Tuesday, November 30, 2010

The Evolution of God: The Middle Years—from god to God

If you wanted to postulate that the entity that Jews, Christians and Muslims call God was merely the last “god” left standing as humanity transitioned from a simplistic polytheism to more advanced conceptions, where would you go for support? To the Bible of course! That is the approach Robert Wright has taken in his book The Evolution of God.

Wright describes the evolution of religion as an aspect of the evolution of society. Humans have a need to try and understand why things happen, and they have an understandable desire to be able to control what happens. The earliest societies were totally dependent on nature for sustenance. It is natural that they would try to understand why a tree might bear more or less fruit by assigning a capricious spirit to that tree. They might consider providing gifts or offerings to the spirit in hope that it will behave. As humans learned more about nature and the behavior of trees, there was less need for a spirit to explain behavior. The next step might be to assign a spirit, or god, to control the entire forest, and maybe one for rivers and another for the sky. As cultures became more complicated a hierarchical social structure would evolve. The gods would need a leader, just as people would need a leader. There was a tendency to have a dominant god with a slew of underlings, who would often be considered members of a council. Interactions between societies became intertwined with interactions between gods. Just as two societies or tribes might cement a relationship by exchanging brides, they might accomplish the same thing by asserting loyalty to each other’s gods.

Wright claims that this is the religious evolution followed by most ancient peoples. They were tending towards monolatry (the worship of only one god among many), the last step before monotheism. The Judean wing of the Israelites eventually evolved from polytheism, to monolatry, to the monotheism that evolved into the major religions of today. This transition need not be explained by a sudden revelation, and, in fact, cannot be explained by a unique point of transition. On the other hand, this evolution can be correlated with the societal and historical transformations that occurred. As the author might say, events ascribed to the heavens were dependent on events on the ground.

The author pleads his case by referring to the Bible for evidence.

Some Biblical background is in order. Scholars tell us that the Torah, the collection of books that form the description of the Judaic religion and is the core of the Christian Old Testament, was actually composed in its final form around the seventh century BCE, long after many of the events described were supposed to have taken place. Only small modifications were added in later years. These books were written around the time of King Josiah of the Judeans. He was a fervent believer in a Yahweh-only religion and he wanted to unite Judea and the northern kingdom of Israel under his leadership. There is considerable evidence that the construction of the Torah was intended to further the Yahweh-only cult and Josiah’s ambitions. The authors constructed a storyline that provided Judea with a long and heroic history and a special relationship with Yahweh. Unfortunately, most of the exquisitely detailed history presented was either an invention or a wild embellishment. The Israelites had no history in Egypt, there was no exodus, no conquering of the Canaanites, no empire of David and no grandeur of Solomon. They couldn’t conquer the Canaanites because they were Canaanites themselves. It was mainly religious and political propaganda. Yahweh was one of many gods worshiped in the region, and a minor one at that.

Wright begins his tale by pointing out a few of the numerous places in the Bible where Yahweh is described as one god among others.
“Though much of the scripture assumes the existence of only one God, some parts strike a different tone. The book of Genesis recalls a time when a bunch of male deities came down and had sex with attractive human females.”

“Psalm 82 says: ‘God had taken his place in the divine council: in the midst of the gods he holds judgment.’ And God himself, addressing the other council members a few verses later, says, ‘you are gods’.”
The word “el” means god in Hebrew. It can also mean God. However, since Hebrew did not have the convention of capitalization, one could only try to derive the meaning from context. There are many instances in the Bible where Yahweh and El appear in the same section. Translators, assuming one God, translate accordingly. However, there are instances where the translation makes more sense in the context of two gods.
“The many Biblical references to the existence of multiple gods are in a sense amazing. For, though the bible was composed over many centuries, the later parts of it passed through the hands of later editors who decided which books and verses to keep and which to discard—and who seem to have had a bias against polytheism. So these hints of Israelite polytheism that remain in the Bible are probably....’only the tip of the iceberg’.”
If Yahweh began as a minor god, he had to grow and acquire stature. His competition was El, the god of the Canaanites and probably also that of the northern kingdom of Israel. El was viewed as the chief god with a “divine council.” The tradition for replacing a god with another in ancient times was to incorporate the two as the same deity.
“...in the sixth chapter of Exodus, during one of Moses’ conversations with God. God says, ‘I am Yahweh. I appeared to Abraham, to Isaac, and to Jacob as El Shaddai, but by my name Yahweh I did not make myself known to them.’ Even Yahweh himself says that he started out life with the name El.!’"
A second component of god replacement was to acquire the attributes and capabilities of the god to be replaced. The writers of the Bible went to great lengths to put Yahweh in situations where he performed deeds that were duplicates of actions presumed to have been accomplished by other gods.

There are many reasons why a nation would devolve to a single god and monotheism. Consider the poor ruler who must contend with multiple prophets claiming competing utterances from different gods. That is no way to run a ship. A king with a single god and a single prophet who he can control is a happy man. One of the more clever actions of Josiah was to centralize the worship of Yahweh in the temple of Jerusalem.
“Archeologists have found written references from the eighth century BCE not just to ‘Yahweh’ but to ‘Yahweh of Samaria’ and ‘Yahweh of Teman.’ In a theocracy, this sort of divine fragmentation threatens national unity. Josiah, by confining the legitimate worship of Yahweh to the temple in Jerusalem, was asserting control over Yahweh’s identity and thus over Judah’s.”
Judean history introduced a strong distrust of international entanglements. As a small, weak country, the best they could hope for was vassal status relative to stronger neighbors. There was no advantage, nor any desire to honor anyone else’s god. The path to monotheism required the Judeans to rid themselves of their own alternate gods. This was a transformation attempted by Josiah, but it would take many years after his abrupt death to complete.

Wright provides an alternate description of the evolution of the Jewish religious tradition. Those who wish to be compelled will find it compelling. But Wright’s goal is not to change anyone’s beliefs; rather he wants to point out that if god was created in man’s image, then god is changing as man and his needs change. He is even an optimist who believes that man and his god are both improving with age. He points out that if you read the Biblical scriptures in the order in which they were presumed to be written, not in the order contained in the Bible, you see a softer, more considerate Yahweh developing.

This report covers a smattering of the history and scholarship contained in a small part of a much larger volume. Wright has written an important and an impressive book. Check it out.

Monday, November 29, 2010

European Multinationals: Slumming in America; Labor and Globalization

When you hear of companies setting up operations in a foreign country and, with the complicity of the local government, subjecting workers to conditions they would never consider applying to workers in their own country, does it remind you of nineteenth century colonialism? It should, but that is exactly what is happening in the United States today.

Two articles appeared recently in “The American Prospect” that discuss labor issues and globalization. The first, written by Lance Compa, is titled Slumming in America. Compa is interested in working conditions as a human rights issue. He provides an overview of traditional labor practices in Europe and illustrates the differences with standard practices in the United States.
“Get back to work, or we'll hire permanent replacements to take your jobs! That's what management at Robert Bosch, a German multinational firm with 270,000 employees worldwide, told union members who exercised their right to strike in December 2005.”

“Bosch's message might come as a surprise to anyone who reads the company's website, which promises "respect and support" for international labor standards, especially International Labor Organization (ILO) norms on workers' freedom of association. Bosch's threat directly contravened an ILO standard that says threatening or using permanent replacements to break a strike violates workers' freedom of association. Bosch's threat also ran counter to labor practices at home in Germany and throughout Europe, where permanent replacements are prohibited or, in the case of Germany, simply unheard of. No employer -- including Robert Bosch -- has ever tried using them there.”

“The 2005 strike wasn't taking place in Europe, however, but at Bosch's packaging equipment plant in New Richmond, Wisconsin, where the company was demanding wage cuts and higher health-insurance payments. Bosch acted legally under U.S. labor law, which uniquely allows employers to permanently replace workers who strike. Most other countries permit only temporary replacements. Some prohibit replacements altogether. Faced with permanent replacement, the Wisconsin workers returned quickly on management's terms.”
Europe’s labor practices demonstrate by contrast the United States’ resemblance to a banana republic.
“Striker replacement is just one feature of U.S. labor law that runs counter to international standards on freedom of association. Other features withhold protections for farmworkers, household domestic employees, ‘independent’ contractors who are really dependent on one employer, and low-level "supervisors" who aren't really part of management at all. Worker protections are further undercut by the disparity in U.S. labor law requiring authorities to seek injunctions against union unfair labor practices but not against employer unfair labor practices.”

“Non-interference in workers' organizing is the key international standard on freedom of association. The most common violations allowed under U.S. law are aggressive, one -- sided, fearmongering campaigns that employers launch when workers try to form unions. Managers can haul workers into captive -- audience meetings, forbidding any talk-back, to hear ‘predictions’ of workplace closure if employees form a union, as long as the predictions are not threats. This prediction-versus-threat distinction pleases judges and lawyers but leaves workers baffled and scared.”
Globalization has driven labor leaders not only into the arms of their counterparts in other countries, it has also initiated an alliance with human rights organizations. The concern is to not only prevent human rights violations in the United States and other third world countries, but to prevent the contamination of the rest of the world with U.S. practices.
“....U.S.-style management interference is also making inroads in Europe... a U.K. poultry-processing company named Cranberry Foods used an American anti-union consulting group to spoil workers' organizing in a plant near Manchester. Some U.S.-based anti-union consultants are setting up shop in Eastern European countries that recently joined the European Union.... trade unions and human-rights groups are developing strategies to turn back the U.S. union-busting model.”
The second article, by Louis Uchitelle, Globalization, Union-Style discusses the developing union strategy for dealing with multinational corporations. With the law and judges on the side of the employer, unions must consider other tactics.
“American law gives workers the right to choose to be represented by unions, but today that happens less and less as managers, ignoring the law, block the process. With employers firing or harassing employees who try to organize unions, only one in seven organizing drives eventually produces a contract. So the American labor movement has turned abroad for the organizing leverage it is losing at home.”

“The deterioration in a single generation is considerable, particularly in the last decade. Only 12 percent of the nation's workers (and just 7 percent of private-sector workers) are represented by unions today, with a further decline likely as union organizing dries up. The National Labor Relations Board (NLRB) reports a ‘precipitous drop’ since the late 1990s in the chief means of union expansion: workplace elections to certify bargaining units. Only 1,304 elections took place last year, down 60 percent in little more than a decade, with only 44,000 workers gaining representation in the elections won by unions. That number, too, has declined precipitously.”
The author uses the attempt by the communication Workers of America (CWA) to unionize T-Mobile’s 26,000 technicians and call center employees as an example.
“The CWA has been trying for years to organize T-Mobile's 26,000 technicians and call-center employees. It even endorsed Deutsche Telekom's 2001 acquisition of the company, then known as VoiceStream, in the belief that Deutsche Telekom's acceptance of unions, required by German law and custom, would carry over to the United States and that the CWA's organizing drives could then proceed without interference from company managers.”
Deutch Telekom is accused of “going native” and using standard U.S. management techniques to hinder the union’s efforts. To counter this, CWA has established ties with similar workers for Deutch Telekom in Germany.
“As part of this strategy, in 2008 the CWA reached out to ver.di, its German counterpart. Wilhelm led the fourth visit of ver.di officials to the United States in support of the CWA's organizing efforts. A former telephone installer, he rose to be a director of ver.di and, as such, holds a seat on Deutsche Telekom's board of supervisors. That puts him in regular contact with Rene Obermann, the company's chief executive. Indeed, ver.di officials occupy several of the board's seats, as provided by Germany's co-determination law.”

“Beyond engaging Obermann, Wilhelm and his union colleagues lobby shareholders and convene press conferences, hoping that descriptions of a worker's lot at T-Mobile across the Atlantic will stir up public anger in Germany. In case that is not enough, ver.di, with 2.3 million members, can appeal for support to the German government, which owns 32 percent of Deutsche Telekom.”
The T-Mobile effort is still underway, but the approach has become more common and has been of value. The goal is to get the European companies to at least be neutral with regard to union organizing.
“As globalization spreads, allowing corporations to play off workers in different nations, it also promotes global unionism. In the process, a cross -- border labor movement is beginning to add muscle to American unions. The United Steelworkers, the United Auto Workers, the Teamsters, the United Food and Commercial Workers, and the Service Employees International Union are all engaged in the novel tactic. SEIU is perhaps the most successful to date. Working in part through UNI Global Union, a relatively new Geneva-based federation of 900 unions in numerous countries, it is managing to organize thousands of American security guards whose employers were acquired by foreign multinationals.”

“A prime target is the Pinkerton company, which, fittingly enough, began as a supplier of strikebreakers in the 19th century. Today, Pinkerton's owner is Securitas AB, a giant security company headquartered in Stockholm, Sweden, a solidly pro-union nation. Securitas acquired Pinkerton in 1999, and in 2004, it signed an agreement with three unions -- SEIU, the Swedish Transport Workers Union, and UNI -- in which the company formally agreed not to interfere with SEIU's organizing efforts in the United States. Even with this commitment to neutrality, though, the going has been slow. Six years have passed, and Securitas employees in fewer than a dozen cities have been organized.”

“That is partly because the company's American managers have resisted, despite the formal agreement. ‘They push back, they argue that unionization will destroy profitability, they threaten to quit if SEIU signs up their employees, and that makes Swedish executives in Stockholm nervous,’ says Tom Woodruff, SEIU's executive vice president. ‘They don't want to have to send Swedes to run the American operation’."
This approach does appear to have some successes.
“What stands out in this data is the role of the foreign company operating in America. One-third of the dwindling number of companies organized successfully in recent years were foreign-owned, according to a study by Kate Bronfenbrenner, director of labor education research at Cornell University's School of Industrial and Labor Relations. One of her colleagues, Richard Hurd, estimates that one-half of all workers organized into bargaining units in the United States in recent years benefited from neutrality agreements. Most of them involved foreign companies with operations in the United States, but in some cases, an American company acquiesced to neutrality in exchange for a union's support in dealing with the federal government, or with state governments, on a regulatory matter or other issue important to the company's managers.”
Most of society’s ills can be attributed to income inequality and its effects. The Republican Party, and the businesses and churches that nourish it, all require large numbers of poor and ignorant people to thrive. Income inequality is no accident. It is hard to see how this issue can be addressed without a strong labor movement in the country.

Sunday, November 28, 2010

The Costs of Obesity

Two recent studies try to determine the costs associated with a population that seems intent on growing ever more obese. The Congressional Budget Office issued a report: How Does Obesity in Adults Affect Spending on Health Care? This report was focused on costs incurred by the nation. A second study by George Washington University addressed costs in the context of the obese individual.

The CBO presented this summary statement.
“Over the past two decades, the adult population in the United States has, on average, become much heavier. From 1987 to 2007, the fraction of adults who were overweight or obese increased from 44 percent to 63 percent; almost two-thirds of the adult population now falls into one of those categories. The share of obese adults rose particularly rapidly, more than doubling from 13 percent to 28 percent. That sharp increase in the fraction of adults who are overweight or obese poses an important public health challenge. Those adults are more likely to develop serious illnesses, including coronary heart disease, diabetes, and hypertension. As a result, that trend also affects spending on health care.”
This table summarized the data they had to work with.

The CBO then considered three scenarios to project health care cost forward to the year 2020. The steady state or baseline solution with obesity ratios staying constant at the 2007 values would see costs increase by 65% due to the basic trend towards increased medical costs. The second scenario assumed
“....a rising prevalence of obesity—namely, that recent trends (from 2001 to 2007) in adults’ body weight will continue. In that scenario, the prevalence of obesity would rise to 37 percent by 2020, and per capita spending would increase to $7,760—about 3 percent higher than spending in the first scenario.”
The final case assumed a reversal of the trend toward obesity, returning to the 1987 levels by 2027.
“In that scenario, the prevalence of obesity among adults would drop to 20 percent by 2020. Per capita spending would increase to $7,230 in 2020—about 4 percent lower than spending in the first scenario.”
These results were somewhat surprising in that a significant change in the health status of a large fraction of the population yielded such a small effect. Actually, the effect is not small in terms of dollars—we’re talking a swing of $100 billion here—but it is small compared to the overall inflation in medical costs.

The CBO study was limited to adults. During this time period childhood obesity increased dramatically. Data is available here.
“Among pre-school age children 2-5 years of age, obesity increased from 5 to 10.4% between 1976-1980 and 2007-2008 and from 6.5 to 19.6% among 6-11 year olds. Among adolescents aged 12-19, obesity increased from 5 to 18.1% during the same period.”

“Obese children and adolescents are at risk for health problems during their youth and as adults. For example, during their youth, obese children and adolescents are more likely to have risk factors associated with cardiovascular disease (such as high blood pressure, high cholesterol, and Type 2 diabetes) than are other children and adolescents.”

“Obese children and adolescents are more likely to become obese as adults. For example, one study found that approximately 80% of children who were overweight at aged 10–15 years were obese adults at age 25 years. Another study found that 25% of obese adults were overweight as children. The latter study also found that if overweight begins before 8 years of age, obesity in adulthood is likely to be more severe.”
This information leaves one wondering if there is not perhaps an explosion of obesity-related issues in our future that is not considered in the CBO study.

The CBO report points out that health care costs alone do not measure the cost of obesity to society. Things like life-expectancy and retirement costs would have to be considered.

The George Washington University study looks at costs from the individual’s perspective. They include the effects of wage differentials, productivity, and absenteeism, as well as health care costs, but not all related costs could be accounted for.
“The picture we have created is only a partial look at the individual costs related to obesity. Existing literature provides information on health- and work-related costs, but with the exception of fuel costs, there is no published academic research that gives us insight into consumer-related costs, such as clothing, air travel, automobile size or furniture. Anecdotal evidence suggests these costs could be significant.”
The following summary is provided.

Ignoring the study’s attempt to assign a cost to decreased life expectancy, the cost for obese women is $4,879 per year and for obese men it is $2,646. Direct medical costs are the same for each at $1,474 (consistent with the CBO report). The difference for women is mainly due to work-related factors. Obese women apparently earn considerably less than non-obese women and take more sick leave. One can only guess that this is probably more a discrimination issue than a productivity concern.

This table also hides the disparity in costs between differing levels of obesity.
“....where we were able to break down the costs by class of obesity, we found the incremental costs of morbid obesity are much higher than the incremental costs of moderate obesity. We observed this trend in direct medical costs, premature mortality, absenteeism, and fuel consumption. For example, the direct medical costs for morbid obese individuals are 3.5 times higher than the direct medical costs for moderately obese individuals. As a result, Allison (1999) estimates one-fifth of total incremental costs of obesity at the societal level are due to morbidly obese patients, although the morbidly obese comprise only 5.7% of the population (Flegal et al., 2010).”
These results indicate that while obesity is not a dominant driver in national costs, for individuals the opposite conclusion can be drawn. Obesity-related costs almost doubled for men when non-medical factors are considered; they more than tripled for women.

Obesity is a national problem, but it is a personal tragedy. We should support efforts to diminish the prevalence by encouraging healthier lifestyles.

Thursday, November 25, 2010

Subprime Opportunity: The Unfulfilled Promise of For-Profit Colleges and Universities

Let us recall this quote from Steve Eisman.

“I thought that there would never again be an opportunity to be involved with an industry as socially destructive and morally bankrupt as the subprime mortgage industry. I was wrong. The for-profit education industry has proven equal to the task.”
Eisman was one of the main characters in the book The Big Short by Michael Lewis. He was one of those who made a financial killing by investing short against the subprime loan mess in the housing market. He delivered the above statement while testifying before a congressional committee. The Government Accountability Office has already issued a report detailing how these institutions encouraged fraud and engaged in deceptive and questionable marketing practices. As of yet, congress has congress has not had the courage to act and reign in the rampant abuse in this industry.

Another voice has been heard. The Education Trust has just issued a report titled: Subprime Opportunity: the Unfulfilled Promise of For-Profit Colleges and Universities. Like Eisman, the report draws a direct comparison between for-profit colleges and the subprime mortgage industry. This report, combined with a little data from Businessweek will make the analogy complete.
“The rationing of opportunity that marginalizes an important sector of American society has ironically become an extraordinarily profitable opportunity for corporations that claim to serve the underserved. In the lead-up to the collapse of the subprime lending industry, homeownership was billed as the cornerstone of the American Dream, as banks aggressively marketed risky financial products to those who could not afford them.”

“The developing showdown between for-profit colleges and the government is another example of how the aspirations of the underserved and the unfulfilled promise of the American dream combine with lax regulation to make the rich, richer and the poor, poorer.”
As was the case with subprime mortgages, the for-profit schools target those least likely to be served by traditional schools. Many such individuals have neither the academic background nor the motivation to complete a degree program and compete in the economy with other degree holders. To entice them with easy loans and promises of a rosy future is not doing them or the nation a favor. What we have here is the opportunity to run a scam to pilfer money from the national treasury via federally subsidized loans that the schools can then pocket as profit.
“The rapid rise of the for-profit industry has largely been driven by the aggressive recruitment of low-income students and students of color—a fact that is not disputed by the sector, but rather heralded as a sign of its commitment to underserved populations. Low-income and minority students make up 50 and 37 percent of students at for-profits, respectively.”

The goal of offering opportunity for advancement via education would be exemplary if advancement was what was delivered. What is provided instead is a path that is unlikely to lead to graduation and commensurate employment. The only certainty for the students is a crushing debt burden.

Consider the chart below. It lists the six-year graduation rates for some of the larger for-profit institutions. The largest organization, University of Phoenix, has a graduation rate of only 9%. The net for all for-profit schools in this category is 22%. The equivalent numbers for public and private, non-profit are 55% and 65% respectively.

The next chart plots the median debt load for students from public, private non-profit, and for-profit schools.

The Education Trust report tells the tale of a woman who graduated with $30,000 of debt; ten years later, with fees and interest, it had ballooned to $60,000. It also pointed out that
“The consequences of default are severe. Student loan debt is not dischargeable in bankruptcy, so it can follow a student for a lifetime. Defaulters can have their wages garnished, their income tax refunds intercepted, and their Social Security payments withheld.”

“These unmanageable debt burdens and high default rates indicate that for-profit schools do not provide students with the education necessary to secure employment at a level that allows them to repay the hefty loans they must borrow.”
Now we have the poor and defenseless being induced, through deceptive—and occasionally fraudulent—means to assume a level of debt that they cannot possibly pay off. One thing is left yet to complete the analogy with subprime mortgages—the rich have to get richer. Businessweek magazine has provided the needed data.
“While for-profit colleges get poor grades for their high dropout rates, student loan defaults, and heavy dependence on federal student aid, their executives excel in another subject: making money. Strayer Education, a for-profit college chain that receives three-quarters of its revenue from U.S. taxpayers, paid Chief Executive Officer Robert Silberman $41.9 million last year. That's 24 times the compensation of the highest-paid Ivy League university president, Columbia University's Lee Bollinger, who received $1.75 million in 2008, including the value of housing and other benefits, according to a study published Nov. 14 by the Chronicle of Higher Education. Silberman's annual pay, including cash and stock-based compensation, would have ranked him eighth on a list of the highest-paid executives at the largest 1,000 U.S. companies, according to Equilar, an executive-pay researcher.”

“It's not just fat paychecks. Top executives at the 15 U.S. publicly traded for-profit colleges, the largest of which are Apollo Group and Education Management, also received $2 billion during the last seven years from the proceeds of selling company stock, Securities and Exchange Commission filings show. Since 2003, nine for-profit college insiders sold more than $45 million of stock apiece. Peter Sperling, vice-chairman of Apollo's University of Phoenix, the largest for-profit college, collected the most: $574.3 million.”

The problem is not that schools are trying to earn a profit. The problem is that these schools are not regulated. They do not have appropriate standards that must be followed. A minimal attempt to correct this was planned by the Department of Education. Lobbyists were able to purchase the allegiance of enough legislators to cause the rule implementation to be delayed. With more Republicans in the houses of congress, the price for the purchase of a legislator will go down and the chance for any meaningful regulation will diminish.

Tuesday, November 23, 2010

Signs of Life from Unions: Nurses Get Feisty, SEIU Takes Advantage of Globalization

It is hard to see how one counters the increasing income disparity in the U.S. without a significant component of the effort coming from wage earners themselves. The labor movement in this country has been in decline, in terms of membership, for decades. Being the only existing conduit for wage-earner discontent, it is important that labor unions begin to acquire more members, and the additional political clout that will come with growth. It was encouraging to come across articles indicating new momentum in the labor movement.

There was a report issued in October by the Institute of Medicine, The Future of Nursing: Leading Change, Advancing Health, recommending an expanded role for nurses as a means of improving healthcare and reducing costs. The specific points of emphasis were:
“Nurses should practice to the full extent of their education and training.”

“Nurses should achieve higher levels of education and training through an improved education system that promotes seamless academic progression.”

“Nurses should be full partners, with physicians and other health care professionals, in redesigning health care in the United States.”

“Effective workforce planning and policy making require better data collection and information infrastructure.”
If nurses are to play an expanded role in the existing system they will need a voice that can speak with as much influence as that possessed by doctors and hospitals. A recent article in the Washington Post points out that nurses are getting organized on a national level and are becoming more aggressive.
“National Nurses United, the largest nurses union in the country, has helped organize strikes or threatened them this year at hospitals in California, Pennsylvania, Maine, Michigan and Minnesota. The Oakland, Calif.-based union has tapped into concerns of registered nurses worried about losing jobs at a time when hospitals and health-care organizations are under enormous pressure to cut costs.”

"’They have been very aggressive in legislative lobbying efforts, influencing public policy through informational picketing, and willingness to get out there and strike,’ said Joanne Spetz, an economist who specializes in nursing workforce issues at the University of California at San Francisco. ‘Love them or hate them, you have to respect their success’."

“The union also sported a high-profile campaign during the recent midterm elections by attacking Republicans for their positions on health care. They targeted Meg Whitman, who lost to Jerry Brown in California's governor's race, and Sharron Angle, who was defeated by Democratic incumbent Harry Reid in Nevada's Senate race.”
There are 3 million registered nurses in this country. Suitably organized, they could be a potent force. When questioned about aggressive tactics, the Union leader, Rose Ann DeMoro replied:
"’Absolutely,’ she said. "If you are going to advocate for nurses and patients, and if you are meek, these hospitals will roll right over you’."
You have to like that reply. Go for it nurses!

After decades of being battered by globalization and low wage competition from other countries, unions have figured out a way to make globalization work in their favor. There is an article in The American Prospect by David Moberg, Translating Solidarity, that described an effort by SEIU to take advantage of an opportunity provided by globalization.

The author tells the story of a food concession worker in Ohio who worked for the French-owned company Sodexo (380,000 workers in 80 countries). Contrast the conditions experienced by the worker in Ohio and by the Sodexo workers in France.
“Sodexo touts that it's ‘a great place to work.’ But on her part-time hours and low pay ($9 an hour or less until recently, after she began organizing and got a raise and a full work week), Snell had to raise her five children with the help of Medicaid, food stamps, and public assistance. When her Medicaid coverage ended, she could not afford Sodexo's insurance or her heart medicine and then needed bypass surgery.”

“French Sodexo union leaders Jean-Michel Dupire and Gerard Bodard say that after visiting Columbus last spring, they were shocked by differences between the lives of Americans like Snell and French Sodexo workers -- and the difference between Sodexo's self-image and reality. In France, anyone can easily join a union, and everyone in the food services is under union contracts. Most French Sodexo workers earn the minimum wage (about $12 an hour), but they have comprehensive public health insurance, a much more generous public pension, full work weeks, and six weeks paid vacation. (Snell will get her first few vacation days next year.)”
The French workers are worried that Europe could be contaminated by the atrocious working conditions in the U.S.
"’I think we'll help each other,’ Bodard says, ‘because we're working for a global company, and the only way for us to go is to build global power. In France, we've put pressure on Sodexo and given publicity [to U.S. conditions] so everyone in the sector knows about it’."

“Reflecting the growing worry that multinational companies will bring U.S. labor standards to Europe, Bodard adds, ‘What I'm going for is equal treatment, but it's also important to bring everyone to the top, not the bottom’."

"’The French workers stood by us and want to help us get a union,’ Snell says. ‘They actually cried when we told them our stories. ... By workers from other states and countries going together, it shows we really want a union’."
This type of activity seems to have been going on for some time.
“Such tangible global solidarity will be key to developing global union power that can counterbalance the expanding influence of multinational corporations. SEIU Executive Vice President Tom Woodruff, director of Change to Win's Strategic Organizing Center, believes unions must unite across borders to organize, because union membership as a fraction of the workforce is declining nearly everywhere. ‘Only if unions build organizing across borders can workers get a fair share from their employers,’ he says. ‘More U.S. unions and unions in other countries are involved, but global campaigning is really an underdeveloped technology’."
I cannot even recall the last time I encountered an encouraging story about the labor movement. Let’s hope there are more to come.

Monday, November 22, 2010

Is China a “Colossus” or a Giant “House of Cards”?

Is China a colossus with the power to reshape the world, or is it beset by so many issues that it is struggling just to hold everything together? Elizabeth C. Economy has written an article for the November/December 2010 issue of Foreign Affairs in which she appears to say yes to both questions. The article is titled The Game Changer: Coping with China’s Foreign Policy Revolution.  She opens with these comments.

“After decades of following Deng Xiaoping's dictum ‘Hide brightness, cherish obscurity,’ China's leaders have realized that maintaining economic growth and political stability on the home front will come not from keeping their heads low but rather from actively managing events outside China's borders. As a result, Beijing has launched a ‘go out’ strategy designed to remake global norms and institutions. China is transforming the world as it transforms itself. Never mind notions of a responsible stakeholder; China has become a revolutionary power.”

“China's leaders once tried to insulate themselves from greater engagement with the outside world; they now realize that fulfilling their domestic needs demands a more activist global strategy. Rhetorically promoting a "peaceful international environment" in which to grow their economy while free-riding on the tough diplomatic work of others is no longer enough. Ensuring their supply lines for natural resources requires not only a well-organized trade and development agenda but also an expansive military strategy. The Chinese no longer want to be passive recipients of information from the outside world; they want to shape that information for consumption at home and abroad. And as their economic might expands, they want not only to assume a greater stake in international organizations but also to remake the rules of the game.”
Clearly China is a major player in the world because of the size of its economy, the size of its population, and its strategic location in the heart of Asia. The question to ask is: “Does this make China a ‘revolutionary power,’ one able to ‘remake the rules of the game’?” If China were able to continue its economic growth into the indefinite future and maintain a healthy and stable government and citizenry throughout that process, then one would have to agree with that description. Many people, including Economy herself, have doubts.

The author discusses a number of China’s actions and initiatives that have been discussed here before. The more aggressive naval posture was discussed here. Its increased emphasis on developing or pilfering technologies to be used for proprietary purposes was discussed here. China’s consolidation of power and influence in order to protect their access to needed resources was discussed here. Finally, Economy’s book, The River Runs Black, in which she details the enormous environmental burden that China must assume, was discussed here.

The author adds some new information on China’s plans for the future. The ambition incorporated in these plans is staggering.
“Yet for China's current leaders, Deng's revolution has run its course. They must now confront the downside of 30 years of unfettered growth: skyrocketing rates of pollution and environmental degradation, rampant corruption, soaring unemployment (reports range from 9.4 percent to 20 percent), a social welfare net in tatters, and rising income inequalities. Together, these social ills contribute to over 100,000 protests annually. In response, China's leadership is poised to launch an equally dramatic set of reforms that will once again transform the country and its place in the world. If all goes according to plan, in 20 years or less, China will be unrecognizable: an urban-based, innovative, green, wired, and equitable society.”

“At the heart of this next revolution is Beijing's plan to urbanize 400 million people by 2030. In 1990, just 25 percent of all Chinese lived in cities; today, that number is almost 45 percent. By 2030, it will be 70 percent. Urbanizing China will allow for a more effective distribution of social services and help reduce income disparities. An urban China will also be knowledge-based. No longer content to have their country be the world's manufacturing powerhouse, China's leaders have embarked on an aggressive effort to transform the country into a leading center of innovation. Beijing is supporting research and development; recruiting Chinese-born, foreign-trained scientists to return to China to head labs and direct research centers; and carefully studying the models of innovation that have proved successful in the West.”

“Even as China moves ahead with its bold plans to transform its economy and society, new pressures and challenges will emerge. The resource demands of rapid urbanization are substantial. Half of the world's new building construction occurs in China, and according to one estimate, the country will construct 20,000-50,000 new skyscrapers over the coming decades. Shanghai, already the country's most populous urban center, will soon be surrounded by ten satellite cities -- each with half a million people or more. Connecting all these and other new cities throughout the country will require 53,000 miles of highway. Once the cities are built and connected, the demand for resources will continue to grow: urban Chinese consume more resources than those in rural areas (roughly 3.5 times as much energy and 2.5 times as much water), placing significant stress on the country's already scarce resources. By 2050, China's city dwellers will likely account for around 20 percent of global energy consumption.”

“In China, the amount of water available per person is one-fourth the global average. China is water rich in absolute terms, but given the number of people, the levels of pollution, and the location of China's water resources, water is scarce throughout much of the country -- and China's leaders fear serious future shortages due to rapidly growing household and industrial demand. Consequently, they are moving quietly but aggressively to dam and divert the water resources of the Qinghai-Tibetan plateau, a move that will affect millions of people outside the country's borders. China's river-diversion initiatives are generating significant concern in Bangladesh, India, and Kazakhstan, among other countries, and paving the way for future regional disputes: the economic livelihood of millions of people outside China's borders depends on access to these water resources.”
The author seems to be saying that China has to succeed in this ambitious plan because it has no other choice: the current path is unsustainable.

Is the planned path sustainable, even assuming one can get there? Let us remind ourselves of some of the author’s own words from her book.
“....officials in Shanghai, Guangzhou, and Taiyaun have all cited water scarcity as the number one environmental concern, and the Ministry of Water Resources predicts a ‘serious water crisis in 2030 when the population reaches 1.6 billion and China’s per capita water resources are estimated to decline to the World Bank’s scarcity level. According to the World Bank, 400 of China’s 660 cities are already short of water and 260 million people find it difficult to get enough water for their daily needs. Moreover, 300 million people in rural areas lack access to piped water. In the absence of adequate piped water, people must rely on surface water, which is often highly contaminated due to run-off from surrounding farm land and factories. As a result, 700 million people in China drink water contaminated with human and animal waste.”

“Over the past twenty years, main stream water flows have declined by 41 percent in the Hai River Basin, 15 percent in the Yellow River and Huai River basins, and 9 percent in the Liao river basin. Since 2004, Beijing has resorted to drawing water from fragile groundwater supplies as deep as one kilometer below the surface. Even still, the city’s per capita water availability has plummeted from 1,000 cubic meters in 1949 to less than 230 cubic meters in 2007....China’s plundering of its groundwater reserves, which has created massive underground tunnels, is causing a corollary problem. Some of china’s wealthiest cities are sinking—in the case of Shanghai and Tianjin, by more than six feet during the past fifteen years. In Beijing, land subsidence has destroyed factories, buildings, and underground pipelines, and is threatening the city’s main international airport.”

“....an investigation conducted by the Ministry of Water Resources found that drinking water in 115 out of 118 cities surveyed was polluted, largely by arsenic....and fluoride....”
And now they want to add 400 million more people to their cities. Taking some water away from other countries does not seem sufficient to make this work. Also for consideration:
“Beijing is one of twenty Chinese cities among the thirty world cities with the most polluted air. A 2005 survey determined that half of China’s cities did not meet the governments own air quality standards. Moreover, according to the World Bank, in 2007 only 1 percent of China’s urban population breathed air considered safe by European Union standards....China’s sulfur dioxide emissions, which cause acid rain, are now the highest in the world, affecting one-third of China’s territory. Acid rain poisons the country’s fisheries, ruins cropland, and erodes buildings....Japan and South Korea also blame China for much of their problems with acid rain, a situation that has contributed to ongoing tensions in the region.”

“A joint study by the World Bank and SEPA in 2007 estimated that 650,000 to 700,000 people in China die prematurely from air pollution annually. In the country’s most polluted cities, when children breathe, it is the equivalent of smoking two packs of cigarettes per day.”
And now they want to add 400 million more people to their cities? Somehow this does not add up.

All the changes the author described will require enormous levels of resources. That has to presuppose a continuous healthy growth in the economy. Can they really pull that off? Here are the thoughts on that subject from one observer.
“STRATFOR thus sees the Chinese economic system as inherently unstable. The primary reason why China’s growth has been so impressive is that throughout the period of economic liberalization that has led to rising incomes, the Chinese government has maintained near-total savings capture of its households and businesses. It funnels these massive deposits via state-run banks to state-linked firms at below-market rates. It’s amazing the growth rate a country can achieve and the number of citizens it can employ with a vast supply of 0 percent, relatively consequence-free loans provided from the savings of nearly a billion workers.”

“It’s also amazing how unprofitable such a country can be. The Chinese system, like the Japanese system before it, works on bulk, churn, maximum employment and market share. The U.S. system of attempting to maximize return on investment through efficiency and profit stands in contrast. The American result is sufficient economic stability to be able to suffer through recessions and emerge stronger. The Chinese result is social stability that wobbles precipitously when exposed to economic hardship. The Chinese people rebel when work is not available and conditions reach extremes. It must be remembered that of China’s 1.3 billion people, more than 600 million urban citizens live on an average of about $7 a day, while 700 million rural people live on an average of $2 a day, and that is according to Beijing’s own well-scrubbed statistics.”

“Moreover, the Chinese system breeds a flock of other unintended side effects."

"There is, of course, the issue of inefficient capital use: When you have an unlimited number of no-consequence loans, you tend to invest in a lot of no-consequence projects for political reasons or just to speculate. In addition to the overall inefficiency of the Chinese system, another result is a large number of property bubbles. Yes, China is a country with a massive need for housing for its citizens, but even so, local governments and property developers collude to build luxury dwellings instead of anything more affordable in urban areas. This puts China in the odd position of having both a glut and a shortage in housing, as well as an outright glut in commercial real estate, where vacancy rates are notoriously high.”

“There is also the issue of regional disparity. Most of this lending occurs in a handful of coastal regions, transforming them into global powerhouses, while most of the interior — and thereby most of the population — lives in abject poverty.”

“There is also the issue of consumption. Chinese statistics have always been dodgy, but according to Beijing’s own figures, China has a tiny consumer base. This base is not much larger than that of France, a country with roughly one twentieth China’s population and just over half its gross domestic product (GDP). China’s economic system is obviously geared toward exports, not expanding consumer credit.”

“Which brings us to the issue of dependence. Since China cannot absorb its own goods, it must export them to keep afloat. The strategy only works when there is endless demand for the goods it makes. For the most part, this demand comes from the United States. But the recent global recession cut Chinese exports by nearly one fifth, and there were no buyers elsewhere to pick up the slack. Meanwhile, to boost household consumption China provided subsidies to Chinese citizens who had little need for — and in some cases little ability to use — a number of big-ticket products. The Chinese now openly fear that exports will not make a sustainable return to previous levels until 2012. And that is a lot of production — and consumption — to subsidize in the meantime. Most countries have another word for this: waste.”
China has done virtually nothing to create an internal consumer economy. They must continue to keep the value of their currency low because raising it and lowering imports would be a disaster.

As Economy points out, there are about 100,000 protests annually by Chinese citizens. Does this sound like stability? Recently, during the naval dispute with Japan, China authorized some anti-Japanese protests. This article describes what happened.
“Many reports from China say small anti-Japanese demonstrations were approved by the authorities in the last few days.”

“But these demonstrations were taken over by thousands of people venting their frustrations and unhappiness with their government.”

“Several of these approved demonstrations are reported to have quickly spun out of control, as protesters used cellphone text messaging and social networks to bring thousands of young people onto the streets.”

“In Chengdu, the capital of Sichuan province, for example, the authorities approved an anti-Japanese rally on Oct. 16 for about 100 university students. But word of the protest spread quickly over the Internet and the demonstration drew more than 10,000 people. The protest turned violent and the police had a hard time restoring order.”
The price of food is increasing in China, as described in this article.
“China's government announced food subsidies for poor families Wednesday as it tries to cool a double-digit surge in prices that communist leaders worry might stir unrest.”

“Inflation is politically volatile in China, where poor families spend up to half their incomes on food. Rising incomes have helped to offset price hikes, but inflation erodes gains that help support the ruling Communist Party's claim to power.”
There seem to be more signs of instability than stability in China today. Two decades from now China will probably have a stable economy and society. I am doubtful that China will arrive at the precise point for which it is now planning, and I believe it is impossible to predict the path it will follow to get wherever it ends up.

Sunday, November 21, 2010

The Gates Foundation and World Health: Closing in on Polio

The Gates Foundation (actually named the Bill and Melinda Gates Foundation) has such a large endowment that it can, by its own actions and funding decisions, affect world health. This places a burden on the organization to use their funds wisely, and occasionally makes them a target for criticism.

As of the end of 2009, the Foundation had assets of $33.5B. To maintain its status as a charitable organization it must disperse 5% of its funds annually, about $1.5B. This is a rate that a conservatively invested endowment might be expected to earn. In 2006, Warren Buffett agreed to contribute shares in Berkshire Hathaway worth approximately $30B at the time. These shares would be distributed over time, and were provided with the intention of having them distributed rather than being added to the endowment. The net effect of the Buffett contribution was to double the amount of funds available for charitable causes from the Foundation. Funding at this level allows the Gates Foundation to participate on the international stage at the same level as nations and international organizations such as the United Nations.

More about the history and activities of the Foundation can be found here. The Foundation’s web site is also a good source of information. Perhaps of most value to those interested in the foundation’s goals, motives and approaches, is a message composed annually by Bill Gates, a form of annual report directed at the world. Not surprisingly Gates has an approach that one might expect from a technology-oriented businessman.
“Although innovation is unpredictable, there is a lot that governments, private companies, and foundations can do to accelerate it. Rich governments need to spend more on research and development, for instance, and we need better measurement systems in health and education to determine what works.”

“Melinda and I see our foundation’s key role as investing in innovations that would not otherwise be funded. This draws not only on our backgrounds in technology but also on the foundation’s size and ability to take a long-term view and take large risks on new approaches. Warren Buffett put it well in 2006 when he told us, “Don’t just go for safe projects. You can bat a thousand in this game if you want to by doing nothing important. Or you’ll bat something less than that if you take on the really tough problems.” We are backing innovations in education, food, and health as well as some related areas like savings for the poor.”

“We have a framework for deciding which innovations we get behind. A key criterion for us is that once the innovation is proven, the cost of maintaining it needs to be much lower than the benefit, so that individuals or governments will want to keep it going when we are no longer involved. Many things we could fund don’t meet this requirement, so we stay away from them. Another consideration for us is the ability to find partners with excellent teams of people who will benefit from significant resources over a period of 5 to 15 years.”
Gates collects the major initiatives under three headings: Global Health Program, Global Development Program, and the United States Program. The latter is focused on education with components addressing teacher effectiveness, on-line and interactive training, and computer and internet availability. The teacher effectiveness thrust has aroused the ire of many education stakeholders. That was previously discussed here and here. The global development activities are focused on agricultural productivity, improving financial tools and availability, and sanitation.

Gates’ review lists under global health activities: pneumonia and rotavirus vaccine delivery, development of a malaria vaccine, and developing the means for reducing the risk of contracting HIV. These are all worthwhile activities, yet the Foundation’s work still comes under criticism occasionally. Much of the complaining seems to come from journalists looking for a good story, or someone whose idea did not get funded. Most of the same criticisms could be directed at the United Nations, for example. However, there are some valid reasons for concern related to placing a narrow focus on a few large-scale projects. Laurie Garrett, in an article in Foreign Affairs (January/February, 2007), The Challenge of Global Health, argues that such narrow focus can detract from the development of general health infrastructure in poor countries and ultimately lead to poorer health delivery.
“Less than a decade ago, the biggest problem in global health seemed to be the lack of resources available to combat the multiple scourges ravaging the world's poor and sick. Today, thanks to a recent extraordinary and unprecedented rise in public and private giving, more money is being directed toward pressing heath challenges than ever before. But because the efforts this money is paying for are largely uncoordinated and directed mostly at specific high-profile diseases -- rather than at public health in general -- there is a grave danger that the current age of generosity could not only fall short of expectations but actually make things worse on the ground.”

“But much more than money is required. It takes states, health-care systems, and at least passable local infrastructure to improve public health in the developing world. And because decades of neglect there have rendered local hospitals, clinics, laboratories, medical schools, and health talent dangerously deficient, much of the cash now flooding the field is leaking away without result.”

“The fact that the world is now short well over four million health-care workers, moreover, is all too often ignored. As the populations of the developed countries are aging and coming to require ever more medical attention, they are sucking away local health talent from developing countries. Already, one out of five practicing physicians in the United States is foreign-trained....”

“The years ahead could witness spectacular improvements in the health of billions of people, driven by a grand public and private effort comparable to the Marshall Plan -- or they could see poor societies pushed into even deeper trouble, in yet another tale of well-intended foreign meddling gone awry. Which outcome will emerge depends on whether it is possible to expand the developing world's local talent pool of health workers, restore and improve crumbling national and global health infrastructures, and devise effective local and international systems for disease prevention and treatment.”
But we came here to praise Bill Gates, not to criticize him. The suggestion for this post came from an article in Businessweek magazine highlighting Gates’ contribution to the effort to eliminate polio throughout the world via an aggressive vaccination program.
“Bill Gates’ eureka moment came in June 2009 in an underground conference room at the World Health Organization's headquarters in Geneva. After a decade of giving away millions to eradicate polio, the billionaire philanthropist was being briefed on hours-old data showing how two doses of a new polio vaccine protected 37 percent more children than conventional ones.”

“The immunization, which protects against multiple strains, promised to speed the effort to wipe out the crippling killer that remains a scourge in developing nations. Several months later, Gates pledged an additional $285 million toward eradication of the malady.”

“Fast forward to early November, when Gates again stepped into the fight against polio. This time his charitable foundation helped broker a deal that will allow the UN to buy those new vaccines more cheaply. The Microsoft co-founder met with GlaxoSmithKline Chief Executive Officer Andrew Witty in New York this month as part of talks that resulted in five international suppliers—GlaxoSmithKline, Indonesia's Bio Farma, Sanofi-Aventis, Novartis, and New Delhi-based Panacea Biotec—agreeing to steep cuts in polio vaccine prices.”

“The $60 million saved by the price-cuts will allow Unicef to buy up to an additional 400 million doses, says Bruce Aylward, head of WHO's polio program. ‘We have a real opportunity to give it our best shot to finish this with the new vaccines,’ he says. ‘The manufacturers are playing ball’.”

“Polio, an acute viral disease, paralyzed millions of people worldwide in the 20th century. At the height of the most extensive polio outbreak ever in 1952, almost 60,000 cases with over 3,000 deaths reported in the U.S. alone. Polio was eliminated from the Western hemisphere after vaccines became widely available in the mid-1950s. Yet before the Global Polio Eradication Initiative began in 1988, the disease still paralyzed at least 350,000 children in more than 125 countries annually. Although outbreaks have been dropping fast in recent years, the malady still struck in 23 countries last year. India had the most cases.”

“The Seattle-based Bill & Melinda Gates Foundation has provided more than $1 billion for polio programs during the past decade, making it the biggest donor to a global three-year, $2.6 billion plan to root out the last vestiges of the disease by 2013. It would be the first viral illness in humans to be declared eradicated since smallpox in 1980. “
Sometimes, when money talks good things happen. Thank you Bill (and Melinda).

Thursday, November 18, 2010

Could the United States Become “Japan”?

Hovering over the disappointment associated with the current state of the economy comes the occasional pundit warning that we face a “lost decade,” or that we face the same fate as Japan. The reference to Japan is intended to conjure up an image of a country doomed to minimal economic growth, high unemployment, and even higher indebtedness for the foreseeable future. While the United States may in fact be faced with a future like the one described, it is not a given by any means, and it will not be because we suffered the same fate as Japan. There are sufficient differences between the situations faced and experienced by the two countries to make the analogy inappropriate.

Japan’s crisis of the late 80s and early 90s came at a time when its economy was reaching a point where a period of readjustment was inevitable. Its export-lead economy was driven for decades by the ability to turn out quality goods at a low price. At some point, success eliminates the “low price” option and manufacturing has to move to poorer countries. At this point Japan lost a lot of its competitive edge; it was, in fact, training its next competitors. Japan never made a successful transition to a more balanced economy. The years of cash flow from the extraordinarily successful export business combined with low interest rates to produce an enormous speculative bubble, one far larger than the housing bubble generated prior to the current crisis. The crash from that bubble is still being felt today, twenty years later.

Richard Katz, in a March/April, 2009 article in “Foreign Affairs” provides a clear and succinct description of the differences between Japan then, and the United States now.
“The consequences of the 2008 U.S. financial crisis will be different from Japan's slump in the 1990s for three reasons: the cause of the current crisis is fundamentally different, its scope is far smaller, and the response of policymakers has been quicker and more effective.”

“Japan's malaise was woven into the very fabric of its political economy. The country has a thin social safety net, and so in order to protect jobs, weak domestic firms and industries were sheltered from competition by a host of regulations and collusion among companies. Ultimately, that system limited productivity and potential growth. The problem was compounded by built-in economic anorexia. Personal consumption lagged, not because people refused to spend but because the same structural flaws caused real household income to keep falling as a share of real GDP. To make up for the shortfall in demand, the government used low interest rates as a steroid to pump up business investment. The result was a mountain of money-losing capital stock and bad debt.”

“Japan's crisis pervaded virtually its entire corporate world. In sector after sector, debt levels and excess capacity ballooned and profitability remained low. White-elephant projects, from office buildings to auto plants, were built on borrowed money under the assumption that if times got tough, the government and banks would bail out the debtors. But the banks were too poorly capitalized to write off bad loans. And for every bad loan, there was a bad borrower whose products were not worth the cost to make them. The cumulative total of bank losses on bad debt between 1993 and 2005 added up to nearly 20 percent of GDP.”

“The United States' subprime mortgage fiasco of 2007-8, in contrast, was primarily the result of discrete, correctable mistakes brought on by ideological excess and the power of financial-industry lobbyists rather than intractable structural problems.”
It is really hard to comprehend the scale of the speculation that occurred in Japan
“The scope of the Japanese crisis and the scope of the U.S. crisis are also fundamentally different. From 1981 to 1991, commercial land prices in Japan's six biggest cities rose by 500 percent. The subsequent bust brought prices down to a level well below that of 1981; as of 2007, they were still 83 percent below the 1991 peak. In the United States, the real estate bubble was not as inflated, and the bust has been less severe. From 1996 through the 2006 peak, housing prices in the 20 biggest U.S. cities rose by 200 percent. Most forecasters think prices will drop by 30-40 percent from the peak levels before bottoming out in 2009 or 2010. No one is suggesting that prices will fall below the level of 1996.”

“Most of the United States' nonfinancial corporations are still healthy. Whereas the debt of Japanese corporations was several times their net worth, in the United States, corporate debt amounts to only half of companies' net worth, the same level that has prevailed for decades. The ratio of nonperforming loans among nonfinancial companies is only 1.6 percent, and productivity growth remains solid.”
The present policy makers had the advantage of having Japan’s response to learn from.
“The Japanese and U.S. crises differ in many ways, but the starkest contrast is in the response of policymakers. Denial, dithering, and delay were the hallmarks in Tokyo. It took the Bank of Japan nearly nine years to bring the overnight interest rate from its 1991 peak of eight percent down to zero. The U.S. Federal Reserve did that within 16 months of declaring a financial emergency, which it did in August 2007. It has also applied all sorts of unconventional measures to keep credit from drying up.’

“It took Tokyo eight years to use public money to recapitalize the banks; Washington began to do so in less than a year. Worse yet, Tokyo used government money to help the banks keep lending to insolvent borrowers; U.S. banks have been rapidly writing off their bad debt. Although Tokyo did eventually apply many fiscal stimulus measures, it did so too late and too erratically to have a sufficient impact. The U.S. government, by contrast, has already applied fiscal stimulus, and the Obama administration is proposing a multiyear program totaling as much as five to six percent of U.S. GDP. When it comes to crisis management, it is far better to do too much than too little.”
In reading about this issue, one is struck by how fundamentally different the two countries are, and by how easy it is to be optimistic about the future of the United States, and by how difficult it is to foresee a healthy Japan.

The mood in the United States is one mainly of anger. Anger, properly focused, can be a positive attribute. A recent New York Times article describes the mood in a Japan experiencing twenty years of deflation and diminished expectations as “resigned.” It is hard to see resignation as a component of a bright future.
“Just as inflation scarred a generation of Americans, deflation has left a deep imprint on the Japanese, breeding generational tensions and a culture of pessimism, fatalism and reduced expectations. While Japan remains in many ways a prosperous society, it faces an increasingly grim situation, particularly outside the relative economic vibrancy of Tokyo, and its situation provides a possible glimpse into the future for the United States and Europe, should the most dire forecasts come to pass.”

“In 1991, economists were predicting that Japan would overtake the United States as the world’s largest economy by 2010. In fact, Japan’s economy remains the same size it was then: a gross domestic product of $5.7 trillion at current exchange rates. During the same period, the United States economy doubled in size to $14.7 trillion, and this year China overtook Japan to become the world’s No. 2 economy.”

“But perhaps the most noticeable impact here has been Japan’s crisis of confidence. Just two decades ago, this was a vibrant nation filled with energy and ambition, proud to the point of arrogance and eager to create a new economic order in Asia based on the yen. Today, those high-flying ambitions have been shelved, replaced by weariness and fear of the future, and an almost stifling air of resignation. Japan seems to have pulled into a shell, content to accept its slow fade from the global stage.”
If you think the real estate market is in bad shape in your area, consider Japan, even twenty years after the crash.
“Yoshinori Kaiami was a real estate agent in Osaka, where, like the rest of Japan, land prices have been falling for most of the past 19 years. Mr. Kaiami said business was tough. There were few buyers in a market that was virtually guaranteed to produce losses, and few sellers, because most homeowners were saddled with loans that were worth more than their homes.”
Japan also faces a challenging demographic future, one that many countries will face, but Japan will get there first. Nicholas Eberstadt tells the story in a “Foreign Affairs” article, The Demographic Future.
“Broadly speaking, all the developed economies will face demographic slowdowns and population aging in the coming decades, but Japan stands to be the most heavily burdened by the looming trends. It has had the steepest and longest fertility falloff in modern history. In 2008, the country recorded around 40 percent as many births as it had 60 years earlier. Japanese childbearing is currently estimated to be nearly 35 percent below the replacement level. But Japan has also enjoyed rapid and continuing improvements in public health since the end of World War II. The Japanese have an average life expectancy of 83 years, higher than any other country in the world. Taken together, the country's fertility, migration, and mortality trends are propelling Japan into demographic decline, and into a degree of aging thus far contemplated only in science fiction.”

“Over the next two decades, according to U.S. Census Bureau estimates, the surfeit of deaths as compared to births is expected to drive Japan's total population down from 127 million to 114 million, a ten percent decrease. The relative decline in the working-age population is projected to be even steeper, from 81 million to 67 million, or a 17 percent decrease. All the while, the number of Japanese senior citizens would be rising -- and by 2030, the country's median age will be above 52 years, with 30 percent of the total population 65 or older. The economic implications of these impending changes are far from positive. Even with healthy aging and later retirement, these trends suggest a marked contraction in the country's labor supply. Moreover, the social and economic strains from Japan's looming old-age boom could further complicate efforts to maintain even the country's current sluggish rates of economic growth.”
That is a future that the United States will not face for some time.
“The United States will avoid the demographic stagnation and decline that faces most other OECD countries. The U.S. population, according to U.S. Census Bureau projections, is set to grow by 20 percent, or over 60 million people (from 310 million to 374 million), between 2010 and 2030. By such projections, the United States' population growth rate will nearly match India's. According to these calculations, the United States' rate of population growth approximates that of the world's average, meaning that the U.S. share of global population is not set to shrink. Virtually every age group in the United States is set to increase in size over the next 20 years. Unlike all other affluent countries, the United States can expect a growing pool of working-age people (a moderate but steady rise averaging 0.5 percent per year over the next 20 years), and it can expect a slower pace of population aging than virtually any other state in the OECD.”

“The United States' demographic exceptionalism is explained by the country's relatively high fertility rate and its continuing influx of immigrants.”
While the anxiety grows in the United States over the growing national debt, Japan has to face all of its issues with continued growth in its debt also. At best, it is expected to grow proportionately (as a fraction of GDP) with that of the United States. The difference is that the 2009 starting point had the United States carrying a debt burden of about 53% of GDP. Japan’s debt was at about 189% of GDP. Japan was exceeded in indebtedness only by Zimbabwe at 283%.

This exercise left me optimistic about the economic future of the United States. I have a hard time being optimistic about Japan. Economists seem to expend their energies studying the past. Every once in a while the future engulfs them and provides some new old data for them to ponder. Let’s say their predictions of the past are usually better than their predictions of the future. We can hope that Japan figures out a way to solve their dilemmas and prove the dire predictions wrong. In any event, it will be interesting to watch this unfold.

Wednesday, November 17, 2010

A Green Revolution in Africa: Feeding the World

There was a headline today indicating that China would subsidize food for poor families who were suffering due to rising prices. China’s leaders feared outbreaks of civil unrest might ensue. This news serves as a reminder that the conditions that caused dramatic price rises and food shortages in recent years have not changed. There remain at least a billion people who are not receiving enough food. Two articles that provide concise summaries of the issues involved have appeared recently.

Carlisle Ford Runge and Carlisle Piehl Runge provided an article in Foreign Affairs, January/February 2010, entitled Against the Grain: Why Failing to Complete the Green revolution Could Bring the Next Famine. The authors detail the factors contributing to rising food prices and the worldwide shortages.

Diminishing gains in output are the rule in regions that contributed most to the green revolution in the past. Degraded soil conditions and diminished water supplies have been the result of the push for ever-expanding productivity. The methods used are not sustainable over the long term. Meanwhile, demand is rising and the agricultural surplus is falling. The authors point out that world grain production was below the rate of consumption in six of the last nine years. Combining this with conversion of some resources to fuel production indicates that the ever growing world population will see shortages and higher prices for some time.

The authors predict that the worldwide production can be increased to meet the needs of the anticipated three billion additional people (before population growth levels off), but only if it acts quickly to raise the productivity of the remainder of the arable world to modern standards. Africa is the most obvious place to focus for gains.

The specific situation with regard to Africa and its agriculture is the subject of an article by Roger Thurow: The Fertile Continent. This appeared if the November/December, 2010 issue of foreign Affairs.
“Thus, more and more eyes are turning to Africa, agriculture's final frontier. Africa was largely left out of the green revolution, the postwar movement to push up crop yields in the hungriest parts of the world by promoting the use of new seeds and new farming technology. And so agricultural production on the continent could jump quickly if farmers there simply used existing seed, fertilizer, and irrigation technology. And if more efficient networks were developed to distribute and sell the harvests, boosting agricultural yields in Africa could be a major step toward feeding not just the continent but also the rest of the world.”
Thurow provides several reasons why agriculture in Africa was neglected by the international community. Part of the explanation was a lack of focus.
“Research for new breeds of seeds and better soil nourishment to improve the yields of the world's poorest farmers dwindled; priorities shifted to producing safer food in environmentally friendly ways for the world's well-fed.”

“Overall funding from rich nations for agricultural projects in the developing world also collapsed. According to the World Bank, official development assistance for agriculture from rich countries to poor ones plummeted from its peak of $8 billion in 1984 to $3.4 billion in 2004 (measured in 2004 dollars). Over the same period, the share of aid devoted to agriculture relative to total assistance crashed from about 18 percent to less than four percent. Agricultural assistance to sub-Saharan Africa briefly exceeded $3 billion in the mid-1980s, but it soon sank back to $1.2 billion, its 1975 level. The U.S. government's retreat was particularly dramatic: annual U.S. aid to agriculture in sub-Saharan Africa declined from more than $400 million in 1984 to just $60 million in 2006.”
Of equal importance were the self-serving policies imposed on African nations by the community.
“This precipitous drop in research and aid came just as international development theory began to doubt whether helping farmers in poor nations was the most effective way to fight hunger and poverty. In the 1980s, the World Bank and other international development institutions promoted "structural adjustment," a policy that required central governments to exercise fiscal discipline and reduce their debt. Governments in Africa were instructed to get out of the agricultural sector, among other areas, and let the private sector take over.”

“But in most African countries, the private sector was too small, too weak, and too undercapitalized to lead agricultural development; supply enough seeds and fertilizers; buy, transport, and store harvests; or build domestic and export markets. Starved of assistance, the continent's agricultural infrastructure -- research institutions, the roads connecting farms to markets, the network of so-called extension agents who carry new information and technology to farmers, post-harvest storage and distribution capability -- fell into a woeful state (refuting, it seems, the arguments of those who insisted that Africa would be better off without foreign aid).”
The major exporters of agricultural produce were encouraging Africa to limit its production because it was more efficient for the heavily subsidized nations to feed the continent with their excess production.
“Meanwhile, the international development community was asking African governments to stop subsidizing African farmers to encourage them to plant as much as possible. Many African governments were happy to follow this lead: even though small farmers made up a majority of the population in much of Africa, it was the urban voters who kept governments in power. But that left the continent's farmers bearing 100 percent of the risk of a very risky business. They were being asked to perform a high-wire act without a safety net, and they were the only farmers in the world who had to do so.”
They were told that with their cheap labor they be better off concentrating on manufacturing. In the other words, it is “better to produce underwear than maize.”

A severe famine in 2003 led to a change in attitude. There was a renewed interest in developing local agricultural capabilities. African leaders signed up to devote ten percent of their budgets to agricultural development. The World Bank also changed its emphasis and began to encourage state investment in local farmers. The prospects of international aid improved considerably when President Obama took office.
“In his [Obama’s] inaugural address last year, he proclaimed, "To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow, to nourish starved bodies and feed hungry minds." Those 30 words have since grown into Feed the Future, a program involving most departments of the administration -- from the Department of State and the Department of Agriculture to the Treasury Department and the National Security Council. Its goal is to help the world's poorest farmers grow enough to feed themselves and to have surpluses to sell on the market rather than have to rely on emergency food aid to survive. Obama has asked for $3.5 billion over three years to support agricultural development programs that the governments of low-income countries would draw up themselves.”

“The U.S. government has rallied international support for Feed the Future by citing global security concerns, pointing, for example, to the rioting that struck dozens of countries during the 2008 food crisis. At Washington's prodding, in 2009, the leaders of the G-8 countries pledged $22 billion over three years for agricultural development in the world's poorest countries. Then the G-20 called for the creation of a multidonor trust fund to help finance those efforts. The Global Agriculture and Food Security Program (GAFSP) was launched this April, with an initial commitment from Canada, Spain, South Korea, and the United States, as well as the Bill & Melinda Gates Foundation, that totaled $880 million.”
The authors are optimistic that Africa can become a significant food producer. Their argument is based partly on the continent’s relative wealth in land and water supplies, and partly on the fact that its methods are so rudimentary now, that adding modern techniques is bound to generate a surge in output.
“Africa is so far behind the rest of the world agriculturally that it would make great gains simply by applying existing technology and developing the infrastructure that is common in the rest of the world, such as farm-to-market roads, basic irrigation systems, crop-storage facilities, and commodities exchanges. The hybrid seeds that revolutionized agriculture in the developed world several decades ago are still scarce in Africa.”

“According to the McKinsey Global Institute, if a green revolution ignites in Africa, the continent's agricultural output could increase from the current value of $280 billion per year to as much as $880 billion per year by 2030. Such growth is possible, the institute calculates, if Africa raises yields on key crops to 80 percent of the world average and brings more of its potential farmland into cultivation.”
Finally, there is a good reason why the world will need Africa’s output, and why nations like Saudi Arabia, China, and India are buying African land to provide food for their own countries.
“Also in contrast to much of the rest of the world, land and water resources in Africa have been largely underused. More than half of the earth's unused arable land that can still be exploited without endangering forests and other ecosystems is in Africa. And less than five percent of Africa's arable land is irrigated; abundant water sources, such as the Blue Nile River in Ethiopia, are largely untapped for farming.”

Tuesday, November 16, 2010

The Evolution of God: The Early Years

The title of this post comes from Robert Wright’s recent book: The Evolution of God. Wright attempts to recreate the evolution of man’s conception of God based on what is known from history and science about humanity’s social and technological development. He describes this as a “materialistic” view, presumably meaning it is fact-based rather than faith-based. Although a professed “non-believer,” he approaches the subject in a sympathetic and factual manner that should allow this book to be appreciated by anyone. Polemical stridency and vitriol will not be found here.

Actually, I am extrapolating a bit since I have not finished the book yet. There is much too much there to cover it all in this format. Plus, I was so delighted by the book’s very first chapter that couldn’t contain myself and jumped the gun. This is a long journey that is best begun at the beginning.

Mankind spent most of its evolution living in small bands of hunter-gatherers. The logical conclusion then is if you want to learn about the early origins of religion, you should learn what you can from this type of culture. Fortunately, this social and economic structure still exists, and was fairly common in previous eras when it could be studied before significant perturbation by “civilization.” Wright summarizes what can be learned from this class of people.

The author uses the word religion to describe a people’s mode of interacting with the deities, but they do not actually have what we would call a religion in the modern sense.
“....hunter-gatherer religions have at least two features that are found, in one sense or another, in all the world’s great religions: they try to explain why bad things happen, and they thus offer a way to make things better....good and bad outcomes are under the control of a supernatural being, and the being is subject to influence.”
From the viewpoint of a hunter-gatherer, his life is subject to random occurrences of famine, pestilence, drought and other things over which he has little control. It is in his self-interest to seek some understanding of why things happen. Given little knowledge of the world, a natural first step is to imbue the components of nature with a “spirit” that can control the components behavior. A next step would be to try to figure out ways to convince this spirit to behave itself. This “spirit” is the beginning of the concept of a god, and the process of dealing with it is the beginnings of a religion. The next step would be for someone to step forward and claim the ability to understand and/or control the behavior of these gods. The shaman is born, soon to be followed by the priest.

Associating “spirits” with animate and inanimate objects was just a step away from assigning a spirit or “soul” to oneself. The author points out that this would be helpful in explaining things like dreaming and death.

Given this as a starting point, one arrives at a concept of “religion” that is quite different than what we are familiar with today. First of all, since the interaction with god arises, by definition, from unpleasant events, gods are not considered objects of reverence.
“....hunter-gatherers don’t generally ‘worship’ their gods. Indeed, they often treat their gods just like you would treat a mere human—kindly on some days, less kindly on others.”
Another distinct characteristic of these early religions is that there was no moral component.
“Hunter-gatherers lived—as everyone lived 12,000 years ago—in intimate, essentially transparent groups. A village may consist of thirty, forty, fifty people, so many kinds of wrongdoing are hard to conceal.....The fact that you live with these people for the rest of your life is by itself a pretty strong incentive to treat them decently....Social order can be preserved without deploying the power of religion.... a hunter-gatherer village is the environment we are built for, the environment natural selection ‘designed’ the human mind for....the product of an evolutionary dynamic known as kin selection, leads us to sacrifice for close relatives. Another, reciprocal altruism, leads us to be considerate of friends—non-kin with whom we have enduringly cooperative relationships....The ethic does not extend to strangers; they are simply enemies, not even people.”
The concept of using religion for moral coercion will arise when society organizes itself into larger structures where these two types of bond no longer suffice to control behavior. People will also discover that religion, and a threat from the gods, can be a powerful motivator in all aspects of society.

Religion will then evolve under the dual motivations of self-interest and societal needs.
“Religion almost always forms a link between self-interest and some of these other interests, but which ones it links to, and how, change over time. And over time there has been—on balance, taking the long view—a pattern in the change. Religion has gotten closer to moral and spiritual truth, and for that matter more compatible with scientific truth. Religion hasn’t just evolved; it has matured.”

“Religion needs to mature more if the world is going to survive in good shape—and for that matter if religion is to hold the respect of intellectually critical people. But before we take up these questions, we’ll address the question of how it has matured to date: how we got from the hunter-gatherer religions that were the norm 12,000 years ago to the monotheism that is the foundation of Judaism, Christianity, and Islam. Then we’ll be in a position to ponder the future of religion and to talk about how true it is or can be.”
As the above quote suggests, there is more to come.
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