16 Leaders The Economist December 18th 2021
E
ach yearThe Economistpicks a “countryoftheyear”.The
award goes not to the biggest, the richest or the happiest, but
to the one that in our view improved the most in 2021. Past win
ners have included Uzbekistan (for abolishing slavery), Colom
bia (for making peace) and Tunisia (for embracing democracy).
This year was a difficult one. Covid19 continued to spread
misery, as brilliantly designed vaccines were unevenly distri
buted and new variants such as Omicron emerged. In many
countries civil liberties and democratic norms were eroded.
Russia’s main opposition leader was jailed. Donald Trump’s sup
porters stormed the usCapitol. Civil wars gripped Ethiopia and
Myanmar. Yet amid the gloom, a few countries shone.
In tiny Samoacourts defused a constitutional crisis, tossed
out the ruling party of 33 years and a prime min
ister who claimed to have been chosen by God,
and installed a reformist, the first woman to
hold the job. Moldova, one of the poorest coun
tries in Europe, has long been a sink of Russian
moneylaundering. But in late 2020 it elected
the graftbusting Maia Sandu as president and
in 2021 it gave her party control of parliament.
Zambiareclaimed its democracy. A year ago
the country was corrupt and broke. In August its rulers tried to
rig an election, but Zambians voted for Hakainde Hichilema, a
liberal businessman, by such a wide margin that the rigging
failed. Mr Hichilema has since struck a deal with the imf, prom
ised to cut wasteful subsidies on fuel and electricity, and started
to investigate corruption.
Lithuaniastood up for democratic values, too. If this Baltic
state were a city, it would barely make the top 40 in China by
population. Yet it defied the government in Beijing by letting
Taiwan open a representative office in Vilnius, the Lithuanian
capital. It also advised its citizens to throw away Chinesemade
smartphones, after its spooks found what they called censor
ship software that could be activated without warning.Lithuaniastoodupto other authoritarian regimes as well. It
gave sanctuary to dissidents from nextdoor Belarus and Russia,
including the woman who probably won Belarus’s most recent
election, Svetlana Tikhanovskaya. The despot who stole that
poll, Alexander Lukashenko, tried to take revenge by forcing
crowds of refugees across the Lithuanian border. Lithuania re
sponded firmly, yet more humanely than Poland, which Belarus
also provoked in the same way. China is determined to bully
Lithuania into submission (see China section). A Chinese news
paper mocked its size, likening it with great originality to “a
mouse, or even a flea”. Democrats everywhere admire its pluck.
Even so, it is not our winner.
That honour goes to Italy. Not for the prowess of its football
ers, who won Europe’s big trophy, nor its pop
stars, who won the Eurovision song contest, but
for its politics. The Economisthas often criti
cised Italy for picking leaders, such as Silvio
Berlusconi, who could usefully have followed
the Eurovisionwinning song’s admonition to
“shut up and behave”. Because of weak gover
nance, Italians were poorer in 2019 than they
had been in 2000. Yet this year, Italy changed.
In Mario Draghi, it acquired a competent, internationally re
spected prime minister. For once, a broad majority of its politi
cians buried their differences to back a programme of thorough
going reform that should mean Italy gets the funds to which it is
entitled under the eu’s postpandemic recovery plan. Italy’s co
vid vaccination rate is among the highest in Europe. And after a
difficult 2020, its economy is recovering more speedily than
those of France or Germany. There is a danger that this unaccus
tomed burst of sensible governance could be reversed. Mr
Draghi wants to be president, a more ceremonial job, and may be
succeeded by a less competent prime minister. But it is hard to
deny that the Italy of today is a better place than it was inDecem
ber 2020. For that, it is our country of the year. Auguroni!nWhich country improved the most in 2021?Triumphal honours
Country of the yeartors have opened up access to financial markets—including to
derivatives, which small investors use in huge numbers to gam
ble on rising stocks.
Perhaps investors are sobering up. Already the blankcheque
company craze has ebbed, with lessfrothy prices and a slower
pace of launches. Speculative shares have taken a beating, too:
witness the 40% fall in the value of ark’s flagship exchange
traded fund, which invests in fledgling technology companies.
And yet, despite all this, it is easy to imagine the bull market
powering through 2022 with renewed vigour. One reason is that
riskfree interest rates remain near alltime lows. The yield on a
tenyear inflationprotected Treasury bond is around 1%,
roughly where it started 2021. The negative real returns on bonds
and cash help push investors into riskier assets, such as shares
and privatemarket vehicles, including buyout funds, direct
lending and venture capital (see Finance & economics section).
Perhaps the Fed will raise interest rates dramatically in the com
ing years. But nothing like that is priced into bond markets. A second prop for bulls is the buythedip reflex that has be
come wired into markets. Experience has taught investors to see
a fall in prices as a chance to buy more assets at a better price. In
FebruaryMarch 2020 the s&p500 fell by a third in a matter of
weeks; it then suddenly revived and kept going up. Swift action
by the Fed helped keep finance flowing to companies at the pan
demic’s onset. But in acting this way, it gave extra credence to the
idea that it would always put a floor under asset prices. Spactacular
Big tests lie ahead. It is easy to forget the selloffs in 199899 as
the dotcom bubble inflated. Likewise the coming months may
witness market declines that seem to signal disaster, only for a
revival to boost prices to even more worrying levels. The mar
ket’s performance has its own logic. “Real life is materially in
vaded by the contemplation of the spectacle and ends up absorb
ing it and aligning itself with it,” wrote Debord. Well,quite.How
ever strange things look now, they could get stranger.n