Chile's presidential election

The strange chill in Chile

After presiding over Latin America’s big success story for two decades, the centre-left Concertación coalition looks tired and divided

ALONGSIDE an urban motorway in Lo Espejo, a crowded working-class district of Santiago, Chile’s capital, builders are labouring in the mud of the southern-hemisphere winter to complete 125 new houses of brick and timber. In the next few weeks families from the dilapidated huts that once stood on the site will move in. The poorest among them will pay just $400 for a house costing about $20,000, part of a government policy aimed at abolishing the last remaining shantytowns in Chile by next year. They are among the 600,000 families who will have received housing grants during the four-year term of Chile’s president, Michelle Bachelet, which ends in March.

This year the programme has been expanded, as part of a fiscal stimulus totalling $4 billion (or 2.8% of GDP). This has not prevented recession: in the second quarter the economy was 4.5% smaller than in the same period last year. But it has mitigated its effects. Some 270,000 building workers are now employed on social-housing schemes, up from 145,000 a year ago. “All these projects are helping the unemployed,” says Willy Gutiérrez, a carpenter at the site in Lo Espejo.

They have also lifted the popularity of Ms Bachelet, a Socialist (see article). Despite the recession, her approval rating has soared to 72%, up from 40% in June 2008, according to polls by the Centre for Public Studies (CEP), a think-tank. So has that of her finance minister, Andrés Velasco, a liberal former Harvard professor. If the constitution did not prohibit consecutive terms, Ms Bachelet would be strongly placed to win the presidential election in December. As it is, her centre-left coalition, called the Concertación, risks losing power for the first time since democracy was restored in Chile in 1990.

As campaigning formally got under way on September 15th, the latest CEP poll gave Sebastián Piñera, the businessman candidate of the conservative opposition, 37% of the vote. Eduardo Frei, a Christian Democrat who was Chile’s president from 1994-2000 and is the official Concertación candidate, trailed on 28%, while Marco Enríquez-Ominami, a dissident Socialist congressman standing as an independent, had 17%. The past four presidential elections mirrored the result of a plebiscite in 1988 in which 56% of voters backed a return to democracy, whereas 44% wanted General Augusto Pinochet’s 16-year dictatorship to continue. Will this one break the most stable political pattern in Latin America?

Under the Concertación, Chile has been the region’s big success story, adding an increasingly robust democracy and welfare provision to the free-market economic policies bequeathed by Pinochet. In the 20 years to 2006, the poverty rate fell from 45% of the population to just 13.7%. Income distribution remains highly unequal but opportunities are widening. Eight out of ten youths now finish secondary school. Four out of ten go on to higher education and of these 70% are the first in their families to do so, in many cases thanks to government-backed grants or loans, points out Mr Velasco.

Thanks to its prudent macroeconomic policies, Chile was able to do more than many of its neighbours when recession struck last year. The Concertación has written into law a fiscal rule requiring the government to balance the budget over the economic cycle. It has paid for the large fiscal stimulus by drawing on savings piled up when the price of copper, the main export and a big source of government revenue, reached record levels in the early years of Ms Bachelet’s term.

Yet despite all these achievements, the sense of malaise in Chile is as palpable as the snow blanketing the Andes. Businessmen worry that the economy is no longer the most dynamic in South America (see chart). For years politicians have talked of the urgent need to improve the dismal quality of education and invest more in innovation and research and development if Chile is to become a developed country. They are still talking about it.

“We’ve gone from the Chilean miracle to the Chilean siesta,” declares Mr Piñera. He would keep the fiscal rule and the social-protection net, he says. But he accuses the Concertación of, in essence, caging the animal spirits of entrepreneurship. Pointing to falling productivity, he blames rigid labour legislation and the mismanagement of public investment (where $10 billion has been wasted in the past four years, he claims, citing the botched overhaul of the railway network and Santiago’s public transport). His economic adviser, Felipe Larraín, says that a Piñera government would raise the annual rate of growth to 6%, boosting productivity through tax breaks for investment, a more flexible labour market and civil-service reforms.

Mr Velasco counters that as Chile gets richer—its income per head was $10,100 in 2008—it is harder for the country to grow as fast. If Chile continues to progress at around 4% a year, that would be broadly in line with the performance of such successful economies as Finland and South Korea at the equivalent stage in their development. He points out that investment and productivity always fall during a recession. Public investment on research and development is rising. Chile continues to score highly in international league tables of competitiveness and the ease of doing business. And growth has been clipped partly by rising energy costs after Argentina ended gas exports to its neighbour.

The Concertación is more vulnerable to the charge that in its way of doing politics it has lost touch with ordinary Chileans. That is the main argument of Mr Enríquez-Ominami. Aged just 36, he describes himself as “an illegitimate child” of the ruling coalition. His father was a guerrilla leader killed by the Pinochet regime. His stepfather is a Socialist senator; his mother’s grandfather was a founder of the Christian Democrats. He grew up in France, returning to become a television director. His boyish good looks, charm and speed of phrase make him “one of the best communicators Chilean politics has ever had,” writes Patricio Navia, a political scientist, in a forthcoming book.

The young desert politics

Mr Enríquez-Ominami’s thinking is a shallow mixture of social liberalism and old-fashioned social democracy. But he, rather than his policies, is the message. His candidacy is a protest against the Concertación’s failure to hold a national primary election and against what he sees as the domination of ageing and unaccountable party bosses. He wants a political reform, partly to sweep away the electoral system of two-member constituencies bequeathed by Pinochet. This is widely reckoned to cement the power of the party bosses, block minority parties and prevent political renewal. It has contributed to a worrying alienation from politics among younger Chileans. Almost a third of adults have not bothered to register to vote (this is voluntary in Chile).

Nearly all political commentators in Chile reckon that Mr Enríquez-Ominami cannot win. But he has made Mr Frei, a decent and competent man, look reactionary and old (he is 67). His response has been to promote young advisers and espouse many of his opponents’ arguments, such as the need for political reform, changes to the labour code and modernisation of the state. He is the only one who could actually get these things done, he claims.

All three candidates agree that Chilean society has changed faster than the state and the political system. After 20 years, a change at the top would hardly be surprising. But the right has not won a presidential election in Chile since 1958. Mr Piñera and Mr Frei will almost certainly go through to a run-off election in January—a contest that either man could win.

Japan's election

The vote that changed Japan

The electorate has thrown out not just a party but a whole system

JAPAN is a decent, consensual and egalitarian country. Much of it is still prosperous, despite a dismal period for the economy. The beliefs of its two main political parties are often hard to tell apart. Both their leaders are grandsons of (rival) prime ministers. There were no loud celebrations when the results of the general election were announced on August 30th. It is tempting therefore to write it off as no earth-shattering event.

That would be a mistake. The vote, in which the Democratic Party of Japan (DPJ) broke the half-century lock of the Liberal Democratic Party (LDP) on power, marked the overdue destruction of Japan’s post-war political system. The question is what will now take its place.

System change

There are three reasons to believe that this vote marks a big change. The first is the scale of the DPJ’s victory. When the LDP lost once before, in 1993, it remained easily the biggest party in the Diet, and within 11 months was back in power. Today, the LDP is devastated. It keeps just 119 out of 480 seats in the lower house of the Diet, down from 300. The DPJ has 308.

Second, the rejection of the LDP is the culmination of deep changes in Japan’s political culture. The LDP, a pro-American, pro-business consequence of the cold war, was undermined by two decades in which consumer interests and non-profit groups slowly mounted a challenge to its paternalism. Electoral reform in the mid-1990s introduced single-member districts, helping to create an opposition that could take on the LDP.

Third, by overthrowing the LDP, Japan’s voters have turfed out not just a party, but a whole system. After the LDP’s creation in 1955, Japan’s “iron triangle” of party, bureaucrats and business promoted breakneck growth, and distributed its fruits equitably: cheap finance for big business, contracts for construction companies, jobs for the masses, subsidies for farmers and re-election for the LDP machine.

But corruption flourished, as tax money went to the highest bidders. Growth slowed from the 1980s, and the system was too inflexible to adjust. Voters grew more demanding. Roads, dams and temporary, low-paid jobs were no longer enough. People wanted careers. They wanted doctors, nursing homes and decent schools that would keep young families from moving to the big cities, leaving only the old behind (see article). And they wanted confidence that the government would still be solvent when they drew down their pensions—not a sure bet in a country with a national debt approaching 200% of GDP.

Successive LDP administrations failed to respond to these demands because the government was often the weakest of the three sides of the triangle. Ministers’ best intentions were undermined by bureaucrats or party barons with their own networks of power. Hence the voters’ rejection of the old system in favour of something unfamiliar in Japan: an open and accountable government.

The huge task of creating it falls to Yukio Hatoyama, whom the Diet will appoint as prime minister on September 16th. It is not clear whether he, or his party, is up to the job; for alarmingly little is known—even by the voters—about the people who have taken power in the world’s second-biggest economy.

In opposition the DPJ tapped into the powerful, rather Nordic, vision of their society that many Japanese people cling to and fear they are losing. Accordingly, it rejected the free-market version of change championed by Junichiro Koizumi, a reforming LDP prime minister. This left-leaning, pro-union bias explains the party’s silence on liberalisation and deregulation of medical and other services that would boost productivity and help create the demand and jobs that Japan badly needs. The party has also made mild anti-American noises about military bases and the Japanese fleet. A market economy might be just about acceptable to the party, but an American market society, however defined, is not.

To Western ears, some of this sounds worrying. Yet the DPJ may be less frightening in office than in prospect. It has already begun to temper its foreign-policy rhetoric to calm American nerves. And its big economic idea, radical by Japan’s standards, is broadly welcome. Where the LDP looked after producers’ interests, the DPJ says it will put consumers first. It also says it will steer the economy away from export-led growth towards domestic demand. These assurances, coupled with a stronger social safety net and employment provisions (see article), may help lift some of the deflationary fog that has lain heavy over Japan for so long.

Bureaucrats and the budget

But all this depends on Mr Hatoyama’s first task: redesigning government. Here he starts with an advantage. Unlike the LDP, the DPJ government will not have to fight off a parallel party power structure when it makes policy. The cabinet will therefore be more powerful, and more accountable.

The test will be taking on the bureaucracy. Mr Hatoyama will have to strike a delicate balance. On the one hand the DPJ demands accountability, and promises to break bureaucrats’ backs to get it. On the other, it needs to harness bureaucrats’ talents if it is to formulate and carry out sound policy, particularly since so many new DPJ politicians are wet behind the ears.

How Mr Hatoyama both motivates bureaucrats and punishes them when they step out of line will make or break the DPJ. The crucial battle comes between now and December, in drawing up the budget for the 2010 fiscal year. Ministries have already submitted their spending plans, including pork for favoured groups, hoping for the usual lack of political oversight. The DPJ promises to rebuild the budget-making process from scratch, going through programmes line by line. That, too, is a chance for the new government to show that it is not as profligate as its opponents have claimed.

Japan has had other opportunities for reform, and has failed to take them. Mr Hatoyama, with no favours to return, has a chance both to revolutionise how Japan is governed and to revitalise the economy. He will need judgment for the first, and imagination for the second. Wish him plenty of both.

Japan's election

Banzai!

A landslide victory for the DPJ in Japan

The victors have an emotive name for it: seiken kotai, or regime change. It came in brutal fashion on Sunday August 30th when Japan, Asia’s richest democracy, dumped the party that has ruled it for almost all of the last 53 years and gave a huge win to one that until recently had little idea of how it would govern.

In a historic result, unofficial results showed that the Democratic Party of Japan (DPJ), a leftist grouping of ruling-party renegades, social democrats and socialists, was heading for a landslide. It is led by Yukio Hatoyama, a mild-mannered career politician likely to be the next prime minister. He promises a government less beholden to the powerful civil service, wants to temper the free market and is keen to dole out cash to the disadvantaged in the economically stagnant and ageing country. He declined to name a cabinet until he is confirmed as prime minister in a special session of the lower house, or Diet. That may be within the next two weeks.

Jubilant cries of Banzai! echoed around the DPJ’s victorious campaign offices. NHK, the public broadcaster, said the party had won 308 seats in the Diet, with almost all the seats counted, as polls had largely predicted. The DPJ hopes to forge a coalition with two minor parties that would give it a two-thirds majority, enabling it to force through legislation. But the three parties do not see eye to eye on all issues, which means plenty of haggling will be needed. The DPJ already holds the upper house.

For the long-ruling Liberal Democratic Party (LDP) there was no disguising its anguish, as discredited heavyweight after heavyweight fell, often to young, telegenic DPJ novices shrewdly drafted in as giant-killers. Taro Aso, the visibly shaken prime minister, conceded defeat, describing the result as “very severe”. When he dissolved parliament in July to hold the elections, the LDP held 300 seats. NHK’s count showed it had won 119 seats so far, almost the same as the puny number the DPJ held before the elections.

The raw numbers, however dramatic, only partly tell of the upheaval this could mean for Japanese politics. The LDP has had its hands on almost every lever of power for more than half a century; even when it briefly lost office in 1993, it regained it within 11 months because the forces assembled against it fell apart.

During much of its tenure, it held power because it helped deliver rising prosperity to a country that had only recently endured the ignominy of second-world-war defeat and American occupation. After taking office in 1955, it turned Japan into one of America’s firmest cold-war allies.

But as Japan’s economic miracle faded, and the country sank into a deflationary funk in the 1990s, the LDP clung onto power largely thanks to an entrenched system of patronage and lavish use of the pork barrel. It used public funds or access to Japan’s vast pool of private savings to launch public-works projects that for its last two decades in power kept its grass-roots supporters, such as farmers and construction workers, loyal.

None of that spending generated a sustainable recovery, however, nor did reforms by Junichiro Koizumi, a political one-off who revived the LDP’s fortunes during the last election in 2005, but whose followers, known as “Koizumi’s children”, were crushed by the DPJ this time round. Instead Japan has become saddled with a debt projected to rise to twice the country’s ¥497 trillion ($4.8 trillion) GDP, and it remains dangerously dependent on its large exporters. Figures released in the closing days of the campaign showed unemployment, exacerbated by the global financial slump, hit a record 5.7% in July. Deflation has also re-emerged; consumer prices fell 2.2% in July from a year earlier.

The LDP’s failure to improve people’s lives was one of the twin pillars of the DPJ’s successful campaign. The other was the LDP’s complicity with an all-encompassing bureaucracy that has been guilty of staggering incompetence recently, not least by losing millions of personal-pension records in 2007. The public has also been vexed by the practice of rewarding top civil servants with plum jobs at firms they formerly supervised. The DPJ has vowed to stamp out that policy.

But how well it can fulfill its manifesto pledges—repeated with worthy insistence on the campaign trail—will depend on many factors. Firstly, it may need to reach some sort of accommodation with civil-service mandarins, because only a handful of its most senior members have experience at cabinet level. Its spending proposals are largely to be funded by cutting waste from government spending; that is always easier to promise than to deliver.

Meanwhile, Japan’s economy is still poised precariously between recovery and renewed slump. If the recovery fails to materialise, it will not necessarily be the DPJ’s fault. But it will be the first test of its administrative competence in a country that is crying out for good leadership.

Besides naming a cabinet, Mr Hatoyama, who has appeared to flip-flop on sensitive issues such as Japan’s occasionally subordinate relationship with America, is soon likely to have to step onto the world stage. He hopes to travel to New York in September for the UN general assembly, and will probably meet Barack Obama on that trip.

But as he sets out to introduce a new era of political openness and accountability to Japan, he will be dogged by a thorny question that was already being put to him as he cautiously claimed victory on Sunday night. That is the position of Ichiro Ozawa, the DPJ’s former leader, who orchestrated this remarkable election victory and is a master manipulator eminently capable of pulling Mr Hatoyama’s strings.

So far, the new leader has ducked the question. But Japan, for all that it will celebrate dealing the LDP a punishment it has long deserved, will want an answer. Otherwise its people may fear they have replaced one dark force with another.

Japan Democrats win landslide in historic election

TOKYO (Reuters) - Japanese voters swept the opposition to a historic victory in an election on Sunday, ousting the ruling conservative party and handing the untested Democrats the job of breathing life into a struggling economy.

The win by the Democratic Party of Japan (DPJ) ended a half-century of almost unbroken rule by the Liberal Democratic Party (LDP) and breaks a deadlock in parliament, ushering in a government that has promised to focus spending on consumers, cut wasteful budget outlays and reduce the power of bureaucrats.

"The people are angry with politics now and the ruling coalition. We felt a great sense of people wanting change for their livelihoods and we fought this election for a change in government," said Democratic Party leader Yukio Hatoyama, 62.

Hatoyama, the wealthy grandson of a former prime minister, is expected to name a transition team on Monday to prepare to take power.

Media projections showed the Democrats set for a landslide win, possibly taking two-thirds of the seats in parliament's powerful 480-member lower house. That matched earlier forecasts of a drubbing for Prime Minister Taro Aso's LDP.

The ruling party loss ended a three-way partnership between the LDP, big business and bureaucrats that turned Japan into an economic powerhouse after the country's defeat in World War Two. That strategy foundered when Japan's "bubble" economy burst in the late 1980s and growth has stagnated since.

"This is about the end of the post-war political system in Japan," said Gerry Curtis, a Japanese expert at Columbia University. "It marks the end of one long era, and the beginning of another one about which there is a lot of uncertainty."

Financial markets wanted an end to a stalemate in parliament, where the Democrats and their allies control the less powerful upper chamber and can delay bills. However, bond yields may rise if a new government increases spending.

The Democrats will have to move fast to keep support among voters worried about a record jobless rate and a rapidly aging society that is inflating social security costs.

Media exit polls showed the Democratic Party had won around 320 lower house seats -- almost triple its 115 before the election. The LDP slumped to just over 100 seats from 300.

LDP'S PERFORMANCE ITS WORST EVER

Aso said he took responsibility for the defeat, adding an LDP leadership race to pick a successor should be held soon.

Japanese news agency Jiji said the LDP's performance was the party's worst since its founding in 1955.

Support for the LDP, which swept to a huge election win in 2005 on charismatic leader Junichiro Koizumi's pledges of reform, crumbled due to scandals and a perceived inability to address the deep-seated problems of a shrinking and fast-aging population.

"It's going to be challenging for the DPJ to allocate money properly, but I think we should give them a shot," said 38-year-old restaurant owner Yasuhiro Kumazawa. "If it doesn't work out, we can re-elect the LDP again in four years."

The Democrats have pledged to refocus spending on households with child allowances and aid for farmers while taking control of policy from bureaucrats, who are often blamed for Japan's failure to tackle problems such as a creaking pension system.

"The problem is how much the Democrats can truly deliver in the first 100 days. If they can come up with a cabinet line-up swiftly, that will ease market concerns over their ability to govern," said Koichi Haji, chief economist at the NLI Research Institute in Tokyo.

"Because hopes for change are so big, the disappointment would be huge if the Democrats can't deliver results."

DIPLOMATIC SHIFT

The Democrats want to forge a diplomatic stance more independent of the United States, raising concerns about possible friction in the alliance.

"The LDP is probably going to be missed more in Washington than in Japan," said Michael Auslin at the American Enterprise Institute in Washington.

The party has also vowed to build better ties with the rest of Asia, often strained by bitter wartime memories.

Economic experts worry spending plans by the Democrats, a mix of former LDP members, ex-Socialists and younger conservatives founded in 1998, will inflate Japan's huge public debt.

The party has vowed not to raise the 5 percent sales tax for four years while it focuses on cutting wasteful spending and tackles the problems of a greying population.

Japan is aging more quickly than any other rich country. More than a quarter of its people will be 65 or older by 2015.

The economy returned to growth in the second quarter, mostly because of short-term stimulus around the world, but the jobless rate rose to a record 5.7 percent in July.

Japan's election

Railing against the wrong enemy

As an historic campaign starts, both main candidates take aim at free-market capitalism as well as each other

SASHED candidates standing on car roofs, their voices crackling through loudspeakers. Worrying signs of heatstroke affecting one of the ruling-party’s septuagenarians. Women applauding politely, wearing hats and long gloves to shield their pale skin from the glinting sun.

It was August 18th, the official start of campaigning for Japan’s general election on August 30th. But it might just as easily have been 1960, when Yukio Mishima, one of Japan’s greatest novelists, published “Utage No Ato” (“After The Banquet”), an evocation of a fictional August election with loudhailers, perspiring candidates and odd goings-on in “the bog of politics”.

As the 12-day general-election campaign got under way (the first to be held in August in 107 years), there was something quaintly old-fashioned in the absence of television hoopla. In a country otherwise mad on mass-media, a musty-smelling ban on internet campaigning also recalled a bygone era.

Even the two main candidates for prime minister, Taro Aso of the ruling Liberal Democratic Party (LDP) and Yukio Hatoyama (pictured above), of the Democratic Party of Japan (DPJ), have hardly torn into each other. In debates, they have sounded more like two bickering old men than the scions of political dynasties (their grandfathers fought over the founding of the LDP in 1955) waging what could be one of the most important battles in any election in Japan’s history.

Mr Hatoyama has tried to cast himself in the Barack Obama mould, using the English word “change” to sum up the DPJ’s meaning to voters. After half a century of almost wall-to-wall rule by his rival’s party, that should be an intoxicating message. The DPJ says evicting the ruling party will break the stranglehold on the budget held by mandarins, giving it freedom to cope with Japan’s ageing population, the low birth-rate and a dangerously lopsided, export-oriented economy. But Mr Hatoyama’s face hardly moves as he delivers the good tidings in a soporific murmur.

Mr Aso, meanwhile, has questioned the DPJ’s ability to pay for expensive campaign promises, such as a ¥26,000 ($280) a month child allowance to push up the birth rate, income support to farmers and heavily subsidised schooling. The opposition party’s sums are indeed fuzzy.

But opinion polls give the DPJ a two-to-one margin over the LDP. Even old ruling-party stalwarts such as doctors and construction workers are shifting allegiances, according to a survey by Kyodo, a news agency. Behind the scenes, analysts say DPJ strategists are working tirelessly to field fresh-faced, likeable candidates to stand against LDP dinosaurs. That has meant a high number of candidates are campaigning: 330 from the DPJ and 326 from the LDP. When parliament was dissolved last month, the LDP held 300 of the 480 seats and the DPJ just 115 (there is a host of smaller parties). In the most hopeful forecasts for the DPJ, some analysts think those numbers could be reversed.

The low-key nature of the race contrasts with the previous contest in 2005, which was swept by the LDP under Junichiro Koizumi, a former prime minister. In what was known as “Koizumi theatre”, the telegenic reformer obtained extensive television coverage by replacing LDP candidates who opposed his plans to privatise the postal system. The DPJ hardly got a look in.

Mr Koizumi is playing a big role in this election too. He is not on the ballot, after shamelessly betraying his own anti-dynastic principles by bequeathing the right to run for his seat to his son. But he still looms large—these days, as a target for both Mr Hatoyama and Mr Aso. Both men appear more intent on laying into his legacy of free-market reforms, though some predated his rule from 2001-06, than on attacking each other. They blame his removal of a ban on temporary workers in manufacturing for soaring inequality and high rates of poverty in a country that used to pride itself on being almost universally middle-class. But neither has come up with a very convincing alternative.

In an article this month, Mr Hatoyama railed against American-led “market fundamentalism” that, he said, the LDP had embraced since Mr Koizumi’s leadership. But his alternative is a mushy-sounding concept, yuai, that mixes up the Chinese characters for friendship and love. He calls it fraternity, and says it means that activities such as agriculture—already under Fort Knox-like protection in Japan—will not be left “at the mercy of the tides of globalism”. Mr Aso has likewise pledged to break with “excessive market fundamentalism”.

Such views have helped shape both parties’ manifestos. The DPJ’s policy platform, for instance, proposes undoing one of the main Koizumi reforms by banning the use of temporary labour in manufacturing. It also wants to raise minimum-wage levels. Exporters fighting for business in China deplore both policies. Yet analysts say Mr Hatoyama, who at a recent press conference asked an aide to field questions on economics, will have little influence on—or even interest in—economic policy. Also, an upper-house election is due in 2010. This may limit the DPJ’s ambitions; its priority is likely to be restructuring the civil service, where it can most easily score political points.

Not everyone thinks Mr Koizumi’s reforms are widely unpopular. The image of temporary workers losing their jobs, and sometimes their home, as the economy slumped last winter was a poignant one. But the stodgy LDP old guard, which had presided over two decades of economic stagnation, bore as much of the blame as the reformist Mr Koizumi.

Jiro Yamaguchi, of Hokkaido University in northern Japan, argues that Mr Koizumi, while trying to trim the budget deficit, failed to do enough to strengthen the social-security system to shield people from the effects of deregulated wages and job losses. He thinks the DPJ, which he advises, should concentrate on developing such “Third Way” reforms. But the party has not yet taken up this cause.

In one way, the DPJ has reason to be grateful to Mr Koizumi. By selling off the postal system, cutting pork-barrel spending to the construction industry and shrinking an already small state further, he may have at long last cut the financial lifeline linking the LDP to its core supporters. If so, then at least the DPJ will not have to endure a full replay of “Utage No Ato”. In Mishima’s novel, the party in front as the election campaign starts does not find it ends altogether happily.

Japan’s election

Promises, promises

One of the world’s most entrenched political parties faces the fight of its life in Japan

FOR more than half a century the Liberal Democratic Party (LDP) has ruled Japan, with only a brief hiatus in the early 1990s. But its monopoly on power is likely to end on August 30th. With less than month to go before general elections, it has issued a manifesto focused on bringing Japan’s economy—still the world’s second largest—back to health. But after years of broken promises, voters appear to be unimpressed, according to a poll published on Monday August 3rd by Asahi Shimbun. The newspaper suggests that the Democratic Party of Japan (DPJ) is almost twice as popular as the LDP.

The LDP promises to restore Japan to 2% growth by March 2011, create 2m new jobs in three years and boost household disposable income by ¥1m ($10,505) in a decade. The focus on the economy reflects the main anxiety of voters. Unemployment is at the highest level in six years and the spectre of deflation has re-emerged. Not only are consumer prices broadly falling, on Monday the government reported that cash wages fell in June at their fastest pace since 1990.

That is why both parties are so keen to boost household incomes. But the LDP also says it will raise the consumption tax from its current level of 5% once the economy improves—a pledge that is meant to suggest the LDP is a responsible set of hands. An emerging campaign strategy is to challenge the DPJ’s fiscal probity, because it has expensive campaign pledges, too, but no plans for tightening fiscal policy. Yet the Asahi poll suggests voters are far more confident in the opposition’s ability to manage the economy than the discredited lot now in charge.

The electoral battle is unlikely to be ideological. Indeed the opposition, which released its own electoral manifesto on July 27th, claims that the LDP has stolen many of its best ideas, such as free pre-schooling and more accessible child care. It sets out to go further than the LDP on social services, however. It wants free high schools as well as pre-schools. It says it will provide families with ¥26,000 per child every month until age 15. It talks of a medium-term goal of rebalancing the economy and ending an over-dependence on exports. But it has not said how it expects to reduce the budget deficit if its pump-priming measures take effect.

The election is really about whether the LDP’s time is up. The party has staged miraculous recoveries in the past, but this time it is further undermined by GDP that is expected to contract by as much as 6% this year, and desperately poor leadership; there have been four prime ministers in the past four years. For a decade and a half the party has been losing support. The notable exception was the 2001-06 tenure as prime minister of Junichiro Koizumi. Yet his popularity partly rested on his vow to destroy the party itself.

The election result is not a foregone conclusion. In a telling sign of public dissatisfaction with politics, about half the electorate supports neither party. Many are looking to smaller parties, which means that the winner may have to forge a coalition to govern effectively.

But the DPJ is already a broad church, encompassing socialists, social democrats and former members of the ruling party. If it wins, it will be enough of a challenge to persuade these disparate groups to act as one. Moreover, in 2010 voters will return to the ballot box for the Diet’s less powerful upper house. So the DPJ would have only a year to show some success.

One of its trickiest tasks would be handling Japan’s unwieldy bureaucracy. The DPJ’s most prominent campaign pledge is to neuter the power of the civil service; it hopes that by cutting administrative expenses some money could be found to pay for its largesse to ordinary households. But as a party inexperienced in command, it would need to rely on bureaucrats to get things done. The bureaucracy, for its part, has begun to prepare for change, by using the annual personnel changes during the summer to send senior officials that are close to the LDP to sinecures in Japan and at international organisations overseas.

Neither party has spelled out a vision of what Japan might look like in the longer term. That is understandable; wrenching political change, after all, is a lot for a country to have to cope with amid an economic slump. On the other hand, Japan has huge long-term problems, such as the highest debt-to-GDP ratio in the rich world, an ageing and shrinking population, protected service industries and young people who are disaffected with politics. A first step towards dealing with these problems is to reassure society that power can alternate between parties and that politicians who do not get things done can be kicked out. But Japan is crying out for bolder policy proposals, too.

Drug-Cartel Links Haunt an Election South of Border

COLIMA, Mexico -- The candidacy of Mario Anguiano, running for governor in a state election here Sunday, says a lot about Mexican politics amid the rise of the drug cartels.

A brother of the candidate is serving a 10-year prison sentence in Mexico for peddling methamphetamine. Another Anguiano is serving 27 years in a Texas prison for running a huge meth ring. A few weeks ago, a hand-painted banner hung on a highway overpass cited the Zetas, the bloodthirsty executioners for the Gulf Cartel drug gang, praising the candidate: "The Zetas support you, and we are with you to the death."

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Mr. Anguiano says his meth-dealing brother was just an addict who sold small amounts to support his habit. He says the man jailed in Texas, reported by local media to be his cousin, may or may not be a relative. "If he is my cousin, I've never met him," he says. Denying any involvement with traffickers, he says the supposed Zetas endorsement was just a dirty trick by his election rivals.

If so, it backfired. In the weeks after the banner made local headlines, new polls showed Mr. Anguiano pulling ahead in the race. He is expected to be elected governor on Sunday.

The reaction suggests how blasé some voters have become about allegations of ties between their politicians and the drug underworld, as Mexico prepares to elect a new lower house of Congress, some state governors and many mayors. This, even as political experts and law-enforcement people worry that violent drug gangs are increasingly bankrolling a wide range of politicians' campaigns across Mexico, in return for turning a blind eye to their activities.

Cartel Turf Wars

The election comes amid President Felipe Calderón's all-out war on drug gangs, which wield armies of private gunmen and account for the bulk of illegal drugs sold in the U.S. The conservative president has deployed 45,000 troops to fight the gangs. In bloody confrontations between his forces and the cartels, and especially in turf battles among the cartels, an estimated 12,000 lives have been lost since Mr. Calderón took office in late 2006. June was the deadliest month yet: 769 drug-related killings, according to a count by Mexican newspapers.

Until recent years, Mexican drug traffickers focused the bulk of their bribery efforts on law enforcement rather than politicians. Their increasing involvement in local politics -- in town halls and state capitals -- is a response, experts say, to the national-level crackdown, to changes in the nature of the drug trade itself and to the evolution of Mexico's young democracy.

Mexico Governor's Race Against Drugs

2:20

Mario Anguiano's campaign for governor in Mexico reveals the problems of power in a country with increasing narcotics trafficking and violence. WSJ's Joel Millman reports.

Starting in 2000, a system of fiercely contested multiparty elections began to replace 71 years of one-party rule, the Institutional Revolutionary Party, or PRI. "In this newly competitive, moderately democratic system, it takes serious money to run a political campaign," says James McDonald, a Mexico expert at Southern Utah University in Cedar City, Utah. "This has given the narcos a real entree into politics, by either running for office themselves or bankrolling candidates."

In addition, the gangs have evolved from simple drug-smuggling bands into organized-crime conglomerates with broad business interests, from local drug markets to extortion, kidnapping, immigrant smuggling and control of Mexico's rich market in knockoff compact discs. "There is more at stake than before. They need to control municipal governments," says Edgardo Buscaglia, a professor of law and economics at both Columbia University and Mexico's ITAM University.

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Ecos de la Costa

A sign in Colima, Mexico, citing a drug gang's executioners praising a candidate: 'The Zetas support you, and we are with you to the death.'

Because of the federal crackdown and the warfare between rival cartels the drug traffickers also need more political allies than ever before.

Politicians who won't cooperate sometimes are threatened. On Monday, in the drug-producing state of Guerrero, a grenade blew up a sport-utility vehicle belonging to Jorge Camacho, a congressional candidate from President Calderón's National Action Party, or PAN. A message next to the destroyed car said, "Look, you S.O.B. candidate, hopefully, you will understand it is better you get out, you won't get a second chance to live."

Mr. Buscaglia says criminal groups' one-two punch of bribes and threats has given them either influence or control in 72% of Mexico's municipalities. He bases his estimate on observation of criminal enterprises such as drug-dealing and child-prostitution rings that operate openly, ignored by police.

According to a September 2007 intelligence assessment by the U.S. Federal Bureau of Investigation, the governors of the states of Veracruz and Michoacán had agreements with the Gulf Cartel allowing free rein to that large drug-trafficking gang. In return, said the report, which was reviewed by The Wall Street Journal, the cartel promised to reduce violence in Veracruz state and, in Michoacán, financed a gubernatorial race and many municipal campaigns across the state.

In Veracruz, the FBI report said, Gov. Fidel Herrera made a deal with the cartel letting it secure a drug route through the state. In an interview, Mr. Herrera said the allegation is "absolutely false, and has no basis in fact -- it never happened." The PRI politician said he has never had any dealings with a criminal organization and blamed a rival political operative, whom he declined to name, for trying to sabotage his career.

In Michoacán, the FBI report said, "in exchange for funding, the Gulf Cartel will be able to control the port of Lázaro Cárdenas, to continue to introduce cocaine and collect a 'tax'" from other Mexican drug-trafficking organizations.

Control of Ports

Lázaro Cárdenas Batel, the Michoacán governor from the leftist PRD party who was in the office when the FBI said the deal was made, says the allegation is "totally false." Mr. Cárdenas Batel, grandson of the former Mexican president for whom the port is named, said Mexican ports are controlled by federal agencies, so drug traffickers have nothing to gain from bribing state officials in connection with them.

His successor, the winner of the 2007 election, is Leonel Godoy, also of the PRD. He calls the FBI allegation "an infamy" with "not a shred of evidence or any proof," and said he had never met or cut deals with drug traffickers. Messrs. Cárdenas Batel and Godoy both say they had alerted authorities before the elections about the growing infiltration of drug traffickers in Michoacán.

None of the three men -- Messrs. Cárdenas Batel, Godoy and Herrera -- have been charged with any crime. U.S. intelligence documents have occasionally proved unreliable in the past.

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Police agents in Mexico City stand guard in May after a group of top officials from Michoacán were detained due to their alleged ties to 'La Familia' drug cartel. Ten mayors and 17 other officials were detained.

The Gulf Cartel doesn't appear to be the only gang with alleged influence in Michoacán officialdom. In May, soldiers and federal police arrested 10 mayors, as well as 17 police chiefs and state security officials, including a man who was in charge of the state's police-training academy. They have been charged with collaborating with "La Familia," the state's violent homegrown drug gang. Those arrested, who have said they are innocent victims of political vendettas, represented all three of Mexico's main political parties. On Monday, three more people, including the mayor of Lázaro Cárdenas, were arrested and charged with the same offense, according to the attorney general's office.

Five hundred miles to the north in the wealthy Monterrey suburb of San Pedro Garza García, a mayoral candidate from President Calderón's party sparked a scandal in June when he was recorded telling a gathering of supporters that security in the town was "controlled by" members of one of Mexico's most fearsome drug cartels, the Beltran Leyva gang.

The candidate, Mauricio Fernandez, seemed to suggest he would be willing to negotiate with the Beltran Leyvas if elected. "Penetration by drug traffickers is for real, and they approach every candidate who they think may win," Mr. Fernandez was recorded saying. "In my case, I made it very clear to them that I didn't want blatant selling."

Mr. Fernandez has acknowledged the audiotape's authenticity, but says his statements were taken out of context and that he had never met with members of the Beltran Leyva cartel. He says the full tape captures him saying he would not negotiate with the drug traffickers. As the election nears, he leads polls by a wide margin.

Meanwhile, in the central Mexican state of Zacatecas, Mayor David Monreal of the town of Fresnillo denied having anything to do with 14.5 tons of marijuana police found months ago in a chili-pepper-drying facility owned by his brother. Mr. Monreal, who plans to seek the governorship next year, said his political enemies planted the mammoth stash.

In the campaign, the state of Mexico's economy appears to trump the drug issue for many voters. The economy is shrinking amid slumps in oil production, in exports to the U.S., in tourism and in remittances from emigrants. Polls give the PRI, the party that ruled for seven decades, an advantage of about six percentage points.

The governing party has made President Calderon's campaign against drug traffickers its main theme, and polls show his policy of using the military in the effort is widely popular. But they also show a majority of Mexicans don't think he is winning the narco-war.

Drugs are certainly campaign fodder in the border state of Chihuahua, where former Ciudad Juárez Mayor Héctor Murguía is the PRI's candidate for a congressional seat. Two years ago, Mayor Murguía named as his chief of public security a businessman named Saulo Reyes Gamboa. Last year, Mr. Reyes was arrested by U.S. law-enforcement agents in El Paso, Texas, after allegedly paying someone he thought to be a corrupt U.S. federal officer to help smuggle drug loads. During the operation, federal agents found nearly half a ton of marijuana in a Texas house, which they say Mr. Reyes had arranged to smuggle from Mexico.

Mr. Reyes, who pleaded guilty and is now serving eight years in a federal prison in Kentucky, couldn't be reached for comment. Mayor Murguía says that he has had no involvement with the Juárez Cartel and that Mr. Reyes never contributed "even five pesos" to support his political career.

Despite the bad publicity, Mr. Murguía is leading in polls and is expected to win Sunday -- not unlike Mr. Anguiano, the candidate in Colima with the supposed endorsement from the Zetas.

Talking Frankly

In Colima, the candidate for governor from President Calderón's party, Martha Sosa Govea, hasn't faced any narco-tie allegations. But there has been plenty of comment about her protegé, national assembly candidate Virgilio Mendoza Amezcua, thanks to a tape of him talking frankly about politics and drug traffickers, recorded by members of a rival party he was trying to win over.

"You don't imagine how many 'nice' people have relations with those drug-trafficking bastards, and through them, the bastards bring things to you," he said on the tape. "They try to seduce you....They got close to me like they get close to half the world, and they sent me money."

Mr. Mendoza declined to comment, but has previously denied he took any money from the cartels. Ms. Sosa said the tape might have been doctored, and in any case, "just because they have him on a tape getting an offer of dirty money, there's still nothing on tape proving he accepted it."

The tape was turned over to federal authorities to determine whether it had been altered. Citing the proximity to the election, the Attorney General's office declined to comment on any of the drug cases.

Colima, though largely exempt from the narco-violence raging in neighboring states, has a reputation as a haven for traffickers, a sleepy place where residents don't ask questions about rich new neighbors. In the 1980s, Colima was home to a gentleman rancher from Guadalajara whom everybody knew as Pedro Orozco. He spent lavishly on schools, gave to charity and hung around with politicians.

In 1991, Mr. Orozco was gunned down in a firefight in Guadalajara, then Mexico's drug capital. It turned out the generous man-about-town was actually Manuel Salcido Uzueta, a top drug capo better known as Cochiloco, meaning the Mad Pig.

Ever since, Colima residents have grown cynical about the influence of drug gangs in politics. "Corruption? Drug ties? They say that about everyone who runs for office. Who can you believe?" says Salvador Ochoa, a local lawyer.

Ms. Sosa has been hammering her opponent, Mr. Anguiano, with claims that he has links to drug trafficking. But, she concedes, the response of many voters is, "Poor guy, why don't they just leave him alone?"

Iran's fading protests

The regime digs in

Iran's contested presidential election was fair, rules the Guardian Council

IRAN’S president, Mahmoud Ahmadinejad, has delivered some familiar bluster in the past few days, hurling accusations that foreign countries, in particular Britain, were behind the mass protests that followed a disputed presidential election on June 12th. At the weekend authorities detained nine local employees of the British embassy, accusing them of fomenting riots. Five were soon released but four are still being interrogated.

Mr Ahmadinejad’s rhetoric is carefully chosen. He is trying to bolster his position domestically by thumbing his nose at wicked foreign powers: turning on Britain as an historic mischief-maker may help to rally some Iranians to his cause. In similar fashion, his fiery foreign policy and his defiance in the face of criticism over Iran’s nuclear programme are designed, in part, to give him the benefit of nationalist support—although it is unclear whether anybody believes his claims over British meddling.

Just as the president is becoming more outspoken, a sullen calm appears to be descending on the streets of Iran. Although there are still reports of protests and clashes between pro-democracy activists and the police, the huge demonstrations that earlier rocked the country have faded away. The emerging calm is partly in response to a government crackdown—hundreds of opposition leaders, academics, journalists and others have been arrested—and partly because Iranians were waiting to hear the views of the Guardian Council, an elite group that is charged with overseeing Iran’s elections. On Tuesday June 30th the council ruled that the election was fair.

Despite the protests since the contested presidential elections, and the complaints of the defeated candidates, neither a full recount of votes nor a rerun of the election was ever likely. The council allowed a limited recount of the votes and Ayatollah Ali Khamenei, Iran’s supreme leader, extended the deadline for its deliberations. But this seemed to be a ruse by the authorities to discourage further protests: confirmation of Mr Ahmadinejad’s victory was delivered, as many had expected.

Yet splits in the governing elite remain deep. More than half of Iran’s MPs failed to turn up to a victory party for Mr Ahmadinejad last week. Even Ali Larijani, the speaker of the parliament and a fellow conservative, chose to stay away. He, as well as other politicians, has been critical of the government’s response to the protests.

More formidable is Akbar Hashemi Rafsanjani, an ex-president who supported the main opposition candidate, Mir Hosein Mousavi. At the weekend Mr Rafsanjani spoke publicly for the first time about the vote, calling on the government to investigate the complaints of the defeated candidates in a “fair review” of the election. The ex-president has played a cautious game so far. At first he exerted influence by letting others speak on his behalf. His daughter was briefly arrested after addressing one public gathering. He is also rumoured to be in Qom, trying to garner support for the creation of a new council, of three or more ayatollahs, which would counter the power of the supreme leader. Such a change would represent a seismic shift in the power structures of the Islamic republic, but there is, so far, no evidence that he has succeeded.

Mr Ahmadinejad now seems defiant, despite such splits. He can draw confidence, for example, from the ongoing support of the Revolutionary Guards. Set up after the 1979 revolution as an ideological counterweight to the less politically minded regular army, they have accrued enormous power under Mr Ahmadinejad. Although the thuggish baseej, the Islamic militia, have been blamed for much of the violence during the protests, the Guards are more influential and their loyalty has been bought by handing them valuable contracts in industries ranging from airport construction to telecommunications. In return, Mr Khamenei and Mr Ahmadinejad can rely on military backing even if the regular army were to hesitate.

The nightly cries of “Allahu Akbar!” continue from the rooftops of Tehran, the capital. Mr Mousavi remains resolute in his opposition to the election result and in calling for a rerun of the voting. But the regime’s grip on the situation appears to be tightening.

Stolen Election in Iran? An Inside View of Vote Fraud

by Maarten Doude van Troostwijk

Although not having been present at the recent presidential elections in Iran and thus not able to state on the basis of personal observation whether there was or wasn’t fraud committed, I was struck by the familiar refrain of some of the arguments by those in the Western media who seem to believe that the election must have been stolen by the incumbent. After observing elections for over ten years in the former communist world – from the Balkans to the Baltics, and from Central-Asia to the Caucasus – one starts to recognize certain recurring arguments in the analysis and assessment of an election.

For instance, in the country where an election is taking place, a particularly predictable ploy for an election official to use in some poor, forgotten village where no one seems to bother to show up for the vote, is that "everyone is working in the fields." Never mind that you saw a normal level of human movement on the village streets on your way up to the polling station but no sign of activity in any field whatsoever. You are assured that the real mass of enthusiastic voters will show up just after you will have left for the next apathetic place.

Western arguments making TV audiences or newspaper readers believe the opposite of what was happening in an election in general sound more plausible, but are often no less deceptive. One typical and recurring argument appeared in various commentaries on the recent election in Iran.

Much was made of the fact that millions of paper ballots had been counted within just a few hours. "Not possible," according to some pundits, and a clear sign of blatant vote rigging. Surely such a huge number of pieces of paper cannot be sorted and counted within such a short time! The authorities must have been making the results up before the counting had finished, was the seemingly logical conclusion.

This is not necessarily so. In fact, results that take one or more days to come out are to be treated with far more caution. It raises the suspicion that some backroom haggling had been going on, where one candidate needed some time to convince the other – either by the sweet lure of money, or the menacing spectre of the bullet – to see things his way. In the properly run elections I observed, the count was often swift and accurate. To illustrate this, a simple bit of arithmetic may suffice.

In my experience an average polling station has anywhere from less than one thousand to 3000 registered voters; let’s take the figure of 2000 for this exercise. An election commission consists typically of some five people; again, an average. In Iran, there were four candidates on the ballot and the reported turnout was around 85%. Thus, assuming that precincts in Iran did not have a meaningfully higher number of registered voters than 2000, some 1700 ballots needed counting. (To be precise, all ballots need to be counted, including the unused and invalid ones, but those are obviously quicker to process than used ones). This comes to 340 ballots per commission member.

Let’s give the election officials one hour to sort the ballots, one hour to count them, and one hour to fill out the various electoral protocols (and count the unused and invalid ballots), so that results can be in within three hours after the closing of the poll. This requires each commission member to sort a little less than 6 pieces of paper per minute, not a particularly cumbersome job, particularly given that there were only four candidates and thus only four different piles on which to put a particular ballot. Now that the ballots are sorted, each member has the same ten seconds per ballot for the count – not a Herculean task either. In fact, a sea of time – enough to allow for a double-check and still make it within the hour.

Given the enthusiastic Western reports of the role played by modern communication technology in the present Iranian upheaval – it seems that everybody is tweeting and facebooking over there – we can safely assume that reporting the official results from the local precincts to the Regional or Central Election Commission did not have to be done by time-consuming pigeon-post.

Wherever I witnessed fraud on the precinct level it either consisted of blatant ballot stuffing (Azerbaijan: the emptying of the ballot box was followed by a loud thud where the huge wad of folded together ballots came down), ballot stealing (Serbia: in order to render the election null and void by "disappearing" ballots so the turnout would fall below the legally required 50%), or voter-faking (Georgia: a tiny, empty station where hardly anyone had voted at noon had magically produced over 1000 enthusiasts for democracy just a few hours later, all using the same curled signature on the voter register…). In all these cases the subsequent count was no doubt perfect (I wasn't at each of these counts, after all, so I cannot be entirely sure), but, if so, that didn’t make the final results fair. The actual counting fraud I have come across was always done at one or two levels above the precinct level – for the sophisticated fraud it made no sense to fiddle results where too many people might see what is going on. It also took time to arrive at these fake results, because it takes time to either buy people off or threaten them enough to make them shut up. Falsifying results is also a bit of a conspiracy – you have to keep (the representatives of) the victims of your fraud away from the action, paperwork has to disappear, people have to be intimidated – it takes some work, really.

Another thing to bear in mind when assessing allegations of fraud in an election is who might have committed the fraud. All too often in the Western mind, the storyline of an "opposition" fighting against a "regime" leads to a reflexive sympathy for, and trust in, the former. Yet, politicians being what they are, it is always possible that the opposition employs the underhand methods in order to fight its way to power. Although not likely applicable in rigid one-party states or violent personal dictatorships, this question is of importance in societies with an active and sizeable opposition, even though – or especially when – they cannot be called fully democratic. In this case, for instance, one has to ask the question, "who controls the electoral process in the cities that were expected to see a clear victory for the opposition candidates?"

Nothing in the above proves or disproves fraud in the recent election in Iran, of course. But since there seem to be hardly any reports indicating the type of blatant, precinct-level fraud as described above, the way it must have been done – if at all – is on the level of the Regional or Central Electoral Commission by manipulating the count. If so, one would expect results to have taken longer to be announced for the above-mentioned reasons. Of course, the manipulation of results could have been done crudely too, particularly if it was done in a panic – by a bunch of incompetents who hadn’t prepared their conspiracy to defraud properly (which would render the current Iranian authorities not much of a dictatorship – proper dictatorships don’t mess up their hold on power). In that case we should see real evidence soon. After all, if the candidates were interested in a fair vote they will have had their representatives and their observers on the various electoral bodies. They will have independently collected the results on the precinct level. They will have their campaign headquarters where they can collate their findings and compare them to the officially announced results. In short, they will have facts.

If not, they are not interested in a fair vote but only in power, which would render the distinction between a "white" – or green in this case – opposition and a "black" regime rather meaningless.

So far, however, the fact in itself that the results of this election were known within a short time after the closing of the polls cannot be a convincing argument that there must have been fraud. On past experience of observing elections, it tends to indicate the opposite.

Iran's election

Demanding to be counted

An apparently rigged election is shaking the fragile pillars on which the Iranian republic rests

IRANIANS voted in record numbers on June 12th. Analysts had predicted a close race; hope of change was in the air. So for many, the official result—with a claimed margin of 63% for the incumbent president, Mahmoud Ahmadinejad—was a preposterous sham. At first, youths took to the streets in Tehran and elsewhere, lighting fires and smashing shop windows. When these were beaten back, opposition grew. Braving an official ban and rumours of police gunfire, well over a million Iranians took to the streets of Tehran on June 15th, dwarfing a televised victory rally staged the day before by Mr Ahmadinejad. A fractured, demoralised opposition suddenly appeared united, empowered and focused on Mir Hosein Mousavi, the soft-spoken former prime minister who, by the official count, had polled only 13m votes to Mr Ahmadinejad’s 24m. Their protests have continued ever since.

In the three decades since the Islamic Republic was founded, Iran has not been rocked like this. Tehran is engulfed in huge marches every day. Women in chadors, bus conductors, shopkeepers and even turbanned clerics have joined the joyous show of people power. Nationwide strikes are planned.

But the government has struck back. Its men have beaten up protesters and fired on the crowd. Reformers, intellectuals, civil leaders and human-rights activists have been arrested or have gone missing, not only in Tehran but also in Tabriz, in the north-west, and across the country. Since the Ministry of Guidance has expelled foreign journalists, the course of the repression will be hard to follow. And the outcome of this clash is impossible to predict.

The unrest is not, or not yet, about the basic underpinnings of the system created by Iran’s 1979 revolution. Protesters have deliberately dressed modestly, enlisting religious symbolism to appeal to the notions of injustice and redemption that lie at the heart of Shia Islam. It is about feelings, shared on both sides of the divide, that the Islamic Republic has gone astray. The split reflects not only a polarised electorate, but also a deep and growing schism within the ruling establishment.

Iran’s unique system rests uncomfortably on two pillars, one democratic, the other theocratic. The elected parliament and presidency have plenty of power over state spending and investment, but little over national security, including Iran’s controversial nuclear programme. This falls under the aegis of the theocratic branch, embodied by the supreme leader, Ayatollah Ali Khamenei. Mr Khamenei serves not only as a moral authority but also as commander-in-chief of the armed forces, and controls a range of powerful bodies intended to enforce the “Islamic” nature of the system, including courts, state broadcasting and the Guardian Council, an appointed committee charged, among other things, with vetting candidates and monitoring elections.

Today’s upheaval undermines both these pillars at once. Most Iranians believe electoral fraud has occurred on a massive scale. The implications are far-reaching. Extracting the state from the cloud of suspicion that has fallen over it will be tricky. A clampdown by the army and police, with Mr Ahmadinejad brazening out his critics, would wreck the Islamic Republic’s democratic pretensions for good. But this turmoil has not just undermined Iranian democracy; it has also damaged the prestige of the supreme leader.

Most of Iran’s fast-expanding but hard-pressed urban middle class dislike Mr Ahmadinejad. They suspect that his re-election was intended to stamp legitimacy on the grip of hardliners who consider the “Islamic” bit of the revolution more essential than its “republican” part. Among his opponents are pious conservatives, including some prominent senior clerics, as well as liberals who would, if given a real choice, probably opt for a secular state. But even in south Tehran, a working-class area assumed to be for Mr Ahmadinejad, pro-Mousavi voters thronged the streets: a middle-aged woman in tears lest the election was stolen, and a young man who used the only English word at his command to explain his choice: “Freedom”.

Their leaders are figures who, like Mr Mousavi, gained prominence in the early years of the revolution, but have learned pragmatism since. Many are linked to the reformist movement that briefly thrived during the presidency, from 1997 to 2005, of Muhammad Khatami, a smiling cleric whose enormous popularity failed to make headway against entrenched and occasionally vicious conservative opposition. Several of those arrested this week were Mr Khatami’s close advisers.

Men like these see Mr Ahmadinejad’s administration as dangerously incompetent in its domestic policy and recklessly confrontational in foreign affairs. Most ominous to some have been his purges not just of reformists, but also of the wider revolution-era nomenklatura from ministries, local government and universities in favour of people seen as narrow-minded, bullying provincials. This, together with the parcelling-out of rich government contracts to ideological allies such as the Revolutionary Guard, has raised fears that the state is drifting towards a Venezuelan model of demagogic cronyism.

What conservatives dread

The president’s supporters also suspect a coup, but one along the lines of eastern Europe’s colour revolutions. The danger, as they see it, is that Iran’s pure Islamic identity will be diluted by a wave of Western materialism, encouraged by a corrupt elite whose revolutionary ardour has faded. Supporters of Mr Ahmadinejad’s millenarian populism include commanders of the Revolutionary Guard and its larger volunteer auxiliary, the baseej, as well as allies the president has packed into the regular army, police and intelligence services. They are backed by extreme conservatives among the Shia clergy, some of whom say a pious elect, not the people, should rule. Other support comes from the (shrinking) peasantry, pensioners, war veterans and others who have benefited from the spendthrift but scattershot generosity of Mr Ahmadinejad’s government.

Getty ImagesScornful Ahmadinejad

The supreme leader, too, who should theoretically remain above the political fray, has frequently signalled tacit support for Mr Ahmadinejad. This means that he cannot easily dissociate himself, as he has in the past, from whatever electoral malpractice there may have been. Not only did he hastily bless the election result, pre-empting its validation by the Guardian Council as the rules require. He also, before the election, described the kind of candidate voters should choose in terms that made it clear he was referring to the president. Moreover, one of Mr Khamenei’s sons is believed to have not only quietly sponsored the president’s rise from provincial obscurity, but also orchestrated his two presidential campaigns.

The first of these, in 2005, also produced credible charges of fraud, albeit on a smaller scale. Mehdi Karroubi, a reformist cleric who ran in the recent election, was narrowly beaten to second place in a first round of voting because of a suspiciously heavy tilt to Mr Ahmadinejad in outlying provinces. This propelled Mr Ahmadinejad, then a political novice, into a surprise second-round triumph against Hashemi Rafsanjani, a former president. Mr Karroubi’s protests at the time were quashed by the supreme leader.

This new result looks even more suspect. Before the vote, the president’s rivals had voiced worries about possible fraud. A news report claimed that whistleblowers inside the Ministry of Interior, which organises vote-counting, had warned that it planned to tamper with the outcome. Mr Rafsanjani, still a power-broker as head of two bodies that are meant to adjudicate between branches of government, took the unusual step of firing off a long, heated public letter to Mr Khamenei, declaring that unless the supreme leader acted to ensure a fair vote, trouble would ensue.

Conservatives at the heart of Iran’s “deep state”—that coterie of officials and clerics who are assumed really to be running things—were known to have been disturbed by the sudden snowballing of support for Mr Mousavi. He had at first been seen as a conveniently weak replacement for Mr Khatami, who withdrew from the race in his favour. Particularly upsetting to them was the disregard for public decorum displayed by the young women (“whores of the West” in one baseej newspaper) who joined Mr Mousavi’s rallies. The rigged count itself appeared to many to be a direct response to these fears.

Early on Mr Mousavi, who, supporters say, was tipped off by allies within the Ministry of Interior, proclaimed himself the likely winner. But soon afterwards rolling official results, announced with unusual speed, showed him far behind with only a third of the vote. Suspicions rose further as observers were barred from some counting centres, and the campaign headquarters of Mr Ahmadinejad’s opponents found its telephone lines cut, along with the nationwide text-messaging services they had intended to use to keep an independent tally of the vote. Any remaining doubts vanished on June 14th, as police sealed the headquarters of Messrs Karroubi and Mousavi, placed them under house arrest and detained dozens of their most prominent supporters.

Mr Ahmadinejad certainly has millions of enthusiasts, particularly in areas beyond the scrutiny of Tehran’s chattering classes. Yet the official result still seemed incredible. Mr Karroubi, for instance, had won more than 5m votes in 2005, but now trailed in last place with a mere 330,000 out of the 39m cast, fewer than the number of spoiled or blank ballots. All three challengers were shown to have lost even in their own home regions, despite strong local loyalties and the expectation of state largesse from having sons in high places.

What could explain such an apparently blatant attempt to rig an election that, even had Mr Mousavi won, would have represented little threat to either the republic or its supreme leader? The most likely theory is of a plan gone awry. Given the line-up of institutions either controlled by Mr Khamenei or systematically packed with Mr Ahmadinejad’s supporters, and given that no incumbent president in Iran has yet lost to a challenger, it may have seemed safe to bet on the president’s victory. This would have brought the added satisfaction to many dyed-in-the-wool conservatives, possibly including Mr Khamenei, of weakening the position of Mr Rafsanjani, who has mounted a rearguard struggle to contain the president’s influence.

ReutersCautious Khamenei

Just to make sure, strong potential challengers, such as Mr Khatami and the popular, conservative mayor of Tehran, Muhammad Qalibaf, were “persuaded” by the supreme leader not to run. Compared with the ebullient, politically canny Mr Ahmadinejad, the three remaining challengers appeared drab and uninspiring. Mr Ahmadinejad felt so confident that he agreed to an unprecedented series of televised debates. His superior political skills gave him the advantage on screen, but his scorn for his rivals helped stir up a surge of sympathy for Mr Mousavi, dispelling the political apathy that normally pervades Iran’s middle class.

Conservatives suddenly found themselves facing a torrent of youthful activists, their passion for change magnified by the spontaneous but effective use of simple symbols and modern communications. Stunned by this turn of events, Iran’s deep state appears to have opted for a last-minute, and therefore clumsy, attempt to alter the outcome in the president’s favour.

Democracy in the balance

What will happen now? None of the possible outcomes looks good. Mr Mousavi, who, along with Mr Karroubi, has shown unexpected steel in the face of pressure, insists that the only solution is to cancel the election results altogether. “Otherwise,” he says, “nothing will remain of people’s trust in the government and ruling system.” Yet, in deference to the Supreme Leader, the three disappointed challengers have also gone through the motions of a formal protest to the Guardian Council.

This 12-man body, chaired by an ultra-conservative who personally endorsed Mr Ahmadinejad, officially has ten days to investigate the charges pressed by Messrs Mousavi and Karroubi. Faced with the pressure of street protests, it has already, grudgingly, agreed to at least a partial recount of votes. Mr Khamenei has sought to bolster his position by issuing his own call for an inquiry. Yet many reformists fear that the intention is to play for time while passions burn out, and then declare some slight irregularities that do not affect the outcome. As a result, they appear grimly determined to carry on the protests.

ReutersWaiting for change

The more immediate concern is that Mr Ahmadinejad may impose a form of martial law. There are already ominous signs of such a move, as arrests of prominent reformists widen, censorship and controls on communication tighten, and feared vigilantes of the baseej lash out with impunity. Given the machinery of oppression at his disposal, Mr Ahmadinejad could probably maintain power by force, though no one can say for sure where the army stands. But force would devastate the image of a state that he exalts as the pinnacle of good governance. Moreover, Mr Ahmadinejad would need the support of the far more cautious, consensus-seeking supreme leader, and this is far from assured.

Mr Khamenei faces a deep quandary. A resolution to the crisis that fails to assuage the huge and growing mass of Mr Mousavi’s supporters would do permanent damage to his regime’s democratic pillar. Few Iranians would ever again deign to volunteer for the empty pageantry of voting. Yet giving in completely to their demands would expose his own weakness and fallibility. Underlying all this is the bitter irony that in its paranoia to avoid a “velvet revolution”, Iran’s deep state has itself engineered precisely the conditions that might make such a revolution happen.