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Find out more at bahrain.com business friendly - BAHRAIN r [es i oper aa / ees se oral cece 7 The Economist February 5th 2011 7 i True POF tonal Contents 9 The world this week Leaders 15 Democracy in the Arab 42 42 Rugby in America Worth a try School food No thanks, Jamie 45 Race and elections wor The preclearance problem gypt rises uP 46 Lexington 16 Somali piracy Was George Bush right? At sea 16 Inflation The Ameri Greater expectations? £ pce ; = El , 48 Brazil's offshore oi apan Naoto Kanis proposing M Ancele aarduslata In deep waters the boldest reforms to Japan in decades: leader, page 18. - 49 Cuba’s housing market : cag = 18 Lae ke oan Swap shop A eae alas nha ihe West should welcome 49 Central America’s adie me or Beano ° not fear, the upheaval in : L Christians reforms page 51 Egypt: leader, page 15. Ten etters Going forth and setonistiing lege panes 20 On oil sands, inequality, multiplying 29-31. Protests in Jordan, rape, food aie page 32. Worried Israelis, Sotenrey. eaves er Asia page 32. America’s reaction, week ecnuer 51 Shaking up Japan page 33. Regional repercussions, page 34. Nervous Chinese, page 34. George Bush's “freedom Briefing 29 The upheaval in Egypt 52 Bold, or plain reckless? China’s property market Protecting the middle class agenda” for the Arab world is An end ora bedinnina? 53 Gujarat suddenly looking a little en i h = Divide and rule cleverer: Lexington, page 46 32 Jordan s monarchy 54 Thailand’s monarchy Nervous times ahead : auucchcni Teac When more is less 32 Worried Israe 54 Shootings on the Piracy Time to turn up the The Economist online Daily analysis and opinion from our 19 blogs, plus audio and video content, debates and a daily chart Economist.com/ blogs Bad news for the Jewish state 33 The American conundrum When allies tumble 34 Regional reverberations 55 India-Bangladesh border Felani’s last steps Banyan Pakistan's uneasy relations with America E-mail: newsletters and nage MUMIETa mobile edition 34 China's reaction ? ; Economist.com/email Build a wall Middle East and Africa 57 South Sudan’s future Print edition: available online by And now for the hard part iS 7pm London time each Thursday United States : Economist.com/ print 58 Sudan and its rebels s Downlos: 2a Audio edition: available online to download each Friday Economist.com/audioedition 37 Health care and the courts Dead or alive? 38 Filibuster reform Putting their knives away 59 A deal over Darfur? Ritual killings in Liberia Nasty business pressure: leader, page 16. Somali piracy is posing an ever greater threat to the world’s shipping, page 69 Europe : . The 38 The economy P Londonism Pro-finance, Seanainicl Turning the corner 61 Germany's leader pro-immigration and hungry Volume 398 Number 8719 First published in September 1843 to take portin “a severe contest between 39 The Republican race Reading the tea leaves 39 Virginia’s next Senate race 62 62 The constant chancellor Spain’s economic outlook Reforming Zapatero Greece's heavy debts intelligence, which presses forward, and The rematch Repayment days anunworthy, timid ignorance obstructing as aunepragreist:* 63 nares s = ea a nsearcn Of a leader Editorial offices in London and also: Atlanta, Beijing, Berlin, Brussels, Cairo, 64 Charlemagne Chicago, Hong Kong,.Johannesburg, Los Angeles, Mexico City, Moscow, New Delhi, New York, Paris, San Francisca, Sao Paulo, Singapore, Tokyo, Washington DC A test for Europe's foreign policy Relense: Storehlags & Fantemag, Magazines for All forinvestment, London andits politicians have developed an ideology of their own, page 65 >> Contents continues overleaf The Economist February 5th 2011 87 Spain’s savings banks Britain 65 Londonism and its Roll up, roll up 1 1 adherents 88 Carbon trading Green fleeces, red faces 88 Terra Firma and EMI The magical misery tour The capital's creed 66 The Olympic stadium Extra time 66 Investment-banking fees 89 rplhacilenpresar Vexed in the City ermany 5 decade 67 Corporate misbehaviour $s « ee Hot, greasy potato Science and technology Germany's success Lessons 68 Bagehot 91 Waste disposal L- : r 4 The science of pain and guilt — for other countries: leader, The Big Society gets lost in Turning garbage into gas By submitting to pain, people chancellor, page aL A not-so-hard graft page 94 companies great and smallare mae ihe mast AE International 92 Extrasolar planets globalisation, page 81. The 69 Piracy Vu ican S mates ; Principal commercial offices: system of training youngsters No stopping them 94 Purification by pain ag ae has done well but could do The masochism tango suena menace : oulevard des Tranchées 1 ee page a ee h Business 1206 Geneva, Switzerland perrormer in the G7 over the 3 j Books and arts Tel: 4122 5662470 Fax: 4122 946 9347 past decade, page 89 73 BP in Russia rd A th Floor, NewYork, NY Dancing with bears 95 Emperor Qianlong’s a : 212 pies Poi eed a ai : ; arden ; is pee family Paradi se on earth Gos Central Plaza usinesses 18 Harbour Road, Wanchai, Hong Kong Dusk for the patria rchs 96 The periodic table Tel: 852 2585 3888 Fax: 852 2802 7638 75 Profits in America A cultural history Dither corninvanctal oplioes: Never had it so good 96 Anew north Chicago, Dubai, Frankfurt, Los Angeles, 76 Rolls-Rovee The future of the Arctic Paris, San Francisco and Singapore Per ardua 97 Politics and calories Food and the second 76 Japanese steel aorliae Subscription service A new giant 98 The fi wena For our latest subscription offers, visit ‘ @ nancial Crisis Economist.com, offers g 78 News on the iPad The official verdict For SID ada please contact by 5 Murdoch's ri sky bet telephone, fax, web or mail at the details ‘= ‘ : a 7 provided below: - Chinese family firmsAs 78 French competitiveness 96 la aaa film Telephone: 1.800 456 6086 (fram outside rs) ageing tycoons die, their heirs Alost decade ie in a day the US and Canada, 1344 447 8091) ey ; : : Facsimile: 1866856 8075 (from outside 3 pa oe g a a es 80 Schumpeter the US and Canada, 1 314 447 8065) e , page Daniel Bell, RIP Obituary Web: Economistsubs.com 8 ‘ 4 E-mail: [email protected] : 100 = alaaste al Post: The Economist Subscription is 7 e voice of India Services, P.0. Box 46978, E Briefing St. Louis, MO 63146-6078, USA = 81 German business Subscription for 1 year (51 issues) a A machine running 105 Economic and financial United States US$138 smoothly indicators Canada CNS189 84 Education and skills Statistics on 42 Argentina US$287 Hiker factor economies, plus our pollof — Mexico US$240 : : forecasters and a closer Rest of Latin America US$264 Egypt may have more effect on food than on oil, page 85 85 86 86 glass-eye-maker Finance and economics Commodities and the Middle East Protests and the pump Inflation around the world Parsing prices America’s housing market Suspended animation look at aquafarming An Economist Group business PEFC certified This copy of The Economist is printed on paper sourced fram sustainably managed forests certified by PEFC win. pefc.ong yy PEFC/29-31-75 C¥recycle © 2001 The Economist Newspaper Limited. All rights reserved. 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Printed by RR Donnelley, Strasburg, VA. 22657 Vi COMPANIES > NEED TO ae [Mca sal ing hres PDE stot Human Energy’ ee tie in Pworll’needs hi It will take all we can prod = _ to meet demand. And we'll n have more efficiently. As we'll still rely on traditional ¢ a teleome. ae we're adv tech eee = Free Magazines Downla Paul Siegel a Vice President, Strafegic Planning Chevron “Oy Piel lere}siey tants Me cies NEeEines for ANll eect ote at xs eg) 1, 7 Meza be aces a Rue - Free Magazines Download j Store iets f ie me See, i= Par 3 1, re ie EB Bee E ' —_— © Siemens AG, 2011. All Rights Reserved. Restoring life below the surface, and above it. Siemens answers are helping keep waterways healthy and productive for future generations. The Chesapeake Bay spans over 200 miles, and its communities are home to millions of people. Every day, Siemens is helping improve the waters they depend on. That's why, after years of neglect, the bay is starting to come back. And it’s just one example of the work Siemens is doing from coast to coast. Siemens purification and wastewater treatment technologies are helping municipalities big and small improve the health of their waterways. Somewhere in America, our team of more than 60,000 employees spends every day creating answers that will last for years to come. siemens.com/answers Release Storehans & Fantaman, IMacaines for All (<0 i True POF tonal a J acy! , if po lds, A rc rP The world this week Politics The 30-year-long reign of Egypt’s president, Hosni Mubarak, came ever closer to an end, as hundreds of thou- sands of Egyptians filled the centre of Cairo, calling on him to step down. There were also big demonstrations in Alexan- dria, Suez and other Egyptian cities. A loose opposition front took shape, including secular liberals, students, trade union- ists and Islamists, with Mo- hamed ElBaradei, a former head of the UN’s nuclear watchdog, tentatively at its head. Violent clashes broke out as government supporters tried to clear the protesters from the streets of Cairo. After a month of protests in Jordan, King Abdullah sacked his government and appointed anew prime minister. Opposi- tion leaders, who want the king’s powers curbed, said this was not enough. With demonstrations continu- ing in Yemen, Ali Abdullah Saleh, the country’s president, announced that he would step down in 2013 when his current term expires and that he would not hand power over to his son. Iraq’s health ministry said that 159 civilians were killed in violent attacks in January, the highest monthly death toll since September; 55 policemen and 45 troops were also killed. On January 27th acar-bomb attack on a funeral in a Shia district of Baghdad left at least 45 people dead and injured scores more. Official results of a referendum last month in South Sudan put those voting to secede from the rest of Sudan at nearly 99%. The new country is expected to come into formal existence on July 9th. No bail-out for Cowen Ireland’s prime minister, Brian Cowen, called an early general election for February 25th. He is standing down; his Fianna Fail party is expected to lose badly. Standard & Poor's set the scene by downgrading Ireland's credit rating by one notch, from A to A-. The Irish government said it would expel a Russian diplomat after an investiga- tion revealed that six Russian spies in America had used stolen Irish identities. Russia threatened to retaliate. America and the European Union imposed sanctions on officials from Belarus, after December’s stolen presidential election. They also promised aid to opposition groups seek- ing to oust Belarus's president, Alyaksandr Lukashenka. Four traffic policemen were shot dead in Kabardino-Bal- karia, arepublic in the north Caucasus, and two insurgents were killed in Dagestan, highlighting the lawlessness prevalent across the region. Spain’s government conclud- ed a social pact with employ- ers and unions thatincludes wage-bargaining changes and arise in the pension age to 67 by 2027. The euro crisis has increased the pressure on Spain to make reforms. Mexican two-ste Angel Aguirre Rivero, of the leftist Party of the Democratic Revolution, was elected go- vernor of the state of Guerrero in southern Mexico. The race had been close, but Mr Rivero benefited when the candidate from the conservative Nation- al Action Party dropped out, in order to prevent the Institu- tional Revolutionary Party from coming to power. The two parties may try to repeat their ideologically incongru- ous alliance at next year’s presidential election. Assets worth $5.7m belonging to Jean-Claude “Baby Doc” Duvalier, a former dictator of Haiti, were frozen after Switzerland implemented a new law making it easier to confiscate the wealth of for- eign politicians. Mr Duvalier returned to his country last month after 25 years in exile, and faces criminal charges there. Closing in India’s former telecoms min- ister was arrested in a corrup- tion scandal involving the sale of licences for mobile net- works. Andimuthu Raja, an ally of the ruling Congress party, resigned in November when it emerged the licences had been sold for less than they were worth, potentially costing India $38 billion in lost revenue and tarnishing the clean image of Manmohan Singh, the prime minister. Myanmar’s dictator, Than Shwe, chose not to run for the post of president, who will be elected by the country’s new sham parliament. Presumably he will continue to exercise power behind the scenes. The constitutional court of Kazakhstan rejected a propos- al by parliament, criticised by America, to allow the long- serving president, Nursultan Nazarbayey, to remain in office until 2020. The parliament, made up entirely of members of the president's party, then passed constitutional amend- ments allowing Mr Nazar- bayev to call a snap election, throwing what counts for the opposition off-guard. The world’s greatest internal migration began in China as people returned to their home- towns to celebrate the New Release: StoreMlags &Fantamag, Magazines tor Al Year of the Rabbit. Perhaps two billion trips will be made over the coming weeks. Looking a bit poorly A federal judge in Floridaruled that the health-insurance mandate contained inthe health-care-reform act was unconstitutional, and that as the provision is so integral to the reforms the whole act should be overturned. Four federal courts have now made decisions on the act, two of which support the legislation. Meanwhile, a measure to repeal the act, passed by Re- publicans soon after taking control of the House, was defeated in the Senate. Early voting in Chicago’s mayoral election was disrupt- ed by a blizzard. There were no further disruptions to Rahm Emanuel’s campaign after Illinois’s Supreme Court rein- stated his candidacy, rejecting a lower court’s argument that the former White House chief of staff did not meet the state’s residency requirements. Elec- tion day is February 22nd. Jon Huntsman said he was stepping down as America’s ambassador to China, fuelling speculation that he will join the list of potential Republican candidates for president. Mr Huntsman was governor of Utah when Barack Obama picked him for the Beijing job in 2009. The Democrats chose Char- lotte, North Carolina, as the host city for their presidential nominating convention next year. In 2008 Barack Obama became the first Democrat to win the state since Jimmy Carter in1976. The Republicans are holding their 2012 conven- tion in Tampa, Florida. The Economist February 5th 2011 b> (<0 re li-, 10 Biiea edie es i True POF tonal = a rey Re Ol BCC ee Business ! Oil prices § per barrel Brent West Texas Intermediate “Ss Leviton ister erst Dec Jan Feb 2010 2011 Source: Thomson Reuters pisisili Concerns that the instability in Egypt could affect shipping in the Suez Canal and disrupt oil supplies from the Middle East caused oil prices to rise fur- ther, with Brent crude topping $100 a barrel in London for the first time since 2008. Oil traded at a lower price on the New York Mercantile Exchange, partly because of a build-up in oil inventories at a big storage facility in Cushing, Oklahoma. BP outlined a new strategy that itsaid would make it “safer and stronger”. The energy company plans to increase significantly its investments in exploration, focus on growth in emerging markets and rationalise its business in “mature” areas. It will selltwo refineries in America, includ- ing its site at Texas City, where 15 workers died in an explosion in 2005. The company an- nounced a headline $4.9 bil- lion loss for 2010 and tooka $40.9 billion charge for the Gulf of Mexico oil spill. Share- holder dividends, suspended during the height of that crisis, were reinstated. BP also affirmed its commit- ment to seek “new partnership opportunities”. However, its recently announced part- nership with Russia's Rosneft was challenged in court this week by investors in BP’s existing Russian venture, TNK-BP, who argue that the Rosneft deal contravenes their arrangement. The judge sent the two sides to arbitration until February 25th. Exxon Mobil, which last month sealed an agreement with Rosneft to develop assets in the Black Sea, made a profit of $30.5 billion in 2010, up by 57% from 2009, on revenue of $383.2 billion. Nippon Steel, Japan’s biggest steelmaker, and Sumitomo Metals, a smaller rival, said they were planning to merge next year. The pair already work together; a merger would make them the world’s sec- ond-largest steel firm, far be- hind ArcelorMittal. Alpha Natural Resources and Massey Energy announceda merger in an $8.5 billion deal that creates the world’s third- biggest supplier of metallurgi- cal coal to steelmakers. Going for a song Citigroup seized control of EMI from Terra Firma Capital Partners, concluding that EMI was insolvent and writing off £2.2 billion ($3.6 billion) of the music company’s £3.4 billion debt. Terra Firma acquired EMI in a leveraged buy-out in 2007 and has struggled with aloan it obtained from Citi to fund the deal. The private-equity firm lost a court case last year in which it alleged that Citi had bamboozled it into buying EMI, which is up for sale again. An official first estimate showed that America’s GDP increased by 3.2% in the final three months of last year, as consumer spending rose by 4.4%, the fastest clip since the start of 2006. The economy grew by 2.9% for all of 2010. Trading was poised to restartin Europe’s carbon market after atwo week shutdown prompted by hackers stealing electronic carbon-permits from accounts in the Czech Republic and elsewhere. Performance review Goldman Sachs said it had approved an annual base salary (excluding stock op- tions) of $2m for Lloyd Blank- fein, representing a pay rise of 233% for its chairman and chief executive. Net profit at Gold- man fell by 38% last year. BTG Pactual, a Brazilian bank, agreed to buy a controlling stake in Banco PanAmer- icano, which specialises in credit cards and car loans and last November was found to have a $15 billion hole in its accounts. Chrysler reported a loss of $652m for 2010, its first full year of operations since leaving bankruptcy protection and forming a partnership with Fiat. The carmaker would have made a profit in the fourth quarter but for interest it paid Relense: Storehlags & Fantemag, Magazines for All The Economist February 5th 2011 on government loans; it insists itis on the road to profitability this year. Earlier, Ford posted net profit of $6.6 billion for 2010, its biggest in 11 years. What's in your phone? Google’s Android operating system was the most popular platform for smartphones at the end of 2010, according toa report from Canalys, a tech consultancy. Based on ship- ments, Android was used in 33% of smartphones, vaulting it ahead of Nokia’s Symbian (31%), Apple’s iOS (16%) and the BlackBerry platform (15%). Apple will probably get a boost this year from Verizon Wireless’s new iPhone service in America. Pfizer’s decision to close its leading research centre in Britain produced much politi- cal hand-wringing about the future for British commercial science. The centre, in Kent, employs 2,400 people and had developed some of Pfizer's best-known drugs, including Viagra. With demand for some of its products expected to droop in the face of stiff com- petition from generic rivals, Pfizer is trimming its R&D worldwide. Other economic data and news can be found on pages 105-106