Waiting for Dough, by Christopher Caldwell
The luck of the Irish runs out.
The Weekly Standard, May 11, 2009, Volume 014, Issue 32
More than any other country over the past two decades--more even than China--Ireland has given up its traditional culture for the global economy. In a quarter century, it went from being a little, poverty-stricken, priest-ridden agricultural backwater to a swingin', low-tax, wide-open, unregulated global-economy entrepôt. Last year, on paper, it was the seventh-richest country, per capita, in the world, ahead of the United States and trailing only a few oil exporters and tax havens. In the decade up to 2007, Ireland's GDP increased 350 percent. House prices quintupled.
At the same time, Ireland abandoned the "backward" parts of its culture. Partly through a string of sex scandals in the 1990s, but largely through its hostility to consumerism, the Catholic Church was discredited, and the culture built on it faded. (One small illustration: There are placards on public garbage cans all over Dublin bearing the catchy but not very Christian sentiment "Litter is disgusting--so are those responsible.") Ireland is not prudish anymore, either. A couple decades ago, 1 in 60 Irish babies were born out of wedlock; today 1 in 3 are. The country has some of the most liberal gay-rights and environmental laws in Europe. Nor is Ireland provincial. Its economy draws immigrants. There is a whole wall of books at the Waterstone's on Dawson Street in Dublin marked "Polskie Ksiazki." Dublin has numerous mosques. Tiny Waterford (pop. 45,775) has an African Women's Forum, not to mention two "adult stores" (in case you're ever in Waterford and need to buy an adult).
This is all very exciting for the Irish, but there is nothing particularly Irish about it. Irish identity has often been--explicitly and officially--a matter of protecting citizens from both the temptations of modernity and the vicissitudes of prosperity. In 1927 a Manchester Guardian journalist asked Eamon de Valera, the father of the modern Irish state, whether he understood that closing Ireland off from trade, the better to protect its culture, would mean a lower standard of living. De Valera replied,
You say "lower" when you ought to say a less costly standard of living. I think it quite possible that a less costly standard of living is desirable and that it would prove, in fact, to be a higher standard of living. I am not satisfied that the standard of living and the mode of living in Western Europe is a right or proper one.
De Valera's Irish Republic was organized around the idea that money doesn't matter that much. This may have been a noble aspiration, it may have been sanctimony and foolishness, but there was at the very least something bold and, as Yeats would say, indomitable about it. Next to De Valera's uncompromising Christian renunciation, those two something-for-nothing ideologies, modern capitalism and modern socialism, are practically indistinguishable. Over the last 20 years, Ireland found riches a good substitute for its traditional culture. But now the country has been harder hit by the financial downturn than any country in Western Europe. We may be about to discover what happens when a traditionally poor country returns to poverty without its culture.
Tiger in the tank
Until around the time the dot-com bubble burst, the Irish described their economy as the Celtic Tiger, after the high-tech and pharmaceutical companies that opened European offices there in the 1980s and 1990s. One senses De Valera wouldn't have liked these places. Much of the world's Viagra is made by Pfizer in the western village of Ringaskiddy. Botox comes from the elegant town of Westport, and one of the largest silicone-breast-implant factories in the world was until recently located in Arklow. Reductil, the slimming drug sold on the Internet, comes from Sligo. Google's European offices are in Dublin. Intel and Dell are still Ireland's two largest high-tech employers. But neither of those employs more than 5,000 people, and Dell laid off over 2,000 of them this winter.
The Celtic Tiger was partly the result of global economic conditions and partly the result of the country's policies. Ireland's decision to join the euro in the 1990s forced it to eliminate its chronic budget deficits and gave it the windfall of super-low interest rates, set for a European economy dragged down by Germany's struggles with reunification. Ireland offered a low-cost English-speaking labor force at a time when U.S. high-tech companies were looking for a springboard into European markets. Even today, Ireland is highly dependent on U.S. corporations, which account, directly or indirectly, for 300,000 jobs. Should the United States go protectionist, or should it inflate, which for Ireland's purposes would amount to the same thing, Ireland would be in trouble. On his St. Patrick's Day visit to Washington, D.C., the Irish taoiseach (prime minister), Brian Cowen, is said to have received an assurance from Barack Obama that the president didn't see Ireland as a tax haven.
This makes Ireland sound like a northern equivalent of a maquiladora economy, like Mexico in the years immediately after NAFTA. The Irish are sensitive about this imputation. "Our natural resource is brainpower," says one Dublin personnel consultant. That is true enough. It is probably not a coincidence that the biggest beneficiaries of the Celtic Tiger were the first generation of Irish born after the institution of universal public education in the 1960s. But education is not a commodity that can be monopolized. As labor costs have risen (by a third in real terms in the past decade), international companies have discovered that there are other, cheaper workforces that can also perform new-economy tasks. Jobs have left for Latin America, southeast Asia, and Eastern Europe. That Arklow breast-enhancement business wound up in Costa Rica.
So how has Ireland continued to grow at staggering rates for the last decade? Mostly thanks to a housing bubble, which was like the American one on steroids. Run-of-the-mill three-bedroom houses in provincial towns were selling for 1.5 million euros. Prices in Dublin were up to seven times as high as in similar U.S. urban markets.
There seemed to be good fundamental reasons for a steep rise in house prices, starting with a rate of home-ownership that approached 80 percent. On top of that there was immigration, the return of Irish exiles, a growing demand for vacation homes, and the new phenomenon of widespread divorce (making two homes necessary where one used to suffice). There were also government incentives for real estate developers and for the building of vacation homes in depressed areas. The most glamorous part of new, swingin' Ireland was deeply implicated in this speculation. Harry Crosbie, real estate-and-rock-music mogul, conceived--and, stranger yet, got financing for--a billion-euro construction project along the River Liffey. It would have included two skyscrapers, including a "U2 Tower," in which the band had invested heavily, and an Ozymandian 15-story sculpture of a giant man overlooking the Liffey. It was a narrow escape for Dublin architecture when Crosbie abandoned the project for lack of funds.
The result of the bubble was that, by the time of the U.S. subprime collapse, Ireland already had as many as 100,000 vacant houses. It also has empty golf courses, empty hotels, and empty shopping malls. Every last developable acre in the country, it seems, has been bought up (and bid up) by speculators. The bad loans attached to this overbuilding might reach 20 billion euros, or 10 percent of GDP. Housing prices are predicted to drop 50 percent from their peak, and development land 70 percent. Alan Ahearne, a former U.S. Federal Reserve economist who is now an adviser to the Irish finance minister, predicted over the winter that, "with possibly one exception, this country will record the largest cumulative drop in national income in an advanced economy since the Second World War."
Partners in crime
The villains of Irish finance, unlike those in New York and the City of London, were not wizards deploying the Black-Scholes equation or the Gaussian copula to turn the dross of subprime real estate into the fool's gold of CDOs. Far from it. They were just go-get-'em businessmen who started to believe their own blarney, cross-collateralized their properties, and got in way over their heads. As the financial journalist Tom McGurk put it: "Were you to gather together all of the senior principals in the six banks and building societies that approved this outrageous behavior, and join them to the property speculators to whom they loaned the billions, they would hardly fill a good-sized bus."
A few of the developers were young and dashing. Most of them were dissolute and lecherous-looking geriatrics. You could see them in the Irish weekend newspapers, posing in front of their huge houses and at charity balls with their toothy wives. Each of the developers had a signature Croesian excess, whether personal or professional. There was Sean Dunne, who had proposed to dynamite two of Dublin's historic hotels in leafy Ballsbridge to build a billion-dollar skyscraper; there was Sean Mulryan with his stables full of racehorses and his whole fleet of helicopters; and there was Johnny Ronan, who reportedly flew several dozen friends to Italy to have Pavarotti sing to him personally.
There is a good side to this lack of sophistication, of course. Boosters of Ireland's economy are keen to point out that there is little toxicity in its real estate market. Even harsh critics of the ruling Fianna Fáil party's economic policy--like the economics spokeswoman of the Labour party, Joan Burton--will grant this. It doesn't take an MIT doctorate to figure out what's wrong with the Irish economy, so the markets have had little trouble pricing the economy's assets. Shares in the Bank of Ireland, which were at 18.83 euros in 2007, now trade for 12 cents.
But there is a dark side to having your small economic pond fouled by only a handful of big fish: The whole social, economic, and political system looks like a con. Why, people now wonder, was so much of the financing in this supposedly open economy done by local Irish banks? The easiest answer to hand--and probably the correct one--is that the bankers and developers bought the protection and indulgence of Fianna Fáil. (The two main Irish political parties don't really have ideologies, but Fianna Fáil is the more historically nationalist and machine-oriented of the two.)
This unease has been heightened by a shocking lack of accountability. The banks' top brass has hardly changed from the days when they were actually making money. One of the few executives to resign was Sean FitzPatrick, chairman of the spectacularly reckless Anglo-Irish Bank, or "Anglo," but he was an extraordinary case. FitzPatrick got "director's loans" worth 83.3 million euros (which the bank's accountants, Ernst and Young, failed to notice) at a time when he was running the bank into the ground. Anglo peaked at 7.50 euros a share and was nationalized this year at 22 cents. When Bear Stearns collapsed, Anglo lost 23 percent of its value. When Lehman Brothers collapsed, Anglo threatened to take the whole Irish banking system with it. The government gave a blanket guarantee to Irish banks, using as security the country's National Pension Reserve Fund.
Now, imagine what the reaction has been to the discovery that the National Pensions Reserve Fund has been used to underwrite golden parachutes. This spring, Michael Fingleton, the chairman of Irish Nationwide, became the face of Irish banking malfeasance in much the way that the AIG financial team became the face of the U.S. banking scandal--and for the same reason. Fingleton's last reported salary was only 2.3 million euros. But in 2007 Irish Nationwide reported that it had transferred a 27.6-million-euro pension fund on behalf of "members" (note the plural) of the plan. Turns out the plan had only one member--Fingleton. And that money constituted 85 percent of Irish Nationwide's reported pension-fund assets at the end of 2006. Fingleton agreed to resign at the end of April. He also agreed to pay back a million-euro bonus he had received after the government had used those taxpayer pensions to secure Irish Nationwide against collapse. Rather like Barack Obama faced with AIG, the Irish finance minister, Brian Lenihan, had seen that the Fingleton bonus was a disaster in the making. He had threatened to withdraw Irish Nationwide's guarantee if Fingleton kept his bonus. This led to a funny photograph on the cover of the satirical magazine the Phoenix:
Lenihan: Return the bonus, or get the sack.
Fingleton: How much is in the sack?
Real money and fake
Ireland once looked to many investors like a versatile economy, matching American dynamism with European security. But now certain commentators are warning that it might be the other way around. "Ireland is like a jockey riding two horses," said the economist and author David McWilliams in Dublin this March. "When the horses are moving together, everything works well. When they're not, the jockey can get a terrible pain in the groin."
Ordinarily, a small, export-dependent economy in which wages are becoming less competitive can regain its edge by devaluing its currency. But Ireland is in the euro, and it is having a hard time staying in. According to the European Stability and Growth Pact, all countries must keep their deficits below 3 percent of GDP. No country until recently has ever gone above 5 percent. Ireland is now at 11 percent, or 20 billion euros. The European Central Bank has given Ireland until 2013 to get back into conformity.
Two-thirds of companies surveyed by the accountants Price Waterhouse Coopers said they were planning on cutting jobs this year. Consumer spending is already down 20 percent. So the government is now faced with the need to raise taxes dramatically and cut spending in the face of a looming recession. On April 7, it announced its budget. Top tax rates have soared past 50 percent, and capital gains and value-added taxes will rise, too. A property tax will be added. And that will make only the merest dent in the 20-billion-euro shortfall.
A basic question remains, though: How, in the absence of leverage-creating derivatives and "toxicity," did a few real-estate yahoos' going broke cause the risk of sovereign default to loom over the previously solvent Irish state? In Ireland now, there is (as an American could predict) a lot of talk about how the past few years have been an era of greed, lacking in social solidarity. But in Ireland's case, this is not true in the slightest. There was plenty of care for the less well-off. It is just that the government got no credit for it because it delivered that care by lowering poor people's taxes.
The fiscal emergency had its roots in the generous-sounding "social partnership" model agreed on by the country's leading politicians in the late 1980s--a sort of Irish answer to Germany's social market economy. The key to the social partnership was assuring "competitiveness" in international markets. Irish workers wanted higher wages, but businesses wishing to locate in Ireland wanted lower ones. How do you square that circle? Through government. In return for workers' moderating wage demands, government would make sure they paid very little in income taxes. Half the income tax in Ireland is paid by people earning over 100,000 euros, and 750,000 people--a third of the workforce--pay no income tax at all. Where does the money come from, then? From transaction taxes ("stamp" duties, capital gains taxes, corporate profits tax) that were paid mostly by the real-estate speculators who were making money hand over fist. Everyone seemed content with this system, even the speculators. It is, after all, easier to tax people's fake money than their real money.
The government could thus stimulate consumption (and consumerism) through low income taxes without having to stint on entitlements. This explains how, for a while, the ruling Fianna Fáil party managed to become the party of both the upper-middle class and the working class--much as U.S. Republicans did by a superficially different but essentially similar shell game.
We can see now that this arrangement was a time bomb. We can also see that the politically connected developers did a good deal to wreck the economy. But there is no denying that, by golly, they paid a lot of taxes. All this meant, though, was that the state became just as dependent on the housing bubble as the private sector. When more money came in, the government just spent it. The featherbedding patronage state is about the only Irish tradition that the global economy did not kill. Government employees make 25 percent more than equivalently situated private employees, according to the Dublin-based Economic and Social Research Institute. Government employees got very powerful in the process. So over the winter, when politicians decided to cut public-sector pay, they weren't exactly forthright--they proposed lopping 7.5 percent off the top and called it a "pension levy."
The head of the Labour party, Eamon Gilmore, recently attacked the finance ministry on the grounds that its new, trimmed budget requires more austerity than the country at large can handle. Gilmore has called instead for an Obama-style stimulus package. This is far more difficult to pull off when you are dependent on foreign investors and don't control the currency in which your debts are denominated--but at least it promises a continuation of something-for-nothing! Unsurprisingly, Gilmore is now the most popular politician in the country.
Prisoners of the open economy
There is lots of unrest and anger in Ireland now, and it is finding various outlets. Government statistics envision unemployment rising to 500,000 this year (in a labor force of 2.2 million). In protest against the pension levy, 150,000 people demonstrated in Dublin in March. Police unions and parts of the armed forces have also taken to the streets, which is supposed to be illegal. A representative of the army wrote to the defense minister for reassurance that it would not be used to break strikes, although it has often been called upon to do just that. Until recently, Irish workers had little to strike about. The country's largest union body, the Irish Congress of Trade Unions, negotiated a 6 percent pay raise on the very eve of the banking collapse and some businesses are even honoring it.
Today unions are united. They are irate. Workers are having their wages cut unilaterally by the government and via negotiations with private business. You would expect upheaval. But even under the circumstances, unions' power to shake the government or win themselves a better deal appears to be meager. Ambitious plans for a national strike fizzled out when Impact, the largest public-sector union, failed to get the necessary votes.
Part of the unions' problem is that the economy is configured so that striking will do them little good. Ireland is now abjectly dependent on the global economy. Paradoxical though it may sound, this makes its workers dependent on government. The social partnership model has an iron logic. Once income tax rates fall to a certain level, Irish workers' disposable income can rise only through transfer payments. If it rises through wage increases, foreign investors will be driven off and there will be no pie to divide. So Ireland must run its economy in a two-step process: First, attract the direct investment from the global market. Then, if you think the workers deserve a better shake, use government to redistribute the income at home.
People are coming to understand how appallingly little there is to redistribute. Waterford Crystal, the mainstay of a market town that has been making glass since the 16th century, recently ran into trouble. The company employed 3,500 people in the 1980s, but under the leadership of Tony O'Reilly--ex-rugby star, ex-chairman of Heinz, ex-billionaire--it screwed things up royally. It over-manufactured items for the millennium: The public turned out not to want the year 2000 commemorated in glass. It went on an acquisition binge. The death blow was Waterford's acquisition of the German porcelain-maker Rosenthal and its tardy discovery that Rosenthal had German-sized pension-and-benefits liabilities. And then came the bad luck of the falling dollar and pound. The company wound up with 400 million euros in debts and a share price of a tenth of a cent. Waterford went into receivership; the Waterford name is now owned by KPS, a private equity company in New York.
On a Friday afternoon in January, KPS announced it would shut down manufacturing at Waterford's Kilbarry plant. Two hundred workers staged an occupation of the visitors' center, which was once ("once" meaning last year) Ireland's fourth-largest tourist attraction, getting 350,000 visitors. The occupation won widespread sympathy in the town of Waterford itself. And why shouldn't it have? Much of the town's economy--hotels and mini-museums, sweater shops and espresso bars--is configured around those foreigners who want to see how Waterford glass gets made. Local women brought meals to the factory canteen to feed the strikers, and teenagers volunteered for janitorial work.
The town will wait in vain for the plant's reopening. After an eight-week sit-in, the company offered the 800 workers left at the plant a 10-million-euro payment--1,200 euros apiece--and they jumped at it, 90 percent of them voting for the settlement. A hundred some-odd workers have been allowed to stay on for another six months. Some labor movement.
Much of the plant's production will be transferred to the Czech Republic, and there is justice in that. Waterford is indeed an ancient glassmaking city, but its name became an international eponym for beautiful crystal only after 1947, when Charles Bacik, a war refugee from Czechoslovakia, revamped the place with the help of a number of fellow Czech glassblowers. One was Miroslav Havel, who developed the beloved Lismore pattern--the one you probably registered for when you got married.
On the other hand, since the factory will remain in the town, and since all these extraordinary Irish craftsmen will, too, it is hard not to share the puzzlement of trade union rep Macdara Doyle of the ICTU that a national treasure, cultural symbol, and economic behemoth like Waterford could just evaporate this way. "What's puzzling and annoying us is this," he said in March. "If you are going to re-grow your economy, surely you have to do high-end manufacturing. We're not all going to get rich pushing strange financial products. Waterford is to Ireland what BMW is to Germany. It's by no means a busted flush."
I visited the factory with John Stenson, a 56-year-old master wedge cutter who took early retirement last year, after working at the plant for 40 years. Stenson is still owed tens of thousands out of his severance payment that he expects never to see. He apprenticed at the company for five years in the time of "Mister Havel," blowing glass and cutting it on old ceramic wheels. It was quickly apparent he was a gifted glassmaker. After three years of further training, he was certified a master, and ran his own "bench" of six artisans. He toured the United States explaining and demonstrating to Americans the craft of glass-cutting as practiced by artisans of Waterford. He handmade six serving dishes for Prince Charles. He designed, sculpted, and cut the crystal grandfather clock that is (or was) the central exhibit in the Waterford visitors' center.
"He is a man of many talents!" said one of his admiring former colleagues, also unemployed after working at the plant for decades, who had managed to get a temp job as a security guard there.
"Well, I'm on the dole now," Stenson said.
Christopher Caldwell is a senior editor at THE WEEKLY STANDARD. His book Reflections on the Revolution in Europe: Immigration, Islam and the West will be published in July.
Wednesday, May 6, 2009
Tuesday, May 5, 2009
Famine-monger Lester Brown still gets it wrong after all these years
Never Right, But Never in Doubt. By Ronald Bailey
Famine-monger Lester Brown still gets it wrong after all these years
Reason, May 5, 2009
"Could food shortages bring down civilization?," asks environmental activist Lester Brown in the current issue of Scientific American. Not surprisingly, Brown's answer is an emphatic yes. He claims that for years he has "resisted the idea that food shortages could bring down not only individual governments but also our global civilization." Now, however, Brown says, "I can no longer ignore that risk." Balderdash. Brown, head of the Earth Policy Institute, has been a prominent and perennial predictor of imminent global famine for more than 45 years. Why should we believe him now?
For instance, back in 1965, when Brown was a young bureaucrat in the U.S. Department of Agriculture, he declared, "the food problem emerging in the less-developing regions may be one of the most nearly insoluble problems facing man over the next few decades." In 1974, Brown maintained that farmers "can no longer keep up with rising demand; thus the outlook is for chronic scarcities and rising prices." In 1981, Brown stated that "global food insecurity is increasing," and further claimed that "the slim excess of growth in food production over population is narrowing." In 1989, Brown contended that "population growth is exceeding the farmer's ability to keep up," concluding that, "our oldest enemy, hunger, is again at the door." In 1995, Brown starkly warned, "Humanity's greatest challenge may soon be just making it to the next harvest." In 1997, Brown again proclaimed, "Food scarcity will be the defining issue of the new era now unfolding."
But this time it's different, right? After all, Brown claims that "when the 2008 harvest began, world carryover stocks of grain (the amount in the bin when the new harvest begins) were at 62 days of consumption, a near record low." But Brown has played this game before with world grain stocks. As the folks at the pro-life Population Research Institute (PRI) report, Brown claimed in 1974 that there were only 26 days of grain reserves left, but later he upped that number to 61 days. In 1976, reserves were supposed to have fallen to just 31 days, but again Brown raised that number in 1988 to 79 days. In 1980, only a 40-day supply was allegedly on hand, but a few years later he changed that estimate to 71 days. The PRI analysts noted that Brown has repeatedly issued differing figures for 1974: 26 or 27 days (1974); 33 days (1975); 40 days (1981); 43 days (1987); and 61 days (1988). In 2004, Brown claimed that the world's grain reserves had fallen to only 59 days of consumption, the lowest level in 30 years.
In any case, Brown must know that the world's farmers produced a bumper crop last year. Stocks of wheat are at a six-year high and increases in other stocks of grains are not far off. This jump in reserves is not at all surprising considering the steep run-up in grain prices last year, which encouraged farmers around the world to plant more crops. By citing pre-2008 harvest reserves, Brown evidently hopes to frighten gullible Scientific American readers into thinking that the world's food situation is really desperate this time.
Brown argues that the world's food economy is being undermined by a troika of growing environmental calamities: falling water tables, eroding soils, and rising temperatures. He acknowledges that the application of scientific agriculture produced vast increases in crop yields in the 1960s and 1970s, but insists that "the technological fix" won't work this time. But Brown is wrong, again.
It is true that water tables are falling in many parts of the world as farmers drain aquifers in India, China, and the United States. Part of the problem is that water for irrigation is often subsidized by governments who encourage farmers to waste it. However, the proper pricing of water will rectify that by encouraging farmers to transition to drip irrigation, switch from thirsty crops like rice to dryland ones like wheat, and help crop breeders to develop more drought-tolerant crop varieties. In addition, crop biotechnologists are now seeking to transfer the C4 photosynthetic pathway into rice, which currently uses the less efficient C3 pathway. This could boost rice yields by 50 percent while reducing water use.
To support his claims about the dangers of soil erosion, Brown cites studies in impoverished Haiti and Lesotho. To be sure, soil erosion is a problem for poor countries whose subsistence farmers have no secure property rights. However, one 1995 study concluded that soil erosion would reduce U.S. agriculture production by 3 percent over the next 100 years. Such a reduction would be swamped by annual crop productivity increases of 1 to 2 percent per year—which has been the average rate for many decades. A 2007 study by European researchers found "it highly unlikely that erosion may pose a serious threat to food production in modern societies within the coming centuries." In addition, modern biotech herbicide-resistant crops make it possible for farmers to practice no-till agriculture, thus dramatically reducing soil erosion.
Brown's final fear centers on the effects of man-made global warming on agriculture. There is an ongoing debate among experts on this topic. For example, University of California, Santa Barbara economist Olivier Deschenes and Massachusetts Institute of Technology economist Michael Greenstone calculated that global warming would increase the profits of U.S. farmers by 4 percent, concluding that "large negative or positive effects are unlikely." Other researchers have recently disputed Deschenes' and Greenstone's findings, arguing that the impact of global warming on U.S. agriculture is "likely to be strongly negative." Fortunately, biotechnology research—the very technology fix dismissed by Brown—is already finding new ways to make crops more heat and drought tolerant.
On the other hand, Brown is right about two things in his Scientific American article: the U.S. should stop subsidizing bioethanol production (turning food into fuel) and countries everywhere should stop banning food exports in a misguided effort to lower local prices. Of course these policy prescriptions have been made by far more knowledgeable and trustworthy commentators than Brown.
Given the fact that Brown's dismal record as a prognosticator of doom is so well-known, it is just plain sad to see a respectable publication like Scientific American lending its credibility to this old charlatan.
Ronald Bailey is Reason magazine's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.
Famine-monger Lester Brown still gets it wrong after all these years
Reason, May 5, 2009
"Could food shortages bring down civilization?," asks environmental activist Lester Brown in the current issue of Scientific American. Not surprisingly, Brown's answer is an emphatic yes. He claims that for years he has "resisted the idea that food shortages could bring down not only individual governments but also our global civilization." Now, however, Brown says, "I can no longer ignore that risk." Balderdash. Brown, head of the Earth Policy Institute, has been a prominent and perennial predictor of imminent global famine for more than 45 years. Why should we believe him now?
For instance, back in 1965, when Brown was a young bureaucrat in the U.S. Department of Agriculture, he declared, "the food problem emerging in the less-developing regions may be one of the most nearly insoluble problems facing man over the next few decades." In 1974, Brown maintained that farmers "can no longer keep up with rising demand; thus the outlook is for chronic scarcities and rising prices." In 1981, Brown stated that "global food insecurity is increasing," and further claimed that "the slim excess of growth in food production over population is narrowing." In 1989, Brown contended that "population growth is exceeding the farmer's ability to keep up," concluding that, "our oldest enemy, hunger, is again at the door." In 1995, Brown starkly warned, "Humanity's greatest challenge may soon be just making it to the next harvest." In 1997, Brown again proclaimed, "Food scarcity will be the defining issue of the new era now unfolding."
But this time it's different, right? After all, Brown claims that "when the 2008 harvest began, world carryover stocks of grain (the amount in the bin when the new harvest begins) were at 62 days of consumption, a near record low." But Brown has played this game before with world grain stocks. As the folks at the pro-life Population Research Institute (PRI) report, Brown claimed in 1974 that there were only 26 days of grain reserves left, but later he upped that number to 61 days. In 1976, reserves were supposed to have fallen to just 31 days, but again Brown raised that number in 1988 to 79 days. In 1980, only a 40-day supply was allegedly on hand, but a few years later he changed that estimate to 71 days. The PRI analysts noted that Brown has repeatedly issued differing figures for 1974: 26 or 27 days (1974); 33 days (1975); 40 days (1981); 43 days (1987); and 61 days (1988). In 2004, Brown claimed that the world's grain reserves had fallen to only 59 days of consumption, the lowest level in 30 years.
In any case, Brown must know that the world's farmers produced a bumper crop last year. Stocks of wheat are at a six-year high and increases in other stocks of grains are not far off. This jump in reserves is not at all surprising considering the steep run-up in grain prices last year, which encouraged farmers around the world to plant more crops. By citing pre-2008 harvest reserves, Brown evidently hopes to frighten gullible Scientific American readers into thinking that the world's food situation is really desperate this time.
Brown argues that the world's food economy is being undermined by a troika of growing environmental calamities: falling water tables, eroding soils, and rising temperatures. He acknowledges that the application of scientific agriculture produced vast increases in crop yields in the 1960s and 1970s, but insists that "the technological fix" won't work this time. But Brown is wrong, again.
It is true that water tables are falling in many parts of the world as farmers drain aquifers in India, China, and the United States. Part of the problem is that water for irrigation is often subsidized by governments who encourage farmers to waste it. However, the proper pricing of water will rectify that by encouraging farmers to transition to drip irrigation, switch from thirsty crops like rice to dryland ones like wheat, and help crop breeders to develop more drought-tolerant crop varieties. In addition, crop biotechnologists are now seeking to transfer the C4 photosynthetic pathway into rice, which currently uses the less efficient C3 pathway. This could boost rice yields by 50 percent while reducing water use.
To support his claims about the dangers of soil erosion, Brown cites studies in impoverished Haiti and Lesotho. To be sure, soil erosion is a problem for poor countries whose subsistence farmers have no secure property rights. However, one 1995 study concluded that soil erosion would reduce U.S. agriculture production by 3 percent over the next 100 years. Such a reduction would be swamped by annual crop productivity increases of 1 to 2 percent per year—which has been the average rate for many decades. A 2007 study by European researchers found "it highly unlikely that erosion may pose a serious threat to food production in modern societies within the coming centuries." In addition, modern biotech herbicide-resistant crops make it possible for farmers to practice no-till agriculture, thus dramatically reducing soil erosion.
Brown's final fear centers on the effects of man-made global warming on agriculture. There is an ongoing debate among experts on this topic. For example, University of California, Santa Barbara economist Olivier Deschenes and Massachusetts Institute of Technology economist Michael Greenstone calculated that global warming would increase the profits of U.S. farmers by 4 percent, concluding that "large negative or positive effects are unlikely." Other researchers have recently disputed Deschenes' and Greenstone's findings, arguing that the impact of global warming on U.S. agriculture is "likely to be strongly negative." Fortunately, biotechnology research—the very technology fix dismissed by Brown—is already finding new ways to make crops more heat and drought tolerant.
On the other hand, Brown is right about two things in his Scientific American article: the U.S. should stop subsidizing bioethanol production (turning food into fuel) and countries everywhere should stop banning food exports in a misguided effort to lower local prices. Of course these policy prescriptions have been made by far more knowledgeable and trustworthy commentators than Brown.
Given the fact that Brown's dismal record as a prognosticator of doom is so well-known, it is just plain sad to see a respectable publication like Scientific American lending its credibility to this old charlatan.
Ronald Bailey is Reason magazine's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.
The Best Judges Obama Can't Pick
The Best Judges Obama Can't Pick. By Benjamin Wittes
Brookings, May 3, 2009
What do Merrick Garland, David Tatel and Jose Cabranes have in common?
All are sitting federal court of appeals judges who were nominated by Democratic presidents. All three are deeply admired by their colleagues and are among a small group of the very finest federal judges in the country. And all three have names you probably won't hear often in public discussions about whom President Obama should tap to replace retiring Justice David H. Souter.
Garland: white guy. Tatel: white guy and, at 67, too old. Cabranes: Hispanic, sure, but even older.
I have nothing against the people whose names have so far been floated as possible nominees (some of them are excellent), and I'm not against diversity on the high court. Far from it: It's important to have a court that looks like America, and it is particularly important that following Sandra Day O'Connor's retirement in 2005 an additional woman join the high court.
That said, there are significant costs to the nominating system that we have developed, in which gender, ethnicity and age have, from the very start of the search for Souter's replacement, placed off-limits many lawyers and judges whose colleagues regard as some of the best in their profession. The dirty little secret is that the conservative talent pool on the federal courts these days is larger and deeper than the liberal one, mainly because Republicans have been in power far longer than Democrats recently and have therefore had more opportunity to cultivate a strong bench on the bench.
While both parties feel pressure to keep the bench diverse, Democrats have less latitude for bucking these expectations in judicial nominations than Republicans do. The core constituency that Republicans must satisfy in high court nominations is the party's social conservative base, which fundamentally cares about issues, not diversity, and has accepted white men who practice the judging it admires. By contrast, identity-oriented groups are part of the core Democratic coalition, so it's not enough for a Democrat to appoint a liberal. At least some of the time, it will have to be a liberal who also satisfies certain diversity categories.
The age issue has particularly striking consequences. It used to be commonplace for presidents to appoint justices who were well into their 60s. Lewis Powell, Earl Warren, Charles Evans Hughes (the second time around), William Howard Taft and Oliver Wendell Holmes, for example, were at least 60 when nominated, as was Justice Ruth Bader Ginsburg when President Clinton nominated her in 1993. Older judges brought experience to the table, and because life tenure is shorter for them than for younger judges, the stakes are lower in their confirmations.
Yet the ever-escalating political war over the courts has put a premium on youth -- on justices who can hang around for decades as members of rival ideological camps. Judge J. Harvie Wilkinson III, one of the most esteemed conservative jurists in the country, might well be on the Supreme Court today, for example, had he not had the temerity to be 60 when O'Connor retired and opened up a slot. Nor is Obama likely to follow Clinton's lead in declining to discriminate against the late-middle-aged. After all, if conservatives only appoint relative youngsters such as John G. Roberts and Samuel Alito (50 and 55, respectively, at the time of their nominations), it's unilateral disarmament for a liberal to do otherwise.
The result is a strange conversation about who should replace Souter -- one that self-consciously omits many of the judges whose work is most actively studied by those who engage day-to-day with the courts. This may well be a reasonable price to pay for a diverse bench, and for those who don't read judicial opinions, it is in any event an invisible price. But let's be candid about paying it.
Brookings, May 3, 2009
What do Merrick Garland, David Tatel and Jose Cabranes have in common?
All are sitting federal court of appeals judges who were nominated by Democratic presidents. All three are deeply admired by their colleagues and are among a small group of the very finest federal judges in the country. And all three have names you probably won't hear often in public discussions about whom President Obama should tap to replace retiring Justice David H. Souter.
Garland: white guy. Tatel: white guy and, at 67, too old. Cabranes: Hispanic, sure, but even older.
I have nothing against the people whose names have so far been floated as possible nominees (some of them are excellent), and I'm not against diversity on the high court. Far from it: It's important to have a court that looks like America, and it is particularly important that following Sandra Day O'Connor's retirement in 2005 an additional woman join the high court.
That said, there are significant costs to the nominating system that we have developed, in which gender, ethnicity and age have, from the very start of the search for Souter's replacement, placed off-limits many lawyers and judges whose colleagues regard as some of the best in their profession. The dirty little secret is that the conservative talent pool on the federal courts these days is larger and deeper than the liberal one, mainly because Republicans have been in power far longer than Democrats recently and have therefore had more opportunity to cultivate a strong bench on the bench.
While both parties feel pressure to keep the bench diverse, Democrats have less latitude for bucking these expectations in judicial nominations than Republicans do. The core constituency that Republicans must satisfy in high court nominations is the party's social conservative base, which fundamentally cares about issues, not diversity, and has accepted white men who practice the judging it admires. By contrast, identity-oriented groups are part of the core Democratic coalition, so it's not enough for a Democrat to appoint a liberal. At least some of the time, it will have to be a liberal who also satisfies certain diversity categories.
The age issue has particularly striking consequences. It used to be commonplace for presidents to appoint justices who were well into their 60s. Lewis Powell, Earl Warren, Charles Evans Hughes (the second time around), William Howard Taft and Oliver Wendell Holmes, for example, were at least 60 when nominated, as was Justice Ruth Bader Ginsburg when President Clinton nominated her in 1993. Older judges brought experience to the table, and because life tenure is shorter for them than for younger judges, the stakes are lower in their confirmations.
Yet the ever-escalating political war over the courts has put a premium on youth -- on justices who can hang around for decades as members of rival ideological camps. Judge J. Harvie Wilkinson III, one of the most esteemed conservative jurists in the country, might well be on the Supreme Court today, for example, had he not had the temerity to be 60 when O'Connor retired and opened up a slot. Nor is Obama likely to follow Clinton's lead in declining to discriminate against the late-middle-aged. After all, if conservatives only appoint relative youngsters such as John G. Roberts and Samuel Alito (50 and 55, respectively, at the time of their nominations), it's unilateral disarmament for a liberal to do otherwise.
The result is a strange conversation about who should replace Souter -- one that self-consciously omits many of the judges whose work is most actively studied by those who engage day-to-day with the courts. This may well be a reasonable price to pay for a diverse bench, and for those who don't read judicial opinions, it is in any event an invisible price. But let's be candid about paying it.
What You Can(‘t) Do About Global Warming
What You Can(‘t) Do About Global Warming
World Climate Report, April 30, 2009
We are always hearing about ways that you can “save the planet” from the perils of global warming—from riding your bicycle to work, to supporting the latest national greenhouse gas restriction limitations, and everything in between.
In virtually each and every case, advocates of these measures provide you with the amount of greenhouse gas emissions (primarily carbon dioxide) that will be saved by the particular action.
And if you want to figure this out for yourself, the web is full of CO2 calculators (just google “CO2 calculator”) which allow you to calculate your carbon footprint and how much it can be reduced by taking various conservations steps—all with an eye towards reducing global warming.
However, in absolutely zero of these cases are you told, or can you calculate, how much impact you are going to have on the actual climate itself. After all, CO2 emissions are not climate—they are gases. Climate is temperature and precipitation and storms and winds, etc. If the goal of the actions is to prevent global warming, then you shouldn’t really care a hoot about the amount of CO2 emissions that you are reducing, but instead, you want to know how much of the planet you are saving. How much anthropogenic climate change is being prevented by unplugging your cell phone charger, from biking to the park, or from slashing national carbon dioxide emissions?
Why do none of the CO2 calculators give you that most valuable piece of information? Why don’t the politicians, the EPA, and/or greenhouse gas reduction advocates tell you the bottom line?
How much global warming are we avoiding?
Embarrassingly for them, this information is readily available.
After all, what do you think climate models do? Simply, they take greenhouse gas emissions scenarios and project the future climate—thus providing precisely the answer we are looking for. You tweak the scenarios to account for your emission savings, run the models, and you get your answer.
Since climate model projections of the future climate are what are being used to attempt to scare us into action, climate models should very well be used to tell us how much of the scary future we are going to avoid by taking the suggested/legislated/regulated actions.
So where are the answers?
OK, so full-fledged climate models are very expensive tools—they are extremely complex computer programs that take weeks to run on the world’s fastest supercomputers. So, consequently, they don’t lend themselves to web calculators.
But, you would think that in considering our national energy plan, or EPA’s plan to regulate CO2, that this would be of enough import to deserve a couple of climate model runs to determine the final result. Otherwise, how can the members of Congress fairly assess what it is they are considering doing? Again, if the goal is to change the future course of climate to avoid the potential negative consequences of global warming, then to what degree is the plan that they are proposing going to be successful? Can it deliver the desired results? The American public deserves to know.
In lieu of full-out climate models, there are some “pocket” climate models that run on your desktop computer in a matter of seconds and which are designed to emulate the large-scale output from the complex general circulation models. One of best of these “pocket” models is the Model for the Assessment of Greenhouse-gas Induced Climate Change, or MAGICC. Various versions of MAGICC have been used for years to simulate climate model output for a fraction of the cost. In fact, the latest version of MAGICC was developed under a grant from the EPA. Just like a full climate model, MAGICC takes in greenhouse gas emissions scenarios and outputs such quantities as the projected global average temperature. Just the thing we are looking for. It would only take a bit of technical savvy to configure the web-based CO2 calculators so that they interfaced with MAGICC and produced a global temperature savings based upon the emissions savings. Yet not one has seemed fit to do so. If you are interested in attempting to do so yourself, MAGICC is available here.
As a last resort, for those of us who don’t have general circulation models, supercomputers, or even much technical savvy of our own, it is still possible, in a rough, back-of-the-envelope sort of way, to come up with a simple conversion from CO2 emissions to global temperatures. This way, what our politicians and favorite global warming alarmists won’t tell us, we can figure out for ourselves.
Here’s how.
We need to go from emissions of greenhouse gases, to atmospheric concentrations of greenhouse gases, to global temperatures.
We’ll determine how much CO2 emissions are required to change the atmospheric concentration of CO2 by 1 part per million (ppm), then we’ll figure out how many ppms of CO2 it takes to raise the global temperature 1ºC. Then, we’ll have our answer.
So first things first. Figure 1 shows the total global emissions of CO2 (in units of million metric tons, mmt) each year from 1958-2006 as well as the annual change in atmospheric CO2 content (in ppm) during the same period. Notice that CO2 emissions are rising, as is the annual change in atmospheric CO2 concentration.
[figure 1]
Figure 1. (top) Annual global total carbon dioxide emissions (mmt), 1958-2006; (bottom) Year-to-year change in atmospheric CO2 concentrations (ppm), 1959-2006. (Data source: Carbon Dioxide Information Analysis Center)
If we divide the annual emissions by the annual concentration change, we get Figure 2—the amount of emissions required to raise the atmospheric concentration by 1 ppm. Notice that there is no trend at all through the data in Figure 2. This means that the average amount of CO2 emissions required to change the atmospheric concentration by a unit amount has stayed constant over time. This average value in Figure 2 is 15,678mmtCO2/ppm.
[figure 2]
Figure 2. Annual CO2 emissions responsible for a 1 ppm change in atmospheric CO2 concentrations (Figure 1a divided by Figure 1b), 1959-2006. The blue horizontal line is the 1959-2006 average, the red horizontal line is the average excluding the volcano-influenced years of 1964, 1982, and 1992.
You may wonder about the two large spikes in Figure 2—indicating that in those years, the emissions did not result in much of change in the atmospheric CO2 concentrations. It turns out that the spikes, in 1964 and 1992 (and a smaller one in 1982), are the result of large volcanic eruptions. The eruptions cooled the earth by blocking solar radiation and making it more diffuse, which has the duel effect of increasing the CO2 uptake by oceans and increasing the CO2 uptake by photosynthesis—both effects serving to offset the effect of the added emissions and resulting in little change in the atmospheric concentrations. As the volcanic effects attenuated in the following year, the CO2 concentrations then responded to emissions as expected.
Since volcanic eruptions are more the exception than the norm, we should remove them from our analysis. In doing so, the average amount of CO2 emissions that lead to an atmospheric increase of 1 ppm drops from 15,678 (the blue line in Figure 2), to 14,138mmtCO2 (red line in Figure 2).
Now, we need to know how many ppms of CO2 it takes to raise the global temperature a degree Celsius. This is a bit trickier, because this value is generally not thought to be constant, but instead to decrease with increasing concentrations. But, for our purposes, we can consider it to be constant and still be in the ballpark. But what is that value?
We can try to determine it from observations.
Over the past 150 years or so, the atmospheric concentration of CO2 has increased about 100 ppm, from ~280ppm to ~380ppm, and global temperatures have risen about 0.8ºC over the same time. Dividing the concentration change by the temperature change (100ppm/0.8ºC) produces the answer that it takes 125ppm to raise the global temperature 1ºC. Now, it is possible that some of the observed temperature rise has occurred as a result of changes other than CO2 (say, solar, for instance). But it is also possible that the full effect of the temperature change resulting from the CO2 changes has not yet been manifest. So, rather than nit-pick here, we’ll call those two things a wash and go with 125ppm/ºC as a reasonable value as determined from observations.
We can also try to determine it from models.
Climate models run with only CO2 increases produce about 1.8C of warming at the time of a doubling of the atmospheric carbon dioxide concentrations. A doubling is usually taken to be a change of about 280ppm. So, we have 280ppm divided by 1.8ºC equals 156ppm/ºC. But, the warming is not fully realized by the time of doubling, and the models go on to produce a total warming of about 3ºC for the same 280ppm rise. This gives us, 280ppm divided by 3ºC which equals 93ppm/ºC. The degree to which the models have things exactly right is highly debatable, but close to the middle of all of this is that 125ppm/ºC number again—the same that we get from observations.
So both observations and models give us a similar number, within a range of loose assumptions.
Now we have what we need. It takes ~14,138mmt of CO2 emissions to raise the atmospheric CO2 concentration by ~1 ppm and it takes ~125 ppm to raise the global temperature ~1ºC. So multiplying ~14,138mmt/pmm by ~125ppm/ºC gives us ~1,767,250mmt/ºC.
That’s our magic number—1,767,250.
Write that number down on a piece of paper and put it in your wallet or post it on your computer.
This is a handy-dandy and powerful piece of information to have, because now, whenever you are presented with an emissions savings that some action to save the planet from global warming is supposed to produce, you can actually see how much of a difference it will really make. Just take the emissions savings (in units of mmt of CO2) and divide it by 1,767,250.
Just for fun, let’s see what we get when we apply this to a few save-the-world suggestions.
According to NativeEnergy.com (in association with Al Gore’s ClimateCrisis.net), if you stopped driving your average mid-sized car for a year, you’d save about 5.5 metric tons (or 0.0000055 million metric tons, mmt) of CO2 emissions per year. Divide 0.0000055mmtCO2 by 1,767,250 mmt/ºC and you get a number too small to display on my 8-digit calculator (OK, Excel tells me the answer is 0.00000000000311ºC). And, if you send in $84, NativeEnergy will invest in wind and methane power to offset that amount in case you actually don’t want to give up your car for the year. We’ll let you decide if you think that is worth it.
How about something bigger like not only giving up your mid-sized car, but also your SUV and everything else your typical household does that results in carbon dioxide emissions from fossil fuels. Again, according to NativeEnvergy.com, that would save about 24 metric tons of CO2 (or 0.000024 mmt) per year. Dividing this emissions savings by our handy-dandy converter yields 0.0000000000136ºC/yr. If you lack the fortitude to actually make these sacrifices to prevent one hundred billionth of a degree of warming, for $364 each year, NativeEnergy.com will offset your guilt.
And finally, looking at the Waxman-Markey Climate Bill that is now being considered by Congress, CO2 emissions from the U.S. in the year 2050 are proposed to be 83% less than they were in 2005. In 2005, U.S. emissions were about 6,000 mmt, so 83% below that would be 1,020mmt or a reduction of 4,980mmtCO2. 4,980 divided by 1,767,250 = 0.0028ºC per year. In other words, even if the entire United States reduced its carbon dioxide emissions by 83% below current levels, it would only amount to a reduction of global warming of less than three-thousandths of a ºC per year. A number that is scientifically meaningless.
This is the type of information that we should be provide with. And, as we have seen here, it is not that difficult to come by.
The fact that we aren’t routinely presented with this data, leads to the inescapable conclusion that it is purposefully being withheld. None of the climate do-gooders want to you know that what they are suggesting/demanding will do no good at all (at least as far as global warming is concerned).
So, if you really want to, dust off your bicycle, change out an incandescent bulb with a compact fluorescent, or support legislation that will raise your energy bill. Just realize that you will be doing so for reasons other than saving the planet. It is a shame that you have to hear that from us, rather than directly from the folks urging you on (under false pretenses).
World Climate Report, April 30, 2009
We are always hearing about ways that you can “save the planet” from the perils of global warming—from riding your bicycle to work, to supporting the latest national greenhouse gas restriction limitations, and everything in between.
In virtually each and every case, advocates of these measures provide you with the amount of greenhouse gas emissions (primarily carbon dioxide) that will be saved by the particular action.
And if you want to figure this out for yourself, the web is full of CO2 calculators (just google “CO2 calculator”) which allow you to calculate your carbon footprint and how much it can be reduced by taking various conservations steps—all with an eye towards reducing global warming.
However, in absolutely zero of these cases are you told, or can you calculate, how much impact you are going to have on the actual climate itself. After all, CO2 emissions are not climate—they are gases. Climate is temperature and precipitation and storms and winds, etc. If the goal of the actions is to prevent global warming, then you shouldn’t really care a hoot about the amount of CO2 emissions that you are reducing, but instead, you want to know how much of the planet you are saving. How much anthropogenic climate change is being prevented by unplugging your cell phone charger, from biking to the park, or from slashing national carbon dioxide emissions?
Why do none of the CO2 calculators give you that most valuable piece of information? Why don’t the politicians, the EPA, and/or greenhouse gas reduction advocates tell you the bottom line?
How much global warming are we avoiding?
Embarrassingly for them, this information is readily available.
After all, what do you think climate models do? Simply, they take greenhouse gas emissions scenarios and project the future climate—thus providing precisely the answer we are looking for. You tweak the scenarios to account for your emission savings, run the models, and you get your answer.
Since climate model projections of the future climate are what are being used to attempt to scare us into action, climate models should very well be used to tell us how much of the scary future we are going to avoid by taking the suggested/legislated/regulated actions.
So where are the answers?
OK, so full-fledged climate models are very expensive tools—they are extremely complex computer programs that take weeks to run on the world’s fastest supercomputers. So, consequently, they don’t lend themselves to web calculators.
But, you would think that in considering our national energy plan, or EPA’s plan to regulate CO2, that this would be of enough import to deserve a couple of climate model runs to determine the final result. Otherwise, how can the members of Congress fairly assess what it is they are considering doing? Again, if the goal is to change the future course of climate to avoid the potential negative consequences of global warming, then to what degree is the plan that they are proposing going to be successful? Can it deliver the desired results? The American public deserves to know.
In lieu of full-out climate models, there are some “pocket” climate models that run on your desktop computer in a matter of seconds and which are designed to emulate the large-scale output from the complex general circulation models. One of best of these “pocket” models is the Model for the Assessment of Greenhouse-gas Induced Climate Change, or MAGICC. Various versions of MAGICC have been used for years to simulate climate model output for a fraction of the cost. In fact, the latest version of MAGICC was developed under a grant from the EPA. Just like a full climate model, MAGICC takes in greenhouse gas emissions scenarios and outputs such quantities as the projected global average temperature. Just the thing we are looking for. It would only take a bit of technical savvy to configure the web-based CO2 calculators so that they interfaced with MAGICC and produced a global temperature savings based upon the emissions savings. Yet not one has seemed fit to do so. If you are interested in attempting to do so yourself, MAGICC is available here.
As a last resort, for those of us who don’t have general circulation models, supercomputers, or even much technical savvy of our own, it is still possible, in a rough, back-of-the-envelope sort of way, to come up with a simple conversion from CO2 emissions to global temperatures. This way, what our politicians and favorite global warming alarmists won’t tell us, we can figure out for ourselves.
Here’s how.
We need to go from emissions of greenhouse gases, to atmospheric concentrations of greenhouse gases, to global temperatures.
We’ll determine how much CO2 emissions are required to change the atmospheric concentration of CO2 by 1 part per million (ppm), then we’ll figure out how many ppms of CO2 it takes to raise the global temperature 1ºC. Then, we’ll have our answer.
So first things first. Figure 1 shows the total global emissions of CO2 (in units of million metric tons, mmt) each year from 1958-2006 as well as the annual change in atmospheric CO2 content (in ppm) during the same period. Notice that CO2 emissions are rising, as is the annual change in atmospheric CO2 concentration.
[figure 1]
Figure 1. (top) Annual global total carbon dioxide emissions (mmt), 1958-2006; (bottom) Year-to-year change in atmospheric CO2 concentrations (ppm), 1959-2006. (Data source: Carbon Dioxide Information Analysis Center)
If we divide the annual emissions by the annual concentration change, we get Figure 2—the amount of emissions required to raise the atmospheric concentration by 1 ppm. Notice that there is no trend at all through the data in Figure 2. This means that the average amount of CO2 emissions required to change the atmospheric concentration by a unit amount has stayed constant over time. This average value in Figure 2 is 15,678mmtCO2/ppm.
[figure 2]
Figure 2. Annual CO2 emissions responsible for a 1 ppm change in atmospheric CO2 concentrations (Figure 1a divided by Figure 1b), 1959-2006. The blue horizontal line is the 1959-2006 average, the red horizontal line is the average excluding the volcano-influenced years of 1964, 1982, and 1992.
You may wonder about the two large spikes in Figure 2—indicating that in those years, the emissions did not result in much of change in the atmospheric CO2 concentrations. It turns out that the spikes, in 1964 and 1992 (and a smaller one in 1982), are the result of large volcanic eruptions. The eruptions cooled the earth by blocking solar radiation and making it more diffuse, which has the duel effect of increasing the CO2 uptake by oceans and increasing the CO2 uptake by photosynthesis—both effects serving to offset the effect of the added emissions and resulting in little change in the atmospheric concentrations. As the volcanic effects attenuated in the following year, the CO2 concentrations then responded to emissions as expected.
Since volcanic eruptions are more the exception than the norm, we should remove them from our analysis. In doing so, the average amount of CO2 emissions that lead to an atmospheric increase of 1 ppm drops from 15,678 (the blue line in Figure 2), to 14,138mmtCO2 (red line in Figure 2).
Now, we need to know how many ppms of CO2 it takes to raise the global temperature a degree Celsius. This is a bit trickier, because this value is generally not thought to be constant, but instead to decrease with increasing concentrations. But, for our purposes, we can consider it to be constant and still be in the ballpark. But what is that value?
We can try to determine it from observations.
Over the past 150 years or so, the atmospheric concentration of CO2 has increased about 100 ppm, from ~280ppm to ~380ppm, and global temperatures have risen about 0.8ºC over the same time. Dividing the concentration change by the temperature change (100ppm/0.8ºC) produces the answer that it takes 125ppm to raise the global temperature 1ºC. Now, it is possible that some of the observed temperature rise has occurred as a result of changes other than CO2 (say, solar, for instance). But it is also possible that the full effect of the temperature change resulting from the CO2 changes has not yet been manifest. So, rather than nit-pick here, we’ll call those two things a wash and go with 125ppm/ºC as a reasonable value as determined from observations.
We can also try to determine it from models.
Climate models run with only CO2 increases produce about 1.8C of warming at the time of a doubling of the atmospheric carbon dioxide concentrations. A doubling is usually taken to be a change of about 280ppm. So, we have 280ppm divided by 1.8ºC equals 156ppm/ºC. But, the warming is not fully realized by the time of doubling, and the models go on to produce a total warming of about 3ºC for the same 280ppm rise. This gives us, 280ppm divided by 3ºC which equals 93ppm/ºC. The degree to which the models have things exactly right is highly debatable, but close to the middle of all of this is that 125ppm/ºC number again—the same that we get from observations.
So both observations and models give us a similar number, within a range of loose assumptions.
Now we have what we need. It takes ~14,138mmt of CO2 emissions to raise the atmospheric CO2 concentration by ~1 ppm and it takes ~125 ppm to raise the global temperature ~1ºC. So multiplying ~14,138mmt/pmm by ~125ppm/ºC gives us ~1,767,250mmt/ºC.
That’s our magic number—1,767,250.
Write that number down on a piece of paper and put it in your wallet or post it on your computer.
This is a handy-dandy and powerful piece of information to have, because now, whenever you are presented with an emissions savings that some action to save the planet from global warming is supposed to produce, you can actually see how much of a difference it will really make. Just take the emissions savings (in units of mmt of CO2) and divide it by 1,767,250.
Just for fun, let’s see what we get when we apply this to a few save-the-world suggestions.
According to NativeEnergy.com (in association with Al Gore’s ClimateCrisis.net), if you stopped driving your average mid-sized car for a year, you’d save about 5.5 metric tons (or 0.0000055 million metric tons, mmt) of CO2 emissions per year. Divide 0.0000055mmtCO2 by 1,767,250 mmt/ºC and you get a number too small to display on my 8-digit calculator (OK, Excel tells me the answer is 0.00000000000311ºC). And, if you send in $84, NativeEnergy will invest in wind and methane power to offset that amount in case you actually don’t want to give up your car for the year. We’ll let you decide if you think that is worth it.
How about something bigger like not only giving up your mid-sized car, but also your SUV and everything else your typical household does that results in carbon dioxide emissions from fossil fuels. Again, according to NativeEnvergy.com, that would save about 24 metric tons of CO2 (or 0.000024 mmt) per year. Dividing this emissions savings by our handy-dandy converter yields 0.0000000000136ºC/yr. If you lack the fortitude to actually make these sacrifices to prevent one hundred billionth of a degree of warming, for $364 each year, NativeEnergy.com will offset your guilt.
And finally, looking at the Waxman-Markey Climate Bill that is now being considered by Congress, CO2 emissions from the U.S. in the year 2050 are proposed to be 83% less than they were in 2005. In 2005, U.S. emissions were about 6,000 mmt, so 83% below that would be 1,020mmt or a reduction of 4,980mmtCO2. 4,980 divided by 1,767,250 = 0.0028ºC per year. In other words, even if the entire United States reduced its carbon dioxide emissions by 83% below current levels, it would only amount to a reduction of global warming of less than three-thousandths of a ºC per year. A number that is scientifically meaningless.
This is the type of information that we should be provide with. And, as we have seen here, it is not that difficult to come by.
The fact that we aren’t routinely presented with this data, leads to the inescapable conclusion that it is purposefully being withheld. None of the climate do-gooders want to you know that what they are suggesting/demanding will do no good at all (at least as far as global warming is concerned).
So, if you really want to, dust off your bicycle, change out an incandescent bulb with a compact fluorescent, or support legislation that will raise your energy bill. Just realize that you will be doing so for reasons other than saving the planet. It is a shame that you have to hear that from us, rather than directly from the folks urging you on (under false pretenses).
Corporate Tax Reform
Corporate Tax Reform. WaPo Editorial
The president's tax plan can be the start of an important discussion.
WaPo, Tuesday, May 5, 2009
EXPECT President Obama's international tax proposal to set off a firestorm in Congress and the business community. The proposal, which will be released in more detail when the president's full budget comes out in the next few days, would alter tax rules so that companies are less able to shift profits to avoid U.S. taxation while also cracking down on tax havens for companies and individuals. In a speech yesterday, the president billed the plan as a revenue raiser, which it would be, and a plan to create jobs, a more contentious assertion.
Corporate tax policy is certainly in need of reform. The United States has the second-highest corporate tax rate in the world, though at just over one-tenth of the budget, the overall share of revenue it raises is remarkably small, both because the corporate tax base is chopped up by so many deductions, exemptions and credits, and because larger companies have great flexibility in shifting their profits around the world to lower their tax bills. In December, the Government Accountability Office reported that 83 of the nation's 100 largest companies have subsidiaries in tax havens, with Citigroup, Morgan Stanley and News Corp. (think Fox News) leading the way, each with more than 150 subsidiaries in tax haven locations. Many companies have legitimate business in these places, and many that are there solely to minimize their tax bills are doing so legally. Still, there is ample room for tax streamlining, given, for instance, the imbalance between domestic companies that are not able to shift profits and multinationals that can to some extent pick and choose where they pay taxes. Additionally, it's good to see the administration looking for revenue to promote investment and reduce the deficit.
However, some of the changes the administration is contemplating could harm U.S. competitiveness. Higher tax burdens would put U.S. corporations at a disadvantage compared with foreign competitors that do not face the double tax regime to which some corporations would be subject. The administration cited numbers showing that in 2004, U.S. multinationals paid $16 billion in taxes on $700 billion in foreign earnings, but it did not mention the $120 billion in foreign taxes they paid that year. Trade groups will argue that the increased cost of doing business will lead to job losses in the United States, not the gains promised by Mr. Obama.
The corporate tax code is a mess -- the rates are too high and the complexity extreme. One promising approach would be to pair the types of reforms the administration is talking about with a reduction in the overall rate, which would be advantageous for both multinational and domestic companies -- though, of course, it would reduce the amount of revenue that would be raised as a result of the policy. While it was never a centerpiece of his campaign, Mr. Obama supported reducing corporate income tax rates during his run for the presidency as long as it was done in a revenue-neutral manner. This proposal could be a way to get that broader discussion of corporate tax reform started.
The president's tax plan can be the start of an important discussion.
WaPo, Tuesday, May 5, 2009
EXPECT President Obama's international tax proposal to set off a firestorm in Congress and the business community. The proposal, which will be released in more detail when the president's full budget comes out in the next few days, would alter tax rules so that companies are less able to shift profits to avoid U.S. taxation while also cracking down on tax havens for companies and individuals. In a speech yesterday, the president billed the plan as a revenue raiser, which it would be, and a plan to create jobs, a more contentious assertion.
Corporate tax policy is certainly in need of reform. The United States has the second-highest corporate tax rate in the world, though at just over one-tenth of the budget, the overall share of revenue it raises is remarkably small, both because the corporate tax base is chopped up by so many deductions, exemptions and credits, and because larger companies have great flexibility in shifting their profits around the world to lower their tax bills. In December, the Government Accountability Office reported that 83 of the nation's 100 largest companies have subsidiaries in tax havens, with Citigroup, Morgan Stanley and News Corp. (think Fox News) leading the way, each with more than 150 subsidiaries in tax haven locations. Many companies have legitimate business in these places, and many that are there solely to minimize their tax bills are doing so legally. Still, there is ample room for tax streamlining, given, for instance, the imbalance between domestic companies that are not able to shift profits and multinationals that can to some extent pick and choose where they pay taxes. Additionally, it's good to see the administration looking for revenue to promote investment and reduce the deficit.
However, some of the changes the administration is contemplating could harm U.S. competitiveness. Higher tax burdens would put U.S. corporations at a disadvantage compared with foreign competitors that do not face the double tax regime to which some corporations would be subject. The administration cited numbers showing that in 2004, U.S. multinationals paid $16 billion in taxes on $700 billion in foreign earnings, but it did not mention the $120 billion in foreign taxes they paid that year. Trade groups will argue that the increased cost of doing business will lead to job losses in the United States, not the gains promised by Mr. Obama.
The corporate tax code is a mess -- the rates are too high and the complexity extreme. One promising approach would be to pair the types of reforms the administration is talking about with a reduction in the overall rate, which would be advantageous for both multinational and domestic companies -- though, of course, it would reduce the amount of revenue that would be raised as a result of the policy. While it was never a centerpiece of his campaign, Mr. Obama supported reducing corporate income tax rates during his run for the presidency as long as it was done in a revenue-neutral manner. This proposal could be a way to get that broader discussion of corporate tax reform started.
Monday, May 4, 2009
Study: Declining Great Lakes Levels Entirely Natural
Study: Declining Great Lakes Levels Entirely Natural. By Henry Payne
Detroit, Mich. — Like polar bears, hurricanes, and arctic ice caps, recent drops in Great Lake water levels have been a poster child for green activists’ claims that the global warming crisis is upon us. A sampling:
April, 2003, Detroit News: “A group of scientists predicted that global warming will wreak havoc on the Great Lakes region . . . the largest single concentration of fresh water in the world.”
October, 2003, Detroit Free Press: “The idea that warming has benefits may be a particularly tough sell to Michiganders already disturbed by what happens when the Great Lakes drop near historic lows.”
April, 2007, Detroit News: “Data from a new United Nations report on climate change . . . strengthens scientific opinion that Michigan will see other dramatic effects in the coming decades: lower Great Lakes water levels, a dramatically receding Lake St. Clair. . . . ”
May, 2008, Detroit News: “A report released by an environmental group warns that unless Congress acts to curb global warming, Great Lakes water levels will drop up to 3 feet; beaches will close more often, and fish and animal populations will decline.”
Never mind.
In a comprehensive, two-year study of Great Lakes water levels, Canadian and American researchers working for the International Joint Commission this week found Mother Nature was to blame. “It’s not ongoing. It has definitely stabilized,” said Ted Yuzyk, the Canadian co-chair of the study, who added the changes have reversed in the last two years anyway. “And it’s not human driven. This is more natural.”
“Record high levels were seen in the early 1950s, in 1973, and again in 1985-1986,” reads The International Upper Great Lakes Study. “In the late 1990s, a nearly 30-year period of above-average water level conditions in the upper Great Lakes ended. Since then, Lake Michigan-Huron and Lake Superior have experienced lower than average lake level conditions.”
Among the natural factors that explain the lakes cyclical rise and fall, reported the Detroit News, “were changing climate patterns, including greater rain and snow” and “shifts in the ’s crust, called glacial isostatic adjustment, that are the result of the planet's rebound from the melting of glaciers 10,000 years ago.”
Green groups were not amused. Facts are such inconvenient things.
Detroit, Mich. — Like polar bears, hurricanes, and arctic ice caps, recent drops in Great Lake water levels have been a poster child for green activists’ claims that the global warming crisis is upon us. A sampling:
April, 2003, Detroit News: “A group of scientists predicted that global warming will wreak havoc on the Great Lakes region . . . the largest single concentration of fresh water in the world.”
October, 2003, Detroit Free Press: “The idea that warming has benefits may be a particularly tough sell to Michiganders already disturbed by what happens when the Great Lakes drop near historic lows.”
April, 2007, Detroit News: “Data from a new United Nations report on climate change . . . strengthens scientific opinion that Michigan will see other dramatic effects in the coming decades: lower Great Lakes water levels, a dramatically receding Lake St. Clair. . . . ”
May, 2008, Detroit News: “A report released by an environmental group warns that unless Congress acts to curb global warming, Great Lakes water levels will drop up to 3 feet; beaches will close more often, and fish and animal populations will decline.”
Never mind.
In a comprehensive, two-year study of Great Lakes water levels, Canadian and American researchers working for the International Joint Commission this week found Mother Nature was to blame. “It’s not ongoing. It has definitely stabilized,” said Ted Yuzyk, the Canadian co-chair of the study, who added the changes have reversed in the last two years anyway. “And it’s not human driven. This is more natural.”
“Record high levels were seen in the early 1950s, in 1973, and again in 1985-1986,” reads The International Upper Great Lakes Study. “In the late 1990s, a nearly 30-year period of above-average water level conditions in the upper Great Lakes ended. Since then, Lake Michigan-Huron and Lake Superior have experienced lower than average lake level conditions.”
Among the natural factors that explain the lakes cyclical rise and fall, reported the Detroit News, “were changing climate patterns, including greater rain and snow” and “shifts in the ’s crust, called glacial isostatic adjustment, that are the result of the planet's rebound from the melting of glaciers 10,000 years ago.”
Green groups were not amused. Facts are such inconvenient things.
DLC Proposes Plan to Spur Housing Recovery
In First Policy Report, New DLC Proposes Plan to Spur Housing Recovery
New Analysis Recommends Expanding and Advancing Federal Homebuyer Tax Credit to Boost Broader Economy
May 4, 2009
In its first policy report released under the new leadership of CEO Bruce Reed, the Democratic Leadership Council (DLC) outlined a plan to spark home purchases by expanding eligibility for the federal Homebuyer Tax Credit and advancing it so first-time buyers can afford to make a down payment.
In "Moving Houses: How Sparking a Housing Recovery Is the Key to America's Economic Recovery" DLC senior fellows Paul Weinstein Jr. and Marc Dunkelman note that the glut of foreclosures has obscured another crisis: reticence among many potential homebuyers to dive into the market. Few doubt that the housing bubble's implosion drove the nation into its current recession. But the authors compile evidence suggesting that an upswing in the housing market could also play a crucial role in turning the broader economy around.
Newly-installed DLC CEO Bruce Reed commented: "The housing market helped start this economic crisis. Getting homes moving again is crucial to speed the nations recovery."
Read the full report here (PDF).
New Analysis Recommends Expanding and Advancing Federal Homebuyer Tax Credit to Boost Broader Economy
May 4, 2009
In its first policy report released under the new leadership of CEO Bruce Reed, the Democratic Leadership Council (DLC) outlined a plan to spark home purchases by expanding eligibility for the federal Homebuyer Tax Credit and advancing it so first-time buyers can afford to make a down payment.
In "Moving Houses: How Sparking a Housing Recovery Is the Key to America's Economic Recovery" DLC senior fellows Paul Weinstein Jr. and Marc Dunkelman note that the glut of foreclosures has obscured another crisis: reticence among many potential homebuyers to dive into the market. Few doubt that the housing bubble's implosion drove the nation into its current recession. But the authors compile evidence suggesting that an upswing in the housing market could also play a crucial role in turning the broader economy around.
Newly-installed DLC CEO Bruce Reed commented: "The housing market helped start this economic crisis. Getting homes moving again is crucial to speed the nations recovery."
Read the full report here (PDF).
As the U.S. Retreats, Iran Fills the Void
As the U.S. Retreats, Iran Fills the Void. By Amir Taheri
WSJ, May 04, 2009
Convinced that the Obama administration is preparing to retreat from the Middle East, Iran's Khomeinist regime is intensifying its goal of regional domination. It has targeted six close allies of the U.S.: Egypt, Lebanon, Bahrain, Morocco, Kuwait and Jordan, all of which are experiencing economic and/or political crises.
Iranian strategists believe that Egypt is heading for a major crisis once President Hosni Mubarak, 81, departs from the political scene. He has failed to impose his eldest son Gamal as successor, while the military-security establishment, which traditionally chooses the president, is divided. Iran's official Islamic News Agency has been conducting a campaign on that theme for months. This has triggered a counter-campaign against Iran by the Egyptian media.
Last month, Egypt announced it had crushed a major Iranian plot and arrested 68 people. According to Egyptian media, four are members of the Islamic Revolutionary Guards Corps (IRGC), Tehran's principal vehicle for exporting its revolution.
Seven were Palestinians linked to the radical Islamist movement Hamas; one was a Lebanese identified as "a political agent from Hezbollah" by the Egyptian Interior Ministry. Hassan Nasrallah, the leader of the Lebanese Hezbollah, claimed these men were shipping arms to Hamas in Gaza.
The arrests reportedly took place last December, during a crackdown against groups trying to convert Egyptians to Shiism. The Egyptian Interior Ministry claims this proselytizing has been going on for years. Thirty years ago, Egyptian Shiites numbered a few hundred. Various estimates put the number now at close to a million, but they are said to practice taqiyah (dissimulation), to hide their new faith.
But in its campaign for regional hegemony, Tehran expects Lebanon as its first prize. Iran is spending massive amounts of cash on June's general election. It supports a coalition led by Hezbollah, and including the Christian ex-general Michel Aoun. Lebanon, now in the column of pro-U.S. countries, would shift to the pro-Iran column.
In Bahrain, Tehran hopes to see its allies sweep to power through mass demonstrations and terrorist operations. Bahrain's ruling clan has arrested scores of pro-Iran militants but appears more vulnerable than ever. King Hamad bin Isa al-Khalifa has contacted Arab heads of states to appeal for "urgent support in the face of naked threats," according to the Bahraini media.
The threats became sensationally public in March. In a speech at Masshad, Iran's principal "holy city," Ali Akbar Nateq-Nuri, a senior aide to Supreme Leader Ayatollah Ali Khamenei, described Bahrain as "part of Iran." Morocco used the ensuing uproar as an excuse to severe diplomatic relations with Tehran. The rupture came after months of tension during which Moroccan security dismantled a network of pro-Iran militants allegedly plotting violent operations.
Iran-controlled groups have also been uncovered in Kuwait and Jordan. According to Kuwaiti media, more than 1,000 alleged Iranian agents were arrested and shipped back home last winter. According to the Tehran media, Kuwait is believed vulnerable because of chronic parliamentary disputes that have led to governmental paralysis.
As for Jordan, Iranian strategists believe the kingdom, where Palestinians are two-thirds of the population, is a colonial creation and should disappear from the map -- opening the way for a single state covering the whole of Palestine. Iranian Supreme Leader Khamenei and President Mahmoud Ahmadinejad have both described the division of Palestine as "a crime and a tragedy."
Arab states are especially concerned because Tehran has succeeded in transcending sectarian and ideological divides to create a coalition that includes Sunni movements such as Hamas, the Islamic Jihad, sections of the Muslim Brotherhood, and even Marxist-Leninist and other leftist outfits that share Iran's anti-Americanism.
Information published by Egyptian and other Arab intelligence services, and reported in the Egyptian and other Arab media, reveal a sophisticated Iranian strategy operating at various levels. The outer circle consists of a number of commercial companies, banks and businesses active in various fields and employing thousands of locals in each targeted country. In Egypt, for example, police have uncovered more than 30 such Iranian "front" companies, according to the pan-Arab daily newspaper Asharq Alawsat. In Syria and Lebanon, the numbers reportedly run into hundreds.
In the next circle, Iranian-financed charities offer a range of social and medical services and scholarships that governments often fail to provide. Another circle consists of "cultural" centers often called Ahl e Beit (People of the House) supervised by the offices of the supreme leader. These centers offer language classes in Persian, English and Arabic, Islamic theology, Koranic commentaries, and traditional philosophy -- alongside courses in information technology, media studies, photography and filmmaking.
Wherever possible, the fourth circle is represented by branches of Hezbollah operating openly. Where that's not possible, clandestine organizations do the job, either alone or in conjunction with Sunni radical groups.
The Khomeinist public diplomacy network includes a half-dozen satellite television and radio networks in several languages, more than 100 newspapers and magazines, a dozen publishing houses, and thousands of Web sites and blogs controlled by the Islamic Revolutionary Guard Corps. The network controls thousands of mosques throughout the region where preachers from Iran, or trained by Iranians, disseminate the Khomeinist revolutionary message.
Tehran has also created a vast network of non-Shiite fellow travelers within the region's political and cultural elites. These politicians and intellectuals may be hostile to Khomeinism on ideological grounds -- but they regard it as a powerful ally in a common struggle against the American "Great Satan."
Khomeinist propaganda is trying to portray Iran as a rising "superpower" in the making while the United States is presented as the "sunset" power. The message is simple: The Americans are going, and we are coming.
Tehran plays a patient game. Wherever possible, it is determined to pursue its goals through open political means, including elections. With pro-American and other democratic groups disheartened by the perceived weakness of the Obama administration, Tehran hopes its allies will win all the elections planned for this year in Afghanistan, Iraq, Lebanon and the Palestinian territories.
"There is this perception that the new U.S. administration is not interested in the democratization strategy," a senior Lebanese political leader told me. That perception only grows as President Obama calls for an "exit strategy" from Afghanistan and Iraq. Power abhors a vacuum, which the Islamic Republic of Iran is only too happy to fill.
Amir Taheri's new book, "The Persian Night: Iran Under the Khomeinist Revolution," is published by Encounter Books.
WSJ, May 04, 2009
Convinced that the Obama administration is preparing to retreat from the Middle East, Iran's Khomeinist regime is intensifying its goal of regional domination. It has targeted six close allies of the U.S.: Egypt, Lebanon, Bahrain, Morocco, Kuwait and Jordan, all of which are experiencing economic and/or political crises.
Iranian strategists believe that Egypt is heading for a major crisis once President Hosni Mubarak, 81, departs from the political scene. He has failed to impose his eldest son Gamal as successor, while the military-security establishment, which traditionally chooses the president, is divided. Iran's official Islamic News Agency has been conducting a campaign on that theme for months. This has triggered a counter-campaign against Iran by the Egyptian media.
Last month, Egypt announced it had crushed a major Iranian plot and arrested 68 people. According to Egyptian media, four are members of the Islamic Revolutionary Guards Corps (IRGC), Tehran's principal vehicle for exporting its revolution.
Seven were Palestinians linked to the radical Islamist movement Hamas; one was a Lebanese identified as "a political agent from Hezbollah" by the Egyptian Interior Ministry. Hassan Nasrallah, the leader of the Lebanese Hezbollah, claimed these men were shipping arms to Hamas in Gaza.
The arrests reportedly took place last December, during a crackdown against groups trying to convert Egyptians to Shiism. The Egyptian Interior Ministry claims this proselytizing has been going on for years. Thirty years ago, Egyptian Shiites numbered a few hundred. Various estimates put the number now at close to a million, but they are said to practice taqiyah (dissimulation), to hide their new faith.
But in its campaign for regional hegemony, Tehran expects Lebanon as its first prize. Iran is spending massive amounts of cash on June's general election. It supports a coalition led by Hezbollah, and including the Christian ex-general Michel Aoun. Lebanon, now in the column of pro-U.S. countries, would shift to the pro-Iran column.
In Bahrain, Tehran hopes to see its allies sweep to power through mass demonstrations and terrorist operations. Bahrain's ruling clan has arrested scores of pro-Iran militants but appears more vulnerable than ever. King Hamad bin Isa al-Khalifa has contacted Arab heads of states to appeal for "urgent support in the face of naked threats," according to the Bahraini media.
The threats became sensationally public in March. In a speech at Masshad, Iran's principal "holy city," Ali Akbar Nateq-Nuri, a senior aide to Supreme Leader Ayatollah Ali Khamenei, described Bahrain as "part of Iran." Morocco used the ensuing uproar as an excuse to severe diplomatic relations with Tehran. The rupture came after months of tension during which Moroccan security dismantled a network of pro-Iran militants allegedly plotting violent operations.
Iran-controlled groups have also been uncovered in Kuwait and Jordan. According to Kuwaiti media, more than 1,000 alleged Iranian agents were arrested and shipped back home last winter. According to the Tehran media, Kuwait is believed vulnerable because of chronic parliamentary disputes that have led to governmental paralysis.
As for Jordan, Iranian strategists believe the kingdom, where Palestinians are two-thirds of the population, is a colonial creation and should disappear from the map -- opening the way for a single state covering the whole of Palestine. Iranian Supreme Leader Khamenei and President Mahmoud Ahmadinejad have both described the division of Palestine as "a crime and a tragedy."
Arab states are especially concerned because Tehran has succeeded in transcending sectarian and ideological divides to create a coalition that includes Sunni movements such as Hamas, the Islamic Jihad, sections of the Muslim Brotherhood, and even Marxist-Leninist and other leftist outfits that share Iran's anti-Americanism.
Information published by Egyptian and other Arab intelligence services, and reported in the Egyptian and other Arab media, reveal a sophisticated Iranian strategy operating at various levels. The outer circle consists of a number of commercial companies, banks and businesses active in various fields and employing thousands of locals in each targeted country. In Egypt, for example, police have uncovered more than 30 such Iranian "front" companies, according to the pan-Arab daily newspaper Asharq Alawsat. In Syria and Lebanon, the numbers reportedly run into hundreds.
In the next circle, Iranian-financed charities offer a range of social and medical services and scholarships that governments often fail to provide. Another circle consists of "cultural" centers often called Ahl e Beit (People of the House) supervised by the offices of the supreme leader. These centers offer language classes in Persian, English and Arabic, Islamic theology, Koranic commentaries, and traditional philosophy -- alongside courses in information technology, media studies, photography and filmmaking.
Wherever possible, the fourth circle is represented by branches of Hezbollah operating openly. Where that's not possible, clandestine organizations do the job, either alone or in conjunction with Sunni radical groups.
The Khomeinist public diplomacy network includes a half-dozen satellite television and radio networks in several languages, more than 100 newspapers and magazines, a dozen publishing houses, and thousands of Web sites and blogs controlled by the Islamic Revolutionary Guard Corps. The network controls thousands of mosques throughout the region where preachers from Iran, or trained by Iranians, disseminate the Khomeinist revolutionary message.
Tehran has also created a vast network of non-Shiite fellow travelers within the region's political and cultural elites. These politicians and intellectuals may be hostile to Khomeinism on ideological grounds -- but they regard it as a powerful ally in a common struggle against the American "Great Satan."
Khomeinist propaganda is trying to portray Iran as a rising "superpower" in the making while the United States is presented as the "sunset" power. The message is simple: The Americans are going, and we are coming.
Tehran plays a patient game. Wherever possible, it is determined to pursue its goals through open political means, including elections. With pro-American and other democratic groups disheartened by the perceived weakness of the Obama administration, Tehran hopes its allies will win all the elections planned for this year in Afghanistan, Iraq, Lebanon and the Palestinian territories.
"There is this perception that the new U.S. administration is not interested in the democratization strategy," a senior Lebanese political leader told me. That perception only grows as President Obama calls for an "exit strategy" from Afghanistan and Iraq. Power abhors a vacuum, which the Islamic Republic of Iran is only too happy to fill.
Amir Taheri's new book, "The Persian Night: Iran Under the Khomeinist Revolution," is published by Encounter Books.
Sunday, May 3, 2009
Demographics & Depression
Demographics & Depression, by David P. Goldman
First Things, May 2009
Three generations of economists immersed themselves in study of the Great Depression, determined to prevent a recurrence of the awful events of the 1930s. And as our current financial crisis began to unfold in 2008, policymakers did everything that those economists prescribed. Following John Maynard Keynes, President Bush and President Obama each offered a fiscal stimulus. The Federal Reserve maintained confidence in the financial system, increased the money supply, and lowered interest rates. The major industrial nations worked together, rather than at cross purposes as they had in the early 1930s.
In other words, the government tried to do everything right, but everything continues to go wrong. We labored hard and traveled long to avoid a new depression, but one seems to have found us, nonetheless.
So is this something outside the lesson book of the Great Depression? Most officials and economists argue that, until home prices stabilize, necrosis will continue to spread through the assets of the financial system, and consumers will continue to restrict spending. The sources of the present crisis reach into the capillary system of the economy: the most basic decisions and requirements of American households. All the apparatus of financial engineering is helpless beside the simple issue of household decisions about shelter. We are in the most democratic of economic crises, and it stems directly from the character of our people.
Part of the problem in seeing this may be that we are transfixed by the dense technicalities of credit flow, the new varieties of toxic assets, and the endless iterations of financial restructuring. Sometimes it helps to look at the world with a kind of simplicity. Think of it this way: Credit markets derive from the cycle of human life. Young people need to borrow capital to start families and businesses; old people need to earn income on the capital they have saved. We invest our retirement savings in the formation of new households. All the armamentarium of modern capital markets boils down to investing in a new generation so that they will provide for us when we are old.
To understand the bleeding in the housing market, then, we need to examine the population of prospective homebuyers whose millions of individual decisions determine whether the economy will recover. Families with children are the fulcrum of the housing market. Because single-parent families tend to be poor, the buying power is concentrated in two-parent families with children.
Now, consider this fact: America’s population has risen from 200 million to 300 million since 1970, while the total number of two-parent families with children is the same today as it was when Richard Nixon took office, at 25 million. In 1973, the United States had 36 million housing units with three or more bedrooms, not many more than the number of two-parent families with children—which means that the supply of family homes was roughly in line with the number of families. By 2005, the number of housing units with three or more bedrooms had doubled to 72 million, though America had the same number of two-parent families with children.
The number of two-parent families with children, the kind of household that requires and can afford a large home, has remained essentially stagnant since 1963, according to the Census Bureau. Between 1963 and 2005, to be sure, the total number of what the Census Bureau categorizes as families grew from 47 million to 77 million. But most of the increase is due to families without children, including what are sometimes rather strangely called “one-person families.”
In place of traditional two-parent families with children, America has seen enormous growth in one-parent families and childless families. The number of one-parent families with children has tripled. Dependent children formed half the U.S. population in 1960, and they add up to only 30 percent today. The dependent elderly doubled as a proportion of the population, from 15 percent in 1960 to 30 percent today.
If capital markets derive from the cycle of human life, what happens if the cycle goes wrong? Investors may be unreasonably panicked about the future, and governments can allay this panic by guaranteeing bank deposits, increasing incentives to invest, and so forth. But something different is in play when investors are reasonably panicked. What if there really is something wrong with our future—if the next generation fails to appear in sufficient numbers? The answer is that we get poorer.
The declining demographics of the traditional American family raise a dismal possibility: Perhaps the world is poorer now because the present generation did not bother to rear a new generation. All else is bookkeeping and ultimately trivial. This unwelcome and unprecedented change underlies the present global economic crisis. We are grayer, and less fecund, and as a result we are poorer, and will get poorer still—no matter what economic policies we put in place.
We could put this another way: America’s housing market collapsed because conservatives lost the culture wars even back while they were prevailing in electoral politics. During the past half century America has changed from a nation in which most households had two parents with young children. We are now a mélange of alternative arrangements in which the nuclear family is merely a niche phenomenon. By 2025, single-person households may outnumber families with children.
The collapse of home prices and the knock-on effects on the banking system stem from the shrinking count of families that require houses. It is no accident that the housing market—the economic sector most sensitive to demographics—was the epicenter of the economic crisis. In fact, demographers have been predicting a housing crash for years due to the demographics of diminishing demand. Wall Street and Washington merely succeeded in prolonging the housing bubble for a few additional years. The adverse demographics arising from cultural decay, though, portend far graver consequences for the funding of health and retirement systems.
Conservatives have indulged in self-congratulation over the quarter-century run of growth that began in 1984 with the Reagan administration’s tax reforms. A prosperity that fails to rear a new generation in sufficient number is hollow, as we have learned to our detriment during the past year. Compared to Japan and most European countries, which face demographic catastrophe, America’s position seems relatively strong, but that strength is only postponing the reckoning by keeping the world’s capital flowing into the U.S. mortgage market right up until the crash at the end of 2007.
As long as conservative leaders delivered economic growth, family issues were relegated to Sunday rhetoric. Of course, conservative thinkers never actually proposed to measure the movement’s success solely in units of gross domestic product, or square feet per home, or cubic displacement of the average automobile engine. But delivering consumer goods was what conservatives seemed to do well, and they rode the momentum of the Reagan boom.
Until now. Our children are our wealth. Too few of them are seated around America’s common table, and it is their absence that makes us poor. Not only the absolute count of children, to be sure, but also the shrinking proportion of children raised with the moral material advantages of two-parent families diminishes our prospects. The capital markets have reduced the value of homeowners’ equity by $8 trillion and of stocks by $7 trillion. Households with a provider aged 45 to 54 have lost half their net worth between 2004 and 2009, according to Dean Baker of the Center for Economic and Policy Research. There are ways to ameliorate the financial crisis, but none of them will replace the lives that should have been part of America and now are missed.
[Population by Age in Advanced Countries graph]
This suggests that nothing economic policy can do will entirely reverse the great wave of wealth destruction. President Obama made hope the watchword of his campaign, but there is less for which to hope, largely because of the economic impact of the lifestyle choices favored by the same young people who were so enthusiastic for Obama. The Reagan reforms created new markets and financing techniques and put enormous amounts of leverage at the disposal of businesses and households. The 1980s saw the creation of a mortgage-backed securities market that turned the American home into a ready source of capital, the emergence of a high-yield bond market that allowed new companies to issue debt, and the expansion of private equity. These financing techniques contributed mightily to the great expansion of 1984–2008, and they were the same instruments that would wreak ruin on the financial system. During the 1980s the baby boomers were in their twenties and thirties, when families are supposed to take on debt; twenty years later, the baby boomers were in their fifties and sixties, when families are supposed to save for retirement. The elixir of youth turned toxic for the aging.
Unless we restore the traditional family to a central position in American life, we cannot expect to return to the kind of wealth accumulation that characterized the 1980s and 1990s. Theoretically, we might recruit immigrants to replace the children we did not rear, or we might invest capital overseas with the children of other countries. From the standpoint of economic policy, neither of those possibilities can be dismissed. But the contributions of immigration or capital export will be marginal at best compared to the central issue of whether the demographics of America reverts to health.
Life is sacred for its own sake. It is not an instrument to provide us with fatter IRAs or better real-estate values. But it is fair to point out that wealth depends ultimately on the natural order of human life. Failing to rear a new generation in sufficient numbers to replace the present one violates that order, and it has consequences for wealth, among many other things. Americans who rejected the mild yoke of family responsibility in pursuit of atavistic enjoyment will find at last that this is not to be theirs, either.
It will be painful for conservatives to admit that things were not well with America under the Republican watch, at least not at the family level. From 1954 to 1970, for example, half or more of households contained two parents and one or more children under the age of eighteen. In fact as well as in popular culture, the two-parent nuclear family formed the normative American household. By 1981, when Ronald Reagan took office, two-parent households had fallen to just over two-fifths of the total. Today, less than a third of American households constitute a two-parent nuclear family with children.
Housing prices are collapsing in part because single-person households are replacing families with children. The Virginia Tech economist Arthur C. Nelson has noted that households with children would fall from half to a quarter of all households by 2025. The demand of Americans will then be urban apartments for empty nesters. Demand for large-lot single family homes, Nelson calculated, will slump from 56 million today to 34 million in 2025—a reduction of 40 percent. There never will be a housing price recovery in many parts of the country. Huge tracts will become uninhabited except by vandals and rodents.
All of these trends were evident for years, and duly noted by housing economists. Why did it take until 2007 for home prices to collapse? If America were a closed economy, the housing market would have crashed years ago. The paradox is that the rest of the industrial world, and much of the developing world, are aging faster than the United States.
In the industrial world, there are more than 400 million people in their peak savings years, 40 to 64 years of age, and the number is growing. There are fewer than 350 million young earners in the 19-to-40-year bracket, and their number is shrinking. If savers in Japan can’t find enough young people to lend to, they will lend to the young people of other countries. Japan’s median age will rise above 60 by mid-century, and Europe’s will rise to the mid-50s.
America is slightly better off. Countries with aging and shrinking populations must export and invest the proceeds. Japan’s households have hoarded $14 trillion in savings, which they will spend on geriatric care provided by Indonesian and Filipino nurses, as the country’s population falls to just 90 million in 2050 from 127 million today.
The graying of the industrial world creates an inexhaustible supply of savings and demand for assets in which to invest them—which is to say, for young people able to borrow and pay loans with interest. The tragedy is that most of the world’s young people live in countries without capital markets, enforcement of property rights, or reliable governments. Japanese investors will not buy mortgages from Africa or Latin America, or even China. A rich Chinese won’t lend money to a poor Chinese unless, of course, the poor Chinese first moves to the United States.
Until recently, that left the United States the main destination for the aging savers of the industrial world. America became the magnet for savings accumulated by aging Europeans and Japanese. To this must be added the rainy-day savings of the Chinese government, whose desire to accumulate large amounts of foreign-exchange reserves is more than justified in retrospect by the present crisis.
America has roughly 120 million adults in the 19-to-44 age bracket, the prime borrowing years. That is not a large number against the 420 million prospective savers in the aging developed world as a whole. There simply aren’t enough young Americans to absorb the savings of the rest of the world. In demographic terms, America is only the leper with the most fingers.
The rest of the world lent the United States vast sums, rising to almost $1 trillion in 2007. As the rest of the world thrust its savings on the United States, interest rates fell and home prices rose. To feed the inexhaustible demand for American assets, Wall Street connived with the ratings agencies to turn the sow’s ear of subprime mortgages into silk purses, in the form of supposedly default-proof securities with high credit ratings. Americans thought themselves charmed and came to expect indefinitely continuing rates of 10 percent annual appreciation of home prices (and correspondingly higher returns to homeowners with a great deal of leverage).
The baby boomers evidently concluded that one day they all would sell their houses to each other at exorbitant prices and retire on the proceeds. The national household savings rate fell to zero by 2007, as Americans came to believe that capital gains on residential real estate would substitute for savings.
After a $15 trillion reduction in asset values, Americans are now saving as much as they can. Of course, if everyone saves and no one spends, the economy shuts down, which is precisely what is happening. The trouble is not that aging baby boomers need to save. The problem is that the families with children who need to spend never were formed in sufficient numbers to sustain growth.
In emphasizing the demographics, I do not mean to give Wall Street a free pass for prolonging the bubble. Without financial engineering, the crisis would have come sooner and in a milder form. But we would have been just as poor in consequence. The origin of the crisis is demographic, and its solution can only be demographic.
America needs to find productive young people to whom to lend. The world abounds in young people, of course, but not young people who can productively use capital and are thus good credit risks. The trouble is to locate young people who are reared to the skill sets, work ethic, and social values required for a modern economy.
In theory, it is possible to match American capital to the requirements of young people in venues capable of great productivity growth. East Asia, for example, has almost 500 million people in the 19-to-40-year-old bracket, 50 percent more than that of the entire industrial world. The prospect of raising the productivity of Chinese, Indians, and other Asians opens up an entirely different horizon for the American economy. In theory, the opportunities for investment in Asia are limitless, but political trust, capital markets, regulatory institutions, and other preconditions for such investment have been inadequate. For aging Americans to trust their savings to young Asians, a generation’s worth of institutional reforms would be required.
It is also possible to improve America’s demographic profile through immigration, as Reuven Brenner of McGill University has proposed. Some years ago Cardinal Baffi of Bologna suggested that Europe seek Catholic immigrants from Latin America. In a small way, something like this is happening. Europe’s alternative is to accept more immigrants from the Middle East and Africa, with the attendant risks of cultural hollowing out and eventual Islamicization. America’s problem is more difficult, for what America requires are highly skilled immigrants.
Even so, efforts to export capital and import workers will at best mitigate America’s economic problems in a small way. We are going to be poorer for a generation and perhaps longer. We will drive smaller cars and live in smaller homes, vacation in cabins by the lake rather than at Disney World, and send our children to public universities rather than private liberal-arts colleges. The baby boomers on average will work five or ten years longer before retiring on less income than they had planned, and young people will work for less money at duller jobs than they had hoped.
In traditional societies, each extended family relied on its own children to care for its own elderly. The resources the community devoted to the destitute—gleaning the fields after harvest, for example—were quite limited. Modern society does not require every family to fund its retirement by rearing children; we may contribute to a pension fund and draw on the labor of the children of others. But if everyone were to retire on the same day, the pension fund would go bankrupt instantly, and we all would starve.
The distribution of rewards and penalties is manifestly unfair. The current crisis is particularly unfair to those who brought up children and contributed monthly to their pension fund, only to watch the value of their savings evaporate in the crisis. Tax and social-insurance policy should reflect the effort and cost of rearing children and require those who avoid such effort and cost to pay their fair share.
Numerous proposals for family-friendly tax policy are in circulation, including recent suggestions by Ramesh Ponnuru, Ross Douthat, and Reihan Salam. The core of a family-oriented economic program might include the following measures:
• Cut taxes on families. The personal exemption introduced with the Second World War’s Victory Tax was $624, reflecting the cost of “food and a little more.” In today’s dollars that would be about $7,600, while the current personal exemption stands at only $3,650. The personal exemption should be raised to $8,000 simply to restore the real value of the deduction, and the full personal exemption should apply to children.
• Shift part of the burden of social insurance to the childless. For most taxpayers, social-insurance deductions are almost as great a burden as income tax. Families that bring up children contribute to the future tax base; families that do not get a free ride. The base rate for social security and Medicare deductions should rise, with a significant exemption for families with children, so that a disproportionate share of the burden falls on the childless.
• Make child-related expenses tax deductible. Tuition and health care are the key expenses here with which parents need help.
• Change the immigration laws. The United States needs highly skilled, productive individuals in their prime years for earning and family formation.
We delude ourselves when we imagine that a few hundred dollars of tax incentives will persuade individuals to form families or keep them together. A generation of Americans has grown up with the belief that the traditional family is merely one lifestyle choice among many.
But it is among the young that such a conservative message could reverberate the loudest. The young know that the promise of sexual freedom has brought them nothing but emptiness and anomie. They suffer more than anyone from the breakup of families. They know that abortion has wrought psychic damage that never can be repaired. And they see that their own future was compromised by the poor choices of their parents.
It was always morally wrong for conservatives to attempt to segregate the emotionally charged issues of public morals from the conservative growth agenda. We know now that it was also incompetent from a purely economic point of view. Without life, there is no wealth; without families, there is no economic future. The value of future income streams traded in capital markets will fall in accordance with our impoverished demography. We cannot pursue the acquisition of wealth and the provision of upward mobility except through the reconquest of the American polity on behalf of the American family.
The conservative movement today seems weaker than at any time since Lyndon Johnson defeated Barry Goldwater. There are no free-marketeers in the foxholes, and it is hard to find an economist of any stripe who does not believe that the government must provide some kind of economic stimulus and rescue the financial system.
But the present crisis also might present the conservative movement with the greatest opportunity it has had since Ronald Reagan took office. The Obama administration will certainly face backlash when its promise to fix the economy through the antiquated tools of Keynesian stimulus comes to nothing. And as a result, American voters may be more disposed to consider fundamental problems than they have been for several generations. The message that our children are our wealth, and that families are its custodian, might resonate all the more strongly for the manifest failure of the alternatives.
First Things, May 2009
Three generations of economists immersed themselves in study of the Great Depression, determined to prevent a recurrence of the awful events of the 1930s. And as our current financial crisis began to unfold in 2008, policymakers did everything that those economists prescribed. Following John Maynard Keynes, President Bush and President Obama each offered a fiscal stimulus. The Federal Reserve maintained confidence in the financial system, increased the money supply, and lowered interest rates. The major industrial nations worked together, rather than at cross purposes as they had in the early 1930s.
In other words, the government tried to do everything right, but everything continues to go wrong. We labored hard and traveled long to avoid a new depression, but one seems to have found us, nonetheless.
So is this something outside the lesson book of the Great Depression? Most officials and economists argue that, until home prices stabilize, necrosis will continue to spread through the assets of the financial system, and consumers will continue to restrict spending. The sources of the present crisis reach into the capillary system of the economy: the most basic decisions and requirements of American households. All the apparatus of financial engineering is helpless beside the simple issue of household decisions about shelter. We are in the most democratic of economic crises, and it stems directly from the character of our people.
Part of the problem in seeing this may be that we are transfixed by the dense technicalities of credit flow, the new varieties of toxic assets, and the endless iterations of financial restructuring. Sometimes it helps to look at the world with a kind of simplicity. Think of it this way: Credit markets derive from the cycle of human life. Young people need to borrow capital to start families and businesses; old people need to earn income on the capital they have saved. We invest our retirement savings in the formation of new households. All the armamentarium of modern capital markets boils down to investing in a new generation so that they will provide for us when we are old.
To understand the bleeding in the housing market, then, we need to examine the population of prospective homebuyers whose millions of individual decisions determine whether the economy will recover. Families with children are the fulcrum of the housing market. Because single-parent families tend to be poor, the buying power is concentrated in two-parent families with children.
Now, consider this fact: America’s population has risen from 200 million to 300 million since 1970, while the total number of two-parent families with children is the same today as it was when Richard Nixon took office, at 25 million. In 1973, the United States had 36 million housing units with three or more bedrooms, not many more than the number of two-parent families with children—which means that the supply of family homes was roughly in line with the number of families. By 2005, the number of housing units with three or more bedrooms had doubled to 72 million, though America had the same number of two-parent families with children.
The number of two-parent families with children, the kind of household that requires and can afford a large home, has remained essentially stagnant since 1963, according to the Census Bureau. Between 1963 and 2005, to be sure, the total number of what the Census Bureau categorizes as families grew from 47 million to 77 million. But most of the increase is due to families without children, including what are sometimes rather strangely called “one-person families.”
In place of traditional two-parent families with children, America has seen enormous growth in one-parent families and childless families. The number of one-parent families with children has tripled. Dependent children formed half the U.S. population in 1960, and they add up to only 30 percent today. The dependent elderly doubled as a proportion of the population, from 15 percent in 1960 to 30 percent today.
If capital markets derive from the cycle of human life, what happens if the cycle goes wrong? Investors may be unreasonably panicked about the future, and governments can allay this panic by guaranteeing bank deposits, increasing incentives to invest, and so forth. But something different is in play when investors are reasonably panicked. What if there really is something wrong with our future—if the next generation fails to appear in sufficient numbers? The answer is that we get poorer.
The declining demographics of the traditional American family raise a dismal possibility: Perhaps the world is poorer now because the present generation did not bother to rear a new generation. All else is bookkeeping and ultimately trivial. This unwelcome and unprecedented change underlies the present global economic crisis. We are grayer, and less fecund, and as a result we are poorer, and will get poorer still—no matter what economic policies we put in place.
We could put this another way: America’s housing market collapsed because conservatives lost the culture wars even back while they were prevailing in electoral politics. During the past half century America has changed from a nation in which most households had two parents with young children. We are now a mélange of alternative arrangements in which the nuclear family is merely a niche phenomenon. By 2025, single-person households may outnumber families with children.
The collapse of home prices and the knock-on effects on the banking system stem from the shrinking count of families that require houses. It is no accident that the housing market—the economic sector most sensitive to demographics—was the epicenter of the economic crisis. In fact, demographers have been predicting a housing crash for years due to the demographics of diminishing demand. Wall Street and Washington merely succeeded in prolonging the housing bubble for a few additional years. The adverse demographics arising from cultural decay, though, portend far graver consequences for the funding of health and retirement systems.
Conservatives have indulged in self-congratulation over the quarter-century run of growth that began in 1984 with the Reagan administration’s tax reforms. A prosperity that fails to rear a new generation in sufficient number is hollow, as we have learned to our detriment during the past year. Compared to Japan and most European countries, which face demographic catastrophe, America’s position seems relatively strong, but that strength is only postponing the reckoning by keeping the world’s capital flowing into the U.S. mortgage market right up until the crash at the end of 2007.
As long as conservative leaders delivered economic growth, family issues were relegated to Sunday rhetoric. Of course, conservative thinkers never actually proposed to measure the movement’s success solely in units of gross domestic product, or square feet per home, or cubic displacement of the average automobile engine. But delivering consumer goods was what conservatives seemed to do well, and they rode the momentum of the Reagan boom.
Until now. Our children are our wealth. Too few of them are seated around America’s common table, and it is their absence that makes us poor. Not only the absolute count of children, to be sure, but also the shrinking proportion of children raised with the moral material advantages of two-parent families diminishes our prospects. The capital markets have reduced the value of homeowners’ equity by $8 trillion and of stocks by $7 trillion. Households with a provider aged 45 to 54 have lost half their net worth between 2004 and 2009, according to Dean Baker of the Center for Economic and Policy Research. There are ways to ameliorate the financial crisis, but none of them will replace the lives that should have been part of America and now are missed.
[Population by Age in Advanced Countries graph]
This suggests that nothing economic policy can do will entirely reverse the great wave of wealth destruction. President Obama made hope the watchword of his campaign, but there is less for which to hope, largely because of the economic impact of the lifestyle choices favored by the same young people who were so enthusiastic for Obama. The Reagan reforms created new markets and financing techniques and put enormous amounts of leverage at the disposal of businesses and households. The 1980s saw the creation of a mortgage-backed securities market that turned the American home into a ready source of capital, the emergence of a high-yield bond market that allowed new companies to issue debt, and the expansion of private equity. These financing techniques contributed mightily to the great expansion of 1984–2008, and they were the same instruments that would wreak ruin on the financial system. During the 1980s the baby boomers were in their twenties and thirties, when families are supposed to take on debt; twenty years later, the baby boomers were in their fifties and sixties, when families are supposed to save for retirement. The elixir of youth turned toxic for the aging.
Unless we restore the traditional family to a central position in American life, we cannot expect to return to the kind of wealth accumulation that characterized the 1980s and 1990s. Theoretically, we might recruit immigrants to replace the children we did not rear, or we might invest capital overseas with the children of other countries. From the standpoint of economic policy, neither of those possibilities can be dismissed. But the contributions of immigration or capital export will be marginal at best compared to the central issue of whether the demographics of America reverts to health.
Life is sacred for its own sake. It is not an instrument to provide us with fatter IRAs or better real-estate values. But it is fair to point out that wealth depends ultimately on the natural order of human life. Failing to rear a new generation in sufficient numbers to replace the present one violates that order, and it has consequences for wealth, among many other things. Americans who rejected the mild yoke of family responsibility in pursuit of atavistic enjoyment will find at last that this is not to be theirs, either.
It will be painful for conservatives to admit that things were not well with America under the Republican watch, at least not at the family level. From 1954 to 1970, for example, half or more of households contained two parents and one or more children under the age of eighteen. In fact as well as in popular culture, the two-parent nuclear family formed the normative American household. By 1981, when Ronald Reagan took office, two-parent households had fallen to just over two-fifths of the total. Today, less than a third of American households constitute a two-parent nuclear family with children.
Housing prices are collapsing in part because single-person households are replacing families with children. The Virginia Tech economist Arthur C. Nelson has noted that households with children would fall from half to a quarter of all households by 2025. The demand of Americans will then be urban apartments for empty nesters. Demand for large-lot single family homes, Nelson calculated, will slump from 56 million today to 34 million in 2025—a reduction of 40 percent. There never will be a housing price recovery in many parts of the country. Huge tracts will become uninhabited except by vandals and rodents.
All of these trends were evident for years, and duly noted by housing economists. Why did it take until 2007 for home prices to collapse? If America were a closed economy, the housing market would have crashed years ago. The paradox is that the rest of the industrial world, and much of the developing world, are aging faster than the United States.
In the industrial world, there are more than 400 million people in their peak savings years, 40 to 64 years of age, and the number is growing. There are fewer than 350 million young earners in the 19-to-40-year bracket, and their number is shrinking. If savers in Japan can’t find enough young people to lend to, they will lend to the young people of other countries. Japan’s median age will rise above 60 by mid-century, and Europe’s will rise to the mid-50s.
America is slightly better off. Countries with aging and shrinking populations must export and invest the proceeds. Japan’s households have hoarded $14 trillion in savings, which they will spend on geriatric care provided by Indonesian and Filipino nurses, as the country’s population falls to just 90 million in 2050 from 127 million today.
The graying of the industrial world creates an inexhaustible supply of savings and demand for assets in which to invest them—which is to say, for young people able to borrow and pay loans with interest. The tragedy is that most of the world’s young people live in countries without capital markets, enforcement of property rights, or reliable governments. Japanese investors will not buy mortgages from Africa or Latin America, or even China. A rich Chinese won’t lend money to a poor Chinese unless, of course, the poor Chinese first moves to the United States.
Until recently, that left the United States the main destination for the aging savers of the industrial world. America became the magnet for savings accumulated by aging Europeans and Japanese. To this must be added the rainy-day savings of the Chinese government, whose desire to accumulate large amounts of foreign-exchange reserves is more than justified in retrospect by the present crisis.
America has roughly 120 million adults in the 19-to-44 age bracket, the prime borrowing years. That is not a large number against the 420 million prospective savers in the aging developed world as a whole. There simply aren’t enough young Americans to absorb the savings of the rest of the world. In demographic terms, America is only the leper with the most fingers.
The rest of the world lent the United States vast sums, rising to almost $1 trillion in 2007. As the rest of the world thrust its savings on the United States, interest rates fell and home prices rose. To feed the inexhaustible demand for American assets, Wall Street connived with the ratings agencies to turn the sow’s ear of subprime mortgages into silk purses, in the form of supposedly default-proof securities with high credit ratings. Americans thought themselves charmed and came to expect indefinitely continuing rates of 10 percent annual appreciation of home prices (and correspondingly higher returns to homeowners with a great deal of leverage).
The baby boomers evidently concluded that one day they all would sell their houses to each other at exorbitant prices and retire on the proceeds. The national household savings rate fell to zero by 2007, as Americans came to believe that capital gains on residential real estate would substitute for savings.
After a $15 trillion reduction in asset values, Americans are now saving as much as they can. Of course, if everyone saves and no one spends, the economy shuts down, which is precisely what is happening. The trouble is not that aging baby boomers need to save. The problem is that the families with children who need to spend never were formed in sufficient numbers to sustain growth.
In emphasizing the demographics, I do not mean to give Wall Street a free pass for prolonging the bubble. Without financial engineering, the crisis would have come sooner and in a milder form. But we would have been just as poor in consequence. The origin of the crisis is demographic, and its solution can only be demographic.
America needs to find productive young people to whom to lend. The world abounds in young people, of course, but not young people who can productively use capital and are thus good credit risks. The trouble is to locate young people who are reared to the skill sets, work ethic, and social values required for a modern economy.
In theory, it is possible to match American capital to the requirements of young people in venues capable of great productivity growth. East Asia, for example, has almost 500 million people in the 19-to-40-year-old bracket, 50 percent more than that of the entire industrial world. The prospect of raising the productivity of Chinese, Indians, and other Asians opens up an entirely different horizon for the American economy. In theory, the opportunities for investment in Asia are limitless, but political trust, capital markets, regulatory institutions, and other preconditions for such investment have been inadequate. For aging Americans to trust their savings to young Asians, a generation’s worth of institutional reforms would be required.
It is also possible to improve America’s demographic profile through immigration, as Reuven Brenner of McGill University has proposed. Some years ago Cardinal Baffi of Bologna suggested that Europe seek Catholic immigrants from Latin America. In a small way, something like this is happening. Europe’s alternative is to accept more immigrants from the Middle East and Africa, with the attendant risks of cultural hollowing out and eventual Islamicization. America’s problem is more difficult, for what America requires are highly skilled immigrants.
Even so, efforts to export capital and import workers will at best mitigate America’s economic problems in a small way. We are going to be poorer for a generation and perhaps longer. We will drive smaller cars and live in smaller homes, vacation in cabins by the lake rather than at Disney World, and send our children to public universities rather than private liberal-arts colleges. The baby boomers on average will work five or ten years longer before retiring on less income than they had planned, and young people will work for less money at duller jobs than they had hoped.
In traditional societies, each extended family relied on its own children to care for its own elderly. The resources the community devoted to the destitute—gleaning the fields after harvest, for example—were quite limited. Modern society does not require every family to fund its retirement by rearing children; we may contribute to a pension fund and draw on the labor of the children of others. But if everyone were to retire on the same day, the pension fund would go bankrupt instantly, and we all would starve.
The distribution of rewards and penalties is manifestly unfair. The current crisis is particularly unfair to those who brought up children and contributed monthly to their pension fund, only to watch the value of their savings evaporate in the crisis. Tax and social-insurance policy should reflect the effort and cost of rearing children and require those who avoid such effort and cost to pay their fair share.
Numerous proposals for family-friendly tax policy are in circulation, including recent suggestions by Ramesh Ponnuru, Ross Douthat, and Reihan Salam. The core of a family-oriented economic program might include the following measures:
• Cut taxes on families. The personal exemption introduced with the Second World War’s Victory Tax was $624, reflecting the cost of “food and a little more.” In today’s dollars that would be about $7,600, while the current personal exemption stands at only $3,650. The personal exemption should be raised to $8,000 simply to restore the real value of the deduction, and the full personal exemption should apply to children.
• Shift part of the burden of social insurance to the childless. For most taxpayers, social-insurance deductions are almost as great a burden as income tax. Families that bring up children contribute to the future tax base; families that do not get a free ride. The base rate for social security and Medicare deductions should rise, with a significant exemption for families with children, so that a disproportionate share of the burden falls on the childless.
• Make child-related expenses tax deductible. Tuition and health care are the key expenses here with which parents need help.
• Change the immigration laws. The United States needs highly skilled, productive individuals in their prime years for earning and family formation.
We delude ourselves when we imagine that a few hundred dollars of tax incentives will persuade individuals to form families or keep them together. A generation of Americans has grown up with the belief that the traditional family is merely one lifestyle choice among many.
But it is among the young that such a conservative message could reverberate the loudest. The young know that the promise of sexual freedom has brought them nothing but emptiness and anomie. They suffer more than anyone from the breakup of families. They know that abortion has wrought psychic damage that never can be repaired. And they see that their own future was compromised by the poor choices of their parents.
It was always morally wrong for conservatives to attempt to segregate the emotionally charged issues of public morals from the conservative growth agenda. We know now that it was also incompetent from a purely economic point of view. Without life, there is no wealth; without families, there is no economic future. The value of future income streams traded in capital markets will fall in accordance with our impoverished demography. We cannot pursue the acquisition of wealth and the provision of upward mobility except through the reconquest of the American polity on behalf of the American family.
The conservative movement today seems weaker than at any time since Lyndon Johnson defeated Barry Goldwater. There are no free-marketeers in the foxholes, and it is hard to find an economist of any stripe who does not believe that the government must provide some kind of economic stimulus and rescue the financial system.
But the present crisis also might present the conservative movement with the greatest opportunity it has had since Ronald Reagan took office. The Obama administration will certainly face backlash when its promise to fix the economy through the antiquated tools of Keynesian stimulus comes to nothing. And as a result, American voters may be more disposed to consider fundamental problems than they have been for several generations. The message that our children are our wealth, and that families are its custodian, might resonate all the more strongly for the manifest failure of the alternatives.
Terrorists and Pirates: An Alliance of Convenience
Terrorists and Pirates: An Alliance of Convenience. By Ryan Mauro
Friday, May 01, 2009
In his Salon.com article titled “Our Misguided Fight Against Somali Pirates,” John Feffer from the Institute for Policy Studies asks “Those teenage high-seas renegades are not about to team up with terrorists, so why is the U.S. military devoting so much attention to them?” While Freer is correct in pointing out that the pirates and terrorists are not ideological allies, it is a mistake to assume that the pirates are not willing to become valued business partners of radical Islamic terrorist groups including those linked to Al-Qaeda.
Al-Shabaab, the Al-Qaeda affiliate labeled by the State Department as a terrorist organization, currently controls southern Somalia. The recent media attention given to the taking of an American cargo ship captain hostage and subsequent rescue will no doubt motivate this group to partner with pirates, if for no other reason than to try to steal some of the spotlight. Indeed, shortly following the incident, al-Shabaab claimed credit for firing mortars near a visiting U.S. congressman.
Already, senior Al-Qaeda member Sa’id Ali Jabir Al-Khathim al-Shihri, has instructed his Somali allies to “increase your strikes against the crusaders at sea and in Djibouti.” Earlier in April, an al-Shabaab spokesperson praised the pirates, saying they were “protecting the coast against the enemies of Allah.” The leader of the Ras Kamboni Brigades, another radical Islamic group said to be linked to Al-Qaeda, said the pirates were “part of the Mujahideen” despite being “money-seekers.” Those that dismiss the possibility of a link between pirates and terrorists underestimate the forces of radical Islam’s ability to establish relationships of convenience, and underestimate the greed of pirates with a clear will to bypass principles for the sake of profit.
At the Somali Piracy Conference on April 7, Ambassador David H. Shinn conceded there was “no evidence that piracy is directly linked to international terrorism, although many Somali groups get a cut of the ransom money.” Citing Jane’s Intelligence Review, Shinn explained that the two forces cooperate on arms smuggling, and the pirates are reportedly helping al-Shabaab develop maritime capabilities.
While the relationship is based on business and not ideology, it doesn’t make it any less beneficial to al-Shabaab. He says that they sometimes receive a “protection fee of 5 to 10 percent of the ransom money. If al-Shabab helps to train the pirates, it might receive 20 percent and up to 50 percent if it finances the piracy operation.”
Andrew Mwangura, the head of the East African Seafarers’ Assistance Programme, has also said such a link exists. He told Reuters in August that “According to our information, the money they make from piracy and ransoms goes to support al-Shabaab activities onshore.”
Nor is al-Shabaab the only radical Islamic group utilizing piracy. According to The Long War Journal, “Al Qaeda’s regional affiliate, Jeemah Islamiyah, is often engaged in piracy, as are the Philippine affiliates Moro Islamic Liberation Front (MILF), Moro National Liberation Front (MNLF) and the Abu Sayyaf Group. The pirates and terrorists are often one in the same, or if not, are in close cooperation.”
This isn’t to say that they don’t sometimes fight one another, as all criminal and terrorist groups sometimes do. Ambassador Shinn accurately described the relationship as “fragile.” As a marriage of convenience, this relationship will fracture and subsequently heal depending on the interests of each party.
Three incidents in 2008 demonstrate this dynamic.
In April 2008, Somali pirates were paid a $1.2 million ransom to release a Spanish fishing boat and its 26 crewmembers. Al-Shabaab reportedly received five percent of the ransom, which local residents said was smaller than what the terrorist group demanded. In this case, they were business partners.
In September 2008, pirates hijacked a Ukrainian vessel which contained arms, including grenade launchers and 33 Russian T-72 tanks destined for Kenya. Al-Shabaab’s requests to receive some of the weapons from the ship were rebuffed by the pirates, who opted to take a $3.2 million ransom and released the ship and crew. Although no reports indicate that a portion of the ransom was given to terrorists, the possibility can not be ruled out. Here, al-Shabaab was rejected, but they did not declare armed conflict on the pirates, ending future deals.
These examples contrast with when pirates seized a Saudi supertanker. Sheikh Abdirahim Isse Adow, a spokesperson for the Islamic Courts Union which was allied with al-Shabaab, condemned the act saying “Saudi Arabia is a Muslim country and hijacking its ship is a bigger crime than other ships…we shall do something about that ship.” Radical Islamic militants then raided a port in an attempt to locate the pirates and the ship. In this case, pirates became the enemies of the terrorists. Despite this clash, the wounds were ultimately healed as Al-Qaeda has praised the recent pirate attacks on non-Muslim ships.
Some experts, such as John Feffer, mistake this on-again off-again relationship as meaning radical Islamic forces in Somalia won’t team up with pirates that do not attack Muslim ships. In fact, even this standard may not be consistently held, as Al-Qaeda has repeatedly attacked Muslims. Feffer describes the Islamic Courts Union, the former al-Shabaab ally from which Somalia’s current “moderate” president comes from, as a force against pirates, and even gives credit to Al-Shabaab’s condemnation of piracy as un-Islamic.
While leaders of the current Somali government may be against piracy, al-Shabaab’s condemnation is meaningless as the above information shows, and that group controls southern Somalia. When terrorist attacks can be carried out for thousands of dollars, the effect of a business relationship between some pirates and terrorists should not be downplayed.
Ryan Mauro is the founder of WorldThreats.com and the Assistant-Director of Intelligence at C2I. He’s also the National Security Researcher for the Christian Action Network and a published author. He can be contacted at TDCAnalyst@aol.com.
Friday, May 01, 2009
In his Salon.com article titled “Our Misguided Fight Against Somali Pirates,” John Feffer from the Institute for Policy Studies asks “Those teenage high-seas renegades are not about to team up with terrorists, so why is the U.S. military devoting so much attention to them?” While Freer is correct in pointing out that the pirates and terrorists are not ideological allies, it is a mistake to assume that the pirates are not willing to become valued business partners of radical Islamic terrorist groups including those linked to Al-Qaeda.
Al-Shabaab, the Al-Qaeda affiliate labeled by the State Department as a terrorist organization, currently controls southern Somalia. The recent media attention given to the taking of an American cargo ship captain hostage and subsequent rescue will no doubt motivate this group to partner with pirates, if for no other reason than to try to steal some of the spotlight. Indeed, shortly following the incident, al-Shabaab claimed credit for firing mortars near a visiting U.S. congressman.
Already, senior Al-Qaeda member Sa’id Ali Jabir Al-Khathim al-Shihri, has instructed his Somali allies to “increase your strikes against the crusaders at sea and in Djibouti.” Earlier in April, an al-Shabaab spokesperson praised the pirates, saying they were “protecting the coast against the enemies of Allah.” The leader of the Ras Kamboni Brigades, another radical Islamic group said to be linked to Al-Qaeda, said the pirates were “part of the Mujahideen” despite being “money-seekers.” Those that dismiss the possibility of a link between pirates and terrorists underestimate the forces of radical Islam’s ability to establish relationships of convenience, and underestimate the greed of pirates with a clear will to bypass principles for the sake of profit.
At the Somali Piracy Conference on April 7, Ambassador David H. Shinn conceded there was “no evidence that piracy is directly linked to international terrorism, although many Somali groups get a cut of the ransom money.” Citing Jane’s Intelligence Review, Shinn explained that the two forces cooperate on arms smuggling, and the pirates are reportedly helping al-Shabaab develop maritime capabilities.
While the relationship is based on business and not ideology, it doesn’t make it any less beneficial to al-Shabaab. He says that they sometimes receive a “protection fee of 5 to 10 percent of the ransom money. If al-Shabab helps to train the pirates, it might receive 20 percent and up to 50 percent if it finances the piracy operation.”
Andrew Mwangura, the head of the East African Seafarers’ Assistance Programme, has also said such a link exists. He told Reuters in August that “According to our information, the money they make from piracy and ransoms goes to support al-Shabaab activities onshore.”
Nor is al-Shabaab the only radical Islamic group utilizing piracy. According to The Long War Journal, “Al Qaeda’s regional affiliate, Jeemah Islamiyah, is often engaged in piracy, as are the Philippine affiliates Moro Islamic Liberation Front (MILF), Moro National Liberation Front (MNLF) and the Abu Sayyaf Group. The pirates and terrorists are often one in the same, or if not, are in close cooperation.”
This isn’t to say that they don’t sometimes fight one another, as all criminal and terrorist groups sometimes do. Ambassador Shinn accurately described the relationship as “fragile.” As a marriage of convenience, this relationship will fracture and subsequently heal depending on the interests of each party.
Three incidents in 2008 demonstrate this dynamic.
In April 2008, Somali pirates were paid a $1.2 million ransom to release a Spanish fishing boat and its 26 crewmembers. Al-Shabaab reportedly received five percent of the ransom, which local residents said was smaller than what the terrorist group demanded. In this case, they were business partners.
In September 2008, pirates hijacked a Ukrainian vessel which contained arms, including grenade launchers and 33 Russian T-72 tanks destined for Kenya. Al-Shabaab’s requests to receive some of the weapons from the ship were rebuffed by the pirates, who opted to take a $3.2 million ransom and released the ship and crew. Although no reports indicate that a portion of the ransom was given to terrorists, the possibility can not be ruled out. Here, al-Shabaab was rejected, but they did not declare armed conflict on the pirates, ending future deals.
These examples contrast with when pirates seized a Saudi supertanker. Sheikh Abdirahim Isse Adow, a spokesperson for the Islamic Courts Union which was allied with al-Shabaab, condemned the act saying “Saudi Arabia is a Muslim country and hijacking its ship is a bigger crime than other ships…we shall do something about that ship.” Radical Islamic militants then raided a port in an attempt to locate the pirates and the ship. In this case, pirates became the enemies of the terrorists. Despite this clash, the wounds were ultimately healed as Al-Qaeda has praised the recent pirate attacks on non-Muslim ships.
Some experts, such as John Feffer, mistake this on-again off-again relationship as meaning radical Islamic forces in Somalia won’t team up with pirates that do not attack Muslim ships. In fact, even this standard may not be consistently held, as Al-Qaeda has repeatedly attacked Muslims. Feffer describes the Islamic Courts Union, the former al-Shabaab ally from which Somalia’s current “moderate” president comes from, as a force against pirates, and even gives credit to Al-Shabaab’s condemnation of piracy as un-Islamic.
While leaders of the current Somali government may be against piracy, al-Shabaab’s condemnation is meaningless as the above information shows, and that group controls southern Somalia. When terrorist attacks can be carried out for thousands of dollars, the effect of a business relationship between some pirates and terrorists should not be downplayed.
Ryan Mauro is the founder of WorldThreats.com and the Assistant-Director of Intelligence at C2I. He’s also the National Security Researcher for the Christian Action Network and a published author. He can be contacted at TDCAnalyst@aol.com.
Why did the candidate of hope and change use workers paid less than half of the minimum wage?
I Was a High-Tech Sweatshop Worker for the Obama Campaign. By Dan Mage
Why did the candidate of hope and change use workers paid less than half of the minimum wage?
Reason, May 1, 2009
Middletown, New York—I wake up at 3:00 AM and I'm already late for work. Fortunately I don't have far to go. Taking care not to wake my wife, I remove the laptop from the bedroom desk and move it into the main computer room on the other side of the apartment. I don't want to use my aging desktop with the big monitor; it can't handle the traffic as fast as I need it to if I want to maximize my earnings.
As an expeditor for ChaCha Search Inc., a business that specializes in answering questions sent by text message, email, and voice mail, my job is to take the queries as they come in, make them readable, categorize them, and forward them to a "guide" who finds the answer—ideally within 2-3 minutes—and relays it back to the customer. It's a free service, with revenue generated by advertisements sent via text message or attached to the answer itself.
So I boot up, log in, and start processing the queries. The faster I work the more money I make. The shift passes with a few bursts of frenetic activity breaking up long stretches where the queries come in every one or two minutes. At 6:30 AM, I calculate my earnings. I've made about $5 in three hours.
For every query I expedite, I make three cents. If traffic is heavy, and when I'm in top form, I can average four queries per minute, or $7.20 an hour—but these high volume periods are rare. I calculate my career average to be approximately $2.85 per hour. That's less than half of the federal minimum wage. ChaCha Search Inc., in other words, is a high-tech 21st century sweatshop.
Headquartered in Carmel, Indiana, ChaCha has approximately 55,000 home-working guides and expeditors under contract. The expeditors are all paid the piece rate described above; the guides receive 10 or 20 cents per query, depending on the quality of their answers and their level of expertise. It's a young, hip company whose advertisers have included AT&T, McDonald's, and the Barack Obama presidential campaign.
The Obama campaign's use of ChaCha was simple and brilliant. Messages would go out advising customers to vote early for Obama and to text back the keyword OBAMA for more information. That would direct them to pro-Obama websites such as VoteForChange.com. If the keyword failed to trigger the automatic response, an expeditor like me would route it to a guide.
Here's the question: Did Obama have personal knowledge of ChaCha's employment practices? His campaign's use of the company was certainly no secret. ChaCha proudly displays an article on its website from USA Today describing their partnership—though the article makes no mention of the compensation received by expeditors and guides.
For its part, ChaCha exemplifies the best and worst of today's Internet economy. The company was more than willing to profit from Obama's candidacy, yet if federal minimum wage laws applied to its home-working contractors, ChaCha wouldn't stay in business for long.
Does Obama's relationship with ChaCha matter? Consider his own words, first spoken during a March 2008 campaign appearance in Lancaster County, Pennsylvania, and later incorporated into his campaign infomercial (transcribed here by Time's Mark Halperin): "If they're able and willing to work, they should be able to find a job that pays a living wage." Obama also favors raising the minimum wage to $9.50 per hour by 2011. But despite all of that lofty talk, his campaign still employed ChaCha's high-tech sweatshop labor.Think about it like this. Obama sold the ideas of hope and change to America's desperate working and lower-middle classes. But it was only a campaign tactic. The Democrats continue to enable and reward the same incompetence, corruption, and corporate welfare that characterized the Bush administration. A stimulus check of $2000 to every American without regard to age, income, or assets would have been less expensive (and probably more effective) than the Bush-Obama bailouts. Give money to the original owners—the taxpayers—and send those corporate losers to the back of the line.
Better yet, what about a truly free market, one that actually lets economic dinosaurs go extinct, rather than keeping them alive via the life support of statist policies and practices. Conversely, if workers stopped expecting help from the state, they might begin to protect their interests as vigorously as the elite promote their own agenda.
Of course none of that will be happening anytime soon. But when it comes to holding the president accountable to his own flowery rhetoric, the time is ripe for some change we can finally believe in.
Dan Mage is a writer living in Middletown, New York. A two-time dropout of Naropa University, he is the owner and creator of www.freneticmemetics.com.
Why did the candidate of hope and change use workers paid less than half of the minimum wage?
Reason, May 1, 2009
Middletown, New York—I wake up at 3:00 AM and I'm already late for work. Fortunately I don't have far to go. Taking care not to wake my wife, I remove the laptop from the bedroom desk and move it into the main computer room on the other side of the apartment. I don't want to use my aging desktop with the big monitor; it can't handle the traffic as fast as I need it to if I want to maximize my earnings.
As an expeditor for ChaCha Search Inc., a business that specializes in answering questions sent by text message, email, and voice mail, my job is to take the queries as they come in, make them readable, categorize them, and forward them to a "guide" who finds the answer—ideally within 2-3 minutes—and relays it back to the customer. It's a free service, with revenue generated by advertisements sent via text message or attached to the answer itself.
So I boot up, log in, and start processing the queries. The faster I work the more money I make. The shift passes with a few bursts of frenetic activity breaking up long stretches where the queries come in every one or two minutes. At 6:30 AM, I calculate my earnings. I've made about $5 in three hours.
For every query I expedite, I make three cents. If traffic is heavy, and when I'm in top form, I can average four queries per minute, or $7.20 an hour—but these high volume periods are rare. I calculate my career average to be approximately $2.85 per hour. That's less than half of the federal minimum wage. ChaCha Search Inc., in other words, is a high-tech 21st century sweatshop.
Headquartered in Carmel, Indiana, ChaCha has approximately 55,000 home-working guides and expeditors under contract. The expeditors are all paid the piece rate described above; the guides receive 10 or 20 cents per query, depending on the quality of their answers and their level of expertise. It's a young, hip company whose advertisers have included AT&T, McDonald's, and the Barack Obama presidential campaign.
The Obama campaign's use of ChaCha was simple and brilliant. Messages would go out advising customers to vote early for Obama and to text back the keyword OBAMA for more information. That would direct them to pro-Obama websites such as VoteForChange.com. If the keyword failed to trigger the automatic response, an expeditor like me would route it to a guide.
Here's the question: Did Obama have personal knowledge of ChaCha's employment practices? His campaign's use of the company was certainly no secret. ChaCha proudly displays an article on its website from USA Today describing their partnership—though the article makes no mention of the compensation received by expeditors and guides.
For its part, ChaCha exemplifies the best and worst of today's Internet economy. The company was more than willing to profit from Obama's candidacy, yet if federal minimum wage laws applied to its home-working contractors, ChaCha wouldn't stay in business for long.
Does Obama's relationship with ChaCha matter? Consider his own words, first spoken during a March 2008 campaign appearance in Lancaster County, Pennsylvania, and later incorporated into his campaign infomercial (transcribed here by Time's Mark Halperin): "If they're able and willing to work, they should be able to find a job that pays a living wage." Obama also favors raising the minimum wage to $9.50 per hour by 2011. But despite all of that lofty talk, his campaign still employed ChaCha's high-tech sweatshop labor.Think about it like this. Obama sold the ideas of hope and change to America's desperate working and lower-middle classes. But it was only a campaign tactic. The Democrats continue to enable and reward the same incompetence, corruption, and corporate welfare that characterized the Bush administration. A stimulus check of $2000 to every American without regard to age, income, or assets would have been less expensive (and probably more effective) than the Bush-Obama bailouts. Give money to the original owners—the taxpayers—and send those corporate losers to the back of the line.
Better yet, what about a truly free market, one that actually lets economic dinosaurs go extinct, rather than keeping them alive via the life support of statist policies and practices. Conversely, if workers stopped expecting help from the state, they might begin to protect their interests as vigorously as the elite promote their own agenda.
Of course none of that will be happening anytime soon. But when it comes to holding the president accountable to his own flowery rhetoric, the time is ripe for some change we can finally believe in.
Dan Mage is a writer living in Middletown, New York. A two-time dropout of Naropa University, he is the owner and creator of www.freneticmemetics.com.
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