Coal exports in the north-west

Dirty war

A rancorous scrap over plans to send American coal to Asia

MITT ROMNEYS charge that America had declared war on coal may not have won him last years presidential election. Yet this once-mighty industry is struggling, squeezed by the plummeting cost of natural gas and a torrent of tough new environmental rules. Last year 37.4% of American electricity production came from coal, down from 48.5% in 2007. The Energy Information Administration expects a slight rise this year as gas prices begin to creep up. But further restrictions on power-station emissions are expected, and the shale revolution is marching on. If coal has a future, it is surely elsewhere. For many, that means Asia. Demand for coal imports is growing in post-Fukushima Japan, as it decreases its reliance on nuclear power; in India, where domestic supplies cannot keep up with the growing economy; and, most tantalisingly, in China, which burns almost half the worlds coal, and which became a net importer of the stuff in 2009. Such facts make mouths water in the Powder River Basin, straddling Wyoming and Montana (see map), where more than 40% of Americas coal is mined. Some already makes its way to Asia, mainly via Canadian ports. But exporters want to build four new terminals on the western shores of the United Statestwo apiece in Oregon and Washingtonto send up to 130m tonnes more a year. The largest, the 1,500-acre (600hectare) Gateway Pacific Terminal near Bellingham in northern Washington, would handle up to 48m tonnes of coal a year, as well as up to 6m tonnes of other dry bulk, such as grain. Energy wars in Americas West are nothing new. But the rancour aroused by the coalexport proposal has become as toxic as a four-chimney belcher. Coal states accuse coastal ones of high-minded NIMBYism. Campaigners say corporations have a primeval attitude to the environment. Cities and counties lock horns over jobs and trade. Everyone accuses everyone else of bad faith, basic innumeracy and, in some cases, black ops. Local objections focus on the trains that would carry coal to the Gateway Pacific Terminal. At capacity, 18 trains a day would run to and from the facility: nine bearing coal and nine returning empty to the mines. BNSF Railway, one of the projects backers,

says little new rail infrastructure would be needed, as traffic remains below its 2006 peak. Sceptics doubt that, and say the bill will be dumped on taxpayers. Even without new tracks there is plenty to object to. The coal trains would rattle through central Seattle (the empties could return via other tracks, says BNSF), potentially gumming up roads already groaning with congestion. I dont want this terminal built, says Mike McGinn, the mayor. In Bellingham, a group called Whatcom Docs (named for the surrounding county) worries about trains spewing diesel particulates. Others fret about coal dust flying off the trains; the Sierra Club, an environmental NGO, is threatening to sue BNSF for polluting Washingtons waterways. Press the naysayers, though, and you find deeper concerns. Shipping coal to Asia is about as innovative as a tree stump, says Reuven Carlyle, a Washington legislator who thinks the states future lies in emulating the high-tech achievements of Amazon and Boeing. The terminals main local foes call themselves Power Past Coal. Shovelling millions of tonnes of the stuff to China every year, say campaigners, will lower prices and encourage it to prolong its reliance on the filthy fuel. Yet Richard Morse of Supercritical Capital, an energy consultancy, argues you would have to model the energy sectors of at least 15 countries to know whether fresh coal exports would increase global carbon emissions. The focus on China is myopic, he says, but even there it is hard to contend that new imports would affect energy policy. For one thing, Chinas domestic coal market is so big that a modest decline in import prices would be unlikely to make much difference at the margin. For another, Chinas energy strategy is not particularly price-sensitive. The Chinese are trying everything they can to get off coal, says Mr Morse. But the rate at which they can do so is maxed out. The lights must stay on in Shanghai and Shenzhen. Closer to home, Bellingham desperately needs the good union jobs that SSA Marine, the terminal operator, would provide, says Mark Lowry, a local union rep who professes no love for coal. SSA says the terminal would provide up to 4,430 direct and indirect jobs during building and 1,250 after that (opponents say these numbers are puny, and dispute them). SSA Marine employees will earn about $100,000 a year, far higher than the local average. But the terminal must first survive an extensive environmental review, conducted by a federal agency and local officials. Like everything else, its scope has been hotly contested. The governors of Oregon and Washington have urged the federal government to look at the global climate implications. Construction will not begin until 2016 at the earliest. More or less the only thing the two sides can agree on is that the row will continue until then.

The Boston bombings

THE strangest commentary produced by the news that the Boston terrorists seem to have been a pair of Chechen brothers from Dagestan has been speculation that this could mean trouble for immigration reform. The initial speculation earlier this week, before the bombers' identities were known, involved comparisons to 2001, when the Bush administration's immigration-reform plans were put on hold after the September 11th attacks. Since last night's news, some anti-immigration conservative media figures have begun sending out feelers. This morning in congress, Charles Grassley, a Republican senator, said the events underlined the need to ensure that "those who would do us harm do not receive benefits under the immigration laws." Immigration reform is basically about two problems. One is how to give some kind of legal status to the estimated 11m undocumented foreigners currently living in America, most of them Hispanic. The other is how to smooth the tangled, restrictive visa system that currently prevents American businesses from hiring foreigners they'd like to recruit, as well as creating absurd travel complications for many Americans with non-citizen spouses and relatives. In discussions of these problems, possible terrorism by legal American residents born in Dagestan is not usually considered a major factor. For Marco Rubio, the Republican senator who has been trying to craft a bipartisan immigrationreform bill, the idea that a goofball lone-wolf terrorist attack by a frustrated Chechen boxer and his younger brother could torpedo his efforts must sound bizarre. And yet it's not entirely impossible, for two reasons. The first is that there is no plausible foreign-policy response to this terrorist event. The September 11th attacks, and the few subsequent instances of deadly terrorism in America, launched political contests over foreign-policy and security issues: military action in Afghanistan and Iraq, massive expansions of homeland security and surveillance. Today, the hot conflict in the Middle East is a civil war in Syria that has little appeal to Americans on either right or left, and no plausible connection to the violence in Boston, even on the sub-rational emotive level where politics often takes place. So anyone trying to exploit the bombings for political advantage is limited to domestic initiatives. The second reason is that, rationally or not, terrorism involving foreigners in America has always been linked to immigration politics. The first push to restrict immigration in the 20th century got started after anarchist Leon Czolgosz assassinated President William McKinley; he wasn't even an immigrant himself, his parents were, but it was enough to prompt Teddy Roosevelt to ask congress to bar "the coming to this country of anarchists or persons professing principles hostile to all government". The resulting Anarchist Exclusion Act of 1903, and the Immigration Act of 1918 which expanded its authority,

didn't end up actually kicking out more than a few dozen people. And the 1924 Immigration Act, which really did lead to a drastic cutback in immigration, was based on quotas by race and country of origin rather than ideology. But the political discourse supporting immigration restrictions has always leaned heavily on supposed threats of violence, both criminal and ideological. A couple of immigrant ideological terrorists, running around Massachusetts killing peoplethe last time the media got hold of a story like this, Sacco and Vanzetti (pictured) were sentenced to death, and four years later immigration to America was cut to a trickle. Sacco and Vanzetti were probably innocent; that seems much less likely to be true of today's suspects. On the other hand, Sacco and Vanzetti were more iconically appropriate to the anti-immigrant sentiment of the time. There was a lot of immigration from Italy in 1920, and the Italian anarchism of Galleani was a modestly significant current in radical left-wing agitation. With the brothers from Dagestan the iconography is all off-kilter. The ethnicity is tiny, and has nothing to do with the main thrust of immigration into the US today. The clumsy nature of the attacks makes them seem less threatening than pitiful. Immigration foes will have to stretch pretty hard to try to turn the Boston bombings into an argument against immigration reform. But that doesn't mean they won't try.

The Boston bombings

Still searching for answers

OVER the next few days, a clearer picture is likely to emerge of the motivations and possible connections of the two Tsarnaev brothers. Given that Dzhokhar, the younger of the brothers who was apprehended on Friday night, is in a serious rather than a critical condition, he may well face some interrogation quite soon and it is quite possible that he will want to talk about what drove him and Tamerlan to terrorism. But for now, all we have is guesswork based on their background, an initial trawl through their social media footprint and press interviews with relatives, friends and acquaintances. It seems probable that there was some vaguely jihadist motivation behind their actions. Although neither brother appeared to be especially religious, Tamerlan apparently became more so in recent years, asking his middle-class, Christian American wife to convert. Tamerlan also seems to have become more alienated from his adopted society. While Dzhokhar was socially quite gregarious and was doing well academically, Tamerlan, although a talented boxer, drifted and complained of having no real friends and not understanding Americans. Inevitably, their Russian Caucasus background and the close proximity of their birthplace to Chechnya, with its traumatic post-Soviet history of violence and terrorism, make possible some connection to the cause of Chechen

independence. However, Chechen terrorism has been focused on their Russian oppressors and it is hard to see how attacking runners in the Boston Marathon in any way fits that pattern. It is just as likely that Tamerlan, turning more to religion and becoming more hostile towards American society generally, self-radicalised on the internet where there is a multitude of jihadist websites providing both inspiration and practical instruction in bombbuilding and other terrorist techniques (the pressure-cooker bombs used in Boston were of a design frequently used by jihadists in Afghanistan, Iraq and elsewhere). Whether he received any further help from al-Qaeda operatives or their ilk is not apparent yet, nor whether he might have left America to receive any more direct training. If so, that will soon emerge, but for now it seems unlikely, as is the possibility of anyone else running the two brothers. The chances are that the radicalised and disgruntled brother drew Dzhokhar into a world of virtual jihadism and revenge fantasies, pushing him into becoming an accomplice. It is impossible to say at present on what spectrum between, say, Lee Boyd Malvo (the younger apprentice of John Allen Muhammad, the Washington sniper) and Faisal Shahzad (the Pakistani-American who tried to bomb Times Square) Tamerlan and Dzhokhar should be placed or whether they should be seen as domestic or international terrorists (or some combination of the two). What can be said with greater confidence is that there will be more such attacks from disaffected individuals: identifying them and stopping them before they strike is almost impossible without maintaining levels of security that would be intolerable in a free society. The best hope is that society is resilient in the face of such threats and that eventually such acts simply go out of fashion.

Another deadly earthquake in Sichuan

Shaken again

AFTERSHOCKS, landslides, and shortages of relief supplies are hampering rescue efforts in Chinas south-western Sichuan province two days after Saturdays strong earthquake, which killed at least 186 people and injured thousands. State television showed vivid images of rescuers working franticallysome with heavy equipment and others with bare handsin the stricken area. Most of the damage was centred on Yaan, a city of 1.5m located 140km (90 miles) south-west of Sichuans provincial capital, Chengdu. The earthquake was of magnitude 7.0, according to Chinese seismology officials, and struck just after 8am Saturday local time. The United States Geological Survey

measured its magnitude at 6.6. Its epicentre was just 85 km away from that of a May 2008 earthquake that had a magnitude of 7.9 and a death toll ranging from 70,00090,000 according to different estimates. The official Xinhua news agency said that within 38 hours of the main tremor, more than 1,700 aftershocks had struck the area, posing additional threats to damaged structures and to rescue workers. A main road was reported cleared by Sunday evening, restoring access to affected areas that had been cut off from aid. Occurring in nearly the same place and at nearly the same time of year, Saturdays earthquake triggered inevitable comparisons to the 2008 disaster. It has also evoked a similar official response. Like his predecessor in 2008, Chinas new prime minister, Li Keqiang, promptly visited the disaster area. "The current most urgent issue is grasping the first 24 hours after the quake's occurrence, the golden time for saving lives, to take scientific rescue measures and save peoples' lives," Mr Li reportedly said on his plane en route to the area. Officials say that in addition to food and water, they have distributed tens of thousands of tents, beds and quilts. As in 2008, ordinary citizens have contributed their own efforts to the relief work. State television and foreign media reports say many have been going on their own into the disaster area to donate supplies. Google, an American internet company, has also provided help, in the form of an online person finder tool where people can either seek or provide information about people in the area. The company says it is already tracking about 1,100 records. An important and controversial element of the aftermath to the 2008 earthquake was the large number of children killed in collapsed school buildings. Parents and activists complained bitterly that corruption was to blame for the fact that school buildings were among the most shoddily built and quick to crumble. Within a year of the 2008 earthquake, officials acknowledged that 5,335 students had been killed or gone missing. Activists claim to have documented thousands of additional cases. There has yet been little reporting from the Yaan disaster area about how schools fared in comparison to other buildings. But such reporting is certain to emerge soon, and certain to attract a lot of attention.
Clean, safe and it drives itself

SOME inventions, like some species, seem to make periodic leaps in progress. The car is one of them. Twenty-five years elapsed between Karl Benz beginning small-scale production of his original Motorwagen and the breakthrough, by Henry Ford and his engineers in 1913, that turned the car into the ubiquitous, mass-market item that has defined the modern urban landscape. By putting production of the Model T on moving assembly lines set into the floor of his factory in Detroit, Ford drastically cut the time needed to build it, and hence its cost. Thus began a revolution in personal mobility. Almost a billion cars now roll along the worlds highways. Today the car seems poised for another burst of evolution. One way in which it is changing relates to its emissions. As emerging markets grow richer, legions of new consumers are clamouring for their first set of wheels. For the whole world to catch up with American levels of car ownership, the global fleet would have to quadruple. Even a fraction of that growth would present fearsome challenges, from congestion and the price of fuel to pollution and global warming. Yet, as our special report this week argues, stricter regulations and smarter technology are making cars cleaner, more fuel-efficient and safer than ever before. China, its cities choked in smog, is following Europe in imposing curbs on emissions of noxious nitrogen oxides and fine soot particles. Regulators in most big car markets are demanding deep cuts in the carbon dioxide emitted from car exhausts. And carmakers are being remarkably inventive in finding ways to comply. Granted, battery-powered cars have disappointed. They remain expensive, lack range and are sometimes dirtier than they lookfor example, if they run on electricity from coal-fired power stations. But car companies are investing heavily in other clean technologies. Future motorists will have a widening choice of super-efficient petrol and diesel cars, hybrids (which switch between batteries and an internal-combustion engine) and models that run on natural gas or hydrogen. As for the purely electric car, its time will doubtless come. Towards the driverless, near-crashless car Meanwhile, a variety of driver assistance technologies are appearing on new cars, which will not only take a lot of the stress out of driving in traffic but also prevent many accidents. More and more new cars can reverse-park, read traffic signs, maintain a safe distance in steady traffic and brake automatically to avoid crashes. Some carmakers are promising technology that detects pedestrians and cyclists, again overruling the driver and stopping the vehicle before it hits them. A number of firms, including Google, are busy trying to take driver assistance to its logical conclusion by creating cars that drive

themselves to a chosen destination without a human at the controls. This is where it gets exciting. Sergey Brin, a co-founder of Google, predicts that driverless cars will be ready for sale to customers within five years. That may be optimistic, but the prototypes that Google already uses to ferry its staff (and a recent visitor from The Economist) along Californian freeways are impressive. Google is seeking to offer the world a driverless car built from scratch, but it is more likely to evolve, and be accepted by drivers, in stages. As sensors and assisted-driving software demonstrate their ability to cut accidents, regulators will move to make them compulsory for all new cars. Insurers are already pressing motorists to accept black boxes that measure how carefully they drive: these will provide a mass of data which is likely to show that putting the car on autopilot is often safer than driving it. Computers never drive drunk or while texting. If and when cars go completely driverlessfor those who want thisthe benefits will be enormous. Google gave a taste by putting a blind man in a prototype and filming him being driven off to buy takeaway tacos. Huge numbers of elderly and disabled people could regain their personal mobility. The young will not have to pay crippling motor insurance, because their reckless hands and feet will no longer touch the wheel or the accelerator. The colossal toll of deaths and injuries from road accidents1.2m killed a year worldwide, and 2m hospital visits a year in America aloneshould tumble down, along with the costs to health systems and insurers. Driverless cars should also ease congestion and save fuel. Computers brake faster than humans. And they can sense when cars ahead of them are braking. So driverless cars will be able to drive much closer to each other than humans safely can. On motorways they could form fuel-efficient road trains, gliding along in the slipstream of the vehicle in front. People who commute by car will gain hours each day to work, rest or read a newspaper. Roadblocks ahead Some carmakers think this vision of the future is (as Henry Ford once said of history) bunk. People will be too terrified to hurtle down the motorway in a vehicle they do not control: computers crash, dont they? Carmakers whose self -driving technology is implicated in accidents might face ruinously expensive lawsuits, and be put off continuing to develop it. Yet many people already travel, unwittingly, on planes and trains that no longer need human drivers. As with those technologies, the shift towards driverless cars is taking

place gradually. The cars software will learn the tricks that humans use to avoid hazards: for example, braking when a ball bounces into the road, because a child may be chasing it. Googles self-driving cars have already clocked up over 700,000km, more than many humans ever drive; and everything they learn will become available to every other car using the software. As for the liability issue, the law should be changed to make sure that when cases arise, the courts take into account the overall safety benefits of selfdriving technology. If the notion that the driverless car is round the corner sounds far-fetched, remember that TV and heavier-than-air flying machines once did, too. One day people may wonder why earlier generations ever entrusted machines as dangerous as cars to operators as fallible as humans.

The future of cars

Gloom and boom

The motor industrys fortunes are increasingly divided, says Peter Collins. But in the right markets and with the right technologies, they look surprisingly bright
A HUNDRED YEARS ago Henry Ford and his engineers perfected an idea whose time had come: the moving assembly line. By putting the car on a conveyor belt, they cut the time taken to assemble a Ford Model T from 12 hours and 30 minutes in 1913 to just one hour and 33 minutes the following year. That made the car a lot cheaper to build and opened up a mass market for it. By 1918 its list price was down to $450, or just over 5 months pay for the average American worker, against the equivalent of about a year and a halfs pay when the car was launched a decade earlier. Cars became a personal badge of status, and in time carmaking became a badge of national virility. But since the 1950s the automobile has come to be seen as dangerous, dirty and noisy. In response it has been ever more strictly regulated, which has imposed additional costs. After the financial crisis the entire industry slumped spectacularly in many rich countries. Two of Americas big three carmakers, Chrysler and General Motors, went bankrupt and had to be bailed out by taxpayers. In Europe car sales last year were the lowest since 1995. The battery-driven cars that were supposed to solve the pollution problem have so far been an expensive flop. The motor industry seems to be in dire straits. Yet this special report sees plenty to be optimistic about. Sales in Japan remain stagnant and in Europe they are unlikely to grow much in the next few years, but in America they are already beginning to bounce back, and in China and other emerging markets the current boom looks likely to continue for the foreseeable future. AlixPartners, a consultancy, forecasts that the worldwide market for cars and other light vehicles will expand from about 80m units a year now to 107m in 2020 (see chart 1). In China, now the worlds biggest market for cars, annual sales are expected to rise from 19m last year to 31m in 2020 as car ownership spreads to the countrys vast interior. So over the next seven years a Europe-sized market will grow up in Chinas hinterland. Over the past decade tens of millions of Chinese families have gained personal mobility on an undreamt-of scale while lots of new jobs have been created making, selling and servicing cars in China. But the Chinese government seems less concerned about that than about its failure to create strong national champions capable of taking on the foreign carmakers on their own turf. In future it may try harder to achieve this aim, which

could deter foreign firms from continuing to invest in the country. A wiser course would be to acceptas Britain, and more recently Russia, have already donethat as long as the business is thriving and generating lots of well-paid work, the nationality of a car factorys owners and the badges on the bonnets hardly matter. As ever more consumers in China and other emerging markets have the money to buy fancier cars, makers of upmarket and high-performance vehicles will benefit. Massmarket carmakers will have a harder time: too many factories are being built, especially in big emerging markets, which will lead to intense competition and price-cutting. As the biggest, most efficient manufacturerssuch as Volkswagen and Toyotapull ahead, those in the second division may seek salvation in alliances. Consumer heaven As an investment, then, the motor industry has to be treated with caution. But its engineering and environmental credentials are improving all the time. A century after becoming a mass-market product, the car is still a long way from being a mature technology. Manufacturers and their suppliers are investing huge sums in a variety of improved propulsion systems and in new lightweight materials to meet regulators emissions targets. The current generation of models is already vastly cleaner than earlier ones, and emissions of carbon dioxide, nitrogen oxides, soot and other pollutants are set to fall much further. The smog that began to afflict traffic-choked California in the 1950s and is now obscuring the sky in Chinese cities will gradually clear. The day may come when environmentalists stop worrying so much about cars and turn their attention to other polluters. Consumers will be in heaven. Improved manufacturing systems will allow the bigger carmakers to offer an ever wider range of models, supplemented by a steady stream of niche products from new entrants. Fierce competition will keep prices down even as cars are packed with ever more technology that will make them more expensive to produce. More of them will drive themselves, park themselves and avoid collisions automatically. That should cut down on accidents and traffic jams, reduce the stress associated with driving and provide personal mobility for the growing ranks of the elderly and disabled. All the technology that will go into making cars cleaner will also make them far more fuelefficient and more economical. For motorists with short, predictable daily drives, allelectric cars may prove adequate and, as batteries improve, increasingly cost-effective. Others will be able to pick from a range of propulsion systems, including hybrid, natural gas and hydrogen as well as improved petrol or diesel engines, to suit their needs.

Manufacturers are hoping that all this technology will help counteract a worrying trend they are beginning to observe in rich countries: that car ownership is becoming unfashionable. In cities car-sharing and short-term hiring is becoming more popular. Young urbanites are getting their driving licences later, but the numbers of drivers at the other end of the age spectrum is growing, which may compensate for that loss. Best of all, in emerging markets there is enough pent-up demand to keep the industry growing for many decades yet. But which makers, in which countries, will reap the benefits?

Luxury cars
Dreams on wheels

Why everyone wants to be in the top end of the market

BRITAINS ECONOMY MAY be heading for a triple dip, but for posh British cars the recession has long been over. Sales of Jaguar Land Rover (JLR) last year were 30% up on the previous year. Over the past two years JLR has taken on 9,000 people, and has just decided to near-double the size of the engine factory it is building in the West Midlands. Rolls-Royce, which sold a record 3,575 of its ultra-luxury cars last year, is on a roll too. At the Geneva motor show it unveiled the new Wraith, a coup for playboys with at least 245,000 ($320,000) to spare who want to leave the chauffeur at home and do the driving themselves. Bentley, which launched a new Flying Spur limousine at the Geneva motor show, enjoyed sales growth of 24% last year. These days JLR is owned by Indias Tata Group, Rolls-Royce by BMW and Bentley by Volkswagen, but the cars appeal still relies on their quintessential Britishness. Similarly, the success of BMW, Mercedes and Audi cars rests on their German styling and precision engineering, both in rich countries and among the new wealthy of the emerging world. The contrast between the luxury end and the mass-market part of the European car business is striking. BMW has recently been making operating profits of about 4,000 ($5,200) on each car it sells whereas Opel-Vauxhall, the European arm of GM, has been losing about 1,500 per car. And the global boom in premium -priced cars looks likely to continue. One thing is for sure, says Rolls-Royces boss, Torsten Mller-tvs. You

will see more rich people in the world. The group of ultra-high net worth individuals from which his customers are drawn is expected to grow by 3-5% a year in the years ahead. And in East Asia, where sales are growing fastest, it is more acceptable expected, evento underline your success in life by conspicuous consumption. In a recent study of motor-industry executives from around the world by KPMG, those from rich countries said customers were scaling down to smaller, more efficient and greener models, whereas those from the BRIC countries reported that buyers wanted upmarket models. Even those who could not currently afford these seemed to be looking forward to the day when they would. Tatas super-cheap Nano has not sold well because Indias first-time car buyers would rather wait than drive what they see as a poor mans car. The feelgood factor A survey by McKinsey of Chinese consumers found that after an initial burst of if youve got it, flaunt it, motives for buying foreign luxury brands were becoming more subtle. Some respondents saw having the right car as a visiting card with which to impress potential business partners. Many considered a fancy car a delightful self-indulgence rather than something to show off to others. Mr Mller-tvs sees the same trend among Rolls-Royce buyers: they are less interested in exterior bling, more in interior comforts, like having the fur inside your coat. In China the market for luxury cars in the past decade has grown by an average of 36% a year, far outstripping the 26% annual rise in its overall car market. Even as growth slows down in the next few years, McKinsey expects the premium-car market to maintain a lead, expanding by an average of 12% a year to 2020, compared with around 8% for the car market as a whole. By then China will be the biggest market for luxury cars. Nor is it just Chinese buyers who are keen on status symbols on wheels. JLRs sales chief, Phil Popham, says his company expects the global market for premium cars to increase by up to 45% over the next ten years. JLR is looking beyond the BRICs into the MIST: populous countries such as Mexico, Indonesia, South Korea and Turkey, whose middle classes are also expanding. Its cars, especially its Range Rover sport-utility vehicle, have joined the elite group of Veblen goods, the sort that become more desirable as they get more expensive (named after Thorstein Veblen, a sociologist who invented the concept in 1899). The first incarnation of the Range Rover in the 1970s was a rugged, utilitarian beast ideal for farmers. The latest version, with its sleek styling, plush interiors, high-tech aluminium frame and impressive performance, caters to a different kind of customer. Prices range from 71,000 ($109,000) to well over 100,000.

One of Rolls-Royces stories is that three-quarters of the cars the company has ever produced are still on the road
The key to success in the luxury market, explains Mr Mller-tvs, is that customers want to be able to tell their friends, family and business associates some good stories about what they have bought. For a brand as steeped in history as Rolls-Royce, that is no problem. One of its stories is that three-quarters of the cars the company has ever produced are still on the road: It is a smart investment, he says. McLaren, a successful British maker of sports cars, is drawing on its heritage as a Formula 1 racing team. Teslas Model S glories in being an advanced car made by a Silicon Valley start -up created by a tech billionaire. This lucrative market is hard to get into. Even Mercedes recently failed in its attempt to revive Maybach, a pre-war ultra-luxury brand. It took VWs Audi three decades of steady improvements and skilful marketing to reach its current level of desirability. Japans three biggest carmakers have put a lot of effort into creating premium brands of their own Toyota with Lexus, Nissan with Infiniti and Honda with Acurabut have yet to catch up with Europes most prestigious marques. KPMGs Mr Leech thinks they may do well with those Asian consumers on whom the finer points of German or British styling are lost, but McKinseys Mr Kaas is not so sure. Chinese consumers are developing Western tastes, he says, and value the long history and brand cachet of European luxury marques. Some of Europes struggling volume carmakers, such as Peugeot and Opel, are trying to move upmarket too in order to get back into the black. Russias president, Vladimir Putin, is calling for a revival of Soviet-era luxury brands such as Zil and Chaika. Chinas new carmaker, Qoros, may also be aiming to establish itself as a premium brand. Mr Kaas says they all need to hurry up. Although brand loyalty in emerging markets is less strong than in the West, tastes are maturing and new luxury brands will find it ever harder to grab a share of the cake.

Start-ups in Brazil
Samba in the valley

A cluster forms in Brazils third city

THE world is littered with would-be Silicon Valleys with catchy monikers, from Chilecon Valley (Santiago) to Silicon Wadi (Tel Aviv). Now Belo Horizonte, Brazils third-biggest city, wants to join the list. Dubbed San Pedro Valley in 2011 by a group of start-ups that formed a chance cluster in its So Pedro district, it is now home to nearly 50 young

tech firms. (They switched the Portuguese So to the Spanish San for a cosmopolitan touch.) The group now holds regular meetings and hack days, and two years ago set up a national association of start-ups. Gustavo Caetano, its president, acts as a mentor to many of San Pedros budding entrepreneursand an inspiration. His firm, Samba Tech, set up in Belo Horizonte in 2004, now has offices in So Paulo, Buenos Aires and Miami, and sells its online-video platform across Latin America. That Belo Horizonte could pip bigger and richer So Paulo and Rio de Janeiro to the title of Brazils Silicon Valley may seem a stretch. But a big new middle class, fast-changing tastes and Brazilians voracious appetite for social media provide plenty of opportunities to challenge incumbents. Facebook overtook a local social-media site, Orkut, in Brazil in late 2011. It is now four times as popular. Only America has more tweeters than Brazil. A recent survey by Rakuten, a Japanese e-commerce firm, found that Brazilians are some of the worlds keenest social shoppers, swapping product tips with their friends and other online contacts. By Brazilian standards Belo Horizonte boasts a well-educated workforce. Four of the universities ranked in the top ten nationally by the education ministry are in Minas Gerais, the state of which it is the capital. A lower cost of living helps which is why Mr Caetano moved back from Rio to set up his firm. He stayed for a laid-back lifestyle he describes as West Coast with added cowboy. San Pedro firms that make it will need a sales team in So Paulo one day, he counsels, but their developers need not move. Yuri Gitahy of Aceleradora, a business accelerator (ie, a firm which helps start -ups keep growing), prefers to work with entrepreneurs with experience in big companies, which usually means a spell in So Paulo. If San Pedro Valley takes off, he thinks, more of these will come home to found their firms. The state government plans to tempt them by offering up to 150 start-ups a year around 60,000 reais ($30,000) each, plus mentoring and shared working space. The federal government is also trying to boost Brazils start-up culture. It has budgeted 45m reais to support up to 100 start-ups a year until 2015, chosen by nine business acceleratorsmost in So Paulo and Rio, one in Belo Horizonte. Up to a quarter may be foreign firms. To tap the money they must relocate and employ locals; their bosses will be fast-tracked for visas. Applicants with good ideas in fields where Brazil is already competitive (aeronautics, agribusiness, banking, oil and gas) or particularly needy (health, education, transport) are more likely to be picked.

All Brazilian businesses are burdened with complex and antiquated tax and labour laws. But start-ups suffer most. Although Minas Gerais has trimmed the time it takes to open a firm, only the federal government can make it easier to close one, a matter of at least as much importance for fast-moving tech entrepreneurs. Start-ups often want to reward staff with stock options; but the labour laws were not written with variable remuneration in mind. The taxman often struggles to understand start-ups that earn money by creating a market and then taking a small cut of its turnover; the result may be that tiny firms receive ludicrous tax demands. To negotiate this minefield, start-ups are forced to spend heavily on specialist advice. Samba Tech has fewer than 100 employeesand a dozen lawyers and accountants. All this is a huge disincentive to setting up a business, for which the modest state handouts for start-ups barely begin to compensate.

Ethnic differences in Kyrgyzstan

Stubborn facts on the ground

The struggle is quieter, but the two biggest blocks remain at odds
TWO dozen older Kyrgyzstani men, a mix of ethnic Kyrgyz and Uzbeks, while away a warm Saturday over chess in a central park in Osh. They wear their traditional hats proudlyembroidered skullcaps for the Uzbeks; tall white kalpaks for the Kyrgyzand insist that the countrys two largest groups are getting on just fine. Rioting and pogroms around southern Kyrgyzstan cost more than 400 lives in June 2010. Nearly three years after the war between Kyrgyz and Uzbeks, as locals call it, this ancient city of the Silk Road has rumbled back to life. Most of the 2,000-odd homes and businesses that were burnt out have been repaired. In the famed bazaar across from the park, Kyrgyz and Uzbek traders hawk their vegetables, halal meat and cheap household goods from beyond the mountains in China. In March a UN committee on racial discrimination reiterated the judgment of earlier international reports: Uzbeks were mostly victims of the June 2010 events. It also notes that in the years since the violence Uzbeks have been disproportionately prosecuted and condemned. It recommends that the national government investigate the courts biased attitude and that it review their guilty verdicts.

Time and fatigue have papered over the more jagged gashes in relations between the two ethnic groups. But the old problems that led them to fight each otherfrom unemployment and organised crime to unchecked rumours and the lopsided distribution of justicehave been left to fester. A 24-year-old Uzbek who sells car parts for a living hints at the underlying tensions. His biggest complaint is police harassment. Most of the officers are Kyrgyz, and frictions since the clashes often fall along ethnic lines. To avoid trouble, we dont go out at night without a Kyrgyz. At least he has Kyrgyz friends. He eschews blaming the lot of them; five fingers from one hand are never equal, as he puts it. His plan is to leave for Russia in search of work, as many Kyrgyzstanis do. The number of Uzbek men emigrating is known to have surged after the violence, but the government has not kept statistics on subsequent migrations. Each side of the ethnic divide feels that the justice system has failed it. Many Kyrgyz resent the uniform reproach that has come from abroad. Passions run high at the trials, which have been marred by irregularities and intimidation. This month the Supreme Court heard the case of an Uzbek accused of participating in an especially brutal episode. Aggrieved women assaulted his lawyers inside the court. The judges just watched, says Tatyana Tomina, a defence lawyer who was attacked as she tried to prove that her client was not in Kyrgyzstan at the time of the violence. Later, in the hall, she was punched in the face. Its obvious the court doesnt want to see the evidence, she says. This is a show trial. In March police detained the editor of an Uzbek-language newspaper on murky accusations linked to the violence. His supporters say the charges are bogus. Many Uzbek shops were seized after the spasm of violence. Their owners have given up hope of receiving compensation. As a group, they find officials unsympathetic, or worse. The shakedowns are exhausting. We cant argue, but the Kyrgyz can, says one Uzbek. Leaderless, many of the Uzbeks try to keep a low profile. A minority across Kyrgyzstan, a poor country landlocked between powerful neighbours, Uzbeks are concentrated in the south. Some Kyrgyz fear they could act as a fifth column for Uzbekistan next door, which has five times Kyrgyzstans population and the biggest army in the region. Poor relations between the two countries stoke those fears and disrupt the trade that underwrites many livelihoods in Osh. The programme director of a local, multilingual broadcaster says that nationalist politicians are to blame for fuelling bigotry by insisting, for instance, that Kyrgyz should rapidly supersede Russian as the language of government. The demand inflames angry youths while distracting everyone from more pressing, economic issues.

Nasty identity politics gripped Kyrgyzstan after the bloody summer of 2010. Its virulence has subsided, but the symptoms remain. New monuments around town feature exclusively Kyrgyz themes and heroes. Last summer the mayor unveiled a peace bell to commemorate lives lost in 2010. It was engraved with Peace all over the world in three languagesKyrgyz, Russian and English. Though few residents of Osh know English, nearly half speak Uzbek.