Donald Trump’s bad judgment on the Paris accord
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The withdrawal from a shared commitment to protect our planet has disturbing echoes
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by: Martin Wolf   
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The US is a rogue superpower. Its decision last week to renounce participation in the climate agreement reached in Paris in December 2015 underlined this reality. The question is how to respond.

Denial of man-made global warming is an article of faith for many Republicans: Donald Trump’s hostility to action is no idiosyncrasy. But clever lobbying reinforces disbelief. The debate parallels those on the dangers of lead and tobacco. In those cases, too, lobbies exploited every uncertainty. The arguments for action on climate are quite as strong as on lead and tobacco. But obfuscation has again been effective.

American views on the US role in the world also matter. HR McMaster and Gary Cohn, Mr Trump’s advisers on security and economics, have recently written that: “The president embarked on his first foreign trip with a clear-eyed outlook that the world is not a ‘global community’ but an arena where nations, non-governmental actors and businesses engage and compete for advantage. We bring to this forum unmatched military, political, economic, cultural and moral strength. Rather than deny this elemental nature of international affairs, we embrace it.” These, we must remember, are the “adults” in the White House.

The US abandoned such a 19th-century view of international relations after it ended so catastrophically in the 20th. In its place came the ideas, embedded in the institutions it created and the alliances it formed, that values matter as well as interests and responsibilities, as well as benefits.

Above all, the earth is not just an arena. It is our shared home. It does not belong to one nation, even such a powerful one. Looking after the planet is the moral responsibility of all.

Hostility to science and a narrow view of interests laid the ground for Mr Trump’s repudiation of the Paris accord. But his speech was also a characteristic blend of falsehood and resentment.





Thus, Mr Trump stated that “as of today, the United States will cease all implementation of the non-binding Paris accord and the draconian financial and economic burdens the agreement imposes on our country”. Yet a “non-binding” agreement can hardly impose draconian financial and economic burdens. Indeed, the point of the agreement was that each country should come up with its “intended nationally determined contribution”. The underlying mechanism of the Paris accord was peer pressure, aimed at achieving a shared goal. No coercion was involved.

Mr Trump also argued that the agreement would have little effect on the climate. As it is, that is true. The main reason for this is that significant players — including the US — would not agree to anything more. Arguing against adhering to an agreement because it is ineffective, when one’s country’s recalcitrance helped make it so, is ludicrous.

Mr Trump asserted that: “We don’t want other leaders and other countries laughing at us any more. And they won’t be. They won’t be.” That is a paranoid fantasy. The US is the second-largest global emitter of carbon dioxide. Its emissions are 50 per cent larger than the EU’s and its emissions per head are twice those of that bloc or Japan. Far from being exploited by others, as Mr Trump suggests, the US emits exorbitantly. American co-operation is not a sufficient condition for management of climate risks. But it is a necessary one. This repudiation is no laughing matter.




Since the agreement is built on national commitments, the sensible path for the US would have been to stay in the process and push for far more ambitious plans all around. It could have linked its efforts to what others, notably China, were willing to do. Yet now, outside the framework, it will achieve nothing of the kind. Nor is there any real chance of negotiating another framework. The commitments should evolve. The framework will not.

In the 1920s, the US repudiated the League of Nations. That led to the collapse of Europe’s post-first world war settlement. Now, it is withdrawing from a shared commitment to protect our planet. The echoes are disturbing.

True, 12 US states, which generate more than a third of gross domestic product, and 187 US cities have pledged to cut their emissions by 26-28 per cent below 2005 levels, by 2025, as the country promised under Barack Obama. Yet, however desirable, that cannot replace a commitment by the US, as former treasury secretary Hank Paulson argues.



Optimists also argue that technological progress on renewables is so fast that policy decisions may not matter: economics alone will drive the needed de-carbonisation of economies. This still looks implausible. Incentives and other interventions continue to matter, particularly since investment decisions have such a long-lasting effect. The infrastructure we build today will shape energy use for decades.

The remaining participants in the accord must stick to their plans. They must also commission an analysis of how to deal with free riders. Everything must be considered, even sanctions.

Meanwhile, those Americans who understand what is at stake need to fight against the irrationality and defeatism that led to this. If any country has the resources to make a success of the energy transition it is theirs.

The US cannot be made “great” by rejecting global responsibility and embracing coal. That is atavistic. Mr Trump’s appeal to irrationality, xenophobia and resentment is frightening. The world must struggle on, trusting that Americans will once again be touched, in Abraham Lincoln’s glorious words, by “the better angels” of their nature.


Virtual vertigo

What if the bitcoin bubble bursts?

Is the latest frenzy like tulipmania, a gold rush or the dotcom boom?

 
MARKETS frequently froth and bubble, but the boom in bitcoin, a digital currency, is extraordinary. Although its price is down from an all-time high of $2,420 on May 24th, it has more than doubled in just two months. Anyone clever or lucky enough to have bought $1,000 of bitcoins in July 2010, when the price stood at $0.05, would now have a stash worth $46m. Other cryptocurrencies have soared, too, giving them a collective market value of about $80bn.
Ascents this steep are rarely sustainable. More often than not, the word “bitcoin” now comes attached to the word “bubble”. But the question of what has driven up the price is important. Is this just a speculative mania, or is it evidence that bitcoin is taking on a more substantial role as a medium of exchange or a store of value? Put another way, is bitcoin like a tulip, gold or the dollar—or is it something else entirely?

Start with the case that this is nothing more than a virtual tulipmania, a speculative hysteria in which a rising price encourages ever more buyers, no matter what the asset is. Bitcoin’s recent trajectory certainly seems manic. Retail investors have piled in. Many already familiar with bitcoin investing have moved on to bet on alternatives, such as Ethereum, and “initial coin offerings” (ICOs), in which firms issue digital tokens of their own.

It looks like a scammers’ paradise, yet unlike tulips, bitcoins have real uses. They now buy everything from pizzas to computers. So if a tulip isn’t the right analogue, how about gold? Bitcoins certainly seem to bear more than a passing resemblance. Goldbugs mistrust governments and their money-printing tendencies; so too do bitcoinesseurs: no central bank is in charge of bitcoin. But a store of value should not bounce around as much as this one does: bitcoin swung from more than $1,100 in late 2013 to less than $200 a year later, before climbing, in fits and starts, to its current dizzying heights.

Rather than being just a form of digital gold, bitcoin aspires to loftier goals: to be a means of exchange like the euro, yen or the dollar. Regulators are starting to take bitcoin seriously. Some of the price surge can be explained by Japan’s decision to treat bitcoin more like any other currency. Yet the bitcoin system is operating at its limits and its developers cannot agree on how to increase the number of exchanges the system is able to handle. As a result, a transaction now costs nearly $4 in fees on average and takes many tedious hours to confirm. For convenience, a dollar bill beats it hands down.
Not so dotty
 
If bitcoin and the other cryptocurrencies are unlike anything else, what are they? The best comparison may be with the internet and the dotcom boom it created in the late 1990s. Like the internet, cryptocurrencies both embody innovation and give rise to more of it. They are experiments in themselves of how to maintain a public database (the “blockchain”) without anybody in particular, a bank, say, being in charge. Georgia, for instance, is using the technology to secure government records. And blockchains are platforms for further experiments. Take Ethereum, for example. It allows all kinds of projects, from video games to online markets, to raise funds by issuing tokens—essentially private money that can be traded and used within these projects. Although such ICOs need to be handled with care, they could also generate intriguing inventions. Fans hope that they will give rise to decentralised upstarts taking aim at today’s oligopolistic technology giants, such as Amazon and Facebook.

This may seem like a dangerous way to generate innovation. Investors could lose their shirts; a crash in one asset class could spread to others, creating wobbles in the financial system. But in the case of cryptocurrencies such risks seem limited. It is hard to argue that those buying cryptocurrencies are unaware of the risks. And since they are still a fairly self-contained system, contagion is unlikely.

If there is such a thing as a healthy bubble, this is it. To be sure, regulators should watch out that cryptocurrencies do not become even more of a conduit for criminal activity, such as drug dealing. But they should think twice before coming down hard, particularly on ICOs. Being too spiky would not just prick a bubble, but also prevent a lot of the useful innovation that is likely to come about at the same time.


The Global Recovery’s Downside Risks

Nouriel Roubini
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NEW YORK – For the past two years, the global economy has been growing, but it has swung between periods of rapid expansion and deceleration. During this period, two episodes, in particular, caused US and global equity prices to fall by about 10%. Is a pattern emerging, or is a fitful global recovery set to stabilize?
 
The first episode came in August/September 2015, when many observers feared that China’s economy could be headed for a hard landing. The second episode, in January/February 2016, also stemmed from concerns about China. But investors were also increasingly worried about stalling US growth, collapsing oil and commodity prices, rapid interest-rate hikes by the US Federal Reserve, and unconventional negative-rate monetary policies in Europe and Japan.
 
Each deceleration episode lasted for about two months, at which point the correction in equity prices began to reverse. Investors’ fears were not borne out, and central banks began to ease their monetary policies; or, in the case of the Fed, put rate hikes on hold.
 
As a third example, one could cite the period following the United Kingdom’s Brexit referendum in June 2016. But that episode was more short-lived, and it did not cause a global slowdown, owing to the small size of the UK economy and monetary easing at the time. In fact, in the months before US President Donald Trump’s election last November, the global economy actually entered a new period of expansion – albeit one in which advanced and emerging-market economies’ potential growth remained low.
 
We may still be living in what the International Monetary Fund calls the “new mediocre” – or what the Chinese call the “new normal” – of low potential growth. And yet economic activity has started to pick up in the US, Europe and the eurozone, Japan, and key emerging markets.
 
Owing to new stimulus measures, China’s growth rate has stabilized. And emerging markets such as India, other Asian countries, and even Russia and Brazil – which experienced recessions between 2014 and 2016 – are all doing better. So, even before the US presidential election had inspired “Trump trades,” a “reflation trade” had signaled a new phase of modest global expansion.
 
Recent economic data from around the world suggest that growth could now accelerate. And yet one cannot rule out the possibility that the current expansion will turn into another global slowdown – if not an outright stall – if some downside risks materialize.
 
For example, markets have clearly been too bullish on Trump. The US president will not be able to pass any of the radical growth policies he has proposed; and any policy changes that he does make will have a limited impact. Contrary to what the administration’s budget projections claim, annual economic growth in the US has almost no chance of accelerating from 2% to 3%.
 
At the same time, markets have underestimated the risks of Trump’s policy proposals. For example, the administration could still pursue protectionist measures that would precipitate a trade war, and it has already imposed migration restrictions that will likely reduce growth, by eroding the labor supply.
 
Moreover, Trump might continue to engage in corporatist micromanagement, which would disrupt the private sector’s investment, employment, production, and pricing decisions. And his fiscal-policy proposals would provide excessive stimulus to an economy that is already close to full employment. This would force the Fed to raise interest rates even faster, which would derail the US’s recovery, by increasing long-term borrowing costs and strengthening the dollar.
 
Indeed, Trump has introduced such profound fiscal uncertainty that the Fed could make a mistake in its own policymaking. If it does not increase rates fast enough, inflation might balloon out of control.
 
The Fed would then have to hike rates rapidly to catch up at the risk of triggering a recession.
 
A related risk is that increasing rates too slowly could lead to an asset-price bubble and all the dangers – frozen credit markets, soaring unemployment, plummeting consumption, and more – implied by its inevitable deflation.
 
The current Fed chair, Janet Yellen, is unlikely to make a mistake. But over the course of the next year, Trump will have the option of appointing five, and possibly six, new members to the Fed’s seven-member Board of Governors. If he chooses poorly, the risk of serious policy errors will increase substantially.
 
Markets are also underestimating today’s geopolitical risks, many of which stem from Trump’s confused and risky foreign policies. Indeed, the global economy could be destabilized by any number of scenarios involving the US. A military confrontation between the US and North Korea now seems plausible. So, too, does a diplomatic or military conflict between the US and Iran that results in an oil-supply shock; or a trade war between the US and China that escalates into a larger geopolitical conflict.
 
But Trump is not the only global risk. China has resorted to a fresh round of credit-fueled fixed investment to stabilize its growth rate. That means that it will have to deal with more toxic assets, debt, leverage, and overcapacity in the medium term. And because growth and economic stability will top the agenda at the Chinese Communist Party’s National Congress later this year, discussions about how to rebalance growth and implement structural reforms will take a back seat. But if China does not jumpstart structural reforms and contain its debt explosion by next year, the risk of a hard landing will return.
 
Elsewhere, the recent Dutch and French election results (and favorable expectations for the German election this September) have reduced the risk that populists will come to power in Europe. But the EU and eurozone are still in an economic slough. And market fears of a disintegrating eurozone will return if the anti-euro Five Star Movement comes to power in Italy’s next election, which could be held early this fall.
 
In the next year, a more robust and persistent global recovery will depend largely on whether policymakers avoid mistakes that could derail it. At least we know where those mistakes are most likely to be made.
 
 


Get Ready for the Fed’s Big Mistake

By Patrick Watson
 
America is fully employed, or so say the statistics. Federal Reserve officials think the job market is strong enough to justify higher interest rates. They’re afraid inflation will get out of control.
 
But if inflation is a problem, it’s not yet apparent in the average worker’s paycheck. “Just wait,” the inflation hawks say.
 
Like many economic dilemmas, this one includes several big assumptions. One is that having a job means you have a steady income. Maybe you want more, but you at least have some kind of reliable baseline.
 
A pile of evidence says that may no longer be a good assumption. If so, Janet Yellen and whoever follows her will be making a huge mistake. We all need to get ready for it.
 

Photo: AP

Persistent Puzzle

We all know people who are unemployed or underemployed – probably more than the stats say we should. Are the official numbers wrong?
 
Yes, they could be flawed. But even if they’re right, it doesn’t mean everyone is happy about it.
 
Maybe you lost your job because your company went bankrupt. No other employers in your area need your skills. You can’t sell the house and move because you’re underwater on the mortgage. With no better choices, you take a lower-skilled job at half your former pay.
 
Someone like that shows up as “employed full-time” in the stats. Yet they now live in a whole new world.
 
Such scenarios explain a lot of our discomfort. We have employment stats, we have income stats, but we lack visibility on how they interact. This makes a difference.
 
The New York Times had an interesting story on this point last month.
 
Mirella Casares has what used to be considered the keystone of economic security: a job. But even a reliable paycheck no longer delivers a reliable income.
 
Like Ms. Casares, who works at a Victoria’s Secret store in Ocala, Fla., more and more employees across a growing range of industries find the number of hours they work is swinging giddily from week to week — bringing chaos not only to family scheduling, but also to family finances.
 
And a new wave of research shows that the main culprit is not the so-called gig economy, but shifting pay within the same job.
 
This volatility helps unravel a persistent puzzle: why a below-average jobless rate — 4.4 percent in April — is still producing an above-average level of economic anxiety. Turbulence has replaced the traditional American narrative of steady financial progress over a lifetime.
 
“Since the 1970s, steady work that pays a predictable and living wage has become increasingly difficult to find,” said Jonathan Morduch, a director of the U.S. Financial Diaries project, an in-depth study of 235 low- and moderate-income households. “This shift has left many more families vulnerable to income volatility.”
 
Sound familiar? It should, if you work in the retailing, restaurant, or travel industry. They run 24/7 and constantly juggle staff schedules to meet shifting demand.
 
Among other things, this makes it very hard to cobble together a full-time income with two or more part-time jobs. The schedules inevitably conflict. You can’t be two places at once.
 
Swinging Paychecks
 
Data from the JPMorgan Chase Institute shows income swings are largest among the poor and the rich.
 
 
 
People on both ends of the income scale have similar variability but they don’t feel similar pain.
 
Wealthy people have savings and/or the ability to borrow if cash is low. For those on the lower end, an unexpected car repair or medical expense at the wrong time can be catastrophic.
 
Does any of this show up in the unemployment rate? No. People can be steadily “employed” but in terrible financial condition. And many are.
 
Maximum Monetary Uncertainty
 
To the Fed’s Federal Open Market Committee, which meets this week, this sort of thing is not part of the mandate. The law charges them with maintaining full employment and price stability.
 
The problem here is that “full employment” doesn’t mean everyone is OK. It can and does coexist with widespread financial misery.
 
Nevertheless, Janet Yellen and the other members see the sub-5% unemployment rate as Mission Accomplished. It is their cue to stop promoting job creation and start fighting inflation.
 

Photo: Alex Torrenegra via Flickr
 
This is why the Fed is (slowly) lifting interest rates and planning to reduce its bloated bond portfolio. We might get more details tomorrow.
 
Predicting what the Fed will do is even harder than usual right now. The seven-member Board of Governors has three vacancies. President Trump hasn’t nominated anyone to fill them.
 
Moreover, Janet Yellen and Vice Chair Stanley Fischer will both likely retire in early 2018.
 
We could see five of seven seats change in the next year or less, and we don’t yet know who will get them. We also don’t know how quickly the Senate will confirm any new Fed governors.
 
Next year’s “dot plot” forecasts mean little when the key dot-makers are halfway out the door and their replacements may have entirely different ideas.
 
We are in a time of maximum monetary uncertainty. By this time next year, the Fed could be…
  • Still on its present slow-tightening course
  • Sitting on its hands and doing nothing
  • Raising interest rates more aggressively
  • Cutting rates lower or even going negative
All those scenarios are completely plausible. Worse, they’re equally plausible. That makes it very hard to have a matching investment strategy.
 
So what do you do?
 

Photo: Allan Lee via Flickr
 
This is a weird environment, and it’s tempting to just sit on your hands and wait. But if you do that, you may have to wait a long time. You might miss good opportunities, too.
 
The best answer is to be ready for anything.
 
See you at the top,
 


Brazil Has Become a Gangland

With the country’s politics plagued by scandal and corruption, Brazil’s gangs are fighting a deadly and brazen turf war — inside and out of the broken prison system.

By Chris Feliciano Arnold 


On April 24, one of Brazil’s largest cartels, the Primeiro Comando da Capital (PCC), orchestrated a sophisticated heist across the Paraguayan border, dispatching dozens of gangsters equipped with automatic weapons, grenades, anti-aircraft guns, security vans, and speedboats to attack the local police headquarters as a diversion, then rob $8 million from the vault of a private security firm. It was the sort of military-type operation that Brazilian and Colombian security officials were hoping to prevent back in January, when they convened in Manaus — the capital of Amazonas, Brazil’s sprawling northwestern state — to share intelligence in light of evidence that the PCC was diligently recruiting members of the recently disbanded Revolutionary Armed Forces of Colombia, or FARC, the alumni of which are revered for their tactical experience and heavy-weapons expertise. The PCC’s “heist of the century,” as the local media called it, revealed a new level of complexity in South America’s cross-border drug wars, the latest evidence that a public security crisis was developing beneath the slow burn of Brazil’s panoramic political corruption investigation and prolonged recession. Nowhere is that crisis more apparent than in the country’s prisons, where it has been taking shape for years. 

Smoke turned to fire in the country’s prisons during the first two weeks of 2017, when at least 130 detainees were massacred by fellow inmates. The spate of prison rebellions began on New Year’s Day in Manaus, a city on the banks of the Amazon, where homegrown syndicate Familia do Norte (FDN) controls one of the world’s most vital arteries for cocaine trafficking — and the region’s chronically overcrowded prison system. On the first morning of 2017, more than 184 pretrial detainees escaped the Instituto Penal Antônio Trindade (IPAT), one of three private prisons nested on a remote road north of the city. The syndicate coordinated the mass jailbreak to divert attention from a higher-security facility up the road, where fellow FDN inmates held guards hostage for more than 17 hours while gang members executed dozens of their rivals, sharing the images on social media as military police helicopters circled overhead. One local news network broadcasted cell-phone video of prisoners shuffling among a pile of decapitated bodies, some of which they threw over the prison walls.

“The scene inside the prison is terrible,” said Pedro Florêncio, the state secretary of prisons, at a news conference the following day. “It’s shocking to see how brutal a person can be.”

Florêncio — who was dismissed from his post by Amazonas State Gov. José Melo on Jan. 13 as the crisis intensified — at first characterized the rebellion as an impromptu gang fight between the Amazon’s FDN and the rival PCC, Brazil’s most highly structured cartel that was born in the prisons of São Paulo. By the end of the week it was evident that the FDN attack was a proxy battle between warring drug syndicates elsewhere in Brazil, organized in coordination with Rio de Janeiro’s Comando Vermelho, which broke off its fragile alliance with the PCC in mid-2016. In the aftermath, conflict among cartels has spread to other prisons, resulting in the massacre of 33 inmates in nearby Roraima state the same week in an apparent PCC reprisal, and the death of 26 inmates during a Jan. 14 riot in Rio Grande do Norte. The attacks have drawn northern Brazil deeper into an escalating national war in the deadliest episode of prison violence since 111 prisoners were killed — 102 by military police — during the notorious Cirandiru riot in São Paulo in 1992.

Violent crime in Brazil is endemic, fueled by crushing income inequality, military police who treat citizens like enemy combatants, and narco-corruption that leaches money and distorts justice at every level of the system. The latest prison crisis focuses the heat of those social ills through the magnifying glass of the nation’s long-neglected prisons, where Brazil’s most pressing problems have been left to fester since the era of the military dictatorship that ruled the country from 1964 to 1985.

Increased prosperity since then has done little to reduce the homicide rate; in 2012, according to a U.N. report, Brazil’s 64,000 homicides rivaled the death toll of the Syrian civil war. Since 2000, the country’s prison population has doubled to become the fourth largest on the planet, with more than 622,000 detainees in a system designed to hold 371,000. While Brazil’s incarceration rate is less than half the U.S. rate, according to data from the World Prison Brief, 36 percent of inmates are pretrial detainees, compared with 21 percent in the United States. As a consequence, the system groans along at 157 percent capacity, compared with 102 percent for the United States, which itself is no model for sustainable incarceration practices.

While Brazil’s embattled President Michel Temer initially dismissed the first riot in Manaus as “a dreadful accident,” the bloody aftershocks spurred his administration to accelerate the release of its national public security plan, which focuses on three prongs: reducing homicides and violence against women, modernizing the prison system, and combating international organized crime. Soon after, intelligence officials from across the country met with the minister of justice in Brasilia to discuss coordination efforts. Temer has proposed building 30 new prisons, including prefabricated facilities that can be operational within a year. Yet while he has assured state governments that federal forces will support prison security operations — and some federal funding has been unlocked — there is no constitutional guarantee of federal support to states for public-security efforts. At a time when unemployment is sky high and new austerity measures are sparking nationwide strikes by teachers, police, and other public workers, the well-being of prisoners has taken a back seat to the economic woes of everyday Brazilians, opening the door for cartels like the FDN and PCC to consolidate their power.

The inmates are running the asylum

“This is a problem in every Brazilian state,” Florêncio, the secretary of prisons, said when I interviewed him in April 2016 while investigating the beheading of another prisoner at IPAT. “Criminal organizations dominate the prisons. The police fight criminals, catch them, and incarcerate them, but that’s easy. Once they are inside, the bosses can create the same environment they had on the street. They have access to women, they have access to drugs, they have access to cell phones to send commands back to the city,” he said. “That’s how they transform their cells into offices of crime.”

The overstrained prison system is plagued by violence, contraband, and escape attempts, magnified by corruption at every level. In January 2016, investigators from the National Secretary of Human Rights visited four prison units in Manaus, observing that inmates are “basically self-governing” in an atmosphere ripe for rebellion. The government watchdogs warned of broken infrastructure and severe crowding, compounded by low morale and high turnover among prison staff. They discovered inmates — in particular those from weaker criminal factions — crowded into makeshift spaces, ostensibly to be kept safe from their enemies. Armed with handmade weapons capable of breaking walls and cutting bars, and enabled by a state all too willing to defer to private prison management, the FDN was free to torture and kill rivals — arguably with more liberty than they would have on the street.

During one visit to IPAT in May 2016, the private prison management company Umanizzare went to great lengths to demonstrate the integrity of their operations, but the show tour only served to highlight the contrast between its marketing efforts and the grim realities within the walls of their prisons. Operations manager Wilson Ramos and seven other staff members walked me through their elaborate, four-stage security inspection, which was clearly no match for good, old-fashioned looking the other way. More than 2,300 illicit objects, including knives, firearms, tools, narcotics, and precision scales, were seized in Manaus prisons in 2016 — and that’s just what was caught. The same security review also discovered nine tunnels leading under state prisons, channels for escape and contraband like the knives and pistols used in the New Year’s Day rebellion.

Like prison administrators the world over, Florêncio lamented the lack of sheer physical space to house inmates and provide social services. Yet building more prisons enriches private prison operators without addressing the key underlying causes: A nightmarishly tangled judicial system with a chronic shortage of public defenders. A system overwhelmed by offenders in prison for drug-related charges, many of them nonviolent. A system staffed by underresourced, overworked, poorly paid employees — prone to low morale and chronic turnover, susceptible to bribes and intimidation.

Worst practices

Brazilian officials are eager to point out that the United States faces many of the same problems, but Brazil can stand to learn from the errors of the world’s leader in mass incarceration before it doubles down on drug enforcement and prison expansion. In the United States, expanding the prison system strengthened prison gangs, rather than weakened them, and the states with the largest prison systems — California and Texas — have a disproportionately large presence of organized gangs that control drugs and crime beyond the prison walls. In the United States, the free-market impulse to privatize incarceration has resulted in lax oversight and egregious human rights violations. Although only 3 percent of Brazilian prisons are private, almost 40 percent are privately run in Amazonas, where the prison population has doubled since 2010 in response to a crackdown on drug trafficking.

Brazil’s private prison-management lobby is eager for the corrections system to emulate the United States in its effort to modernize failing prisons, but as local, state, and federal governments reel from the findings of sprawling, ongoing corruption investigations, the country needs desperately to crack down on big prison contracts that have little oversight. The family-owned Pamas consortium — a joint venture between private prison companies LFG and Umanizzare, which allegedly donated campaign funds to Gov. José Melo in 2014 — controls the private prisons of Amazonas. Those contracts are under investigation for possible fraud and price gouging, though the companies defend their pricing on the basis that their operations costs are higher than average in the remote region, and the governor claims that the state awarded the contracts through legal means.

The state and Umanizzare would have the public believe that inmates are acquiring new skills at IPAT’s “Nuclear Learning Center,” designed to train 30 students to become either firefighters or plumbers once they leave. But on the day of my visit, the facility was devoid of books or desks. Nobody could seem to find the keys to the classrooms. At the exit of the empty room, a handwritten sign read: Don’t just throw your papers on the floor.

“We have to transform these people into good citizens, to reeducate them, to reintegrate them to society, to return them better than when they entered,” Florêncio said, “but that vision is almost utopian.” Asked to identify the resources he needs most, he answered without hesitation: “Today the most important priority is food, absolutely.”

During a tour of the IPAT kitchen, the Umanizarre handlers slipped on hairnets (for my benefit) while the staff turned meat on the grill and stirred an enormous pot of stew, boasting of the 3,000 meals they serve each day, including special fare for Christmas and Thanksgiving.

Florêncio cited prison food as the leading cause of rampant gastrointestinal illness in the system.

That day, I interviewed guards and operations managers over lunch in the staff cafeteria. “A lot of Brazilians don’t have enough respect for how serious the security situation is here, for how we’re working,” Ramos said, digging into a slab of beef with a metal knife and fork. Staff keep their own sets of metal cutlery in little pouches in a secure locker area to make sure not a single scrap of metal reaches the hands of prisoners, though it’s not unusual for Brazilian prisoners to be shanked or decapitated with metal cutlery. “We’re having some success,” Ramos said. “I stand by the system. I stand by my state.”

The staff seemed surprised when I dug into my plate of rice, beans, spaghetti, and a little cup of Coke.

“How do you like the monkey meat?” one guard asked — and old joke about prison food in Brazil.

“We’re just playing around,” another guard said. “It’s beef. Really.”

Praying for a crime wave

No matter what’s in the stew, the prisons are broken, and they’re only one shard of a fundamentally broken justice system in Brazil. Organized crime is growing — and so is the stark inequality that leaves too many young men with few ways to make a decent living. The allures of cartel life are magnified in the Amazon, so close to the world’s cocaine, so far from the rest of the world. Even youngsters who try to walk a righteous path face an early, often violent introduction to the justice system. Crime offers a brotherhood that seems stronger and more secure than the aloof state. On social media, those who escaped during the recent riots were folk heroes, and on the streets of Manaus, vendors sell DVDs of cell-phone footage of the riots, FDN vs. PCC, the pop culture incarnation of a cartel war that is staining the national fabric. Since the New Year’s massacre, the FDN has been taunting the PCC in funk songs posted on YouTube. Police in Manaus arrested a group of PCC members on a mission to kill the family of one of the FDN’s leaders.

A strain among Brazil’s elites seems more confident than ever that tough cops and hard time are the only cures for the scourge. After the first wave of riots, Temer’s National Youth Secretary Bruno Júlio gave voice to that view: “I’m pretty conservative. I’m a cop’s son, right?

There should be more killings. There should be one massacre per week.” Although he abruptly resigned, his sentiment toward prisons — and the young men of color who mostly fill them — is not all that unusual among the law-and-order crowd.

“These were no saints,” Amazonas Gov. José Melo, who was recently under investigation for election fraud, said of the riots. “These were murderers, rapists.”

No saints, perhaps, but men with families who pray for them. Every weekend on visitation days, hundreds of women and children in Manaus crowd into northbound buses, lumbering along BR-174 to the unassuming prison road beyond the landfill. On one of my visits to IPAT just before Christmas 2015, a few prisoners punted soccer balls around the main yard, searching the new arrivals for familiar faces. Vendors in the parking lot huddled under the shade of canvas tents, hawking Coke, water, and chips to the thirsty pilgrims who arrived up the gentle slope carrying birthday cakes, homemade Christmas ornaments, and newborn children. For these families, the question was not whether the prison was public or private, fair or corrupt, or whether the guards felt secure in their pensions. The question was whether their loved ones would ever come home again, and if they would still be the men their families remembered.