Estos días los precios del petróleo han vuelto a marcar mínimos históricos ante la preocupación de que un exceso de oferta en los Estados Unidos pueda desbordar las ya de por si rebosantes instalaciones de almacenamiento.
Además, la Organización de Países Exportadores de Petróleo acaba de publicar un informe que sugiere que el cartel se mostrará reacio a intervenir para apuntalar los precios.
La dirección de los precios del petróleo, que habían aumentado considerablemente desde los mínimos de enero, ha caído en los últimos días. Los operadores se centran ahora en el segundo trimestre del año, cuando la demanda de petróleo es tradicionalmente débil debido al final del invierno y a los cierres programados de las refinerías para su mantenimiento.
El lunes, el precio del crudo West Texas Intermediate, el principal punto de referencia de Estados Unidos, cayó un 2 por ciento a alrededor de 44 dólares por barril, un mínimo de seis años, mientras que el crudo Brent, de referencia internacional, se redujo en un 2 por ciento a alrededor de 53 dólares barril.
Los mercados del petróleo siguen centrándose en la OPEP porque sus miembros podrían alterar rápidamente el equilibrio de los mercados mediante la reducción de la producción. Pero mientras que a algunos miembros, entre ellos Nigeria y Venezuela, les gustaría ver recortes, Arabia Saudí y sus aliados del Golfo muestran poca inclinación a cambiar la política que acordaron en otoño: Proteger la cuota de mercado, independientemente de lo que suceda con los precios.
Según la opinión de los participantes en el mercado, el papel de la OPEP como productor de oscilación se ha trasladado a los Estados Unidos y, en particular, a los productores de petróleo de esquisto que han ayudado a aumentar la producción estadounidense en más de cuatro millones de barriles diarios desde el año 2009, mucho más que los aumentos combinados en el resto del mundo.
Muchos analistas afirman que los bajos precios desincentivaran futuras inversiones de nuevas perforaciones por lo que el crecimiento de la producción en los Estados Unidos se estabilizará e incluso comienzan a declinar. Pero saber cuando este cambio va a suceder es un mero ejercicio especulativo.
El grupo de empresas petroleras que trabaja en Texas o en Dakota del Norte u otros lugares es muy diferente de las reuniones de los ministros de la OPEP que deciden si se debe cortar o aumentar la oferta en sus reuniones de Viena.
En su último informe mensual, la OPEP formuló su propia conjetura sobre la posibilidad de que la producción podría comenzar a disminuir en los Estados Unidos alegando que la salida de un esquisto típico puede caer un 60 por ciento anual y tomando nota de la continua disminución en el número de equipos de perforación que operan en los Estados Unidos, la OPEP ha sugerido que una caída de la producción posiblemente se puede esperar, para finales de 2015.
Mientras que puede parecer una noticia alentadora para los productores de petróleo, también significa que la OPEP, o al menos Arabia Saudí, pueden tener ninguna prisa para recortar la producción en la próxima reunión del grupo, en junio.
Los saudíes sostienen que con el tiempo, la economía se tornará en su favor porque su petróleo cuesta muy pocos dólares por barril de producir, mientras que el petróleo de esquisto, el que proviene de los pozos en aguas profundas o el extraído de las arenas petrolíferas de Canadá es mucho más caro. Los saudíes también sostienen que cualquier movimiento para apuntalar los precios ahora alentará una mayor inversión en la producción en los Estados Unidos y en otros lugares.
El informe de la OPEP del pasado lunes fue menos optimista, ya que pronosticaba que la demanda de su crudo sería de unos 29,2 millones de barriles diarios en 2015. Es decir, alrededor de 800.000 barriles menos por día de los que la OPEP dijo que estaba produciendo en febrero.
17 mar 2015
16 mar 2015
Aerotropolis
Politicians in London who have been debating for years over whether to approve the building of a third runway at Heathrow Airport might find a visit to Zhengzhou—an inland provincial capital little known outside China—an eye-opening experience.
Some 20,000 workers are labouring around the clock to build a second terminal and runway for the city’s airport. They are due to begin test operations by December, just three years after ground was broken. By 2030, officials expect, the two terminals and, by then, five runways will handle 70m passengers yearly—about the same as Heathrow now—and 5m tonnes of cargo, more than three times as much as Heathrow last year.
But the ambitions of Zhengzhou airport are far bigger than these numbers suggest.
It aspires to be the centre of an “aerotropolis”, a city nearly seven times the size of Manhattan with the airport not a noisy intrusion on its edge but built into its very heart. Its perimeter will encompass logistics facilities, R&D centres, exhibition halls and factories that will link central China to the rest of the global economy. It will include homes and amenities for 2.6m people by 2025, about half as many as live in Zhengzhou’s main urban area today. Heathrow struggles to expand because of Londoners’ qualms, but China’s urban planners are not bothered by grumbling; big building projects rarely involve much consulting of the public.
The idea of airport-centred cities is not a Chinese one. John Kasarda of the University of North Carolina helped to promote it in a book he co-wrote, “Aerotropolis: The Way We’ll Live Next”, which was published in 2011. He is an adviser to Zhengzhou Airport Economic Zone (ZAEZ), as the aerotropolis is called. China, however, is well-placed to turn Mr Kasarda’s etymological mishmash into reality. The Chinese see airports as “competitive assets”, he says, not “nuisances and environmental threats”—although many cities, inspired by another American-invented term, insist they want to turn themselves into green “eco-cities”. New urban centres are being built on greenfield sites across the country. Some are being developed in such disregard of demand that they are becoming eerily empty “ghost towns”. But they are giving planners ample opportunity to build airports alongside new cities, instead of as afterthoughts.
Construction of airports is proceeding at a blistering pace. The government’s plan for 2011-15 called for 82 new airports to be built during this period. In the event, more than 100 have sprung up. Officials are fond of what they call “airport economics”, by which they mean the use of airport-building to boost local economies.
Only in a handful of cases do overseers of these projects explicitly say that they want to build aerotropolises. One example is in the southern outskirts of Beijing, centred on a village called Nangezhuang, where a groundbreaking ceremony was held on December 26th. Little activity is visible: a few pieces of construction equipment sat idle one recent afternoon at the edge of a sorghum field as herders walked their sheep along a nearby dirt road. But by 2019 the area is due to be turned into one of the world’s largest airports, at a cost of 80 billion yuan ($13 billion). As much as 80 billion yuan more will reportedly be spent turning the surrounding area into an economic and industrial hub.
Some wonder whether all this is necessary. Wang Tao of the Carnegie-Tsinghua Centre for Global Policy, a think-tank in Beijing, calls the airport-construction frenzy “misguided”. He believes many of the cities building big airports do not need them, thanks to a rapid expansion of the country’s high-speed rail network in recent years.
Local officials, Mr Wang says, are after political prestige and a quick boost to local GDP; they are happy to leave their successors to grapple with the debts. Many new airports operate at a loss. Mr Kasarda, however, defends the Zhengzhou project. It is misguided, he says, to assess an airport’s value solely by its operational profitability; its role as an economic driver also needs to be taken into account. “We are putting the aerotropolis theory into practice,” says Zhang Yanming, ZAEZ’s Communist Party chief.
Zhengzhou has a long history as a trading and transport hub, well-connected to China’s largest population centres. It also has an abundant supply of labour (it is the capital of Henan province, one of China’s most populous, with more than 100m people). The ZAEZ allows duty-free import and re-export of goods and components. Mr Zhang says this has attracted more than a dozen makers of mobile phones, including Foxconn, a Taiwanese-owned firm best known for producing Apple iPhones. The Foxconn factory employs 200,000 people year-round, and 300,000 at times of peak production. Three-quarters of the iPhones made globally in the past three years came from ZAEZ, Mr Zhang says. Such small, high value-added, products benefit greatly from ready access to airports.
Beijing’s aerotropolis also has built-in advantages, not least strong support from the central government. Mr Kasarda acknowledges that his concept cannot work everywhere, especially in many of China’s smaller cities. But he remains excited by the many suitable candidates in a country that is willing—and more able than most— to give it a try. “They can really design not just an airport, but an aerotropolis from scratch,” he enthuses. It remains to be seen how enthusiastic residents will be about the jets roaring over them.
The Economist
Mar 14th 2015
Some 20,000 workers are labouring around the clock to build a second terminal and runway for the city’s airport. They are due to begin test operations by December, just three years after ground was broken. By 2030, officials expect, the two terminals and, by then, five runways will handle 70m passengers yearly—about the same as Heathrow now—and 5m tonnes of cargo, more than three times as much as Heathrow last year.
But the ambitions of Zhengzhou airport are far bigger than these numbers suggest.
It aspires to be the centre of an “aerotropolis”, a city nearly seven times the size of Manhattan with the airport not a noisy intrusion on its edge but built into its very heart. Its perimeter will encompass logistics facilities, R&D centres, exhibition halls and factories that will link central China to the rest of the global economy. It will include homes and amenities for 2.6m people by 2025, about half as many as live in Zhengzhou’s main urban area today. Heathrow struggles to expand because of Londoners’ qualms, but China’s urban planners are not bothered by grumbling; big building projects rarely involve much consulting of the public.
The idea of airport-centred cities is not a Chinese one. John Kasarda of the University of North Carolina helped to promote it in a book he co-wrote, “Aerotropolis: The Way We’ll Live Next”, which was published in 2011. He is an adviser to Zhengzhou Airport Economic Zone (ZAEZ), as the aerotropolis is called. China, however, is well-placed to turn Mr Kasarda’s etymological mishmash into reality. The Chinese see airports as “competitive assets”, he says, not “nuisances and environmental threats”—although many cities, inspired by another American-invented term, insist they want to turn themselves into green “eco-cities”. New urban centres are being built on greenfield sites across the country. Some are being developed in such disregard of demand that they are becoming eerily empty “ghost towns”. But they are giving planners ample opportunity to build airports alongside new cities, instead of as afterthoughts.
Construction of airports is proceeding at a blistering pace. The government’s plan for 2011-15 called for 82 new airports to be built during this period. In the event, more than 100 have sprung up. Officials are fond of what they call “airport economics”, by which they mean the use of airport-building to boost local economies.
Only in a handful of cases do overseers of these projects explicitly say that they want to build aerotropolises. One example is in the southern outskirts of Beijing, centred on a village called Nangezhuang, where a groundbreaking ceremony was held on December 26th. Little activity is visible: a few pieces of construction equipment sat idle one recent afternoon at the edge of a sorghum field as herders walked their sheep along a nearby dirt road. But by 2019 the area is due to be turned into one of the world’s largest airports, at a cost of 80 billion yuan ($13 billion). As much as 80 billion yuan more will reportedly be spent turning the surrounding area into an economic and industrial hub.
Some wonder whether all this is necessary. Wang Tao of the Carnegie-Tsinghua Centre for Global Policy, a think-tank in Beijing, calls the airport-construction frenzy “misguided”. He believes many of the cities building big airports do not need them, thanks to a rapid expansion of the country’s high-speed rail network in recent years.
Local officials, Mr Wang says, are after political prestige and a quick boost to local GDP; they are happy to leave their successors to grapple with the debts. Many new airports operate at a loss. Mr Kasarda, however, defends the Zhengzhou project. It is misguided, he says, to assess an airport’s value solely by its operational profitability; its role as an economic driver also needs to be taken into account. “We are putting the aerotropolis theory into practice,” says Zhang Yanming, ZAEZ’s Communist Party chief.
Zhengzhou has a long history as a trading and transport hub, well-connected to China’s largest population centres. It also has an abundant supply of labour (it is the capital of Henan province, one of China’s most populous, with more than 100m people). The ZAEZ allows duty-free import and re-export of goods and components. Mr Zhang says this has attracted more than a dozen makers of mobile phones, including Foxconn, a Taiwanese-owned firm best known for producing Apple iPhones. The Foxconn factory employs 200,000 people year-round, and 300,000 at times of peak production. Three-quarters of the iPhones made globally in the past three years came from ZAEZ, Mr Zhang says. Such small, high value-added, products benefit greatly from ready access to airports.
Beijing’s aerotropolis also has built-in advantages, not least strong support from the central government. Mr Kasarda acknowledges that his concept cannot work everywhere, especially in many of China’s smaller cities. But he remains excited by the many suitable candidates in a country that is willing—and more able than most— to give it a try. “They can really design not just an airport, but an aerotropolis from scratch,” he enthuses. It remains to be seen how enthusiastic residents will be about the jets roaring over them.
The Economist
Mar 14th 2015
10 mar 2015
Bobby Fischer
No es casualidad que, coincidiendo con el dominio español del mundo, Felipe II organizara el primer torneo internacional de ajedrez de la historia, como no lo es que durante la Revolución francesa el mejor ajedrecista del periodo, François-André Danican, fuera francés.
El ajedrez es una escenificación perfecta de la situación
política y también lo fue durante la Guerra Fría. En 1972, Bobby
Fischer, un joven neoyorquino se enfrentó al soviético Borís
Spassky, campeón del mundo de ajedrez entre 1969 y 1972. Tras superar la
interminable lista de extravagancias y problemas generados por el
norteamericano, que reclamó repetidas veces que se apagaran todas las cámaras
para acabar con el imperceptible estruendo que provocaban las máquinas, la
partida terminó con la victoria de Bobby Fischer, el cual se convirtió en un
héroe nacional y un icono mediático.
Bobby Fischer
se crió en un pequeño apartamento en Brooklyn, Nueva York, junto a su madre y su hermana. Su increíble memoria –llegó a aprender cinco idiomas– le permitió moverse con facilidad desde muy pequeño en el ajedrez, que se convirtió en una obsesión para el joven desde
que su madre le regalara un tablero de
este juego, a medio camino entre el arte y el deporte. Pero ni siquiera
la influencia del psicólogo al que acudió su madre al advertir que su hijo se
había obsesionado con el ajedrez, pudo evitar que Bobby Fischer se inscribiera en un prestigioso club de Mathatam y
avanzara en su aprendizaje. A los 12
años ya se enfrentaba a los mejores jugadores de EE.UU.
«Ha sido el jugador que más cerca ha estado de la perfección. Dicen que Fischer no tenía estilo, que
simplemente elegía la mejor jugada», afirmó Magnus Carlsen
poco después de proclamarse campeón del mundo de ajedrez a los 22 años.
Fischer, como Carlsen, empezaron a competir al más alto nivel desde la más
temprana adolescencia. A los 13 años, el americano ya era capaz de
anticiparse 6 o 7 movimientos a
sus oponentes,
como pudieron comprobar sus maestros de Mathatam,
y se alzó como ganador del Campeonato
Junior de Estados Unidos. Su vida academia, no obstante, iba en declive,
puesto que, como otros chicos superdotados, se aburría en las clases
y abandonó los estudios a los 16 años
para dedicarse completamente al ajedrez.
Al precio de colocar
el ajedrez por encima de su vida académica y sus relaciones sociales, Fischer
se hizo con el campeonato de EE.UU. tres veces y con el título de Gran Maestro antes
de llegar a la mayoría de edad. Fue entonces cuando empezaron a
aparecer las primeras extravagancias y salidas de tono que harían célebre a
Fischer, quien en 1960 amenazó con
abandonar el campeonato nacional de su país alegando una infinidad de quejas.
Quería la luz apropiada, que no le fotografiaran, que no hubiera el mínimo
sonido… y si no se daban las circunstancias adecuadas abandonaba la
competición. Estas exigencias impidieron que pudiera alcanzar mejores
resultados en los siguientes años de su carrera. Hoy, muchos médicos
psiquiatras han apreciado en el ajedrecista rasgos del síndrome de Asperger, un tipo de autismo que lleva a los
afectados a obsesionarse con un campo concreto y a tener problemas para
relacionarse socialmente.
La partida del siglo: el patriota
Cuando la comunidad ajedrecista empezaba a poner en cuestión el talento de
Fischer, que en 1968 hizo la primera de sus sorprendentes desapariciones y se fue a vivir tres años a la costa oeste
para escribir un libro sobre ajedrez, el neoyorquino regresó por sorpresa y anunció sus
intenciones de disputar el título mundial. Tras vencer por aplastamiento a
tres de los mejores jugadores del mundo,Fischer desafió al soviético Borís
Spassky, que mantenía un balance a su favor de 3 victorias sobre el americano y
2 tablas.
Pero no solo se
enfrentaba a un rival estadísticamente superior a él, el estadounidense aspiraba a derribar el
mito de la invencibilidad de la escuela de la Unión Soviética, dirigida por el Comité de Educación Física y Deportes, que había producido a
todos los campeones y subcampeones mundiales desde 1948. En medio de la Guerra Fría entre la URSS y EE.UU, la partida
trascendió a nivel político.
El campeonato del mundo de 1972 se celebró en Reikiavik, capital de Islandia.
Allí se desplazó Fischer,
declarado anticomunista, no sin antes exigir a la Federación Internacional de Ajedrez (FIDE) que elevara el premio
en metálico y no sin que el propio Henry Kissinger, el secretario de Estado, le
suplicara ir por el honor de su patria. «Este es el peor jugador del mundo
llamando al mejor jugador del mundo», anunció al descolgar el teléfono
Kissinger. Una vez en Islandia, se quejó de absolutamente cada detalle, incluso
de las vistas de la habitación del hotel.
Todavía absorto en sus exigencias –entre ellas que hubiera alguien
dispuesto a jugar con él al tenis y a los bolos las 24 horas del día–Fischer
perdió la primera partida.
Y en la segunda
partida, el neoyorquino no se presentó porque el sonido de las cámaras
grabando, casi imperceptible para el oído humano, no le dejaba
pensar. Fue declarado perdedor por no presentarse.
Con dos derrotas como losas, nadie creía
posible que Fischer remontara, salvo él.
A diferencia de su
rival, que había acudido con un enorme
séquito de grandes maestros rusos, el neoyorquino se encontraba
prácticamente solo y sin la asistencia de otros ajedrecistas americanos. Solo
ante el peligro. Finalmente, Bobby Fischer volvió a la competición a condición de jugar sin público. Venció
en la tercera. La cuarta
partida fue tablas, y desde la quinta se impuso rotundamente el gran maestro
estadounidense. Fischer superó a su
rival tras 21 partidas y se coronó campeón mundial el 1 de septiembre de 1972.
Había presumido que ganaría al ruso, y lo
hizo, convirtiéndose en un auténtico fenómeno mediático a su regreso a EE.UU.
No obstante, el triunfo sobre
Spassky fue el comienzo
del fin para este genio del ajedrez.
Britain’s House of Commons
The distance between the front benches in Britain’s House of Commons, it is said, is that of two drawn swords: it is a fittingly archaic and combative conceit.
The Victorian chamber is not as urgently in need of rebuilding as some of the Palace of Westminster—it does not actually leak, falling bits of cornice do not routinely endanger life and limb, the electricity supply is reasonably reliable—but it is still arranged for the politics of a bygone era. Members of Parliament are arrayed behind the ministers and shadow ministers to whom they owe their tribal loyalty; at Prime Minister’s Questions jeers, roars and braying from both sides reverberate from the oak panelling. “I count my blessings for the fact I don’t have to go into that pit,” President George H.W. Bush once remarked.
The pit is the product not just of Parliament’s adversarial architecture, but of the electoral system that supports it. The MPs in the House of Commons, the elected and more powerful of Parliament’s two chambers, are the individuals who won the largest share of the vote in each of 650 constituencies. This constituency-winner-takes-all system, known rather oddly as “first past the post” (FPTP), took its current form in 1885. By its nature, FPTP squashes small political parties; the dynamics of what political scientists call “Duverger’s law” doom them to irrelevance or merger, a process that will reliably lead to duopolies on power. Defenders of FPTP argue that by giving voters two broad parties to choose between, instead of a plethora of more focused ones, it delivers durable single-party governments rather than flimsy coalitions. This allows governments to do more—and lets voters hold parties to account for either doing or not doing in office what they promise to do at elections.
Britain's Parliament
The system’s detractors say that disenfranchising people who vote for small parties is a price that outweighs these purported benefits. And this problem has recently been getting worse. The general election to be held on May 7th will see some widely popular parties winning very few seats, but it is quite unlikely to produce a strong single-party government. If increasing costs in fairness offer fewer compensating benefits, both Britain’s people and its politicians may decide it is time for a change.
Not a tale of two parties
The most two-party election held since FPTP took its modern form was that of 1951; the Conservatives got 48% of the vote and Labour got 49%. It was a time when class loyalty trumped almost all other concerns. A study of Labour supporters in Bristol in 1955 found that only a third held political views vaguely resembling the party’s; the rest presumably voted for it because their families, neighbours and workmates did. At the other end of the scale the Conservatives were the only game in town.
Now people do not feel so constrained. “My father was a steelworker, my uncles went down the mines,” explains Peter Short, who last year stood as a council candidate for the UK Independence Party in Yorkshire. “I was a Labour voter all my life. But I’ve had it with them.” Much the same can be heard from new supporters of the left-nationalist SNP and the left-somewhat-libertarian Greens. All told, UKIP, the SNP and the Greens commanded one in 18 votes in the 2010 election. Some polls put the equivalent figure today at around one in three. The share of the vote for the biggest two parties in May may be below 70% and could fall nearer to 60%.
Party activists are redesigning their canvassing sheets to accommodate newly nuanced voting intentions: “I suppose I am your classic Tory-Green-Labour swing voter,” says one resident of Cambridge, a seat so plural that five parties could all win more than 10% of the vote there. A number of previously safe seats are up for grabs, not because they will be lost to the new parties, but because those new parties will eat into past margins of victory. John Curtice, a psephologist, predicts a “lottery election” in which small shifts in the vote will make big differences in the Commons.
The complexity is in part a reaction to Britain’s first coalition government for 70 years, which has left its members with weakened flanks. The Conservatives have lost right-wing voters to UKIP. The Lib Dems have lost some more left-wing voters to the Greens and Labour. Labour, for its part, has seen its support in Scotland plummet after campaigning against independence in last September’s referendum. Stagnant living standards, blamed by each of the major parties on the other, have fuelled a “stuff the pair of them” attitude which benefits the small fry.
But longer-term trends are also in play. Half a century ago one in four voters said they identified with one of the main parties very strongly; now only one in ten does. Under Margaret Thatcher and Tony Blair this breakdown proved quite compatible with two-party politics. In the 1980s Thatcher courted working-class voters who would once have reflexively backed Labour; Mr Blair turned the tables a decade later. But either because the process has gone too far, or because they have no similarly gifted successors, neither of the two big parties now seems able to turn the collapse of allegiance to its advantage.
Who’s like us?
A second, related trend is that voters expect more from politics. They are more used to “shopping around” in their everyday lives, says Tim Bale, a political scientist at Queen Mary University of London. But whereas supermarkets offer wider choice and better value than ever before, politics does not. Quality has not improved and the differences between parties seem to many to be harder to see. Ever fewer politicians have significant experience outside Westminster. And FPTP means that many hardly even need to try and sell themselves. In 69% of seats the incumbent has a majority of ten percentage points or more; in those seats only half the voters had any contact with a politician in 2010. Voters paid no heed by the big parties return the favour.
The resultant disdain encourages people to vote for marginal candidates—what, after all, are they losing—or not to vote at all. In 1979’s general election 76% of voters participated; by 2005 turnout had fallen to 61%. The proportion rose slightly to 65% in the narrow 2010 election and may nudge up a little further this time. But the trend in safe seats is clear. A 2012 by-election in the utterly safe Labour seat of Manchester Central achieved the dubious honour of the lowest turnout in an election since 1945. Only 18% of voters participated.
The third and possibly most significant trend is a change in the shape of politics. A two-party system works best when debates can be collapsed onto a single axis—say from command-and-control economics to free markets. In Britain as elsewhere such a one-dimensional scheme does ever less justice to how people think. As class has lost salience, cultural issues have increasingly taken its place as a way of defining people’s politics. This has been helped along by the unusually large gulf in the experiences of younger voters and older ones that has come with the huge expansion of higher education over the past few decades. James Tilley, an Oxford academic, has argued for a while that Britain’s political maps are increasingly in need of a libertarian-authoritarian axis to supplement the old left-right economic axis. The rise of fresh-faced (if bearded) libertarian Greens and the support greying authoritarians offer UKIP proves he is on to something, though the fit is far from perfect: there are libertarian ‘kippers, including Douglas Carswell, one of UKIP’s two MPs; Green do-what-thou-wilt-ishness does not extend to fox hunting.
The politics of national identity have strengthened too. UKIP is a beneficiary; the SNP is another. Represented in Westminster since the 1960s, for decades the party defined what it was to be marginal. The devolution granted to Scotland in 1998—designed in part to sate the appetite for self-rule—provided it with a Scottish Parliament at Holyrood which included a degree of proportional representation (PR); its seats are allocated more or less in line with the popular vote. Re-energised and able to make every vote count the SNP became a minority government in 2007 and won an absolute majority in 2011, when it promised an independence referendum.
It lost the referendum, but its fortunes are better than ever. In Cumbernauld, Kilsyth and Kirkintilloch East, a seat east of Glasgow until recently as solidly Labour as Manchester Central, SNP membership has surged from some 300 before the referendum to over 1,600 now. Local members are dazzled by their success: one branch had to move its meetings from an official’s living room to a school gymnasium. “We are struggling to train people as fast as they join,” buzzes Jamie Hepburn, the local SNP member of the Scottish Parliament. Some polls have the SNP winning 40 of Scotland’s 59 Westminster seats in May.
The party is popular because it has successfully promulgated the idea that Scots are different: given to tolerance, solidarity and greenery in a way that sets them apart from the right-wing, authoritarian and insensitive English. The party emphasises the sort of issues that were until recently the preserve of single-issue campaigners. Both fracking and nuclear weapons are likely to be key features of negotiations with Labour if it seeks the support of the SNP’s Westminster MPs in some way on May 8th.
Such inter-party arrangements, either full coalitions or looser promises of support, look likely outcomes in Mr Curtice’s lottery . The Lib Dems look as if they could lose two dozen seats or more, and the SNP could make gains on the same scale. If UKIP and the Greens pick up a handful of seats, too, the number of seats held by the two main parties will shrink and the chances of a minority government, or a coalition of some sort, will rise. Political advisers and civil servants are dusting off histories of the period from 1976-79, the last in which Britain had a minority government. Political folklore has MPs at death’s door brought into the Commons on stretchers to vote.
Back then a minority government could seek a stronger mandate at any time by going to the polls. That is no longer possible. The Fixed-Term Parliaments Act, passed by the current coalition as a guarantee of its durability, requires the agreement of two-thirds of MPs to approve an immediate dissolution. The opposition may thus reject new elections if the timing does not suit it; that happened in Canada’s legislature, which uses the Westminster model, in 2008. Thus a weak minority government could persist for some time.
The alternative worry is a government which is not inherently wobbly but which the ever more grotesque distortions of FPTP strip of legitimacy. Polling suggests that UKIP could come third in share of the vote and sixth in number of seats; the SNP, on the other hand, could come sixth in share of the vote, third in number of seats and get to choose the government. The Greens and UKIP could together obtain a quarter of votes but only 1% of the seats. Labour could win more seats than the Conservatives with many fewer votes. It is indeed conceivable, though unlikely, that Labour could win an absolute majority with less than 30% of the vote.
An added complication is the House of Lords. In Labour and Lib Dem circles the talk is of turning it into a senate elected by PR of some sort. That might to some extent mollify small parties; but by highlighting the unrepresentative nature of the Commons it might well also make that chamber’s legitimacy harder to defend.
Britain may muddle along, as it has done when its electoral system has creaked in the past. Weak governments in the 1970s gave way to more than a decade of handsome Tory majorities as FPTP squashed the attempts of the Liberals, allied to the Labour absconders in the Social Democratic Party, to split the two-party system. (In the 1983 election Labour, with 28% of the vote, got 209 seats; the SDP-Liberal alliance, with 25%, got 23.) People seeing their votes for small parties wasted and no likelihood of that changing might return to Labour or the Tories—one of which might yet come up with a leader and programme that appeals both to its ideologically hardcore members and to centrist voters. And it is worth remembering that though it favours a two-party system, FPTP has in the past allowed the identities of those parties to change, with Labour supplanting the Liberals. Perhaps, after a period of turbulence and realignment, a new two-party configuration will emerge and stable majority governments will return. Duverger’s law is strong.
But it is also possible to imagine Britain responding to its great political fragmentation by giving up, or modifying, FPTP. The Lib Dems, a merger of the Liberals and the SDP, have steadfastly favoured PR (and after the 1980s who could blame them?). The Greens do, too, and so do some in UKIP—including Nigel Farage, its leader. It is easy for small parties to favour a reform that gets them more seats. It is more notable that the SNP, which looks likely to do very well out of FPTP in May, also favours PR at Westminster. And so does a substantial body of opinion in Labour.
Wellington calling
Only the Conservative Party is resolutely anti-PR. The party is conservative by temperament as well as name. It sees itself as the “natural party of government” and finds it inconceivable that in any two-party system it will long be out of power. Forced by the Lib Dems to hold a referendum on an uninspiring modification of FPTP called “alternative vote” as a coalition dowry, nearly all Tories campaigned for a “No”. Yet the party’s interests are shifting.
The current system is punishing Tory voters for being increasingly concentrated in rural and wealthy parts of the country; it is that concentration which makes it possible for Labour to get more seats than the Tories with fewer votes. Some senior Conservatives—including, it is said, the prime minister—favour introducing PR in local elections to establish a presence for the party in parts of the country where it lacks local councillors, let alone MPs. (It has no representatives on the councils of Manchester, Liverpool, Sheffield or Newcastle.) Mr Bale, an expert on the party’s recent history, says that the sight of UKIP taking many votes from the party yet failing to translate them into a largely supportive bloc of right-wing seats in Parliament might finally make first-past-the-post intolerable. And if enough people across the major parties favour it, reform will become possible, even inevitable.
Even if the Conservatives do not change their stance, grossly disproportionate election results could still force the issue. That was the case in New Zealand in 1993 when, after years in which the two main parties had lost a lot of votes but only a few seats to smaller outfits under FPTP, the public voted for reform in a referendum. Admittedly this was in part because of an earlier non-binding referendum which the then prime minister had offered by accident (he misread his notes in an interview and chose not to correct himself). But chance always has a role to play.
The fact that an FPTP system like that of New Zealand before the 1990s—so majoritarian people called it “more Westminster than Westminster”—gave way fairly easily to a form of PR suggests the same could happen in Britain, too. Indeed, such systems are already in use in the London and Welsh assemblies as well as Holyrood.
The contrast between the architecture of Holyrood and that of Westminster illustrates the differences between the two systems: one is rigidly divided, opposing winners and losers; the other offers a spread of possibilities for compromise and deal-making. Scotland’s legislators speak from individual desks in a horseshoe (they tend to sit in groups, but can take any seat in the chamber if they want) in an airy complex that feels like a modern airport: all bright, wide galleries full of seating.
The architectural parallel has one further dimension. Like Britain’s electoral system, the Palace of Westminster was completed in the second half of the 19th century, survived occasional blows through the 20th century, and is poorly suited to today’s politics. Like the electoral system, it is close to falling to bits. A drastic restoration is planned for the next parliamentary term; some or all MPs may have to move out. For Britain’s constitutional reformists—which include this newspaper—this presents a golden opportunity to fix both the physical and electoral architecture of British politics. The edifice may survive the next parliament, and even the one after that. But without drastic renovation it could easily collapse.
The Victorian chamber is not as urgently in need of rebuilding as some of the Palace of Westminster—it does not actually leak, falling bits of cornice do not routinely endanger life and limb, the electricity supply is reasonably reliable—but it is still arranged for the politics of a bygone era. Members of Parliament are arrayed behind the ministers and shadow ministers to whom they owe their tribal loyalty; at Prime Minister’s Questions jeers, roars and braying from both sides reverberate from the oak panelling. “I count my blessings for the fact I don’t have to go into that pit,” President George H.W. Bush once remarked.
The pit is the product not just of Parliament’s adversarial architecture, but of the electoral system that supports it. The MPs in the House of Commons, the elected and more powerful of Parliament’s two chambers, are the individuals who won the largest share of the vote in each of 650 constituencies. This constituency-winner-takes-all system, known rather oddly as “first past the post” (FPTP), took its current form in 1885. By its nature, FPTP squashes small political parties; the dynamics of what political scientists call “Duverger’s law” doom them to irrelevance or merger, a process that will reliably lead to duopolies on power. Defenders of FPTP argue that by giving voters two broad parties to choose between, instead of a plethora of more focused ones, it delivers durable single-party governments rather than flimsy coalitions. This allows governments to do more—and lets voters hold parties to account for either doing or not doing in office what they promise to do at elections.
Britain's Parliament
The system’s detractors say that disenfranchising people who vote for small parties is a price that outweighs these purported benefits. And this problem has recently been getting worse. The general election to be held on May 7th will see some widely popular parties winning very few seats, but it is quite unlikely to produce a strong single-party government. If increasing costs in fairness offer fewer compensating benefits, both Britain’s people and its politicians may decide it is time for a change.
Not a tale of two parties
The most two-party election held since FPTP took its modern form was that of 1951; the Conservatives got 48% of the vote and Labour got 49%. It was a time when class loyalty trumped almost all other concerns. A study of Labour supporters in Bristol in 1955 found that only a third held political views vaguely resembling the party’s; the rest presumably voted for it because their families, neighbours and workmates did. At the other end of the scale the Conservatives were the only game in town.
Now people do not feel so constrained. “My father was a steelworker, my uncles went down the mines,” explains Peter Short, who last year stood as a council candidate for the UK Independence Party in Yorkshire. “I was a Labour voter all my life. But I’ve had it with them.” Much the same can be heard from new supporters of the left-nationalist SNP and the left-somewhat-libertarian Greens. All told, UKIP, the SNP and the Greens commanded one in 18 votes in the 2010 election. Some polls put the equivalent figure today at around one in three. The share of the vote for the biggest two parties in May may be below 70% and could fall nearer to 60%.
Party activists are redesigning their canvassing sheets to accommodate newly nuanced voting intentions: “I suppose I am your classic Tory-Green-Labour swing voter,” says one resident of Cambridge, a seat so plural that five parties could all win more than 10% of the vote there. A number of previously safe seats are up for grabs, not because they will be lost to the new parties, but because those new parties will eat into past margins of victory. John Curtice, a psephologist, predicts a “lottery election” in which small shifts in the vote will make big differences in the Commons.
The complexity is in part a reaction to Britain’s first coalition government for 70 years, which has left its members with weakened flanks. The Conservatives have lost right-wing voters to UKIP. The Lib Dems have lost some more left-wing voters to the Greens and Labour. Labour, for its part, has seen its support in Scotland plummet after campaigning against independence in last September’s referendum. Stagnant living standards, blamed by each of the major parties on the other, have fuelled a “stuff the pair of them” attitude which benefits the small fry.
But longer-term trends are also in play. Half a century ago one in four voters said they identified with one of the main parties very strongly; now only one in ten does. Under Margaret Thatcher and Tony Blair this breakdown proved quite compatible with two-party politics. In the 1980s Thatcher courted working-class voters who would once have reflexively backed Labour; Mr Blair turned the tables a decade later. But either because the process has gone too far, or because they have no similarly gifted successors, neither of the two big parties now seems able to turn the collapse of allegiance to its advantage.
Who’s like us?
A second, related trend is that voters expect more from politics. They are more used to “shopping around” in their everyday lives, says Tim Bale, a political scientist at Queen Mary University of London. But whereas supermarkets offer wider choice and better value than ever before, politics does not. Quality has not improved and the differences between parties seem to many to be harder to see. Ever fewer politicians have significant experience outside Westminster. And FPTP means that many hardly even need to try and sell themselves. In 69% of seats the incumbent has a majority of ten percentage points or more; in those seats only half the voters had any contact with a politician in 2010. Voters paid no heed by the big parties return the favour.
The resultant disdain encourages people to vote for marginal candidates—what, after all, are they losing—or not to vote at all. In 1979’s general election 76% of voters participated; by 2005 turnout had fallen to 61%. The proportion rose slightly to 65% in the narrow 2010 election and may nudge up a little further this time. But the trend in safe seats is clear. A 2012 by-election in the utterly safe Labour seat of Manchester Central achieved the dubious honour of the lowest turnout in an election since 1945. Only 18% of voters participated.
The third and possibly most significant trend is a change in the shape of politics. A two-party system works best when debates can be collapsed onto a single axis—say from command-and-control economics to free markets. In Britain as elsewhere such a one-dimensional scheme does ever less justice to how people think. As class has lost salience, cultural issues have increasingly taken its place as a way of defining people’s politics. This has been helped along by the unusually large gulf in the experiences of younger voters and older ones that has come with the huge expansion of higher education over the past few decades. James Tilley, an Oxford academic, has argued for a while that Britain’s political maps are increasingly in need of a libertarian-authoritarian axis to supplement the old left-right economic axis. The rise of fresh-faced (if bearded) libertarian Greens and the support greying authoritarians offer UKIP proves he is on to something, though the fit is far from perfect: there are libertarian ‘kippers, including Douglas Carswell, one of UKIP’s two MPs; Green do-what-thou-wilt-ishness does not extend to fox hunting.
The politics of national identity have strengthened too. UKIP is a beneficiary; the SNP is another. Represented in Westminster since the 1960s, for decades the party defined what it was to be marginal. The devolution granted to Scotland in 1998—designed in part to sate the appetite for self-rule—provided it with a Scottish Parliament at Holyrood which included a degree of proportional representation (PR); its seats are allocated more or less in line with the popular vote. Re-energised and able to make every vote count the SNP became a minority government in 2007 and won an absolute majority in 2011, when it promised an independence referendum.
It lost the referendum, but its fortunes are better than ever. In Cumbernauld, Kilsyth and Kirkintilloch East, a seat east of Glasgow until recently as solidly Labour as Manchester Central, SNP membership has surged from some 300 before the referendum to over 1,600 now. Local members are dazzled by their success: one branch had to move its meetings from an official’s living room to a school gymnasium. “We are struggling to train people as fast as they join,” buzzes Jamie Hepburn, the local SNP member of the Scottish Parliament. Some polls have the SNP winning 40 of Scotland’s 59 Westminster seats in May.
The party is popular because it has successfully promulgated the idea that Scots are different: given to tolerance, solidarity and greenery in a way that sets them apart from the right-wing, authoritarian and insensitive English. The party emphasises the sort of issues that were until recently the preserve of single-issue campaigners. Both fracking and nuclear weapons are likely to be key features of negotiations with Labour if it seeks the support of the SNP’s Westminster MPs in some way on May 8th.
Such inter-party arrangements, either full coalitions or looser promises of support, look likely outcomes in Mr Curtice’s lottery . The Lib Dems look as if they could lose two dozen seats or more, and the SNP could make gains on the same scale. If UKIP and the Greens pick up a handful of seats, too, the number of seats held by the two main parties will shrink and the chances of a minority government, or a coalition of some sort, will rise. Political advisers and civil servants are dusting off histories of the period from 1976-79, the last in which Britain had a minority government. Political folklore has MPs at death’s door brought into the Commons on stretchers to vote.
Back then a minority government could seek a stronger mandate at any time by going to the polls. That is no longer possible. The Fixed-Term Parliaments Act, passed by the current coalition as a guarantee of its durability, requires the agreement of two-thirds of MPs to approve an immediate dissolution. The opposition may thus reject new elections if the timing does not suit it; that happened in Canada’s legislature, which uses the Westminster model, in 2008. Thus a weak minority government could persist for some time.
The alternative worry is a government which is not inherently wobbly but which the ever more grotesque distortions of FPTP strip of legitimacy. Polling suggests that UKIP could come third in share of the vote and sixth in number of seats; the SNP, on the other hand, could come sixth in share of the vote, third in number of seats and get to choose the government. The Greens and UKIP could together obtain a quarter of votes but only 1% of the seats. Labour could win more seats than the Conservatives with many fewer votes. It is indeed conceivable, though unlikely, that Labour could win an absolute majority with less than 30% of the vote.
An added complication is the House of Lords. In Labour and Lib Dem circles the talk is of turning it into a senate elected by PR of some sort. That might to some extent mollify small parties; but by highlighting the unrepresentative nature of the Commons it might well also make that chamber’s legitimacy harder to defend.
Britain may muddle along, as it has done when its electoral system has creaked in the past. Weak governments in the 1970s gave way to more than a decade of handsome Tory majorities as FPTP squashed the attempts of the Liberals, allied to the Labour absconders in the Social Democratic Party, to split the two-party system. (In the 1983 election Labour, with 28% of the vote, got 209 seats; the SDP-Liberal alliance, with 25%, got 23.) People seeing their votes for small parties wasted and no likelihood of that changing might return to Labour or the Tories—one of which might yet come up with a leader and programme that appeals both to its ideologically hardcore members and to centrist voters. And it is worth remembering that though it favours a two-party system, FPTP has in the past allowed the identities of those parties to change, with Labour supplanting the Liberals. Perhaps, after a period of turbulence and realignment, a new two-party configuration will emerge and stable majority governments will return. Duverger’s law is strong.
But it is also possible to imagine Britain responding to its great political fragmentation by giving up, or modifying, FPTP. The Lib Dems, a merger of the Liberals and the SDP, have steadfastly favoured PR (and after the 1980s who could blame them?). The Greens do, too, and so do some in UKIP—including Nigel Farage, its leader. It is easy for small parties to favour a reform that gets them more seats. It is more notable that the SNP, which looks likely to do very well out of FPTP in May, also favours PR at Westminster. And so does a substantial body of opinion in Labour.
Wellington calling
Only the Conservative Party is resolutely anti-PR. The party is conservative by temperament as well as name. It sees itself as the “natural party of government” and finds it inconceivable that in any two-party system it will long be out of power. Forced by the Lib Dems to hold a referendum on an uninspiring modification of FPTP called “alternative vote” as a coalition dowry, nearly all Tories campaigned for a “No”. Yet the party’s interests are shifting.
The current system is punishing Tory voters for being increasingly concentrated in rural and wealthy parts of the country; it is that concentration which makes it possible for Labour to get more seats than the Tories with fewer votes. Some senior Conservatives—including, it is said, the prime minister—favour introducing PR in local elections to establish a presence for the party in parts of the country where it lacks local councillors, let alone MPs. (It has no representatives on the councils of Manchester, Liverpool, Sheffield or Newcastle.) Mr Bale, an expert on the party’s recent history, says that the sight of UKIP taking many votes from the party yet failing to translate them into a largely supportive bloc of right-wing seats in Parliament might finally make first-past-the-post intolerable. And if enough people across the major parties favour it, reform will become possible, even inevitable.
Even if the Conservatives do not change their stance, grossly disproportionate election results could still force the issue. That was the case in New Zealand in 1993 when, after years in which the two main parties had lost a lot of votes but only a few seats to smaller outfits under FPTP, the public voted for reform in a referendum. Admittedly this was in part because of an earlier non-binding referendum which the then prime minister had offered by accident (he misread his notes in an interview and chose not to correct himself). But chance always has a role to play.
The fact that an FPTP system like that of New Zealand before the 1990s—so majoritarian people called it “more Westminster than Westminster”—gave way fairly easily to a form of PR suggests the same could happen in Britain, too. Indeed, such systems are already in use in the London and Welsh assemblies as well as Holyrood.
The contrast between the architecture of Holyrood and that of Westminster illustrates the differences between the two systems: one is rigidly divided, opposing winners and losers; the other offers a spread of possibilities for compromise and deal-making. Scotland’s legislators speak from individual desks in a horseshoe (they tend to sit in groups, but can take any seat in the chamber if they want) in an airy complex that feels like a modern airport: all bright, wide galleries full of seating.
The architectural parallel has one further dimension. Like Britain’s electoral system, the Palace of Westminster was completed in the second half of the 19th century, survived occasional blows through the 20th century, and is poorly suited to today’s politics. Like the electoral system, it is close to falling to bits. A drastic restoration is planned for the next parliamentary term; some or all MPs may have to move out. For Britain’s constitutional reformists—which include this newspaper—this presents a golden opportunity to fix both the physical and electoral architecture of British politics. The edifice may survive the next parliament, and even the one after that. But without drastic renovation it could easily collapse.
India. A chance to fly
Emerging markets used to be a beacon of hope in the world economy, but now they are more often a source of gloom.
China’s economy is slowing. Brazil is mired in stagflation. Russia is in recession, battered by Western sanctions and the slump in the oil price; South Africa is plagued by inefficiency and corruption. Amid the disappointment one big emerging market stands out: India.
If India could only take wing it would become the global economy’s high-flyer—but to do so it must shed the legacy of counter-productive policy. That task falls to Arun Jaitley, the finance minister, who on February 28th will present the first full budget of a government elected with a mandate to slash red tape and boost growth. In July 1991 a landmark budget opened the economy to trade, foreign capital and competition. India today needs something equally momentous.
Strap on the engines
India possesses untold promise. Its people are entrepreneurial and roughly half of the 1.250 million population is under 25 years old. It is poor, so has lots of scope for catch-up growth: GDP per person (at purchasing-power parity) was $5,500 in 2013, compared with $11,900 in China and $15,000 in Brazil. The economy has been balkanised by local taxes levied at state borders, but cross-party support for a national goods-and-services tax could create a true common market. The potential is there; the question has always been whether it can be unleashed.
Optimists point out that GDP grew by 7.5% year on year in the fourth quarter of 2014, outpacing even China. But a single number that plenty think fishy is the least of the reasons to get excited. Far more important is that the economy seems to be on an increasingly stable footing . Inflation has fallen by half after floating above 10% for years. The current-account deficit has shrunk; the rupee is firm; the stockmarket has boomed; and the slump in commodity prices is a blessing for a country that imports four-fifths of its oil. When the IMF cut its forecasts for the world economy, it largely spared India.
The real reason for hope is the prospect of more reforms.
Last May Narendra Modi’s Bharatiya Janata Party won a huge election victory on a promise of a better-run economy.
His government spent its early months putting a rocket up a sluggish civil service and on other useful groundwork. But the true test of its reformist credentials will be Mr Jaitley’s budget.
The easy part will be to lock in India’s good fortune, with fiscal and monetary discipline. In addition India’s public-sector banks need capital and, since the state cannot put up the money, the minister must persuade potential shareholders that they will be run at arm’s length from politicians.
If India is to thrive, it needs bold reforms and political courage to match. The tried-and-tested development strategy is to move people from penurious farm jobs to more productive work with better pay. China’s rise was built on export-led manufacturing. The scope to follow that model is limited. Supply-chain trade growth has slowed, and manufacturing is becoming less labour-intensive as a result of technology. Yet India could manage better than it does now. It has a world-class IT-services industry, which remains too skill-intensive and too small to absorb the 90m-115m often ill-educated youngsters entering the job market in the next decade. The country’s best hope is a mixed approach, expanding its participation in global markets in both industry and services. To achieve this Mr Jaitley must focus on three inputs: land, power and labour.
Jumbo on the runway
All are politically sensitive and none more so than land purchases. In China the state would just requisition the land, and let farmers go hang. But India has veered too far the other way. A long-standing plan to build a second international airport in Mumbai is on ice. An act passed in the dying months of the previous government made things worse by calling for rich compensation to landowners, a social-impact study for biggish projects and the approval of at least 70% of landholders before a purchase can go ahead. Mr Modi has used his executive powers to do away with the consent clause for vital investments. It is a temporary fix; Mr Modi needs to make it permanent and to win that political battle he needs to show that prime locations do not go to cronies, but to projects that create jobs.
Power, or rather the shortage of it, also stops India soaring. According to one survey half of all manufacturers suffered power cuts lasting five hours each week. Inefficiency is rampant throughout the power network, stretching from Coal India, a state monopoly, to electricity distributors. The first auctions of coal-mining licences to power, steel and cement companies, which began this week, are a step forward. More effort will be needed to open distribution to competition. Regulators are cowed by politicians into capping electricity prices below the cost of supply—though people will pay up and leave the politicians alone if they know that the supply is reliable.
The third big area ripe for reform is India’s baffling array of state and national labour laws. Compliance is a nightmare. Many of the laws date to the 1940s: one provides for the type and number of spittoons in a factory. Another says an enterprise with more than 100 workers needs government permission to scale back or close. Many Indian businesses stay small in order to remain beyond the reach of the laws. Big firms use temporary workers to avoid them. Less than 15% of Indian workers have legal job security. Mr Jaitley can sidestep the difficult politics of curbing privileges by establishing a new, simpler labour contract that gives basic protection to workers but makes lay-offs less costly to firms. It would apply only to new hires; the small proportion of existing workers with gold-star protections would keep them.
Adversity has in the past been the spur to radical change in India. The 1991 budget was in response to a balance-of-payments crisis. The danger is that, with inflation falling and India enjoying a boost from cheaper energy, the country’s leaders duck the tough reforms needed for lasting success. That would be a huge mistake. Mr Modi and Mr Jaitley have a rare chance to turbocharge an Indian take-off. They must not waste it.
China’s economy is slowing. Brazil is mired in stagflation. Russia is in recession, battered by Western sanctions and the slump in the oil price; South Africa is plagued by inefficiency and corruption. Amid the disappointment one big emerging market stands out: India.
If India could only take wing it would become the global economy’s high-flyer—but to do so it must shed the legacy of counter-productive policy. That task falls to Arun Jaitley, the finance minister, who on February 28th will present the first full budget of a government elected with a mandate to slash red tape and boost growth. In July 1991 a landmark budget opened the economy to trade, foreign capital and competition. India today needs something equally momentous.
Strap on the engines
India possesses untold promise. Its people are entrepreneurial and roughly half of the 1.250 million population is under 25 years old. It is poor, so has lots of scope for catch-up growth: GDP per person (at purchasing-power parity) was $5,500 in 2013, compared with $11,900 in China and $15,000 in Brazil. The economy has been balkanised by local taxes levied at state borders, but cross-party support for a national goods-and-services tax could create a true common market. The potential is there; the question has always been whether it can be unleashed.
Optimists point out that GDP grew by 7.5% year on year in the fourth quarter of 2014, outpacing even China. But a single number that plenty think fishy is the least of the reasons to get excited. Far more important is that the economy seems to be on an increasingly stable footing . Inflation has fallen by half after floating above 10% for years. The current-account deficit has shrunk; the rupee is firm; the stockmarket has boomed; and the slump in commodity prices is a blessing for a country that imports four-fifths of its oil. When the IMF cut its forecasts for the world economy, it largely spared India.
The real reason for hope is the prospect of more reforms.
Last May Narendra Modi’s Bharatiya Janata Party won a huge election victory on a promise of a better-run economy.
His government spent its early months putting a rocket up a sluggish civil service and on other useful groundwork. But the true test of its reformist credentials will be Mr Jaitley’s budget.
The easy part will be to lock in India’s good fortune, with fiscal and monetary discipline. In addition India’s public-sector banks need capital and, since the state cannot put up the money, the minister must persuade potential shareholders that they will be run at arm’s length from politicians.
If India is to thrive, it needs bold reforms and political courage to match. The tried-and-tested development strategy is to move people from penurious farm jobs to more productive work with better pay. China’s rise was built on export-led manufacturing. The scope to follow that model is limited. Supply-chain trade growth has slowed, and manufacturing is becoming less labour-intensive as a result of technology. Yet India could manage better than it does now. It has a world-class IT-services industry, which remains too skill-intensive and too small to absorb the 90m-115m often ill-educated youngsters entering the job market in the next decade. The country’s best hope is a mixed approach, expanding its participation in global markets in both industry and services. To achieve this Mr Jaitley must focus on three inputs: land, power and labour.
Jumbo on the runway
All are politically sensitive and none more so than land purchases. In China the state would just requisition the land, and let farmers go hang. But India has veered too far the other way. A long-standing plan to build a second international airport in Mumbai is on ice. An act passed in the dying months of the previous government made things worse by calling for rich compensation to landowners, a social-impact study for biggish projects and the approval of at least 70% of landholders before a purchase can go ahead. Mr Modi has used his executive powers to do away with the consent clause for vital investments. It is a temporary fix; Mr Modi needs to make it permanent and to win that political battle he needs to show that prime locations do not go to cronies, but to projects that create jobs.
Power, or rather the shortage of it, also stops India soaring. According to one survey half of all manufacturers suffered power cuts lasting five hours each week. Inefficiency is rampant throughout the power network, stretching from Coal India, a state monopoly, to electricity distributors. The first auctions of coal-mining licences to power, steel and cement companies, which began this week, are a step forward. More effort will be needed to open distribution to competition. Regulators are cowed by politicians into capping electricity prices below the cost of supply—though people will pay up and leave the politicians alone if they know that the supply is reliable.
The third big area ripe for reform is India’s baffling array of state and national labour laws. Compliance is a nightmare. Many of the laws date to the 1940s: one provides for the type and number of spittoons in a factory. Another says an enterprise with more than 100 workers needs government permission to scale back or close. Many Indian businesses stay small in order to remain beyond the reach of the laws. Big firms use temporary workers to avoid them. Less than 15% of Indian workers have legal job security. Mr Jaitley can sidestep the difficult politics of curbing privileges by establishing a new, simpler labour contract that gives basic protection to workers but makes lay-offs less costly to firms. It would apply only to new hires; the small proportion of existing workers with gold-star protections would keep them.
Adversity has in the past been the spur to radical change in India. The 1991 budget was in response to a balance-of-payments crisis. The danger is that, with inflation falling and India enjoying a boost from cheaper energy, the country’s leaders duck the tough reforms needed for lasting success. That would be a huge mistake. Mr Modi and Mr Jaitley have a rare chance to turbocharge an Indian take-off. They must not waste it.
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