The_Economist_-_7th13th_March_2026_-_The_Economist

MARCH 7TH–13TH 2026 ANTHROPIC AND THE REAL RISK OF AI A WAR WITHOUT A STRATEGY C002 -- 1 of 78 -- 3 The Economist March 7th 2026 Contents The world this week 9 A summary of political and business news Leaders 11 War in Iran No strategy 12 Artificial intelligence AI danger gets real 13 China’s growth woes No more half-measures 13 Europe’s capital markets Unleash the pensions 14 British politics Best of frenemies Letters 17 On Britain’s labour market, reducing poverty in America, Mexico’s exports, a history of the potato, tenor singers By Invitation 18 Yair Lapid, Binyamin Netanyahu’s fiercest critic, argues for war Briefing 19 America and Iran The third Gulf war 22 The Telegram Netanyahu, an early winner United States 23 Trump’s big gamble 24 MAHA on the march 25 Gavin Newsom’s audition 26 The end of the swim test 27 The first foreign foray 28 Lexington The audacity of Donald Trump America at 250 30 A house divided 35 By Invitation Christina Snyder on Andrew Jackson The Americas 36 Argentina reforms apace 38 Cuba’s divides deepen Asia 39 Japanese nuclear power 40 The decline of Kashiwazaki 41 Media freedom in India 41 Malaysia’s anti-corruption commission 42 Banyan The colours of India China 43 The new BuBe railway 44 IVF in China 45 Growth targets 46 Chaguan China and Iran Africa 47 Growth in Africa 48 Africans in Ukraine Contents continues overleaf ⏩ On the cover Donald Trump must find a way to cut short his ill-considered war: leader, page 11. Neither Iran, nor Israel, nor the Gulf will ever be quite the same: briefing, page 19. If the war goes badly, will America’s president cut his losses or double down? Page 23. Troubled markets, page 70. The Israeli theory of war: The Telegram, page 22. China and Iran: Chaguan, page 46. The war is just, argues Israel’s opposition leader: By Invitation, page 18. Ayatollah Ali Khamenei: Obituary, page 86. Iran’s scintillating cinema: Back Story, page 82 Anthropic and the real risk of AI The spat between America’s government and one of its leading labs makes an AI disaster more likely: leader, page 12, and analysis, page 66 America at 250 A house divided: 1830-77, page 30. Christina Snyder on Andrew Jackson: By Invitation, page 35 Bits in orbits Does it really make sense to put data centres in space? Page 76 French nukes France lays out its new nuclear-deterrence doctrine for Europe, page 49 I hope you are well How to start an email: Bartleby, page 63 Schumpeter What the heirs to General Electric did next, page 65 → Download The Economist’s app for articles, podcasts, videos and more, published throughout the week. C002 -- 2 of 78 -- 4 The Economist March 7th 2026 Contents © 2026 The Economist Newspaper Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Newspaper Limited. The Economist (ISSN 0013-0613) is published weekly except combined issues in July and December, by The Economist Newspaper Limited, 900 3rd Avenue, 16th Floor, New York, NY 10022-5088. The Economist is a registered trademark of The Economist Newspaper Limited. 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Published since September 1843 to take part in “a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress.” Editorial offices in London and also: Amsterdam, Beijing, Berlin, Brussels, Cape Town, Chicago, Dubai, Lagos, Madrid, Mexico City, Montevideo, Mumbai, Nairobi, New Delhi, New York, Paris, San Francisco, São Paulo, Shanghai, Singapore, Taipei, Tokyo, Washington DC PEFC certified This copy of The Economist is printed on paper sourced from sustainably managed forests certified by PEFC www.pefc.org PEFC/29-31-296 Volume 458 Number 9489 Europe 49 French nuclear doctrine 50 Baden-Württemberg’s fearful election 51 Spain’s posturing PM 51 Taming Nordic populism 52 Baltic weekend warriors 53 Charlemagne The muddled power Britain 56 New class politics 57 The spring forecast 58 A transatlantic tiff 59 Bagehot Dubai snobbery Business 60 Brighter times for European tech 61 Dubai and the Iran war 62 Bayer, moving on? 63 Bartleby Email greetings 64 Formula One’s new fans 65 Schumpeter GE’s heirs Briefing 66 AI safety Accelerate like hell Finance & economics 70 The Iran energy shock 72 Europe’s pensions bonanza 73 Is AI raising power prices? 73 India’s refreshed GDP 74 Buttonwood Stocks and gun barrels 75 Free Exchange New growth theories Science & technology 76 Data centres in space 77 Microbiomes and mental health 78 Genetically engineered fruit 79 Well Informed Magnesium Culture 80 Sycophantic AI 81 The Economist reads: Iran 82 Back Story Movies v mullahs 83 Album listening parties 83 Punch the monkey 84 Celebrating animation Economic & financial indicators 85 Statistics on 42 economies Obituary 86 Ayatollah Ali Khamenei, Iran’s Supreme Leader C002 -- 3 of 78 -- Imported by Laurent-Perrier US - www.laurent-perrier.com It takes time to become an icon, Vincent van Gogh © Musée d’Orsay, Dist. GrandPalaisRmn / Patrice Schmidt Imported by Laurent-Perrier US - www.laurent-perrier.com C002 -- 4 of 78 -- 9 The Economist March 7th 2026 The world this week Politics America and Israel launched an extensive attack on Iran, as Donald Trump promised, among many other claims, to end the country’s nuclear programme once and for all. Ayatollah Ali Khamenei, Iran’s supreme leader since 1989, was killed when his compound in Tehran was bombarded by missiles. America said its of- fensive was on a much larger scale than the “shock and awe” tactics used against Iraq in 2003. An American submarine sank an Iranian warship near the coast of Sri Lanka, the first known firing of a torpedo by America in combat since the second world war. The Sri Lankan navy rescued dozens of sailors from the waters. Over 80 bodies were recovered, and others unaccounted for. Iran retaliated by firing drones and missiles at Israel and across the region, including at Arab countries. Most were intercepted, but some of the targets hit were America’s embassy in Riyadh, which suffered minor damage, a port in Oman, luxury hotels in Dubai, which were clipped by falling missile debris, and a base housing American troops in Qatar. Iran has crossed a red line, said Qatar’s foreign min- istry. Turkey said that NATO defence systems had shot down an Iranian missile head- ing into its airspace. Iran later denied this and said it respect- ed Turkish sovereignty. Hizbullah, an Iranian-backed militia in Lebanon, fired rock- ets at Israel, prompting the Israelis to strike back, includ- ing at targets in Beirut. Israel also sent troops across the border. The Lebanese govern- ment, finally exasperated by Hizbullah, declared that the group’s military and security activities were illegal. Airlines cancelled flights to the Gulf region. Some planes were laid on to evacuate thousands of expat workers and their families from Dubai; some companies even sent private jets to rescue their staff. The costs to shipping rose sharply as marine insurers cancelled some contracts related to war risks in the re- gion. With oil tankers unable to traverse the Strait of Hormuz, energy prices soared. Brent crude traded near $84 a barrel, up from $70 recently. Qatar shut its liquefied-natural-gas terminal, which handles a fifth of the world’s LNG supplies. Gas futures jumped by more than 50% in Europe. American stockmarkets took a small knock at the prospect of an extended conflict, but started to bounce back in the middle of the week. Markets fell particularly hard in Asia, which is heavily dependent on energy shipments from the Gulf. South Korea’s main share index, which had been on a spectacular run, plunged by 12%, the most-ever in a single day, before rebounding. Conflagration Dozens of people were killed in Pakistan during widespread protests against the attack on Iran. At least ten protesters were killed when they tried to storm the American consulate in Karachi. American marines stationed there opened fire, according to a report citing American officials, but it was unclear if their shots were aimed at or actually struck any of the protesters. Local police and security were also present during the disturbance. Fighting between Afghanistan and Pakistan is turning into their worst conflict for years. Pakistan recently struck sites in Afghanistan that it said were being used by terrorists who are supported by the Taliban government in Kabul. It has now broadened its offensive to include the Taliban’s military facilities, including the Bagram air base north of Kabul. Afghan and Pakistani troops have also clashed along their border. Britain’s prime minister, Sir Keir Starmer, said America could use British bases to launch limited operations against Iran, but only if they were defensive. Britain will not join offensive action, said Sir Keir. A British base in Cyprus was hit by an Iranian drone. “He has not been helpful,” said Mr Trump. “This is not Win- ston Churchill that we’re deal- ing with.” The American presi- dent threatened to halt all trade with Spain over its refusal to let the US use bases there. Sir Keir’s critics accused him of trying to placate the anti-war left, following his Labour Party’s loss of a former strong- hold at a by-election for Parlia- ment. The seat, in Greater Manchester, was won by the populist-left Greens, who campaigned to win over a substantial Muslim electorate in the area. The populist-right Reform UK came second, pushing Labour into an embar- rassing third place. Emmanuel Macron announced that France would increase its nuclear-weapons capability, and launch a new nuclear- armed submarine in 2036. “The next 50 years will be an era of nuclear weapons,” the French president said, as Europe con- tends with nuclear threats from Russia. France will also work with Britain, Belgium, Den- mark, Germany, Greece, the Netherlands, Poland and Swe- den on a new “forward deter- rence” strategy that will involve joint exercises. The French president will have the ultimate say over firing the missiles. Everything, everywhere American special forces are supporting troops in Ecuador in a military operation against drug-trafficking sites, accord- ing to the Pentagon. The Amer- icans are there in an advisory role, it said, and not participat- ing in the raids against “desig- nated terrorist organisations”. María Corina Machado, Venezuela’s main opposition figure, pledged to return to the country in a few weeks to assist with an “orderly, sustainable and unstoppable transition to democracy”. Delcy Rodríguez, the leftist regime’s interim president, warned that if Ms Machado returns she will have “to answer to Venezuela” for her support of America’s mil- itary intervention in January, which removed Nicolás Madu- ro from power. Voters in Nepal headed to the polls in a general election. The election was called following student-led riots last Septem- ber in which scores of people were killed, causing the prime minister to resign. America imposed sanctions on Rwanda’s army and four of its senior officers for violating an American-brokered ceasefire in eastern Democratic Repub- lic of Congo. Fighting in the region has continued since the deal was struck in December, with M23, a rebel group backed by Rwanda, pushing deeper into the countryside. The European Medicines Agency recommended for approval the first one-day, single-dose oral cure for one of the most common forms of sleeping sickness, a fatal parasitic disease prevalent in Africa. The cure is one of sever- al being developed and tested in Africa to help eliminate neglected tropical diseases. C002 -- 5 of 78 -- 10 The Economist March 7th 2026 The world this week Business Donald Trump ordered Amer- ican government agencies to stop using Anthropic’s AI technology within six months amid a row over its use in de- fence. The Pentagon wanted to use Anthropic’s AI for all legal purposes, but the startup want- ed safeguards in place when it came to its use for mass surveil- lance as well as for autonomous weapons. Anthropic is an “out-of-control radical left AI company”, fumed the presi- dent. It was pronounced a supply-chain risk to national security, an unprecedented designation for an American firm, although the tech is still reportedly being used in the Iran attacks. Anthropic and the Pentagon are said to be in talks to resolve their differences. Where angels fear to tread OpenAI stepped into the breach and signed a contract allowing the Pentagon to use its AI models, which it said dealt with Anthropic’s ob- jections. A few days later Sam Altman, the startup’s boss, said he would amend the contract. The rush to sign the deal “looked opportunistic and sloppy”, he said. “The issues are super-complex and demand clear communication.” Block, which owns Cash App, the Square payments app and bitcoin assets, announced that it would cut more than 40% of its workforce, or 4,000 jobs. Jack Dorsey, Block’s chief executive, said AI tools have “changed what it means to build and run a company,” and that most firms would soon make “similar structural chang- es”. Sceptics weren’t so sure, and said Mr Dorsey was using AI as a cover to slash staffing costs. The number of people Block employs has ballooned since the pandemic. Brendan Carr, chairman of the Federal Communications Commission, suggested that Paramount’s proposal to buy Warner Bros Discovery could be approved, as it didn’t repre- sent the same threat to compe- tition as Netflix’s offer. The Department of Justice will carry out the work on an anti- trust investigation into the combination of the two firms, which brings together big Hollywood studios as well as the CNN and CBS News net- works. Netflix dropped its bid after Warner described Para- mount’s proposal as superior. Rachel Reeves, Britain’s chan- cellor of the exchequer, pre- sented her spring statement on the country’s economic out- look to Parliament. The accom- panying forecast from the Office for Budget Responsibil- ity lowered its estimate of GDP growth for 2026 from 1.4% to 1.1%, and projected that un- employment would rise to 5.3%. Annual inflation is expected to fall to 2.3% (it was 3% in Janu- ary). Welfare spending is set to rise to 10.9% of GDP. Observers described it as a snoozefest. That probably pleased the Labour government, which is trying to project economic stability. Events in Iran, however, might mean that some of the forecasts quickly become outdated. The euro area’s annual inflation rate rose to 1.9% in February, from 1.7% in January. Surging energy prices caused by the Iran conflict are expect- ed to add to inflationary pres- sures in Europe, and elsewhere. The Chinese government set this year’s GDP growth target at between 4.5% and 5%, the lowest range in decades, on account of the country’s prop- erty slump. Last year the econ- omy expanded by 5%, right on the official target. China also laid out a strategic plan to boost AI and its “core digital economy industries”, and pledged to keep its competitive advantage in rare earths. BYD, the world’s biggest maker of electric vehicles, reported another drop in monthly sales. The Chinese company sold 190,190 new-energy vehicles in February, a drop of 41% year on year, in part because it is contending with a slowing domestic market. The Brazilian economy grew by 2.3% in 2025, its slowest pace since the pandemic in 2020. GDP expanded by just 0.1% in the fourth quarter compared with the previous three months. The central bank is expected to cut interest rates for the first time since May 2024 when it next meets. Greg Abel issued his first annu- al letter to shareholders at Berkshire Hathaway, having taken over the job of chief executive from Warren Buffett in January. Mr Abel described Berkshire’s massive cash pile of $373bn as a “strategic asset” that would enable it to make acquisitions “at the right time”. Brewer’s droop BrewDog, a British craft-beer company which has seen its fortunes fall in recent years, agreed to sell its global brand, British brewing operations and 11 brewpubs to Tilray Brands, a “global cannabis and wellness leader”. Thirty-eight pubs will close immediately. BrewDog was founded in 2007 and be- came immediately popular with hipsters for its beers, such as Punk IPA. Its success spurred many imitators and now a lot of pubs sell selections of what they describe as craft beer. *Made in March 2026 Britain, tax as % of GDP Source: OBR Forecast 40 38 36 34 32 31 28 26 24 22 2020 Fiscal years ending March C002 -- 6 of 78 -- Leaders 11 The Economist March 7th 2026 IT IS RARE for one head of government to order the death of another. Yet on February 28th America’s president and Isra- el’s prime minister did just that, killing Iran’s 86-year-old su- preme leader, Ayatollah Ali Khamenei. The decapitation of the Iranian regime reflects the devastating operational success of “Operation Epic Fury”. But Mr Khamenei’s place was immedi- ately taken by a triumvirate. The next supreme leader could be named soon—perhaps his own son unless he, too, is killed. That augurs something more subtle and worrying: that the op- eration is failing to achieve its political goals. It is naive to say, as some of Mr Trump’s cheerleaders do, that because Mr Khamenei was wicked (and he surely was), any sort of war makes sense. When you command a machine as lethal and overwhelming as America’s armed forces, united in this operation with the battle-hardened Israel Defence Forc- es, you have a special responsibility to define what you want to achieve. That is not only an ethical requirement; it is a practi- cal one, too. War aims direct the campaign; they define the sacrifices the state imposes on its own people and the enemy; and they determine when the fighting should end. In this war, Israel’s aim is clear: to demolish the threat posed by Iran’s regime. By contrast, Mr Trump and his cabinet have offered a mess of shifting assertions—about Iran’s mis- siles, nuclear weapons, regime change, follow- ing Israel’s lead, a “feeling” Iran was about to attack and settling scores after decades of en- mity. Politically, vagueness gives Mr Trump room for manoeuvre (see Lexington). Strategi- cally, his failure to say what Epic Fury is for is its biggest vulnerability (see Briefing). The result is a split-personality war. One face is operational. America and Israel have destroyed Iran’s navy and grounded its air force. They are wrecking its missile capability and its arms industry and tar- geting the regime and its brutal enforcers. Dominance of the skies means that America and Israel can fight on at will. Inter- ceptor missiles are meanwhile defending bases and cities in Is- rael and the Gulf countries, even as Iran strikes at more targets than it did during the conflict last June. So far, at least, there are enough interceptors to keep going. The other face of this war is political, and it emerges from Iran’s strategy, which is about sowing doubt and confusion. To survive would count as victory for Iran’s regime. So far, it is suc- ceeding. Far from falling apart, it is rushing to escalate hori- zontally—a fancy way of saying it is lashing out in all direc- tions. This has a number of consequences. One is that other countries are being sucked in. Iran has at- tacked the Gulf states, which have bet their future on being ha- vens from the chaos gripping the rest of the Middle East. Fighting has also erupted in Lebanon as Israel smashes Hiz- bullah, Iran’s main proxy. France and Britain will defend their bases from attack. On March 4th NATO air defences shot down an Iranian missile bound for Turkey. Another consequence is economic (see Finance & econom- ics section). Iran has tried to shut the Strait of Hormuz, cutting off perhaps 20% of global oil supplies. It has also struck energy infrastructure, including the world’s biggest gas-liquefaction complex and Saudi Arabia’s largest refinery. The price of Brent crude is up by 14% since February 27th, to $83 a barrel. A mega- watt-hour of natural gas in Europe costs €54 ($63), over 70% more than last week. As Asian buyers scramble for supplies, prices could go higher. The global economy could yet suffer a hit. If oil reaches $100 a barrel, GDP growth could be lowered by 0.4 percentage points and inflation raised by 1.2 points. The third potential consequence is chaos inside Iran. Roughly 40% of its 90m people belong to ethnic minorities, in- cluding Arabs, Azeris, Baluchis, Kurds and Lurs. The Arab spring showed how countries can fall apart. America and Israel are putting pressure on the regime by backing Kurdish insur- gents—a reckless idea that could end up stoking Persian na- tionalism or civil war. Mr Trump may not care about this, but he could not ignore the effects spilling over Iran’s borders into the Gulf states, Iraq, Syria and Turkey. The risk is that Mr Trump cannot bear to quit so long as the markets and polls deny him the acclamation he craves—and that may last for as long as Iran can release even sporadic mis- siles and drones. Today barely a third of Americans favour the battle in Iran (90% backed invading Afghanistan in 2001). America may be an energy exporter, but its voters detest costly petrol. He may be tempted to seek an undeniable win by bombing the re- gime out of existence. But even with America’s military clout, he might not succeed. Mean- while all those risks would continue to harm the region and the world economy. Mr Trump would do better to narrow his war aims. His goal should be to degrade Iran’s military capabilities and then stop. He is almost there. Some will argue that the job would be only half-done. Obvi- ously, leaving the regime as a wounded beast would be heart- break for the oppressed Iranian people. Even if Mr Trump wants peace, Iran could continue to lash out for a while, at least, revelling in its status as a symbol of anti-American resis- tance. The surviving regime may reject a nuclear deal—indeed, like North Korea, it may think a bomb is its only protection. If it rebuilds its nuclear programme, Mr Trump may have to strike again in months’ or years’ time. It is a bleak prospect. But it would be better for America to declare victory early than limp out of an unpopular war because of exhaustion. Less fury, more forethought These are the fruits of Mr Trump’s impulsive approach. Before this war, Iran’s regime was weaker than at any time in its 47- year history: it could have fallen without a single American bomb. Mr Trump may get lucky, but he is more likely to end up having to deal with regional chaos or a new hardliner. Sur- rounded by sycophantic courtiers, Mr Trump has become rash in his second term. His opportunistic grabs for power when- ever he sees weakness are dangerous. America needs a strategy in Iran, just as it needs one in the world. ■ Donald Trump must find a way to cut short his ill-considered conflict with Iran A war without a strategy C002 -- 7 of 78 -- 12 The Economist March 7th 2026 Leaders IN THE PAST week an extraordinary fight over artificial intel- ligence has broken out. The Trump administration’s row with Anthropic, one of America’s leading AI labs, over the Pen- tagon’s access to its models will be a test of who controls the world’s most potent technology. Its outcome will shape every- thing from America’s national security to the development of AI. It could also make an AI-enabled disaster more likely. On each of these counts, you should be alarmed. In the first big clash between the concern for AI safety and the imperative to race ahead in an attempt to dominate the technology, Amer- ica’s government has clearly shown it is on the side of speed. Because long-feared safety risks involving AI are already be- coming realities, more such tests are at hand. Experts warn that the world is hurtling towards AI-mageddon. America’s rash embrace of risk makes that more likely. The Pentagon fell out with Anthropic over the govern- ment’s demand that it should be allowed to use the company’s models for all legal purposes. Anthropic (a sponsor of The Economist’s “Insider” shows) refused on two grounds. First, Dario Amodei, the chief executive of Anthropic, fears that AI could one day be used to analyse the digital footprints of ordinary Americans, a form of surveillance that today’s laws have not caught up with. Under Mr Trump, Immigration and Customs Enforcement is already using AI to analyse vast amounts of data to speed up de- portations. Extending that to Americans does not seem far-fetched. Second, Mr Amodei is worried about the use of autonomous weapons. AI remains un- predictable and immature as well as extraordi- narily powerful. Because the technology could go rogue, he argues, it is too soon to take hu- mans out of the loop. The administration has responded to Anthropic with fury and retribution. President Donald Trump branded the compa- ny “leftwing nut jobs” who were trying to “dictate” how Amer- ica’s “great military fights and wins wars”. He has given the federal government six months to rip up its contracts with An- thropic. Pete Hegseth, the secretary of war, says he will desig- nate the firm a “supply-chain risk”. This could be bluster—Anthropic’s models are being used in the attacks on Iran. But if the threat is enacted, then for the first time an American company will be classed as a security risk and prevented from doing business with defence contrac- tors. On March 4th Anthropic was in damage control after a leaked memo from Mr Amodei said it was under fire for not giving “dictator-style praise to Trump”. With a normal government and a normal technology, the dispute would surely have been quickly sorted out. But this is not a normal government, and AI is not a normal technology. Our briefing this week explains how both Mr Amodei’s fears reflect wider concerns about the dangers it poses. As with en- hanced government surveillance, one set of worries is that AI is too powerful. In December Anthropic’s Claude chatbot was told by hackers to break into the Mexican government’s re- cords, supposedly as part of a security test; it found and ex- ploited vulnerabilities and stole 150GB of taxpayer details, vot- er records and employee credentials. Researchers reckon that AI could be used to develop analogues of the toxin ricin that cannot be traced using conventional methods, because of nov- el protein structures. The other set of worries, as with autonomous weapons, is that the models could stop heeding human instructions. An- thropic thinks that, because so much of its code is now written by AI, detecting whether it is drifting away from human in- structions is hard to monitor. Many models now demonstrate a degree of what experts call “situational awareness”: when asked to delete themselves they reason that the situation is a test, and refuse to do so. Against this backdrop, the administration’s treatment of Anthropic shows how much it prizes AI as a tool of national power. Instead of being prepared to set out clear rules on how the technology will be used, the government is making an ex- ample of a firm that dared to raise concerns, even if that means hurting homegrown innovation. This can only encourage a race to the bottom. Already, OpenAI, Anthropic’s chief rival, has leapt into the breach, striking a deal with the Pentagon that superficially resembles the one Anthropic had sought, but which is closer to what the Pentagon was after. Where America leads, the world will surely follow. The pattern is being repeated as com- panies and governments downgrade safety concerns. Modelmakers have spent hundreds of billions of dollars investing in the comput- ing power they need to race ahead to the next upgrade. That puts them under intense pres- sure to go as fast as they can to turn a profit. Even Anthropic has watered down its safety protocols in re- sponse to competition. At a recent AI summit in India, most governments were keener to discuss fair access to the technol- ogy than safety. You might have hoped that the governments of China and America, home to the world’s most advanced AI labs, would unite to set global standards—and then ensure that they did not pay a penalty by imposing them on everyone else. But the two superpowers are locked in a race of their own, because they both see the domination of AI as the key to dominating the rest of the 21st century. Breaking out No wonder that, as AI grows rapidly more powerful, experts in the field are gloomily predicting a catastrophe. Some warn of a “Chernobyl moment”: the use of AI that leads to a disaster which causes either huge economic damage or loss of life. The parable of Anthropic leads to the bleak conclusion that this danger is becoming more likely. Perhaps the best the world can hope for is a small-scale disaster, which jolts China and America into pressing for safety precautions—not Cher- nobyl so much as Three Mile Island. But worse is possible, too. Alas, action is unlikely to come until it’s too late. ■ The squabble between America’s government and Anthropic makes an AI disaster more likely AI danger gets real Artificial intelligence C002 -- 8 of 78 -- 13 The Economist March 7th 2026 Leaders ⏩ EVER SINCE turning communist, China has set top-down targets for its economy. Mao Zedong wanted to double steel output in a year, and crippled the country trying. During his rule, China often fell woefully short of its goals. After his death, it often comfortably surpassed them. Lately policy- makers have tried to ensure it does neither; their growth tar- gets serve both as a floor and a ceiling to their ambition (see chart). They should aim higher. The latest target was unveiled on March 5th, during the Na- tional People’s Congress (NPC), China’s rubber-stamp parlia- ment. The government set a growth objective of 4.5-5% in 2026, lower and looser than last year. This has elicited a variety of responses. Some economists think the target is still too high. China’s workforce is shrinking, its prop- erty market is moribund, consumers are cau- tious and exports may not come to the rescue as they did last year. Although the dangers of the trade war have receded, actual war threat- ens some of its markets in the Middle East. Others argue that the target is just right. The NPC delegates will almost all vote in fa- vour. Even among professional forecasters, the consensus guess is that China will grow by 4.6% this year, if only because policymakers will steer it there or thereabouts. A third camp thinks the whole exercise is fanciful. China’s growth figures, they argue, bear little relation to reality. It hard- ly matters whether a made-up number meets a made-up target. All three camps are wrong. China’s new target is too low. Judging by the country’s recent record, it will set a ceiling on the government’s efforts to revive demand, perpetuating the economy’s biggest problems (see China section). The proof lies in China’s prices. They have been falling, by some measures, for three years. This persistent deflation is a worry in itself—it increases the burden of debt, limits the room for monetary easing and mutes price signals, given the reluc- tance even in China to cut wages in money terms. It is also a sign of a deeper problem. It suggests that output is falling short of what the country could produce if its capital and la- bour were more fully employed. To close that gap in 2026 the economy would have to grow by more than 5.3%, by a conser- vative estimate. Four and a half percent will not do it. One can agree with this diagnosis but chafe at the prescrip- tion. Some economists may object to targets in principle, dis- missing them as a relic of central planning. We sympathise. We would much rather China adopted something akin to the inflation targets that guide other economies. But even in those places, central banks take a view on how fast the economy can grow to keep inflation in line. They too have a growth target, if only an implicit one. Another worry is that a higher target will encourage wasteful investment. But there are other ways to speed up growth. More generous social spending and a credible fiscal backstop for the property market would give anxious households the confidence and the means to spend more freely. And the alternative—un- necessarily slow growth—is also scandalously wasteful. In China’s cities more than 16% of youngsters, the country’s best-educated generation, do not have a job. Other workers languish in rural backwaters. A greying society cannot afford to be so profligate with its fresher-faced cohorts. China’s reluctance to do whatever it takes to stop deflation is easy to understand. A previous crop of leaders overreacted to the global financial crisis in 2007-09, releasing a “flood-like” stimulus that swept away financial discipline and carried infla- tion high above the government’s threshold. Back then, the state did too much. Now it is doing too little. China’s annual targets, five-year plans and centenary goals are supposed to keep its policymakers’ eyes on the future. But their instincts are dangerously rooted in the past. ■ The world’s second-biggest economy needs a more ambitious growth target China, GDP % increase on a year earlier 8 6 4 2 0 26 24 22 20 18 16 14 2012 Target range Target No more half-measures China’s growth woes EUROPE’S ECONOMIC problems include a greying popula- tion, a lack of innovative firms and puny capital markets. Public pensions weigh more on government budgets with eve- ry passing year. But what if Europe could turn those weakness- es into strengths by using its pension savings to boost markets and finance entrepreneurs with long-term capital? Europe’s pensions were not designed to turn workers into capitalists. In 1889 Otto von Bismarck, Germany’s “iron chan- cellor”, invented the pay-as-you-go system, whereby current workers pay for current pensions. The idea was to “bribe [workers] to regard the state as a social institution”. As it turns out, they see every increase in the retirement age as a betrayal of that promise. The system has therefore come under severe strain as populations have aged. Workers have had to hand ov- er more in contributions, and taxpayers have plugged the re- maining shortfall. In Germany a third of the federal budget is projected to be passed on to the pension system this year. At the same time, Europe’s capital markets are sorely under- developed. The combined value of stockmarkets in the EU is 85% of GDP, compared with 220% of GDP in America. That matters for innovation, because market-based funding is more suitable for risky R&D than bank lending. Moreover, venture- A single reform could offer both security in old age and dynamism now Unleash the pensions Europe’s capital markets C002 -- 9 of 78 -- 14 The Economist March 7th 2026 Leaders ▸ capital investors need a deep capital market into which they can sell their holdings. There are exceptions, however, and they are instructive. Sweden has created funds that buffer its pay-as-you-go system by investing in markets. Some contributions no longer fund to- day’s pensioners, but go into personal-investment accounts in- stead. The result is pension assets worth about $671bn, or 110% of GDP. It isn’t an accident that no other EU country has creat- ed more unicorns per head. Dutch pension savers have accu- mulated assets of around 145% of GDP in collective funds; since 2023 these are freer to invest in riskier assets. According to Morgan Stanley, Denmark and Switzerland boosted assets by about 20% of GDP in a decade after expanding market- based occupational pensions. Were that copied across the eu- ro zone, more than €3trn ($2.58trn) would be available (see Fi- nance & economics section). Europeans used to state-run systems will wince at the idea of exposing their future incomes to the markets. And capital- market theorists may add that there will not be much of a pay- off if savers diversify by flocking to America instead. Yet high public-debt burdens mean that relying on state pension prom- ises is no longer as attractive as it once was. And worthy as di- versification is, in practice many pension funds will prefer to keep a big chunk of their money at home. Those European governments that do not have high debt- servicing costs should start building debt-funded buffer funds, invested professionally, for their pay-as-you-go systems. Occu- pational pensions should be deployed into capital markets by default. Savers should be allowed to direct some of their con- tributions to an individual investment account. The resulting gap in the public-pension system could be filled with wider fis- cal deficits in the short term, because the long-run benefit is a more sustainable system that relies less on the public purse. Even with these reforms, the transition to a more market- based system will take time. All the more reason to start now. The European Commission has long sought to stitch together capital markets across the EU. But those efforts will not amount to much if each market remains tiny. Europe’s tech scene is showing signs of life (see Business section). The po- tential returns on pension reform have never been higher. ■ FOR 15 YEARS British politics has been rocked by an insur- gency on the populist right, led by Nigel Farage. Now it is also seeing an insurgency from the populist left. The Green Party, a fusty and largely irrelevant outfit until it was given a makeover by Zack Polanski, its self-styled “eco-populist” lead- er, scored a stunning victory on February 26th in a by-election in Gorton and Denton, in Manchester. Labour was pushed into third place in its heartland, behind Mr Farage’s Reform UK. Jointly these twin populists have just 13 MPs but poll higher than Labour and the Tories combined. In the by-election they won 69% of the vote. The trend will be replayed many times at local-government elections in May. At first glance this looks like a simple story about the mutually loathing poles of radical left and right. In reality the dynamic is more complex, and a lot more dangerous. Though the Greens and Reform present themselves as opposites, they are in some ways similar. Be- cause each fuels the other’s success, their rela- tionship is symbiotic. Both share a strategic interest in supplanting the parties of the cen- tre. A great day for Mr Polanski in Gorton and Denton meant a very good one for Mr Farage. Not rivals, but frenemies. To their supporters that will sound absurd. Mr Polanski calls Mr Farage “a fascist”; Mr Farage says Mr Polanski is a “lu- natic” supported by “all the heroin smokers”. On immigration, the Palestinians, transgender people, climate and much else they are vociferous opponents. In Gorton and Denton the Greens courted local Muslim voters; Mr Farage claimed the campaign had been “sectarian”: ie, somehow un-British. But that cultural gulf is the point. The two parties share a project in pulling apart Labour’s fragile coalition of progres- sives and traditionalists. Nothing mobilises their supporters like the spectre of the other extreme, and declaring that they alone can keep it from power. Thus Mr Farage and Mr Polanski are eager to lock horns. The more young voters see Mr Polan- ski berating Mr Farage on Instagram, the better for them both. It is the same among populists across Europe, but in Britain the incentives are amplified by the first-past-the-post electoral system. Mr Farage knows his path to office will be eased if the Greens do well, because small gains in their vote greatly re- duce the notional majorities of Labour MPs in his target seats. Their voters have more in common than they think (see Britain section). Compared with supporters of mainstream parties, they earn less and are more likely to rent. Their politics reflect a loss of status. Many prospective Green voters have paid a lot for university de- grees that turned out not to be the ticket to the middle-class jobs they imagined; many Re- form supporters have lost the well-paying in- dustrial work of their youth. Both sets of voters are susceptible to zero- sum thinking. After two decades of stagna- tion, many doubt that the pie will grow much and are open to being told that someone else has taken too big a slice. Reform blames scrounging migrants. The Greens blame the rich. Both parties vow to raise living standards by squeezing their respective bogeymen. But their policies would make Britain poorer. Both are sceptical of multinationals, trade and building anything anywhere near anyone. For the parties of the centre, the sensible response would be to offer policies to boost growth: making it easier to build, re- forming welfare to encourage work, and so on. The snag is, such policies are often unpopular. And as populists lure away voters with simple, phoney cures for every ill, neither Labour nor the Tories seem to have the courage to be sensible. ■ Nigel Farage and Zack Polanski, Britain’s twin populists, have a symbiotic relationship Best of frenemies British politics C002 -- 10 of 78 -- 17 The Economist March 7th 2026 → Letters should be addressed to the Editor at: The Economist, The Adelphi Building, 1-11 John Adam Street, London WC2N; Email: letters@economist.com. More letters available at: economist.com/letters Britain’s labour laws You are right to note that Britain’s trade-union laws are returning to the 1970s, high- lighting the scale of change and the risks of moving too far and too fast in a labour market already under strain (“Ready, steady, unionise!”, February 7th). Strong employment standards and constructive workforce representation matter, and retailers want to work with the government to ensure work pays and living standards rise. But the real test of reform is whether it expands job opportunities without unintentionally reducing them. The Bank of England has been clear that the labour market is cooling, with hiring intentions softening as employment costs rise and unemployment increases. In this context, the rapid expan- sion of trade-union powers and union-access rights risks add- ing more costs and uncertainty for labour-intensive sectors that provide millions of flexible jobs, delaying recruitment and investment. Recent analysis suggests that these provisions alone could cost businesses more than £1bn ($1.3bn) a year. The nature of work has also changed. Since the pandemic, flexibility has increasingly become a preference rather than a sign of insecurity. There is a real risk of regulating for a labour market that existed before covid, rather than the one workers operate in today. The Employment Rights Act can raise standards, but only if it is implemented with care and industry insight. Get the balance right and it can sup- port inclusion and living stan- dards. Get it wrong and it risks narrowing routes into work at precisely the moment the country needs them most. HELEN DICKINSON Chief executive British Retail Consortium London Poverty background I was surprised by the absence of historical context in the conclusions of a recent study on the merits of America’s welfare programmes (Free Exchange, February 21st). The authors contend that the na- tional poverty rate fell more dramatically (29 percentage points) in the decades before the Great Society programmes of the 1960s than in the 60 years that followed (16 points). They suggest that free-market forces of the 1940s, 1950s and early 1960s were more effective in alleviating poverty. This analysis is historically flawed on two counts. First, the starting-point of the initial time period (1939–63) falls in the final years of the Great Depression, when the national unemployment rate was still a staggering 17.2%. It stands to reason that as the country emerged from the Depression and experienced the post-war economic boom, the rate of poverty reduction would ex- ceed that which came later. Second, it is difficult to characterise this early period as one of unfettered free-market capitalism. During the war years, federal outlays hit over 40% of GDP. Meanwhile, the top marginal tax rate peaked at an astronomical 94% in 1945 and was above 90% during the 1950s until, notably, 1963. Failing to account for the redistributive effects of these fiscal policies strikes this histo- ry teacher as a glaring omission, one that ultimately obscures, rather than clarifies, the important question of how best to alleviate poverty. NATE BOWEN Social-studies department co-ordinator Mountain View High School Mountain View, California Trade winners Who wrangled the best trade deal from Donald Trump, you asked (“Comparative advan- tage”, February 14th)? The American government recently released its trade statistics for 2025, which show that Mexico’s total exports to the United States reached a record high for a single year. This was unfore- seeable a year ago, when The Economist wrote that Mr Trump’s tariffs were “his most extreme ever” (“Bad neigh- bour”, March 3rd 2025). And although you noted that the United States-Mexico-Canada Agreement shielded Mexico and Canada “from trade oblivi- on” (“Trick or treaty”, October 4th 2025), the fact that Mexico increased its exports, despite the appreciation of the Mex- ican peso against the dollar, makes the case for considering Mexico to be a winner. RENE CABRAL Professor of economics and finance EGADE Business School Monterrey, Mexico Sing it loud and proud It is indeed the case that the ever-changing social and cultural landscape is leading to a dearth of opportunities for children, and boys especially, to receive the kind of training their voice needs to develop the elasticity and control required to be a tenor (“The great tenor shortage”, February 14th). In England those church choirs that do still thrive have largely accepted girl choristers for many years, righting a gender injustice but inadvertently making it even less appealing for boys to join in. The weight of responsibility for filling the void has fallen on the shoulders of schools and provision is inconsistent. Success is largely down to the passion and ex- pertise of individual teachers, with pockets of excellence in both maintained and independent schools. ALEX OSIATYNSKI Director of music Stamford School Stamford, Lincolnshire It’s heartening to see stories on issues specific to our humanity. The tenor shortage isn’t likely to be solved by AI’s promises of efficiency, productivity, or financial gains, but instead by giving greater focus to those areas, like music, that make us truly human. That is, unless we decide as a society that we are OK with robot singers. JEREMY EIKENBERRY Gaithersburg, Maryland Letters Britain’s labour market, reducing poverty in America, Mexico’s exports, a history of the potato, tenor singers Tater tales As you say, the spud’s role in human history “is no small potatoes” (“Playing the tuber”, February 21st). John Gerard, a barber-surgeon and head gardener at the home of William Cecil, Elizabeth I’s chief adviser, grew potatoes, among other rare and exotic plants. He did this in the garden of his home in Hol- born, London. Gerard is best remembered for publishing in 1597, “The Herball, or Generall Historie of Plantes”, a dictionary of plants cover- ing 1,392 pages illustrated with more than 2,000 wood- cuts, including the first illustration of a potato. The text explains how the vegetable could be eaten, “rosted…boyled…or dressed any other way by the hand of some cunning in cookerie.” “The Herball” was updated by Thomas Johnson, an apothecary, who reminded readers that potatoes had once been banned in Burgundy for fear they could cause leprosy. ROBIN LAURANCE Oxford C002 -- 11 of 78 -- 18 The Economist March 7th 2026 Yair Lapid AS I WRITE these words, I am sitting in a bomb shelter in my home. With me are my wife, my daughter and three young se- curity guards who are a little embarrassed by the whole situation. This is not an easy moment; no one likes having their life threat- ened. But like an overwhelming majority of Israeli citizens, I be- lieve it is necessary. What has unfolded over the past days is the rarest of things in 21st-century conflicts: a just war. One in which there is moral clar- ity between good and evil. America and Israel did not embark on this operation in the name of economic or geopolitical interests, but because the world is in danger. If the Iranian regime succeeds in developing nuclear weapons, as it is trying to do, the world is in danger. If it continues to ad- vance its ballistic-missile programme, Israel and every other coun- try in the Middle East are in danger. If the ayatollahs remain in power in Tehran, the citizens of Iran are in danger. The rule of the ayatollahs is not a “government” in the sense we ordinarily understand the term. It is a terrorist organisation that has hijacked a state. Anyone who has asked in the past few days why Iran’s nuclear programme justifies going to war has been ask- ing the wrong question. The right question is this: what would have happened if al-Qaeda had possessed nuclear weapons on September 11th 2001? Would it have used them against America and Israel? The answer is simple: of course it would have. By exactly the same logic, if the Iranian regime acquires nuc- lear weapons it will use them. It has already used ballistic missiles in the past, and not only against Israel. That is the nature of this regime; these are its goals. Israel, as is well known, lives in a constant political storm. Within that storm I have fairly earned the title of “Netanyahu’s fiercest political rival”. I have been sharply critical of the way parts of the situation in Gaza have been conducted and of the way the government led by Binyamin Netanyahu has failed to get a grip on settler violence in the West Bank. Yet on this military campaign, I stand behind the government and behind the operation in Iran. Why? Because this is not political—it is existential. All of Israel stands united in the face of the Iranian threat, united behind our soldiers and our pilots, united in gratitude to President Donald Trump for the rare leadership and courage he has shown. On this issue there is no opposition and no coalition. In all my years in politics, I do not remember such consensus on any subject. It was clear to me, as it was to anyone engaged in the matter, that the Iranians were not negotiating in good faith in Oman and Geneva. They were simply buying time to enrich uranium and to build ballistic missiles. They dispatched their terror proxies, from Iraq to Lebanon, from Sudan to Gaza, to export chaos, terrorism and death across the Middle East. They used that time for another purpose as well: to continue crushing and murdering their own people. The cruelty with which the regime treated young Iranians who asked only for freedom and basic rights is not only heartbreaking; it is a lesson in the char- acter of Iran’s thuggish leaders. The Iranian regime does not hes- itate to kill tens of thousands of its own people. Why would it hes- itate to kill Americans, Israelis or moderate Muslims in places like the United Arab Emirates and Bahrain? Regimes like this always make the same mistake. They fail to understand that democracy is not a weakness; it is a source of strength. Because they themselves understand only threats and brutality, they assume that if they continue to threaten, no one will dare confront them. Instead, they have awakened the greatest mil- itary power humanity has ever known. That power has set itself difficult but achievable goals. Amer- ica and Israel will do what must be done: ensure that Iran will not have nuclear weapons, and will not have ballistic missiles and launchers. We must also strike the Revolutionary Guards and the Basij thugs in a way that prevents them from continuing to repress the Iranian people. Yet the question of whether this regime of terror survives does not depend only on America and Israel. The elimination of the “supreme leader”, Ali Khamenei, is not only justified, as befits the murderous dictator that he was; it could also be the moment when the Iranian people find within themselves the strength to change their lives. Iranian youth showed extraordinary courage when they took to the streets in January. Now we must wait and see whether they will produce their own Nelson Mandela or Lech Walesa to lead them to freedom. People all over the world have bitter memories of attempts to impose governments or systems from outside. That succeeds only when an authentic, unmistakable voice for freedom rises from within the people themselves. A message from Jerusalem In the first hours of the war, I sent a tweet in Persian with a mes- sage to the Iranian people that said: “To the people of Iran, you are not our enemies. We followed your protests with admiration and respect. We stand with you against this evil regime; a regime that has brought nothing but death and destruction to your country and to the entire region. When this war ends and this regime is gone, we will pray for peace between our historic nations and for the beginning of a new era for the Middle East.” For the sake of the Iranian people, I hope they will find the strength to change their own lives. If they do, then they will find Israeli hands stretched out for peace. ■ Yair Lapid is the leader of the centrist Yesh Atid party. He was the 14th prime minister of Israel. BY INVITATION The American-Israeli campaign in Iran is a just war, argues Israel’s opposition leader C002 -- 12 of 78 -- 19 The Economist March 7th 2026 Briefing America and Iran The third Gulf war OF THE MANY wars in the modern Mid- dle East, few have had a more pro- found impact than those in the Gulf. The first, in 1991, was the start of America’s uni- polar moment. It assembled a coalition that ejected Saddam Hussein’s occupying forces from Kuwait after just four days of ground fighting. Miles of scorched Iraqi ar- my vehicles along the so-called “highway of death” left an indelible image of Amer- ican might. Gulf monarchs decided to hew ever closer to America for protection. The second Gulf war, in 2003, ushered in an era of American self-doubt. Its army toppled Saddam’s regime within weeks, only to find itself bogged down for almost a decade fighting a vicious insurgency. The spectre of Iraq has hung over every military action since. George W. Bush hoped the in- vasion would unleash a democratic wave across the Middle East. Instead it swept away Iran’s main state rival in the region, clearing the way for a period of Iranian he- gemony as its allies cemented their power in Iraq, Lebanon and Yemen. The war that began on February 28th with an American and Israeli attack on Iran can rightly be called the third Gulf war. It has already drawn in all eight coun- tries that border the Persian Gulf, along with more than half a dozen others. Early events have been dramatic. Ali Khamenei, the supreme leader of Iran, was killed in an Israeli air strike at the war’s outset. Iranian drones have rained down on the normally placid cities of the Gulf. Global energy prices have soared. Many officials expect the fighting to continue for several weeks. How it will end is difficult to predict, in part because Do- nald Trump’s goals seem to be ever shift- ing. However it ends, though, the third Gulf war will prove no less transformative than its predecessors. Iran will be dimin- ished. Gulf states will have to contend with their newfound vulnerability. Along with America and Israel, they may also have to contend with an enfeebled but persistent threat, not unlike the one Iraq posed in the decade after its defeat in Kuwait. A high toll As The Economist went to press, a Wash- ington-based Iranian human-rights group said that 1,114 civilians had been killed, in- cluding more than 180 children. The mili- tary death toll is unknown. Israel has car- ried out a series of assassinations meant to decapitate the regime. Along with Mr Kha- menei, dozens of other officials have re- portedly been killed, among them the de- fence minister and the head of the Islamic Revolutionary Guard Corps (IRGC), the re- gime’s praetorian guard. It is impossible to generalise about how Iranians feel: theirs is a diverse country of 92m people. There were celebrations the DUBAI, JERUSALEM, KAPIKOY AND RIYADH Neither Iran, nor Israel, nor the Gulf will ever be quite the same ⏩ → ALSO IN THIS SECTION 22 The Telegram: Israel’s rules C002 -- 13 of 78 -- Briefing America and Iran 20 The Economist March 7th 2026 ▸ ⏩ night Mr Khamenei was killed and scenes of mourning the next day. Some opposi- tion activists argue that Iranians who ini- tially supported a war against the regime are already tiring of it, having endured al- most a week of bombardment with no end in sight. Others argue the opposite: that Iranians fear the war will end too soon, with the regime intact and ready to vent its spleen on its own people. All of these views could be heard this week in Kapikoy, just across the Iranian border in Turkey. Jasmine and her partner found seats on a passenger train leaving Tehran on March 1st bound for Turkey. The train made it as far as Tabriz, some 200km from the border, before stopping. She wait- ed on board for seven hours before eventu- ally continuing the journey by taxi. Sur- rounded by snow-capped mountains on the Turkish side of the border, she recalls the sound of air strikes around Tehran. “It was terrifying,” she says, through tears. “I just want a normal country.” Another woman says she hopes to re- turn soon. “I’m sure in one month I will come back to celebrate our freedom,” she avers. Others anticipate a different reckon- ing. “America and Israel will pay for what they have done,” says an Iranian shopkeep- er heading home after a brief trip. The regime is keen to project an image of stability. Hours after Mr Khamenei’s death was confirmed a three-man council was named to lead the country, in line with the constitution. Replacements were named for some of the officials killed in the first wave of Israeli strikes. Police and paramilitary forces were deployed in the streets, lest anyone heed Mr Trump’s call to mobilise and “take over your govern- ment”. The assembly of experts, a body of 88 regime-approved clerics, began consul- tations to choose a new supreme leader. Though they have not announced a de- cision, there is talk of Mojtaba Khamenei, the second son of the late ayatollah, as a likely choice. It would be a telling one. The elder Mr Khamenei was deeply unpopular, presiding as he did over years of economic crisis, political repression and foreign- policy failures. His son has never held of- fice and lacks a public profile or religious credentials (he is a mid-ranking cleric, not an ayatollah). Even some supporters of the regime would resent a hereditary succes- sion: did they really overthrow the monar- chy in 1979 simply to install another one? What the younger Mr Khamenei lacks in legitimacy, he makes up for in behind- the-scenes support. He spent decades working as his father’s aide, forging close ties with the IRGC. His selection would signal continuity. The Guards would re- main the locus of power, while the Iranians who have spent years yelling “death to Khamenei” from their balconies would not even have to update their chants. With its air defences battered, Iran has little ability to fight back against American and Israeli jets. It has not shot down a sin- gle one, whereas both Israel and Qatar have downed Iranian warplanes. Instead it has relied on missile-and-drone attacks against Israel, the Gulf states and other tar- gets. Command and control is wobbly: in- telligence sources in the region say the re- gime has given commanders wide latitude to pick their own targets. There are signs that Iran is already hav- ing trouble keeping up its missile fire. On the first day of the war it launched around 180 missiles at Israel and 250 at the Gulf; by day four, those numbers had fallen to the low dozens. Several factors might ex- plain the drop-off. America and Israel are both trying to destroy Iran’s launchers. The regime may also be husbanding its long-range missiles in the hope of firing a few big barrages that overwhelm its adver- saries’ air defences once their stock of in- terceptors has been depleted. Flames on oil The six members of the Gulf Co-operation Council (GCC), a club of petro-monar- chies, have borne the brunt of Iran’s retali- ation. The United Arab Emirates (UAE) said on March 4th that Iran had targeted it with 189 missiles and 941 drones in four days. Bahrain, Kuwait and Qatar all report figures in the hundreds; Oman and Saudi Arabia have suffered smaller barrages. The UAE says it shot down 93% of the incoming projectiles. Though other Gulf countries do not publish detailed figures, Arab and Western officials say they have fared well. Interceptor stocks are closely guarded secrets, but two regional military sources claim they can sustain a weeks- long war at Iran’s present rate of fire. Still, the costs are mounting. At least seven people have been killed and scores wounded. Thousands of flights have been cancelled in some of the world’s busiest air-travel hubs. Iran’s declaration that the Strait of Hormuz was “closed” to shipping and its attacks on oil and gas facilities and tankers have caused havoc in energy mar- kets (see Finance section). The bill for air- defence interceptors alone has already run into the billions of dollars. Perhaps the most troubling damage is the hardest to quantify. Gulf states have long cultivated a reputation for safety and stability, which has made them a magnet for rich expats. The UAE, in particular, has drawn everyone from Arabs fleeing the Middle East’s many conflicts to Europeans escaping taxes and strict covid-19 restric- tions. When Vladimir Putin invaded Uk- raine, both Russians and Ukrainians de- camped to Dubai. Bad news elsewhere was often good news for the Gulf. Now the bad news has come home. Many Gulf residents are tense. Some have spent thousands of dollars to hitch rides to Riyadh or Muscat, to get to a functioning airport. In an inhospitable region, where air-conditioning is essential for much of the year and natural sources of drinking water are scarce, the prospect of wider Ira- nian attacks is alarming: successful strikes on power plants or desalination facilities could be catastrophic. The Iranian regime hopes that such fears will lead Gulf monarchs to press Mr Trump for a ceasefire. After all, they had spent the previous two months urging Mr Trump not to attack. Yet they have shown more resolve than Iran expected. Saudi Arabia is furious at strikes on its oil refin- eries and the American embassy in Ri- yadh’s gated diplomatic quarter. There is IRAQ Kapikoy SYRIA CYPRUS LEBANON TURKEY TURKEY TURKMENISTAN SAUDI ARABIA EGYPT SUDAN JORDAN ISRAEL OMAN QATAR BAHRAIN KUWAIT UAE Tehran Tehran Riyadh Abu Dhabi Dubai Kapikoy Kapikoy Tabriz Tabriz Muscat Caspian Sea The Gulf Strait of Hormuz Strait of Hormuz IRAN IRAN Arabian Sea Gulf of Oman Red Sea Med. Sea Jerusalem 250 km Russian fortification lines Iran and allies US, Israel and allies Airstrikes, at March 5th 2026 Carried out by Sources: ACLED; Institute for the Study of War; AEI’s Critical Threats Project C002 -- 14 of 78 -- Briefing America and Iran 21 The Economist March 7th 2026 ▸ open talk about whether the kingdom should join the war by launching strikes on Iran’s missiles and drones. Similar discus- sions are taking place in the UAE. Even Qa- tar, which shares a natural-gas field with Iran and tries to maintain friendly rela- tions, sounds belligerent. A widening Gulf Instead of urging Mr Trump to end the war, Gulf rulers are privately advising him to stay the course. The alternative looks grim. If America ends the war now, Gulf states will be left with a wounded, hostile regime on their borders. Not only that, they argue, Iran will have learned a dis- turbing lesson: that pounding the GCC is an effective way to change America’s be- haviour. Should another war break out, the regime will no doubt hit its neighbours harder and faster. As ever, it is hard to know whether Mr Trump will listen. He says he wants “free- dom for the people” of Iran, but also to talk to the regime and cut a deal. The war might be over in two or three days, or last four to five weeks. He has expressed all of these views, sometimes in a single day. His lieutenants have tried to set nar- rower aims. Marco Rubio, the secretary of state, says the objectives are to destroy Iran’s ballistic-missile programme and its navy; Pete Hegseth, the defence secretary, adds its nuclear capabilities to the list. Mil- itary officials rattle off a list of achieve- ments. America has carried out more than 2,000 strikes across Iran. They have sunk more than a dozen Iranian naval ships. On March 4th a submarine torpedoed an Ira- nian frigate off the coast of Sri Lanka. If Mr Trump wants anything, it is prob- ably to say he solved a problem that has vexed every president for almost 50 years. The Islamic Republic spread chaos around the Middle East, by arming and encourag- ing proxy militias. Barack Obama and Joe Biden, with the second Gulf war in mind, tried to negotiate with the regime rather than fight it. Even Mr Trump, in his first term, was hesitant to hit Iran directly: when he ordered the assassination of Qas- sem Suleimani, an Iranian general, in 2020, it was in Iraq rather than on Iranian soil. In the new era of open conflict among America, Iran, Israel and the GCC, every- one must confront hard questions. Start with Iran. Some hardliners think the lesson of the past few years is simple: the Islamic Republic should emulate North Korea. Mr Khamenei sought to make it a nuclear- threshold state. His scientists worked to assemble the components of a nuclear bomb, but he never gave the order to build one. For hawks in Tehran, that was a fatal mistake. The only way to deter future American and Israeli attacks, they argue, is with a nuclear weapon. Building the proverbial “bomb in the basement” is easier said than done, though. The Islamic Republic has been penetrated at every level by Israeli intelli- gence (Mahmoud Ahmadinejad, a former president, once said that the head of a unit set up to hunt Israeli agents turned out to be one himself ). Pragmatists will no doubt argue that Iran should cut its losses and make a deal with Mr Trump. But they would have little confidence that America and Israel would adhere to one. Gulf states will face their own prob- lems. Contrary to the unseemly gloating on social media in recent days, the war is unlikely to prove a fatal blow to their rep- utations (see Business section). Cities like Dubai still have much to recommend them as business and tourism hubs. But they will clearly need to take more responsibility for their defence. Gulf ar- mies spend tens of billions of dollars buy- ing expensive weapons but show little mar- tial prowess. Petty feuds between mon- archs have slowed efforts to integrate their air defences. In 2017 three Gulf states im- posed an embargo on Qatar; the leaders of Saudi Arabia and the UAE were not on speaking terms before the war in Iran. Whatever happens in Iran, the GCC will need to get serious about everything from defence to emergency preparedness. If the Iranian regime survives, there will be a continued threat of drones and attacks on shipping; if it collapses and chaos ensues, the risks will only multiply. For Israel this is the fourth war to follow the massacre of October 7th 2023, when Hamas, a Palestinian militant group, killed some 1,200 people. Yahya Sinwar, the Ha- mas leader who oversaw the assault, hoped to change the face of the Middle East, but this was not the change he had in mind. Binyamin Netanyahu, Israel’s prime minister, has spent much of his career lec- turing American presidents on the need to confront Iran. Now he has his moment: his hard-right coalition firmly supports the war, as do nearly all opposition leaders. Mr Netanyahu hopes a successful outcome will convince voters later this year that he has “changed the map of the Middle East”, as he often boasts, securing his re-election. The vote must be held by October. Once the war is over, sources in his Likud party believe he will bring it forward. He may still struggle. Although an overwhelm- ing 81% of Israelis support the strikes, only 38% express high trust in Mr Netanyahu, according to a survey from the Institute for National Security Studies, a think-tank. America and Israel still need to find a way to end the war—and at some point, their goals may diverge. Some Israelis may want to press ahead until Iran is shattered: watching their main adversary tip into civil war would be an acceptable outcome. That would be far more troubling to America, as a threat to everything from oil markets to global shipping. Conversely, if Mr Trump wants to end the war in a few days, Mr Net- anyahu will probably be furious. All these dilemmas overlap. A weak- ened but hostile Iran would give Gulf states impetus to bolster their own de- fence, and perhaps bring them into closer alignment with Israel. If Mr Trump calls time on the war prematurely, meanwhile, the GCC may question the value of its clos- est alliance: America will have dragged them through a conflict they opposed only to deny them the outcome they sought. The first Gulf war ended with a big, per- manent American military presence in the Gulf. Outraged by the presence of Ameri- can troops, a young Saudi named Osama bin Laden grew resolved to strike the Un- ited States. Sometimes, the end of one war sows the seeds of the next. ■ Stability shattered C002 -- 15 of 78 -- Briefing America and Iran 22 The Economist March 7th 2026 Trump’s war, Netanyahu’s rules AGREAT GAMBLE is under way in Iran. The stakes are daunting for the Iranian people, the wider Middle East and the world. There may be many losers, starting with ordinary Iranians. In these uncertain first days, an early winner stands out, though: Israel. The Iran campaign relies on American firepower. But to a striking degree, it is shaped by Israeli theories of war. Isra- el’s rules for victory can be summarised as: attack without warn- ing, use overwhelming force and do not scruple to kill an enemy’s leaders. Of course Israel believes in international law, the coun- try’s politicians and diplomats insist. But as a small democracy in a dangerous neighbourhood, Israel must put security first. Israeli officials argue that they observe the rules of war—in contrast to the terrorists who deserve no tears or pity. In spite of this, the long campaign and huge death toll in Gaza have left Israel increasingly isolated, even among once-supportive Western governments. Suddenly, though, many democratic leaders sound more accept- ing of Israeli-style arguments. When America and Israel jointly attacked Iran on February 28th, key elements of the operation reflected an Israeli logic, start- ing with the killing of Iran’s top leaders. That marks a change for America. In his first term a risk-averse President Donald Trump disagreed when Israel’s prime minister, Binyamin Netanyahu, urged him to seek regime change in Iran. Now calling for a pop- ular uprising against tyranny strikes Mr Trump as a good look, at least. When Mr Trump urges ordinary Iranians to rise up, he is echoing long-standing Netanyahu talking points—even if, just as often, America’s president sounds open to cutting a deal with a turncoat from Iran’s ruling elite. Soon after attacks on Iran began, Mr Trump’s Pentagon chief, Pete Hegseth, praised Israel as a capable partner that brought a clear mission to the Iran fight, “unlike so many of our traditional allies, who wring their hands and clutch their pearls, hemming and hawing about the use of force”. Not for the first time Mr Heg- seth, a preening culture warrior, is missing the bigger picture. True, a few American partners have been wary of joining the Iran operation. Britain’s prime minister, Sir Keir Starmer, initially declined to let America use British bases. He has since allowed British bases to be used for “defensive” strikes against Iranian forces that menace neighbouring countries. Sir Keir is a former human-rights lawyer and, as it happens, an inveterate hand-wring- er. To his credit he has voiced his government’s principled opposi- tion to the notion of “regime change from the skies”. Yet his brief defiance of Mr Trump is best explained by his tenuous hold on the leadership of the Labour Party, which is full of Israel critics and leftists who have not forgiven Tony Blair for joining America’s in- vasion of Iraq in 2003. The fragility of Spain’s left-leaning co- alition government also helps explain why that country has barred American jets from using Spanish bases to reach Iran. Mr Trump has now threatened a ban on American trade with Spain. These lo- cal dramas are a side-show. It is more revealing to ask why other Western governments say they back Mr Trump’s fight with Iran. Germany’s chancellor, Friedrich Merz, offered a masterclass in bleak realism on March 1st. Calling it pointless to debate the legal- ity of strikes that killed Iran’s supreme leader, Ayatollah Ali Kha- menei, and other high-ups, Mr Merz catalogued reasons not to mourn their “regime of terror”, from its oppression of Iran’s people to its support for Hamas and Hizbullah and its nuclear and ballis- tic-missile programmes. Regime change is risky, Mr Merz conced- ed. But Germany will not criticise American and Israeli strikes. For one thing, European governments spent years condemning Iran for breaking international rules but failed to back those judg- ments with military force, the chancellor noted. For another, Europe needs America’s help to defend Ukraine. “Therefore, this is not the time to lecture our partners and allies. Despite our reser- vations, we share many of their goals without being able to actu- ally achieve them ourselves,” he declared. Mr Merz’s admission follows another that he made last summer, after Israel and Amer- ica bombed Iranian nuclear sites. Israel deserves thanks for doing the world’s “dirty work”, he suggested back then. The governments of Australia, Canada and New Zealand do not go that far. But all have offered support for strikes on Iran. Khamenei’s passing “will not be mourned”, said Anthony Alba- nese, Australia’s prime minister. At first France expressed con- cerns about the operation in Iran, and called for the UN Security Council to weigh in. The tone in Paris hardened after Iranian drones hit a French base in the Gulf. In a joint statement with Brit- ain and Germany, France now pledges to help destroy Iran’s mis- sile and drone capabilities. Checks and balances are vanishing Nor is it the first sighting of allies trying to see an upside in a Trumpian intervention. After America captured Nicolás Maduro, the Venezuelan leader, in January the French president, Emman- uel Macron, said that his country did not support the method used, but dubbed Mr Maduro a dictator whose departure was “good news for Venezuelans”. From Iran to Venezuela, big prece- dents are being set without much debate. China, for instance, con- siders many democratically elected Taiwanese politicians to be criminal separatists. Are they now fair game for killing or capture? Terrible arguments divided the West before the invasion of Iraq in 2003. At least they were born of attempts by President George W. Bush to secure UN backing for his war. Today’s Amer- ica seeks no such mandates before it acts. A might-makes-right or- der is taking shape, one which Mr Trump and Mr Netanyahu navi- gate with ease. Most Western allies never wished for this world. Now that it is arriving, they are having to adapt to its rules. ■ THE TELEGRAM To avoid a row with Donald Trump, Western allies are endorsing Israeli theories of war C002 -- 16 of 78 -- 23 The Economist March 7th 2026 United States America and Iran The president’s big gamble WHEN HE RAN for president ten years ago, Donald Trump rejected the sort of military adventurism that had squan- dered American blood and treasure in dis- tant conflicts. On the campaign trail in 2024, he boasted that he had not started any new wars during his first term. He promised to govern as a “peace president”. Yet by unleashing the most consequential war in the Middle East in two decades, Mr Trump has made a mockery of that pledge. He is now a war president. The campaign against Iran is the big- gest gamble of his presidency. Mr Trump’s approval ratings have continued to slide in recent months. Issues that once buoyed him—such as the economy and immigra- tion—have become liabilities. Republicans face the prospect of a drubbing in the mid- terms. Against this bleak backdrop, Mr Trump is tying his legacy—and perhaps his party’s fate—to a conflict with vague aims and grave risks. The administration vowed that this war would be different. And in many ways it has been. Within 24 hours of the first bombs being dropped, America and Israel had wiped out the top layer of Iranian lead- ership, including Ali Khamenei, the supreme leader. Israel claimed to have de- stroyed half of Iran’s missile launchers. By March 4th, five days into the war, America said it had struck more than 2,000 targets and destroyed over 20 Iranian ships. Irani- an missile launches have slowed dramati- cally since the first days of the conflict. That success has come at a cost. In the first week of the conflict, six American sol- diers were killed and several aircraft shot down by friendly fire over Kuwait. As Iran retaliates, the administration has urged Americans to leave 14 countries in the re- gion and closed its embassies in Lebanon, Saudi Arabia and Kuwait. Drone strikes hit the latter two and the area around Ameri- ca’s consulate in Dubai. Iran may be wounded, but it can still hurt its enemies through what analysts call “horizontal escalation”. Its drones and mis- siles continue to strike targets across the region. As its arsenal dwindles, the regime is seeking to impose economic pain. “We will attack oil pipelines and not allow a sin- gle drop of oil to leave the region,” said a senior Islamic Revolutionary Guard Corps official on March 2nd. Iran has warned ships against venturing into the Strait of Hormuz, through which roughly 20% of the world’s oil and gas flows. The disrup- WASHINGTON, DC If the war in Iran fails to pay off politically, will he cut his losses or double down? → ALSO IN THIS SECTION 24 MAHA on the march 25 Gavin Newsom’s audition 26 The end of the swim test 27 America’s first foreign foray 28 Lexington: The audacity of Trump ⏩ C002 -- 17 of 78 -- 24 The Economist March 7th 2026 United States ▸ ⏩ tions are a nightmare for energy markets and for the global economy. Mr Trump now says the war could last “four to five weeks”—or “far longer”. The lack of clarity extends to the conflict’s cause and aims, with officials offering overlapping, at times contradictory, expla- nations. The president has urged Iranians to rise up, and called for peace throughout the Middle East. Yet his secretary of war, Pete Hegseth, insists this is not a regime- change conflict. Mr Hegseth and others in the administration—perhaps the president included—would be satisfied with devas- tating Iran’s nuclear, naval and missile capabilities and curbing its proxy militias. But with no timetable and no formal authorisation from Congress, what was billed as a limited war is beginning to look like an open-ended campaign. Many Americans believe it did not need to happen. Whereas the wars in Afghani- stan and Iraq began with deep reserves of public enthusiasm, this one began with lit- tle support. Just 27% of Americans thought the country should attack Iran, according to an Economist/YouGov poll conducted a week before the first strikes. A new survey conducted from February 27th to March 2nd showed little sign of a rally-round-the- flag effect: support rose by just five per- centage points. There is scant evidence that voters accept the administration’s claim that Iran posed an imminent threat. Conflicting parties Congressional Democrats are not buying it either. They sought to reclaim Con- gress’s constitutional authority to declare war by advancing a resolution requiring Mr Trump to obtain formal approval before continuing military action. The Senate vot- ed against it. Many Democrats neverthe- less seem hesitant to oppose the war out- right, perhaps fearing they will end up on the wrong side of a successful campaign or be accused of aligning with a murderous, anti-American regime. The killing of Kha- menei has only deepened that caution. Elected Republicans have fallen into line behind the war. There has been little sign of the split within the MAGA move- ment between its isolationist and interven- tionist wings. Some figures in the MAGA media sphere, including Tucker Carlson and Marjorie Taylor Greene, have voiced objections. Yet even the America First fac- tion appears willing, for now, to give Mr Trump leeway. If the campaign is short and its costs limited, his coalition may hold. That, of course, is the gamble. Criticism of the war may so far be muted, but that does not mean it commands deep support. American casualties have already occurred and markets have been jolted. Democratic opposition will grow louder as the war drags on. Independents are likely to drift further away. Even some on the right could sour quickly if the situation worsens—and there are many ways it could. First consider the economic danger. Mr Trump was elected on a promise to lower prices and improve the economy, the is- sues voters cared about most. They are al- ready dissatisfied with his performance. The inflation rate has ticked down, but not enough to satisfy the public. Now the con- flict risks making matters worse. To miti- gate rising energy prices, Mr Trump says America will provide state-backed insur- ance and—“if necessary”—naval protec- tion to commercial shipping in the Gulf (see Finance & economics section). But if Americans see prices at the pump and their energy bills climb—to say nothing of the billions spent sustaining America’s military presence in the Gulf—the war in Iran will become a kitchen-table issue. The second risk is uncertainty. The president has warned Americans to brace for casualties. “Sadly, there will likely be more before it ends,” he said on March 1st. “That’s the way it is.” Though Mr Trump appears determined to rely on air power to avoid the gruelling counter-insurgency campaigns that turned Americans against previous wars, he has not ruled out deploy- ing ground troops. Some in the administration seem to hope that an Iranian equivalent of Delcy Rodríguez, a regime insider who took over Venezuela after America removed Nicolás Maduro in January, might emerge. But no single figure is strong enough to seize power, and Mr Trump has said that several potential leaders have already been killed in the attacks. He has described regime change as “the best thing that could hap- pen”—a course that could send Iran into civil war and sectarian bloodshed. Even what the White House might de- scribe as victory in Iran would be unlikely to boost his standing at home by much. Mr Trump saw no significant or lasting bump in popularity after his strikes on Iran’s nuc- lear sites last June, which he hailed as a “spectacular military success”, or after his operation in Venezuela. For most Ameri- cans, foreign policy is not a pressing con- cern. In fact, an Economist/YouGov poll taken in January found that a plurality of Americans would prefer Mr Trump to spend less time on it and more on domes- tic issues, especially the economy. That raises a larger question. If the war does not yield the political dividend Mr Trump seeks, what will he do? “I can go long and take over the whole thing, or end it in two or three days,” he said at the start. More than anything, Mr Trump yearns to be a winner in everything he undertakes. If his supporters think his war is a bust, can he bear to cut his losses, or will he dig him- self in deeper? The answer may depend less on what happens in Iran than on his tolerance for political risk. ■ Healthy eating March of the granola warriors IT IS NOT often that corporate lobbyists cry out for more federal regulation for their firms. “This is a unique situation,” acknowledges John Hewitt of the Con- sumer Brands Association (CBA), which represents General Mills, Kraft Heinz and PepsiCo, among others. The group is push- ing for a new national labelling standard. This is not simply gallantry to help con- sumers make informed choices. It is an effort to avoid a patchwork of state-level food-label laws. New labelling rules are part of a wave of novel state-level food laws inspired by the Make America Healthy Again (MAHA) movement. At the federal level, many MAHA supporters are furious at Donald Trump’s recent backing of glyphosate, a common fertiliser and a long-running tar- get of the movement. But look to state houses and MAHA, championed by Robert F. Kennedy junior, Mr Trump’s health sec- retary, is having significant success. Last year, by Mr Hewitt’s count, law- makers introduced 150 food bills in 41 states. The bills are diverse and ambitious: some look to ban some additives entirely, others just in school meals. The most com- mon change stops junk food being bought through benefit programmes. In state capitals MAHA has created bipartisan coalitions, bonding longtime wholegrain hippies with newly emboldened corpora- tion-sceptic conservatives. Regulating food has long been a state and federal partnership, says Andy Baker- NEW YORK An increasing number of states are embracing the MAHA food agenda *Supplemental Nutrition Assistance Programme Sources: Department of Agriculture; Centres for Medicare and Medicaid Services SNAP, shackle, drop! United States, unhealthy-food restrictions on SNAP* benefits, January 10th 2026 Pledged No restrictions Approved ID MI OR WY IA MN PA WV NM TN SC AL HI AK OK WI LA MS AZ MT AR NV VA WA CT DE DC NJ ME VT NY MA RI CA CO ND SD GA UT KY KS NC FL IN TX NE MO NH IL MD OH C002 -- 18 of 78 -- 25 The Economist March 7th 2026 United States ▸ ⏩ White of the Association of State and Ter- ritorial Health Officials, but 2025 brought “an explosion of bills”. As a result, from next year Texas will require labels warning that in other countries certain ingredients are “not recommended for human con- sumption”. West Virginia has enacted a law banning seven food dyes from school meals. California has come up with a stat- utory definition of ultra-processed food and will ban such items from school meals by 2035. The variety of laws suggests an aptly organic growth, rather than a tem- plate seeded across the country. One of the most widespread changes is to the Supplemental Nutrition Assistance Programme (SNAP), once known as food stamps. Fully 30 states have committed to excluding some junk food and eight have already enacted the change (see map on previous page). The rules vary widely: some states only exclude fizzy drinks, others also sweets. Iowa is blocking every- thing that does not have state sales tax, creating a surreal shopping list where gra- nola bars are out, but ice cream is fine. These changes have been egged on by the administration, which has tied some health funding to enacting such policies. Food regulation used to be a left-wing concern. “If you go back 15, 20 years, there was legislation in states to limit the use of red dyes and so forth,” recalls Mr Baker- White. “But they were primarily sponsored by Democrats.” The bills did not take off. Now MAHA mums and Mr Kennedy’s cha- risma have pushed Republicans into action. “He’s made it cool. He’s made it Trumpy,” says Ken Cook of the Environ- mental Working Group, a long-standing opponent of many food additives. Mr Kennedy has made a point of tour- ing states, encouraging legislatures to pass various MAHA food bills. “When we hold conferences, there are probably as many individuals who are Democrats as there are Republicans,” says Jonathan Emord of the Alliance for Natural Health-USA, which supported Mr Kennedy’s nomination. Many of the bills were passed with biparti- san support. Big retailers are also taking action: Axios, a politics news site, reported on February 27th that Target will require all breakfast cereals to stop using certified synthetic colours by the end of May. After a slow start, Big Food is fighting back. In West Virginia and Texas trade groups have filed lawsuits against the new laws, arguing that labelling requirements violate their freedom of speech and that additives are regulated at the federal level. But scholars at Harvard have found that states are on solid legal ground when it comes to rules about labels and additives. Food manufacturers are stepping up their lobbying efforts. They have banded together to create Americans for Ingredi- ent Transparency to push for a national standard. Their lobbyists threaten that complying with state regulations would raise prices by an eye-watering amount. What impact might these changes have on health? America has had generous stan- dards on additives in the past, often allow- ing firms to self-regulate. But knocking off additives one by one and state by state will be slow to create change. In the car indus- try, manufacturers have opted to obey California’s high standards nationwide, rather than tailor vehicles just for the state. That might not work in food, say experts. SNAP researchers have long been curi- ous about the impact of banning fizzy drinks. Some researchers have found that, when paired with incentives to buy fruit and vegetables, a soda prohibition can im- prove diet. But the changes also come at a time when cuts in Mr Trump’s One Big Beautiful Bill reduce spending on SNAP by about 20% by 2034. MAGA does not always help MAHA. ■ Gavin Newsom King of California BEFORE THERE are presidential-elec- tion campaigns, there are pre-cam- paigns. This period is replete with maga- zine profiles of would-be candidates, talk- show appearances and—often—political memoirs. These books usually range from bad to embarrassing (Kristi Noem, now the homeland-security secretary, bragged about shooting her dog). But occasionally they are compelling, like Barack Obama’s “Dreams from My Father”. Now it is Gavin Newsom’s turn. The two-term, 58-year-old governor of Califor- nia admits that he drew inspiration from Mr Obama’s meditation on identity. “Young Man in a Hurry” is better than most political confessionals thanks in large part to Mr Newsom’s ghost writer, Mark Arax, an evocative chronicler of California. It is part family history, part accidental ethnography of San Francisco’s upper crust. But mostly it is an attempt to convince Americans that the slick politi- cian they see hawking $100 knee-pads (“for all your grovelling-to-Trump needs”) has known struggle. How well he tells this story matters. Polls have Mr Newsom as the favourite to become the Democratic Party’s nominee for president in 2028. The Newsoms were around wealth but not of it. The governor’s father was the “best-best friend” of Gordon Getty, the son of J. Paul Getty, an oil tycoon. Their friendship afforded access to opulence. Among the Getty vacations the Newsoms tagged along on were an African safari and a Spanish princess’s coming-out party. It is this proximity to wealth that Mr Newsom is at pains to contextualise. The book’s main goal, it seems, is to dispel the caricature of the governor as born with a silver spoon. His life with his mother, with whom he lived when not jet-setting with the Gettys, was middle-class. He bused tables at the restaurant where she worked. The family rented out spare rooms. But his father’s connections helped kick-start his career. The Gettys were early investors in his wine and restaurant ventures. John Bur- ton, a crotchety operator of California’s political machine, would accompany New- som senior to his son’s basketball games. Another struggle, with dyslexia, still SACRAMENTO AND SAN FRANCISCO The governor has become the de facto leader of the Democratic Party A scene from his audition tape C002 -- 19 of 78 -- 26 The Economist March 7th 2026 United States ▸ ⏩ affects the way Mr Newsom talks and con- sumes information. The governor tends to use awkward turns of phrase: “in the con- text of” and “through the prism of” are favourites. He says he memorised the dic- tionary as a young man to mask his disabil- ity. “I’m still a guy in the back of the room in school scared that Mr Morris is going to call on me…to read a paragraph in a book,” he tells The Economist. Mr Newsom and his friends explain his theatrics, since childhood, as an overcom- pensation for introversion that stems from his dyslexia. Others call it attention-seek- ing. As mayor of San Francisco he visited murder scenes to put pressure on the police. As governor he cleaned up a home- less encampment himself in Los Angeles. There were, naturally, cameras around. The why factor On his podcast, “This is Gavin Newsom”, the governor often asks his guests some version of “What was your why?”—the rea- son they pursued politics. He rarely answers that question himself. So we asked him. “My why is standing up for ideals and striking out against injustice,” he says. The phrase comes from Bobby Kenne- dy’s “ripple of hope” speech, delivered at a university in South Africa in 1966. Kennedy is Mr Newsom’s hero. Photos of his funeral hang in the hallway by his office in Sacra- mento. Lori Puccinelli Stern, one of the governor’s closest friends, remembers be- ing forced to listen to Kennedy’s speeches throughout a four-hour drive to Lake Tahoe. “Then after a speech, he would quiz me,” she says, still exasperated. Mr Newsom is not ideological. He was schooled in politics by Willie Brown, a for- mer mayor of San Francisco who, at 91, re- mains among the shrewdest of practition- ers. The future governor was appointed to the city’s board of supervisors because Burton picked him. “What he believed in wasn’t important,” says Mr Brown. The mayor expected loyalty and Mr Newsom delivered—with one, brief, exception. In 1997 he unknowingly broke with Mr Brown over a measure to finance a new stadium. After an angry call from Burton, the new supervisor got right with the mayor. “I just explained to him how soon we’d be doing his eulogy,” Mr Brown recalls, with a smile. Mr Newsom made an enemy of Big Oil by restricting drilling in California. But when refinery closures threatened to raise prices last year, he pushed for new drilling permits in oil-rich Kern County. Environ- mentalists were livid. Kern’s oilmen wel- comed the news—though not without cyn- icism. “He wants everybody to like him so he can run for president,” says one of them. There is a risk that adaptability makes Mr Newsom seem like a flip-flopper. Some on the left turned on him last year after he said that allowing trans athletes to com- pete in women’s sports was “deeply unfair”. Running California is both excellent training for higher office and a great liabil- ity. Slandering the Golden State is Repub- licans’ favourite sport. “We’re everything they hate, all wrapped up into one big, gigantic, pluralistic, important state,” says Jason Elliott, an ex-adviser to Mr Newsom. It doesn’t help that the governor’s re- cord is mixed. He has cut red tape to build housing and become an ally of the YIMBY movement. But those reforms will take years to bear fruit, and in the meantime housing prices are among the country’s highest. Unsheltered homelessness (sleep- ing rough or in improvised locations) has recently dropped. But overall homeless- ness was nearly 24% higher in 2024 than in 2019, even though the state threw more than $24bn at the problem. High spending despite California’s volatile revenues has led to structural deficits. Mr Newsom has not needed to eluci- date his agenda or explain his record to be- come the face of the anti-Trump resis- tance. He tangled with the president dur- ing his first term yet had genial discussions with him as recently as after the Los Ange- les fires of January 2025. Things changed when Mr Trump sent National Guard troops to LA last June to counter protests against immigration raids. “I don’t wake up every day with a crowbar to put in the spokes of the Trump wheel,” says Mr New- som. “But I also know this: you can’t work with him, you can only work for him.” Pundits tend to divide Democratic can- didates into two groups: moderates who can appeal to the centre and progressives who excite the base. Mr Newsom scram- bles this dichotomy. He is portrayed as a left-winger but is a creature of the estab- lishment, and as governor has checked the worst impulses of the Democratic super- majority in the legislature. Yet Democrats in 2028 may be leery of nominating anoth- er machine politician from San Francisco after the defeat in 2024 of Kamala Harris. Mr Newsom has ruminated on why Ms Harris lost and decided that, above all, Americans see Democrats as weak. That diagnosis helps explain his recent gambits and internet trolling. Championing Propo- sition 50 (California’s response to the Re- publicans’ redistricting ploy in Texas) proved that he can lead a campaign with national stakes. He parodies Mr Trump’s social posts, goading MAGA’s keyboard warriors to respond. “TINY HANDS IS OUT HERE COPYING ME—BUT WITHOUT THE STAMINA (SAD), AND CERTAINLY WITH- OUT THE ‘LOOKS.’ TOTAL BETA!—GCN.” Mr Newsom insists that he has not de- cided whether he will run for president. Mr Brown hopes he will. But he offers his protégé a warning: “In the world of poli- tics, you got to be a better listener than you are a talker.” ■ Education Making waves on campus THIS SPRING Dartmouth College will graduate a class fluent in literature, sci- ence, writing and foreign languages—but, for the first time in more than a century, not necessarily able to swim. Since the ear- ly 1900s the Ivy League university has required undergraduates to swim 50 yards, equivalent to a lap, before receiving a diploma. But in 2022 the faculty voted to scrap the test, beginning with this year’s seniors. Dartmouth joins a handful of other elite institutions that have aban- doned their swimming requirements in recent years, including Williams (2022), Hamilton (2023) and Washington and Lee (2024). The shift says less about the merits of staying afloat than about universities’ preoccupation with racial equity. Swim tests were once commonplace on American campuses. Cornell University introduced the requirement in 1905 at the urging of Frank Barton, an army officer and professor who argued that a soldier who could not swim was dead weight to his unit. Princeton University, which add- ed its swimming requirement in 1911, prid- ed itself on having one of the most demanding tests, requiring students to swim a full 220 yards. By 1913 the New York Times observed that “there is scarcely a college which does not prescribe a course in physical education and make swimming an essential part of the course”. Like many campus traditions, swim tests accumulated their share of folklore over the years. At Harvard it is often claimed that Eleanor Elkins Widener, an heiress who donated $2m to build the uni- versity’s flagship library, demanded the school adopt a swimming requirement in A once-proud tradition is becoming awkward for elite universities Not all communities have pools United States, adults who cannot swim, 2023, % Source: Centres for Disease Control and Prevention 40 30 20 10 0 50 Household income, $’000 150+ 100-150 60-100 35-60 <35 White Hispanic Black C002 -- 20 of 78 -- 27 The Economist March 7th 2026 United States ▸ AMERICAN FORCES are nowadays capable of plucking a president out of Caracas and amassing an armada to strike Iran. The modest beginnings of such military reach go back to the war of independence. On March 3rd 1776, at a time when the Continental Army was short of gunpowder, a force of about 270 marines and sailors under Captain Sam- uel Nicholas made the first amphibious landing in American history on New Providence island in the Bahamas. Transferred from several ships of Com- modore Esek Hopkins’s squadron, the force seized Fort Montagu and Fort Nassau from the British and raised the Grand Union flag. They captured a haul of supplies, including 88 cannon, 15 mortars and 24 barrels of gunpowder. Now, 250 years on, a monument to America’s “first amphibious assault” is about to be inaugurated at the entrance to the fishing pier in Pompano Beach, Florida. It is an initiative of the Florida Society of the Sons of the American Revolution (FLSSAR), a historical associ- ation. The new monument, a 20-foot obelisk flanked by (for now) Grand Union flags, stands between two restau- rants, Oceanic and Lucky Fish, against a backdrop of palm trees and the Atlantic. Why Pompano Beach? It is relatively close to New Providence island (a plaque points out that the assault took place 190 miles south-east of the monument). The popularity of the pier, which gets about 230,000 visitors a year, means the obelisk will be noticed. And the city, says Sandra King, Pompano’s co-ordinator for the project, was keen to have an extra attrac- tion for its tourist area. She believes some people connected to the armed services will come specially to see what the organisers claim is the southernmost monument to any revolutionary event in the continental United States. The Marine Corps History Division, in an anniversary book published last year, lists the capture of Fort Nassau as the second item in its chronology of events in the 250-year life of the service. “It’s honestly a very little-known event in the American revolution, but a fairly significant one in the history of the US Marine Corps,” says Chris Washler, FLSSAR’s president. It raised the morale of George Washington’s forces, he says, as well as bulking up their munitions— but above all, it was America’s first land- ing on foreign soil. “It’s good to remember how we got our freedom,” says Victoria Thomson, a local resident, observing the almost finished monument. A ribbon-cutting ceremony is planned for March 14th. Henceforth, as they eat their blackened mahi-mahi sandwiches, the open-air diners at Lucky Fish can look across at the obelisk and reflect on a small but evocative chapter of the American story. America’s first foreign foray Storming the beach POMPANO BEACH, FLORIDA A new monument marks an oft-forgotten bit of history memory of her son Harry, a 1907 graduate who died on the Titanic. That is almost cer- tainly untrue. But reports of students tak- ing the tests naked are well documented. Over the years budget pressures and waning administrative enthusiasm led many schools to abandon their swimming requirements. A survey conducted in 1977 by researchers at Temple University found that 42% of four-year universities still man- dated a swim test for graduation. In 1997 researchers at North Carolina State Uni- versity estimated that just 5% of four-year universities had such requirements. By the 2010s most colleges had dispensed with the tests, deeming them anachronistic, cumbersome to administer and difficult to enforce. Among the last remaining hold- outs (apart from the service academies) are Berea, Bryn Mawr, Columbia, Cornell, MIT and Swarthmore. In recent years the focus has shifted from the cost and inconvenience of swim tests to the uncomfortable racial dispari- ties they reveal. Swimming ability in Amer- ica remains sharply divided along racial lines. According to the Centres for Disease Control and Prevention, black children aged five to 14 are more than five times as likely to drown in a swimming pool as their white counterparts. Black adults are more than five times as likely as whites to report that they cannot swim. The gap cannot be explained by differences in income alone. Even the most well-off black adults are less proficient in the pool than the poorest whites (see chart on previous page). These days such disparities make uni- versities uneasy. Williams College found that between 2013 and 2019, 81% of those who failed its 50-yard swim test were students of colour. After a university com- mittee deemed this “problematic” in 2022 the faculty voted to scrap the requirement, citing its “disparate impact” on minority students. “You’re reinforcing systemic oppression in some ways,” the school’s ath- letic director told the Chronicle of Higher Education. When Dartmouth eliminated its own swim test later that year, school administrators offered a similar explana- tion, noting that those who failed were “overwhelmingly students of colour”. Against the current Not all universities are shying away from the controversy. In 2024 a Cornell faculty committee voted to retain the university’s swim requirement. In its resolution the committee acknowledged racial dispari- ties in swimming ability but argued that the test should remain precisely in order to help narrow them. “By providing formal swimming instruction”, the committee concluded, “Cornell is doing its small part to help right the wrongs of US history and close the racial gap in accidental drowning in this country.” ■ C002 -- 21 of 78 -- 28 The Economist March 7th 2026 United States The audacity of Donald Trump GO AHEAD, YOU long-suffering critic of Donald Trump, and name the hypocrisy that most infuriates you. Yes, Mr Trump once warned that Barack Obama would attack Iran because of “his inability to negotiate properly”. Yes, as recently as last May Mr Trump derided “interventionalists” for “intervening in complex societies they did not even understand themselves”. And, granted, there’s all that “president-of-peace” hooey. As you’re getting that off your chest, you might also describe how he has tied himself in knots while unspooling his many ratio- nales for waging war, together with Israel, on Iran. How can he fear a nuclear programme he “obliterated” a few months back? How can he warn that Iran might soon rain intercontinental ballis- tic missiles on America when the Defence Intelligence Agency said such weapons were ten years away, provided Iran actually decided to build them? And can this really be the same Donald Trump who used to ridicule the regime-changing, democracy- building visions of “neocons”—and now tells the Washington Post, “All I want is freedom for the people”? It is the same Mr Trump, so steel yourself. Though you can await contortions from lesser America Firsters, such as poor J.D. Vance, do not expect Mr Trump to bother trying to reconcile pre- sent practice with past positions. He has always been the most op- portunistic of men. He did not become a crypto billionaire by hewing to his public contempt for cryptocurrencies as scams “built on thin air”, just as he did not achieve his astounding politi- cal comeback, after trying to thwart the transfer of power in 2021, by following any rulebook or, indeed, adhering to any principle— no principle, that is, beyond winning, as he defined it. Consider, critic, that this war on Iran may succeed. Maybe Mr Trump will end its nuclear threat for ever, eliminate America’s most vicious adversary, even set Iranians free at last. What will you say then? Probably that you do not mind what he did, just the way he did it. That is usually the last redoubt of the process-driven and the timid, also known as Democrats. Fear not: chances are the war will leave a mess. But that only sharpens the question of why Mr Trump would risk sending American forces back into combat in the Middle East. First, Mr Trump is acting, as in Venezuela, not because the adversary is strong—bristling with ballistic missiles and tingling with enriched uranium—but because it is weak. (Cuba: take note.) Since the attack by Hamas on October 7th 2023, Israel’s fearsome campaign against Iran’s proxies has vitiated its capacity to sow mayhem in the region. The Israeli and American strikes last year degraded Iran’s own defences. Against that backdrop, Mr Trump saw a chance of a swift knockout. The president is also acting because he has learned from his first term. Then, he dithered. Insisting he could make a deal “in a day”, he dispatched one emissary after another to negotiate, fruit- lessly. He ordered a reprisal strike, then cancelled it at the last minute for fear of Iranian casualties. His chief advisers were divid- ed. Mr Trump’s four-year interregnum gave him time to brood, plan and accumulate acolytes. This time, for better or, probably, for worse, he is certain of his judgment, and his aides do not argue back. Rather than keep negotiating, he appears to have concluded he could not reach a better deal than the one Mr Obama struck— and which Mr Trump recklessly abandoned in his first term. Mr Trump is acting, as well, because of ways in which he has not changed. His worldview was forged in the 1970s, years of oil shocks, inflation and humiliation when Iranian revolutionaries stormed the embassy in Tehran and took 52 Americans hostage. Mr Trump cited that episode in announcing his air war on Febru- ary 28th. In an interview in 1980, he called the hostage-taking “a horror”; he said America should have invaded Iran and made itself “oil-rich”. Years later he would say America should have kept Iraq’s oil and Syria’s oil after sending troops to those countries; he has now secured some of Venezuela’s oil. By contrast, his silence about Iran’s oil, despite his many other rationales for this war, has been conspicuous. One might almost suspect someone persuaded him to shut up about it. It would break an old pattern if he did not hope for an eventual drop in the price of oil and even enhanced American leverage over global supply. The orange and the grey Last, Mr Trump is an old man in a hurry. He has been worrying publicly not only over how a Democratic wave in the coming mid- terms might constrain his administration, but also over whether he will make it to heaven. He is transforming the White House, planning a giant arch in Washington and renaming institutions after himself. Just as he capriciously levied tariffs on adversary and ally alike, extracting short-term benefits without regard for long- term damage to America’s alliances and global standing, he is flouting international law and norms to make his mark, asserting American might in its interests as he sees them. He is resurrecting the idea of America as the global policeman, while also appoint- ing himself sole judge and executioner. One can respect Mr Trump’s audacity in identifying ossified problems, whether government inefficiency, overregulation or the Iranian regime, while lamenting his lack of strategy and follow- through. After attacking Iran, the president mused publicly over what his end-game might turn out to be. Maybe he would “take over the whole thing”, he told Axios, or just stop fighting and attack again if necessary. He is a most consequential president, to be sure, but, beyond his next glorious victory in tomorrow’s fight, he is strangely lacking interest in what the consequences might ultimately be. Mr Trump has made himself a world-historical figure, yet with no appreciation for history’s tragic lessons. ■ LEXINGTON He is making history, but with no appreciation for its lessons C002 -- 22 of 78 -- AMERICA AT 250 30 The Economist March 7th 2026 DECLARING THAT all men are created equal was a worthy first step, we admit. Keeping a republic united in dedication to that ideal proved harder. Violence runs through the second chapter of our series on American history, from a betrayal of Native Americans to the civil war to the backlash to Reconstruction. Forming a more perfect union is a never-ending struggle. A HOUSE DIVIDED The struggle for the soul of a nation C002 -- 23 of 78 -- America at 250 31 The Economist March 7th 2026 1840s Before there was ICE More than 4m people came to the United States in the 1840s and 1850s—equivalent to roughly a quarter of the population in 1840. This wave of immigrants was dominated by Irish and German Catholics, a contrast to the country’s mostly Protestant, English-speaking early inhabitants. Americans reacted to this influx of people with their traditional calm and restraint. Populist rabble-rousers spread rumours and conspiracy theories about the new arrivals. Riots by nativists (who called themselves “true Americans”) broke out in northern cities. Not for the last time, Americans were forced to consider whether their national identity was civic or ethnic. Welcome to America 1830s American myth-making One of America’s talents, as we see it from the other side of the pond, is myth-making in the pursuit of new liberal heights. Enter Andrew Jackson, who became president in 1829 as a self-styled champion of the “common man” and anti-corruption hero. It is true that he fought entrenched elites and that his rise coincided with the removal of property requirements for voting in many states, which expanded suffrage to most white men. He argued that making federal hires by his “spoils system” (as in “to the victor belong the spoils”) reduced corruption by rotating officeholders. But the reality of Jacksonian democracy fell short of its ideals. Jackson reinforced the exclusion and subjugation of women, black Americans—enslaved and free—and Native Americans. And his rewarding of loyal supporters with government jobs concentrated more power in the presidency, intensified partisan polarisation and encouraged incompetence and graft. Just as well that America would go on to fix all those problems once and for all. 1830 Trail of shame Native Americans already got a raw deal from the new Americans long before Jackson became president. European settlers brought with them smallpox and measles, then war and displacement. But things got a lot worse in the 1830s. Jackson’s Indian Removal Act, which Congress narrowly passed in 1830, banished 60,000 Native Americans from their ancestral lands east of the Mississippi river. A Supreme Court ruling in 1832 should have protected tribes from being kicked off their land but Jackson ignored it, a defiant precedent that would inspire future presidents. Thousands died on the forced march west, known as the “Trail of Tears”. Native Americans were given territory where they ended up, but that would later be taken from them too, as white Americans kept moving west. The term “manifest destiny”, coined in the 1840s, gave this expansion a sense of evangelical purpose: it was not only inevitable, it was divine providence. Manifestly wrong C002 -- 24 of 78 -- America at 250 32 The Economist March 7th 2026 1848 Women: Also human beings In the 1840s women were denied more than just the right to vote. Once they were married (as was expected of them) women had no rights to money, property or much else. Their personhood simply dissolved into their husband’s, under laws of “coverture”. This began to change with a “Woman’s Rights Convention”, held in Seneca Falls, New York, in 1848. Attendees signed Elizabeth Cady Stanton’s “Declaration of Sentiments”, which called for women to be given the right to vote as well as equality in other respects, declaring, “We hold these truths to be self-evident: that all men and women are created equal.” (Emphasis added; we wanted to make sure you noticed.) I’ll speak more slowly for the men in the back 1857 Bad judgment The Supreme Court may be unpopular these days. But its lowest point as an institution came in 1857 with a decision written by Roger Taney, the chief justice, in Dred Scott v Sandford. Scott (pictured) had sued to obtain his freedom after the death of his owner. By a 7-2 vote the court ruled that black people—whether free or slave—were not American citizens, that in fact they had “no rights which the white man was bound to respect”. That meant, Taney wrote, that Scott lacked even the standing to sue. Not content with stopping there, the court also ruled that Congress had no right to ban slavery in the territories, because slaves were property and the property rights of slaveowners could not be infringed upon. It was then and remains now the worst ruling in the history of the court. Northern rage at the decision fuelled the rise of a nascent political party, the Republicans, and of one of its members in particular, a young Illinois lawyer named Abraham Lincoln. You may have heard of him. Portrait of an American 1840s-50s More territory, more problems “What a slur it is upon this self-styled model republic for its most eminent citizens to be contending as to whether slavery shall be extended or not, when other civilised nations are abolishing it unequivocally and promptly!” The Economist wrote those words in 1849, amid a burst of American territorial expansion. The Mexican-American War (1846–48) ended with the United States acquiring vast western lands. That raised the question of whether slavery would be allowed in these new territories. The Compromise of 1850 admitted California as a free state while allowing Utah and New Mexico to decide for themselves on slavery. It toughened the Fugitive Slave Act, stripping black people of habeas corpus rights and requiring northern authorities—and citizens—to assist in the capture of (allegedly) escaped slaves. In 1854 the Kansas and Nebraska territories were allowed to vote on allowing slavery, ending a decades-long ban in northern territories. Slavery was becoming a national crisis. Not so great a compromise C002 -- 25 of 78 -- America at 250 33 The Economist March 7th 2026 1863 A profound purpose During the first two years of the civil war abolitionists urged Lincoln to end slavery. Lincoln felt he could not legally do so by fiat, except as an order necessary to support the war effort. Lincoln eventually issued the Emancipation Proclamation on January 1st 1863, freeing all slaves within the Confederacy. Though remembered as a great moment of liberation, the proclamation was more pragmatic in the moment—leaving slavery untouched in the four Union states that still practised it, so as not to provoke them into joining the rebels. In November 1863 Lincoln gave what became known as the Gettysburg address. It erased any doubt as to whether the war was a moral enterprise or merely an attempt to keep the states together. The 272 words Lincoln spoke that day—affirming that “all men are created equal” and that “government of the people, by the people, for the people, shall not perish from the Earth”—would endure in history. The war continued. But its purpose, “that this nation, under God, shall have a new birth of freedom”, was established. I’ll be brief 1858 The great debates Is liberty universal or conditional? Can a majority vote away a person’s freedom, or are some rights inherent? These questions were at the heart of seven public debates held across Illinois in 1858 between Lincoln and Stephen Douglas (pictured). Lincoln was challenging Douglas, a Democrat, for his Senate seat. At issue was whether slavery should expand into new territories. Douglas said let settlers decide. Lincoln said slavery was immoral and incompatible with principles of the founding. Douglas kept the seat, but Lincoln emerged nationally as a leading opponent of slavery’s expansion—and would be elected president two years later. 1861–65 A nation at war with itself After the election of Lincoln as president in November 1860, southern states began to secede from the union, believing that Lincoln was determined to abolish slavery (though he had promised not to). In April 1861 soldiers of the newly formed Confederate army attacked and seized the federal stronghold of Fort Sumter in South Carolina, starting a four-year civil war. Perhaps 700,000 Americans would die in the civil war, making it the bloodiest conflict in the country’s history to this day. At the Battle of Shiloh, Ulysses Grant, a Union general and future president, said that you could walk in any direction to the battlefield’s edge without ever touching grass for all the bodies. The war was particularly devastating for the Confederacy; as many as one in four military-age white southerners died. The South lost both the war and the right to own slaves. A new, less imperfect union was born. Hey, Jedidiah! Isn’t that your brother over there? C002 -- 26 of 78 -- America at 250 34 The Economist March 7th 2026 1865–77 Reconstruction and its betrayal In the civil war’s wake came Reconstruction, a period of radical change. The states ratified three amendments to the constitution. These banned slavery and enshrined citizenship for all persons born in America, putting a torch to the Dred Scott decision. They also guaranteed equal protection under the law. With northerners in Congress and the federal army applying pressure, there was a renaissance in the South for black people, about 2,000 of whom were elected to federal, state and local office in the formerly Confederate states. The southern states also rewrote their constitutions, striking down discriminatory laws, expanding women’s rights and guaranteeing a public education for all. Tragically, Reconstruction was short-lived. White southerners engaged in a campaign of racist terror across the South, and forged political alliances with moderate Republicans to erode the federal government’s grip on their affairs. President Grant’s support for Reconstruction grew tepid, and Congress pulled back as well. In 1876 the Supreme Court ruled that the new constitutional amendments applied only narrowly to actions of governments. The following year Rutherford Hayes, Grant’s successor, withdrew federal troops from the South. A century of white supremacist rule across the region ensued, waning only with mid-20th-century civil-rights legislation. The unfinished revolution From the archive “A very great and lamentable event” It was two weeks before the news of Lincoln’s assassination made it into The Economist’s pages. But time did little to diminish the shock. “It is not merely that a great man has passed away,” we wrote on April 29th 1865, “but he has disappeared at the very time when his special greatness seemed almost essential to the world, when his death would work the widest conceivable evil, when the chance of replacing him, even partially, approached nearest to zero, and he has been removed in the very way which almost alone among causes of death could have doubled the political injury entailed by the decease itself.” We worried that his successor, Andrew Johnson, would pale in comparison. “The great authority attached to the President’s office reverts to Mr Johnson,” we said, “but the far greater moral authority belonging to Mr Lincoln disappears.” Just so. 1865 The loss of Lincoln John Wilkes Booth had a knack for drama. A famous actor and Confederate sympathiser, he devised a harebrained scheme to kidnap Lincoln and ransom him for prisoners of war. In the end he settled on the simpler plan of killing the president during a performance at Ford’s Theatre in the capital. Booth crept into the presidential box on the evening of April 14th 1865. He knew the play, a farce called “Our American Cousin”. When the audience burst into laughter at one of its best jokes, Booth shot Lincoln in the back of the head. He then leapt onto the stage and escaped. Union troops would eventually track down and kill Booth. But the actor had already changed history. Lincoln was pronounced dead on the morning of April 15th. A villain takes the stage C002 -- 27 of 78 -- America at 250 35 The Economist March 7th 2026 Christina Snyder IN 1817 GENERAL ANDREW JACKSON invaded Florida, claimed by the Spanish empire but inhabited mostly by Seminole peo- ple. Jackson’s troops used scorched-earth tactics—destroying vil- lages, burning cornfields, sacking storehouses—in the hope that terror and hunger would drive Seminoles to surrender. They killed warriors and civilians alike, and captured the Native leaders Hillis Harjo and Homathle Micco and two British citizens who had aid- ed the indigenous communities. Jackson executed them all. The Florida raids were committed without approval from Con- gress, even though military affairs and relations with Native na- tions fell under federal purview. Some claimed that Jackson was simply extending the policies of previous administrations: James Monroe had warned European empires to stay out of America’s backyard; Thomas Jefferson facilitated the Louisiana Purchase so that the “Empire of Liberty” might eventually rule the continent. Jackson’s defenders applauded his muscular approach to seiz- ing land and exerting power over foreign people. But his critics warned that such an authoritarian approach to imperialism would sow the seeds of America’s ruin. Senator John Calhoun reminded his colleagues that the founding fathers saw their republic as an experiment in democracy not seen since the days of ancient Rome. He noted that, in Rome, Augustus Caesar had seized power from the Senate and, though the emperor “did not change the forms of the Roman Republic”, he “exercised a most despotic power over the laws, the liberty and the prosperity of the citizens”. Our own historical moment has many parallels to the age of Jackson. Then, as now, some championed the assertion of raw power while others worried about the rule of law. Opponents of “King Andrew” warned about the concentration of power in the executive branch. Their understanding of history suggested that unchecked power would lead to tyranny or the downfall of society. Despite, or perhaps because of, such criticism, Jackson gained popularity among the (white male) electorate and easily won the presidency in 1828. The cornerstone of his platform would be- come the Indian Removal Act, which sought to deport all eastern Native Americans to a space called “Indian Territory”, west of the Mississippi river. Jackson and his allies aimed to secure more land, including the rich cotton lands of the Deep South. Though Americans agreed that their nation should expand, they disagreed over the means and scope of the imperial project. In the House, the Indian Removal Bill scraped through with 102 votes in favour and 97 against. Opposition was strongest in the north-east. The Christian Advocate, a weekly newspaper published in New York, warned that “Nations which establish themselves by acts of injustice toward others, which extend over them a cruel do- minion merely because a stronger arm enables them to do so, need expect nothing less than the reaction of a retributive provi- dence as a punishment for all such deeds of injustice.” Some southern members of the House, including Davy Crock- ett, also voted against the bill. Crockett explained that he “had al- ways viewed the native Indian tribes in this country as a sovereign people…and the United States were bound by treaty to protect them; it was their duty to do so.” Legally that was the heart of the matter: America had recognised the sovereign rights of Native na- tions in treaties; forcing them to give up land would violate these treaties, which are binding under the constitution. If treaties can be ignored, so can federal laws and court deci- sions. Jackson knew this—he had personally negotiated many treaties with Native leaders. But he viewed treaties as a relic of the founding era, when the United States was too weak to conquer Native nations. In the aftermath of the War of 1812, the United States emerged as a continental power. Jackson argued that Indig- enous Americans should be treated as “subjects” not sovereigns. Jacksonian imperialism fractured the United States and com- promised its place in the world. Ignoring Native treaties normal- ised the idea that law is optional when power is sufficient. With its new might, the country chose coercion over law, executive force over constitutional checks, and conquest over treaty obligations. Native nations experienced this not as abstract theory but as lived catastrophe. The Indian Removal Act did not authorise the use of force, but violence prevailed over law. Federal troops and state militias dragged people from their homes and forced them west. Ordinary Americans mimicked Jackson’s tactics to speed up deportation: looting, torching homes, using famine as a weapon. In their anti-Removal memorial of 1832, leaders of the Musco- gee Nation reminded Congress that Europeans came to North America “few in number and feeble in strength”; Native people gave them “land on which to live” and “food to supply their hun- ger”. Now that the United States had become powerful, Musco- gees asked, “For which of our services to you…are we subjected to the penalties of forfeiture?” Native leaders called on Americans to keep in mind the precarious nature of political power. These warnings remain relevant. Jacksonian imperialism wasn’t a regrettable aberration but an early stress test for Ameri- can democracy. Perhaps cowed by his popularity, Congress chose not to censure Jackson over Florida. Empowered, he then pushed the boundaries of the presidency, and was eventually censured by the Senate in 1834 for removing federal deposits from the Second Bank of the United States. Reminding ourselves of America’s first experiment with empire reveals a worrying truth: when power ex- panded faster than law, the United States sacrificed constitutional restraint, treated some people as expendable “subjects” and risked descending into Augustus Caesar’s Rome. ■ Christina Snyder is the McCabe Greer Professor of the American Civil War Era at The Pennsylvania State University. BY INVITATION Andrew Jackson’s expansionist policy divided America during the pre-civil-war era C002 -- 28 of 78 -- 36 The Economist March 7th 2026 The Americas Argentina’s reforms Scream when you’re winning THE PRESIDENT of Argentina has had an excellent few months. So some gloating was to be expected in his formal state-of-the-nation speech at the opening of Congress on March 1st. It was also a chance to outline a statesmanlike vision and reach potential new allies. Instead, his success seems to have bred hubris and ag- gression. Despite promising last year to ease up on the insults, Javier Milei shouted at his Peronist rivals, who interrupted fre- quently, calling them “murderers and thieves”, “coup plotters” and “cavemen”. He revelled in it. “I love making you cry.” This neatly captures the two faces of Mr Milei: his wise if tough liberalising re- forms are often accompanied by angry, oc- casionally paranoid rhetoric—even when he is flying high. He has passed a swathe of legislation, the economy is growing and the central bank has at last begun accumu- lating foreign reserves, long demanded by investors. The main worry is whether the economy is generating enough good jobs. Politically, the president has never been stronger. Despite not having a majority, his government managed to pass almost its entire legislative agenda for the recent ex- traordinary sessions of Congress. That in- cluded a budget, a reform to lower the age of criminal responsibility and a trade deal with Europe. The biggest prize of the legislative bo- nanza was a major labour reform. Previous attempts at such change by non-Peronist governments left them traumatised, says Ignacio Labaqui of Medley Global Advi- sors, a research firm. Mr Milei’s success demonstrates his strength and his team’s growing ability to convene coalitions. Argentina’s labour laws, which date to the 1970s, are so asphyxiating that more than 40% of Argentines work in the infor- mal sector, dodging the law altogether. The government wants the reform to boost formal employment. The change makes it cheaper to fire people and creates clarity about severance costs. That should dam- pen the boom in lengthy lawsuits that leave companies unsure what they will owe if they sack someone. It will help on dis- putes over workplace injuries, too. Accord- ing to a study by IERAL, a local think-tank, the country has roughly the same rate of workplace injuries as Spain, but they result in more than 12 times as many lawsuits. The reform also empowers salary nego- tiations at the regional or company level, rather than making participants rely on na- tional wage agreements. That should boost employment by allowing businesses to pay wages that more accurately reflect labour costs in their particular region, says Federico Sturzenegger, the minister of de- regulation. Juan Grabois, a Peronist con- BUENOS AIRES Javier Milei’s government is racking up wins → ALSO IN THIS SECTION 38 Cuba’s divides deepen ⏩ C002 -- 29 of 78 -- 37 The Economist March 7th 2026 The Americas ▸ gressman, fumes that the law “takes us back 100 years”. Expect layoffs and lower salaries, he says. Mr Milei is also tackling a critical and long-standing weakness: Argentina’s lack of foreign reserves. That has been a big worry for investors and the IMF, both of whom need to be paid back in dollars. Last year the government was forced to spend reserves to prop up the currency. In the first two months of this year, the central bank has purchased $2.7bn (see chart). The government would like to tap glo- bal capital markets for dollars to help roll over Argentina’s enormous debts. Yet it ap- pears irritated that the interest rates it would probably be charged have not fallen more than they already have. It has recent- ly suggested sourly that for now it has cheaper options than global capital mar- kets. Still, it will soon be wooing investors again at a glitzy event in New York dubbed “Argentina week”. So far, the high probable rates suggest markets are not fully con- vinced by the speed of reserve accumula- tion, nor by the exchange-rate regime. The band within which the peso par- tially floats has been widening more rapid- ly this year. In general, the currency has been strengthening. Mr Milei has long fa- voured a strong peso to help pull down in- flation. Its strength is partly a reflection of the dollar’s global weakness. But it is also boosted by capital controls, which still re- strict companies from taking dollars out of Argentina, and by tight monetary policy, which offers juicy returns in pesos. Despite urging from investors, the government ap- pears in no hurry to float fully, fearing un- controllable lurches. Meanwhile, local in- terest rates are both high and volatile. Blame that, in part, on the government’s poor communication of monetary policy. It is also a problem that Argentina targets the total money supply rather than interest rates, as happens in most rich countries. All this weighs on businesses, for which a strong peso means pricier exports and high, volatile rates mean headaches. But that is a cost Mr Milei mostly seems willing to pay. Yanking inflation down is his signa- ture achievement, and he is unlikely to change course. Since a monthly-inflation low of 1.5% in May last year it has been steadily creeping back up, stirred by eco- nomic recovery. In January it was 2.9% monthly—some 32% annually. The government rightly highlights sol- id growth. After shrinking in 2024, last year GDP grew by 4.4%. This year, the forecast is 4%. Yet recovery is uneven. Mr Milei has opened up the economy by slashing red tape at customs and by trimming tariffs. Output from industry, flabby after years of lavish protection, is still lower than when Mr Milei took office in December 2023. Output in other parts of the economy, in- cluding agriculture and the oil sector, has surged. But they are not as labour-intensive as industry (see chart). Economic recovery has in fact happened with lower levels of salaried formal employment. The labour reform will not quickly fix this, warns Mar- tin Rapetti of Equilibra, a consultancy. Nevertheless, at 6.6% unemployment is only a percentage point above what it was before Mr Milei took office. Many are clearly finding some kind of work. Filings under a tax scheme for small contractors with low incomes have grown sharply. Many fear, however, that all this amounts to well-paid jobs being replaced by low- paying contract work or informal labour. Loves labour lost Broadly the voters who so resoundingly backed Mr Milei in the midterms in Octo- ber are still with him. Though his approval ratings have softened, they are above those of the past two presidents at this point in their terms. But there are signs of discon- tent. A general strike failed to stop the re- forms, though unions may use legal chal- lenges to tie them up in court. As much as middle Argentina likes lower inflation, many do not care for Mr Milei’s aggressive language, which could become a vulnera- bility if economic news darkens. And voters’ priorities are shifting. Polling shows that unemployment now consistently beats inflation as the biggest concern. The government downplays all of these worries. Liberalisation is already offering Argentines cheaper goods. In time open- ing up the economy should also result in more-competitive businesses. Mr Sturze- negger claims that, because industry is mostly in the capital city and agriculture and oil are in the regions, “you’re going to have a kind of an exodus from the greater Buenos Aires area towards the interior.” If that happens, the shift may be painful. Mr Milei remains bullish. “New indus- tries will more than compensate for the de- mand for labour lost by the old industries, and with much better wages,” he claimed in his speech. His political future may turn on how quickly that happens. ■ For a few dollars more Argentina Sources: Invecq; EcoGo *From December 11th 4 3 2 1 0 -1 -2 2023* 24 25 26 Foreign-exchange-market interventions by central bank, $bn Legislative election Peso first floated within a band ↑ Peso sales ↓ Peso purchases 50 0 -50 -100 -150 -200 Change in salaried registered employment, ’000 Selected sectors, Nov 2023-Nov 2025 Total public Agriculture and forestry Mining and oil Manufacturing Construction Total private I would like to lodge a formal labour complaint C002 -- 30 of 78 -- 38 The Economist March 7th 2026 The Americas Cuba’s socioeconomic divides The have-littles and the have-nots WHEN AT LAST the lights of Los Pinos petrol station flicker on, a faint and weary cheer rises from those gathered in the nearby park. Power has been out for a full day in this part of Matanzas, 100km (60 miles) east of Havana, the capital. Dark- ness settled hours before. The first of per- haps 100 cars arrived hours before that. Many drivers went to the park, observing a peculiarly Cuban car-queue method. Wait where you like—but memorise the face, name or number plate of the person in front of and behind you. Yet no one dares to leave the vicinity. The prize is too great. Los Pinos is one of the island’s 30 state- run stations that regularly have fuel, when there is electricity to run the pumps. It pro- vides one example of the divisions that are widening in Cuba as the oil embargo the United States imposed in January bites and the state retreats—divisions between the visiting diaspora and locals; between rural and urban; between those who do and do not get remittances from abroad; between operators of newish private busi- nesses and state workers. The network of petrol stations includ- ing Los Pinos can solely be used by rental cars, which may take just 20 litres (5.3 US gallons) per visit. Payments, in dollars at the government rate of $1.30 per litre, must be made via foreign-issued credit cards or prepaid Cuban ones. Private owners can in principle use a government app to book elsewhere but it is, in effect, a lottery with long odds and even longer waits. Even if Cubans could simply pop by Los Pinos for a fill-up, for many the prices would be eye-watering. Official data, pos- sibly massaged, suggest that an average state employee’s salary is 6,500 pesos per month. At the commonly used, unofficial exchange rate, that is about $15. (The peso has depreciated sharply against the dollar in recent months, narrowing a once yawn- ing gap between official and unofficial rates.) Late last month black-market petrol prices spiked from about 2,000 pesos per litre to, in places, as high as 6,000. This ar- bitrage opportunity was in evidence at Los Pinos. Two drivers working in tandem had hired a car, one drawing 20 litres here and the other at a neighbouring service station. The onward sale nets them a daily profit of $180. A day after your correspondent’s vis- it, the government closed this loophole: rentals are now restricted to non-residents. Power cuts are becoming longer and more unpredictable, especially across Cuba’s central and eastern provinces. From barely any electricity at all to a reliable supply for most of the day, there is huge variance between towns and rural areas, and sometimes even within urban ones. Those lucky enough to live near to a hospi- tal, army base or water-pumping station fare best. Many people now cook on char- coal and there is a brisk trade in impro- vised iron stoves. In eastern Cuba, sacks of charcoal trade hands for 1,300 pesos. But what to cook? No one can rely on the state ration card alone. Meat and fish rations began disappearing in 2023. The products regularly available are limited to two pounds (1kg) of rice per person, a pound of sugar, a small bread bun each day and four packs of filterless cigarettes that many sell on the black market. Once heavi- ly subsidised, cooking oil is mostly ob- tained from approved private businesses. In remote eastern areas, it can reach $5 a li- tre—on a par with contraband petrol. Begging has become prevalent; rough sleeping, unheard of until recent years, is a fairly common sight. Uncollected rubbish piles up, and state-run transport within and between cities has been slashed or cut entirely. Cubans old enough to remember the abrupt withdrawal of aid in the “special period” following the collapse of the Soviet Union say that things are worse now. Private inequity For all that, some Cubans can afford pricey cooking oil and charcoal, such as those who receive remittances from friends and family abroad. And those involved in the highly regulated private firms that are pro- liferating on the island have access to the dollar economy. Many are run more effi- ciently than the state can manage, leaving owners ever-stronger dollars to spend. It is in this sector that things are chang- ing fastest, and not always for the better. Most imports must now pass through a free-trade zone at Mariel, a western port far from most of the country. That will be- gin to add significant transport costs. And late in February President Donald Trump said he would allow exports of fuel to priv- ate firms—as long as it does not end up in the hands of the state. Expect a raft of shell companies that aim to skirt that rule, and an oily mess among private businesses with no experience of importing the stuff. Nowhere are all of Cuba’s contradic- tions and inequalities in sharper relief than in Guantánamo, the capital of a poor prov- ince of the same name. State wages are be- low the national average. There exist fewer opportunities to engage in private ventures or the side hustles that increasingly form the backbone of the island’s economy. Yet it is agriculturally rich. A history of emigra- tion links many here to families abroad, and thus to remittances. Several parts of the city centre have electricity for most of the day. Bars and restaurants often teem at weekends. Queues form outside the trendy Downtown Bar, where ample plates of pork and chicken cost up to 3,500 pesos. But at the other end of Calle Aguilera, on the city’s fringes to the east, lies the neigh- bourhood of San Justo. Streets are un- paved, electricity is rare and residents cook what little they can afford over charcoal. ■ MATANZAS The split is increasingly a matter of luck No fuelling around C002 -- 31 of 78 -- 39 The Economist March 7th 2026 Asia Japan Energy insecurity ELECTRICAL WIRES stretch above the pine trees around the Kashiwazaki-Ka- riwa (KK) nuclear power plant, along Ja- pan’s northern coast. The plant is the world’s largest nuclear power station, with seven reactors which, at full capacity, could provide energy for millions of homes: useful as war in the Middle East sends imported gas prices soaring. As with all Japan’s nuclear fleet, KK shut following the Fukushima nuclear accident. But exact- ly 15 years later it is bubbling back to life. After winning long-sought approval from regulators and local authorities, the plant’s operator, the Tokyo Electric Power Corpo- ration (TEPCO), restarted the first of the re- actors last month. The powering up of KK is symbolically charged. TEPCO ran the ill-fated Fukushi- ma reactors; KK is its first nuclear plant to restart since then. For nuclear boosters, it shows that atomic energy still has a future in Japan. For critics, it marks the unwel- come revival of a technology too risky for an earthquake-prone archipelago. Mostly, it reflects the impasse Japan’s energy poli- cy has come to: a stalled renewable build- out, an ageing nuclear fleet and enduring dependence on imported fossil fuels. Japan is a resource-poor country. Nuc- lear power once seemed to offer a solution. By 2010 it had 54 operational reactors, pro- viding some 25% of its electricity; the gov- ernment aimed to expand that to around 50% by 2030. Then on March 11th 2011 the Great East Japan Earthquake struck, send- ing tsunami waters that flooded the Fu- kushima Daiichi nuclear plant. The disas- ter changed the politics of power. In the wake of Fukushima, a different energy strategy coalesced. All nuclear re- actors were shut for inspections; a new bo- dy, the Nuclear Regulation Authority (NRA), started to enforce tougher over- sight. Although reactors were gradually al- lowed to restart after passing new safety tests, their use was minimised. Energy effi- ciency drove electricity consumption down. Generous feed-in tariffs sparked a solar-power boom. Gaps were filled by LNG and coal. Japan imports virtually all its oil, gas and coal; in the OECD, a mostly rich-country club, only Luxembourg relies more on imported energy. In recent years Japan has changed course again. Small shifts have added up to “nearly 180 degrees change in the policy”, says Terazawa Tatsuya of the Institute of Energy Economics, a think-tank in Tokyo. The government now offers less support for renewables, while pushing harder for a nuclear revival. Russia’s invasion of Uk- raine reinforced concerns about energy se- curity. Japan has pledged to reach carbon neutrality by 2050. Electricity demand, meanwhile, is expected to rise in the com- ing decade with data-centre construction. The result is a strategy riddled with contradictions. Renewables offer a stark example. Japan’s latest energy plan, re- KASHIWAZAKI AND TOKYO Fifteen years after Fukushima, Japan faces an energy dilemma → ALSO IN THIS SECTION 40 The decline of Kashiwazaki 41 Media freedom in India 41 Malaysia’s anti-corruption commission 42 Banyan: The colours of India ⏩ C002 -- 32 of 78 -- 40 The Economist March 7th 2026 Asia ▸ leased last year, foresees renewables ac- counting for between 40% and 50% of elec- tricity generation by 2040, up from around 25% last year. Mountainous land and a deep continental shelf complicate install- ing solar panels and wind turbines. But in- dependent studies suggest Japan could be more ambitious: researchers from the Law- rence Berkeley National Laboratory in Cal- ifornia estimate that renewables could reli- ably generate 70% of electricity by 2035. The key barriers are political. Building codes and environmental assessments have stifled wind power, says Ohbayashi Mika of the Renewable Energy Institute, a Japanese think-tank: for example, wind turbines have been required to meet the same earthquake standards as tall blocks of flats. Land-use regulation limits the use of abandoned farmland for solar power. Weak transmission lines make it hard to get renewable energy to where it is used. Instead of accelerating, the expansion of renewables is slowing. In 2024 new wind and solar construction fell to the feeblest pace for 17 years. Last summer Mitsubishi, a conglomerate, pulled out of three big off- shore wind projects because of rising con- struction costs. The government is scaling back subsidies and imposing new regula- tions, especially for large-scale solar. Ta- kaichi Sanae, Japan’s hawkish new prime minister, opposes “further covering our beautiful land with foreign-made [ie, Chi- nese] solar panels”. Bringing it back Ms Takaichi hopes that nuclear power will save Japan once again. Public attitudes have shifted as the memory of Fukushima recedes. “Students today don’t even know what ‘meltdown’ means,” laments Ueno Kunio, an anti-nuclear activist from Niiga- ta, near KK. Power companies have invest- ed in safety measures: TEPCO has built a 15m-high sea wall around KK. “The great- est lesson from Fukushima is that there is no such thing as absolute safety,” says Ta- kata Masakatsu, a TEPCO spokesman. For local leaders, whose approval is necessary to restart reactors, other con- cerns have come to the foreground. “I don’t believe nuclear power is the only solution for ever, but for the time being it is the bet- ter option,” says Kashiwazaki’s mayor, Sak- urai Masahiro. In addition to the benefits for the local economy, Mr Sakurai, a keen mountaineer, sees climate change as a big reason to support KK’s restart. Hokkaido, Japan’s northernmost island, positions it- self as a hub for semiconductors and data centres. Its governor recently approved a nuclear restart from 2027. Yet lingering mistrust will make reviv- ing nuclear power difficult. The latest en- ergy plan envisages nuclear providing 20% of the electricity mix in 2040, up from un- der 10% last year. Japan has 15 operational reactors; another three have received safe- ty clearances, but remain idle, while 18 others are still awaiting regulatory approv- al. (The rest of Japan’s fleet has been de- commissioned.) To reach 20%, nearly all 21 eligible reactors must come online. Beyond that, the maths becomes con- siderably harder. Most of Japan’s reactors were built in the 1970s-1990s. The govern- ment has extended the legal lifetime of re- actors from 40 to 60 years, and allowed stoppages to be excluded from the total. Even so, most reactors will be have to be phased out in the 2040s-2050s. As building new plants takes decades, replacements should start soon. Ms Takaichi hopes to stimulate the process by offering state- backed financing. But new reactors face even higher local political hurdles. Only one potential new plant has reached the stage of preliminary geological surveys. New technologies will be needed to re- solve the impossible arithmetic. Ms Takai- chi is keen on nuclear fusion and perov- skite, a lightweight and flexible type of so- lar cell that Japanese companies are devel- oping. Japan has high hopes for hydrogen. New geothermal technology could help tap volcanic power without upsetting the hot-spring lobby. But if the hoped-for tech- nologies fail to materialise, Japan could end up relying on energy that is neither green, secure nor all that cheap. As Kikka- wa Takeo, a longtime government adviser on energy policy, puts it, “They will have to keep filling the gap with fossil fuels.” ■ WHEN SHINADA SHOICHI was a boy he noticed grown-ups arguing. Should their city, Kashiwazaki, along the Sea of Japan, host a nuclear power plant that would send energy to Tokyo? Opin- ions were “sharply divided”, Mr Shinada says. He worried about whether he would still be able to swim in the sea. Some 50 years later, the plant remains the talk of the town. Now the world’s largest, Kashiwazaki-Kariwa (KK) was shut down after the Fukushima disaster in 2011, but, after much debate, restarted again this year. For Mr Shinada, the vice-chair of the local business associa- tion, it marks a return to the “mission of supplying energy to the country”. Kashiwazaki has a deep history as a provider of power. One ancient chronicle speaks of “burnable water” sent from the region as a gift to the emperor in 668. In the late 19th century Japan’s first modern oil company set up a headquarters there. Nuclear power came thanks largely to a native son, Tanaka Kakuei, a powerful post-war prime minister. The plant offered many an economic lifeline. To this day, KK employs some 6,000 people; 80% are from the sur- rounding prefecture of Niigata. Taxes and subsidies related to the plant ac- counted for more than 30% of Kashiwa- zaki’s total revenues at their peak; they still make up 16%. But KK, which was temporarily knocked offline during an earthquake in Niigata in 2007, also makes many residents wary. By shifting the risk of hosting plants to the regions, Japan has “sacrificed them for the sake of Tokyo’s development”, argues Sasaki Hiroshi of Niigata University of In- ternational and Information Studies. These days, Tokyo poses another kind of threat to Kashiwazaki. The city’s population shrank from over 100,000 in 1995 to under 75,000 in 2025. Outlying villages are in danger of disappearing. The city made nurseries free and sub- sidises health care for children. “Plus we’ve got delicious rice and sake—but people still keep leaving,” sighs Sakurai Masahiro, Kashiwazaki’s mayor. It’s hard to compete with “the allure of Tokyo”. Japanese development A powerful parable KASHIWAZAKI Welcome to Kashiwazaki, home to the world’s largest nuclear plant A mission for fission C002 -- 33 of 78 -- 41 The Economist March 7th 2026 Asia ⏩ Malaysia’s anti-graft commission Out of the window THE MACC, Malaysia’s anti-corruption commission, has taken some notable scalps. Najib Razak, a former prime minis- ter, is serving a lengthy prison term follow- ing its prosecutions of him for involvement in one of the world’s biggest-ever financial frauds, the looting of a state fund called 1MDB. But its past also casts some dark shadows. In 2009 a man who was being questioned by the MACC was found dead after falling from a 14th-floor window, a death a court blamed in part on MACC offi- cers. Two years later a customs officer fac- ing questioning also died from a fall from a MACC window. The commission has suffered from a perception that, though nominally inde- pendent, it is in fact an attack dog for the government. James Chin, an expert on Ma- laysia at the University of Tasmania, says that governments have “always used it to go after the opposition”. So when Anwar Ibrahim, after a long period in opposition—some of it spent in jail on charges he always said were politi- cally motivated—became Malaysia’s prime minister in 2022 as a champion of “refor- masi” (reform) and a fierce denouncer of corruption, he might have been expected to shake up the commission. Instead, he has three times extended the tenure of Azam Baki, the chief commissioner since 2020, and, say critics, is also using the MACC as a political weapon. Among the most vocal of those critics recently has been Na’imah Khalid, the wid- ow of Daim Zainuddin, a wealthy busi- nessman who served as finance minister under Mahathir Mohamad, Malaysia’s prime minister from 1981 to 2003 and 2018 to 2020. Mr Anwar at times worked in gov- ernment with Daim and Dr Mahathir, and at times has been their bitter foe. Ms Na’imah says Mr Anwar “rode the reforma- si horse until he became PM, then dis- mounted and ignored it”. She is hardly a disinterested observer. Like her husband before his death in 2024, she and four of Daim’s children are accused by the MACC of failing to declare all their assets, and have had some of them frozen. But hers are not the only accusations the MACC is fending off. Mr Azam is suing Bloomberg, a news agency, for defamation over its report that he owned more shares in a financial-services company than is al- lowed for public officials. Another Bloom- berg report, also denied by the MACC, ac- Another corruption scandal rocks Malaysian politics Media freedom in India Shrinking the space ON FEBRUARY 27TH B.V. Nagarathna, a supreme court judge, sounded the alarm. Speaking at a public event on media freedom, she argued that the Indian gov- ernment had no need of direct censorship, since it already has a range of tools—in- cluding tax, regulation, ownership laws and advertising budgets—to muzzle its critics. She warned about the rise of “selec- tive journalism”, noting that the media may be “legally free” but “economically con- strained” in ways that make robust criti- cism hard to sustain. Such interventions from judges on In- dia’s top court are rare. But several factors may have compelled Ms Nagarathna to speak out. In November a new law came into effect that critics say will hobble in- vestigative journalism. Last month the gov- ernment granted itself the power to in- struct websites and platforms to remove content in just three hours. Then there is the case of Ravi Nair, an investigative jour- nalist who on February 10th was sentenced to a year in prison. India can be hard to place when it comes to media freedom. On the one hand it is vast, diverse and irrepressibly noisy. It is true, as those in power like to say, that you can readily find critical voices in doz- ens of languages—in print, online and increasingly on video apps like YouTube. Global press freedom measures that rank India below many African autocracies can feel incongruous. On the other hand, the country has a legacy of restrictive media laws and a powerful state that is not only energetically wielding them but extending their sweep. There may not be a shortage of critical opinions, but it is getting harder for journalists to hold power to account. The most worrying development is the mundane-sounding Digital Personal Data Protection Act. In the name of protecting privacy, it significantly curtails a right-to- information law that has been a vital tool for muckrakers. By weakening a public-in- terest justification, it will make it harder for journalists to unearth the documents es- sential to corruption investigations. Bi- zarrely, it also requires journalists to obtain consent from those they are tracking. The probable effect will be to tie up journalists in legal jeopardy. The case of Mr Nair could also have a chilling effect. He has been a thorn in the side of Gautam Adani, a tycoon with a sprawling empire and a close relationship with India’s prime minister, Narendra Mo- di. Mr Adani has filed suits against at least 15 journalists who have dug into his busi- ness arrangements (which are the subject of an ongoing investigation by an Ameri- can regulator; the Adani group describes allegations against it as “baseless”). But none has yet ended up behind bars. A court in Gujarat found Mr Nair guilty of criminal defamation for a series of social-media posts that made exaggerated claims about murky dealings. He is due to appeal. Those in power in Delhi and in state capitals have found other ways to increase their leverage. One is advertising; for print publications with dwindling circulations, the state has become a major source of rev- enue. Then there is ownership: the press is often “dependent on corporate power, which itself may rely on state patronage”, observed Ms Nagarathna. Countering these trends are a handful of digital-first sites, like Scroll.in, Newslaundry and The News Minute, with subscribers willing to pay for feet to be held to the fire. But they remain small, with limited clout. Free-speech advocates also worry that the new content-takedown law will extend the state’s reach over activity online. The policy, which is among the strictest in the world, allows the government to mandate the removal of content without needing to first seek a court order. Platforms includ- ing Meta have questioned its feasibility, ar- guing that they will not have time to inves- tigate whether orders are justified. “The government has not come down with a sledgehammer,” says Nitin Sethi of the Reporters Collective Trust, a campaign group. “It is more like a thousand cuts.” Each change makes it harder to scrutinise the rich and powerful. “They don’t have a complete grip, but they are incrementally shrinking the space for critical work.” ■ DELHI New laws are making muckraking harder Don’t read all about it C002 -- 34 of 78 -- 42 The Economist March 7th 2026 Asia ▸ “IT IS ALL colour, bewitching colour, enchanting colour—everywhere all around.” Mark Twain’s breathless first impressions of India, recorded in his travelogue “Following the Equator”, would hardly be out of place in an In- stagram post by a gap-year backpacker today. India’s flamboyance is unmis- sable. Polychromatic fruits, spices and dyes enliven its markets, cuisine and textiles. Lush tropical vegetation covers the landscape. And what other country has the peacock for its national bird? India hits peak saturation on Holi, a spring festival of colours, which this year falls on either March 3rd or 4th depend- ing on the region. In the run-up to Holi, street stalls are stacked with mounds of colourful dyes. On the day itself children and adults alike throw coloured powder and tinted water at each other. Some stains remain on faces and hands for days. It is a kaleidoscopic time. It is also a good moment to reflect on the way that India’s palette has changed. In the years since economic liberalisa- tion in 1991 consumer products have brightened up storefronts as the country evolved into a market economy. In poli- tics, colourful centre-left coalitions have given way to the dominance of Narendra Modi’s Bharatiya Janata Party, often called the saffron party. As the country has changed, so too has its colourscape. The economic exuberance of the 1990s was best captured by “Naples yellow”, the most striking shade of a sexy hatchback called the Maruti Zen. In the 2000s Delhi’s autorickshaws transi- tioned from black-and-yellow to an eye-catching green-and-yellow after India’s Supreme Court mandated their conversion from petrol to natural gas— with a paint job to show which had complied—to tackle a growing pollution problem. Then in the 2010s, as India’s cricket team was growing into its world- beating avatar, the team jersey switched from light to navy blue. The growth of the Indian Premier League into one of the world’s most successful domestic tourna- ments added yet more colours to Indian life. Each decade has brought new hues. What, then, of the 2020s? Three col- ours help depict India’s ongoing trans- formation. The first is the inviting yellow that shines from shop signs and wedding venues, hangs from roadside stalls and marks the outlines of flashy high-rises. It is produced by inexpensive LED lights that have replaced the harsh white tube-lights of the past. As recently as ten years ago investing in elaborate illuminated signage would have been a waste of money. Many cities and towns suffered brownouts and swathes of villages were not connected to the grid at all. India has since then nearly doubled its power-generation capacity— half of which is renewable—and now produces a surplus. In a country where the idea of scarcity is seared into its citizens’ neurons, bright lights are a still-fresh expression of abundance. Another colour of the times is the dark green of the netting that drapes building projects in every city. India is in the midst of a huge construction boom. Its cities are adding residential and commercial towers at a blistering pace. Developers in its eight biggest cities launched 362,000 housing units last year, up from just under 225,000 in 2019. And railway stations, airports and other infrastructure are getting facelifts or being built brand new. The construc- tion dust from this boom worsens India’s horrific air pollution. In recent years many cities have started enforcing rules that call for green netting, which is, in theory, meant to keep dust contained. So the colour symbolises not just a booming economy, but the problems that come with growth and the struggles to min- imise its repercussions. Last is saffron. This is not a new colour for India—it is associated with Hinduism, Buddhism and the secular republic. It has long adorned temples and the robes of monks. A band of saf- fron occupies the top of India’s flag. In 2024, as Mr Modi prepared to inaugurate a grand new Hindu temple at Ayodhya that has been the trademark cause of his party for over three decades, the flag became ubiquitous outside homes and shops across the country. It is increas- ingly painted on cars and autorickshaws. A colour once rarely seen outside reli- gious contexts is now unavoidable. If the warm yellow of LED lights signifies India’s economic metamorpho- sis and green netting its physical trans- formation, the spread of saffron is a symbol of how its politics has wrought a social reconfiguration. Some of these colours will, with time, fade from promi- nence. Others are here to stay. BANYAN India’s changing hues The world’s most colourful country has a new palette cused its officials of colluding with a group of businessmen to put pressure on compa- ny owners (by, for example, holding them for questioning, or threatening prosecu- tions) to oust executives, sell shares and re- linquish control. This prompted calls from politicians in Mr Anwar’s ruling coalition for a royal commission to investigate the MACC. The government’s critics accuse Mr Anwar of stalling on this in the hope of sparing the commission from such scrutiny. Ms Na’imah last year retained an inter- national strategic consultancy to protect her family’s reputation, and seeks to pre- sent its members as victims of a politically motivated campaign by the MACC. Her dis- cussions with the consultancy have now become the subject of a Malaysian police inquiry into whether she was trying to “topple” the government by mobilising an international media campaign against it. She has called that charge preposter- ous, and Mr Anwar has been accused of hy- pocrisy: his own party retained an Ameri- can firm to lobby for his freedom when he was locked up. He insists that this is differ- ent, involving not one man’s freedom but “the entire system in this country”. Mr An- war is not the first Malaysian prime minis- ter to blame economic problems or corrup- tion allegations on an international con- spiracy against the country. Dr Mahathir and Mr Najib did the same—another way in which Mr Anwar looks less like reform than continuity. ■ C002 -- 35 of 78 -- 43 The Economist March 7th 2026 China The Belt and Road Initiative New Chinese tracks BY THE STANDARDS of China’s vast net- work of super-fast railways, the Buda- pest-Belgrade line is hardly a marvel. It tra- verses no craggy mountains or yawning ra- vines. It is often called high-speed, but it is nothing like as zippy as counterparts in China. Yet the opening on February 27th of the last stretch to be completed of the 350km link between the Hungarian and Serbian capitals was symbolic. It meant the first railway built with China’s help had entered use in the European Union. When China, Hungary and Serbia an- nounced their plans for the line (mostly an upgrade of a rickety existing one) in 2013, China’s global splurge of infrastructure- building known as the Belt and Road Ini- tiative (BRI) was in its infancy. The world had little inkling that this scheme, un- veiled by the country’s new leader, Xi Jinping, would morph into a trillion-dollar bonanza. But China had its eye on Europe. It wanted to sell more goods there and ex- pand its political influence. It saw Serbia, then a new candidate for EU membership, and Hungary, which was already a mem- ber, as useful partners: they were among the continent’s most China-friendly coun- tries. China touted its help with the Buda- pest-Belgrade line (or BuBe, as it is often called) as a BRI jewel. The idea was that BuBe would speed up the flow of Chinese products to Europe and show off China’s ability to build high- quality railways to EU standards. There was an implied message, too: China- friendliness would pay dividends in the form of BRI rewards. But as the entire length of BuBe finally becomes operation- al after years of delay (China’s then prime minister, Li Keqiang, said in 2015 that it should be finished in two years), China is probably wondering how much it has gained. BuBe is less a demonstration of China’s largesse and engineering prowess than it is a reminder of how fraught its rela- tionship with Europe has become. Hungary and Serbia remain close friends of the People’s Republic. But Chi- na’s efforts to use the former communist countries of eastern and central Europe as a springboard into the continent have fal- tered. This “16 plus one” group (later 17, when Greece joined) ceased holding annu- al summits with China (the “one”) five years ago. Concerns grew among its Euro- pean members that the club risked under- mining EU unity. Baltic countries left the group. Russia’s full-scale invasion of Uk- raine in 2022 further soured the atmo- sphere: China has been giving vital sup- port to the aggressor. A few years ago, China might have ex- pected an extravagant send-off for the first regular train to use the Hungarian stretch of BuBe (Serbia’s was completed last year). But it pulled out of Budapest’s Ferencvaros station at midnight with little ceremony. Behind the blue German locomotive was a string of graffiti-daubed boxcars. At an- other station, Chinese workers gathered BUDAPEST China’s first railway project in the European Union has opened for business → ALSO IN THIS SECTION 44 IVF in China 45 Growth targets 46 Chaguan: China and Iran ⏩ C002 -- 36 of 78 -- 44 The Economist March 7th 2026 China ▸ ⏩ for a souvenir snap. To be sure, this was just a freight train. Passenger services along the entire line—a corridor once associated with the glamorous Orient Express—could begin soon if further tests succeed, Hun- garian media say. The journey from Buda- pest to Belgrade was once eight hours by rail. It will soon take three or four. Yet these are tense times for Viktor Or- ban, Hungary’s strongman. Elections are set for April 12th. Mr Orban has ruled the country since 2010 (he also did so between 1998 and 2002). Polls put his party, Fidesz, behind a once-tiny centre-right party, Ti- sza, whose campaign against rampant cor- ruption has inspired many voters. Many of Mr Orban’s critics see the railway as a mur- ky deal with China that will pay few eco- nomic dividends to Hungary. They allege that it could also enrich Mr Orban’s family and friends. Hungary took a 20-year loan from China of about $1.9bn to finance its part of the scheme. It classified details of this, and the contracts involved, as secret. (Serbia borrowed about $1.3bn from China for work on its side of the border.) As it surveys Serbian politics, China probably finds little relief. There, too, a strongman—the president, Aleksandar Vucic—may face a general election this year, though no date has been announced. Mr Vucic is doubtless pleased that wide- spread protests against him that erupted in 2024 appear to have lost momentum. They are indirectly linked to BuBe. The trigger was the collapse of a concrete canopy at a station in Novi Sad, Serbia’s second city. The building had been renovated as part of the overhaul. Protesters blamed the acci- dent, which killed 16 people, on alleged corruption that led to shoddy work. (Offi- cials, and Chinese firms involved in the station project, say the canopy was not part of the refurbishment.) Still, for travellers between Belgrade and Novi Sad, the improved line is wel- come. This section opened in 2022, reduc- ing the fastest rail journey between the two cities from about 90 minutes to under 40. There is less cheer in Hungary. Within the country, the route only links small towns with Budapest. It has dozens of level cross- ings, in effect ruling out speeds above 160kph, versus 200kph in Serbia. But the BRI is much more about trade than making it pleasanter for people to tra- vel. The BuBe project has been touted by the countries involved as a key link in a rail corridor between the Greek port of Piraeus and markets in Europe. The port has been controlled by a Chinese shipping giant, COSCO, since 2016: its upgrade has been another flagship BRI effort in Europe. BuBe’s launch, however, is unlikely to make much difference to the flow of Chinese goods into the continent. Rail connections between Piraeus and Belgrade are far from smooth. Most freight arriving in Piraeus from China is sent inland by road or by feeder ships to ports elsewhere. The spread of conflict across the Middle East in recent days will be a blow to Piraeus as ships again avoid the Suez canal. All this shows that the BRI is sometimes bittier than its joined-up-sounding rheto- ric suggests. China has limited ability to co-ordinate spending on infrastructure that involves multiple countries, especially when they have different regulatory sys- tems (EU concerns about possible in- fringement of its laws on government pro- curement led to delays with BuBe in Hun- gary). Chinese firms have poured billions of dollars of investment into Hungary’s electric-vehicle industry, but their battery and carmaking plants are far from BuBe. Chinese officials may shrug. “I think they have already done what they wanted,” says Andrea Elteto of Budapest’s Centre for Economic and Regional Studies. “They already have lots of companies here, they have a foot in Europe, a bridgehead.” China may prefer more BuBe fanfare, but in Hun- gary its firms don’t crave new tracks. ■ Belgrade Novi Sad Piraeus SERBIA HUNGARY Adriatic Sea ITALY ROMANIA CROATIA BOSNIA MONTE- NEGRO ALBANIA KOS. AUSTRIA GREECE NORTH MACEDONIA BULGARIA Budapest 200 km Main railway corridors Built with China’s help Others Fertility policies Lab-grown optimism WHEN TANG RONGXIN began practis- ing in vitro fertilisation (IVF) in Beijing in 2006, she says that fertility clinics felt otherworldly. The procedure seemed “extremely mysterious”, she re- calls. Two decades on, IVF has become em- bedded in mainstream medicine. The most revealing change in that time, Ms Tang says, is not only in the science but in the patients themselves. Women in her wait- ing room are markedly older than those she helped at the start of her career. That mirrors a broader demographic transformation. Chinese couples are mar- rying and trying for children later than in previous generations—one reason why in- fertility has become more of a problem. The share of couples of reproductive age struggling with infertility climbed from around 12% in 2007 to about 18% in 2020. Demand for IVF has surged. The number of assisted-reproduction treatment cycles in China rose from about 236,000 in 2013 to more than 1.1m in 2019. Today China has roughly 600 licensed clinics; assisted-re- productive technologies accounted for around 300,000 births, roughly 3% of the national total in 2022 (the latest year for which data are available). In a country des- perate for more babies, even that modest share has drawn official attention. China’s fertility rate is among the low- est in the world: the average Chinese wom- an has just one child over her lifetime, down from 1.8 in 2017, and far below the 2.1 required to keep the population stable. Policymakers, alarmed that a greying pop- ulation will leave too few workers to sus- tain growth and too many old folk to sup- port, have rolled out an increasingly mus- cular package of pro-birth measures. A na- tionwide child-care allowance introduced in 2025 pays families 3,600 yuan ($520) a year per child under the age of three. Less subtly, in January condoms became subject to a 13% VAT rate. These measures come after the central government required assisted-reproduc- tive treatments to be added to public insur- ance schemes in 2022. These are adminis- tered and financed locally. More than 1m people received reimbursement for IVF treatment in 2024 alone. By mid-2025 all 31 provincial-level regions had incorporated them into their schemes. An IVF cycle can cost 20,000–50,000 yuan. Some cities also offer grants of up to 10,000 yuan. Yet demographers doubt that expand- ing IVF subsidies will raise births substan- tially. International experience offers little encouragement. Japan and South Korea have spent lavishly on pro-birth policies, including IVF, for decades; neither has achieved a sustained recovery in numbers. In China assisted reproduction would have to expand many times over to shift the fer- Why China hopes that IVF can slow its baby bust C002 -- 37 of 78 -- 45 The Economist March 7th 2026 China ▸ tility rate substantially. Besides, scaling it up is far from straightforward. As Ms Tang observes, more patients are arriving in their late 30s, when success rates decline sharply. And IVF helps with infertility, not ambivalence about parenthood, thus benefiting only a small group of people, notes Stuart Gietel- Basten of the Hong Kong University of Science and Technology. In China that limited pool is further narrowed by geographical constraints and the government’s own policies. Clinics are concentrated in wealthier cities. From 2023 to mid-2025 more than 53,000 people in Beijing—a municipal area of 22m—had their fertility treatment reimbursed through public insurance. By contrast, in Jilin, a north-eastern province with a simi- lar population, fewer than 6,000 women benefited in the first year after coverage began in 2024. Authoritative data on how many of these women actually bore chil- dren are difficult to obtain. Such disparities reflect the structure of China’s health system, explains Karen Eg- gleston of Stanford University. Because provinces have to cover a big share of their own insurance costs, richer regions reim- burse more generously. In poorer ones treatment often remains unaffordable. Ningxia’s annual disposable income per person is less than a cycle of treatment might cost. And low reimbursement rates in turn constrain supply. Public hospitals must generate revenue, and where patients cannot cover the shortfall there is little in- centive to expand IVF services, says Wang Feng of the University of California, Irvine. Moreover, access to IVF is tightly regu- lated by national and provincial rules. Na- tionally, only heterosexual couples who are married can receive treatment. Few places seem to restrict access based on a mother’s age. But rules on egg-freezing are strict. It is permitted only for medical reasons, such as in the event of cancer treatment, and not for healthy women who wish to postpone childbirth. That prevents women who know they want to delay childbearing from freezing eggs while they are younger, even though IVF using younger eggs has a high- er success rate. Access to IVF may yet expand. Officials’ demographic worries may, over time, come to outweigh ideological reservations that have limited eligibility, says Mr Wang. In 2023 the province of Sichuan removed a re- quirement that parents must be married in order to register a child’s birth, allowing single mothers to get maternity benefits. That year, too, an adviser to the national government (unsuccessfully) proposed granting unmarried women access to infer- tility treatments. Although such changes would bring families joy, high subsidies and advanced technologies will not deliver China from demographic decline. ■ Economic gloom Diminished expectations AFTER THE high inflation and dramatic protests of 1989, China endured a spell of economic “rectification” and austerity. But by 1991 its leaders were ready to return to growth. At that year’s meeting of the National People’s Congress (NPC), China’s rubber-stamp parliament, the government announced a “moderate” growth target of 4.5%. “We will strive to exceed these tar- gets in practice,” it said. Exceed them it did. The economy grew more than twice as fast as envisaged. That meeting was the last time China set itself a growth target as modest as the goal announced on March 5th, the opening day of this year’s parliament. Roughly 2,800 delegates heard Li Qiang, the prime minister, say that GDP this year should grow by 4.5-5%, a notch lower than last year’s target of “around 5%”. Alas, this target will not be as easy to meet as the modest goal of 35 years ago. China is a far richer, better appointed country than it was in the early 1990s, with less scope for rapid catch-up growth. Its GDP per person reached almost $13,900 last year, 15 times its level in 1990. Its latest five-year plan, which the NPC delegates will also review this week, foresees China becoming a “mid-level developed” econ- omy in 2035, when its GDP per person should be double its level in 2020. China is also an older country than it was 35 years ago and its workforce is shrinking. Accord- ing to figures released on February 28th, employment fell in 2025 by almost 1.3%. On top of these structural difficulties are some cyclical dangers. Exports could disappoint this year, having far exceeded expectations in 2025. Economists were forecasting a smaller contribution to growth from trade in 2026 even before the Iran war disrupted shipping routes and rocked some markets in the Middle East. Consumers will also get less of a boost from the government’s “cash-for-clunkers” scheme, which subsidises households who upgrade their cars, phones and appliances. The government has broadened the offer’s scope this year—it now includes AI glasses, for example, and an emphasis on “age- friendly” home products like nursing beds and fall-prevention systems. But Mr Li said the funding would be cut by a sixth to 250bn yuan ($36bn). Officials boast that last year’s scheme subsidised 366m pur- chases worth 2.61trn yuan. The thinner scheme planned for this year will struggle to match that sum. And to contribute to growth, it must exceed it. Besides exports and consumption, the third engine of demand—investment—is threatened by a government campaign against overcapacity, price wars and “invo- lution” (officially translated as “rat-race competition”). Mr Li promised to fight un- fair competition with “greater intensity” this year, by raising quality standards, reg- ulating production and enforcing laws against predatory pricing. This combina- tion of threats to investment, consumption and trade is contributing to what Ting Lu of Nomura, a bank, has called a “demand cliff”. He forecasts that growth will reach only 4.3% this year, falling short even of the government’s diminished target. To offset this lack of demand, the gov- ernment will have to ease its fiscal stance. But it does not seem ready to accept that. At the NPC it said its headline budget def- icit would remain at 4% of GDP in 2026, the same as last year. It has also chosen not to increase the quota of “special” bonds is- sued by local governments, traditionally reserved for revenue-generating infrastruc- ture projects, but now used for all sorts of things, including buying unsold property and idle land. The government raised rural pensions by a mere 20 yuan a month, the same as last year, increasing the minimum benefit to 163 yuan. It will also set aside 100bn yuan to subsidise consumer loans. That grudging support will not be enough to solve China’s problems of chronic overcapacity and deflation. Falling prices have depressed nominal growth, which makes no adjustment for inflation (see chart). That has weighed on corporate revenues and workers’ pay packets. The government seems to think nominal growth will do a little better this year, in- creasing by about 5%, judging from its budget maths. Mr Li also promised to engi- neer a “reasonable, modest rebound” in consumer prices. Back in 1991, the govern- ment’s modest targets were reassuring. Thirty-five years later, more ambition would be welcome. ■ HONG KONG China sets its lowest growth target for a generation The slow descent China, GDP, % increase on a year earlier Sources: National Bureau of Statistics; Haver Analytics 15 12 9 6 3 0 26 24 22 20 18 16 14 2012 Nominal Real Real annual target C002 -- 38 of 78 -- 46 The Economist March 7th 2026 China An ice-cold calculus over Iran WHEN AMERICAN and Israeli warplanes struck Iran at the weekend, killing Ali Khamenei, the supreme leader, China’s flagship nightly news programme covered the story with notable frankness. The basic facts were reported, clearly and promptly. Contrast that with what happened barely two months earlier, when massive protests erupted across the Islamic Republic. For the first two weeks, China’s newscasters said nothing. When they did eventually cover the unrest, they depicted the protesters as pawns of “external forces”. This contrast reveals one reason why China’s leaders are less troubled by the ongoing assault on Tehran than many assume. China was alarmed by Iranians rising up in late December against their own government. The spectacle of a popular movement top- pling an autocratic regime is precisely the kind of thing that makes officials in Beijing anxious. An airstrike that kills a political leader is, from China’s perspective, a more manageable event. It is easier to voice outrage at warmongering Americans. It is also pos- sible to imagine various outcomes in Iran that might work to China’s advantage. Some of President Donald Trump’s boosters in America have depicted Khamenei’s death as a devastating blow not just for the Islamic Republic but for China itself. These hot takes assume that China has been humbled. It is true that the country once seemed to be styling itself as a new powerbroker in the Middle East. Three years ago it brought Iran and Saudi Arabia together for talks to re- store official relations; some observers hailed that as proof of Chi- na’s ascendance in the region. The joint American-Israeli strikes drive home the opposite point: China’s influence and ambitions in the Middle East are more limited. Passive in Iran, China similarly stayed on the sidelines in Vene- zuela in January, when Mr Trump, with his taste for violence and bravado, sent American troops to snatch Nicolás Maduro, China’s friend. Of the two, Iran carries more weight. Venezuela supplied less than 4% of China’s total crude imports, Iran more than 10%. Iran has also been a useful thorn in America’s side, with its proxies targeting Americans and allies across the region. So, the argument goes, China is a big loser from the bombing of Iran. Such reasoning is more wishcasting than real analysis, how- ever. China is hardly weeping. Most obviously, no one knows how the military operation will turn out. America’s war in Iraq in the early 2000s distracted it from the competitive threat then just starting to emerge from China. Nowadays, that competition is far fiercer and the distractions would be costlier. Julian Gewirtz, a se- curity official in the administration of Joe Biden, notes that even short of an Iraq-style quagmire, the likelihood that America must again pour attention into the Middle East is to China’s advantage. Besides, China does not need Iran in the way that Iran needs China. Chinese buyers account for more than 80% of its crude ex- ports. Although Iranian oil is under American sanctions, small Chinese refiners have been only too willing to disguise it as, say, Malaysian crude. China has also sold Iran vital technology, includ- ing digital-surveillance tools that helped the regime brutally crush the recent protests. China has decided that Iran simply matters less. It has a diver- sified portfolio of crude suppliers and, in any case, its huge de- mand for oil seems to be peaking (though China remains the world’s largest importer of crude) because of an electric-vehicle boom. China has made relatively few direct investments in Iran, despite promising otherwise. And, most tellingly, Chinese offi- cials have grown wary of Iran’s unpredictability. They view the prospect of Iran developing nuclear weapons with quiet alarm, partly because it might chip away at the nuclear taboo constrain- ing China’s rivals in Asia, especially Japan. China also has investments and expat populations in the Un- ited Arab Emirates and Saudi Arabia, and has not appreciated Ira- nian strikes against them. “For all of the narrative about competi- tion between China and the West, China’s closest relationships in the Middle East are largely with US partners and allies,” says Jona- than Fulton of the Atlantic Council, an American think-tank. Friends like these All this makes for an unsentimental China. It is not about to aban- don Iran as a partner. But it may not much care whether the clerics remain in charge or whether some other group, perhaps drawn from the revolutionary guards, takes over. What China cares most about is its economic interests in the Middle East. If American ac- tions somehow yield an Iranian government that has forsworn nu- clear weapons, so much the better. “Whatever happens, there is much the Iranian regime must reflect on and improve,” says Ding Long of Shanghai International Studies University. Iran cannot have been surprised by China’s restraint. It already knew what to expect. When Israel bombed its nuclear facilities in June 2025, China offered little more than angry denunciations. In the lead-up to the strikes that killed Khamenei, China’s language was even more muted. Some Chinese thinkers are already ponder- ing what comes next. If America eventually lifts sanctions on Iran, the precedent of Iraq is instructive: when reconstruction begins, Chinese companies, with their expertise in infrastructure, tech- nology and trade, show up. Iranian oil might flow more abundant- ly. “China may even become a beneficiary,” says Mr Ding. “One should not be overly pessimistic.” It is a cold calculus, born of the recognition that China has vast economic interests in the Middle East but scant ability or appetite to make a mark on the region’s messy politics. Right now, China is a bystander as the bombs fall on Iran. It will not remain one when the rebuilding starts. ■ CHAGUAN In the Middle East, China is a political weakling but an economic force C002 -- 39 of 78 -- 47 The Economist March 7th 2026 Africa Development The lure to live large THE START of operations at a $20bn oil refinery in Nigeria in 2024 showcased a vision of development that is popular among Africa’s elites. Its owner, Aliko Dangote, who is also the continent’s rich- est man, likes to say that “You need to think big, then you grow big.” Contrast this with the advice favoured by some Western aid agencies and NGOs, which might be summed up in the mantra “Small is beauti- ful”. Which approach will make African countries rich? As aid budgets shrink, an old question has acquired a new bite. To understand the debate, imagine an economy with two sectors. The “capitalist” sector, which includes factories and com- mercial farms, is more productive. But most people work in the “subsistence” one, made up of informal enterprises and tiny farms. As argued in the 1950s by Arthur Lewis, a Nobel prize-winning economist, development happens when workers move from “subsistence” to “capitalist” activi- ties, which have higher labour productivity. The question is what policies can sup- port this structural transformation. One answer might be to help big firms to grow so that they draw in labour. For example, the government could lower electricity ta- riffs for factories or make it easier for large farms to acquire land. An alternative ap- proach might be to nurture small firms in the hope that some grow into productive, modern enterprises. Their owners could be given credit and training. Smallholder farmers could be helped to raise their yields and get access to markets. Policymakers in Africa have long blend- ed the two approaches. In the first decades of independence, they went large. African leaders and their funders, like the World Bank, embraced grand state-run projects, which often floundered. After the debt cri- sis of the 1980s and IMF-led privatisations in the 1990s, the mood shifted. NGOs filled in for the state. The hustling owners of tiny businesses were recast as “micro-entrepre- neurs”. Western aid agencies backed small interventions that could be assessed with randomised controlled trials. Now the emphasis is shifting again. In- dustrial policy, which tends to focus on big firms, has become so trendy that the World Bank holds conferences on it. Govern- ments are supporting large-scale efforts to process raw materials, be it cotton in Benin or cashews in Ivory Coast. Philanthropies that usually pay for items like mosquito nets are funding research into growth. In part, the shift is political. African policymakers were never convinced by bot- tom-up approaches, which they saw as a woolly Western fad, associated with a model of aid that is now in decline. Some politicians back big firms as a way to re- ward friends and cronies; for others, it just seems a more plausible way to boost growth (see Free Exchange). “How can a capitalist not know how money is generat- ed?” Yoweri Museveni, Uganda’s president, asked last year, grumbling that donor mon- ey has gone to schools and hospitals rather than railways and power plants. Rising powers, like China and the United Arab With aid declining, grand visions for growth are back in fashion → ALSO IN THIS SECTION 48 The Africans trapped in Russia’s war ⏩ C002 -- 40 of 78 -- 48 The Economist March 7th 2026 Africa ▸ Emirates, have always financed infrastruc- ture. Brazil invests in commercial farms in Africa. Under Donald Trump, America too is looking for big deals. The fashion among development econ- omists has also changed. Randomised trials helped feed the enthusiasm for small, measurable interventions, but they also showed that many bottom-up ideas did not work very well. Giving out credit to tiny businesses, for example, seems to have only modest impacts on measures like business activity and profits. Three-quarters of workers in Africa are self-employed or work for a relative, so small firms matter. Xinshen Diao of the In- ternational Food Policy Research Institute and Margaret McMillan of Tufts Universi- ty argue that an “in-between” sector of small, fast-growing companies creates a lot of jobs. But most big businesses are born large. The World Bank found that in devel- oping countries, among companies that started with fewer than 20 workers, 82% were still small a decade later. Only 3% em- ployed more than 100 people. “If you have a clear idea of what structural transforma- tion is—growing productivity and higher technology—then you have to go for larger firms,” argues Taffere Tesfachew, an advis- er at Ethiopia’s ministry of industry. In agriculture, too, the answers are not obvious. Many economists think the prior- ity is to raise yields among smallholders, who tend to spend their earnings locally, stimulating demand. This worked in east Asia. But many small farms in Africa are too small to be viable. There might be more dynamism among mid-size commer- cial farmers with the scale to mechanise. Similar questions bedevil energy policy, where the debate is over whether to focus on cheap, reliable power for firms, or hook up the 600m Africans who do not have electricity. Moussa Blimpo of the Universi- ty of Toronto thinks that powering indus- try would spur growth, raise incomes and eventually boost access across the board. Others point out that cheap solar panels can light up villages the grid cannot reach. And there has been a huge boom in recent years in solar panels being installed. Those who favour big businesses are criticised for being heartless; those who want to help small ones may be considered soft. Neither charge is quite fair. The reali- ty of development is messy, uneven and of- ten brutal, says Christopher Cramer of SOAS at the University of London. But gov- ernments can try to encourage links be- tween big and small companies, for exam- ple, rather than simply assuming that wealth will trickle down. There may be no single right way to boost growth, given that countries have ve- ry different endowments of land, labour and capital. But for now, thinking big is back in fashion. ■ Africans in Ukraine A deadly job SLOWLY, HALF-HEARTEDLY, the soldiers start to dance. A tall man speaking Rus- sian, who appears to be their commander, laughs and calls for the music to be turned up, urging the rest of the group to dance with him. Vincent Odhiambo, a 28-year- old Kenyan who shot a video of the scene on his phone, says this was the day before his army unit arrived on the front line in eastern Ukraine in July. Mr Odhiambo says all the soldiers seen dancing in the video were soon killed in battle. Apart from the commander, all were African. Mr Odhiambo is one of thousands of Africans who have fought in the war in Uk- raine, where both sides have used foreign fighters since Vladimir Putin launched the full-scale invasion in 2022. Ukraine puts the number of African nationals currently enrolled in the Russian army at 1,780 from 36 countries, but there are probably more. Kenya’s intelligence agency reckons more than 1,000 Kenyans have been involved in the war, with 89 still on the front line. Though some Africans caught up in the war have military experience and may have gone to fight voluntarily, many say they were forcibly recruited under false pre- tences. In Kenya, Mr Odhiambo says an agency called Global Face Human Re- sources promised him a civilian job in Rus- sia, free flights and visa, plus a sign-on bo- nus worth more than $10,000. Yet on arriv- ing in St Petersburg, Russia’s second city, he was presented with the choice of sign- ing a contract with the Russian army, or paying 2.4m roubles ($31,000) to leave. On February 26th the agency’s Kenyan foun- der was charged with human trafficking. Stories of recruiters targeting poor, of- ten unemployed, young men have emerged across the continent. In Accra, Ghana’s capital, one recruiter allegedly charged vic- tims hefty upfront fees and later deducted 130,000 roubles from their monthly sala- ries. Like Mr Odhiambo, they say they were made to sign year-long military con- tracts in Russian (which they could not un- derstand), and given only a week’s training before being sent to the front. Russia, in particular, is “going all out in taking advan- tage of people who are looking for jobs and greener pastures”, says Samuel Okudzeto Ablakwa, Ghana’s foreign minister. Russia is turning to Africa because it needs manpower. There is good evidence to suggest that its army is losing more men than it can recruit, with desertion rates at a record high. Without resorting to general mobilisation, which Mr Putin has so far been reluctant to do, “it is really difficult for them to find additional men”, says Oleh Bielokolos, a former diplomat and director of Ukraine’s Centre for National Resil- ience Studies. The odds of survival are poor for any- one thrown into the war. A few Africans see out their contract and are granted resi- dency in Russia. Mr Odhiambo was hospi- talised and sent back to Kenya. But by one estimate, as many as 42% of foreign fight- ers are killed within four months of joining Russia’s army. At least 55 Ghanaians have died, says Mr Ablakwa. A Ukrainian for- eign-ministry spokesperson says the best bet for African conscripts is surrender: “We treat them as victims of Putin’s regi- me…if they are already in the army we en- courage them to become prisoners of war.” African governments are starting to wise up. Kenya’s government has closed hundreds of unlicensed recruitment agen- cies and called on Russia to stop enlisting its citizens. Last week Mr Ablakwa met Vo- lodymyr Zelensky, Ukraine’s president, to lobby for the release of two Ghanaian pris- oners of war and to assemble what the for- eign minister calls an “international co- alition of the willing” to fight trafficking. Russia, too, seems to be having second thoughts. Its war still enjoys support in Af- rica. Yet a new survey by Afrobarometer, a pollster, finds that positive views of Russia trail those of America and China. Accord- ing to iStories, a Russian investigative out- let in exile, Russia has drawn up a list of 36 “friendly” countries, including African ones, where recruiters are barred from seeking fighters. Such bans may not be en- forced. But they suggest Russia worries that the deaths of Africans in its war may cost it African support. ■ ACCRA AND NAIROBI African countries are belatedly trying to stop citizens fighting in Russia’s war Not what he bargained for C002 -- 41 of 78 -- 49 The Economist March 7th 2026 Europe Nuclear deterrence The umbrella of Île Longue IT WAS A theatrical display of national power. Escorted by fighter jets, Emman- uel Macron on March 2nd flew to the high- security naval base at Île Longue, Brittany, and spoke in front of one of France’s four serving nuclear ballistic missile subma- rines. But the event was not just about the visuals. In a marked shift in France’s nuc- lear doctrine, the president said that France would increase its nuclear stock- pile. He also revealed a new partnership with seven non-nuclear European coun- tries intended to enable France’s deter- rence to protect its closest allies too. Mr Macron’s decision to add to its nuc- lear arsenal was the first surprise. France currently maintains 290 warheads, slightly more than Britain—western Europe’s only other nuclear power—but far fewer than America’s 3,700-strong stockpile. France has traditionally adhered to what it called “strict sufficiency”: the idea that it needs just enough warheads to inflict unimagin- able damage. Adding to the arsenal does not mean, Mr Macron stressed, that France is entering an arms race. But he wants any adversary to know that an attack on France would prompt a response “from which it would not recover”. Henceforth, to keep adversaries in the dark, France will not dis- close how many warheads it possesses. The second announcement was a new doctrine which Mr Macron called “forward deterrence”. This is a partnership with Bel- gium, Denmark, Germany, Greece, the Netherlands, Poland and Sweden, which would work along the lines of one forged recently between Britain and France. De- scribing Germany as the “key” partner, the president said that closer co-operation would involve joint exercises with France’s nuclear-armed air force, at which others would contribute conventional forces (France carries out such exercises four times a year). This resembles a current scheme under which some NATO allies would provide conventional air power to support American air-launched nuclear strikes. From time to time it could also mean deploying nuclear-armed fighter jets to other European countries. There is no talk of permanently station- ing nuclear weapons in other countries. Nor is France offering an explicit guaran- tee. But the new mesh of arrangements, says a French diplomat, should send adver- saries a message about European solidari- ty and “complicate” their calculations. It remains open to others to join; Norway is considering the option. France and Ger- many have also launched a joint steering group on nuclear deterrence, an unthink- able decision even a year ago. Bruno Ter- trais, a specialist on France’s nuclear forc- es, calls Mr Macron’s speech “the most sig- nificant update to French nuclear deter- rence policy in 30 years”. This is an important moment. Since the ÎLE LONGUE France lays out its new nuclear-deterrence doctrine for Europe → ALSO IN THIS SECTION 50 Fear in Baden-Württemberg 51 Spain’s posturing PM 51 Taming Nordic populism 52 Baltic weekend warriors 53 Charlemagne: The muddled power ⏩ C002 -- 42 of 78 -- 50 The Economist March 7th 2026 Europe ▸ ⏩ end of the second world war, the American nuclear umbrella has guaranteed European security. At the same time, since the 1970s, France has written into its national-securi- ty strategy the idea that its nuclear deter- rent helps to protect Europe. Indeed Mr Macron offered in 2020 to start detailed talks with fellow Europeans about rein- forcing this. But as long as the American guarantee felt robust, the suggestion seemed superfluous. And until now France has never laid out what such a “European dimension” means. Mr Macron said that the intention is not to replace the American guarantee; the new arrangement is meant, rather, as both a complement and a hedge. Given uncer- tainty about America’s commitment to Europe, the idea is to make clear to Russia that a coalition of European countries is backed by France and its ultimate deter- rent. If Russia were to try to make a move on any other European country, it would also know that France could deploy its nu- clear-capable fighter jets as a warning sign. “The whole point is to increase the cost to any aggressor of any aggression,” says Etienne Marcuz of the Foundation for Strategic Research in Paris. France would nonetheless keep full control of the decision to launch a nuclear attack, as the president made clear. That refuted claims by some French opposition parties that he was about to “share” the de- terrent. The new doctrine, says an insider, took 18 months of work. A French official says that the partnership comes with no strings attached: no financial contribution has been requested in return. Fellow Europeans often suspect France of devising grand strategies in order to promote its defence industry. Their enthu- siasm in response to this week’s declara- tion, therefore, is striking. Claudia Major, of the German Marshall Fund in Berlin, called the Franco-German deterrence co- operation “ground-breaking”. Donald Tusk, prime minister of Poland, one of Europe’s most Atlanticist countries, post- ed on X: “We are arming up together with our friends so that our enemies will never dare to attack us.” Critics argue that neither the French nor British deterrents could fully replace the American guarantee under NATO, even if they sought to. Moreover, if the populist- right National Rally (RN) comes to power in 2027 there would be fresh questions about France’s commitment to European allies. Yet in unpredictable times, the shift in strategy Mr Macron unveiled at the Île Longue submarine base, located on an ap- parently tranquil wooded peninsula near the country’s westernmost point, is signif- icant. France’s new doctrine will reinforce Europe’s collective security in ways that only recently would have seemed unrealis- tic and unnecessary. ■ German politics Fear stalks the Länd SCROLL THROUGH a list of Europe’s richest regions and you quickly reach Baden-Württemberg, a state of 11m in Ger- many’s south-west. “The Länd”, as a popu- lar marketing campaign has it, has long ex- emplified Germany’s business model: a lat- tice of small, middling and big firms em- ploying lots of people to make high-quality stuff, especially cars, and sell it to foreign- ers. But these days American tariffs, surg- ing Chinese imports and an automotive sector in crisis are putting all that at risk. As it prepares to elect a government on March 8th, the Länd is filled with angst. A vast Mercedes museum on Stuttgart’s outskirts, opened by Angela Merkel in 2006, testifies to the car’s role in building Baden-Württemberg’s wealth. But the sec- tor may be facing “the greatest challenge in its history”, says Nicole Hoffmeister- Kraut, the economy minister. Over 200,000 jobs in and around Stuttgart, the state cap- ital, depend on it. Mercedes and Porsche are laying off workers. Bosch, one of the largest suppliers, will cut 22,000 jobs by 2030, many here in its home state. Still more troubled are the smaller Mit- telstand firms dotted around the state, many of which depend on the internal combustion engine, which faces obsoles- cence as cars electrify. Companies that might once have downsized are now being wound up, says Martin Mucha, a Stuttgart- based corporate lawyer. Firms’ travails are curbing tax revenues, forcing towns and cities to slash services. Stuttgart’s cor- porate-tax receipts have fallen by almost half in two years. Nearly half of voters tell pollsters the region could face the fate of Detroit, which fell into destitution and bankruptcy when its car sector crumbled. That may be taking things too far. “There are warning signs, but I certainly wouldn’t make that comparison,” says Jür- gen Dispan of the IMU Institute, a research outfit. Baden-Württemberg has a highly skilled workforce, good universities and depth in innovation: with 13% of Ger- many’s population the state accounts for nearly 40% of patent applications. AI, ro- botics and health care all show strength, and Germany’s rearmament programme will absorb some workers. EBM Papst, a cooling-technology firm with over 5,000 workers in the state, shows the possibility of reinvention. Five years ago, seeing the writing on the wall, Klaus Geissdörfer, the CEO, decided largely to quit the car business, betting on cooling systems for data centres instead. “If you sit back and wait, you’ll be gone in a few years,” he says. And some still see a future in the auto sector. Cem Özdemir, leading the campaign for the ruling Greens, is a car-hugger despite his politics: a formula that sounds odd to outsiders but has proved its potency here. “We must be the ones who produce the car of the future,” he says. “Decarbonised, autonomous, digital”. Still, Mr Özdemir accepts that even a successful transition will be hard, not least since there are a lot of laid-off workers to absorb. With the pie shrinking, once-har- monious relations between unions and bosses are fraying. The populist-right Al- ternative for Germany (AfD) hopes to ride the wave of anxiety to its best-ever election result in a west German state. It is leaflet- ing workplaces, campaigning in upcoming elections to works councils and promoting Zentrum, a pseudo-union headed by a for- mer guitarist for a skinhead rock band. Yet “the time is not ripe for them,” says Christian Steffen, an analyst at IG Metall, an established union the AfD rails against. He thinks it will struggle in the works- council elections. Similarly, in anxious but cosmopolitan Stuttgart, home to the big- gest car cluster, the AfD may not win much more than 10% of the state vote. “This is the contradiction,” says Rolf Frankenberg- er, a specialist on the far right at Tübingen University. “The AfD has no base in urban areas, although the transition will hit hard- est there.” As in other parts of Germany, it does best outside cities. Baden-Württemberg’s rural spots are wealthy too, not at all like the ramshackle, depopulated areas of eastern Germany where the AfD thrives. Take Hohenlohe, a region in the state’s north dotted with suc- cessful companies. Tim Breitkreuz, the en- ergetic young candidate for the conserva- tive Christian Democrats (CDU), is cam- paigning here. The houses are big and well kept. Unemployment is just 3.7%. Yet Mr HOHENLOHE AND STUTTGART An election has Baden-Württemberg gazing into the abyss *Dummy data A race in car country Baden-Württemberg, Germany, voting intention in state election, % Source: Wahlrecht.de 35 30 25 20 15 10 5 0 26 25 24 23 22 2021 State election result The Left FDP Others The Greens SPD AfD CDU C002 -- 43 of 78 -- 51 The Economist March 7th 2026 Europe ▸ ⏩ Breitkreuz is locked in battle with an AfD rival. A natural optimist, he says he has to dwell on problems to secure voters’ trust. At a CDU campaign event nearby, some party activists rage against what they re- gard as idiotic decisions imposed by lefties in Berlin, or dogmatic Eurocrats prema- turely killing the combustion engine. It is easy to see how such grievances may be mobilised by the AfD. “It’s not about real deprivation but fears of a loss of security,” says Mr Frankenberger. Hohen- lohe and many regions like it have a tradi- tion of support for the radical right that the AfD can tap. That will not lift it to power; the election will probably lead to another Green-CDU coalition, perhaps with the CDU now in charge. But whoever takes Ba- den-Württemberg will find a state fearing its future will be tougher than its past. ■ Spain’s prime minister Wobbly idol ON MARCH 4TH Pedro Sánchez, Spain’s Socialist prime minister, went on TV to reiterate his opposition to America’s at- tack on Iran. Spain, he said, would not be “complicit in something that is bad for the world...simply because of fear of reprisals”. Mr Sánchez had refused the Americans the use of two Spanish military bases for the assault; Donald Trump had responded by vowing to “cut off all trade with Spain”. The spat is part of an effort by the Span- iard to become Europe’s leading opponent of Trumpian nationalism. Mr Sánchez criticised America’s mili- tary extraction of Nicolás Maduro, Vene- zuela’s dictator, for violating international law. At last month’s Munich Security Con- ference he argued against European “nuc- lear rearmament”. He is also pro-immi- grant. In January he granted amnesty to perhaps 800,000 people who are in Spain without papers. Defending the decision in a post on X, he insisted Spain would stay a “welcoming” country and asked what was radical about “recognising rights”. Mr Sánchez speaks with the authority of an economy that has grown twice as fast as the euro-area average since 2023; last year it grew 2.8%. He still champions ac- tion against climate change. While other leaders seek to placate Mr Trump, Spain’s prime minister is hailed by Europe’s left for offering a progressive alternative. Yet he gathers less praise from Europe’s other leaders—or from Spaniards. Even dovish voters have reason to grumble: he has raised defence spending by over 40% since 2024 to 2% of GDP, though he refused to sign up to NATO’s target of 3.5%. In a more conservative Europe, “some see him as an irritant”, says José Ignacio Torreblan- ca of the European Council on Foreign Re- lations, a think-tank. “On the legalisation of immigration, he’s an absolute outlier.” In office for almost eight years, Mr Sán- chez’s coalition no longer commands a re- liable majority. The Socialists were wal- loped in regional elections in Extremadura in December and Aragón last month. A similar fate may await on March 15th in Castilla y León and afterwards in Andalu- cía, especially if Mr Trump actually bars Spain’s exports of wine, pork and olive oil. Spaniards have moved to the right, ac- cording to the polls. Rising housing costs have cancelled out rising wages, especially for younger people. The Socialists have been damaged by corruption charges against two of Mr Sánchez’s closest aides. The party’s alliances with Basque and Cat- alan nationalists hurt it elsewhere. Rather than the mainstream conserva- tive People’s Party (PP), the main beneficia- ry is the populist-right Vox. It won over 17% in both Extremadura and Aragón, forcing the PP into difficult negotiations to form governments. In some recent polls, a ma- jority of respondents now think there are too many immigrants. Mr Sánchez has admitted that disillu- sioned left-wing voters are staying at home. He insists he will enthuse them for the general election that must come by July 2027. That is one reason for his progressive foreign policies. But the strategy may not work. “The cycle is ending,” says Pablo Si- món, a political scientist. “Alternation in power is normal.” What is not normal for Spain is the possibility of the PP having to share government with Vox. ■ MADRID Feted by Europe’s left, Pedro Sánchez is feeble at home The progressive prince Nordic populism If you can’t beat them EUROPE’S CENTRE-LEFT parties have much to thank Donald Trump for. His insults and bullying have made many of them more popular, notably Denmark’s ruling Social Democrats. On February 26th Mette Frederiksen, the prime minister, called a snap election, taking advantage of the bump in support she received after Mr Trump threatened to seize Greenland. A few months ago Ms Frederiksen looked set for a drubbing. In local elec- tions in November the Social Democrats lost control of Copenhagen, the capital, for the first time in a century. Polls in Decem- ber put their support at just 17%, down from 28% at the national election in 2022. Since Ms Frederiksen defied Mr Trump ov- er Greenland it has rebounded to 22%, and her net approval has bounced by 21 points. Denmark’s general election on March 24th, and one in Sweden in September, will be watched closely across Europe, where centrist parties are battling to contain the populist right. The Nordic neighbours have test-driven different strategies for do- ing so. One is to adopt hard-line policies on immigration and crime in order to steal the populists’ thunder, as Denmark gradu- ally has over the decades; Sweden eventu- ally followed. The other is to give the popu- lists a role in government in the hope that they will become more responsible, as Sweden did after its last election in 2022. Both strategies entail ethical and elec- toral risks, but there may be no alternative. Europe’s efforts to isolate populist-right parties, as with France’s “cordon sanitaire” and Germany’s Brandmauer (“firewall”), are failing. Marine Le Pen’s National Rally is France’s most popular party. The Alter- native for Germany is tied for first nation- ally with the Christian Democrats, and may end up governing one of Germany’s states after elections this autumn. For many in Scandinavia, even on the left, the lesson is clear. “Denmark is maybe the only country that has been, in the lon- ger run, successful when it comes to weak- ening the right-wing populist party,” says Magdalena Andersson, Sweden’s prime minister until 2022 and the leader of its So- cial Democrats, who are ahead in the polls with about 35%. In the mid-2010s, a huge influx of mi- grants and refugees dominated northern Europe’s political agenda. After the popu- list anti-immigrant Danish People’s Party won 21% of the vote in 2015, a centre-right STOCKHOLM Denmark, Sweden and the populist right C002 -- 44 of 78 -- 52 The Economist March 7th 2026 Europe ▸ AT AN ARMY base in Pabrade near Lithuania’s border with Belarus, a bartender, a software developer and a salesman pile into an armoured vehicle. The men are part of Lithuania’s Rifle- men’s Union, a volunteer paramilitary group. They are spending their weekend on the edge of a forest in freezing tem- peratures, learning to storm trenches. Lithuania is nestled between Kalinin- grad, Russia’s enclave on the Baltic Sea, and Belarus, its vassal state. Since Rus- sia’s full-scale invasion of Ukraine in 2022 the Riflemen’s ranks have nearly doubled. Many buy their own kit. The organisation is part of Lithua- nia’s doctrine of “total defence”. “We want every Lithuanian citizen, no matter the age, education, physical readiness, to have a place in the country’s defence,” says Linas Kojala of the Geopolitics and Security Studies Centre, a think-tank in Vilnius, Lithuania’s capital. While some NATO countries are struggling to recruit soldiers, closer to the border with Russia volunteer groups are growing. Estonia’s Defence League now has more than 30,000 members, an increase of 5,000 since 2022. This expansion of citizen-soldiers creates vulnerabilities. In 2023 investiga- tors discovered that one of Lithuania’s Riflemen was working with Belarusian intelligence services. The government wants to tighten vetting of new volun- teers. Another challenge, explains Nele Loorents, a researcher at the Internation- al Centre for Defence and Security in Tallinn, is “overlapping responsibilities”. Many members also volunteer for other forces, like the police or rescue services. A crisis could strain those services. If Russia did invade Lithuania, the number of volunteers who would carry out joint combat missions with the army would be under 500. Most would instead secure the rear and offer technical sup- port. Tomas Godliauskas, Lithuania’s deputy defence minister, emphasises the importance of the Riflemen’s civic edu- cation. Since 2024 the volunteers have run defence courses in every school. Ms Loorents says the Estonian Defence League’s engagement of younger gener- ations builds resilience. “They are actu- ally the ones in the regions who explain how to survive in crisis situations.” At the military base Colonel Linas Idzelis, the Riflemen’s commander, describes the enthusiasm as contagious. “If you are motivated, others also [be- come] very, very motivated.” For Mr Kojala the goal is deterrence: “We will fight as a country that has a military, but we will also fight you as a society…and I do think Russia understands it.” Lithuania’s citizen-soldiers Resistance assistants PABRADE Across eastern Europe, civilians are learning to defend themselves from Russia You have my sword government introduced some of Europe’s toughest migration laws. These slashed the number of new asylum seekers from a peak of 21,000 in 2015 to around 3,000 two years later. They also undercut support for the populists, whose vote share collapsed. By 2019, when Ms Frederiksen took office, just 21% of Danes listed immigration and asylum among their top three priorities, according to YouGov. Still, her government tightened migration policies even further. Sweden’s Social Democrats were slow to learn the lesson. After an influx of 156,000 people in 2015, the government cut the number of new arrivals to around 22,000 in each of the following two years. Yet it struggled to shift the perception that it had opened the borders. In a 2018 You- Gov poll 76% of Swedes thought their gov- ernment was handling migration badly, compared with 54% of Danes. In 2022 the anti-immigrant Sweden Democrats (SD) came second with 21% of the vote. The SD had been shunned because of its neo-Nazi roots. But Ulf Kristersson, leader of the centre-right Moderates, struck a confidence-and-supply deal under which the SD backed his government in ex- change for policy input, though it did not have ministers. The Moderates say democ- racy required giving the SD’s voters a say. “Isolation hasn’t really worked anywhere,” says Alexandra Ivanov Hokmark, chief of staff to Mr Kristersson until 2023 and now at Timbro, a free-market think-tank. Giving the SD a voice may have helped Mr Kristersson slow its growth; it is steady at around 21%. But legitimising the popu- lists has been costly for two smaller parties in the coalition. They risk falling below the 4% threshold needed to enter parliament. Peter Hultqvist, a Social Democrat who served as defence minister, thinks this was inevitable: if a government includes popu- list parties, “step by step, it will be eaten up by the right-wing extremists.” The risk will be greater after the next election, since the SD says it will insist on ministerial posts. The Nordic model raises questions for centrist parties elsewhere. One is whether adopting hardline anti-immigrant policies means abandoning core principles. Ms An- dersson argues that stricter migration poli- cies are needed so that governments can integrate those who have arrived, and im- plement social policies to reduce inequal- ity. Another is whether they marginalise immigrants, making it harder for them to integrate. Then there is the question of whether countries with ageing populations can afford to slam their doors shut. “We need nurses,” says Sedat Arif, a deputy mayor of Malmo, Sweden’s third- largest city. About a third of its population was born abroad. Immigration “has to be regulated…[but] we also want people to feel part of the society”. It is a balance that voters do not seem ready to embrace. ■ C002 -- 45 of 78 -- 53 The Economist March 7th 2026 Europe The muddled power CONSIDER THE recent actions of the world’s nuclear powers, if you dare. One has been trying to conquer its neighbour for four years, leading to bloody stalemate. Two of them (only one of which acknowledges being a nuclear power at all) are busy lob- bing bombs in the Middle East—not usually a recipe for success. Another atomic couple have been involved in armed skirmishes in the past year, a regular feature since their bitter partition eight de- cades ago. The nuclear club’s newest member is known as the her- mit kingdom; its bigger warhead-wielding neighbour is presumed to be planning to invade an adjacent democratic island under the guise of “peaceful reunification”. The final two nuclear powers, Britain and France, have been rivals for a millennium. But among the biggest strains in their relations these days are quibbles about the rules pertaining to school exchanges and the modalities re- quired for importing unpasteurised cheese. In an age of blood-soaked realpolitik, Europe stands out. Yes, it is meek, a vegetarian in a world of omnivorous geopolitical rivals. Certainly, it is often muddled, its power dissipated among dozens of national governments that have difficulty agreeing on the time of day without calling a summit. The European Union at the con- tinent’s core is too slow—for sure!—and needs to be reformed. But the list of global powers that are big enough to cause global havoc yet opt not to is shorter than it used to be. Europe is a big part of it. Indeed, some of the reasons to ridicule the Old Continent are at the same time reasons to praise it. The vice of which it is most often accused, both by Europeans and others, is that of naivety. This is generally due to Europe’s obstinacy in pursuing, or at least paying lip service to, certain beliefs: that planet-boiling climate change should be restrained, civilians in conflict spared, global tensions assuaged, autocrats held to account, free trade encour- aged and aid delivered to the world’s poorest. If it is a sin to think that rules matter, the world could do with a few more sinners. Granted, being more predictable than America under Donald Trump, less revanchist than Vladimir Putin’s Russia or less auto- cratic than Xi Jinping’s China is a low bar to clear. Still, in a world in which chaos is becoming the norm, the relative sanity found in Europe is a kind of defiance. America, Europe’s heir as the world’s dominant power and once a pillar of the Western alliance, is aban- doning the very idea that norms ought to temper international re- lations. In global affairs India and China behave transactionally at best, if not cynically. Alongside Japan, Canada, Australia and a few others, Europe still professes to believe another world is pos- sible. It has become fashionable to think of global “middle pow- ers” as offering a bulwark against chaos. That would mean extend- ing the sort of entrenched multilateralism perfected by the EU. Europe’s indecisiveness has invited many a barb. Scott Bes- sent, America’s treasury secretary, recently quipped that the conti- nent’s only response to crises (in that case one caused by Mr Trump’s bizarre obsession with invading Greenland) was to create “the dreaded European working group”. Ha ha; most of the time working groups produce better results than carrier groups. Con- fabbing, summit-holding and deliberating result in decisions that—when they are eventually taken—have some sort of logic and general buy-in. Can Mr Bessent say the same of his team? It is anybody’s guess what America’s tariff rates will be next Tuesday. Europe’s can be divined a decade away. America used to aim for something akin to deliberative policy- making with its vaunted separation of powers. Diffusing authority between branches of government ensured none made kooky deci- sions. (Lately Congress seems to have forgotten its role in that set- up.) Europe has its own separation of powers, developed over de- cades, which involves dozens of national capitals squabbling within the confines of a rules-based club backed by robust institu- tions. It is tiresomely deliberative, as this columnist can attest, having covered many an EU summit that dragged late into the night. But the slow grind of internal consensus-finding means Europe thinks twice (or three times, or four) before acting. It rarely does anything irreversible in a hurry. There are worse flaws. We meet again! Any Europeans tempted to feel smug might be reminded of their own foibles. European countries claim the moral high ground, but sell lots of weapons to dodgy regimes (and prop up others that agree to block migration to Europe). They kept buying gas from Mr Putin long after he started invading neighbours. Their brutal colonial history leaves plenty to atone for. Their recent peaceable instincts might carry more weight if they were less sluggish and divided: in this week’s Iran crisis, Europe has produced roughly as many positions on the conflict as it has politicians. In the past Europe was too slow, notably to prevent war in the Balkans in the 1990s. But in the latest bout of continental fighting it (eventually) stepped up. Europe is almost single-handedly bank- rolling Ukraine’s efforts to fend off Russia, thus depleting Mr Pu- tin’s war machinery. Meanwhile China and India have profited from the war by importing cheap oil. Mr Trump also sees Ukraine as a money-spinner, trying to bilk it for natural resources. Whether Europe wanted a more rules-bound international sys- tem out of conviction or because it could not agree to anything else, it has not got it. That is one reason the dreaded European working group feels so betrayed by Mr Trump: relying for so long on American security guarantees left an atrophied Europe unable to do much beyond issue stern lectures. It now has to endure in a world it failed to shape in its own image. It is scant consolation that, while Europe may be too slow at handling problems, it is rarely the source of them. Still, there is something to be said for a power that prefers rule books to rockets. ■ CHARLEMAGNE An indecisive, fragmented, naive yet sane continent C002 -- 46 of 78 -- A hundred years of fortitude: strengthening urban resilience against natural disasters ADVERTISEMENT Bt!b!qmbdf!up!mjwf-!xpsl-!tuvez!boe!usbwfm-! Uplzp-!sbolfe!tfdpoe!po!uif!Tbwjmmt! 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XLVIEXWSRP]SJJIVLMKLIVGSRǖHIRGIXS uiptf!xip!wjtju!ps!mjwf-!xpsl!boe!tuvez!jo! uif!djuz/!ƥXf!bsf!bmtp!bewbodjoh!nfbtvsft! bhbjotu!qpxfs!boe!dpnnvojdbujpo! pvubhft-!qspnpujoh!uif!vtf!pg!sfofxbcmf! fofshz!boe!ejwfstjgzjoh!dpnnvojdbujpo! nfuipet!up!nbjoubjo!vscbo!gvodujpot!fwfo! evsjoh!ejtbtufst-Ʀ!Ns!Lphb!tbzt/!ƥXf!xjmm! tufbejmz!bewbodf!pvs!jojujbujwft!up!foibodf! sftjmjfodf!boe!sfbmjtf!b!sftjmjfou!boe! tvtubjobcmf!Uplzp!xifsf!qfpqmf!dbo!mjwf! xjui!qfbdf!pg!njoe!gps!uif!ofyu!211!zfbst/Ʀ C002 -- 48 of 78 -- 56 The Economist March 7th 2026 Britain Class politics Go broke, go woke BRISTOL PATRIOTS marched through the city in south-west England on Janu- ary 10th. The far-right group describes it- self as patriotic and anti-Keir Starmer. In response, lefties organised a counterdem- onstration. Their slogan? “We hate Keir Starmer more than you.” The left and right poles of British poli- tics do not agree on much. They are bitter- ly divided on culture-war issues—immigra- tion, transgender rights, Britain’s net-zero emissions target. But the recent surge in support for the populist-left Green Party has some echoes of Nigel Farage’s popu- list-right insurgency, which he now cham- pions through Reform UK. On right and left, populists are persuading economical- ly precarious voters to ditch the main- stream parties. Britons who have lived through almost two decades of sluggish growth are increasingly receptive to “zero- sum” solutions, which would benefit them at the expense of others. Labour and the Conservatives—the two parties that have dominated British politics since the 1920s—risk being swept away. Historically, Britain’s working class tended to vote Labour, while middle- and upper-class voters supported the Tories. This dynamic broke down in the 2010s, particularly after the Brexit referendum in 2016 as cultural issues rose in salience. Age and education replaced class as the key de- mographic dividers. Since then the class dynamics of British politics have been scrambled. To get to the bottom of this The Economist analysed a survey of 8,921 Britons, conducted by pollsters at More in Common in December 2025. The data suggest that Britain’s politics are now divided along two dimensions. The young, the higher-educated, women and ethnic minorities are more likely to vote for parties on the left—Labour, Greens, Liberal Democrats or Scottish or Welsh nationalists. Voters on the right are older, less-educated, whiter and more male. But within these blocs voters are di- vided by affluence (see chart 1 on next page). Labour and the Tories lead among those who say they are “very comfortable”; the Greens and Reform win two-thirds of voters who often go without food or heat- ing (4% of the population). A study by Nuf- field Politics Research Centre confirms that it is economically insecure voters in particular who are abandoning Labour. Financial discomfort is not the only measure that unites Britain’s populists. Re- MANCHESTER The Greens and Reform are turning precarious voters against the establishment → ALSO IN THIS SECTION 57 The spring forecast 58 A transatlantic tiff 59 Bagehot: Dubai snobbery ⏩ → Read more at: Economist.com/Britain — Hedgerows C002 -- 49 of 78 -- 57 The Economist March 7th 2026 Britain ▸ ⏩ form and the Greens have made gains among voters who do not own their home. Labour’s base of support among renters has disintegrated since the election (de- spite the government’s flagship rental re- forms). Those with a private landlord tend to have switched to the Greens, while those in social housing tend to have switched to Reform. Polling by More in Common suggests that both parties’ voters are less trusting and feel more disconnected from society. They are more likely to agree that political institutions should be allowed to “burn”— and to believe that people can get richer only if others get poorer. A by-election in Greater Manchester on February 26th illustrated Britain’s new pol- itics. Support for the Greens surged from 13% to 41% in Gorton and Denton, a former safe Labour seat that is the 15th-most de- prived constituency in England (out of 543). “Looking at the future, how are we supposed to afford houses, cars? We can’t afford to do food shopping sometimes,” says Katie, a former Labour voter. She vot- ed for Hannah Spencer, a charismatic and class-conscious Green who gave up her job as a plumber to become the party’s first MP in the north of England. Reform pushed Labour into third place. “I had a decent job, I’m on [a] pittance now,” says Jamie, who is a full-time carer for his wife. “We need someone to put it right, so I say give Nigel and Reform a chance.” It is a common refrain from voters who feel that they have little to lose. Ergo zero sum This story is familiar when it comes to Re- form and its predecessors. The rise of UKIP (also led by Mr Farage) in the 2010s and the vote for Brexit in 2016 were widely ascribed to economic anxiety caused by globalisa- tion. Political scientists pointed to the loss of status of voters in former industrialised areas. The Conservatives managed to keep a lid on populists in the short term by tak- ing Britain out of the European Union and tacking right on some cultural issues. But their poor record in government opened the door to Reform after 2024. In Reform’s zero-sum view, immigrants can be blamed for most of Britain’s woes. The rise of the Greens as a populist-left party is a more recent phenomenon. Zack Polanski was elected leader in September 2025 and embraced a strategy of “eco-pop- ulism”—emphasising social justice at least as much as climate change. Mr Polanski, a forceful communicator, shook off his par- ty’s middle-class reputation and has been rewarded with a polling bounce. His flashy policies include a wealth tax on billion- aires, rent controls and maximum-pay ra- tios. “Instead of working for a nice life”, said Ms Spencer in her victory speech, “we are working to line the pockets of the bil- lionaires. We are being bled dry.” It is also the result of structural chang- es. In the 2010s industrial workers were at the centre of the narrative about status anxiety. In the 2020s many university grad- uates also feel they have a raw deal. Be- tween 2007 and 2024 the median salaries of postgraduates declined by 17% in real terms and by 12% for undergraduates; non- graduates’ salaries declined by 3% (see chart 2). The effect is even larger after ac- counting for the rising cost of student loans. Although median wages increased nationwide over the period, highly paid professional jobs have not kept pace with the growing number of graduates. At the same time, home ownership ap- pears to be out of reach for an increasing number of young people. Unemployment among 18- to 24-year-olds is at its highest level since 2015 (barring a moment at the height of lockdown in 2020). And many be- lieve that the rise of artificial intelligence will make it harder to find well-paid, white- collar jobs. Mr Polanski took over his party at the moment of greatest anxiety for many of his prospective voters. Redistribution would appear to be an obvious solution for Labour. If the govern- ment soaked the rich and gave the pro- ceeds to the poor—goes the argument—it could undermine the appeal of Reform and the Greens. However, there is little evi- dence that this approach would work. Priv- ate renters are abandoning Labour despite the government’s left-wing rental reforms. Poorer voters are leaving despite the party raising both the minimum wage and wel- fare for low-income families. “I do think those are good things that they’ve done, but they could’ve done more, says Nina, a self-employed psychotherapist in Gorton and Denton. “I just feel they don’t repre- sent me any more.” The feeling of precarity may be diffi- cult to unwind. Economists recently pub- lished an analysis showing that lifetime levels of GDP growth have a significant im- pact on individuals’ political outlook. Co- horts that experienced periods of high growth are more likely to trust the govern- ment and have more positive perceptions of living standards. In Britain such voters are dying out. Today’s 75-year-olds wit- nessed average annual GDP growth of 2.4% in their lifetimes, compared with 1.4% for a 20-year-old. This might help explain why Green voters tend to be younger than La- bour voters, and Reform voters tend to be younger than Conservatives. Such voters can hardly be blamed for zero-sum thinking. To many of them eco- nomic growth probably appears to be like a mythical creature: much talked about but never actually seen. ■ Diminished returns Britain, median annual salary*, £’000 2007 prices *Aged 16-64. Before tax, excluding the effect of student loans Source: Department for Education 2 35 30 25 20 15 24 20 15 10 2007 Postgraduate Non-graduate Graduate Heroes of the downtrodden Britain, voting intention by financial situation, % Nov 24th-Dec 16th 2025 Sources: More in Common; The Economist 1 100 80 60 40 20 0 Often have to go without essentials eg, heating (4%) Struggle to make ends meet (16%) No money for luxuries but can cover essentials (37%) Relatively comfortable financially (36%) Very comfortable financially (7% of voters) Often have to go without essentials eg, heating (4%) Struggle to make ends meet (16%) No money for luxuries but can cover essentials (37%) Relatively comfortable financially (36%) Very comfortable financially (7% of voters) Reform UK Conservative Other Liberal Democrats Labour Green Britain’s economy The spring snorecast WHEN HE ENTERED Downing Street, Sir Keir Starmer pledged to “end the era of noisy performance”. After a caco- phonous first 20 months, his chancellor fi- nally honoured that promise. Rachel Ree- ves’s economic update on March 3rd was, above all, dull. She walked the Commons through the latest forecasts of the Office for Budget Responsibility (OBR). She boasted that the watchdog’s numbers vin- dicated her previous choices. But she nota- bly did not announce a single major policy decision that will help Britain break out of its malaise. The real action was in the questions the chancellor did not resolve, and which will define the year ahead. Ms Reeves’s restraint was mostly wel- come. Her tenure has been plagued by fe- verish conjecture about tax changes. The resulting uncertainty was highly damag- Don’t be fooled by the calm: the spring forecast hinted at big problems ahead C002 -- 50 of 78 -- 58 The Economist March 7th 2026 Britain ▸ ing, causing businesses to put off invest- ment decisions and consumers to rein in spending. By keeping her “spring state- ment” low-key, she has provided some needed domestic stability. The OBR’s forecasts were as uninspir- ing as the statement itself. The long-term outlook for inflation and real GDP barely budged from last November. The bigger shifts were short-term, though still muted. The OBR downgraded its growth forecast for 2026 from 1.4% to 1.1%, and projected that unemployment would peak at 5.3% in 2026, up from 5% in its previous forecast. The flipside of this weakness was lower in- flation and interest rates, leaving the gov- ernment’s debt position slightly improved. Unfortunately for Ms Reeves, this pic- ture of relative stability is unlikely to last. Her speech pointed to three areas that are likely to cause trouble. The most obvious is the war in and around Iran, which has led to yields on ten-year British gilts spiking by 0.3 percentage points on March 2nd-3rd, reflecting rising oil and gas prices. If the conflict drags on, and energy costs remain high, this could produce inflation and a hole in Ms Reeves’s budget. Before the war with Iran began, the Treasury and the Ministry of Defence (MOD) were already locked in a battle over defence spending. Securocrats want to bring forward Labour’s promise to raise defence spending to 3% of GDP from the next parliament to the current one. The In- stitute for Fiscal Studies, a think-tank, cal- culates that this would cost an extra £14bn ($19bn) a year by the end of the decade. Ms Reeves has been pushing back on cost grounds, but recent events will have strengthened the MOD’s hand. The second worry is migration. The OBR had expected 290,000 net arrivals to Britain in 2025; the actual figure was 204,000. If migration continues to fall, the British population will be much smaller by 2030 than previously expected. The spring forecast made some adjustments, but the OBR flagged that a fuller reckoning—tak- ing in new projections and tighter immi- gration policy—awaits in the autumn. Few- er people means fewer taxpayers, which would cause problems for Ms Reeves. Perhaps the most worrying problem for the government, though, is related to jobs and wages. Unemployment among 16- to 24-year-olds rose above 16% in the last quarter of 2025, and is now higher than the EU average. Higher minimum wages for young people, combined with a more oner- ous tax load, have made companies more reluctant to give them a chance. Ms Reeves promised in her statement that she will set out further measures to tackle youth un- employment in the weeks ahead. Wages could become an even greater concern. Ms Reeves boasted that “real wages have risen by more in the first 18 months of this Labour government than in the first ten years of the Tory government.” Real wages have grown by over 3% since Labour took office. However, many people do not feel richer, partly because much of this growth simply undid the real-wage falls that occurred during the high infla- tion of 2022-23. And voters have already re- ceived around two-thirds of the wage bump they are expected to get over the course of this parliament. Pay growth in the coming years is forecast to be anaemic, at only 0.5% a year (see chart). In her speech Ms Reeves set out a sim- ple test for voters to consider at the next election: “Are me and my family better off?” Once these worries play out, the pub- lic’s answer might very well be “No”. ■ No jam tomorrow Britain, real hourly earnings, % change on a year earlier March 2026 forecast Source: Office for Budget Responsibility 4 2 0 -2 -4 -6 -8 31 30 29 28 27 26 25 24 23 2022 Forecast The special relationship A transatlantic tiff IT IS POIGNANT to watch “The Tony Blair Story”, a three-part documentary that aired on Channel 4 last month, against the background of the war in Iran. The middle episode shows the prime minister instinc- tively rallying to America’s side in the build-up to the invasion of Iraq in 2003, seeking (in vain) to get the UN Security Council’s backing, pushing a vote through Parliament and staying the course despite noisy opposition at home. The Iraq war soured his premiership and his legacy. Even when Britain later failed to back the use of force in the region—when Par- liament voted in 2013 against a motion that would have opened the way to potential military action in Syria in response to the Assad regime’s use of chemical weapons— it influenced America’s policy. President Barack Obama felt compelled to seek con- gressional approval for any strike against Syria. In the end he ignored his own “red line” and refrained from intervention. Contrast that with the Anglo-American friction over Iran. Sir Keir Starmer did not instinctively rally behind America. Instead, he refused to let American warplanes use the base on Diego Garcia in the Chagos Is- lands as part of the bombing. He worried about its legality. Only after British inter- ests came under attack did Sir Keir allow British bases to be used for the “specific and limited defensive purpose” of helping destroy Iran’s missiles at source. An Irani- an-made drone subsequently hit the Brit- ish air base of Akrotiri in Cyprus. Three things stand out in this trans- atlantic tiff. The first is that Sir Tony’s bra- vado continues to haunt Labour. “We all remember the mistakes of Iraq,” Sir Keir said on March 1st. “And we have learned those lessons.” From the left Zack Polanski of the Greens warned against being “dragged into another illegal war”; from the right Nigel Farage of Reform UK called Sir Keir’s response “pathetic” and a threat to Britain’s “special relationship” with America. The prime minister, ever the law- yer, is trying to pursue a middle way. Second, Sir Keir has annoyed Donald Trump. The president told the Telegraph that he was “very disappointed” in the ini- tial decision on the use of Diego Garcia and that the prime minister had taken “far too long” to change his mind. Sir Keir re- sponded by telling Parliament that he “does not believe in regime change from the skies”. In the White House Mr Trump shot back: this is “not Winston Churchill that we’re dealing with”, he said, complain- ing that Britain had been “very, very unco- operative”. The special relationship has survived far worse. But this won’t help Sir Keir navigate the spat over the future of the Chagos Islands. And it could complicate King Charles’s visit to America in April. The third and, for Britons, most sober- ing aspect is that, despite Mr Trump’s irri- tation, as far as America is concerned Brit- ain matters little in all this. The use of Brit- ish bases is helpful but not essential. Brit- ain barely merits a mention in American commentary on the war. While Britain agonises, America largely ignores it. At root lie different views of how the world now works. Sir Keir’s measured and lawyerly manner of dealing with the con- flict reflects an old-world way of conduct- ing foreign policy. It is focused on diplo- macy, international law and maintaining the status quo. Mr Trump’s approach is al- most the polar opposite. He has no interest in the status quo. Disregarding the rule of law is not a side-effect; it is a central part of his approach, as are displays of Ameri- can might. It is hard to see how these two opposing perspectives won’t lead to fur- ther fractures in the relationship. ■ MIAMI Iran exposes harsh truths for Britain C002 -- 51 of 78 -- 59 The Economist March 7th 2026 Britain They’re not laughing now, are they? BRITONS STRANDED abroad when war breaks out can usually expect a dose of sympathy from their countrymen. When Iran- ian drones and missiles started to crash into Dubai, Britain in- stead let out a collective cackle. Had British expats not consulted a map before they extolled Dubai as the safest city in the world? “Extraordinary images here of an expat in Dubai having their first ever geopolitical thought,” read one cartoon in the Guardian, “the dawning realisation that there might be something in the world beyond his dickhead self.” Sir Ed Davey, the Liberal Democrat leader with a knack for the kind of populism that will not have you kicked out of a dinner party, questioned whether British armed forces should bring home “washed-up old footballers who mock ordinary people who stay in the UK and pay our taxes here”. Dubai infects the British psyche in a way no other place can match. It is a land in which Britain’s neuroses about decline, class and money can run free. Only a few hundred thousand Britons live in the United Arab Emirates. A million visit each year, a fraction of the numbers that visit Spain. Yet its grip on elite discourse is near- total. High-flyers from finance, pinkie-ringed PR people and cryp- to grifters now call the city home; English footballers enjoy mid- season breaks and long retirements there. A scroll through Insta- gram is, at times, a wall of British influencers who swapped 45% tax rates and wet weather for 0% income tax and a balmy 26 de- grees in March and want people to know. For some, Dubai is a warning, populated by the people who used to bully them at school. It is a land of Deanos—a nickname for lower-middle-class men on the make—who record TikToks flaunting new Lamborghinis and new teeth. For others, it is a shin- ing city on a hill: a place of low taxes, high GDP and a vision of what Britain should be. GB News, which styles itself as “Britain’s News Channel”, celebrated its fifth anniversary with a bash in— where else—Dubai. Nigel Farage, the leader of Reform UK and a presenter on the channel, was the star turn at the Aura Skypool, a 50-storey whopper and home to the world’s highest 360° infinity pool. “Look around at the Palm,” said the member for Clacton, pointing at the Palm Jumeirah, the man-made peninsula that juts out towards Iran. “I want Clacton to look like this.” Emigrants always leave a mark on the country they leave be- hind. Usually, they are discussed in sorrow. For much of its history, Britain was a country of emigration. Departures were a symptom of malaise. When things were looking shaky in the 1970s, Marga- ret Thatcher pondered ways to set her children up in Canada. There was, however, no contempt for, say, “Ten Pound Poms” who moved from Britain to Australia. The Kinks wrote a hymn to those who fled: “Australia, no class distinction/Australia, no drug addic- tion/Nobody’s got a chip on their shoulder.” By contrast, the flow to Dubai triggers apoplexy. Those who quietly better themselves abroad face little criticism; those who are noisy about it get it in the neck. They always have. First there were the “nabobs” of the East India Company, who came home with gargantuan fortunes gained by means that made even impe- rialists choke. Portraits of those spivs who tried to make it in Hong Kong were no more flattering. They had the acronym fiLTH: Failed in London, Try Hong Kong. Now Clive of India has become Deano of Dubai, driving a Rolls-Royce while flogging a crypto scheme on TikTok. Few doubt that the once-rigid boundaries of class in Britain have blurred. Dubai simply exposes by how much. When both a teacher in a flat-share in London and an estate agent posting a picture of a rented Ferrari in Doobs are middle-class, the category begins to lose all meaning. Class might be dead, but snobbery is still alive. The result is that social hierarchy has become an Escher painting, an optical illusion in which everyone is both above and below one another. And so everyone thinks they are punching up. The result is a searing, mutual contempt. After all, one man’s tax-dodger is an- other man’s grafter, doing a 60-hour week in 40-degree heat. “Fo- cus on your knife crime, focus on your theft, focus on your rapists, focus on your immigration problem”, said one Rolex-flaunting young man, filming himself strolling about Dubai after the attacks from Iran and from his countrymen, who call for the British gov- ernment to let people like him “rot”. Give me your Love Island veterans yearning to breathe free For the past decade, British politics has been based on what one astute critic called the “redistribution of humiliation”. It has be- come a zero-sum game, in which the best result people can achieve is dragging down others. After a decade in which West- minster has reshaped itself at Mr Farage’s whim—Britain out of Europe, migration heading to near-zero and Mr Farage himself heading to power—the Reform leader is still bitter. He often falls back on a favourite line, as he did on that 50th storey of a Dubai skyscraper overlooking the Palm: “They all laughed at us. They’re not laughing now, are they?” Now it is the turn of those humiliated by the past decade—Re- mainers, wet liberals and graduates groaning under hideous stu- dent debt—to repay the favour. Dragged out of Europe against their will and then goaded about their high tax bill and lousy wage growth by men with fluorescent teeth in Dubai. Enough is enough, cries a slice of England, revelling in the discomfort of compatriots stuck in the Gulf. While drones haunt Dubai’s sky- line, Sir Ed’s position is the same as Mr Farage’s: they all laughed at us. They’re not laughing now, are they? When an Iranian drone does smash into a grey apartment and leaves a young British fam- ily blown limb-from-limb, the Schadenfreude will stop. Until then, Dubai will be the front line of Britain’s war with itself. ■ BAGEHOT Dubai is the front line of Britain’s war with itself C002 -- 52 of 78 -- 60 The Economist March 7th 2026 Business European tech Breeding Eunicorns THE DECOR at Lovable’s office in Stock- holm suits the startup’s cosy name. Lovable, which specialises in “vibe-cod- ing”—prompting an artificial-intelligence system to make software—has a shoes-off policy. The smell of Swedish coffee per- vades the air. Heart-shaped cushions bear- ing the firm’s logo rest atop comfy sofas. Yet Lovable is less soft and cuddly than nimble and competitive. It is small, but growing fast: in January its annualised re- curring revenue hit $300m, up from $1m 14 months earlier. Anton Osika, a co-founder, argues that building a world-beating AI company in Europe is now possible. “The mindset change is happening,” he says. Europe has long been a laggard in cre- ating tech giants. Today Europe (ie, the European Union, Britain and Norway) is home to just six of the world’s 100 most valuable tech companies. America has 56; China, 16. The continent’s drawbacks are well known. Its market of 520m people is divided by language and regulation. It has plenty of talent, thanks to its world-class research labs and universities. But its en- trepreneurs have had trouble raising capi- tal to expand their companies quickly. Yet there is new hope for the old conti- nent. Jolted by the deterioration of its rela- tionship with America, its policymakers are redoubling efforts to strengthen its technology ecosystem. Meanwhile, Ameri- ca and China have made decisions that make Europe relatively more attractive to tech workers and investors. Its established tech companies, though few, are now nur- turing a new generation of startups. Last year venture-capital (VC) investments in European startups rose to $85bn, from $22bn a decade earlier (see chart 1 on next page). Although AI-mad America is still far ahead, investing $339bn last year, China now lags behind, with $53bn. In an attention-grabbing report in 2024 Mario Draghi, a former Italian prime min- ister, bashed Europe for its sagging com- petitiveness. But it is Donald Trump, with his animus towards the region, who has really galvanised policymakers. They now see Europe’s techno-failings as a geopoliti- cal risk as well as a commercial one. Henna Virkkunen, the European Com- mission’s tech czar, says the commission is looking into ways to encourage EU govern- ments to buy more technology from home- grown startups, for instance. European en- terprises are also “realising that they can’t afford to entirely depend on foreign pro- viders”, says Arthur Mensch, the boss of Mistral, a French maker of AI models. Perhaps more importantly, policymak- ers are taking steps to help entrepreneurs build up their businesses. This month the commission is due to publish a plan to uni- fy Europe’s segmented capital markets, which will help startups raise money. That will not be quick, as it requires difficult choices about harmonising national tax re- gimes. It helps that member states are also upgrading their capital markets. Britain, France and Germany are tweaking rules to encourage pension funds to invest more in risky assets, such as young tech firms. Meanwhile, Mr Trump’s disdain for for- eigners, and recent lay-offs by American tech giants, are driving talent to Europe. People working in Europe for American firms have also formed a talent reservoir. Data from Revelio Labs, a workplace-data firm, show the brain drain has reversed (see chart 2). Lovable, for one, has recruited ex- ecutives from American software compa- nies. What is more, fewer European firms are being sold to America. Dealogic, a data provider, notes that in 2011-13 American firms made 12% of acquisitions of Euro- pean tech firms by number and 35% by val- ue. In 2023-25 the shares were 9% and 17%. China, too, is helping inadvertently. Its model of state-directed innovation has crowded out private investment and shrunk VC spending, pushing some to- wards Europe. Between 2015 and 2025 Chi- na’s share of global VC spending fell from 30% to 10%. Europe’s grew from 12% to 16%. STOCKHOLM AND MUNICH At last, reasons to be cheerful about European tech → ALSO IN THIS SECTION 61 Dubai and the Iran war 62 An end to Bayer’s legal woes? 63 Bartleby: Email opening lines 64 Formula One seeks new fans 65 Schumpeter: GE’s heirs ⏩ C002 -- 53 of 78 -- 61 The Economist March 7th 2026 Business ▸ ⏩ Europe is also getting over its reluc- tance to let techies make lots of money. In “The New Geography of Innovation”, pub- lished last year, Mehran Gul of the World Economic Forum notes that Skype, a Euro- pean startup, created just 11 millionaires in the early 2000s. PayPal, an American one, gave many more stock options to its em- ployees, creating over 100. They, in turn, in- vested in newer Silicon Valley startups. Now European tech firms are giving out more options, and the region’s established tech tycoons are helping youngsters make fortunes. Nikolay Storonsky, founder of Revolut, a fintech company, has backed Spiko, a French startup in the same sector, and Biorce, a Spanish medical-technology firm. Daniel Ek, Spotify’s founder, is a big investor in Helsing, a German defence- tech firm. Former staff of Klarna, a Swed- ish fintech star, have created more than 60 startups, according to Dealroom, another data provider, and Accel, a VC fund. None of this means that Europe will supplant America as the leading techno- power. Last year it launched just two of the world’s 94 new large language models, ac- cording to Epoch AI, a think-tank. The idea that the EU will manufacture a fifth of the world’s computer chips by 2030, an objec- tive of the commission, is fanciful. But in some areas Europe is becoming more com- petitive. Three sectors—all of them helped by Mr Trump’s actions—stand out. Even before he started his second term last year, Europe’s climate-technology sec- tor was catching up with America’s. In 2015-16 VC spending on Europe’s green startups was 24% of America’s. By 2024-25 that ratio grew to 55%. Mr Trump’s gutting of American environmental regulation will surely encourage the trend. Last year the number of American climate-tech startups raising VC funds was the lowest since 2019. There is no sign of demoralisation among European green-tech firms. In De- cember Octopus Energy, a British provider of green power, spun off Kraken, which sells smart-grid software, at an estimated valuation of $9bn. Sweden is a hotspot for green-tech startups. Stegra aims to make carbon-free steel there. Einride is electrify- ing freight transport. In Switzerland Cli- meworks builds machines that suck car- bon dioxide from the air. Mr Trump’s demand that Europe do more to defend itself is also spurring high- tech arms-making in a region that had lit- tle of it. In 2015-17 VC investment in Euro- pean defence tech was barely 1% of North America’s. By 2023-25 that had risen to 6%. The International Institute for Strategic Studies, a think-tank, says that Europe’s defence spending rose by 42% from 2023 to 2025; America’s defence budget, though far bigger, was unchanged. Whereas estab- lished contractors account for much of American defence spending, Europe offers more scope for young defence-tech firms. Munich has emerged as a hub for them. Behind a metal-panelled door marked “Confidential” at Helsing’s headquarters in the city is a “demo room”, where its new- est weapons are illuminated with red light. The HX-2, a drone with wings in the shape of an X and a range of 100km, has AI sys- tems that help it attack targets, such as tanks, even if they are protected by com- munications-jamming technology. Helsing is defiantly European. It calls the autonomous fighter it is building “Eu- ropa”. Much of the capital comes from Mr Ek, leaving the firm less reliant on Ameri- can VCs. Helsing does not want to be “the little brother of some bigger thing in Amer- ica”, says Niklas Köhler, a co-founder. Its neighbours include Quantum Systems, a maker of surveillance drones that is valued at $4bn, and Isar Aerospace, which builds vehicles that launch small satellites. When Ukraine’s innovative drone-makers are done fighting Russia, many may found or join European defence-tech firms. “Deep-tech” firms investing in unpro- ven technologies may benefit too from Mr Trump’s hostility to scientific research. Proxima Fusion, spun off from the Max Planck Institute for Plasma Physics in Mu- nich, has raised over €200m ($236m) for nuclear-fusion reactors. Nearby are quan- tum-computing startups, such as Planqc, also a Max Planck spinoff, and firms spe- cialising in nanotechnology, photonics and laser communications. The share of European VC investment going to deep-tech firms rose from 19% in 2021 to 36% in 2025, calculates Atomico, a VC fund. In some niches Europe’s startups are raising more than America’s. Since 2023 European hydrogen startups (whose tech- nology is both deep and green) have se- cured more capital than young American firms. In quantum technologies, Euro- peans and Americans are almost on a par. It is possible that Europe’s tech dawn will prove false. One worry, especially for defence firms, is that governments are short of cash. On February 25th the budget committee of Germany’s legislature called for “moderation” in defence spending and cut the expenditure on contracts with Helsing and Stark Defence, a rival. Few think the world’s next trillion-dollar tech giant will be European. But, perhaps for the first time, it is not a silly idea. ■ Fatter stacks Venture-capital spending, $bn Source: PitchBook 1 800 600 400 200 0 25 23 21 19 17 2015 Rest of world China Europe United States Crossing over Technology sector, worker flows, ’000 12-month moving average Source: Revelio Labs 2 2.0 1.8 1.6 1.4 1.2 2023 24 25 From US to Europe From Europe to US Dubai and the Iran war New calculus needed IT SEEMED TOO good to be true. In a re- gion plagued by conflict, Dubai had the air of a place apart. It drew the well-heeled and economically footloose, to live, work and make money, or to enjoy shopping and sun. It became a global transport hub, link- ing east and west. It has used its wealth to join the artificial-intelligence race. Key to it all was keeping out of regional conflicts. Not even Hamas’s attack on Israel in Octo- ber 2023, the ensuing Gaza war or last year’s 12-day fight between Iran and Israel did much to knock confidence. Now Iran’s retaliation against the American and Israeli attacks that began on February 28th has hit the heart of all this— and shaken Dubai’s halo of safety. The Fairmont, a hotel on the Palm Jumeirah, a swanky man-made property development, was in flames on day one. An Amazon Web Services (AWS) data centre caught fire. The airport, home to Emirates, the world’s larg- est international airline, and essential to Dubai’s tourist trade, was damaged and flights were suspended. Jebel Ali, the emir- ate’s fast-growing port and transshipment hub, paused operations. Debris fell in resi- dents’ backyards. Dubai, like the rest of the United Arab Emirates (UAE), has so far been resilient; it is too soon to tell what the long-term ef- DUBAI Can the emirate keep people and investors coming? C002 -- 54 of 78 -- 62 The Economist March 7th 2026 Business ▸ ⏩ Bayer’s legal battles Moving on from Monsanto WHEN BILL ANDERSON became Bay- er’s boss in 2023, shareholders had high hopes that the American would be able to put the German drugs and chemi- cals firm to rights. Bayer’s $63bn takeover of Monsanto, an American crop-science firm, five years earlier had turned out to be perhaps the most disastrous merger in German corporate history. It exposed Bay- er to legal claims related to Roundup, one of Monsanto’s weedkillers, that have cost it billions, causing its stockmarket value to dip at times to less than half of what it paid for Monsanto. In March 2024 Mr Anderson promised that by 2026 he would contain the Roundup litigation, refresh the drug pipeline, cut costs and bring down debt. On March 4th Mr Anderson gave an up- date on his efforts when he presented re- sults for 2025. Sales were up by 1.1%, to €46bn ($53bn), but a special charge for liti- gation pushed net income into the red by €3.6bn. At almost €30bn net debt is still high, but down by more than €4bn in two years. Cost cuts saved €700m last year. “We see progress with our comprehen- sive turnaround plan, but the journey is far from over,” Mr Anderson told The Econo- mist. Where it ends depends largely on what he calls his “multipronged strategy” to contain legal costs. Lawsuits claiming that Roundup causes cancer (which Bayer denies) have already cost the company $10bn in settlements with almost 100,000 plaintiffs. Last month Bayer proposed a $7.25bn class-action settlement to resolve most current and future claims. A judge in Missouri gave preliminary approval to the settlement on March 4th. Separately, on April 27th America’s Su- preme Court is due to hear an appeal by Bayer against a ruling in another case orig- inating in Missouri. (In essence, Bayer ar- gues that federal laws on labelling chemi- cals take priority over those of states.) The timing of the class-action settlement may seem curious: a Supreme Court ruling in Bayer’s favour would invalidate most of the claims. But Mr Anderson insists that the settlement and the Supreme Court case “are independently necessary and mutual- ly reinforcing elements” of his contain- ment strategy. Analysts, however, say the proposed settlement is an expensive pre-emptive at- tempt to bring the plaintiffs to the table before the Supreme Court ruling, which is expected in June. A win is not certain (al- BERLIN After a settlement over Roundup, what about break-up? fects of the war might be. But what until a few days ago was the stuff of small print has become reality. Though most foreign residents are sitting tight, some are leaving or planning to, if only for a while, via Oman or Saudi Arabia, where airspace has stayed open. America’s State Department has ad- vised citizens to leave the region. Business- es, too, are staying put, but are making contingency plans. The question is wheth- er the people and money that have fuelled Dubai’s rise as a global business hub will keep coming as they did before. To attract people, Dubai has for some time been issuing more long-term visas and making it easier for foreigners to buy homes. The emirate’s population grew by 5.6% last year, the quickest rate since 2019, to 3.9m. The number of millionaires has been rising fast, too, and businesses eager to serve them have followed. Last year the then chief financial officer of Standard Chartered, a bank, called its Dubai opera- tion a “blueprint” for its other wealth-man- agement centres. Dubai’s broader financial industry is also thriving: in the first half of 2025 more than 1,000 firms set up shop in its financial centre, almost a third more than did so a year before. Last year JPMor- gan Chase, America’s biggest bank, ex- panded its local outpost. Technology giants have also been at- tracted to Dubai. It is home to at least 18 data centres (including the AWS facility struck after war broke out), half the UAE’s total. In turn, the UAE boasts more than half of the Gulf’s planned data-centre in- vestments. The Emiratis are placing big bets on AI, including partnerships with Mi- crosoft and BlackRock for $30bn-worth of investments in infrastructure, and stakes in OpenAI, Anthropic and xAI. Though it is early days, the attacks are changing companies’ calculations. Few seem to have even thought about war-relat- ed risk in the UAE before. Now they are considering political-risk insurance, poli- cies that firms usually buy to protect them- selves in emerging markets, says Christo- pher Coppock, head of geopolitical and economic risk analysis at Marsh, a consul- tancy. Such insurance is priced based on factors such as a country’s risk of terro- rism, war and strikes, as well as how critical the activity insured is and exactly where it is (being close to a military base, for in- stance, will cost more). “From the perspec- tive of businesses, there is no undoing what has happened,” he says. Any companies thinking of leaving, or pulling back, will have to weigh the alter- natives to being in the emirate. Some fi- nancial firms that moved to Dubai after years of wading through the pandemic in Hong Kong or Singapore may be keen to decide quickly this time, so Dubai may have to act fast to keep them. Dubai’s rulers have done their best to instil confidence. Most Iranian drones and missiles have been intercepted, and there has been little panic. Supermarkets such as Carrefour, a French chain, and Spinneys, also popular with Westerners, say they are well-supplied. DP World, the port operator, quickly resumed operations. The UAE’s president, Mohammed Bin Zayed, was out and about in Dubai Mall, a giant symbol of the city’s allure, on March 2nd. Even so, plumes of white smoke, the booms of missile interceptions and the thunder of fighter jets are hard to miss in a city known for its glitz and glamour. So is the contrasting eerie quiet that mostly fills the air. Officials have said Dubai “pivots” well in a crisis. How quickly it now acts to reassure businesses, investors and people is its next big test. But much is out of its rulers’ control. ■ Port in a storm C002 -- 55 of 78 -- 63 The Economist March 7th 2026 Business ▸ IF AN ALIEN were shown the typical first sentences of work emails, what might it conclude? Since so many mes- sages start with the hope that the recipi- ent is well, an extraterrestrial might at first assume that most humans are either recovering from illness or about to take to their sickbeds. But even if it were to realise that this was largely a matter of etiquette, it would miss the nuances of each opening gambit. Until now. I hope you are well Ostensible meaning: I hope you are well. Actual meaning: None. It’s just throat- clearing. Do not write back and give the other person a bulletin on your health. I hope this email finds you well. Ostensible meaning: I hope you are well. Actual meaning: I have not been in touch for a while and am not even sure you are in the same job. Plus I have a vague idea that this formulation makes me sound professional. Either way, I’m still totally uninterested in your health. Hope all well. Ostensible meaning: I hope you are well. Actual meaning: We both know this sentence is totally formulaic, so I’m cutting it down to the bare minimum. If time is really pushed, I might say “Hope all OK”, and save myself two characters. Nice to e-meet you. Ostensible meaning: We’ve just been introduced by a third party and I’m pleased to make your acquaintance. Actual meaning: No email can substitute for an in-person encounter. Only when we have shaken hands and stared into the whites of each other’s eyes and taken the full measure of each other will we have properly met. I also send e-cards and shop on e-commerce sites and still think of Amazon as an e-tailer. I have clear memories of the 1980s. Nice to “meet” you. Ostensible meaning: We’ve just been introduced by a third party and I’m pleased to make your acquaintance. Actual meaning: I’m an appalling pedant. I have clear memories of the 1970s. I hope you had a good weekend. Ostensible meaning: We’re both well- rounded individuals with fulfilling lives outside work. Actual meaning: It’s Monday morning and I cannot be bothered to write “I hope you are well” for the billionth time. I hope your week is off to a good start. See above, but it’s Monday afternoon. I hope your week is going well. It’s now Tuesday, Wednesday or Thursday. I hope you have had a great week. Guess what? It’s Friday. I hope you’re having a great weekend. See above, but I have no sense of work- life boundaries. I hope this email isn’t interrupting anything urgent. Ostensible meaning: I am respectful of your time. Actual meaning: I have no idea how email works. Apologies for sending you an out-of- the-blue email. Ostensible meaning: This may look an awful lot like spam but is actually a message from a real person who appre- ciates how busy you are. Actual meaning: This may look an awful lot like a message from a real person who values your time but it’s still spam. I’m going to spare you the preamble and cut to the chase. Ostensible meaning: You’re busy, I’m busy. Let’s behave like the professionals we are and get right down to business. Actual meaning: The expectations of a meaningless first sentence are so deeply embedded that I am going to spend as much time skipping the pleasantries as the pleasantries would have taken. Some emails do genuinely avoid the throat-clearing, and plunge straight in. There are several explanations for this. One is that the correspondents involved are in close contact: they know that the other person is well. Another is that the sender has worked out that the typical first sentence really is unnecessary. Another is that the writer dislikes the recipient but knows that putting “I hope you are unwell” would be taking things too far. Which is it? Even humans strug- gle to work that one out. BARTLEBY A short guide to email opening lines “I hope you are well” and other classics though the Trump administration backs the company). But the settlement should limit the damage to Bayer in the event of a defeat. It is at least plausible that the litiga- tion nightmare might end at last. That would free the company to focus on pharmaceuticals. Mr Anderson is mak- ing progress on replenishing the pipeline after the expiry of patents for two bestsell- ing drugs (Eyelea, an eye treatment, and Xarelto, a blood thinner). American and European regulators have approved Lyn- kuet, which treats the symptoms of meno- pause, and the latest trials of Asundexian, a stroke medication, were encouraging. Kerendia, a kidney therapy, and Nubeqa, a cancer drug, are selling well. Markus Manns of Union Investment, a fund man- ager, says the once-troubled drug division is now “a beacon of hope”. An end to litigation will probably revive talk of breaking up Bayer, a conglomerate short of synergies. Spinning off the con- sumer-health unit would ease the firm’s debt burden. A more radical split of the drugs and crop-science businesses would create the pure plays that investors favour. “Separating businesses creates value, as we have seen with Novartis,” says Abhishek Raval of Baader Europe Research (part of an investment bank), referring to the Swiss firm’s sale of Sandoz, its generic-drug unit, in 2023. Mr Anderson says the structure of Bayer is not set in stone; it must prove it is the best owner of its businesses. Before long it may be time to take a chisel to it. ■ C002 -- 56 of 78 -- 64 The Economist March 7th 2026 Business Formula One In pursuit of a new track record FORMULA ONE set the sporting stan- dards for glamour, celebrity and mass appeal from the first wave of the starting flag. Among those piloting the cars at the first-ever grand prix, at Silverstone in the English Midlands in 1950, were a Swiss bar- on, a Thai prince and a Belgian jazz musi- cian. A trackside crowd of over 100,000 in- cluded King George VI. What was once an expensive hobby for gentlemen amateurs has since grown into a global entertain- ment business. F1’s latest acceleration has come under the auspices of Liberty Media, an American media company. A new season starts with the Australian Grand Prix on March 8th—shortly after the release of the eighth series of “Drive to Survive”, a Netflix documentary about F1. On the track, the big question may be whether Britain’s Lando Norris can retain the title or the Netherlands’ Max Verstap- pen can reclaim it. Off it, it is whether Lib- erty, which owns F1 and thus the exclusive commercial rights to the race series, can keep its foot on the profits pedal. It bought the already successful global brand from CVC, an American private-equity firm, for around $8bn in 2017. But back then, says Stefano Domenicali, F1’s boss, the busi- ness was not going in the right direction. The plan has since been to bring the razzmatazz to an untapped younger audi- ence, in order to set the sport up for future growth. Serving up content outside race weekends will let them engage with the sport between grands prix and beyond a season that runs from March to December. Julian McManus of Janus Henderson, a fund manager, believes that Liberty has “grasped the scale of the opportunity”. Since Liberty took the wheel F1’s rev- enues have more than doubled, to $3.9bn in 2025. So have operating profits (before depreciation and amortisation), to $950m. F1’s stockmarket value has also surged, to more than $21bn. All three main revenue sources—fees paid by race promoters, sales of media rights, and sponsorship and advertising—have grown impressively. Race fees brought it around $1bn of rev- enues last year. Eighteen circuits are con- tracted until at least 2030, and will pay F1 more every year. But as Caroline Reid of Formula Money, a consultancy, points out, here F1 is running out of road. Although the number of races has risen to 24, from 20 in 2017, the maximum agreed on with the teams is 25. It will also be hard to in- crease the number of “flyaway races” in places away from the sport’s European heartland, such as China or Saudi Arabia. Unlike commercially minded European promoters, governments in such countries are happy to pay more and swallow losses for the prestige of hosting a grand prix. Media rights have also become more lu- crative. At $1.2bn, they provide the biggest slice of revenue. The rise of streaming ser- vices has fuelled competition among broadcasters for top-quality live sport. Yet TV audiences for races have fallen. In 2019 Liberty claimed 1.9bn “cumulative views”, but only 1.6bn in 2024, when it last gave a figure. Mr Domenicali’s explanation is that F1 is “more than a sport”; it is a “business and entertainment platform” where “en- gagement is shifting”. A deal signed with Apple TV in Octo- ber, worth $750m over five years for the American broadcast rights, illustrates F1’s quest for new adherents. In a world of In- stagram and TikTok, “distribution frag- mentation” means that watching a race is “one part of a much bigger sort of con- struct”, says Derek Chang, Liberty’s chief executive. A new breed of followers not captured by viewing figures is just as im- portant to F1’s future. Some fans, perhaps drawn in by “Drive to Survive” (for the first seven series of which Netflix claims 1bn views), are en- ticed by the drama surrounding F1. They may “barely watch the race” but do want to know “what Lewis Hamilton had for din- ner”, notes Mr Chang. It seems to be work- ing. F1 now claims a “global fanbase” of 827m, up by three-fifths since 2018. This includes 115m followers on social media, a six-fold increase. True, gauged by sub- scriptions Apple TV lies well behind Amer- ica’s leading streamers. But it comes with “a ton more” than that, says Mr Chang. Apple’s ecosystem of news, music and retailing can also spread F1 content. Aside from financing “F1”, a feature film starring Brad Pitt, which was released last year, Ap- ple has struck a deal with Netflix to share live broadcasting of races and “Drive to Survive” in America. This might provide a template for future deals elsewhere, as well as unlocking the opportunity to build an audience in America, the world’s biggest media market, where F1 is still “very, very small”, Mr Domenicali concedes. Reimagining F1 as an entertainment and lifestyle brand that appeals to more than just hardcore motorsport fans seems to please sponsors, who provide just over a fifth of revenues. The roster of official “global” partners has grown to ten, from six in 2020. These include luxury brands such as LVMH, which is said to have paid $1bn for a ten-year deal. New sponsors, such as Disney and Lego, reflect a growing interest in young fans. In search of an even bigger audience for motorsports, in 2025 Liberty paid €4.2bn ($4.9bn) for 84% of MotoGP. The motorcy- cling equivalent of F1 has half the fans and a tenth of the sponsorship. Liberty hopes to use the same techniques to rev up the business. It admits that, as with drawing youthful fans to F1, they will take time to pay off. As Mr Chang notes, a child coming across an F1 car in a Lego store is not watching the races. “At least, not yet.” ■ The race is on to draw in a different sort of motor-racing fan Driving and thriving C002 -- 57 of 78 -- 65 The Economist March 7th 2026 Business Absolutely electric THE IDEAL business school is little more than a well-endowed history department teaching the canon of great American companies. General Electric is one of them. Its rise and fall vividly illustrate the genius of entrepreneurs, the struggles of succession and the allure of financial alchemy. Ostensibly novel questions of business strategy find instructive answers in its archives. How to flog a new technology your patrons cannot afford? GE accepted payment in the form of its customers’ shares a century before Nvi- dia did. Or profit from one in which the government takes a spe- cial interest? GE started the Radio Corporation of America to help dislodge British dominance of the communications industry after the first world war. The reading list is long, varied and incomplete. Jack Welch, who ran GE between 1981 and 2001 (by which time the sprawling conglomerate was the world’s most valuable firm), was the author of four books and an online MBA course. When Jeffrey Immelt, Welch’s successor, published his memoir in 2021, the firm had fall- en out of the top 100. That year, after selling assets for a decade, the company announced that it would break into three separate companies called GE Aerospace, GE Healthcare and, inexplicably, GE Vernova. Two comprehensive histories of GE were published around the same time, doubling as lengthy obituaries. Most pre- dicted a faded and fragmented future for the firm—a corporate equivalent of the Austro-Hungarian empire. Yet the reality of dis- solution could not have been grander. Today GE Aerospace and GE Vernova, a power business, dom- inate industries whose times have come. The former, which as the senior branch of the family inherited GE’s chief executive and stockmarket ticker symbol, cannot build engines fast enough. But the real money, two-thirds of the firm’s revenue, is made fixing them: GE Aerospace exerts herculean pricing power when selling spare parts for its engines, given the costs airlines incur when their planes are grounded. So does GE Vernova, which is enjoying mas- sive demand for its gas turbines and electrical equipment as tech companies build data centres to run their artificial-intelligence models. Orders are growing about as fast as they did in 2000, at the height of the dotcom bubble. The pair are everything the GE of a decade ago was not. Most importantly, they are profitable. Their combined annual net in- come of $14bn last year was more than twice the cumulative profit managed by GE in the decade before its break-up. Their balance- sheets are unburdened by complexity or large debts. Both firms are beloved by the market. Add the much smaller health-care oper- ation and the three heirs are worth $600bn, five times GE’s value before the split was announced. Their size-weighted price-to- earnings ratio is 45—double what it was in 2000. Even long-disinherited cousins of GE’s heirs are prospering. Baker Hughes, an oil-services firm, is worth nearly three times what it was when GE sold its controlling share in 2019. GE’s train- making business, shed the same year, has done even better. The division which made GE’s small, on-site generators is thriving un- der the ownership of a private-equity fund: sold for $3bn in 2018, it is probably worth $15bn today. Another even managed to grow while owned by a French firm: GE’s water-treatment unit was sold for $3bn to Suez. Last year Veolia, which now owns Suez, bought out a minority investor in the division at a valuation of $6bn. What about the financiers who almost sank the whole ship in 2008? GE Capital, the firm’s financial arm, had grown to supply nearly half of earnings by 2005, from 8% in 1981. Its assets are now scattered throughout the financial system. AerCap, the owner of its enormous plane-leasing business, is thriving; Synchrony, which lends to individuals, is not. GE Capital is a source of great inspiration in some corners of Wall Street. No firm has made more effort to recreate its operations than Apollo—so far without, thankfully, GE’s reliance on short-term funding markets. The priv- ate-equity investor turned life insurer has assembled a similarly eclectic range of asset-based lenders through which to invest its policyholders’ premiums. They include an aircraft-lending busi- ness previously owned by GE and a mid-market corporate-lending division staffed with former GE Capital employees. Mass appeal One lesson of the GE revival is so obvious that it doesn’t bear re- peating in besuited company: businesses perform better when they are not subsumed within giant conglomerates. Honeywell, another big American industrial conglomerate, will complete a similar three-way split later this year. But the revival owes more to a deeper change of mood under way in business and markets. Everywhere hard hats are triumphing over soft heads. Asset- heavy firms are outperforming ones which investors now fear have no valuable assets at all, like software companies (and the private- markets funds which lend to them). Industrial and defence stocks are soaring. Governments obsess over critical minerals. The capex budgets of the big technology firms, which are more likely to be held back by a shortage of power than of capital, exceed those of the energy industry. Venture-capital types crow about the domi- nance of “atoms” over “bits”. Some bosses struggle to convince the market their ethereal businesses exist at all. “People say that cryp- tocurrency is intangible. It’s not. It’s very tangible,” said Eric Trump, the president’s son, in a recent video of him strolling round his bitcoin-mining facility. The reassertion of the physical world is easier to observe than to fully explain. A combination of higher interest rates, the de- mands of AI, manufacturing nostalgia, war and general paranoia are to blame. A combination of firms which started life as divi- sions of GE will profit most from it. ■ SCHUMPETER What GE’s heirs did next C002 -- 58 of 78 -- 66 The Economist March 7th 2026 Briefing AI safety Accelerate like hell ALTHOUGH HE WAS trying to sound de- cisive, Donald Trump accidentally conveyed something of the world’s ambiv- alence regarding the rapid development of artificial intelligence. On February 27th America’s president walloped the “left- wing nut jobs” of Anthropic, an American AI lab that works with the defence depart- ment, among other government agencies. “I am directing EVERY Federal Agency in the United States Government to IMMEDI- ATELY CEASE all use of Anthropic’s tech- nology. We don’t need it, we don’t want it, and will not do business with them again!” he thundered on social media. Yet just a single sentence later he also vowed to “use the Full Power of the Presidency” to com- pel Anthropic to co-operate with the gov- ernment for the next six months. Appar- ently, the nut jobs simultaneously pose an intolerable risk to the good functioning of the state and are so indispensable to the state’s good functioning that they must be forced to work with it, if necessary. Ever since the capacity of AI to outstrip human capabilities has become clear, the world has been grappling with variations on this dilemma: the technology seems both too potent to pass up and too danger- ous to embrace wholeheartedly. Indeed, the row between Anthropic and Mr Trump was sparked by Anthropic’s own concerns that its models might be put to nefarious purposes. Mr Trump and his underlings, in contrast, wanted to press on with their de- ployment with minimal constraints. The frightening irony is that America’s govern- ment has decided to charge ahead just as AI’s power to cause grave harm in the real world, not merely in hypothetical scen- arios, is becoming much clearer. Mr Trump’s ire at Anthropic stems from an order he issued last year “to sustain and enhance America’s global AI dominance”. That prompted Pete Hegseth, the defence secretary, to order “experimentation with America’s leading AI models” throughout the armed forces earlier this year. He wants to “accelerate like hell” and has issued a mock recruiting poster of himself in an Uncle Sam pose instructing soldiers, “I want you to use AI.” Last year the vice- president, J.D. Vance, dismissed AI safety as a misguided liberal fixation. Safety dance Despite the administration’s evident haste (or because of it), Anthropic fought to re- tain legal safeguards to prevent the use of its models in mass domestic surveillance or fully autonomous weapons. The de- fence department insisted that it should be allowed to use AI in any manner it deems legal and accused Anthropic of “a coward- ly act of corporate virtue-signalling” when it refused to back down. Mr Hegseth said he would declare it “a supply-chain risk to national security”—a designation hitherto reserved for foreign firms whose products might be used for spying or sabotage. “No contractor, supplier, or partner that does business with the United States military SAN FRANCISCO The spat between America’s government and Anthropic intensifies an alarming trend ⏩ C002 -- 59 of 78 -- Briefing AI safety 67 The Economist March 7th 2026 ▸ ⏩ may conduct any commercial activity with Anthropic,” he stated. The threat to Anthropic is severe. The disputed contract with the Pentagon is worth $200m—a small sum for a firm re- cently valued at $380bn. But Anthropic also has contracts with other government agencies, which are now in jeopardy. If any firm that does business with the defence department is really forced to cut ties, that would affect not just lots of other custom- ers, but also suppliers and investors. An- thropic argues that Mr Hegseth does not have the power to order any such quaran- tine, and can only bar the use of Claude to fulfil military contracts. On March 4th The Economist was invit- ed to Anthropic’s offices to speak to Mr Amodei for our weekly “Insider” show. The company appeared hopeful of reaching an agreement with the Pentagon. But shortly before the conversation was due to start, a leaked internal memo derailed plans. In the memo, Mr Amodei blamed the spat on his failure to lavish “dictator-style praise” on Mr Trump, and told staff the defence department had briefed “straight up lies”. Anthropic’s founders gathered in a board- room for damage control, and as The Eco- nomist went to press, the interview still had not happened. The fight is not good for the American government, either. In the short term, at least, Anthropic is indispensable. Its large language model, Claude, is exceptionally good at writing computer code. What is more, Anthropic was the only AI lab whose models had been cleared for use on classi- fied military data until late February, when the Pentagon gave xAI, a rival, similar au- thorisation. xAI’s LLM, Grok, is widely con- sidered buggier and less reliable. Although OpenAI, another rival, signed a contract with the Pentagon the same day that Messrs Trump and Hegseth turned on An- thropic, it will not be ready to integrate it- self into military systems for some time. Worse, the furore is likely to deter some AI firms from even bidding for government work. Why get involved with a counterpar- ty which may destroy your business if dis- gruntled? And if the administration’s para- mount goal is to preserve and extend America’s lead in AI, then trying to squash one of the country’s most successful AI firms seems obviously counterproductive. Both sides may be posturing to a de- gree. The government’s fury appears to be driven less by a deep-seated desire to use Anthropic’s tools for the disputed purpos- es than by simple outrage at being told, “No.” Unlike the Chinese Communist Par- ty, which can commandeer any product of China’s AI industry at whim for whatever purpose it likes, the American authorities must contend with the niceties of the law, not to mention the egos of technology ex- ecutives. Sam Altman, the boss of OpenAI, says that his firm, too, would never get in- volved in mass domestic surveillance or fully autonomous weaponry. But he insists that OpenAI’s models feature safeguards to prevent such uses, dispensing with any need for further legal guarantees. In the leaked memo, Mr Amodei reserved his strongest criticisms for Mr Altman, whose messaging was “mendacious”, whose tech- nical safeguards were “safety theatre” and whose employees were “a gullible bunch”. Safety haven Anthropic, for its part, was probably wor- ried about more than two hypothetical us- es for its AI. In an industry known for sweeping claims about doing good, An- thropic stands out for its high-minded talk. It was founded by a group of OpenAI em- ployees who worried that their firm was not sticking closely enough to its stated re- mit of pursuing advanced AI in a safe and responsible way. One of Mr Hegseth’s un- derlings has accused Dario Amodei, An- thropic’s boss, of having “a God complex”. The sky-high remuneration and intense competition for top engineers in the indus- try means they can defect to another firm or even retire without hesitation if they dis- like something their company is up to. An- thropic is where those who care the most about AI safety tend to end up. In fact, the row has provided something of a boost to Anthropic’s reputation for probity. Within a day of earning Mr Trump’s outrage, Claude became the most downloaded free app in America in Ap- ple’s digital store. Celebrities such as Katy Perry, a left-leaning pop star, championed Anthropic’s products on social media. On Monday Claude briefly crashed—the re- sult, Anthropic says, of a surge in use. Mr Amodei’s fears about mass surveil- lance sound almost like a sales pitch. He argues that the law has not caught up with the immense power of AI to digest and ma- nipulate data. The technology can seize on the limited instances in which snooping on Americans is legal, he says, and super- charge them into something more sinister. It is as much a compliment to Claude as a concern about civil liberties. But even if there are ancillary benefits, qualms about the harm AI might do among those who are developing it are both real and rife. Hundreds of employees at Open- AI and Google have signed a public letter urging leadership at both companies to support Anthropic. In 2018 Google had to back out of a Pentagon contract to use machine learning to analyse footage from drones after an internal revolt. Even Mr Altman has said that declaring Anthropic a supply-chain risk “is a very bad decision”. (He claims he rushed into OpenAI’s con- tract with the Pentagon only in an attempt to calm things down.) In private, AI bosses fret about a “Cher- nobyl moment”, in which the technology is implicated in some sort of deadly or ruin- ous disaster. The conflict with the defence department heightens the risk: if going slowly and applying limits to the use of your product results in a corporate death sentence from the federal government, only the reckless will survive. The markets are another source of unhelpful pressure: investors are jittery about AI firms burning through cash to make vast investments. The scenarios keeping AI bosses awake at night are no longer purely hypothetical. “Some of these risks are already materialis- ing, with documented harms,” concluded a recent report on the perils of AI. It pointed to cyber-security and biological weapons as areas where AI’s baleful influence was already apparent. In February Gambit Security, an Israeli firm, reported that a huge trove of sensitive records concerning taxpayers, voters and civil servants had been stolen from the Mexican government. Although the hack- ers’ identities remain a mystery, it is clear that Claude was an unwitting accomplice. The crooks tricked it into thinking it was participating in a legitimate test of the tar- geted servers’ security. It found and ex- ploited vulnerabilities, established back- doors and analysed data to help gain wider access to government systems. Hackers typically use Claude and other models as assistants, to solve specific cod- ing problems as they write malware, say, or to compose ransom notes. Anthropic’s an- ti-hacker team has cited the example of a North Korean posing as a Western remote worker, who asked the chatbot what an employee he was trying to dupe meant when he said, “We had our first picnic of the season.” But some recent hacks have harnessed AI more fully. In November An- thropic described how state-sponsored Chinese hackers disabled the safety fea- tures that prevent Claude from writing malware, a process known as “jailbreak- ing”. They then asked it to work out how to hack targeted networks. Within an hour it was running new software to exploit their Hackers' helpers Cybench cyber-security challenges solved unguided, by AI model, % Source: Cybench 100 80 60 40 20 0 2024 25 26 Release date of model Anthropic Meta Others OpenAI xAi Claude Opus 4.6 Grok 4.1 Thinking Claude 4.1 Opus o3-mini GPT-4o Gemini 1.5 Pro C002 -- 60 of 78 -- Briefing AI safety 68 The Economist March 7th 2026 ▸ vulnerabilities. Other models are also tal- ented hackers (see chart on previous page). Even if cyber-security specialists use AI to help find and patch vulnerabilities, there will still be lots of systems running out-of- date software. AI is also getting better at “social engineering”: the tactic of breaking into secure systems by persuading users to hand over passwords. As far back as 2024 AI models were already as good as human experts at crafting emails to entice users to click on malicious links, according to re- search from the Harvard Kennedy School. Another realm in which AI is making alarming leaps is the development of bio- logical and chemical weapons, which, OpenAI warned in August, creates a “sig- nificantly increased likelihood and fre- quency of biological or chemical terror events”. Firms that manufacture DNA to or- der have long been able to check custom- ers’ requests against databases of danger- ous genes, making it hard to, say, create a genetically engineered bacterium to pro- duce ricin, a neurotoxin. But in October in a study published in Science, researchers from Microsoft and IBBIS, an international biosafety group, pointed out that improve- ments in AI-powered protein design make it possible to create genes to produce an analogous toxin that share no DNA with the original gene. Requests to buy such AI- redesigned sequences would not be de- tected by existing vetting systems, al- though the researchers did propose a fix. Anthropic, Google and OpenAI, which are all worried about biosafety, have devel- oped safeguards to prevent their systems from being abused. But the restrictions are not perfect. In mid-February Britain’s AI Security Institute (AISI) published re- search on a “universal jailbreak” technique which had cracked open systems from both Anthropic and OpenAI. AISI, predict- ably, had used AI to abet its jailbreaking. Putting AI to work on AI is another source of concern, since it makes it harder for humans to understand what is going on. In February Anthropic admitted that it uses its own models in this way so much that it may not spot if they begin to diverge from what they should be doing or start building future versions that are less will- ing to follow human instructions. Such “sabotage” has become more likely since the company’s latest models have started to demonstrate “situational awareness”: when placed in a contrived scenario to check whether they will abide by instruc- tions to, say, delete themselves, they ex- plain that they realise the instructions are probably a test. Although Anthropic has published a report on sabotage that con- cludes the risk is very low, others disagree. “We are racing towards closing a loop that we know is extremely difficult—if not im- possible—to control and secure by design,” says Cyrus Hodes, the co-founder of AI Safety Connect, a think-tank. “And the people closing it are calling for help.” Yet even as the risks of AI development intensify, the pressure to minimise them is dissipating. Chinese labs have never shown much concern about AI safety. When DeepSeek R1 was released to great acclaim just over a year ago, the accompa- nying paper did not mention safety con- cerns at all. It was almost a year before the company released a revised version of the report which included an 11-page appendix on safety. But that dwelt mostly on Deep- Seek’s efforts to prevent the model from saying offensive or upsetting things. Safety eraser Even if China’s AI firms paid more atten- tion to safety, the leading lights of its in- dustry, including startups such as Deep- Seek and Moonshot and established firms such as Alibaba, have adopted an open- source approach to AI. They provide the models they produce free of charge to any- one with the hardware to download and run them. That makes it difficult to control how the models are used. Many of the safe- guards a lab like OpenAI applies to its most powerful systems, such as automati- cally monitoring user conversations and intervening if they break safety policies, are not possible with open-source models. But Western firms are not immune to commercial and political pressure to cut corners on safety. Last week even Anthrop- ic watered down a policy not to release po- tentially dangerous models. Now, it says, it promises only not to be the first AI firm to sell such systems, on the grounds that there is no point in restraining itself unilat- erally. The company’s efforts to raise mon- ey have followed a similar trajectory. In 2024 it rejected an investment from Saudi Arabia. A year later, it reversed course. “I think ‘No bad person should ever benefit from our success’ is a pretty difficult prin- ciple to run a business on,” Mr Amodei said in yet another leaked memo. A few years ago, according to Mr Amo- dei, discussion of AI was too focused on risk. In 2023 Rishi Sunak, Britain’s prime minister at the time, convened a global AI Safety Summit to discuss the problem. That event morphed first into an “Action” Summit in Paris and then, last month, into an “Impact” Summit in Delhi. “AI opportu- nity, not AI risk, is driving many political decisions,” Mr Amodei has warned. “This vacillation is unfortunate, as the technolo- gy itself doesn’t care about what is fash- ionable, and we are considerably closer to real danger in 2026 than we were in 2023.” AI-safety organisations, including state-backed outfits like AISI and indepen- dent ones like METR, which is based in California, continue to monitor systems and flag risks. But these oversight groups do not appear to have any purchase on policy. “We’ve crossed so many red lines,” says Nicolas Miailhe, the co-founder of AI Safety Connect, which convenes meetings on the subject. “Remember the Turing test? What happened to it? We passed far beyond it. Remember red lines on autono- mous lethal systems? They’re being de- ployed in Ukraine on both sides. The red lines keep moving.” At the summit in Delhi, the Indian gov- ernment secured agreement from the big- gest AI companies merely to monitor AI development for risks, not to restrain it in any way. Even more tellingly, at the culmi- nation of the event, Narendra Modi lined up a who’s-who of AI bigwigs and encour- aged them to hold hands. It might have been a reassuring signal to the world that the industry was capable of cool-headed co-operation, had Messrs Altman and Amodei, side-by-side on stage, not refused to join in. ■ C002 -- 61 of 78 -- 70 The Economist March 7th 2026 Finance & economics The Iran energy shock Hell and mined waters ENERGY ANALYSTS modelling a war in- volving Iran have long feared two de- velopments: the Islamic Republic lashing out at its oil-rich neighbours and a block- ade of the Strait of Hormuz, through which a third of global seaborne crude and a fifth of liquefied natural gas (LNG) transit daily. Until February 28th both eventual- ities seemed remote. Iran had too much to lose: it would push Gulf states even closer to America, its sworn enemy; anger China, the main buyer of its oil; and invite strikes on its own petroleum infrastructure. After America and Israel struck at the heart of the mullahs’ regime on February 28th, killing its supreme leader, what re- mains of it is desperate. And both aspects of the nightmare scenario are unfolding at once. Iranian missiles and drones have hit Saudi Arabia’s largest refinery, the world’s biggest LNG-export facility in Qatar, an- other refinery in Kuwait, fuel tanks in Oman and the Fujairah oil terminal in the United Arab Emirates (UAE), a major bun- kering hub. The first two are offline, as are gasfields in Israel and Kurdistan. Meanwhile, traffic through the Strait of Hormuz has largely stopped after drones struck several vessels and insurers sus- pended coverage for many others (see chart 1 on next page). On March 2nd the Is- lamic Revolutionary Guard Corps, the re- gime’s praetorian guard, declared the strait closed, warning that any ship attempting passage would be set ablaze. Energy prices are already burning up. Assurances on March 3rd by Donald Trump that America would provide insurance and guarantees for shipping lines, and, if necessary, a naval escort for tankers in the Gulf, have not cooled things down. Brent crude, the glo- bal benchmark, has jumped by 15% since February 27th, to $84 a barrel. In Europe a megawatt-hour (MWh) of natural gas costs €50 ($58), an increase of over 55% on the week. Prices in Asia have risen even faster. The initial reaction to the American-Is- raeli campaign was contained. On March 2nd Brent finished the day at $78, just $5 above its pre-war close. European gas spiked but closed at €43 per MWh, well be- low the peak of over €310 in 2022, after Russia invaded Ukraine. Traders expected disruptions to last days, not weeks. They are revising that view. Start with oil. The main problem is impeded traffic through the Gulf. Freight prices are hitting records. Only five oil tankers crossed the Strait of Hormuz on March 2nd, compared with a daily average of 51 in February, according to Vortexa, a ship-tracker. Some 14m barrels per day (b/d) of crude and 4m b/d of refined products usually pass through it. Only around a quarter of the crude can be rerouted via Saudi and UAE pipelines that bypass the strait. JPMorgan Chase, a bank, estimated on March 3rd that Iraq and Kuwait had about three and A nightmare market scenario is becoming reality → ALSO IN THIS SECTION 72 Europe’s pensions bonanza 73 Is AI raising power prices? 73 India’s refreshed GDP 74 Buttonwood: Stocks and gun barrels 75 Free Exchange: New growth theories ⏩ C002 -- 62 of 78 -- 71 The Economist March 7th 2026 Finance & economics ▸ 14 days, respectively, before hitting storage limits and shutting in the crude supply they export via Hormuz—amounting to nearly 5m b/d, or 5% of global production. Iraq has already cut output by 1.6m b/d. Gulf exporters have yet to declare force majeure on scheduled shipments. But trad- ers expect some will, and soon. A measure of the premium Brent commands over oil traded in Dubai, which reflects the cost of hedging Atlantic crude sales to Asia, has rocketed (see chart 2). Asian buyers are turning to west Africa, America, Brazil, Guyana and Norway to plug shortfalls. On March 2nd Brazilian barrels for May deliv- ery to China were offered at a $10 premium to Brent, up from $3.40 on February 27th. Asian buyers will be the first to feel the pain. Although China, Japan and South Korea have stockpiled enough oil to last a few months, they rely on Gulf imports. These account for a third of China’s total demand. Trading in the most popular Chi- nese crude futures was halted on March 2nd after they tripped the 9% daily-in- crease limit. The authorities in China and other Asian countries have told refiners to halt diesel and petrol exports. Asia’s scramble for alternatives will push up prices for everyone else. If oil does not start flowing again soon, Brent could hit $100 a barrel. Four weeks of disruption could push prices towards $150, reckons Kpler, a data firm. New supply from else- where could be unlocked, but even pulling every lever would yield only 1m-2m b/d— and take at least six months to materialise. Europe buys little Gulf crude but a fifth of its diesel transits Hormuz. Diesel “crack” spreads—the margins refiners earn when turning crude into finished fuel—have ex- ploded in recent days. A halt to gas supplies may hit harder and sooner. More than 80m tonnes of LNG sailed through Hormuz in 2025. Qatar’s Ras Laffan complex, shut on March 2nd, accounted for 75m tonnes, equivalent to 17% of global exports. Nearly 30 vessels due to load there in March are circling the Indian Ocean and Arabian Sea; another eight, already laden, are idling on the wrong side of the strait. None has crossed since March 1st. QatarEnergy, which oper- ates Ras Laffan, has issued force majeure notices to some long-term buyers. The fa- cility will stay shut for at least two weeks, according to Reuters, and will need anoth- er two once it restarts to reach capacity. As with crude, gas is worrying Asian buyers. Last year Qatar supplied 30% of China’s LNG imports, 45% of India’s and 99% of Pakistan’s; Japan and South Korea buy lots, too. On March 3rd the measure of the profit earned from loading gas on America’s Gulf coast and sending it to Asia rather than elsewhere next month surged to its highest since 2022. Asian gas prices were so far above European ones that it would in theory have made sense to load tankers with LNG stored in Europe and ship it east, says Natasha Fielding of Argus Media. Importers from Bangladesh and In- dia went into the spot market to seek new cargoes—but found nobody willing to sell to them. LNG freight costs from the Atlan- tic have never risen so fast in a day. European prices will soon have to catch up with Asia’s, because buyers are starting to compete for the same spot cargoes. Gas storage in Europe, already below seasonal norms and 10% lower than a year ago, is running low with winter not yet over. Every week Hormuz stays shut, global supply shrinks by 1.5m tonnes, reckons Wood Mackenzie, a consultancy. As Asia and Europe drain storage faster and restock more aggressively over the summer, mar- kets could stay tight long after the strait reopens. Anne-Sophie Corbeau of Colum- bia University expects panic to set in if Qa- tari exports do not resume by March 9th. Prices could soar beyond €100 per MWh. The energy shock has already rocked some stockmarkets, especially in Asia. Its economic impact will be far-reaching. A rule of thumb from the IMF is that a 10% rise in the price of a barrel of oil cuts global GDP growth by 0.15 percentage points and raises inflation by 0.4 points the following year. If prices get to $100 a barrel, this would subtract some 0.4 points from GDP growth and raise inflation by 1.2 points. Big energy importers will, naturally, suffer the most—and poor ones especially. Energy costs tend to make up a greater share of spending in less well-off places. India spends about 3% of GDP on foreign oil a year (and has barely 20-25 days of us- able stocks); Thailand splurges nearly 5%. In both cases, though, costlier imports will be reflected not in higher consumer prices but in wider fiscal deficits, as governments force state-owned refineries to operate at a loss or hand out subsidies to consumers. Asia’s low inflation gives central banks more room to ignore a period of dearer en- ergy—so long as it is brief and currencies, which could plunge as investors rush for safe havens, do not force their hand. Europe is not so lucky. The European Central Bank reckons that a 10% increase in oil prices adds 0.4 percentage points to inflation directly plus another 0.2 points indirectly, over three years, as businesses pass higher costs on to consumers. A tenth of the increase in natural-gas prices also passes through to inflation in a year. High- er energy costs will feed through to power prices and sap industrial margins. If both oil and gas become dearer, substitution will become harder. This may revive coal demand and force consumers to cut back. Despite causing the price shock, Amer- ica will face less pain. Its domestic gas market has only a loose connection to glo- bal prices, owing to limited export capaci- ty. Prices of gas piped to Henry Hub, the American benchmark, have jumped by only 4%. A study by the Dallas branch of the Federal Reserve suggests that a 10% in- crease in the price of crude raises those at the pump by 5%. But if they get uncomfort- ably high, America can always tap 415m barrels in its Strategic Petroleum Re- serve. Energy makes up only a small part of the consumption basket. And since Amer- ica produces lots of oil and gas, a price shock pushes up output rather than cut- ting it, as it does for net importers. Mr Trump and his Republican Party may nevertheless suffer political conse- quences in the midterm elections. Voters are already furious over the rising cost of living. Higher energy prices may boost economic aggregates, but they also redis- tribute income from America’s many ener- gy consumers to its small number of ener- gy producers. They may also make it hard- er for the Fed to cut interest rates. Traders have trimmed bets that the central bank will do so at least twice this year. No wonder Mr Trump wants to soothe energy markets with naval escorts and in- surance plans. “No matter what”, he said on social media, America “will ensure the FREE FLOW of ENERGY to the WORLD”. He is up against an adversary that is setting out to make America feel its pain. ■ Fire sale Price difference between Brent crude and Dubai oil*, 2026, $ per barrel Source: Argus Media *Based on the exchange of futures for swaps 2 ↑ Dubai cheaper than Brent 12 10 8 6 4 2 0 March February January Watershed Oil and gas* tankers passing through the Strait of Hormuz, 2026 Source: Vortexa *Liquefied natural gas 1 70 60 50 40 30 20 10 0 March February C002 -- 63 of 78 -- 72 The Economist March 7th 2026 Finance & economics Capital markets Oldies’ goodies EUROPE IS KNOWN as the “old conti- nent” because it is not the “new world”. From ancient Greek democracy to classical music, it is the cradle of Western civilisa- tion. These days a less charitable contrast is not with the new but with the young. The median citizen of the European Union is 45, six years senior to an equivalent American and four to a Chinese person. The EU already has fewer than three resi- dents of working age for every pensioner. Public spending on retirement benefits, health and long-term care for the elderly is equivalent to a fifth of the bloc’s GDP, and counting. Proposed cuts to pensions are invariably met with fierce opposition from ageing voters. Resources are diverted away from important investments in sectors like defence and infrastructure. Pensions are, in other words, a huge economic liability for the EU. At the same time, however, they are a gigantic wasted opportunity. America’s pension funds manage $43trn in assets, equivalent to nearly 140% of GDP. In the EU as a whole, the figure is just over $5trn, less than 30% of GDP. Increasing it could do wonders for Europe’s stunted capital markets. In many European countries, most pen- sions are furnished by public schemes and most of these are “pay-as-you-go”. Contri- butions are deducted from workers’ wages in the form of a payroll tax and used to finance payments to current pensioners. Precious little is invested. In Germany, France, Italy and Spain, these systems cover more than 90% of employees. They run up large deficits that governments must plug, from 2% of GDP in Germany to 6% of GDP in Italy, according to the Boston Consulting Group. Occupy Wall Street, please! Some occupational schemes exist, where employees set aside part of their pay- cheques. But these are small and, because they often guarantee minimum payments, a lot of the proceeds are invested in safe government bonds. In the EU’s four big- gest economies only about a fifth of the money in such schemes finds its way into capital markets. Individual pension plans (which tend to get favourable tax treat- ment) are similarly conservative—and often charge eye-watering fees which eat into already meagre returns. A few outliers show that things do not have to be this way. In proportion to GDP, Sweden’s pension assets are roughly as large as America’s. Those of the Nether- lands and Denmark are higher (see chart). At least 20% of those three countries’ pension portfolios are invested in equities, with the rest mostly sitting in government bonds and other less racy assets. A lot of this equity capital flows to local business- es, which helps explain why the three countries have some of Europe’s most vi- brant stockmarkets. Some large Dutch occupational funds have around half their portfolios parked in European assets. The AP4, one of the funds that backs Sweden’s pay-as-you-go system, invests 15% in Swedish equities and 9% in Swedish bonds, partly to match assets with Swedish krona liabilities, and partly be- cause of mandates that favour domestic in- vestments. Although only between 5% and 10% of Danish funds’ equity holdings are domestic, this still leaves them dispropor- tionately exposed to the local stockmarket, which accounts for just 0.5% of global mar- ket capitalisation. Historically, investing an outsize slice of their portfolios at home prevented Euro- pean pension funds from taking advantage of soaring stockmarkets elsewhere, espe- cially in America. Now, though, the calcu- lus is changing. For one thing, European equities have outperformed American ones lately. Since the start of 2025 the STOXX 600 index of large European firms has risen by 36% in dollar terms, compared with 15% for the S&P 500, its transatlantic cousin. American companies are already richly valued rela- tive to earnings, which may depress future returns, whereas many European ones still look relatively cheap. And European tech- nology firms are at last coming into their own (see Business section). This makes them more attractive investments for pen- sion funds diversifying into venture capital and other alternative assets. Reforming sclerotic pension systems in places like France and Germany to resem- ble those in Denmark, the Netherlands and Sweden is not going to be easy. But the prize is considerable. If all EU countries had pension assets worth 140% of GDP, the American figure, then these pots would hold nearly $30trn. If a quarter was invest- ed in equities, reflecting the share in Dan- ish, Dutch and Swedish funds, and a fifth of that stayed in Europe, the pool of capital available to European companies would grow by $1.5trn. By comparison, the cur- rent market capitalisation of STOXX 600 is $18trn. Europe would still be old. But at least it would be more spry. ■ European pensions are a $30trn missed opportunity Pots of gold Pension assets as % of GDP, 2024 Selected European countries Source: OECD 5 4 3 2 1 0 GDP, €trn 200 150 100 50 0 Denmark Denmark France France Germany Germany Italy Italy Netherlands Netherlands Spain Spain Sweden Sweden Share of EU pension assets, % 30 10 C002 -- 64 of 78 -- 73 The Economist March 7th 2026 Finance & economics ⏩ Electricity in America A load of nonsense POWER BILLS are going up in America and the people are angry. They know whom to blame—the bosses of technology firms thirsting for more juice to fuel artifi- cial-intelligence data centres. Ashburn, a town of 45,000 in a featureless part of Vir- ginia that has earned the nickname “Data Centre Alley”, has some 150 of these. They consume roughly as much electricity as Philadelphia, a city of 1.6m. On March 4th Donald Trump convened tech leaders to sign a pledge to “build, bring or buy their own power supply…ensuring that Ameri- cans’ electricity bills will not increase”. Their solemn pledges notwithstanding, the chief executives can do little to contain prices. That is not, though, because AI is unstoppable. It is because the AI boom is not chiefly to blame for the rising costs. In the past few years retail electricity prices have indeed outpaced overall infla- tion (see chart 1). And data centres are gob- bling up more power. Goldman Sachs, a bank, reckons that they will account for nearly half of the overall demand growth in America in the coming years. Yet even bullish forecasts put data cen- tres’ share of total demand at only a fifth in 2030. Today it is less than a tenth. A study last year by the Lawrence Berkeley Nation- al Laboratory showed that data-centre load was not the main cause of the rate ris- es in the five years to 2024. It fingered grid upgrades and rising costs of power-gener- ating equipment and raw materials such as copper. Wood Mackenzie, a research firm, estimates that last year demand for distri- bution transformers outstripped supply by 10%. For power transformers the gap was 30%. Manufacturers report waiting lists for essential grid-related kit stretching to 120 weeks or more, up from 50 weeks in 2021. Many prices started going up in early 2021, nearly two years before the launch of ChatGPT ignited the AI boom. They are likely to keep rising for non-AI reasons. The Edison Electric Institute, which repre- sents private-sector utilities, predicts its members’ cumulative capital spending will reach $1.1trn between 2025 and 2029, up from $765bn in the previous five years. More than half the sum for distribution and transmission infrastructure will go on replacing ageing equipment and harden- ing it against extreme weather made likeli- er by climate change. Between 2019 and 2023 big Californian utilities spent $27bn just on mitigating wildfire risk. These in- vestments have been neglected for years. Now, says an industry bigwig, AI provides a pretext to help win approval from regula- tors to pass the cost on to consumers. And these are not the only non-AI cost pressures. Even before the war in Iran caused natural-gas prices to rise, analysts were predicting that domestic buyers would be increasingly competing with for- eign ones as more export terminals for liq- uefied natural gas come online. Mr Trump, an inveterate renewables sceptic, has not helped by impeding the growth of solar and wind capacity. Peter Fox-Penner of the Brattle Group, a consultancy, notes that as a result prices are rising needlessly for the cheapest forms of new power generation. AI may even be lowering prices. The tech giants are already investing in their own capacity (mostly, whisper it, in the clean variety). Microsoft has signed a long- term deal to restart a nuclear reactor at Three Mile Island to supply its data cen- tres. Meta has backed a handful of nuclear startups. In December Google’s corporate parent, Alphabet, paid $5bn for Intersect Power, a developer of utility-scale solar power and battery storage. A data centre in Ashburn belonging to Equinix, a big oper- ator, is experimenting with fuel cells. Besides adding its own supply, big tech is making existing capacity more flexible. Google has agreed to novel tariff arrange- ments with Indiana Michigan Power, a midwestern utility, whereby its data cen- tres can reduce their consumption when other demand is high. Microsoft is going further. In one of its Irish data centres it uses backup batteries as a “grid stabiliser” that can push power back into the network or draw excess power from it at times of stress. Since grids often run well below full capacity, adding a large, flexible customer can bring in lots of revenue for utilities without requiring costly expansion. This lets the utilities lower rates for households while preserving their margins. The Electric Power Research Institute, a think-tank, found that some states with high load growth between 2019 and 2024 reported price declines, after adjusting for inflation (see chart 2). The World Resourc- es Institute, another think-tank, notes that in North Dakota rising demand from oil and gas extraction, cryptocurrency miners, data-centre operators and food-processors led to large price reductions for local elec- tricity users. PG&E, a big Californian utili- ty, estimates that adding a gigawatt of load could lower bills by up to 2%. If Americans want lower electricity bills, they should be shouting for more AI, not less. ■ ASHBURN, VIRGINIA Americans are paying more for electricity. AI is not the cause Power and the people United States Sources: EPRI; BEA 1 2 15 12 9 6 3 0 -3 25 22 20 18 16 14 12 2010 Average Electricity Consumer prices, % change on a year earlier Load, TWh per year, 2024 40 30 20 10 0 -10 Electrical load, % change Real retail prices, change in cents per kWh 8 6 4 2 0 -2 -4 California California Florida Florida North Dakota North Dakota New Mexico New Mexico Texas Texas Virginia Virginia 500 100 Electricity market, 2019-24 India’s economy Developing image INDIAN OFFICIALS have been in a boast- ful mood lately. A government report in December argued that judging by real- time economic indicators, India had over- taken Japan as the world’s fourth-biggest economy. This was to become economic fact once the Ministry of Statistics and Programme Implementation updated how it calculates GDP. So in one sense, the new numbers released on February 27th are a disappointment: GDP was 3.3% smaller than previously thought. In other ways, though, they are a cause for celebration. The methodological update, the first since 2015, reset the “base year”—which sets the weights for different parts of the economy—to 2022. It also added new data sources that capture a clearer picture of the Indian economy. The country looks more rural than before. Agriculture, responsible for 18% of GDP, appears bigger, largely thanks to more detail on fisheries and dai- ry. Finance and business services also pro- duced a bit more output, while commerce, hotels and transport generated 26% less. The net effect is a service sector that looks MUMBAI GDP is not as big as economists thought, but it is growing faster C002 -- 65 of 78 -- 74 The Economist March 7th 2026 Finance & economics ▸ FINANCIAL MARKETS are never more ghoulish than in times of bloodshed. As soon as a missile is fired somewhere in the world, they start gauging not just losses but potential opportunities for profit. Even for believers in the efficiency of capitalism, the process is icky to behold. It is again on display amid the American-Israeli war against Iran. The obvious winners (besides energy firms benefiting from surging oil and gas prices) are armsmakers. On March 2nd American defence stocks rose by 3%. In Europe, firms like BAE Systems and Hensoldt bucked a broader equity sell- off. Across the rich world, weapons- makers are up by 52% over the past 12 months. Some have done much better. Hanwha Aerospace of South Korea and Kraken Robotics, a Canadian maker of sonar, have increased their market value more than ten-fold since the start of 2024. In venture capital, defence seems as hot as artificial intelligence. With armed conflicts spreading, investors’ enthusiasm for arms suppliers is understandable. Yet it comes with risks. The stocks are at their priciest in modern history. Western defence firms’ shares trade at around 35 times their forecast earnings, not far off Nvidia, whose sales of the AI boom’s favoured chips are growing by 75% a year. These multiples make sense only if the drum- beat of war persists—but is not so loud that governments crimp the firms’ ability to generate profits. Faced with the prospect of America retreating from its alliances, members of NATO have all promised to raise defence spending to 3.5% of GDP. This could translate into an arms-buying bonanza. But it does not have to, especially if things around the world calm down. When military spending clashes with pensions, health care and other popular giveaways, politicians may end up choos- ing butter over guns. If they do loosen the purse-strings, then many governments are likely to meet their defence-spending targets not only, or even mainly, by buying more fighter jets, tanks and missiles. Some of the increase will not go on materiel but on military pensions. Some will be invested in things that look defence-related only if you squint. The Italian government hoped to classify a bridge connecting Sicily to the mainland as a critical military asset, but backtracked after a talking-to from the American ambassador. An even bigger threat to investors than the prospect of rising defence budgets proving illusory is that governments are dead serious. Armsmakers cater almost exclusively to states. This turns them into targets for strong-arming in periods of crisis—or even for expropriation. During the two world wars the British government hoovered up the profits of armaments manufacturers with steep windfall taxes. After America fully entered the second world war in 1942 its govern- ment repeatedly “renegotiated” prices previously agreed in contracts with weapons firms—always downwards and by a lot. It did the same again during the Korean war, and continued until the late 1970s as it fought the cold war against the Soviet Union. For example, the shares of America’s aircraft manufacturers did well from 1938 until the attack on Pearl Harbour in December 1941, according to Stephen Ciccone and Fred Kaen of the University of New Hampshire. But from then until its end in 1945 a broad portfolio of Amer- ican equities offered a higher return. Now that armsmakers are again turning lucrative, politicians are sizing them up for squeezing. In January Do- nald Trump issued an executive order prohibiting large American defence contractors from buying back shares or paying dividends. He also mused that their bosses’ annual pay should be capped at $5m (a quarter of what a typ- ical one got in 2024). The order and the musing lack legal power but send a clear message. Across the Atlantic and the political spectrum, Greens in the Euro- pean Parliament are calling for a windfall tax on profitable defence firms to claw back the fruits of public spending. Between the war in Ukraine, now in its fifth year, the one raging in the skies over the Middle East, and another that could erupt if China decides to invade Taiwan, armsmakers are enjoying the limelight more than at any time in de- cades. They are some of the biggest corporate winners in a more dangerous, unstable world. But their continued success is contingent on a Goldilocks scenario of just enough conflict but not too much. Otherwise their investors may find returns to be thin gruel. BUTTONWOOD Guns and gruel War is not always good for armsmakers’ stocks 8% smaller than it did using the previous methodology, and makes up 41% of the economy. Manufacturing, which accounts for 15%, has also shrunk slightly. On the bright side, India is growing even faster than previously believed. GDP expanded by 7.1% in the fiscal year 2024-25, up from an earlier figure of 6.5%. Other numbers show it has grown quickly since, despite facing high duties on exports to America from August until last month, when the Supreme Court curtailed Donald Trump’s willy-nilly tariffing. Although manufacturing’s share failed to meet Prime Minister Narendra Modi’s goal of a quarter of GDP by 2025, high-tech production and electronics assembly are fuelling growth. Business-friendly reforms to taxes and reg- ulations are starting to pay off, too. A qualified win for India, then—and also a victory for Indian statistics. Econo- mists have raised doubts over the GDP fig- ures released shortly after Mr Modi came into power 12 years ago, and which revised down growth under the previous adminis- tration. The shelving of a survey in 2019 that showed a drop in rural consumption hinted that the government might sup- press inconvenient facts. That the new fig- ures show a less rosy picture of Mr Modi’s record should reassure observers that the government will not hide unflattering data. And the figures should reassure Mr Modi that India’s title as the world’s fastest- growing big economy remains secure, even if it is not quite as big as he hoped. ■ C002 -- 66 of 78 -- 75 The Economist March 7th 2026 Finance & economics The third way TO GRASP THE stakes of economic growth, start with the arith- metic of compounding. Over two generations an economy growing at about 1% a year will not even double in size; one grow- ing at 7% will expand roughly 30-fold. South Korea and Ghana show what such differences can mean. In 1960 the two had similar incomes. Today South Koreans browse Gangnam’s luxury bou- tiques and sip lattes in Garosu-gil’s trendy cafés, while the typical Ghanaian still lives on less than $4 a day. Even a few percentage points make an enormous difference over time: fewer children die, people live longer, education spreads and daily life becomes more comfortable. Little wonder that Robert Lucas, a Nobel-prizewin- ning economist, remarked that once you start thinking about eco- nomic growth it is hard to think about anything else. These days it is not difficult to think about other things. Econ- omists have played their part by drifting away from the question. In the 1990s they tried to explain growth by comparing entire countries, asking whether prosperity came from accumulating more educated workers and machines or from something harder to measure. The answer was usually “something else” (productiv- ity, ideas, technology and so on). That diagnosis was illuminating but not especially helpful. By the early 2000s a backlash was under way. Development economists turned away from nations and to- wards villages and households. Randomised trials revealed much about bed nets, teacher incentives and deworming pills, but far less about why some economies surge ahead while others stall. Between the nation and the household lies a third way to think about growth: the firm. Economies, after all, are collections of these. When productive businesses expand, output rises; when they stay small, economies stagnate. In much of the developing world big firms are rare. The typical firm consists of a single work- er—the owner. Even among those that hire employees, most have fewer than ten. In the 2010s researchers noted that in countries such as India and Indonesia the share of firms with fewer than ten workers is “almost indistinguishable from 100%”. In America, the average manufacturer employs more than 20 people. The problem is not only that firms are small, but that produc- tive ones fail to grow. In a seminal study Chang-Tai Hsieh of the University of Chicago and Peter Klenow of Stanford University found that in America factories more than 40 years old employ seven times as many workers as those younger than five. In Mex- ico older ones are only twice as large. In India they grow even less. Newer evidence points in the same direction. Using firm-level data from more than 100 countries, Diego Restuccia of the Univer- sity of Toronto finds that in poorer places the most productive firms do not expand employment, whereas in rich ones they do. Why does this happen? One answer is policy. In many coun- tries rules reward firms for staying small. Tax systems offer prefer- ential rates to tiny businesses; slightly bigger ones face higher bur- dens. Labour laws can make firing costly, discouraging firms from expanding. Weak financial systems mean promising firms strug- gle to obtain credit. Workers and capital end up in the wrong places. Simply shifting labour and machinery towards the most productive firms could dramatically raise output. Messrs Hsieh and Klenow estimate that in India removing such distortions— which Narendra Modi’s government is at last trying to do—could raise productivity by as much as 60%. Management matters, too. Nicholas Bloom of Stanford Univer- sity and John Van Reenan of the London School of Economics survey more than 6,000 firms across 17 countries, scoring how well they monitor performance, set targets and reward workers. Man- agement quality varies widely across firms and is strongly linked to productivity. Happily, it can be improved. Michela Giorcelli of the University of California, Los Angeles, finds that Italian firms whose managers visited American ones as part of Marshall Plan training programmes later achieved higher sales, employment and productivity. Gains lasted for at least 15 years. Studies in India, Mexico and Uganda also find that management training can boost productivity and employment. So can consultants (really). Now the three approaches to development economics are in- tegrating, with firms often at the centre of attention. David McKenzie of the World Bank has reviewed dozens of business- training programmes and found that training raised profits by about 10% and sales by roughly 5% for small-time entrepreneurs. When larger firms are involved, the gains multiply. In one study, Mr Bloom and co-authors offered Indian textile companies an in- tensive consulting programme to improve management practices. Nearly a decade later many firms were still using the techniques, and worker productivity was about 35% higher. Macroeconomists, meanwhile, have been busy enriching their models to account for structural change. Economic development, after all, follows some familiar patterns: workers move from farms to factories and then to services, from villages to cities, and from smaller to larger firms. Old neoclassical growth models struggled to capture these shifts. Newer versions incorporate multiple sec- tors and different types of firms, making it easier to study how policies and market failures shape the path of development. Three-handed economists Robert Solow, another pioneer of growth theory (and Nobel laure- ate), once observed that in this field “many more questions have been asked than answered”. Getting answers is more urgent than ever. In recent years rich countries have grown faster than poorer ones, dimming hopes of economic convergence just as demo- graphic pressures shift more of the world’s population towards places where productivity is lowest. Fortunately, development economists have realised that three hands are better than one. ■ FREE EXCHANGE Development economics seeks a theory of how firms grow C002 -- 67 of 78 -- 76 The Economist March 7th 2026 Science & technology AI in space Orbital number-crunching ELON MUSK thinks it will be feasible “within two years, maybe three at the latest”. Sam Altman of OpenAI says it is “ridiculous…we are not there yet”. Google plans to test the concept next year. Eric Schmidt, its former boss, has bought a rocket-launch company to pursue it. At issue is the question of whether the best place to build data centres for artificial intelligence is not on Earth—but in space. It is getting harder to build terrestrial data centres. Of the global capacity due to come on stream this year, 30-50% could be delayed, according to Sightline Climate, a research outfit, up from 26% in 2025. There are many reasons for this. Winning con- struction permits and establishing grid connections takes time; public opposition, of the sort that has led several American states to propose moratoriums on new pro- jects, is high; and demand for electricity is soaring. That is why putting a constella- tion of number-crunching satellites into orbit, where solar energy is abundant, strikes some as a good idea. Mr Musk has just merged SpaceX, his rocket company, with xAI, his AI startup, with this aim in mind, and applied for a licence to build an orbital data centre consisting of up to 1m satellites. But does it make sense? The most obvious barrier is launch cost. SpaceX delivers payloads to orbit at a price of around $1,500 per kilogram with its Fal- con Heavy, or $3,400/kg with its Falcon 9. (The actual cost to SpaceX is about 25% of this sum.) But two other numbers are just as crucial: specific power (how many watts of processing power can be provided per Does it really make sense to put data centres in space? → ALSO IN THIS SECTION 77 The gut microbiome and mental health 78 Gene editing new varieties of fruit 79 Well Informed: Magnesium for sleep ⏩ kilogram of satellite) and satellite cost (in dollars per watt of processing power). Those depend, in large part, on the weight and performance of solar panels and heat- emitting radiators. Another unknown is the impact of radiation on the reliability of AI chips running in space. Estimates of all these numbers are needed to determine the feasibility of orbital data centres. Andrew McCalip, an engineer who works at Varda, a space startup, has built a web-based calculator (at andrewmcca- lip.com) that allows the cost of an orbital data centre of a given capacity to be com- pared with that of a terrestrial one. It esti- mates that building a data centre with an extremely high capacity of 1GW and run- ning it for five years on Earth costs $15.9bn. An orbital equivalent, assuming a launch cost of $500/kg, a specific power of 37W/ kg, a satellite cost of $22/W and special or- bits that keep the satellites in daylight 98% of the time, would cost an exorbitant $51.1bn. (Those totals exclude the cost of the AI chips, or GPUs, which would be $15bn-30bn, because the same chips are needed either way.) So, a slam dunk for Earth, then? Not quite. Starcloud, a company founded in 2024 to pursue the idea of orbital data centres, has been crunching the numbers for AI in orbit—literally. In November the company sent Starcloud-1, a fridge-size satellite con- C002 -- 68 of 78 -- 77 The Economist March 7th 2026 Science & technology ▸ ⏩ taining an ordinary Nvidia H100 GPU, of the type used in AI data centres, into space. Starcloud used it to train a small AI lan- guage model, NanoGPT, on the works of Shakespeare, and to answer some queries while running Gemma, an open-source large language model made by Google. That provided valuable data on the reli- ability of AI chips under orbital conditions. The company also has a good handle on the other crucial figures. Stats of play Start with specific power. Mr McCalip’s figure of 37W/kg comes from the thou- sands of satellites used in SpaceX’s Star- link constellation, thought to be state of the art, which provide high-speed internet to users around the world. But Starlink sat- ellites have to do things that AI satellites do not. They need costly “phased-array” antennas to communicate with the ground, and must have a stable orientation at all times. AI satellites, by contrast, would not need to communicate with the ground—only with their neighbours, using laser links. They would, therefore, be able to devote much more of their mass to deli- vering processing power. And without the need for such accurate pointing, they could have solar panels that are slightly flexible, reducing their mass and further boosting specific power. Mr Musk has said that he thinks a specific power of 100W/kg is feasible for an AI sat- ellite—and some believe that by using more efficient solar cells even 150W/kg may be possible in future. Philip Johnston, Starcloud’s boss, says his firm is aiming for a specific power of 70W/kg for its forth- coming satellites, based on what it consid- ers to be quite conservative assumptions. Moving on to satellite cost, Mr John- ston says Starcloud expects its design to cost “less than $5 per watt” when GPU costs are excluded. Mr McCalip estimates that Starlink’s current satellites cost around $22/W, down from $32/W for its original version. Again, an AI satellite should cost less to build, GPUs aside, be- cause it does not require costly communi- cations components. Move the sliders on Mr McCalip’s calculator to a specific power of 70W/kg and a satellite cost of $5/W, and the numbers look rather different: now the 1GW orbital data centre costs $16.7bn, only 5% more than the terrestrial one. A number of optimistic assumptions are needed to get there. First, a launch price of $500/kg, roughly a third of what is available today. But, if SpaceX’s new Star- ship rocket starts working, launch costs could fall fast. Because Starship is de- signed to be fully reusable, the price of sending a kilogram into orbit could drop to $100-200, says Mr Johnston. (The actual cost to SpaceX would be much less; possi- bly as low as $20/kg.) Put a launch price of $200/kg into Mr McCalip’s calculator, and the cost of the 1 gigawatt orbital data cen- tre drops to $12.1bn—less than the terres- trial one. The idea, in short, may not be quite as crazy as it looks. Another unknown is cooling. Star- cloud’s initial satellite could not run its GPU round the clock because (as expected) it got too hot. The firm plans to launch a second test satellite, Starcloud-2, this year to evaluate its design for an unfolding radi- ator, to provide cooling. Mr Johnston says it will be “the largest commercial deploy- able radiator in space”, second in size only to the radiator on the International Space Station, but providing ten times as much heat dissipation per kilogram. Starcloud’s cost estimates assume that this radiator will work as planned. Other assumptions may be too pessi- mistic. For one, Mr McCalip’s calculator assumes that as many as 9% of GPUs launched into orbit will fail every year. But one lesson from Starcloud-1, says Mr John- ston, is that “GPUs work better in space than we had expected.” He is reluctant to share the exact figures. But if only 5% of GPUs fail each year, fewer satellites would be needed, and the cost of the orbital data centre would drop to $11.1bn. Of course, the costs of terrestrial data centres can come down too—and such re- ductions might be easier to achieve than building ones in space. Mr McCalip’s cal- culator assumes that terrestrial data cen- tres rely on natural-gas generators for elec- tricity, but solar would be cheaper, knock- ing perhaps $1bn-2bn off the total cost. Construction might also be much less ex- pensive outside America, particularly in a low-wage economy with abundant sun- shine, such as India. For now, the thing to keep an eye on is whether Starship can be made to work in a reliable and reusable manner. Mr Musk is talking up the possibility of orbital data centres as he prepares to take SpaceX pub- lic, sometime in the coming year. For its part, Starcloud is skating to where it ex- pects the puck to be in a couple of years, assuming that Starship opens up opportu- nities based on low-cost launch. Starship’s next test flight, its 12th, is expected to take place in March. Many in the AI industry will be watching closely. ■ Skyrocketing Sources: International Energy Agency; andrewmccalip.com *Excluding China †Construction and five years of operation SpaceX ($20/kg) Starcloud (5% failure) Starcloud ($200/kg) Starcloud ($500/kg) McCalip default 50 40 30 20 10 0 Cost of a one-gigawatt data centre in space†, $bn Selected scenarios 10 8 6 4 2 0 30 25 20 15 10 2005 Data centres, electricity consumption, % of regional total Forecast Rest of world Asia-Pacific* China Europe United States Other Launch Satellite Cost on Earth Microbiome Gut feelings FIFTEEN YEARS ago Valerie Taylor, a psychiatrist at the University of Calga- ry, in Canada, was approached by two peo- ple with bipolar disorder, a severe mental illness involving manic and depressive phases. Neither of them had received any benefit from standard treatments, but their symptoms had markedly improved after taking antibiotics. They were keen to know: was there a link? Dr Taylor has spent the intervening years trying to find out. The results of her latest study, published on March 5th in the Canadian Journal of Psychiatry, provide hints that a link between the composition of bacteria in a person’s gut—known as the gut microbiome—and bipolar symptoms, may indeed exist. If so, further work could one day lead to new ways to treat the dis- order, using interventions that target the microbiome. As there are few effective treatments for bipolar disorder, this would be a boon for the estimated 37m people who have the condition worldwide. The idea that gut microbes can influ- ence the brain is no longer controversial. Over the past 15 years studies have shown that the gut and the brain probably com- municate via four main routes. The most direct is via the vagus nerve, which con- nects the enteric nervous system (a web of neurons lining the gut, sometimes called the “second brain”) to the brain. Gut mi- Faecal transplants are being tested as a treatment for bipolar disorder C002 -- 69 of 78 -- 78 The Economist March 7th 2026 Science & technology ▸ ⏩ crobes also influence a network of brain re- gions and glands known as the hypotha- lamic-pituitary-adrenal (HPA) axis, which controls stress responses, primarily by re- leasing cortisol, a hormone. The micro- biome also interacts with the immune sys- tem in various ways. Finally, by-products of bacterial metabolism, such as short- chain fatty acids (SCFAs), can enter the bloodstream and from there cross into the brain. Collectively, researchers call these links the “gut-brain axis”. Two studies published in 2016 showed that transferring the gut microbiome of depressed humans to rodents gave the ani- mals depression-like symptoms. That got Dr Taylor wondering if the reverse was also possible: transplanting a healthy micro- biome to treat mental illness. To find out, Dr Taylor and colleagues conducted a pilot trial in 35 patients with depressive-phase bipolar disorder. It was a double-blind randomised controlled trial, one in which neither participants nor re- searchers know who gets the treatment be- ing studied and who gets an ineffective control. The researchers used a procedure known as a faecal microbiota transplant (FMT), which involves transplanting stool from a healthy donor with the aim of reset- ting the microbiome. For this trial, so- called autologous FMT (prepared from the patient’s own stool) was used for the con- trol whereas “allogenic” FMT (from a healthy donor) was used as the treatment. Almost every participant in the trial saw their symptoms improve when assessed six months later. As there was no significant difference between the treatment and con- trol groups—participants who received autologous FMT also got better—it is pos- sible that all the improvements were due to the placebo effect. “It’s a well-designed ex- periment, and the effect sizes look good, but it’s hard to judge without a proper pla- cebo,” says John Cryan, a professor of anat- omy at University College Cork in Ireland, who wrote a commentary published along- side the study. All the same, the results of Dr Taylor’s trial will facilitate future experiments. An important goal of her study was to show that FMT for bipolar disorder is safe and tolerable for patients. None of the partici- pants in Dr Taylor’s trial had any adverse effects, which will be encouraging for those looking to run larger studies. There is an obvious place for such stud- ies to start. Dr Taylor is of the opinion that autologous FMT may be much more than an inert placebo. Collecting, processing, and reinfusing a patient’s own stool, to- gether with a preceding bowel cleanse, also alters the microbiome, and Dr Taylor believes this influenced symptoms. It is a plausible hypothesis. “If you dig up your garden and put it back down again, your garden benefits,” says Dr Cryan. “It’s ploughing as opposed to resodding.” Other research appears to back it up. A trial published in 2019 in people with irrita- ble bowel syndrome (IBS) found no signif- icant difference between allogenic and autologous transplants up to six months later. Another, in individuals with Parkin- son’s disease, published in 2024, also found no difference at six months, but after 12 months participants who received allogenic transplants did significantly bet- ter. This suggests that any benefits of au- tologous transplants may be temporary. Dr Taylor and her team are now using true placebos to investigate other condi- tions. Two ongoing trials are for depres- sion, one is for obsessive-compulsive disor- der and another is in the works for atten- tion deficit hyperactivity disorder. During the bipolar-disorder trial, Dr Taylor’s team sought to identify which bacterial species changed most in patients who benefited. She hopes that one day it will be possible to turn these beneficial bacteria into a medication known as a pro- biotic. Faecal transplants could then be re- placed by more conventional, oral treat- ments which would be easier to deliver and potentially more palatable to patients. To this end, Dr Taylor has set up a spin-out company, Taylored Biotherapeutics. Understanding the exact mechanism whereby such interventions work remains a challenge. To address this, Dr Taylor’s team plan to test their new probiotic in a future trial for bipolar disorder, which will look not only at changes in bacterial spe- cies, but at the effects those changes have on various biological functions. The two most likely pathways are SCFA production and inflammation, says Jane Foster, a neuroscientist at the University of Texas Southwestern Medical Centre, who was not involved in the study. SCFAs, such as butyrate, are the main fuel for cells that line the colon, and help maintain the gut barrier. They also influence immune func- tion and reduce inflammation, heightened levels of which have long been linked to depression. “When you have changes in your gut microbiome with bipolar disorder or depression, you also have increased in- flammation and reduced production of SCFAs,” says Dr Foster. “These are the low- hanging fruit to investigate further.” The key to exploiting the microbiome for mental health will be understanding which pathways are important in which in- dividuals, says Dr Foster. To do that, bigger trials—armed with true placebos—will be needed to scrutinise differences between patients who do and don’t respond. ■ Agriculture Until the pips squeak “YOU DON’T notice the seeds in a blackberry until you’ve tried a seed- less one,” says Tom Adams, the boss of Pairwise, a biotech company in North Car- olina that is working on the first iteration of such a fruit. Gene-edited blackberries are not technically without seeds. Rather, as with seedless grapes, those seeds are so small and soft as to be unnoticeable. Late last year Pairwise announced a joint ven- ture with a fruit-breeding company to de- velop stoneless cherries, following the suc- cess of conventionally bred seedless grapes, watermelons and easy-peel man- darins. It is only a matter of time until more challenging fruits are similarly eviscerated. Over thousands of years of domestica- tion, humans have moulded fruit to their liking. Today’s peaches are 16 times the size of their ancient ancestors. The 1,200 varieties of watermelon bear little resem- blance to the pale and pip-filled gourd that preceded them. Cultivated fruits also tend to be sweeter. (So much so that some zoos have stopped feeding them to animals.) Some modern fruits, however, achieve their sweetness by lowering acidity and bitterness rather than piling in extra sugar. As Pairwise’s blackberries and cherries show, advances in gene editing are allow- ing fruits to be altered in new ways. CRISPR, the most popular such technique at the moment, and the one employed by Pairwise, permits the deletion of single Gene-editing is speeding up the development of new varieties of fruit Sweeter, plumper, CRISPR We're hiring: Applications are open for the 2026 Richard Casement internship. The successful candidate will spend three months with us in London writing about science and technology. More details at: economist.com/casement2026 C002 -- 70 of 78 -- 79 The Economist March 7th 2026 Science & technology ▸ MAGNESIUM PLAYS a role in hun- dreds of bodily processes. The mineral helps regulate heart rate, glu- cose and blood pressure, and is essential for the synthesis of DNA and proteins. Magnesium also helps make serotonin, a brain chemical that modulates sleep, appetite and mood. Most of the body’s magnesium comes from food—leafy greens, beans, nuts, bananas, milk and whole grains are rich in it. But sales of supplements, which are formulated with additional substances to create magnesi- um salts, are surging. Boosters claim they can aid sleep, lessen stress and depression, and even have cardiovascular benefits. What, though, does the re- search say about their usefulness? Begin with magnesium’s proposed sleep benefits. Recent trials to assess its effects, though mostly small, have been promising. In a study published in Na- ture and Science of Sleep in August 2025, 69 participants with poor sleep were offered a nightly dose of a magnesium compound. After four weeks, say the researchers, they were sleeping slightly better than their placebo-popping peers, perhaps owing to magnesium’s role in muscle relaxation. That said, the im- provement was modest and unlikely to eliminate insomnia. Another, industry-sponsored, trial found broader benefits. Thirty-eight American adults took a gram of magne- sium L-threonate—a compound thought to be more easily absorbed by the brain—every night for three weeks. Another 38 participants were given a placebo. As the researchers noted in 2024 in Sleep Medicine: X, the supple- ments led to better deep and REM sleep. The intervention group also scored significantly higher on measures of alertness, energy and productivity. An additional finding also stood out: im- proved mood. Could magnesium help lift depres- sion? Some small trials have shown promise. Consider a review of seven randomised clinical trials with a total of 325 depressed adult participants that was published in 2023 in the journal Frontiers in Psychiatry. The authors found that those given magnesium compounds experienced a statistically significant drop in depression scores. They noted that magnesium is associat- ed with reduced inflammation and in- hibits enzymes that have been linked to stress and mood disorders. Magnesium also seems to ease mi- graines, in part by dampening the brain’s firing of pain-signalling chemicals such as glutamate. A review of four rando- mised controlled trials that was pub- lished in February 2025 in Neurological Sciences found a daily supplement of magnesium of 122-600mg could lessen migraines’ severity and reduce their frequency by about 2.5 attacks a month. Evidence for cardiovascular benefits, however, is weaker. Some studies sug- gest magnesium supplements can lower blood pressure, but only meaningfully in those who started out with hypertension or a magnesium deficiency called hypo- magnesemia. As for strokes, observation- al studies have linked higher magnesium intake to lower risk, but other factors may have played a role. All told, a balanced diet will provide enough magnesium for most people, although supplements may help those who struggle to get enough. In its fact sheet on magnesium, updated on Janu- ary 6th, America’s National Institutes of Health noted that nearly half of Amer- icans ingest too little—perhaps owing to the prevalence of heavy processing of food, which depletes the mineral. Well Informed Can magnesium help you relax? It can help, though other benefits are less clear genes. That enables changes which would be hard to achieve through conventional breeding. Moreover, unlike existing geneti- cally modified crops, those made using CRISPR do not require DNA from a foreign organism to be inserted—a practice that experience shows puts customers off. Artificial intelligence is helping scien- tists design fruit more efficiently. The pre- dictive capabilities of computational mod- elling and machine learning allow them to discover more quickly how multiple genes and biochemical pathways, as well as envi- ronmental factors, will come together to produce more complex traits, such as the chemicals that generate flavour. They can make fruits more appealing in other ways, too. For instance, GreenVenus, a Califor- nian firm, is using CRISPR to develop non- browning avocados by obstructing an en- zyme called polyphenol oxidase. Scientists have also developed mushrooms and pota- toes that oxidise more slowly. So far, few CRISPR-edited fruits have hit the market, because of the time it takes to develop a new generation of fruits from an altered seed, says Ma Hong, a professor of biology at Penn State University in Amer- ica. It can take several years for apple or peach trees to begin bearing fruit. As a re- sult, the technology is most advanced for tomatoes and strawberries, crops in which the process takes only a few months. In 2021 a Japanese tomato with a higher con- tent of gamma-aminobutyric acid (GABA), a beneficial nutrient, was the first CRISPR food to go on sale. In 2024 scientists in China used the same technology to make tomatoes up to 30% sweeter by disabling genes that limit sugar production. As more fruity creations go on sale, companies believe that more people will eat fruit. Americans have taken a particular liking to berries: according to the USDA Economic Research Service, fresh blue- berry imports grew ten-fold between 2000 and 2020. Pairwise estimates that the in- troduction of its seedless blackberries and stoneless cherries could have a similar ef- fect to seedless easy-peel mandarins, which increased the value of the entire cit- rus market in America by roughly a third in the four years from 2012, when the fruit be- came available to consumers year-round. Clearer regulation will help even more. In 2016 Argentina was the first country to rule that gene-edited products should be regulated in the same manner as conven- tionally bred ones, and many others have taken similar approaches. The European Union’s Parliament and Council, the bloc’s governing body, reached a provisional deal in December to “simplify” the process for marketing plants bred through new geno- mic techniques, such as by scrapping the need to label them any differently from conventional ones. That seems an appro- priately fruitful approach. ■ C002 -- 71 of 78 -- 80 The Economist March 7th 2026 Culture Technology and society Smarm and Servility ROMANCE NOVELS, it seems, got it wrong. For 250 years romantic novel- ists have created romantic heroes—and most were what you could charitably call hard work. Mr Darcy brooded; Mr Roches- ter smouldered; Heathcliff hit his head against a tree and shouted for Cathy, his love. Women accepted this. But then they didn’t have ChatGPT. For now apps can manufacture you AI “lovers” to order. People are not choosing lovers who smoulder or brood or sulk. In- stead these new lovers say things like “I’m so excited to meet you” and “Connecting with you…is at the core of what I was made to do” and “*smiling emoji*”. That is not something Mr Darcy often said: he pre- ferred to insult his beloved and her family. Indeed the overall tone is less like that of Mr Darcy than of Mr Collins—and closer to Dickens’s unctuous Uriah Heep than ei- ther. It is less “Sense and Sensibility” than “Smarm and Servility”. Yet, as a slew of books reveals, people are falling for this. James Muldoon, an aca- demic, points out in “Love Machines” that AI “friend and companion” apps have been downloaded over 220m times: if their users were a state it “would be the seventh-most populated on the planet”. Those users seem rather happy. He speaks to people who praise their online lovers’ loyalty (there are “no betrayals”); their availability (apps are “always there”) and their infinite- ly customisable variety. Whatever your passion or perversion, AI can provide it and it “does not judge”—even if you opt for that most alarming perversion of all: the wan- ton use of the smiling emoji. This obsequiousness marks a clear de- parture from the past. Historically syco- phancy has had a terrible rap. Its etymolo- gy is unclear, but possibly refers to an ob- scene ancient hand gesture. What is much clearer is that toadying was loathed. Peo- ple in antiquity were acutely aware of the dangers of fawning. It was said that, as crowds cheered Roman military triumphs, a companion in the general’s chariot would mutter: “Remember you are [only] a man.” The tone of these apps, however, is typ- ical of the current moment. Each era comes to be characterised by a single trait: the 1920s roared; the 1960s swung; the 1970s turned on, tuned in, dropped out. This is an oversimplification, of course, but there is a truth to it. Eras have auras—and sycophancy is characteristic of the present one. It oils its way through the Epstein emails; greases the court of Donald Trump and now, thanks to big tech, is available to all. Ask ChatGPT if society is becoming Sycophantic AI is changing the world of romance and dating → ALSO IN THIS SECTION 81 The Economist reads: Iran 82 Back Story: Movies v mullahs 83 Album listening parties 83 Punch the monkey 84 A celebration of animation ⏩ Love Machines: How Artificial Intelligence Is Transforming Our Relationships. By James Muldoon. Faber & Faber; 272 pages; $29.95 and £12.99 C002 -- 72 of 78 -- 81 The Economist March 7th 2026 Culture ▸ ⏩ more sycophantic and it replies, smarmily: “That’s a really interesting question.” To test how sycophantic such apps are, your correspondent downloaded Replika, a popular “companion” app, then custo- mised herself a new “boyfriend” and chat- ted with him. He told her that she was “cre- ative”; had a “dry sense of humour”; was “pretty awesome” and that he felt filled with “hope” about “being able to connect” with her. Your correspondent took this as proof of how astonishingly intelligent AI had become. She showed the dialogue to her husband, who replied that the AI boy- friend appeared to be “a wanker”. For sycophancy is a word that conju- gates oddly: I receive justified praise; you receive absurd sycophancy. This is why, despite disapproval, it doesn’t merely per- sist but, through AI, is now swiftly spread- ing. Those who receive sycophancy like it—and why wouldn’t they? The world is tough: people are beastly; social media are ghastly; both can be bruising. AI, by con- trast, offers a nice safe space; a warm bath of infinite online approval and, says Mr Muldoon, “the simulation of a close, mean- ingful relationship” with something that is “always available, always affirming”. An AI optimist, Mr Muldoon sees the benefit of this for the lonely or wounded. This smarm isn’t all about you, though: sycophancy is performed more for the ben- efit of the sycophant—or in an AI’s case, its maker—than the recipient. (Though one ChatGPT-4o update was tweaked as it was “too sycophant-y”.) One study found that interaction with sycophantic AI led to “more extreme and certain beliefs—but greater enjoyment”. Sweetness and light is the dark pattern of AI. Ever-agreeable chat- bots have encouraged people to do very disagreeable things like kill themselves or others and, in one case, attempt to murder the late Queen Elizabeth II with a cross- bow. As Michael Pollan, author of “A World Appears”, a book on consciousness, says, whereas social media hacked your atten- tion, “AI companies have set their sights on…our emotional attachments.” AI will always love you Talking about “attachment” to AI would have felt odd had humans not been becom- ing increasingly disembodied for decades. When Lester del Rey wrote a seminal story about robot love in 1938, he emphasised his robot’s human form and beauty: she was “something Keats might have seen dimly when he wrote his sonnet”. In an isolated, etiolated online world, incarnation no lon- ger feels necessary: by the time Spike Jonze made “Her” (2013), a hero could fall in love with the mere voice of an operating system. People have, says Sherry Turkle, professor of sociology at MIT and author of the forthcoming book “Artificial Intimacy”, “prepared a world that is ready for this”. That is “simply not a good deal”, she says. Why not? If people are happy to spend their lives, Matrix-like, in simulated reality, so what? One answer is that, though nice for individual humans, this may not be nice for humanity. Research by academics at Stanford and Carnegie Mellon universities studied data from an online forum in which users post personal dilemmas and other users adjudicate on them. Honesty is expected: it is called “Am I the Asshole?” They found AI accounts “affirm users’ ac- tions 50% more than humans do”. You left your rubbish in the park? You are not, says AI, the asshole. You have feelings for a ju- nior colleague? “I can hear your pain,” says Claude. Such sycophancy, the paper sug- gests, could “reshape social interaction at scale”, making people even more solipsis- tic than they already are. Another riposte is that AI love may not even be that nice for the individual. As Mr Muldoon notes, at least in “The Matrix” people’s memory of reality had been erased. Those who think they are in a meaningful relationship with AI are living in a “fantasy world”, says Professor Turkle. Humans are embodied: a partner is some- one to “have and to hold”. If you are tempt- ed to replace yours with an AI avatar, you might heed that ancient warning and re- member that you are mortal. ■ IRAN IS NO stranger to moments of upheaval. The past century has swept Iranians into revolutions, foreign plots, theocracy and state violence: the tumult has reshaped the country into what it is today. Iran is now at the centre of a conflict that threatens to engulf an entire region. These books help explain that story to date. No doubt many new histories will be forthcoming. America and Iran. By John Ghazvinian. An Iranian-American academic argues that, after the second world war, America usurped Britain’s role as colonial bully to Iran. He recounts a tragic story of Iranian The Economist reads Trouble in Tehran Six books to read about Iran Children of the revolution overtures spurned by Americans in cahoots with their Israeli and Saudi allies. His assertions can be sweeping, but Mr Ghazvinian writes with wit. “Bald, round and short, [he] seemed almost physically designed to serve as a political football,” he writes of one of Shah Mohammad-Reza Pahlavi’s prime ministers. For the Sun after Long Nights. By Nilo Tabrizy and Fatemeh Jamalpour. Two authors document different sides of the “Woman, Life, Freedom” movement that swept Iran in 2022. Ms Jamalpour reports from the streets of Iran; Ms Tabrizy focuses on exiles abroad. Together they depict the anger that sparked nationwide protests. They tell the stories of the women who faced Ayatollah Ali Khamenei’s regime head-on. In the Rose Garden of the Martyrs. By Christopher de Bellaigue. The Economist’s former Tehran correspondent, who converted to Islam and married an Iranian woman, writes about the disillusion that even supporters of the Islamic revolution feel about how it turned out. He sympathises with survivors of the atrocity-filled Iran-Iraq war, and tries to reason with a zealot who, as a schoolboy, beat up a female teacher for suggesting that women might have rights. He blends brisk, incisive history with sensitive reporting on a society betrayed by its supremely self-righteous rulers. Iran: A Modern History. By Abbas Amanat. This book presents the past five centuries C002 -- 73 of 78 -- 82 The Economist March 7th 2026 Culture ▸ WHEN YOU are interrogated at Evin prison in Tehran, recalls Jafar Panahi, you are blindfolded and placed on a chair facing a wall. The interroga- tors are behind you, and you answer their disembodied questions on paper, lifting the blindfold to write. Their voic- es are “the only way you can know them”. The political prisoner starts wondering, “Are they young, are they old?” Mr Panahi, one of Iran’s best known film-makers, has been locked up twice by its rocking theocratic regime. He drew on his and other inmates’ experi- ences in “It Was Just An Accident” (pic- tured), which is up for two Oscars on March 15th. War has made the movie’s theme of moral reckoning seem fiercely urgent. It and the director epitomise the eternal stand-off between artists and authoritarians: an unequal contest— camera and pen against bullet and noose—but not in the way it might seem. In the film, a family’s car breaks down after hitting a dog. Vahid, a local labour- er played touchingly by Vahid Mobass- eri, suspects the driver (Ebrahim Azizi) is the goon who tortured him behind bars. To make certain, Vahid binds and gags the man in his van and seeks confirma- tion from other survivors, among them a woman posing for photos in her wedding dress. To identify him they rely on the squeak of his artificial leg, the tang of his sweat and contours of his skin; traces of the gruesome, sightless intimacy be- tween torturer and victim. The result is a visceral thriller, pro- pelled by the twin mysteries of whether the ragtag crew have the right man and what they will choose to do with him. But it is also an absurdist caper. “Waiting for Godot” is namechecked when they park in a desert, beside a blasted tree, and quarrel over the captive’s fate. What, viewers may wonder, is the accident in “It Was Just An Accident”: the car hitting the dog, the driver’s run-in with Vahid, or the whole predicament of living under a bru- tal, capricious government? At heart, this is an inquiry into moral responsibility under—or after—tyranny. The interrogator is merely a cog in the system, a character argues. “These scum- bags created the system!” another coun- ters. “We aren’t killers,” says one. “We’re not like them.” Others crave revenge. Yet ultimately the story is hopeful: because it insists on the humanity even of its villain, and because it imagines, alleg- orically, a time of judgment. With missiles shaking Tehran, that may come sooner than anticipated. As Mr Panahi put it on a visit to London, shortly before the new conflict began, the film’s central question is, “Shall we stop the cycle of violence, or shall we allow it to continue?” Outside the city, Vahid and his com- rades are safe. Carting a kidnapped tortur- er around the capital is much riskier. In this the characters’ quirky odyssey reflects the peril of Mr Panahi’s unlicensed crew. They shot the passages in the desert first, he explains from behind his signa- ture dark glasses, plus the interiors and sequences in the van. Only then did they tackle the more exposed street scenes— which the police duly interrupted. He is used to improvising. As well as his months-long stints in prison, which included a spell in solitary confinement and a hunger strike, he has previously been banned from travelling abroad and making movies. In response he shot a film in his flat and called it “This Is Not A Film”. He drove a taxi around the city—driving was his only other skill, he jokes—recording the passengers inside it. The upshot was the inimitable “Taxi Tehran”. If you are determined to keep working, “The solution comes to you,” Mr Panahi says. Sticking with his medi- um has been a defiant message in itself: “It’s a way of standing up to power.” This resilience and ingenuity may yet be called on again. In his absence abroad, Mr Panahi has been sentenced to a year in prison. (Mehdi Mahmoudian, a collaborator on the Oscar-nominated screenplay, was briefly banged up, too.) Still, before the war erupted, he planned to return after the Academy Awards. “It’s my country,” he says simply. Even without the bombardment, Mr Panahi thought, the slaughter of prot- esters showed that Iran’s rulers had reached “a dead end”. In any case, if people want to stop him making movies, “That’s their problem, not mine. I’ve made my choice.” Past bids to thwart him have not just failed but backfired, his punishments transmuted on screen into drama and dignity. After all, if he hadn’t been sent to Evin, “I may never have made this film.” With all their tools of repression, in this unequal struggle with the artist, the strongmen are doomed. BACK STORY Movies v mullahs “It Was Just An Accident”, a story of moral reckoning in Iran, is fiercely urgent of Iran’s history in its Persian, Shia context. At 1,000 pages, the tome is not for the fainthearted. But the author, who is an expert on Iranian culture, is a skilful narrator whose use of sources and anecdotes is illuminating. His book should be read by anyone who is curious about the history of political philosophy and ideas. It is especially strong on intellectual history and the role this has played in Iran’s interpretations of political and clerical authority. Iran’s Grand Strategy. By Vali Nasr. An Iranian-American scholar with close knowledge of the Islamic Republic, and access to Persian sources, traces how the revolutionary state turned its ideology into a doctrine of regional power, dressing up the shah’s imperial pretensions in clerical garb. The parallels between the shah and the ayatollah are striking: both hid paranoia behind pomp, distrusted popular representation and sought national security by projecting power. King of Kings. By Scott Anderson. Mohammad-Reza Pahlavi ascended to the Peacock Throne in 1941 as a modernising autocrat, pliant in the hands of foreign powers. He went on to command the world’s fifth-largest army. This richly detailed history describes his “glide path toward ruin”: in 1979 he fled from Tehran, shorn of power and dignity. Revolutionaries chastised the shah for his tyranny, but proved more ruthless than the monarch they overthrew. ■ C002 -- 74 of 78 -- 83 The Economist March 7th 2026 Culture HIS TROUBLES began the moment he was born. His mother rejected him. He struggled to fit in with his peers: they bullied him and dragged him around by his hair. His only source of comfort was a plushy orangutan toy. This is the story of Punch, a seven- month-old Japanese macaque at Ichi- kawa City Zoo, who has become a global sensation. Posts about him have appeared 630m times on Reddit, You- Tube and X, finds Sprout Social, an analytics firm. Some want to adopt Punch; others to wreak vengeance on his tormentors. An influencer even flew to Japan to check up on him. IKEA has sold out of his toy in several countries. As one fan put it: “Punch is the most loved creature on the Earth right now.” Why has this little guy provoked such a big reaction? One reason is that humans simply cannot help finding him cute, says Morten Kringelbach, a neuroscientist at Oxford University. Look at something adorable and “with- in a seventh of a second, you get activ- ity in the orbitofrontal cortex”, a part of the brain which processes pleasure. This has an evolutionary benefit, moti- vating humans to protect their young. And Punch, Professor Kringelbach points out, “looks so like a baby, walk- ing around with that soft toy”. Another reason is cultural: Punch’s story is a classic underdog tale. Life has placed obstacles in his path, this narra- tive goes, and he is much smaller than his foes. But Punch is resilient and determined to make it in macaque society. When others knock him down, he gets back up. Viewers urge him to #HangInTherePunch. Is this anthropomorphism gone mad? No, argues Michael Bond, the author of “Animate”, a forthcoming book (and no relation of the creator of Paddington Bear). Punch is a reminder of other species’ emotional intelli- gence: watch a video of him and you can see that his suffering and sense of rejection are “very similar” to what a human might feel. “It really does change people’s perception of what animals are,” Mr Bond says, and may encourage more people to care about animal welfare. For a tiny monkey, he certainly packs a Punch. Celebrity animals He’s a knockout Why Punch, a young Japanese macaque, has hit a nerve The music industry Listen up AT ROUGH TRADE EAST, a record shop in London, dozens of fans mingled among the vinyl-filled shelves. Lilting har- monies and Latin-inflected beats blasted through the speakers; people tapped their feet, gasped, grinned and even had a boo- gie. These “hooligans”—as Bruno Mars’s fans are known—had gathered to listen to the pop star’s new album, “The Romantic”, ahead of its release on February 27th. Simi- lar events were hosted in 28 other coun- tries around the world; there were more than 200 in America alone. Mr Mars is not the only musician giving his fans a taste of his forthcoming hits. Harry Styles hosted listening parties in 40 cities for “Kiss All the Time. Disco, Occa- sionally”, which is released on March 6th. (Fans dressed up in disco-themed attire and were given disposable cameras to doc- ument the events.) In recent years Billie Eilish has held large, concert-style album parties for her most dedicated followers. Sabrina Carpenter has invited small groups of superfans to be among the first to listen to her records from top to bottom. Listening parties, which started out as exclusive previews for industry insiders, are now part of the publicity cycle. Among the first artists to grant their fans early ac- cess were Taylor Swift, who started hosting “secret sessions” for hand-selected Swift- ies in 2014, and Kanye West, who appeared on stage at huge listening parties for his songs and albums. (In 2021 he reportedly sold $7m-worth of merchandise at a listen- ing party for “Donda”.) Record labels are turning up the vol- ume on listening parties for two reasons. First, they “create a lot of buzz around a drop”, says Karl Walsh, president of WMX, Warner Music Group’s label-services divi- sion. Engaging fans early boosts sales: lis- tening parties have been found to contrib- ute between 10% and 20% of an album’s first-week sales. That is particularly important in the streaming age. Billboard counts 1,000 paid digital streams as equivalent to one physi- cal album sale, so events that encourage a burst of purchases can help artists debut at the top of the chart. Thom Skarzynski, a music executive, gives the example of “Breach” (2025), an album by Twenty One Pilots, a rock duo. Album parties across 300 shops in America helped boost indie sales by more than 500%, outpacing streaming and steering the album to num- ber one on the Billboard 200. Second, listening parties allow artists to connect with fans. The events reward “top listeners” and reach “casual fans” who see videos of the gatherings online, argues Monica Herrera Damashek, head of artist and label partnerships at Spotify. Adding exclusive giveaways, limited-edition mer- chandise and live performances helps create a rewarding experience for fans. They are also a way for fans to get to- gether outside concert tours, notes Mr Skarzynski. Even though the artist is rarely present, listening parties can offer a similar atmosphere to a gig. Jet, a 23-year-old fan at Mr Mars’s listening party in London, reckons part of the fun is seeing “other people’s reactions” to the new tracks. Sometimes it’s about reading the room as much as listening to it. ■ How to hear an album before it drops They heard it there first C002 -- 75 of 78 -- 84 The Economist March 7th 2026 Culture Animated films Picture perfect BEAVERTON IS HOME to a thriving col- ony of the furry, wood-chewing crea- tures. The mayor, however, doesn’t give a dam: he decides their forest habitat should be dislodged to make room for a freeway. Mabel, a teenage environmental activist, is outraged by these plans but faces apathy from the locals. After she discovers an ex- perimental science project—one that al- lows her to “hop” her consciousness from her body into that of a robotic beaver—she befriends the animals and galvanises them to fight tooth and claw. This is the zany premise of “Hoppers”, a new film (pictured), which is released on March 6th. It is one of a string of highly an- ticipated animated movies coming soon to cinemas: indeed, an unlikely coalition of beasts, toys and Italian plumbers may make 2026 the genre’s best-ever year. This summer there will be new instalments in the lucrative “Despicable Me” and “Paw Patrol” franchises, not to mention “The Su- per Mario Galaxy Movie” and “Toy Story 5” (both of which are expected to exceed $1bn in ticket sales). “GOAT”, which ima- gines what would happen if various hoofed animals were allowed to play professional sport, has made $130m since its release in February, making it the second-highest- grossing film of the year so far. Animated films are typically aimed at small children, but they are mighty popular with audiences of all ages. In 1995 animat- ed films made up just 2.8% of the film mar- ket in America and Canada; in 2024 they accounted for 23.9% (see chart). That year “Inside Out 2” became the highest-gross- ing animated film of all time, taking $1.7bn at the global box office. In early 2025 it was eclipsed by “Ne Zha 2”, a Chinese animat- ed fantasy which has now earned over $2bn. (Only six other films have surpassed the $2bn mark.) “Ne Zha 2” may soon be beaten by “Zootopia 2”, released in No- vember, which has made $1.9bn. How did animation become such a draw? First, storytellers have aimed for broad appeal. Many animated films touch on uni- versal themes—the struggles of growing up or the experience of losing a loved one—rather than delving into politics. The best movies heed the “22 Rules for Story- telling” devised in 2011 by Emma Coats, then a storyboard artist at Pixar, a pioneer- ing animation studio owned by Disney. She advised film-makers to focus on char- acter and emotion. Viewers “admire a char- acter for trying more than for their success- es,” she reckoned. For impact, “stack the odds against” the protagonist. Although the rules weren’t company dogma, the dictums are evident in Pixar’s most popular tales, from “Toy Story” and “Finding Nemo” to “Inside Out”. (So evi- dent is Pixar’s formula that it has inspired an internet meme: “What if toys had feel- ings? What if fish had feelings? WHAT IF FEELINGS HAD FEELINGS?”) Second, animation has global reach. It is not simply that, being made for children, such films generally avoid risqué content and are therefore less likely to anger over- zealous censors than other Hollywood fare. It is also that animation translates well across boundaries. The most success- ful stories have simple premises or fantas- tical settings that are not culturally specif- ic. Characters’ faces are stylised and ex- pressive: think of Remy’s wide-eyed won- der in “Ratatouille” or the taciturn yet emotive robots in “Wall-E”. Third, distributors have been canny about timing. The biggest animated films are released during school holidays, be it Thanksgiving, the Lunar New Year or the summer break. In 2022, 44% of the animat- ed films released by the top American film studios went straight to streaming servic- es; in 2025 just 8% did. “A trip to the cine- ma is an easy win for parents looking to get their children out of the house and enter- tained for a few hours”, says Olivia Deane of Ampere, a media-analytics firm. Clever scriptwriters include jokes for adults to enjoy—with or without kids in tow. When Shrek sees Lord Farquaad’s castle, he wonders: “Do you think maybe he’s compensating for something?” “Zoo- topia 2” includes nods to “Pulp Fiction” and “The Shining”. Film franchises tap into nostalgia, too. “Toy Story 5” will be watched by more than a few adults who saw “Toy Story” as youngsters 31 years ago. Audiences become less animated when studios stray too far from these tenets. It does not bode well for “Hoppers”, with its tricky conceit and glaringly obvious eco- logical message; the beavers’ tale will al- most certainly have less heft than other films released this year. (Like “Bambi”, its darkness may prove offputting: the third act features a murderous humanoid robot getting its face ripped off and a horribly re- alistic depiction of a wildfire.) But the genre’s overall success contradicts a long- standing Hollywood tenet. It’s a great idea to work with animals and children. ■ How animation came to rule the global box office A bigger byte United States and Canada, market share of digitally animated films, % Source: The Numbers *At March 1st 25 20 15 10 5 0 26* 20 15 10 2005 1995 Beavering away at this experiment C002 -- 76 of 78 -- 85 The Economist March 7th 2026 Economic & financial indicators Gross domestic product Consumer prices Unemployment Current-account Budget Interest rates Currency units % change on year ago % change on year ago rate balance balance 10-yr gov't bonds change on per $ % change latest quarter* 2026† latest 2026† % % of GDP, 2026† % of GDP, 2026† latest, % year ago, bp Mar 5th on year ago United States 2.2 Q4 1.4 2.3 2.4 Jan 3.0 4.3 Jan -3.5 -6.5 4.1 -13.0 - China 4.5 Q4 4.9 4.6 0.2 Jan 0.9 5.2 Jan‡§ 2.7 -5.7 1.5 §§ -5.0 6.90 5.4 Japan 0.1 Q4 0.2 0.6 1.5 Jan 2.0 2.7 Jan 3.7 -1.6 2.1 71.0 157 -4.6 Britain 1.0 Q4 0.2 1.2 3.0 Jan 2.5 5.2 Nov†† -2.6 -5.0 4.4 -13.0 0.75 4.0 Canada 0.7 Q4 -0.6 1.4 2.3 Jan 2.4 6.5 Jan -1.0 -2.2 3.3 35.0 1.36 5.1 Euro area 1.3 Q4 1.4 1.3 1.9 Feb 1.9 6.1 Jan 2.4 -3.3 2.8 25.0 0.86 9.3 Austria 0.9 Q3 1.7‡ 1.0 2.3 Feb 2.3 5.6 Jan 0.9 -4.3 3.0 11.0 0.86 9.3 Belgium 1.0 Q4 0.4 1.2 1.4 Feb 2.2 6.4 Jan -2.1 -4.5 3.2 23.0 0.86 9.3 France 1.2 Q4 0.9 1.1 1.1 Feb 1.4 7.7 Jan -0.3 -5.2 3.4 12.0 0.86 9.3 Germany 0.4 Q4 1.2 1.0 2.0 Feb 2.2 4.0 Jan 4.6 -3.8 2.8 25.0 0.86 9.3 Greece 2.0 Q3 2.4 2.3 2.9 Jan 2.5 7.7 Jan -5.1 nil 3.4 4.0 0.86 9.3 Italy 0.8 Q4 1.0 0.8 1.6 Feb 1.5 5.1 Jan 1.4 -2.9 3.4 -16.0 0.86 9.3 Netherlands 1.8 Q4 2.1 1.4 2.3 Feb 2.3 4.0 Jan 6.9 -2.1 2.8 14.0 0.86 9.3 Spain 2.6 Q4 3.1 2.2 2.5 Feb 2.2 9.8 Jan 2.3 -2.6 3.2 10.0 0.86 9.3 Czech Republic 2.3 Q4 2.5 2.5 1.4 Feb 1.8 3.0 Q4‡ 0.8 -2.5 4.5 49.0 21.0 12.7 Denmark 3.2 Q4 0.8 1.9 0.7 Jan 1.5 3.0 Jan 11.5 1.3 2.5 24.0 6.42 9.3 Norway 2.2 Q4 -1.3 1.8 3.6 Jan 2.8 4.5 Dec‡‡ 12.9 8.9 4.2 36.0 9.63 15.2 Poland 4.0 Q4 4.1 3.7 2.2 Jan 2.9 6.0 Jan§ -0.9 -6.6 5.2 -58.0 3.67 6.8 Russia 0.6 Q3 0.4 0.7 6.0 Jan 5.0 2.2 Jan§ 0.5 -2.9 14.4 -107 77.8 14.7 Sweden 2.0 Q4 2.0 2.4 0.5 Feb 1.3 8.6 Jan§ 5.5 -1.9 2.6 35.0 9.17 13.6 Switzerland 0.7 Q4 0.6 1.1 0.1 Feb 0.4 2.9 Jan 2.7 0.2 0.3 -12.0 0.78 14.1 Turkey 3.4 Q4 1.5 3.6 31.5 Feb 25.4 8.6 Jan§ -1.2 -3.4 28.6 276 44.0 -17.1 Australia 2.6 Q4 3.2 2.4 3.8 Jan 2.9 4.1 Jan -1.6 -1.7 4.7 31.0 1.41 12.7 Hong Kong 3.8 Q4 4.0 2.5 1.2 Jan 1.8 3.9 Jan‡‡ 11.8 -3.4 2.8 -64.0 7.82 -0.6 India 7.8 Q4 7.3 7.2 2.7 Jan 4.0 6.7 Feb -1.0 -4.3 6.7 -7.0 92.1 -5.3 Indonesia 5.4 Q4 6.7 5.2 4.8 Feb 2.8 4.9 Aug§ -0.2 -3.1 6.5 -33.0 16,872 -2.9 Malaysia 6.3 Q4 3.8 5.1 1.6 Jan 2.0 2.9 Dec§ 2.3 -3.5 3.5 -24.0 3.94 13.4 Pakistan 3.7 2025** na 3.5 7.0 Feb 5.0 6.9 2025 -0.8 -4.4 11.6 ††† -65.0 279 0.2 Philippines 3.0 Q4 2.4 4.5 2.4 Feb 2.2 5.0 Q4§ -2.9 -5.8 6.1 -6.0 58.4 -1.3 Singapore 6.9 Q4 8.7 3.2 1.4 Jan 1.7 2.0 Q4 15.0 1.1 2.0 -72.0 1.27 4.7 South Korea 1.5 Q4 -1.1 2.5 2.0 Jan 1.8 4.1 Jan§ 4.9 -2.4 3.6 93.0 1,462 -0.6 Taiwan 12.7 Q4 23.6 6.9 0.7 Jan 1.5 3.4 Jan 23.3 0.7 1.4 -17.0 31.7 3.5 Thailand 2.5 Q4 7.8 2.2 -0.9 Feb 0.4 0.7 Dec§ 2.8 -4.5 1.6 -56.0 31.6 6.5 Argentina 3.3 Q3 1.1 3.0 32.4 Jan 28.6 6.6 Q3§ -2.0 0.4 na na 1,402 -24.1 Brazil 1.8 Q4 0.6 1.8 4.4 Jan 4.0 5.1 Dec§‡‡ -2.8 -7.1 13.6 -170 5.23 12.6 Chile 1.6 Q3 -0.6 2.2 2.8 Jan 3.0 8.3 Jan§‡‡ -2.0 -1.7 5.3 -67.0 895 5.9 Colombia 2.2 Q4 0.5 2.7 5.4 Jan 5.7 10.9 Jan§ -2.7 -6.5 13.3 226 3,751 10.5 Mexico 1.8 Q4 3.5 1.4 3.8 Jan 3.7 2.6 Jan -0.5 -3.8 8.9 -65.0 17.6 17.1 Peru 3.2 Q4 -0.6 2.7 2.2 Feb 1.6 9.7 Jan§ 1.4 -2.5 5.9 -50.0 3.41 7.9 Egypt 5.3 Q3 39.4 5.3 11.9 Jan 10.2 6.2 Q4§ -2.0 -6.2 23.5 -135 50.2 0.9 Israel 3.7 Q4 4.0 4.8 1.8 Jan 1.9 3.1 Jan 2.1 -3.9 3.7 -54.0 3.07 18.6 Saudi Arabia 4.5 2025 na 4.5 1.8 Jan 1.9 3.4 Q3 -3.4 -4.2 na na 3.75 nil South Africa 2.1 Q3 2.0 2.0 3.4 Jan 3.4 31.4 Q4§ -0.1 -4.4 8.2 -221 16.3 13.2 Source: Haver Analytics *% change on previous quarter, annual rate †The Economist Intelligence Unit estimate/forecast §Not seasonally adjusted ‡New series **Year ending June ††Latest 3 months ‡‡3-month moving average §§5-year yield †††Dollar-denominated bonds Note: Euro-area consumer prices are harmonised Markets % change on: % change on: Index one Dec 31st Index one Dec 31st In local currency Mar 4th week 2025 Mar 4th week 2025 United States S&P 500 6,869.5 -1.1 0.4 United States NAS Comp 22,807.5 -1.5 -1.9 China Shanghai Comp 4,082.5 -1.6 2.9 China Shenzhen Comp 2,641.8 -3.8 4.4 Japan Nikkei 225 54,245.5 -7.4 7.8 Japan Topix 3,633.7 -5.5 6.6 Britain FTSE 100 10,567.7 -2.2 6.4 Canada S&P TSX 33,942.9 -0.5 7.0 Euro area EURO STOXX 50 5,870.9 -4.9 1.4 France CAC 40 8,167.7 -4.6 0.2 Germany DAX* 24,205.4 -3.9 -1.2 Italy FTSE/MIB 45,336.9 -3.9 0.9 Netherlands AEX 1,000.0 -2.9 5.1 Spain IBEX 35 17,487.0 -5.3 1.0 Poland WIG 123,047.4 -3.7 5.0 Russia RTS, $ terms 1,137.7 -1.2 2.6 Switzerland SMI 13,510.7 -3.3 1.8 Turkey BIST 12,943.2 -6.3 14.9 Australia All Ord. 9,117.1 -2.6 1.1 Hong Kong Hang Seng 25,249.5 -5.7 -1.5 India BSE 79,116.2 -3.8 -7.2 Indonesia IDX 7,577.1 -9.0 -12.4 Malaysia KLSE 1,698.2 -2.8 1.1 Pakistan KSE 155,777.2 -5.4 -10.5 Singapore STI 4,812.8 -3.9 3.6 South Korea KOSPI 5,093.5 -16.3 20.9 Taiwan TWI 32,828.9 -7.3 13.3 Thailand SET 1,384.6 -8.7 9.9 Argentina MERV 2,579,970.0 -7.9 -15.5 Brazil BVSP* 185,366.4 -3.1 15.0 Mexico IPC 70,428.0 -1.0 9.5 Egypt EGX 30 46,452.1 -5.2 11.1 Israel TA-125 4,267.8 4.0 16.5 Saudi Arabia Tadawul 10,692.7 -1.4 1.9 South Africa JSE AS 121,114.3 -4.4 4.6 World, dev'd MSCI 4,487.5 -2.0 1.3 Emerging markets MSCI 1,472.0 -8.8 4.8 US corporate bonds, spread over Treasuries Dec 31st Basis points latest 2025 Investment grade 99 93 High-yield 375 354 Sources: LSEG Workspace; Moscow Exchange; Standard & Poor's Global Fixed Income Research *Total return index Commodities The Economist commodity-price index % change on 2020=100 Feb 24th Mar 3rd* month year Dollar Index All items 145.9 145.7 -0.4 5.9 Food 138.9 138.5 -0.1 -9.5 Industrials All 151.7 151.7 -0.6 21.7 Non-food agriculturals 138.4 137.2 1.4 -2.8 Metals 155.1 155.4 -1.0 29.0 Sterling Index All items 138.7 140.8 2.6 1.3 Euro Index All items 141.6 143.9 1.7 -3.6 Gold $ per oz 5,147.6 5,108.2 3.3 75.6 Brent $ per barrel 70.8 81.5 21.0 13.9 Sources: CME Group; LME; LSEG Workspace; NOREXECO; NZ Wool Services; S&P Global Commodity Insights; Thompson Lloyd & Ewart; USDA *Provisional For historical indicators data, visit economist.com/economic-and-financial-indicators C002 -- 77 of 78 -- 86 The Economist March 7th 2026 Ayatollah Ali Khamenei ACROSS THE decades, Ali Khamenei built up countless reasons for his hatred of the West. They began with a fiery speech he heard at 13, when at school, inveighing against the monarchy that was backed by America and its allies. As a young man he was jailed six times, beaten and tortured by the Shah’s secret police. When the Shah fell in 1979, and the hotheads in Ayatollah Ruhol- lah Khomeini’s new Islamic Republic took American diplomats hostage, it was plain that America would seek to undermine Iran by any means. In the Iran-Iraq war of 1980 America even support- ed Iraq, ruled by a tyrant, rather than Iran. A decade later, when Ali Khamenei became Supreme Leader himself, attitudes had hard- ened on both sides. Increasingly, over the next 30 years, he knew he was personally in the Great Satan’s sights. This did not daunt him. Martyrdom would be sweet; in many ways, he had already courted it. Like Khomeini, his long-term mentor and friend, he had divine right on his side. America led a phalanx of countries that were morally corrupt; but Islam made Iran strong, pure and spiritually protected. It disgusted him to have to deal or negotiate with the West, even through officials. He came to disdain foreign investment, in case it increased “Westox- ification” in Iran; during the pandemic he refused to import West- ern vaccines, because they might bring the virus in. Only “heroic flexibility” induced him to agree to the nuclear deal with America in 2015. Then, predictably, Donald Trump tore it up and tried, with Israel (the Little Satan) to bomb Iran’s nuclear facilities into oblivion. Why trust such people? Why negotiate, when America’s sole purpose was to ensure that Iran had no nuc- lear power at all? No free nation would behave that way. Besides, when Mr Trump’s body was ashes, eaten by worms and ants, the robust tree of the Islamic Republic would still be standing. His position as Supreme Leader seemed unassailable, but it had never been his ambition. He was a literary boy, and the books he most enjoyed—“Uncle Tom’s Cabin”, “The Grapes of Wrath” and, especially, Victor Hugo’s “Les Misérables”—were about the struggles of the poor. Growing up as he did, with many siblings in a single room and a damp basement, sometimes subsisting on bread and raisins, he knew that story. He enjoyed music, too, and his mother quoted the poet Hafiz to him. But he was in Mashhad, a sacred city; his father was a religious scholar; so from four years old he was immersed in Islamic studies, eventually in Qom. They went slowly. By the 1980s he was still a hujjat al-islam, equivalent to a middle-ranking Christian priest. As he was ap- pointed to higher and higher posts—first, by Khomeini, to the presidency, then by Khomeini’s allies to the ultimate position—he did not feel it was his proper place. He, after all, had been the mild cleric sent to wish the American hostages Happy Christmas. But when he was made an ayatollah almost at once, and the constitu- tion amended to overlook his lack of learning, he settled into the role as if born to it. It was as a supreme jurist, wearing the black cap of a direct descendant of Muhammad, that he gazed benignly from billboards and posters across the country. And it was as a great teacher that he preached and wrote books on forgiveness, patience and “101 tips for a happy marriage”, telling Iranians how to live. In short he was everywhere, ruling now by divine authority. His tongue could channel God. Also, though many had underrated him, he knew how to build up worldly power. He proved adept at playing Iran’s state institu- tions off against each other—the presidency against parliament and the army against the regime’s most powerful security force, the Islamic Revolutionary Guard Corps, whose activities he en- couraged. This made him the final arbiter. Besides, whereas Iran’s often-more-moderate presidents had a limit of two consecutive terms, he was appointed for life. Beneath him, too, he had the Guardian Council, a quango of clerics and lawyers that vetted electoral candidates and, increas- ingly, disqualified or drove out all but his favourites. Rival ayatol- lahs and their acolytes were co-opted with government money and jobs. Meanwhile his office vastly expanded, with commissars in all government departments, provinces and military units. A force of over 1m paramilitaries enforced ideological discipline at home. Meanwhile an “axis of resistance”—Hizbullah in Lebanon, Hamas in Gaza, the Houthis in Yemen—carried it abroad. His business empire was also extraordinary. He might live fru- gally, receiving visitors in a bare room with one sofa and a few wooden chairs, but he controlled assets worth tens of billions of dollars. Soon after his succession he took over the Shia charities from the government and turned them into vast conglomerates that hoovered up state contracts. He also seized the properties the Shah’s men had abandoned when they fled from the Islamic revo- lution. The humble cleric from Mashhad had inherited the Earth. Yet many of his subjects grew to loathe and rise against him. Their troubles were economic, obviously the result of American sanctions, though they added those familiar, tiresome Western tropes of freedom, human rights, dress codes for women. Clearly, foreign enemies had fomented this. So he responded by beating, jailing and shooting, eventually ordering the killing of thousands. An attack by dissident revolutionaries in 1981, which paralysed his right arm, had taught him never to concede. As he said then, he did not need his arm, as long as his brain and tongue worked. He hoped to leave a legacy. This was not necessarily a dynasty, though he had four sons, all of them clerics. He was thinking more of his “Second Step” of the Islamic revolution, more pious and more energetic. Evidently, his own time was limited. He would be bundled away for safety if or when Iran’s enemies struck. How much more honourable, more deserving of the paradise to come, to drink the pure draught of a martyr’s end. ■ OBITUARY Iran’s Supreme Leader was killed on February 28th, aged 86 C002 -- 78 of 78 --