Monthly Archives: April 2013

Boston With one of the suspects dead and the other in hospital, the Boston marathon investigation has turned to the men’s motives. The Wall Street Journal looks at how a turn to religion caused fissures within the family. David Remnick examines the disaffection of the Tsarnaev brothers. (It seems the links the brothers had to Chechnya were rather remote.) Edward Luce thinks Obama should tread warily after the Boston attack.
The US economy is getting a Hollywood makeover, as the Bureau of Economic Analysis rewrites economic history by adding 21st century components such as film royalties, and research and development spending. This will make the US economy three per cent bigger.
♦ Civic involvement in the rescue effort following the Sichuan earthquake was so big, officials had to turn helpers away.
♦ Steve Schwarzman, founder of alternative investment company Blackstone, is donating $100m to establish an elite international education programme at Tsinghua University in Beijing.

 Read more

Over the past year, there have been security and war scares all over East Asia – but Taiwan, the traditional hot spot, remained strikingly cool. In recent months, Japan and China have jostled over their disputed islands and the North Koreans have threatened America and the South with nuclear weapons. By contrast, Taiwan has not been at the centre of a good war scare since the Straits crisis of 1996. Visiting the island, a few weeks ago, I was told by a senior member of the security establishment that – “We look like an island of calm in a boiling sea.”

Perhaps the Taiwanese were feeling left out? Because, together with China, they have succeeded in creating some waves over the past week. First, the Taiwanese government staged its first live-fire security exercise since 2008. And this event was swiftly followed by the revelation that China has deployed missiles near the island that are capable of threatening American aircraft carriers. This is significant, because the carriers are the basis of American power in the Pacific. And, in the Straits crisis of the mid-90s, it was the dispatch of US carriers to the area that signalled that America was taking a tough stance. Read more

Images of two suspects at an FBI press conference on April 18  (Darren McCollester/Getty)

Images of the two suspects at an FBI press conference on April 18 (Darren McCollester/Getty)

Two brothers, Dzhokhar and Tamerlan Tsarnaev, are suspected by US law enforcement officials of carrying out the bombing of the Boston marathon on Monday. The elder brother Tamerlan died in the course of an early morning car chase. The younger is now the subject of a manhunt. If we assume that these two men were indeed the perpetrators of the killings, establishing the motive for the attacks will soon become the biggest challenge for the US authorities.

Over the next few hours and days the US police and security services will be searching properties and buildings associated with the two men, analysing the content of computers and laptops, interviewing family and friends – all in order to build up a picture of why the two brothers acted as they did. Only then will the US government be able to work out the security and policy implications of the horrific events Boston has seen this week.

As of now, no form conclusion can be drawn. What can be said is that the two brothers will have had one of three possible motives. Read more

Boston

♦ Overnight, one of the two suspects in the Boston Marathon bombings was killed during a car chase. Officers have mounted a manhunt to find a man believed to be the other suspects, reports Robert Wright. The FBI has issued photographs of the suspects and details are beginning to emerge about their background. Updates throughout the day on FT.com

Gun control and a captured Senate?

♦ The US Senate on Wednesday voted down two measures that would have imposed tough new rules on who can buy guns. The Guardian reports this morning that all but three of the 45 senators who voted ‘No’ received money from firearms lobbyists.

♦ Gabrielle Giffords, the former Arizona congresswoman who was shot in the head in 2011, lambasted the senators in an Op-Ed for the New York Times. “Senators say they fear the N.R.A. and the gun lobby. But I think that fear must be nothing compared to the fear the first graders in Sandy Hook Elementary School felt as their lives ended in a hail of bullets… These senators made their decision based on political fear and on cold calculations about the money of special interests like the National Rifle Association, which in the last election cycle spent around $25 million on contributions, lobbying and outside spending.”

Elsewhere

♦ The FT’s Guy Dinmore visited L’Aquila, four years after it was devastated by an earthquake. Reconstruction there has all but ground to a halt, through lack of money and paralysing politics – making the city “the ultimate symbol of Italy’s great stagnation.”

♦ Tom Feiling writes for the new digital magazine, Aeon, about why Colombia’s FARC guerrillas are still resisting the coming peace. “Is it drug money or the romance of revolution that’s to blame?“ Read more

Reinhart-Rogoff Redux

♦ The FT’s Robin Harding and Chris Giles look at the perils of austerity theory, and argue that “the essential problem is limited data.”

♦ To catch up on the debate thus far, check out our reading list.

♦ Over on Counterparties, Felix Salmon has helpfully summarised a long blog by an econometrician, Arindrajit Dube. As Salmon puts it: the causation here seems about as clear as causal analysis can ever be: low growth causes high debt, rather than high debt causing low growth.

Elsewhere

♦ The FT’s Tom Mitchell, a Bostonian, writes about his response to the bombs at Monday’s marathon – “An attack on much more than a race.”

♦ A new Israeli guidebook “offers maps, tips, and tours through 18 areas of Israel where Palestinian villages once stood”. The Economist reviews it.

♦ Obama’s administration appears to hold varying views on the Syrian opposition, something that became obvious on Wednesday when Secretary of State John Kerry and Defense Secretary Chuck Hagel made separate appearances before Congress, reports the New York Times.

♦ The European Central Bank’s newest game [wait, they do games?] was released on Wednesday. Alphaville’s Lisa Pollack has played it.

♦ Silicon Valley is welcoming a new kind of business pilgrim – “itinerant company executives who come from the benighted analogue world”, writes Richard Waters. Read more

The Thatcher legacy
The past week in Britain has been a reminder of the bitterness of the politics of the 1980s as a vehement debate has broken out about the legacy of Margaret Thatcher since her death last week. For Conservatives, she remains a hero who rescued the British economy and helped to win the Cold War. But for the left, she was a villain who provoked social division and wrecked Britain’s relations with the European Union. Chris Giles, economics editor, and Philip Stephens, chief political commentator, join Gideon Rachman to attempt to arrive at a more nuanced verdict on the Iron Lady’s legacy — for Britain and the world.

Want to make your own mind up over Reinhart-Rogoff? Here are links to the original working papers that gave us the mother of all economic dust-ups, the responses of the two sets of authors, and some great secondary sources.

PRIMARY sources:

The working paper by Carmen M Reinhart and Kenneth S Rogoff, published in January 2010:

The critique of the Reinhart-Rogoff research, by Thomas Herndon, Michael Ash and Robert Pollin, published on April 15 2013:

Reinhart and Rogoff respond:

Ash and Pollin respond to the response:

And a selection of SECONDARY sources:

Here’s the post by Rortybomb blogger Mike Konczal that brought the critique to the attention of the masses. Konczal notes that the episode is “good evidence for why you should release your data online, so it can be properly vetted.”

Over at Slate, Matthew Yglesias asked:

FT Alphaville’s Cardiff Garcia and Joseph Cotterill shared their thoughts on the debate:

Paul Krugman has been busy:

 Read more

Supporters of Venezuelan opposition presidential candidate Henrique Capriles protest in front of riot police in Caracas on April 15, 2013 (Ronaldo Schemidt/AFP/Getty Images)

Supporters of Henrique Capriles protest on April 15 (Ronaldo Schemidt/AFP/Getty Images)

“I will continue governing the country with its people. Street government.” So tweeted Nicolás Maduro on Tuesday night as Venezuela’s president-elect sought to strengthen his hold on the country amid deadly street clashes, a teetering economy and an angry opposition that has disputed his narrow election victory.

It’s a febrile atmosphere: seven people died in riots overnight, 60 were injured and 170 arrested. Back in Europe, fresh from a recent trip to Caracas, many have asked me: is this country nuts?

One way to imagine yourself into the Venezuelan mindset is to picture yourself in an old fashioned American automobile – a yank tank – cruising along one of the rain-stained concrete flyovers that define Caracas’ cityscape. Towering sky-scrapers, built during the 1970s oil boom and now thick with grime, flit by on either side. You have a full tank of gas (it cost just $3 to fill up). It’s tropical hot, and the car’s air-conditioning is broken and unfixable because the spare parts needed to repair it are imported and thus unobtainable due to currency restrictions. No matter: the windows are open. Other cars are jouncing along at high speed in the adjacent lanes. The atmosphere is exhilarating – although you are just making a regular trip to the airport, a half hour drive down to the coast, and your suitcase is in the back.

When I made that trip on the Friday before the election, our way was momentarily blocked by an accident. Think of what follows as just another regular day in Caracas. To avoid the traffic back-up, a white SUV with blue tinted windows was bucking over the concrete lane divider, and then started heading backwards against the traffic towards a slipway a couple of hundred metres behind. Further on, we passed a turning to Ciudad Caribe, a “socialist new town” where earlier that week two police had accidentally shot a child. A furious mob subsequently lynched one of the police officers.

Later, checking in at the airport, I was pulled aside for a routine security check. A bored young soldier rummaged through my suitcase. He found a DVD set of a hit Colombian soap opera I was watching: “Pablo Escobar, Father of Evil”. The badges on his olive green tunic proclaimed him a member of Venezuela’s “National Boliviarian Guard – anti-drugs unit.” His interest perked up, although not for the reasons I expected.

“You know, for me, Pablo Escobar was one of the greatest of men, ever,” he said fingering the DVDs covetously. Read more

The Boston aftermath

♦ Police in Boston said they had found fragments of nylon bags, shrapnel and the remnants of a pressure cooker at the site of Monday’s bombing, report Geoff Dyer and Robert Wright. Time’s Swampland blog put together a short history of pressure cooker bombs.

♦ Within hours of the attack, some US media outlets were discussing the possible involvement of a 20-year-old man seen running – along with almost everyone else who could – from the scene. He was later declared to be only a witness, but not before his apartment had been searched. So why was he singled out? Probably because he’s Saudi, says Amy Davidson.

♦ “There’s not much to say about Monday’s Boston Marathon attack because there is virtually no known evidence regarding who did it or why,” writes Glenn Greenwald. “There are, however, several points to be made about some of the widespread reactions to this incident.

♦ David Kenner muses on the difference between the Muslim Brotherhood’s official response to the bombs, and the message posted by a senior Brotherhood leader, Essam el-Erian, on his facebook page. El-Erian condemned the attack — but also linked it to the French war in Mali, the destruction in Syria and Iraq.

Elsewhere

♦ A senior Chinese auditor told Simon Rabinovitch that local government debt is “out of control” and could spark a bigger financial crisis than the US housing market crash. But don’t worry – there won’t be any sudden collapse in China’s financial system, says Jamil Anderlini in today’s Global Insight column – it’ll be slow.

On the theme of accountancy in China, Simon Rabinovitch and Adam Jones looked at how homegrown auditors are eroding the influence of established western firms in China.

♦ India’s first major theme park opens on Thursdsay. Among its rides is “a gigantic six-armed animatronic Hindu god, standing astride a trio of curly-horned fire-breathing rams”. Yes you should go – but in the meantime, read James Crabtree’s report.

♦ The 2013 Pulitzer Prize for breaking news photography has been awarded to five photographers from the Associated Press – Rodrigo Abd, Manu Brabo, Narciso Contreras, Khalil Hamra and Muhammed Muheisen – for their “compelling coverage of the civil war in Syria, producing memorable images under extreme hazard.” You can see the images on the Pulitzer website (warning: some are graphic).

♦ InsideClimate News may be the leanest news start-up ever to be presented with a Pulitzer, says Brian Stelter – and they don’t even have a newsroom. Read more

An elderly man plays his accordion at the old town market in Warsaw, Poland, on June 24, 2012 (CHRISTOF STACHE/AFP/GettyImages)

(Photo by Christof Stache/AFP/Getty)

The former Italian prime minister Giuliano Amato once compared the powers of Italy’s president to an accordion. Just as the box-shaped musical instrument can expand and contract, the same is true for the influence of Italy’s head of state: what the president can or cannot do largely depends on the strength of the political parties.

On Thursday, Italy’s 949 MPs and 58 representatives from the 20 regions will convene to elect the successor to President Giorgio Napolitano. Amato himself is a candidate, alongside former prime minister Romano Prodi, former European commissioner Emma Bonino, and others.

The political stalemate following February’s inconclusive election means that the new president will have to be picked on the basis of a last-minute deal between the centre-left, (the largest alliance in Parliament) and at least one of the other three significant forces – the centre-right coalition of the People of Liberty and the Northern League, Beppe Grillo’s Five Star Movement and Mario Monti’s Civic Choice. There are no clear favourites for the job. Yet, this election will matter a great deal for Italy and for those who are interested in a solution to its political crisis.

For decades, the President’s job was seen as largely ceremonial. True, the President is the head of the judiciary and of the armed forces. But he doesn’t have anything like the kind of executive powers held by the French or American presidents (though he can veto any law if he believes it is against the constitution). Read more

♦ JP Rathbone looks at the fading of Chávez’s political dream in Venezuela, arguing that the results of Sunday’s election represent “no kind of mandate for [Nicolás] Maduro or the radical socialism he espouses.

♦ “Either I bought [the lumber], or I stole it. But I can’t have done both. And actually, I did neither.” Russian blogger Alexei Navalny talks to the FT’s Charles Clover, ahead of the start of his trial on Wednesday.

♦ The Washington Post has the story of a mysterious Iranian-controlled factory in Germany which closed its doors last month. Could it have been involved in a scheme to aid Iran’s rogue nuclear program?

♦ The debate around whether women can have it all has been swirling for a while now, but today psychotherapist Naomi Shragai considers the other side: men who struggle to balance their work with family time.

♦ Guinea-Bissau is considered one of the world’s leading narco-states. Adam Nossiter writes about a long-running US sting operation that managed to snare a former chief of the country’s navy.

♦ Young Turkish people living in Germany are being asked to choose between German or Turkish nationality because they don’t have the right to hold onto both once they reach the age of 23, reports Judy Dempsey in the New York Times.

♦ “The finish line at a marathon is a small marvel of fellowship,” writes Ezra Klein. “Today, the final line of the Boston Marathon is a crime scene.” Also on the subject of yesterday’s tragedy in Boston, the New Scientist has a post on what clues the bomb fragments may yieldRead more

Liberty Leading the People, Eugène Delacroix [Public domain], via Wikimedia Commons

There’s nowhere left to hide! The champagne socialists have been outed, their secret extravagance and hypocritical lives of luxury exposed once and for all!

At least, that’s what critics of François Hollande’s government must have been hoping.

What actually emerged from the enforced declaration of assets by French cabinet ministers on Monday was somewhat less exciting.

Ok, so there are a few millionaires – foreign minister Laurent Fabius is officially the cabinet’s richest member, with assets of around €6m; minister for the elderly Michèle Delaunay has about €5.4m, including two houses and €15,000 in jewellery.

And yes, Arnaud Montebourg, that famous leftwing fireband, owns an Eames chair that he bought for €4,300. But who said socialists weren’t allowed to covet icons of modern design?

You can peruse the documents yourself, minister by minister, on a special website courtesy of the French government. We found the section marked: “Véhicules terrestres à moteur, bateaux, avions, etc.” of particular interest. From it, we have learned the following.

Clio Expression Eco - 94g/km CO2 (image courtesy Renault)

This is the most popular car in the French cabinet

1) This is not a cabinet of petrolheads or luxury car enthusiasts. With a few exceptions, these ministers like cars that are French-made, sensible, easy to park, and inexpensive. Thus, the most popular car in the French cabinet is the Renault Clio, a vehicle described by WhatCar magazine as a chic supermini [that] offers low running costs”.

2) Most, though not all, are patriotic in their car-buying. We counted 4 Citroens, 9 Peugeots, and no fewer than 19 Renaults. Of the Renaults, after the Clio, the Twingo and the Megane were particularly favoured. Only a few ministers broke from French brand names – including minister of defence, Jean Yves Le Drian, whose cars include a Suzuki Wagon R from July 2004 and a Lancia Ypsilon from 2012. Read more

By Gideon Rachman
Travelling between Madrid and Barcelona on a recent weekday afternoon, I wandered into the first-class section of the train. There was only one passenger, snoozing on the black leather seats – and he turned out to be the conductor, who looked up startled at the sound of an intruder.

If commodities exporters were pinning hopes on an acceleration in Chinese growth, Monday was not a good start to the week. The disappointing gross domestic product statistics for the first quarter give the likes of Australia, Brazil and Indonesia plenty to be worried about.

As one investor put it: “For the global economy this data is bad news. Commodity exporters are screwed (especially those needing exports to China as key component). I would be very worried about places like Brazil, Indonesia, Australia and the like. The current level of GDP growth in China is OK with China but not OK for the currencies above.” Read more

Justin Trudeau with his wife Sophie Gregoire at a film premiere in September 2012 (Photo by Jemal Countess/Getty Images)

Justin Trudeau with his wife Sophie Gregoire (Getty)

Historically, the legislative class has often liked to keep it in the family. And while hereditary titles have fallen out of fashion in most modern democracies, political dynasties appear to be thriving nonetheless.

The latest scion of a political leader to seek office is Justin Trudeau, 41-year-old son of Canada’s former prime minister, the swashbuckling Pierre Trudeau.

Justin was elected leader of Canada’s Liberal party on Sunday.

The ruling Conservative party greeted the news of Trudeau Junior’s victory somewhat sniffily, with Fred DeLorey, the Conservative party’s director of communications, saying:

“Justin Trudeau may have a famous last name, but in a time of global economic uncertainty, he doesn’t have the judgment or experience to be prime minister.”

Perhaps mindful of that kind of criticism, Justin Trudeau was careful in his acceptance speech to mix confidence – “More than one hundred thousand voters have sent a clear message: Canadians want better leadership” – with modesty: “I take nothing for granted. I understand that trust can only be earned. And my plan is to earn yours.

George W. Bush and his father George H.W. Bush in 2010 (Stephen Dunn/Getty)

George W. Bush and his father George H.W. Bush in 2010 (Stephen Dunn/Getty)

The Trudeaus are of course part of a long tradition of North American political clans, from the Kennedys and the Clintons to presidents Bush I and II – despite America’s Founding Fathers’ concerns around the implications of power flowing through blood.

But it is in Asia where political dynasties have really flourished. In India, the Nehru-Gandhi dynasty has provided three prime ministers since the country’s Independence in 1947. Rahul Gandhi, 42-year-old great-grandson of Jawaharlal Nehru, India’s first prime minister, is tipped to be the Congress party’s candidate for India’s 2014 election. But the prospect of yet another Gandhi at the helm has met with criticism in some quarters.

“Essentially he has nothing besides his name,” Ramachandra Guha, a historian, said when Gandhi was promoted to the role of the Congress party’s vice president earlier this year. Read more

♦ Syria’s Jabhat al-Nusra has dealt a blow to the rebel cause.

♦ When it comes to the labour market, America is suffering from a rising case of ‘German envy’, writes Edward Luce. However, Germany’s labour market is not without its problems – reformers are keen to take action on the shortage of workers.

♦ The world’s top commodities traders have pocketed nearly $250bn over the last decade, making the individuals and families that control the largely privately-owned sector big beneficiaries of the rise of China and other emerging countries. The FT’s Javier Blas has done a comprehensive review of the sector.

♦ Bassem Youssef, Egypt’s Jon Stewart, has ignited a public debate over Qatar’s influence in Egypt.

♦ MJ Rosenberg looks back at negotiations over the Israeli-Palestinian issue in 1990 and explains why he thinks there is “no possibility of serious negotiation so long as Benjamin Netanyahu is prime minister of Israel.”

♦ The Senate begins debate next week on the biggest gun control bill in nearly 20 years, and the gun rights lobby is working with Senate allies on a series of amendments that could actually loosen many of the current restrictions.

♦ Anonymous has handed over to Canadian police what it claims are details about four boys linked to the alleged rape of Rahtaeh Parsons, whose funeral was held last week.

♦ A matriarch in her mid-50s with only $28 to her name is making a bid for election to the provincial assembly in Pakistan’s elections next month.

♦ The Economist writes on Bitcoin and how it is more than a passing frenzy: “chances are that some form of digital money will make a lasting impression on the financial landscape.” Meanwhile, Paul Krugman thinks that “Goldbugs and bitbugs alike seem to long for a pristine monetary standard, untouched by human frailty. But that’s an impossible dream… green pieces of paper are doing fine — and we should let them alone.”

♦ A row has flared between the London School of Economics and the BBC over the presence of journalists on a university-affiliated trip: “the BBC, which the university says actually sent three journalists, also later acknowledged that it had not told the students of the nature of the documentary, in what it characterized as a bid to keep them safe if the journalists were found out and the students were questioned about what they knew.”

Golf round-up
Adam Scott has become the first Australian to win the US Masters.
♦ The Guardian looks back at Guan Tianlang’s week and what he has gained from it – the teen golfer has changed the face of Chinese sport.
In the UK, the downturn means that golf clubs are trying to shed their stuffy, middle-aged image.

 Read more

Nicolas Maduro celebrates with his wife, Cilia Flores, after being declared the winner of Venezuela's presidential election (Reuters).

Only six weeks in the grave, and Hugo Chávez’s socialist dream is fading fast. Last night, the chosen successor of “el commandante”, Nicolas Maduro, won Venezuela’s presidential election, but only by a whisker.

Maduro – “the self-proclaimed son of Chavez” – got 50.7 per cent of the vote, versus 49.1 per cent for Henrique Capriles, the opposition leader. That compares to an 11 point win for Chavez in October’s presidential election. Capriles has refused to accept the result until the votes are fully audited.

Assume, for now, that the result stands and no evidence is found of jiggery-pokery. That is still no kind of mandate for Maduro and Venezuela’s ruling socialist party. This is a country split down the middle. Such a close result will also undermine Maduro’s standing within the ruling socialist party. The 50-year old former foreign minister and bus driver will struggle to reconcile chavismo’s various factions, many of whom may think they could do a better job. But the country is in a mess, whoever comes to govern it. Read more

In the week of Margaret Thatcher’s funeral – and with the euro-crisis bubbling along – it is interesting to take a look back at what Thatcher had to say about the single currency. Much of the commentary since her death has portrayed Thatcher’s views on Europe as irrational and backward-looking. For example, Anne-Marie Slaughter in the FT, wrote that “her attitude to Europe was a throwback to the 19th century”. For good measure, Prof Slaughter adds that Thatcher’s views were “deeply anachronistic and dangerous”. Of course, there was a strong element of emotion in Thatcher’s views of Europe. So what? It is more interesting to note that she also made some quite precise criticisms of the European single currency that look increasingly prescient, as time wears on. Read more

Photo by Getty

An energy and diplomacy deal that would reshape the map of the eastern Mediterranean might be proceeding faster than many people think.

It is just a few weeks since, in a bid to revive frozen diplomatic ties, Israel apologised to Turkey for a deadly raid that left nine Turkish citizens dead. The process was still sufficiently shaky for US Secretary of State John Kerry to come to Istanbul last weekend to chivvy both sides to go all the way and exchange ambassadors.

There are plenty of potential slips on the way ahead: compensation has to be agreed; the fate of Turkish court cases against retired Israeli commanders has to be decided (at present, they are going ahead); and Ankara still has to pronounce itself satisfied with the lifting of restrictions on civilian goods to Gaza (relevant, because the flotilla stormed by Israeli Defence Forces in 2010 was seeking to break the Gaza blockade). Read more

♦ Kenya’s new leader Uhuru Kenyatta is proving deft at politics even with a charge for crimes against humanity hanging over his head.

♦ Jonathan Soble looks at the dilemma that Haruhiko Kuroda faces over the next two years – “How do you convince markets and consumers that you are serious about raising prices, without being so dogmatic that you risk the central bank’s credibility – and your job – if you fail?”

♦ Margaret Thatcher’s death has prompted a wave of nostalgia among US conservatives.

♦ Sarah Neville, the FT’s public policy editor, thinks welfare reforms in the UK are likely to test the resolve of the middle class. (You can find out more about the reforms in today’s additions to the FT Austerity Audit.)

♦ Nicolás Maduro summons the ghost of Hugo Chávez in the final days of his campaign, a move he is counting on to propel him to victory at Sunday’s presidential elections.

♦ Hugo Chávez may have made himself enormously popular by subsidising fuel, but his policy has damaged long-term prospects for Venezuela’s economy.

♦ Jon Lee Anderson recalls his earliest memories of living in Seoul when his father was working in the Korean demilitarised zone.

♦ Jack Goldstone at Foreign Policy thinks there “is a real risk that the Korean Peninsula will follow Syria’s descent into war”. (Although you might not have to worry. The military’s planned missile test has been “put on hold because of “problems with Windows 8”, according to the Borowitz Report.)  Read more