mr Zelensky’s own predecessor as president. Ukraine’s friends have not done enough to call him out over such lapses.

With indecent haste, Mr Zelensky signed the new measure on the same day that it was tabled and passed by the Rada. It is not only a bad law: it is also a strategic blunder. It makes Ukraine look more like the enemy it is fighting and less like the country it aspires to become. It weakens the moral case for Western solidarity when that solidarity is entering a more fragile phase. If the president values his people’s European future, he must quickly kill the bill that he has just so ill-advisedly signed before it kills the idea of a democratic Ukraine. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A deal with the Kurds is welcome. Erdogan’s authoritarianism is not

Peace in Turkey must not become a smokescreen for repression A deal with the Kurds is welcome. Erdogan’s authoritarianism is not July 24th 2025 AFTER more than four decades of war, peace between Turkey and the outlawed Kurdistan Workers’ Party (PKK) seems within reach. Disarmament has begun and is expected to continue throughout the summer; a partial amnesty may also be on the table. Peace could unlock new growth in Turkey’s south-east, where the economy has been ravaged by PKK violence and scorched-earth reprisals from Turkey’s armed forces. The war has already cost Turkey some $1.8trn, according to the country’s finance minister. More than 40,000 people have died. Peace could lay the ground for Turkey to allow its Kurds a measure of well-deserved autonomy. It could also help avert yet more bloodshed in Syria by easing tensions between the PKK’s offshoot there and the new regime in Damascus.

This is all good, and outsiders should support it. But they must not allow Turkey’s president, Recep Tayyip Erdogan, to use peace as a smokescreen for repression. Having ruled for over two decades, first as prime minister and then as president, Turkey’s strongman is openly musing about yet another term in power. To have a shot at one, he needs parliament to bring forward the coming presidential elections, set for 2028, or to approve a new constitution, which would reset his term limits. Short of the votes he needs to do either, he may offer the Kurds concessions in order to win over Turkey’s main Kurdish party, Peoples’ Equality and Democracy (DEM), while dismantling the rest of the opposition.

The Kurds should not, and probably will not, fall for any of this. They, more than anyone, know no good can come of a deal with a bully. A decade ago DEM’s predecessor scored an election upset, depriving Mr Erdogan’s party of its majority in parliament. Peace talks with the PKK, which had begun years earlier, collapsed soon thereafter, giving way to urban warfare across Turkey’s south-east. Thousands of Kurdish activists and politicians, including Selahattin Demirtas, a former presidential contender and one of Mr Erdogan’s most eloquent critics, ended up behind bars. Mr Demirtas remains there to this day.

Now it is the secular Republican People’s Party (CHP) that is paying the price for standing in the way of Mr Erdogan’s ambitions. The party’s most formidable politician, Ekrem Imamoglu, the mayor of Istanbul, was arrested in March on trumped-up charges of corruption. Hundreds of others, including the former CHP mayor of Izmir and the CHP mayors of Adana and Antalya—three more of the country’s six biggest cities—have since been detained.

The CHP came ahead of AK in last year’s local elections for the first time in two decades. Unable to bring the party down through the ballot box, Mr Erdogan’s government is using the courts to do the job instead. By locking up Mr Imamoglu, Turkey’s strongman has removed his most serious challenger from the next presidential elections, whenever they are. He is counting on the outside world’s silence, and so far he is succeeding. Shamefully, not a word of criticism has come from America or Britain. The EU has complained, but in a mealy-mouthed way. Germany, which had held up the sale of Eurofighter Typhoon jets to Turkey in protest, backtracked this week. Turkey’s allies should urge Mr Erdogan to follow through with peace with the Kurds. But they also need to do more to hold him accountable for his autocratic excesses. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Progress has been remarkable. Death rates are down substantially, and are likely to fall further

The world is winning the war on cancer Progress has been remarkable. Death rates are down substantially, and are likely to fall further July 17th 2025 IN 1971 RICHARD NIXON, then America’s president, announced a “war on cancer”. Just two years earlier the Apollo programme had combined big science and big government to put astronauts on the Moon, so hopes were high. Some optimistic doctors talked of a cure for cancer within a few years.

They were wrong. Today every adult has had cancer, knows someone who has, or both. Half of men and a third of women in rich countries can expect to suffer from it at some point in their lives. In America, where it is the second-most-common cause of death, just behind heart disease, it kills around 600,000 people a year. Worldwide, it is responsible for about one in six of all deaths. If your criterion for success was a cure within a decade—or even two or three or four—then you might conclude that the war on cancer has been lost.

In fact, things are better than many realise. The progress is plain from the data and there is every reason to think it will continue. Cancer is related to age. If you strip out longer lifespans, it becomes clear that in the rich world the early 1990s were an inflection point. Since then, the age-adjusted death rate has been falling, slowly but steadily, year after year. In America the rate is now about a third lower than in the 1990s. The trend is similar in other developed countries.

What some scientists hoped would be a blitzkrieg has turned out to be a steady but successful war of attrition. Some victories have been spectacular. Childhood leukaemia used to be virtually a death sentence; now it has a five-year survival rate above 90%. Yet because cancer is not one illness, but a whole category, much of the progress has come not from big breakthroughs, but thousands of smaller advances in screening, surgery and drugs.

Future gains will come from three main sources. Some will come by applying lessons from the rich world all across the globe. The overlooked success story in the fight against cancer has been prevention—perhaps because cancers that never happen are less visible than those that are cured. For example, smoking rates have plummeted in rich countries. That has probably prevented more than 3m cancer deaths since 1975 in America alone. Because smoking still causes one in five cancer deaths around the world, anti-tobacco drives in poor and middle-income countries, where smoking remains common, stand to do an enormous amount of good.

Another source of progress will be cheaper medicines and extra wealth to pay for them. Cervical cancer is one of the most common cancers in women. Almost all cases are the delayed side-effect of infection with the human papillomavirus (HPV), a bug. In 2008 Britain began offering a newly developed HPV vaccine to teenage girls. A decade and a half later, rates of cervical cancer among women in their 20s are down by 90%, and British health officials talk of virtually eradicating cervical cancer by 2040. The original HPV vaccine was relatively expensive. But a cheaper version developed in India now underpins a mass-vaccination campaign in that country, too.

And the last source of progress will be the clinical application of fresh science. This comes in two steps: identifying who is most at risk of developing a cancer, and then finding ways to stop the disease in its tracks. As we report this week, both hold promise .

Scientists already know of genetic variants that predispose their carriers to certain kinds of cancer, such as a faulty BRCA-1 gene that raises the risk of breast or prostate cancer. However, less than half of all cancer patients have a known risk factor. Similarly, only some pre-cancerous cells turn malignant. For example, bowel cancers tend to emerge from polyps, but only 5-10% of polyps become cancerous.

The aim is to untangle this confusion in order to identify patients very early, when treatment is most effective. That work draws on huge biobanks of tissue samples and on the ability to watch genes switch on and off in living cells—impossible even a decade ago. Armed with new biomarkers in blood or breath and a deeper understanding of how combinations of genes and environmental exposure predispose people to develop cancers, physicians can target those who would benefit from treatment. That is important to prevent people undergoing needless surgery, chemo- and radiation therapy, at vast expense and with severe side-effects.

Having worked out whom to treat, doctors can make use of an expanding arsenal of therapies. Some cheap drugs seem to act as cancer prophylactics. Aspirin, a painkiller, seems to cut the risk of bowel cancer in half when given to those with Lynch syndrome, a genetic disorder that predisposes sufferers to some types of cancer. Metformin, a cheap diabetes drug, cuts the risk of recurrence in women who have been treated for a particular type of breast cancer. GLP-1 receptor agonists such as Ozempic show promise, too.

Alongside the mainstays of surgery, chemotherapy and radiotherapy a new technique is emerging that harnesses the power of the immune system. The idea is to boost the body’s own ability to attack cancerous cells. Some vaccines—perhaps genetically tailored to individual patients—can target a cancer that is already established. Others, acting more like broad vaccines used against diseases such as the flu, could target pre-cancerous cells. Vaccines of this sort for breast and colon cancer are in clinical trials.

Good news often goes unreported, especially if it happens gradually. That is the story of the war on cancer. Not everything is perfect: treatments are costly, drug firms worry about being sued for side-effects when treating people for diseases they do not yet have, and the Trump administration is planning steep cuts to the National Cancer Institute—setting back the science and putting off a generation of researchers. But costs will fall, treatments will find their way to market and work goes on in Europe and China, which this year overtook America as the main source of cancer research. That is why the age-adjusted death rate will continue falling, year after year. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

His pivot on supplying arms could help Ukraine defend itself

Trump’s U-turn on Russia is utterly cynical—and welcome His pivot on supplying arms could help Ukraine defend itself July 17th 2025 Over the past six months President Donald Trump has been all over the place on Ukraine. He said he could end the war in 24 hours. Then, while negotiating with Russia, he threatened to cut off the supply of weapons to Ukraine. In the past week he has signalled a new enthusiasm for supporting Ukraine. His spectacular pivot involves ambiguity, theatre and cynicism. Yet it creates a pathway for Ukraine and its supporters to stabilise a weakening position. They must take it.

Mr Trump originally called Vladimir Putin a “genius”, while blaming Ukraine for the war and humiliating its president in front of the world’s press. His new position, outlined after a meeting with NATO on July 14th, is rather different (see Europe section). First, Mr Trump says he is “disappointed” with Russia’s leader, who has ignored his entreaties for peace, sent more troops into the meat grinder and rained missiles on Ukraine’s cities. Second, Mr Trump says he will give Russia 50 days to end the fighting or face economic punishment, with America imposing secondary tariffs on any country that buys Russian exports, mostly its oil. Finally, America will resume weapons deliveries to Ukraine.

What to make of the U-turn? Mr Trump’s fickleness looms large: he walked back some of his comments after only a day. “I’m on nobody’s side,” he said on July 15th. Having appeared to endorse attacks by Ukraine deep inside Russia, he has told Volodymyr Zelensky not to strike Moscow, and says he is not inclined to give Ukraine long-range missiles.

Neither are his threats of “severe” secondary tariffs credible. In theory, he could impose sanctions that reduced Russia’s export earnings without greatly affecting the oil price. But if they were strict enough to choke off the Kremlin’s energy exports, the oil price would soar, causing an inflation shock that Mr Trump might find intolerable. The big buyers of Russia’s oil exports are China (47%) and India (38%). Mr Trump has backed away from an all-out trade war with China and is in negotiations with India. Tellingly, investors do not believe in Mr Trump’s brinkmanship. After he threatened to cut off Russia, the oil price fell.

Yet one element of America’s new stance is valuable: the flow of weapons. Instead of giving American arms to Ukraine as Joe Biden did, Mr Trump wants European governments to buy and donate them. The logic is grubby. It will be, he says, “good business”. Still, by paying for such weapons, Europe could fill military gaps. Not all European leaders are keen, but they could defray the cost by using frozen Russian state assets. Already Germany has indicated it will buy Patriot missile batteries, which can provide air defence for Ukraine.

Since it relies on Mr Trump’s word, this new arrangement is unreliable. Production bottlenecks mean that even if America is willing and Europe is prepared to write cheques, some weapons may run short. But they can buy time, allowing Europe to raise production of everything from shells to satellites and Ukraine to develop new ways to prevent Russia pummelling civilians, perhaps through defensive drones that neutralise aerial attacks. If Ukraine can find a way to protect its cities from the air, Mr Putin will be trapped in an exhausting war of attrition. Over the past two years his ground forces have made only meagre advances, at a huge cost.

Ultimately Europe is rich and capable of containing Russia. Mr Trump’s dream of a quick peace deal has been exposed as a fantasy. Although his word counts for little, Ukraine and Europe must seize on it to create a mechanism that does not require daily presidential decisions to function. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Artificial intelligence has undermined the internet’s central bargain

To survive the AI age, the web needs a new business model Artificial intelligence has undermined the internet’s central bargain July 17th 2025 This week Hollywood released details of a new film about Sam Altman and the rise of OpenAI, whose launch of ChatGPT in late 2022 has brought high drama to the tech world. One of the most important effects of artificial intelligence (AI) so far is surely on how information is spread online. Instead of typing their questions into search engines, people increasingly pose them to chatbots. Google, which a year ago started adding AI-generated summaries to its results, promises that users can “let Google do the Googling for you”.

This revolution promises to bring more knowledge more quickly to more people. Users are right to embrace it. But there is a sting in the tail. As AI-powered search engines remove the need for people to trawl the web looking for sites with answers, they are stopping the flow of traffic to those pages. Those lost visitors mean lost money. The danger is that, as answer-engines take readers away, they are removing the incentive for content to be created. The technology that is opening up the web also threatens to kill it.

Web use is hard to measure, but by one estimate monthly traffic from search engines has fallen by 15% in the past year. Some of the loudest complaints have come from the news media, an industry in which we acknowledge an interest. But the drought is a wider problem. Science and education sites have lost a tenth of their visitors in the past year. Reference sites are down by 15% and health sites by 31%. Some big names are being gutted: Tripadvisor.com, which recommends the best hotels or beaches, is down by a third; WebMD, which offers reassurance (or alarm) to the poorly, has fallen by half.

The cost is clear. Human traffic—monetised with ads—is the economic fuel of much of the internet. A steady flow of traffic is also needed to build online communities. Wikipedia, whose visitor numbers have fallen by 8% in the past year by one measure, warns that AI summaries without attribution could deter people from contributing. Stack Overflow, a coding community whose traffic has more than halved, reports that fewer questions are being asked on its chat boards. Reddit, another giant forum, saw its share price fall by half earlier this year over concerns about bumpy search referrals.

As the old model buckles, the web is changing. It is becoming less open, as formerly ad-funded content is hidden from bots, behind paywalls. Content firms are reaching people through channels other than search, from email newsletters to social media and in-person events. They are pushing into audio and video, which are harder for AI to summarise than text. Big brands are striking content-licensing deals with AI companies. Plenty of other transactions and lawsuits are going on. (The Economist Group has yet to license its work for AI training, but has agreed to let Google use select articles for one of its AI services.) Hundreds of millions of small sites—the internet’s collectively invaluable long tail—lack the clout to do this.

No one should expect the web of the future to look just as it does today. AI-powered search will rightly shake up some services: business directories, for instance, face disintermediation as answer-bots field queries such as “emergency plumber” or “houses for sale”. But the evaporation of incentives to create content presents a fundamental problem. If human traffic is drying up, the web will need a new currency.

Online innovators are trying out alternatives. Some propose a pay-as-you-crawl system, in which AI bots are charged for reading sites’ content. Others are working on systems that analyse chatbots’ answers to determine where their information came from, so that sources can be compensated. Tech firms resist such ideas: giants don’t want their crawling of the internet to be metered, and startups fear they will be made to pay for training data that pioneers like OpenAI were allowed to grab for nothing. Optimists cite the music industry, where piracy gave way to profitability when streaming platforms invented new ways to charge consumers and compensate artists.

Bringing a new business model to the web is daunting; it may take a shove from regulators to get started. Yet everyone has an interest in making content-creation pay. Publishers may be the ones complaining now, but if the content tap dries up, AI companies will suffer, too. Some are more vulnerable than others. Whereas Meta can draw on data posted to its social networks and Google owns YouTube, the world’s biggest video vault, OpenAI relies entirely on others for its content.

If nothing changes, the risk is of a modern-day tragedy of the commons. The shared resource of the open web will be over-exploited, leading to its eventual exhaustion. If that process is not stopped, one of the great common properties of humanity could be gravely diminished. The tragedy of the web would be a tragedy for everyone. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Growth has held up astonishingly, given geopolitics. But it can’t last for ever

Bit by bit, the world economy’s resilience is being worn away Growth has held up astonishingly, given geopolitics. But it can’t last for ever July 17th 2025 As Donald Trump prosecutes his trade war and muses about sacking Jerome Powell, the chairman of the Federal Reserve, analysts are poring over the data—and they are seizing on the smallest dips in stockmarkets and rises in inflation as proof of harm. Take a step back, though, and what is striking is how calm it all is. Over the past decade the global order has been upended by populists, authoritarians and war. Yet, as we explain this week, the economy is powering on, unfazed . Aside from a brief contraction as covid-19 lockdowns went into effect, global gdp has grown at a respectable annual clip of about 3% since 2011. Across the rich world, unemployment is near a record low. Both America’s S&P 500 and the global MSCI index of stocks are near record highs.

This resilience, a Teflon-like superpower, is cause for celebration. It means that the twin scourges of recession and unemployment have been kept at bay. The trouble is that threats are now mounting. Because governments do not appreciate the economy’s resilience, they are undermining the fundamental sources of its strength.

To see the danger, consider first what has propelled the long expansion. Around the world, economic policy now cushions demand more effectively. After the long agony of the global financial crisis, rich-country governments decided that decisive fiscal stimulus was the best way to avert economic pain, and low interest rates made their interventions affordable.

Meanwhile, policy in the emerging world improved. The number of inflation-targeting central banks rose to 34 in 2022, from five in 2000. More governments let their exchange rates float and issued debt in local currency, sheltering them from the vagaries of American interest rates. That helped stave off debt crises even as rates rose and commodity-price spikes made life harder for importers.

More stable demand has been met by increasingly flexible supply. During the pandemic, early shortages of masks and chips convinced politicians that markets could not be trusted. In fact, supply chains responded quickly: hand sanitiser was churned out by the gallon; shipments of chips spiked in 2021. More recently, a glut of oil—thanks in part to America’s shale drillers—meant that even as Israel and then America bombed Iran, the price of crude barely budged.

You should be worried, therefore, that the fundamentals of Teflon capitalism are now looking shaky. The costs of activist policies are mounting. Politicians in the rich world spent more than 10% of GDP shoring up demand during the pandemic; those in Europe allocated, on average, another 3% during the energy crisis. Interest rates on ten-year government debt now average 3.7%, up from 1% during the pandemic.

Yet because voters increasingly expect the state to step in, and fiscal consolidation is hard, debts are ratcheting up. Even as the economy hummed along last year, America ran a deficit of 7% of GDP. Britain’s attempt to cut benefits for the disabled ended in tears; French pension reforms seem just as doomed. With every increase in the fiscal burden today, governments’ ability to step in next time trouble hits is sorely constrained.

Moreover, the instinct to protect now extends to supply chains. Prices play a crucial role in a market economy, sending signals about what is scarce and what is plentiful. But governments are seeking to override them in the name of sparing voters’ wallets and jobs. According to the imf, the rich world had 1,000 industrial-policy measures in place in 2022, up from 100 in 2017. While Mr Trump uses tariffs, the European Commission is relying on subsidies and strictures; it is reportedly mulling a plan for its school-meal scheme to buy food locally.

All this will only make supply chains more brittle. The pandemic revealed that diversified supply was more resilient than local production, which could be taken out by a lockdown or natural disaster. And governments are hardly the best backers of new supply. The biggest triumph of American reshoring, the rise of the shale industry, came about not because of policy, but because entrepreneurs spied an opportunity.

History shows that economies do not stay stable for ever. The longer an expansion, the more politicians, investors and companies take risks, hastening its demise. On July 16th Mr Trump said that he was “highly unlikely” to sack Mr Powell. If he were to change his mind, undermining the central bank’s independence, the placidity of the past decade would be put to the test. The economy has surprised so far; it could surprise for a while still. But the Teflon is wearing thin. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A data breach, a gag order, a stampede to duck responsibility

The British people have been kept in the dark for two years A data breach, a gag order, a stampede to duck responsibility July 17th 2025 It is RARELY the sin that lands you in trouble; it is the cover-up. Britain is being reminded of this adage after a judge ruled on July 15th that a two-year gagging order barring all reporting of a serious security-data breach, and its equally serious consequences, was no longer justified. As he lifted the first-ever super-injunction granted to the government, Sir Martin Chamberlain, a High Court judge, said that the evidence for maintaining the order had been “fundamentally undermined” and that there was “no tenable basis” for continuing it.

Ministers from both the Conservative and the Labour parties must now explain why they kept secret for 683 days not just an alarming leak that revealed the identities of thousands of Afghans in danger of Taliban reprisals, but also a policy mop-up that includes a secret scheme to resettle thousands of Afghans in Britain. This week the government said the leak added £850m ($1.1bn) to the cost of resettling Afghans. Confusingly, in court it had cited an overall total in the billions.

The super-injunction kept these facts, including the existence of the order itself, out of the public domain. This was during the long run-up to an election at a time of strained public finances and of growing worries over migration. The bar for such a restriction should have been extremely high. Whether the gagging order ever met that standard is doubtful. The fact that it has endured for so long looks like an abuse of state power.

The desire to stop the dissemination of information that could endanger lives is understandable. In February 2022 a Royal Marine mistakenly leaked the names and contact details of almost 19,000 Afghans, some of whom had helped the British army against the Taliban, and then applied for safe haven in Britain after the Islamist rebels seized control of their country. In autumn 2023, after members of the press got wind of the breach, the government asked a judge to intervene. Ben Wallace, the defence secretary at the time, recalls asking for a four-month injunction in order to bring people to safety.

What happened next does not sound nearly as reasonable. A High Court judge, Sir Robin Knowles, suggested that rather than just issuing an injunction, he would issue a super-injunction. This rare and controversial instrument had only ever been used to protect celebrities and the odd business from embarrassment. Several other mechanisms are available for the state to stop publication of sensitive security information: this was much more extreme than any of them. And, once the super-injunction was in place, it was kept there for 22 months by Tory and Labour governments alike (despite several opportunities to lift or downgrade it).

This is a terrible place to have ended up. A recent report by a retired civil servant suggests that simply being on the leaked list has not turned out to be a death sentence, as the Ministry of Defence (MOD) had feared. Perhaps it never was. In any case, two years is unjustifiably long. Mr Justice Chamberlain ruled a year ago that the injunction should be lifted, as keeping the leak secret could in fact endanger those on the list who were not likely to be given asylum in Britain. The government successfully appealed against that decision.

Complexity is no excuse for secrecy. In fact, difficult ethical choices that involve public money and a controversial policy like immigration are best worked through under public scrutiny. The injunction meant that Parliament, press and the public could not do their jobs. An obfuscation of this magnitude, by several governments and state institutions, will only aggravate public mistrust of politicians and the government, which is already at a record high . Shutting down the basic instruments of democratic scrutiny and accountability sets a terrible precedent.

As to whether the MOD overreacted in 2023 and was too cautious about the risks following the leak, Mr Justice Chamberlain this week said that would “be for others to consider”. Today “others” can at last weigh up most of the information they need to reach a judgment. It is likely to be damning. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Rich countries need to separate asylum from labour migration

Scrap the asylum system—and build something better Rich countries need to separate asylum from labour migration July 10th 2025 THE RUles for refugees arose haphazardly. The UN Refugee Convention of 1951 applied only to Europe, and aimed to stop fugitives from Stalin being sent back to face his fury. It declared that anyone forced to flee by a “well-founded fear” of persecution must have sanctuary, and must not be returned to face peril (the principle of “non-refoulement”). In 1967 the treaty was extended to the rest of the world.

Most countries have signed it. Yet dwindling numbers honour it. China admits fewer refugees than tiny Lesotho and sends North Koreans home to face the gulag. President Donald Trump has ended asylum in America for nearly everyone except white South Africans, and plans to spend more on deporting irregular migrants than other countries spend on defence. Western attitudes are hardening. In Europe the views of social democrats and right-wing populists are converging .

The system is not working. Designed for post-war Europe, it cannot cope with a world of proliferating conflict, cheap travel and huge wage disparities. Roughly 900m people would like to migrate permanently. Since it is almost impossible for a citizen of a poor country to move legally to a rich one, many move without permission. In the past two decades many have discovered that asylum offers a back door. Instead of crossing a border stealthily, as in the past, they walk up to a border guard and request asylum, knowing that the claim will take years to adjudicate and, in the meantime, they can melt into the shadows and find work.

Voters are right to think the system has been gamed. Most asylum claims in the European Union are now rejected outright. Fear of border chaos has fuelled the rise of populism, from Brexit to Donald Trump, and poisoned the debate about legal migration. To create a system that offers safety for those who need it but also a reasonable flow of labour migration, policymakers need to separate one from the other.

Around 123m people have been displaced by conflict, disaster or persecution, three times more than in 2010, partly because wars are lasting longer. All these people have a right to seek safety. But “safety” need not mean access to a rich country’s labour market. Indeed, resettlement in rich countries will never be more than a tiny part of the solution. In 2023 OECD countries received 2.7m claims for asylum—a record number, but a pinprick compared with the size of the problem.

The most pragmatic approach would be to offer more refugees sanctuary close to home. Typically, this means in the first safe country or regional bloc where they set foot. Refugees who travel shorter distances are more likely one day to return home. They are also more likely to be welcomed by their hosts, who tend to be culturally close to them and to be aware that they are seeking the first available refuge from a calamity. This is why Europeans have largely welcomed Ukrainians, Turks have been generous to Syrians and Chadians to Sudanese.

Looking after refugees closer to home is often much cheaper. The UN refugee agency spends less than $1 a day on each refugee in Chad. Given limited budgets, rich countries would help far more people by funding refugee agencies properly—which they currently do not—than by housing refugees in first-world hostels or paying armies of lawyers to argue over their cases. They should also assist the host countries generously, and encourage them to let refugees support themselves by working, as an increasing number do.

Compassionate Westerners may feel an urge to help the refugees they see arriving on their shores. But if the journey is long, arduous and costly, the ones who complete it will usually not be the most desperate, but male, healthy and relatively well-off. Fugitives from Syria’s war who made it to next-door Turkey were a broad cross-section of Syrians; those who reached Europe were 15 times more likely to have college degrees. When Germany opened its doors to Syrians in 2015-16, it inspired 1m refugees who had already found safety in Turkey to move to Europe in pursuit of higher wages. Many went on to lead productive lives, but it is not obvious why they deserved priority over the legions of other, sometimes better-qualified people who would have relished the same opportunity.

Voters have made clear they want to choose whom to let in—and this does not mean everyone who shows up and claims asylum. If rich countries want to stem such arrivals, they need to change the incentives. Migrants who trek from a safe country to a richer one should not be considered for asylum. Those who arrive should be sent to a third country for processing. If governments want to host refugees from far-off places, they can select them at source, where the UN already registers them as they flee from war zones.

Some courts will say this violates the principle of non-refoulement. But it need not if the third country is safe. Giorgia Meloni, Italy’s prime minister, wants to send asylum-seekers to have their cases heard in Albania, which qualifies. South Sudan, where Mr Trump wants to dump illicit migrants, does not. Deals can be done to win the co-operation of third-country governments, especially if rich countries act together, as the EU is starting to. Once it becomes clear that arriving uninvited confers no advantage, the numbers doing so will plummet.

That should restore order at the frontier, and so create political space for a calmer discussion of labour migration. Rich countries would benefit from more foreign brains. Many also want young hands to work on farms and in care homes, as Ms Meloni proposes. An orderly influx of talent would make both host countries and the migrants themselves more prosperous.

Dealing with the backlog of previous irregular arrivals would still be hard. Mr Trump’s policy of mass deportation is both cruel and expensive. Far better to let those who have put down roots stay, while securing the border and changing the incentives for future arrivals. If liberals do not build a better system, populists will build a worse one. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Workers and assets are on sale to the rest of the world for bargain-basement prices

Britain is cheap, and should learn to love it Workers and assets are on sale to the rest of the world for bargain-basement prices July 10th 2025 PANIC IS NEVER far off. After Britain’s government capitulated to a backbench rebellion over welfare benefits earlier this month, bond vigilantes bared their teeth and the prime minister, Sir Keir Starmer, had to scramble to assure markets that he would not swap his chancellor for someone more spendy. Fears over the public finances had also struck in January, October and, most alarmingly, in 2022, when Liz Truss was in office. This week the Office for Budget Responsibility (OBR), a fiscal watchdog, warned that, as Britain becomes less able to deal with future shocks, it will face “daunting” risks.

No surprise, therefore, that the doomsters command the public stage. Britain’s population is ageing and too dependent on handouts. Growth is dismal, public services are starved of funds and taxes are high and look likely to drift higher. Yet few people in politics seem able to square all that with the fact that Britain is already living beyond its means and depends on loans from foreigners to pay the bills.

The doomsters are right, but failure also contains a copper lining. Call it the “Poundland” strategy, after the bargain retailer that originally priced all items at just £1 ($1.36). Britain is cheap—cheaper than warranted by the obvious risks. If the government can seize the opportunity, then being value for money offers Britons a pathway to better economic growth.

Britain’s sales pitch begins with the bargain-basement cost of assets and labour. Gilts have lower prices (and hence higher yields) than just about any rich-world bonds. Stock valuations are low, too—last month Poundland itself was flogged to a Boston-based investment firm for a token sum. Global investors are noticing how inexpensive British assets look. AQR, a quant manager, has pegged the expected future returns from British stocks and bonds as the highest of any rich country. Larry Fink, the boss of BlackRock, a giant asset manager, said Britain was “undervalued” in April, and claims to be buying.

Well-educated British workers are cheap, too. Feeble wage growth and the clobbering sterling took after the Brexit referendum has made them cost-competitive, especially in services, including consulting, IT, law, human resources and the like. JPMorgan Chase, a bank, says that the cost of its technologists in Glasgow is closer to that in India than Texas . Indeed, services are just about the only success story in the British economy over the past decade. Services exports to America, where the cost advantage is sharp, are up by around three-quarters in inflation-adjusted terms since 2016.

Britain is well-protected against many of the traps that doubling down on exports of mid-skilled services might spring. Countries like Poland and India fret about never transitioning to high-skilled work. Britain already has a few such niches, including banking, life sciences and culture—just not enough to sustain the whole economy. Artificial intelligence could automate away many of the “email jobs” that Britain does well in, but under that scenario Britain’s solid AI industry should do well enough to compensate.

The question is how to ensure Britain’s cheapness attracts the rest of the world—rather than being seen as a fair price for serious risks. The to-do list starts with what the IMF might tell an emerging-market country looking to attract investors.

If the government repeats its recent debacle, it risks causing capital flight. Sir Keir must not succumb to the temptation to run up more debt, mess with credible institutions like the Bank of England and the OBR, or attempt to create room for profligacy by once again fiddling with the fiscal rules. Instead, he must confront the fantasy economics which rejects all cuts to welfare as immoral without regard to what is affordable.

Next, Sir Keir should stop undermining Britain’s strengths. His government is flirting with financial repression by nudging pension funds to invest at home. If the aim is to secure more bids for Britain’s cheap assets, attraction will work better than compulsion. Labour also plans to improve workers’ lot by imposing extra regulations on employers. That would erode a key advantage that Britain has over most of mainland Europe and heap costs on business. Sir Keir should remind rebellious Labour backbenchers that the best way to help employees (and fund taxes) would be for growth to boost their wages.

Last, the government should apply itself to reform. Sir Keir needs to sort out post-Brexit sticking-points, including helping companies move employees between countries and focus migration on the high-skilled . Labour is improving planning and should encourage building in the places where lucrative outsourcing is happening, particularly Britain’s second-tier cities, such as Birmingham, Glasgow and Manchester. The baffling choice by the housing minister to support a local council’s objections to a new film studio being developed on farmland near London suggests that plenty of blockerish instincts still lurk behind the government’s pro-building rhetoric.

The rub is the politics. Embracing the Poundland strategy would run against a century of rhetoric obsessed with restoring the Great to Great Britain. After the chest-thumping of the Brexit era, a Poundland prime minister would be accused of declinism and of selling Britain short. The attacks would be especially fierce on the right, where Reform UK, Nigel Farage’s populist party, is waiting impatiently in the wings with a fantastical, deficit-exploding offer of its own.

Sir Keir has reality on his side. Since the financial crisis of 2007-09, Britain has fallen behind economically; since Brexit, it has fallen behind diplomatically. Supposing he can retain control of his party, the prime minister has a vast parliamentary majority and four clear years to execute his agenda: a position most rich-world governments can only dream of. Armed with the Poundland strategy, Sir Keir can make Britons better off. Instead of being cheap for a reason, the country would seem worth backing. After a decade of sorry growth, Britain has no shame—and lots to gain—from being a bargain. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Their economic impact has been delayed but not averted

America cannot dodge the consequences of rising tariffs for ever Their economic impact has been delayed but not averted July 10th 2025 THREE MONTHS ago a tariff announcement by Donald Trump caused a market meltdown. More recently his words have mostly elicited a shrug. On July 7th America’s president published letters he had sent to 14 countries threatening “reciprocal” tariffs to be introduced by August 1st, including levies of 25% on Japan and South Korea. The next day he said he would impose a 50% charge on copper and, after a possible year and a half’s notice, up to 200% on pharmaceuticals. The day after that, he escalated a political row with Brazil by threatening it with tariffs of 50%. Yet although the copper price soared and Brazilian markets shivered, global equity and bond markets seem unaffected. Panic has given way to placidity.

Everyone has a pet theory for this. One is that Mr Trump is not serious: most of the “Liberation Day” tariffs that caused the crash in April were postponed; the threat to impose similar tariffs in August seems empty. What the president really wants is deals. Another is that lots of tariffs have been levied, but their impact has not been as bad as feared. A third is that Mr Trump will back off if the markets or the economy take fright, so pessimism does not pay.

These arguments are inconsistent. They are also flawed. Take the policies that have gone into effect. Although Mr Trump tempered his Liberation Day barrage, tariffs have been relentlessly creeping up. The average rate has reached around 10%, compared with just 2.5% last year. The threatened August 1st and sectoral tariffs would raise that to 16-17%, ie, most of the way to the roughly 20% that loomed over the economy in the spring. Even the deals that have been struck, with Britain and Vietnam, have left in place much higher trade barriers than existed at the start of the year. Besides, the federal government increasingly needs the money raised by high tariffs to help pay for Mr Trump’s One Big Beautiful Bill .

Contrary to received wisdom, these tariffs are hurting the economy. Consumption and retail sales have been weak. America is on course to grow only about half as fast this year as it did in 2024. Inflation remains relatively low—but import prices show that American companies, not foreigners, are sparing consumers from the full burden of tariffs. Many are probably trying to avoid raising prices in the hope of a reprieve. They can do so because they stockpiled imports at the start of the year. Eventually, though, higher costs will tell and prices will rise. Inflation is likely to end the year above 3%.

Relying on Mr Trump to chicken out is paradoxical. If markets do not react to announcements of damaging policies, then nothing is forcing him to back off. It is also complacent. When Mr Trump avoids cliff-edges as big as Liberation Day, by raising tariffs gradually, the feedback from markets and the real economy is subtler. Yet America will surely grow more slowly than it would have—like Britain since Brexit.

Some of the worst fears from the spring have indeed been proved wrong: retaliation against America has been limited. And Mr Trump is right to think he has negotiating leverage, especially over smaller, trade-dependent economies. But Mr Trump’s apparent wish to turn tariff policy into a constant bilateral negotiation is not in America’s interest. It encourages firms to pour their efforts into lobbying the government for changes and exemptions, rather than making their products better. And although uncertainty has so far obscured the harm from tariffs—because companies and countries are waiting to see what unfolds—uncertainty will eventually become a cost in itself. Gradual corrosion in an economy is easier to ignore than a crisis, but it is no less harmful. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The kingdom is stagnating while its elites squabble

After another leader is brought low, Thailand’s voters need a real choice The kingdom is stagnating while its elites squabble July 10th 2025 IN THEORY it was a phone call that landed Thailand’s prime minister, Paetongtarn Shinawatra, in trouble. Last month someone leaked a recording of her speaking to Hun Sen of Cambodia about a border dispute. Critics said she sounded subservient and had disparaged Thailand’s armed forces. In early July Thailand’s constitutional court said her words may have breached ethics rules; it suspended her from office, pending further inquiries. The deputy prime minister is serving as caretaker while everyone works out what to do next.

There is no doubt that Ms Paetongtarn has made costly mistakes. She got the job largely because she is the daughter of Thaksin Shinawatra, a tycoon who ran Thailand between 2001 and 2006; in office for less than a year, she has often looked green. Yet anyone who thinks the reason for her travails is her phone manner is also being naive. Thailand’s ruling establishment—its army, the palace and assorted other magnates—has long felt entitled to sack politicians whenever they believe their own interests are under threat.

For decades these elites have worked hard to make sure that Thailand’s democracy is never much more than a veneer . The army has launched a dozen successful coups since the 1930s, including in 2006 and 2014. More recently, the powers that be have been using friendly constitutional judges to make sure no one can change the country in ways they might dislike. After a general election in 2023, stooges in the Senate prevented Move Forward, a party of young liberals that had won the most seats, from forming a government. This promising grouping was dissolved by order of a judge, and its leaders banned from politics for ten years.

Instead of the people it voted for, the country ended up with the fractious and failing coalition government that Ms Paetongtarn had, until this month, been leading. It throws pro-army factions together with Pheu Thai, a populist party founded by Ms Paetongtarn’s father that once claimed to speak for the poor but which no longer seems fussed about them. For a while Thailand’s generals (who have twice before ousted Mr Thaksin’s lot) appeared to find this arrangement convenient. But lately they have again been unable to let the politicians get on with their jobs. Ms Paetongtarn came to office last August only because her predecessor was turfed out for breaching vague “ethics” rules. Now she herself may fall in a similar way.

While the elites squabble, Thailand is stagnating. Its economy is expected to grow by 1.8% this year, down from 2.5% in 2024. Tourism arrivals fell in the first half of 2025; the numbers coming from China sank by a third. Exports to America, one of Thailand’s biggest trade partners, risk being whacked with high tariffs. And leaders have made no headway on big underlying problems, such as a shockingly anticompetitive environment for business. This is all the more tragic given Thailand’s many advantages: its relative wealth, a sophisticated middle class and breathtaking landscapes.

Back-room negotiations could soon install a new prime minister. If so, he or she would be the third in 12 months. Yet if this wrangling fails—or, more probably, if the fix proves short-lived—frustration and protests are likely to mount. And that could become a pretext for yet another coup.

What Thailand really needs are fresh elections: fought freely, with the winning party given every opportunity to form a coalition that can actually govern. When Thais return to the ballot boxes, the young liberals from Move Forward—many of whom have regrouped as the People’s Party—will once again do very well. Their resilience is a reason to be optimistic about Thailand’s future, even when much else looks grim. Unfortunately, Bangkok’s old guard look no more willing than before to loosen their grip on the levers of power. If they really cared for their country, they would. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

If they can be liberated from ignorance and hucksterism

Sex hormones could be mental-health drugs too If they can be liberated from ignorance and hucksterism July 10th 2025 POOR MENTAL health is a scourge. Prescriptions for anti-depressants and anti-anxiety medicines have soared in rich countries in recent decades. Yet they do not work for everyone. Perhaps a third of people with serious depression, for instance, report that drugs seem to have little effect. Doctors are therefore beginning to look further afield.

As we report this week, one promising area is hormone therapy . The idea is to boost levels of naturally occurring hormones in patients’ bodies—and in particular, to tweak sex hormones such as oestrogen, progesterone and testosterone. New ways to treat mental illness should be celebrated. Making the most of them, however, will involve dispelling the poor reputation that hormones have gained over the years.

Hormone-replacement therapy (HRT) is best known as a treatment for the physical symptoms, such as hot flushes or night sweats, that come with menopause, when a woman’s levels of oestrogen and progesterone drop. But, as any parent of teenagers will tell you, hormones can influence the mind as well as the body. Evidence suggests that restoring hormone levels can sometimes ease symptoms of many disorders, including depression and schizophrenia, that have resisted other treatments.

It is not just women who can benefit. Men do not experience anything like the fluctuation in hormones tied to various life stages such as menopause. But many (perhaps a third of older men) seem to have lower levels of testosterone than they should. There is growing evidence that giving those men extra testosterone can help with mood disorders, too.

The problem is that many patients—and even some doctors—remain wary of hormonal treatments, because of their bad name among the public. Excessive worries about a small increase in breast-cancer risk have dogged women’s HRT since the early years of this century. Even now, only 5% or so of menopausal women in America take it. This situation is not helped by the persistence of the naturalistic fallacy, which holds that what is natural—like the menopause and male ageing—must be good, and so is not in need of treatment.

With testosterone replacement in men, the problem is too much enthusiasm among people who want cosmetic rather than medical benefits. Testosterone is a potent performance-enhancing drug. In America, in particular, an industry has emerged to sell the hormone to middle-aged men . Rife with hucksters and Instagram influencers, it pitches testosterone as a fountain of youth: a way to pack on muscle, restore sex drive and generally turn back the clock on ageing. Less is said about the downsides: that testosterone causes infertility, say, or that high doses are bad for your heart. Even the clinics themselves admit that shady prescribing is driving the industry into disrepute, though many say their rivals are to blame.

For the testosterone business, better regulation is the place to start. Clinics should be required to test their customers and clearly spell out the downsides. For women, awareness is the key. Fears about HRT and breast cancer have been overplayed; and anyway, HRT brings health benefits by, for example, cutting the risk of osteoporosis. When it comes to mental health, hormonal treatments should undergo clinical trials to identify which patients stand to benefit: because hormones are cheap, the gains could be huge. If patients can be made less wary of sex hormones, many more people could be helped by them—for ailments of the mind as well as of the body. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The Big Beautiful Bill is symptomatic of a wider malaise

Trumponomics 2.0 will erode the foundations of America’s prosperity The Big Beautiful Bill is symptomatic of a wider malaise July 3rd 2025 Was it JUST a false alarm? The panic about the world economy that followed President Donald Trump’s “Liberation Day” tariffs in April has given way to growing optimism. Tariffs’ inflationary effect has so far been muted. In private, bosses say they now expect trade fights to produce trade deals, not to be an end in themselves. Surveys show that business and consumer confidence, though low, is improving. The S&P 500 index of stocks has hit a record high.

And as we report, the One Big Beautiful Bill act (BBB) that passed the Senate on July 1st and the House on July 3rd looks more like traditional tax-cutting, spending-slashing Republicanism worthy of Paul Ryan or Mitt Romney than it does a MAGA fantasy. Suddenly, business leaders are again willing to see Mr Trump as the populist from his first term: a man to be taken seriously but not literally.

Unfortunately, the BBB, which Mr Trump plans to sign into law on July 4th, is likely to cast a shadow over this sunny picture. It illustrates the long-term damage Mr Trump is doing to the foundations of America’s economy.

The bill’s main effect is to extend the tax cuts from Mr Trump’s first term which were due to expire. Republicans paint this as an extension of the status quo. Yet they, like the Democrats before them, ignore the fact that the status quo is unsustainable. Over the past 12 months America’s budget deficit has been an astonishing 6.7% of GDP. If the bill passes, the deficit will remain around that level and the country’s debt-to-gdp ratio will in about two years exceed the 106% reached after the second world war. Revenue from tariffs will help, but not enough to stop the ratio rising—meaning that the drift towards crisis will continue.

To the extent the bill tightens the belt, it does so in the wrong places. As life expectancies rise and the population ages, America should trim handouts to the old, for example by raising the retirement age. Instead, pensioners are getting a tax break and Republicans are cutting Medicaid, health insurance for the hard-up. Some sensible measures include reducing the ability of states to game the system for more federal cash. Yet according to official projections, the overall effect will be to add nearly 12m to the number of Americans without health insurance. That is a scandalous number for the world’s richest big country. Many of those who lose coverage will fall foul of new requirements that recipients must work. Such rules have in the past created an obstacle course of paperwork for claimants while failing to boost employment.

More savings come from repealing tax credits for clean energy passed under President Joe Biden. The credits were littered with protectionist “buy American” requirements that this newspaper opposed. But because Congress abhors carbon pricing, nothing will replace them. The country will once again lack a federal policy for decarbonisation, and its greenhouse-gas emissions will be greater than they would have been. Mr Trump’s nostalgia for fossil fuels ignores the potential of renewables to make energy much more abundant. That is foolish when the race for artificial general intelligence is in part a race for the electricity necessary to train massive models.

Even the way the bill was passed reveals America’s creeping dysfunction. The BBB is gargantuan because governing parties very rarely get more than one chance a year to pass a tax and spending bill with just 51 votes in the Senate, rather than the 60 needed to circumvent the filibuster. In such a big bill, important reforms are poorly scrutinised, and a lot of pork can be used to buy the support of congressmen.

Optimists acknowledge some or all of this, but argue that economic growth will wipe out all these worries. Faster growth would ease the burden of debt, benefit the poor through more jobs and higher wages and make political dysfunction seem economically irrelevant. Sure enough, the administration projects nearly 5% more output over the next four years.

Yet it is wrong to expect this bill to create a growth boom. The tax cuts in the BBB that are already in effect offer little fresh stimulus, and tariffs are an offsetting force. In any case, interest rates are three times their level when Mr Trump last cut taxes and the Federal Reserve is more likely to balance looser fiscal policy with tweaks to its monetary stance. Supply-side tax cuts will help boost investment, but account for just 8% of the total, by cost. Many new tax cuts, including exemptions for tips and overtime, are gimmicks. The administration’s deregulation agenda could help, but only on the margins.

In fact, America’s geyser of debt issuance will increasingly harm growth. In normal times public debt crowds out private investment, raising the cost of capital for new projects like data centres. And the costs of a sudden fiscal adjustment, forced on America by bond markets, would be vast. Goldman Sachs, a bank, reckons that if Congress postpones fiscal tightening for another decade, it may then need to cut spending or raise taxes by an annual 5.5% of GDP to stabilise debt-to-GDP. That is more than the austerity endured by the euro zone after its sovereign-debt crisis in the 2010s. If that proved too hard for legislators, America might resort to tactics used after the second world war: inflation and financial repression.

The BBB’s neglect of the long term is part of a wider malaise. Riding high on America’s economic might and undoubted negotiating leverage, Mr Trump ignores the foundations of America’s success. He has renewed his attacks on the Fed, adding another threat to economic stability. His defunding of scientific research will harm American innovation. His cavalier approach to the rule of law makes America a riskier place to invest. And despite the moderation of his trade war, the average tariff rate is still its highest in a century and trade-policy uncertainty is a burden. Even as American assets boom in dollar terms, they have fallen behind when priced in foreign currencies. An 11% fall in the dollar this year reflects long-term risks to the American economy that are real, and growing. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

As well as his hope of achieving much in office

Sir Keir Starmer is rapidly losing his authority As well as his hope of achieving much in office July 3rd 2025 The first birthday of Britain’s Labour government on July 4th will be a miserable, cakeless affair. The party’s polling is dreadful, trailing Reform UK, an insurgency from the right led by Nigel Farage. Promises to cut hospital waiting-lists, build more houses and stop migrant boats are off-track. And on July 1st Sir Keir Starmer was humiliated by a huge rebellion, as Labour MPs gutted a bill to cut sickness and disability benefits. In Parliament the next day his chancellor wept and yields on Britain’s debt soared. The prime minister has never looked weaker .

Labour came to power hoping to be a beacon for European and American centrists beset by populist merchants of division and chaos like Mr Farage. Sir Keir boasted that he would attack Britain’s structural crises by combining a technocratic cabinet with a mighty parliamentary majority. In place of Conservative gimmicks, he would engineer deep reforms. Growth would return, public services would stir and Britons’ faith in the political system would be restored.

This week’s rebellion shows how Sir Keir has failed. True, Britain is more stable than when the Tories culled several prime ministers in a bloodfest to rival “Squid Game”. Yet even as Sir Keir has shepherded Britain back into the European fold, nannied President Donald Trump and backed Ukraine and NATO, the crisis at home has only deepened.

Britain is stuck in its longest period of economic stagnation since the 1930s. The public finances do not add up. The cost of servicing debt as a share of GDP is the highest since 1987. In the 1980s only 12% of voters thought the prime minister would put party before country; today only 12% expect Labour to put country first. On election morning Sir Keir called trust in government “the battle that defines our age”; under Labour, trust is at a 40-year low.

One error has been for Sir Keir to court political pain for little gain, as the welfare debacle shows. Britain is suffering a steeper rise in benefits than other Western countries, owing partly to a surge in young claimants citing poor mental health. Labour should have dealt with the fundamental causes and managed the politics by offsetting cuts in one area of welfare with gains in another. Instead, the reforms were a cosmetic measure to flatter the public finances by trimming just £5.5bn ($7.5bn) of annual savings from an expected total of £66bn by 2030. Even that progress has been undone by the rebellion.

Across government, Sir Keir tweaks systems that need reinvention and shores up institutions that should be demolished. Labour’s reforms to the planning code, Brexit, the National Health Service, Whitehall and taxation are all too timid. As a result, the government has blown its stock of political capital on measures that are often sensible, frequently unpopular, but invariably too small, shallow and slow to make a difference.

Another of Sir Keir’s errors has been to shy away from making the big argument. The case for reforming welfare should come naturally to a leader who has preached blue-collar values of hard graft and minding the pennies. But the former star barrister instead fell back on the weak, contingent case that his hands are forced by the public finances—only then to destroy his credibility by backing down. Having run a “small target” election campaign that included as few details as possible, Sir Keir has never sought to tell voters why he wants power—at least not beyond saying that it should help him be re-elected.

And a last disappointment has been his failure to equip Labour to grapple with the mood in the country. Britons know that their economy is stagnant, but they also balk at attempts to fix it. They tell pollsters they want higher spending, but oppose higher taxes. They want lower welfare bills in general, but oppose benefit cuts in particular. Naturally, Kemi Badenoch, the Conservative leader, and Mr Farage play into this, with talk of a smaller, leaner state even as they line up to oppose cuts to goodies that voters treasure.

Labour MPs were elected to resolve these contradictions. Under Sir Keir, they have been unwilling to confront their voters. Twice MPs have shown they will not control spending—first by protesting against a cut to heating subsidies, and then by rebelling on welfare. Labour’s supposed “iron grip” on the public finances is feeble. Many MPs talk about loosening the fiscal rules again, so as to borrow even more. They have learned the wrong lessons from Liz Truss, whose 49 days as prime minister in 2022 tanked the bond market. The conclusion should not be just that Ms Truss was a fool, but also that Britain, a country with high debt, weak growth and borrowing costs above the G7 average, will struggle to retain the faith of its creditors.

In theory, one year is too soon to write off Sir Keir. Even Sir Tony Blair in his pomp was dealt a bloody nose by backbenchers over welfare reform. The prime minister could yet confront his MPs with the hard truth that, without a transformation in Britain’s growth prospects, the social democracy to which they aspire is a mirage. Britain is lucky that the solutions to many of its problems could be fixed by Parliament: deeper welfare reform; a predictable, rules-based planning system; a new property-tax and VAT regime; and visas geared to productive newcomers. Such a course would bring growth and help refute Mr Farage’s argument that the old parties are inert in the face of decline.

More probably, Sir Keir will sink further. His government appears to have lost confidence among investors, and his chancellor’s credibility has vaporised: it is unclear how long she will survive in office. After this week, the prime minister will struggle to enforce discipline in Parliament. Rather than try to pass ambitious legislation, he is more likely to try to soothe irate MPs and buy off his base with a thin smear of jam today.

A Labour Party that chooses popularity over hard reforms will end up with neither. Deeper crisis could shake Britain out of its stupor, but if the malaise continues it may well be Mr Farage who rides to power promising change. That should be Labour’s warning to centrists everywhere. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

It will change the online economy and the evolution of artificial intelligence

China is building an entire empire on data It will change the online economy and the evolution of artificial intelligence July 3rd 2025 CHINA’S 1.1BN internet users churn out more data than anyone else on Earth. So does the country’s vast network of facial-recognition cameras. As autonomous cars speed down roads and flying ones criss-cross the skies, the quality and value of the information flowing from emerging technologies will soar. Yet the volume of data is not the only thing setting China apart. The government is also embedding data management into the economy and national security. That has implications for China, and holds lessons for democracies.

China’s planners see data as a factor of production , alongside labour, capital and land. Xi Jinping, the president, has called data a foundational resource “with a revolutionary impact” on international competition. The scope of this vision is unparalleled, affecting everything from civil liberties to the profits of internet firms and China’s pursuit of the lead in artificial intelligence.

Mr Xi’s vision is being enacted fast. In 2021 China released rules modelled on Europe’s General Data Protection Regulation (GDPR). Now it is diverging quickly from Western norms. All levels of government are to marshal the data resources they have. A sweeping project to assess the data piles at state-owned firms is under way. The idea is to value them as assets, and add them to balance-sheets or trade them on state-run exchanges. On June 3rd the State Council released new rules to compel all levels of government to share data.

Another big step is a digital ID, due to be launched on July 15th. Under this, the central authorities could control a ledger of every person’s websites and apps. Connecting someone’s name with their online activity will become harder for the big tech firms which used to run the system. They will see only an anonymised stream of digits and letters. Chillingly, however, the ledger may one day act as a panopticon for the state.

China’s ultimate goal appears to be to create an integrated national data ocean, covering not just consumers but industrial and state activity, too. The advantages are obvious, and include economies of scale for training AI models and lower barriers to entry for small new firms.

Some of the disadvantages are equally clear, however. The state has a poor record of managing personal data: Shanghai’s police lost 1bn records to a hacker. If private firms lose control over the data they create, profits could suffer, diminishing the incentives to innovate. Although the digital-ID scheme may supersede the existing clunkier online surveillance system, in which low-level enforcers abuse their enormous powers, the new approach looks a lot like a paradise for Big Brother.

Most countries are grappling with how to manage and control data. According to some reports, the Trump administration may consider hiring Palantir, a private tech firm, to consolidate government data pools. The European Union may have to update its GDPR rules. India’s Aadhaar system for IDs emphasises privacy at the possible expense of boosting the economy.

All countries need scale and efficiency in data management. Yet for democracies the task is harder, because they must build in checks and balances that safeguard property rights, privacy and civil liberties. As it embraces its vast experiment, China will put less weight on such things and could build an efficient and dystopian system of surveillance. For decades it has been a “fast follower” of Western innovations. If China now races ahead in showing the financial value of its national data ocean, its method of centralisation will pose not just an economic challenge, but also a political one. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The president’s authoritarian instincts are propelling a spiral of violence

William Ruto is taking Kenya to a dangerous place The president’s authoritarian instincts are propelling a spiral of violence July 3rd 2025 For the past two decades, if you searched a map of Africa for a country that was relatively stable politically and successful economically, one stood out: Kenya. Home to 57m people from 40 ethnic groups, the east African country has grown steadily and sustained a largely peaceful democracy. But now the picture is looking bleak. Kenyans are increasingly discontented and venting their anger in the streets. President William Ruto, elected in 2022 on a promise to improve the lives of ordinary Kenyans, has responded to demonstrations with brutality and censorship. A spiral of riot and repression is eroding civil liberties and may jeopardise economic reforms . Mr Ruto must change tack.

The latest ominous sign came on June 25th, when 19 people were killed and hundreds injured after police opened fire on protests. The government banned live television coverage of the mayhem, until a court intervened. The protesters were furious at the recent death of an opposition blogger in police custody; they were also marking the anniversary of anti-government demonstrations in 2024, during which at least 63 people were killed and many more arrested or abducted.

Kenyans’ fury reflects their country’s deeper problems. In contrast with the past, protesters are not divided along ethnic lines, but united by frustration over their poor living standards and their lack of opportunities. Last year’s demonstrations were named the “Gen Z” protests because they were led by young people outraged at a planned tax rise by a government that wastes money and creates too few jobs for them.

The official response to bloodshed last year was indifference. Following the latest killings, the interior minister has denounced what he calls a “coup attempt” by “criminal anarchists” and commended the police on their restraint. The more repressive the government grows, the more young Kenyans question its legitimacy. Their country, which once set a fine example to the rest of Africa, now offers a how-to guide on smothering dissent.

It could get worse. Unrest could grow more violent, and be met with more deadly force and more midnight abductions of government critics by hooded men wielding batons and handcuffs. (The police insist they are not to blame, but survivors say they were tortured and questioned about the protests.) Kenya has a reasonably solid judiciary, but such abuses undermine confidence in the rule of law and deter investment. Several global companies have already left or scaled back operations. Worse still, Mr Ruto’s inability to create a consensus could delay or derail much-needed economic reforms. After last year’s protests, he backed down and scrapped the plan to raise taxes. Yet the state needs more revenues if it is to do its job properly while reducing public debt and promoting growth.

The best way out of the spiral would be to take the protesters’ demands seriously. The government should rein in its security forces, ending the abductions of dissidents and prosecuting those responsible for killing protesters. It should make a visible effort to improve public services, while curbing corruption, state profligacy and ostentatious consumption by the political elite. Kenyans are likely to accept higher taxes only if they feel more confident that their hard-earned cash will not be stolen or squandered.

Given the damage to Mr Ruto’s reputation over the past three years, a less tainted successor would have a better chance of getting the reforms Kenya needs. So the president should not stand for re-election in 2027. Alas, he is unlikely to step aside. Kenya does not have a strong opposition candidate to challenge him. Unless one emerges, there is a grave risk that Mr Ruto will continue to take his country backwards. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Hailey Bieber, Rihanna and Ryan Reynolds are among a new cohort of celebrity entrepreneurs

How A-listers are shaking up the consumer-goods business Hailey Bieber, Rihanna and Ryan Reynolds are among a new cohort of celebrity entrepreneurs July 3rd 2025 Celebrities ARE venturing beyond the billboard and the big screen—and into big business. Hailey Bieber, a model married to Justin, recently sold Rhode, her make-up brand, in a deal valued at as much as $1bn. Skims, a shapewear label founded by Kim Kardashian, a reality-TV star, makes $1bn in annual sales and is expected to list on the stockmarket soon. Rihanna is now a billionaire not directly because of her music, but thanks to Fenty Beauty, her make-up label. Ryan Reynolds, a Hollywood actor, is active in everything from telecoms to online privacy. Surprisingly, many of these superstar businesses have become a source of innovative new consumer products.

Celebrities have long used their fame to peddle things. Michael Jordan, a basketball player, is thought to have made over $1.5bn from his partnership with Nike over the past 40 years. Nespresso has reportedly paid George Clooney more than $40m to have his mug selling its coffee. Two decades ago Hulk Hogan, a professional wrestler, helped market the “Hulkster” cheeseburger, pre-cooked and frozen for your convenience. The practice continues. This week President Donald Trump launched “Victory 45-47”, a line of fragrances for men and women priced at $249, having launched “Fight Fight Fight” ($199) last year.

By contrast, the new superstar brands put the A-list into capitalist. Ms Bieber and co are involved in operations and hold equity stakes of varying sizes in the underlying businesses. Many celebs have begun to rethink the value of traditional endorsement and licensing deals. Social media now give them a line straight to their fans. Direct-to-consumer distribution, meanwhile, has made getting a product to market easier than ever. Given that the real money is in building and owning a brand , rather than advertising, why not launch one instead?

This thinking in turn is altering the life-cycle of consumer goods. Just as pharmaceutical giants acquire biotech startups to refresh their drug pipelines, so consumer giants are buying up the most successful celebrity brands. The match makes sense. The hardest part of building a brand is the first 100,000 sales, but the A-list has a fan base that is well disposed towards them and their wares. Once a celebrity brand gets off the ground, a consumer giant has the production and distribution networks to help it grow.

Hence the series of deals. Among the first was Apple’s acquisition of Beats Electronics, a headphones and streaming business co-founded by Dr Dre, a music producer. Many were shocked when the tech giant, which prides itself on in-house research and design, paid around $3bn for the brand in 2014. More recently Diageo, a drinksmaker, has bought a tequila firm co-owned by Mr Clooney, in a deal valued at around $1bn, and a gin distiller partly owned by Mr Reynolds, for up to $610m.

Obviously, a famous name is not enough on its own to get a second-rate product flying off the shelves. You need only peer into the bargain bin in any cosmetics shop to spot the remainders of Rosie Huntington-Whiteley’s beauty products, or Sarah Jessica Parker’s scents. Some of Mr Trump’s newest offerings may soon join them. According to a perfume-review website, Victory 45-47 for men is “not particularly memorable”.

Shoppers today are quick to review products on social media. Fans might try a new lipstick or t-shirt produced by a celebrity. But they will not buy it a second time if they are disappointed. At their best, celebrity brands are innovative, creative—and lucrative for their owners. Yet, just like show business, brutal flops are possible, too. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

After the bombs should come a plan to reset the region

How to win peace in the Middle East After the bombs should come a plan to reset the region June 26th 2025 DONALD TRUMP gambled. But has he won? He has bombed Iran’s nuclear programme and immediately imposed a ceasefire on Israel and the Islamic Republic, and without a single American casualty. That is vindication over those who, like this newspaper, feared that Iran would lash out.

But the risks were only half the calculus: the other factor was whether America would be able to use a strike to stop Iran from building a nuclear weapon. The best way to accomplish that would now be for Mr Trump to reach a full nuclear agreement with the regime. He can bolster it by pressing the Middle East to solve its problems through trade and investment, rather than preparing for wars. Those are daunting tasks, but if Mr Trump even partially accomplished them, he would have secured a prize that has eluded his predecessors.

His efforts should begin with an assessment of how much his 14 bunker-busting bombs and 30 or so cruise missiles damaged three facilities in Iran. Characteristically, Mr Trump claimed to have “obliterated” the Iranian programme. Within days he was contradicted by a leaked assessment from the Defence Intelligence Agency that warned that Iran had been set back by only a few months . But it was preliminary and “low-confidence”. It, in turn, has been contradicted.

The furious row now unfolding must not obscure the central truth. Bombing alone was unlikely to verifiably destroy all Iran’s facilities and was never going to eliminate Iran’s nuclear know-how. Its purpose was to set back the programme or, better, persuade Iran that a nuclear weapon was not worth pursuing at all. Regardless of how much damage has been done, Mr Trump now needs to accept that this insight must be formalised in a nuclear agreement.

The president has more than American bombers to help him. His raid was the culmination of a stunning 20-month Israeli campaign that has broken Iran’s two-decade strategy to extend its malign influence over the Middle East. Its nuclear programme cost tens of billions of dollars but, far from deterring a foreign attack, it provoked one. Iran spent tens of billions more on a network of militias and clients across the Middle East. One purpose was also to deter Israel from attacking Iran, but after being struck by Hamas on October 7th 2023 Israel took Iran’s proxy network apart.

Having been humiliated, Iran’s regime is at a fork in the road. It could chase a bomb, but if this was discovered the country would be isolated and face another round of attacks. It could also infuriate ordinary Iranians, who have endured hardship and repression even as their taxes have been frittered away by a regime that proved unable to defend them. The alternative is for the military officers who have increasingly elbowed aside the mullahs to conclude that waging a revolutionary struggle against Israel and America is a fight the republic cannot win—and that their own prosperity and survival would be better served by peaceful engagement.

Mr Trump can influence the regime’s choices by offering a nuclear deal in everyone’s interests. America should demand that Iran give up its stocks of highly enriched uranium and submit to intrusive international inspections. Iran should be able to enrich uranium to reactor grade, but under tough terms that require it to be part of a consortium of countries working offshore. In exchange, the negotiations should be about lifting European and American sanctions, as well as threats.

Do not imagine this will be easy. The urgent question is what became of Iran’s 400kg of highly enriched uranium, which was targeted in the American strikes. Nobody trusts Iran to tell the truth, but it will be very hard for the regime to prove what it doesn’t have, or for international inspectors to account for every kilogram after such extensive bombing. For its part, Iran trusts nobody, including the inspectors. The negotiations risk getting bogged down in recriminations.

That is why Mr Trump should also change Iran’s incentives to go nuclear by trying to set a new direction for the Middle East. Israel is now the region’s dominant military power. After October 7th, many Israelis have concluded that survival in a dangerous neighbourhood demands the relentless application of violence. Its armed forces strike targets in Lebanon and Syria at the first sign of an emerging threat. Far-right factions in its government want to use this dominance to annex Palestinian territory in Gaza and the West Bank.

After its victory over Iran, Israel should turn the page instead, as it did with Egypt after the war in 1973 and as it began to in 2020, when it normalised ties with several Arab states in the Abraham accords. The aim should now be a similar deal with Saudi Arabia. But that will require a ceasefire in Gaza, Israeli acknowledgment of the principle of two states and a move away from a permanent state of war.

To bring about a nuclear deal and normalisation will be very hard—especially for a president with a short attention span and a tendency to improvise. And yet Mr Trump has strengths. He dominates the Republican Party, so Binyamin Netanyahu, Israel’s prime minister, will struggle to outflank him in Congress. Having helped Israel, Mr Trump has earned the authority to bang heads together—as he did on the White House lawn on June 24th when he furiously demanded that Israel observe his ceasefire.

If Mr Trump loses interest, as is all too possible, the alternative will be bleak. If Iran’s nuclear programme looms once more, Israel will bomb Iran again. But a second or third campaign would be technically and diplomatically harder than the first. Iran would have learned lessons and the world would lose patience at the repeated use of war as a temporary fix. America, obliged to support Israel even if it did not fight alongside it, would find that the Middle East sucked in military resources and political focus that it wanted to direct towards Asia. Eventually, bombing could come to seem futile, driving a wedge between America and Israel. Mr Trump has gambled. If he is to win, much hard work lies ahead. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Donald Trump’s health secretary undermines global public health, too

RFK’s loopy approach to vaccines endangers Americans Donald Trump’s health secretary undermines global public health, too June 26th 2025 When it comes to vaccines, President Donald Trump’s instincts have sometimes been sound. In May 2020 he launched Operation Warp Speed, which came up with inoculations for covid-19, based on a new mRNA technology, at an unprecedented pace and scale. By one estimate, covid vaccines averted 18.5m hospitalisations and 3.2m deaths in America in two years. And Mr Trump wisely got himself jabbed. So why is he now letting his health secretary, Robert F. Kennedy junior, dismantle the country’s vaccine-making ecosystem?

Mr Kennedy is what is known politely as a “vaccine sceptic” and impolitely as a crank. He is undermining trust in, sensible scrutiny of and incentives to invest in one of modern medicine’s greatest wonders.

Time and again he casts spurious doubt on the safety of vaccines. His department has hired a conspiracy theorist to investigate a long-debunked link between vaccines and autism. He warns against the human papillomavirus (HPV) vaccine, which is estimated to have reduced American cervical-cancer deaths by 62% in the past decade. (As a lawyer, he was involved in a lawsuit against the vaccine-maker, Merck; he promised that any profits from it would go to his son, but that hardly erased the conflict of interest.) He has scrapped the recommendation that expectant mothers should be vaccinated against covid, as 120 other countries advise. He called the measles jab a “personal” choice, and urged giving children vitamin A. Several have been hospitalised for liver damage from vitamin A overdoses, and measles is resurgent in America, along with whooping cough, another vaccine-preventable disease. At least eight people have died this year.

Mr Kennedy’s efforts to warp scrutiny of vaccines are equally troubling. This month he fired all 17 members of a committee that determines which vaccines are recommended (and thus funded). A new eight-member committee has less expertise and more doubts; it includes two former paid witnesses in legal cases against vaccine-makers. Mr Kennedy insists this will ensure Americans receive safer vaccines. More probably, they will receive fewer.

As if all this were not bad enough, he is cutting funding. One step is to cancel federal contracts to develop vaccines for bird flu and HIV. Another is to refuse to support global efforts to roll out vaccines in poor countries—which benefits Americans by limiting the spread of infectious diseases. Alarmingly, he also has some power over a federal scheme that shields vaccine-makers from litigation.

Vaccines are unusual because they are given not to the sick but to billions of healthy people. By the laws of chance, many who receive them subsequently fall ill. To prevent vexatious lawsuits from making vaccine production a money-loser, many countries have schemes that weigh the evidence and directly compensate those who suffer such things as allergic reactions, nerve damage or clots. No one claims that vaccines never cause harm; only that the benefits far outweigh the costs. Mr Kennedy has criticised vaccine liability shields, which make life harder for litigators. If he uses his power to hobble America’s scheme, drug firms could pull vaccines from the market, drastically raise prices, or cut back on research.

So his boss faces a choice. Will he let his most eccentric henchman continue to undermine public health? Or will he show the same good sense he demonstrated when he launched Operation Warp Speed? If Mr Trump is wise, he will brave the ire of his vaccinephobic supporters and rein in—or sack—his health secretary. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

As they spend big, politicians must resist using one pot of money to achieve many goals

How the defence bonanza will reshape the global economy As they spend big, politicians must resist using one pot of money to achieve many goals June 26th 2025 For the first time in decades, the rich world is embarking on mass rearmament. Wars in Ukraine and the Middle East, the threat of conflict over Taiwan and President Donald Trump’s impulsive approach to alliances have all made bolstering national defence an urgent priority. On June 25th members of NATO agreed to raise their target for military spending to 3.5% of gdp, and allocated an extra 1.5% to security-related items (Spain insisted on a loophole). If they achieve that target in 2035, they will be spending $800bn more every year, in real terms, than they did before Russia invaded Ukraine. The boom goes wider than NATO. By one estimate, embattled Israel splurged more than 8% of its gdp on defence last year. Even doveish Japan plans to stump up.

Such vast sums could reshape the global economy, by squeezing public finances and shifting activity within countries. As politicians sell the benefits of rearmament to voters, many will claim that military spending will bring economic gains as well as security. Sir Keir Starmer, Britain’s prime minister, promises defence will offer “the next generation of good, secure, well-paid jobs”. The European Commission says it will bring “benefits for all countries”. However tempting politically, such arguments are wrong. Using defence spending for economic objectives would be a costly mistake.

The most obvious economic consequence of bigger defence budgets will be to strain public finances. Debts are already high and the financial pressures on governments, caused by ageing populations and higher interest rates, are mounting. The average nato member, excluding America, will need to raise annual defence spending by 1.5% of gdp.

As a result other parts of the budget, such as social spending, will be squeezed, shrinking the peace dividend from the ending of the cold war. And cutting spending or raising taxes by the full amount is likely to be politically impossible, meaning that many governments will run higher deficits, too. Defence spending will therefore tend to raise interest rates and make the public finances more fragile, even as it makes countries safer from their enemies.

What are the consequences for growth? Deficit-financed spending will provide a Keynesian fiscal stimulus, but it is likely to be modest—and unwelcome at a time of low unemployment and lingering inflation in the rich world. Moreover, defence spending is costly and lifts no one’s living standards directly.

Defence research and development, by contrast, could be more beneficial. Publicly funded innovation often has the effect of spurring private innovation; by one recent estimate, when defence R&D accounts for an additional 1% of an industry’s value-added, its annual productivity growth rises by 8.3%. Just think of the internet, or nuclear energy, both of which emerged from military research.

Spending on arms will also shift demand around the economy. Politicians hope that it might counter the effects of deindustrialisation, but they are likely to be disappointed. Defence production, like much other manufacturing, is now highly specialised and automated, meaning that rearmament is likely to create far fewer jobs than are being lost to new technology or foreign competition. By one estimate, higher defence spending in European NATO countries could create 500,000 jobs —a paltry number when set against the EU’s 30m manufacturing workers.

The nature of modern warfare only makes mass job creation less likely. Ukraine shows that a country does not need broad-based industrial policy to prepare for war. Making drones, which are inflicting the majority of casualties on the battlefield, is relatively simple . And the more artificial intelligence becomes important, say in guiding and operating those drones, the fewer jobs are created on assembly lines and the more rents accrue to tech firms.

Big defence budgets will present governments with trade-offs between security, efficiency and equity. As budgets grow, local officials, companies and unions may all clamour for the money to flow their way. But giving in would be a mistake. One of the problems with Europe’s defence spending is that too many countries want to make their own hardware. EU countries operate 12 types of battle tanks, for example, whereas America produces only one. Duplication is wasteful and hinders armies from being able to work together.

Governments have no duties more important than keeping their citizens safe. The fragility of the public finances means that they will need to be as efficient as possible in how they spend taxpayers’ money. Splashing the cash on favoured places and industries will only lead to more tax rises or cuts to social spending. To make a success of rearmament, governments will need to make an honest case to voters for spending for security’s sake. If they look to accomplish everything with a single budget, they will do nothing well. There is no point in boosting growth if the consequence is to be invaded. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The Awami League has a dire record. But voters should have a free choice

Banning the opposition is no way to revive Bangladesh’s democracy The Awami League has a dire record. But voters should have a free choice June 26th 2025 It took only four years for the euphoria that followed Bangladesh’s independence, in 1971, to be extinguished by a military coup. Bangladesh’s second liberation, ushered in by a popular revolution last year, is in danger of fizzling out even more swiftly. In August 2024 a student-led uprising overthrew Sheikh Hasina, the prime minister, who had ruled the country with increasing despotism for the preceding 15 years. A caretaker government took over, led by Muhammad Yunus, a microcredit pioneer and national hero; it promised to rebuild the country’s democracy. Nearly a year on, the new Bangladesh hangs in the balance .

To be fair, Mr Yunus and his caretaker administration were handed a wickedly difficult task. Years of misrule had deeply corroded democratic institutions. Corruption was widespread and blatant; thugs beat up the government’s enemies. The economy, after a period of impressive growth, had lost steam: nearly a fifth of Bangladeshi youngsters were unemployed. Some furious revolutionaries vowed to take vengeance on anyone they thought had helped Sheikh Hasina’s regime.

The new government has made some headway. It has said, tentatively, that it plans to hold elections in February 2026. The economy is sluggish but stable. Inflation has slowed. International lenders are providing loans.

Yet much else that it is doing looks risky. In foreign affairs Bangladesh has lurched towards China, wooed by the prospect of trade, investment and cheaper arms. This endangers ties with America, which is the biggest buyer of Bangladesh’s exports and was, until the Trump administration’s aid cuts, one of its most important donors. The tilt to China, as well as greater chumminess with Pakistan, has angered India, too. Ties with Bangladesh’s giant neighbour were improving until last summer, but are now fraying. In recent months India has cancelled a trans-shipment agreement that was benefiting Bangladeshi firms and deported Bangladeshi migrants. Now it wants to renegotiate an important river-sharing treaty.

Mr Yunus’s most important task is to remodel Bangladesh’s politics. That means convincing the country’s quarrelsome parties to agree on new rules for elections, and much besides. Yet there are signs that politicians are running out of patience with this process. Political disagreements are spilling onto the streets. In mid-June a mob assaulted a former election commissioner accused of helping Sheikh Hasina’s party, the Awami League, fix elections in 2018.

In May the interim administration made a big misstep: it banned the Awami League from politics, which will prevent it from taking part in the elections due next year. Courts are rightly prosecuting party leaders for crimes committed in office. But until recently there was hope that the rank and file would be given a chance to rejuvenate their movement.

The ruling, enacted through an amendment to an anti-terror law, is legally questionable. It reeks of the kind of dirty tricks that Bangladeshi politicians have long used to thwart their opponents. It risks throwing Bangladesh back into a cycle of retribution, in which whoever is in office uses their power to nobble challengers.

Bangladesh’s leaders should unban the Awami League and let it contest a fair election. Many citizens would find that deeply unpalatable—but not everyone in Bangladesh’s oldest party is tainted. The League still draws considerable support, including from minority groups. After years of dodgy elections, these voters deserve the right to make a mark for whomever they like.

The party would not win, even if allowed to campaign freely. But its presence in parliament might bolster the opposition, which would help keep the victors on their toes. Building a new Bangladesh requires reconciliation, not revenge. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

From fast food to video games, new marques are making their mark

Chinese brands are sweeping the world. Good From fast food to video games, new marques are making their mark June 26th 2025 Ask a Westerner for an example of a successful Chinese consumer-goods brand, and until recently most would have struggled. Although China is the world’s premier manufacturing power, it has long lagged behind when it comes to imaginative home-grown retail brands and products, even as its factories have cranked out vast numbers of them for foreign companies. This is now changing. Innovative Chinese brands are popping up everywhere. Consumers and investors around the world stand to benefit

From Stockholm to Sydney, the electric car gliding silently by is increasingly likely to be Chinese . Mixue, a purveyor of ice-cream and cold drinks, has dethroned McDonald’s as the world’s largest fast-food chain by number of outlets. It is expanding in South America, as is Meituan, a Beijing-based delivery app. Chagee, a chain of tea shops, is on track to have at least 1,300 stores outside China by the end of 2027, mainly in South-East Asia; a few years ago it had barely any. And Pop Mart, a Chinese toymaker, has created a buzz worthy of Disney around its strange grinning (or are they grimacing?) nine-toothed dolls, called Labubus. Fans include Rihanna, a pop star, and Sir David Beckham, a retired footballer.

Western shoppers have bought goods made in China for decades. But these were largely made for, and designed by, foreign firms. More recently, internet retailers such as Shein and Temu have won over customers with cheap, cheerful clothes and consumer goods, while downplaying their Chinese origins. Chinese brands were long seen as poor-quality, unimaginative and unfairly subsidised. Scandals around food safety and labour standards did not help.

New firms are now overturning those old assumptions. Many happily advertise their roots. The logo of Chagee shows a Peking Opera singer in full headdress. (The firm’s name derives from “Farewell, My Concubine”, a traditional Chinese opera.) “Black Myth: Wukong”, one of the most successful video games ever, features the Monkey King from “Journey to the West”, a 16th-century novel. Many brands now compete on quality as well as price. Chagee’s drinks can be as costly as Starbucks’. Chinese EVs offer dazzling entertainment systems as well as low prices. Pop Mart’s toys can cost as much as $835.

In the past, Chinese firms typically succeeded by learning to replicate Western products cheaply. Now they are accumulating valuable intellectual property of their own. And though state media outlets laud Labubus, the government does little to subsidise these new consumer firms (with the exception of electric-carmakers). Indeed, China’s capital markets, which are tasked with nurturing technologies to beat America, are stacked against them. Consumer firms have received only 3% of the capital raised in listings on the mainland over the past two years. Chipmakers have taken five times as much.

The rise of Chinese consumer brands is good for shoppers everywhere: they now have a wider array of innovative products to choose from. Investors, too, should welcome the sight of oddly mesmerising dolls and the taste of red-bean ice-cream. Investing in Chinese technology companies has long been politically hard because of security worries on both sides. If DeepSeek, China’s breakthrough AI firm, were to go public, American investors would be unlikely to get a piece of the action. And TikTok is still stuck in legal limbo. But handbags and hot drinks are harmless. Even as the trade war erupted in April, Chagee went public in New York, raising more than $400m to fuel its global expansion. Many more brands have listed in Hong Kong, or plan to do so.

Western firms will have to wake up and smell the bubble tea. Within China, the premium that foreign brands command simply for being foreign is eroding. In the future they will need to try harder to understand Chinese customers’ particular tastes. Some may even do deals with inventive Chinese partners, to gain insight and inspiration. These are still early days for Chinese marques’ foray into global markets. But Chinese carmakers are already forcing Western rivals to reconsider their strategies. And competition from China may eventually push Disney, Mattel and other Western mega-brands to new heights of creativity. Chinese brands’ westward journey, like the Monkey King’s, could bring lavish rewards. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

In a worse place if Donald Trump rushes in

Where will the Iran-Israel war end? In a worse place if Donald Trump rushes in June 19th 2025 IN THE 20 months since Hamas massacred almost 1,200 people, Israel has fought in Gaza, Lebanon, Syria and Yemen. On June 13th, when Israeli aircraft struck Iran, it became clear that these campaigns waged against Iranian clients and proxies have all been leading to today’s momentous confrontation between the Jewish state and the Islamic Republic.

The Iran-Israel war will reshape the Middle East, just as Arab-Israeli wars did between 1948 and 1973. As President Donald Trump teeters between talking to Iran and sending American aircraft and missiles to bomb it, the question is whether this first Iran-Israel war will also be the last, thereby creating space for a new regional realignment built on economic development. Or will it lead to a series of Iran-Israel wars that mire the Middle East in years, if not decades, of further violence?

Israeli minds are focused on the looming threat of a nuclear-armed Iran. Israel claims that it acted now because Iran has been racing towards a bomb, under the cover of arms talks with America. Western intelligence agencies are less sure. Either way, a nuclear Iran could abuse its neighbours with impunity, much as Vladimir Putin has Ukraine. It could also spark an atomic arms race in the Middle East and beyond.

A nuclear-armed Iran would therefore be a disaster for Israel and the world. Mr Trump’s desire to stop it is a welcome signal to would-be proliferators across the planet that they should abandon their ambitions.

However, Binyamin Netanyahu, Israel’s prime minister, faces a grave problem. To remove the threat, he must destroy Iran’s wherewithal to make a bomb or he must eliminate its desire to acquire one. War with Iran is unlikely to achieve either of those things. Even if Israel wrecks Iran’s infrastructure, thereby postponing the day when it might complete a weapon, it cannot eradicate the know-how accumulated over decades. And far from eliminating the Iranian regime’s desire to go nuclear , Israeli strikes are likely to redouble it.

Mr Netanyahu’s solution is to encourage Iranians to rise up and topple the Islamic Republic. He calculates that a new regime is likely to be less tyrannical, less bellicose and less wedded to a nuclear programme. But Israel can only create conditions that favour a change of regime; it cannot impose a coup from the skies. Besides, nobody knows how willing a new government would actually be to make peace with Israel or to abandon nuclear dreams which, after all, began with the shah.

The conclusion is that the only thing under Israel’s direct control is to buy time, by setting back Iran’s technical capacity to get a bomb. If, in a few years, Iran renewed its nuclear programme, Israel would have to mount another operation all over again. The barriers to success would surely grow.

What is to be done? The G7, meeting in Canada, called for de-escalation and there are reports that Iran wants to negotiate. Diplomacy, if it worked, would indeed be the best way to solve this problem. In contrast to war, it could both lead to the dismantling of the programme and also, by building confidence, reduce Iran’s incentive to dash for a bomb. That is why Mr Trump’s decision in 2018 to walk out of an imperfect arms agreement with Iran was a terrible blunder.

In practice, however, a deal will be very hard to reach. For it to be credible, Iran must agree to give up every ounce of highly enriched uranium, submit to intrusive inspections and forgo all but a token enrichment capacity. Would the regime in Tehran ever accept such humiliating terms as a precondition? Only, if at all, if it fears for its survival. Perhaps sensing that, Mr Trump has demanded Iran’s “unconditional surrender”, issuing threats that have caused residents to flee Tehran.

The best way to apply pressure to Iran, hawks suggest, would be to leave negotiations for later—and for America instead to shift from merely defending Israel and deterring Iran to joining the attack on Iran’s programme. This has advantages, too. America’s bunker-busting bombs are much more likely than Israel’s to penetrate key nuclear facilities such as Fordow, in central Iran. Iran might talk sooner, because it would know that America has the resources to strike it long after Israel’s stocks of guided munitions start to run out.

Yet for Mr Trump to enter the fray would be a huge gamble. He was elected to keep America out of wars in the Middle East. Even if he intends to hit nuclear targets and nothing else, America could be sucked in. So far Iran has focused all its strike-power on Israel, but it may be saving missiles for a regional assault. It may also have terror cells around the world. Imagine that it now starts to kill American troops and civilians, or that it sends energy prices soaring by blasting Saudi Arabia’s oil industry or blocking the Strait of Hormuz, a vital waterway for oil and gas tankers. Or perhaps it will hit tower blocks in Dubai or Qatar, beginning a stampede of the expatriates who power their economies. Mr Trump would have to retaliate.

Where does that leave America? Fordow is important, but even if it is destroyed Mr Trump cannot be sure of eradicating Iran’s programme once and for all. Secret facilities and stocks of uranium might survive; know-how definitely would. If Iran is not to go nuclear, America might therefore have to go to war in the Middle East repeatedly—forcing it to choose between non-proliferation and giving full attention to its rivalry with China. Sooner or later, America will come to realise that talks offer the least bad path and that the refusal of Mr Netanyahu to countenance them is an obstacle.

So Mr Trump faces a trade-off. By doing more damage than Israel could alone, America could set the clock back further. Its participation might also increase the chances that the regime enters talks in earnest or collapses. But those gains are uncertain and must be weighed against the risk of a regional conflagration. In a shifting landscape, better for the king of ambiguity to wait to see how far Israel’s campaign gets, whether the Iranian regime is willing to talk and to gauge whether American intervention could tip the balance. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

European members need a hard date to boost their defence budgets

To keep Russia out and America in, NATO must spend more European members need a hard date to boost their defence budgets June 19th 2025 The first head of NATO, Hastings “Pug” Ismay, reputedly said the alliance’s purpose was to “keep the Soviet Union out, the Americans in and the Germans down”. Today, no one wants to keep the Germans down. But as NATO’s 32 members gather in The Hague on June 24th, most agree that the still-essential task of keeping the Russians out requires keeping the Americans in. And that is no longer straightforward.

At one point the summit was in danger of being scrapped. In February President Donald Trump, along with his vice-president, J.D. Vance, and his defence secretary, Pete Hegseth, launched a series of verbal attacks on America’s European allies, culminating in the humiliation of Ukraine’s president, Volodymyr Zelensky, whom Mr Trump threw out of the White House. Vladimir Putin was doubtless delighted. NATO suddenly looked more vulnerable than ever before in its 76-year history.

Relations have been mended since then. America has quietly continued intelligence-sharing and modest arms shipments to Ukraine. The rhetorical attacks on allies have dried up. Mr Trump, having given up on his campaign promise to end the war in Ukraine in a single day, is no longer pressing Mr Zelensky to accept terms that would amount to surrender. Mr Trump is still likely at some point to pull out some of the 80,000 American troops stationed in Europe; yet he has gone quiet about it.

The president is right that it makes no sense for 340m Americans to carry the main burden of defending 600m Europeans. Europe’s economy is about as large as America’s. The nation threatening it has only 140m people and a GDP smaller than Italy’s. Russia is Europe’s problem, and the surest way to ensure that America continues to help out with the things that only it can provide, such as heavy-lift aircraft and intelligence-gathering, is for Europe to be seen to be paying its fair share for its own defence .

At the summit, European governments will take a step in this direction. Mark Rutte, who now heads NATO, appears to have secured agreement from its members to raise their target for defence spending from 2% of GDP to an impressive 3.5%, which is even more than America spends. On top of that, there will be an agreement to commit an additional 1.5% of GDP to defence-related categories, such as infrastructure (strengthened bridges and roads for carrying heavy equipment, etc); better cyber-security; and support for defence industries. A headline figure of 5% will be something for Mr Trump to crow about, which matters.

Commitments are one thing; fulfilling them is another. The 2% target was agreed to in 2014, but it took pressure from Mr Trump in his first term—and the shock of Mr Putin’s full-scale invasion of Ukraine—for Europeans to take it seriously. Even now, France and Germany barely spend 2%; Italy and Spain spend far less.

Mr Rutte’s task is to secure a hard date for the new spending target of 3.5% of GDP. Early chatter suggests it may be as far off as 2035. Since Russia is already gearing up for the next conflict after Ukraine, this is rash; 2030 would be more prudent. Even better would be a series of interim targets, as with curbing carbon emissions. None of this will be easy. Gung-ho countries like France and Britain face huge budgetary constraints; Germany, which can afford to act, has a history of reluctance to rearm. Italy is both reluctant and broke.

Raw numbers, anyway, are only part of the puzzle. The money needs to be spent wisely, avoiding duplication and with a good portion allocated to innovative kit and training to give the alliance an edge over Russia’s mass armies (and extraordinary tolerance for casualties). But you can’t do anything without money. If it is to pass an updated version of Pug Ismay’s test, NATO needs to up its game—starting next week. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Even as interest costs mount, politicians promise handouts

Japan’s government bonds: this time it won’t end well Even as interest costs mount, politicians promise handouts June 19th 2025 FOR YEARS Japan was a reassuring example for governments. Even as its net public debt peaked at 162% of GDP in 2020, it suffered no budget crisis. Instead it enjoyed rock-bottom interest rates, including borrowing for 30 years at 0.1%. Now, though, Japan is going from comfort to cautionary tale.

Government-bond yields have risen steadily since 2022 and have surged this year. Interest payments gobble up a tenth of the central government’s budget. The central bank is paying out 0.4% of GDP in interest on the mountains of cash it created during years of monetary stimulus—costs that eventually land on taxpayers. Investors are starting to ask if Japan might be vulnerable to a fiscal crisis after all. They are watching especially closely because Japan’s bond market has lately acted as a bellwether for sovereign debt across the rich world.

The good news is that a crash is not imminent. Japanese bond yields have risen in part because inflation is up, meaning the government can still borrow over most horizons and repay less, in real terms, than it raises. High inflation has already helped shrink the net debt to around 135% of GDP. Even at Japan’s paltry rate of growth, only modest belt-tightening is needed to keep the ratio stable.

The bad news, though, is that politicians are going in the wrong direction. Ahead of an election to the upper house of parliament, which is due by the end of July, they are locked in a bidding war to shower voters with handouts.

Voters are eager to be bribed, since inflation has squeezed household incomes. Real wages are down by about 4% since 2019. And the price of rice, the politically sacred Japanese staple, has doubled since the start of 2024, as regulations and tariffs have stopped fresh sources of supply from responding to shortages caused by bad harvests.

The main opposition parties want to help stretched households by suspending the 8% consumption tax on food. Others want to halve or abolish the overall 10% rate of tax to help with the cost of living. The government is rightly resisting calls for tax cuts which, though supposedly temporary, could be hard to reverse. But the prime minister, Ishiba Shigeru, has yielded to temptation in other ways. He promises giveaways to households worth ¥20,000 ($139) per person, and twice that for children and low earners, at a cost of about 0.5% of GDP.

It is a worrying sign for an indebted country which, like most of the rich world, faces immense fiscal pressure . On plausible assumptions about future bond yields, the imf reckons that interest payments could double as a share of GDP by 2030. Moreover, Japan will need to boost its defence spending as America’s commitment to its allies frays. In the face of these pressures, politicians could have eased the cost of living with structural reforms—such as deregulating the rice market. Instead, they are reaching for handouts, fiscal consequences be damned.

Although politicians hope to help households, it is households that will suffer if Japan’s public finances become riskier. Any dove will tell you that only 12% of the country’s debt is held by foreigners, which makes a run on government bonds less likely. But local ownership is a double-edged sword. It means that any fiscal crisis would mostly hurt Japanese people, who would, in all likelihood, have to endure prolonged and destabilising inflation if public debt became unsustainable. Japanese households are particularly exposed to falls in the purchasing power of the yen. About half of their financial wealth is in bank deposits, compared with about a third in the EU and only 10% in America.

Japan could face more market pressure in the coming months. The central bank is reducing its purchases of government bonds, depriving the market of an important buyer. If inflation proves more persistent than expected, the Bank of Japan might have to raise interest rates faster and higher, worsening the fiscal picture. Donald Trump’s protectionism could dent the country’s economic growth. If Mr Ishiba loosens the purse-strings, a credit-rating downgrade is possible. Japan was once the ultimate demonstration of bond-market placidity. Now it is the first place to look for the start of trouble. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Efforts to deliver a baby boom either fail or cost a fortune

Why MAGA’s pro-natalist plans are ill-conceived Efforts to deliver a baby boom either fail or cost a fortune June 19th 2025 America’s politicians have babies on the brain. In February President Donald Trump told officials to make ivf cheaper. Even without its procreator-in-chief, Elon Musk, the White House is thought to be working on a bigger package of pro-natalist policies. Vice-President J.D. Vance is keen. Mr Trump says he favours a $5,000 handout for new parents. In Britain, meanwhile, Nigel Farage, the leader of Reform UK, a MAGA-ish opposition party, has proposed tax breaks and benefits to encourage women to have more children.

Politicians have long feared the fiscal consequences of an ageing population, with too few young workers supporting legions of pensioners. Governments in places with very low birth rates, such as Japan and South Korea, have spent billions trying to reverse the decline, with little success. The new pro-natalist policies of the transatlantic right differ from older ones in that they are more targeted at working-class women, whose fertility rate has fallen the most. That might make them a bit more effective. But not at a reasonable cost, or without creating perverse incentives.

Previous attempts to deliver a baby boom have either failed or been eye-wateringly expensive, relative to the number of extra births they deliver. Hungary’s prime minister, Viktor Orban, started a big pro-natal push in 2011, and has since given parents everything from tax breaks and cash handouts to free child care. These policies cost a staggering 5.5% of the country’s GDP annually—more than almost any government will spend on an ageing population in any year between now and 2050. In February mothers of two were promised a lifelong exemption from income tax.

Hungary’s fertility rate rose to 1.6 children per woman in 2018, from 1.2 in 2011, making it a poster child for populist pro-natalists everywhere. However, it has since dipped, suggesting handouts encouraged some mums not to have more babies, but to have the same number sooner. Other countries, including Japan, Norway and Poland, have tried tax breaks, handouts, maternity leave, subsidised child care and even state-sponsored dating, to little effect. Such policies mostly soften the blow to the finances and career prospects of professional women from having children, without persuading them to have more.

Like Mr Orban, both Mr Farage and Mr Vance see pro-natalism as a way to boost the native population over the immigrants they so dislike. However, they would not spend as lavishly as Hungary, and they would focus the cash more narrowly on poorer parents. Mr Farage would scrap a cap on benefits, which stops families claiming benefits for more than two children, and boost the threshold below which earnings are exempt from income tax for one half of a married couple. Mr Trump’s handouts would be a bigger relief for poor households than rich ones.

Underpinning these policies is an assumption that poorer women are more likely to respond to incentives to have more children. Indeed, their fertility rates do seem more elastic than those of professional women. Whereas the fertility rates of older, college-educated women have remained fairly steady over the past six decades, most of the collapse in fertility in America and Britain since 1980 stems from younger and poorer women having fewer children, particularly from unplanned pregnancies. In 1994 the average age of a first-time American mother without a university degree was 20. Today, about two-thirds of women without degrees in their 20s have never given birth. Mr Trump’s and Mr Farage’s policies might therefore lead to more babies being born than the approaches of places like Norway, which focus on offering child care, a benefit that professional women tend to take up.

However, it is implausible that any policies will change a country’s demographic trajectory at a less-than-extortionate price tag. The state should help poor families because they need help, not because it wants them to have more children. There is no evidence that working-class women in America currently have fewer offspring than they actually want. Nor is it obvious that encouraging them to procreate would yield a better society. The period of falling fertility rates and fewer teenage pregnancies coincided with more girls staying in school and going to university, which improved their prospects in all kinds of ways. A pro-natal policy generous enough to work might encourage them to drop out of education earlier, reversing some of those gains. All in all, best to leave family planning to families. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

A rosé-soaked meeting in Cannes is like a postcard from the future

What the “cockroaches” of the ad world teach about dealing with AI A rosé-soaked meeting in Cannes is like a postcard from the future June 19th 2025 When advertising executives describe themselves as cockroaches, they are not being self-deprecating. Admen have shown a remarkable ability to survive what look like extinction-level events. Copywriters adapted to radio in the 1920s; artists embraced tv in the 1950s. Agencies clung on in the early 2000s as ads moved online. This week, in the face of another technological revolution , the admen steadfastly held their annual jamboree on the French Riviera.

The latest upheaval, brought by artificial intelligence (AI), is testing the cockroaches as never before. Advertising is one of the sectors most radically affected by AI so far. As such, adland offers a postcard from the future for other industries. Three lessons stand out.

The first is that the moat between human workers and chatbot rivals is narrower than most people think. Creative work is often seen as immune from automation. Large language models (LLMs) are designed to predict the most likely answer, which is often the opposite of the most original one. The best ads remain too weird and wonderful for any machine to have dreamt up: consider the campaign that attached step-counters to chickens to advertise free-range eggs.

Yet this week in Cannes TikTok, Meta, Google and other ad platforms showed off AI-powered features that can create passable video or rewrite ad copy at the click of a button. Their output will not win any awards. That does not matter. Most of the $1trn that is spent on ads each year goes towards workmanlike campaigns, rather than Cannes trophy-bait. Sam Altman’s prediction that AI will one day be able to do 95% of marketing may sound like boosterism for his firm, OpenAI. But the inspired human-made content that people present as a counter-argument is firmly within the remaining 5%. Robots will content themselves with the rest.

Another lesson is that the biggest companies have the most to gain. This runs counter to a popular narrative, that AI will democratise skills and intelligence. It is true that the new tools from Meta and co will allow millions of micro-businesses to produce video ads of a quality that was once out of their reach, and translate text into several languages. Global campaigns can now be launched online for hundreds of dollars; TV-worthy commercials are being put together for a few thousand.

But take a step back and it is clear that the serious money is being made by the giants. The selling of ads was already becoming more concentrated: four tech firms that accounted for a third of the global ad market five years ago now account for half of it. And America’s biggest companies are ramping up their AI investment at a faster rate than the rest. No wonder: AI requires computing muscle and large data sets, both of which are expensive. Whereas human intelligence is more or less randomly distributed, the artificial kind can be bought. Rather than democratise access to intelligence, AI may allow the richest to hoard it.

The last lesson from adland is that AI’s spread will have unpredictable consequences. Some advertisers are shifting their budgets from tv to the humble outdoor billboard. Why? In part because AI has made it possible to infer from vast data sets whether consumers who saw the ad bought the product, allowing marketers to measure the campaign’s effectiveness rather than guess at it. Another unexpected winner is old-school public relations. As consumers switch from search-engines to chatbots, brands need to persuade LLMs to speak highly of them. The most effective way to do that is to influence the sources that the model pays most attention to, such as news articles. In the AI age, high-tech “search-engine optimisation” may be less effective than offline schmoozing (or so, at least, marketers can insist when presenting their post-Cannes expenses claims).

Adland is an outlier in important ways. Ad spending is highly cyclical, so the industry has benefited more than most from the AI-fuelled boom of recent years. The big tech firms that are active in ads also happen to be leaders in AI, and have used ads to test their newest products. And not everyone has the admen’s knack for survival. But the rest of the business world should pay attention to the cockroaches of Cannes. The revolution in adland is a taste of what is to come. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Donald Trump’s troop deployment in LA could yet backfire

When a radical performance artist has command of an army Donald Trump’s troop deployment in LA could yet backfire June 12th 2025 In the 1960s the Yippies had a theory about how to transform America. The system, they thought, was rotten, and the best way to show it was to create a spectacle for TV. They scattered dollar bills in the New York Stock Exchange and held a mass meeting to levitate the Pentagon. Some also thought that if armed police or soldiers attacked protesters, Americans would realise they were living in a fascist state and revolt. It backfired: the silent majority saw these stunts and voted for Richard Nixon. The Yippies had got on the wrong side of a fundamental political divide: who stands for order?

By sending troops into Los Angeles, President Donald Trump is trying to show that he does. His opponents, who include the mayor of Los Angeles, Karen Bass, and California’s governor, Gavin Newsom, believe he is provoking disorder. Who wins this argument matters for America’s second-largest city and the country. Mr Trump has just established a formula for conflict. If it works for him, he will surely try it again. All of America’s big cities have large populations of undocumented or illegal migrants. Almost all of them are run by Democrats. Mr Trump is betting that the cycle of protest, violence and repression benefits him and makes his opponents look extreme.

America’s partisan divide is not news. But people who loathe each other online can mostly put politics aside in person. For all the hostility between the parties, the ballot box and the courts continue to mediate their differences. The confrontation in downtown Los Angeles threatens to be different. Unlike the battles Mr Trump is having with universities or law firms, this involves actual troops. Regardless of who provokes violence, it could escalate and spread.

One side in America is cheering him on. For this bit of America, LA and other big cities are places where internal enemies lurk and invaders wave the flags of foreign countries. Rather than repel these alien enemies, the story goes, Democratic mayors and governors harbour them, preventing the government from keeping Americans safe. Democrats not only allow the rules to be broken but reward the rule-breakers with legal protection and benefits. In this they disrespect the president and the people who gave him a mandate, as well as serving police and soldiers. Mr Trump should give Chicago and New York the same treatment.

For the other side, what’s happening offends against America’s fundamental values. It asserts that the government in Washington, which once called out the National Guard to protect civil rights against the wishes of racist governors, is now about to use troops to suppress civil rights and to kick out brown people. Yes, undocumented migrants who commit serious crimes should be deported. But the government is going after law-abiding, hard-working immigrants. The president is a hypocrite who celebrates the violent protest carried out in his name on January 6th 2021. He prefers one-man rule to the separation of powers. And he wants troops on American streets to become a common sight: look at the parade of military hardware he has planned for his birthday on June 14th.

This is all alarmingly reminiscent of the 1960s, and not just because that was the last time an American president deployed the National Guard over the objections of a governor. Fortunately—so far, at least—there are differences.

One is scale. When the Watts neighbourhood of LA saw riots in 1965, 34 people were killed and 1,000 arrested. In this week’s protests some cars were burned and fireworks were launched at officers, but violence was limited and the protests were well marshalled by police . Ms Bass, who is on the side of order too, has wisely declared a curfew. A few hundred people have been arrested. Thankfully, nobody has yet been killed.

Another difference concerns the soldiers. When the National Guard was deployed in the 1960s , America was at war and some protesters sympathised with the enemy. The decade that gave birth to the Civil Rights Act and Martin Luther King’s dream ended with four students shot dead by National Guardsmen at Kent State University in Ohio. In 2025, by contrast, civil-military relations are on a different footing. Most soldiers do not want to be on the streets facing down other Americans. When New York’s subways were policed recently by soldiers in camouflage, at the request of the governor, nobody saw it as a harbinger of fascism.

A last difference is that sending troops to LA, aptly given the city’s most famous industry, is about performance and spectacle rather than a real need to enforce order. Mr Trump implicitly acknowledged this in the way he federalised the California National Guard, setting rules that allow troops to protect federal property but not to get involved in crowd control or immigration enforcement. For Mr Trump, the attraction of sending in the Marines is that he can say: “Send in the Marines!” It lets him do what he likes best: horrify liberals, look tough and dominate the news. This produces pictures of soldiers facing people wrapped in Mexican flags, with flames in the foreground and smoke in the background. Elon Musk and the Epstein files are already ancient history. What could be better?

Yet what serves Mr Trump is dangerous for America. The president is a kind of reactionary Yippie and his reckless actions seem designed to provoke his opponents. Although army commanders want to stay away from politics, Mr Trump held a rally at Fort Bragg on June 10th, where he whipped the troops into a MAGA fervour. It is easy to see how—in LA or the other cities where protests are planned this weekend—a confrontation could descend into further disorder or lethal violence.

This is a perilous moment for America. Mr Newsom struck the right note in his address, also on June 10th. Accusing Mr Trump of choosing “theatrics over public safety”, he encouraged peaceful protest but warned: “Criminal behaviour will not be tolerated. Full stop.” The most powerful message has come from protesters who laid flowers before National Guard troops. The hope is that they are conjuring a vision of the country which both Americas can still believe in. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Governments’ obsession with factories is built on myths—and will be self-defeating

The world must escape the manufacturing delusion Governments’ obsession with factories is built on myths—and will be self-defeating June 12th 2025 Around the world, politicians are fixated on factories. President Donald Trump wants to bring home everything from steelmaking to drug production, and is putting up tariff barriers to do so. Britain is considering subsidising manufacturers’ energy bills; Narendra Modi, India’s prime minister, is offering incentives for electric-vehicle-makers, adding to a long-running industrial-subsidy scheme. Governments from Germany to Indonesia have flirted with inducements for chip- and battery-makers. However, the global manufacturing push will not succeed. In fact, it is likely to do more harm than good.

Today’s zeal for homegrown manufacturing has many aims. In the West politicians want to revive well-paying factory work and restore the lost glory of their industrial heartlands; poorer countries want to foster development as well as jobs. The war in Ukraine, meanwhile, shows the importance of resilient supply chains, especially for arms and ammunition. Politicians hope that industrial prowess will somehow translate more broadly into national strength. Looming over all this is China’s tremendous manufacturing dominance, which inspires fear and envy in equal measure.

Jobs, growth and resilience are all worthy aims. Unfortunately, however, the idea that promoting manufacturing is the way to achieve them is misguided. The reason is that it rests on a series of misconceptions about the nature of the modern economy.

One concerns factory jobs. Politicians hope that boosting manufacturing means decent employment for workers without university degrees or, in developing countries, who have migrated from the countryside. But factory work has become highly automated. Globally, it provides 20m, or 6%, fewer jobs than in 2013, even as output has increased 5% by value. For all countries to take more of a shrinking pie is impossible.

Many of the good jobs created by today’s production lines are for technicians and engineers, not lunch-pail Joes. Less than a third of American manufacturing jobs today are production roles carried out by workers without a degree. By one estimate, bringing home enough manufacturing to close America’s trade deficit would create only enough new production jobs to account for an extra 1% of the workforce. Manufacturing no longer pays those without a degree more than other comparable jobs in industries such as construction . As productivity growth is lower in manufacturing than it is in service work, wage growth is likely to be disappointing, too.

Another misconception is that manufacturing is essential for economic growth. India’s manufacturing output, as a share of gdp, languishes about ten percentage points below Mr Modi’s target of 25%. But that has not stopped India’s economy growing at an impressive rate. In the past few years China has struggled to meet its growth targets, even as its manufacturers have come to dominate entire sectors, such as renewable energy and electric vehicles.

What about the argument that, given the war in Ukraine and tensions with China, the rich world must reindustrialise for the sake of national security? It seems dangerous to rely on factories abroad. And covid-19 caused a supply-chain panic. Some dependencies are indeed chokeholds. China’s near-monopoly in refining rare earths has recently allowed it to put the brakes on global carmaking, giving it leverage over America. It is also prudent for the West to build up stocks of weapons and ammunition, to ensure that crucial infrastructure is sourced from allies and to build things with long lead times, like ships, before conflict breaks out.

But in today’s ultra-specialised world, across-the-board subsidies for reindustrialisation will not do much to boost war-readiness. Making Tomahawks is entirely different from making Teslas. Far from suggesting that countries at peace must develop the capacity to make lots of drones, the war in Ukraine shows that a wartime economy can innovate and multiply production volumes remarkably fast .

The final part of the manufacturing delusion is the idea that China’s industrial might is a product of its state-led economy—and so must be countered with a similarly extensive industrial policy everywhere else. China does indeed distort its markets in all kinds of ways, and early in this century it manufactured an unusual amount given its level of development. But those days are past.

China has not escaped the global shrinkage of factory jobs since 2013. The share of its workforce in factories corresponds to America’s at a similar level of prosperity; and it is lower than it was in most other rich economies. China’s 29% share of global manufacturing value-added is a function of its size rather than its strategy. After years of fast growth, it now has an enormous domestic market to support its manufacturers. Innovation is begetting innovation; a “ low-altitude economy ” of drones and flying taxis promises to take flight soon. Yet, even though China’s goods exports have grown by 70% relative to global GDP since 2006, they have fallen by half as a share of the Chinese economy.

The way to rival the manufacturing heft of China is not through painful decoupling from its economy, but by ensuring that a sufficiently large bloc rivals it in size. This is best achieved if allies are able to work together and trade in an open and lightly regulated economy; factories in America, Germany, Japan and South Korea together add more value than those in China. As the pandemic showed, diverse supply chains are a lot more resilient than national ones.

Alas, governments today are heading in precisely the opposite direction. The manufacturing delusion is drawing countries into protecting domestic industry and competing for jobs that no longer exist. That will only lower wages, worsen productivity and blunt the incentive to innovate, while leaving China unrivalled in its industrial might. The mania for manufacturing is not just misguided. It is self-defeating. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Ecuador is a test case in the fight against global gangs

How to curb organised crime without shredding civil rights Ecuador is a test case in the fight against global gangs June 12th 2025 The gangsters are in their pomp. From the mangrove forests of Colombia and Brazil they launch 20-metre-long narco-submarines stuffed with cocaine and pilot them to Spain and America. They hide hundreds of tonnes of the drug in the crates that shift some 600m bananas through Ecuador’s ports every week. Across Latin America they rely on pliant judges and politicians, bought or terrorised. Cocaine production is soaring and illegal gold-mining is booming. Bodies are piling up amid a struggle to control billion-dollar businesses.

So far efforts to curb the gangs have been dispiriting. This week in Colombia, where the government has pursued fruitless negotiations, police stations were bombed and a tough-on-gangs presidential contender, Miguel Uribe, was shot. El Salvador’s President Nayib Bukele has crushed the gangs but abandoned the rule of law. For six years under the previous president, Andrés Manuel López Obrador, Mexico avoided confronting gangs, leaving them free to traffic fentanyl and migrants over the northern border.

Ecuador is the new front line. In recent years gangsters have transformed a peaceful Andean tourist spot into the murder capital of Latin America. Daniel Noboa, the Harvard-educated president whom we interview this week , has been re-elected on a promise to defeat them. The country is a crucial test case of whether national governments can beat back transnational organised crime without breaching the constraints of liberal democracy.

The surest way to weaken drug gangs would be for the world to legalise drugs. But since that won’t happen, Mr Noboa must act. One measure would be to strengthen Ecuador’s civilian police. They need more weapons, armour and manpower to confront gangsters wielding machineguns and rocket launchers. This is under way, but will take time. Mr Noboa was right to put the army on the streets during the genuine emergency that erupted during his 18-month first term. But as the police grow stronger, he should pull the army back.

Ecuador also needs an effective justice system. Jailing suspects indefinitely with no trial, as in El Salvador, reduces gang crime but means the state can also threaten anyone it chooses. Deterring gangsters lawfully involves consistently putting them before independent judges with enough evidence to convict them. For this, Mr Noboa needs to spend heavily to hire, train and protect prosecutors and judges, so they can stand up to wealthy criminal empires. A supercharged independent judiciary should also go after money-launderers and corrupt politicians. Mr Noboa acknowledges this. Now he must make it happen.

The gangs move people, weapons and drugs over jungle borders and communicate via encrypted messaging. They can be held in check only if governments work together. That happens too little, partly because tired ideological differences get in the way. Thus, whereas gangs in Mexico and Ecuador are joined at the hip, the two governments speak only through Swiss intermediaries. They have been at odds since Ecuador raided the Mexican embassy in Quito last year to seize a former vice-president being sheltered there, who had been convicted of corruption.

America could galvanise co-operation, which is in its interest as well as Latin America’s. So far President Donald Trump has lionised El Salvador’s police state. Far better for the West to support Mr Noboa with cash and intelligence, while watching for any authoritarian drift. Should he fail it would embolden the likes of Mr Bukele, who believe that organised crime can only be tackled with authoritarianism. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Tight control over its products, once an asset, has turned into a liability

In the age of AI, Apple needs to open up Tight control over its products, once an asset, has turned into a liability June 12th 2025 DURING APple’s annual developer conference, which began on June 9th, the tech giant’s bosses were in their happy place. On home turf in Cupertino, California, they unveiled a glossy visual overhaul of Apple’s operating systems and showed off new features that pull its devices into ever-closer harmony. However, although the new “liquid glass” styling may give its software a new sheen, beneath the window-dressing things are not going well.

Nearly all of Apple’s products are made in Asia, so President Donald Trump’s tariffs threaten to crush its margins in America. Its tight grip on its software ecosystem has got it into trouble with regulators; after a bust-up with a judge during its long-running fight with Epic Games, the maker of “Fortnite”, over how it runs its App Store, Apple was slapped with a court order that jeopardises the $30bn it takes each year in app-related fees. And in the vital field of artificial intelligence (AI), Apple is floundering . No wonder, then, that its share price is down by almost a fifth this year, the most of any of America’s five biggest tech firms.

The company’s struggles to adapt to the AI boom are deep-rooted. Even before OpenAI launched ChatGPT in late 2022, Apple was falling behind, as Siri, its voice assistant, proved to be notably less capable than the alternatives from other firms. At last year’s conference Apple previewed a new version of Siri that could combine data from different apps to handle complex requests. It looked impressive, but it never shipped.

As in the fight with Epic Games, Apple’s difficulties come down to control. The firm has long differentiated its products by enabling users to keep their personal data private. It can afford to do this because it makes most of its money selling hardware—unlike rivals such as Google and Meta, whose business models depend on collecting and analysing data in order to sell personalised ads.

The rise of AI has turned Apple’s control-freakery from a strength to a weakness. The plan, announced last year, was to deploy the company’s own AI model directly on users’ devices, where it could gain access to personal data (such as emails, messages and calendars) to answer queries and perform tasks, without compromising privacy. The problem is that this doesn’t seem to work: a small model running on a smartphone cannot compete with a much more powerful one running in the cloud. Surely Apple could develop its own big cloud-based model, to compete with ChatGPT, Claude or Gemini? Maybe. Catching up might be possible if Apple dipped into the rich trove of its users’ data. But it has promised not to.

As a result, it is now seeking outside help. Already, Siri can offer to hand off more complex queries to ChatGPT, though it must clunkily ask permission each time. This week Apple announced a deeper partnership with OpenAI. With users’ permission, ChatGPT will be given more access to their devices, for example to answer queries about what is on their screens. ChatGPT will also be baked into Apple’s programming tools.

This is a step in the right direction, but Apple needs to go further. Rather than trying to control what AI can and cannot do on its devices, Apple should let users decide. This would go against Apple’s instincts for control, which have only intensified under the leadership of Tim Cook. Yet openness may not be as scary as Apple fears.

Think back to when Apple launched the iPhone in 2007, and refused to let anyone else build native apps for it. Apple changed its mind the following year, allowing others to build apps on its terms and unleashing a surge of new tools, games and services. It should now apply the same approach to AI. Opening up the App Store helped make the iPhone the world’s most successful consumer product. Opening up to others’ AI models is Apple’s best chance of keeping it that way. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

The country needs defence spending and nuclear power, but not more social housing

Rachel Reeves’s big-government rhetoric is a worrying sign for Britain The country needs defence spending and nuclear power, but not more social housing June 12th 2025 IT WAS never going to be a glorious task. On June 11th Rachel Reeves, Britain’s chancellor of the exchequer, apportioned the spending for which she had budgeted. The government is so cash-strapped that most of its departments suffered in order to help the rickety National Health Service. To gloss over this, Ms Reeves delivered a tub-thumping speech in Parliament about the virtues of big government.

At times the performance was ridiculous. The chancellor listed endless tiny projects, such as cash for Kirkcaldy’s high street and Southport’s pier, to make it sound as if she is showering the country with money. Yet the speech was also genuinely worrying. Suffering in the polls and menaced by Nigel Farage’s populist Reform UK, Labour seems to have decided that interventionism is a route to popularity. Even without the higher taxes or borrowing that Ms Reeves has forsworn, a statist turn, via regulation and the composition of spending, could do much damage.

Ms Reeves pledged to “buy, make and sell more” at home, to make the country a “defence industrial superpower” and to ensure that “the energy technologies of the future are built here and owned here, and that those jobs come to Britain”. She will maintain a limit on bus fares and cap school-uniform prices. And she will adjust the Treasury’s methodology to favour “place-based business cases”: ie, to tilt infrastructure spending away from London , favouring redistribution over growth. The capital city, also known as the goose that lays Britain’s golden eggs, will be kept waiting for money to finance its Docklands Light Railway and Bakerloo Line projects.

Some parts of the economy really do need more government. It is wise to boost defence spending in light of Russia’s aggression. Labour is also correct to throw its weight behind nuclear power by funding the new Sizewell C plant in Suffolk and investing in small modular reactors. Nuclear power is essential as Britain seeks to bring down its punishing energy costs while cutting its carbon emissions.

The rest of the pivot to statism is unwelcome. The most harm could come where the stakes are highest: the housing market. A shortage of homes in the south-east of England chokes growth. Labour has incrementally loosened planning rules when a more radical deregulation is needed. Now the chancellor says she will use her capital budget to build lots of social housing, which the government heavily subsidises. This is a classic demand of British left-wingers, who resent the fact that reforms carried out under Margaret Thatcher have since the 1980s allowed social tenants to buy their houses at a discount.

Yet social housing is a red herring. It already makes up a share of Britain’s housing stock that is about twice the average in the OECD, a club of mostly rich countries. Rules requiring developers to include “affordable” homes are one of many disincentives to private development, and reduce the average quality of new houses. As with most things, the state allocates homes inefficiently. Westminster Council recently announced that it would offer contracts for life to all its tenants, who enjoy below-market rents—an astonishing and indiscriminate giveaway. Ms Reeves touted that new homes would be built in Blackpool, Preston and Sheffield, where housing is far less scarce.

Such are the mistakes when the state controls too much. It is good that Ms Reeves is not letting tax and spending rip, as many Labour backbenchers would like her to do. But even the chancellor’s shoestring statism could undermine the government’s pursuit of economic growth. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Millions of girls were aborted for being girls. Now parents often lean towards them

The stunning decline of the preference for having boys Millions of girls were aborted for being girls. Now parents often lean towards them June 5th 2025 Without fanfare, something remarkable has happened. The noxious practice of aborting girls simply for being girls has become dramatically less common. It first became widespread in the late 1980s, as cheap ultrasound machines made it easy to determine the sex of a fetus. Parents who were desperate for a boy but did not want a large family—or, in China, were not allowed one—started routinely terminating females. Globally, among babies born in 2000, a staggering 1.6m girls were missing from the number you would expect, given the natural sex ratio at birth. This year that number is likely to be 200,000—and it is still falling.

The fading of boy preference in regions where it was strongest has been astonishingly rapid. The natural ratio is about 105 boy babies for every 100 girls; because boys are slightly more likely to die young, this leads to rough parity at reproductive age. The sex ratio at birth, once wildly skewed across Asia, has become more even. In China it fell from a peak of 117.8 boys per 100 girls in 2006 to 109.8 last year, and in India from 109.6 in 2010 to 106.8. In South Korea it is now completely back to normal, having been a shocking 115.7 in 1990.

In 2010 an Economist cover called the mass abortion of girls “ gendercide ”. The global decline of this scourge is a blessing. First, it implies an ebbing of the traditions that underpinned it: the stark belief that men matter more and the expectation in some cultures that a daughter will grow up to serve her husband’s family, so parents need a son to look after them in old age. Such sexist ideas have not vanished, but evidence that they are fading is welcome.

Second, it heralds an easing of the harms caused by surplus men. Sex-selective abortion doomed millions of males to lifelong bachelorhood. Many of these “bare branches”, as they are known in China, resented it intensely. And their fury was socially destabilising, since young, frustrated bachelors are more prone to violence. One study of six Asian countries found that warped sex ratios led to an increase of rape in all of them. Others linked the imbalance to a rise in violent crime in China, along with authoritarian policing to quell it, and to a heightened risk of civil strife or even war in other countries. The fading of boy preference will make much of the world safer.

In some regions, meanwhile, a new preference is emerging: for girls. It is far milder. Parents are not aborting boys for being boys. No big country yet has a noticeable surplus of girls. Rather, girl preference can be seen in other measures, such as polls and fertility patterns. Among Japanese couples who want only one child, girls are strongly preferred. Across the world, parents typically want a mix. But in America and Scandinavia couples are likelier to have more children if their early ones are male, suggesting that more keep trying for a girl than do so for a boy. When seeking to adopt, couples pay extra for a girl. When undergoing in vitro fertilisation (IVF) and other sex-selection methods in countries where it is legal to choose the sex of the embryo, women increasingly opt for daughters.

People prefer girls for all sorts of reasons. Some think they will be easier to bring up, or cherish what they see as feminine traits. In some countries they may assume that looking after elderly parents is a daughter’s job.

However, the new girl preference also reflects increasing worries about boys’ prospects. Boys have always been more likely to get into trouble: globally, 93% of jailbirds are male. In much of the world they have also fallen behind girls academically. In rich countries 54% of young women have a tertiary degree, compared with 41% of young men. Men are still over-represented at the top, in boardrooms, but also at the bottom, angrily shutting themselves in their bedrooms.

Governments are rightly concerned about boys’ problems. Because boys mature later than girls, there is a case for holding them back a year at school. More male teachers, especially at primary school, where there are hardly any, might give them role models. Better vocational training might nudge them into jobs that men have long avoided, such as nursing. Tailoring policies to help struggling boys need not mean disadvantaging girls, any more than prescribing glasses for someone with bad eyesight hurts those with 20/20 vision.

In the future, technology will offer parents more options. Some will be relatively uncontroversial: when it is possible to tweak genes to avoid horrific hereditary diseases, those who can will not hesitate to do so. But what if new technologies for sex selection become widespread? Couples undergoing fertility treatment can already choose sperm with X chromosomes or determine an embryo’s sex via genetic testing. Such techniques are expensive and rare, but will surely get cheaper.

Also, and more important, more parents who conceive children the old-fashioned way are likely to use cheap, blood-based screening in the first weeks of pregnancy to find out about genetic traits. These tests can already reveal the sex of the embryo. Some people trying for a girl may then use pill-based abortifacients to avoid having a boy. As a liberal newspaper, The Economist would prefer not to tell people what kind of family they should have. Nonetheless, it is worth pondering what the consequences might be if a new imbalance were to arise: a future generation with substantially more women than men.

It would not be as bad as too many men. A surplus of single women is unlikely to become physically abusive. Indeed, you might speculate that a mostly female world would be more peaceful and better run. But if women were ever to make up a large majority, some men might exploit their stronger bargaining position in the mating market by becoming more promiscuous or reluctant to commit themselves to a relationship. For many heterosexual women, this would make dating harder. Some wanting to couple up would be unable to do so.

Celebrate the cooling of the war on baby girls, therefore, and urge on the day when it ends entirely. But do not assume that what comes next will be simple or trouble-free. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

Provisions in the Republican budget are a dangerous step

America’s tax on foreign investors could do more damage than tariffs Provisions in the Republican budget are a dangerous step June 5th 2025 America needs foreign investors, and foreign investors need America. Yet clauses buried in the Republican budget bill in Congress are a threat to this crucial symbiosis. Under the obscure “Section 899”, the treasury secretary will gain the power to tax interest, dividends and rent flowing to foreigners in countries with tax systems that the law defines as “unfair”. The rate will start at 5% but could rise as high as 20%. That could mean lower returns for pension funds, governments and individual investors from the rest of the rich world. Companies with operations in America would also be caught in the net when they remit their profits. A separate clause taxes at 3.5% money sent out of the country by any non-citizen.

It is a worrying new front in the trade war. President Donald Trump’s tariffs have been highly disruptive, but at least America’s economy does not depend heavily on trade, which as a share of GDP is less than half the rich-world average. The same cannot be said for foreign investment, on which America is unusually reliant. Foreigners own $62trn-worth of American assets (including derivatives) compared with only $36trn owned abroad by Americans. The balance, at -90% of GDP, is by far the lowest “ net international investment position ” of any big, rich economy. One third of America’s government debt, amounting to $9trn, is held by foreigners.

This is a particularly bad time for America to become less attractive to foreign investors. The budget bill, by making past unfunded tax cuts permanent, will also make annual government borrowing worth 6-7% of GDP the norm. Treasuries will probably be exempted from Section 899, but that is not yet certain. Even if they are carved out, foreign buyers might reasonably wonder if the rules could change in the future. Scaring them when there is such a big deficit to finance is reckless, especially when foreign investors have already become skittish about American assets after Mr Trump’s “Liberation Day” tariff announcement. Moreover, the bill works against the president’s desire to have foreign companies build factories in America. Why would they, if they and their foreign staff must pay a steep price to send money home?

Capital protectionism will also badly hurt the rest of the world. Other countries could, ultimately, create their own trading arrangements and make do with restricted access to America’s goods market, which accounts for only 15% of final demand for imports. Being denied entry to Wall Street is another matter. American stocks account for about 60% of global equities by value, and the dollar is the world’s reserve asset. Even if American investments no longer produce outsize returns, foreigners would lose the benefits of diversification. The allocation of capital across the globe would be distorted, making the world economy less efficient, and therefore poorer, over time.

Optimists contend that Section 899 is a negotiating tool and that the tax on remittances is small. And didn’t other rich-world countries start the tax war by ganging up on America’s technology giants with “digital services taxes” and other rules designed to extend the reach of their tax systems across borders? The proposed law specifically targets these rules; it does not give Mr Trump a free hand.

The trouble with these arguments is that new taxes tend to expand over time regardless of their initial scope and size. There is no constituency in Congress to defend the interests of foreigners, and the legislature’s failure to avert tariffs shows how unwilling it is to challenge the president’s self-harming protectionism. The budget bill is a sign that the world could be entering an era of hostility towards foreign capital, not just foreign goods. If that day arrives, the damage will be so great that who started the fight will be irrelevant. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Ukraine’s daring raid on Russia has lessons for European armed forces. But they need cash, too

The West is rethinking how to fight wars Ukraine’s daring raid on Russia has lessons for European armed forces. But they need cash, too June 5th 2025 THE UKRAINIAN drone strike on bombers far inside Russia on June 1st will be ranked among the greatest military raids in history. The operation, combining old-fashioned sabotage with the iconic weapon of the Ukraine war, illustrated two things. One is that new technology, deployed inventively, can be lethal. The other is that even major powers are vulnerable to attacks on critical infrastructure deep inside their own territory, overturning the assumptions of the 1990s and 2000s.

Britain’s defence review , published the next day, deserves praise for recognising these lessons. It also serves as an example of the new, more flexible thinking that will be needed in Europe and Asia to deal with the breakneck innovations that are transforming warfare. However, the review also points to the hardest problem in turning such thinking into reality—finding the money to pay for it.

After decades of complacency, Britain, like its allies, has acknowledged that it must prepare for war. That means building up the ammunition, forces and technologies for fighting abroad, as well as securing the home front. After the cold war, the Royal Air Force (RAF), like many of its European counterparts, saved money by shutting down bases and consolidating aircraft at ever fewer places. Ukraine’s surprise attack is a reminder of why that now looks like a mistake. The review says that the RAF must relearn how to fight from a wider range of sites, and to disperse its munitions, spare parts and fuel.

The same principle of resilience holds more widely: redundancy applies as much to undersea cables, electrical substations and communications as it does to air bases. The British review rightly calls for a “whole of society” approach in which industry, finance, academia, education and ordinary people are better prepared for crises.

The thinking about military technology needs to be similarly supple. “Emerging technologies”, the review warns, “are already changing the character of warfare more profoundly than at any point in human history”. Britain and its allies have been slow to adapt. The review laments that, for defence projects worth over £20m ($27m), awarding a contract takes an average of 6.5 years. It recommends that 10% of the procurement budget should be earmarked for novel technologies.

Bolder, faster reorganisation of military services matters, too. The Royal Navy will accelerate a “hybrid” carrier air wing, with drones flying alongside piloted F-35 fighter jets. The army will have a 20-40-40 mix of equipment. Crewed platforms will make up only 20% of kit. They will control uncrewed platforms that can be reused (40%) as well as “consumables” like shells, missiles and single-use strike drones (40%).

Britain can experiment because big land powers such as Germany are expanding their traditional ground forces . Wisely, the review resists the temptation to declare that old, large equipment is obsolete. Not every act of war can be waged with drones in trucks. The review concludes that tanks still matter, for instance, not least because they protect troops on an increasingly transparent battlefield. The commitment to build up to a dozen attack submarines is a reminder that one of the largest and costliest weapons, the nuclear-powered sub, remains one of the most potent.

So far, so laudable. But a glaring gap remains between ambition and money. Britain plans to spend 2.5% of GDP on defence by 2027, with a vague hope of 3% by 2034. That is inadequate. Russia is rearming and America is signalling that it will shift forces away from Europe. Germany, facing the same threats, could be spending twice as much as Britain by 2029.

At a summit on June 24th NATO allies are likely to agree to spend 3.5% of GDP on defence. That would require painful tax rises, welfare cuts or borrowing. But it is hard to see how Europe can support Ukraine, deter Russia and fill gaps left by America on less.

In 2014 NATO allies agreed to a 2% target—and many ignored it. This time, the timeline is as important as the target. There is little point in deferring spending to the 2030s. “Until recently…a war against another country with advanced military forces was unthinkable,” says the British defence review, warning that conflict would be deadly and long-lasting. How much better to deter such a war than wage it. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

China is playing all sides in the country’s bloody civil war

Myanmar is a demonstration of Chinese hegemony in action China is playing all sides in the country’s bloody civil war June 5th 2025 The world is not exactly short of crises. But one of the most alarming is also the most overlooked: an escalating state of anarchy in Myanmar, in the heart of Asia. The country is degenerating into a violent state of nature . Over 2m of its people are on the verge of starvation. The effects of crime, including drug-dealing, huge scam centres and human trafficking, spread far beyond its borders.

What is taking place inside Myanmar is a humanitarian disaster, but it matters for another, more abstract reason, too. America and Europe have walked away from what was once an influential role in the country. Instead, the hellscape is unfolding under the watch of China, which has become the dominant outside power. Its cynicism and indifference in Myanmar are a demonstration of its values-free foreign policy in action.

Myanmar has a desperate past. After a coup in 1962, it suffered 49 years of military rule. Between 2011 and 2021, the army relinquished some power, and for a while that allowed Aung San Suu Kyi, a liberal darling of the West, to front a government. Even in those years there were severe human-rights violations, including pogroms against the Rohingya minority. In 2021 the army fully retook power in a coup. Since then, a sinister junta has been engaged in a civil war with a swirling cast of dozens of armed-resistance groups, freedom fighters and bandits, turning a country the size of Ukraine into a bewildering and bloody mess.

As the West has lost interest, China has become more powerful. Its conduct is pragmatic rather than ideological, and it will do business with anyone who has clout, money or guns. It has worked with Ms Suu Kyi, and now co-operates with the junta and also with the resistance groups and militias. It uses its influence and control over ammunition and weapon supplies to shape the fighting in order to safeguard its interests.

These include protecting a 2,500km energy pipeline from the Indian Ocean. This gives China an alternative supply route that bypasses the Malacca Strait and might become vital in the event of a war over Taiwan. China also wants to maintain its access to minerals and other resources, protect infrastructure built under its Belt and Road Initiative, clamp down on scammers targeting Chinese citizens, and keep the West out of a country adjacent to its own southern border.

China plays all sides, arming, threatening and coaxing them into meeting its demands. The results are lethal. Amid mounting hunger, the size of the economy has fallen by a quarter in nominal terms since 2019. The picture could get worse. China is pushing General Min Aung Hlaing, the junta’s chief, to hold a sham election later this year, designed to provide a figleaf of legitimacy. That could trigger a surge in violence as resistance groups seek to disrupt an illegitimate process. More chaos could spill across the borders Myanmar shares with Bangladesh, China, India, Laos and Thailand.

Having been mistakenly star-struck by Ms Suu Kyi’s leadership in the 2010s, the West has abandoned the groups fighting for democracy. Today America and Europe could still help Myanmar by increasing their humanitarian assistance, publicising abuses and backing pro-democracy forces in any negotiations and even on the battlefield. But the Trump administration has cut aid to Myanmar, and Europe is preoccupied with security on its own eastern border.

Given Western neglect, Myanmar’s best long-term hope is either that pro-democracy groups eventually consolidate and win the civil war, or that Myanmar’s other neighbours, such as India and Thailand, strive for a just peace. Despite all the talk of a multi-polar world in which power and responsibility are more evenly spread, neighbouring countries have so far tended to back the junta and have encouraged other states to normalise relations with it. Yet over time they may come to recognise that only a more democratic Myanmar will provide the stability they crave.

Until then, the war will continue and the liberal future that some Burmese are fighting for will remain out of reach. China’s growing power and pursuit of its own priorities, the West’s shrinking view of its own interests, and the apathy of everyone else have consigned a country to misery. That makes Myanmar not just a tragedy—but also a warning. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Kagame’s intervention in Congo threatens his legacy at home

Africa’s most admired dictator rolls the dice Kagame’s intervention in Congo threatens his legacy at home June 5th 2025 Back in the 1990s Paul Kagame grabbed global attention as the leader of a rebel group that halted the Rwandan genocide, the worst mass atrocity of the past four decades. In the 2000s and 2010s he became Africa’s most admired dictator, turning Rwanda from a graveyard into a case study at Harvard Business School, with one of the fastest growth rates in the world. Those who pointed to his regime’s brutal suppression of dissent and assassinations of opponents were ignored. For Western donors, Mr Kagame was the leader who proved that aid could be spent well. For African elites starved of examples of well-run states, he was a role model.

More than three decades on, Mr Kagame has gone from the darling of donors to Africa’s arch-exponent of realpolitik. He has turned to new friends abroad to gamble on state-led modernisation. In neighbouring Congo he has fuelled a long-running conflict. But the Trump administration, with an eye on Congo’s mineral wealth, says it wants Mr Kagame to stop meddling as part of a peace-for-investment deal. Unintentionally, America might just save Rwanda’s president from himself.

Taking advantage of geopolitical shifts, Mr Kagame has befriended rising powers, acquiring weapons for his formidable army from China, Russia and Turkey. Rwanda looks up to Israel, another small nation with a shared history of suffering genocide and fighting its neighbours. It exports gold to Dubai. Qatar is financing a new airport. Mr Kagame has long shown how transactionalism can give minor countries outsize influence. His offers to receive deported migrants, export critical minerals, or send troops to places where the West is unwilling to go have helped limit criticism of Rwanda’s human-rights abuses and its backing of M23, a Congolese militia.

Earlier this year, with the help of Rwanda’s army, that militia seized the cities of Goma and Bukavu in eastern Congo. In Goma M23 has set up an ersatz version of Mr Kagame’s rule in Rwanda; it is ordering the streets to be cleaned at the point of a gun. Elsewhere fighting still rages.

Mr Kagame’s intervention in Congo has several motives. It is a chance to create a buffer zone and to vanquish the FDLR, a rebel group that traces its roots to genocidal militias and which Mr Kagame still regards as a threat. Rwanda earns hundreds of millions of dollars from exporting smuggled gold and other metals from Congo. Some in Rwanda’s elite want to redraw what they complain are colonially imposed borders. The arrival of the Trump administration, which Mr Kagame saw as less worried about territory-grabbing, probably factored in his thinking. Creating facts on the ground unbothered by an indifferent America, went the calculation, would at the very least produce leverage in any negotiations.

The logic may yet prove sound. Félix Tshisekedi, Congo’s president and an enemy of Mr Kagame’s, has been weakened and his political rivals are circling. But the risks for Rwanda’s president are mounting, too.

The costs of the war highlight the flaws of Mr Kagame’s development model. Growth has mostly benefited the urban elite. Researchers have disputed government claims about poverty reduction and agricultural production. The ruling party and the army own lots of companies, deterring private investment. The ratio of public debt to GDP has quadrupled since 2012, to almost 80%; the war will add to fiscal pressures. A gaping current-account deficit of 14% of GDP will widen further if the tourists who pay in dollars to see mountain gorillas stay at home. The longer the war goes on, the more Rwanda’s brand will be tarnished.

And in a world where everyone is becoming more transactional, Mr Kagame may find he has less to offer. President Donald Trump, who opined last month that “there are a lot of bad things going on in Africa”, is not famed for his knowledge of the continent. But his administration wants America to get more of Congo’s vast reserves of copper, cobalt and other crucial minerals, and to see more American firms profit in the region. That could grant Congo more clout at Rwanda’s expense and imperil Mr Kagame’s influence in Congo’s east.

Mr Kagame is 67 years old—middle-aged by the standard of African (and indeed American) leaders. But he is thinking about his legacy. The escalation of the war in Congo suggested he saw no tension between pursuing vengeance in the region and modernisation at home. But ultimately Mr Kagame may have to choose between guerrillas and gorillas. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Donald Trump is putting an untested system under almighty strain

American finance, always unique, is now uniquely dangerous Donald Trump is putting an untested system under almighty strain May 29th 2025 A LWAYS A HAVEN in dangerous times, America has itself become a source of instability. The list of anxieties is long. Government debt is rising at an alarming pace. Trade policy is beset by legal conflicts and uncertainties. Donald Trump is attacking the country’s institutions . Foreign investors are skittish and the dollar has tumbled. Yet, astonishingly, one big danger lurks unnoticed still.

When you think of financial risk, you may picture investment-banking capers on Wall Street or subprime mortgages in Miami. But, as our special report explains, over the past decade American finance has been transformed. A mix of asset managers, hedge funds, private-equity firms and trading firms—including Apollo, BlackRock, Blackstone, Citadel, Jane Street, KKR and Millennium—have emerged from the shadows to elbow aside the incumbents. They are fundamentally different from the banks, insurers and old-style funds they have replaced. They are also big, complex and untested.

The financial revolution is now encountering the MAGA revolution. Mr Trump is hastening the next financial crisis by playing havoc with trade, upending America’s global commitments and, most of all, by prolonging the government’s borrowing binge. America’s financial system has long been dominant, but the world has never been as exposed to it. Everyone should worry about its fragility.

The new firms are a magnet for financial talent. They also enjoy regulatory advantages, because governments forced banks to hold more capital and rein in their traders after the financial crisis of 2007-09. That combination has led to a spate of innovation, supercharging the firms’ growth and propelling them into every corner of finance.

Three big private-markets firms, Apollo, Blackstone and KKR, have amassed $2.6trn in assets, almost five times as much as a decade ago. In that time the assets of large banks grew by just 50% to $14trn. In the search for stable funding, the upstarts have turned to insurance; Apollo, which made its name in private equity and merged with its insurance arm in 2022, now issues more annuities than any other American insurer. The firms lend to households and blue-chip companies such as Intel. Apollo alone lent $200bn last year. Loans held by large banks increased by just $120bn. New-look trading firms dominate stockpicking and marketmaking. In 2024 Jane Street earned as much trading revenue as Morgan Stanley.

There is much to like about this new financial system. It has been highly profitable. In some ways, it is also safer. Banks are vulnerable to runs because depositors fear being the last in the queue to withdraw their money. All things being equal, finance is more stable when loans are financed by money that is locked up for longer periods.

Most importantly, the dynamism of American finance has channelled capital towards productive uses and world-beating ideas, fuelling its economic and technological outperformance. The artificial-intelligence boom is propelled by venture capital and a new market for data-centre-backed securities. Bank-based financial systems in Europe and Asia cannot match America’s ability to mobilise capital. That has not only set back those regions’ industries, it has also drawn money into America. Over the past decade, the stock of American securities owned by foreigners doubled, to $30trn.

Unfortunately, the new finance also contains risks. And they are poorly understood. Indeed, because they are novel and untested by a crisis, they have never been quantified.

One lot of worries come from within the system. The new giants are still bank-like in surprising ways. Although it is costly to redeem a life-insurance policy early, a run is still possible should policy holders and other lenders fear that the alternative is to get back nothing. And although the banks are safer, depositors are still exposed to the new firms’ risk-taking. Bank loans to non-bank financial outfits have doubled since 2020, to $1.3trn. Likewise, the leverage supplied to hedge funds by banks has ballooned from $1.4trn in 2020 to $2.4trn today.

The new system is also dauntingly opaque. Whereas listed assets are priced almost in real time, private assets are highly illiquid. Mispriced risks can be masked until assets are suddenly revalued, forcing end investors to scramble to cover their losses. Novel financial techniques have repeatedly blown up in the past because financial innovators are driven to test their inventions to breaking-point and, the first time round, that threshold is unknown.

Under Mr Trump, the next upheaval is never far away. The government’s excessive borrowing imperils bond markets, alarming foreign investors. Although a court has this week limited the president’s powers to wage trade wars, the administration is appealing and Mr Trump is unlikely to abandon tariffs altogether. A toxic combination of uncertainty, institutional conflict, volatile asset prices, higher capital costs and economic weakness threatens to put the new-look financial system under almighty strain.

A crisis would test even the most capable policymaker. Much about the risks of the superstar firms, and their linkages to the wider financial system and the real economy, will become clear only when trouble strikes. New emergency-lending schemes would be needed. Rescuing banks last time was politically toxic. Saving billionaire investors would be an altogether harder task. And yet if the biggest of these giant firms were left to fail, it could lead to a global credit crunch.

Under Mr Trump a rescue would be unpredictable. In 2008 the Treasury and the Federal Reserve acted quickly to save the banks, and set up swap lines to offer dollar funding to much of the world. Mr Trump might decide to bail out everyone. But imagine the panic if he started to pick his favourite financiers, threatened to abandon or charge countries that displeased him and changed his mind every five minutes on Truth Social.

There will be another financial crisis—there always is. Nobody knows when disaster will strike. But when it does, investors will suddenly wake up to the fact that they are dealing with a financial system they do not recognise. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

The Trump administration hobbles a great American export

Pausing foreign applications to American universities is a terrible idea The Trump administration hobbles a great American export May 29th 2025 The Trump administration’s decision to pause all visa interviews for foreign students who want to study in America, pending a review of how applicants’ social-media posts are vetted, is yet another escalation in the power struggle over who controls the world’s best universities. The policy may be modified. It may prove less onerous than it looks at first glance. Even if that happens, though, this is another blow to a great American success story .

President Donald Trump cares about America’s trade deficit. So it is perverse for him to make it harder for one of America’s most prodigious exporters—the education industry—to sell its services to foreigners. Some of his supporters imagine that foreign students are taking places that could have gone to Americans. This could be called the lump-of-college fallacy. In fact, by paying higher fees, foreign students tend to subsidise locals. American universities attract a wider variety of the best minds from around the world than any of their global rivals. That makes them more dynamic and innovative. And by pulling foreign elites into America’s cultural orbit, they magnify America’s soft power abroad.

Unfortunately, that is not how Mr Trump and his cabinet see it. To them, elite universities, in particular, are hotbeds of antisemitism and wokery. They are factories for future Democratic Party leaders and donors. And they must be brought to heel. “The universities are the enemy,” as J.D. Vance (Ohio State and Yale Law) told a conference of national conservatives before he became the vice-president.

There is some truth to MAGA criticisms of elite universities. Some have indeed been too soft on antisemitism and too dismissive of conservative viewpoints. But that hardly justifies the cudgels the administration is wielding against the entire college system. So far they include: deporting foreign students for wrongthink, freezing applications from foreign students, suspending government research grants and promising to increase taxes on big college endowments.

Mr Vance has often complained, with some justification, about censorship on campus. So it is galling for him now to favour deporting foreign students for their views and making new student applications subject to social-media vetting. College is supposed to be a place where the young explore new ideas, not a place where they venture only with burner phones, terrified to reveal they once shared a meme sympathising with Palestinians or mocking Mr Trump. The only students likely to have clean social-media feeds will be those from police states like China, who have internalised the lesson that free expression attracts unwelcome attention. Perhaps that is why the administration has also said that it will “aggressively” revoke visas of Chinese students.

In the global war for talent, America’s universities have long been its most persuasive recruiters, with huge benefits for American science , business and arts. Mr Trump’s policies will make them less attractive. Foreigners have other options. Why pay to study in a country where the president doesn’t want you, your visa could be revoked before you graduate, you will be snooped on and you may not be allowed to work?

American universities are so good that large numbers of foreigners will still jostle to attend them. However, the early signs are that all this really is deterring applicants. Mr Trump and his supporters may think that, by cutting snooty lefty institutions down to size and shutting out foreigners with distasteful views, they are making higher education in America great again. They are on course to make it mediocre. ■

This story has been updated

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

El Salvador’s president has all the tools of repression he needs to stay in power indefinitely

First he busted gangs. Now Nayib Bukele busts critics El Salvador’s president has all the tools of repression he needs to stay in power indefinitely May 29th 2025 Nayib Bukele’s autocratic tendencies were already clear when he ran for a second term as El Salvador’s president in 2024. He had extended a “temporary” state of emergency for two years, and used it to lock up legions of alleged gangsters without due process. He had ignored court rulings and used soldiers to bully lawmakers into supporting him. After his party won a supermajority in the legislature in 2021, he used it to stack the justice system with cronies. El Salvador’s constitution limits presidents to one five-year term, but those friendly judges waved him through. There was evidence that his government had done deals with the gangs, and bought their support in elections.

Salvadorans did not care. They re-elected Mr Bukele in a landslide, with 85% of the vote. They loved him because he made the streets safe. Gangs had terrorised the country for decades. The murder rate in 2015, at 106 per 100,000 people, was the highest in the world. Every corner shop and bus company faced the threat of extortion. Mr Bukele ended this by jailing 85,000 people, equivalent to 8% of all young men in El Salvador. Anyone suspected of gang ties—because of a tattoo, a tip-off or a policeman’s hunch—could be locked up indefinitely without trial. By 2024 the official murder rate was only 1.9 per 100,000: lower than in the United States. Extortion all but disappeared, since gangsters were too scared to show their faces.

Voters were so grateful that they overlooked the power grabs that came with all this. Only a few liberal voices warned that the strongman would one day aim his weapons of repression more widely.

One year after his re-election, he is doing just that. Journalists who report on his tyranny are being arrested, along with union leaders who question government spending and farmers protesting against land seizures. On May 18th his goons seized Ruth López, a prominent human-rights lawyer.

On May 20th his tame legislature passed a law that mimics the repression of Vladimir Putin. Any organisation that receives foreign funds or merely “responds to the interests” of foreigners must register as a foreign agent. It can then be strictly monitored and shut down on a whim. That will be crippling for human-rights groups, anti-corruption NGOs, and so on. Mr Bukele has also empowered himself to rewrite the constitution more easily. Now that the opposition has been neutered and most watchdogs are muzzled, there is little to stop the 43-year-old from remaining “the world’s coolest dictator”, as he styles himself, well into old age.

Mr Bukele has been a beneficiary of President Donald Trump’s values-free foreign policy. Whereas President Joe Biden objected to Mr Bukele’s power grabs and slapped sanctions on his allegedly corrupt or abusive associates, Mr Trump gushes that he is doing “a fantastic job”. In turn, Mr Bukele lets Mr Trump use El Salvador’s brutal prisons as a memory hole for deportees, beyond the reach of any law.

At home, however, Mr Bukele’s popularity has started to slip. Many Salvadorans dislike playing jailer for Uncle Sam. Despite safer streets, the economy is lacklustre. Poverty is rising, many public services are dismal and ordinary Salvadorans smell whiffs of grotesque corruption in high places.

Recent revelations about Mr Bukele’s cosy relationship with the gangs have been damaging, too. El Faro, a news outlet, reports that gangs helped him win his first big election , as mayor of the capital, San Salvador, and agreed to make the murder rate look lower by hiding bodies better. Mr Trump has obligingly sent back to El Salvador some gang members who were detained in America under Mr Biden and may have dirt on Mr Bukele. But silencing them will not hush up the scandal.

Polls in El Salvador are unreliable, given widespread fear of the government, but some show Mr Bukele’s approval rating far below its peak of nearly 90%. This may explain his recent crackdown on critics.

A spiral of souring public opinion and greater repression looms. However, Mr Bukele will probably weather it. He has a knack for social media, a powerful propaganda machine and all the tools he needs to crush his opponents. As Nicaragua and Venezuela show, autocrats can cling to power long after they cease to be admired.

Mr Bukele’s entrenchment as a despot holds a simple lesson, especially for other countries made miserable by gang violence, such as Ecuador and Peru. When a would-be strongman promises to keep you safe from criminals by suspending the rule of law, he may succeed for a while. But there will be no law left to keep you safe from him. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

Among all its ideas, the most important is to go all-in for digital transformation

How Labour should save the NHS Among all its ideas, the most important is to go all-in for digital transformation May 29th 2025 Reform UK, the party leading in Britain’s polls, has an uninspiring slogan: “Britain is broken”. The fact that even the populists’ bumper sticker carries none of the hope of “Make America Great Again” says a lot about Britons’ mood. Nothing illustrates the malaise more strikingly than the state of their beloved National Health Service (NHS). Hospitals are crumbling, sometimes literally. Waiting lists in England are 7.4m, twice as long as before the covid-19 pandemic. Public satisfaction has collapsed from 70% in 2010 to 21% in 2024. “Broken” was also how Wes Streeting, Labour’s health secretary, described the service on his first day in office last year.

But in the crisis lies an opportunity, particularly for the digital revolution the NHS needs. If Labour grabs it, it could cement its reputation as the only party to be trusted with the nation’s health. If it falters, voters will not forgive it.

Labour has two big incentives. The first is political: to its voters, the NHS matters more than any other issue. Its strategists see saving the NHS as central to winning re-election. The ambitious Mr Streeting knows that fixing the NHS will be seen as a test of whether he is prime minister material.

The second incentive is practical. Without reform, things will only get worse as the population ages and demand for health care grows. Other, better-funded health-care systems are struggling, too. France has a shortage of doctors; Australian emergency departments are as dreadful as British ones; some Canadian hospitals are as overcrowded as Latin American jails. To make the NHS sustainable, Labour must modernise the health service. Its blueprint is a ten-year plan , expected to be released in June.

The plan involves three main shifts: moving care out of costly hospitals and into the community; focusing on prevention rather than just sickness; and dragging the NHS from paper and pagers into the digital age. All are sensible. And all have also been promised before. Past would-be reformers got sidetracked by penny-pinching and short-term fixes; Labour has already shown it could be vulnerable to repeating such mistakes. But this time there are also grounds for optimism—so long as Labour sets some priorities.

The key will be for Mr Streeting to go all-in on digital transformation. This holds great potential to align Labour’s short- and longer-term ambitions. Some doctors already use artificial intelligence (AI) to transcribe patient consultations; studies suggest this can reduce time spent on clinical notes by 20%. Another AI app, which lets patients scan moles at home using their mobile phones, has cut skin-cancer referrals in half—a potential game-changer for dermatology. And in some GP surgeries, the use of online triage has slashed waiting times and removed the stress of the 8am appointment rush.

But tech performs wonders only if staff and patients embrace it, and working practices adapt. To maximise the benefits of AI, more should be done with the health service’s trove of data. The NHS is unique in holding cradle-to-grave records on an entire population. This makes it a potential gold mine for research. Researchers at two London universities are training an AI model on anonymised data from 57m people in England, the aim being to predict future health risks such as heart attacks and hospital stays for groups of patients.

Harnessing such potential requires investment: new computers, digital patient records and integrating the NHS’s fragmented and incompatible systems. It also requires avoiding being bogged down by centralised solutions. The government’s plans for a national single patient-record resembles a previous attempt that flopped. Instead, the NHS should learn from banking, which overcame a lack of standardisation to enable customers to see their bank and credit-card accounts in one place. In parts of the country, shared records are already helping plan, manage and provide services. In Lincolnshire linking NHS and social-care data helped cut emergency-department admissions by 58% in six months, by flagging those who needed social care.

Reforming the NHS is a huge task, across many fronts. One is motivating demoralised staff, some of whom are planning strikes. Efforts to modernise IT systems are routinely caught up in a culture of mistrust and malaise. A proper transformation needs cash that the Treasury is wary of spending. The Health Foundation, a think-tank, estimates the digital shift for England alone will cost £15bn ($20bn) over five years—around 7% of the NHS’s annual budget. Labour did the unthinkable before, when it founded the NHS in 1948. It must not squander the opportunity to modernise its own creation. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

If its awful air pollution is ever solved the country will get even hotter

India needs to turn the air-con on If its awful air pollution is ever solved the country will get even hotter May 29th 2025 AT THE END of March the India Meteorological Department predicted a warmer-than-usual April, the first month of India’s hot season. The forecast was soon proved right: in the first week of April temperatures in big cities were 3°C above normal. By the second, Delhi was suffering an intense heatwave. Even night-time minimums hit their highest in years. Heat-related illnesses soared.

India, always hot, has been getting hotter. The past decade was the warmest on record. Yet it has not been warming as quickly as the rest of the planet. In the past four decades temperatures over Earth’s land mass have risen by 0.30°C per decade, and by 0.23°C at comparable latitudes. The figure for India is a mere 0.09°C.

Two things are responsible for keeping India relatively cooler. One is the expansion of irrigated land, the area of which has doubled since 1980. Moisture in the air lowers temperatures, but comes at the cost of increasing humidity, sometimes to dangerous levels. In the baking Indo-Gangetic plain a combination of temperatures of just 37°C—a nice day for many—with 90% humidity can be fatal.

As we explain this week, the second cooling agent is horrific air pollution . During the day, particulate matter intercepts the sun’s rays, absorbing heat. It also makes clouds more reflective. The combined effects lead to a comparatively cooler surface. It follows that there is a tension: if India achieves cleaner air, an unintended effect would be higher daytime temperatures.

Some call for natural, energy-neutral methods to deal with rising heat, such as painting buildings white, using less concrete, and covering roofs in reflective tiles or second roofs. These low-cost solutions help somewhat, but they are no match for a north-Indian heatwave. More air-conditioning is necessary. Those who can afford it are already fuelling a boom: annual sales doubled between 2020 and 2024. Often these machines clean air as well as cool it.

One problem is that too few people yet have air-con: just one in ten households owns a unit, whereas two-thirds do in China and four-fifths in Malaysia. Air-con also creates even more pollution. During a heatwave last year, it accounted for a fifth of power demand, much of it met by dirty thermal-energy plants which provide three-quarters of generation. Air-conditioners throw heat into their immediate environment, making conditions worse for those without them. The hydrofluorocarbons they use as coolants are powerful greenhouse gases.

What to do? The only rational path is for India to push for cleaner energy and more air-con, simultaneously. The country is getting many things right. State and central pollution-control boards are responsible for cleaning up the air. Renewables, including hydro, make up 224GW of installed generation capacity of 472GW and there are ambitious plans for them to provide half of total capacity of 1,000GW by 2030. There are new efficiency standards for air-conditioners.

Yet the country needs to move faster. Pollution in the northern plains routinely exceeds the maximum readings of air-quality sensors. That means millions die from pollution-linked disease every year. And if the skies become clearer, temperatures will rise faster.

Speeding up land acquisition for solar projects, investing in the grid and reforming the market for purchasing and distributing power would accelerate private-sector investment in renewables. And a faster roll-out of air-conditioning could be encouraged by lowering the tax on machines from 28%, the highest-available rate (Apple’s iPhones are charged just 18%). The government should lead by example, air-conditioning offices where citizens meet public servants, not just those of politicians and elite bureaucrats.

Across Asia, the Middle East and the southern United States air-conditioning has helped make cities dynamic and more productive. There is a way for India to combine that goal with cleaner air. It should seize it. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.

America will pay the price most of all

MAGA’s assault on science is an act of grievous self-harm America will pay the price most of all May 22nd 2025 Editor’s update (May 22nd): The Trump administration revoked Harvard University’s ability to enroll international students.

The aTTACKS have been fast and furious. In a matter of months the Trump administration has cancelled thousands of research grants and withheld billions of dollars from scientists. Projects at Harvard and Columbia, among the world’s best universities, have been abruptly cut off. A proposed budget measure would slash as much as 50% from America’s main research-funding bodies. Because America’s technological and scientific prowess is world-beating, the country has long been a magnet for talent. Now some of the world’s brightest minds are anxiously looking for the exit.

Why is the administration undermining its own scientific establishment? On May 19th Michael Kratsios, a scientific adviser to President Donald Trump, laid out the logic. Science needs shaking up, he said, because it has become inefficient and sclerotic, and its practitioners have been captured by groupthink, especially on diversity, equity and inclusion (dei). You might find that reasonable enough. Look closely at what is happening, though, and the picture is alarming. The assault on science is unfocused and disingenuous. Far from unshackling scientific endeavour, the administration is doing it grievous damage. The consequences will be bad for the world, but America will pay the biggest price of all.

One problem is that actions are less targeted than the administration claims, as our special Science section this week explains. As Mr Trump’s officials seek to stamp out dei, punish universities for incidents of antisemitism and cut overall government spending, science has become collateral damage. A suspicion that scientists are pushing “woke” thinking has led grant-makers to become allergic to words like “trans” and “equity”. As a consequence, it is not only inclusive education schemes that are being culled, but an array of orthodox science. Funding has been nixed for studies that seek, say, to assess cancer risk factors by race, or the prevalence of sexually transmitted diseases by sex.

The attack on elite universities takes this to an illogical extreme. Because the White House sees colleges as bastions of wokeness and antisemitism, it has withheld funding for research at Harvard and Columbia, no matter in which subject. Overnight, projects on everything from Alzheimer’s disease to quantum physics have been stopped. When scientists warn of the harm this does, they risk being seen as part of a scornful anti-MAGA elite that has been protected for too long.

More fundamentally, the claim that Mr Trump will stop groupthink is disingenuous. maga reserves a special hatred for public-health and climate researchers, whom it regards as finger-wagging worrywarts determined to suppress Americans’ liberties—as they did in lockdowns and school closures during covid-19. The consequence is that spending on vaccine and climate research will be gutted most viciously of all. With the stroke of a pen, officials are trying to impose new rules that tell scientists what areas of inquiry they may pursue and what is off-limits—a shocking step backwards for a republic founded on the freethinking values of the Enlightenment.

Meanwhile, genuine problems with the way science works in America are being neglected. Mr Kratsios is right that there is too much bureaucracy. America’s best researchers say they spend two out of five days on form-filling and other administrative tasks, instead of in the lab. Research is becoming more incremental. New ways of funding, such as lotteries, are worth trying. So far, however, the White House has not set out plans to make science work better. Indeed, when scientists are uncertain whether their work will still be funded, or if they take to the courts to challenge arbitrary grant terminations, American science becomes less efficient, not more so.

Congress and the courts may yet act to limit the scale and the scope of these anti-science endeavours. Even so, the damage of the past few months will soon be felt. Savage cuts to the National Oceanic and Atmospheric Administration mean worse weather-forecasting, making it harder for farmers to know when to plant their crops, and for local authorities to prepare for natural disasters. Those to the Centres for Disease Control and Prevention will make it harder to monitor, and thus curb, outbreaks of disease.

There will also be longer-term harm. Although Mr Trump hopes his tariffs will lure businesses to invest in America, their research spending is unlikely to fill the same gaps as publicly funded basic work, much of which may not be commercialised for years, if ever. As funding is frozen, the danger of a brain drain looms. In the first three months of the year the number of applications for overseas jobs from American scientists rose by a third compared with the same period in 2024; foreign researchers applying to come to America fell by a quarter. The country’s reputation for welcoming talent will not be so easily regained. If the belief that academic freedom is curtailed takes hold, the scientists who remain could self-censor their lines of inquiry for years to come.

The consequences will be felt around the world. America is the planet’s biggest backer of public research; it is home to half of all science Nobel laureates and four of the ten best scientific-research universities. The knowledge uncovered by American scientists and resulting innovations such as the internet and mrna vaccines have been a boon to humanity. When America retreats, everyone is robbed of the fruits of this ingenuity.

It is America, however, that will feel the pain most of all. At the beginning of the 20th century there was no branch of science in which Uncle Sam led the world. At the century’s end there was none where it did not. America’s triumphs—its economic prowess, and its technological and military might—were interwoven with that scientific success. As America pulls back, it will cede ground to authoritarian China as a scientific superpower, with all the benefits that confers. maga’s assault on science is not just about dei, nor is it about universities. It is first and foremost an act of self-harm. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

A Communist Party hard man has to rescue Asia’s great success story

The man with a plan for Vietnam A Communist Party hard man has to rescue Asia’s great success story May 22nd 2025 Fifty years ago the last Americans were evacuated from Saigon, leaving behind a war-ravaged and impoverished country. Today Saigon, renamed Ho Chi Minh City, is a metropolis of over 9m people full of skyscrapers and flashy brands. You might think this is the moment to celebrate Vietnam’s triumph: its elimination of severe poverty; its ranking as one of the ten top exporters to America; its role as a manufacturing hub for firms like Apple and Samsung. In fact Vietnam has trouble in store . To avoid it—and show whether emerging economies can still join the developed world—Vietnam will need to pull off a second miracle. It must find new ways to get rich despite the trade war, and the hard man in charge must turn himself into a reformer.

That man, To Lam, isn’t exactly Margaret Thatcher. He emerged to become the Communist Party boss from the security state last year after a power struggle. He nonetheless recognises that his country’s formula is about to stop working. It was concocted in the 1980s in the doi moi reforms that opened up the economy to trade and private firms. These changes, plus cheap labour and political stability, turned Vietnam into an alternative to China. The country has attracted $230bn of multinational investment and become an electronics-assembly titan. Chinese, Japanese, South Korean and Western firms all operate factories there. In the past decade Vietnam has grown at a compound annual rate of 6%, faster than India and China.

The immediate problem is the trade war. Vietnam is so good at exporting that it now has the fifth-biggest trade surplus with America. President Donald Trump’s threat of a 46% levy may be negotiated down: Vietnam craftily offered the administration a grab-bag of goodies to please the president and his allies, including a deal for SpaceX and the purchase of Boeing aircraft. On May 21st Eric Trump, the president’s son, broke ground at a Trump resort in Vietnam which he said would “blow everyone away”.

But even a reduced tariff rate would be a nightmare for Vietnam. It has already lost competitiveness as factory wages have risen above those in India, Indonesia and Thailand. And if, as the price of a deal, America presses Vietnam to purge its economy of Chinese inputs, technology and capital, that will upset the delicate geopolitical balancing act it has performed so well. Like many Asian countries it wants to hedge between an unreliable America and a bullying China which, despite being a fellow communist state, has long been a rival and now disputes Vietnam’s claim to coastal waters and atolls. The trade and geopolitical crunch is happening as the population is ageing and amid rising environmental harm, from thinning topsoils in the Mekong Delta to coal-choked air.

Mr Lam made his name orchestrating a corruption purge called “the blazing furnace”. Now he has to torch Vietnam’s old economic model. He has set expectations sky-high by declaring an “era of national rise” and targeting double-digit growth by 2030. He has made flashy announcements, too, including quadrupling the science-and-technology budget and setting a target to earn $100bn a year from semiconductors by 2050. But to avoid stagnation, Mr Lam needs to go further, confronting entrenched problems that other developing countries also face as the strategy of exporting-to-get-rich becomes trickier.

Vietnam’s growth miracle is concentrated around a few islands of modernity. Big multinational companies run giant factories for export that employ locals. But they mostly buy their inputs abroad and create few spillovers for the rest of the economy. This is why Vietnam has failed to increase the share of the value in its exports that is added inside the country. A handful of politically connected conglomerates dominate property and banking, among other industries. None is yet globally competitive, including Vietnam’s loss-making Tesla-wannabe, VinFast, which is part of the biggest conglomerate, Vingroup. Meanwhile, clumsy state-owned enterprises still run industries from energy to telecoms.

To spread prosperity, Mr Lam needs to level the playing field for smaller firms and new entrants. That means hacking back a bewildering licensing regime and allowing credit to flow to small firms by shaking up a corruption-prone banking industry. Legislation issued this month abolishes a tax on household firms and strengthens legal protection for entrepreneurs. That is a step in the right direction, but Mr Lam also needs to free up universities so that ideas flow more easily and innovations thrive.

This is where it gets risky. Vietnam’s people would without a doubt benefit from a more liberal political system. But although that may also help development, China has shown that it may not be essential—at least not immediately. What is crucial is facing down powerful vested interests that hog scarce resources. A good start would be forcing the oligarchs to compete internationally or lose state support, as South Korea did with its chaebols. Often they are protected by cronies and pals within the state apparatus and the Communist Party. Encouragingly, Mr Lam has already begun a high-stakes streamlining of the state, including by laying off 100,000 civil servants. He is also halving the number of provinces in a country where regions have sponsored powerful factions within the party. And he is abolishing several ministries. All this will modernise the bureaucracy, but it is also a brilliant way of making enemies.

The danger is that, like Xi Jinping in China, Mr Lam centralises power so as to renew the system—but in the process perpetuates a culture of fear and deference that undermines his reforms. If Mr Lam fails, Vietnam will muddle on as a low-value-added production centre that missed its moment. But if he succeeds, a second doi moi would propel 100m Vietnamese into the developed world, creating another Asian growth engine and making it less likely that Vietnam will fall into a Chinese sphere of influence. This is Vietnam’s last best chance to become rich before it gets old. Its destiny rests with Mr Lam, Asia’s least likely, but most consequential, reformer. ■

For subscribers only: to see how we design each week’s cover, sign up to our weekly Cover Story newsletter .

If it does not, a collision with the bond markets awaits

The Senate should vote down Donald Trump’s reckless tax cuts If it does not, a collision with the bond markets awaits May 22nd 2025 Complacent about being the world’s haven, America has been budgeting without any sense of restraint. Over the past year the federal government has borrowed a staggering $2trn, or 6.9% of GDP, even though no crisis has drained its coffers. On May 16th Moody’s, a rating agency, stripped the country of its last headline triple-A credit score. Yet on May 22nd the House of Representatives passed, by just one vote, President Donald Trump’s “big, beautiful” budget bill, which cuts taxes and raises deficits. Reflecting the rising fiscal risk, the yield on 30-year Treasuries has risen to 5.1%, the highest since 2007, amid a sell-off

America has more fiscal leeway than other countries, but the Republican Party seems determined to test its limits. Net federal debts have grown to 100% of GDP, a near-trebling over two decades, meaning that the Treasury will soon pay more than $1trn per year in debt interest, almost as much as it spends on health care for the old. Politicians who should be debating how to tighten their belts are instead poised to raise borrowing still further. Unless they think again, they risk stoking a crisis.

Some Republicans pretend that their budgeting is sound, but they are guilty of a sleight of hand. The bill’s main effect is to take the temporary tax cuts from Mr Trump’s first term and make them permanent. A continuation of the status quo, they argue, is not a new expense. The bill also adds new tax cuts which, to keep down costs, will supposedly expire in 2028. In other words, sunset clauses for new tax cuts seem to count as a saving, but stopping scheduled sunsets comes free. To this fantasy, the bill adds cuts to clean-energy subsidies and Medicaid , health insurance mostly for the poor, to produce a slight fiscal tightening.

In reality the bill makes it more likely that America will exhaust its fiscal space. Today’s official forecasts, which suggest that net debt interest could soon hit a record high as a share of GDP and then keep rising, are bleak—and they assume that the 2017 tax cuts expire and that deficits will narrow. The new law would ensure that deficits stay around 6-7% of GDP, raising forecast debt in 2034 by about $3trn. And if new temporary tax cuts become permanent, the cost could exceed $4trn. These measures include tax exemptions for tips and overtime pay that were promised by Mr Trump during his election campaign. Once enacted, they will be hard to get rid of, whatever the law says.

Republicans hope that two things will fill this giant hole. One is tariff revenues . This may be partly true, but their estimated proceeds range from $1.4trn-2.9trn over a decade. Moreover, the figures include reciprocal duties that are on hold pending talks to reduce them, after their announcement caused a mini-run on dollar assets.

The other great Republican hope is economic growth. Yet today’s bill is far less pro-growth than Mr Trump’s past tax reforms, which included a big permanent corporate-tax cut. The tip and overtime exemptions are gimmicks. The bill even includes a big increase in the deduction that high earners can claim on account of their state and local tax bills, which in effect subsidises lower levels of government to raise the taxes they levy. When combined with Mr Trump’s tariffs, the overall effect on growth will be negative. Moreover, whereas in 2017 a deficit increase arguably provided a helpful stimulus, there is less slack in the economy today, meaning that more spending is likely to be offset by higher interest rates.

The bill now passes to the Senate, which should vote against it. The belief that deficits will never matter is dangerous, especially as doubts mount over the country’s commitment to economic stability and low inflation under Mr Trump. America needs lower spending and higher taxes to bring down borrowing. When politicians do not face up to reality, the bond market eventually forces reality upon them—and that could prove sudden and painful. ■

Subscribers to The Economist can sign up to our Opinion newsletter , which brings together the best of our leaders, columns, guest essays and reader correspondence.