reuters davos issue

7/29/2019 Reuters Davos Issue

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SignS ofEconomic LifEPAGE 26

ThE havESs.ThE havE LoTSPAGE 48

ThE 2011monEy ShoTSPAGE 6

JANUARY 2012

ThEviEwfromdavoS



THERE’S A PRINCIPLE SOME CALL

THE BUTTERFLY EFFECT.

IT SAYS A RANDOM EVENT IN ONE PART

OF THE WORLD CAN HAVE A DRAMATIC

EFFECT IN ANOTHER. CHAOS REIGNS.

WE BELIEVE IN A DIFFERENT PRINCIPLE.

THAT KNOWLEDGE ALLOWS US TO STEER THE

COURSE OF EVENTS. TO GROW ECONOMIES.

PROMOTE JUSTICE. EVEN SAVE LIVES.

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THAT’S THE KNOWLEDGE EFFECT. SEE HOW WE’RE PROVING IT EVERY DAY AT THOMSONREUTERS.COM



2 �o.

reut ers Jan .2012 3reut ers Jan .2012

�o.

euteRsandthe Word Economic

orum have much in common. We’re bothoba in outook, dedicated to generating

nsights that drive better, smarter deci-ions and committed to bringing togetherhe word’s most interesting peope. As aews organization, Reuters has a urther

mission: to deiver trustworth, time andnspired journaism that powers marketsnd media. We do this as a proud eec-ronic news agenc that whisks text, pho-os, and videos to nancia, proessiona,nd media customers around the word.

That is not to sa, however, that we areverse to print, particuar on speciaccasions ike the annua meeting o the

Word Economic Forum in Davos. Themagazine ou are hoding was created to

oincide with the 2012 session.Among the highights:Each da Reuters produces rough

500 picture images, so coming up withhe top pictures iustrating the harrowingear in economic and nancia news waso eas task. Check out the stunning port-

oio produced b Aexia Singh and RusseBoce in Framing the Goba Econom.Warning: some o the photos are not orthe aint o heart—then again, 2011 wasthat kind o ear.

Are drones a siver buet? PuitzerPrize-winning reporter David Rohde,who spent seven months as a prisonero the Taiban, oers a unique personaperspective—he can vivid reca theincongruous buzz the piotess ghtersmade as the hovered in the sk—andsuggests the United States is paing asteep i hidden price or its reiance onthis high-tech weaponr.

In What’s Going Right, ReutersChie Economics Correspondent AanWheate interrupts our goom-est andshows that despite the debt crisis inEurope and sundr other nancia prob-ems, parts o the word econom, romBrazi to Zambia, are thriving.

What do the Tea Part and Occup WaStreet have in common? To Nick Care,both movements represent a return tood-schoo activism—as we as a threat totheir proessiona counterparts: the otenwe-heeed NGOs o the word.

So shut o our gadgets or a ewminutes, turn awa rom our screen(ater setting our home page to Reuters.com) and dig in.

Warm regards,

STEphEn adLEr, Editor in Chie

e d i t o r ’s l e t t e r

E d i t o r i n C h i E f Sph Adlr

E x E C u t i v E E d i t o r Chrsia Frlad

M a n a g i n g E d i t o r Jim Impc

C r E a t i v E d i r E C t o r s Pris+Grac

a s s i s t a n t M a n a g i n g E d i t o r s Rgr D. Hdg, Bb R

s E n i o r E d i t o r s Jams Ldbr, Paul Smalra

a s s o C i a t E E d i t o r s Assa Abrahamia, Pr Rudgair

P i C t u r E E d i t o r s Russll Bc, Alxia Sigh

i n f o g r a P h i C s Mara Murra

C o P y E d i t o r s Laur Caspr, Charls Prs

PAGE .06

FRAMInGtHe GLoBAL

eConoMy The Top BsiessPitres o 2011

PAGE .16

tHe eLePHAntSIn tHe

SkI LoDGeThe or isses that odri the vie rom Davos

PAGE .18

SPRInGtIMe FoReURoPe?

A retr to the 1930s is otievitabe, provided eaders ad themidde ass do’t aste the risis

PAGE .21

HeLL no,I won’t Go!

Eve ith Go-paigserit, a armada o private

heiopters ad $20,000-a-ightsites, ta is heap. Oe ma’s

probem ith Davos

PAGE .22

FAItH-BASeDeConoMIC

tHeoRyAmeria’s Repbia

presidetia adidates a agreeo the root ase o the iaia

risis, ad the are a rog

PAGE .24

tHe GLoBALMIDDLe

A srprisig shit i iomeeves ordide

PAGE .26

wHAt’S GoInGRIGHt

Searhig or sigs o ie i thegoba eoom

PAGE .38

tHe DRone wARSStepped-p stries b Ameria’s piotess

ighters have bee ost-eiiet,thogh ot ithot ost. I ived i their meaig

shado or seve moths

PAGE .48

tHe HAveS s.tHe HAve LotS

Miioaires o the ord, ite!

PAGE .32

tHe HASHtAGRevoLUtIonAs poitis ad Titter gro more itertied

there’s a ot ridig o a bsiess mode that is etto be disovered

PAGE .44

wIkILeAkS’16tH MInUte

His orgaizatio is i d isarra, his soresdried p, ad Jia Assage is desperaor a seod at. His eas over the pas

ive ears have tod s pet, bt have thhaged athig?

PAGE .52

RetURn oF tHACtIvISt

A e geeratio o protesters strggeavoid the ate o its eders

PAGE .58 DAvoS By tHe nUMBeRS

PAGE .60 tHe DevIL In tHe CDS

PAGE .62 ConFeSSIonS oF A DAvoS SPoU

PAGE .64 tHe FIGHt oveR RUSSIA’S SoUL

SignS ofEconomic LifE

ThE havESs.ThE havE LoTS

ThE 2011monEy ShoTS

REUTERSThEviEwfromdavoSC oveR

IL L UStRAtIonBy

ZoHAR L AZAR

C o N t e N t s

P O R T R A I T I l l u S T R A T I O n : A n D y F R I E D M A n



I l l u S T R A T I O n : A n D y F R I E D M A n

4 �o.

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THE RIGHT INFORMATION IN THE RIGHT HANDS LEADS TO AMAZING TH

In business today, there’s a new mantra: move fast while mitigating risk. With Thomson Reuters Accelus,™ it’s poss

Accelus provides a powerful suite of comprehensive GRC technologies and services that dynamically connect b

strategies, operations, and transactions to the ever-changing regulatory environment. With greater transpare

their organizations, companies in highly governed industries can anticipate, manage, and report emerging reg

and legal risks with confidence. And seize new growth opportunities without hesitation. It’s just one of the many

empower the professionals of the world with the knowledge they need to do what they do best.

THAT’S THE KNOWLEDGE EFFECT. SEE HOW WE’RE PROVING IT AT THOMSONREUTERS.COM

With advanced solutions

from Thomson Reuters,

businesses can better

manage Governance, Risk,

and Compliance–ensuringtheir path to future growth

and innovation is not only

clear, it ’s wide open.

C o N t r i b u t o r s

a l w e t l e

Goba Economics correspondentWheate has reported or Reuters rom

more than 40 countries over the past31 ears, and that weath o experience

has given him a hard-earned skepti-cism about the current despair over the

goba economic orecast, which heas out in What’s Going Right.

J t w e e

The revoution wi not on be tee-vised, it wi be covered exhaustiveb Twitter. In The Hashtag Revolution,Weber, the West Coast Bureau Chie

or Reuters, shows how the seemingendess torrent o tweets is rapid

changing how we a get our news, andeven how we seect our eaders.

n c e

The reporting Care has done in thepast coupe o ears or Reuters has

taken him rom the ront-ines o the Tea Part revot to the streets o

Tripoi, where he was caed a CIA spb the then-tottering Gadda regime.Both those battegrounds inorm his

piece here, Return o the Activist.

c s t f e e l

The word’s putocrats don’t just haveto worr about those sur members o the 99 percent, sas Thomson ReutersDigita Editor Freeand. In The One Per-cent War , she surves the coming cass

war between the “haves” and the “haveots,” as miionaires everwhere shedtheir aegiance to the biionaire cass.

J S e

In Wikileaks’ 16th Minute, Reuters co-umnist and media critic Shaer takeson the task o expaining how Juian

Assange’s secrets cearinghouse wentrom eared to angesss, and wh themercuria Assange has ound himse

trapped in a reationship with the tradi-tiona media he proesses to despise.

d r e

There are man peope with opinionsabout the mora and miitar justica-

tions or drones, but ew have beenon the ground when one is buzzingoverhead. That’s the iuminating—

and chiing—perspective deivered bRohde in The Drone Wars, which drawson his stear reporting in Aghanistan,

incuding the seven months he washed captive b the Taiban.



FramingTHeglobaleconomy

TRIPLE-A BOMB A ade ud’ de s dsa Auus ase Faku Exae k a pue as akes wdwdeeaed Sadad & P’s dwade U.S. de.

g e r m a n y

Ph ot og ra ph by

Potoo

Ordinarily,business news isn’t much to look at.A behemoth hedge und implodes, sucking bil-

lions into the ether, but even the Oliver Stone ver-sion o that scene would eature colorless quantsin starched white shirts, pacing the trading ooror nervously staring at screens.

Last year, the money shot was dierent.Many images o the big fnancial stories o 2011

are horriying. Amid Greece’s spiraling crisis,a middle-aged man set himsel ablaze ater hisbank reused to renegotiate his home and busi-ness loans. On the northeastern coast o Japan,a 33-oot-high tsunami—a Mothra rom MotherNature—unleashed its ury on the world’s third-largest economy, disrupting the global industrialsupply chain.

In Libya, Arab Spring met petrodollars, as reb-els put a bullet in the orehead o the tyrant who’dbeen sitting on the world’s eighth-biggest oil re-serves. The blood and oil owed.

As i the eurozone crisis, popular uprisingsacross the Middle East, and Occupy Wall Streetand its oshoots weren’t enough, business alsohad its R-rated moments. A spot quiz on a park

bench in any major city might show that most ci-vilians don’t know what IMF stands or, but theysure know who DSK is.

The ollowing portolio, culled by Reuters’Alexia Singh and Russell Boyce, shows a world inturmoil, and with each image reminds us that—or good or bad—we live in extraordinary eco-nomic times.

The Top BusinessPictures o 2011



Ph ot og ra ph by n o s S t s

Ph ot og ra ph by m h S h b

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F r A m i n g t h E g l o b A l E c o n o m y

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ThE ELEphanTS in ThE Ski LodgE

The our issues that could ruin the view rom Davos

Nader Mousavizadeh isCEO o Oxord Analytica,theglobal analysisand advisory rm. Previously, hewasan investmentbanker atGoldman Sachs.

by N a d e r M o u s a v i z a d e h

I l l U S T R A T I O N B y k a g a N M C l e o d

the epic goba shits o 2011 trans-ormed the poitica, economic, and sociaandscape rom Shanghai to Sao Paoo,Washington to Cairo. No eader (not evenVadimir Putin) is sae rom the vagarieso socia unrest; no econom (not evenChina’s) is unaected b contagion rom

an over-everaged, under-managed eurozone. No countr (not even the UnitedStates) is immune rom the threat o asm-metric attacks—anthing rom a terroristbomb to cber-warare.

Voatiit wi be the rue, not the ex-ception in 2012. What I ca the emergingArchipeago Word o ragmenting power,capita, and ideas is inherent unstabe—as vunerabe to od conicts and newthreats as it is open to the dnamic entre-

preneurship o rising powers and corpora-tions remaking the map o the word.

A 20-ear period o one-word, one-wagobaization is being repaced b an era o competitive sovereignt. The was are goingback up. Deveoped and deveoping statesaike are vertica integrating poitica and

economic interests across pubic and privatesectors in a goba race or growth, empo-ment and securit. Having previous em-braced interdependence as the motivationor horizonta integration across marketsand regions, states as diverse as Canada,Finand, Saudi Arabia, Japan, Brazi, Turkeand the United Kingdom are now pursuingmore nationa strategies or economic andpoitica securit.

For investors, corporations, and govern-

ments doing diigence on their goba expo-sures, acknowedging this new reait is anessentia starting point. Forget stabiit andpredictabiit. Abandon the notion o gobasoutions to goba probems. Instead, de-veop deep, granuar understanding o thedistinct poitica and economic context o new markets. Seek cooperation and aianc-es o interest, beginning with the discreetinterests o these states and their econo-mies. Embrace compexit, and understandthat the successu management o poiticaand economic discontinuities wi be the es-sence o stabiit in the 21st centur.

Four themes are ike to dominate theenvironment in which goba investors,companies and institutions wi seek toimit the downside to risk and capture theupside to voatiit in 2012.

a gll reseta new strategic andscape wi take ormamid a goba reset marked b eadershipchange in China and nationa eectionsin the United States, Russia, and a ha-dozen other pivota powers. The sstemicbanking crisis in the euro zone wi orceBerin and the European Centra Bankto pick their poison—and either becomea sovereign ender o ast resort or seethe 27-member ECB’s dreams o scaunion evaporate. For the Midde East, thesecond ear o the Arab Awakening wibegin under a coud o increasing periand paranoia. The movement or moreegitimate and accountabe governmentsin the Arab word wi be tested b thesti-poweru orces o trann, corrup-tion, and undamentaism—a scenariothat wi urther draw in Israe, Iran andTurke as strategic arbiters o the region.For the goba econom, 2012 wi ikesee continued disarra, with the gap be-

tween the debtor and creditor nations o the word ike widening.

w e nle itheMiddle East, more than an other re-gion, gives vaidit to the od joke that even

paranoid schizophrenics have enemies.Add to the ver rea peris arising romdeep divergent interests o Arabs, Turks,Persians, and Israeis heightened paranoiaabout Iran’s nucear program. Gu coun-tries are as concerned about Iran’s med-ding in their interna aairs as the areabout its nucear ambitions. Combine thiswith Israe’s growing ear o Iran reachinga point o no return in its nucear weaponsprogram and the stage is set or a conron-tation—whether panned or accidenta—in 2012. Non-miitar options or hatingIran’s nucear weapons program have notet succeeded, nor have the aied. How-ever exasperating the dipomatic track maseem, growing tak o a miitar option riskscreating a ogic a its own.

ntls, pls, ptets

a fRagMenting map o the word pro-vides, in even the best o times, an openingor the orces o popuism and nationaism,and those movements are coaescing now

—rom China to the United States to SouthArica. Factor in the ccica deeveragingand austerit in the West, and it is on amatter o time beore isoationist poiticsgain traction.

The best antidote to this ies not in an-other vacuous appea to “goba aware-

ness,” but rather in setting out the caseor wh the nationa interest is best servedthrough a mosaic o regiona and gobaaiances. The countries and eaders nowgaining stature on the nationa stages—rom Turke to Brazi—are those thatunderstand that a sustainabe economicstrateg begins with deivering growth orthe citizens o their own nation rst. Thesee open markets and ree trade not asends in themseves, but as means to broad-

based prosperit; the are makto secure greater competitivevestment. Down this road iemore popuist, more continggobaization with beggar-tpoicies—a spira o currenc contros, and taris that couthe current contraction throuwordwide protectionism.

cett gll despite a dramatic increaseta and technoog devoted ense in the West, the threatsources o cber-war are mutWest reveed in the success oand other orms o cber-sabothe Iranian nucear program

soon have to ace the consequproieration o these technoernments, terrorists, and ehackers are increasing amabiit to aunch a cber-attaWestern government or mThe rea test o an eective c

wi not be “Can ou prevent awi be, “Can ou survive one

2012: Te wl tethebuRgeoning roe o thage o sovereign crises and sou

a dening eature o the strategThe ocus o poitica egitimturned to the nation-state, and and poitica power shits to emkets, no soution that isn’t botnationa wi be successu orA new kind o Great Game win 2012—winners wi be thoscorporations seeking successo the traditiona boundaries oideoog, interest, or aiances.

Potts

forgET STabiLiTy and prEdicTabiabandon ThE noTion of gLobaSoLuTionS To gLobaL probLEm




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P O R T R A I T I l l u S T R A T I O n : A n D y F R I E D M A n ; P H O T O G R A

P H : R E u T E R S / J u A n

M E D I n A

P H O T O G R A P H : R E u T E R S / M A n u E l S I l v E S T R I

Hugo Dixonisthe ounder and editor o ReutersBreakingviews. Beoreounding Breakingviewsin1999, Hugospent13yearsatthe Financial Times ,thelastveasHeadoLex.HewasnamedBusiness Journalistothe Year2000inthe BritishPressAwards.

by h u g o d i x o N

olitical convulsions in the euroone have on just begun. Six prime min-sters have been kicked out o oce, pro-esters have occupied pubic spaces, na-onaist parties have grown in popuarit,nd two countries have appointed tech-ocratic eaders. And that was just 2011.he coming ear is ike to prove even

ougher on the economic ront as the crisisontinues to rage, austerit bites, and un-mpoment mounts. Euro zone countriesre being orced to choose between scaiscipine or the disintegration o theirhared currenc. Under pressure rom

German, governments have agreed toign up or treat changes that wi require

hem to baance their budgets, pa downheir debts, and give the European Com-mission in Brusses more power to inter-ere with nationa budgets. Such oss o overeignt coud provoke a backash romhe peope—and boost the support o right-

wing euro-skeptic parties such as France’sNationa Front. It’s possibe that the treat

hanges ma not even get ratied.The euro zone coud start coming apart

t the seams, not just economica but

poitica. Popuist parties in northernEurope—such as the True Finns and Ho-and’s PVV—coud gain traction b arguingthat their citizens shoudn’t have to baiout the Greeks, the Itaians, and the Portu-guese. Meanwhie, prett much everbodcoud grow unhapp with the Germans ordictating how to run their countries. Anti-

oreigner sentiment coud rise across theboard. In a nightmare scenario, protection-ism woud return whie border checks andcapita contros woud be reimposed.

The conventiona view is that economiccrises are the breeding grounds o extrem-ists, particuar right-wing ones. Suchworries are egitimate, but the economicand poitica strains o the present do nothave to pa out ike a repeat o the 1930s.Everthing depends on the actions o po-itica eites and the genera popuation.

For poiticians, the most important cha-enge wi be to contain the crisis withoutgetting too ar ahead o what the peopeare prepared to toerate—both in terms o

not be quite as dramatic as 2011, when ha a dozen eaders, incuding Ita’s SivioBerusconi, Greece’s George Papandreou,and Spain’s José luis Rodríguez Zapatero,bit the dust. But we wi probab witnessthe biggest a et: that o France’s Nicho-as Sarkoz, who is ghting o a sti cha-enge rom François Hoande, the socia-

ist candidate. Some countries coud asosee big shits in the poitica andscapeas od parties coapse and new ones taketheir pace. This outcome is most ike inIta and Greece, where corrupt poiticaeites, known in each countr as “castes,”

have or decades ed o the state ratherthan serving the pubic interest. Disaec-tion with traditiona poitics in both coun-

tries is high. When Berusconi and Papan-dreou e, it was teing that the oppositionparties were not in a position to repacethem. Instead, both countries turned totechnocrats—Mario Monti, an economistand ormer European Commissioner, andlucas Papademos, ormer vice presidento the European Centra Bank.

The crisis has created an opportunit ora break with the pas t. In Ita, Berusconi’scenter-right PDl part coud easi a

apart. That might open the wager centrist group to emergeso-caed Terzo Poo (or Thi

b Pier Ferdinando Casini. Ta possibiit that the new techdeveop a taste and aptitudeand create a new centrist poitheir own. In Greece, both Pet-wing Pasok part and thNew Democrac part are besna rivaries. In each part, thetionaists, who tend to be eurowe as more centrist, p ro-Euernizers. In one scenario, the m

ThE moST imporTanT chaLLEngE wbE To conTain ThE criSiS wiTho

gETTing Too far ahEad of whaT pEopLE arE prEparEd To ToLEra

austerit and oss o sovereignt. The bestbet is probab or the southern countriesto emphasize structura reorms to boostong-term growth—such as pushing uppension ages, reeing up abor markets,and ghting corruption—rather than pass-ing et more short-term spending cuts andtax hikes that wi drive their economies

deeper into recession. For this strateg tobe possibe, the northern countries wihave to cut the southerners some sack,which woud require a signicant changeo mindset, especia rom Angea Merke,German’s chanceor.

Whatever is done on the poic ront,there wi be poitica upheavas. In somerespects—the deenestration o incum-bent prime ministers or presidents—thepoitics wi be “norma.” This ear ma

Riplic i vic ighihdmsrars durig a prsagais h

righig nrhr Lagu par

Righig dmsrars i Madridarig Falag uirms rmh Frac

ra gi a ascissalu

SpringTimE for EuropE?

A return to the 93s is not inevitable, provided leadersand the middle class don’t waste the crisis

eo Zo



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R E S E A R c H

B y c H R I S T I n E M u R R A y ; P H O T O G R A P H : R E u T E R S / O l I v I A

H A R R I S

n et and right coud break awa romheir current coeagues and join with eachther as we as some sma center parties

o create a new orce.But it won’t just be the poiticians who

etermine how the poitica andscapehanges. How the peope behave wi asoe critica. last ear saw the birth o a newhenomenon: the Indignados. Hundreds thousands o most oung, arge apo-tica nonvioent Spaniards occupied citenters in Madrid and Barceona. The

were objecting to austerit, greed bank-rs, and incompetent poiticians.

The Indignados were copied in Greece

nd in Ita, where the were caed theAganaktismenoi and the Indignati re-

pective. The were part inspired bhe mass raies in Egpt during the Arabpring, and the shared some ideas with

he Occup movements in the Unitedtates and Britain. But despite creating a

ot o noise, the Indignados have not co-esced into a poitica orce. That’s partecause the are diuse, and part be-ause the haven’t deveoped positive

programs. Their name gives it awa: theare indignant about what is happening buttend not to have constructive ideas aboutwhat can be done better. In some cases,moreover, their protests were aso hi-

jacked b vioent extremists. Such vioencewas most avoided in Spain, but in Ath-ens protesters threw Mootov cocktais atthe poice, and in Rome the Back Boc, ananarchist group, attacked banks, smashed

windows, and set cars on re. Athough theAganaktismenoi and the Indignati werenot responsibe, their cause suered.

The sight oder educated middecasses, meanwhie, were arge sient inthese southern countries. Sure, the wereindignant, too, but the didn’t take to thestreets in arge numbers. Instead, theumed in the privac o their homes. Thebamed their poiticians or mismanag-ing their economies and destroing their

weath, but the have been arge pas-sive. Admitted, there have been a ewattempts b this demographic to organizethemseves. In Mian, or exampe, citizenscampaigned via socia media or GiuianoPisapia, a non-traditiona poitician. Hewent on to deeat Berusconi’s candidate,letizia Moratti, in the maora race in Ma.And in Greece a group main composed o inteectuas set up an organization caedKoinonikos Sndesmos, a pro-Europeanpressure group campaigning or a newtpe o poitics to serve the nationa inter-est rather than vested interests.

What euro zone countries now need is

the engagement o their ibera-mindedmidde casses on a much wider scae.These groups need to sough o their nat-ura passivit and organize themseves asa counterweight to the potentia growth o extremism in the ears ahead. Howeverthe nancia side o the crisis pas out,the active invovement o constructivecitizens coud be an important eement instopping European poitics rom taking aver nast turn.

Plic arrsa occup Ld prsrh r Pa Hus, a buildig usd b h miig

cmpa Xsraa, i cral Ld


�o.

I l l u S T R A T I O n : A n D y F R I E D M A n

hELL no, i won’T go!

Even with Glock-packing security, an armadao private helicopters, and $,-a-night suites, t

is cheap. One man’s problem with Davos

i’ve neveR been to Davos, despite at-tempts b man over the ears to per-suade me to go. Don’t get me wrong. Iunderstand that it is a specia event orman peope, and or man reasons. It isanchored b wide-ranging and engaging

agendas, and participants get to mingewith a goba cornucopia o importantpeope. It is aso the pace to see and beseen or heads o state, poiticians, aca-demics, thought-eaders, media pundits,CEOs, and movie stars.

The annua meeting o the Word Eco-nomic Forum in that intimate setting re-mains one o the ear’s hottest tickets,but its organizers want their event to bemuch more than what it current is—abig, prestigious tak-shop. The want it toinuence poic at the nationa, regiona,and goba eves.

yet, over the ears, and in the contexto an increasing unsetted and uncertainword, Davos has not had much impact.

I get a range o responses when I ask at-tendees wh so ew, i an, o the interestingdiscussions that have taken pace in thosebeautiu Swiss Aps have ed to change thatimproves the ives o most peope.

Some sa the strength o the tpica Da-vos agenda is aso a weakness. The topicsare over ambitious. In tring to cover too

much or too man, breadth trumps depth.Others cite the inherent dicut o dis-

tiing the opinions o such a varied groupo peope into specic action points. Thisis never an eas e ndeavor, and it becomesa virtua impossibe one when it invovesso much weath and so man egos.

Then there are those who beieve thattoo much time is spent arguing about whathas happened—especia when thingshave gone horrib wrong—and too itte

Tv

Mohamed El-Erian isCEO and co-Cand author o“When Markets Collide

time is devoted to what ies around thenext corner, and the one ater that.

But most o the Davos devotees I tak tosa the probem is more undamenta. Thesa that man o the attendees who trumatter are not interested in the organiz-ers’ higher ambitions, and some are evensuspicious o them. In either case, these

ke paers do not want to give up controo their narratives, and the certain donot wish to deegate an meaningu part o their persona agenda to Davos.

It wi be dicut to overcome these ob-staces uness Davos organizers make ma-

jor changes. Specica, the need to dotwo things that no one who puts on suchevents has seemed wiing or abe to do.

First, the must revise how Davos’sagendas and discussions are structured.

To be more productive, moreneed to be much ess incusivemoments. Ver dicut (andcate) decisions have to be madto invove in certain meetingsexcude. This woud require

(and cose monitored) statparticipants, which coud onmented b changing the WorForum’s current roe o convetor into a much stronger one oductor/enorcer.

Second, ke participants coaborate—something that hpened. This ack o coaboratparticuar cost at a time whteeters on the brink o an econo

Shared interests must comeer sense o shared responsibii ocused nationa agendas mgreater periphera vision, and mances must be supported b creviews. The probabiit o theing done is sma, i not de min

I am not happ about thisgoba changes in pa todaenormous need or better cand understanding among thuence deveopments in crThis word has ost man o iand socio-poitica anchors,

are nding it impossibe to kdeveopments on the grountoo oten dispaces mutua trwh this prestigious gatheringue to a short o its vast poten

Even i nothing rea cogets done there, Davos wi rticket, but I wi not be going.

by M o h a M e d e l - e r i a N




�o.

22 �o.

reut ers Jan .2012

P O R T R A I T I l l u S T R A T I O n : A n D y F R I E D M A n ; P H O T O G R A P H S : ( G I n G R I c H ) R E u T E R S / A D A M H

u n G E R ; ( R O M n E y ) R E u T E R S / c H R I S k E A n E ; ( P E R R y ) R E u T E R S / J I M y

O u n G

Bethany McLean isa Reuters columnist,contributing editor at Vanity Fair , and co-author withJoe Nocera o “All the Devils are Here:The Hidden History othe Financial Crisis.”

by b e t h a N y M c l e a N

the Republican candidatesor president have some majordierences in their poicies andtheir persona ives. But thehave one striking thing in com-mon—the a sa the ederagovernment is responsibe orthe nancia crisis. Even NewtGingrich (pioried or havingbeen a Freddie Mac obbist)sas: “The x was put in b theedera government.”

The notion that the ederaovernment, via the Communit Reinvestment Act (CRA) and bushing housing nance giants Fannie Mae and Freddie Mac to meetordabe housing goas, was responsibe or the nancia crisis hasecome Repubican orthodox. This contention got a boost rom aecent awsu it the Securities and Exchange Commission (SEC) edgainst six ormer executives at Fannie and Freddie, incuding twoormer CEOs. “Toda’s announcement b the SEC proves what Iave been saing a aong—Fannie Mae and Freddie Mac paed a

eading roe in the 2008 nancia coapse that wreaked havoc onhe U.S. econom,” said Congressman Scott Garrett, the New Jerse

Repubican who is chairman o the nancia services subcommitteen capita markets and government-sponsored enterprises (GSEs).

But the SEC’s case doesn’t prove anthing o the sort, and in act,he theor that the GSEs are to bame or the crisis has been thor-ugh discredited, again and again. The roots o this canard ie in anpposition—one that estered over decades—to the growing power Fannie Mae, in particuar, and its smaer sibing, Freddie Mac.his stance was both right and brave, and was most taken b a ew

Repubicans and ree-market economists—athough even PresidentCinton’s Treasur Department took on Fannie and Freddie in theate 1990s. The unn thing, though, is that the compaint back then

wasn’t that Fannie and Freddie were mak-ing housing too aordabe. It was that theirgovernment-subsidized prots were accru-ing to private sharehoders (correct), thatthe had ar too much everage (correct),that the posed a risk to taxpaers (correct),and what the did to make housing aord-abe didn’t justi the massive benets thegot rom the government (aso correct!).Indeed, in a 2004 book that recommendedprivatizing Fannie and Freddie, one o itsauthors, Peter Waison, wrote, “Stud a-ter stud has shown that Fannie Mae andFreddie Mac, despite u-throated caimsabout triion-doar commitments and theike, have aied to ead the private marketin assisting the deveopment and nancingo aordabe housing.”

When the bubbe burst in the a o

2008, Repubicans immediate pinnedthe bame on Fannie and Freddie. JohnMcCain, then running or president, caedthe companies “the match that started th isorest re.” This narrative picked up mo-mentum when Waison joined orces withEd Pinto, Fannie’s chie credit ocer un-ti the ate 1980s. According to Pinto’s re-search, at the time the market cratered, 27miion oans—ha o a U.S. mortgages—were subprime. O these, Pinto cacuatedthat over 70 percent were touched b Fan-nie and Freddie—which took on that risk inorder to satis their government-imposedaordabe housing goas—or b some oth-er government agenc, or had been madeb a arge bank that was subject to theCRA. “Thus it is cear where the demandor these decient mortgages came rom,”Waison wrote in a recent op-ed in TheWall Street Journal , which has enthusiasti-ca pushed this point o view in its edito-ria section since the crisis erupted.

But Pinto’s numbers don’t hod up.The Financia Crisis Inquir Commission

(FCIC)—Waison was one o its 10 commis-sioners—met with Pinto and anazed hisnumbers, and concuded that whie Fannieand Freddie paed a roe in the crisis andwere deep probematic institutions, the“were not a primar cause.” (Waison is-sued a dissent.) The FCIC argued that Pinto

overstated the number o risk oans, and asDavid Min, the associate director or nan-cia markets poic at the Center or Ameri-can Progress, has noted, Pinto’s number isar bigger than that o others—the nonpar-tisan Government Accountabiit Oce es-timated that rom 2000 to 2007, there wereon 14.5 miion tota nonprime oans origi-nated; b the end o 2009, there were just4.59 miion such oans outstanding.

The disparit stems rom the act thatPinto denes risk oans ar more broadthan most experts do. Min points out thatthe deinquenc rates on what Pinto cassubprime are actua coser to prime oansthan to rea subprime oans. For instance,Pinto assumes that a oans made to peopewith credit scores beow 660 were risk.But Fannie- and Freddie-backed oans in

this categor perormed ar better than theoans securitized b Wa Street. Data com-pied b the FCIC or a subset o borrowerswith scores beow 660 shows that b theend o 2008, 6.2 percent o those GSE mort-gages were serious deinquent, versus 28.3

percent o non-GSE securitized mortgages.To recap: I private-sector oans per-

ormed ar worse than oans touched bthe government, how coud the GSEs haveed the race to the bottom?

Another probematic aspect to Pinto’s re-search is that he assumes the GSEs guaran-

teed risk oans soe to satis aordabehousing goas. But man o the guaranteedoans didn’t quai or aordabe housingcredits. The GSEs did a this business be-cause the were osing market share to WaStreet—their share went rom 57 percent in2003 to 37 percent b 2006. As the housingbubbe grew arger, the wanted to recap-ture their share and boost their prots.

Indeed, the SEC awsuit specica sasFannie and Freddie began to do more risk

business not to meet their goato recapture market share—agan to do so aggressive in the market was aread peakithe GSEs paed a huge roe inbubbe bigger than it otherwisbeen—and the numbers in thpaint are huge—the ooweded, the private market.

It’s aso ver hard to ook pened in the crisis and concuing went wrong in the privatethat the other Repubican meFCIC reused to sign on to Wsent. Instead, the issued thsent. “Singe-source expanasaid, were “too simpistic.”

yet despite a that, the one-ncan rerain hasn’t changed. The

is obvious: The “governmentpos we with conservatives. Mto counter the equa simpistthe et—that the crisis was entio greed, unscrupuous bankget a strong resistance to the

there’s a deeper reason, too. Fie in the a-knowing marketamost a reigion. This nanciaenged that aith b showingwoud indeed aow oans to bcoud never be paid back, andthat high paid nancia ser

tives aren’t gods, and that manstupid and vena and a too hu

So mabe the Repubican ounderstandabe, but that doeisn’t scar. O course, there’s trom Edmund Burke: “Thoseknow histor are destined to rehousing market is a mess thatdrag down the entire economer is president in 2013 needs toDening the acts is not a good

Pots

All h Rpublica cadidas rprsid, icludig Gigrich (p),MiRm (middl), ad Ric Prr , blam h iacial crisis

h aggrssi ldig plicis Fai Ma ad Frddi Mac, dspirhlmig idc hah sr is much mr cmplicad ha ha.

ThE “govErnmEnT SuckS” ranT powELL. mix in an urgE To counTEr

SimpLiSTic STory from ThE LEfT angET a STrong rESiSTancE To fac

faiTh-baSEdEconomic ThEory

America’s Republicanpresidential candidates

all agree on the root causeo the fnancial crisis, and

they are all wrong




�o.

24 �o.

reut ers Jan .2012

theSWeLLING

mIddLe

I N F O G R A P H I C S B y M a r y a N

ioph

FOrthe rst time in histor, a tru goba midde cass is emerging. B 2030, it wimore than doube in size, rom 2 biion toda to 4.9 biion. Brookings Institution scho-ar Homi Kharas estimates that the European and American midde casses wi shrinkrom 50 percent o the tota to just 22 percent. Rapid growth in China, India, Indonesia,Vietnam, Thaiand, and Maasia wi cause Asia’s share o the new midde to more thandoube rom its current 30%. B 2030, Asia wi hos t 64% o the goba midde cass andaccount or over 40% o goba midde-cass consumption. —David Rohde

20308,011,521,525PeoPLe

toP357,936,395

MIDDLe4,871,161,044

BottoM2,782,424,086

19653,267,422,420

PeoPLe

toP5,558,825

MIDDLe736,853,742

BottoM2,525,009,853

20126,820,730,223 PeoPLe

toP

The ras o the ord’seath i otie toget bigger as the emergigmaret atios reate more

miioaires. The mbero eath idividas igro rom 130 miio todato 360 miio i 2030,aordig to kharas. Theirperetage o the popa-tio i gro as e, jmp-ig rom 2% to 4%.

MIDDLe

The biggest srge i emembers o the middeass over the et 20 earsi ome rom hdreds

o miios o chiese adIdias—the peretage opeope i Idia ad chiabeo the midde i dropb 70 peret b 2030.

BottoM

The peretage o poorpeope i the ord hasbee o the rise ordeades, bt it i start

to shri as miios ochiese ad Idia itizesrise ot o povert. Thei irease the demador atra resores romAria, sprrig eoomigroth i Ethiopia, kea,Tazaia ad Ghaa.

Word Popuation b Income leve

Word Midde Cass Percentage b Region

Note: Inthe 2012and 2030 maps,some ormerSoviet republicsarerepresented intheMiddleEast and North Arica region. S O U R C E : d r . h o M i k h a r a s , The Brookings

196524%u.S.

6%u.k.

9%GERMAny

10%u.S.S.R

8%JAPAn B

28%nORTH

AMERIcA

1%SuB-

SAHARAnAFRIcA

4%cEnTRAl

AnD SOuTHAMERIcA

1%MIDDlE

EAST AnDnORTHAFRIcA

11%ASIA

PAcIFIc

56%EuROPE

201216%

nORTHAMERIcA

2%SuB-

SAHARAnAFRIcA

10%cEnTRAl

AnD SOuTHAMERIcA

6%MIDDlE

EAST AnDnORTHAFRIcA

34%ASIA

PAcIFIc

33%EuROPE

11%u.S.

3%u.k.

4%GERMAny

5%RuSSIA

5%InDIA

6%JAPAn

12%cHInA

20307%

nORTHAMERIcA

2%SuB-

SAHARAnAFRIcA

7%cEnTRAl

AnD SOuTHAMERIcA

5%MIDDlE

EAST AnDnORTHAFRIcA

64%ASIA

PAcIFIc

15%EuROPE

4%u.S.

1%u.k.

1%GERMAny

3%RuSSIA

29%InDIA

2%JAPAn

20%cHInA

Op: Annualper capita expenditureover US$36,500in 2005 pricesMiddle: Annualper capita expenditurebetween US$3,650and US$36,500

OttOM: Annualper capita expenditurebelow US$3,650



W Ah t ‘S

G IO N G

R GI h t

by Alan W heatley

P H O T O G R A P H B y r e u t e r s

eoos

Searching

for SignS

of life

in the

global

economy

G Sworkers

compleIndian city o



28 �o.


�o.

P H O T O G R A P H S : ( T O P ) R E u T E R S / J A S O n

l E E ; ( B O T T O M ) R E u T E R S / c H I n A

D A I l y

With the BritiSh eCOnOMyat on its back, the Jaguar land Rover (JlR) actor in Birmingham, the sec-nd argest cit in Engand, is doing something unusua: hiring. The compan

s doing we. With exports to China and other big emerging economies risingtrong, Britain’s argest automotive manuacturer recent said it woud hirenother thousand workers and buid a new engine pant, creating a urther50 t jobs.

The Jaguar pant, whichmanuactured Spitre ghter

ircrat and lancaster bomb-rs during Word War II, is anmagam o state-o-the-art ro-ots and od-ashioned crats-

men intent on their work. Eec-ric carts aden with parts buzzcross the actor oor, passingeneath big screens that ash

he number o cars competedhat shit. It takes 48 hours torocess the top-o-the-ine XJ

mode. As sedans ro o thessemb ine, each customer’specications are given a naheck, and the cars are drivenwa to be shipped everwhererom Austraia and Azerbaijano the United States and China.he compan, bought b India’sata Motors rom Ford Motor in008, exports 75 percent o itsutput. Britain and the Unitedtates remain JlR’s biggest mar-ets, but China has sped into the

hird spot and now accounts or4 percent o the compan’saes, which reached 232,704 ve-ices ast ear.

That the uxur tastes o new

ch Chinese are generating em-oment in the birthpace o the industria revoution is a poweru expression Asia’s rising cout and a reminder that the West’s protracted debt crisis has notucked a ie out o the goba econom. JlR’s saes to China have risen b morehan 750 percent in the past ve ears. “Near everbod’s cutting back because the recession, but China is sti an expanding market,” said Jim Kearns, an ex-erienced assemb-ine worker at JlR’s Caste Bromwich pant in Birmingham.The’ve got their heads screwed on over there.”

Europe’s debt maaise is prompting tak o a ost decade or the econom, ikeapan in the 1990s. In the United States, deadocked debt reduction taks, highnempoment, and ong-stagnant incomes are sapping condence. But man

ess afuent countries, though not immune to the West’s woes, have dispaed re-

markabe resiience. Whie advanced economies areike to expand just 1.6 percent this ear, emergingand deveoping countries shoud notch up growth o 6.4 percent, according to the Internationa MonetarFund. For the past ve ears, deveoping countrieshave contributed as much as 65 percent o wordgrowth and 70 percent o the growth in goba im-ports, the Word Bank estimates. Nor is this growthpure a unction o na demand in the West. South-South trade—or instance between China and Indiaor Brazi and Arica—now makes up 45 percent o de-veoping countr imports, up rom about 23 percentin the ear 1990s.

the BriC COuntrieS are inthe vanguard o this reorderingo the word econom. Brazi,Russia, India, and China ac-counted or just 8.5 percent o goba GDP at market exchangerates in the period between

2000 and 2004, according tothe IMF. Between 2005 and2009 that share rose to 13.1 per-cent, and b 2015 it wi haveovertaken that o the euro zoneto reach 20.7 percent, just sho the United States at 21.1 per-cent. “We’re in the ear daso the rise o the BRICs,” saidJim O’Nei, the Godman Sachseconomist who coined the con-cept a decade ago. Trade tesa simiar stor. Over the pasttwo decades, the share o wordexports among the BRIC coun-tries has near triped, whietheir share o goba importshas near doubed. At the sametime, the gu in productivitbetween industria and deve-oping economies—what econ-omists ca the “convergencegap”—remains ver arge. Hun-dreds o miions o peope havebeen ited out o dire povert

thanks to the 10 percent annuagrowth China has enjoed since the ate 1970s, butan estimated 300 miion Chinese sti do not haveaccess to cean water. Measured at purchasing pow-er parit, annua income per head in China is just16 percent o that in the United States. In India, thegure is just 7 percent. It’s this catch-up potentiathat has businesses saivating.

“I’m sti optimistic. We wi continue to see h-per growth in these markets,” said yang yuanqing,the chairman o lenovo, the word’s number twopersona computer maker. In China, or exampe,

man peope in the biggest cities a-read own a computer, yang said, butthe penetration rate in smaer citiesand townships remains ver ow. Hiscondence is broad shared b theman in the street in China even i there is resentment towards ociassuspected o having acquired theirweath through connections or cor-ruption. Zhu lijun, a postgraduatestudent in Beijing, said he was satis-ed with his standard o iving. “Asa coege student, I ee optimisticabout m uture,” Zhu said. “Whatmatters is not whether other peopeget weath aster than me, but thewa the get weath.”

Economic growth in China is sow-ing but incomes are sti rising ast; t hegovernment is committed to boost-ing househod consumption’s share

o the econom so that growth reiesess on investment and exports. HSBCreckons 40 percent o China’s urbanhousehods now a into the midde-cass categor, with annua incomeo 60,000 uan to 500,000 uan($9,450 to $78,600). Five ears agothe proportion was just 10 percent. “This group has both the capacit and thedesire to bu branded products and more expensive consumer durabes as weas spend mone on trave and cuture,” said HSBC’s chie China economist, QuHongbin. That’s good news not on or Jaguar land Rover, lenovo, and thethousands o other companies current ogging their wares in China, it asobodes we or other companies, and entire countries, that woud ike to eedChina’s voracious demand or components, energ, and mineras.

Austraia owes much o its ong economic expansion to sound poic-making,but credit is due as we to China’s hunger or iron ore, coa, and other naturaresources. China accounted or 27 percent o Austraia’s exports in the rst ninemonths o 2011, up rom just 5 percent in 2000. Because the price o natura re-sources has soared whie the cost o manuactured goods has aen, a shipoado iron ore rom Austraia in 2010 coud bu about 22,000 at-screen teevisionsets, 10 times more than just ve ears earier.

The commodit boom is aso heping Arica. Excuding countries with ew-er than 10 miion peope, six o the 10 astest growing economies in the wordbetween 2001 and 2010 were in Arica. Between 2010 and 2015, seven o thetop 10 countries, the IMF reckons, wi be Arican. One o them wi be Zambia,

the continent’s argest producer o copper. The $13 biion econom has grownat more than six percent annua over the ast ve ears, and the benets aresow starting to tricke down. Kemm Chaande, a reserved, sot-spoken man inhis orties, has received a 3.2 biion kwacha ($625,000) government oan to ex-pand his roong sheet pant in Kabwe, about 140 kiometers north o the capita,lusaka. With the government panning to spend more on construction in 2012,Chaande is eeing a bigger market and h opes gradua to increase his workorceto 150 rom 28 toda. “The uture ooks ver bright,” he said. “It is companies ikethis one which empo peope, and i we can be supported then even p overt ev-es wi come down.” Foreign direct investment, especia rom China, has asobeen a poweru driver o Arica’s growth, contributing an additiona one ha o a percentage point or more to GDP growth, according to Aaron Weisbrod and

John Whae o the Universit o WestIn the case o Zambia, which drew minvestment reative to the size o its ecan other countr the researchers studigrowth came to 1.9 percentage points 2003 to 2009.

Research b IMF economists corronotion that the BRICs are acting as a opoorer nations such as Zambia. Issou yongzheng yang estimate that a 1 percincrease in BRIC demand and producta cumuative 0.7 percentage point incrincome countries’ output over three ehas transated, the argue, into a surnomic resiience in the ace o the woror deveoped nations since Word War

Not everone in Zambia is prosperin“It’s just hand to mouth,” said Gertrudeear od mother o ve who ses vegetstreets o lusaka. “I’ve been seing on tthe past 10 ears and I am sti here the

ed.” What is enthusing Arica optimis that governance is genera improvnumber o conicts has aen and p owing changing hands peaceu throubox, as it did in Zambia in Septembernew government has introduced pro-psuch as the decision to reduce taxes oo workers, a ot o peope shoud eeo Zambia’s positive economic growth,Maibata, a rura deveopment worker.

The picture is rough the same in Pmodit boom ueed b demand rom the oundations or a surge in domesttion. Per capita income more than do$2,000 in 2000 to $5,000 in 2010 anreach $6,700 in 2015, the IMF sas. Pea ong wa rom the hper-ination ao etist Shining Path insurgents that1990s. “There are job opportunitieabove a, there is stabiit,” said Maa t ear od nurse outside a middeping ma in lima, the capita. “I know opportunities or m chidren and granMan poor Peruvi-ans who propeeormer arm ocer Oanta Humaa

eections ast June are sti waiting otricke down rom the construction, shrea estate bonanza under wa in limmism prevais. “It’s an incredibe t urn10 ears ago, and ots o Peruvians a re home,” said Javier Ugarte, a restauranwas visiting his native lima rom San American dream actua seems to be Peru now.”

thiS rOSy piCture o demand romother emerging powerhouses extendin

“what

matterS

iS not

whether

other

people get

wealthy

faSter

than me,

but the

way they get

wealthy”

i’s rgCs Jaguars outside a dealer in Bejing ( top);the interior o a texile mill in China’s eastern Anhui province (below)



30 �o.


�o.

gobe invites an obvioHow ong can these coundemand ast? Maria Pivice chair o strategic gkets at consutants Ernexpects that the gocass—peope with daiincomes between $10expressed at purchasingit—wi expand rom biion now to ve biiAnnua spending in theap to $56 triion roion, oering juic oppmutinationa companioutrace ast-moving otheir home tur. “Speewi be absoute essenpeope in those countrietrepreneuria to et an pass. The’ gure it ou

mutinationas do,” shea undamenta change.”

Not everone is so optRodrik, a proessor o poitica econom at Hversit, is skeptica o that deveoping countrie

tain ver high growth rates as the catcWest. Widespread convergence is a reaphenomenon, he argues. “It woud be niments simp had to stabiize, iberaizeand markets woud do the rest,” Rodripaper. “Aas, that is not how sustained was achieved in the past.” Continued rsion wi require the kind o poicies theconomies harnessed on the wa to besuch as keeping currencies undervauing the nancia sector, and avoring dustries—in short, the Chinese recipe Western backash against the Beijing moperhaps b austerit atigue, is a rea rithough, peope inside and outside Chinthe most o the countr’s economic rise

“In China there are pent o oppoeverone to increase their standard o

David Zhang, who was born into a ai and is now chie nancia ocer oisted in Hong Kong. “The Chinese wand uxuries the haven’t dared to dreacenturies,” said Zhang, who owns two B

Back in Birmingham, taxi driver Motias said the news that JlR’s prots werrm was taking on more workers hadon his ace. “When I heard that, it madine ee happ. It was good news oIktias said. “It didn’t bring a tear to mwas cose.”

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aabo (Clockwise romtop let) Subwaycommuters indowntown SãoPaulo; a subwaytunnel underconstructionbetween the

Jangpura andLajpat Nagarstations in NewDelhi; modelspose next toa Russian LadaNiva vehicle inSt. Petersburg;customersentering the newApple Store atPudong Lujiazuiin Shanghai



33 �o.

reut ers Jan .2012

Th

in juSt Five yearS , Twitterrom a 140-character punchuniversa, a-purpose newand open to amost anonewith the puse o the panet It’s where Newt Gingrich his presidentia run, Prince nounced his engagement, ankiing o Osama bin laden wb the time President Obamait on teevision. I ou’re watcing part in a poitica proteTahrir Square or downtown M

Twitter is where ou have tthan CNN, more credibe thaand unique abe to invite oow the news and report it

Twitter is, o course, mucha headine news wire. For 100 miion users around theprimari a source o diversiosiona amusement. Nor is it

TwEET rEvEngE Clbras gahr i tah rsigai Mubara, h had riArab Sprig prss b shuig d

revolutionthe hashtag

GROW mORe INteRtWINed, AS POLItIcS ANd tWItteR theRe’S A LOt RIdING

ON A buSINeSS mOdeLthAt IS yet tO be dIScOveRed

by Jonathan Weber



has something to sa. Twitter doesn’t report the news; rather,peope report or retransmit the news on it.

As the reach o Twitter and the other Internet media compa-nies extends across the gobe, though, it’s becoming apparentthat the are not just enabers o communication, the are pub -ishers, wresting with cassic pubishing probems. The makedecisions about what tpes o words and pictures are suitabe,the determine how to respond to woud-be government cen-sors, the strugge with how to organize inormation in a useuashion, and the even worr about how to hande advertisingin a wa that doesn’t aienate customers.

Whie Googe seems a bit New York Times-ian (smart, thor-ough, reiabe, and a itte arrogant) and Facebook tends toward

People magazine or USA Toda (something or everone, ceanand generic, more concerned with the soter side o ie), Twit-ter is their taboid cousin: oud and reewheeing, ight on rues,heav on sensationa hard news, encouraging risk and experi-mentation.

In spite o that—or perhaps because o it—Twitter has becomeone o the most important news purveors o the 21st centur.

the deCeMBer Twitter messages rom the Bahraini activist@Nezrad, transated b the website Goba Voices, are painu toread: “because o some words I wrote on Twitter, I was arrested,shacked, bindoded, and interrogated or ve hours. I suered aot rom being shacked, rom thirst, insuts and standing withoutgetting to sit down.” In a series o 20 messages, he tweeted detais o his imprisonment and the mistreatment o his eow prisoners.

In Bahrain, as in man other countries, ou tweet at our ownrisk—and hope that i the government wants our name so that itcan kick down our door, Twitter wi protect our identit andmake sure our words get out to the word uncensored. Just as tra-ditiona Western journaism organizations deend their reportersand ght restrictions on press reedom, so Twitter nds itse onthe ront ines o a goba batte over ree speech on the Internet.

B positioning themseves as open patorms and, at east in theUnited States, not responsibe or what peope post on their ser-vices, Internet media companies have tried to avoid man o theknott issues od-media editors and their awers dea with ever

da. Is a given message or picture protected ree speit a into a categor—deamation, or exampe, or cringement, or shouting re in a crowded theater—thconstitutiona protection, or vioates another countr

yet socia media services are ar rom being unrerums or ree speech. Most ban man tpes o expresega protected in the United States—pornograph,and various orms o advertising, or exampe—and serve the right to bock or deete a user’s account.

These companies do, however, have ver dieror how the hande dierent tpes o inormationrequires rea names on its accounts, prohibits haterassment, and pornograph, and oten works with gthat want to bock inormation that’s iega oca. Inexampe, it’s against the aw to insut Ataturk, the ocountr. Thereore, on Facebook in Turke, ou wiinsuts o Ataturk. The compan empos hundreds review terms o service vioations, ed compaints, remove inormation deemed objectionabe.

Twitter takes a more hands-o approach. Aex Mac

reator o a new kind o goba eectronic conversation: Googend Facebook, Tumbr and Wordpress, and much o the rest o he goba communications industr are among those reinventinghe wa the word communicates about its dai intrigues, be therosaic or horric.

But i the basic purpose (or “use case,” as techies ike to sa)or Facebook is sharing a picture o our kid or “riending” theute gir in our chemistr cass, the use case or Twitter is to gethe word out: I have a new job! The police are pepper-s praing us!

The big rall is happening downtown at 10:00! Beoncé is pregnant!teve Jobs is dead!

And ou don’t even need a computer; just about an ce phonewi do.

like man Internet media companies, Twitter positions itse s a patorm—a utiit-ike entit that provides a set o toos oreope to use as the see t.

Unike Time Warner or The New York Times or Reuters, Twit-er is not a “content creator,” to use the vernacuar. Rather its a proud democratizer o content creation, neutra as to theubstance o digita bits o inormation but open to anone who

IN mANy cOuNtRIeS,yOu tWeet At yOuR OWN RISk—

ANd hOPe thAt If the GOveRNmeNtWANtS yOuR NAme SO thAt

It cAN kIck dOWN yOuR dOOR,tWItteR WILL PROtect yOuR IdeNtIty.

ONe executIve RecALLS heARING fReNchPReSIdeNt NIcOLAS SARkOzy

INSISt thAt ONLINe cONveRSAtIONShAd tO be ReINed IN. “he WAS mAINLy

cONceRNed WIth GOSSIPAbOut hIS WIfe.”

a TEST of 140-characTErS

Prss arud h glb, icludig rcs i Russia (l)adegp, r uld b s.



37 �o.

reut ers Jan .2012

requirements o dierent countries, Twitter seems to understandthat i ou’re not wiing to pubish with out ear or avor, ou’re notgoing to be much o a news service.

preServinG itS abiit to do what it does—aow anone, an-where, to sa just about anthing to everone—is one part o Twit-ter’s news chaenge. The other part, probab more dicut butdecided ess gamorous, has to do with categorization, naviga-tion, and the reiabiit o inormation on the service.

In the od das o media—up ti 10 ears ago, sa—anonebuiding a genera-interest news service spent a ot o time divid-ing the word into categories. Poitics, business, sports, ieste,and entertainment woud be tpica categories, and within thosecategories there woud be subcategories. Interested in news aboutthe San Francisco 49ers? Cick on sports, then cick on ootba,then cick on pro ootba, and then nd the 49ers.

Twitter, though, has no such hierarch or organizing topics, andis on in the eariest stages o creating one. Itsriver o inormation is structured not around

topics but around peope: ou see news postedb peope ou “oow,” and send our news topeope who oow ou. Big news gets passedaround—or retweeted—incredib quick, soi ou are active on Twitter, it won’t be ongbeore someone ou oow tweets about thedeath o bin laden. The act that ou mightsee dozens o tweets about that can be inor-mation in itse, what Costoo cas “the roar o the crowd.”

But the shortcomings o this structure areobvious, and oten maddening. Most o thetime, ou’re interested in some o the things anindividua or organization is tweeting, but nota o them. Aso, it can be hard to te what theprovenance o a bit o news is, and thus hard to

judge its reiabiit—context is amost awasabsent, since a tweet is so brie. Nor is therea good wa to access news our network doesnot happen to be tweeting about, or to deve deeper into a topic.

Twitter users took a stab at soving this probem with thehashtag, or # sign. I ou mark our tweet with a # and a topic, an-one can nd it—and others on the same topic—b searching orthat hashtag. It’s sti a crude sstem, though. Search #moscow,and ou’ get activists taking about demonstrations and news or-

ganizations taking about demonstration poitics—as we as hep-wanted ads, weather reports, and bad jokes. Twitter’s search unc-tion is improving, but i ou want on the atest substantive andauthoritative updates on the poitica situation in Moscow, thereisn’t an eas wa to nd them.

Numerous companies hope to have a hand in making Twitter’smiions o dai messages more useu—think o the third-part“apps” on Facebook or the iPhone—but Twitter is determined toaddress the core navigation and categor issues itse. A recent re-design has made it much easier to get started, presenting a moreFacebook-ike home page and suggesting subjects ou might beinterested in. This atter concept coud utimate hod the ke to

the service’s utiit—behind-the-scenes math wizarticipates, based on a range o actors, what s orts o thvidua might nd most reevant.

Instead o the od news structure o categories andries, Twitter might have user-driven search and custotime sorting o the inormation stream. For exampeI’m interested in Caiornia poitics. Based on m bnetwork connections, Twitter divines what sorts o thto Caiornia poitics I might nd most reevant.

Is a tweet a piece o news, a comment, an endorsemto action? Eventua Twitter wi know, and attempt cording. In principe, it shoud be abe to take its re hand ter it into a customizabe, coherent news servicethat news wi be ive reports rom “citizen” journaists.reports wi come rom traditiona news organizationtimes the wi come direct rom the news subjects th

Peope who don’t give a g about poitics but ove mbe abe to have their own movie wire. The same wians o sports, music, or ood. like a great newspa

Twitter might aso show the sven the occasiona crime sto

ight the poitica event so bione shoud know about it. Thwant to hear the roar o the gcoud isten to that too.

the teChniCal chaenges are daunting, and unti recentn coud bare keep its core sing reiab, et aone sove giascience probems. Twitter’s chaenges are massive too. It icompan, and sas it has no intcoming one soon, but with a prvauation o $8 biion, it’s unto show that it can make monincude Saudi prince A-Waewho bought a $300 miion sta

sian internet mogu yuri Miner, who put in $400 miioing is the obvious soution, but too man ads coud be ausers. As Twitter ooks harder at the bottom ine, it wior the compan to avoid troubesome poitica activison, sa, the man ad-riend TV stars and sports cehave become big users o the service.

Fortunate or Twitter, soving the reevance probsove the advertising probem. As Internet media guruwrote recent: “I Twitter can assign a rank, a bit o conin the word’ or ever tweet as it reates to ever other ter account on Twitter, we, it can do the same or eververtiser on the panet, as the reate to those tweets, thoand whatever messaging the advertiser might have to o

And ortunate or the word, soving the reevancoud aso reinorce Twitter’s commitment to deiveVirtua ever stud o what peope are ooking or onet puts news at the top o the ist . And nobod is betteto seize that opportunit than Twitter.

ompan’s genera counse, decared ast ear that the compan wasrom the ree speech wing o the ree speech part,” a stance thatas been armed b the compan’s CEO, Dick Costoo. Rea namesre not required on Twitter, and even hate speech and pornographre not banned outright. (A U.S. judge rued recent that a stream o ateu and threatening anonmous tweets did not constitute iegaber-staking.) Part because tweets are so brie (it’s hard to vioatecopright in 140 characters) and part because the compan is so

oung and reative sma (no empoees on the ground in countrieswhere the coud get arrested), Twitter is sti abe to it over an inter-

ationa media andscape mined with onerous restrictions on eec-ronic communication.

That’s one reason Twitter has paed such a prominent roe as anrganizing too and source o inormation in recent poitica protestsround the word. Repressive governments, caught o-guard b aree-orm news channe the can’t contro, have been reduced to us-ng bunt orce. Egpt shut down its Internet amost entire at theeight o the Arab Spring protests (and Twitter, working with Googe,esponded b creating a sstem in which peope coud phone-inweets). China has its “great rewa,” which bocks Facebook, Twit-er, and Googe, among others. In December, Russian agents appar-

nt ooded Twitter with “junk tweets” to drown out news and in-erere with onine organizing during that countr’s recent protests.

Industr ocias (and their awers) sa democratic governmentsan be as big a threat to onine press reedom as iron-goved dicta-ors. One executive recas hearing French President Nicoas Sarkoznsist that onine conversations had to be reined in. “He was mainoncerned with gossip about his wie,” said the ocia, who decinedo be identied due to the sensitive nature o the issue.

In India, which prides itse on its democratic was, the govern-ment summoned Internet executives in December and demandedhe impement a censorship regime (the decined). The U.K. gov-rnment toed with shutting Twitter down during the london riots

ast ear, though a recent anasis b the Guardian newspaper showedhat other users quick corrected inammator tweets during thatumut, and the service was an important channe or sharing saetnd cean-up inormation.

The ug truth is that no government—even that o the Unitedtates—ikes a ree speech ree-or-a. Federa prosecutors requenteek court orders demanding inormation on socia media users, or in-st that a specic bit o content be removed rom the services. In man

ases these court orders are secret, and the companies quiet turn overhe inormation. Otentimes, prosecutors are ocused on cber-crimesuch as credit card thet, movie pirac or chid pornograph, but in theost-9/11 era, the increasing dea with poitics and nationa securit.

Twitter, to the deight o ree speech advocates, shed a bright ight

n these secret court orders ast ear when the government came hunt-ng or inormation on peope associated with Wikileaks. Twitter gotourt permission to inorm the subjects o the request and thus aowhem to mount their own ega chaenges. (The itigation is ongoing.)This is a ver important exampe o wiingness to stand up to pow-ru interests when man others were wiing to do the government’sidding” said David Ardia, a aw proessor at the Universit o North

Caroina and a ormer attorne at the Washington Post. “That was a cou-ageous stance.”

Deending ree speech on a goba service subject to the aws o everountr in which peope use it is a daunting task. But even as it exporesew was o customizing and possib tering the service to meet the

@the ARAb SPRINGReuteRS SOcIAL medIA edItOR

ANthONy de ROSA fLAGS SemINAL tWeetSfROm the mIddLe eASt uPRISINGS:

Tunisian street vendor turned protester turnedsel-immolator Mohamed Bouazizi dies@elt Mona Etahawy

Fami o Mohamed Boazizi, 26, o#Sidibozid sa he died o Tesda ight.His se-immoatio ispired poparprisig i #Tisia.January 5th, 2011

Zine El Abidine Ben Ali resigns Tunisian Presidenc@j Jonathan Rugman

Be Ai is goe. A etraordiar vitor orpeope poer i the Arab ord.January 14, 2011

Complete Internet blackout in Egypt@htpst Hufngton Post

ne aasis: #Egpt’s Iteret baot

“preedeted i Iteret histor” http://h.to/gxGjQJanuary 27, 2011

President Ali Abdullah Saleh declareshe’s staing, securit orces open fre on protesters in Yemen@SltalQsse Sutan A Qassem

Ai Abdaah Saeh oses it. | A Jazeera: 750peope ijred ater gire shots & teargasas sed agaist protesters i Taiz, #yeme.Apr 3rd, 2011

Egypt’s “Da o Rage”@j Jonathan Rugman

Somethig haged toda. This beame a bo prisig agaist Mbara re ttigaross soia divides #cairo #Egpt #ja25January 28, 2011

Pearl Roundabout in Manama, Bahraindestroed b government orces@tl Martn Chuov

The hb o #Bahrai’s prisig has bee de-stroed. Pear Rodabot o a mess o soi& debri. Fags, tets—& mabe ega—goe.March 18, 2011

Egyptian President Hosni Mubarak steps down@retes Reuters Top News

FlASH: Egpt’s Presidet Mbara to traser

poer as arm hie to miitar—cnnFebruary 10, 2011

Col. Muammar Gaddaf killed@retes Reuters Top News FlASH: liba’s Gaddai dies o odssered i aptre ear Sirte—seior nTcmiitar ofiiaOctober 20, 2011

To see an archive o Reuters’ real-time Arab Spring tweets, visit: reuters.com/ArabSpringTimeline

ThE TwEET hErEafTEr Csl isiss hatirb a ardddr r spch,

ad is rsisig Big Brhrs all rh rld.

36 �o.

reut ers Jan .2012



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P H O T O G R A P H S : R E u T E R S / S k I P P E T E R S O n ; k .

P E R v E Z

been no strikes in Pakistan or six weeks, the on-gest pause since 2008, and a garing exampe o theimitations o drone warare.

M perspective on drones is an unusua one. InNovember 2008, the Aghan Taiban kidnapped twoAghan coeagues and me outside Kabu and erriedus to the triba areas o Pakistan. For the next sevenmonths, we were hed captive in North and SouthWaziristan, the ocus o the vast majorit o Ameri-can drone strikes during that period. In June 2009,we escaped. Severa months ater, I wrote about theexperience in a series o artices or the New YorkTimes, m empoer at the time.

Throughout our captivit, American drones werea requent presence in the skies above North andSouth Waziristan. Unmanned, propeer-driven air-crat, the sounded ike a sma pane—a Piper Cubor Cessna—circing overhead. Dark specks in a buesk, the coud be spotted and tracked with the nakedee. Our guards studied their ight patterns or indi-cations o when the might strike. When two drones

appeared overhead the thought an attack was immi-nent. Sometimes it was, sometimes it was not.

The drones were terriing. From the ground, it isimpossibe to determine who or what the are track-ing as the circe overhead. The buzz o a distantpropeer is a constant reminder o imminent death.Drones re missies that trave aster than the speedo sound. A drone’s victim never hears the missiethat kis him.

Our Aghan and Pakistani Taiban guards de-spised the drones and disparaged them as a cow-ard wa or America to wage war. The 2009 surgein drone attacks in Pakistan prompted our guards tohate Obama even more than the hated Bush.

The most dicut da o our captivit was March25, 2009. late that aternoon, a drone attack occurred

just outside our house in Makeen, South Waziristan.Missies red b an American drone had struck doz-ens o ards awa. Ater chunks o mud and bits o shrapne anded in our courtard. Our guards hustedme down a hiside and ordered me to get inside a sta-tion wagon. The tod me to ie down, pace a scar over m ace, and sa nothing. We a knew that i o-ca miitants enraged b the attack earned an Ameri-can prisoner was in the area, I woud be kied. As I a

in the car, I heard miitants shout with ur as thecoected their dead. A woman waied somewherein the distance. I sient recited the lord’s Praer.

Ater 15 minutes, the guards took me back to ourhouse and expained what had happened. Missiesrom American drones had struck two cars, thesaid, kiing seven Arab miitants and oca Taibanghters. later, I earned that one o our guards sug-gested I be taken to the site o the attack and rituabeheaded. The chie guard overrued him.

The strikes ueed a vicious paranoia among theTaiban. For months, our guards tod us o civiians be-

aRecoMpaRativelycheap,RisknoaMeRicanlives,and pRoducetRiuMphant headines. Over the ast three ears, drone strikes have quiet become the Obama Ad-ministration’s weapon o choice against terrorists.

Since taking oce, President Barack Obama has uneashed ve times as man dronestrikes as George W. Bush authorized in his second term in the White House. He hastransormed drone attacks rom a rare used tactic that kied dozens each ear to atwice-week onsaught that kied more than 1,000 p eope in Pakistan in 2010. last ear,

American drone strikes spread to Somaia and liba as we.In the wake o the troubed, triion-doar American invasions o

Iraq and Aghanistan, drone strikes are a taisman in Washington. Tocash-strapped ocias, drones eiminate the United States’ enemies

at itte human, poitica, or nancia cost.The sweeping use o drone strikes in Pakistan, though, has creat-

ed unprecedented anti-American sentiment in that countr. WhieU.S. inteigence ocias caim that on a handu o civiians havedied in drone attacks, the vast majorit o Pakistanis beieve thou-sands have perished. last ear, the Pakistani government apparent- bocked American drone strikes ater tensions escaated betweenthe two governments.

Ater a CIA contractor kied two Pakistanis in Januar and American commandoskied Osama bin laden in March, there were no drone strikes there or weeks at atime. In November, drone strikes stopped again ater an American airstrike kied 26Pakistani sodiers near the border with Aghanistan. As o ate December, there had

ing rounded up, accused o working as American spiesand hung in oca markets. Immediate ater that at-tack in South Waziristan, a everish hunt began or aoca sp who the Taiban were convinced had some-how secret guided the Americans to the two cars.

Severa das ater the strike, our guards tod usoreign miitants had arrested a oca man and ac-

cused him o guiding the drones. Ater the jihadistsdisemboweed the viager and chopped o his eg,he “conessed” to being an American sp, t he said.Then the miitants decapitated the man and hunghis corpse in the oca bazaar as a warning.

MytiMe in captivit ed me with enormous sm-path or the Pakistani civiians trapped between thederanged Taiban and ruthess American technoog.The inhabit a he on earth in the triba areas. Bothsides abuse them. I am convinced Taiban caims

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42 �o.

t opl in e Jan .2012

that on civiians die in drone strikes are ase, as areAmerican caims that on miitants do. Drone strikesare not a siver buet against miitanc, nor are the awanton practice that es on civiians. The weakenmiitant groups without eiminating them.

During m time in the triba areas, it was cear thatdrone strikes disrupted miitant operations. Tai-ban commanders requent changed vehices andmoved with ew bodguards to mask their identi-ties. Aghan, Pakistani, and oreign Taiban avoidedgathering in arge numbers. The training o suicidebombers and roadside bomb makers was carried outin sma groups to avoid detection.

Atogether, 22 drone strikes kied at east 76 mii-tants and 41 civiians in North and South Waziristanduring our seven months in captivit, according tonews reports. Some strikes cear succeeded. Ourguards reacted with ur, or exampe, when Uz-bek bomb makers the knew were kied in a drone

strike. The aso showed m Aghan coeagues thegraves o chidren the said died in strikes.

It is impossibe or journaists, human rights groups,or outside investigators to denitive determinethe ratio o civiians to miitants kied b Americandrones. The United States reuses to reease detaisor pubic acknowedge the attacks, which the insistare cassied. Miitants, meanwhie, reuse to aowunettered access to the area.

The strikes ki senior eaders and weaken A Qae-da, the Pakistani Taiban, and the Aghan Taiban, butmiitants use exaggerated reports o civiian deaths torecruit vounteers and stoke anti-Americanism. I be-ieve the drones create a staemate between miitantgroups and U.S. inteigence agencies.

Whie drones are seen as a triumph o Americantechnoog in the United States, the provoke in-tense pubic anger in Pakistan. Exaggerated Taibancaims o civiian deaths are wide beieved b thePakistanis, who see the strikes as a agrant vioationo the United States’ purported support or human

rights. Anasts beieve that kiing a senior miitantin a drone strike is a tactica victor but a oss overthe ong term because it weakens pubic supportor an American-backed crackdown on miitanc inPakistan, which man anasts think is essentia.

“In the short term, it puts [the miitants] on theback oot,” a ormer United Nations ocia in theregion who spoke on condition o anonmit todme. “In the overa communit, it’s devastating.”

Worsening the probem, the U.S. has aowed thePakistani miitar to ase caim that it has no con-tro over the drone strikes. American drones operateout o Pakistani air orce bases with the permission o Pakistani orces, et the Pakistani pubic is tod that aoreign power is carring out uniatera attacks insidetheir countr and vioating their sovereignt.

Pakistan is not the on countr experiencing droneattacks. Since 2001, the United States has carried outdrone strikes in ve other countries—Aghanistan,yemen, Iraq, liba and Somaia. In liba, the Ameri-can miitar carried out 146 drone strikes duringNATO’s seven-month bombing campaign againstthe Gadda regime. In Aghanistan and Iraq, the CIAand the American miitar do not discose the num-ber o attacks but a senior American miitar ocia

put the number at “dozens” since 2001.The most aarming pattern has emerged in yemen

and Somaia. The exact number o strikes in bothcountries is unknown. loca media in yemen reportstrikes as oten as once a week, but American ociasdecine to conrm that.

On September 30, 2011, a drone ing over ye-men set a new precedent. Without a t ria or an pub-ic court proceeding, the United States governmentkied two American citizens, Anwar A Awaki andSamir Khan. The target o the attack was Awaki, aNew Mexico-born yemeni-American whose charis-

matic preaching inspired terrorist attacks around theword, incuding the 2009 kiing o thirteen sodiersin Fort Hood, Texas. Civi iberties groups arguedthat a dangerous new threshod had been crossed.For the rst time in American histor, the UnitedStates had executed two o its citizens without tria.

The Obama Administration cited a secret JusticeDepartment memorandum as justication or theattack. Its authors contended that Awaki’s kiingwas ega due to his roe in attacks on the UnitedStates and his presence in an area where Americanorces coud not easi capture him. The administra-tion decined to pubic reease the u document.

ManyexpeRts insist a new approach to drones is

desperate needed. Strikes shoud continue, the sa,but in a vast dierent manner. Among the changesthe suggest: The U.S. must end its absurd practice o reusing to pubic acknowedge attacks. Man ana-sts aso beieve Washington shoud accede to ong-standing demands rom the Pakistani, Aghan, andother oca governments or more contro over the useo drones. Their reasoning is simpe: Aong with theUnited States, oca ocias wi then bear the burdeno buiding oca pubic support or drone strikes.

“The have asked or sharing the responsibiit,but aso means sha ring the technoog,” Vai Nasr, a

Tuts Universit proessor and ormer senior ObamaAdministration adviser on Pakistan, tod me. “Wehave resisted that, but the benet is that ou give theoca government ownership.”

For a their shortcomings, drones do present atempting though ar rom perect martia option.Drones can reach jihadists in remote mountains anddeserts inaccessibe to American and oca troops.The have taken out top miitants, such as the Paki-stani Taiban commander Baituah Mehsud, who wasresponsibe or the kiing o thousands o Pakistani

civiians in suicide bombings. And the have sowedthe training o suicide bombers and roadside bombmakers, most o whose victims are innocent Aghanand Pakistani bstanders, not American troops.

But drones aone are not the answer. Over theong term, it wi be moderate Musims who deeatmiitanc, not technoog.

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Jack Shafe rW h yol FoM l?as Assange scrambles to save WikiLeaks,he is shackled with several problems: he’sfghting extradition to Sweden, has alienatedsupporters with his imperious manner, andhis best source is in a military jail.

P H O T O G R A P H B y r e u t e r s / p a u l h a C k e t t




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ate OCtOBer, a deated Juian As-ange caed a press conerence in lon-on to announce he ma have to mothba

Wikileaks. The reason, he said, was mon-. Visa, MasterCard, Western Union, andapa were preventing supporters romonating to the organization, Assange ex-

ained. He warned that uness the bank-rs’ bockade was ited at once, the cash-trapped organization woud soon die.

B then, however, the biggest probemWikileaks aced wasn’t nancia. Ater a,he group had awas operated on a shoe-tring, its eader amous seeping some-

where other than at home or in a hote mostights. The main concern was productivi-

: Wikileaks and Assange, its 40-ear-odrovocateur, were out o scoops.

And oh, what a string o scoops it had run in the previous 18 months. Wikileaks’010 posting o a cassied video showingiviian casuaties during an Apache hei-opter attack in Baghdad, which Assangeted “Coatera Murder,” drew debatend viewers around the word. Then cames distribution o cassied documents

rom the wars in Aghanistan and Iraq, theGuantánamo Ba prison camp es, andhe cassied U.S. State Department dipo-

matic cabes to the Guardian, the New YorkTimes, Der Spiegel, and other news outets.

But ater the dipomatic cabe stories

etered out in September, so too didWikileaks. Its side into irreevance a-er months o dominating the headineshoud have been enough to humbe even

Assange. His ve-ear-od supranationaroup, with its hardened computer inra-tructure and sophisticated encrptiongorithms, was supposed immune toovernment crackdowns and corporateetaiation. But instead o ourishing, as

Assange had predicted, Wikileaks a butaporized in its 16th minute o ame: Its

ward Pakistan. These one woves under-stood the had booked one-wa trips—thathaving unoaded their stash o secrets, theirnext stops were jai, exie, or obscurit.

Assange’s se-dened roe as go-be-tween rather than eaker, and his ambitionto buid a perpetua secret-exposing ma-chine, urther dierentiates him rom thea-stars. Steven Atergood, who runs theFederation o American Scientist’s Proj-ect on Government Secrec, sas, “TheWikileaks discosures were presented—above a—as a chaenge to ocia secrecrather than as a ocused reveation o anparticuar scanda or misdeed or an eortto redirect U.S. oreign poic.”

deSpite hiS man troubes, Assangeis sti swinging. In December, he gaveThe Washington Post saes brochures romwhich the paper ashioned a page-one sto-

r about the wordwide market or inva-sive surveiance technoog. (Not exactgroundbreaking, but worth enough.)

Whatever Wikileaks’ current status, it’sair to ask what it has accompished. Canwe identi an signicant changes in poi-tics or poic prompted b its reveations?(To be air, that’s a tough question to ask o an news organization.) Its most tangibeaccompishment must be that it has giventhe word a better ook at how the UnitedStates prosecutes its wars and conductsits dipomac. “The [Wikileak] reeasesincuded quite a ew records o enduringinterest, but man others o on passingcuriosit, and perhaps a majorit that areo no particuar signicance at a,” sasAtergood. “We probab need more timeand perspective to reach a na judgmenton Wikileaks’ asting impact... The Penta-gon Papers were a phenomenon, but whatwas their impact, rea? Did anone actu-a read them? Or did their signicancearise rom the over-reaction o the NixonAdministration?”

But who can den the impact o theeakers o the 1970s? A new breed o na-tiona securit reporter, inspired b thereveations o those whistebowers, be-gan ing tough dispatches. The Freedomo Inormation Act, estabished in the ate1960s, was strengthened, giving reportersadditiona everage in their investigations.And Senate hearings exposed the muti-decade excesses o the CIA, the FBI, andthe miitar inteigence agencies.

Wikileaks hasn’t inspired much in the

wa o ocia government investigations,open-government egisation, or even suc-cessu imitators. Governments and corpo-rations have proved how good the are atstiing eakers and their depositories. Themost direct eect, Atergood notes, is atightening o U.S. government computer se-curit: Securit had been oosened ater 9/11to make dot-connecting easier in the hopeo preventing another attack. Atergoodaso notes that the dipomatic cabe eakscaused the U.S. to transer some personneand curtai dipomac, and that the revea-tions strained U.S. dipomatic reations withsome nations. In this case, Wikileaks mahave shaken the earth, but Assange’s orga-nization did not rea change it.

Or mabe it did. Gideon Rachman gavea wonderu perverse reading o the im-pact o the pubication o the dipomatic ca-bes ast December in the Financial Times,

decaring that Assange and Wikileaks haddone America “a massive avour” b “in-advertent debunking decades-od con-

spirac theories about its oreign poic…Where Wikileaks does revea a gap be-tween America’s pubic statements and pri-vate discussions, it tends to be because U.S.representatives are being dipomatic ratherthan dupicitous.” Athough the candorin man o those cabes embarrassed theUnited States, the compete dump atteredit because it showed the pubic positions o the United States are near identica to theprivate positions expressed in the cabes.This consistenc, Rachman argues, dispesthe “idea that something sinister is going

on behind the was o the U.S. embass.”Rachman’s ormuation sounds ip, but

it isn’t. Obvious, some o those cabesand action reports embarrassed the U.S.government or did damage to its coveted“sources and methods” o inormation co-ection and dipomac. But when Secretaro State Hiar Rodham Cinton ripped theeak o the dipomatic cabes as “an attackon the internationa communit,” she gavehperboe a bad name. Secretar Cinton’scaim that the condentia conversations

between governments o thWikileaks exposed “saeguacurit and advance economicreads ike a hack passage outextbook. The reason governmtarian and democratic, abor dipomatic works—trivia andwrapped in secrec has ess tosuring word peace and prowith avoiding scrutin b theinternationa dipomac can bepoitics b other means, what gmost object to is not the eak ou pubic discussion o what gdo in private in the pubic’s nam

Setting aside or a momenbad manners, his megaomasupreme skis as a bridgeare in his debt or reignitingthe prosecution o the wars Aghanistan. Better than an

broker o eaks—beore him, ured out a new mechanism to monitor the poweru ew.

“The dominant message cWikileaks was, ‘you cannosecrets rom us,’” sas Atethe gathering ocia responswe can.’” Atergood is right.o eakers are traditiona Even i the aren’t caught andthe Esbergs and Mannings wevicted rom the secrets trovedenc o the press and other incuding governments, on edocumented. Journaists, o ceaks to perorm their watchd

But governments depend on tcheck and baance the bureahas grown unaccountabe.

What Wikileaks demonst16th minute o ame is the extrdenc o eakers on strong inma be too ate to rescue Wsending Assange to the Emitute or remedia studies in goBut his exampe stands or annization or pirate outt bod enow his ead.

auteur was shacked with a securit brace-et, ghting extradition to Sweden, whereauthorities want to question him regard-ing charges o sexua assaut; Wikileaksmembers and aies, aienated b the dic-tatoria Assange, had abandoned him; andeakers were no onger making their sub-stantia deposits in Wikileaks computers.

you can date the beginning o this decineto mid-2010, when Assange’s aeged super-source, U.S. Arm Pc. Brade Manning—suspected o having eaked the Aghani-stan, Iraq, Gitmo, and dipomatic cabees—was jaied. Assange was sti boastingto Forbes in November 2010 that Wikileakswas receiving so man eaks that it had toturn o the submission orm on its site andthat “about 50 percent” o the documentsin its hoard were rom the private sector(banking, oi, pharmaceuticas). But despitethose boasts, he never deivered those cor-

porate exposés. The Manning trove was hisast big data dump, a reminder that journa-ists are on as good as their sources. lastear, ater teasing 60 Minutes about expo-sive documents he hinted coud take downa bank (Bank o America?) he reportedbackpedaed in private. Was he overse-ing his materia or was he hoding back thebank documents or maximum impact at-er? On Juian Assange, internationa mano mster, knew or sure.

theWikileakS ade-out demonstratesthe advantage estabished news institu-tions have over widcatters ike Assange. Hema have ound the oi but he had no wao making it useu to the masses. The es-tabished press—ove them or hate them—had the means to quick gure out whatthe Manning es meant and the ski topresent them in readabe orm, somethingAssange appears to be incapabe o doing.The pressies aso had awers who knewhow to beat back the ega threats o gov-ernments, name the United States, that

did not want the es pubished. O course,Assange mocked attempts b the Times andthe Guardian to discuss the eaks with thegovernments invoved prior to pubicationas seing out. In a new documentar, TrueStories: WikiLeaks, Assange snars that themainstream media “cannot be trusted” be-cause the are “part o the socia networko the eite.” Even i he’s right, that eite isnot a static entit with a singe set o inter-ests. That governments around the goberecoied at the Times and Guardian stories

based on Wikileaks materia puts the ie toAssange’s sweeping condemnation.

I mean no disrespect to Assange b ca-ing him a widcatter—or b caing him a

journaist! (I digging up state secrets andreveaing them to the pubic isn’t an act o

journaism, what is?) The widcatter abecaptures the entrepreneuria quaities hebrought to his work. Charie Beckett, o thelondon Schoo o Economics and PoiticaScience, notes that Assange drew on hisskis as a programmer and hacker to spot“a new business mode and a nove kindo patorm.” As Beckett points out, thereare pent o programmers and hackersout there, so “what made Wikileaks workwas Assange’s ideoogica drive and hisa-consuming desire to use digita com-munications as a poitica weapon.”

Athough it’s dicut to think o Assangewithout imagining gigabtes o cassied

data coursing around the Web, this cber-centric view denies him his proper status inthe pantheon o secrec hackers. He’s neverbeen a eaker; instead, he positioned him-se as a broker o eaks. At rst, he beievedWikileaks coud be a passive patorm, dis-persing anonmous eaks to an interestedword. Assange had moderate success earon interesting journaists in his es—main-stream outets generated numerous storiesrom Wikileaks documents that outragedgovernments (the Chinese and the British),reigions (Scientoogists and Mormons),banks, and other power centers. But itwasn’t unti Assange started working withthe mainstream media on the Aghanistanand Iraq es—aping the traditiona source-

journaist reationship—that he startedmaximizing the “ied” rom his es.

Assange’s current intimac with editorsand reporters paces him coser to the tra-dition o the a-star eakers o the 1970s—Danie Esberg (the Pentagon Papers),Phiip Agee (outing CIA ocers), Navyeoman Chares Radord (the Indo-Paki-

stan conict)—who teamed with journa-ists or pubishers to get their secrets out.like them, Assange was (and is) on a sui-cide mission to destabiize the sstem.

But unike Assange, the aorementionedocused their outrage on a singe issue:Esberg exposed the ies at the heart o theUnited States’ Vietnam poic; Agee, a born-again Marxist, opposed what he consideredto be U.S. imperiaism; Radord (who servedhis Mormon mission in India) objected tothe Nixon Administration’s avoritism to-

he’S never been a leaker;inStead, he poSitionedhimSelf aS a broker of lea




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by Chrystia Freeland

The ONe

WARPeRCeNT

css

A confict is brewing between

the ultra-wealthy and the merely rich I l l U S T R A T I O N B y r a y M o N d b i e s i N g e r




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within the one percent. That is part because it canbe a itte stomach-churning to consider the grada-tions o weath at the ver top at a time when unem-poment is cose to nine percent and midde-cassamiies are being hammered. Nor is this queasi-ness about studing what’s happening on Ompusconned to ibera do-gooders. Branko Mianovic,a Word Bank economist who is one o the eadingstudents o goba income distribution, writes in hisatest book, The Haves and the Have-Nots, that it isar easier to secure unding or research about p ov-ert than about income inequait. The reason orthat is “rather simpe even i oten wise ignored,”Mianovic sas. “Inequait studies are not particu-ar appreciated b the rich.” Indeed, Mianovicsas he was “once tod b the head o a prestigiousthink tank in Washington, DC, that the institution’sboard was ver unike to und an work that hadincome or weath inequait in its tite. yes, thewoud nance anthing to do with povert aevia-tion, but inequait was an atogether dierent mat-

ter. Wh? Because ‘m’ concern with the poverto some peope actua projects me in a ver nice,warm gow: I am read to use m mone to hepthem… But inequait is dierent. Ever mention o it raises in act the issue o the appropriateness oregitimac o m income.”

Within the one percent, awareness o the dier-ent tiers o weath is as keen as an Indian match-maker’s sensitivit to the ner divisions o caste.And thanks to the wire-tapping authorit o theManhattan edera prosecutor, the hoi pooi wererecent abe to eavesdrop on one conversationwithin the one percent that reveaed some o theseinterna distinctions. The diaogue was betweenRaj Rajaratnam, the hedge und investor convictedo insider trading ast summer, and Ani Kumar,who was at the time a partner at McKinse, themanagement consutant. The two were discussingtheir mutua riend, Rajat Gupta, the ormer man-aging director o McKinse. At the time o the con-versation—August 2008—Gupta was considering amove rom the bue-chip board o Godman Sachsto serve as an advisor to KKR, the egendar privateequit group. “I think he wants to be in that circe,”Mr. Rajaratnam sas to Mr. Kumar. “That’s a bi-

ionaire circe, right? Godman is ike the hundredso miions circe, right?”

Ho Peterson, the daughter o private equit bi-ionaire Pete Peterson—and herse a rather s andeoquent chronicer o the one percent in h er essasand ction—tes a simiar stor o the tension at thever top. “I think peope making ve miion doarsto ten miion doars denite don’t think the aremaking enough mone,” she tod me. “Woudn’tit be nice to private? There are so man thingsou can aspire to, even making ve miion doars aear. For the ower rung o this crowd, these peope

set up ives or themseves the can’t aord. Theare broke and maxed out on their credit cards inDecember, just ike midde cass coupes iving onone hundred thousand doars. I don’t think theee that rich. The are tring to pa with the highroers, and there are things the can’t do, and theee deprived, which is compete sick and absurd,but that’s the truth o the matter.”

Athough the insecurities and pett jeaousies o the rich are reveaing, the best wa to understandwhat’s happening at the top o the income distribu-tion is simp to ook at the numbers. Brian Be andJohn van Reenan, two economists at the Centre orEconomic Perormance at the london Schoo o Economics, have done a careu stud o Britain’ssuper-rich. Peering inside the top one percent, theound a distribution amost as skewed as that withinthe econom as a whoe—the top two percent o theone percent captured 11 percent o the wage shareo this top sice overa in 1998 and thirteen percentin 2008. Among nanciers, who are disproportion-

ate represented within the British and Americanone percent, the tit towards the ver top is evenmore pronounced.

Jere Winters, an American poitica scientist,has devised another wa to appreciate the dier-ence between the mere rich and the super-rich.His “Materia Power Index” (MPI) measures theincome o the top 10 percent o Americans as amutipe o the average income o the bottom nine-t percent. The index shows that, ike a mountainwhose sopes become steeper as ou ascend to thepeak, income poarization in America gets sharperthe richer ou are: the top 10 percent have a MPI o our (meaning their average income is our timesthat o the bottom 90 percent), the top one percenthave an MPI o 15. But when ou get to the top 0.1percent, the MPI jumps to 124. That is the ine, inWinters’ view, which separates the afuent romthe putocrats. “There were about 150,000 Ameri-cans whose average annua incomes were $4 mi-ion and above in 2007,” Winters writes o the 0.1percent. “This is the threshod at which oigarchsdominate the andscape.”

Winters has more bad news or the mere rich.In a stud o US tax poic over the past centur

he concudes that the utra-weath have outoxedtheir ess afuent neighbors in the top percentie.When a edera income tax was rst evied in theUnited States in 1913 it was targeted soe aboveWinters’ oigarch threshod, at the 0.1 percent.Over the next hundred ears that burden has shit-ed down the income adder. Within the one per-cent, the richer ou are, the ower our eective taxrate: in 2009, the top one percent paid more than 23percent o their income in tax; the top 0.1 percentpaid about 21 percent; and the top 400 taxpaerspaid ess than 17 percent.

The gap between the one percent percent coud have serious poitica coEven in the United States, there are jusaires, and 134,888 taxpaers a in theThe one percent is bigger, containing paers. With an annua income o $486percent is aso not t hat ar awa rom thtaxpaers who occup the wider 10 earn an average $128,560. These peoptom o the top income distribution aressentia to the countr and p oitica at the ver top. I the super-eite oses tit coud become ver isoated indeed.

Historica in America the merestrong identied with the ver rich.at the bottom o the one percent wereidea or one big job awa rom the summare a ew indications that the sub-mibeginning to suspect that the biionating an unair dea. One sign is how “cism” has become the batte cr not on

Wa Street, but aso o Tea Part dariin and conservative inteectua Pauemerging spit between pro-businessAmericans and the 0.1 percent is potenmore important than the patchoui-scestabishment ideaism o Occup Waawas knew the et was suspicious o hWhat is surprising is that Wa Street’s become suspicious o their bosses.

Here’s how Joshua Brown, a se-desyork–based investment advisor to higindividuas, charitabe oundations, anpans responded to compaints b a numStreet chies that the were being unjuBrown’s tirade, which he posted on hReormed Broker, quick went vira: “we not ‘hate the rich’ as ou and other putocrats have postuated, in point o them,” Brown wrote. “We ove the suin our midst and it is a distinct Amerbeieve that we can a oow in the the eite, even though so ew o us edo. So, no, we don’t hate the rich. Ware the predators. America hates unjuege, it hates an unair paing ed and

taism without the threat o bankrupprivatized gains and sociaized osses,changes that benet the ew at the exman and it hates peope who have beeand don’t dispa even the sightest bior humbeness in the presence o so muin the atermath.”

In a popuist age, the super-eite caever miionaire is convinced he has abaton in his knapsack. I that convidown, the batte o the miionaires veionaires coud move west.

When anderS aSlund, a Swedish economist whoas studied and advised most o the eaders in the

ormer Soviet Union, visited Kiev in ate 2004, athe height o the Orange Revoution, he returned tois oce in Washington, DC, with a surprising ob-ervation. Most reports depicted the Orange Revo-utionaries, with their determined, sub-zero en-ampment o the capita cit’s centra square, eithers western Ukrainians rebeing against the govern-

ment’s pro-Russian stance, or as ideaistic studentswho were unwiing to stomach poitica repression.

oth characterizations were true, but Asund saw a

hird dnamic at pa. The Orange Revoution, heod me, was the rebeion o the miionaires againsthe biionaires. Ukraine’s cron capitaism workedxtreme we or the sma, we-connected group oigarchs at the ver top, but it was stiing themerging business cass. This ambitious hauteourgeoisie was na ed up and it was ghting or

more equitabe rues o the game.A version o that batte o the miionaires versus

he biionaires has been paing out around theword over the past tweve months. It was a decisiveactor in the Tahrir Square uprising, whose mostisibe organizer was Wae Ghonim, a Googe exec-tive based in Dubai with an MBA degree; the pro-

ests aso quick won the support o the countr’swe-heeed miitar eite. The same cass struggewas on dispa in India, where veteran socia ac-

vist Anna Hazare’s anti-corruption hunger strikewas haied as the poitica awakening o the pros-

ering Indian urban midde cass. And it coud beeen ast month in Moscow, where the unexpectedevot against Vadimir Putin’s “part o crooks andhieves” was catazed b a bogging awer andrew ur-cad proessionas into the streets—it iseing caed the “Mink Revoution.” In the United

tates, Occup Wa Street has drawn the poiti-a batte ines somewhat dierent—betweenhe 99 percent and the one percent. But when ouri down into the data, ou can see another, eventeeper division inside the one percent itse. Thetra-rich o the 0.1 percent have pued ar ahead o

he mere rich who make up the other 0.9 percentt the tip o the income pramid. The divide is cu-ura and it is economic—and i it becomes poitica

coud transorm the nationa debate.The wider pubic discussion about income in-

quait hasn’t much touched on the divisions

WiThiN The ONe PeRCeNTthe awareness

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americansANd The

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idealism Of OCCuPyWall street.



52 �o.

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A C t I v I S

R e t U R n

of the Potst

Sgs M Tea Party protestersin Flagsta, Arizona, demonstrate

against President Obama,Congress, and the corruption o

Washington politics.

a w to o potsts sts to vo

th t o ts s

by Nick Carey

P H O T O G R A P H B y r e u t e r s / j o s h u a l o t t



54 �o.


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P H O T O G R A P H S : ( c l O c k w I S E F R O M T

O P R I G H T ) R E u T E R

S / J O E S k I P P E R ; J I M y

O u n G ; P A w E l k O P c Z y n S k I

undreds o mies and a vastideoogica divide separate Ceci Frida rom Tim Dake. But what t he share is a passionate dis-

ike and distrust o the American p oitica eite. I caught up with Frida on a bitter cod, rainOctober night in Nashvie. That same night state troopers had arrested twent-nine memberso Occup Nashvie or vioating a new curew designed to end the occupation o l egisativePaza. The were there, the occupiers said, to protest income inequait, bank baiouts, andcorporate invovement in American poitics. “I have been waiting and waiting or ears or

aMeriCa’SleFt-WinG Occup movement and right-wing TeaPart are just two exampes o the word’s new wave o activists, adiverse and dispersed coection o movements that aso incudesSpain’s Indignados (the “Indignant”) and the rebeious outh o the Arab Spring. What these disparate groups have in common isa desire to chaenge a sstem that avors a weath and powerueite, oten at their expense, whether that takes the orm o op-posing baiouts or the banking giants or attempting to take downongtime despots ike liba’s Muammar Gadda. Man in this newwave o activists ee et behind b gobaization. Coming o agein the Great Recession era o rising inequait and high unempo-ment, the seem determined to remain outside the sstem—or inthe case o the Tea Part activists, to take over the sstem but re-main as unpaid outsiders. Man ook upon mainstream NGOs as

part o the estabishment and thereore part o the probem. Thehave a point. Over the past ew decades, NGOs ounded b theactivists o decades past have become increasing domesticated.The chie executives o these high respectabe groups receive in-vitations to attend the Word Economic Forum’s annua meetingin Davos aongside the word’s poweru and weath eite, and thehet saaries o some top nonprot executives put them in the top 1percent o American earners targeted b the Occup movement.

But can this new generation o activists avoid the ure o insti-tutionaization that has apparent beaen the arge mainstreamNGOs? And wi these new activists have an staing power? Someacademics ike larr Jacobs, a poitics proessor at t he Universit

o Minnesota, see the Occupiers and others ike them eventuasuccumbing to the enticements o proessiona activism. “A sma

number o peope wi see a career opportunit, the rest wi adeback into the scener,” he tod me. “To sustain something ike thisou need mone a nd organization.”

But Mark Thoma, an economist at the Universit o Oregon,sas this is just the beginning. The midde cass in the deveopedword and the oung everwhere have borne the brunt o thegoba sowdown, he argued, and wi suer more rom high ong-term unempoment. “What we’re seeing now ma just be therst wave o protests,” Thoma said. “The midde cass has aspira-tions and taught their chidren that i the studied or a degreethe woud get a job. Sudden that’s not happening and we’reseeing anger and protests as a resut. I don’t know i this rst wave

is the big one et, but i the sstem doesn’t provide gthe midde cass, there wi be others.”

Over the past decade or so there have been protestsstrations against gobaization and the institutions thit, though nothing on the scae seen since 2009. Thoan assistant proessor o s ocioog at Tennessee Techas been studing protest movements going back tHe argues that the word has been in a “new cce otion” since the “Batte o Seatte” in 1999, when anttion protesters cashed with poice outside a Word Tzation meeting. Subsequent, thousands o protestetrip to Prague in September 2000 or the annua meInternationa Monetar Fund and the Word Bank. T

ed a cheeru bunch o Itaian anarchists who donnedbod armor (consisting o oam pads, varied sports htrash-can ids as shieds) and batted riot poice on thsesk Bridge, taking turns sitting in the warm autumtheir ees streaming when the tear gas became too mremained a arge ringe movement.

The United States saw protests against the Iraq Waimmigration reorm demonstrations in more than 2006, but these soon petered out. B contrast, the p2009 have been more requent, in more paces, and growing numbers o peope. In 2010, students in the Udom took to the streets to protest against rising uni

peope to come out onto the streets,” said Frida, aormer et-wing bogger, now a sta-at-home momwho has become a spokeswoman or the oca Occu-p movement. Sender, brown-haired, and ecient,Frida did not waste man words—she was neededesewhere. “Now we’re doing something and we’re

not going to stop.”When I asked wh protestors et compeed to oc-

cup this pubic space instead o reing on civi societand nongovernmenta organizations to make their case,

Frida paused to warm her bright red ngers on a post-ene cup o hot iquid that ooked, but didn’t taste, ike co-ee. “The have been around or a whie, but app arent theaven’t done enough,” she said matter-o-act. “Otherwise

we woudn’t be here.”Two weeks ater and some 500 mies north o Nashvie

n the Miwaukee suburb o Frankin, Tim Dake and larrGambe o the Wisconsin Grandsons o libert described

visit rom a nationa conservative nonprot group seek-ng to open an oce in the state. Dake, an engineer, said thereiminar $7.5 miion budget proposed b the nonprot,

which he decined to name, incuded a six-gure saar orhe state director, pus $3.5 miion or a new buiding. “Iooked at that budget and I thought about how much havoccoud wreak with that mone,” he said, sapping his ore-ead as he spoke. “A ot o groups go to Washington withood ideas, but over time it a becomes about raising mon- rom donors,” said Gambe, a ormer Air Force coone.Ater a whie a the’re doing is eeding the beast and tr-

ng to justi their budgets.”

A LOt Of GROuPS G O tO WAShINGtONWIth GOOd IdeAS, but OveR

tIme It ALL becOmeS AbOut RAISING

Money.

a i u Tea Party protesters inFlorida (top right) and Iowa (bottom

right); Occupy Berlin protestersin ront o the Reichstag.



56 �o.


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P H O T O G R A P H : R E u T E R S / M I k E S E G A R

he were oowed in Ma b the predominant oung Indigna-os o Spain. Aong with the Arab Spring, these vigorous protestsave served as the inspiration or the Occup movement. “The is-ues raised b these movements are not new issues,” Rati said.But the do invove peope who a re new to protesting.”

Fit-six-ear-od Dorse Maina is just such a newcomer. Shewas aid o two ears ago rom her job as a counseor at an acoho

nd drug abuse center. I met her in ate October in the crowd atOccup Nashvie. “This movement is u o peope ike me whoee ike the have a boot across their necks,” she said. “Man o

s are working peope who have done a the right things but areti stuck.” The same might be said o Jama Sibai, age 25, an arttudent who was among the 75 attendees at the rst protest orreater reedoms in the liban cit o Misrata on Februar 17.ibai had come despite the risk o arrest b the Gadda regime’s

eared miitia, and indeed a the protesters were arrested. “We just wanted the things a norma countr shoud have,” he tod mewhen I visited Misrata in Ju. This wave o new activists aso in-cudes Juianne Thompson, a mother o two and a co-organizer o the Atanta Tea Part. “For ears conservatives in America weredisappointed b the eaders we eected because the did not x ev-erthing we wanted them to,” she said. “But then we reaized wehad to ook no urther than ourseves i we wanted to x it .”

On nOveMBer 8, 2011, in a specia baot, voters in Ohio heav-i rejected a bi passed b the state’s Repubican-controed eg-isature to imit coective bargaining b pubic sector unions. Inthe same specia baot, Ohio residents backed the HeathcareFreedom Amendment, a chaenge to President Barack Obama’ssignature heathcare reorm aw. Backed b Tea Part activistswho went door-to-door statewide, the amendment is intended to

be part o the case against “Obamacare” that the U.S. SupremeCourt wi hear in 2012. On the same da, FreedomWorks, aconservative nonprot that has requent associated itse withthe Tea Part movement, touted its roe in the campaign or theamendment, which incuded producing more than 18,000 ardsigns and 145,000 door hangers.

yet Chris litteton o the Ohio libert Counci was dismissiveo the nonprot’s roe. “FreedomWorks needs to show its donorsthat it’s doing something substantive when it’s not rea doinganthing at a,” said litteton, whose background is in heathcaremanagement. “It’s nice o them to hep, but i rea peope are notout there doing it, it’s not going to happen. FreedomWorks does

just enough or recognition, but not enough to make a dierence.”Grassroots Tea Part activists oten criticize FreedomWorks andits chairman, Dick Arme, a ormer Repubican Majorit leaderin the U.S. House o Representatives who makes a combinedannua saar o $500,000 rom both FreedomWorks Inc. andFreedomWorks Foundation Inc. But this is nothing compared tothe criticism reserved or the Repubican Part’s od guard estab-ishment. Athough the Tea Part is occasiona portraed as anadjunct o the Repubican Part, amost a o the activists in this

midde-cass grassroots movement are unpaid and the oten pickghts with the estabishment. Tea Part groups in Georgia, or ex-ampe, are aso working with the ibera group Common Causeon ethics reorm. “Our ethics reorm proposa has not been wereceived in the state egisature,” said Debbie Dooe, co-organiz-er o the Atanta Tea Part. “But poiticians on both sides need tounderstand we are here to cean house.”

unlike the Tea Part, the Occup movement has on beenaround since September, and it is sti working out what to do a-ter being ejected rom the pubic spaces that it occupied ear on.Beond a disike o corporate baiouts and a sense that a moneedeite dominates American poitics, the Tea Part and the Occupmovement are poes apart poitica. So ar Occup Wa Streethas resisted the urge to become invoved in the poitica process.“It is hard to sa where t he Occup movement wi go rom here,”said Robert liebman, an associate socioog proessor at Port-and State Universit. “But even i the ade awa their contribu-tion to histor thus ar is the have changed the poitica debatein America rom being about decit reduction to being about in-come inequait and jobs.”

Many OF toda’s arge mainstream NGOs started out as scrap-

p, conrontationa groups o activists. Greenpeace, to take justone exampe, rose out o antinucear protests in 1971. Toda thegroup maintains oces in 40 countries. “I ou ook at an protestmovement in the ast 50 ears, the have started o as chaeng-ers,” said Braden King, an assistant proessor o managementand organizations at Northwestern Universit’s Keogg Schoo o Management. “But with success the have a become more insti-tutionaized,” he added. “Now the are no onger rea a move-ment anmore, but proessiona advocac groups.”

That institutionaization entais compromise and inevitab re-quires proessiona sta, man o whom come rom the privatesector. King sas that students in his MBA casses oten sa their

goa is to make a ot o mone and then pursue theiworking or an NGO. “Whie that is great and nobehave the same background in activism and have ittewith the activists the end up working with,” King saiustration o his point can be s een at Davos, where utives o mainstream NGOs have become xtures. linstance, executives rom Merc Corps, GreenpeaceVision Internationa—a Christian humanitarian orwere a in attendance.

And ike their Iv league cassmates who enteredsector, such we-meaning executives pu down exceAccording to tax ings, Merc Corps CEO Nea Kenceived $303,419 in compensation in 2010. Richard Stdent o Word Vision Internationa, received $439,155.cent data avaiabe rom the Interna Revenue Service stop 1 percent o U.S. taxpaers earned a minimum o $3provided b Guidestar, which coects inormation on ganizations, shows that the median compensation oexecutive director o nonprots—which incudes musuniversities, and hospitas—with budgets o more thanrose 60 percent to $422,000 between 2000 and 2009

are theSe new movements destined to go the samactivists o esterear? Some argue that it’s inevitabor Tea Part members, man o whom have workedover the Repubican Part rom the ground up. In manmeans earning how to raise mone or campaigns. “is rigged and uness ou earn the rues and how tothem, ou’re never going to win the game,” said Dawpresident o the SoCa Tax Revot Coaition in San Diearning how to pa the game.”

But whether or not groups ike Occup, the Tea Pardignados ater or become indistinguishabe rom th

ment ma be irreevant; the undering probems thestargeting wi persist and are expected to ue urtherSpain, or instance, unempoment among those agder stands at more than 45 percent. In America, t he raage 16 to 19 and 20 to 24 were 23.7 percent and 14.2spective. Robert liebman warns that what we have “just the beginning” and that it woud be unwise o tturn up at Davos—which he described as an “od peoto ignore the deveoped word’s disenranchised ouno certaint as to whether the democratic institutionew decades are going to h od,” liebman said. “This ia ver dangerous time.”

WhAt the PROteSt GROuPShAve IN cOmmON IS A deSIRe tO

CHALLenGeA SyStem thAt fAvORS A WeALthyANd POWeRfuL eLIte.

OveR the PASt feW decAdeS, NGOs fOuNded by the

ACtIvIStS oF yeARS PASthAve becOme INcReASINGLy dOmeStIcAted.

t Bc Ss Ater being evicted romtheir encampment inlower Manhattan, OccupyWall Street protesters mustfnd their way throughan uncertain politicallandscape.




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58 �o.

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P H O T O G R A P H : ( G A D D A F I ) R E u T E R S / c H R I S H E l G R E n

I l l u S T R A T I O n S : P E T E R A R k l E ; P H O T O G R A P H S : ( B u F F E

T ) R E u T E R S / J E S S I c A

R I n A l D I ; ( S T O n E ) R E u T E R S / y u R I k O n

A k A O

davosb the

numb3rS

n u m b r

i g l s h

S c i a l i s

y u h G r u p

S i z r l a d

p l a s

b u i l d i D a s

h i s a r :

15

R u h w r l d e c m i c

F r u m i 2 0 1 0 2 0 1 1 :

$157millione x p s s h a a r :

$156millionthat’s 0.3% of Warren Buffett’s net Worth

M i i m u m r a i w o m e n me n p r s c r i b d

b h w e F r S r a g i c

P a r r a d s : 1: 5

P r c a g F r u 5 0 0

C e o s h

ar w o m e n: 2.4

1 1 , 2 5 4y a r r u d p p u l a i D a sC s , i S i s s F r a c s , a a u a l

p a s s h e a u - l à - l à D a v o s w e l l n e s s

a n D P l e a s u r e P o o l C e n t r e :

R p r d

a a c s

h w e F

s i c 1 9 7 1 :

1

litos

n u m b r

g l o b a l e C o n o m i C

r e C e s s i o n s

s i c h w r l d

e c m i c F r u m a s

i r s h l d a D a s :

r e C e s s i o n s i n t h e

u n i t e D s t a t e s

i h l a s

r a r s

7 5 0

M i u s ,

d u r i g h 2 0 0 5 w e F ,

i h i c h

Sharon

Stone r a i s d

$ 1 m i L L i o n

h l p

p r

m a l a r i a :

5

n u m b r

r r c s D a s i U . S .

d i p l m a i c

c a b l s p u b l i s h d

b w i k i L E a k S :

57 1

y a r i

h i c h h

S i s s

d s

m i i s r a s

g i

p r m i s s i

s h

d

u a u h r i z d

a i r c r a

l i g r

D a s :

2 0 0 3

A r a g u m b r

S i s s r p s

d p l d a c h

d a i 2 0 1 0 .

866 4,712t r p s

d p l d d u r i g

h w r l d

e c m i c F r u m

y a r i h i c h

t h m a s M a

d s c r i b d D a s ’ s

“dELuxET ubErcuL o SiSSanaToriumS”

i the Mag ic Mounain :

1 9 2 4

4

6

$71,000

M i i m u m c s n o n - v i P i n v i t a t i o n h

w r l d e c m i c F r u m :

$156,000

C s i c a h “ i n D u s t r y a s s o C i a t e ” ll m m b r s h i p , h i c h g u a r a s

a c c s s p r i a s s s i s :

e s i m a d c s h w i n e s e r v e D a

w r l d e c m i c F r u m p a r i 2 0 1 1 .

$15,973

750t h u m b r

p p l

m p l d

u l l i m b

h w e F .

w a t e r c a n n o nl a d b G r m a i 2

u s p r s r

6“ S r a g i c P a r r s , ” s u c h a s

g o l D m a n s a C h s a d b a n k o f a m e r i C a , p a

$527,000 r m m b r s h i p ,

— P L U S —

$19,000 p r i i a i

( up to a maximum of 5 )

P p l h s h d u p a l a s a r ’ s

a n t i - h e g e m o n i c W o r l d S o c i a l F o r u m i n h r a l l b a d g s r c r a d q u a l :

7 0 , 0 0 0

g l o b a l P u b l i C D e b t i 2 0 0 0 : $ 1 8 T R i l l i O N

th P r o j e C t e D f i g u r e r 2 0 1 2 : $ 4 7 T R i l l i O N

2,488 “ h i b a d g ”

h l d r s , h r c i

u l l a c c s s

c r c s a d

p a r i s , a d d

h w e F i

2 0 1 1 .

69b i l l i O N A i R e s

r a m g h m , r

5 . 7 P e r C e n t h r l d ’ s

b i l l i a i r p p u l a i .

G-Zero :

w h a h c m i s

n u r i l R u b i i , a . . a .

D r . D m , d u b b d h

G 2 0 a D a s l a s a r .

y a r i h i c h

G i u l i t r m i ,

I a l ’ s F i a c

M i i s r , l l d

a R u b i i

“go back to turkey” l l i g h i s d i r

c m i c

p r d i c i s :

2 0 0 6

y a r s a r

s a i f a l i s l a m

g a D D a f i

a s a m d a

w e F G l b a l

y u g L a d r

h a h a s

s u s p d d : 6

J a m E S Q u i

C e o D l

c l a i m s h w e

hi m 5 0 d a y S

i m a c h

I c s s $ 6

a a l i m o

r m Z u r i c h

P r i c a r

b h e l i C o

$ 9 , 0 0 0

M i i m u m i m

a d s hs r d

i P r i s o




�o.

60 �o.

reut ers Jan .2012


ThE dEviL in ThE cdS

he woRld o internationa nance isarge incomprehensibe, even to its prac-tioners. Consequent, a whoe industr, which I am persona part, has sprungp to “expain nance” to the pubic. This

makes the pubic think that understandingnance is something that is possibe.On top o that, nance is particuar

usceptibe to the kind o hubris that onends in peope who think that i the’ve

made miions o doars, the must behe “smart mone,” with an edge not onver the pubic but even over their eowankers and nanciers. That, in turn, setsp some ver eas morait pas. When

he inevitabe nemesis arrives, the weak-esses o the erstwhie Masters o the Uni-erse are exposed or a to see, and those us whose job it is to Expain Finance

ake ever opportunit to spe out exactwhat these prideu men got wrong. The

weren’t smart, the were stupid!I ver inteigent, successu, and aggres-ive men ike Robert Rubin, John Thain, oron Corzine coud be so stupid, then, rea-stica speaking, everbod was stupid.

And i everbod was stupid, then, in rea-, nobod was quite as stupid as we now

hink the were.

n the immediate atermath o the nan-ia crisis, a ot o books came out pointing

Books

the Devil’s Derivatives: THE unTOlD STORy OF THE SlIck

TRADERS AnD HAPlESS REGulATORSwHO AlMOST BlEw uP wAll STREET . . .

AnD ARE READy TO DO IT AGAIn

b nls d

Harvard Business Press

by f e l i x s a l M o N

Felix Salmon isthe Reutersnance blogger.

sentia aowed banks to turn credit risk,which required ots o capita, into coun-terpart risk, which didn’t.

dunbaR pRovides od-ashioned shoe-eather reporting here, too, especia inthe portions covering the New york Fedand the wa it treated banks ike Citi-group (reguated with a eather touch)and Godman Sachs (which ocias in-sisted shoud get back one hundred centson the doar in the contracts it took outwith AIG). Supine reguation was a hugepart o the reason wh the crisis was sobad in the United States and much esssevere in paces ike India and Canada.Dunbar names names. And he ends witha perect epigram, rom The Master and

Margarita, b Mikhai Bugakov:

“During your act you made bank notes foat down rom the ceiling… Today, when

I came to check the till, there was nothing

in it but a lot o strips o paper.”

“Oh dear, dear, dear!” exclaimed the

proessor. “Don’t tell me people thought

those notes were real?”

if dunbaR’s ocus is on high compexnancia inventions, Emanue Derman’s

Models.Behaving.Badl. is more concernedwith the nature o reait, and how thequestion o what is rea, and what isn’t, re-ates to the nancia crisis. Derman usedto be a “quant,” one o the nerd rocketscientists who buit modes o how mar-kets work and how the can be arbitraged.Toda, however, Derman is more o a phi-osopher, and though this book was writ-ten to expain what went wrong during thenancia crisis, it’s actua quite dierent:a heartet phiosophica voume aboutmodes, their uses, and their misuses.

Derman’s book opens with a memoiro his outh in apartheid South Arica, a

touching passage that immediate putsou on notice that ou’re not reading adr tome about mathematics. Apartheidwas, o course, a mode o the word, andit’s eas to see how Derman ended up witha ieong mistrust o modes ater beingorced to ive with that particuar one orso ong. The rest o the rst section o thebook is a ascinating expanation o theman dierent tpes o modes there areand how the can be used. It is oowed

wE wanTEd To know why ThEcriSiS happEnEd, how iT happEnEd,

and whoSE fauLT iT waS.

ngers and assigning bame. We wanted toknow wh the crisis happened, how it hap-pened, and whose aut it was. Inevitab,these books took on a poitica tinge—nonemore so than the na report o the Finan-cia Crisis Inquir Commission, which wasdisowned b a the Repubicans on thecommission or reasons that were inte-ectua dishonest but poitica expedi-ent. As the FCIC concuded, the crisis wasavoidabe. But the probem with assigningbame is that everbod tends to exoner-ate themseves and their riends: it’s much

easier to just bame others. As a resut, noone ever earns an essons. What we reaneed, in the wake o the Great Recession,is ess nger-pointing and more insight.Happi, there is a surpus o insight in tworecent books on subjects that have et thesmartest peope in the room ooking dumb.

nicholas dunbaR, author o The Devil’sDerivatives, is that rarest o animas: a genu-

ine expert on the structured products at theheart o the crisis who is not araid to tethe truth about just how harmu the were.Dunbar has spent his career in the struc-

tured-nance trade journas, which setshim apart rom a the authors who had totr to work out what on earth was going onon ater the word started aing apart.More important, Dunbar was one o thebest-sourced journaists in the ed ongbeore the nancia crisis hit.

lots o big-name journaists tried to un-derstand structured nance ater the actand man o them had ong acquaintanceswith ver important executives at big Wa

Street banks. But getting peope to tak toou honest ater the word has bown upis prett much impossibe. To know whatpeope were thinking in the ears when thesector was booming, when the seeds o di-saster were being panted, ou needed tobe taking to them at the time. And that’sexact what Dunbar was doing.

Dunbar’s aso specia in that he wasn’t just taking to the senior Wa Street execu-tives who tend to get wheeed out in ronto the press on a reguar basis. That’s uck,because those executives, as we now know,

didn’t rea have a cue about what was go-ing on. Instead, Dunbar was taking to mid-eve traders and brokers and investors andreguators—the u apparatus o marketparticipants who coective managed toget everthing so spectacuar wrong.

Dunbar’s great at taking the ong view o things, and ou won’t nd a better expa-nation, anwhere, o wh banks sh oudn’tmark their assets to market. This isn’t an

eas book to read, but it’s a necessar bookto read, because it reveas the deep struc-ture o the crisis as no one ese has man-aged to do, using rea-word exampes to

expain, or instance, how utra-sae creditratings and massive et unpredictabemarket voatiit were two sides o thesame coin. And i ou want to understandcredit deaut swaps (CDS), this is the rstand ast book ou shoud read. Dunbarexpains with ease how the CDS becamethe perect instrument or banks ookingto engage in reguator arbitrage: the es-

photo tk

b “Modes Behaving,” a ophsics and phsicists. (like mDerman is a phsicist b traDunbar, curious enough.) shows the awesome power odone with a mode when it gesoute right.

B the time we come to thenancia portion o the book, wwhat modes are good or andwhich the can ai, and Dermeas to see just how stretchebreaking point modes tendwhen the’re used on Wa Stno rea specicit here: Dinto no detai at a about thecaused the crisis. For that kindou’re better o with DunbaDerman can be a bit too ena

the eegance o pure phsics,tendenc to take anthing itate with accurac and simpnot-phsics, and thus as somdamenta uninteresting, ikperhaps, or engineering. Butquant himse, understands ohow nance tpes think, and scribes the beautiu discoveton or Maxwe or Fenman, to see the attraction o the squantitative mindset that is sgerous on Wa Street.

Human compexit is awproached modest, without certaint that is common tand scientists. The esson o is that we got too cock, too seves, and paid a terribe priso. But cockiness, too, is a human trait, which is wh I’msimistic that anthing wi rein the uture. Just as a ongrogue traders never seems toother one rom popping up

it’s equa certain that our o nancia crises won’t be sor stopped b the magnitudethat began in 2007-8. There wsuch crises, and the wi even worse than the one wthrough. And athough the mcaused b credit deaut swapdesigned b phsicists, the wbe caused b peope who are vdeed o what the’re doing.

moDels.behaving.baDly. wHy cOnFuSInG IlluSIOn

wITH REAlITy cAn lEAD TO DISASTER,On wAll STREET AnD In lIFE

b Eel de

Free Press




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confESSionS of a davoS SpouSE

W s dos sso o oso?anning or Davos starts quite ear in

he ear. Months beore it actua beginshere is the inevitabe jockeing or spotsn desirabe panes with important peo-e, a rantic gance ever da at th e emai

o see i an interesting dinner invitationsave come in, and a hunt or a hote room

n a ocation not too ar rom the coner-nce venue. Wives ike me don’t have too an work at Davos so I just think aboutacking. Moisturizer is crucia, since the

mountain air is so dr, and I wi tr touste up a coupe o respectabe outtshat I can wear b da and at the eveninginners as we. Then there is ootwear.ou can carbon date Davos Wives b their

hoes. Newcomers tend to wear attrac-ve daint hees. Veterans ike me haveiven up. I don sturd shoes and tr not to

ip on the ice.

W o b m ms dos s ?

Davos tends to be more interesting duringeriods o socia upheava. Conronted with

acts that threaten his wordview, DavosMan oses some o his smugness and be-

omes a bit more conused. Founder Kauschwab is awas interested in the zeitgeist,

by a N y a s C h i f f r i N

Anya Schifrin is the author o Bad News: HowAmerica’s Business Press Missed the Story o theCentury. Sheismarriedto theeconomistJosephStiglitz.

so there wi doubtess be man panesabout the goba protests, the euro crisis,the Arab Spring, and Occup Wa Street.How Davos Man wi respond I don’t know.M avorite comment during a pane ongoba warming a ew ears ago came roma businessman who reminded his audiencethat one upside to goba warming is theease o driing or oi under gaciers. Thisear there wi be more securit, pent o goom observations about the state o theword econom, questions about whetherChina can maintain its expansion, and so

on. We’ aso see a ot more conservativeheads o state at Davos this ear, since soew socia democratic governments sur-vived the eections and turmoi o 2011.

how o dos Ws occmss w dos M wos? We go to an panes we can actua getinto. Usua that means the ones aboutart and science, which Davos Man tendsto skip. last ear’s pane on the poutiono the word’s seas was packed with wives.When we can’t get into a pane we ma re-pair to a oca caé or hot chocoate or signup or the perennia horse-drawn carriage

ride to a ondue restaurant up in the his.

I a ese ais, we can awas prow thehas o the conerence center, hoping ora sighting o Bono or Ton Bair.

a dos hsbs

g bo? Ever now and then one spots a DavosHusband, ga or straight, but he’s a rarespecies. The are oten mistaken or DavosMan and tend to be good sports about their

roe as traiing spice. The don’t join DavosWives in their traditiona activities. I sus-pect the are on th e ski sopes or watchingpanes. I hope to meet one this ear.

W o o bo

s?The men discuss economics and the wom-en discuss how the ee about being Da-vos Wives. Some swear the won’t comeback but the usua do. We trade storieso snubs and panes we coudn’t get into.

Davos is a competitive pace; there is a-was much comparing o notes so peopecan earn which events the didn’t get in-vited to. Gossip is a vauabe currenc—asit is everwhere—so an juic exampes o drunken midnight misdeeds are passedaround prett quick. A ot o untowardgroping goes on ater hours and that is dis-cussed quiet rather than open.

how’s g?Davos encourages bad behavior. It comesrom the hot-house atmosphere o high-powered egos, the high atitudes com-bined with too much drink. A sorts o

peope who woud never sta up ate can

be ound—cocktai in hand—at the Googepart, the Time Warner reception, and thegaa dinner on Saturda night. It’s usu-a too oud to have a conversation butthe tr. last ear one businessman hedorth about his travais in Russia and keptthe crowd entertained with a ength de-scription o how he ost his compan to

you can carbon daTE davoSwivES by ThEir ShoES.

I l l U S T R A T I O N B y i s t

the tax authorities. That passes or a grip-ping evening at Davos. There are awasa ot o men who become “geographicasinge” when the arrive, and even the

nerdiest expert in anti-maaria bed netsor obscure nancia instruments ancieshimse a paer the moment he steps ootin the Zurich airport. late at night, these

men can be ound eeing theand there are rumors o at eabeing born nine months atepassion at Davos.

Sot



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reut ers Jan .2012

P H O T O G R A P H : R E u T E R S / J A S O n

R E E D

et’S GO bc o s cow p w ps Bs

, “i oo m . i ws

b o g ss o s so.” W w m o M. p’s so ow? don’t know what his sou is, but his be-avior is appaing. Things were dierentt the time o Sovenia. It was a dierent

Russia, he was a ess condent gure, and

rank the were ver hepu to us im-mediate ater 9/11. But this is a regimehat has gotten more authoritarian in theast 10 ears, that has tramped on inde-endent institutions and reedoms, and I

hink it’s coming back to haunt them.

hso n Fgso gs

rss s b ob scb om b 7 s o Com

ms . tw s So uo, ss ’s

o gob c w cg

oo c Gdp msm uS. ost-Soviet Russia is a mixed picture. Peopeave more persona reedom than at anther time in their histor; prosperit is more

widespread than ever. There is a viabe mid-e cass, which is one o the expanations

or the reaction to Putin’s attempt to comeack. A that is or the better. But the under-

ing power structures are not rea trans-ormed. It is sti an oi and gas econom thatoes not take advantage o its tremendous

uman potentia. So it is absoute true thatheir inuence is waning, but I woudn’t sa’s irreevant. It’s a permanent member o

he Securit Counci with a veto; it has tens thousands o nucear weapons, a argerm sti, a network o word reationshipsnd important regiona inuence in Centra

Asia. It’s sti a poweru state, but it’s no on-er one o the two most poweru states.

spoMb’sc?joMcC

w,“v,absgscomgsooo gboooo.” I hesitate to sa that it’s an Arab Spring be-cause the regime in Moscow is more resi-ient, but Putinism won’t ever be the same.Now that peope are not so earu, I thinkit’s going to be ver dicut or Putin to rueRussia. The Russians are rising up againstwhat, I think rom their point o view, was atremendous aront in the wa that he triedto simp trade jobs with Medvedev. It wasa terribe miscacuation on his part.

Ws Sc Co ws o km o b cczg boggg?

She was absoute right to speak up or ourvaues. I’ve man times criticized them,and the don’t ike it. I think the anti-west-ern rhetoric is part desperation on Putin’spart; but aso I do beieve that suspicion o the west is deep ingrained in him.

d nc m m s unn— unn g—m n ?less vunerabe, because the Georgian

war showed that the Russians can’t simpbehave ike the Soviet Union. The’re toointegrated into the internationa sstem todo that. But it woudn’t surprise me i thedisturbances in Moscow make them tr tobe more aggressive against the neighbors.I just don’t think the can pu it o.

a boggs ax n, wo

s s b , f ogo rss? is Moscow/psbg g?Oh, I don’t think it’s just Moscow andPetersburg. There was a ver interest-ing deveopment, which man peopedidn’t notice: when the Russian Ortho-dox Church—through its most prominentspokesman, Archpriest Vsevood Chapin—said peope were cear upset, and therehad to be answers about the eection.

It’s the rst time the Church been socritica. It has tentaces a over Russiaand I suspect the’re hearing rom prieststhroughout the countr that there is con-siderabe unhappiness.

And remember, whie the action ma bein the cities, povert in the rura areas is stiquite dire. So ou have severa eements tothe revot, not one. yes, in the cities de-mands or civi iberties come rom oungpeope who don’t have a memor, rea, o the repression o communism, and there-ore are not earu. But it’s not cear to methat ibera orces woud be popuar in the

rura areas. We have to be a itte careu notto assume that this revoution is a a iberarevoution. In act, the discontent in the ru-ra areas coud take the orm o more sup-port or Mother Russia nationaism—andremember the Communist part sti hassignicant support there and coud gainrom a kind o anti-Putin revot.

ThE fighT ovEr ruSSia’S SouL

A conversation between Sir Harold Evansand Condoleezza Rice

Q&a

Evans’sull interview with Secretary Riceis at Reuters.com/Condoleezza.



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