Chip wars: China, America and silicon supremacy

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THE TRADE disputes President Donald Trump relishes have an old-fashioned feel. Tariffs are the principal weapons. Old-economy markets, from cars to steel, are the main battlefields. Farmers and factories preoccupy the president. And his personal chemistry with other powerful men can make or break deals. Hence the focus on the meeting between Mr Trump and Xi Jinping at this week’s G20 summit, which takes place in Buenos Aires after The Economist has gone to press.

Yet the trade conflict that matters most between America and China is a 21st-century fight over technology. It covers everything from artificial intelligence (AI) to network equipment. The fundamental battleground is in semiconductors. The chip industry is where America’s industrial leadership and China’s superpower ambitions clash most directly. And whatever Messrs Trump and Xi say at the G20, this conflict will outlast them both.

That is because computer chips are the foundations of the digital economy and national security. Cars have become computers on wheels. Banks are computers that move money. Armies fight with silicon as well as steel (see article). Firms from America and its allies, such as South Korea and Taiwan, dominate the most advanced areas of the industry. China, by contrast, remains reliant on the outside world for supplies of high-end chips. It spends more on semiconductor imports than it does on oil. The list of the top 15 semiconductor firms by sales does not contain a single Chinese name.

Well before Mr Trump arrived on the scene, China made plain its intention to catch up. In 2014 the government in Beijing announced a 1trn yuan ($150bn) investment fund to improve its domestic industry. Semiconductors feature prominently in “Made in China 2025”, a national development plan issued in 2015. 

China’s ambitions to create a cutting-edge industry worried Mr Trump’s predecessor. Barack Obama blocked Intel from selling some of its whizziest chips to China in 2015, and stymied the acquisition of a German chipmaker by a Chinese firm in 2016. A White House report before he left office recommended taking action against Chinese subsidies and forced technology transfer. Other countries are alarmed, too. Taiwan and South Korea have policies to stop purchases of domestic chip firms by Chinese ones and to dam flows of intellectual property.

Although the chip battle may have pre-dated Mr Trump, his presidency has intensified it. He has made a national champion of Qualcomm, blocking a bid for it from a Singaporean firm for fear of Chinese competition. Earlier this year an export ban on selling American chips and software to ZTE, a Chinese telecoms firm in breach of sanctions, brought it to the brink of bankruptcy within days. Startled by the looming harm, and (he says) swayed by appeals from Mr Xi, Mr Trump swiftly backtracked.

Two things have changed. First, America has realised that its edge in technology gives it power over China. It has imposed export controls that affect on Fujian Jinhua, another Chinese firm accused of stealing secrets, and the White House is mulling broader bans on emerging technologies. Second, China’s incentives to become self-reliant in semiconductors have rocketed. After ZTE, Mr Xi talked up core technologies. Its tech giants are on board: Alibaba, Baidu and Huawei are ploughing money into making chips. And China has showed that it can hinder American firms. Earlier this year Qualcomm abandoned a bid for NXP, a Dutch firm, after foot-dragging by Chinese regulators.

Neither country’s interests are about to change. America has legitimate concerns about the national-security implications of being dependent on Chinese chips and vulnerable to Chinese hacking. China’s pretensions to being a superpower will look hollow as long as America can throttle its firms at will. China is destined to try to catch up; America is determined to stay ahead.

The hard question is over the lengths to which America should go. Protectionists in the White House would doubtless like to move the semiconductor supply chain to America. Good luck with that. The industry is a hymn to globalisation. One American firm has 16,000 suppliers, over half of them abroad. China is a huge market for many firms. Qualcomm makes two-thirds of its sales there. Trying to cleave the industry into two would hurt producers and consumers in America. And it would be a bluntly antagonistic act, which would make no distinction between unfair and genuine competition.

In the long run it may be futile, too. Today America has the edge over China in designing and making high-end chips. It can undoubtedly slow its rival. But China’s progress will be hard to stop. Just as Silicon Valley’s rise rested on the support of the American government, so China blends state and corporate resources in pursuit of its goals. It has incentive programmes to attract engineering talent from elsewhere, notably Taiwan. Firms like Huawei have a proven ability to innovate; blocking the flow of Intel chips in 2015 only spurred China on to develop its domestic supercomputing industry.

Moreover, China’s bid to become a global semiconductor powerhouse is propitiously timed. For decades the chip industry has been driven forward by Moore’s law, under which the capabilities of a chip of a given size double every two years. But Moore’s law is reaching its physical limits. As everyone jumps to new technologies, from quantum computing to specialised AI chips, China has a rare chance to catch up.

The right approach for America, therefore, has three strands. The first is to work with its allies in Europe and Asia to keep pushing back against unfair Chinese practices (such as forced tech transfer and intellectual-property theft) at the World Trade Organisation, and to screen out inward Chinese investments when security justifies it. The second is to foster domestic innovation. More government funding is already going into chip research; greater openness to talent is needed. And the third is to prepare for a world in which Chinese chips are more powerful and pervasive. That means, among other things, developing proper testing procedures to ensure the security of Chinese-made products; and tightening up on data-handling standards so that information is not being sprayed about so carelessly. Measures such as these will not make the headlines at the G20. But they will do more to shape the world in the years ahead.

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Glencore’s attempt at reinventing mining has run into trouble

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FROM THE edge of the Kamoto Copper Company’s pit, it is hard even to see the mechanical diggers toiling dozens of tiers below. The 280-metre hole on the southern edge of the Democratic Republic of Congo is deeper than Africa’s tallest building is tall. Lorries take the best part of an hour to crawl out from its heart. The greenish ore they lug is given its hue by copper but much of its value by cobalt nestled within. Usually driven to South Africa, then often shipped to China, the cobalt will emerge from a series of factories as the priciest component of a battery powering a smartphone or, increasingly, an electric car.

A sign at the mine indicates it is 1,320km to Kinshasa, the capital, half a week’s drive away. Another arrow points to a less likely destination: Baar, a sleepy suburb of Zurich, 6,600km away at the foot of the Swiss Alps. Located in a business park there are the headquarters of Glencore, the company that ultimately controls the Congolese mine. Once a commodities trader that merely bought and shipped stuff others dug out of the ground, in recent years Glencore has gatecrashed an august club of global mining companies, such as Rio Tinto and Anglo American, whose histories stretch back to colonial times.

Its transformation has not been problem-free, however. Glencore’s dealings in Congo have landed it in a hole as deep as Kamoto. Authorities in America, Canada and Britain are probing whether its executives, known in the industry for their sharp suits and elbows, deployed even sharper business practices to get ahead. Investors have started to question the firm’s prospects; its share price has slumped. Mining firms once encouraged to emulate Glencore’s aggressive culture now wonder whether their old-fashioned approach might not have more merit after all.

Glencore is to mining what Goldman Sachs is to high-street banking: nominally in the same trade but in a turbo-charged way. Like the Wall Street stalwart, it thrived first as a private partnership, set up in 1974 as Marc Rich + Co. Its eponymous founder gained fame as a consummate trader, and infamy for evading American authorities irked by his busting of sanctions and dodging of taxes. (He was ousted from the firm in 1993, after which the company was rechristened Glencore.)

When the firm listed its shares in London in 2011, it was the first in a generation to be propelled straight into the blue-chip FTSE 100 index. Its top brass, particularly Ivan Glasenberg, a brusque South African who joined in 1984 and who has been chief executive since 2002, were lauded as visionaries in a staid field. At least five senior executives were revealed to be billionaires—almost unheard of for employees rather than founders of any company, whatever the industry. Around 40 top traders held shares valued at over $200m each.

Bosses of mining firms are mostly engineering types, as comfortable down a mineshaft as in a boardroom. An accountant by training, Mr Glasenberg’s spiritual home is the trading floor. Unlike hedge funds, commodities-traders do not make money on fluctuating prices, but by working out how to get the best price for whatever they can source. The job is more logistics than speculation. A wrinkle in markets might mean a pile of high-quality coal and a low-quality one are worth more if blended together into a medium-quality grade. Access to natural resources is vital, and tricky. In recent years, Glencore has made loans to “state-owned” oil firms in Libya and Iraqi Kurdistan, for example, to be repaid in barrels. (That trick works so long as the “state” in question keeps control of the oilfields.) Glencore handles over 90 commodities, from soyabeans to aluminium.

Trading is a fabulously lucrative business. Returns on equity at Glencore’s operation can top 40% a year. But there are limits to how big it can get. So Glencore branched out. Instead of just securing the offtake of mines, it wanted to own them. With little in-house engineering nous, it has mostly bought facilities set up by others (or so sniffy rivals decry). Its transformation was complete when in 2013 it took full control of Xstrata, a big coal venture.

Glencore is now overwhelmingly a mining group—around two-thirds of its $8.6bn in adjusted operating profits last year came from stuff coming out of the ground. But its DNA is still that of a trader’s. Sometimes it cuts its own production to support prices: a sort of one-firm OPEC. It is nimbler than rivals, and more opportunistic. “Glencore has a different culture to other miners. They are quick, they trust their own judgment,” says Paul Gait of Sanford C. Bernstein, a research firm.

The superlatives are less frequently heard now than they were at the time of listing. Investors who bought Glencore shares at the time have lost 48% of their money since 2011—a worse return than any of its big FTSE mining peers except for Anglo American (see chart). Mr Glasenberg failed to spot a commodities-price wobble coming in 2015. A humbling $2.5bn capital infusion was required to fix the balance-sheet. After recovering, its shares have slipped again since the start of 2018 and trade at just 7.3 times this year’s estimated earnings.

Many people in mining think Glencore’s buccaneering business model is now haunting the firm rather than helping it. Mr Glasenberg’s strategy has been not so much contrarian as actively seeking out opportunities others shun. His firm has snapped up coal mines that rivals have been all but forced to divest by environmental activists: it is now the world’s biggest seaborne exporter of thermal coal, for example. Peers might panic at being exposed to Vladimir Putin’s Russia; Glencore has stakes in Rosneft and Rusal, two firms active in oil and aluminium respectively, both battling American sanctions.

Most worrisome to investors has been its investment in Congo, a country avoided as too risky by Glencore’s big rivals. Tricky conditions have necessitated $7bn in investment to improve its mines there. At first the payoff seemed worth it, especially given a surge in the price of cobalt, a by-product that was a mere afterthought when Glencore had first invested in 2007.

But just as production has been ramping up, the political landscape has worsened. Old agreements to freeze royalties paid by Glencore have been all but torn up by the government. Remitting profits abroad is harder. Under duress, in June Glencore wrote off $5.6bn it loaned to a joint venture with a government-owned miner, in exchange for equity. To add to its woes, in November cobalt at Kamoto was found to be contaminated with uranium. Sales are suspended until a plant to remediate the radiation can be built.

Yet even radioactivity is not Glencore’s biggest problem in Congo. Since first investing a decade ago, it has relied on a deep-seated alliance with Dan Gertler, a controversial Israeli businessman who started in the diamond trade. According to a UN report, after arriving in 1997 Mr Gertler won favour with the ruling Kabila family by offering $20m to finance the purchase of arms, which the current president’s father used to win a bloody civil war. That gained him a perch as an unavoidable middle man to just about anyone looking to dig something from the ground in Congo. Mr Gertler is said to be the inspiration for the film “Blood Diamond” (presumably not for the hero). Through a spokesman, Mr Gertler declined to comment but reiterated claims of having committed no impropriety.

American authorities now have Mr Gertler in their sights. Under “Global Magnitsky” sanctions first enforced to target Russian wrongdoing, in December 2017 he was among 13 kleptocrats and their cronies placed under sanction for egregious breaches of human rights and for corruption—a problem for Glencore, whose boss once described Mr Gertler as “a supportive shareholder” in a joint venture in Congo. It has found it hard to cut ties with him.

Glencore might have known from the outset of Mr Gertler’s sulphurous reputation. The UN report that outlines his past was written in 2001. In the wake of an American hedge fund facing scrutiny for allegedly dealing with him in 2016, before he was sanctioned, Glencore bought him out from its mines, including Kamoto, for $534m. But the deal entitled its erstwhile partner to further royalty payments in the region of over $20m this year and $100m in 2019. When Glencore at first refused to make these payments, citing the sanctions, Mr Gertler filed a lawsuit and, in essence, threatened to close down Glencore’s Congolese operations. Keen to avoid that outcome, Glencore decided to pay him.

Glencore has insisted it did not violate American sanctions, largely by means of having paid Mr Gertler his dues in euros, and outside America. It has made the case to American and Swiss authorities that penalising it would be tantamount to self-inflicted industrial sabotage: Congo is the source of two-thirds of the world’s cobalt, an element which is crucial to modern electronics (see article). If it were to leave the place, Glencore has argued, Chinese miners already active there would send ever-more precious cobalt straight to China (as Glencore itself often does, too).

Whatever its merits, this argument seems to have fallen on deaf ears. Three weeks after Glencore paid part of this year’s dues to Mr Gertler, on July 3rd, it announced it had received a subpoena from America’s Department of Justice (DOJ) in respect to compliance with the Foreign Corrupt Practices Act; its activities in Congo, as well as in Venezuela and Nigeria, were cited. Britain’s Serious Fraud Office is also reported to be investigating Glencore on matters relating to Congo, as is the Ontario securities regulator in Canada.

Who can succeed Ivan?

“Paying Gertler was a blatant finger in the eye of US authorities,” says a senior executive at a rival firm. “You can’t do that and hope to get away with it, even if you are Ivan Glasenberg.” Worse, the matter is not even fully resolved: Glencore has yet to publicly announce whether it intends to pay Mr Gertler the money he is entitled to in 2019 under existing agreements. (The company declined to comment.)

Glencore’s market value fell by $5bn on the news of the DOJ investigation—an amount more than five times greater than the biggest fine ever meted out under the relevant statute. That reflects investors’ fear not only of a large penalty, but also that American authorities could in effect force a change of direction at the company.

The miner is hardly unique in the corporate world in having faced the attention of American authorities. But Glencore’s case stands out. Other American investigations have mostly been against firms where the alleged wrongdoing was peripheral to their activities, where the top brass could blame underlings and where the problem was not seen as indicative of wider culture. Yet some analysts estimate that Congo, at least before its current woes, represented around a quarter of Glencore’s market value (now at $51bn). Mr Glasenberg is reported to be a regular visitor. And the DOJ investigation targets three countries, suggesting it is investigating a pattern of problems.

Analysts have fretted about Glencore itself coming under “secondary sanctions” for its relationship with Mr Gertler. That seems unlikely. But even the slightest whiff that Glencore is abetting sanctions-busting will jangle the nerves of the compliance department of its banks. Commodities trading is fuelled by ample and cheap bank financing; Glencore has $33bn in bonds and loans outstanding.

Mr Glasenberg has had to reassure analysts about this. “He knows that if banks start worrying about getting caught up in sanctions stuff just by doing business with Glencore, that would be a terminal issue,” says one. It was worried banks that pushed Mr Rich from his perch in 1993. Given its supportive shareholders—30% are Glencore employees, and the Qatari sovereign-wealth fund has a further 8.5%—the firm’s lenders are the most likely source of pressure on its business model.

Some industry executives worry that Glencore is turning mining into the new banking: a sector aggressively pursued by American authorities, with the power to dictate fresh faces at the top of firms they deem to fall short. “The DOJ worries about sectors that don’t take compliance seriously. Industries only wake up after one of them is hammered, like HSBC in Mexico,” says one industry figure. The bank’s money-laundering of cartel drug money earned it a $1.9bn fine in 2012, along with five years of intense monitoring, prompting wider change in the banking industry’s culture.

How and when the Glasenberg era ends is what investors are most curious about now. Aged 61, he has already started indicating to investors he won’t be around for more than three to five years—as it happens, roughly the time frame of a DOJ investigation of the scale Glencore faces. None of his lieutenants are in line for promotion; even in the gossipy world of mining, no one has any idea who will succeed him. Once, the obvious choice would have been a swashbuckling trader willing to win at all costs and to plough on in the face of criticism. Less so, now.

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A decade after the Mumbai attacks, India remains vulnerable

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THIS WEEK residents of Mumbai marked ten years since gunmen of Lashkar-e-Taiba (LeT), a terrorist group with close ties to Pakistan’s intelligence service, rampaged through their city over four harrowing days, killing 166 people. A decade on India has beefed up security, launched cross-border raids against terrorists and drummed up international pressure on Pakistan. Yet many of the institutional failings that left it open to attack remain unchanged, while LeT and like-minded jihadists are stronger than ever.

The good news is that Indian cities are safer than they were. The number of serious attacks, excluding those in insurgency-ridden states like Kashmir, fell from 25 in the eight years leading up to the Mumbai attacks to six since, notes Tilak Devasher, a former Indian security official. Large cities have avoided Mumbai-like atrocities.

That may partly be owing to improved defences. A spate of institutions were established or spruced up after 2008. A new National Investigation Agency became the lead law-enforcement body for terrorism cases. The Multi Agency Centre, which was created after lapses in intelligence-sharing between different government agencies allowed Pakistani troops to grab a sliver of Indian territory in Kashmir in 1999, was strengthened following a similar failure of co-ordination ahead of the assault on Mumbai. The National Security Guard (NSG), a force of commandos that was pilloried for taking ten agonising hours to get to Mumbai from its New Delhi headquarters, set up hubs in six other cities.

India’s spies and soldiers have also stepped up their work. India has tightened links with foreign spy services, including those of America and Britain, both of which eavesdrop closely on jihadists in Pakistan, and the United Arab Emirates, once a favourite hideaway for shady Pakistanis. It has signed extradition treaties with seven additional countries and agreed Mutual Legal Assistance Treaties with 15 more.

Shivshankar Menon, who became national security adviser after the Mumbai attacks, says that India responded with “covert” and “asymmetric” measures as well. The army has been more willing to flex its muscles, too, conducting what the government called “surgical strikes” on Pakistan’s bit of Kashmir after a massacre in 2016 of Indian soldiers by militants based in Pakistan, though many thought these more a political stunt than a serious deterrent.

For all this activity, many experts and officials remain sceptical about how much has changed. Co-ordination between the central government and states, which have constitutional responsibility for policing and public order, as well as among states, remains a problem. Vappala Balachandran, a veteran police officer and intelligence official, points to a tussle between the Anti-Terrorism Squad of Maharashtra, a large western state which includes Mumbai, and New Delhi’s police force, with each arresting one another’s operatives. A National Counter Terrorism Centre was supposed to resolve these feuds but never got off the ground. Officials also point to massive staff shortages, poor personnel management and rampant nepotism in intelligence agencies, as well as a police-to-population ratio that is one of the lowest in the world. Remarkably, NSGcommandos still lack their own aircraft.

In recent months Ajit Doval, the national security adviser, seen by acolytes as a swashbuckling figure who would personally slip across the border to shoot at terrorists if given the chance, has ushered in a sweeping reorganisation of his office, stacking it with spies instead of diplomats, increasing its budget tenfold and taking over prime New Delhi office space from cabinet ministers. The concentration of power has irked many. It is “totally unsuited to a democracy like India”, Mr Balachandran says.

Meanwhile the threat to India is dormant but undiminished. Pakistan has largely kept LeT on a leash over the past decade, wary of provoking Indian bombs or America’s wrath. But Hafiz Saeed, LeT’s leader, was allowed to field candidates in elections in July and his front organisations were recently dropped from Pakistan’s list of banned outfits. On September 30th the loquacious Mr Saeed even shared a stage with Pakistan’s religious affairs minister, cheerfully defying a $10m American bounty on his head. Were he to be permitted to strike an Indian city once more, India’s only partly patched defences would be sorely tested.

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After 12 draws, Magnus Carlsen is once again the chess world champion

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RARELY HAS a tournament involved so little winning. The World Chess Championship of 2018, held in London at The College in Holborn over nearly three weeks from November 9th-28th, began with a series of 12 games played under classical time controls, the traditional slow pace of play. The reigning champion and top-ranked player in the world, 27-year-old Magnus Carlsen of Norway, failed to win a single one of his contests against the challenger, 26-year-old American Fabiano Caruana. Fortunately for the Norwegian, Mr Caruana never reached a checkmate or extracted a resignation either. Each of the dozen classical games ended in a draw, sending the match to a series of faster-paced tiebreakers, starting with a series of up to four “rapid” games, in which players are allotted less than one-quarter the thinking time of the classical format. Mr Carlsen, the stronger competitor in speedier formats, won the first three rapid games to clinch the tiebreaker and retain his title.

To the casual observer, three weeks of drawn games may sound excruciatingly boring. (In the first game alone, the two men played 115 moves over seven hours before reaching an impasse.) But like a football World Cup full of impregnable defences, or a baseball World Series studded with scoreless pitching duels, the chess title match featured two equally matched grandmasters competing at an extremely high level. A game of chess opens in a state of equilibrium, and if the optimal move is made with each play, a draw is all but assured. For a player to win a game, he must capitalise on his opponent’s blunders. Neither man played perfectly—a supercomputer identified a guaranteed, though extremely opaque, path to victory for Mr Caruana in the sixth game, and Mr Carlsen held a sizeable advantage in the final classical game before surprisingly offering a draw—but mistakes were rare.

Indeed, the frequency of draws is a strong indicator of the overall level of play. Among beginners, roughly one in five games end deadlocked. At the elite, grandmaster level, more than half of contests are drawn, a figure that has remained steady for decades. The governing body of chess, FIDE, uses an algorithm called Elo to evaluate players, boosting a competitor’s rating after victories and dropping it after losses, with the magnitude determined by the opponent’s own rating. Among the highest-rated players—those above 2,700 on the Elo scale, a category that currently counts around 50 members—63% of classical games end in draws. Mr Carlsen and Mr Caruana entered their championship match atop the ranking table, with ratings a hair’s breadth apart at 2,835 and 2,832, respectively, and had drawn 18 of their 33 career games against each other.

Mr Carlsen has drawn games at an even greater clip when playing on the sport’s biggest stage. This year’s World Chess Championship was the Norwegian’s fourth, after he claimed the title from Viswanathan Anand in 2013, successfully defended it against the same opponent in 2014, and withstood Sergey Karjakin in 2016. Of the 35 games in the three previous championships (the match was decided after 11 games in 2014), 26 ended in draws, a rate of 74%. Not only are the competitors in these matches among the very best in the world, they also spend months preparing to parry the preferred tactics of a single foe.

Computer chess engines play a significant role in that preparation, and they help explain the increasingly precise play of the world’s best. In 1997, a machine defeated the top-ranked human player for the first time, when IBM’s Deep Blue overtook Garry Kasparov. In the intervening two decades, engines have gotten smarter and processing speeds have increased exponentially. When Deep Blue made its breakthrough, it edged out a player rated by Elo in the 2,800s. Today, Stockfish, the highest-rated engine, is rated above 3,450, more than 600 points above Mr Carlsen, a gap that implies the machine would defeat the human nearly every time. (Google’s AlphaZero engine isn’t rated, but it is far stronger. In December 2017, it demolished Stockfish in a 100-game match, winning 28, drawing 72, and losing none.) While grandmasters cannot use the engines during play, they use computers to evaluate openings and develop strategies tailored to specific opponents.

The result is human chess that increasingly resembles computer chess. Chess.com has developed a metric, Computer Aggregated Precision Score (CAPS), which compares a player’s moves to those of a top engine. Mr Carlsen scores higher than any other champion; his moves parallel those of the engine’s more than 85% of the time, and his overall choices are better than 98% as effective as those of the computer. At this year’s championship, Mr Caruana was nearly as good. A smaller-scale approach to measuring the level of precision relies on the concept of centipawn loss, the difference between a player’s move and an engine’s optimal alternative. (One centipawn is one-hundredth of a pawn, a unit that represents the effects of strong or weak positions on the board.) In the 2018 championship, as well as the drawn games in Mr Carlsen’s three previous title matches, the average centipawn loss was less than 10, a mark that had been achieved only a handful of times in over a century of chess championships. By the same metric of centipawn loss, the gap between the competitors’ performances was the smallest ever in a title match.

But even if an increased draw rate represents a positive step for the quality of play, it doesn’t present the sport at its most gripping at the one time that the world is watching. The tiebreaker, which took place in a single day, made for much more engaging viewing: three speedy games, one after another, and no draws. The faster time controls of rapid chess prevent grandmasters from carefully choosing every move, and the limitations drove Mr Caruana into mistakes that he had avoided in the previous 12 games. Among rapid games between players with ratings of 2700 or higher, only 47% of meetings result in draws. In the even quicker “blitz” format, which was slated to be the second tiebreaker had the competitors drawn even after four rapid games, the draw rate is lower still, at 34% of elite-level games.

Still, the World Chess Championship determines the classical chess title, and it may be a bit unfair to deny the American the honour due to his lapses in a different format. But a decision had to be made somehow, and the suggestions of purists that the match be extended to 16, 18, or more games seem impractical. At the level of Mr Carlsen and Mr Caruana, a draw is the most likely outcome in any single contest, and both deserve ample credit for playing well enough to prevent the other from breaking through. Such acknowledgements are surely little consolation for the American. But as the early favourite to challenge the Norwegian once again in 2020, Mr Caruana now has another 15 head-to-head games’ worth of information to take with him into his preparation to unseat the champion next time.

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Britain’s government of national unity

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IN 1931 THE beleaguered prime minister of a minority British government faced a divided cabinet. The agreed template for British policy seemed to be causing economic damage, yet the prime minister saw no alternative but to carry on, and duly formed a government of national unity with the opposition.

There are spooky parallels with the current crisis. The then-PM was Ramsay MacDonald, the first Labour leader of Britain. He was attempting to defend the value of the pound, which had been tied to gold since Winston Churchill, as chancellor of the exchequer, restored the link in 1925. But the Bank of England and other experts insisted on public spending cuts, including to unemployment benefits, to restore investor confidence. Almost half MacDonald’s cabinet disagreed, so he took a handful of Labour MPs and led a coalition, backed largely by the Conservatives, which won a crushing majority in the general election.

This time around, Theresa May is the prime minister and she faces almost certain defeat in Parliament on December 11th in a vote on the European Union withdrawal deal that she negotiated. There has been some muttering that she might get the deal through with Labour backing, or even that a government of national unity could be formed to avoid a catastrophic “no deal” scenario. But the 1931 example is not encouraging. MacDonald and his colleagues were denounced as traitors to the Labour movement and the same fate could befall any Labour MPs who choose to back Mrs May.

Remainers might take hope from the fact that the 1931 government went off the gold standard almost immediately, finding that the economic costs were too great. Could a coalition government drop Brexit on the same grounds? Only with the backing of a massive Commons majority in a new election. And that seems a remote possibility, given that the British public are divided almost 50-50 on the issue.

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British Airways should not be allowed to buy Flybe

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WITHIN DAYS of putting itself up for sale, Flybe, a beleaguered regional airline based in Britain, has attracted interest from the country’s two largest carriers. Its executives are hoping for a bidding war between International Airlines Group (IAG), which is the parent company of British Airways (BA), Britain’s flag carrier, and Virgin Atlantic, its main rival. Flybe’s shares have surged in value due to the tussle. But only one of the bids would be good for the travelling public.

IAG already controls over 54% of the take-off and landing-slots at London Heathrow, Britain’s biggest airport. By contrast Heathrow’s second-largest carrier, Virgin Atlantic, has a market share of less than 5%. For London-based travellers who only fly short-haul, there is meaningful competition in the skies from low-cost carriers. But for regular business travellers—who demand multiple daily flights, lounge access and a good frequent-flyer scheme—there is only one attractive airport in London, and only one attractive carrier at that airport: BA.

Britain’s flag carrier cannot be blamed for inheriting its privileged status. But regulators can be blamed for allowing the airline to exploit it. Over the past few years the airline has been accused of hacking back at service levels. Baggage allowances, legroom and on-board refreshments were all cut. This year BA began charging passengers to sit next to each other. The tactics are justified by an alleged need to compete with short-haul low-cost carriers. Yet the frugality extends to long-haul routes on which there are few direct competitors. Constant criticism of BA on social media and in the national press achieves little. Its customers keep coming back, because they have no other alternatives on many of those routes.

If BA is allowed to buy Flybe, this monopoly will extend to other parts of Britain. Heathrow currently has limited appeal to those living in the Midlands and the North. Both BA and Virgin Atlantic would seek to change this by plugging Flybe’s network into their Heathrow hubs. But unlike BA, Virgin Atlantic also operates long-haul flights from other British cities like Manchester and Glasgow. Strengthening these secondary hubs will weaken Heathrow’s, and thus BA’s, grip on the market. Sky-high profits at BA amid declining service standards show the flag carrier has an unassailable lead over competitors. A Flybe-Virgin tie-up might be the first step towards giving it a run for its money.

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Two films prompt a debate about portrayals of Spain’s Roma on screen

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FOR A wandering people, Andalusia, at the edge of the Iberian peninsula, is the end of the road. Many Roma have settled there and, compared to communities in other European countries, they are well integrated. They make use of education and health care, as well as housing and employment programmes; culturally, Roma are the lifeblood of flamenco. But when it comes to representation on screen, they are either invisible or mocked. That is why two recent films looking at Roma lives, both directed by non-Roma Spaniards, were scrutinised. One took the top prize at the San Sebastián Film Festival in September, while the other drew complaints and a boycott from Roma associations.

The ruckus was caused by “Carmen & Lola” (pictured left). Directed by Arantxa Echevarría, it follows two girls who fall in love in a Roma community that sees them as wives-in-waiting. When one of them is engaged to a man she hardly knows, her father boasts that she has never left the house alone and doesn’t own a mobile phone. Both are lies, but the point remains: this is a patriarchal community, and one that is poor and devout. Homosexuality is neither understood nor accepted. The girls try to hide it, but in the end it is exposed.

Even a brief description gives an idea of why the film annoyed some Roma. A rare outing on the big screen portrays their community perfectly in line with people’s prejudices: these Roma work exclusively in tatty markets, and they dance at gypsy weddings in flash suits and extravagantly beaded outfits. They don’t do tarot cards, but they do do exorcisms. The stereotypes are reasserted, rather than nuanced or questioned. “Carmen & Lola” is a bland story of forbidden love to which the word Roma was added like a pinch of chilli.

The topic was still raw when Isaki Lacuesta’s film arrived two months later. “Between Two Waters” (pictured right, and below) is a sequel to a film he made in 2006 about Isra and Cheíto, two real-life Roma brothers. A mix of fact and fiction, this one starts as Isra is released from prison and Cheíto, who is a chef on a military vessel, returns from sea. They meet back home in San Fernando, just outside Cádiz, where both are trying to find a future for themselves and their families. That they are Roma is rarely said aloud, but it is written in the details: the very particular Spanish they speak among friends, and the freelance jobs that Isra juggles, salvaging scrap metal and picking seashells out of the silt.

Real events from the actors’ lives, such as jobs and tattoos, the death of their father and the birth of a child, are incorporated into the script. The intimate portrayal of life’s vicissitudes through time gives it the feel of an Andalusian “Boyhood”; where that film goes from childhood to adolescence in suburban America, Mr Lacuesta follows his subjects from adolescence to adulthood in an impoverished corner of Spain.

San Fernando has one of the highest unemployment rates in Spain (around 30%). It is a place of beauty and hardship, and of the struggle and yearning that also power flamenco. Mr Lacuesta’s films borrow their titles from albums of Camarón de la Isla and Paco de Lucia, two of the great flamenco artists, but they don’t offer romanticised depictions of Roma life. Quite the opposite: Mr Lacuesta is obsessed with the honesty of his portrayal even to the point of repetitive, aseptic realism. His films feel neither scripted nor acted, as if there were no lighting or make-up or extras. There is little drama, but its characters and events ring true.

Realism is the key difference between the two films, as it means recognising the truth within stereotypes, but not trading in them. They are also set apart by the depth of the Roma element. Where in “Carmen & Lola” it feels like an artificial and gaudy detail, impossible to ignore, in “Between Two Waters” it is quietly essential. The story at the heart of “Carmen & Lola” could be transplanted to another setting or minority group, but that of “Between Two Waters” could not, for it would pluck the heart out of the film.

The stakes involved were high because neither director is Roma themselves (Ms Echevarría is Basque, while Mr Lacuesta is Catalan). They come from two of Spain’s richest regions, in every sense on the opposite side of Spain to Cádiz. Them making a film about Roma required unusual sensitivity. “Between Two Waters” proves that you do not need to be part of a group to make a good film about it. “Carmen & Lola” is a reminder to tread with caution.

“Between Two Waters” is released in Spain on November 30th

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