Suddenly, hope

The promise of the new covid-19 vaccine is immense

But don’t underestimate the challenge of getting people vaccinated


Nine long years elapsed between the isolation of the measles virus in 1954 and the licensing of a vaccine. The world waited for 20 years between early trials of a polio vaccine and the first American licence in 1955. 

Marvel, then, at how the world’s scientists are on course to produce a working vaccine against sars-cov-2, the virus that causes covid-19, within a single year.

And not just any vaccine. The early data from a final-stage trial unveiled this week by Pfizer and BioNTech, two pharma companies, suggests that vaccination cuts your chances of suffering symptoms by more than 90%. 

That is almost as good as for measles and better than the flu jab, with an efficacy of just 40-60%. Suddenly, in a dark winter, there is hope.

Not surprisingly, Pfizer’s news on November 9th roused the markets’ bulls. Investors dumped shares in Clorox, Peloton and tech firms, which have all benefited from the coronavirus, and instead switched into firms like Disney, Carnival and International Consolidated Airlines Group, which will do well when the sun shines again. 

The OECD, a club of mainly rich countries, reckons that global growth in 2021 with an early vaccine will be 7%, two percentage points higher than without.

There is indeed much to celebrate. Pfizer’s result suggests that other vaccines will work, too. Over 320 are in development, several in advanced trials. Most, like Pfizer’s, focus on the spike protein with which sars-cov-2 gains entry to cells. 

If one vaccine has used this strategy to stimulate immunity, others probably can, too.

Pfizer’s vaccine is also the first using a promising new technology. Many vaccines prime the immune system by introducing inert fragments of viral protein. This one gets the body to make the viral protein itself by inserting genetic instructions contained in a form of RNA. 

Because you can edit RNA, the vaccine can be tweaked should the spike protein mutate, as it may have recently in mink. This platform can be used with other viruses and other diseases, possibly including cancer, BioNTech’s original focus.

So celebrate how far biology has come and how fruitfully it can manipulate biochemical machinery for the good of humanity (there will be time later to worry about how that power might also be abused). And celebrate the potency of science as a global endeavour. 

Drawing on contributions from across the world, a small German firm founded by first-generation Turkish immigrants has successfully worked with an American multinational company headed by a Greek chief executive.

Yet despite the good news, two big questions stand out, about the characteristics of the vaccine and how fast it can be distributed. 

These are early results, based on 94 symptomatic cases of covid-19 from among the 44,000 volunteers. 

Further answers must wait until the trial has gathered more data. It is, therefore, not clear whether the vaccine stops severe cases or mild ones, or whether it protects the elderly, whose immune systems are weaker. 

Nor is it known whether inoculated people can still cause potentially fatal infections in those yet to receive jabs. And it is too soon to be sure how long the beneficial effects will last.

Clarity will take time. In the next few weeks the trial should be declared safe, though further monitoring of the vaccine will be needed. The companies predict that immunity will last for at least a year. 

The 90%-plus efficacy is so high that this vaccine may offer at least some protection to all age groups.

While the world waits for data, it will have to grapple with distribution. Vaccine will be in short supply for most of next year. Although rna jabs may prove easier to make at scale than those based on proteins, Pfizer’s requires two doses. 

The company has said that it will be able to produce up to 50m doses in 2020 and 1.3bn next year. That sounds a lot, but America alone has over 20m first responders, medical staff, care-home workers and active-duty troops. 

Perhaps a fifth of the world’s 7.8bn people, including two-thirds of those over 70, risk severe covid-19. Nobody has ever tried to vaccinate an entire planet at once. As the effort mounts, syringes, medical glass and staff could run short.

Worse, Pfizer’s shots need to be stored at temperatures of -70°C or even colder, far beyond the scope of your local chemist. The company is building an ultra-cold chain, but the logistics will still be hard. 

The vaccine comes in batches of at least 975 doses, so you need to assemble that many people for their first shot, and the same crowd again 21 days later for a booster. Nobody knows how many doses will be wasted.

So long as there is too little vaccine to go around, priorities must be set by governments. A lot depends on them getting it right, within countries and between them. 

Modelling suggests that if 50 rich countries were to administer 2bn doses of a vaccine that is 80% effective, they would prevent a third of deaths globally; if the vaccine were supplied according to rich and poor countries’ population, that share would almost double. The details will depend on the vaccine. Poor countries may find ultra-cold chains too costly.

The domestic answer to these problems is national committees to allocate vaccine optimally. The global answer is covax, an initiative to encourage countries’ equal access to supplies. 

Ultimately, though, the solution will be continued work on more vaccines. Some might survive in commercial refrigerators, others will work better on the elderly, still others might confer longer protection, require a single shot, or stop infections as well as symptoms. All those that work will help increase supply.

Only when there is enough to go around will anti-vaxxers become an obstacle. Early reports suggest the jab causes fevers and aches, which may also put some people off. The good news is that an efficacy of 90% makes vaccination more attractive.

The tunnel ahead

The next few months will be hard. Global recorded death rates have surged past their April peak. Governments will struggle with the logistics of vaccination. America is rich and it has world-class medicine. 

But it risks falling short because the virus is raging there and because the transition between administrations could lead to needless chaos and delays. Squandering lives when a vaccine is at hand would be especially cruel. 

Science has done its bit to see off the virus. Now comes the test for society. 

When Milton Friedman, prophet of profit, met a pandemic

Coronavirus sheds fresh light on the economist’s narrow definition of social responsibility

Andrew Hill

         Purist perspective: Milton Friedman in 1986 © George Rose/Getty Images

 

Among the many things Milton Friedman could not have predicted in 1970 was that the 50th anniversary of his famous New York Times essay, headlined “The social responsibility of business is to increase its profits”, would fall in the middle of a global pandemic.

The University of Chicago economist might have been less surprised that corporate social responsibility was enjoying a revival, half a century after he condemned executives for indulging in “hypocritical window-dressing” by spending shareholders’ money “for a general social interest”.

Friedman’s ideas continue to provoke debate. That much was clear at a recent online anniversary event, hosted by the University of Chicago’s Booth School of Business. As Raghuram Rajan, a Booth professor and former governor of the Reserve Bank of India, told me in a live interview at the conference, Friedman’s ideas “make sense, but only to a first approximation”. Shareholder value maximisation “sounds sinister, it sounds pro-rich, it sounds evil — even if it may be the right thing to do for society and in many circumstances”.

Today’s circumstances could not be more extreme. But they shed light on Friedman’s doctrine and how companies interpret their responsibilities, in three main ways.

First, Covid-19 has threatened some companies with the extinction of shareholder value, subjecting businesses to a shock that, despite government intervention, has put their existence in question. “At this point,” Prof Rajan told me, “the best thing [a company with thin resources] could do is focus those resources on survival, because in surviving, it provides a decent job for its workers, it continues making that widget which people buy. It lives for the future.”

Not all companies came into the crisis with thin resources. For the tech companies, nursing war chests replenished by tech-hungry consumers in lockdown, this should be a chance to go beyond bare Friedmanite requirements.

Amazon, for instance, could “do more for its various suppliers, some of whom may be struggling small and medium business units”, said Prof Rajan. “It could find ways to provide them more credit to last through the pandemic that will get it more loyalty, because people will know it can be a source of insurance, rather than just a platform.”

Second, the pandemic underlines the interconnectedness of 21st-century capitalism. “The ecosystem lives because it is integrated,” Jaime Augusto Zobel de Ayala, head of the Philippine conglomerate Ayala, told the conference. His group postponed or cancelled interest and rental payments from customers and tenants, inviting them to “symbolically hold hands, ride this out together and rebuild together”.

This sort of action exposes the “missing part” of Friedman’s thesis, said Prof Rajan. He failed to recognise that “implicit equity stakes” — such as the commitment of a company to the partnership with its workers, suppliers or customers — are “as important, sometimes, as the explicit equity stake”.

Third, the pandemic has focused attention on the changed relationship between companies and governments. Friedman attacked companies in part for acting as “legislator, executive and jurist”, and performing roles that should, by rights, be left to governments.

In many cases, though, the pandemic has made businesses realise it is in their interest to supplement a faltering public sector response. Ayala put together an emergency package, including food and medical aid, because it recognised that government support measures would take time to enact. 

“We got together and as a community put some numbers on the table and said, ‘Let’s fill a gap, because this is going to be bad’,” Ayala’s chief executive told the Financial Times in July.

More darkly, the pandemic has exposed that “a lot of our political institutions have simply broken down and they’re not functioning”, economist Margaret Blair told the conference, making it essential for the private sector to act to support the common good. She cited the joint pledge by pharmaceutical companies not to pursue regulatory approval for coronavirus vaccines without completing the necessary clinical steps. 

In effect, Prof Blair said, the groups were saying, “We can’t count on the Food and Drug Administration in the US [and other regulatory agencies] to actually do an adequate job, given the political context.”

“There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud,” Friedman wrote. But he acknowledged, however grudgingly, that acts of social responsibility were “one way for a company to generate goodwill as a byproduct of expenditures that are entirely justified in its own self-interest”.

The pandemic and its aftermath will show to what extent companies have enhanced, or squandered, that goodwill.


Andrew Hill is the FT’s management editor 

How Coke Is Shaking Things Up — and Why Its Stock Is a Buy

By Andrew Bary

Coca-Cola stock has bubbled up and down over the past five years, from $42.96 (12/31/15) to $50.68 (10/22/20). Photograph by Sarah Anne Ward; Food Styling by Ed Gabriels for Halley Resources


Long before people started talking about globalization, Coca-Cola was living it. Coke is in more than 200 countries and for many decades has had a global reach like no other consumer company. And when the world starts to get back to normal in 2021, the soda giant will be poised to rebound along with it.

As a postpandemic “reopening” play, however, shares of Coca-Cola (ticker: KO) seem to be underappreciated. The stock has lagged behind PepsiCo (PEP) and Procter & Gamble (PG) this year.

It shouldn’t. More than those consumer peers, Coke benefits from rising living standards in the developing world. And Coke provides exposure to a weaker dollar because the company generates about 75% of its profits outside the U.S.

Investors are also overlooking a great operational turnaround story. Under its dynamic CEO of the past three years, James Quincey, Coke has largely sold off its company-owned bottling operations to franchisees, resulting in a capital-light business model with strong free-cash-flow generation.

“The beverage industry is a growth industry, and we are the market share leader not just in soft drinks, but also in other major categories, and we are gaining share,” Quincey tells Barron’s.

Still the Real Thing

Coca-Cola faces many challenges, but it remains the market leader in the U.S. beveragemarket.



The pandemic and its restrictions have hurt Coke, which gets about half of its sales from restaurants, cafeterias, stadiums, and other places and events outside the home. Quincey is optimistic, however.

“I believe the away-from-home [market] will come back if one is worried about the short term,” he says. “We are social animals. We love to mix and mingle and love to have experiences. That will come back, and Coke is pre-eminently positioned to benefit from the recovery from the pandemic, given the long-term positive trends in the beverage industry and our position as the leader.”

The CEO wants Coke to be bolder and better attuned to innovative beverages, including energy drinks and coffee-linked products, and more aggressive in culling “zombie” brands—as it recently did with Tab, the diet soda introduced in 1963—while continuing to expand its core soft-drink franchise.

The Covid-19 crisis has heightened Coke’s focus on these issues, with the company weighing the elimination of half of its 500 brands worldwide.

“Coke is a great recovery play going into 2021,” says Lauren Lieberman, an analyst at Barclays. “Coke is using this period to accelerate operational and strategic change that should allow the company to come out more profitable and with faster growth than before Covid.” She has an Overweight rating and $59 price target on the shares.

The stock, at around $50, is off 8% in 2020, and carries a bond-like yield of 3.2%, nearly double that of the S&P 500 index.

The annual dividend of $1.64 a share looks safe, despite a high payout of earnings. The dividend has been raised for 58 consecutive years, and is likely to increase in coming years, adding to the appeal of the stock.

Morgan Stanley recently identified Coke as a “mispriced” reopening stock. The company’s “long-term top-line growth outlook is above peers’, with strong pricing power and favorable strategy tweaks under Coke’s relatively new CEO, including increased innovation and a cultural shift toward a total beverage company,” wrote Morgan Stanley’s beverage analyst Dara Mohsenian.

Still, the shares aren’t cheap, trading for about 24 times projected 2021 earning of $2.09 a share. Coke critics call it a no-growth “growth” stock, given that earnings have been stuck around $2 a share for the past decade.

Yet profits could be set to finally break out. Credit Suisse analyst Kaumil Gajrawala sees $2.70 in 2023 earnings—15 cents above the consensus— and thinks that the stock could hit $70 then. The analyst has an Outperform rating on Coke, with a $57 price target. “The business was fundamentally restructured and showing momentum pre-Covid, and while the improvement has been delayed, it has not been derailed,” Gajrawala says.

Coke targets 7% to 9% annual growth in earnings per share, and Gajrawala thinks the company can beat that goal coming out of 2021.

A strong dollar has dampened Coke’s profits; currency translations are expected to have a high-single digit impact on 2020 earnings after an eight-percentage point hit last year. But should the dollar weaken, few large companies would be bigger beneficiaries than Coke.

The soft-drink titan had strong years in 2018 and 2019, during which its organic revenues rose 5% and 6%, respectively. Reflecting pre-Covid optimism about Quincey and his strategy, Coke shares peaked at $60 in February.


CEO James Quincey wants Coca-Cola to be bolder with beverage innovations. Coca-Cola With Coffee and a hard seltzer are coming next year. /Melissa Golden/Redux


The progress halted in mid-March. Second-quarter organic revenue fell 26%, while earnings per share dropped 33%, to 42 cents a share.

“We started to win share in a growing industry, and that’s what you saw in 2018 and 2019,” CEO Quincey says. “And that’s what I think we can see growing forward and that will allow us to break out of the famous $2 a share in EPS”—he pauses—“infamous $2 a share in EPS.”

The company saw an improvement in the third quarter as adjusted earnings fell 2%, to 55 cents a share, from the year-earlier level, nine cents better than the consensus estimate, while volume slid 4%, compared with a 16% drop in the second quarter. The results, released on Thursday, cheered investors. Coke shares rose 2%, and several analysts raised their price targets.

Shelf Life

How Coca-Cola stacks up against some other consumer giants.


Tempering the optimism was Quincey’s comment that the Atlanta-based company’s critical away-from-home business “showed signs of stalling” in September, amid greater Covid-19 restrictions in several markets. 

Away-from-home volume was down in the midteens in the third quarter, against 50% in April. Coke also offered little guidance on 2021, other than to state that it aims to “recover faster than the broader economic recovery.”

Quincey has warned that the recovery could be jagged. The surge in Covid-19 cases in Europe—an important market for Coke—and the U.S. could slow the company’s recovery. As those cases have climbed, Coke’s stock has stagnated.

Still, he says, the third-quarter results show how “we clearly adapted to the situation we face with the pandemic and how the crisis has altered the landscape of how we sell and where consumers can drink our products.” And he adds, “More importantly, we’ve been trying not just to adapt but also to improve the business through the crisis, so that we can be even stronger and more capable of growth post the crisis.”

The longer-term challenge is the company’s reliance on carbonated soft drinks, which account for almost 70% of its global beverage volume.

Consumers increasingly favor a wider variety of drinks and are focusing more on health. Coke hasn’t been a great innovator, either, coming late to trends like flavored seltzer and energy drinks. It does own a 20% stake in Monster Beverage (MNST) worth $9 billion, and its bottlers distribute Monster Energy drinks.

Coke is trying to catch up, making room for newer drinks like AHA seltzer and Coca-Cola Energy. In the U.S. next year, it plans to roll out Coca-Cola With Coffee and Topo Chico Hard Seltzer, an alcoholic seltzer.

The company has succeeded with Coca-Cola Zero Sugar, a no-calorie diet drink that tastes more like regular Coke than Diet Coke. 

Coke Zero Sugar has had double-digit volume growth in recent years, but it remains a third the size of Diet Coke in the U.S., according to Beverage Digest. 

The Claus that refreshes: A local Coca-Cola salesman dressed as Santa Claus distributes gifts to an orphanage in Bacolod, in the Philippines, in 1999. Emerging markets like the Philippines are key to Coke’s growth./ Marcial Angelo/AFP/Getty Images


“Full sugar may be challenged, but low- and no-sugar is growing, and Coke Zero Sugar is a case in point,” says Lieberman of Barclays.

The company is trying to get in shape for a rebound. In August, Coke said that 4,000 employees would be offered enhanced severance packages in a program projected to cost $350 million to $550 million.

And Quincey is restructuring Coke’s global operations to help facilitate new-product introductions in its four regions—North America; Latin America; Asia Pacific; and Europe, the Middle East, and Africa—and improve cooperation. That has paid off with the successful introduction of a North American brand, Fuze Tea, in Europe, Lieberman says.

“The Coca-Cola brand and red-can Coke are held up as sacred things in the company,” says Duane Stanford, the editor of Beverage Digest. “What Quincey has said is that it’s OK to experiment with Coke with coffee and Coke Energy and extend the brand. 

He has said, ‘We can preserve the legacy of Coke and modernize it.’ It’s hard to overestimate the importance of that.”

The Cola Wars


Many investors favor rival PepsiCo’s powerhouse snack-food business, Frito-Lay, over Coca-Cola’s beverage empire. Frito-Lay generates over half of its parent’s profits.

Coke, PepsiCo, and Procter & Gamble all have similar valuations—low- to mid-20s multiples of projected 2021 earnings. A Covid-19 play, P&G has gotten a lift this year as heavy demand has led to shortages of some of its leading products, including Bounty paper towels and Charmin toilet paper.

Soda might prove more durable than critics believe, however. “The carbonated soft drink business has been a relatively reliable way to generate low- to mid-single digit sales growth,” says Brett Cooper, an analyst at Consumer Edge Research, who rates Coke Overweight, with a $58 price target.


The company doesn’t have many fans among institutional investors. Coke’s profit gains are too anemic for most big growth-stock investors, who prefer faster-growing internet “staples,” such as Amazon.com (AMZN), Facebook (FB), and Google parent Alphabet (GOOGL). And the beverage maker’s valuation makes it too pricey for many value investors.

Jason Subotky, a portfolio manager at Yacktman Asset Management, and a holder of Coke shares, sees it differently: “In an environment where rates have gone down and price/earnings multiples have gone up, one of the things you prize most are consistent and predictable businesses. Coke is one of the best-positioned companies in a world of disruption, given its market presence worldwide. Who is going to dislocate Coke?”

Consumers drink two billion servings of Coke products daily, bought at 30 million retail outlets and supplied through 225 bottling partners around the world.

Subotky says Coke’s “ability to expand the consumption of beverages and achieve reasonable volume growth and some pricing continues to be there. The currency challenge has been severe, and that might go from being a headwind to tailwind.” He views Coke as the stock market equivalent of a triple-A bond, given its 3%-plus yield and relatively stable business.

Coke’s debt carries rock-bottom yields, with the company’s 10-year paper around 1.4% and its 30-year obligations at 2.5%, less than a percentage point above risk-free U.S. Treasuries.

Warren Buffett’s Berkshire Hathaway owns a stake in Coca-Cola that’s worth $20 billion. / Daniel Acker/Bloomberg


Coke’s most famous booster is Warren Buffett, whose Berkshire Hathaway (BRK.B) has owned a large stake since the late 1980s. That holding of 400 million shares, now worth $20 billion, hasn’t changed in more than 20 years. It represents 9% of the shares outstanding, making Berkshire Coke’s largest investor.

Buffett, Berkshire’s CEO, made a well-timed purchase; Coke stock rose about tenfold in the decade after he acquired his holding.

But the shares haven’t appreciated much since 1998. Coke’s stock market ranking has fallen to 29th from eighth since 1998, and its current market capitalization of $218 billion is below Salesforce.com’s (CRM) $227 billion.

Buffett declined to comment to Barron’s, but he told CNBC two years ago that “if you look at the return on tangible assets, you’ve got a very good business,” while acknowledging that “it doesn’t look as good as it did five or 10 years ago.” He attributed that to reduced brand loyalty linked to a growing willingness among consumers to try different products.

A numbers maven, Buffett pointed out that Coke sells 100 ounces of beverages annually for each of the seven billion people on the planet.

He’s a big consumer, drinking several Cokes a day. Buffett even has a Coke soda fountain in his Omaha office. He joked earlier this year in a Yahoo! interview that all of those Cokes may have helped him stave off Covid-19.

A potential new worry for Coca-Cola is the rise of socially responsible and environmental, social, and corporate governance, or ESG, investing. Coke’s high-sugar drinks, critics say, contribute to the global obesity problem. Then there is the environmental impact of all the waste from the 120 billion plastic bottles used to package its products each year.



Jeff Ubben, a leading activist investor who is now a socially conscious one, said recently that Coke could be hurt by the plastic-waste issue.

“The externalities of the core business are now starting to be reflected in the stock price,” Ubben said at a Reuters conference on ESG investing. In June, he retired from ValueAct Capital to start Inclusive Capital Partners.

Coke says that its overall recycling rate is 60%, with plastic bottles at about 55%. It aims to get to 100% by 2030. Just 10% of its plastic containers are from recycled material.

It’s harder to finesse the obesity issue. Coke gets a high percentage of sales from sugary drinks.

In response, Quincey points to the growth of no-sugar brands like Coke Zero sugar, reformulations of existing brands to lower sugar, and an emphasis on smaller packaging sizes.

“We have a clear strategy to be part of the solution,” he says.

Coke says that 45% of its brands are “low” or “no” sugar, which it defines as about 17 grams or less per 12-ounce can. A 12-ounce can of regular Coke has 39 grams of sugar and 140 calories.

But just 29% of its sales volume comes from low- or no-sugar drinks.

Smaller packages, like the popular 7.5 ounce cans of Coke with 90 calories each, are what the company calls a more permissible “treat.” The smaller cans also generate about double the profits to the Coke system.

Few big consumer companies have been hit harder by the pandemic than Coca-Cola. Yet, as people start heading back to restaurants, stadiums, arenas, and concerts and other events in an increasingly Covid-19-vaccinated world—perhaps as early as next year—the beverage giant’s out-of-home exposure could be a positive catalyst for its shares. With good news on Covid vaccines, the move into Coke shares could even start later this year.

In the interim, investors can enjoy a 3%-plus yield—and a Coke beverage. As the company’s ads say, “Together Tastes Better.”

The 1.4bn-people question

Apparatchiks and academics alike struggle to take China’s pulse

Pollsters have to use roundabout ways to find out what people are thinking



Among those arrested after the nationwide pro-democracy protests of 1989 were students, playwrights, poets—and a pollster. Earlier that year Yang Guansan had sent the results of China’s first public-opinion surveys to Zhao Ziyang, then the Communist Party’s chief. To Mr Yang, they suggested that unrest was imminent. 

After Zhao was purged for opposing the use of troops to crush the demonstrations, investigators discovered Mr Yang’s submission. Found guilty of inciting the protests, the researcher was locked up for two years.

For decades the party had scorned opinion polls as bourgeois and unnecessary—it embodied the will of the Chinese people, so why ask them what they thought? But it has become more open to pulse-taking since Mr Yang’s ordeal, which was described in an article by Tang Wenfang of Hong Kong University of Science and Technology, published in 2018. 

Mr Yang says the party is “more paranoid” about public opinion than its democratic peers because it lacks elections or a free press for feedback. Now ministries and official media have their own polling units. Universities run state-funded social surveys.

In the internet age the party has been trying to gauge popular feeling in real time. Tech giants and consultancies such as Womin Technology offer help. In a report circulated online, apparently sent to the “central authorities” in February, Womin gave advice on how to handle swelling anger online over the death of a whistle-blowing doctor from covid-19. 

It suggested that recognising the doctor’s contribution and blocking information put out by “foreign forces” would restore calm. (Perhaps coincidentally, that was the tactic adopted.)

But social-media chatter can be hard to interpret, in part because the government’s own censors work hard at suppressing subversive comments and injecting pro-party ones. Netizens often use coded messages, self-censor, or avoid posting on sensitive topics. 

Hu Yong of Peking University has identified two types of online public opinion in China: popular sentiment and views crafted or given prominence by the state. It is often hard to tell the genres apart.

In a crisis, while officials are still unsure what line to impose, the job can be a little easier. “If you act fast, you can get good results,” says Mr Tang, noting a brief period of openness on the Chinese web early in the covid-19 epidemic. 

Sometimes critical opinions on public health, the environment and even official corruption are left uncensored, providing they do not support collective action. But views expressed online offer only a partial picture. It is mainly young, urban and tech-savvy Chinese who use social media.


For all its embrace of opinion polls, the government often does not publish the results of state-sponsored ones. Many are narrowly focused, aiming to gauge feelings about a particular local-government project, for example. The few Chinese universities that conduct nationwide social surveys are cautious, too. 

They avoid sensitive social or political questions. One academic recalls having to push for questions related to labour disputes among migrant workers to be included in a survey. He succeeded, but the findings were kept confidential. 

Foreigners are banned from conducting direct surveys in China, forcing them to team up with Chinese pollsters or outsource to them.Between 2003 and 2016 scholars at Harvard University, working with a Chinese partner, conducted a nationwide survey of political trust. Its key finding was that levels of confidence in the central government were high (see chart).

But in the past five years it has become much harder for scholars abroad to find partners in China who are willing to help with such surveys. And in China’s increasingly repressive political environment, researchers struggle to ensure that results are not skewed by respondents’ nervousness. More are resorting to workarounds, says Xu Yiqing of Stanford University. 

The “list experiment”—often used in polls globally to ask about racism or drug use—can shield someone from having to give a direct answer to a political question. It involves asking respondents to give the total number of affirmative answers to a list of questions (eg, “Did you travel abroad this year?”). But half of them get the same list with one additional sensitive question (“Did you join a protest this year?”). 

Another way is to let respondents toss a coin and answer “yes” to a question if they get heads, or honestly if they get tails, allowing researchers to calculate a proportion from half of the total pool of survey-takers. Using the list experiment, Mr Tang finds that answers on trust in the party are inflated by only about eight percentage points (those on bribe-giving vary by up to 35).

So why not encourage independent pollsters to conduct more big-picture surveys of the public mood? Would they not help the party to sense trouble long before it erupts, and avoid another 1989-style calamity? 

Good questions, but those about the party’s own anxieties are among the most difficult to raise of all. 

In need of a new edifice

Chile’s momentous referendum on its constitution

The country will probably become more social-democratic. Will it become spendthrift?


A year after the outbreak of huge protests in which at least 30 people died, Chileans assembled again. 

The combination of mass civility and minority mayhem was familiar. Tens of thousands of flag-waving demonstrators congregated peacefully on October 18th in Plaza Italia in central Santiago, the capital. In the afternoon fights broke out between football gangs. 

The day ended with attacks on police stations and two churches ablaze.

The pandemic has largely contained such protests. But a more enduring solution is supposed to come from a referendum, to be held on October 25th, on whether Chile should scrap its constitution and write a new one. 

“This provides a chance to channel in a civilised way something that got really scary,” says Javier Couso, a constitutional scholar at Diego Portales and Utrecht universities who advises the centrist Christian Democratic Party.

The problems with the current constitution start with its origins. Adopted in 1980, it is the work of the regime led by Augusto Pinochet, a despot who ruled until 1990. Although it acknowledged basic freedoms, a state of emergency suspended these until the regime’s final days. 

Under the influence of pro-market economists educated at the University of Chicago, it not only protected the private sector but gave it a big role in providing public services. 

“It is the one that most favours the private sector in the world,” says Mr Couso.

Chile prospered under Pinochet’s charter, which later governments amended dozens of times. Since 1990 the economy has grown rapidly, poverty has fallen sharply and politics have been stable. 

But the anger that flared last year has been building for more than a decade. Chileans fume about two-tier health care, which serves the rich better than ordinary folk; about the poor quality of state schools; and about privately managed pensions, which pay out less than many people expected.

Chileans largely blame the constitution. By giving citizens a choice of contributing towards the public health-care system or a private one, the charter makes it hard for the state to set up a taxpayer-financed health-care system like Britain’s nhs. When a left-leaning government sought to strengthen the consumer-protection agency, by allowing it to fine companies, the Constitutional Tribunal overruled it. 

The court might also strike down any attempt to replace privately managed pensions as an infringement of the right to choose between public and private systems. Changes to laws on education, policing, mining and elections require four-sevenths majorities in both houses of Congress.

In critics’ eyes the constitution is not just “neoliberal” but “hyperpresidential”. It gives the president the power to dictate which bills get priority in Congress. Members may not propose tax or spending bills. Regions cannot raise their own revenues, which concentrates power in Santiago. 

The constitution is “designed to neutralise democratic politics”, says Fernando Atria, a legal scholar at the University of Chile and head of Common Force, part of the left-wing Broad Front alliance.

On October 25th voters will also choose whether to entrust drafting to an elected assembly, half of whose members would be women, or to a convention split evenly between elected delegates and members of Congress. What might they write on the blank sheet? 

They will probably agree to a constitutional mention of indigenous Chileans, 9% of Chile’s 19m people, and perhaps encourage use of their languages. The president will probably lose some powers; some delegates will argue for adopting a parliamentary system. There may be more scope for referendums.

Any new constitution is likely to make Chile more social-democratic. Advocates of the new charter want to introduce the idea of “equality of opportunity”, which in Chilean terms means making better public services affordable for everyone. They will press for the creation of new social rights, such as an entitlement to housing. 

Some fear that all this will compel the government to spend money it does not have. 

The autonomy of the Central Bank, which has helped kept inflation low, could be weakened. The far left will not realise its dream of nationalising industries, believes Bernardo Larraín, president of sofofa, a business lobby, but a new constitution could weaken property rights.

Such risks are heightened by the political calendar. The assembly, to be elected next April, will be deliberating as the country holds presidential and congressional elections next November. Campaign promises will influence the drafters.

The danger is lessened, however, by the requirement that two-thirds of the convention must approve every clause in the new document. The odds are that the pro-business centre-right and the small group still nostalgic for Pinochet’s rule will have a blocking minority. 

New demands on government spending may be tamed by rules that protect fiscal stability. The shift towards more social rights will not be radical, predicts Verónica Undurraga, a professor of law at Adolfo Ibáñez University. 

If Chileans fail to rewrite their constitution now, demands for radicalism could grow.