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The economist usa may 19 2018

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An American princess in London Beware Italy’s next government How firms cope with Trump’s sanctions Special report: China in the world MAY 19TH– 25TH 2018Gaza…
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An American princess in London Beware Italy’s next government How firms cope with Trump’s sanctions Special report: China in the world MAY 19TH– 25TH 2018Gaza There is a better wayPURE AEROSPACEThe state that revolutionized the automotive industry has taken to the skies to become one of the top places in the country for aerospace business. Michigan. Home to more than 600 aerospace-related companies, Michigan is ranked among the top 10 states for major new and expanded facilities. When it comes to aerospace success, the sky’s the limit in Michigan.michiganbusiness.org/pure-aerospaceThe Economist May 19th 2018 3Contents 6 The world this week Leaders 9 Israel and Gaza There is a better way 10 Pharmaceuticals The price is wrong 10 Italy’s next government Fiddling before Rome burns 11 The dollar About that big stick 12 Non-compete clauses Restrain the restraints On the cover Israel must be held to account for this week’s deaths in Gaza. But it is time for Palestinians to take up non-violence: leader, page 9. Why Palestinians are ready to brave bullets and risk death on the border fence between Gaza and Israel, page 16. Despite the politics of fear, Israel is more successful than ever, page 18Letters 14 On happiness, cryptocurrencies, Marx, mental health, Deutsche Bank, the post Briefing 16 Gaza Siege mentality 18 Israel at 70 Promised landThe Economist online Daily analysis and opinion to supplement the print edition, plus audio and video, and a daily chart Economist.comE-mail: newsletters and mobile edition Economist.com/emailPrint edition: available online by 7pm London time each Thursday Economist.com/printeditionAudio edition: available online to download each Friday Economist.com/audioeditionVolume 427 Number 9092 Published since September 1843 to take part in "a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress." Editorial offices in London and also: Beijing, Berlin, Brussels, Cairo, Chicago, Madrid, Mexico City, Moscow, Mumbai, Nairobi, New Delhi, New York, Paris, San Francisco, São Paulo, Seoul, Shanghai, Singapore, Tokyo, Washington DC19 20 22 22 23 26United States The Justice Department A finger on the scale Politics in California Wacky races Gambling on sport For the bettor Medicaid Will work for health care Missouri’s governor Under fire Lexington A Democratic deficitThe Americas 27 Venezuela Mr Maduro’s mock election 28 Peru Vizcarra’s vision 30 Bello Argentina and the IMF Asia 31 Politics in Thailand Vacuum power 32 Rebellions in Myanmar Rumble in the jungle 32 Bombings in Indonesia A new low34 The Murray-Darling From paddles to puddles 35 North Korea Forewarned on disarmament 36 Banyan A Malaysian tsunami China 37 Language One country, many tongues 38 Football The home advantage Middle East and Africa 39 Burundi’s referendum Back to the bad old days 40 Zimbabwe Can the economy be fixed? 41 State airlines in Africa Where one is not enough 41 Gulf politics Why Qatar is raising cows 42 Iran’s stricken economy A system in shock 42 Iraq’s election Muqtada al-Sadr’s win Special report: China in the world Opening the gates After page 42 Europe 43 Italy’s coalition talks The wills of the people 44 Spain and Catalonia No surrender 45 Sex in French Vive la différence 45 Orban visits Poland Drinking from one glass 46 Georgia’s hipster politics Dance dance revolution 47 Charlemagne Standing up to The Donald Britain 48 Corbynomics The great transformation 51 Bagehot American princessThe royal wedding The monarchy is stronger than it has been for years—and the government is weaker: Bagehot, page 51Trump and sanctions America must take care when wielding its extraordinary power over global finance: leader, page 11. Business has little choice but to cave in to the Trump administration’s unpredictable sanctions policies, page 54. How to escape a hegemonic currency: Free exchange, page 68. Europe has few good options for dealing with America’s president: Charlemagne, page 47Italy The prospect of a populist government is more dangerous than people think: leader, page 10. The new administration threatens to be fractious and risky, page 431 Contents continues overleaf4 ContentsThe Economist May 19th 2018International 52 Higher education Ranking universitiesUniversity rankings League tables lead universities to favour research over teaching and hard sciences over the humanities. Yet they also foster global co-operation, page 52Music streaming In response to #MeToo, Spotify kicks off a cultural shift in the music business, page 55Global growth An economic slowdown should not cause too many jitters—yet, page 61. How Turkey went from investment darling to a junk rating: Buttonwood, page 62. The demise of China’s currentaccount surplus will change the global economy, page 64Business 54 American sanctions What the OFAC? 55 Music streaming Bad rap 56 Samsung and labour Workers of the Galaxy 56 AirAsia On a wing and a slogan 57 Bankruptcy advice Raising a racket 57 China Three Gorges and EDP Opening the floodgates 58 Toyota and autonomy Speed limit 59 Crypto-currencies Bitcoining it Finance and economics 61 The world economy Levelling off 62 Buttonwood Istanbuls and bears 63 NAFTA negotiations Labouring away 63 Boeing v Airbus Flying blind 64 China’s current account Discovering deficits 64 Life insurance Declining years 65 Pension bonds Will Selfies stick? 66 Non-compete agreements Ball and chain 68 Free exchange The long arm of the dollarScience and technology 71 Conservation in Colombia Something to shout about 72 Glaciology and history Core values 73 Astronomy Inconstant 74 The science of songs What makes good music? 74 Microdrones Petite fly from a bright guy Books and arts 75 Russian theatre The bandage and the wound 76 Modern opera His dark materials 77 Organised crime The biggest gang in town 77 Irish fiction How the past holds on 78 The history of silence Whereof we cannot speak 80 Economic and financial indicators Statistics on 42 economies, plus a closer look at oil Obituary 82 Ninalee Allen Craig A woman walkingChinese abroad China’s decision to let its people travel abroad freely is changing the world. James Miles argues that it is changing China, too. See our special report after page 42Subscription service For our latest subscription offers, visit Economist.com/offers For subscription service, please contact by telephone, fax, web or mail at the details provided below: North America The Economist Subscription Center P.O. Box 46978, St. Louis, MO 63146-6978 Telephone: +1 800 456 6086 Facsimile: +1 866 856 8075 customerhelp@economist.com E-mail: Latin America & Mexico The Economist Subscription Center P.O. Box 46979, St. Louis, MO 63146-6979 Telephone: +1 636 449 5702 Facsimile: +1 636 449 5703 customerhelp@economist.com E-mail:Subscription for 1 year (51 issues) United States Canada Latin AmericaUS $158.25 (plus tax) CA $158.25 (plus tax) US $289 (plus tax)Principal commercial offices: The Adelphi Building, 1-11 John Adam Street, London WC2N 6HT Tel: +44 (0) 20 7830 7000 Rue de l’Athénée 32 1206 Geneva, Switzerland Tel: +41 22 566 2470 750 3rd Avenue, 5th Floor, New York, NY 10017 Tel: +1 212 541 0500 1301 Cityplaza Four, 12 Taikoo Wan Road, Taikoo Shing, Hong Kong Tel: +852 2585 3888 Other commercial offices: Chicago, Dubai, Frankfurt, Los Angeles, Paris, San Francisco and SingaporePEFC certifiedPEFC/29-31-58This copy of The Economist is printed on paper sourced from sustainably managed forests certified to PEFC www.pefc.org© 2018 The Economist Newspaper Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Newspaper Limited. The Economist (ISSN 0013-0613) is published every week, except for a year-end double issue, by The Economist Newspaper Limited, 750 3rd Avenue, 5th Floor New York, NY 10017. The Economist is a registered trademark of The Economist Newspaper Limited. Periodicals postage paid at New York, NY and additional mailing offices. Postmaster: Send address changes to The Economist, P.O. Box 46978, St. Louis, MO 63146-6978, USA. Canada Post publications mail (Canadian distribution) sales agreement no. 40012331. Return undeliverable Canadian addresses to The Economist, PO Box 7258 STN A, Toronto, ON M5W 1X9. GST R123236267. Printed by Quad/Graphics, Hartford, WI. 53027MAGIC APP IN MY HANDS, I FOLLOW YOU UNTIL THE END MOBILE APP. Benefit from all its features: directions to the airport and boarding gate*, real-time flight information, notifications related to your flight, boarding pass available at any time… And so much more to discover at airfrance.us*At Paris-Charles de Gaulle.6The Economist May 19th 2018The world this week Politicska, a transport hub, raising fears that the disease will advance rapidly. At least 42 people have been infected by this latest outbreak so far.Fidesz government, which blames the Jewish billionaire philanthropist for much that goes wrong in Hungary.Time to talkTens of thousands of Palestinians protested along the border between Gaza and Israel to highlight their various grievances. Israeli soldiers shot and killed about 60, according to Gaza’s health ministry. Some had attempted to breach the border fence; others threw rocks and Molotov cocktails at the Israeli side. Most of the protesters, however, were unarmed. On the same day as the violence, America opened its new embassy in Jerusalem, recognising the contested city as Israel’s capital. Binyamin Netanyahu, Israel’s prime minister, said it was a “great day for peace”. Mahmoud Abbas, the Palestinian president, described the embassy as a “US settlement outpost”. A coalition led by Muqtada al-Sadr, a Shia cleric who once urged attacks on American troops, won Iraq’s parliamentary election, according to preliminary results. His allies promised to tackle corruption and curtail foreign influence. A coalition led by Haider alAbadi, the prime minister, came second. After a campaign marred by several murders, Burundi held a referendum on whether to extend the president’s term from five years to seven. If it passes, Pierre Nkurunziza, who calls himself the country’s “Supreme Eternal Guide”, might remain president until 2034. An outbreak of Ebola in the Democratic Republic of Congo spread to the city of Mbanda-Fancy a flutter? The Supreme Court overturned a law that banned betting on sports, finding that it infringed on states’ rights. The law was passed in 1992 (Nevada was exempted). Americans already place an estimated $150bn of illegal wagers on sports each year. Another round of primary elections was held in America to pick congressional candidates for the mid-terms. Pennsylvania’s contests took place under new district boundaries, after a court over-ruled Republican gerrymandering. Three women won in heavily Democratic districts, so the state’s all-male delegation will probably be slightly feminised in November.Unknown territory Italy’s populist Five Star Movement (M5S) and far-right Northern League neared agreement on forming a governing coalition, more than two months after an election. The government would be the first all-populist one in western Europe. Many fear it could pull Italy out of the euro and cosy up to Russia. The parties have struggled to reconcile their programmes, which promise big tax cuts (the League) and benefit increases (M5S). Catalonia’s parliament elected Quim Torra as president of the region. He was backed by Carles Puigdemont, who was forced from office when he declared independence and is now in Germany. The Catalan parliament approved Mr Torra, a hardline separatist who has made disagreeable remarks about Spaniards, by a margin of one vote. The Open Society Foundations decided to close shop in Budapest, the birth place of George Soros, its founder, and move its Hungarian operations to Berlin. Mr Soros has been scapegoated by the nationalistStudents, businessfolk and civic leaders in Nicaragua gathered in Managua, the capital, for the first day of talks with Daniel Ortega, the president. The “dialogue”, which is being mediated by the Catholic church, follows weeks of protests against Mr Ortega’s socialist government, in which dozens of people were killed. Margarita Zavala, an independent candidate in Mexico’s presidential election, dropped out to “free” her supporters to vote for more popular candidates. Her withdrawal could weaken Andrés Manuel López Obrador, a left-wing populist who has a big lead in the polls. Venezuela’s socialist regime took over a factory that Kellogg, a food company, had closed because of the country’s economic meltdown. President Nicolás Maduro said workers at the factory could “continue producing for the people”, who are going hungry because of price controls and official corruption. Meanwhile, prisoners took over the detention centre of Sebin, Venezuela’s feared intelligence agency, to protest against abuses. The government said it had regained control; prisoners disputed this.Party poopers North Korea cancelled a meeting with the South about improving ties and threatened to pull out of a summit between its leader, Kim Jong Un, and Donald Trump, due to take place in Singapore in June. The Kim regime hinted that it wasless keen on giving up its nuclear weapons than it had previously implied. China marked the tenth anniversary of an earthquake in Sichuan that killed 70,000 people. President Xi Jinping said China had provided “enlightenment for the international community” in rebuilding disaster zones. Officials imposed tight security, fearful of attempts by parents to mourn children who died in shoddily built schools. The governor of the Indian state of Karnataka invited the Bharatiya Janata Party to form a government, though two other parties had won a majority of the state legislature between them. The pair appealed to the Supreme Court. Suicide-bombers attacked churches and police stations in Indonesia, killing13 people. The attacks were mounted by families, including children. Islamic State claimed responsibility.Anwar Ibrahim, Malaysia’s former finance minister and a leader of the opposition alliance that won the recent general election, was released from prison on the ground that his jailing had been politically motivated. Mr Anwar is expected eventually to take over from the current prime minister, Mahathir Mohamad. The windscreen of a Chinese passenger jet blew out while it was cruising at 32,000 feet. The co-pilot was sucked halfway out, but was saved by his safety belt. The pilot landed the aircraft safely, despite the sudden loss of cabin pressure and a plunge in temperature to 1 -30°C (-22°F).The Economist May 19th 2018Business President Donald Trump introduced a plan to lower the cost of drug prices for consumers in America. The proposals include compelling pharmaceutical firms to list their prices in advertisements. The government may also get tough with firms that prevent their drugs from being copied when patents expire. But Mr Trump stopped short of keeping his populist pledges, such as allowing Americans to import prescriptions from other countries. The share prices of leading drug companies rose after his speech.The great protector Taking many in his administration by surprise, Mr Trump tweeted that he was working to overturn a ban on American chip companies from selling to ZTE, a Chinese maker of telecoms equipment, because of the job losses it entailed in China. The Commerce Department imposed the ban on ZTE for contravening a settlement over selling products to Iran and North Korea. Mr Trump said his remarks were made in the context of negotiating with China to avoid a trade war. America claimed victory after the World Trade Organisation upheld a decision that the European Union wrongly provided subsidies to Airbus. Robert Lighthizer, America’s trade representative, said that unless the EU stopped “breaking the rules” America would “have to move forward with countermeasures on EU products”. Airbus retorted that 94% of Boeing’s original claims had been dismissed by the WTO. A separate case brought by the EU against American support for Boeing will come up later this year. Vodafone announced that Vittorio Colao is to step down as CEO after ten years in the job. During Mr Colao’s tenure the world’s second-biggest wireless provider sold its minority stake in Verizon Wireless, a deal which fetched $130bn, $84bn of which wasThe world this week 7 returned to shareholders. It recently struck an agreement to expand in Europe by buying some of Liberty Global’s assets. Nick Read, the company’s chief financial officer, steps up to the top job. Xerox called off an agreement that would have seen it merge with Fujifilm, with which it has a long-standing joint venture in Asia selling photocopiers. The deal had been strongly opposed by Carl Icahn and Darwin Deason, two investors who own more than 10% of the shares in Xerox. In an acquisition underlining the popularity of price-comparison services, Silver Lake, an American private-equity firm, agreed to buy ZPG, which owns several such websites in Britain, including Zoopla and uSwitch, for £2.2bn ($3bn).A hawkish dove The Turkish lira tumbled against the dollar again, after Recep Tayyip Erdogan, Turkey’s president, said that he will seek greater influence over monetary policy if he wins next month’s snap election. Mr Erdogan’s distaste for high interest rates, which he recently described as the “mother and father of all evil”, has increased investors’ concernsabout the capacity of Turkey’s central bank to rein in inflation and arrest the currency’s fall. Britain’s financial-conduct regulators handed a £642,000 ($865,000) fine to Jes Staley, the chief executive of Barclays, for his attempt to unmask an internal whistleblower. The regulators said that Mr Staley “failed to act with due skill, care and diligence” in his response to an anonymous letter that criticised a senior executive at the bank. After months of negotiations, Saudi British Bank (SABB) and Alawwal Bank struck a preliminary agreement to merge. The combination of SABB, which is 40% owned by HSBC, and Alawwal, which is 40% owned by the Royal Bank of Scotland, would create Saudi Arabia’s third-biggest bank. It would also mark the largest banking merger in the kingdom since 1999. Punjab National Bank reported a net loss of134bn rupees ($2bn) for the quarter ending on March 31st, one of the biggest ever at an Indian stateowned bank. The loss was mostly a result of setting aside money to cover a fraud involving diamond firms that raised credit abroad using fakeguarantees from PNB. Federal investigators have charged more than 20 people in the case, including a former chief executive of the bank.The stakes are highThe British government reduced the maximum stake at fixed-odds betting terminals from £100 ($135) to £2. Groups helping gambling addicts had pressed for change, claiming punters could potentially lose £18,000 an hour because £100 can be wagered every 20 seconds at the machines. FOBTs are the primary source of income for betting shops, generating £1.8bn a year. Each terminal (restricted to four per shop) on average takes in £50,000 a year for a bookie. The industry has warned there will be big job losses because of the change.For other economic data and news see Indicators sectionThe Economist May 19th 2018 9LeadersThere is a better way Israel is answerable for this week’s deaths in Gaza. But it is time for Palestinians to take up non-violenceGAZA is a human rubbishheap that everyone would rather ignore. Neither Israel, nor Egypt, nor even the Palestinian Authority (PA) wants to take responsibility for it. Sometimes the poison gets out—when, say, rockets or other attacks provoke a fully fledged war. And then the world is forced to take note. Such a moment came on May 14th. Tens of thousands of Pa
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