Fareed’s MHI Global Briefing;

A Liberal Thaw in Eastern Europe

“Anti-populist” reformer Zuzana Caputova has offered a “ray of hope” for liberalism in Eastern Europe, the Financial Times writes, after the anti-corruption lawyer won Slovakia’s presidency with 58% percent of the vote in a runoff over the weekend. She’ll become the country’s first female president. But Caputova’s connection with journalist Kuciak’s case began long before his death. The lawyer previously waged a 14-year legal battle with a company represented by accused businessman Marian Kocner that planned to build an illegal landfill in her home town, Reuters reported. Caputova won the case — and the Hollywood-inspired nickname “Slovakia’s Erin Brockovich,” after the environmental campaigner played by Julia Roberts in the film of the same name. During the election campaign Caputova, a divorced mother-of-two, turned her back on issues that have worked so effectively for populist parties in neighboring Hungary and Poland, such as migrants and family values.In Slovakia, a country where same-sex marriage is illegal, Caputova called for greater LGBT rights. Her “values could not be more antithetical to those of populist strongmen in power” elsewhere in the region, the FT writes. Her social politics cut against the grain, too: She supports gay marriage and abortion rights at a time when Europe sees a sharp cultural divide across the former Iron Curtain. Voters apparently liked what they heard, and Caputova gained just over 58% of the vote in a second-round run-off against 52-year-old European commissioner Maro Sefcovic, according to state-owned Radio and Television of Slovakia (RTVS). Pro-European Union campaigner Sefcovic conceded defeat Saturday to Caputova, a member of the liberal non-parliamentary Progressive Slovakia party, which has no seats in parliament. Some extreme candidates for the presidency — which is a largely ceremonial role although the president does appoint the prime minister — were eliminated after the first round of voting on March 16. Now as all eyes turn to the upcoming European Parliamentary Elections in late May, Slovakia — which has traditionally had one of the lowest turnouts in the election — may have shown that populist parties might not triumph, as so many analysts have predicted.

In Ukraine, a Comedian Upends the Political Order

It’s a “resounding slap in the face to an entire Ukrainian political class,” The Economist writes: Comedian Volodymyr Zelenskiy took the leading spot in Ukraine’s first round of presidential elections on Sunday, capitalizing on “total disillusionment” with politicians and assembling a broader coalition than his rivals while saying “almost nothing about his politics.” Volodymyr Zelensky, who plays a history school-teacher accidentally propelled to the presidency, won around 30% of the votes, according to exit polls. With around two-thirds of the ballots counted, the actual results are indicating a similar outcome. In second place is Mr Poroshenko with 16%; Ms Tymoshenko is currently third with 13%. Mr Zelensky will now face either Mr Poroshenko or Ms Tymoshenko in the second round scheduled for April 21st. He looks likely to win then. Zelenskiy will advance to a runoff, and we shouldn’t dismiss him as a solid choice to run the country, Michael Bociurkiw writes: Zelenskiy is intelligent, has a team of reformist advisers, and might be Ukraine’s best chance at a different direction, after politicians have let the country down for decades, he argues. In trust surveys, Ukraine’s politicians have traditionally ranked at rock bottom — a March Gallup Poll showed that just 9% of Ukrainians have confidence in their national government, a world low. Having crowdsourced most of his policies on social media, Zelenskiy has made a key campaign promise of stripping the president, lawmakers and judges of immunity — a surefire way to ignite voters. So too will a pledge to run for just one term. Even if he doesn’t get the presidency his newly formed political party, Servant of the People, appears to be in strong position for the fall parliamentary elections. As Ukraine is a crucial buffer state between Europe and an increasingly belligerent and aggressive Russia, what happens there over the next weeks and months should be everybody’s business as it turns another page in its slow transformation from oligarchic pluralism to real pluralism. After five years in power, propped up by billions of dollars in Western loans and assistance, and with no notable progress in either the war on corruption or bringing an end to the war with Russia, Poroshenko has demonstrated he is not the right man to fix the seemingly insurmountable problems of this nation of 44 million people. Sure, Zelenskiy is an unproven leader. But after all, American voters managed to send an immigrant actor and former Mr. Universe (Arnold Schwarzenegger) to the Governor’s Mansion in Sacramento to manage an economy several times larger than Ukraine’s. And that didn’t terminate California — and that’s no joke!

Quantifying Brexit’s Damage

Brexit has cost the UK 2.5% of its potential economy, the Centre for European Reform estimates, for an annual hit of £19 billion. The group keeps a running tally of Brexit’s economic cost, and the latest figures (through December 2018, when the British economy shrank by .4%) reflect continued losses, compared to a computer-selected group of similar economies representing how Britain would’ve fared without Brexit. The latest UK trade figures have brought little cheer. Britain’s trade gap with the rest of the world has widened in the last quarter as it bought more goods – including cars – from the EU. Imports from EU countries increased by £1.7bn in October-December, while exports increased by just £0.04bn. The rise in imports was due mainly to a £1.5bn increase in imports of machinery and transport equipment, of which £1bn was cars.  Photograph: ONS Here’s the key points from the ONS: The total trade deficit (goods and services) widened £0.9 billion to £10.4 billion in the three months to December 2018, due mainly to a £1.5 billion rise in goods imports. Rising imports of cars, material manufactures and chemicals were the main contributors to the rise in goods imports in the three months to December 2018; this was offset in part by falling imports of unspecified goods (including non-monetary gold) and fuels. The trade in goods deficit widened £1.6 billion with EU countries and narrowed £0.2 billion with non-EU countries in the three months to December 2018. Excluding erratic commodities, the total trade deficit widened £3.8 billion to £12.9 billion in the three months to December 2018. Removing the effect of inflation, the total trade deficit widened £0.6 billion to £7.1 billion in the three months to December 2018. The total trade deficit widened £8.4 billion to £32.3 billion between 2017 and 2018, due mainly to a £7.2 billion increase in services imports. Sky News have broadcast an interview with Philip Hammond, in which the chancellor warns that the failure to agree a Brexit deal is hurting the economy. Asked about the slowdown in growth to just 0.2% in the last quarter, Hammond replies: It’s a solid performance from the economy when you took at what’s happening globally and in other competitor countries. But of course there is no doubt that our economy is being overshadowed by the uncertainty created by the Brexit process. The sooner we can resolve that the better, and the quicker we can get back to more robust growth in the future. Ed Conway@EdConwaySky Chancellor @PhilipHammondUK tells me: “There is no doubt that our economy is being overshadowed by the uncertainty from Brexit.. this has gone on longer than we wanted” 4 7:15 PM – Feb 11, 2019 Twitter Ads info and privacy See Ed Conway’s other Tweets Hammond (a former Remain supporter who now favours a softer Brexit) also admitted that he’s expected an agreement to be signed by now. I’m afraid this has gone on longer than we would have liked. We would have liked to have been able to bank this at the back end of last year, but I’m confident that we will get it done, and that’s the important thing that business needs to hear. UK trade secretary, Dr Liam Fox, has blamed China’s cooling economy for Britain’s weak growth, rather than Brexit. Speaking in Bern this morning, Fox said: “Clearly there are those who believe that Brexit is the only economic factor applying to the UK economy. I think you’ll find that the predicted slowdown in a number of European economies is not disconnected from the slowdown, for example, in China”. He saw speaking after signing a trade continuity agreement to guarantee future trading terms between the UK and Switzerland after Brexit. Since the 2016 vote, uncertainty has put a “speed limit” on Britain’s economy, the group writes, with foreign and corporate investment in a slump—though a softer Brexit could bring some of it back.

Is China Taking the Lead in Social Media?

“Silicon Valley is now looking East,” writes Ashley Galina Dudarenok in the South China Morning Post, as Mark Zuckerberg seems to want Facebook to mimic Chinese social-media giant WeChat by shifting focus to messaging and privacy. It’s the first time a Silicon Valley tycoon has publicly mused that “a Chinese digital ecosystem is worth learning from and emulating,” Dudarenok writes. WeChat dominates social media in China the way Facebook does in the US, and its multifunctionality—it allows users to shop and make payments—has turned heads. It’s part of a larger trend, Dudarenok writes, expecting China to export more tech advancements to the West. Called Weixin in China, it dominates the country’s social media. Its interface is in Chinese and it can only be downloaded from within the country with a China-based phone number. It has far more functions and abilities than the international version. It can be used to shop, request a taxi, order food, buy air tickets, check in for your flight, book a medical appointment, pay utility bills and even file an application for a divorce in some cities. No one ever needs to leave the app. When one looks at statements that Zuckerberg has made and the initiatives the company has championed, it seems that one goal he’s had for Facebook is for it to be a smaller, more manageable version of the internet that people don’t leave … just like WeChat is now in China. In some ways, Facebook has succeeded. However, there’s been pushback over the years, especially against its Free Basics initiative, which offered free internet access in developing countries but only to a few sites, Facebook being one of them. Within China, WeChat has been able to achieve this not by restricting access (with the exception of competitors such as Alibaba and sites already blocked by the Chinese government) but by creating more pathways. It hasn’t created a smaller internet, but a more connected one, available in one place, centred on personal needs and daily use. China’s digital progress can also be seen in the app TikTok .The short video app is a leading platform in Asia, the US and the rest of the world. It has hit 500 million global monthly active users and was the most downloaded non-game app in the Apple Store in the first quarter of 2018. Two weeks ago, Google unveiled its cloud gaming platform, Stadia, joining Microsoft and Tencent in the gaming space. Silicon Valley is now looking east. And so is Berkshire Hathaway. At the company’s annual shareholders’ meeting in May 2018, Charlie Munger mentioned WeChat as the potential cloud on the horizon for credit card companies such as American Express. For many years, globalisation has meant the global adoption of Western ways. Now it’s obvious that China is taking a leading role and repositioning itself on the world stage. According to a McKinsey report, a large part of China’s outbound investment focuses on manufacturing, AI and the internet of things. In the past decade, China’s internet giants have built their own AI labs and invested aggressively in AI companies around the world. China’s relentless focus and investment in data has paid off. With more people than anywhere else in the world and a gigantic trove of data, it has enormous advantages in this area and is using them to supercharge research and development, as well as industrial and medical solutions. The Chinese government is continuing progress on its “Belt and Road Initiative”, building infrastructure, investing in multiple countries and organisations, and racing ahead in 5G technology. Huawei, which claims to have the world’s fastest 5G commercial solutions, will deploy an ultra-fast 5G telecom network in a Shanghai railway station in a world first. Born in China but going global – is this the next trend?

India Is Awash in Fake News

Ahead of its upcoming elections, India is facing “information wars of an unprecedented nature and scale,” write Snigdha Poonam and Samarth Bansal in The Atlantic, as disinformation is running rampant on services like Facebook and WhatsApp, as well as smaller platforms. The message was posted to dozens of WhatsApp groups that appeared to promote Prime Minister Narendra Modi’s governing Bharatiya Janata Party, and seemed aimed at painting the BJP’s main national challenger as being soft on militancy in Kashmir, which remains contested between India and Pakistan, just as the two countries seemed to be on the brink of war. The claim, however, was fake. No member of Congress, at either a national or a state level, had made any such statement. Yet delivered in the run-up to the election, and having spread with remarkable speed, that message offered a window into a worsening problem here. raditional media continue to be the dominant source of information for Indians. Among those aged 15 to 34, 57 percent watch TV news a few days a week, 53 percent read newspapers at the same frequency, and about 18 percent consume their news on the internet, according to a 2016 study by the Centre for the Study of Developing Societies, a think tank based in New Delhi. But social media is playing a growing role. As many as 230 million Indians use WhatsApp, making the country the messaging platform’s biggest market. One-sixth of them are members of chat groups started by political parties, according to another CSDS study. These groups, ostensibly used to organize rallies, recruit volunteers, or disseminate campaign news, are capped at 256 members. In 2018, “horrified by terrible acts of violence,” WhatsApp limited the number of people that messages could be forwarded to in India from 256 users to five, and made it harder to forward images, audio clips, and videos. (Some of these restrictions have since been rolled out worldwide.) Many political groups use WhatsApp to distribute pure propaganda. Consider the description of BJP Cyber Army 400+, a WhatsApp group whose five administrators include Amit Malviya, the head of the BJP’s information-technology division: “This Group is Nationalists Group With Hindu Warriors Working To Save Nation From Break India forces Led politically by congress, communist And religiously by Islam and Christianity [sic].” Modi has campaigned on promoting good governance, but Hindu-Muslim polarization is also central to the BJP’s election strategy. The party’s messaging aims to consolidate the support of Hindus, who make up 80 percent of India’s electorate, by presenting opposition parties as pro-Muslim. For example, in the southern state of Telangana, several pro-BJP groups picked parts of Congress’s manifesto that promised government benefits to Muslims, such as free electricity to mosques and scholarships for Muslim students, and presented them as the party’s exclusive offerings. Such efforts are widespread. Based on research published in the Hindustan Times, eight of the 10 most shared misleading images in pro-BJP WhatsApp groups ahead of last year’s state elections were about the Telangana manifesto, and the claims that Congress favored only Muslims. Though other parties use similar tactics, the BJP has built the largest social-media system. Malviya, who did not respond to requests for comment for this story, has said that about 1.2 million volunteers will help run the party’s social-media campaign for the national elections. In Uttar Pradesh, India’s most populous state, the BJP’s IT department has a six-tier hierarchical structure covering the capital city of Lucknow down to the most remote village. At what is known as the booth level, the last point of contact with voters, each party worker has been directed to create a WhatsApp group with at least 50 users, Brajesh Mani Mishra, the 39-year-old in charge of the party’s media and IT division in Gorakhpur, in Uttar Pradesh, told us.The strategy extends beyond WhatsApp. Another BJP staffer in Gorakhpur, Nitin Sonkar, told us how he was charged with, among other things, promoting downloads of Modi’s own smartphone app, known as NaMo. The app—which came preloaded in free Android phones distributed by at least two BJP-led state governments and in low-cost phones sold by Reliance Jio, a domestic cellphone operator—has been installed by more than 10 million people. It is used to promote the prime minister, and has a built-in social network with Twitter-like features. But it, too, is vulnerable to misinformation. Some of the falsities are being spread “by political parties with nationwide cyberarmies,” and platforms’ efforts to clamp down aren’t working—two disconcerting trends, as democracies figure out what to do about fake news worldwide.

Fareed’s MHI