Monday, May 27, 2013

College Graduates and the Decline in Jobs Requiring College Skills

If one looks at the unemployment rate for college graduates and compares it to the unemployment rate for high school graduates, one finds that having a college degree makes it considerably more likely that a person will be employed. The conventional wisdom derived from this fact concludes that if only we had more college graduates, then net unemployment would decrease. A related conclusion holds that there are jobs going unfilled because we are not producing enough quality applicants for the jobs available. The unemployment rate data for the two degree types is necessary to support these two contentions, but not sufficient to prove them. 

Could something more complex be taking place and confusing the issues?

In the article The Evolving Labor Market: Hiring Trends we discussed some hiring dynamics that preclude applying a simple supply and demand analysis. In particular, we discussed an article by Catherine Rampell in the New York Times: It Takes a B.A. to Find a Job as a File Clerk. Rampell provided these insights:

"The college degree is becoming the new high school diploma: the new minimum requirement, albeit an expensive one, for getting even the lowest-level job."

"Economists have referred to this phenomenon as "degree inflation," and it has been steadily infiltrating America’s job market. Across industries and geographic areas, many other jobs that didn’t used to require a diploma — positions like dental hygienists, cargo agents, clerks and claims adjusters — are increasingly requiring one, according to Burning Glass, a company that analyzes job ads from more than 20,000 online sources, including major job boards and small- to midsize-employer sites."

"This up-credentialing is pushing the less educated even further down the food chain, and it helps explain why the unemployment rate for workers with no more than a high school diploma is more than twice that for workers with a bachelor’s degree: 8.1 percent versus 3.7 percent."

These interpretations would lead one to conclude that unemployment for college graduates is lower because they have been forced to accept positions that were once considered below their capabilities, not because there is an abundance of good jobs waiting to be filled. One could also conclude that the difference in employment rates between the two degree categories is artificially increased by the willingness of college graduates to accept work that traditionally was performed by high school graduates.

Viewed from this perspective, a college degree entails an educational experience, but it is also a very expensive means of obtaining a work permit.

Three economists, Paul Beaudry, David A. Green, and Ben Sand, provide a more rigorous analysis of college graduates and the work available to them: The great reversal in the demand for skill and cognitive tasks.

These economists have analyzed employment data for college graduates along with characterizations of various job categories in terms of the cognitive skills demanded by each job category. Their basic finding is illustrated by this chart:

"....we argue that in about the year 2000, the demand for skill (or, more specifically, for cognitive tasks often associated with high educational skill) underwent a reversal....In this paper, we document a decline in that demand in the years since 2000, even as the supply of high education workers continues to grow."

They find that the number of positions requiring high cognitive skills has leveled off at about the year 2000 level. Meanwhile the number of college graduates has grown. This increasing number of job seekers then must be taking jobs of lesser cognitive content, resulting in the lowering of the average cognitive content indicated in the above chart.

The authors also draw this conclusion:

" response to this demand reversal, high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers. This de-skilling process, in turn, results in high-skilled workers pushing low-skilled workers even further down the occupational ladder and, to some degree, out of the labor force altogether."

These economists applied an academic glaze and provided hard data to arrive at exactly the same conclusions that Catherine Rampell reached based on more anecdotal evidence.

Things are not always as they seem, and statistics can be interpreted in many ways. It seems we don’t have too few college graduates; we have too many. It seems we don’t have a lack of skills; we have a lack of jobs requiring skills—at least for college graduates.

Thursday, May 23, 2013

The Rise of Agricultural Imperialism

Humanity has thus far managed to keep increasing its food production and fend off the predictions of inevitable food scarcity and growing hunger. How much longer can that continue? Perhaps not long at all, according to a book by Lester R. Brown: Full Planet, Empty Plates: The New Geopolitics of Food Scarcity. Brown is the president of the Earth Policy Institute.

"We are entering a new era of rising food prices and spreading hunger. On the demand side of the food equation, population growth, rising affluence, and the conversion of food into fuel for cars are combining to raise consumption by record amounts. On the supply side, extreme soil erosion, growing water shortages, and the earth’s rising temperature are making it more difficult to expand production. Unless we can reverse such trends, food prices will continue to rise and hunger will continue to spread, eventually bringing down our social system."

If that last sentence seems a bit over-the-top to you, recall that many people believe that food supply insecurity was one of the major contributors to the revolutions that swept the Middle East. That topic was discussed in Climate Change, Food Security, and Revolution.

Brown discusses the issues associated with food production and consumption in considerable detail. Here the focus will be on just one of his topics: "The Global Land Rush."

The Food and Agriculture Organization of the United Nations (FAO) tallies a global food price index. A plot of that quantity over time is provided below.

Note the sharp rise over the last decade. The price has about doubled in that time. Those in the wealthier nations have been little affected by this increase, but in countries where food makes up the dominant component of a family’s budget, a doubling in price is a tragedy.

Note also the sharp spike in price that occurred in the 2007-2008 timeframe. Brown tells us that period was a shock to the major players and led to changes in strategy.

"As food prices climbed everywhere, some exporting countries began to restrict grain shipments in an effort to limit food price inflation at home. Importing countries panicked. Some tried to negotiate long-term grain supply agreements with exporting countries, but in a seller’s market, few were successful. Seemingly overnight, importing countries realized that one of their few options was to find land in other countries on which to produce food for themselves."

The largest area of land that could still be converted to modern agricultural use resides in sub-Saharan Africa. The idea of wealthy countries going into poorer countries and extracting produce for their own use is the traditional colonial approach. But this time, the wealthy countries are attempting to produce their basic food needs in areas where the native population is having a hard time feeding itself. This is something new.

The roster of countries that seem to need additional land in order to feed their people is rather scary. Middle Eastern countries like Saudi Arabia, along with South Korea, China, and India appear to be the major players.

Saudi Arabia is rapidly consuming its underground water supply while continuing to increase its population, making it ever more dependent on food imports. A politically volatile Middle East facing long-term food security issues is not a promising scenario. The fact that the two most populous countries on earth are unable to feed their own populations does not bode well.

"India, with a huge and growing population to feed, has also become a major player in land acquisitions. With irrigation wells starting to go dry, with the projected addition of 450 million people by mid-century, and with the prospect of growing climate instability, India too is worried about future food security."

Information on this quest for other counties’ land is difficult to obtain. Many sales or long-term leases are negotiated secretly.

Many of the targeted nations are poorly governed and do not have a well-established system of property rights. Often the land sought for "development" has long been used by local farmers who have no claim to the land other than tradition.

The World Bank has attempted to track these land deals and issued a report in 2011 in which 464 projects were identified.

"The amount of land was known for only 203 of the 463 projects, yet it still came to some 140 million acres—more than is planted in corn and wheat combined in the United States."

This land rush has attracted all sorts of bidders, including speculators. The quest for renewable energy has even led to land that could have produced food being diverted to producing biofuels.

"Particularly noteworthy is that of the 405 projects for which commodity information was available, 21 percent were slated to produce biofuels and another 21 percent were for industrial or cash crops, such as rubber and timber. Only 37 percent of the projects involved food crops."

Because land can be obtained most cheaply in sub-Saharan Africa, about two-thirds of the acquired land was from that region.

"George Schoneveld of the Center for international forestry Research reported that two-thirds of the area acquired there was in just seven countries: Ethiopia, Ghana, Liberia, Madagascar, Mozambique, South Sudan, and Zambia. In Ethiopia, for example, an acre of land can be leased for less than $1 per year, whereas in land-scarce Asia it can easily cost $100 or more."

The idea of removing arable land from use by the local population is not an obvious benefit to the targeted country.

"Unfortunately, the countries selling or leasing their land for the production of agricultural commodities to be shipped abroad are typically poor and, more often than not, those where hunger is chronic, such as Ethiopia and South Sudan. Both of these countries are leading recipients of food from the U.N. World Food Program. Some of these land acquisitions are outright purchases of land, but the overwhelming majority are long-term leases, typically 25 to 99 years."

Brown also points out that more intense agricultural activities in these areas will lead to increased water usage. That will have regional ramifications. Reducing the flow of water into the Nile basin is something that Egypt will certainly notice.

Those interested in using the acquired land for industrial scale agriculture will be required to invest in the necessary infrastructure to support those activities, and will be hiring some local workers as part of their activities. The argument is made that this will produce a net benefit to the host countries. Brown has serious doubts.

"Since productive land is not often idle in the countries where the land is being acquired, the agreements mean that many local farmers and herders will simply be displaced. Their land may be confiscated or it may be bought from them at a price over which they have little say, leading to the public hostility that often arises in host countries."

"The displaced villagers will be left without land or livelihoods in a situation where agriculture has become highly mechanized, employing few people. The principle social effect of these massive land acquisitions may well be an increase in the ranks of the world’s hungry."

Many of these targeted countries are not only poor, they are also politically unstable. A traditional means of fomenting political turmoil is by taking land away from a large number of small farmers. Evidence of such discontent is beginning to appear.

"In Ethiopia, local opposition to land grabs appears to be escalating from protest to violence. In late April 2012, gunmen in the Gambella region attacked workers on land acquired by Saudi billionaire Mohammed al-Amoudi for rice production. They reportedly killed five workers and wounded nine others."

Given that the sub-Saharan region is expected to see a dramatic increase in population in the coming decades, any activity that would constrain the ability of those nations to produce food for their own populations seems misguided at best. It would be far better to assist these countries in increasing their agricultural output and then let them sell any excess on the open market. The current activity appears to be yet another occasion where the rich take advantage of the poor.

Brown would seem to agree.

"When virtually all the inputs—the farm equipment, the fertilizer, the pesticides, the seeds—are brought in from abroad and all the output is shipped out of the country, this contributes little to the local economy and nothing to the local food supply. These land grabs are not only benefiting the rich, they are doing so at the expense of the poor."

Tuesday, May 21, 2013

Disease and the Human Outbreak

With reports coming out of China and the Middle East of human deaths being caused by new and mysterious viruses, what better time to encounter a book that delves into the issues associated with the emergence of new viruses. David Quammen has provided a survey of recent disease outbreaks and explores the paths by which viruses came to infect humans in Spillover: Animal Infections and the Next Human Pandemic. The theme that emerges repeatedly throughout Quammen’s work is that human’s are not merely the unlucky recipient of some random infection; rather, humans, as they multiply and modify or destroy ecosystems, are presenting themselves as an obvious target for disturbed or threatened life forms such as viruses and bacteria.

The term zoonosis is used to describe the transfer of a pathogen from a nonhuman animal species to humans. Quammen points out that the frequency of zoonosis seems to have accelerated in recent decades.

"The drumbeat has been sounding ever more loudly, more insistently, more rapidly over the past fifty years."

He provides this partial list of emerged viral diseases.

"If you assembled a short list of the highlights and high anxieties of that saga within recent decades, it could include....Machupo [1959]....Marburg (1967), Lassa (1969), Ebola (1976)....HIV-1 (inferred in 1981, first isolated in 1983), HIV-2 (1986), Sin Nombre (1993), Hendra (1994), avian flu (1997), Nipah (1998), West Nile (1999), SARS (2003), and the much feared but anticlimactic swine flu of 2009."

Quammen concludes that these outbreaks are a direct result of changes produced by human activity.

"Make no mistake, they are connected, these disease outbreaks coming one after another. And they are not simply happening to us; they represent the unintended results of things we are doing. They reflect the convergence of two forms of crisis on our planet. The first is ecological, the second is medical. As the two intersect, their joint consequences appear as a pattern of weird and terrible new diseases, emerging from unexpected sources and raising deep concern, deep foreboding, among the scientists who study them."

In fact, Quammen suggests we should think of ourselves as a species in a condition of "outbreak." This term can refer to the emergence of a rapidly spreading disease, but it also has a more general usage.

"Outbreak in the broader sense applies to any vast, sudden population increase by a single species."

"....we are hungry. We are prodigious, we are unprecedented. We are phenomenal. No other primate has ever weighed upon the planet to anything like this degree. In ecological terms, we are almost paradoxical: large-bodied and long-lived but grotesquely abundant. We are an outbreak."

A fraction of the species on earth are capable of generating vast increases in population, but these expansions do not end well.

"And here’s the thing about outbreaks: they end. In some cases they end after many years, in other cases they end rather soon. In some cases they end gradually, in other cases they end with a crash."

Species that increase in number and become more densely packed become greater targets for infectious diseases such as viruses. Quammen speaks in detail of how the gypsy moth population grows until a specific virus becomes active and lowers the number to near zero; at which point the growth and decimation process begins all over.

Quammen details the actions humans take that increase the probability of zoonosis.

"We have increased our population to the level of 7 billion and beyond....We live at high densities in many cities. We have penetrated, and we continue to penetrate, the last great forests and other wild ecosystems of the planet, disrupting the physical structures and ecological communities of such places. We cut our way through the Congo. We cut our way through the Amazon. We cut our way through Borneo. We cut our way through Madagascar. We cut our way through New Guinea and northeastern Australia. We shake the trees, figuratively and literally, and things fall out. We kill and butcher and eat many of the wild animals found there."

We use and abuse animals in ways that are unnatural. We are reminded that the SARS virus was transferred to a human by a civet cat, a member of the mongoose family. However, the civet was similarly infected by another animal, a horseshoe bat. This type bat is the reservoir for the virus where it has permanent residence. How did the bat and the civet come together in the first place? Most likely in the live markets of Guangdong province in China where both animals were caged and sold as food.

"We multiply our livestock as we’ve multiplied ourselves, operating huge factory-scale operations involving thousands of cattle, pigs, chickens, ducks, sheep, and goats, not to mention hundreds of bamboo rats and palm civets, all confined en masse within pens and corrals, under conditions that allow these domestics and semidomestics to acquire infectious pathogens from external sources (such as bats roosting over pig pens), to share those infections with one another, and to provide abundant opportunities for the pathogens to evolve new forms, some of which are capable of infecting a human as well as a cow or a duck."

Is it possible that the human outbreak could be limited by a disease so lethal that our population could be significantly reduced? The SARS virus had that potential. It had a high degree of lethality and it was easily spread from human to human. What limited its effect was the fact that it showed signs of illness before it became highly contagious. This drove most sick people off the streets and often into controlled medical settings before they could spread the virus. It also helped that the virus was spread by air travel to locations that possessed modern medical facilities. If the virus had emerged in different locations, or, if it became contagious before severe symptoms were exhibited, the result could have been disastrous.

Quammen and the scientists who worry about such matters suspect that the "next big one" is likely to emerge as a form of influenza. Influenza is a zoonosis. This class of virus is ultimately transferred from wild aquatic birds although it often reaches humans after being passed through an intermediary host such as a pig. Influenza viruses know how to infect humans, they mutate continuously, and can vary from mild to deadly in effect.

The flu pandemic of 1918 provides an example of the potential for harm. According to Wikipedia, 50 to 100 million people died (3-5% of the world’s population at the time) and 500 million were infected (about 30% of the population). The 10% fatality rate is not unusual (Ebola kills about 70% of those it infects), but the transmissibility is what made this pandemic so deadly.

While much progress has been made, we are still pretty much at the mercy of whatever mutations this class of virus chooses to produce.

"....there’s still no magical defense, no universal vaccine, no foolproof and widely available treatment, to guarantee that such death and misery don’t occur again. Even during an average year, seasonal flu causes at least 3 million cases and more than 250,000 fatalities worldwide. So influenza is hugely dangerous, at best. At worst, it would be apocalyptic."

Just to make sure we are paying attention, Quammen reminds us that bird flu, H5N1, is still out there. This flu emerged in Hong Kong in 1997. It was the first occasion where a virus with the H5 designation was observed to infect a human. The virus resides in duck species. Some die from it, others don’t, like the mallard and pintail, and they have spread it across the world. It is particularly prevalent in Egypt where duck and poultry populations are infected, and about a quarter of all known human infections have occurred. Most human infections come from transmission from an infected bird rather than via human-to-human transmission.

The virus is not going away and it continues to create new versions of itself. It is widespread and it has a high fatality rate of about 33%. If, or when, it emerges in a form that allows humans to infect one another, it could be catastrophic.

Quammen quotes one scientist, Robert Webster:

"’As long as H5N1 is out there in the world,’ Webster said, ‘there is the possibility of disaster. That’s really the bottom line with H5N1. So long as it’s out there in the human population, there is the theoretical possibility that it can acquire the ability to transmit human-to-human.’ He paused. ‘And then God help us’."

And don’t forget, there are two new and mysterious viruses out there that scientists are worrying over.

David Quammen has produced an excellent book. Not only is the topic timely and important, but it is presented in an extremely readable format. Quammen is a formidable writer.

Thursday, May 16, 2013

North Korea Explained

For those who are perplexed, and occasionally frightened, by the strange and seemingly irrational nation of North Korea, some enlightenment is available. Richard Lloyd Parry has provided an interesting perspective on the country in an article in the London Review of Books: Advantage Pyongyang. Parry is reviewing a book by Victor Cha: The Impossible State: North Korea, Past and Future

Parry calms our concerns about madmen running the nuclear-armed Democratic People’s Republic of Korea (DPRK) with this assessment:

"Much writing and thinking about North Korea is still hobbled by the assumption that the rulers of the DPRK are ‘mad’. But no government without an iron grip on reality could have survived this long in such dire circumstances. Most of the Kims’ behaviour is rendered understandable, often logical and occasionally even reasonable, through the simple mental exercise of placing yourself in their shoes. This is not to defend an indefensibly vile regime. But if you accept that the North Korean government seeks only to prolong its survival, many things fall into place."

If one places themselves in DPRK shoes and looks around, one discovers that the nation is surrounded by well-armed, powerful forces that would intervene in the affairs of the country if they could. The goal of the government is to insure that any such intervention would result in an unacceptable level of pain for any adventurous nation. One of the best ways to forestall any intrusion in your affairs is to possess nuclear weapons and threaten to use them.

A crisis occurred in 1994 when the DPRK threatened to obtain nuclear material for a weapon from reprocessed reactor rods.

"It is startling to remember now, when North Korea’s possession of nuclear bombs, and perhaps the means to deliver them, are facts of life, that to Clinton the mere act of reprocessing was unacceptable. As the White House contemplated a call-up of reservists and the evacuation of Americans from South Korea, there was panic buying in Seoul, where the stock market fell by 25 per cent. The situation was defused by a brilliant and near-treasonous intervention by Jimmy Carter, who negotiated a compromise face to face with Kim Il Sung and then bounced the administration into accepting it by announcing it live from Pyongyang on CNN."

"The result was the Agreed Framework, an elaborately programmed sequence of reciprocal steps under which an international consortium would provide North Korea with ‘safe’ nuclear reactors, fuel, political normalisation and economic engagement, in return for a nuclear freeze and eventual disarmament."

"There was bad faith on both sides. Even as it shut down the reactors at Yongbyon [reactor], the North was secretly enriching uranium elsewhere. But the Agreed Framework averted war, placed Yongbyon under international monitoring, and prevented the construction of two much bigger reactors which would have provided enough fuel for thirty nuclear warheads every year."

While not an ideal situation, it was viewed as a means of buying time until the North Korean government either collapsed, or came to its senses.

The list of dumb things attributed to the presidency of George Bush is so long that most people tire before adding his disruption of this delicate balance between the DPRK and the rest of the world. When he coupled North Korea with Iraq, and Iran as an "axis of evil," the message he sent was interpreted as a threat to take preemptive military action.

"Bush does not lack detractors, but his vandalism of the delicate architecture of US policy on North Korea has been insufficiently recognised. His first secretary of state, Colin Powell, came to office reassuring reporters that ‘we do plan to engage with North Korea to pick up where President Clinton and his administration left off.’ Within 24 hours neocon pressure forced a humiliating retraction."

"Human rights in North Korea became a political weapon, wielded by the right as a means of undermining those, including the elected government of South Korea, who favoured continued engagement."

"Clinton had prepared, reluctantly, for war; having averted it, he had energetically concluded three separate diplomatic agreements with North Korea, with a fourth (on limiting ballistic missiles) in the works. After four years of Republican government all those agreements, and the safeguards they incorporated, had collapsed, with nothing to take their place. This was the sum achievement of George Bush, foe of rogue states and protector of the nation: to allow the world’s most isolated government to acquire the Bomb."

Victor Cha was a member of the team that eventually participated in the six-party negotiations. In the course of those discussions he received this message from the other side of the table:

"You attacked Afghanistan because they do not have nukes. You attacked Iraq because it did not have nukes. You will not attack us. And you will not attack Iran."

North Korea has the bomb and is issuing statements about all the terrible things it could do. How concerned should we be?

"The rhetorical torrent which began issuing from the state media in late March was unexpected in its intensity. But none of what followed has been inconsistent with past North Korean behaviour. The goal of the leadership is the same as it was in 1994: to strike a bargain in which certain assets (including the repeatedly frozen and unfrozen Yongbyon reactor, and the right to do business at Kaesong and the Diamond Mountains) are auctioned off in return for oil, food and cash."

"The noises from the North are widely misunderstood. They are not unilateral threats of war, but promises of retaliation in the event of US and South Korean attack. (This gets lost in much of the reporting because of the famous verbosity of North Korea’s official communiqu├ęs: the threat is quoted, while the balls-aching conditional preamble is cut.)"

Parry reminds us that in spite of all the threats, charges and countercharges, the Korean situation has been rather stable compared to other regions in the world.

"Clinton called the demilitarised zone between the two Koreas ‘the scariest place on earth’; but it has proved less dangerous over the last sixty years than the Falkland Islands, Northern Ireland, the former Yugoslavia and broad swathes of Africa, South Asia and the Middle East."

He thinks this state of not quite unstable equilibrium will continue indefinitely.

"The sorry truth is that North Korea’s state of political undeath suits the most powerful players in the game better than any alternative."

"Until twenty years ago, the desire for national reunification was painfully felt by South Koreans; today, the political and social cost of integrating the strange, impoverished people in the North makes it positively undesirable. For Japan, the prospect of a unified peninsula is exciting in the short term (new markets, a check on South Korean competitiveness), but alarming for its end result: a union of 74 million people with distinctly funny feelings about Japan. For the United States, the prospect of another nation to rebuild, with Iraq and Afghanistan barely under control, is nauseating."

China is the one country that could force the North Korean rulers to toe the line by withholding the economic necessities that it allows to flow across the border. But it is in their best interests to maintain the status quo.

"The standard explanation points to China’s long border with North Korea and the chaos of refugees and fleeing soldiers which could follow a regime collapse in Pyongyang. But Cha identifies a stronger reason: the valuable cross-border trade, and the coal, iron and minerals which China extracts from the North. Copper, gold, zinc, nickel and rare earth metals like molybdenum can be mined more cheaply in North Korea, and with even fewer concerns for health and safety. China keeps the North afloat through gifts of cash, grain, as well as ‘friendship prices’, not out of fraternal feeling, but ‘to sustain a minimal level of stability and subsistence so that China can continue its economic extraction policies’."

It seems the only ones with a vested interest in a change of government are the long-suffering North Korean people.

Tuesday, May 14, 2013

Capitalism vs. The Good Life: The Faustian Bargain

Robert Skidelsky and Edward Skidelsky have written an interesting book exploring the interactions between capitalism, society, and human nature. They chose to title it How Much Is Enough?; Money and the good life. The argument is made that society should have used the wealth created by economic growth to satisfy its material needs and then transition to a mode in which the goal of greater wealth would be replaced by the goal of greater "leisure." The term leisure does not connote inactivity. Rather, the authors define leisure as the time necessary to pursue "the good life." The claim is made that greater leisure had been the goal of societies before the advent of modern capitalism.

The authors use an essay written by Keynes in 1930, "Economic Possibilities for Our Grandchildren," as a point of departure.

"Its thesis is very simple. As technological progress made possible an increase in the output of goods per hour worked, people would have to work less and less to satisfy their needs, until in the end they would have to work hardly at all. Then Keynes wrote, ‘for the first time since his creation man will be faced with his real, his permanent problem—how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.’ He thought this condition would be reached in about a hundred years’ time—that is by 2030."

The authors concede that such a notion likely seems quaint to modern ears, but they argue that a discussion of what the uses of our wealth should be and of what "the good life" should consist of is long overdue.

"Making money cannot be an end in itself—at least for anyone not suffering from acute mental disorder. To say that my purpose in life is to make more and more money is like saying my aim in eating is to get fatter and fatter."

The authors take the reader on a rather extensive tour of classical thinking in civilizations throughout the world to convince one that no society viewed the accumulation of wealth as a worthy goal in itself. Wealth was to be of benefit to society and the higher goal was to attain "the good life." The precise definition of what that was varied from society to society.

The authors provide this description of leisure and how it would lead to the good life.

"Leisure, in the true, now almost forgotten sense of the word, is activity without extrinsic end, ‘purposiveness without purpose’ as Kant put it."

Scientists, sculptors, musicians, teachers are provided as examples of people who would be using their leisure to pursue some goal based on the enjoyment of the pursuit rather than any monetary reward. Simpler people would have simpler pursuits available to them: learning a new language, a hobby, reading, writing, gardening....the list is long.

Some readers might be dubious about today’s ‘couch potatoes’ making good use of any increase in leisure. The authors address that concern.

"The image of man as a congenital idler, stirred to action only by the prospect of gain, is unique to the modern age. Economists, in particular, see human beings as beasts of burden who need the stimulus of carrot or stick to do anything at all."

Humans are capable of more than they are currently given credit for. However, some reeducation of the population would be required.

"Athens and Rome had citizens who, though economically unproductive, were active to the highest degree—in politics, war, philosophy and literature. Why not take them and not the donkey as our guide? Of course, Athenian and Roman citizens were schooled from an early age in the wise use of leisure. Our project implies a similar educational effort. We cannot expect a society trained in the servile and mechanical uses of time to become one of free men overnight. But we should not doubt that the task is in principle possible."

Capitalism was originally viewed as a servant of society. Its capability to create wealth was to bring about the means by which a better life for all would be attained. It was recognized that embracing capitalism would mean embracing the heretofore repugnant attributes of avarice and selfishness, but it was thought that the good produced would outweigh the bad. In any event, it was assumed that increased wealth would eventually dampen the power of greed.

"Keynes understood that capitalist civilization had, at some level of consciousness, undertaken to license motives previously condemned as ‘foul’ for the sake of future reward. It had struck a bargain with the forces of darkness, in return for which it would secure what earlier ages could only dream of—a world beyond the toil and trouble, violence and injustice of life as it actually is."

The authors make the analogy to a classical tale.

"We have called this bargain ‘Faustian’ in honor of the famous doctor who sold his soul to the Devil in return for knowledge, pleasure and power."

A similar sentiment to that of Keynes can be found in Adam Smith’s writings from which this is quoted:

"[Though the rich] mean only their own conveniency, though the sole end which they the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interests of society."

Free market capitalists love to refer to Smith’s "invisible hand," but they never manage to recall that it was supposed to produce equality of wealth and be of benefit to society. Given that capitalism seems determined to produce the exact opposite to the result Smith expected, and in keeping with the authors’ analogy, perhaps the "invisible hand" is nothing more than the meddling of that fallen angel.

What Keynes, Smith, and others hadn’t anticipated was that when "needs" are satisfied, humans will continue to pursue "wants." There is a limit to needs, but wants are unbounded. This human characteristic seems to be inflamed by the income inequality that capitalism produces. How can one ever have enough if others have so much more?

Capitalism has produced wealth sufficient, if it were distributed more equally, to satisfy everyone’s needs. Society could have evolved to a state in which leisure has increased and people have more time to pursue their version of the good life. Instead we have evolved to a state where we feel the need to work ever harder to keep up, and where our wants can never be satisfied.

The authors provide an apt summary.

"In the language of myth, Western civilization has made its peace with the Devil, in return for which it has been granted hitherto unimaginable resources of knowledge, power and pleasure....The irony is, however, that now that we have at last achieved abundance, the habits bred into us by capitalism have left us incapable of enjoying it properly. The Devil, it seems, has claimed his reward."

Friday, May 10, 2013

Teachers: Overworked and Undertrained

Jal Mehta has produced an article for Foreign Affairs that provides some useful insight into our education system, and provides recommendations on how to improve it: Why American Education Fails: And How Lessons From Abroad Could Improve It. Mehta discusses the education system as a whole, but much of his content is concerned with teaching as a profession. That will be the focus here as well.

Mehta emphasizes several times that one of the major problems is that the profession of teaching has never had the systematic approach to developing and accrediting skills that exists in other professions such as medicine and law.

"The United States needs a more thoroughgoing and systematic approach to educational improvement. To see what such an effort might look like, consider that any professional field consists of the following four components: human capital, which involves attracting, selecting, training, and retaining the people who work in the field; a core of knowledge that guides the field; effective organizational structures; and overall performance management and accountability."

"In recent years, the U.S. education system has become overly focused on the last element -- accountability -- at the expense of progress on the others."

Mehta argues that by focusing on obtaining good people and training them well these other professions can worry less about accountability.

"By contrast, stronger professions in the United States, such as medicine, law, and engineering, focus more on building their foundations than on holding their practitioners accountable. Doctors, for example, must clear a series of high bars before entering the field; develop a broad knowledge base, through course work and then extensive clinical training; and continually revisit their training, with practices such as hospital rounds. The medical profession places less emphasis on setting targets and making sure physicians meet them -- there is no such thing as No Patient Left Behind."

He claims that this is the approach used by the countries that continually outperform the US in international student tests.

"Such countries -- which include Canada, Finland, Japan, Singapore, and South Korea, top scorers on the Program for International Student Assessment, an internationally recognized test for 15-year-olds that measures higher-order problem solving in math, reading, and science -- all do certain things similarly. They choose their teachers from among their most talented graduates, train them extensively, create opportunities for them to collaborate with their peers within and across schools to improve their practice, provide them the external supports that they need to do their work well, and underwrite all these efforts with a strong welfare state. Because these countries do a good job of honing the expertise of their educators to begin with, they have less of a need for external monitoring of school performance."

Our education system is still burdened by attitudes formed a century ago when public education was established with limited objectives.

"Teachers received minimal training, the assumption being that they did not have a complicated job. The top education schools mostly avoided training teachers, seeing teaching as carrying the stigma of low-status, feminine work; they instead focused on cultivating the male administrators who would govern the system."

"For half a century, this model worked relatively well, largely because the expectations for what schools needed to produce were fairly limited....Teachers were mostly women, who had few other employment options and were generally not the breadwinners in their families, so their low pay did not provoke significant resistance."

A rather unexceptional public education system worked for a long time because the wealthy could always provide a better private education for their children, and the rest were able to find work after leaving school because of the nature of the jobs that then existed in the economy. As the character of the economy changed and demands on workers became much greater, our school system failed to respond in a systematic way to the new expectations placed on school graduates.

Mehta tells us that the cornerstone to a more effective education system is an improved approach to producing members of the teaching profession.

"Teachers learn mostly through experience, and U.S. teachers generally report that the training they do receive is of limited utility in practice. Licensing exams for teachers lack the rigor of the bar and board exams that exist in law, medicine, engineering, accounting, and many other professions. Some teachers master their craft over time, but others merely learn to control a classroom."

The experience of other countries is again illuminating.

"Any attempt to reform American education would have to start with attracting better teachers, retaining them, and helping them develop their practice. The most striking finding of comparative international research is that the best-performing school systems draw their teachers from the top third of college graduates, whereas lower-ranking school systems do not. A recent McKinsey report found that most U.S. teachers come "from the bottom two-thirds of college classes, and, for many schools in poor neighborhoods, from the bottom third." In Finland, teaching is the single most preferred career for 15-year-olds, a priority that allows the country to accept only one in ten applicants to its teacher-training programs. Similarly, in Singapore, only one in eight is accepted to such programs. By contrast, in the United States, even the most prestigious education schools commonly accept 50 percent or more of the applicants to their teacher-training programs."

Mehta believes that placing greater demands on the teaching profession will begin to attract higher quality applicants.

"....if it became harder to become a teacher, respect for the profession would grow, and schools might start to show better results. This process could boost public confidence in schools, potentially leading to higher teachers' pay and, in the long run, a greater desire by talented people to join the profession."

There is support for this type of initiative from the people most directly affected.

"In the past year, the country's two largest teachers' unions (the American Federation of Teachers and the National Education Association) and the Council of Chief State School Officers, which is the main organization representing state-level education officials, have released reports advocating raising the bar for entry into teaching. Under their proposals, prospective teachers would start out with provisional status for their first several years. Before becoming fully licensed, they would need to demonstrate their knowledge of their subjects and their skill in the classroom. Tenure would no longer be an expected and near-immediate step but would become an accomplishment similar to getting tenure at a university or making partner at a law firm."

Instituting such changes would not be easy and it would not be cheap. If we are to demand that our teachers are educated and accredited in the same manner as other professionals, then we also must begin to create work environments that are consistent with professionalism. Teachers in US schools put in more hours teaching than those in almost any other nation even though they have one of the shortest school years. If they are to be effective in honing their skills they will need the time and the opportunity to exchange experiences and methods with other teachers. Again, the comparison with other countries is illuminating.

"In Japanese schools, for example, teachers regularly come together to study one another's lessons and refine them. Doing this sort of work well depends on both structure and culture. Structurally, U.S. teachers spend more time in the classroom and less time planning and working with one another than do teachers in countries with higher-performing schools. Secondary school teachers in the United States teach an average of nearly 1,100 hours a year, compared with an average of 660 hours across the countries of the Organization for Economic Cooperation and Development [OECD] and fewer than 600 hours in Japan and South Korea. Culturally, for growth through professional collaboration to be effective, U.S. teachers need to feel as though they are members of a shared profession with a common knowledge base, rather than freelancers accountable only to what they think is right." 

The OECD tracks the educational systems of all its member countries (essentially all the wealthy nations) and produces summary documents. The latest US summary can be found here. It contains a wealth of comparative data, including this chart of hours spent teaching in the various countries for the various levels of education.

Instituting a more rigorous path for entry into the teaching profession assumes that there is an adequate body of knowledge available to be taught. Mehta indicates that the nation has failed to make the investments required to produce that knowledge base.

"Pilots are permitted to fly planes, lawyers to draw up contracts, and doctors to prescribe drugs because they possess an exclusive understanding of how to do these things. Teaching, however, lacks the type of codified, shared knowledge that ensures quality control in other professions -- hence the huge inconsistencies from classroom to classroom. In some regards, American education today is where medicine was a little more than a century ago: instead of relying on a shared knowledge base, teachers draw on a mix of hunches, occasional research, and some outright quackery."

"Anthony Bryk, the president of the Carnegie Foundation for the Advancement of Teaching, has estimated that whereas fields such as medicine and engineering spend 5-15 percent of their budgets on research and development, the U.S. education system invests less than one-quarter of one percent for those purposes. Not only does the field lack knowledge; it lacks the resources and infrastructure needed to produce it."

Mehta concludes by pointing out that most of the initiatives intended to improve education are being imposed from the top of the system. What he is suggesting are changes that will begin at the bottom and propagate upwards.

"Currently, a central part of the problem in American education is that government officials are trying to remake teaching from afar. But teaching is hard work and has proved difficult to change from above; efforts to do so have set teachers against policymakers. If the country implemented the needed processes to ensure skilled teaching -- better recruitment, training, knowledge development, and school organization -- teachers would come to be seen as experts, like those in other professions. The state could then shift its function from holding teachers accountable to taking on roles in which it has more of a comparative advantage and is more likely to be effective."

"In particular, the state could assist in the creation of curricula, invest in research and development....."

JAL MEHTA is an Assistant Professor at the Harvard Graduate School of Education. His most recent book is The Allure of Order: High Hopes, Dashed Expectations, and the Troubled Quest to Remake American Schooling. (Oxford University Press, 2013), from which this essay is adapted. Copyright ©Oxford University Press.

Wednesday, May 8, 2013

The Obama Effect: A Plague of Haters, Antigovernment "Patriots," and Militias

If one obtains a picture of the world as provided by our traditional media sources, one is likely to be unaware that there are organizations out there training for the day when they have the opportunity to attack minorities, do battle with our police forces, and to bring down our government by force. The ignorant, the violent, and the bigoted have always been among us, but now they are receiving encouragement from national political figures. Economic uncertainty, immigration, growth of minority groups, the declining number and influence of whites, and the election of a black president seem to have been more than these people could handle.

We should thank the people at the Southern Poverty Law Center (SPLC) for trying to keep track of these fringe groups and counter them with legal challenges wherever possible. We should also be sending SPLC donations so that they can continue their good work. This is how the SPLC describes itself:

"The Southern Poverty Law Center is a nonprofit civil rights organization dedicated to fighting hate and bigotry, and to seeking justice for the most vulnerable members of society."

"Founded by civil rights lawyers Morris Dees and Joseph Levin Jr. in 1971, the SPLC is internationally known for tracking and exposing the activities of hate groups. Our innovative Teaching Tolerance program produces and distributes – free of charge – documentary films, books, lesson plans and other materials that promote tolerance and respect in our nation’s schools."

This is what they intend to accomplish:

"The SPLC was founded to ensure that the promises of the civil rights movement became a reality for all. Since our founding in 1971, we’ve won numerous landmark legal victories on behalf of the exploited, the powerless and the forgotten."

"Our lawsuits have toppled institutional racism in the South, bankrupted some of the nation’s most violent white supremacist groups and won justice for exploited workers, abused prison inmates, disabled children and other victims of discrimination."

One of SPLC’s tasks is to keep track of hate groups, antigovernment "patriot" groups, and armed militia movements. You can find here an interactive map (the Hate Map) that will allow you to select the list of all the hate groups in your state. Every state has them; it seems everyone is hated by somebody.

"The Southern Poverty Law Center counted 1,007 active hate groups in the United States in 2012. Only organizations and their chapters known to be active during 2012 are included."

"All hate groups have beliefs or practices that attack or malign an entire class of people, typically for their immutable characteristics."

"This list was compiled using hate group publications and websites, citizen and law enforcement reports, field sources and news reports."

"Hate group activities can include criminal acts, marches, rallies, speeches, meetings, leafleting or publishing."

An article in The Economist provided this chart of the growth in number of "patriot" and militia groups and labeled it "The Obama Effect."

Isn’t it curious how comfortable the ignorant, the violent, and the bigoted are when there is a Republican president in office—and how riled up they get when a black Democrat enters office?

"Since 2000, the number of hate groups has increased by 67 percent. This surge has been fueled by anger and fear over the nation’s ailing economy, an influx of non-white immigrants, and the diminishing white majority, as symbolized by the election of the nation’s first African-American president."

"These factors also are feeding a powerful resurgence of the antigovernment "Patriot" movement, which in the 1990s led to a string of domestic terrorist plots, including the Oklahoma City bombing. The number of Patriot groups, including armed militias, has grown 813 percent since of the Obama was elected – from 149 in 2008 to 1,360 in 2012."

An SPLC article written by Larry Keller, The Second Wave, provides a history of these "patriot" groups and how they have evolved during the current resurgence.

"Almost 10 years after it seemed to disappear from American life, there are unmistakable signs of a revival of what in the 1990s was commonly called the militia movement. From Idaho to New Jersey and Michigan to Florida, men in khaki and camouflage are back in the woods, gathering to practice the paramilitary skills they believe will be needed to fend off the socialistic troops of the ’New World Order’."

"One big difference from the militia movement of the 1990s is that the face of the federal government — the enemy that almost all parts of the extreme right see as the primary threat to freedom — is now black. And the fact that the president is an African American has injected a strong racial element into even those parts of the radical right, like the militias, that in the past were not primarily motivated by race hate. Contributing to the racial animus have been fears on the far right about the consequences of Latino immigration."

Here is an example of the kind of nonsense these people tell each other in order to inflame their hatreds.

"In Pensacola, Fla., retired FBI agent Ted Gunderson tells a gathering of antigovernment ‘Patriots’ that the federal government has set up 1,000 internment camps across the country and is storing 30,000 guillotines and a half-million caskets in Atlanta. They're there for the day the government finally declares martial law and moves in to round up or kill American dissenters, he says. ‘They're going to keep track of all of us, folks,’ Gunderson warns."
This type of thinking has entered the mainstream with Republican politicians and conservative media personalities lending credence.

"A remarkable aspect of the current antigovernment movement is the extent to which it has gained support from elected officials and mainstream media outlets. Lawmakers complaining about the intrusiveness of the federal government have introduced 10th Amendment resolutions (reasserting that those powers not granted to the federal government remain with the states) in about three dozen states. In Texas, Gov. Rick Perry raised the prospect of secession several months after Obama's inauguration — a notion first brought up there in the '90s by the militia-like Republic of Texas. U.S. Rep. Michele Bachmann (R-Minn.) said she feared that the president was planning "reeducation camps for young people," while U.S. Rep. Spencer Bachus (R-Ala.), evoking memories of the discredited communist-hunter Sen. Joseph McCarthy, warned of 17 "socialists" in Congress. Fox News host Glenn Beck, who has called Obama a fascist, a Nazi and a Marxist, even re-floated militia conspiracy theories of the 1990s alleging a secret network of government-run concentration camps."

Keller fears that these fringe groups may begin to collaborate.

"Militiamen, white supremacists, anti-Semites, nativists, tax protesters and a range of other activists of the radical right are cross-pollinating and may even be coalescing."

Let’s hope Keller is wrong.

If anyone still believes these people are not worth worrying about—remember Oklahoma City.

Sunday, May 5, 2013

Psychiatry Finally Encounters Science—and Rejects It

Psychiatry is unique among the medical disciplines in that there is no science that supports the diagnoses made and the treatments prescribed by the practitioners. Gary Greenburg posted a note at The New Yorker that suggested that this lack of a scientific basis, once a source of unease within the discipline, has come to be perceived as a benefit in the practice of psychiatry. Greenburg titled his article Does Psychiatry Need Science?

"....doctors in most medical specialties have only gotten better at sorting our suffering according to its biochemical causes. They have learned how to turn symptom into clues, and, like Sherlock Holmes stalking a criminal, to follow the evidence to the culprit. With a blood test or tissue culture, they can determine whether a skin rash is poison ivy or syphilis, or whether a cough is a symptom of a cold or of lung cancer. Sure-footed diagnosis is what we have come to expect from our physicians. It gives us some comfort, and the confidence to submit to their treatments.

"But psychiatrists still cannot meet this demand. A detailed understanding of the brain, with its hundred billion neurons and trillions of synapses, remains elusive, leaving psychiatry dependent on outward manifestations for its taxonomy of mental illnesses."

Psychiatrists develop diagnoses by observations of patients and by assessing self-reported symptoms of patients. They use the same approach in determining the efficacy of treatments.

"Indeed, it has been doubling down on appearances since 1980, which is when the American Psychiatric Association created a Diagnostic and Statistical Manual of Mental Disorders (D.S.M.) that intentionally did not strive to go beyond the symptom. In place of biochemistry, the D.S.M. offers expert consensus about which clusters of symptoms constitute particular mental illnesses, and about which mental illnesses are real, or at least real enough to warrant a name and a place in the medical lexicon."

The D.S.M. provides a cookbook approach whereby symptoms can be catalogued and compared with possible mental illnesses. Of course, a set of symptoms need not be uniquely associated with a specific illness so it is of limited precision. Its main strength is in its simplicity and its authority. It can be interpreted and used to make a diagnosis by anyone capable of reading: parents, teachers, school nurses, psychologists, and medical doctors with no training in psychiatry. Because it is produced by a medical association it is assumed to have the same authority as a similar document produced by any science-based medical profession.

"But this approach hasn’t really worked to establish the profession’s credibility. In the four revisions of the D.S.M. since 1980, diagnoses have appeared and disappeared, and symptom lists have been tweaked and rejiggered with troubling regularity, generally after debate that seems more suited to the floors of Congress than the halls of science. The inevitable and public chaos—diagnostic epidemics, prescription-drug fads, patients labelled and relabelled—has only deepened psychiatry’s inferiority complex."

Did psychiatry still feel uncomfortable with its lack of a physical basis for their actions, or had they become comfortable with the simplicity it provided? Greenberg became suspicious when he observed what transpired when a group of experts advocated adding the diagnosis of the condition known as melancholia.

"A group of seventeen prominent doctors—biological psychiatrists, experts in diagnostics, subspecialists in the field of depression, and even a historian—petitioned the D.S.M.-5s mood-disorders committee to add a diagnosis they named melancholia."

"The proposal was not so much an innovation as a retrieval of an old idea. Melancholia is one of the most venerable of psychiatric disorders, noted by doctors at least as far back as Hippocrates, who attributed its characteristic dejection and unresponsiveness to external events to an excess of black bile. But melancholia lost its place in psychiatric nosology [disease classification] in 1980, when all forms of depression were consolidated under a single diagnostic label—‘major depressive disorder’—of which melancholia was only a variant. It was the D.S.M. equivalent of calling Pluto just another ice dwarf in the Kuiper Belt."

The group argued that melancholia was, in fact, a unique disease. While it had observable symptoms that might be confused with manifestations of other forms of depression:

" unshakeable despondency and sense of guilt that arises from nowhere, responds to nothing, and dissipates for no apparent reason—also displayed some distinctive physical signs: hand-wringing, for instance, and psychomotor retardation, an easily perceived slowing down of movement, thought, and speech."

The petitioners could provide evidence that melancholia could be detected by medical tests while other forms of depression could not.

"But some of the group’s proof was of precisely the kind that psychiatrists had been looking for since the nineteenth century. Thirty years of replicated studies had shown that patients with those signs and symptoms had a sleep architecture and cortisone metabolism that was distinct from that of other people, both normal and depressed. A night in a sleep lab could detect the reduced deep sleep and increased REM time characteristic of melancholics, and a dexamethasone suppression test (D.S.T.) could determine whether or not a patient’s stress hormones were in overdrive, as is generally the case among melancholic patients. And melancholia responded better than other kinds of depression to two treatments: tricyclic antidepressants (the first generation of the drugs) and electroconvulsive therapy (E.C.T., better known as shock therapy). Treatment success rates with this population reached as high as seventy per cent, much more robust than the anemic results found in trials that mixed melancholic and non-melancholic depression...."

One might have expected psychiatry to be thrilled with this request.

"Distinctive signs, symptoms, lab studies, course, and outcome—if melancholia wasn’t the Holy Grail, it was at least a sip from the chalice of science, one disorder that could go beyond appearances. You would think that the committee would at least have been eager to consider it as a partial remedy for ongoing concerns about the profession’s lack of scientific rigor."

But one would have been wrong.

"But the panel barely gave melancholia the time of day, let alone a full-on floor debate, relegating it to the same slush pile as the proposed Parental Alienation Syndrome and Male-to-Eunuch Gender Identity Disorder."

Incredibly, it was the scientific basis for the diagnosis and treatment that rendered it unacceptable to the D.S.M. committee.

"And the main obstacle was exactly what you would think was melancholia’s main strength: the biological tests, especially the D.S.T. ‘I believe you and your colleagues are fundamentally correct,’ committee member William Coryell wrote to the melancholia advocates, by way of explaining his panel’s inaction. But ‘the inclusion of a biological measure would be very hard to sell to the mood group.’ Coryell explained that the problem wasn’t the test’s reliability, which he thought was better than anything else in psychiatry. Rather, it was that the D.S.T. would be ‘the only biological test for any diagnosis being considered’."

As Greenberg so aptly summarized:

"A single disorder that met the scientific demands of the day, in other words, would only make the failure to meet them in the rest of the D.S.M. that much more glaring."

Science marches on, but psychiatry has found a sweet spot where it is comfortable and willing to live for the foreseeable future with diagnosis and treatment by committee revelation.

Friday, May 3, 2013

The History of Debt: Economics and Morality

Robert Kuttner provided an interesting article on the topic of debt in the New York Review of Books. He reviewed the book Debt: The First 5,000 Years by David Graeber, and took the opportunity to express his opinions on how debt is currently being handled. His chosen title, The Debt We Shouldn’t Pay, provides a clue as to Kuttner’s sentiments.

Graeber indicates that credit, and thus debt, has been part of human interaction about as far back as one can look. As soon as wealth began to be accumulated unevenly a system of creditors and debtors emerged. Kuttner provides this quote from Graeber:

"....the struggle between rich and poor has largely taken the form of conflicts between creditors and debtors—of arguments about the rights and wrongs of interest payments, debt peonage, amnesty, repossession, restitution, the sequestering of sheep, the seizing of vineyards, and the selling of debtors’ children into slavery."

Kuttner provides this summary of the main issues to be discussed with relation to debt.

"In Graeber’s exhaustive, engaging, and occasionally exasperating book, three themes stand out. One is the "profound moral confusion" in our understanding of debt. A second is the perennial struggle over debt forgiveness, and who receives it. A third is the function of debt in the politics of social class and social control."

The basic business transaction of lending resources should be quite simple. The debtor assumes a risk in borrowing resources that he might not be able to repay. The creditor assumes the risk that his resources might not be returned and charges a fee appropriate to the risk being taken. In an ideal world there is a balance of risks and both creditors and debtors lose occasionally.

However, we are not in an ideal world and creditors, being the wealthy, have easily balanced the scales in their favor. One approach utilized by the wealthy was to turn a pure economic transaction into a moral obligation.

"Graeber observes that debt is often conflated with sin. The version of the Lord’s Prayer drawn from Matthew (used by most Protestant denominations) asks God to forgive us our "debts," while most translations of Luke (and the Catholic liturgy) ask forgiveness for our "trespasses" or "sins." Graeber notes that in modern German, the same word, Schuld, means both debt and guilt. Likewise in several ancient languages."

Thus the debtor who was unfortunate in business was also a sinner and morally culpable. This imbalance in favor of creditors has been an integral part of history and has provided creditors with a range of options for punishing debtors for their sins.

One of the mechanisms that served as both punishment and encouragement for debtors to find payment "somewhere" was the system of debtor prisons. This ineffective and rather counterintuitive approach began to break down when economies became more complicated and economic swings became more severe. When the economy runs on credit and there is an economic collapse, no one can pay their debts. It is awkward for a society to come to the conclusion that all its merchants should be thrown in jail. When economics conflicts with morality, it is usually economics that wins.

"The British devised the concept of legal discharge from debt not out of a sudden attack of compassion but because the economic crisis of the 1690s had put much of the merchant class in jail. The cause was not improvident or immoral behavior on the part of debtors, but general economic dislocation beyond their control...."

Not surprisingly, it was decided that economics was a matter for debtors "of significance." Morals were to continue to be the issue for poorer debtors.

"But when the law was finally enacted, allowing a magistrate to settle debts with partial repayment, only substantial merchants could qualify for relief. Common debtors still languished in jail, since their penury had scant wider consequences."

This difference in approach to the wealthy and the non-wealthy persists to this day. When corporations do dumb things and acquire more debt than they can deal with they are allowed to declare bankruptcy, renege on debts, and then go back in business. When banks do dumb things, their mistakes are covered by the tax payers if the banks are big enough.

"The double standard in debt relief that favored large merchants, present at the creation of bankruptcy law in 1706, persists today in many different forms. It gets surprisingly little attention in the debt debates. Despite the tacit assumption that "surely one has to pay one’s debts," the evasion of repayment is both widespread and selective. Corporate executives routinely walk away from their debts via Chapter 11 of the national bankruptcy law when that seems expedient. Morality scarcely enters the conversation—this is strictly business."

The term "moral hazard" usually comes up when a non-wealthy person gets into financial trouble. Any attempt to bail the poor out runs the risk of encouraging them to continue to do dumb things.

While individuals of any economic standing now have access to debt relief through bankruptcy proceedings, individuals experience more restrictions than corporations.

"Homeowners, however, are explicitly prohibited from using the bankruptcy code to reduce their outstanding mortgage debt. White House legislation proposed in 2009 would have allowed a judge to reduce the principal on a home mortgage, as part of the effort to contain the economic crisis. Congress rejected the measure after extensive lobbying by the financial industry. Consumers may use bankruptcy to shed other debts, but a revision of the law signed by President Bush in 2005 subjects most bankrupt consumers to partial repayment requirements, while bankrupt corporations get a general discharge from their debts. Thanks to the influence of the same financial lobby, the rules of student debt provide that the obligations of a college loan follow a borrower to the grave."

The system of debt peonage that Graeber referred to persists.

Kruttner is particularly outraged by the application of "moral hazard" to nations.

"Proposals for debt relief for....Greece encounter resistance cloaked in the language of moral opprobrium and ‘moral hazard,’ the danger that debt relief will reward and thus induce reckless behavior."

He points out that there is a long history of debt relief for nations, and that some of the countries that benefited the most in the past are now the loudest moralizers when it comes to considering the sins of others.

"....the US ....wrote off some of the international debts of allies and enemies alike. (Britain, America’s closest ally, received near-total forgiveness of wartime Lend-Lease debt.)"

"Germany, today’s enforcer of Euro-austerity, was the beneficiary of one of history’s most magnanimous acts of debt amnesty in 1948. The Allies in the 1920s made the catastrophic error of helping to destroy Germany’s economy with reparations and debt collection policies. In the 1940s, after a brief flirtation with World War I–style reparations, the occupying powers agreed to behave differently: they wrote off 93 percent of the Nazi-era debt and postponed collection of other debts for nearly half a century. So Germany, whose debt-to-GDP ratio in 1939 was 675 percent, had a debt load of about 12 percent in the early 1950s—far less than that of the victorious Allies—helping to produce postwar Germany’s economic miracle. Almost every German can cite the Marshall Plan, but this larger act of macroeconomic mercy has disappeared from the political consciousness of Germany’s current austerity police. Whatever fiscal sins the Greeks committed, the Nazis did worse."

The continued ascendency of creditors (banks) and the determination to conflate moral issues with economic issues has been unwise.

"Another former IMF official, Anne O. Krueger, an appointee of George W. Bush, recently reiterated her call for Chapter 11 bankruptcy for indebted countries. When she first proposed the idea as deputy managing director of the IMF in 2002, Krueger was fairly shouted down by officials of the US Treasury and leading bankers. In January 2013, she argued that ‘a clear mechanism [to allow nations to use bankruptcy] could have prevented all sorts of problems in the eurozone.’ With a Chapter 11 law, Greece could have written off old debt and used new borrowing to finance new growth, just like a private corporation. Even acknowledging past bad behavior (as in the case of many corporate bankruptcies), a Chapter 11 for countries could sensibly combine incentives for honest bookkeeping with macroeconomic policies that write off old debt for the sake of recovery."

Kuttner provides this summary statement:

"The particulars no longer involve the sequestering of sheep or the seizing of vineyards. But the ten million Americans at risk of losing their homes to foreclosure, or recent graduates who cannot qualify for mortgages because of their monthly payments on college loans, have become modern debt-peons. At the same time entire economies abroad, indentured to past debts, find themselves in a metaphoric debtors’ prison where they can neither repay creditors nor resume productive livelihoods."

Nicely said!

Wednesday, May 1, 2013

Will the Coming Energy Revolutions Breed Political Revolutions?

Most in the United States view the possibility of energy independence in the near future with unmitigated joy. An article by Benjamin Alter and Edward Fishman in the New York Times reminds us that all actions produce reactions, and that the withdrawal of the US from the world energy market as a consumer will have repercussions. Their piece is aptly titled The Dark Side of Energy Independence.

The authors provide this projection:

"A wave of new technologies has made it possible to extract oil and gas from shale rock formations, and the results have been astonishing. By some estimates, the United States is on track to overtake Saudi Arabia as the world’s largest oil producer as early as 2017, start exporting more oil and gas than it imports by 2025, and achieve full energy self-sufficiency by 2030."

Based on that assumption, they make this prediction:

"....America’s oil and gas bonanza will drive down global energy prices, undercutting the foundations of petrostates everywhere. According to Francisco Blanch, the head of commodities research at Bank of America Merrill Lynch, oil could fall to just $50 a barrel within the next two years, which could unleash unrest in regions crucial to American interests. Far from releasing the United States from the burden of global leadership, this process would force Washington to assume an even greater international role than it currently plays."

A number of countries are highly dependent on oil income and have created societies and economies that assume the price of oil and gas will be kept high.

"Consider Bahrain, which earns 70 percent of its revenues through petroleum production and refining. The small island monarchy has undergone deeply destabilizing protests since the start of the Arab Spring. A drop in global energy prices would hurt the already weak government, breathing new life into opposition forces. A populist revolution in Bahrain could empower the country’s long-repressed Shiite majority, who already resent Washington’s support for the ruling Sunni al-Khalifa family. A new regime in Bahrain might even seek to expel the Navy’s Fifth Fleet, complicating America’s efforts to protect international shipping lanes, fight piracy and check Iran’s regional ambitions."

"Even more alarming is the prospect of instability in Saudi Arabia. In 2011, the Saudi royal family was able to head off an Arab Spring-style revolution because of its enormous oil revenues, doling out $130 billion in benefits to pacify the country’s younger and poorer inhabitants. Should lower oil prices make such patronage impossible in the future, the kingdom could face domestic unrest — making the country a far less reliable partner for America in fighting terrorism and countering Iran. Moreover, if Saudi Arabia has less of its own money to spend on regional security, Washington will have to make up for the shortfall."

A dramatic fall in the price of oil would have repercussions outside the Middle East with the possibility of political fallout in places such as Russia, Venezuela, and in select nations of Africa and Central Asia.

The authors wish to disabuse everyone of the notion that life will become simpler once they become independent of the international oil market.

"Americans should cheer the energy revolution. It will do wonders for the American economy, and the democratic politics it could encourage in the Middle East and Russia may ultimately serve American interests. But in the meantime, Washington should expect a world far less stable than the one it is used to — and, in turn, prepare to adopt an even more outward-looking foreign policy."

Alter and Fishman consider the issues that might arise from the US attaining energy independence. Obviously, there are other countries out there who would also like to reduce or eliminate the need for imported fossil fuels. Is there a means by which other countries could follow the projected path of the US? That is a topic covered by an interesting article by Charles C. Mann in The Atlantic: What If We Never Run Out of Oil?

Mann acknowledges the seeming inexhaustibility of the various oil sources that have been discovered. He also recognizes that other nations are likely to have the opportunity to take advantage of new technologies and new sources such as fracking for shale oil and gas. However, he is most interested in the possibility of exploiting yet another source of natural gas: methane hydrate, undersea deposits of methane "frozen" into a water lattice at high pressures and low temperatures.

"In the 1970s, geologists discovered crystalline natural gas—methane hydrate, in the jargon—beneath the seafloor. Stored mostly in broad, shallow layers on continental margins, methane hydrate exists in immense quantities; by some estimates, it is twice as abundant as all other fossil fuels combined."

Estimates of quantities are uncertain. At least as interesting as its perceived abundance is its ubiquity. It seems to be available to just about any country that has coastal access to relatively deep seawater.

Life flourishes in the seas near land. When living matter dies it sinks to the bottom and forms sediment. Microorganisms exist that feed off this accumulating residue.

"In a process familiar to anyone who has seen bubbles coming to the surface of a pond, the microbes emit methane gas as they eat and grow. This undersea methane bubbles up too, but it quickly encounters the extremely cold water in the pores of the sediment. Under the high pressure of these cold depths, water and methane react to each other: water molecules link into crystalline lattices that trap methane molecules. A cubic foot of these lattices can contain as much as 180 cubic feet of methane gas."

"....water pressure and temperature keep them stable at depths below about 1,000 feet. Scientists on the surface refer to them by many names: methane hydrate, of course, but also methane clathrate, gas hydrate, hydromethane, and methane ice."

There are a number of technically-advanced countries that would like to have access to their own large sources of natural gas rather than be required to import most of their fossil fuels. Mann emphasizes the large and long-term investment that Japan has made in attempts to mine this prevalent nearby source. The Asian nations of China, India, Korea, and Taiwan have their own research efforts. A number of Western nations are also involved, including the US and Canada.

Mann provides a view of the extent of the Japanese effort by describing the activities of the research ship Chikyu (Earth).

"....a $540 million Japanese deep-sea drilling vessel that looks like a billionaire’s yacht with a 30-story oil derrick screwed into its back. The Chikyu, a floating barrage of superlatives, is the biggest, glitziest, most sophisticated research vessel ever constructed, and surely the only one with a landing pad for a 30-person helicopter. The central derrick houses an enormous floating drill with a six-mile "string" that has let the Chikyu delve deeper beneath the ocean floor than any other ship."

"The Chikyu, which first set out in 2005, was initially intended to probe earthquake-generating zones in the planet’s mantle, a subject of obvious interest to seismically unstable Japan. Its present undertaking was, if possible, of even greater importance: trying to develop an energy source that could free not just Japan but much of the world from the dependence on Middle Eastern oil that has bedeviled politicians since Churchill’s day."

"Japan, which has spent about $700 million on methane-hydrate R&D over the past decade, has the world’s biggest hydrate-research program....In mid-March, Japan’s Chikyu test ended a week early, after sand got in the well mechanism. But by then the researchers had already retrieved about 4 million cubic feet of natural gas from methane hydrate, at double the expected rate. Japan’s Ministry of Economy, Trade, and Industry is eager to create a domestic oil industry; at present, the nation produces just one one-thousandth of its own needs. Perhaps overoptimistically, the ministry set 2018 as a target date for commercializing methane hydrate."

If the notion of an abundant new energy source becoming available in about ten years sounds farfetched, Mann reminds us of the history associated with fracking.

"Twelve years ago, a magazine asked me to write an article about energy supplies. While researching, I met petroleum geologists and engineers who told me about a still-experimental technique called hydraulic fracturing. Intrigued, I asked several prominent energy pundits about it. All scoffed at the notion that it would pay off."

If Alter and Fishman were concerned about the effects of the US attaining energy independence, what would they anticipate happening if countries like Japan, Korea, China, and India were able to one day soon greatly diminish their need for imported fossil fuels?

If methane hydrate becomes a commercial source of natural gas, Mann anticipates numerous international disputes and widespread turmoil.

"A methane-hydrate boom could lead to a southwest-to-northeast arc of instability stretching from Venezuela to Nigeria to Saudi Arabia to Kazakhstan to Siberia. It seems fair to say that if autocrats in these places were toppled, most Americans would not mourn. But it seems equally fair to say that they would not necessarily be enthusiastic about their replacements."

"Augmenting the instability would be methane hydrate itself, much of which is inconveniently located in areas of disputed sovereignty....Methane-hydrate deposits run like crystalline bands through maritime flash points: the Arctic, and waters off West Africa and Southeast Asia."

It is both fascinating and frightening to think that such large changes can occur over the span of a decade.

Hang on, we are about to experience the curse of living in "interesting times."
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