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NEWS IN CONTEXT
JANUARY 2016
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SHORT SELLING
BY TRISTA KELLEY

THE SITUATION

The biggest headlines these days are

made by so-called activist shorts, even
though they account for only a small slice
of short selling. Most shorting is done by
hedge funds and institutional investors to
cushion their investments against falling
stock prices (thats called hedging) or
to bet that shares have risen too high.
Activists research companies and find
targets that they allege have dodgy
business or accounting practices, spread
the word (sometimes anonymously) via
Twitter and if all goes as planned
watch the stock slump. Shares of Valeant
Pharmaceuticals fell 40 percent on the day
of a damning report by Citron Research
in October 2015. Although activist shorts
have been crying foul for decades, their
numbers are swelling thanks to the
rise of social media as a platform for
disseminating theories and analysis. In
2015, shorts began campaigns against
174 companies globally versus 119 in
2013. The head of the U.S. Securities and
Exchange Commission said in November
that short selling was getting the agencys
intense attention. Chinas regulator
blamed malicious short selling in part for
a stock market crash in 2015, placing limits
on the practice as well as arresting traders
and imposing fines. Even so, the practice
is flourishing. Stock markets in Hong Kong
and Japan had unprecedented shortselling volumes in 2015, while in the U.S.
bearish wagers reached the highest level
since the 2008 financial crisis.

THE BACKGROUND

Short sellers borrow shares, sell them, buy

them back at a lower price and profit from
the difference unless the stock rises.
Dutch traders were shorting as long ago
as the 1600s, including during the tulip
bubble. Napoleon labeled short sellers
of government securities treasonous.
The collapse of Enron in 2001 marked
a notable scalp for shorts including Jim
Chanos, who had been among the first
2

to question its accounting. Carson Block

of Muddy Waters raised the profile of the
new breed of activist shorts by taking aim
at under-the-radar Chinese companies
listed in North America, including the now
bankrupt Sino-Forest. When markets
go bad, governments and regulators
sometimes impose restrictions in an effort
to help stem the slide. The U.S. targeted
short selling during the Great Depression
and joined the likes of the U.K. and Japan
in limiting short selling or banning it during
the financial crisis.

THE ARGUMENT

Critics say short sellers can transform

downturns into full-blown panics. They
point to the ability of shorts to hoodwink
investors by spreading false rumors before
exiting a trade, a technique known as
short and distort. Defenders say the
potential for abuse shouldnt discredit all

Photo: Scott Eells/Bloomberg

Buy low, sell high and youre rich and everybodys happy. Sell high,
buy low and you may be rich but odds are that quite a few people are
anything but pleased. Thats the short sellers predicament, and why
shorts, as theyre known, get threatened with everything from temporary
restrictions to serious jail time, particularly during times of stock market
turmoil. Shorts say theyre keeping markets and companies honest.
Critics say their practices can blur into market manipulation, a charge
that has some regulators taking note.
shorts any more than pump and dump
schemes by investors who whip up interest
in a stock to push it higher and then sell
it. Short sellers say they are skeptics who
alert investors to bouts of market euphoria,
identifying mispricing or deception that
analysts, auditors and investors overlook.
The name of Chanoss firm is Kynikos
the Greek term from which the English
word cynic was derived. Often vilified
as market outlaws, shorts are portrayed
as the good guys in the film The Big
Short. They have some backing from
researchers: One paper found that short
selling discourages the manipulation of
earnings reports, while another showed
shorts making more accurate predictions
of the share performance of U.S.-listed
Chinese firms than stock analysts. A third
concluded that activist shorts were usually
factually right.

Activists Get Busier

Short-selling campaigns, tracked by published bearish reports

180
160
140
120
100
80
60
40
20
0

2013

Source: Activist Shorts Research

2014

2015

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IRON ORE WARS

Photo: Cathy Finch/Getty Images

BY DAVID STRINGER AND JASMINE NG

Iron is one of the worlds most common elements, making up about 5 percent of the Earths crust. But one place
that doesnt have nearly enough is China. So when the countrys furious urbanization took off more than a decade
ago, China began to import huge quantities of iron ore to produce the steel it needed to build factories, highways
and skyscrapers. Thus began an epic race to meet Chinas needs, fueled by soaring prices, with metal from the
furthest corners of the globe. Now that Chinas economic growth is slowing, the boom is looking like a bust. Iron
ore prices have collapsed, and the big producers miners in Brazil and Australia are squeezing out highercost rivals from Sweden to Iran. In Australia, the slump has sparked a debate about whether the nation is now
squandering its iron ore riches.
THE SITUATION

The price of iron ore tumbled about 40 percent in 2015, as the

biggest producers pressed ahead with expansions planned when
the market was soaring. Smaller rivals blamed Brazils Vale and the
two Australian giants, Rio Tinto and BHP Billiton, for exacerbating
a global supply glut. Only a handful of producers the largest and
lowest-cost operations are expected to survive. Some projects
conceived during the go-go years are being halted or delayed.
Guinea, one of the worlds poorest countries, hoped a $20 billion
investment in mines, railroads and ports would transform its
fortunes; now theres doubt they will ever be built. Meanwhile China
continues to consume more than two-thirds of the worlds iron ore
exports and produce about half the worlds steel. Yet demand for
steel inside China has peaked, many analysts say, leaving the
market oversupplied. So Chinas steel producers expanded exports
by a quarter in 2015. Thats spurred complaints that the countrys
state-owned and state-supported steel mills are illegally dumping
their output on world markets below cost, a charge they deny.

THE BACKGROUND

Iron replaced bronze as the metal of choice for tools and weapons
in Europe and the Middle East in about 1200 B.C., giving the Iron
Age its name. Major deposits were uncovered in the U.S. and
Australia in the mid-19th century, bringing an era of commercial
mining to fuel industrial growth. Australias main market was Japan,
though exports were curbed in 1938 amid concern shipments were
bound for munitions factories during the Second Sino-Japanese
War. During those tense prewar years, Australians worried that
the countrys reserves were limited. Discoveries from the 1950s
revealed that Australia holds about a quarter of the worlds iron ore,
followed by Brazil with 17 percent. The $225 billion annual market
for iron ore is bigger than that of any other commodity except oil
and gas.

THE ARGUMENT

Iron ore prices are simply returning to their historical range, some
observers argue, and the drop benefits users of steel including
3

carmakers and construction companies. And why shouldnt

the most efficient miners be the ones to survive the battle for
market share? One reason, articulated by smaller miners and
labor unions, is that expanding supply and depressing prices
cheats the public in producer nations. In Australia, lower tax and
royalty payments mean iron ore exports now account for about 3
percent of gross domestic product, down from 5 percent in 2013.
Colin Barnett, the premier of ore-rich Western Australia, says
the miners are pursuing a flawed strategy of increasing output
in an oversupplied market and should better tailor production to
match demand. Australian billionaire Andrew Forrest, the founder
of Fortescue Metals, has called on the largest miners to cap their
shipments, envisioning a cartel-style agreement similar to the
one OPEC used for decades to support oil prices. His proposal
has been dismissed by rivals as illegal and unworkable. Iron ore
producers and analysts say any cuts to output would likely be
offset by competitors rushing to fill the gap.

Iron Ores Boom and Bust

Demand from China sent prices soaring, then tumbling

$200/ton
160
120
80
40
0
1980

1984

1989

1993

Source: International Monetary Fund

1998

2002

2007

2011

2015

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BRAZILS HIGH AND LOWS

Its 2009 and Brazils beloved President Luiz Inacio Lula da Silva proclaims
the nations biggest oil discovery its passport to the future. Rio de Janeiro
is awarded the 2016 Olympics on top of the 2014 World Cup, and Brazilians
see both as belated recognition of their rising international standing. The
global financial crisis is a hiccup for effervescent Brazil as a commodity boom
surges. Fast-forward to today and the economy has sunk into a recession
so deep Goldman Sachs calls it an outright economic depression. A new
finance minister is facing the fattest budget deficit in at least two decades
and a national credit rating downgraded to junk. Petrobras, the state-run oil
colossus, is embroiled in a scandal that has ensnared a billionaire banker and
the ruling partys leader in the Senate. Authorities are investigating Lula, who denies any wrongdoing, for influence
peddling. And his protege and successor, Dilma Rousseff, chastened by presidential approval ratings near their
lowest point in more than two decades, faces impeachment proceedings in Congress. What went wrong? Can
Brazil get back its magic?
THE SITUATION

Brazils economic growth slowed from

2011 through 2014, and economists expect
output to contract for 2015 and 2016. The
currency has tumbled about 60 percent
against the U.S. dollar since a 2011 peak
early in Rousseffs first term. Business and
consumer confidence levels are at their
lowest levels on record. Petrobras has lost
more than four-fifths of its market value
since 2007. Inflation is running in the double
digits. Rousseff barely won re-election in
2014, pledging to fight the price increases.
Upon taking office with a record budget
deficit, she chose banker Joaquim Levy
as finance minister to raise taxes and cut
government spending. His replacement,
Nelson Barbosa, is seen by investors as
less austere. In October, the nations audit
court said the government used illegal
techniques to obscure its deteriorating
accounts. The president of Brazils lower
house, presented with multiple requests
to open impeachment proceedings
against Rousseff, moved on a complaint
accusing her of breaching the nations fiscal
responsibility law, which seeks to establish
transparency in government accounting.

THE BACKGROUND

Brazil has suffered boom-and-bust cycles

and political instability since independence
from Portugal in 1822. Half its 2014 exports
were raw products, so its prosperity is
sensitive to the vagaries of the commodities
markets. On paper, Brazil looks like a
powerhouse. Its the fifth-largest country in
the world by land mass and population. Its
offshore oil reserves include the Western
Hemispheres biggest discovery since
1976. It has the second-largest iron ore
4

reserves, is the second-largest producer of

soybeans and third-largest of corn. On the
other hand, its wealth distribution remains
among the most unequal. Good times did
provide cash to beef up the Bolsa Familia
social welfare program that became an
international model for poverty eradication.
The new middle class went shopping,
boosting growth. Now, with commodity
prices dropping and industry sputtering,
that model appears to have run its course.
Investment that would make the economy
more efficient has remained well below half
that of China as a percentage of GDP.

THE ARGUMENT

In her first term, Rousseff blamed Brazils

modest economic performance on slow
international growth after the financial crisis.

At the start of her second, she endorsed

austerity and promised that it wouldnt
impair social gains that included less
poverty and inequality, as well as advances
in life expectancy, educational attainment
and income. To shore up accounts, the
government announced tax increases and
crimped some pension and unemployment
benefits. The measures have yet to reverse
a ballooning budget deficit. Critics say
that Brazil should ignite the next stage of
growth by reducing the tax burden and the
bureaucracy. These measures would boost
investment, they say, and more flexible
labor laws would improve productivity.
They want Brazil to shift reliance away from
consumption, which along with government
spending still accounts for more than 80
percent of GDP.

The Slide of Brazils GDP

Percentage change from same quarter in prior year

7%
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
Sept. 10

Sept. 11

Sept. 12

Source: Brazilian Institute of Geography and Statistics

Sept. 13

Sept. 14

Sept. 15

Photo: Yasuyoshi Chiba/AFP via Getty Images

BY DAVID BILLER

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SOUTH AFRICAS FRUSTRATIONS

BY MIKE COHEN

THE SITUATION

The government of President Jacob

Zuma is lurching from one crisis to the
next. Zuma replaced his popular finance
minister with a little-known lawmaker in
December. A market rout ensued and
four days later Zuma backtracked and
reappointed Pravin Gordhan, who served
as finance minister between 2009 and
2014, to the post. Zuma has batted away
a series of corruption scandals, including
allegations that he used taxpayer money
to build a swimming pool and enclosures
for cattle and chickens at his private home.
The economy is hamstrung by a shortage
of electricity, a hangover from decades
of under-investment in new generation
capacity. Prices of gold and platinum
vital exports have plunged. Police
violence has been a recurring issue. In
October, anger over rising tuition costs
and persistent poverty levels led to the
largest protests by South African university
students in the post-apartheid era.

THE BACKGROUND

In 1652, the Dutch East India Company

established a supply post in Cape Town,
which the British occupied in 1795 to
secure the sea route around the southern
tip of Africa. British immigrants settled
mainly in coastal areas, while Dutch
colonists known as Boers or farmers
migrated to the interior. Discovery of
inland gold and diamond deposits spurred
the Anglo-Boer Wars, which the British
won in 1902, making South Africa a
British colony. White colonists adopted a
constitution in 1910 that disenfranchised
blacks, whom they viewed primarily as
cheap labor. The National Party took
power in 1948, stripped black South
Africans of their land and denied them
decent education and health care under a
policy known as apartheid, or apartness.
5

In 1961, Prime Minister Hendrik Verwoerd

declared a republic and severed ties with
the U.K. South Africa endured decades
of economic sanctions and an armed
struggle by the ANC and other groups
before the government agreed to free
Mandela from prison in 1990 and hold
multiracial elections. The ANC has won
every election since.

THE ARGUMENT

The ANC-controlled government can point

to successes. The economy has almost
trebled in size in the past two decades and
the poverty rate has been reduced from 45
percent in 1993 to 38 percent in 2013. Life
expectancy is rising and infant mortality
rates are dropping. Yet the economy was
expected to have grown just 1.4 percent in
2015 less than half the rate for all sub-

Photo: Per-Anders Pettersson/Getty Images

When the African National Congress swept to power under Nelson

Mandela in South Africas first multiracial elections in 1994, its campaign
slogan assured a better life for all. Yes, enforced segregation has
ended. But a quarter of the workforce remains unemployed and 22
percent of the population still doesnt get enough to eat. Census data
shows white households still earn six times as much as black ones.
Mounting discontent is manifest in violent street protests and strikes.
While the ANC shows no signs of losing power nationally it won 62
percent of the vote in 2014s elections party support is slipping in the
cities amid charges of corruption and incompetence. Many doubt that
the ANC will ever be able to deliver that better life.
Saharan Africa. The governments failure to
add power plants as it connected millions of
black households to the electrical grid led to
rolling blackouts that have hit manufacturing
hard. New laws that discourage the hiring
of temporary workers have added to
unemployment. Many have lost patience.
The National Union of Metalworkers, the
countrys largest labor union, is setting
up its own political party, saying the ANC
hasnt done enough to help workers. While
the ANC still commands support thanks to
its role in ending apartheid and the states
extension of welfare to almost a third of the
population, the party is nervous. An internal
report it commissioned after the 2014
election warned that voters are fed up with
government corruption and incompetence.

Unemployments Steady Grip

South Africas jobless rate, by quarter
27%
26
25
24
23
22
21
20

March 08

March 09

Source: Statistics South Africa

March 10

March 11

March 12 March 13 March 14 March 15

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CHINAS DIRTY AIR

BY NATASHA KHAN

THE SITUATION

China closed factories and limited traffic

to clear the skies for a military parade in
Beijing in September 2015, as it had before
the APEC summit in 2014 and the Beijing
Olympics in 2008. By late 2015, the smog
returned to hazardous levels, schools in
Beijing were closed and the city issued
its highest pollution alert for the first time.
Earlier that year, a documentary on Chinas
filthy skies drew more than 100 million
viewers online before it was scrubbed from
websites. Public concern about pollution
exploded in 2013 as Beijings levels of
PM2.5, the tiny particles posing the
greatest health risk, peaked at 35 times the
World Health Organizations recommended
limit. Trapped in a cloud worse than most
airport smoking lounges, the capitals 21
million residents donned face masks, kept
their kids indoors and complained on social
networks. State-backed media provided
surprisingly critical coverage of a crisis that
foreign outlets dubbed an airpocalypse.
Recent studies have raised alarm bells.
One report said people in northern China
may be dying five years sooner because
of air pollution. Another said it kills 4,000
people a day and another linked pollution
and lung cancer. Chinese authorities
responded, tightening environmental laws,
raising fuel taxes, shutting some coalburning power plants, limiting the number
of cars and unveiling more investments in
solar and wind power.

exceed United Nations targets for the rise

in the Earths temperature. Yet with coal
still providing about two-thirds of Chinas
energy, it will take years to reverse the
nations dependence on polluting fossil
fuels. Chinas leaders have pledged to be
less secretive and not to repeat mistakes
that cost them public trust during the SARS
outbreak in 2003 and a tainted milk scandal
in 2008. Chinas contaminated water and
soil have also prompted public worry, along
with food and drug safety. Chinas pollution
blows into Japan and has contributed to
smog as far away as California.

to limit greenhouse gases and promised

for the first time that its carbon emissions
will peak around 2030. China is the worlds
biggest spender on clean energy; it had
64 percent more solar capacity than the
U.S. by the end of 2014 and plans to start a
national market to trade emission permits
in 2017. President Xi Jinping has pledged
to unleash an iron hand to protect the
environment. Is China at a point where the
smoggy air might temper its ambitions? At
least seven provinces lowered their goals
for economic growth for 2014 amid pressure
for air pollution controls. Chinas Ministry
of Environmental Protection is challenged
by other powerful bureaucracies and
must battle local officials and other vested
interests to ensure government directives
are followed.

THE ARGUMENT

While the scale of the problem is massive,

so is Chinas top-down response. In 2014,
it signed a historic agreement with the U.S.

Beijings Bad Air Days

Beijing pollution levels: days in 2014 at Air Quality Index ratings

Good
(6% of 2014)

Hazardous
(6%)

22 21

Moderate
(17%)

37

Very unhealthy
(10%)

63 days

THE BACKGROUND

Air pollution has been killing people since

the dawn of industrialization, and Chinas
is no worse than Londons 19th-century
pea soup or Japans smog of the 1960s.
Yet more is known about its risks now,
and global warming raises the stakes:
China overtook the U.S. as the biggest
source of greenhouse gases in 2006 and
has helped put the globe on a path to

Photo: Kevin Frayer/Getty Images

For many people in China, the most visible problem isnt the countrys
slowing economy, corruption or social harmony. Its dirty air. China is
home to some of the worlds most polluted cities, and when its thick
blanket of smog blows into urban areas, frantic citizens pick up their
mobile phones to check air-quality levels. Pollution is shortening lives in
the worlds most populous nation and, by some accounts, is the main
cause of social unrest. Its a reminder of the trade-offs at the heart of
Chinas transition from developing country to prosperous, modern nation,
forcing the Communist Party to balance the rush for economic growth
against the threats to life and health. Can China clear the air?

Unhealthy
for sensitive
groups
(16%)

60

Unhealthy
(44%)

162

Source: Greenpeace using Chinese government data and U.S. EPA standards

76 percent of 2014
days were
unhealthy or worse

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HOW THE U.S. ELECTS ITS PRESIDENTS

BY ANGELA GREILING KEANE

The U.S. Constitution lays out just three requirements to be eligible to become president: You must be at least 35
years old, have lived in the U.S. for at least 14 years and be a natural-born citizen. Not much else about becoming
president is simple. Americans have the longest, most expensive and arguably most complex system of choosing
a head of state in the world. And after two years of debates, caucuses, primaries and conventions, the person who
gets the most votes can still lose. Its a system that baffles non-Americans and many Americans, too.
THE SITUATION

Every four years, Americans select a president on a Tuesday in

November. The two candidates representing the Republican and
Democratic parties on Election Day will have survived a long series
of state-level primaries (votes by ballot) and caucuses (votes by
a show of hands or by clustering all the candidates supporters
in one place in the room). The first 2016 caucus comes on Feb.
1 in Iowa; the first primary is in New Hampshire on Feb. 9. These
small, rural states jealously guard their first in the nation status
and the outsized influence it gives them. Candidates spend months
meeting the states voters in school gyms, diners and living rooms,
so it makes sense to build campaign teams and raise money

Source: Bloomberg

early. Thats why some contenders formally step into the race
almost a year before the first votes take place. By the time a dozen
states hold primaries on so-called Super Tuesday (March 1), the
field is winnowed down, as campaign cash, news coverage and
debate invitations dry up for those who have fared poorly. After the
primaries and caucuses end in June, each state sends delegates
to the Democratic and Republican conventions, where their job is
to translate the popular vote into a formal nod for a party nominee.
Though its been decades since the outcome of a convention has
been in doubt, the events serve as made-for-TV spectacles to tout
the achievements of the partys nominee and that persons pick to
be the vice-presidential running mate.

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THE BACKGROUND

The U.S. has had an elected president since the Constitution took
effect in 1789. Since Abraham Lincoln took the job in 1860, all
presidents have been members of the Republican or Democratic
parties. Third-party candidates have a hard time getting on state
ballots for the November general election and have never done
better than the 27.4 percent won in 1912 by former Republican
President Theodore Roosevelt, then running on the Bull Moose
Party ticket. The quirkiest part of the contest is the Electoral
College, created by the nations founders as a compromise
between those who favored a direct popular vote and those who
wanted lawmakers to pick the president. Every state is assigned
as many Electoral College votes as it has members of Congress,
a formula that amplifies the importance of small states. In the early
19th century, states seeking to maximize their impact adopted a
winner-take-all approach that awards all Electoral College votes to
whichever candidate wins the most votes in that state on Election
Day. Maine and Nebraska are the only exceptions; they award one
electoral vote to the winner of each Congressional district and two
electoral votes to the winner statewide.

THE ARGUMENT

The winner-take-all system caused the Electoral College to choose

presidents who did not win the overall vote in 1876, 1888 and
2000, when Republican George W. Bush beat Democrat Al Gore
after a weeks-long recount. After each such election, theres a
renewed push to make the total tally of ballots decisive, but states,
especially small ones, are unwilling to switch, citing the loss of
sway. The Electoral College also forces candidates to focus on
a few swing states where polls show a close contest, since the
electoral votes of reliably Democratic California or Republican
Texas can be taken for granted. Critics of the system argue that
just a handful of states actually decide the election, and that urban
issues get short shrift. Defenders say that small states and rural
areas would otherwise be overlooked. Theres broad agreement
that money plays too big a role in campaigns. Its estimated that
each partys 2016 nominee will spend $1 billion by Election Day,
most of it on advertising. So the winners in this long process
include local television stations that reap these ad dollars and the
political junkies who love to watch the saga unfold.

The Electoral College

There are 538 Electoral College votes, which are apportioned
based on how many senators and House representatives each
state has. The District of Columbia, which is not part of any
state, was awarded three electoral votes in 1961.

Candidates need 270 votes to win the presidency. If no

candidate receives a majority, the House of Representatives
elects the president from the three candidates who received
the most electoral votes.

The 2012 tally:

Washington
12

Votes for
Barack Obama,
Democrat
(332)

Oregon
7

Votes for
Mitt Romney,
Republican
(206)

Nevada
6
California
55

Montana
3

Idaho
4

Utah
6

Arizona
11

Alaska
3

Hawaii
4

Sources: The Green Papers, Federal Election Commission

Wyoming
3
Colorado
9

New Mexico
5

Vermont - 3

North Dakota
Minnesota
3
10

New York
Wisconsin
Michigan
29
10
16
Iowa
Pennsylvania
Nebraska
Ohio
6
20
5
Illinois
18
20 Indiana West Virginia
11
5 Virginia
Kansas
Missouri
Kentucky
6
13
10
8
North Carolina
Tennessee
15
Oklahoma Arkansas
11
7
South Carolina
6
Georgia
9
16
Alabama
9
Texas
38
Louisiana

South Dakota
3

Mississippi - 6

Florida
29

Maine
4
New Hampshire - 4

Massachusetts - 11

Rhode Island - 4
Connecticut - 7
New Jersey - 14
Delaware - 3
Maryland - 10
District of
Columbia
3

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THE GENDER GAP

BY ELIZABETH TITUS

THE SITUATION

Hoping to win over more women and widen the gender gap,
Labour Party leaders in Britain made direct appeals to female
voters in Parliaments 2015 general election, focusing on
child care, domestic violence and social care. Labour lost to
the Conservatives, but women did win a record number of
seats thanks to the Scottish National Party, which increased
its female MPs to 20 from one in 2010. In the U.S., Democrat
Hillary Clinton, who is running for president again, begins with
a presumptive edge among female voters after she scored an
average gender gap of 8 percentage points among voters in
her 2008 primary races against Barack Obama. She achieved
that even while playing down her gender during the race.
Clinton advisers have concluded that was a mistake and a lost
opportunity to maximize female support.

THE BACKGROUND

The gender gap is relatively new. Research shows women in

the U.S. and Britain generally voted the same way men did in
the early decades of the last century, and were focused on
protecting families and promoting a moral society. As more
women joined the workforce and put off marriage in the 1960s
and 1970s, voting preferences also began to shift in industrial
nations. The first documented gender gap was in the 1980
U.S. presidential election, when Republican Ronald Reagan
opposed the Supreme Courts ruling upholding abortion rights
and made it a campaign issue. While men backed Reagan by
a wide margin, the female vote was evenly divided between
him and Democratic President Jimmy Carter, creating a
gender gap of 8 percentage points. In the 1980s, women also
began to lean toward left-wing candidates in the Netherlands,
and a gender gap began to emerge in the 1990s in Canada,
Britain and Germany. In Israel, the first signs of a gender split
in voting were detected in the 2009 elections.

THE ARGUMENT

Some womens rights advocates in the U.S. say the gender

gap forces politicians to focus on issues important to female
9

Photo: Andrew Harrer/Bloomberg

New Zealand became the first nation to grant voting

rights to all women, in 1893. Fast-forward to this
century and womens votes are among the most
coveted by politicians. In the U.S., more women than
men have turned out to vote in national elections
since 1980, and the two genders dont vote alike.
More women choose Democratic candidates and
more men choose Republican ones. Thats created
what political observers call the gender gap, the
difference between the percentage of females and
males voting for a candidate. Its not just in the
U.S. women around the world have become
more likely to vote for candidates on the left. These
gaps often affect election outcomes, which is why
campaign strategists work hard to shrink or expand
them to gain an advantage.
voters. Others say that its wrong to assume all women share
one agenda. In practice, the gender gap has proved an
imperfect formula for winning elections. In the 2008 primary,
though Hillary Clinton won more female votes, she still lost
to Obama. Yet in 2012 Obama beat Republican Mitt Romney
with the largest gender gap in American presidential election
history. In Britain, political observers are raising alarms
about a significant decline in the number of women voting in
elections, which would take the punch out of any gender gap.

Going Different Ways

Percentage voting for the Democratic presidential candidate
in each U.S. election
60%

WOMEN

50

MEN

40
30
20
10
0

56

64

Source: Gallup polls

72

80

88

96

04

12

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FAMILY LEAVE
Photo: Getty Images

BY JENNIFER OLDHAM

In 183 countries around the world, a working mom can take time off to be with a newborn or young child and
have an income while she does so. Fathers can count on that too, in almost as many nations. On average, a
couples combined paid leave for childbirth and child care amounts to 63 weeks. Theres one big exception
the United States, where theres no national requirement for paid family leave. Instead theres a hodgepodge of
state and company policies that mean a familys circumstances depend on where they live and who they work for.
Overall, just 12 percent of workers have access to paid leave. Managers and professionals in large companies are
most likely to be eligible, while in Silicon Valley companies scrambling to hire or hold onto scarce tech workers offer
up to a year to new parents.
THE SITUATION

Paid family leave is becoming an issue in the 2016 U.S.

presidential race. Candidate Hillary Clinton said she will fight for
a federal requirement, as did her rival for the Democratic Partys
nomination, Senator Bernie Sanders. Senator Marco Rubio was
the first Republican to propose a family leave plan, offering tax
credits to businesses that provide four paid weeks off or more. Only
three states, California, New Jersey and Rhode Island, require
paid time off. Their programs are funded by payroll taxes paid
by workers but not by their employers. Eleven other states have
expanded eligibility for unpaid leave. In January 2015, while a
Democratic-sponsored national paid parental-leave bill languished
in the House of Representatives, President Barack Obama granted
federal workers six weeks of paid leave after the birth or adoption
of a child or to care for a sick family member. The Washington D.C.
City Council is considering a plan to offer most privately employed
workers up to 16 paid weeks of family leave, funded by a tax on
businesses. Globally, few countries have cut back on paid leave,
even during the recent economic downturn; the trend instead is
toward expansion, especially of paternity leave.

THE BACKGROUND

Paid maternity leave became the norm in Europe and other

industrialized nations in the 1970s as more women entered the
workforce. In most countries, its funded by taxes and considered
an extension of social security programs. In others, the law
requires that businesses cover the cost directly or share it with the
government. In 1984, U.S. womens rights activists helped draft
The Family and Medical Leave Act to require companies to offer
an unpaid program for men and women covering a range of family
issues. It was resisted by businesses before passing in 1993. The
law contains many exemptions it doesnt apply to firms with
fewer than 50 employees and mandates that employees must
work for a company for at least 1,250 hours in the previous year
to be eligible. As a result, 43 percent of private-sector workers
fail to qualify. Paid leave is far scarcer: In 2012, only 15 percent
of workers in medium and large companies, 8 percent of small
business employees and 4 percent of part-time workers had that
option. And 23 percent of women who did take leave were back at
work within two weeks of giving birth.
10

THE ARGUMENT

As states and cities have discussed action, some business groups

in those places have argued that a paid-leave mandate would
give an edge to competitors elsewhere. Many Republicans back
allowing private workers to exchange overtime for paid leave,
arguing that this wouldnt impose new costs on companies.
Supporters of paid leave say it could help the economy
by reversing a slump in the American womens labor force
participation rate, which has fallen to 63 percent, just below
Japans. Studies in California and New Jersey found that most
businesses reported no negative impact from their paid leave
programs and researchers said they cut worker turnover. Polls
show support for the idea from a majority of voters in both parties.

Paid Maternity Leave Around the World

Country

Avg. payment rate

Weeks of paid leave (2014)

Bulgaria

90%

59

U.K.

31%

39

Slovakia

65%

34

Croatia

100%

30

Czech Republic 70%

28

Poland

100%

26

Ireland

35%

26

Hungary

70%

24

Italy

80%

22

Estonia

100%

20

OECD average

78%

17

U.S.

None

None

Source: OECD

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GUNS IN AMERICA
BY ESM E. DEPREZ

THE SITUATION

Frustrated by Congressional gridlock over gun laws, U.S.

President Barack Obama issued a series of executive orders
in January aimed at reducing gun violence. Notably, the orders
expand the definition of gun sellers who require licenses and
must conduct background checks on potential purchasers. In a
2015 survey by Harvard researchers, 40 percent of gun owners
said theyd acquired their most recent weapon without such a
check. Gun-rights advocates threatened to challenge Obamas
orders. A Congressional bill to expand background checks was
defeated in a momentous vote in 2013, after the massacre the
year before at an elementary school in Newtown, Connecticut.
States led by Democrats, including Connecticut, New York and
Maryland, expanded bans on assault weapons, while California
created a new type of restraining order meant to keep guns
out of the hands of the mentally unstable and Oregon closed a
background-check loophole. But a majority of states weakened
restrictions, and many now permit guns in more places, including
schools, restaurants, churches and public buildings. Hidden guns
are now allowed in all 50 states, and many states have expanded
rights to use guns in self-defense. The U.S. has a higher percapita rate of firearm homicides than any other industrialized
nation. Harvard and Northeastern University researchers say
mass shootings have been increasing in frequency since 2011.

THE BACKGROUND

The U.S. is one of three countries to include gun-ownership

rights in its constitution. (Mexico and Guatemala are the others.)
The right of the people to keep and bear arms, enshrined in
the Second Amendment, was established in the 18th century
to allow states to form militias to protect themselves against
oppression by the federal government. Interpretation has evolved,
and in 2008, the U.S. Supreme Court ruled that the amendment
protected the gun rights of individuals, not just militias. Beyond
the legalities, the gun is a cultural icon in the U.S. a necessary
instrument of soldiers in the Revolutionary War, frontiersmen
conquering the Great Plains, cowboys roaming the Wild West.
The number of guns in private hands is thought to have grown
to as high as 310 million, even as recent surveys show that a
record low of 32 percent of Americans own at least one of those
firearms or live with someone who does, down from more than
50 percent in the late 1970s to early 1980s. Shootings in other
countries also lead to debates over regulation. Switzerland, which
combines a high gun ownership rate with a low homicide rate,
11

Photo: Jordan Alexander Ciampini/Getty Images

Each new mass shooting in the U.S. reignites debate

over the countrys treatment of gun rights as virtually
sacrosanct. Americans own more guns than anybody
else on earth, even adjusted for population. (Yemenis
are second.) Firearms are involved in the deaths
of more than 30,000 people in the U.S. annually,
about two-thirds of which are suicides. Guns are
also integral to the story of the nations founding.
The National Rifle Association, the dominant pro-gun
group, has been on a decades-long winning streak
convincing courts and lawmakers to loosen gun
restrictions and to prevent the passage of new ones.
began considering weapons-control measures in 2013 after mass
shootings in consecutive months.

THE ARGUMENT

The well-funded NRA and its allies argue that gun regulations
only hurt law-abiding gun owners because criminals simply ignore
them. They note that since Congress let a ban on assault weapons
expire in 2004, violent crime in America has fallen significantly,
while fatal and non-fatal shootings are also down slightly.
Meanwhile gun-control advocates (some backed by Michael
Bloomberg, founder and majority owner of Bloomberg News parent
Bloomberg LP) say limiting weapons will drive down gun-related
crimes. Australia enacted strict gun ownership laws after a historic
massacre that left 35 people dead in 1996; since, thereve been
zero mass shootings, and the firearms homicide and suicide rates
have plummeted. An editorial in the Annals of Internal Medicine
said the level of gun violence in the U.S. amounts to a public health
crisis; the left-leaning magazine Mother Jones calculated direct
and indirect costs of $229 billion a year.

Civilian Firearms by Country

Estimated gures in millions, 2007 survey
U.S.

270.0

India

46.0

China

40.0

Germany

25.0

Pakistan

18.0

Mexico

15.5

Brazil

14.8

Russia

12.8

Yemen

11.5

Thailand

10.0

Others
Source: Small Arms Survey 2007

186.4

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TRANSGENDER RIGHTS
BY FLAVIA KRAUSE-JACKSON

Most of us grew up thinking there were boys and girls, and who was which was determined by the sex organs a
person was born with. The transgender rights movement challenges that. Its advocates say how a person feels
determines whether that individual is male, female, both or neither. People who identify as transgender suffer
from discrimination and persecution. Still, their efforts to gain acceptance and equal rights have made headway
in recent years in Westernized countries, especially in the U.S. Supporters cast their campaign as the next
chapter in the civil rights movement and as a way of liberating all people from gender stereotypes.
THE SITUATION

In the last six years in the U.S., openly

transgender individuals have been
named to federal office and the White
House staff, appointed and elected
judges, nominated for an Emmy award,
featured on the covers of Time and
Vanity Fair magazines and admitted to a
Division 1 college basketball team. The
U.S. Equal Employment Opportunity
Commission held that discrimination
against transgender people is illegal.
Medicare, the U.S. health-care program
for the elderly, extended coverage to sexreassignment surgery. The U.S. military
promised to abolish its ban on transgender
members in 2016. Increasingly, states,
schools and companies have affirmed the
right endorsed by the U.S. Department
of Justice of people to use bathrooms
matching their gender identity; at the
same time, some state lawmakers have
proposed bills barring such policies. In
November 2015, voters in Houston, Texas
invalidated a city ordinance prohibiting
discrimination against transgender and
gay people. Those who are transgender
report high rates of unemployment,
poverty and attempted suicide. Worldwide,
more than 1,700 were killed in apparent
hate crimes from 2008 through 2014, by
one count.

THE BACKGROUND

Transgender references reach back into

antiquity. Platos text Symposium mentions
a myth of a third sex. Some translations
of the Kama Sutra include references to
the behavior of such a sex. In the Indian
subcontinent, a long tradition persists
to this day of hijras, male-to-female
transgender people, who are recognized
by law as a third sex. Some transgender
people undergo hormone treatment to
achieve physical characteristics of the
opposite sex. A smaller number have
sex-reassignment surgery. The first
such operation is thought to have been
performed in 1930 in Germany on the
Danish painter who became Lili Elbe.
Some people who are transgender
say they are a third gender or have no
12

gender or identify at times as female, at

other times as male. They often ask to
be referred to as they or use created
pronouns such as zie and ey. Gender
identity is separate from sexual preference;
transgender people can be straight, gay or
bisexual. Researchers have found some
evidence suggesting a biological basis for
transgender identity.

THE ARGUMENT

Transgender people say they want

acceptance and recognition for who they
really are. They say people shouldnt be
confined by stereotypical expectations of
how males and females are supposed to
be. Skeptics say their movement reinforces
such stock roles by suggesting that
certain feelings, personality traits or ways
of looking belong to one sex and not the
other. Feminist critics argue that being

authentically female requires experiencing

womens particular hardships, which they
say is impossible for someone raised
with male privilege. Other skeptics worry
about excessive use of hormones and
surgery, especially among children,
to treat gender dysphoria, the name
psychiatrists give to discomfort with ones
inborn sex. In a 2008 study, most children
whod been gender dysphoric at ages 5
through 12 did not remain so after puberty.
Bathroom and locker-room issues are
especially divisive. Activists say compelling
transgender people to use facilities that
dont match their gender presentation
exposes them to harassment. Opponents
argue that allowing a physiologically male
transgender person to enter a girls room
invades womens privacy and invites
perverts to abuse the privilege.

The Right To Change Gender

A survey of statutes in some countries by the advocacy group Transgender Europe.

In some places, actual practice differs from the law.

Policy by
country:

Gender cannot
be legally changed

Legal gender change requires

surgery and/or sterilization

Gender can be
legally changed

Varies by
locality

Sources: Transgender Europe, Bloomberg

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