Gun control

Taken down

A modest attempt to curb the sale of firearms fails

EVERY so often there appears to be a turning point in the debate over guns in America. The latest came in December, when 20 children and six staff were shot to death at a school in Newtown, Connecticut. We cant tolerate this any more, said Barack Obama shortly afterwards. These tragedies must end. And to end them, we must change. Americans seemed to agree. Polls showed increased support for stricter gun laws in the aftermath of the shooting. But as the months passed, that enthusiasm waned. Sensing this, in March Democrats in the Senate introduced only a modest bill that contained few of the big restrictions first sought by gun-control advocates and by the administration. It aimed to toughen penalties for illegal gun sales and increase funding for school-safety programmes. Most important, it would have expanded the use of background checks, which are meant to keep unfit people, like criminals and the mentally ill, from acquiring guns. Under current law, such checks are required only for sales handled by a licensed dealer. The bill would have extended the requirement to all purchases. Although immensely popular, this was poison to many Republican legislators, who do not like the idea of government interference in private sales. So a compromise was hashed out between two pro-gun senatorsJoe Manchin, a Democrat from West Virginia, and Patrick Toomey, a Republican from Pennsylvaniathat focused only on extending the checks to sales at gun shows and online. In the end, even that proved too ambitious. Despite having once supported more background checks, the National Rifle Association threatened senators with electoral retribution if they backed Obamas gun ban. Some appeared cowed. Early signs of support quickly faded, and on April 17th the Democrats failed to muster the 60 votes needed to pass the background-check compromise, derailing their push for stricter gun laws. Short memories cannot be blamed for the defeat. Democrats incessantly invoked the victims of Newtown and other gun violence during the debate. But far from swaying the 41 Republicans and four Democrats who blocked the measure, the tactic dismayed

some. When the family members of victims showed up in Washington, Rand Paul, a Republican from Kentucky, called them the presidents props. Mr Paul and others noted that the background-check proposal would not have stopped Adam Lanza, the shooter in Newtown, who had used his mothers legally-obtained guns to carry out his massacre. This is true, but proposals that would have taken some of the firepower out of Lanzas hands won even less support. Bans on assault weapons and high-capacity magazines did not even win a majority of votes in the Democrat-controlled Senate. The measure that came closest to passing this week would have made it easier to carry a concealed weapon. All in all, this was a pretty shameful day for Washington, said Mr Obama. He and his fellow Democrats vowed to continue to pursue tougher gun laws, but their way forward is now unclear. If a tragedy like Newtown cannot galvanise support for even modest reforms, nothing will.

Repression in Russia
Put in his place

Vladimir Putin comes under fire abroad for repressive laws at home
THE body language gave Vladimir Putin away. In a German television interview he was not at all his composed self. Everything irritated him: the calm, smiling interviewer questioning him about a crackdown on civil society, the headsets, his own staff for not finding a document fast enough. He has reasons to fret. Germany, Russias largest European trading partner and once a firm political ally, has turned into a big critic. Mr Putin may have made light of the half-naked protesters that disturbed his visit to Germany this week, but he must have been shocked by Chancellor Angela Merkels attack on the Kremlins raids on non-governmental organisations, including two German foundations. Putin has no real allies left in Europe, says Mikhail Dmitriev, president o f the Centre for Strategic Research, a think-tank. The Kremlin had hoped that its anti-American policy would have no effect on Europe, where politicians and businessmen were too wet, greedy or desperate for gas to confront Mr Putin. But as Mrs Merkel has shown, European patience has limits. Moreover, the value of Russia as a source of natural gas for Europe has been undermined by the proliferation of shale gas.

The recent Cypriot bail-out highlighted Russias inability to influence decisions touching its financial interests. Russians not only hold some 20 billion in Cypriot banks but often use Cyprus as a hub for merger activity (a quarter of inward investment in Russia nominally comes from the island). Russian firms cannot comply with the tight regulations in mainland Europe and in America and it would be hard to replace Cyprus as an offshore centre, says Mr Dmitriev. The problems caused to Russian business by Mr Putins anti-Western rants are becoming more obvious. So is infighting within the elite, demonstrated by the downfall of Anatoly Serdyukov, a former defence minister involved in a procurement scandal. Television reports about second-tier officials being arrested are seen by the public not as part of Mr Putins anti corruption campaign but as confirmation that corruption is ubiquitous. The economy is starting to stall, and trust in Mr Putin is falling. A recent opinion poll shows that only 25% of the country is satisfied with the status quo. Most want more democracy, but Mr Putin is responding with more crackdowns. Golos (Voice or Vote), an NGO that monitors elections and blew the whistle on vote-rigging in 2011 and 2012 is being prosecuted for not registering as a foreign agent engaged in political activity. This is not about closures and bans, Mr Putin insisted in Germany. All that we are asking them to do is to register. But Arseny Roginsky, a founder of Memorial, one of Russias first human-rights groups, notes that the purpose of the new law is not to extract information, as Mr Putin claims, but to humiliate and isolate the NGOs by labelling them as foreign agents, a label with echoes of Stalins enemies of the people. For Memorial, dedicated to the memory of Stalinism, such a badge is intolerable, says Mr Roginsky. It is a matter of principle. What drives Mr Putins attack of Golos and other NGOs is not mere vindictiveness but also a belief that his troubles are the result of conspiracy by foreign governments and their agents. In the Kremlins picture of the universe, nothing happens without a plan. This bodes ill not so much for the NGOs, which are used to working under pressure, but for Russia as a whole. Cracking down on NGOs will not deal with the causes of growing dissatisfaction with Mr Putin, but rather push him further into the corner. The next year or two will be tough for us, says Alexei Navalny, an anti-corruption blogger with presidential ambitions. A court trial of Mr Navalny on highly dubious charges starts on April 17th. It will almost certainly end with a conviction and perhaps with a sentence that bars him from running in any election. Yet the biggest threat to Mr Putins power is not Mr Navalny or his ilk, but his own actions.

Disrupting television
Signalled out

Aereo, a small start-up, has infuriated television executives

HOW many people here love their cable company? Chet Kanojia, the boss of Aereo, an internet TV start-up, posed that question to an audience recently. Only one man raised his handand he worked for one. Mr Kanojia (pictured) started Aereo in 2012 to capitalise on peoples hatred of high cable bills. For as little as $80 a year, his firm allows subscribers in New York City to record programmes and watch live broadcasts over the internet. Aereo rents each subscriber a fingernail-sized antenna, which it houses in a warehouse in Brooklyn. Television companies loathe Aereo. It does not pay networks for the free-to-air channels it streams. It allows people to receive content without paying for the bundles of channels from which cable firms derive their profits. Broadcasters have sued Aereo for copyright infringement and filed a request to shut down the service (this was denied on appeal on April 1st). Aereo is stealing our signal, grumbled Chase Carey, the president of News Corporation, which owns Fox, a broadcast network, on April 8th. Mr Carey has threatened that if Aereo continues, Fox could turn itself into a cable channel and charge viewers for carriage. Haim Saban, the chairman of Univision, a Spanish-language broadcaster, has said the same. Why does a one-year-old firm with an undisclosed number of subscribers make media moguls so agitated? Aereophobes see Mr Kanojias firm as a pesky parasite that flouts copyright law and profits from distributing content that it does not pay for. Supporters point out these are free-to-air networks, and say Aereo has designed a clever and legal technology to give customers what they want: the ability to watch live programmes and recordings cheaply, and on devices other than a TV set. Aereo has started to hurt big media firms share prices. On April 1st, after the networks request for an injunction was denied, the share prices of some big media firms, such as CBS, dipped (although they later recovered a bit). The concern is that Aereo threatens a valuable source of income. Retransmission fees, which cable operators pay broadcast networks to carry their channels, will earn the big four broadcast networks (ABC, NBC,

Fox and CBS) $1.3 billion in 2013 and as much as $3.5 billion in 2016, predicts Benjamin Swinburne of Morgan Stanley, a bank. Aereo could spoil the party. When broadcast networks have tried to negotiate hikes to their fees in the past, they have threatened cable operators, such as Time Warner Cable or Comcast, with blackouts. Operators have caved in. But if customers have Aereo, the threat of a blackout is less grave, says Rich Greenfield, an analyst at BTIG Research, since people can watch network programmes online. Mr Kanojia, an Indian entrepreneur, sold his previous company, which helped target advertisements to TV viewers, to Microsoft in 2008 for a reported $250m. He knew before he launched Aereo that he faced a fight. His firm has $64m in venture-capital funding, including some from Barry Diller, the feisty boss of IAC who once helped launch Fox alongside Rupert Murdoch. Now it only operates in New York city, but it plans to reach another 22 cities this year. The networks could sue in those places, but may prefer to wait for their New York case to be heard, perhaps early next year. With luck, by then the judge will see us as pro-social, says Mr Diller. No one knows how many people would subscribe to Aereo if given the chance. Currently it offers only broadcast channels and one cable channel (Bloomberg television). However, in the next year it could start paying to carry other cable channels and add more content. Mr Kanojia anticipates strong demand for live shows. Plenty of services, such as Netflix and Hulu, offer previously-aired content online but few offer live news and sports. Aereo is not the only disruptive force attracting lawsuits. New technologies allow firms to do things that lawmakers never imagined. Aereos fate will mostly depend on whether the courts deem its transmissions to constitute private or public viewing (the latter is barred by copyright law). Like Law and Order, this courtroom drama could run and run.
From the print edition: Business
Sex, drugs and hope

How big business fought AIDS in South Africa

MOST managers extol the power of positive thinking. At the New Vaal colliery in South Africa, however, workers are urged to stay negative. This is not because Anglo American, the mining giant that owns the colliery, wants to foster a gloomy attitude among its employees. Rather, it wants them to stay alive.

When Schumpeter visited, the coal mines top brass were wearing the canary-yellow shirts of the national football team, part of a promotion to encourage employees to take a voluntary test for HIV, the virus that causes AIDS. Around 80% have done so. No one who was HIV-negative last year has turned positive this year. Early testers are often those with the least reason to be anxious about their status; nonetheless, this is promising. The rate of conversions from HIV-negative to positive is dubbed the safe-sex indicator. In 2005 it was 2.1 for every 100 staff at Anglos thermal coal division; so far this year it has fallen to 0.63. Bosses receive a daily e-mail that shows, statistically speaking, which is the safest mine to have sex, says John Standish-White, an Anglo executive and a champion of its AIDS policy. Managers are judged by it. There is even a trophy for the mine with the lowest score. Any employee who tests positive for HIV is offered antiretroviral drugs paid for by Anglo. So the 17% of Anglos South African staff with HIV can live a normal life. The firms big push now is to slow down or stop new infections. How much has changed. A decade ago South Africa faced catastrophe. The proportion of adults with HIV had shot up from barely 1% in 1992 to 17% in 2002. The drugs that kept HIV-positive people in rich countries alive and healthy were impossibly expensive for most South Africans. Legions were dying. And the countrys president, Thabo Mbeki, was promoting the crackpot theory that HIV did not cause AIDS. The story of how apocalypse was averted has many heroes, from health workers to AIDS activists. But big business also played its part. Some industries were especially vulnerable. Miners were often migrants who lived in single-sex hostels surrounded by prostitutes. Truckers often rested at roadside brothels. Infection spread fast. Skilled workers sickened and slowly died. Two people were trained for each critical job at each mine, so there was a backup if one fell ill. The consequent loss of productivity threatened to destroy the business. Attempts to preach safe sex failed. Then, in August 2002, Brian Brink, Anglos chief medical officer, was called in to see the boss, who told him that it was time to change tack. Anglo would provide testing for all employees who wanted it and free treatment for those who tested positive. The firm did not know what this programme would cost or whether it would work. Anglo is no charity but in the end it was a moral decision, says Dr Brink. Other businesses followed suit. SABMiller, a big brewer, was one of the first. Its operations were at risk from barley-field to bar: the virus hit the small farmers who supplied its ingredients, the truckers who delivered its beer and the customers who drank it. (People sometimes make unwise choices about sex after a glass or three.)

SABMiller offers antiretroviral drugs to its staff. It also dishes out condoms in taverns and trains bar staff to spread the safe-sex message. Hectoring strangers may be ignored, but warnings from peerssuch as the buddy who suggests you use a condom as you leave the bar with a new friendare often heeded. The results of all this were better than anyone dared to hope. Free drugs gave workers an incentive to get tested, so many did. Thanks to lobbying by activists and improvements in technology, the price of drugs meanwhile plummeted from roughly $10,000 per person per year in the late 1990s to as little as $100 today. Drug firms made their medicines simpler to take: a pill or two a day instead of lots. Corporate AIDS programmes are starting to pay for themselves by cutting absenteeism and staff turnover, not to mention improving morale. Anglos Dr Brink talks of turning a disaster into something we could manage. Positive paternalism The fight against AIDS has subtly changed the relationship between firms and their workers. Before AIDS, a mine boss at Anglo would worry about rockfalls but feel it none of his business if an employee took risks at home. These days he takes a paternalistic interest in the sex lives of his workers. Managers at SABMiller, too, have formed closer relationships with suppliers and sellers. Since Anglo started monitoring its workers health more closely it has discovered other problems, such as rising obesity and hypertension, and started to tackle them. Dr Jan Pienaar, who developed the healthcare IT system for Anglos coal unit, jokes about linking it to the cafeterias turnstiles so that the overweight are guided to the salad counter. Mining firms have a strong incentive to keep employees healthy, because they are hard to replace. Miners become familiar with the unique geology of the mine where they work. Staff turnover is only 2.4% a year at Anglo. Also, its record in tackling HIV may help it secure the social licence to mine in other regions with virulent diseases, such as malaria. A final pay-off from the corporate fight against AIDS is that it helped to shame South Africas government into changing its AIDS policy. President Mbeki left office in 2008. The current president, Jacob Zuma, is hardly perfect: when on trial for rape, he said he had showered after sex with an HIV-positive woman to avoid infection. (He was acquitted.) But despite ignorance at the top, the government now offers the 6m South Africans with HIV free antiretroviral drugs if their immune strength drops below a critical level. Such treatment makes carriers less infectious, and so slows the spread of the epidemic. Business has played only a supporting role in this revolution, but an honourable one.

Women and work

Girl talk

Working women today have it better than ever before. But few agree on how to help them rise furtheror whether they still need help at all
PEOPLE have been holding heated discussions recently about womens experience in the workplace. The catalyst? A single Silicon Valley executive. Last month Sheryl Sandberg, chief operating officer at Facebook, published Lean In, a controversial manifesto on why women have not ascended to the most senior positions at companies (reviewed in our March 16th issue). She concludes that it is partly womens own fault: they do not lean in and ask for promotions, pipe up at meetings and insist on taking a seat at the table. Three new books will not have the same impact as Lean In, bu t they offer some interesting new perspectives on how women are coping at work, and what is holding them back. Some of it is down to simple miscommunication. Barbara Annis and John Gray argue in Work With Me that men and women are biologically wired to think and react differently to situations, and have gender blind spots when it comes to understanding their co workers behaviour. Ms Annis, who leads workshops on gender for big companies and governments, and Mr Gray, author of Men are from Mars, Women are from Venus, a bestselling book in 1992 about relationship problems, have collaborated to produce an easy-to-read guide to workplace communications. Women ask more questions, gather more peoples opinions and seek collaboration with co-workers more frequently than men. Men view these preferences as signs of weakness, and women, in turn, grow annoyed by how competitively men work, and how quickly and unilaterally they arrive at conclusions. If both female and male employees became more gender intelligent about how their work and behavioural preferences are hard-wired, it would contribute to a more harmonious workforce. Women have been choosing to leave companies at twice the rate of men, and more than half the women whom the authors met in workshops were considering leaving their firms. Women often tell their bosses that they are quitting for personal reasons, but the majority actually leave because they feel excluded from teams and not valued for their contributions. Yet the reality is that women often have trouble communicating with other women at work as well, though the authors do not explain in quite as much detail why this is so.

Communication and gender equality are not just problems at large firms. In A Rising Tide Susan Coleman and Alicia Robb look beyond womens experience at big companies. They focus instead on women entrepreneurs, who have the potential to become leaders in their field, earn a high income and hire more women. In a positive shift, women have been starting more firms in the past decade. However, these tend to be in the service and retail industries (as opposed to fast-growth industries like technology). They also remain smaller than mens firms. Ms Coleman and Ms Robb point out that part of this may be by design; women sometimes want to keep their businesses small in order to balance their family responsibilities. However, women also often lack the financing that male entrepreneurs enjoy. They have fewer savings, so usually launch their businesses with less capital than men, and are less likely to apply for a loan for fear of being denied. And they have not had as much access to the masculine world of Silicon Valley: in 2000 they obtained only 5% of funding from venture capitalists, a notoriously male-dominated industry. During their first year of operation men raised 27 times more equity from outsiders for their startups than women. How has the success of high-achievers differentiated them from other women? In The XX Factor, Alison Wolf, the director of public policy and management at Kings College London, argues that there are now around 70m highly educated, high-earning women around the world. They have more in common with elite men than with other women. These grandes dames tend to marry more often and have fewer children than lesseducated women. They spend more time working, and, unexpectedly, more time parenting. Ms Sandberg also makes this point. As the demands on women in the workplace have increased, so too have the standards for being a good, involved motherwhich adds to the challenges for women at the top. Ms Wolf and Ms Sandberg ultimately differ, however, on whether the glass is half full or half empty for women. Ms Sandbergs book is a call to female arms to change their behaviour so they can rise further. Ms Wolf concludes with an economists detachment. She says that given how much things have improved for women in the past century, it is a little surprising to find so many elite women still arguing passionately for directed, top down social changechange designed to improve things for female elites. Most people agree that more needs to change in the workplace. Men still occupy most top jobs, do not feel comfortable mentoring younger women and judge young men differently from young women (young men by their potential, young women by their past output). However, after decades of women failing to gain equal representation in executive suites, it is notable how many books now focus on women altering their behaviour, rather than men changing their way of doing things. Women cannot change

their fate on their own. What happened to the responsibility for men to lean in to listen and advance women in the workforce, as well?

What the Arab papers say

On North Korea

ESCALATING uncertainty on the Korean peninsula has set off a stream of sarcastic commentary in the Arabic-speaking quarters of Twitter. Other media outlets however, have taken a more sober tone, drawing parallels with the Arab worlds experien ce of both militaristic, dictatorial regimes and the nuclear tensions between Iran, its neighbouring states, and the international community. In an article for the Emirati newspaper Al Bayan, also published on the pan-Arab Al Arabiya website, Mohammed Bin Huwaidin highlights the similarity between the showdown on the Korean peninsula and the ongoing nuclear drama in the Persian Gulf. Insisting that the region must remain free of nuclear weapons, he writes: The responsibility has fallen on everyones shoulders to take this matter under consideration and to deal with it seriously. International efforts to convince Iran to halt its suspect nuclear programme are of the highest importance. Conditions must be created that support their success so that we dont arrive one day and find the North Korean scenario replaying itself in the Gulf, with the language of nuclear blackmail becoming the dominant language of the region. Writing in the pan-Arab daily Al Sharq Al Awsat, Samir Atallah posits that the most ridiculous aspect of the rising tensions on the Korean peninsula is that we have to take the boy seriously. He has a nuclear button that he could fiddle with, just like he fiddles with the buttons on the military jacket that he wears. Following a survey of the poverty and militarism of North Korea, he concludes: This, then, is the country of the supreme leader and his funny hair and the picture of him in the artillery emplacement pondering which nations to strike with his nuclear missiles. Dont joke. There are many like him who repress and oppress and incinerate, then smile for the camera, enjoying the limelight. Like you, I think about this world and tremble. It has become full of nuclear-armed children. A ruler no longer needs to accomplish anything: every time he desires extra aid, he merely lays his nuclear pistol on the table.

Writing for the Jordanian website Ammon News, Batir Mohammed Wardam reflects on the Arab publics reaction to the situation. Sarcasm and apathy have been the main response, he says, because the scenario in North Korea is a familiar one in the Middle East. We have in the Arab world too many political problems, military conflicts, and internal wars to really worry about the situation in Korea. But what we are hearing in Pyongyangs rhetoric is exactly what we are hearing from Damascus, and what we have heard previously from Baghdad and Tripoli and all the other backward regimes that brought nothing to their peoples and neighbours except tragedy. While the world remains on edge regarding what is happening, we paradoxically react primarily with sarcasm, perhaps knowing that these kind of regimes dont affect the United States o r combat colonialism to the same extent that they bring destruction to their peoples, and ultimately fail.

Professional firms
Simply the best

Lessons from the leaders

THE ink was barely dry on the pages of In Search of Excellence and Good to Great when some of the corporate diamonds mentioned in those books started to lose their sparkle. Charles Ellis at least had the advantage of knowing while he was writing his new book, What It Takes, that McKinsey and Goldman Sachs had already stumbled badly, the first when its former managing partner was charged with insider trading, the second by becoming the greedy face of post-crash Wall Street. He has turned this into an advantage, making his book on what he considers to be the five greatest professional firms in the world a fascinating analysis both of how corporate greatness can be achieved and how easily it can be lost. During a long career advising senior professionals, Mr Ellis found that a handful of firms were almost universally regarded by their peers as the best in their particular business. As well as McKinsey (management consulting) and Goldman (investment banking), they included Capital Group (investment management), the Mayo Clinic (health care) and Cravath, Swaine & Moore (law). He was surprised to discover that each of the firms had several things in common. These include leaders who devote their lives to serving their firm rather than enriching themselves (though that tended to follow naturally), a good sense of what motivates staff to get up early and work late and the ability to get individualistic professionals to function unusually well in teams.

Above all, these firms are fanatical about recruiting new employees who are not just the most talented but also the best suited to a particular corporate culture. These firms bosses spend a disproportionate amount of time on the recruitment process, often putting it before other more immediately lucrative demands on their time. McKinsey interviews 200,000 people each year, but selects just over 1%. Each McKinsey applicant can be interviewed eight times before being offered a job; at Goldman, twice that is not unheard of. At Capital a serious candidate is likely to be seen by 20 people, some more than once. Recruitment, these firms believe, is the start of a lifelong relationship. At the same time, Goldman and McKinsey also have a policy of helping their staff to find suitable work elsewhere, all in the expectation that they will eventually become loyal customers. Each firm has a mission that is clear, if perhaps a bit dull: Cravaths is to be the most effective law firm on the most difficult cases involving US law. Each also stressed the importance of its customers. John Whitehead, former co-head of Goldman, once wrote a 14-point document outlining Business Principles which began Our clients interests always come first. No wonder its current bosses were so embarrassed last year when a former employee claimed that Goldman staff referred to clients as Muppets. In the past Mr Ellis would have praised Arthur Andersen, an audit firm that went bust in 2002 after getting embroiled in the collapse of Enron, a client. But the seeds of Andersens demise were sown decades before, when the firm started to put its professional obligations to its clients second to the ambitions of its partners. Goldman began committing similar sins in the 1990s as its then leaders started to dream of awarding themselves fortunes by taking the firm public. A quintessential insider, Mr Ellis is discreet in his criticisms. But reading between the lines, he is more impressed by McKinseys response to the recent public stumbles than by Goldmans. Whereas McKinsey has returned to putting the customer first, Goldman is struggling to convince anyone that it has genuinely recommitted itself to serving those Muppets.

The economy
Climbing, stretching and stumbling

Chinas disappointing new growth figures are not the end of the world

ENGINEERS used to dominate Chinese policymaking. But the Communist Partys highest organ, the seven-member standing committee of the Politburo, now includes three economists, for better or worse, including Li Keqiang, the prime minister. On April 14th he chaired his first symposium of economists since taking office, inviting views on Chinas prospects from fellow members of the tribe. The economy, he concluded, would have to climb hills and cross ridges. Things, in other words, might get bumpy. One of those bumps was revealed the next day. New figures showed Chinas economy growing by 7.7% in the year to the first quarter, falling short of expectations and the previous quarters pace. The figures were puzzling as well as perturbing. The job market still seems tight: there are 1.1 job vacancies for every applicant, the highest ratio since records began in 2001, points out Zhang Zhiwei of Nomura, a bank. Meanwhile, credit seems incredibly loose: the broad flow of financing to Chinas economy (including bank loans, trust-company loans and corporate-bond sales among other things) set a monthly record in January, then matched it in March. The links between credit, growth and jobs are not instantaneous. It takes time for disappointing growth to translate into weak employment, because employers hesitate to fire people. Likewise loose credit feeds into fast growth only after a lag (of up to nine months, by some estimates). Since these lags can be long and variable, economists can use them to link almost any unexpected effect with any favourite cause. That is one reason they are held in lower esteem than engineers. Chinas uneven figures may also reflect a different kind of cycle: the earths orbit around the sun. Last year was a leap year, skewing the comparison of this years shorter first quarter with last years longer one. If the extra day were taken into account, growth would have been closer to 8%, reckons Tao Wang of UBS, a bank. The slowdown may also owe something to the new stars in Chinas political firmame nt. A frugality campaign championed by the president, Xi Jinping, may have hit conspicuous consumption. According to the National Bureau of Statistics (NBS), the revenues of big restaurants fell (year-on-year) in January and February for the first time since 1978. Tighter curbs on property speculation, including the revival of a 20% capital-gains tax, have also slowed construction. Quality not quantity The slower figures may be easier to excuse than to explain. Chinas new government is intent on improving the quality and efficiency of growth, according to the NBS. If that is true, it might justify some reduction in the quantity of growth.

More efficient growth would require a lower input of capital (as well as energy and labour) per yuan of extra output. It was, therefore, notable that investment (the addition of capital) contributed only 30% of Chinas growth in the first quarter. That was an unusually small contribution for an economy often accused of building bridges to nowhere. In 2012, by comparison, investment contributed about half of Chinas growth; in 2009, more than 87%. The first quarters growth was instead led by consumer spending, which contributed over 55% of it, despite Mr Xis frugality drive. Consumption is often strong in the first quarter, notes Mark Williams of Capital Economics, a research company. But its prominence was no seasonal fluke. In both 2011 and 2012, consumption exceeded investments contribution to growtha welcome sign that rebalancing of the economy is finally under way. These shifts in Chinas spending mix are mirrored by changes in its mix of production. Services contributed more to GDP than industry for the third quarter in a row. The sector (which includes transport, wholesaling, retailing, finance and property) remains unusually underdeveloped for a country with Chinas level of prosperity. But this year services may nonetheless become the biggest part of the economy. That might make the engineers a little wistful. They created an economy in their own image: dedicated to things, not services; durable assets, not consumer trifles. To an economist, by contrast, consumption is, as Adam Smith once put it, the sole end and purpose of all production. From that point of view, the growth revealed this week was slower but better balanced, and geared towards the consumer. If consumption was not the sole end of the extra production, it was 55% of its purpose. That should be some consolation to the Politburos economists.

Banking
Safety in numbers

An important argument for safer banks is undermined by its tone

The Bankers New Clothes: Whats Wrong with Banking and What to Do about It. Anat Admati and Martin Hellwig. Princeton University Press; 398 pages; $29.95 and 19.95. Buy from Amazon.com, Amazon.co.uk

NEARLY six years have passed since rumblings in the credit markets signalled the start of the financial crisis. Yet the debate over what ailed them and how best to fix them burns on as fiercely as ever. One element of the diagnosis is relatively uncontroversial. The banks capital base was far too thin to protect them against the shocks in property markets that eventually eroded confidence in virtually all big banks in America and Europe. Yet the question of how much capital they should hold to prevent a recurrence is still strongly contested. Many readers may feel their stomachs sink at the mention of capital ratios and systemic risk. But Anat Admati, a finance professor at Stanford University, and Martin Hellwig, a director at the Max Planck Institute for Research on Collective Goods, have done an admirable job in explaining how capital in the banking system works to absorb shocks, and how too little of it makes banks unstable. To do so they invented Kate, a hapless house-buyer and small-business owner. When Kate sets out to buy a house using mostly borrowed money, the deposit she puts down is a bit like the capital that a bank holds on its portfolio of assets. If Kate puts down a deposit of, say, 5%, and her home increases in value by 10%, she triples her money. If the house falls in value, even by as little as 5%, she loses everything. If Kate puts down a much bigger deposit, she stands to make a less spectacular return if prices rise, but is far less at risk of losing all if they fall. The plain-spoken homily of Kate demystifies an important concept at the heart of banking. This has generated praise for the authors from, among others, Sir Mervyn King, outgoing governor of the Bank of England, and Sheila Bair, former chairman of the Federal Deposit Insurance Corporation. Yet in the books homespun simplicity, it adopts a shrill tone and then gallops past important and nuanced arguments that, if addressed, would have strengthened the authors contention that the banking system needs to hold a lot more capital than it does at the moment. Start with tone. The authors argue that since the credit crunch serious attempts to reform banking regulation have foundered and that todays banking system is as dangerous and fragile as the system that brought us the recent crisis. The rhetoric makes for a fine call to action, but does not recognise the fact that capital ratios have already significantly increased. Most large banks now have two to three times more capital buttressing their balance-sheets than they did a few years ago. More capital may still be needed, yet in its efforts to specify how much more the book is a disappointment. The authors set out to refute many of the arguments that banks and their lobbyists advance in defence of current capital standards. Among these is the myth that capital is idle and could better be employed lending to businesses or households (it is, in fact, just

another way of financing a loan). They also challenge the argument that higher capital comes at the expense of economic growth. Yet on a central question, whether capital is more costly than debt and leads to higher borrowing costs, they slip. In their zeal for higher capitalthey suggest ratios of 20-30%the authors argue that it is no more expensive than the debt and deposits that form the rest of banks balance sheets; that no one can make banks safer at no cost. If that were indeed the case then why not immediately insist banks hold more capital? Why stop at the 30% proposed by the authors? Why not demand that banks have capital ratios of 50% or even more? There are costs and trade-offs. The first is the unequal tax treatment of debt and equity. Interest paid by corporations and banks is tax-deductible, whereas returns to shareholders through dividends or share buy-backs are not. The authors correctly point out that this inequality is not immutable. But without a wholesale revision of tax codes, equity capital will remain more expensive than debt. Another cost relates to the role that banks play in turning short-term deposits into longterm mortgages. This provides an important social function. Savers want ready access to their cash but do not want to have to repay their mortgages at the whim of their bank. The more that a bank uses its own equity to fund its loans, the less it is able to do so using deposits and offer a return to savers who would rather deposit funds with a bank than buy shares in it. In refusing to see that there are costs and trade-offs to be made in assessing the right level of capital, they weaken an important call to make the banking system safer.

Gay marriage
And now on to polygamy

THE excitement over the Supreme Court arguments on gay marriage has probably died down until the court comes back with a decision. And what with a majority of senators now in favour, it certainly looks like, whether by judicial or legislative action, gay marriage is on a fairly rapid road to acceptance across America. So this moment, when fewer people are paying attention and it can't do too much harm, seems like a good time for people who support gay marriage to admit that there are a couple of arguments for it which they've always thought were wrong. Alexander Borinsky's article in N+1 takes up the issue from the perspective of a 20something gay man who's not entirely comfortable with marriage advocates' campaign to show that gay people's sexual preferences are inborn and involuntary, and to present gay people as non-threateningly monogamous. Sexuality, he feels, is in part something you actively construct as part of the bildungsroman of your life, and that journey for a lot of gay people involves a bunch of sex with strangers. After the dissolution of a relationship led him to a period of screwing around, he writes: ...my promiscuity served a purpose. Abandoning myself to alcohol and flirtation felt like a salvific, if reckless, kind of machismo. Uncommitted sexual encounters meant selfreliance. I vividly remember leaving the house of a waifish, doe-eyed dancer from Devon who grinned and giggled and wore a ripped army jacket. It was around four thirty in the morning. The sex had been terrible, but outside was a lovely, warmish night. As I waited for the night bus I felt disappointed, embarrassed, and a little frightened. I also felt brave, dangerous, and grown... The urge to prove that I could stand on my own two manly legs came, in part, from the language of helplessness that pervades most messages of gay acceptance: Its okay that youre gay, because you were just born that way. Its no ones fault. Binging and [having sex] made my gayness into, yes, a lifestyle choicenot just a hormonal tic I couldnt help. I was a person making choices, not a sexuality unfolding itself. Right on. And this kind of sentimental education isn't exclusively or even particularly gay. Who hasn't left the house of a waifish, doe-eyed dancer at 4:30 in the morning? Now, as a heterosexual, I enjoy the privilege of being able to declare that I greatly enjoyed the relatively few such evenings I experienced in my 20s and wish there'd been more of them, without worrying that anyone will then try to deny me the right to get married. But what I was doing, on those evenings, was just as much a volitional construction of my own sexuality and masculinity as what my gay friends were doing at the same age. Mr Borinsky forthrightly notes evidence that gay men are, on average, a lot more promiscuous than straights, which certainly comports with anecdotal experience. And so what? There's no logical or ethical need for proponents of legalising gay marriage to argue that gay men are just as monogamous as straight men, or to imply that being non-

monogamous is in itself bad. There may be a political necessity to make that argument, but that's another story. So there's one aspect of the pro-gay-marriage brief that deserves a mental asterisk. A second argument that has always been a bit weak has been the attempt to minimise the extent to which allowing same-sex marriages will change the definition of marriage for straight married couples. When conservatives have argued that gay marriage would "devalue traditional marriage", the response has often been to ridicule the idea that straight people's marriages will change at all. ("OMG! Marriage is now worthless!") This isn't a serious response. Obviously the legalisation of same-sex marriage represents a major change in the institution and in the meaning of the word, much as the meaning of phrases like "all men are created equal" changed significantly when they began to be understood to include, say, women. For people who have a strongly gendered understanding of their own marriage, this is a paradigm shift. The government is now saying it understands marriage as a long-term legal commitment between two people who are assumed to have a sexually attached relationship to each other. Gender is irrelevant; marriage is simply a paired relationship. It's a big deal when social institutions change this way, and if conservative heterosexuals feel their marriages are affected, they're right, even when the way they phrase their complaints is wrong. Which brings us to moderately off-the-mark argument number three. One of the assumptions that gay marriage calls into question, for many conservatives, is: why pairs, then? If not man-woman, then why not man-woman-woman, and so forth? Again, the response of gay-marriage proponents is generally ridicule. I don't think this is a ridiculous question. "Why can't you marry your dog, then?" is a ridiculous question; marriage, in our society, is between consenting adult persons. (Though states where girls can marry below the age of legal adulthood violate this premise, and show the traces of a premodern understanding of marriage as a reproductive contract between extended families that few Americans would say they support today.) But "why only two?" isn't a ridiculous question. It's easy enough to show that gay marriage does not empirically lead to pressure to legalise polygamy; that hasn't happened anywhere that gay marriage is legal. But this is different from explaining why opening up the boundaries of the 20th-century understanding of marriage shouldn't raise the possibility of legalising polygamy. Why shouldn't it be legal for more than two consenting adults to marry each other? There are, obviously, a whole lot of societies in the world where polygamy is legal and normal. In fact the anthropological record suggests that the overwhelming majority of human societies have allowed men to have more than one wife simultaneously. I don't want to be taken to be making a creepy dirty-old-man argument in favour of polygamy. But the reflexive belief that polygamous marriages must be evil and oppressive even in

societies where they are traditional is basically an expression of cultural prejudice. I would never want to be in a polygamous marriage myself, because I've grown up in the West and it seems freaky and inegalitarian to me; but for people who grew up in Yemen, or in Swaziland, or in Vietnam before the 1950s, that is not necessarily the case. Women in polygamous societies may decide to become a rich man's second wife rather than a poor man's only wife, and do not necessarily feel oppressed by that choice. Their children usually turn out well-adjusted. To take the typical paradigm-upender, if you imagine a Sudanese man with two wives (and children by each of them) who wins the Green Card lottery and is told he has to divorce one of his wives before coming to America, you have to wonder whose interests the government thinks it is defending. And yet modernisation in almost every country seems to entail a shift from polygamy to monogamy. This is actually something of a puzzle, according to "The puzzle of monogamous marriage", a paper published last year by Joseph Henrich of the University of British Columbia, Robert Boyd of UCLA, and Peter Richerson of the University of California Davis. It's particularly confusing, they note, in that in any polygamous society, the most powerful men are likely to be the ones who benefit from polygamy. How does a society make a shift in norms that greatly disadvantages its most powerful members? Their argument is that in the case of Europe, the dynamic that led pagan, polygamous Germanic tribes to shift to monogamy and Christianity was competition between protostates at the group level. In polygamous societies, high-status men marry a disproportionate share of the women, leaving low-status men to fight and scramble for the rest. Monogamous European societies outperformed polygamous societies economically and on the battlefield, the argument runs, because low-status males in polygamous societies were more often engaged in debilitating violence against each other. So monogamous Christian societies defeated and converted polygamous heathen ones, and monogamy gradually spread. Now this argument may well be wrong. But any other plausible explanation is likely to be similar in that it explains the transition in terms of enhancing the economic welfare and institutional reach of monogamous cultures and states. Monogamy thrives in the service of power. Having grown up in a monogamous society, we respond instinctively to its myths: the brilliant state-building legend of Romeo and Juliet, "one girl, one boy"( to quote the Leonard Bernstein version), the might of the sovereign ("the Prince expressly hath forbidden bandying in Verona streets!") decreeing that marriage as a tool of clan alliance or rivalry will make way for marriage as a pairing of two autonomous individuals in a romantic attachment, answerable to no one but the law. This is the way the state will recognise sexual bonding, because this is the codification of sexual bonding that makes for the strongest state. We absorb these norms, we learn to embrace them, we thrill to them from the age when we watch our first Disney film. Today, gay men and women

want to have their sexual bonding embraced within the same norms, to achieve equality, and that's their right. But my guess is that the real answer to the conservative question "why not more than two people, then?" is that we will stick to pairs because marriage is a creature of the state and pairs are the form that makes the state strongest. Nobody, though, gays or conservatives, finds this way of thinking about the issue very appealing, so it probably won't get much play.

Overseas investment
Nice to see you, EU

Chinese investors love Europes companies but hate its bureaucracy

EUROPE was the main destination last year for Chinese overseas direct investment (ODI). According to a new report by A CAPITAL, an investment fund, Chinese ODI into Europe in 2012 shot up to $12.6 billion (see chart), 21% more than in 2011. Though some countries are equivocal about a Chinese presence (see article) others welcomed investment in companies ranging from Weetabix, an English food brand, to EDP, a Portuguese utility. The trend is accelerating. Huawei, a Chinese telecoms firm officially blacklisted in America, has been selected by Wind, an Italian mobile-phone operator, to help build its $1.3 billion 4G network. Dalian Wanda Group, a Chinese conglomerate that stunned Hollywood by purchasing Americas AMC cinemas last year, is rumoured to be in talks to acquire a big European cinema chain. The new report reveals two notable trends. Investment, once directed mainly at commodities, is going more into services. That change mirrors the shift in Chinas economy from manufactured exports to domestic consumption. To compete for the new middle class in China and to sell across the world, Chinese firms need brands and technologies. Europe has both. The other shift, notes Andr Loesekrug-Pietri of A CAPITAL, is the increasing willingness to take minority stakes, which now make up 58% of Chinese deals. He believes this is a pragmatic response to local hostility at outright takeovers and to the fact that it is hard to run a company from abroad (as Geely, a Chinese car firm, has found after purchasing Swedens Volvo).

The EU Chamber of Commerce in China recently asked some six dozen local firms about their European investments. The chambers Piter de Jong says that nearly every firm said it would invest again in Europe, but many had grumbles. A big complaint is regulatory delay, especially for visas. Another is the EUs many legal systems and languages, and onerous labour practices: a Chinese manager was shocked that a union representative should have a say in where to put a coffee machine. Mr de Jong says Chinese firms should unite to lobby for change. Luxembourg is a favourite destination of Chinese investors. Many use holding companies there to expand across the continent. In addition to seeking tax advantages, they are attracted by its swift action on permits and visas and its willingness to handle paperwork in English. Nicolas Mackel, the countrys consul general in Shanghai, notes that its only advantages over rivals are speed and pragmatism. Eurocrats and their national counterparts might take note.

Women's health
Strange medicine

IT IS a bizarre time for womens health. In March Arkansas passed a law banning abortions after 12 weeks of pregnancy. Then North Dakota went even further, signing a law to ban all abortions after six weekssix!the most severe restriction in America. These measures flout legal precedent. Or as Arkansass Democratic governor put it (the legislature overrode his veto), his states ban is blatantly unconstitutional. Even stranger than the current fight over abortion, however, is the current fight over contraception. Today is the last day for public comment on the contraceptive coverage mandate Obamacares requirement that insurers cover contraception without making patients pay an additional fee. It has been the subject of fierce debate for nearly two years. Despite the Obama administrations attempts at compromise, the fight shows no sign of abating. That is too bad. One would think that both sides of the abortion debate could rally behind contraception. Young, unmarried women have particularly high rates of unintended pregnancy. In 2008 more than half of these unintended pregnancies ended in abortion. Reduce the rate of unintended pregnancies, reduce the rate of abortion. Expanding access to contraception would seem a reasonable way to advance this goal. But no one can agree on how to do so.

In 2011 the Obama administration proposed that insurers cover contraception for women without a co-pay. The National Academy of Sciences had recommended as much: Women with unintended pregnancies are more likely to receive delayed or no prenatal care and to smoke, consume alcohol, be depressed, and experience domestic violence during pregnancy. Unintended pregnancy also increases the risk of babies being born preterm or at a low birth weight, both of which raise their chances of health and developmental problems. Under the health departments first proposal, insurance plans sponsored by some religious employers would be exempt from the requirement. This did nothing to assuage the United States Conference of Catholic Bishops or other conservative groups. So the health department adjusted the proposal in February 2012, then again in February 2013. Under the most recent version, non-profit religious organisations would not have to cover contraception. Female employees would be able to get free contraception through a separate plan, with insurers footing the bill. Those insurers would then pay lower fees on state health-insurance exchanges. This did not placate the bishops. Thirteen state attorneys general have sent a letter to the health department voicing their own objections. Lawsuits over the mandate continue (Stuart Taylor provides a good overview). The question now is whether the Obama administration will keep trying to find a compromise. The administration might do well to learn from another recent experiment. In 2011 Kathleen Sebelius, the health secretary, took the extraordinary step of rebuffing her own colleague, Margaret Hamburg of the Food and Drug Administration (FDA). Dr Hamburg had recommended that emergency contraception be made available to women of all ages without a prescription, as medical societies had urged for years. Mrs Sebelius, mindful of the imminent presidential election, rejected the idea. On April 5th a federal judge scolded her, calling the restriction on emergency contraception politically motivated, scientifically unjustified, and contrary to agency precedent. The judge ordered that emergency contraception be made available over the counter within 30 days. So, whats the lesson? There is a limit to how much one should try to please those opposed to contraception. Mrs Sebelius is right to try to accommodate the concerns of religious employers. But at this point, she has to move forward.