SAVING the world is a thankless task. The only thing beyond dispute in the $700 billion plan of Hank Paulson, the treasury secretary, and Ben Bernanke, chairman of the Federal Reserve, to stem the financial crisis is that everyone can find something in it to dislike. The left accuses it of ripping off taxpayers to save Wall Street, the right damns it as socialism; economists disparage its technicalities, political scientists its sweeping powers. The administration gave ground to Congress, George Bush delivered a televised appeal and Barack Obama and John McCain suspended the presidential campaign. Even so, as The Economist went to press, the differences remained. There was a chance that Congress would say no.

Spending a sum of money that could buy you a war in Iraq should not come easily; and the notion of any bail-out is deeply troubling to any self-respecting capitalist. Against that stand two overriding arguments. First this is a plan that could work (). And, second, the potential costs of producing nothing, or too little too slowly, include a financial collapse and a deep recession spilling across the world: those far outweigh any plausible estimate of the bail-out's cost.

Mr Market goes to Congress

America's financial system has two ailments: it owns a huge amount of toxic securities linked to falling house prices. And it is burdened by losses that leave it short of capital (although the world has capital, not enough has been available to the banks). For over a year, since August 2007, central bankers, principally Mr Bernanke, have been trying to make this toxic debt liquid. But by September 17th, following the bankruptcy of Lehman Brothers and the nationalisation of American International Group earlier that week, the problem started to become one of the system's solvency too. The market lost faith in a strategy that saved finance one institution at a time. The economy is not healing itself. If credit markets stay blocked, consumers and firms will enter a vicious spiral.

Mr Paulson's plan relies on buying vast amounts of toxic securities. The theory is that in any auction a huge buyer like the federal government would end up paying more than today's prices, temporarily depressed by the scarcity of buyers, and still buy the loans cheaply enough to reflect the high chance of a default. That would help recapitalise some banks--which could also set less capital aside against a cleaner balance sheet. And by creating credible, transparent prices, it would at last encourage investors to come in and repair the financial system: this week Warren Buffett and Japan's Mitsubishi-UFJ agreed to buy stakes in Goldman Sachs and Morgan Stanley. Some banks would still not have enough capital, but under Mr Paulson's original plan, the state could put equity in them, or, if they become insolvent, take them over and run them down.

The economics behind this is sound. Government support to the banking system can break the cycle of panic and pessimism that threatens to suck the economy into deep recession. Intervention may help taxpayers, because they are also employees and consumers. Although $700 billion is a lot--about 6% of GDP--some of it will be earned back and it is small compared with the 16% of GDP that banking crises typically swallow and trivial compared with the Depression, when unemployment surged above 20% (compared with 6% now). Messrs Bernanke and Paulson also have done well by acting quickly: it took seven years for Japan's regulators to set up a mechanism to take over large broke banks in the 1990s.

Could the plan be better structured? Some economists want the state to focus on putting equity into the banks--arguing that it is the best way to address their lack of solvency. In theory you would need to spend less, because a dollar of new equity would support $10 in assets. Yet the banks might not take part until they were on the ropes and, if house prices later fell dramatically more, the value of the banks' shares would collapse. The threat of the government taking stakes would scare off some private investors. And in the charged atmosphere after this bail-out meddling politicians, as part-owners, would have a tempting lever over the banks.

Mr Paulson's plan also has its shortcomings. He will find it hard to stop sellers from rigging auctions, if only because no two lots of dodgy securities are exactly the same. Taxpayers may thus pay over the odds and banks may be rewarded for their stupidity. Yet these costs seem small against the benefit of putting a floor under the markets. And fine calculations about moral hazard are less pressing when investors are fleeing risk.

If the economics of Mr Paulson's plan are broadly correct, the politics are fiendish. You are lavishing money on the people who got you into this mess. Sensible intervention cannot even buy long-term relief: the plan cannot stop house prices falling and the bloated financial sector shrinking. Although the economic risk is that the plan fails, the political risk is that the plan succeeds. Voters will scarcely notice a depression that never happened. But even as they lose their houses and their jobs, they will see Wall Street once again making millions.

Buckle a little, but do it briefly

In retrospect, Mr Paulson made his job harder by misreading the politics. His original plan contained no help for homeowners. And he assumed sweeping powers to spend the cash quickly. He was right to want flexibility to buy a range of assets. But flexibility does not exclude accountability. As complaints mounted, Mr Paulson and Mr Bernanke buckled--agreeing, for instance, to more oversight. Now that Messrs McCain and Obama have returned to Congress to forge a deal, more buckling may be necessary. Ideally, concessions should not outlast the crisis: temporary help for people able to stay in their houses, a brief ban on dividends in financial firms, even another fiscal package. They should not be permanent or so onerous that the programme fails for want of participants--which is why proposed limits on pay are a mistake (see 133?article).

Mr Paulson's plan is not perfect. But it is good enough and it is the plan on offer. The prospect of its failure sent credit markets once again veering towards the abyss. Congress should pass it--and soon.

The world this week

Politics this week

South Africa's president, Thabo Mbeki, was forced to resign by the leadership of the ruling African National Congress (ANC). This followed a bitter legal and constitutional struggle with Jacob Zuma, who ousted him as party leader last year. Kgalema Motlanthe, an ANC ally of Mr Zuma, will serve as caretaker president until an election in which Mr Zuma is expected to win the post. Mr Mbeki's deputy and ten ministers also resigned, of whom six said they would not serve in a new government.

Nearly two weeks after a power-sharing agreement was agreed on in Zimbabwe, ministerial posts in a unity government had yet to be allocated. President Robert Mugabe and a large entourage went to New York to attend the annual opening session of the UN's General Assembly.

Heavy fighting resumed in Somalia's capital, Mogadishu, as Islamist fighters attacked African Union peacekeepers. Thousands fled the city; some 50 were killed.

Iraq's parliament passed a long-awaited law providing for provincial elections to be held, probably before the end of January, though they had been due next month. Elections in the disputed city of Kirkuk were to be postponed until a separate agreement could be reached.

Speaking at the UN General Assembly, Iran's president, Mahmoud Ahmadinejad, denounced "Zionist murderers" and said that a small number of "deceitful" Zionists were manipulating the West. "The Zionist regime is definitely sliding towards collapse," he said. America's "world empire" was "reaching the end of its road".

Guns and bombs

Finland's prime minister called for tougher gun controls after a gunman shot and killed nine students and a teacher at a college in the west of the country before killing himself.

Three car bombs exploded in Spain's Basque country. Eleven people were wounded and a Spanish army officer was killed. Subsequently, police in France arrested at least 12 suspected members of the Basque terrorist group, ETA.

In a sign of post-war tensions, Georgia claimed it had shot down a Russian drone over its territory. Earlier a Georgian policeman was shot dead at a checkpoint near Abkhazia, one of its breakaway enclaves.

A former Chechen rebel commander, Ruslan Yamadayev, was shot dead in central Moscow. His younger brother, Sulim, is now a fierce rival of Chechnya's strongman president, Ramzan Kadyrov.

Suffering and innocent

The number of Chinese children admitted to hospital after drinking infant-milk formula tainted with melamine climbed to 13,000. Li Changjiang, the head of China's quality-control watchdog, resigned. Four children in Hong Kong have also been diagnosed with kidney stones after drinking milk from the mainland. Many other countries have started testing Chinese dairy products or taking them off shop shelves.

Suicide-bombers detonated an enormous bomb outside the Marriott Hotel in the centre of Islamabad, Pakistan's capital. It killed 53 people and wounded more than 260. A previously unknown group, Fedayeen Islam, claimed responsibility. A few hours earlier Asif Zardari, Pakistan's new president, made his first speech to parliament. He promised to protect the country's sovereignty, a message he later conveyed to George Bush in New York. Pakistanis have been incensed by recent American raids on militants on their territory.

Among 9,002 prisoners granted amnesties by Myanmar's ruling junta were a handful of political prisoners, including the longest-serving one, Win Tin. But more than 2,000 are believed still to be detained, including Aung San Suu Kyi, the leader of the opposition. Most analysts thought the releases had been timed to influence opinion at the UN General Assembly session in New York.

Taro Aso easily won an election to become leader of Japan's Liberal Democratic Party and was sworn in as prime minister, the country's third new leader in two years. There was speculation that he might call a snap general election, though one does not have to be held until September 2009.

North Korea said it planned to restart its plutonium reprocessing plant at Yongbyon, which it had pledged to dismantle as part of a denuclearisation process agreed with America, China, Japan, Russia and South Korea. UN inspectors were asked to remove seals and surveillance cameras from the plant.

Time to talk

Barack Obama and John McCain were due to meet in Oxford, Mississippi for the first of their three eagerly awaited presidential debates. But Mr McCain appealed for a delay while Congress attempted to tackle the financial crisis. Mr Obama declined one, leading to impasse.

The vice-presidential debate is not until next month, but the Republican nominee, Sarah Palin, has been preparing. She was in New York this week, where she met no fewer than seven world leaders, including Afghanistan's Hamid Karzai.

Residents returned to Galveston, on the Texas coast, and saw for themselves the devastation wreaked by Hurricane Ike. Much of the city's infrastructure, including its port, was badly damaged. Texan politicians asked Congress for $2.2 billion in emergency aid.

Faraway friends

Russian warships set off to Latin America to take part in joint manoeuvres with Venezuela, for the first time since the cold war. Venezuela's president, Hugo Chávez, said Latin America needed a strong friendship with Russia to help reduce the influence of the United States in the region.

President Rafael Correa of Ecuador ordered troops to seize the assets of Odebrecht, a big Brazilian construction company, in a dispute over the country's second-largest dam. Built by Odebrecht, it was forced to shut down just one year after being opened. Ecuador has demanded millions of dollars in compensation.

Officials in Colombia reported that a rebel commander of the FARC guerrillas, wanted for hundreds of murders and kidnappings, had been killed by government forces in a bombing raid near the western province of Choco. Among the deaths attributed to Aicardo de Jesus Agudelo, better known as El Paisa, were those of eight hostages, including a former defence minister, in 2003.

Business this week

America's government unveiled a plan to end the credit crunch by spending up to $700 billion buying troubled assets from financial institutions. Hank Paulson, the treasury secretary, and Ben Bernanke, the chairman of the Federal Reserve, argued that swift and forceful action was needed to stem growing panic about the soundness of the financial system. But many members of Congress, which must approve the plan, complained variously that the government was seizing too much power, letting reckless bankers off too lightly and failing to help struggling homeowners.

The Federal Reserve gave America's last two big investment banks, Goldman Sachs and Morgan Stanley, permission to change their status to bank holding firms. They will be subject to stiffer regulation, but allowed to take deposits. Goldman Sachs raised $5 billion to shore up its capital by selling shares to Berkshire Hathaway, the firm run by Warren Buffett, a celebrated investor. The next day, it raised $5 billion more from a share offering. Mitsubishi-UFJ, Japan's largest bank, agreed to buy up to 20% of Morgan Stanley for $8.4 billion.

Nomura, a Japanese investment bank, offered to buy bits of the European, Middle Eastern and Asian divisions of Lehman Brothers, an American rival that declared itself bankrupt last week, for an undisclosed sum. Barclays, a British bank, bought Lehman's main American unit for $250m, and several of its properties for $1.29 billion.

The Federal Bureau of Investigation said it was looking into 26 cases of potential fraud related to the collapse of America's mortgage industry. The financial institutions under investigation are said to include the now-defunct Lehman Brothers, as well as three failing firms recently taken over by the American government: American International Group, Fannie Mae and Freddie Mac.

In a bid to attract more investment to America's struggling financial sector, the Fed relaxed rules on bank ownership. Private-equity firms will now be allowed to own bigger stakes.

White knuckles

It was another tumultuous week for the world's stockmarkets. They had been tumbling because of Wall Street's woes, but rallied at the news of the Treasury's planned bail-out. Then Congress's obstreperous response to the plan sent them sliding again. Money-market rates, which had been falling, also registered alarm.

Moody's, a rating agency, lowered its outlook for 12 Russian banks, despite a government rescue package worth$120 billion. The state-owned Development Bank said it would take over Svyaz Bank, a struggling private one. Meanwhile a fund controlled by Mikhail Prokhorov, a former mining magnate, agreed to buy half of Renaissance Capital, a big Russian investment bank, for $500m.

EDF, a French utility, struck a deal to buy British Energy, a partially state-owned nuclear-power firm, with a slightly improved offer of £12.5 billion ($23 billion). EDF said it was involved in talks to sell a stake in British Energy to Centrica, a British utility. Meanwhile the board of Constellation, an American utility and energy-trading firm, rejected EDF's offer to buy it for $6.2 billion. Instead it accepted a much lower offer from Berkshire Hathaway on the ground that it could be completed more quickly. The decision prompted lawsuits from several disgruntled shareholders.

Shell shock

The government of Iraq and Royal Dutch Shell, a big energy firm, plan to set up a joint venture to collect and sell gas from Iraq's southern oilfields. The deal is the first in the country involving a Western oil firm since Iraq nationalised its oil industry in 1972.

Chrysler, America's third-biggest carmaker, said it had lost $400m so far this year. At the same time, it tried to dispel doubts about its future by unveiling prototypes for three different electric vehicles, including a sports car.

Warm up

Six American states were due to set the country's first mandatory cap-and-trade scheme to combat global warming in motion on September 25th with an auction of permits to emit greenhouse gases. The Regional Greenhouse Gas Initiative will impose a limit on emissions from big power stations in ten north-eastern states from the beginning of next year.

T-Mobile, a telecoms firm, unveiled the first mobile phone to use Android, operating software developed by Google, an internet-search giant. Android is designed, among other things, to make it easier for people to access the internet from their phones. Google also plans tie-ups with other handset-makers.

KAL's cartoon

Leaders

America's bail-out plan : I want your money

No government bail-out of the banking system was ever going to be pretty. This one deserves support

Mr Market goes to Congress

Buckle a little, but do it briefly

Pay and the financial crisis : Questions of equity

Salary caps are a rotten idea; but the crisis also carries lessons for regulators and workers

IT IS easy to understand why many in Congress and beyond have demanded salary caps on bank executives as a condition of approving the Bush administration's bail-out of the financial system. After all, many of the people who will be leading the effort to get the banks back on their feet were the very same masters of the universe whose greed and myopia brought the industry to its knees in the first place. Nonetheless the lawmakers' apparent decision to impose some form of still unspecified wage limit, a demand reluctantly accepted by Hank Paulson and the Bush administration this week, is a mistake.

Just now, it is a struggle to keep a straight face when you read the words "talent" and "Wall Street" in the same sentence. And yet, precisely because it is in a mess, the financial system will need decent managers if it is to return to the health that benefits the rest of the economy. The sort of sums that would satisfy Congress as a cap may be far above the incomes of average Americans, but there is no surer way of driving finance offshore or into hedge funds where it is beyond the gaze of regulators. Besides, if ever there was a time when pay in banking and broking is likely to be depressed by the market, it is now. The bubble did not only inflate asset prices, it also inflated pay. Now the bubble has burst and hundreds of thousands of finance professionals want work.

American politicians have a lamentable record of intervening in setting executive pay. In the early years of the Clinton administration, Congress imposed a salary cap of $1m, beyond which firms faced a tax penalty. Pay rose, as one set of executives, beneath the cap, realised that they were "underpaid" and another set gained from an outpouring of creativity, as consultants invented myriad option schemes, perks and pension benefits to get around the limit. This only made it harder for shareholders to know who was getting what.

If the foolishness of Congress setting corporate pay levels is an old lesson, the financial crisis is teaching some new ones to shareholders. First, forget the received wisdom that paying people in large amounts of shares in their own firm ensures they take sensible value-maximising decisions. In the collapse of Lehman Brothers and Bear Stearns, the management did not just take reckless gambles with other people's money. Dick Fuld and Jimmy Cayne took reckless gambles with their own--and still they failed to do the right things and ended up losing most of their fortunes. Outside shareholders should remember that loading up the people at the top with shares can be an aid to corporate governance, but not a substitute for it.

Esop's fables

For employees, the tale of Lehman, especially after Enron, is a reminder of the danger of having too many savings tied up in the firm where you work. More of the truly talented will now demand their bonuses in cash, or perhaps ask for even more shares. That surely will have an effect on the way that firms recruit staff and on employee share-ownership schemes. Paying ordinary workers in shares is expensive--because equity is costly to issue and discounted by employees. And the idea that ordinary workers who own shares in their firm will stop senior managers taking bad decisions has taken another knock.

The structure of bonus schemes is more important than their level--especially in finance. Foolish short-term risk-taking could be discouraged by matching the timing of bankers' pay to the timing of the risks they are trading. Britain's Financial Services Authority may ask banks to put up more capital if their pay structures are dangerously risky. That makes far more sense than capping pay. But in the end companies and shareholders are better at setting salaries than bureaucrats.

South Africa : Queasy about the future

Thabo Mbeki was a rotten president. Fingers crossed that Jacob Zuma, plainly flawed, will be better

FOURTEEN years after apartheid was flushed down the sewer of history, South Africa has entered a less-than-fragrant era of murky internecine politics inside the ruling African National Congress (ANC). A bad president, Thabo Mbeki, has been ousted by his own party, which is almost certain to replace him, after an awkward hiatus that may last until a general election in the summer, with Jacob Zuma, a canny populist with a rackety personal and financial record (see 131?article). It is a far cry from the early years of a newborn rainbow nation under the magnificent healing presidency of Nelson Mandela.

South Africa is the continent's most successful country. It has a vibrant economy. Its GDP amounts to a third of all of sub-Saharan Africa's 48 countries. It has a fine constitution, robust institutions, a strongish judiciary, open political debate and an array of good people from all points of its multicoloured spectrum bent on making it a beacon for the rest of Africa. Its influence as a continental peacemaker and economic engine has generally been beneficial. But it sorely needs better leadership.

It is good that Mr Mbeki has gone. He has been a grave disappointment. He started well as Mr Mandela's chief technocrat, playing an impressive part in the early years in getting the ANC to chuck its old Soviet-sponsored socialism. But he lost his way, surrounded himself with yes-men and became grossly intolerant of opposition, in the ANC and beyond.

Several things stand out. First, his bizarre reluctance to respond rationally to the plague of HIV/AIDS, dabbling instead in the dottiest fringes of unscientific hocus-pocus, may have caused millions of needless deaths; 5.5m of South Africa's 49m people are afflicted by the virus. Only belatedly has a proper antiretroviral treatment programme been rolled out.

The second big blot on his record has been his failure to bring South Africa's diplomatic, economic and moral weight to bear on Robert Mugabe's tyranny in Zimbabwe. Mr Mbeki's defenders claim that his perseverance has brought about the recent power-sharing agreement. Not so. If he had acted more firmly from the start, Zimbabwe could have been saved years of misery.

Third, Mr Mbeki has squandered much of the interracial goodwill created miraculously by Mr Mandela. When faced with legitimate criticism on issues such as AIDS and crime, all too often Mr Mbeki has responded with unwarranted accusations of racism at any white person who disagrees with him. Yet if he disenchanted many of South Africa's whites (see 134?article), he has also signally failed, because of his aloofness and arrogance, to win the trust of South Africa's black masses.

Will the next man be better?

By comparison, Mr Zuma, his presumed successor, has many admirable qualities. He is better with people. He can listen and empathise. His inner toughness was honed during ten years as a political prisoner on Robben Island. Later, as head of the ANC's intelligence service in the anti-apartheid struggle, he proved a wily operator. In the early years of freedom he helped calm tension between the ANC and a party backed by many Zulus, his own ethnic group. He is liked by the poor, the trade unions and the Communist Party. But he is a pragmatist who has sought, so far successfully, to reassure the country's capitalists that he will not lurch to the left. It is important that the laudable finance minister, Trevor Manuel, keeps his job.

Yet Mr Zuma has grave defects too. He alters his tune to please his audience. Though charges of fraud have twice been dropped on technicalities, a cloud of financial impropriety hangs over him. He was acquitted of rape but revealed, during his trial, a striking ignorance of HIV/AIDS, not to mention a chauvinist attitude to women, to put it mildly. His friends have reviled the independent judiciary in virulent terms, with little reproach from Mr Zuma. It is unclear, after many years at the heart of a liberation movement that tends to identify the interests of party and state as much the same, how genuinely he accepts the constraints of a pluralist parliamentary system.

In the longer run, the country needs a more competitive democracy, for it is in danger of becoming a de facto one-party state under the ANC. It may be better if the ANC splits (which could yet happen). If Mr Zuma is a true democrat, he should seek to change South Africa's party-list system which means that MPs are elected on the basis of party loyalty rather than directly by the ordinary voters. This has helped engender a culture of patronage, sycophancy and authoritarianism.

Ideally, a better person should succeed Mr Mbeki. The caretaker president, Kgalema Motlanthe, may do so well in the next few months that calls could grow for Parliament to elect him as Mr Mbeki's permanent successor. That is improbable. The ANC looks set to replace a bad leader with one who will make South Africa's well-wishers more than a little queasy.

North Korea : Dealing with an impossible regime

North Korea is changing from the bottom: it needs more delicate handling than ever

IN HIS last such speech as president, George Bush told the UN General Assembly this week that the world must stay vigilant against nuclear proliferation. And so it must. For on his own watch, Mr Bush has so far been unable to stop Iran from enriching uranium in what many presume to be a quest for a bomb, or to make North Korea give up the nuclear weapons it has already tested. Indeed, on September 24th, the day after Mr Bush spoke, North Korea barred nuclear inspectors from its reprocessing plant at Yongbyon, and said it intended to reintroduce nuclear material in a week's time.

Dismantling Yongbyon was a central part of the disarmament deal hammered out in six-party talks between North Korea, United States, China, Japan, South Korea and Russia. But the North's threats to restart the complex are no surprise. The regime of Kim Jong Il is capable of extreme brutality towards its own people, whom it uses as hostages to extort aid. It is also a master of nuclear brinkmanship, which it also uses for extortion. It was angry that America has not yet removed it from the list of states sponsoring terrorism. But that is because the North has not yet come clean about its proliferation activities.

So far, so familiar. However, two things make dealing with North Korea even more delicate than usual right now. One is that the autumn harvest has brought mounting signs of a new famine. This will make it difficult to apply the pressure needed to make Mr Kim honour his nuclear deal. Outsiders can hardly just stand by and watch millions starve. The hungry will need help, even if some of the help is filched by the country's bloated armed forces. America is still providing food and energy aid. To minimise diversion, as much food as possible should be monitored, not just handed over on trust.

The end of the line?

The second complication is that North Korea is changing. Rumours have it that Mr Kim is ill, maybe following a stroke. His passing would be no tragedy in itself, but it is far from certain that the regime would collapse like a puffball as a result of it. A successor might crack down with renewed vigour, or rival factions might fight it out, causing a humanitarian disaster.

Even if Mr Kim is in fact in rude health, the country is changing in other ways. As our 132?special report in this week's issue argues, the North's largely improvised response to the last famine has brought some dramatic shifts. Informal markets have sprung up across the country, while cross-border exchanges with China have transformed what North Koreans know about the outside world. Mr Kim's country is no longer quite the closed-off Stalinist place it was. The state no longer has all the means it used to have to shape "correct" behaviour.

This makes Mr Kim vulnerable--in ways the outside world should exploit. That will be easier if America, China, Japan, South Korea and Russia, the five countries that pushed for the deal with Mr Kim, stand tough together against the North's attempts to renege on it. Indeed, there is value in their sticking together even if the North has no intention of giving up its bomb. The six-party framework is as good as anything yet tried with North Korea; it also draws together the countries that will have to co-operate in the event of the regime's collapse.

One of the worst-kept secrets in North-East Asia is that its neighbours dread the regime's collapse, given the costs that picking up the pieces will entail. But such a regime cannot last for ever. In the meantime, the policy of outsiders should be neither to prop it up nor shatter it to pieces, but to use a mix of hard and soft power to guide it to a soft landing.

China has the most influence, if only it chose to use it, but the West could do more as well. Now that short-wave radios are common in the North, broadcasts from outside should be stepped up. The growing number of defectors leading a second-class life in the South should get the training that will enable them to help when the regime finally falls. And both China and the West should be offering the North's bureaucrats and students every possibility to visit or study abroad.

Some will say that such actions pander to a repellent elite. But they will also more quickly convince its members that their archaic system is living on borrowed time--and mean that some competence is on hand when time is called.

British politics : No time for old hands either

Neither Labour nor the Conservatives are offering the economic leadership they should

BRITONS who poke fun at the endless reality show that is America's presidential race might spare a thought for their own party-conference rituals. For three weeks (following a long summer holiday) parliamentary business is suspended while politicians go off to contemplate their partisan navels. This week it was the turn of ruling Labour: Gordon Brown enlisted his nice wife to help him make the speech that would buttress his beleaguered premiership (see 130?article). Next week David Cameron will seek to fire up the Conservative Party he leads (with, no doubt, the fragrant Samantha by his side).

The sense of unreality in all this is dumbfounding. Most obviously, the revels seem out of touch with what is actually happening on the ground: banks are tottering, share prices plummeting and a mood of paralysed pessimism grips the country. But there is also something rather delusional in the way both parties imagine they are profiting from the crisis.

Take Mr Brown first. "This is no time for a novice," he claimed this week--a pointed reference to Mr Cameron's slim curriculum vitae in economic management. In Mr Brown's view, he is the experienced hand. As chancellor of the exchequer before becoming prime minister, he sailed the (admittedly benign) seas of his decade at the Treasury in some style. Now that Britain has been assailed by storms beyond anyone's control, how lucky the nation is to have a captain at the helm who knows these seas--who can recalculate derivatives in his head, who has the telephone numbers of the world's financial establishment on his mobile. The great man duly disappeared off to New York after his conference to add some intellectual weight to the regulators gathered there.

Alas for Mr Brown, there are more holes in this picture than in Lehman Brothers' balance sheet. The global credit crunch and high commodity prices may indeed have been beyond his control, but the depletion of the Treasury he ran and the erratic supervision of financial services that he set up emphatically were not (there must surely be a time limit on the praise he deserves for freeing the Bank of England). The fact that he showed some resolve over the forced merger of HBOS with Lloyds TSB announced on September 18th does not make up for his dithering over Northern Rock last year. It is welcome that he has belatedly apologised for his role in the 10% tax fiasco; but this was also the man who assured the country that the boom-and-bust era was over. Whatever that meant, it did not mean taking credit for the boom and disowning the bust.

Hornblower or horn blower

If Mr Brown is an old sea dog with a questionable memory and a suspiciously large number of shipwrecks behind him, the Tories' problem is they do not seem to have put to sea at all. They have skimped on details when it comes to explaining what they would do differently from Mr Brown (other than saying he is handling the crisis badly). This is surely in part because they once believed Mr Brown: when the young Tories began to refashion their party three years ago, they accepted his notion that a smooth economy was a done deal, so they deployed their energies ridding their party of the nasty illiberal image on social issues that Mr Cameron's predecessors had managed to cultivate. But it also seems to be because, until recently 20 points ahead in the polls, they think staying relatively mum is the safe option. They are wrong for two reasons.

First, the economy could still hurt the Tories. Mr Brown is probably destined for Davy Jones's locker, but his attacks on Mr Cameron's lack of economic conviction will still score points; and that front could be broadened if Mr Brown were replaced by another, less tarnished, Labour figure. Second, the economic crisis has opened up a debate about the role of the state in the economy. The left, understandably, sees the current turmoil as an opportunity to extend that role.

This is a dangerous moment for capitalism. It needs all the friends it can get. The reaction to the crisis is bound to go too far, and allow the state to get too big. The Tories need to show that they believe in capitalism, and stand up for it clearly and loudly. Next week would be a good time to start.

Letters

On global warming, Islamic finance, Biogen Idec, traffic jams, the Balkans, American rednecks

Cooling the planet

SIR - Your assertion that "global warming is happening faster than expected" exhibits a disturbing degree of cognitive dissonance ("128?Adapt or die", September 13th). Since 1998 the world's average surface temperature has exhibited no warming, according to all the main temperature records. The trend has been a combination of flatlining and cooling, with a marked plunge over the past year; many countries, including Australia, Canada, China and the United States, experienced severe winters.

Moreover, recent work demonstrates that the Earth's temperature may stay roughly the same for at least a further decade through the impact of the Atlantic Multidecadal Oscillation. In addition, the next 11-year cycle of solar storms--Solar Cycle 24--is late by more than two years. The sun is currently spotless, conditions that obtained during the "Dalton Minimum", an especially cold period that lasted several decades starting from 1790 and which was implicated in the rout of Napoleon's Grand Army during the retreat from Moscow in 1812.

Finally, one expert, Victor Manuel Velasco Herrera of the National Autonomous University of Mexico, has gone so far as to give warning that the Earth may enter a new "Little Ice Age" for up to 80 years because of decreases in solar activity. The immediate portents thus point in the direction of a cooling period.

Whatever one thinks about longer-term trends in world average temperatures and their possible relationship with carbon emissions, it cannot be claimed that currently "global warming is happening faster than expected". It troubles me when a publication with the standing of The Economist permits such a gap between observed reality and political rhetoric.

Philip Stott Emeritus professor of biogeography University of London London

SIR - In tackling climate change, there is no need for a crystal ball to see which technologies would set us on the road to reducing carbon emissions ("131?The world in a test tube", September 6th). More efficient vehicles, better building-control systems and the next generations of offshore wind-power and biofuels are at, or near, commercial deployment. These technologies, which will deliver emissions cuts within the next ten years, should be fast-tracked to receive R&D funding.

In the medium term, a robust carbon market will help to drive investment in low-carbon technologies. To reduce the uncertainties of the longer term, key technologies, such as marine power (both wind and wave), should be the focus of investment, rather than trying to pick individual winners within these areas.

Neil Bentley Director of business environment Confederation of British Industry London

Financial products

SIR - I was surprised at your positive treatment of Islamic finance ("132?Savings and souls", September 6th). Islamic finance taps into a captive market where people pay a premium in order to buy products that differ mostly in semantic terms from their mainstream alternatives.

These products are sanctioned by a select group of self-appointed scholars, who receive a tidy fee for their troubles, and have an interest in maintaining strict barriers to entry. Most users of such products doubtless do so sincerely, but I expected you to condemn those who sell them as old-fashioned rent-seekers.

Philip Blue London

Biogen Idec

SIR - Your article about some recent attempts to buy big biotech firms mentioned Biogen Idec's decision to seek a buyer in 2007 ("133?Convergence or conflict?", August 30th). Biogen Idec's board decided to explore a sale to deliver greater value for shareholders through an acquisition. It made that decision only weeks after Carl Icahn disclosed his stake in Biogen Idec and shortly after he made a purported offer to buy the company. We conducted a thorough and professional sale process, but after two months no offer was received. Three independent proxy advisory services reviewed the sales process and concluded it was fair and earnest.

Shareholders voted overwhelmingly to elect the board's nominees and rejected the candidates Mr Icahn put forward in his proxy contest. May I add that Biogen Idec's board maintains its commitment to deliver significant shareholder value.

Timothy Hunt Vice-president for public affairs Biogen Idec Cambridge, Massachusetts

Join the queue

SIR - It may be of interest to your readers to know that it was actually economists who first figured out that an individual's selfish behaviour when selecting an optimal travel route would yield different traffic flows and times than if one were to assign flows in a centralised manner to try and minimise the cost to society ("134?Queuing conundrums", September 13th). Arthur Pigou wrote "The Economics of Welfare" in 1920, by which time he was well aware of the distinction between different traffic behaviours.

Curiously, traffic and queuing problems keep on getting (re)discovered by different disciplines; now it seems to be the turn of the physicists.

Anna Nagurney Director Virtual Centre for Supernetworks Isenberg School of Management University of Massachusetts Amherst, Massachusetts

The empire strikes back

SIR - That many in the Balkans still harbour fond memories of the Austro-Hungarian empire is quite clear from your review of a book about the assassination of Archduke Franz Ferdinand, the heir-apparent to the imperial throne ("135?Starting pistol", September 6th). Emperor Franz Josef, who ruled the enlightened multi-ethnic empire from 1848 to 1916, is still remembered by many in Slovenia, Croatia, Bosnia and parts of Serbia with surprising fervour. One can see why the Sarajevo taxi driver quoted was angry about a memorial erected to Gavrilo Princip and his co-conspirators.

What your reviewer misses, perhaps in line with the author of the book, is that the taxi driver's lament offers the best hope for the European Union in the Balkans, where such sentiments are rife. Although foreign rule is widely resented in the region, it nonetheless offers the best hope for the future. The union's authorities would be well advised to exploit these Balkan sentiments as best they could.

Ranko Bon Motovun, Croatia

Local delicacies

SIR - In America, the redneck is not as homogeneous as 136?Bagehot presumes (September 13th). In Sarah Palin's state of Alaska, there are only two species of tree squirrel. They are both classified as "fur" animals: one has a very minimal amount of meat and the other is nocturnal. Hunting for either, while legal, is non-existent. Consequently, if you did come across someone eating "squirrel gumbo" it would be a very rare occurrence indeed.

By the way, gumbo is a dish of the American South, and is thus less likely to be found on the table of an Alaskan redneck than bear bourguignon.

Douglas Syverson Newcastle, Washington

Briefing

South Africa : Dropping the helmsman

As South Africa's president steps down amid a bitter power struggle, we look at his achievements, the doubts about his successor and the souring mood of the country

THABO MBEKI, South Africa's president (above right), has had a spectacularly bad year. First came a humiliating defeat in December, when the ruling African National Congress (ANC) elected Jacob Zuma (above left), the country's former deputy president, to replace him as the party's head. Mr Mbeki had sacked Mr Zuma in 2005. Then, on September 20th, the ANC decided he should step down "in the interest of making the country move forward". This cut short his term as president; Mr Mbeki was supposed to stay until the general election, expected in April. Instead, he unprotestingly bowed out.

ANC leaders, desperate to calm things down, talked of continuity and stability and asked cabinet members to stay. Instead, two days after Mr Mbeki announced that he was going, the deputy president and ten ministers followed, shocking the ANC to the core. The ministers included Trevor Manuel, in charge of finance and responsible for South Africa's impressive economic performance. The rand and the stockmarket swayed for a while, until Mr Manuel--and some of the others--said they were willing to be reappointed under the new president. The dipping of the rand betrayed the increasingly febrile atmosphere in South African politics, and the worries, both at home and abroad, that the present turmoil in the ANC may yet undermine the economic progress that South Africa has made over the past decade.

On September 25th Parliament elected Kgalema Motlanthe, the ANC's deputy president, to succeed Mr Mbeki. The arrangement is expected to last until the election, after which Mr Zuma--who currently holds no seat in Parliament--will most probably become South Africa's president.

Mr Motlanthe, a former political prisoner and trade unionist, is well respected within both the ANC and the opposition. Soft-spoken and self-effacing, patient and accessible, he has been cast as the voice of reason in the past few months, especially for his put-downs of firebrands such as Julius Malema, the new leader of the ANC Youth League. Mr Motlanthe, whose dream job is to scout young football talent for the ramshackle national team, also seems to have little ambition of his own. If he does well in his interim post, he may become an alternative to Mr Zuma. But the ANC said some time ago that Mr Zuma was its candidate, and Mr Motlanthe himself is a Zuma ally.

The decision to eject Mr Mbeki follows a court ruling earlier this month that struck down, on a technicality, fraud and corruption charges against Mr Zuma. The judge believed that Mr Mbeki and some of his ministers might have leant on the National Prosecuting Authority (NPA) over Mr Zuma's prosecution. Both Mr Mbeki and the NPA say the allegation is nonsense. But it spurred some of Mr Zuma's supporters into thinking him a victim of political conspiracy, and calling for Mr Mbeki's head.

Mr Zuma himself argued at first that there was no point in beating "a dead snake". Instead, the ruling party should focus on uniting itself. But a few days later, after a heated meeting that went on until the early hours of the morning, the ANC's National Executive Committee (NEC) decided that Mr Mbeki had to go. The decision, said Mr Zuma, was "one of the most difficult...the NEC has ever had to take". Scrabbling to mend the obvious cracks, he called Mr Mbeki a comrade and a friend.

Can Manuel calm nerves?

In a televised address on September 21st, Mr Mbeki, with his usual poker face, repeated that he had never interfered with the prosecuting authority. (He is now keen to clear his name, and is trying to appeal against part of the judgment.) He also thanked South Africans for the chance to serve, and reminded them that they had some things to thank him for.

During his almost 15 years at the helm--first as Nelson Mandela's deputy, before succeeding him as president in 1999--he was a chief architect of the country's economic recovery. Apartheid left South Africa isolated, divided and stagnant; today the public finances are in good shape, and the government is even running a surplus. South Africa's economy has been growing by an average of over 4.5% a year since 2004, and has so far weathered the global turmoil relatively well. Unemployment, which rose sharply after 1994, has been falling slightly over the past few years, although it is still around 25%, and almost 40% if using a broader measure.

Mr Mbeki helped to put Africa back on the global map, and encouraged an African renaissance which, ideally, was meant to inspire the continent to find African solutions to Africa's problems, instead of always depending on Western aid. Since the end of apartheid, South Africa has moved from pariah to regional champion: an achievement to be crowned, in this football-mad country, by hosting the 2010 World Cup. Mr Mbeki himself has helped mediate conflicts across the region, from Burundi to the Congo. Earlier this month he presided over a power-sharing deal in imploding neighbouring Zimbabwe.

But there are big shadows on this picture. Mr Mbeki's resistance to the scientific evidence on HIV/AIDS has cost countless lives in a country where 5.5m carry the virus and where AIDS is thought to kill more than 800 people a day. Antiretroviral drugs are now available through public clinics and hospitals, but Mr Mbeki's revisionist stance has sowed deadly confusion and fear. Violent crime and deep social inequalities continue to plague the country (). The crippling power cuts that shut down the country's mines earlier this year exposed unforgivably poor planning. Abroad, Mr Mbeki appeased Zimbabwe's Robert Mugabe for far too long while the country sank into ruin.

But it was his leadership style, more than anything else, that brought him down. Mr Mbeki was accused of centralising power in his own hands and criticised for his arrogance and aloofness. Mark Gevisser, his biographer, depicts a troubled man often racked by political paranoia. He rewarded loyalty over competence and ruthlessly sidelined rivals and dissenters, creating a coalition of the wounded that coalesced around Mr Zuma. The ANC's trade-union and communist allies felt increasingly ignored.

The watershed came with Mr Mbeki's firing of Mr Zuma in 2005, after Mr Zuma's financial adviser was indicted for fraud and corruption. A growing number of ANC activists and heavyweights began to oppose him. Mr Mbeki's shielding of Jackie Selebi, the country's police chief, who is himself facing corruption charges, only added fuel to the fire. His decision to run for a third term as president of the ANC against Mr Zuma was the last straw. Mr Mbeki ignored the fact that most of the party's provincial structures had endorsed Mr Zuma, and suffered a sharp defeat. Since then, the government has sunk into semi-paralysis. But despite that, many South Africans feel that Mr Mbeki should have been allowed to finish his term.

The ruling party, still squabbling over power and positions after the change of guard in December, is not keen on an early general election for which it does not feel ready. It is certain to win the next poll, but the opposition, which has won back the city of Cape Town, could wrest at least the Western Cape province from the ruling party. An increasing number of voters, disheartened by the ANC's in-fighting and Mr Mbeki's departure, may also decide to stay home on election day.

Rumours abound that supporters of Mr Mbeki, led by Mosiuoa Lekota, the minister of defence (who has just resigned) may split and form a new party to contest next year's election. Several of the ministers who have resigned are outraged, and will not serve in the new government. Serious discussions are said to be under way, and money available. A number of middle-class ANC supporters, not necessarily fans of Mr Mbeki's, are also appalled at the idea of a Zuma administration. But they may have neither the courage nor the strength to split the former liberation movement now, with so little time left before the elections. And the ANC leaders, if they manage the transition wisely, should be able to keep the party together for a while. The ANC has been predicted to split many times before, but never has.

The Zuma road

What should be expected of the new administration, especially when Mr Zuma takes over after next year's election? The ANC president is everything Mr Mbeki is not: expansive, relaxed, and with his political ear to the ground. His negotiating skills came in handy when KwaZulu Natal was on the brink of civil war in the 1990s. His leadership of the ANC since he was elected president in December appears far more collegial than Mr Mbeki's, and he is likely to be a less interfering president.

At best, this could mean a more inclusive leadership. But it could also mean no leadership at all. Mr Zuma has shown little desire to rein in, let alone speak against, some of his supporters' intemperate remarks, both about his trial for rape in 2006 (he was cleared) or his corruption charges. His supporters, who include trade unionists but also business heavyweights such as Tokyo Sexwale, may be left fighting for fiefs unless he provides clear direction.

So far, Mr Zuma has been working hard to repair relations with those who felt alienated under Mr Mbeki, from trade unions to poor Afrikaners (whites of mainly Dutch descent). The new ANC team has been making all the right noises about the country's creaking public services, although it is unclear how they will overhaul them. They have repeated that there will be no change of economic direction. But Mr Zuma finds it easier to tell people what they want to hear than to articulate a vision. He may also have to concede ground to his left-wing allies. Once in power, he will have to disappoint some among his motley band of supporters; it is unclear who he will choose to ignore.

With a lot of new ministers to appoint, the new ANC leaders will have to show their hand earlier than expected. About half of the ministers who walked out say they would be willing to serve under a new president. The main test will be whether Mr Motlanthe reappoints Mr Manuel as finance minister, which would clearly indicate that the government intends to stay its economic course. It looks likely: the ANC has said it wants to keep all the ministers in place. Trade unions and the Communist Party have been pushing to have more say over appointments, but may not get their way.

Less clear is what will happen to the corruption and fraud charges against Mr Zuma. The new ANC leadership wants the whole thing dropped, arguing that he has been treated unfairly and that this is dividing the country. This may explain why Mr Zuma is not becoming president straight away; the ruling party is hoping that, by the next election, the charges will be buried for good. But the opposition says he still has a case to answer. The wheels of justice have been grinding so slowly that there is no chance of Mr Zuma standing in the dock before the election, if at all. Although the NPA has said it intends to appeal against the invalidation of the charges, no papers have been filed yet. The next few months will show whether the ruling party's new leaders are able to resist doing what they accuse Mr Mbeki of: meddling with the prosecution for political ends.

White flight from South Africa : Between staying and going

Violent crime and political turmoil are adding to South Africa's brain drain

FIRST he thought it was a mouse, then a rat--and then the rat shot him in the face. That is how André Brink, one of South Africa's most famous novelists, described the recent killing of his nephew Adri, at home at 3am in the morning. The young man was left to die on the floor, in front of his wife and daughter, while his killers ransacked the house.

Such murders are common in South Africa. According to Mr Brink's account, published later in the Sunday Independent, 16 armed attacks had already taken place in a single month within a kilometre of the young couple's plot north of Pretoria, South Africa's capital. Soon afterwards--this is more unusual--the police arrested a gang of six. They recovered a laptop and two mobile phones. That was the haul for which Adri paid with his life.

A decade-and-a-half after the end of apartheid, violent crime is pushing more and more whites out of South Africa. Exactly how many are leaving is impossible to say. Few admit that they are quitting for good, and the government does not collect the necessary statistics. But large white South African diasporas, both English- and Afrikaans-speaking, have sprouted in Britain, Australia, New Zealand and many cities of North America.

The South African Institute of Race Relations, a think-tank, guesses that 800,000 or more whites have emigrated since 1995, out of the 4m-plus who were there when apartheid formally ended the year before. Robert Crawford, a research fellow at King's College in London, reckons that around 550,000 South Africans live in Britain alone. Not all of South Africa's émigrés are white: skilled blacks from South Africa can be found in jobs and places as various as banking in New York and nursing in the Persian Gulf. But most are white--and thanks to the legacy of apartheid the remaining whites, though only about 9% of the population, are still South Africa's richest and best-trained people.

Talk about "white flight" does not go down well. Officials are quick to claim that there is nothing white about it. A recent survey by FutureFact, a polling organisation, found that the desire to emigrate is pretty even across races: last year, 42% of Coloured (mixed-race) South Africans, 38% of blacks and 30% of those of Indian descent were thinking of leaving, compared with 41% of whites. This is a big leap from 2000, when the numbers were 12%, 18%, 26% and 22% respectively. But it is the whites, by and large, who have the money, skills, contacts and sometimes passports they need to start a life outside--and who leave the bigger skills and tax gap behind.

Another line loyalists take is that South Africa is no different from elsewhere: in a global economy, skills are portable. "One benefit of our new democracy is that we are well integrated in the community of nations, so now more opportunities are accessible to our people," Kgalema Motlanthe, now South Africa's president, told The Economist. And to some extent it is true that the doctors, dentists, nurses, accountants and engineers who leave are being pulled by bigger salaries, not pushed by despair. But this is not the whole story. Nick Holland, chief executive of Gold Fields, a mining company, says that in his firm it is far commoner for skilled whites to leave than their black and Indian counterparts. "We mustn't stick our heads in the sand," he says. "White flight is a reality."

Another claim is that a lot of leavers return. Martine Schaffer, a Durbanite who returned to South Africa herself in 2003 after 14 years in London, now runs the "Homecoming Revolution", an outfit created with help from the First National Bank to tempt lost sheep back to the fold. And, yes, a significant number of émigrés do come home, seduced by memories of the easeful poolside life under the jacaranda trees, excited by work opportunities or keen--perhaps after having children themselves--to reunite with parents who stayed behind.

In some cases, idealism remains a draw. Whites who left in previous decades because they were repelled by apartheid, or who expected apartheid to end in a bloodbath, can find much to admire. Whites build tall walls around their houses and pay guards to patrol their neighbourhoods; they consider some downtown areas too dangerous to visit. But on university campuses and in the bright suburban shopping malls it is still thrilling to see blacks and whites mingling in a relaxed way that was unimaginable under apartheid.

Reasons not to panic?

So South Africa certainly has its white boosters. Michael Katz, chairman of Edward Nathan Sonnenbergs, a law firm in Johannesburg, hands over a book with the title "Don't Panic!", a collection of heartwarming reflections by disparate South Africans on why there is, even now, no better place than home. Mr Katz ticks off the pluses as he sees them: minimal racial tension (a third of his own firm's 350 professionals are black); a model constitution that entrenches the separation of powers and is "revered" by the people; a free press and free judiciary; a healthy Parliament; a vibrant civil society; good infrastructure and a banking system untouched by the global credit crunch. The "one major negative" Mr Katz concedes is violent crime. If only this could be brought under control, he says, the leavers would return.

But would they? Violent crime is undoubtedly the biggest single driver of emigration, the one factor cited by all races and across all professions when people are asked why they want to go. Police figures put the murder rate in 2007-08 at more than 38 per 100,000 and rape at more than 75 per 100,000. This marks a big fall over the past several years, but is still astronomical by international standards (the murder rate was 5.6 per 100,000 in the United States last year). It has reached the point where most people say they have either been victims of violent crime themselves or know friends or relatives who have been victims. Typically, it is a break-in, carjacking, robbery or murder close to home that clinches a family's long mulled-over decision to leave.

All the same, crime is far from being the only cause of white disenchantment. Some say that 2008 brought a "perfect storm". A sequence of political and economic blows this year have buffeted people's hope. Added together they provide reason to doubt whether the virtues ticked off by the exuberant Mr Katz--a model constitution, separation of powers, good infrastructure and so on--are quite so solid.

Good infrastructure? At the beginning of the year South Africa's lights started to go out, plunging the thrumming shopping malls and luxury homes into darkness and stopping work in the gold and diamond mines. This entirely avoidable calamity was caused by a distracting debate about the role of the private sector in electricity supply. Eskom, the state-owned utility in which many experienced white managers had been too quickly pushed aside, is now investing again in new plant under a new chairman, Bobby Godsell, a veteran mining executive. But for the time being power will remain in short supply and rationing and blackouts will continue.

As for that model constitution and the separation of powers, Desmond Tutu, the retired Anglican archbishop of Cape Town, was moved this week to describe the sordid battle between Jacob Zuma, Thabo Mbeki, the party, government, prosecuting authority and courts as suggestive of a "banana republic". As well as being appalled by events at home this past year, whites have watched Robert Mugabe's pauperisation of neighbouring Zimbabwe and wonder whether South Africa will be next to descend into the same spiral.

Besides, fear of crime cannot be separated from the other factors that make South Africans consider emigration. People who do not feel safe in their homes lose their faith in government. John Perlman, who worked for the SABC, the state broadcaster, before resigning in a quarrel over political interference, does not believe that most people leave because they are afraid. "I think they leave when they lose heart," he says. One white entrepreneur about to leave for New York says that it was not being held up twice at gunpoint that upset him most: it was the lack of interest the police showed afterwards. Tony Leon, the former leader of the opposition Democratic Alliance, claims that policing has been devastated by cronyism and that the entire criminal-justice system is dysfunctional. The head of the police, Jackie Selebi, is on leave pending a corruption investigation.

How much does the outward flow of whites matter? South Africa can ill afford the loss of its best-trained people. Iraj Abedian, an economist and chief executive of Pan-African Capital Holdings, says a pitiful shortage of skills is one of the main constraints on economic growth. He concedes that the ANC has pushed hard to give every eligible child a place in school, but argues that a "politically correct" focus on expanding access has come at the expense of quality. With virtually no state schools providing adequate teaching in science or maths, he says, the country has added to its vast problem of unemployment (every other 18-24-year-old is out of work) a no less vast problem of unemployability.

The gap they leave behind

On Mr Abedian's reckoning, about half a million posts are vacant in government service alone because too few South Africans have the skills these jobs demand. Not a single department, he says, has its full complement of professionals. Local municipalities and public hospitals are also desperately short of trained people. Dentists are "as scarce as chicken's teeth" and young doctors demoralised by the low standards of hospital administration. Last May Azar Jammine, an independent economist, told a Johannesburg conference on the growing skills shortage that more than 25,000 teachers were leaving the profession every year and only 7,000 entering.

A blinkered immigration policy makes things worse. Nobody has a clue how many millions of unskilled Africans cross into South Africa illegally. But skilled job applicants who try to come in legally are obstructed by a barricade of regulations. Mr Abedian says that the ANC used to think that relying on foreigners would discourage local institutions from training their own people. Now at least the government earmarks sectors where skills are in short supply and for which immigration procedures are supposed to be eased. In April, however, an internal report by the Department of Home Affairs showed that fewer than 1,200 foreigners had obtained permits under this scheme, from a list of more than 35,000 critical jobs.

In fairness, South Africa has been through far worse times before. Whites streamed out during the township riots of the 1980s. It is far from clear how much of the present dinner-table talk about leaving ends with a family packing its bags. Alan Seccombe, a tax expert at PWC in Johannesburg, says that many affluent whites have moved money offshore and prepared their escape routes, but that his firm's emigration practice is doing less business today than it did in 1995.

Perspective is necessary in politics, too. Raenette Taljaard, previously an opposition member of Parliament and now director of the Helen Suzman Foundation, a think-tank, says that events this past year have raised profound concerns about the rule of law and the durability of the constitution. But Allister Sparks, the author of several histories of South Africa (and a former writer for The Economist), maintains that the ANC has done as well as anyone had a right to expect after apartheid's destructive legacy. Some whites even express enthusiasm about the advent of Mr Zuma. How many other African liberation movements, they ask, have been democratic enough to vote out an underperforming leader, as the ANC has Mr Mbeki?

For the average white person, South Africa continues to offer a quality of life hard to find elsewhere. And there are other compensations. Mr Brink says in the article on the murder of his nephew that people who ask when he will be emigrating are perplexed to hear that he intends to stay. There is, he says, an "urgency and immediacy" about life in South Africa that lends it a sense of involvement and relevance he cannot imagine finding elsewhere.

All the same, he is staying on bereft of some former illusions. The myopia and greed of the country's new regime of rats have eroded my faith in the specific future I had once believed in. I do not foresee, today, any significant decrease in crime and violence in South Africa; I have serious doubts that our rulers can even guarantee a safe and successful soccer World Cup in 2010; I do not believe that the levels of corruption and nepotism and racketeering and incompetence and injustice and unacceptable practices of "affirmative action" in the country will decrease in the near future.

The famous novelist will stay. Many other whites are making plans to leave, and will be taking their precious skills with them.

United States

The politics of the bail-out : The candidates intervene

The battle to save the financial system has now become part of the presidential race

JOBS will be lost, homes will be foreclosed, America will stumble into a recession and the economy will not recover in a normal, healthy way. All this will happen, Ben Bernanke warned members of Congress, if they do not approve a $700 billion bail-out for the financial sector. Mr Bernanke, the chairman of the Federal Reserve, and Hank Paulson, the treasury secretary, spent this week trying to persuade lawmakers to stump up the cash. But they met angry resistance from both parties.

The plan (see 130?article) is for the Treasury to spend up to $700 billion to buy up mortgage-related assets, with the aim of getting credit flowing again. Given the urgency of forestalling a financial meltdown, a rescue package of some sort is likely to emerge, but the details are unclear. Will the government simply mop up toxic securities, or will it buy equity in ailing institutions? Will Congress sign a cheque for $700 billion, or start with a smaller sum and see how it goes? With the election--for all of the House of Representatives and a third of the Senate, not just for the presidency--barely a month away, no one wants the blame for failing to prevent a deep recession. But no one wants to be accused of showering taxpayers' cash on bankers in $5,000 suits, either.

On September 24th John McCain weighed in. "If we do not act, every corner of our country will be impacted," he declared. He said he would suspend his campaign until the crisis is resolved. Instead of holding a debate with Barack Obama on September 26th, as planned, he said he would come to Washington. He asked President George Bush to convene a meeting with him, Mr Obama and congressional leaders to hammer out a deal. Mr Bush agreed to do it.

Mr Obama said he would be happy to help if congressional leaders asked him to, but that the debate should go ahead. A president, he said, should be able to deal with more than one issue at a time. The result was an impasse, throwing the whole calendar for presidential and vice-presidential debates into confusion.

Critics were quick to accuse Mr McCain of grandstanding, and noted that his intervention came on the day he recorded his lowest poll rating against Mr Obama yet. The Democratic leadership said bringing presidential politics into the bail-out discussions would only complicate and delay things. But Mr McCain contended, with some justification, that the bail-out was in big trouble. If he can help find a solution, he will emerge as a hero: if not, he will indeed look as though he has put politics above country.

Throughout the crisis, both candidates have sought to strike a tricky balance between raging on behalf of the little guy and reassuring panicky investors. At first, Mr McCain erred on the side of apoplectic fury, accusing unnamed crooks of corruption and regulators of being "asleep at the switch". In a crass attempt to find a scapegoat, he also said that he would sack Christopher Cox, the head of the Securities and Exchange Commission. But he made some sensible points, too.

He balked at the unchecked discretion Mr Paulson sought over how to allocate $700 billion of public cash. "We will not solve a problem caused by poor oversight with a plan that has no oversight," he said. Mr Obama made the same point. Mr Paulson backed down and agreed to accept greater oversight.

Both presidential candidates warned against rewarding overpaid fools for their folly. Mr McCain urged that no executive at a firm bailed out by the government should be paid more than the president, who makes $400,000 a year. Since the chief executive of Goldman Sachs makes that in two days, that would make it hard to hire the necessary financial talent to make the bail-out work. But pay caps for fat cats are popular in Congress. Some form of them may well be included in the final deal, assuming that there is one.

Mr Obama said he would support a bailout if it includes bipartisan oversight, pay curbs for Wall Streeters, help for people to avoid foreclosure and a way of returning any profits on the government's investments to taxpayers. Mr McCain stressed that the bail-out should be transparent and include no earmarks. Neither would specify the circumstances under which he would vote against the plan.

Both candidates tried to blame each other for the crisis. Mr Obama accused Mr McCain of obstructing unspecified "common-sense rules" that supposedly could have prevented it. Mr McCain fulminated about Mr Obama's ties to Fannie Mae and Freddie Mac, the government-backed mortgage behemoths whose reckless shepherding of loans towards un-credit-worthy borrowers helped create the crisis. In 2005, Mr McCain supported a bill to curb Fannie and Freddie's excesses. Mr Obama did not, and his party blocked it in the name of helping poorer Americans to own houses.

Few voters understand how the proposed bailout would work, and polls reflect this confusion. A Bloomberg survey found that 55% of Americans thought the government should not bail out private companies with taxpayers' money even if their collapse could damage the economy, while only 31% thought it should. A Pew poll found pretty much the opposite. It all depends on how you ask the question.

Nonetheless, the financial crisis is likely to help Mr Obama, who tends to sound cooler and better-informed than his rival. In the Pew poll, 47% of voters thought him more capable of addressing the crisis, while only 35% preferred Mr McCain. In a poll of polls by 133?RealClearPolitics.com, he now leads by 3.5 points overall.

But whoever wins in November, the bailout will make many campaign promises moot. Even without the costs of shoring up Wall Street, either candidate will have to struggle with large and growing deficits, yet both are offering tax cuts and Mr Obama in particular has made some expensive spending pledges. He said in an interview that some of these might have to go. He was careful not to say which ones.

The election campaign : Heard on the stump

Candyman "I called him John, but also my dear and my coconut sweet."

Maria Gracinda Teixeira de Jesus, a former Brazilian beauty queen, met John McCain in 1957. O Globo, September 20th

Wine, women and song "It was our bestselling wine."

The owner of a wine bar in San Francisco complains about the drop in sales of Palin Syrah, a certified organic wine from Chile. 130?SeriousEats.com, September 22nd

Cold dead hands "I guarantee you, Barack Obama ain't taking my shotguns, so don't buy that malarkey...I got two, if he tries to fool with my Beretta, he's got a problem."

Joe Biden reacts to anti-Obama National Rifle Association ads. 131?FoxNews.com, September 20th

I feel pretty "People shouldn't make a decision this time based on, `I like that guy' or `She's cute'--and I'm talking about me."

Michelle Obama asks Americans to make considered decisions when voting. 134?Jezebel.com, September 18th

Sore loser "I bet he'd probably get pretty angry and lit up if his team was losing."

Fifty per cent of voters would prefer to watch football with Mr Obama, 47% with Mr McCain; some feared the latter would be a bad loser. AP, September 19th

Easy rider "Sarah and I are going to get on that chopper and ride it straight to Washington!"

John McCain was given a motorbike honouring POWs. AP, September 22nd

Special ed "It's the public school system. Let's be honest, it's full of liberal loons."

An 11-year-old was suspended for wearing an anti-Obama T-shirt. His father is suing. 135?MyFoxColorado.com, September 22nd

Boy crush "I like the idea that this guy does those long-distance races. Stayed in the race for 500 miles with a broken arm. My kind of guy."

Bill Clinton admires Sarah and particularly Todd Palin. AP, September 22nd

Rural voters : Bucolic ballots

Could the economy trump the Palin effect?

THE population of Whitesburg, Kentucky is "1,534 friendly people plus two grouches", according to the sign outside. The people here are warm and talkative and wry. They are also quite conservative.

Astor Blair sits on an old deck chair in his front yard, with a majestic view of the Appalachian mountains and a pile of cigarette butts on the ground beside him. He says he will not vote for Barack Obama because liberals are always trying to change things, and "when you shake things up too bad, bad things happen."

A coal train thunders by. Liberals want to do away with coal and "put a windmill on every square acre," he grumbles. "You'd destroy the countryside. It'd cost trillions of dollars?. And it won't work." Mr Blair, who mows lawns for a living, worries that Mr Obama will raise taxes on the rich, thereby damaging the economy.

He also frets about social issues. Gay marriage does not bother him: "It's not my choice of lifestyle, but God never called me to do his judging and I ain't going to." But he favours school prayer and is "dead set" against abortion. "Who has the right to take somebody's life over nothing? Especially your own young." Mr Blair pats his 21-year-old son on the head, grins and adds: "Although, sometimes..."

A new poll for the Centre for Rural Strategies, a think-tank in Whitesburg, shows John McCain leading Mr Obama by ten percentage points among rural voters in swing states. The poll, conducted in New Hampshire, Pennsylvania, Ohio, Michigan, Wisconsin, Iowa, Minnesota, Missouri, Florida, Virginia, Colorado, New Mexico and Nevada, found that 51% of rural voters said they would vote for Mr McCain, while 41% preferred Mr Obama.

Only a fifth of Americans live in rural areas. And Mr McCain's advantage among rural voters is slimmer than George Bush's 13-point lead over John Kerry in a similar poll in 2004. But it is still a useful vote bank in a very close election. And the reasons rural voters give for preferring the Republican ticket are revealing.

Asked who would deal better with problems facing rural areas or the economy more generally, rural voters are about evenly divided. But when asked who shares their values, they prefer Mr McCain by a 14-point margin. And they love his running-mate, Sarah Palin, the governor of Alaska. Fully 65% of rural voters in swing states think she "represents the values of rural communities".

Though many urban voters were repelled by Mrs Palin, many rural Americans were instantly attracted, and for similar reasons. She kills and skins her own food. She talks a lot about her faith. She rides big machines. A campaign button juxtaposes a photo of her in a short skirt leaning on a motorbike outside a log cabin with one of Mr Obama bicycling in a dorky helmet, with the caption: "This settles it."

"I really like her. And? it would be great to have a woman vice-president," says Karen McAuley, who runs a general store near Whitesburg that also sells enormous lunches (Today's special: sausages, sauerkraut, bean stew and corn bread). Her husband Jim agrees. "She's untested," he concedes, but "I've enjoyed listening to her."

"This country has been in a mess since [John Kennedy's] time," contends Mr McAuley. "Any time you reward people for not working, you're creating a monster." Mr McAuley says he disagreed with the occupation of Iraq, because "we're not trained to be policemen." And he worries about the economy: the family store is selling less ice cream and candy these days. But he still backs Mr McCain because he is pro-gun and anti-taxes. As for Mr Obama: "His character is whatever he wants you to see. I don't think there's a whole lot of substance there."

A quarter of voters in the survey say their neighbours are not ready for a black president. A few are blunter. "I don't like Barack Obama at all," says Glenna Smith, Mr Blair's 72-year-old former mother-in-law. "I don't sugarcoat things. I don't like black people." However, Mrs Smith says she gets on well with her niece, who is half-black.

If Wall Street's explosion rains shrapnel on rural heads, the polls may change. For many voters, economic issues are growing more urgent. "Prayer is important," says Thomas Ilowiecki, an Obama fan from rural Virginia. "But feeding your family is also important. And if you don't have gas for your car, you can't go to church."

Among rural Americans, distrust of big government is mixed with widespread dependence on it. Shannon Ferrell, who runs a shop selling video games in Whitesburg, says he gets his health insurance through his wife, who works for the government. "You can't find a good job round here that's not a state job," he sighs. Mr Ferrell says that at first he did not "buy the whole `change' thing", but he looked at Mr Obama's plans and they seemed better for the middle class, so he'll vote for him.

In November, rural voters who care most about the economy are more likely to vote Democratic; those who care most about cultural issues are more likely to vote Republican. People want their president to be someone they might enjoy breaking cornbread with. For many rural folk, Mr McCain passes the test. Mr Obama is like no one they have ever met.

Early voting : The beginning of the end

The polls are opening; soon this election will be decided

Take your time

ELECTION day is on November 4th, more than a month away. Anything could happen between now and then. There is a crisis unfolding on Wall Street, and Congress is not sure what to do about it. Barack Obama and John McCain meet for their first debate on September 26th. There is still plenty of time for the running-mates to get in trouble. Joe Biden might make one of his famous gaffes. Sarah Palin might even give her first press conference.

All of this is irrelevant to the thousands of Americans who have already cast their votes, and the millions who will do so before election day. No fewer than 34 states are allowing early voting in person this year, and only a handful require an excuse. Campaigns can find this a challenge. A prolonged voting season requires a sustained effort, not just a last-minute frenzy of phone calls and ads. But the early option is good for voters. It lets them avoid queues on election day itself, and, should a problem arise, they can just come back later. Paul Gronke, who runs the Early Voting Information Centre at Reed College in Oregon, reckons that a third of all voters will vote early this year, up from 20% in 2004.

Will this affect the election? The Obama campaign hopes that the relaxed schedule will help ensure that young voters, who can be flaky, find a time to hit the polls. However, studies suggest that early voting options do not increase turnout much. The people who vote early are, in most cases, the ones who would have voted anyway. Similarly, early voting seems to have only a modest effect on the outcome of the election. Undecided voters tend not to rush to the polls, so the people who vote early were in the bag anyway.

Still, early voters should not be dismissed. They can help insulate candidates from eleventh-hour stumbles or revelations. The cautionary tale here comes from the bitter 2000 race. Five days before the election, the story bubbled up that George Bush had been arrested in 1976 for drunken driving. This disgusted many voters: Karl Rove, Mr Bush's chief strategist in the election, later remarked that the arrest probably cost them the popular vote. But with millions of votes cast in advance, Mr Bush squeaked by in key states like Florida.

This time around, early voting could help Mr Obama. He has opened small but significant leads in several western swing states where lots of people vote early. In Colorado, where 47% of voters weighed in early in 2004, Mr Obama has been beating Mr McCain since late August. He leads in New Mexico by six points, according to the Real Clear Politics average of polls. Early votes made up 51% of the 2004 total in that state, and Mr Bush won it by a nose. There is still time for Mr McCain to rally these western states, so close to his Arizona home. But he may find that by the time he gets there the contest is already over.

Campaign finance : And the money came rolling in

Surprisingly, John McCain is doing as well as Barack Obama

DESPITE America's complex campaign-finance laws, the country's presidential candidates still bring in a lot of money. More than $1 billion dollars (a record) has found its way to the candidates so far in this election.

Mr Obama's fund-raising machine gets much of the credit. His success even convinced him to reject public financing for his campaign, leaving him to raise and spend as much as he likes. Mr McCain, meanwhile, took $84m in public funds at the beginning of the month and cannot raise another dollar for himself. But that hasn't stopped him. To the surprise of pundits, Mr McCain's team has creatively managed to catch up with Mr Obama.

Since he began campaigning, Mr Obama has raised $455m. Last month alone he took in $65m, according to reports filed by his campaign on September 20th. Two-and-a-half million Americans have given to Mr Obama in the past 19 months, his campaign says, and many of them have not yet contributed the full $2,300 each they are allowed to give, leaving a vast pool of untapped donors. The Democratic National Committee (DNC)--which is allowed to help Mr Obama, though not without fetters--can accept plenty more from individual donors, too. Between the two of them, the Democrats had $95m on hand at the end of last month.

Mr McCain, meanwhile, has raised only $210m since the start of his campaign, but he did not have to pay for a long primary battle as Mr Obama did. And his fund-raising has picked up, particularly in the wake of naming Sarah Palin as his running-mate. Mr McCain raised $48m last month, $9m of it in the three days after he chose her. His team has put together a "victory" fund that raises large donations for the Republican National Committee (RNC) and state party organisations, which will supplement Mr McCain's cash from the Treasury. Between Mr McCain and the RNC, the Republicans had about $94m on hand at the end of last month, with the candidate's $84m infusion still to come.

Mr Obama, however, spent $53m last month, Mr McCain only $41m. Part of the difference, probably a wise investment, went to much bigger staffing expenses on the Democrat's side for ground operations in swing states. Mr Obama may also take a bigger lead yet in the money race in the final weeks. Still, rejecting federal campaign financing means that he will have to spend a lot more time fund-raising than Mr McCain. And in hard economic times, donors may become stingier.

No surprise, then, that each candidate hardly murmurs as unaffiliated spending groups--which can spend lots of money as long as they do not co-ordinate with the campaign they favour--run attack ads against his opponent. Those extra millions will no doubt finance some of the blackest mud slung in this election year.

New York City finances : Economic fallout

When Wall Street sneezes, New York catches cold

DESPITE a bit of grumbling that the federal bail-out of Wall Street is a handout to the wealthy, most New Yorkers realise the crisis affects everyone, from the trader making a six figure salary to the coffee vendor stationed outside the old Lehman Brothers building. As David Paterson, New York's governor recently said, "every time you hear Wall Street's having a bad day, just know that New York is having a worse day."

The securities industry, according the city's Independent Budget Office (IBO), accounts for 25% of the wages paid in the city. It generates 27% of its direct tax revenue. The city's unemployment rate rose last month to 5.8% from 5% in July, the largest monthly increase on record. Some 40,000 of the city's 185,700 Wall Street jobs could be lost. Doug Turetsky, of the IBO, says every thousand jobs lost on Wall Street translates into a roughly $50m loss in tax revenue.

Even before the crisis, City Hall was predicting a budget deficit in the 2010 fiscal year of $2.3 billion. Nicole Gelinas, of the Manhattan Institute, thinks this could increase by between $1 billion and $2 billion. The budget, as it stands, assumes a $7.1 billion securities industry profit, which is no longer possible.

Michael Bloomberg, New York's mayor, has directed all city agencies to cut their budgets by 2.5% this year and 5% next fiscal year. He also wants to increase property taxes by 7% in January. The mayor got New York out of its last downturn, in 2002. But he must leave office next year, unless the mayoral two-term limit is scrapped. Now there's a thought.

Giving : Billanthropy squared

A big week for Bill Clinton and Bill Gates

AROUND this time every year, New York's traffic grinds to a halt as the police make the city safe for an influx of global dignitaries. It was bad enough when the visitors were limited to heads of state attending the annual United Nations General Assembly, but for the past four years they have been accompanied by a gathering of business leaders and philanthropists pledging to save the world at the Clinton Global Initiative.

This year, the UN is reviewing progress (mostly slow) towards the various Millennium Development Goals it wants to achieve by 2015. Bill Gates is flying in to tell the delegates that, thanks not least to his giving, he now believes that malaria is likely to be eradicated ahead of schedule.

Meanwhile, the CGI will focus on poverty reduction, improving water supply and sanitation in the developing world, education and climate change. Despite the financial crisis, which its founder, Bill Clinton, feared may mean smaller pledges than in past years, it has attracted a bumper crowd. But Dick Fuld, the erstwhile billionaire philanthropist boss of Lehman Brothers, cancelled.

It marks a rehabilitation of sorts for the former president. There were fears that Hillary Clinton's failure to secure the Democratic nomination would remove one of the main reasons for attending the CGI--cosying up to the next occupant of the White House. Some also feared that being too friendly with the Clintons might annoy the Obama campaign.

Thankfully, Barack Obama agreed to address the CGI, albeit by satellite, as did John McCain, accompanied by Sarah Palin as she visited New York in an apparent attempt to overcome her lack of foreign policy experience by breaking the world record for meeting the most heads of state in 48 hours.

Mr Clinton seems relieved that he can now concentrate on building the CGI into a powerful philanthropic marketplace, where wealthy donors meet social entrepreneurs with bright ideas, and a platform for his post-presidential career as a relatively non-partisan international statesman. He is disappointed that his wife is not about to become president, he says, "but it's not a disappointment to me that I'm not going to be back in the White House. I like the life I have now. It is a bit easier for me to play the role I am playing." Every cloud, it seems, has a silver lining.

Swing states: Michigan : The centre of the storm

Michigan is at the heart of the debate over the economy

ECONOMIC gloom is no stranger to Michigan's cities. A house in Detroit was recently sold for one dollar. But now despair extends to the suburbs, too. Orchard Lake, a main drag of shops in Farmington Hills, has "for lease" signs planted like tombstones on the side of the road. The national unemployment rate reached a dismal 6.1% in August. Michigan's rate is almost three points higher, at 8.9%.

It is not surprising then, that in the war over which candidate can revive America's economy, Michigan is the front line. On a recent rainy night in Farmington Hills, Barack Obama tried to persuade voters that Michigan could be pulled out of the gloom. The crowd cheered wildly--"I'm absolutely positively sold on Obama!" gushed Ninevah Lowery. But not everyone is so convinced. Al Gore won Michigan by five points, John Kerry by just three. Mr Obama leads in the polls, but victory is by no means certain.

Much of Michigan's bleak outlook is caused by the car industry, which remains at the heart of the state's identity. Each August residents line Woodward Avenue, which runs north of Detroit, to watch the Dream Cruise, when vintage cars buzz by and conjure memories of glories past. The present is more of a nightmare. Since 2000 Michigan's car industry has shed more than 300,000 jobs. Within the past year, Ford and GM have posted their worst quarterly losses ever, with dire effects for suppliers and small businesses.

Both candidates entered this mess awkwardly. John McCain won the Republican primary in 2000, but lost this year's contest to Mitt Romney, the son of a former governor. Crowds trudged through the January cold to see Mr McCain; the senator, still in his straight-talk days, told them that "some of the jobs that have left the state of Michigan are not coming back." It was honest, but hardly a rallying cry.

Mr Obama had an equally awkward introduction. On visiting the Detroit Economic Club in May 2007, he extended not a handshake but a wagging finger, lecturing local executives about fuel efficiency. Later Mr Obama withdrew from the primary because the state held its contest early, in defiance of party rules.

Now, however, the candidates are scrapping for Michigan's 17 electoral votes (270 are needed to win the presidency). To pull the state out of its hole, Mr McCain offers low taxes, retraining and an all-inclusive energy policy. For the car industry, he has moved from tough love towards the unconditional sort. He still favours an unpopular cap-and-trade scheme for emissions (like Mr Obama), but this month courted carmakers by supporting low-interest government loans to them.

Mr Obama, meanwhile, has done his best to "kiss and make up" with the car industry, says Bill Ballenger, editor of Inside Michigan Politics. He has wholeheartedly supported the loans to the carmakers. He is also promising to end tax breaks for companies that ship jobs overseas and to revise trade agreements to "level the playing field". A second stimulus package would help families pay for food and fuel. A $150-billion clean-energy plan would invigorate the state's manufacturing sector.

To spread these messages, each campaign has covered the state with staff. In the past two weeks the Republicans and Mr McCain have increased their 14 local offices to more than 30. The Democrats and Mr Obama have 45 offices and plan to open at least five more.

Michigan is a diverse state, with posh suburbs, grim industrial cities and 3,200 miles (5,150km) of shoreline along the Great Lakes. The northern and western parts of Michigan have traditionally leant to the right, though there are pockets of Democrats in cities such as Muskegon and Saginaw. The most crucial region, however, is the Detroit area in the south-east, home to almost half the state's population. Detroit itself is reliably Democratic. The main fight is for its suburbs.

Oakland County is a bellwether. Though more than 80% white, it is a diverse place. A ten-minute drive will take you from Birmingham, a chi-chi suburb where Margot's European Day Spa offers a pedicure for $115, to Pontiac, an industrial city where Main Street Pawn Shop will buy your watch for $20. The Democrats have carried the county since 1996, but by falling margins. Mr McCain's main office is in Farmington Hills, in Oakland's heart.

Though the economic debate remains paramount in Oakland and other suburban counties, other factors are at play too--namely, whether Mr Obama will be able to woo the white blue-collar voters he had trouble winning in primaries elsewhere. This question is most acute in the swing county of Macomb, a bastion of socially conservative white workers. Two factors have made Mr Obama's task even harder.

The first is Sarah Palin. Macomb, explains Saul Anuzis, head of the state Republican Party, "is the home of the Reagan Democrat, the blue-collar worker who happens to be a hunter who rides a snowmobile." Mr McCain's first rally after his convention was in Macomb County, to show off Mrs Palin.

The second concerns Kwame Kilpatrick, Detroit's black former mayor, who has pleaded guilty to two felonies. South-east Michigan is deeply segregated: Detroit is more than 80% black, its suburbs mostly white. Macomb, for instance, is almost 90% white. Mr Kilpatrick's debacle has stirred festering racial tensions, and an independent group is running ads in Macomb that show Mr Obama praising Mr Kilpatrick last year. Lingering racism could yet tip a very tight contest.

Lexington : President Hank

Henry Paulson is the most important man in Washington

THE Treasury was always intended to be at the heart of the American government. George Washington's first Cabinet appointment was his treasury secretary. The Treasury building is connected to the White House by an underground tunnel.

Yet for most of the Bush years the Treasury has been a backwater. Paul O'Neill disagreed with the Bush administration about the central thrust of its economic policy--deficit-boosting tax cuts--and was first neutered and then sacked. John Snow went to the other extreme and functioned as a travelling salesman for policies cooked up in the White House. The people who mattered in Washington were the war hawks, not the money men.

The Treasury is now back at the heart of government. Hank Paulson has been the dynamo behind everything from the $168 billion stimulus package to the latest plan for a $700 billion bail-out of Wall Street. Mr Paulson may go down in history as the man who saved American capitalism or the man who mishandled the worst financial crisis since the 1930s. But he will certainly not go down as the third in a succession of empty suits.

A whiff of the old American establishment hangs about Mr Paulson; the establishment of well-bred WASPs with Ivy League educations and muscular Christian views. His six-foot-one frame is rendered more imposing by his iron self-belief. He was educated at Dartmouth, where he studied English and distinguished himself on the (American) football field, earning the nickname "the Hammer" for his relentlessness. He spent his career working for the premier investment bank on Wall Street, Goldman Sachs.

But in fact Mr Paulson is very far from being a member of the old establishment. He was brought up on a farm in Barrington Hills, Illinois. He is a devout Christian Scientist who does not drink or smoke. In calmer times, he spends his weekends back home in Illinois rather than playing golf or hobnobbing in the Hamptons.

Mr Paulson made his career at Goldman Sachs at a time when the company was transforming itself into a global meritocracy. He led the company's drive into the Asian market (he has visited China more than 70 times). His forte at Goldman, above all, was deal-making. But he was also a hard-edged office politician. He became chairman in 1999 after helping to lead a palace coup against John Corzine.

For all its global ambitions Goldman Sachs remains at the heart of the American establishment, packing its employees off to public service after stuffing their pockets with gold. Mr Paulson's three predecessors as CEO of Goldman, Robert Rubin, Stephen Friedman and Mr Corzine, all went on to have political careers: Mr Rubin as a highly successful treasury secretary and Mr Friedman as the director of the National Economic Council in 2002-05. Mr Corzine is now governor of New Jersey. Mr Paulson was persuaded to move to the Treasury only after prolonged wooing by a fellow Goldman Sachs executive, George Bush's chief of staff, Josh Bolten. He brought a tightly knit group of Goldman alumni with him when he moved.

Mr Paulson is also an unusually unideological figure in today's Washington. He is a long-standing Republican who raised money for Mr Bush in 2004. But he is more of a Rockefeller Republican than a Southern-fried conservative (by an odd coincidence he shares his nickname with that quintessential Southern conservative, Tom DeLay). Perhaps his greatest passion outside work is for the environment. He is a former chairman of the board of the Nature Conservancy, an organisation that strongly supported the Kyoto protocol. Under his leadership Goldman became the first Wall Street institution to acknowledge officially that global warming is a man-made problem; it also bought thousands of acres of Chilean forests. Mr Paulson plans to leave much of his fortune to environmental causes.

His lack of ideology has been on display in his handling of the financial crisis. The right accuses him of selling out free-market principles. The left accuses him of bailing out his old friends on Wall Street ("cash for trash"). People on both sides point to the inconsistency of throwing Lehman Brothers to the wolves while bailing out AIG.

But sticking to principles may be the last thing that the market needs at the moment. Andrew Mellon, the treasury secretary at the time of the 1929 crash and another ex-banker, was a model of consistency, preaching a policy of "liquidate, liquidate, liquidate", to "purge the rottenness out of the system". This helped to plunge the economy into the Great Depression. Mr Paulson's pragmatism has given him a degree of flexibility in deciding who to save and who to allow to go under. He has also displayed the same flexibility in altering his bail-out plan in the light of the opposition it ran into on Capitol Hill: whether he has shown enough to close the deal is still unknown. Critics say he alienated Congress by initially refusing to submit to any oversight, supporters that this was only an opening bid.

Continuity please

This pragmatism will also make it easier to ensure some continuity in policymaking. The current crisis has hit at a particularly difficult moment in the political cycle. The November election will drain the Bush administration of what power it has left, but the new