14 Leaders The EconomistJune 1st 2019
2 ble alternative venue for China’s global companies. It now wel-
comes firms with dual-share classes after a rule change in 2018. It
has expanded its role as a conduit through which mainland in-
vestors can buy shares and global investors get access to China.
Last year more money was raised in listings in Hong Kong
($37bn) than on Nasdaq or the New York Stock Exchange.
Hong Kong’s rise has been accompanied by an erosion of
Western hegemony in Asian high finance. A decade ago Chinese
banks were peripheral. Now Wall Street firms are not as essential
as they used to be. Last year seven of the top 20 equity underwrit-
ers in Asia were Chinese. Chinese banks are among the largest
cross-border lenders in Asia. America still controls the dollar-
payments system, but in time that could change, too.With a Hong Kong listing, Alibaba would have another place
to raise capital. It is still expanding fast—sales grew by 51% last
year. New York will continue to thrive as a financial centre, even
if Chinese firms start to shy away. But the bigger message is that,
as the trade war rumbles on, the immensely complex global net-
work of financial and commercial ties is adjusting. Big hardware
firms are tweaking their supply chains. Retailers are shifting
their sourcing so that goods sold in America are not made in Chi-
na. Banks are cutting their exposure to counterparties that could
face American sanctions. And even the world’s most successful
firms, such as Alibaba, feel they need a backup plan. It is a very
different vision from the one Mr Ma stood for when he rang a cer-
emonial bell at the New York Stock Exchange back in 2014. 7J
air bolsonaro, Brazil’s president, was elected last year on a
promise to rid his country of a trio of plagues: economic stag-
nation, corruption and sickening violence. For residents of Rio
de Janeiro, the last of these is most urgent. The number of mur-
ders in Rio state reached 40 per 100,000 in 2017, 14 times the rate
in New York state. The government felt compelled to send in the
army, temporarily, to quell the mayhem. Much of the city and its
favelas are controlled by organised criminals, who are difficult
to prosecute because residents are terrified to testify against
them. Mr Bolsonaro is well aware of this. He was a seven-term
federal congressman for the state of Rio de Janeiro and has deep
personal ties to the city. Yet his prescription for fighting crime in
Rio and places like it is clueless (see Americas section).
Instead of bolstering the institutions of law and order so that
they can restore calm and prosecute gang bosses, Mr Bolsonaro
thinks the way to tackle violence is with more
violence. He has allowed more Brazilians to own
and carry guns, encouraging them to confront
criminals themselves. He also wants to make it
harder to punish police officers who kill sus-
pects. Under one proposal, a judge could sus-
pend a cop’s sentence for homicide if he acted
out of “excusable fear, surprise or intense emo-
tion”. Yet how many cops do not experience “in-
tense emotion” just before shooting someone? Unsurprisingly,
the number of shootings by police has soared. In the first four
months of this year, officers in Rio state shot dead nearly five
people a day. That is more than all the police in the United States
typically kill, while policing a population 19 times larger.
Worse, Mr Bolsonaro has smiled on militias—paramilitary
groups that are often run by current and retired police officers.
These mafia-like organisations now, in effect, control a quarter
of Rio’s metropolitan area and hold sway over a little under a
sixth of its population—some 2m people. They claim to offer
protection from drug gangs, and to provide services to people
who live in the areas they control. In fact, they run their patch
like a medieval estate, extracting money from residents with the
threat of violence. Far from suppressing drug gangs, they have in
some places held auctions where gangs bid for the right to distri-
bute their wares on militia turf.Mr Bolsonaro has done nothing to stop the militias. He has ar-
gued, ludicrously, that they prevent violence. Until last year his
eldest son, Flávio, now a federal senator from Rio, employed the
wife and mother of a fugitive police officer accused of leading a
militia called the “Crime Office”. Two of its members are accused
of the murder of an opposition city councilwoman. Polling sug-
gests most residents fear the militias, perhaps even more than
drug gangs. Politicians, however, find them useful. They share
loot with political patrons, shepherd their supporters into poll-
ing stations and intimidate their opponents.
This should not need spelling out, but if Mr Bolsonaro wants
to reduce crime, he should not allow police officers to run their
own mafia. It is hard to foster respect for the law if cops can gun
people down and run extortion rackets with impunity. It is also
hard to instil in the cops themselves the necessary habits of pa-
tient detective work and the impartial gathering
of evidence if they can close a case simply by
pulling a trigger. Evidence from around the
world shows that crime is lowest when the po-
lice are trusted; when officers come from the ar-
eas where they work, know the people who live
there and are not seen as the enemy.
In the past, Rio had started to do a better job
of curbing gang violence. Before the football
World Cup in 2014, the state government cracked down on re-
venge killings by cops and tried community policing. It also
promised better infrastructure (such as piped water) and better
services (such as schools and youth centres). The death toll de-
clined. But then a fiscal crisis hit, the money dried up and the
campaign to restore the rule of law fizzled. Now Rio has a gover-
nor who urges police to shoot criminals in their “little heads”.Bullets do not solve crimes
Ultimately, making Brazil safe will require an overhaul of its rot-
ten, ineffectual institutions. If the government provided people
with decent public services, taxed them fairly and cracked down
on the corruption which keeps state spending from reaching
them, lawlessness in the favelas would eventually fall. Sadly,
there is little sign that Mr Bolsonaro or his trigger-happy allies
have the patience for such a task. 7Fighting thugs with thugs
You cannot defeat crime by tolerating militiasBrazil’s militias