Insecticide or Suffering? By Gilbert Ross, M.D.
American Council on Science and Health, Sunday, January 18, 2009
Next week, the European Parliament will debate stringent regulation of a number of effective pesticides. It is apparently too much to expect a sense of shame from European public health officials and their activist "environmental" collaborators when the subject of chemical pesticides is raised.
What about some sense of history? Or compassion? Not likely, as the European Parliament votes next Tuesday on a proposal to tighten the already onerous restrictions on many common insecticides. If this regulation is passed, the consequences will be devastating -- not in Europe, but in Africa and Asia.
Over the decades from World War II through the late 1960s, widespread use of the potent and safe insecticide DDT led to eradication of many insect-borne diseases in Europe and North America. But at the doorstep of global malaria control, DDT became the poster child for environmental degradation, thanks to Rachel Carson's polemic, Silent Spring.
Based on no scientific evidence of human health effects, the newly established U.S. Environmental Protection Agency banned DDT, and its European counterparts followed suit. Subsequently, more than 1 million people died each year from malaria -- but not in America or Europe. Rather, most of the victims were children and women in Africa and Asia.
Today, even while acknowledging that indoor spraying of small amounts of DDT would help prevent many deaths and millions of illnesses, nongovernmental organizations continue -- with great success -- to pressure African governments not to allow its use. In order to stave off such pressure and be allowed to sell their agricultural products in Europe, African public health officials cave, and their children die needlessly. Yet, rather than learning the tragic lesson of the DDT ban, the European Union leadership in concert with activists wants to extend this unscientific ban to other effective insecticides, including pyrethroids and organophosphates -- further undercutting anti-malarial efforts.
The currently debated regulation would engender a paradigm shift in the regulation of chemicals, from a risk-based approach -- based on real world exposures from agricultural applications -- to a hazard-based standard, derived from laboratory tests and having little or no basis in reality as far as human health is concerned. Of course, this is fine with anti-chemical zealots in the activist camps. Their concern is bringing down chemical companies in the name of "the environment" -- tough luck if African children have to be sacrificed to their agenda, as was the case with DDT (which is still banned in the EU and not under consideration in the current debate).
Further consequences involve discontinuation of currently used insecticides, leading to higher prices and decreased availability of these chemicals, which would worsen food shortages and increasing malnutrition. Moreover, farmers and marketers of agricultural products in the world's poorest regions would withdraw from using restricted pesticides out of fear of discrimination against their exports in the EU, with similar consequences for farmers' yields, income and local nutrition. Such bans would, in effect, become nontariff trade barriers against poor African farmers.
The banned insecticides will not be easily replaced -- researchers in this area of chemistry will take note of the new, stringent standards and decide the potential return on their investment is not worth the effort of passing through the regulatory hurdles. Development of newer, more effective pesticides will come to a halt.
Most poignantly, the fight against malaria and other insect-borne tropical diseases would take another hit, with resulting illness, disability and death disproportionally affecting children under five and pregnant women.
And what, after all, is the "danger" of these chemicals being debated? In fact, there is no evidence to support the activists' contention that insecticides pose a health threat to humans. Even DDT, one of the most studied chemicals of all time, has been conclusively shown to be safe for humans at all conceivable levels of exposure sufficient to control malaria and save millions of lives.
So these new restrictions would have no benefit, yet contribute to much suffering. Is it asking too much for someone in power in the European Union to care?
Gilbert Ross, M.D., is medical director of the American Council on Science and Health in New York City.
Tuesday, January 27, 2009
Chernobyl, Three Miles Island and thyroid cancer
Nuke Those Fears! By Ruth Kava, Ph.D., R.D.
Greens dismiss nuclear energy based on little more than greatly exaggerated depictions of the supposed dangers and difficulties of its use.
American Council on Science and Health, Jan 27, 2009
Excerpts:
The environmental mantra these days has two main components -- clean energy and green (sustainable) energy -- anything but oil and coal. Proponents strongly encourage the development of solar and wind energy, neither of which is ready yet for widespread commercial use. But they ignore or downplay the use of a well understood and already commercialized technology -- nuclear energy -- based on little more than greatly exaggerated depictions of the supposed dangers and difficulties of its use.
One fear that has been widely promoted is that of large-scale accidents in nuclear power plants. Anti-nuclear activists point to two examples of that -- the explosion at the Russian Chernobyl reactor in 1986, and the partial meltdown of the fuel rods at the Three Mile Island reactor in 1979.
The Chernobyl explosion was due to errors made by the operators during a test and a lack of adequate safety features and procedures that could have prevented such errors. It will surprise many that, with the exception of workers who were on the scene and received massive acute doses of radiation, there has been no evidence of increased radiation-caused mortality. In contrast to the Chernobyl plant, modern nuclear facilities have redundant safety features to prevent such errors.
Although it has also been used as an example of a large-scale accident, there was actually little release of radioactivity from the Three Mile Island reactor -- even though about half of the fuel melted. The level of radioactivity received by the surrounding area was not significantly greater than that normally supplied by natural background sources. In other words, the containment precautions were effective. Of course, the anti-nuclear fanatics' propaganda pays no attention to these simple facts.
Another fear that has been widely promoted is that release of radioactivity from a nuclear plant -- specifically the radioactive iodine, I131 -- would cause thyroid cancer in exposed children. This fear actually has some biological basis in that the thyroid gland avidly takes up iodine. It can be prevented from absorbing the radioactive iodine, however, by giving a large dose of non-radioactive iodine. An even simpler preventive measure: avoid drinking milk for a week or two after such an (unlikely) event. Of course prevention of I131 release is a much better option.
It is true that a year after the Chernobyl accident screening studies revealed an increased occurrence of thyroid cancer in exposed children. However, many scientists have questioned whether this was really due to the Chernobyl-related exposure, since thyroid cancer typically has a latency period of thirty years. Further, it is important to note that prior to the explosion, there was very little screening of children in the Chernobyl area -- but around 90% were screened afterwards. This fact alone very likely contributed to the increased incidence observed. In addition, the incidence of thyroid cancer was actually lower in the highly contaminated region than in the general Russian population.
[...]
Dr. Ruth Kava is Director of Nutrition at the American Council on Science and Health (ACSH.org, HealthFactsAndFears.com).
Greens dismiss nuclear energy based on little more than greatly exaggerated depictions of the supposed dangers and difficulties of its use.
American Council on Science and Health, Jan 27, 2009
Excerpts:
The environmental mantra these days has two main components -- clean energy and green (sustainable) energy -- anything but oil and coal. Proponents strongly encourage the development of solar and wind energy, neither of which is ready yet for widespread commercial use. But they ignore or downplay the use of a well understood and already commercialized technology -- nuclear energy -- based on little more than greatly exaggerated depictions of the supposed dangers and difficulties of its use.
One fear that has been widely promoted is that of large-scale accidents in nuclear power plants. Anti-nuclear activists point to two examples of that -- the explosion at the Russian Chernobyl reactor in 1986, and the partial meltdown of the fuel rods at the Three Mile Island reactor in 1979.
The Chernobyl explosion was due to errors made by the operators during a test and a lack of adequate safety features and procedures that could have prevented such errors. It will surprise many that, with the exception of workers who were on the scene and received massive acute doses of radiation, there has been no evidence of increased radiation-caused mortality. In contrast to the Chernobyl plant, modern nuclear facilities have redundant safety features to prevent such errors.
Although it has also been used as an example of a large-scale accident, there was actually little release of radioactivity from the Three Mile Island reactor -- even though about half of the fuel melted. The level of radioactivity received by the surrounding area was not significantly greater than that normally supplied by natural background sources. In other words, the containment precautions were effective. Of course, the anti-nuclear fanatics' propaganda pays no attention to these simple facts.
Another fear that has been widely promoted is that release of radioactivity from a nuclear plant -- specifically the radioactive iodine, I131 -- would cause thyroid cancer in exposed children. This fear actually has some biological basis in that the thyroid gland avidly takes up iodine. It can be prevented from absorbing the radioactive iodine, however, by giving a large dose of non-radioactive iodine. An even simpler preventive measure: avoid drinking milk for a week or two after such an (unlikely) event. Of course prevention of I131 release is a much better option.
It is true that a year after the Chernobyl accident screening studies revealed an increased occurrence of thyroid cancer in exposed children. However, many scientists have questioned whether this was really due to the Chernobyl-related exposure, since thyroid cancer typically has a latency period of thirty years. Further, it is important to note that prior to the explosion, there was very little screening of children in the Chernobyl area -- but around 90% were screened afterwards. This fact alone very likely contributed to the increased incidence observed. In addition, the incidence of thyroid cancer was actually lower in the highly contaminated region than in the general Russian population.
[...]
Dr. Ruth Kava is Director of Nutrition at the American Council on Science and Health (ACSH.org, HealthFactsAndFears.com).
US–India Strategic Partnership on Laser-Based Missile Defense
U.S.–India Strategic Partnership on Laser-Based Missile Defense. By Lisa Curtis and James Jay Carafano, Ph.D.
Heritage, January 27, 2009
WebMemo #2250
Last week, the Press Trust of India reported that defense officials intend to produce a laser capable of shooting down enemy ballistic missiles. The United States is a global leader in directed-energy defenses, including both low and high-powered lasers. American military research is also highly advanced in the technologies of acquiring targets as well as the command, control, and battle management systems necessary to identify and direct weapons to destroy missiles and other targets. In recent years, the United States and India have increased bilateral cooperation in a range of defense, counterterrorism, and homeland security areas. This cooperation is helping increase trust and confidence between the two nations while fostering security, stability, and prosperity in Asia. Working together on directed-energy developments offers a significant opportunity to strengthen the U.S.-India strategic partnership.
India Goes to Light Speed
The United States and India share many security concerns, such as the threat of ballistic missiles. V. K. Saraswat of the Defense Research and Development Organization rightly told the Press Times of India: "If you have a laser-based system on an airborne or seaborne platform, it can travel at the speed of light and in a few seconds, [and] we can kill a ballistic missile coming towards [India]." India's interest in developing directed energy defenses is understandable, as lasers have several distinct advantages. Such weapons:
- Can use a high-powered beam of energy to disable electrical components or detonate explosives, rendering the attack means such as the warhead or body of a missile useless;
- Come with an almost infinite magazine--as long as the weapons have power, they can be recharged and fired again;
- Can be aimed effectively using existing target acquisition systems (such as radars) and command and control systems (such as a computer battle management network); and
- Can be employed with a minimum of risk toward surrounding civilians, buildings, or vehicles (such as aircraft, cars, and ships).
In addition, lasers are versatile. While high-powered lasers address ballistic missile threats, low-powered lasers have a number of potential security uses, from disabling small boats to downing shoulder-fired missiles to intercepting rockets and mortars. All these uses have application to Indian security concerns.
It is also worth noting that missile defenses, such as high-powered lasers, limit the potential for regional conflict. Missile defenses serve as important deterrents, undermining the effectiveness of enemy threats. They also provide an alternative to massive retaliation in the face of an actual attack. The security provided by missile defenses actually limits the likelihood of armed escalation or an arms race and makes diplomacy more effective. It is no coincidence that the greatest strides in reducing the nuclear arsenals came in the late 1980s, at the same time the U.S. was pursuing the Strategic Defense Initiative. A world with effective missile defenses is safer and more stable.
American Arsenal
The United States has significant research and development capabilities regarding the application of lasers for national security uses. The Tactical High-Energy Laser (THEL) is one such experimental system tested by the U.S. Army. Development of the THEL began in 1996 as a joint program between the United States and Israel to develop a laser system capable of shooting down Katyusha rockets, artillery, and mortar shells. The THEL system uses radar to detect and track incoming targets. This information is then transferred to an optical tracking system, which refines the target tracking and positions the beam director. The deuterium fluoride chemical laser then fires, hitting the rocket or shell and causing it to explode far short of its intended target. More recently, the Army has experimented with low-power commercial solid-state lasers.
Another system under development in the United States is the Airborne Laser (ABL). The ABL is a system that uses a megawatt chemical laser mounted on a modified Boeing 747 to shoot down theater ballistic missiles. The megawatt-class laser was first successfully tested at full power in early 2006. The system is still under development.
A Shared Security Interest
The American record of military laser research and its many cooperative ventures with friendly and allied powers suggests that a joint U.S.-Indian directed energy program is certainly achievable. The shared interests of both nations in promoting security and stability in Asia also indicates they have a common cause in developing military technologies that would lessen the potential for conflict while effectively countering terrorism. The U.S. should explore opportunities for joint development of cutting edge directed energy technologies--lasers--with India as part of overall missile defense dialogue and deepening of military-to-military ties.
Lisa Curtis is Senior Research Fellow in the Asian Studies Center, and James Jay Carafano, Ph.D., is Assistant Director of the Kathryn and Shelby Cullom Davis Institute for International Studies and Senior Research Fellow in the Douglas and Sarah Allison Center for Foreign Policy Studies at The Heritage Foundation.
State Dept Contributes $125 Million to the United Nations High Commissioner for Refugees
State Department Contributes $125 Million to the United Nations High Commissioner for Refugees
Media Note, Office of the Spokesman
State Dept, Washington, DC, January 27, 2009
The United States is pleased to announce an initial contribution of $125 million toward the 2009 operations of the United Nations High Commissioner for Refugees (UNHCR).
The contribution will support UNHCR efforts worldwide, including activities such as refugee returns to Afghanistan and Burundi; local integration and resettlement; and protection and life-saving assistance such as the provision of water, shelter, food, healthcare, and education to refugees, internally displaced persons, and other persons under UNHCR's care and protection in places like Colombia, Ecuador, Georgia, Thailand, Nepal, Pakistan, Sudan, Chad, Kenya, Liberia, the Democratic Republic of Congo, Uganda, and Rwanda.
The contribution will directly support UNHCR's Annual and Supplementary Program activities as indicated below.
Africa $65.07 million
Asia and Pacific $15.88 million
Europe $9.92 million
Global Operations $7.16 million
North Africa/Middle East $6.73 million
Headquarters $9.87 million
Western Hemisphere $5.5 million
Emergency Response activities $4.87 million
TOTAL $125.0 million
2009/082
Media Note, Office of the Spokesman
State Dept, Washington, DC, January 27, 2009
The United States is pleased to announce an initial contribution of $125 million toward the 2009 operations of the United Nations High Commissioner for Refugees (UNHCR).
The contribution will support UNHCR efforts worldwide, including activities such as refugee returns to Afghanistan and Burundi; local integration and resettlement; and protection and life-saving assistance such as the provision of water, shelter, food, healthcare, and education to refugees, internally displaced persons, and other persons under UNHCR's care and protection in places like Colombia, Ecuador, Georgia, Thailand, Nepal, Pakistan, Sudan, Chad, Kenya, Liberia, the Democratic Republic of Congo, Uganda, and Rwanda.
The contribution will directly support UNHCR's Annual and Supplementary Program activities as indicated below.
Africa $65.07 million
Asia and Pacific $15.88 million
Europe $9.92 million
Global Operations $7.16 million
North Africa/Middle East $6.73 million
Headquarters $9.87 million
Western Hemisphere $5.5 million
Emergency Response activities $4.87 million
TOTAL $125.0 million
2009/082
US: Bainimarama Has No Plan For Elections in Fiji
Bainimarama Has No Plan For Elections in Fiji
Press Statement by Robert Wood, Acting Spokesman
US State Dept, Washington, DC, January 27, 2009
The United States is extremely disappointed that Fiji’s self-appointed leader, Commodore Frank Bainimarama, refused to attend the Pacific Island Forum (PIF) conference of leaders in Port Moresby on January 27. The United States firmly supports the PIF’s statement that “More than two years of rule by an unelected military government, with no clear timetable for the return of constitutional government to the people, is not acceptable by international standards.” The United States strongly endorses the PIF position and urges Fiji’s interim government to move immediately to restore democracy and to hold free and fair elections by the end of this year.
2009/080
Press Statement by Robert Wood, Acting Spokesman
US State Dept, Washington, DC, January 27, 2009
The United States is extremely disappointed that Fiji’s self-appointed leader, Commodore Frank Bainimarama, refused to attend the Pacific Island Forum (PIF) conference of leaders in Port Moresby on January 27. The United States firmly supports the PIF’s statement that “More than two years of rule by an unelected military government, with no clear timetable for the return of constitutional government to the people, is not acceptable by international standards.” The United States strongly endorses the PIF position and urges Fiji’s interim government to move immediately to restore democracy and to hold free and fair elections by the end of this year.
2009/080
Bjorn Lomborg on Mr Obama's global warming policies
The climate change safari park, by Bjorn Lomborg
The Economic Times (India), Jan 23, 2009, 0033 hrs IST
Barack Obama in his inaugural speech promised to “roll back the spectre of a warming planet.” In this context, it is worth contemplating a passage from his book Dreams from My Father. It reveals a lot about the way we view the world’s problems.
Obama is in Kenya and wants to go on a safari. His Kenyan sister Auma chides him for behaving like a neo-colonialist. “Why should all that land be set aside for tourists when it could be used for farming? These wazungu care more about one dead elephant than they do for a hundred black children.” Although he ends up going on safari, Obama has no answer to her question. That anecdote has parallels with the current preoccupation with global warming. Many people — including America’s new President — believe that global warming is the pre-eminent issue of our time, and that cutting CO2 emissions is one of the most virtuous things we can do.
To stretch the metaphor a little, this seems like building ever-larger safari parks instead of creating more farms to feed the hungry.
Make no mistake: global warming is real, and it is caused by manmade CO2 emissions. The problem is that even global, draconian, and hugely costly CO2 reductions will have virtually no impact on the temperature by mid-century. Instead of ineffective and costly cuts, we should focus much more of our good climate intentions on dramatic increases in R&D for zero-carbon energy, which would fix the climate towards mid-century at low cost. But, more importantly for most of the planet’s citizens, global warming simply exacerbates existing problems.
Consider malaria. Models shows global warming will increase the incidence of malaria by about 3% by the end of the century, because mosquitoes are more likely to survive when the world gets hotter. But malaria is much more strongly related to health infrastructure and general wealth than it is to temperature. Rich people rarely contract malaria or die from it; poor people do.
Strong carbon cuts could avert about 0.2% of the malaria incidence in a hundred years. The other option is simply to prioritise eradication of malaria today. It would be relatively cheap and simple, involving expanded distribution of insecticide-treated bed nets, more preventive treatment for pregnant women, increased use of the maligned pesticide DDT, and support for poor nations that cannot afford the best new therapies.
Tackling nearly 100% of today’s malaria problem would cost just one-sixtieth of the price of the Kyoto Protocol. Put another way, for each person saved from malaria by cutting CO2 emissions, direct malaria policies could have saved 36,000. Of course, carbon cuts are not designed only to tackle malaria. But, for every problem that global warming will exacerbate — hurricanes, hunger, flooding — we could achieve tremendously more through cheaper, direct policies today.
For example, adequately maintained levees and better evacuation services, not lower carbon emissions, would have minimised the damage inflicted by Hurricane Katrina on New Orleans. During the 2004 hurricane season, Haiti and the Dominican Republic, both occupying the same island, provided a powerful lesson. In the Dominican Republic, which has invested in hurricane shelters and emergency evacuation networks, the death toll was fewer than ten. In Haiti, which lacks such policies, 2,000 died. Haitians were a hundred times more likely to die in an equivalent storm than Dominicans.
Obama’s election has raised hopes for a massive commitment to carbon cuts and vast spending on renewable energy to save the world — especially developing nations. As Obama’s Kenyan sister might attest, this could be an expensive indulgence. Some believe Obama should follow the lead of the European Union, which has committed itself to the goal of cutting carbon emissions by 20% below 1990 levels within 12 years by using renewable energy. This alone will probably cost more than 1% of GDP.
Even if the entire world followed suit, the net effect would be to reduce global temperatures by one-twentieth of one degree Fahrenheit by the end of the century. The cost could be a staggering $10 trillion.
Most economic models show that the total damage imposed by global warming by the end of the century will be about 3% of GDP. This is not trivial, but nor is it the end of the world. By the end of the century, the United Nations expects the average person to be 1,400% richer than today.
An African safari trip once confronted America’s new president with a question he could not answer: why the rich world prized elephants over African children. Today’s version of that question is: why will richer nations spend obscene amounts of money on climate change, achieving next to nothing in 100 years, when we could do so much good for mankind today for much less money? The world will be watching to hear Obama’s answer.
(The author, adjunct professor at the Copenhagen Business School, is the organiser of the Copenhagen Consensus.)
The Economic Times (India), Jan 23, 2009, 0033 hrs IST
Barack Obama in his inaugural speech promised to “roll back the spectre of a warming planet.” In this context, it is worth contemplating a passage from his book Dreams from My Father. It reveals a lot about the way we view the world’s problems.
Obama is in Kenya and wants to go on a safari. His Kenyan sister Auma chides him for behaving like a neo-colonialist. “Why should all that land be set aside for tourists when it could be used for farming? These wazungu care more about one dead elephant than they do for a hundred black children.” Although he ends up going on safari, Obama has no answer to her question. That anecdote has parallels with the current preoccupation with global warming. Many people — including America’s new President — believe that global warming is the pre-eminent issue of our time, and that cutting CO2 emissions is one of the most virtuous things we can do.
To stretch the metaphor a little, this seems like building ever-larger safari parks instead of creating more farms to feed the hungry.
Make no mistake: global warming is real, and it is caused by manmade CO2 emissions. The problem is that even global, draconian, and hugely costly CO2 reductions will have virtually no impact on the temperature by mid-century. Instead of ineffective and costly cuts, we should focus much more of our good climate intentions on dramatic increases in R&D for zero-carbon energy, which would fix the climate towards mid-century at low cost. But, more importantly for most of the planet’s citizens, global warming simply exacerbates existing problems.
Consider malaria. Models shows global warming will increase the incidence of malaria by about 3% by the end of the century, because mosquitoes are more likely to survive when the world gets hotter. But malaria is much more strongly related to health infrastructure and general wealth than it is to temperature. Rich people rarely contract malaria or die from it; poor people do.
Strong carbon cuts could avert about 0.2% of the malaria incidence in a hundred years. The other option is simply to prioritise eradication of malaria today. It would be relatively cheap and simple, involving expanded distribution of insecticide-treated bed nets, more preventive treatment for pregnant women, increased use of the maligned pesticide DDT, and support for poor nations that cannot afford the best new therapies.
Tackling nearly 100% of today’s malaria problem would cost just one-sixtieth of the price of the Kyoto Protocol. Put another way, for each person saved from malaria by cutting CO2 emissions, direct malaria policies could have saved 36,000. Of course, carbon cuts are not designed only to tackle malaria. But, for every problem that global warming will exacerbate — hurricanes, hunger, flooding — we could achieve tremendously more through cheaper, direct policies today.
For example, adequately maintained levees and better evacuation services, not lower carbon emissions, would have minimised the damage inflicted by Hurricane Katrina on New Orleans. During the 2004 hurricane season, Haiti and the Dominican Republic, both occupying the same island, provided a powerful lesson. In the Dominican Republic, which has invested in hurricane shelters and emergency evacuation networks, the death toll was fewer than ten. In Haiti, which lacks such policies, 2,000 died. Haitians were a hundred times more likely to die in an equivalent storm than Dominicans.
Obama’s election has raised hopes for a massive commitment to carbon cuts and vast spending on renewable energy to save the world — especially developing nations. As Obama’s Kenyan sister might attest, this could be an expensive indulgence. Some believe Obama should follow the lead of the European Union, which has committed itself to the goal of cutting carbon emissions by 20% below 1990 levels within 12 years by using renewable energy. This alone will probably cost more than 1% of GDP.
Even if the entire world followed suit, the net effect would be to reduce global temperatures by one-twentieth of one degree Fahrenheit by the end of the century. The cost could be a staggering $10 trillion.
Most economic models show that the total damage imposed by global warming by the end of the century will be about 3% of GDP. This is not trivial, but nor is it the end of the world. By the end of the century, the United Nations expects the average person to be 1,400% richer than today.
An African safari trip once confronted America’s new president with a question he could not answer: why the rich world prized elephants over African children. Today’s version of that question is: why will richer nations spend obscene amounts of money on climate change, achieving next to nothing in 100 years, when we could do so much good for mankind today for much less money? The world will be watching to hear Obama’s answer.
(The author, adjunct professor at the Copenhagen Business School, is the organiser of the Copenhagen Consensus.)
Pelosi: "contraception [...] will reduce costs to the states and to the federal government."
Speaker Nancy Malthus. WSJ Editorial
Pelosi should abstain from social engineering.
WSJ, Jan 27, 2009
One of the more curious items in the $825 billion House "stimulus" is $87 billion to help states with Medicaid, specifically including an expansion of family-planning services. The implication is that more people mean less economic growth.
Following a White House meeting with President Obama on Friday, Republican John Boehner, the House Minority Leader, asked how spending millions of dollars on birth control will help stimulate the economy. On Sunday, George Stephanopoulos of ABC's "This Week" repeated the question to House Speaker Nancy Pelosi, who responded that "family planning services reduce costs."
She added: "The states are in terrible fiscal budget crises now, and part of what we do for children's health, education and some of those elements are to help states meet their financial needs. One of those -- one of the initiatives you mentioned, the contraception -- will reduce costs to the states and to the federal government."
The notion that a larger population will produce a lower standard of living can be traced to the 18th-century economist Thomas Malthus. But during Malthus's own lifetime, his prediction was proved false, as he later acknowledged. Population and living standards rose simultaneously, and have continued to do so.
Ms. Pelosi's remarks ignore the importance of human capital, which is the ultimate resource. Fewer babies would move the U.S. in the demographic direction of Europe and Asia. On the Continent, birth rates already are effectively zero, and economists are predicting labor shortages in the years ahead. In Japan, where the population is aging very fast, workers are now encouraged to go home early to procreate. Japan is projected to lose 21% of its population by 2050.
The age and growth rate of a nation help determine its economic prosperity. A smaller workforce can result in less overall economic output. Without enough younger workers to replace retirees, health and pension costs can become debilitating. And when domestic markets shrink, so does capital investment. Whatever one's views on taxpayer subsidies for contraception, as economic stimulus the idea is loopy.
Pelosi should abstain from social engineering.
WSJ, Jan 27, 2009
One of the more curious items in the $825 billion House "stimulus" is $87 billion to help states with Medicaid, specifically including an expansion of family-planning services. The implication is that more people mean less economic growth.
Following a White House meeting with President Obama on Friday, Republican John Boehner, the House Minority Leader, asked how spending millions of dollars on birth control will help stimulate the economy. On Sunday, George Stephanopoulos of ABC's "This Week" repeated the question to House Speaker Nancy Pelosi, who responded that "family planning services reduce costs."
She added: "The states are in terrible fiscal budget crises now, and part of what we do for children's health, education and some of those elements are to help states meet their financial needs. One of those -- one of the initiatives you mentioned, the contraception -- will reduce costs to the states and to the federal government."
The notion that a larger population will produce a lower standard of living can be traced to the 18th-century economist Thomas Malthus. But during Malthus's own lifetime, his prediction was proved false, as he later acknowledged. Population and living standards rose simultaneously, and have continued to do so.
Ms. Pelosi's remarks ignore the importance of human capital, which is the ultimate resource. Fewer babies would move the U.S. in the demographic direction of Europe and Asia. On the Continent, birth rates already are effectively zero, and economists are predicting labor shortages in the years ahead. In Japan, where the population is aging very fast, workers are now encouraged to go home early to procreate. Japan is projected to lose 21% of its population by 2050.
The age and growth rate of a nation help determine its economic prosperity. A smaller workforce can result in less overall economic output. Without enough younger workers to replace retirees, health and pension costs can become debilitating. And when domestic markets shrink, so does capital investment. Whatever one's views on taxpayer subsidies for contraception, as economic stimulus the idea is loopy.
Iraq's Next Vote: How elections can work in an unstable country
Iraq's Next Vote. WaPo Editorial
How elections can work in an unstable country
Washington Post, Tuesday, January 27, 2009; Page A16
PRESIDENT OBAMA has suggested that elections may not be constructive in countries where there is no "freedom from fear" or where the rule of law and civil society are undeveloped. Iraq may be about to prove him wrong. Though security is fragile, the constitution is still disputed and institutions such as courts and a free media remain works in progress, the country's third national election since 2005 is scheduled for Saturday -- and it is looking like another important step toward stabilization.
The campaign for positions in 14 provinces so far has been a major improvement over the previous Iraqi elections -- not to mention the rigged or tightly limited ballots staged by most other Arab countries. Some 14,400 candidates are competing for 440 seats; in contrast to the last provincial vote, in January 2005, candidates are identified by name rather than being presented anonymously on a party slate. Thousands are openly competing in Iraqi cities and towns once paralyzed by violence or controlled by al-Qaeda. Blast walls have been papered with posters, and much of the debate is focused on improving government services. Violence, which spiked four years ago, so far has been a minor factor: Two candidates have been reported killed, and U.S. and Iraqi casualties this month are among the lowest since the war began.
In 2005, voters mostly chose among sectarian coalitions, and most Sunnis boycotted the vote. This month, Sunni parties are actively competing, and though religious parties remain important, the major Shiite and Sunni factions are jockeying among themselves. This means that Sunni politicians will be far better represented in local government and that the leaders themselves will be more popular, secular and diverse. In southern Iraq, an important debate over whether Shiites should support a strong national government or a Shiite-dominated federal region is being fought out by the Dawa party of Prime Minister Nouri al-Maliki and the Islamic Supreme Council of Iraq, which controls many provincial councils.
Mr. Maliki has gravitated toward a secular nationalism: His coalition is called State of Law. Once dismissed as hopelessly weak, the prime minister has grown so strong that some accuse him of plotting to construct a new Iraqi autocracy. For the moment, that seems unlikely, given the balances built into Iraq's new political system. But Mr. Maliki's platform does augur an Iraq that will be relatively secular, that will assert its independence from Iran and that will remain allied with the United States in the fight against al-Qaeda. If that prospect is advanced this weekend, Iraqis -- and their American partners -- will have elections to thank.
How elections can work in an unstable country
Washington Post, Tuesday, January 27, 2009; Page A16
PRESIDENT OBAMA has suggested that elections may not be constructive in countries where there is no "freedom from fear" or where the rule of law and civil society are undeveloped. Iraq may be about to prove him wrong. Though security is fragile, the constitution is still disputed and institutions such as courts and a free media remain works in progress, the country's third national election since 2005 is scheduled for Saturday -- and it is looking like another important step toward stabilization.
The campaign for positions in 14 provinces so far has been a major improvement over the previous Iraqi elections -- not to mention the rigged or tightly limited ballots staged by most other Arab countries. Some 14,400 candidates are competing for 440 seats; in contrast to the last provincial vote, in January 2005, candidates are identified by name rather than being presented anonymously on a party slate. Thousands are openly competing in Iraqi cities and towns once paralyzed by violence or controlled by al-Qaeda. Blast walls have been papered with posters, and much of the debate is focused on improving government services. Violence, which spiked four years ago, so far has been a minor factor: Two candidates have been reported killed, and U.S. and Iraqi casualties this month are among the lowest since the war began.
In 2005, voters mostly chose among sectarian coalitions, and most Sunnis boycotted the vote. This month, Sunni parties are actively competing, and though religious parties remain important, the major Shiite and Sunni factions are jockeying among themselves. This means that Sunni politicians will be far better represented in local government and that the leaders themselves will be more popular, secular and diverse. In southern Iraq, an important debate over whether Shiites should support a strong national government or a Shiite-dominated federal region is being fought out by the Dawa party of Prime Minister Nouri al-Maliki and the Islamic Supreme Council of Iraq, which controls many provincial councils.
Mr. Maliki has gravitated toward a secular nationalism: His coalition is called State of Law. Once dismissed as hopelessly weak, the prime minister has grown so strong that some accuse him of plotting to construct a new Iraqi autocracy. For the moment, that seems unlikely, given the balances built into Iraq's new political system. But Mr. Maliki's platform does augur an Iraq that will be relatively secular, that will assert its independence from Iran and that will remain allied with the United States in the fight against al-Qaeda. If that prospect is advanced this weekend, Iraqis -- and their American partners -- will have elections to thank.
How to Cull Geese Flocks (PETA- and GeesePeace-Approved!)
How to Cull Geese Flocks (PETA- and GeesePeace-Approved!), by Greg Pollowitz
Planet Gore/NRO, Monday, January 26, 2009
Here's a good article on the problem of non-migratory Canada Geese in Connecticut. First up, why they won't migrate:
"There has been a steady increase of the nonmigratory Canada geese since the 1950s," Cherichetti said.
Harris estimated that there were 40,000 Canada geese in the state, primarily in the southwestern region.
Cherichetti said the geese are staying because they have the perfect combination of foraging (food), nesting (habitat) and covering habitat in this area of the state. They also don't have many natural predators left in Connecticut.
"With each nesting pair producing nonmigratory goslings each year, there are thousands of geese born each year that do not migrate," said Patrice Gillespie of the Wilton Conservation Commission member and a member of the Norwalk River Watershed Initiative. "Because we feed them and provide them with mowed lawns and well-groomed grass, we provide them with an ample food source, thus contributing to the excess nutrient problem they create."
And take a look at the "approved" method for controlling the population:
As a result, Cherichetti and other local environmental activists are urging local residents, especially those with waterfront property, to do their part in controlling the geese population through geese "family planning."
"We are trying to reduce their long-term growth rate by locating their nests and oiling their eggs," Cherichetti said. "The oiling means that the clutch of eggs is non-viable and won't mature into chicks. The birds continue to incubate the nests because they don't realize the eggs aren't viable. If we were to take the eggs away instead, it would result in the geese laying more eggs."
According to Cherichetti, in order to legally oil the eggs, municipalities must obtain a registration from the Fish and Wildlife Service. Then, with the permission of private property owners, environmental officers like Cherichetti can enter their property and oil the nests.
Eggs are only oiled if they do not float during a float test. If an egg, submerged in water, floats it means it is in the later stages of incubation and the chick has fully formed, so the egg wouldn't be oiled. If the egg sinks, in means it has been incubated for less than 13 days and the chick is not matured, so the egg is allowed to be oiled.
This method has been approved by several animal rights groups, including GeesePeace, PETA and the Humane Society because of the "float test" method, Cherichetti said.
"I think it's because of that clause that animal rights groups approve of the oiling and are even quite active in the oiling because they recognize that without minimally invasive methods to control the geese population the geese are going to have other issues like over-competition for food and diseases," Cherichetti said.
Other issues . . . like airplane crashes. Thanks in part to a feel-good bird-sanctuary earmark provided by Sen. Chuck Schumer, Laguardia airport has witnessed and a near tripling of bird strikes over the past few years:
When Flight 1549 took off from LaGuardia, North and South Brother Island Sanctuaries were about one-and-a-half miles to its west. As the jet headed north, it flew within two miles of Goose Island, another city bird sanctuary.
Seconds later, pilots radioed a bird strike and the plane started losing altitude as it headed for the Hudson.
"I predicted something just like that based on what we knew as a result of our study and the close proximity of a large bird population," aviation attorney Andrew Maloney said.
Data that we obtained from the Port Authority shows a dramatic increase in the number of reported bird strikes at LaGuardia in the last six years — From 31 bird strikes in 2002 to 87 in 2007, nearly a tripling in the number of strikes.
Parks and Recreation insists its sanctuaries pose no threat to aircraft. Egrets and cormorants nest on the islands. Experts we spoke to say both can pose risk to aircraft. In 2004, a passenger jet had to make an emergency landing in Chicago after one engine ingested two cormorants and caught on fire.
"Each one of these birds that are wading birds, all get sucked into engines and all pose a threat. They all pose a threat," Garber said.
A spokesperson for Parks and Recreation says there is no causal link between birds nesting on these islands and any bird strikes. She said the Port Authority has not contacted parks about the issue.
Planet Gore/NRO, Monday, January 26, 2009
Here's a good article on the problem of non-migratory Canada Geese in Connecticut. First up, why they won't migrate:
"There has been a steady increase of the nonmigratory Canada geese since the 1950s," Cherichetti said.
Harris estimated that there were 40,000 Canada geese in the state, primarily in the southwestern region.
Cherichetti said the geese are staying because they have the perfect combination of foraging (food), nesting (habitat) and covering habitat in this area of the state. They also don't have many natural predators left in Connecticut.
"With each nesting pair producing nonmigratory goslings each year, there are thousands of geese born each year that do not migrate," said Patrice Gillespie of the Wilton Conservation Commission member and a member of the Norwalk River Watershed Initiative. "Because we feed them and provide them with mowed lawns and well-groomed grass, we provide them with an ample food source, thus contributing to the excess nutrient problem they create."
And take a look at the "approved" method for controlling the population:
As a result, Cherichetti and other local environmental activists are urging local residents, especially those with waterfront property, to do their part in controlling the geese population through geese "family planning."
"We are trying to reduce their long-term growth rate by locating their nests and oiling their eggs," Cherichetti said. "The oiling means that the clutch of eggs is non-viable and won't mature into chicks. The birds continue to incubate the nests because they don't realize the eggs aren't viable. If we were to take the eggs away instead, it would result in the geese laying more eggs."
According to Cherichetti, in order to legally oil the eggs, municipalities must obtain a registration from the Fish and Wildlife Service. Then, with the permission of private property owners, environmental officers like Cherichetti can enter their property and oil the nests.
Eggs are only oiled if they do not float during a float test. If an egg, submerged in water, floats it means it is in the later stages of incubation and the chick has fully formed, so the egg wouldn't be oiled. If the egg sinks, in means it has been incubated for less than 13 days and the chick is not matured, so the egg is allowed to be oiled.
This method has been approved by several animal rights groups, including GeesePeace, PETA and the Humane Society because of the "float test" method, Cherichetti said.
"I think it's because of that clause that animal rights groups approve of the oiling and are even quite active in the oiling because they recognize that without minimally invasive methods to control the geese population the geese are going to have other issues like over-competition for food and diseases," Cherichetti said.
Other issues . . . like airplane crashes. Thanks in part to a feel-good bird-sanctuary earmark provided by Sen. Chuck Schumer, Laguardia airport has witnessed and a near tripling of bird strikes over the past few years:
When Flight 1549 took off from LaGuardia, North and South Brother Island Sanctuaries were about one-and-a-half miles to its west. As the jet headed north, it flew within two miles of Goose Island, another city bird sanctuary.
Seconds later, pilots radioed a bird strike and the plane started losing altitude as it headed for the Hudson.
"I predicted something just like that based on what we knew as a result of our study and the close proximity of a large bird population," aviation attorney Andrew Maloney said.
Data that we obtained from the Port Authority shows a dramatic increase in the number of reported bird strikes at LaGuardia in the last six years — From 31 bird strikes in 2002 to 87 in 2007, nearly a tripling in the number of strikes.
Parks and Recreation insists its sanctuaries pose no threat to aircraft. Egrets and cormorants nest on the islands. Experts we spoke to say both can pose risk to aircraft. In 2004, a passenger jet had to make an emergency landing in Chicago after one engine ingested two cormorants and caught on fire.
"Each one of these birds that are wading birds, all get sucked into engines and all pose a threat. They all pose a threat," Garber said.
A spokesperson for Parks and Recreation says there is no causal link between birds nesting on these islands and any bird strikes. She said the Port Authority has not contacted parks about the issue.
Industry Views On President Obama Clearing Way for California to Institute a Carbon Tax
President Obama Clearing Way for California to Institute a Stealth Carbon Tax
Institute for Energy Research, January 26, 2009
President Obama has ordered the Environmental Protection Agency to swiftly decide whether or not it will waive federal law and allow California to regulate greenhouse gas emissions from automobiles. EPA is very likely to grant the waiver enabling California to institute new and costly regulations. The regulations amount to a stealth carbon tax of at least $1,000 on average per car or truck.
While the costs for this action are substantial, the benefits will be miniscule. These regulations will only reduce carbon dioxide emissions by a tiny amount. In fact, if every car in the US met these standards, the amount of carbon dioxide reduced would be overcome by the increase in other parts of the world within 134 days.[1] American jobs, American workers and American family budgets will suffer. Meanwhile carbon dioxide emissions savings will essentially be “background noise.”
According to the rosy and dated estimates from California’s regulators, granting the waiver and allowing California to further regulate automobiles will increase the average price of a car by over $1,000. In addition to California, 16 other states have indicated that they plan to implement California’s costly regulations. If California and other states choose to deliberately increase the cost of automobiles for their citizens, their voters can express their discontent to their government. However, since California and the 13 other states’ citizens make up 50 percent of the nation’s population, in order to make car cost-effectively, automakers will likely be forced to implement California’s regulations on all cars, not just ones for California. This means that California will become the de facto national regulator and all Americans will pay a hidden $1,000+ tax per car.
Worse, there are infinitesimally small benefits generated from the planned regulations. In fact, if every car and truck complied with California’s regulation today (in reality, California’s regulation will likely only apply to new cars and trucks) U.S. emissions of greenhouse gases would decrease by 5 percent overnight.[2] But emissions from the rest of the world are increasing so dramatically that by mid-June, emissions increases from the rest of the world make our decrease moot.[3] This small and costly policy would have no noticeable impact on carbon dioxide emissions.
This program hurts family budgets and transportation affordability and provides no real benefits. It is a luxury that our nation should not be subjected to when economic times were good and we certainly cannot afford it now.
President Obama should ensure that Detroit builds cars Americans want to buy, not to satisfy California’s regulators. After all, should the U.S. be forced to follow the policies of a state nearing bankruptcy and losing massive numbers of jobs?
Institute for Energy Research, January 26, 2009
President Obama has ordered the Environmental Protection Agency to swiftly decide whether or not it will waive federal law and allow California to regulate greenhouse gas emissions from automobiles. EPA is very likely to grant the waiver enabling California to institute new and costly regulations. The regulations amount to a stealth carbon tax of at least $1,000 on average per car or truck.
While the costs for this action are substantial, the benefits will be miniscule. These regulations will only reduce carbon dioxide emissions by a tiny amount. In fact, if every car in the US met these standards, the amount of carbon dioxide reduced would be overcome by the increase in other parts of the world within 134 days.[1] American jobs, American workers and American family budgets will suffer. Meanwhile carbon dioxide emissions savings will essentially be “background noise.”
According to the rosy and dated estimates from California’s regulators, granting the waiver and allowing California to further regulate automobiles will increase the average price of a car by over $1,000. In addition to California, 16 other states have indicated that they plan to implement California’s costly regulations. If California and other states choose to deliberately increase the cost of automobiles for their citizens, their voters can express their discontent to their government. However, since California and the 13 other states’ citizens make up 50 percent of the nation’s population, in order to make car cost-effectively, automakers will likely be forced to implement California’s regulations on all cars, not just ones for California. This means that California will become the de facto national regulator and all Americans will pay a hidden $1,000+ tax per car.
Worse, there are infinitesimally small benefits generated from the planned regulations. In fact, if every car and truck complied with California’s regulation today (in reality, California’s regulation will likely only apply to new cars and trucks) U.S. emissions of greenhouse gases would decrease by 5 percent overnight.[2] But emissions from the rest of the world are increasing so dramatically that by mid-June, emissions increases from the rest of the world make our decrease moot.[3] This small and costly policy would have no noticeable impact on carbon dioxide emissions.
This program hurts family budgets and transportation affordability and provides no real benefits. It is a luxury that our nation should not be subjected to when economic times were good and we certainly cannot afford it now.
President Obama should ensure that Detroit builds cars Americans want to buy, not to satisfy California’s regulators. After all, should the U.S. be forced to follow the policies of a state nearing bankruptcy and losing massive numbers of jobs?
Monday, January 26, 2009
IER on Oil Speculation
60 Minutes Spectacle on Speculators
Institute for Energy Research, Jan 26, 2009
Excerpts:
The January 11 edition of 60 Minutes featured a segment on oil speculation. Correspondent Steve Kroft interviewed hedge fund manager Michael Masters and others who blamed the run-up in oil prices on hedge funds and other investors. Unfortunately, Kroft failed to interview a single person who explained the benefits of hedging and even speculation on oil contracts. The 60 Minutes takeaway message—that government should increase regulation of commodities futures markets—could actually increase volatility in the oil market and hurt consumers.
[...]
The Benefits of Futures Markets
As we explained in an IER study issued last summer, the commodities futures markets perform a vital function by allowing parties to “lock in” a price of oil months or even years in advance. By removing their exposure to huge price swings, both oil producers and major consumers (such as refiners and airlines) can more confidently plan their future operations.
For example, the owner of an oil field might be willing to sink new wells if he expects oil prices to average at least $50 per barrel in 2010, while an airline might expand its service area to include a new city, but only if it can buy oil at less than $75 per barrel throughout 2010. If there were no futures markets, the oil producer and airline might decide to play it safe, rather than investing millions in projects that could prove unprofitable if oil prices move the wrong way. But fortunately with sophisticated financial markets, the two enterprises can hedge away this risk with futures contracts. The oil producer can sell (“go short”) futures contracts, agreeing to sell his output in 2010 for, say, $65 per barrel, and the airline can take the other side of the contracts. Both parties benefit by locking in the price of $65, rather than being subject to the volatile spot price of oil.
Successful Speculation Reduces Price Volatility
Just about everyone agrees on the benefits of futures markets when the buyers and sellers are those who physically deal with oil by the nature of their business. But even non-traditional “speculative” buyers—who plan on unloading their futures contracts before taking physical delivery—perform a useful service if they accurately forecast price moves.
The motto of the speculator is to “buy low, sell high.” (Or a more sophisticated version is to “short-sell high, cover low.”) But these actions reduce the volatility in the market, because the speculator’s buying pulls up prices when they are too low, while the speculator’s selling pushes down prices when they are too high. This is exactly what consumers want speculators to do. When the price strays from where they “ought” to be, an astute speculator comes along and knocks it back into line.
Now it’s true that many investors piled into commodities through the summer of 2008, thinking they would move ever higher—and then they had the rug pulled out from them in August and September. But we don’t need the government to impose penalties on such faulty speculation (which pushed prices the wrong way), because these investors lost their shirts! The market itself provides the appropriate reward and punishment for wise or foolish forecasts.
People often forget that for every speculator who “went long” on oil futures contracts, there was another party who had to go short. Indeed, after the 60 Minutes piece aired, investment manager Kevin Duffy reminded us of his warnings to clients over the summer that oil was overpriced. His hedge fund, Bearing Fund, shorted futures contracts and made money from the accurate call.
Another wrinkle in the typical complaint against speculators is that the statistical evidence shows the causality ran in the opposite direction. According to the CFTC’s analysis of confidential data, it was far more typical for a price change in oil to precede a change in investors’ holdings, rather than vice versa. Yes, big investors were enlarging their clients’ exposure to commodities in 2007 and 2008, but this was often because these sectors were outperforming others. So it wasn’t that a bunch of pension funds rushed into oil, and pushed up its price. Rather, the rising price of oil led to more and more investment in oil futures, by fund managers who were trying to shield their clients from skyrocketing energy prices. The process was mutually reinforcing, but the line between hedging and speculation is blurred. After all, soaring oil prices were hurting stock performance. By diversifying holdings to include commodities, fund managers were trying to limit the volatility in their clients’ returns.
A final point is that the presence of large, institutional investors provides more liquidity to the futures markets, allowing the traditional hedgers (such as producers and airlines) to use these contracts more flexibly. New regulations that restricted the ability of “speculators” to enter these markets would ironically hurt even the non-speculators because of higher bid-ask spreads.
Was It Speculators, or Supply and Demand?
A recurring theme in the 60 Minutes segment was that the price swings in oil weren’t due to the fundamentals of supply and demand, and so they must have been the fault of the insidious speculators [...].
The true situation is far more nuanced. Part of what happened on Sept. 22 was that the dollar fell sharply against other currencies; recall that these weeks involved the bailout of AIG and the collapse of Lehman Brothers. Because oil is traded internationally but quoted in U.S. dollars, a fall in the dollar translates into a higher quoted price for oil, which is perfectly consistent with “fundamentals.”
Moreover, Sept. 22 was the last trading day before the expiration of the October futures contracts. There were investors who had shorted oil—they were pushing down its price, betting that it would fall further—and they needed to unwind their positions, because they didn’t actually have physical barrels to deliver to the holders of the contracts. According to oil economist James Williams, the Nymex contracts had a delivery point of Cushing, Oklahoma, but the inventories in Cushing were low because of the hurricane drawdown. The situation led to a “short squeeze” where short-sellers were trying to buy back their positions and were scrambling for the unusually tight supplies. Thus the 60 Minutes piece is right that speculation was involved that day, but it’s the opposite of their interpretation: The people pushing down oil prices hit a temporary snag, caused by a physical bottleneck, and so the price popped back up briefly.
Masters’ analysis of the EIA data is also misleading. It is true that world oil supply had been steadily increasing every quarter since the beginning of 2007, while world oil demand finally peaked in the fourth quarter of 2007 and then began falling in 2008. But what Masters neglects to mention is that world oil demand was always higher than supply, up until April 2008, as the EIA data (XLS spreadsheet) show.
The market price of oil during this period did exactly what consumers would want. Starting in 2006, the world began consuming more barrels of oil per day than producers could deliver to market. The deficit was covered by drawing down on previously accumulated stockpiles. In this environment of a supply crunch, the market price needed to rise rapidly in order to call forth greater supply and curtail demand.
Even as late as the first quarter of 2008, on average there was more than a million barrel a day deficit, where world oil demand exceeded supply. Of course the “fundamentals” would drive higher prices in this environment. And then, after years of rising oil prices in this deficit environment, the situation finally reversed in April 2008. From that point on, world oil output had finally caught up with and overtaken demand. A few months later, the price of oil crashed back down. The presence of large investors definitely influenced the movement of prices, but ultimately the explanation based on supply and demand is accurate.
Even the sudden collapse of oil prices may be partially or completely attributable to “real” forces in the economy. The economic outlook changed considerably in the late summer of 2008, meaning that oil consumption will not grow nearly as quickly over the next few years as forecasters previously believed. The dollar has also strengthened tremendously because of the “flight to safety” by investors around the world. The rising dollar translates into lower oil prices, quoted in U.S. dollars.
Conclusion
Institutional investors rushed into the commodities futures markets as oil prices steadily rose from the fall of 2007 through the summer of 2008. This correlation led many analysts to conclude that the hedge funds were causing the prices to rise. But a more careful analysis shows that the situation was more nuanced, with price rises (fueled by legitimate, fundamental supply and demand) leading rational investors to diversify their holdings by gaining exposure to the energy sector.
In any event, it is wrong to assume that giving government bureaucrats more power will somehow make financial markets more transparent or efficient. Masters and the folks at 60 Minutes should read up on how the SEC ignored letters about Bernie Madoff’s Ponzi scheme that a suspicious analyst in the private sector began sending them back in 1999. In the private sector, speculators who make bad forecasts lose money, big time. In contrast, the SEC will probably see its budget increased even though it ignored a reputed $50 billion swindle for 9 years.
Many investors overshot the rise in oil prices, and the market punished them accordingly. But record oil prices really were driven by the fundamentals of supply and demand. Futures markets, and large institutional investors who use them, provide a valuable service to consumers by actually reducing volatility in the long run. It’s too bad that 60 Minutes seems to have overshot in their finger-pointing, but there won’t be any market correction for them.
Institute for Energy Research, Jan 26, 2009
Excerpts:
The January 11 edition of 60 Minutes featured a segment on oil speculation. Correspondent Steve Kroft interviewed hedge fund manager Michael Masters and others who blamed the run-up in oil prices on hedge funds and other investors. Unfortunately, Kroft failed to interview a single person who explained the benefits of hedging and even speculation on oil contracts. The 60 Minutes takeaway message—that government should increase regulation of commodities futures markets—could actually increase volatility in the oil market and hurt consumers.
[...]
The Benefits of Futures Markets
As we explained in an IER study issued last summer, the commodities futures markets perform a vital function by allowing parties to “lock in” a price of oil months or even years in advance. By removing their exposure to huge price swings, both oil producers and major consumers (such as refiners and airlines) can more confidently plan their future operations.
For example, the owner of an oil field might be willing to sink new wells if he expects oil prices to average at least $50 per barrel in 2010, while an airline might expand its service area to include a new city, but only if it can buy oil at less than $75 per barrel throughout 2010. If there were no futures markets, the oil producer and airline might decide to play it safe, rather than investing millions in projects that could prove unprofitable if oil prices move the wrong way. But fortunately with sophisticated financial markets, the two enterprises can hedge away this risk with futures contracts. The oil producer can sell (“go short”) futures contracts, agreeing to sell his output in 2010 for, say, $65 per barrel, and the airline can take the other side of the contracts. Both parties benefit by locking in the price of $65, rather than being subject to the volatile spot price of oil.
Successful Speculation Reduces Price Volatility
Just about everyone agrees on the benefits of futures markets when the buyers and sellers are those who physically deal with oil by the nature of their business. But even non-traditional “speculative” buyers—who plan on unloading their futures contracts before taking physical delivery—perform a useful service if they accurately forecast price moves.
The motto of the speculator is to “buy low, sell high.” (Or a more sophisticated version is to “short-sell high, cover low.”) But these actions reduce the volatility in the market, because the speculator’s buying pulls up prices when they are too low, while the speculator’s selling pushes down prices when they are too high. This is exactly what consumers want speculators to do. When the price strays from where they “ought” to be, an astute speculator comes along and knocks it back into line.
Now it’s true that many investors piled into commodities through the summer of 2008, thinking they would move ever higher—and then they had the rug pulled out from them in August and September. But we don’t need the government to impose penalties on such faulty speculation (which pushed prices the wrong way), because these investors lost their shirts! The market itself provides the appropriate reward and punishment for wise or foolish forecasts.
People often forget that for every speculator who “went long” on oil futures contracts, there was another party who had to go short. Indeed, after the 60 Minutes piece aired, investment manager Kevin Duffy reminded us of his warnings to clients over the summer that oil was overpriced. His hedge fund, Bearing Fund, shorted futures contracts and made money from the accurate call.
Another wrinkle in the typical complaint against speculators is that the statistical evidence shows the causality ran in the opposite direction. According to the CFTC’s analysis of confidential data, it was far more typical for a price change in oil to precede a change in investors’ holdings, rather than vice versa. Yes, big investors were enlarging their clients’ exposure to commodities in 2007 and 2008, but this was often because these sectors were outperforming others. So it wasn’t that a bunch of pension funds rushed into oil, and pushed up its price. Rather, the rising price of oil led to more and more investment in oil futures, by fund managers who were trying to shield their clients from skyrocketing energy prices. The process was mutually reinforcing, but the line between hedging and speculation is blurred. After all, soaring oil prices were hurting stock performance. By diversifying holdings to include commodities, fund managers were trying to limit the volatility in their clients’ returns.
A final point is that the presence of large, institutional investors provides more liquidity to the futures markets, allowing the traditional hedgers (such as producers and airlines) to use these contracts more flexibly. New regulations that restricted the ability of “speculators” to enter these markets would ironically hurt even the non-speculators because of higher bid-ask spreads.
Was It Speculators, or Supply and Demand?
A recurring theme in the 60 Minutes segment was that the price swings in oil weren’t due to the fundamentals of supply and demand, and so they must have been the fault of the insidious speculators [...].
The true situation is far more nuanced. Part of what happened on Sept. 22 was that the dollar fell sharply against other currencies; recall that these weeks involved the bailout of AIG and the collapse of Lehman Brothers. Because oil is traded internationally but quoted in U.S. dollars, a fall in the dollar translates into a higher quoted price for oil, which is perfectly consistent with “fundamentals.”
Moreover, Sept. 22 was the last trading day before the expiration of the October futures contracts. There were investors who had shorted oil—they were pushing down its price, betting that it would fall further—and they needed to unwind their positions, because they didn’t actually have physical barrels to deliver to the holders of the contracts. According to oil economist James Williams, the Nymex contracts had a delivery point of Cushing, Oklahoma, but the inventories in Cushing were low because of the hurricane drawdown. The situation led to a “short squeeze” where short-sellers were trying to buy back their positions and were scrambling for the unusually tight supplies. Thus the 60 Minutes piece is right that speculation was involved that day, but it’s the opposite of their interpretation: The people pushing down oil prices hit a temporary snag, caused by a physical bottleneck, and so the price popped back up briefly.
Masters’ analysis of the EIA data is also misleading. It is true that world oil supply had been steadily increasing every quarter since the beginning of 2007, while world oil demand finally peaked in the fourth quarter of 2007 and then began falling in 2008. But what Masters neglects to mention is that world oil demand was always higher than supply, up until April 2008, as the EIA data (XLS spreadsheet) show.
The market price of oil during this period did exactly what consumers would want. Starting in 2006, the world began consuming more barrels of oil per day than producers could deliver to market. The deficit was covered by drawing down on previously accumulated stockpiles. In this environment of a supply crunch, the market price needed to rise rapidly in order to call forth greater supply and curtail demand.
Even as late as the first quarter of 2008, on average there was more than a million barrel a day deficit, where world oil demand exceeded supply. Of course the “fundamentals” would drive higher prices in this environment. And then, after years of rising oil prices in this deficit environment, the situation finally reversed in April 2008. From that point on, world oil output had finally caught up with and overtaken demand. A few months later, the price of oil crashed back down. The presence of large investors definitely influenced the movement of prices, but ultimately the explanation based on supply and demand is accurate.
Even the sudden collapse of oil prices may be partially or completely attributable to “real” forces in the economy. The economic outlook changed considerably in the late summer of 2008, meaning that oil consumption will not grow nearly as quickly over the next few years as forecasters previously believed. The dollar has also strengthened tremendously because of the “flight to safety” by investors around the world. The rising dollar translates into lower oil prices, quoted in U.S. dollars.
Conclusion
Institutional investors rushed into the commodities futures markets as oil prices steadily rose from the fall of 2007 through the summer of 2008. This correlation led many analysts to conclude that the hedge funds were causing the prices to rise. But a more careful analysis shows that the situation was more nuanced, with price rises (fueled by legitimate, fundamental supply and demand) leading rational investors to diversify their holdings by gaining exposure to the energy sector.
In any event, it is wrong to assume that giving government bureaucrats more power will somehow make financial markets more transparent or efficient. Masters and the folks at 60 Minutes should read up on how the SEC ignored letters about Bernie Madoff’s Ponzi scheme that a suspicious analyst in the private sector began sending them back in 1999. In the private sector, speculators who make bad forecasts lose money, big time. In contrast, the SEC will probably see its budget increased even though it ignored a reputed $50 billion swindle for 9 years.
Many investors overshot the rise in oil prices, and the market punished them accordingly. But record oil prices really were driven by the fundamentals of supply and demand. Futures markets, and large institutional investors who use them, provide a valuable service to consumers by actually reducing volatility in the long run. It’s too bad that 60 Minutes seems to have overshot in their finger-pointing, but there won’t be any market correction for them.
U.S. Conventional Weapons Destruction Program in Afghanistan
U.S. Conventional Weapons Destruction Program in Afghanistan. Fact Sheet, Bureau of Political-Military Affairs
US State Dept, Washington, DC, Jan xx, 2009
The U.S. conventional weapons destruction program in Afghanistan aims to protect victims of conflict, provide life-saving humanitarian assistance and help provide security and safety for the Afghan people. Since 1993, the Department of State has provided more than $95,000,000 in conventional weapons destruction and humanitarian mine action assistance to Afghanistan. Direct funding to five Afghan non-governmental organizations has sustained clearance operations, developed host nation management and technical capacity and provided vocational training when a reduction in mine clearance activities increased the number of unemployed deminers.
The Conventional Weapons Problem
The widespread and indiscriminate use of mines, small arms/light weapons, ordnance and munitions since the Soviet invasion of 1979 has left Afghanistan heavily contaminated with explosive remnants of war (ERW). The United Nations Mine Action Program for Afghanistan (MAPA) estimates that 720 square kilometers of suspected hazardous areas exist, with more than 4 million Afghans living in 2,229 ERW-contaminated communities. Mines and ERW killed or injured more than 445 Afghans in 2008, an average of 37 victims per month. Additional conventional weapons and munitions hazards are reported daily. Although MAPA has cleared almost two-thirds of all suspected hazards discovered to date, vast amounts of areas remain contaminated due to on-going conflict and inaccessibility because of difficult terrain and deteriorating infrastructure.
The majority of ERW-contaminated areas are agricultural fields, irrigation canals, and grazing areas as well as roads and residential and commercial areas. Security belts of landmines also exist around major cities, airports, government installations, and power stations. An equally significant problem is the existence of large amounts of unexploded ordnance, which inflicted extensive injuries and destruction even prior to the on-going conflict. Still, mines and ERW and loosely secured or illicit conventional weapons and munitions persistently restrict access to valuable resources and important infrastructure, effectively making social and economic reconstruction in Afghanistan extremely difficult.
United States Assistance
In FY 2008, the Bureau of Political-Military Affairs’ Office of Weapons Removal and Abatement (PM/WRA) in the Department of State provided $18,000,000 for the Conventional Weapons Destruction Program in Afghanistan. These funds enabled Afghan non-governmental organizations, international non-governmental organizations, international organizations, and private and public sector partners to clear ERW-contaminated areas as well as to destroy or secure abandoned or otherwise at-risk munitions and explosive ordnance that might be used by insurgent elements to construct roadside bombs and other improvised explosive devices that target coalition forces, Afghan civilians, and international aid organizations. Slight increases in programmatic funding for FY 2009 will be used to increase national capacity development and conventional weapons destruction activities throughout Afghanistan.
Accomplishments
Since January, 2006, PM/WRA-funded projects have destroyed or secured more than 9,000 metric tons of unexploded, abandoned, or otherwise at- risk munitions and small arms/light weapons, and provided explosive ordnance safety training to more than 65,000 Afghan nationals. This assistance removes explosive hazards that threaten civilian populations, and enables critical reconstruction and development projects central to economic growth, stability, and security. Department of State funds also play a vital role in the capacity development of MAPA, which consists of 20 Afghan implementing partners and international non-governmental organizations, and the UN’s Mine Action Center in Afghanistan, the coordinating body for MAPA management and operations.
To learn more about the Office of Weapons Removal and Abatement's humanitarian mine action and conventional weapons destruction programs, visit www.state.gov/t/pm/
US State Dept, Washington, DC, Jan xx, 2009
The U.S. conventional weapons destruction program in Afghanistan aims to protect victims of conflict, provide life-saving humanitarian assistance and help provide security and safety for the Afghan people. Since 1993, the Department of State has provided more than $95,000,000 in conventional weapons destruction and humanitarian mine action assistance to Afghanistan. Direct funding to five Afghan non-governmental organizations has sustained clearance operations, developed host nation management and technical capacity and provided vocational training when a reduction in mine clearance activities increased the number of unemployed deminers.
The Conventional Weapons Problem
The widespread and indiscriminate use of mines, small arms/light weapons, ordnance and munitions since the Soviet invasion of 1979 has left Afghanistan heavily contaminated with explosive remnants of war (ERW). The United Nations Mine Action Program for Afghanistan (MAPA) estimates that 720 square kilometers of suspected hazardous areas exist, with more than 4 million Afghans living in 2,229 ERW-contaminated communities. Mines and ERW killed or injured more than 445 Afghans in 2008, an average of 37 victims per month. Additional conventional weapons and munitions hazards are reported daily. Although MAPA has cleared almost two-thirds of all suspected hazards discovered to date, vast amounts of areas remain contaminated due to on-going conflict and inaccessibility because of difficult terrain and deteriorating infrastructure.
The majority of ERW-contaminated areas are agricultural fields, irrigation canals, and grazing areas as well as roads and residential and commercial areas. Security belts of landmines also exist around major cities, airports, government installations, and power stations. An equally significant problem is the existence of large amounts of unexploded ordnance, which inflicted extensive injuries and destruction even prior to the on-going conflict. Still, mines and ERW and loosely secured or illicit conventional weapons and munitions persistently restrict access to valuable resources and important infrastructure, effectively making social and economic reconstruction in Afghanistan extremely difficult.
United States Assistance
In FY 2008, the Bureau of Political-Military Affairs’ Office of Weapons Removal and Abatement (PM/WRA) in the Department of State provided $18,000,000 for the Conventional Weapons Destruction Program in Afghanistan. These funds enabled Afghan non-governmental organizations, international non-governmental organizations, international organizations, and private and public sector partners to clear ERW-contaminated areas as well as to destroy or secure abandoned or otherwise at-risk munitions and explosive ordnance that might be used by insurgent elements to construct roadside bombs and other improvised explosive devices that target coalition forces, Afghan civilians, and international aid organizations. Slight increases in programmatic funding for FY 2009 will be used to increase national capacity development and conventional weapons destruction activities throughout Afghanistan.
Accomplishments
Since January, 2006, PM/WRA-funded projects have destroyed or secured more than 9,000 metric tons of unexploded, abandoned, or otherwise at- risk munitions and small arms/light weapons, and provided explosive ordnance safety training to more than 65,000 Afghan nationals. This assistance removes explosive hazards that threaten civilian populations, and enables critical reconstruction and development projects central to economic growth, stability, and security. Department of State funds also play a vital role in the capacity development of MAPA, which consists of 20 Afghan implementing partners and international non-governmental organizations, and the UN’s Mine Action Center in Afghanistan, the coordinating body for MAPA management and operations.
To learn more about the Office of Weapons Removal and Abatement's humanitarian mine action and conventional weapons destruction programs, visit www.state.gov/t/pm/
Good and Bad Things At ILO
Can the ILO Be Saved from Itself?, by Charlotte M. Ponticelli
Heritage, January 22, 2009
Heritage Lecture #1106
Excerpts:
[...]
One of my major responsibilities has been representing the Department of Labor--and, indeed, the United States government--in international organizations that deal with labor and employment issues. And, of course, the major international organization I have worked with is the International Labor Organization.
My bureau works closely with the ILO on a number of projects.
I think this is an opportune time, with the current economic challenges, to talk about the ILO itself: to give you my perspective on what it does well, what concerns the U.S. government has had, and what we at my Bureau see as the road ahead.
The Mission of the ILO
[...]
The International Labor Organization was created in 1919, in the wake of World War I, with the purpose of creating an international institution that could bring governments, employers, and workers together to improve living and working conditions and help preserve social stability in the new post- World War I order. As the sole remaining component of the League of Nations, and as a member of the present-day U.N. system, the ILO has been a strong voice for worker rights, for helping to build democracy in Poland and South Africa, and building strong, open-market systems in Eastern Europe after the collapse of the Soviet Union.
The ILO continues to be a beacon in promoting freedom in some critical places across the globe. For example:
The Other Side of the Story
There's also another side to this story. Go to the ILO Web site or look at the Director-General's speeches over the past few years. You won't find very many references to all of the good work I've just described. What you will find are articles and speeches that deal with the ILO's role in:
Here's another example: In November, the officers of the Governing Body issued a statement calling for six steps to be taken to address the financial crisis. I won't enumerate them, but among them were:
In short, the key problem is that the ILO is seeking to become the world's lead institution in addressing the social consequences of globalization. This is not a conspiracy theory; rather, it's a point made regularly by the Director-General. The world of work, a challenging field unto itself, suddenly loses importance and instead becomes a platform for launching all sorts of social projects.
That's why we have been very concerned about a new instrument that was adopted by the organization's conference just this past June, called the ILO Declaration on Social Justice for a Fair Globalization.[3] The title alone suggests exactly what is wrong with the ILO at this time. What is worrisome is that it opens the door to efforts to attribute universal applicability to conventions that heretofore would be relevant only if a country formally ratified them. That means, for example, that select conventions on employment and social protection could conceivably take on the status of agreed international principles without our consent.
Now we, of course, would not honor this. Suffice it to say, it would be appalling, both morally and in terms of economic efficiency, if an international organization were to determine the "right" balance between employment and social protection.
Management
How well are these resources managed? In short, not well. The ILO fails to ensure adequate impact analysis of its programs. We receive reports from them on what they did and how they managed programs, but we can't get answers to questions like, "What do we get for the $10 million spent on Project X?"
When our Secretary of Labor raised this with the Director-General, he replied, "You have to realize that it's sometimes very difficult for the ILO to measure the impact of what we do. After all, we don't sell shoes. We hold seminars. We give advice. And how do you measure the impact of advice?"
Perhaps there is something to be said for that question, but for an organization that spends almost one-half billion dollars per year, that's not enough.
Tripartism
The ILO is the only tripartite organization in the U.N. system--that is, the only organization in which each country is represented three ways: by representatives of the government, employers, and workers. In my view, this tripartite nature is both the strength and the weakness of the organization. The good part is that it includes the private sector and civil society. But there are two difficult issues.
There are many times when the interests of organized labor and the interests of other employees may differ significantly. Perhaps thought should be given to including other worker groups--maybe professional associations or entrepreneurs or non-governmental organizations--to better represent the real workforce. I don't have an easy answer to this, but it's something we will surely have to deal with in the future.
What Should the ILO Be Doing?
What should the ILO be doing? Here's what I would suggest. It may not be glamorous, but we think the ILO could--and should--focus its activities on helping countries improve their capabilities in these areas:
Conclusion
As we look at the problems and the potential of the ILO, it's worth asking the question, "If the ILO disappeared tomorrow, would we need to replace it?" Or, as I said in the blurb for this meeting, "Can the ILO be saved from itself?"
The short answer is yes; the ILO could be a very useful tool in addressing many of the issues the world faces in the era of globalization. Both the United States worker and employer representatives agree on this.
Unfortunately, the ILO is veering further from, rather than closer to, being in a useful position. I hope that the new Administration, which has given much attention to labor issues, will use its influence to push the ILO to do its real job: to create better opportunities and better workplaces for working people, to promote job creation, to help provide businesses with the skilled workers they need, and to help boost economic development and prosperity around the world.
Charlotte M. Ponticelli, at the time of this lecture, served as Deputy Under Secretary for International Affairs at the U.S. Department of Labor. She has also served in the U.S. Department of State as Senior Coordinator for International Women's Issues and Senior Advisor to the Assistant Secretary for Population, Refugees and Migration, and on the U.S. Commission on Civil Rights.
Full article w/references here
Heritage, January 22, 2009
Heritage Lecture #1106
Excerpts:
[...]
One of my major responsibilities has been representing the Department of Labor--and, indeed, the United States government--in international organizations that deal with labor and employment issues. And, of course, the major international organization I have worked with is the International Labor Organization.
My bureau works closely with the ILO on a number of projects.
- We oversee labor programs funded by the State Department and implemented by the ILO in the Middle East and Latin America.
- We oversee numerous projects that are implemented by the ILO's International Program for the Elimination of Child Labor (IPEC). Over the past decade, the U.S. has funded nearly $370 million worth of programs in over 75 countries. As a result of these programs, we have rescued more than a million children from exploitive child labor.
I think this is an opportune time, with the current economic challenges, to talk about the ILO itself: to give you my perspective on what it does well, what concerns the U.S. government has had, and what we at my Bureau see as the road ahead.
The Mission of the ILO
[...]
The International Labor Organization was created in 1919, in the wake of World War I, with the purpose of creating an international institution that could bring governments, employers, and workers together to improve living and working conditions and help preserve social stability in the new post- World War I order. As the sole remaining component of the League of Nations, and as a member of the present-day U.N. system, the ILO has been a strong voice for worker rights, for helping to build democracy in Poland and South Africa, and building strong, open-market systems in Eastern Europe after the collapse of the Soviet Union.
The ILO continues to be a beacon in promoting freedom in some critical places across the globe. For example:
- In Burma, the ILO is the sole U.N. agency that plays a useful role on the ground. It has been directly responsible for enabling victims of forced labor to report on their treatment without fear of reprisal. The ILO's special adviser in Burma has helped people get out of jail, has helped rescue child soldiers, and has actually engaged the military in dialogue on forced labor.
- In Belarus, the ILO's Governing Body has been in perfect sync with the Bush Administration's goal of pushing for democracy, both by condemning Belarus for its lack of freedom of association and by at the same time offering to work with the government to move forward.
- In Zimbabwe, thanks to the workers and employers--and with no thanks to countries like South Africa or China--the ILO has been in the forefront of criticizing the atrocities of the Mugabe regime. In the labor area, this includes the systematic arrest, detention, and harassment of trade unionists. At its last session, the Governing Body decided to send to Zimbabwe a Commission of Inquiry, one of the highest-level investigatory missions available.
- In regard to Iran, the ILO has regularly condemned the Iranian government for arresting and imprisoning independent trade union leaders and for its record on discrimination in the workplace.
- And in Colombia, the ILO--largely at the behest of the United States--has established an office on the ground to help address key labor issues, including violence against trade union officials. The Colombian government, the business community, and the labor unions themselves supported the establishment of the office.
The Other Side of the Story
There's also another side to this story. Go to the ILO Web site or look at the Director-General's speeches over the past few years. You won't find very many references to all of the good work I've just described. What you will find are articles and speeches that deal with the ILO's role in:
- Climate change and energy policy,
- Reforming the international monetary system,
- Changing the rules of the international trade system,
- Addressing international investment issues,
- Addressing the global food crisis,
- Mandating social policy for individual countries, and
- Suggesting that the ILO take the lead in addressing global social policy in the current economic crisis.
Here's another example: In November, the officers of the Governing Body issued a statement calling for six steps to be taken to address the financial crisis. I won't enumerate them, but among them were:
- Ensuring the flow of credit to consumption, trade, and investment;
- Supporting productive, profitable, and sustainable enterprises, together with a strong social economy and a viable public sector, so as to maximize employment and decent work;
- Maintaining development aid as a minimum at current levels and providing additional credit lines and support to enable low-income countries to cushion the crisis.
In short, the key problem is that the ILO is seeking to become the world's lead institution in addressing the social consequences of globalization. This is not a conspiracy theory; rather, it's a point made regularly by the Director-General. The world of work, a challenging field unto itself, suddenly loses importance and instead becomes a platform for launching all sorts of social projects.
That's why we have been very concerned about a new instrument that was adopted by the organization's conference just this past June, called the ILO Declaration on Social Justice for a Fair Globalization.[3] The title alone suggests exactly what is wrong with the ILO at this time. What is worrisome is that it opens the door to efforts to attribute universal applicability to conventions that heretofore would be relevant only if a country formally ratified them. That means, for example, that select conventions on employment and social protection could conceivably take on the status of agreed international principles without our consent.
Now we, of course, would not honor this. Suffice it to say, it would be appalling, both morally and in terms of economic efficiency, if an international organization were to determine the "right" balance between employment and social protection.
Management
How well are these resources managed? In short, not well. The ILO fails to ensure adequate impact analysis of its programs. We receive reports from them on what they did and how they managed programs, but we can't get answers to questions like, "What do we get for the $10 million spent on Project X?"
When our Secretary of Labor raised this with the Director-General, he replied, "You have to realize that it's sometimes very difficult for the ILO to measure the impact of what we do. After all, we don't sell shoes. We hold seminars. We give advice. And how do you measure the impact of advice?"
Perhaps there is something to be said for that question, but for an organization that spends almost one-half billion dollars per year, that's not enough.
Tripartism
The ILO is the only tripartite organization in the U.N. system--that is, the only organization in which each country is represented three ways: by representatives of the government, employers, and workers. In my view, this tripartite nature is both the strength and the weakness of the organization. The good part is that it includes the private sector and civil society. But there are two difficult issues.
- First, the ILO is disproportionately run by workers--and, to be exact, by trade unions. Workers see the ILO as their organization, but if its outputs are going to be useful, governments and employers have to see it as their organization too. This drove the International Organization of Employers earlier this year to stand up and demand that the ILO ensure "that employer priorities, objectives and resources are treated on an equal basis with those of the workers." This might not be easy: Just a year ago, during a discussion on "sustainable enterprise," the representatives of workers objected to any inclusion of the word "entrepreneur."
- Second, governments are being marginalized. If workers and employers agree on an issue, the views of the governments--the funders of the Organization--become irrelevant because the worker-plus-employer majority is declared to be "consensus." Something must be done to address this issue.
There are many times when the interests of organized labor and the interests of other employees may differ significantly. Perhaps thought should be given to including other worker groups--maybe professional associations or entrepreneurs or non-governmental organizations--to better represent the real workforce. I don't have an easy answer to this, but it's something we will surely have to deal with in the future.
What Should the ILO Be Doing?
What should the ILO be doing? Here's what I would suggest. It may not be glamorous, but we think the ILO could--and should--focus its activities on helping countries improve their capabilities in these areas:
- Labor Law and Implementation. [...]
- Building Capacity. [...]
- Child Labor, Forced Labor, and Trafficking. [...]
- Fewer International Meetings, More Work in the Field. [...]
- Corporate Social Responsibility. [...]
Conclusion
As we look at the problems and the potential of the ILO, it's worth asking the question, "If the ILO disappeared tomorrow, would we need to replace it?" Or, as I said in the blurb for this meeting, "Can the ILO be saved from itself?"
The short answer is yes; the ILO could be a very useful tool in addressing many of the issues the world faces in the era of globalization. Both the United States worker and employer representatives agree on this.
Unfortunately, the ILO is veering further from, rather than closer to, being in a useful position. I hope that the new Administration, which has given much attention to labor issues, will use its influence to push the ILO to do its real job: to create better opportunities and better workplaces for working people, to promote job creation, to help provide businesses with the skilled workers they need, and to help boost economic development and prosperity around the world.
Charlotte M. Ponticelli, at the time of this lecture, served as Deputy Under Secretary for International Affairs at the U.S. Department of Labor. She has also served in the U.S. Department of State as Senior Coordinator for International Women's Issues and Senior Advisor to the Assistant Secretary for Population, Refugees and Migration, and on the U.S. Commission on Civil Rights.
Full article w/references here
Sunday, January 25, 2009
Poorly Defined Questions Lead to Meaningless Poll Results
Poorly Defined Questions Lead to Meaningless Poll Results, by Indur Goklany
Master Resource, January 23, 2009
The American Geophysical Union’s house organ, Eos, has an article entitled “Examining the Scientific Consensus on Climate Change,” written by Peter Doran and Kendall Zimmerman of the University of Illinois at Chicago. (h/t Roger Pielke, Sr.)
The paper explains that the two “primary questions” asked were:
1. When compared with pre-1800s levels, do you think that mean global temperatures have generally risen, fallen, or remained relatively constant?
2. Do you think human activity is a significant contributing factor in changing mean global temperatures?
The article reports that over 90 percent of the responders agreed with the statement that mean global temperatures have “risen” relative to the pre-1800 levels (Question 1). But this is unremarkable. Everyone knows that in the 1700s and early 1800s the world was in the grip of the Little Ice Age, so a recovery toward normalcy alone would lead to global warming. No one I know — and I know plenty of skeptics (not yet a criminal offense, I hope) — has ever disputed this point. So the real surprise to me is that it wasn’t 99 percent–plus!
With respect to the second question, the authors report that 82 percent agreed that “human activity is a significant contributing factor” in the increased global temperature.
But what precisely does this mean? How did respondents interpret the terms “human activity” and “significant contributing factor”?
I am reminded that under the Clean Air Act, an area that has relatively clean air is deemed to be “significantly deteriorated” if the concentration of an air pollutant in that area increases by 2–8% of the National Ambient Air Quality Standard. Under this interpretation, a contribution of 2–8% would be significant! So the question is: What instructions or guidance, if any, was provided to respondents in interpreting what precisely was meant by “significant contributing factor” in the second question? Is a 2% contribution significant? Why not 20%, or 40%, or 60%?
In addition, what exactly is the “human activity” that is supposed to be significantly contributing to global warming? Is it land clearance, paving over surfaces, producing black-carbon emissions, generating well-mixed greenhouse gases, or a combination of all these activities? I claim that most people would interpret “human activity” to encompass “all of the above.”
Moreover, how do the researchers know that there is a uniform understanding of the question, and what precisely is that uniform understanding?
Given that the two key terms are imprecisely defined, a person who believed that well-mixed greenhouse gases have contributed no more than, say, 10% to the global warming since 1800 might be compelled to agree that “human activity is a significant contributing factor” to post-1800 global warming.
From the perspective of policy makers, to whom this article is partly addressed, identifying the precise kind of human activity that contributes significantly to global warming (however defined) is absolutely critical. If well-mixed greenhouse gases (GHGs), for example, carbon dioxide, do not contribute significantly, then no amount of GHG reductions will make a significant difference (however defined) to the degree of future warming. Thus, the imprecise wording of Question 2 precludes this poll from closing the debate among policy makers.
The fact that the article doesn’t raise, let alone address, the issues posed by its inexact question indicates that the Eos article is premature, if not erroneous, in its claim that “the debate on the authenticity of global warming and the role played by human activity is largely nonexistent among those who understand the nuances and scientific basis of long-term climate processes.” It also reflects poorly on the pollsters and Eos reviewers — assuming it was reviewed — that they missed such obvious difficulties with the study.
The article also claims that ‘[t]he challenge, rather, appears to be how to effectively communicate this fact to policy makers and to a public that continues to mistakenly perceive debate among scientists.”
But the real challenge is: How can pollsters accurately communicate their questions to potential respondents so that there is a common and precise understanding on everyone’s part regarding the question posed. Without this, one is condemned to obtain meaningless poll results. And the rest of the world is subjected to reading (and reading about) one more poorly designed study.
Master Resource, January 23, 2009
The American Geophysical Union’s house organ, Eos, has an article entitled “Examining the Scientific Consensus on Climate Change,” written by Peter Doran and Kendall Zimmerman of the University of Illinois at Chicago. (h/t Roger Pielke, Sr.)
The paper explains that the two “primary questions” asked were:
1. When compared with pre-1800s levels, do you think that mean global temperatures have generally risen, fallen, or remained relatively constant?
2. Do you think human activity is a significant contributing factor in changing mean global temperatures?
The article reports that over 90 percent of the responders agreed with the statement that mean global temperatures have “risen” relative to the pre-1800 levels (Question 1). But this is unremarkable. Everyone knows that in the 1700s and early 1800s the world was in the grip of the Little Ice Age, so a recovery toward normalcy alone would lead to global warming. No one I know — and I know plenty of skeptics (not yet a criminal offense, I hope) — has ever disputed this point. So the real surprise to me is that it wasn’t 99 percent–plus!
With respect to the second question, the authors report that 82 percent agreed that “human activity is a significant contributing factor” in the increased global temperature.
But what precisely does this mean? How did respondents interpret the terms “human activity” and “significant contributing factor”?
I am reminded that under the Clean Air Act, an area that has relatively clean air is deemed to be “significantly deteriorated” if the concentration of an air pollutant in that area increases by 2–8% of the National Ambient Air Quality Standard. Under this interpretation, a contribution of 2–8% would be significant! So the question is: What instructions or guidance, if any, was provided to respondents in interpreting what precisely was meant by “significant contributing factor” in the second question? Is a 2% contribution significant? Why not 20%, or 40%, or 60%?
In addition, what exactly is the “human activity” that is supposed to be significantly contributing to global warming? Is it land clearance, paving over surfaces, producing black-carbon emissions, generating well-mixed greenhouse gases, or a combination of all these activities? I claim that most people would interpret “human activity” to encompass “all of the above.”
Moreover, how do the researchers know that there is a uniform understanding of the question, and what precisely is that uniform understanding?
Given that the two key terms are imprecisely defined, a person who believed that well-mixed greenhouse gases have contributed no more than, say, 10% to the global warming since 1800 might be compelled to agree that “human activity is a significant contributing factor” to post-1800 global warming.
From the perspective of policy makers, to whom this article is partly addressed, identifying the precise kind of human activity that contributes significantly to global warming (however defined) is absolutely critical. If well-mixed greenhouse gases (GHGs), for example, carbon dioxide, do not contribute significantly, then no amount of GHG reductions will make a significant difference (however defined) to the degree of future warming. Thus, the imprecise wording of Question 2 precludes this poll from closing the debate among policy makers.
The fact that the article doesn’t raise, let alone address, the issues posed by its inexact question indicates that the Eos article is premature, if not erroneous, in its claim that “the debate on the authenticity of global warming and the role played by human activity is largely nonexistent among those who understand the nuances and scientific basis of long-term climate processes.” It also reflects poorly on the pollsters and Eos reviewers — assuming it was reviewed — that they missed such obvious difficulties with the study.
The article also claims that ‘[t]he challenge, rather, appears to be how to effectively communicate this fact to policy makers and to a public that continues to mistakenly perceive debate among scientists.”
But the real challenge is: How can pollsters accurately communicate their questions to potential respondents so that there is a common and precise understanding on everyone’s part regarding the question posed. Without this, one is condemned to obtain meaningless poll results. And the rest of the world is subjected to reading (and reading about) one more poorly designed study.
Brazil Expands Investment in Offshore Drilling Projects
Brazil Expands Investment in Offshore Drilling Projects, by Andrew Downie
TNYT, January 24, 2009
SÃO PAULO, Brazil — Brazil’s state-controlled oil company, Petrobras, announced a crisis-busting investment plan Friday to spend more than $174 billion over the next five years, much of it for prodigious deep-water oil and gas exploration.
The investment covers the 2009-2013 period and represents a rise of 55 percent over the $112.4 billion the company had vowed to spend on development between 2008 and 2012.
This investment is “very robust and very important for the continuity of Petrobras’s growth,” José Sergio Gabrielli, the company’s chief executive, told reporters Friday at a news conference in Rio de Janeiro.
Petrobras, whose full name is Petróleo Brasileiro, had promised to unveil its spending plans in September but delayed the announcement several times because of the world’s financial turmoil.
In 2007 and 2008, Petrobras and partners including Repsol YPF of Spain and the BG Group of Britain discovered vast deposits of oil under more than 4,000 meters of water, rock and salt.
Although the finds are at previously untapped depths and will be costly to extract, they hold an estimated 8 billion to 12 billion barrels of oil, according to Petrobras figures. Company officials and oil experts say that other reserves of that size could be nearby.
One of the finds alone, named the Tupi, holds the equivalent of 5 billion to 8 billion barrels of light crude oil and is the world’s biggest new field since a 12-billion-barrel find in Kazakhstan in 2000.
President Luiz Inácio Lula da Silva of Brazil has said repeatedly that developing these oil reserves is vital to the country’s future, and Petrobras has set aside $28 billion to that end.
In all, new drilling could produce 219,000 barrels a day by 2013, 582,000 barrels a day by 2015 and 1.82 million barrels a day by 2020, he predicted.
Natural gas extraction would rise from 7 million cubic meters a day in 2013 to 40 million a day in 2020, the company added.
Petrobras produced a daily average of 2.18 million barrels of oil and gas last year.
TNYT, January 24, 2009
SÃO PAULO, Brazil — Brazil’s state-controlled oil company, Petrobras, announced a crisis-busting investment plan Friday to spend more than $174 billion over the next five years, much of it for prodigious deep-water oil and gas exploration.
The investment covers the 2009-2013 period and represents a rise of 55 percent over the $112.4 billion the company had vowed to spend on development between 2008 and 2012.
This investment is “very robust and very important for the continuity of Petrobras’s growth,” José Sergio Gabrielli, the company’s chief executive, told reporters Friday at a news conference in Rio de Janeiro.
Petrobras, whose full name is Petróleo Brasileiro, had promised to unveil its spending plans in September but delayed the announcement several times because of the world’s financial turmoil.
In 2007 and 2008, Petrobras and partners including Repsol YPF of Spain and the BG Group of Britain discovered vast deposits of oil under more than 4,000 meters of water, rock and salt.
Although the finds are at previously untapped depths and will be costly to extract, they hold an estimated 8 billion to 12 billion barrels of oil, according to Petrobras figures. Company officials and oil experts say that other reserves of that size could be nearby.
One of the finds alone, named the Tupi, holds the equivalent of 5 billion to 8 billion barrels of light crude oil and is the world’s biggest new field since a 12-billion-barrel find in Kazakhstan in 2000.
President Luiz Inácio Lula da Silva of Brazil has said repeatedly that developing these oil reserves is vital to the country’s future, and Petrobras has set aside $28 billion to that end.
In all, new drilling could produce 219,000 barrels a day by 2013, 582,000 barrels a day by 2015 and 1.82 million barrels a day by 2020, he predicted.
Natural gas extraction would rise from 7 million cubic meters a day in 2013 to 40 million a day in 2020, the company added.
Petrobras produced a daily average of 2.18 million barrels of oil and gas last year.
Libertarian views on global warming: "Glacier Slowdown in Greenland: How Inconvenient"
Glacier Slowdown in Greenland: How Inconvenient
In this week’s Science magazine, science writer Richard Kerr reports on some of the goings-on at this past December’s annual meeting of the American Geophysical Union.
While he didn’t cover our presentation at the meeting in which we described our efforts at creating a reconstruction of ice melt across Greenland dating back into the late 1700s (we found that the greatest period of ice melt occurred in the decades around the 1930s), Kerr did cover some other recent findings concerning the workings of Greenland’s cryosphere in his article titled “Galloping Glaciers of Greenland Have Reined Themselves In.”
Here is how Kerr starts things off:
Things were looking bad around southeast Greenland a few years ago. There, the streams of ice flowing from the great ice sheet into the sea had begun speeding up in the late 1990s. Then, two of the biggest Greenland outlet glaciers really took off, and losses from the ice to the sea eventually doubled. Some climatologists speculated that global warming might have pushed Greenland past a tipping point into a scary new regime of wildly heightened ice loss and an ever-faster rise in sea level.
And some non-climatologists speculated disaster from rapidly rising seas as well.
During his An Inconvenient Truth tour, Gore was fond of spinning the following tale:
[E]arlier this year [2006], yet another team of scientists reported that the previous twelve months saw 32 glacial earthquakes on Greenland between 4.6 and 5.1 on the Richter scale - a disturbing sign that a massive destabilization may now be underway deep within the second largest accumulation of ice on the planet, enough ice to raise sea level 20 feet worldwide if it broke up and slipped into the sea. Each passing day brings yet more evidence that we are now facing a planetary emergency - a climate crisis that demands immediate action to sharply reduce carbon dioxide emissions worldwide in order to turn down the earth’s thermostat and avert catastrophe.
Oh how things have changed in the past 2 years.
For one, the “team of scientists” that reported on the Greenland earthquakes now think that the earthquakes were the result of processes involved with glacial calving, rather than something “underway deep within the second largest accumulation of ice on the planet” (Nettles et al., 2008).
For another, Gore’s “massive destabilization” mechanism for which the earthquakes were a supposed bellwether (meltwater lubrication of the flow channel) has been shown to be ineffective at producing long-term changes in glacier flow rate (e.g. (Joughin et al., 2008; van de Wal et al., 2008).
And for still another, the recent speed-up of Greenland’s glaciers has even more recently slowed down.
Here is how Kerr describes the situation:
So much for Greenland ice’s Armageddon. “It has come to an end,” glaciologist Tavi Murray of Swansea University in the United Kingdom said during a session at the meeting. “There seems to have been a synchronous switch-off” of the speed-up, she said. Nearly everywhere around southeast Greenland, outlet glacier flows have returned to the levels of 2000. An increasingly warmer climate will no doubt eat away at the Greenland ice sheet for centuries, glaciologists say, but no one should be extrapolating the ice’s recent wild behavior into the future.
The last point is driven home by new results published last week (and described in our last WCR and in our piece over at MasterResource) by researchers Faezeh Nick and colleagues. They modeled the flow of one of Greenland’s largest glaciers and determined that while glaciers were quite sensitive to changing conditions at their calving terminus, that they responded rather quickly to them and the increase in flow rate was rather short lived. Nick et al. included these words of warning: “Our results imply that the recent rates of mass loss in Greenland’s outlet glaciers are transient and should not be extrapolated into the future.”
All told, it is looking more like the IPCC’s estimates of a few inches of sea level rise from Greenland during the 21st century aren’t going to be that far off—despite loud protestations to the contrary from high profile alarm pullers.
Maybe Gore will go back and remove the 12 pages worth of picture and maps from his book showing what high profile places of the world will look like with a 20-foot sea level rise (“The site of the World Trade Center Memorial would be underwater”). But then again, probably not—after all the point is not to be truthful in the sense of reflecting a likely possibility, but to scare you into a particular course of action.
References:
Intergovernmental Panel on Climate Change, 2007. Climate Change 2007: The Physical Science Basis. Solomon, S., et al. (eds.), Cambridge University Press, Cambridge, U.K., 996pp.
Joughin, I., et al., 2008. Seasonal speedup along the western flank of the Greenland Ice Sheet. Science, 320, 781-783.
Kerr, R. A., 2009. Galloping glaciers of Greenland have reined themselves in. Science, 323, 458.
Nettles, M., 2008. Step-wise changes in glacier flow speed coincide with calving and glacial earthquakes at Helheim Glacier, Greenland. Geophysical Research Letters, 35, doi:10.1029/2008GL036127.
Nick, F. M., et al., 2009. Large-scale changes in Greenland outlet glacier dynamics triggered at the terminus. Nature Geoscience, DOI:10.1038, published on-line January 11, 2009.
van de Wal, R. S. W., et al., 2008. Large and rapid melt-induced velocity changes in the ablation zone of the Greenland ice sheet. Science, 321, 111-113.
In this week’s Science magazine, science writer Richard Kerr reports on some of the goings-on at this past December’s annual meeting of the American Geophysical Union.
While he didn’t cover our presentation at the meeting in which we described our efforts at creating a reconstruction of ice melt across Greenland dating back into the late 1700s (we found that the greatest period of ice melt occurred in the decades around the 1930s), Kerr did cover some other recent findings concerning the workings of Greenland’s cryosphere in his article titled “Galloping Glaciers of Greenland Have Reined Themselves In.”
Here is how Kerr starts things off:
Things were looking bad around southeast Greenland a few years ago. There, the streams of ice flowing from the great ice sheet into the sea had begun speeding up in the late 1990s. Then, two of the biggest Greenland outlet glaciers really took off, and losses from the ice to the sea eventually doubled. Some climatologists speculated that global warming might have pushed Greenland past a tipping point into a scary new regime of wildly heightened ice loss and an ever-faster rise in sea level.
And some non-climatologists speculated disaster from rapidly rising seas as well.
During his An Inconvenient Truth tour, Gore was fond of spinning the following tale:
[E]arlier this year [2006], yet another team of scientists reported that the previous twelve months saw 32 glacial earthquakes on Greenland between 4.6 and 5.1 on the Richter scale - a disturbing sign that a massive destabilization may now be underway deep within the second largest accumulation of ice on the planet, enough ice to raise sea level 20 feet worldwide if it broke up and slipped into the sea. Each passing day brings yet more evidence that we are now facing a planetary emergency - a climate crisis that demands immediate action to sharply reduce carbon dioxide emissions worldwide in order to turn down the earth’s thermostat and avert catastrophe.
Oh how things have changed in the past 2 years.
For one, the “team of scientists” that reported on the Greenland earthquakes now think that the earthquakes were the result of processes involved with glacial calving, rather than something “underway deep within the second largest accumulation of ice on the planet” (Nettles et al., 2008).
For another, Gore’s “massive destabilization” mechanism for which the earthquakes were a supposed bellwether (meltwater lubrication of the flow channel) has been shown to be ineffective at producing long-term changes in glacier flow rate (e.g. (Joughin et al., 2008; van de Wal et al., 2008).
And for still another, the recent speed-up of Greenland’s glaciers has even more recently slowed down.
Here is how Kerr describes the situation:
So much for Greenland ice’s Armageddon. “It has come to an end,” glaciologist Tavi Murray of Swansea University in the United Kingdom said during a session at the meeting. “There seems to have been a synchronous switch-off” of the speed-up, she said. Nearly everywhere around southeast Greenland, outlet glacier flows have returned to the levels of 2000. An increasingly warmer climate will no doubt eat away at the Greenland ice sheet for centuries, glaciologists say, but no one should be extrapolating the ice’s recent wild behavior into the future.
The last point is driven home by new results published last week (and described in our last WCR and in our piece over at MasterResource) by researchers Faezeh Nick and colleagues. They modeled the flow of one of Greenland’s largest glaciers and determined that while glaciers were quite sensitive to changing conditions at their calving terminus, that they responded rather quickly to them and the increase in flow rate was rather short lived. Nick et al. included these words of warning: “Our results imply that the recent rates of mass loss in Greenland’s outlet glaciers are transient and should not be extrapolated into the future.”
All told, it is looking more like the IPCC’s estimates of a few inches of sea level rise from Greenland during the 21st century aren’t going to be that far off—despite loud protestations to the contrary from high profile alarm pullers.
Maybe Gore will go back and remove the 12 pages worth of picture and maps from his book showing what high profile places of the world will look like with a 20-foot sea level rise (“The site of the World Trade Center Memorial would be underwater”). But then again, probably not—after all the point is not to be truthful in the sense of reflecting a likely possibility, but to scare you into a particular course of action.
References:
Intergovernmental Panel on Climate Change, 2007. Climate Change 2007: The Physical Science Basis. Solomon, S., et al. (eds.), Cambridge University Press, Cambridge, U.K., 996pp.
Joughin, I., et al., 2008. Seasonal speedup along the western flank of the Greenland Ice Sheet. Science, 320, 781-783.
Kerr, R. A., 2009. Galloping glaciers of Greenland have reined themselves in. Science, 323, 458.
Nettles, M., 2008. Step-wise changes in glacier flow speed coincide with calving and glacial earthquakes at Helheim Glacier, Greenland. Geophysical Research Letters, 35, doi:10.1029/2008GL036127.
Nick, F. M., et al., 2009. Large-scale changes in Greenland outlet glacier dynamics triggered at the terminus. Nature Geoscience, DOI:10.1038, published on-line January 11, 2009.
van de Wal, R. S. W., et al., 2008. Large and rapid melt-induced velocity changes in the ablation zone of the Greenland ice sheet. Science, 321, 111-113.
Medicine's Miracle Man
Medicine's Miracle Man. By John E. Calfee
Maurice Hilleman's remarkable period of industrial scientific research yielded the most cost-effective medicines ever made.
The American, Friday, January 23, 2009
The pharmaceutical industry has been under attack for longer than most people realize. In the 1950s and 1960s, when for the first time in history we had quite a few drugs that worked very well—including many antibiotics, the first miracle drugs—there was the full panoply of congressional hearings, outraged newspaper editorials, and dour experts who described an industry in which prices were too high, marketing too important, and innovation in decline amid a flood of “me-too” drugs barely distinguishable from the original innovative brands. But I doubt that the atmosphere then was as hostile as it has been in the past five years or so. A flood of books, including some by authors with academic credentials, have re-circulated many of the same arguments (albeit with more emphasis on safety). The more scholarly works include Merrill Goozner’s The $800 Million Pill: The Truth Behind the Cost of New Drugs; Jerome Kassirer’s On The Take: How Medicine’s Complicity with Big Business Can Endanger Your Health; and Jerry Avorn’s Powerful Medicines: The Benefits, Risks, and Costs of Prescription Drugs. Others have a more muckrakian tone, beginning with the muchquoted The Truth About the Drug Companies by former New England Journal of Medicine editor Marcia Angell, and continuing on to many others including Ray Moynihan and Alan Cassels’s Selling Sickness: How the World’s Biggest Pharmaceutical Companies Are Turning Us All Into Patients; Howard Brody’s Hooked: Ethics, the Medical Professions, and the Pharmaceutical Industry; Alison Bass’s Side-effects: A Prosecutor, a Whistleblower, and a Bestselling Antidepressant on Trial (about the drug Paxil); and Philip R. Lee’s Pills, Profits, and Politics.
What’s with R&D?
To my mind, the most serious of these indictments focus on industry research. No doubt, the stakes are high for the industry. If drugs are truly innovative life-modifiers or life-savers, the argument over prices and spending tends to be marginalized. But if there hasn’t been a lot of innovation and if the innovation we do get comes mainly from the taxpayer-supported National Institutes of Health and other nonprofit organizations, the politics of drugs becomes difficult for the industry to handle.
We need to look ahead, and when we do it’s hard not to get excited. The entire field of immunology has taken off along with so much else in this age of biotechnology.
I have had occasion to write about innovation and its sources in the pages of The American. As I explained in “The Golden Age of Medical Innovation” (March/April 2007), the critics have paid too much attention to the annual count of new drug approvals by the FDA and too little attention to two crucial developments. One is the increasing importance of research that occurs after a drug is approved. Newer drugs, especially so-called biotech drugs including monoclonal antibodies, involve complex biological processes that are themselves subject to ever more sophisticated research on everything from DNA to drug interactions. Basic research and clinical trials have been running side by side, often with drugs themselves serving as research tools to find out what happens when a particular receptor is suppressed (such as the epidermal growth factor receptor, or EGFR, to cite a target that is important for cancer and much more). Sometimes, scientists harvest a series of improved treatments using existing drugs without actually getting a new one approved. Rituxan, originally approved for certain types of non-Hodgkin’s lymphoma cancer, is now approved for other types of cancer along with multiple sclerosis, rheumatoid arthritis, and Crohn’s Disease, and is being researched to treat lupus, idiopathic thrombocytopenia purpura, and chronic lymphocytic leukemia.
The other phenomenon that has been largely lost in popular discussion of drug R&D and its discontents is the extraordinary role played by “follow-on” drugs (a much more accurate term than “me-too”). The story with statin cholesterol-reducing drugs, where a decade or more of research on follow-ons revolutionized the prevention and treatment of coronary heart disease, is a familiar one. Similar stories are playing out now, but much faster. Competition among rapidly developed drugs to attack a promising target (such as tumor necrosis factor inhibitors for rheumatoid arthritis) can bring about revolutions in treatments as doctors and patients dance through one drug after another while dealing with the unique mix of side effects and drug resistance that plague each individual patient.
The interested reader can get a flavor of this blend of basic science and practical drug development by reading the fascinating discussion by Jan Vermorken, et al., of evolving treatments for head-and-neck cancer in the September 11, 2008 issue of The New England Journal of Medicine. Much of this story involves Erbitux, the monoclonal antibody that put Martha Stewart in jail after a disappointing FDA decision put the owners of ImClone, the developer, into a panic. The many years of up-and-down research and results on that drug, costing hundreds of millions or even billions of dollars back when no revenues were in sight, is probably as good an example as any of the vagaries and payoffs from high-risk drug research informed by ongoing work in pure science.
Hilleman set out to develop vaccines for the chief life-threatening viral and bacterial infectious diseases of childhood. Amazingly, he came close to clearing the table.
In another recent article in The American, I addressed the thorny question of the role of publicly supported basic research in drug development (“The Indispensable Industry,” May/June 2008). To put it in the simplest terms, a close look reveals a striking pattern that seems to be little noticed by the critics of private drug development: no matter how far-flung the curiosity-driven NIH-supported research is, the only results that seem to get translated into useable drugs are the ones that are grabbed by drug firms and put through the difficult research necessary to produce appropriate quantities of promising substances to run through years of arduous clinical trials. Take away the private sector, and basic research nearly always languishes with little practical effect, as is unceasingly and tragically illustrated by the dearth of new drugs and vaccines for malaria and tuberculosis. Sometimes, the drug firms themselves do perform crucial basic research, as in the case of Genentech’s Avastin for cancer and Lucentis to prevent blindness. These were the fruits of the firm’s own top-tier basic research forces.
Just Two Words
But there is something else in drug development that hardly gets talked about: the sheer energy and determination that you find in the private sector. Combine that with substantial financial resources and you get what John Maynard Keynes called “animal spirits,” a singular motivating force in creative capitalism. When this force attacks big problems, the results can be both spectacular and unexpected, sometimes with fabulous benefits for mankind. It so happens that animal spirits are very much involved in one of the great blessings of modern medicine: an armamentarium of vaccines, mainly given to children, which have been saving lives by the millions at astonishingly low costs. “The most cost-effective treatments ever created by mankind” is a typical summary of the value of vaccines for mumps, measles, rubella (German measles), and half a dozen or so others, including those for diphtheria, whooping cough, hepatitis A, and hepatitis B.
Where, you might ask, did all those life-saving vaccines come from? Amazingly, for half or more of them, the answer can be summarized in two words: Hilleman and Merck. You’ve likely never heard of Maurice Hilleman even though he probably saved more lives than any other scientist in the 20th century. For most of his career, Hilleman was a biologist at Merck, where he developed one vaccine after another, stretching through four extraordinary decades of productive work. Along the way, he pioneered new ways to create, test, and manufacture vaccines, and played a crucial role in the creation of an entirely different class of drugs known as interferons.
We know a lot about Hilleman’s career thanks to a wonderful book published last year by Paul Offit: Vaccinated: One Man’s Quest to Defeat the World’s Deadliest Diseases. Offit was the perfect vehicle for getting this story the attention it deserves. A prominent academic immunologist at Children’s Hospital of Philadelphia and the University of Pennsylvania Medical School, Offit is also a vaccine developer. He is a co-inventor and co-developer of Rotateq, the first fully successful vaccine for rotavirus, a cause of deadly dehydration that kills thousands of children annually in poor nations.
Offit is attuned to public policy. He has been a member of the Advisory Committee on Immunization Practices, whose child vaccination recommendations are gospel for physicians and payers. His previous book, The Cutter Incident, was an insightful historical account of how litigation over an early miracle vaccine—for polio—helped shape (very much for the worse) the entire litigation environment of vaccines and pharmaceuticals. Offit’s academic journal articles and newspaper op-eds on the consequences of unscientific attacks on vaccine safety are required reading for anyone interested in this contentious topic.
Offit’s Vaccinated is informed by 11 interviews with the 85-year-old Hilleman in 2005, during the last months of his life before he succumbed to cancer. Judging by dozens of meaty quotes, Offit is a probing interviewer, capturing a great scientist’s personality and working style to a degree that cannot be matched without personal experience with the subject, and is seldom matched even then.
His basic strategy was simple: solve whatever problems had to be solved in order to reach the goal, which was usually a new vaccine.
Who was Maurice Hilleman and what did he do? Born to a German-American family in 1919 and raised on a Montana farm near his birthplace, Hilleman was a brilliant student on scholarship at Montana State University. After graduation he moved to the Midwest intellectual mecca at the University of Chicago, where in 1944 he finished a Ph.D. in microbiology based on groundbreaking research on the chlamydia bacterium (previously thought to be a virus). To the dismay of his new intellectual peers, Hilleman left academia to work for a pharmaceutical firm, E.R. Squibb, where he achieved advances in flu vaccine development and manufacturing. In 1948, he moved to the Walter Reed military hospital in Washington. His work there culminated in an extraordinary episode in 1957 when he correctly forecast the arrival of a new Asian Flu to which almost no one was immune. He led the development and manufacturing (by private firms) of a vaccine in time to save hundreds of thousands of lives and perhaps many more.
In 1957 Hilleman returned to the private sector, this time at Merck, where he was head of virus and cell biology in Merck’s relatively new vaccine enterprise. Hilleman apparently set out to develop vaccines for the chief life-threatening viral and bacterial infectious diseases of childhood. Amazingly, he came close to clearing the table. First was the mumps, with the approval in 1967 of the “Jeryl Lynn” vaccine based on a mumps virus taken from his daughter of that same name. A measles vaccine arrived the next year. In 1969, we got a vaccine for rubella. Hilleman soon concocted the immensely useful idea of combining these three vaccines into a single shot. Approved in 1971, this proved a blessing to untold millions of small children and their mothers. The 1981 vaccine for hepatitis B (not really a childhood disease, of course) was a scientific and technological tour de force essentially from start to finish. In 1995 came the hepatitis A vaccine. For chicken pox, pneumococcus, and Hib (haemophilus influenzae type b), Hilleman transformed relatively untested vaccines into the mass-produced tools with which we are now familiar. It is hard to imagine the cumulative benefits of this research. (Hilleman also developed a vaccine for a destructive form of chicken cancer, rescuing a substantial part of the poultry industry.) Hilleman’s work sometimes ranged beyond vaccines. Starting in the late 1950s, he figured out how to mass-produce a newly discovered virus-killing substance in chickens called interferon. He soon detailed interferon’s basic physical, chemical, and biological properties, discovering that it was produced in many animals, including humans, and that it could impede or kill many viruses, such as those involved in cancer. He correctly predicted that interferon could be used to treat chronic infections and cancer. Today, it is used against hepatitis B, hepatitis C, and several types of cancer.
Problem Solving for Fun and Profit
This is more than the history of medicine, science, and technology. It is also business history, a classic story of problem solving for fun and profit and humanity. How was Hilleman able to accomplish so much in basic research, drug development, and manufacturing technology, often working essentially from scratch because vaccine development was still in its infancy when he set to work? The answer lies in Hilleman’s decision to work at Merck instead of pursuing a top-tier academic career. He realized that to attack the most pressing illnesses susceptible to immune-based prevention, he would have to marshal massive forces even after solving the purely intellectual puzzles. Merck had supported that kind of work before in Max Tishler’s research on the vitamin B complex. Offit tells us relatively little about internal Merck affairs, but it is clear that Hilleman enjoyed an extraordinary degree of autonomy combined with generous funding increases for low-profit products (now there’s a combination we’d all like to have!).
The Nobel Prize committee was not willing to award a prize to an industry scientist. It is hard not to see this as a miscarriage of scientific justice.
Hilleman sometimes exercised an iron fist over such normally mundane matters as manufacturing, where any deviation from his recipe could result in undetectable dangers. Indeed, Hilleman was apparently a bit of a tyrant, demanding almost as much of his staff as of himself, facilitated by his mastery of the art of profanity. Nonetheless, he retained the respect and often the devotion of his hard-driven staff along with near-legendary status among his academic peers.
In 1984, when Hilleman reached Merck’s mandatory retirement age of 65, he refused to retire and Merck kept him on. One result was the hepatitis A virus vaccine that arrived in 1995, along with a steady stream of academic work of all sorts until shortly before his death in 2005. Hilleman never jettisoned the problem solving method of a successful Montana farmer. Like Orville and Wilbur Wright when they built the first successful heavier-than-air flying machine, Hilleman’s basic strategy was simple: solve whatever problems had to be solved in order to reach the goal, which was usually a new vaccine. The list of problems included daunting scientific puzzles, excruciating judgments about whether dangerous side effects had been defeated, and the vagaries of regulation (much easier before the FDA got into the action).
As the 80-plus-year-old Hilleman approached death, Offit and other academic scientists lobbied the Nobel committee to award Hilleman the Nobel Prize for Medicine, based partly on his vaccine work and partly on his contributions to the basic science of interferons. The committee made clear that it was not going to award the prize to an industry scientist. (Offit has assured me that the situation was even more hopeless than he describes in his book.) It is hard not to see this as a miscarriage of scientific justice. Perhaps Hilleman would have done better if his volcanic personality had not included a surprising element of self-effacement. None of the vaccines or the crucial agents or processes he created were named after himself. At one point, he even called the developer of a new rubella vaccine to say that he thought it should replace his own because it was better. Hilleman’s absence from the academic and public spotlight was quite extraordinary. In one of the most striking of the dozens of anecdotes told by Offit, Hilleman’s death was announced to a meeting of prominent public health officials, epidemiologists, and clinicians gathered to celebrate the 50th anniversary of the Salk polio vaccine. Not one of them recognized Hilleman’s name!
Next…
Thanks to Offit and his book, Hilleman’s light and the extraordinary research achieved by the Merck company will shine for many, many years. What about vaccine research itself? There have been formidable obstacles. One was the liability system, which in the 1980s nearly killed off the child vaccine market before Congress removed child vaccines from the liability system altogether. Another, more persistent problem has been low reimbursement rates, especially by government, for traditional child vaccines (including most of Hilleman’s crop). This can discourage new research and production, and cause shortages. The situation was sufficiently worrisome to trigger a 2003 report by the federally sponsored Institute of Medicine entitled “Financing Vaccines in the 21st Century: Assuring Access and Availability.” Reimbursement seems to have improved recently. Better yet, newer vaccines are sufficiently protected by patents so that prices are set through ordinary market forces rather than government fiat. Merck and its competitors, such as GlaxoSmithKline and Sanofi-Aventis plus smaller firms, have developed a series of important new vaccines—notable among them are the pneumococcal vaccine, a vaccine for the human papilloma virus (which causes cervical cancer), and two rotavirus vaccines (including the one co-invented by Offit). Traditional vaccine research is now flourishing but will probably never again be dominated by a single person’s laboratory like the one run by Hilleman in his prime.
Hilleman was apparently a bit of a tyrant, demanding almost as much of his staff as of himself, facilitated by his mastery of the art of profanity.
But we need to look ahead, and when we do it’s hard not to get excited. The entire field of immunology—roughly speaking, the harnessing of the human immune system to fight disease—has taken off along with so much else in this age of biotechnology. We are discovering faster and more efficient ways to manufacture traditional vaccines (especially for the flu), better methods for identifying newly arrived infectious agents such as avian flu (the dreaded “bird flu” that could cause an epidemic on the scale of the one in 1918 that killed millions worldwide), and new techniques for developing vaccines once their targets have been identified.
And there is the extraordinary prospect of therapeutic vaccines, i.e., vaccines that harness the immune system to attack illnesses already present in the body rather than just preparing the body to reject infections that have not yet been encountered. None has been approved, but a brain cancer vaccine from the biotech firm Dendreon received a favorable rating from an FDA advisory committee and may yet gain approval from the FDA (despite its reluctance to approve highly innovative drugs in this era of attacks on it for paying too much attention to new benefits and too little attention to safety). Alzheimer’s Disease vaccines have achieved striking results against the beta-amyloid plaques typically found in the brains of Alzheimer’s patients. Other therapeutic vaccines are in various stages of testing.
It’s about time for the biotech revolution to hit the vaccine industry in a big way. It has already upended the treatment of rheumatoid arthritis and a few cancers, and is starting to do the same for multiple sclerosis and other conditions including rare diseases like psoriasis. Now let us see what happens in this once-quiet corner of the biopharmaceutical market. As Hilleman’s career demonstrates, when industrial science is harnessed to the profit motive, enormous advances in human welfare are possible.
John E. Calfee is a resident fellow at the American Enterprise Institute, which is about to publish a new book on recent developments in the vaccine market, U.S. Vaccine Markets: Overview, Case Studies, and Comparisons with Pharmaceuticals and Other Biologics, by economists Ernest Berndt, Rena N. Denoncourt, and Anjli C. Warner of MIT. It provides the best summary yet published of vaccine development in the past two decades, along with a preview of what is on the way.
Maurice Hilleman's remarkable period of industrial scientific research yielded the most cost-effective medicines ever made.
The American, Friday, January 23, 2009
The pharmaceutical industry has been under attack for longer than most people realize. In the 1950s and 1960s, when for the first time in history we had quite a few drugs that worked very well—including many antibiotics, the first miracle drugs—there was the full panoply of congressional hearings, outraged newspaper editorials, and dour experts who described an industry in which prices were too high, marketing too important, and innovation in decline amid a flood of “me-too” drugs barely distinguishable from the original innovative brands. But I doubt that the atmosphere then was as hostile as it has been in the past five years or so. A flood of books, including some by authors with academic credentials, have re-circulated many of the same arguments (albeit with more emphasis on safety). The more scholarly works include Merrill Goozner’s The $800 Million Pill: The Truth Behind the Cost of New Drugs; Jerome Kassirer’s On The Take: How Medicine’s Complicity with Big Business Can Endanger Your Health; and Jerry Avorn’s Powerful Medicines: The Benefits, Risks, and Costs of Prescription Drugs. Others have a more muckrakian tone, beginning with the muchquoted The Truth About the Drug Companies by former New England Journal of Medicine editor Marcia Angell, and continuing on to many others including Ray Moynihan and Alan Cassels’s Selling Sickness: How the World’s Biggest Pharmaceutical Companies Are Turning Us All Into Patients; Howard Brody’s Hooked: Ethics, the Medical Professions, and the Pharmaceutical Industry; Alison Bass’s Side-effects: A Prosecutor, a Whistleblower, and a Bestselling Antidepressant on Trial (about the drug Paxil); and Philip R. Lee’s Pills, Profits, and Politics.
What’s with R&D?
To my mind, the most serious of these indictments focus on industry research. No doubt, the stakes are high for the industry. If drugs are truly innovative life-modifiers or life-savers, the argument over prices and spending tends to be marginalized. But if there hasn’t been a lot of innovation and if the innovation we do get comes mainly from the taxpayer-supported National Institutes of Health and other nonprofit organizations, the politics of drugs becomes difficult for the industry to handle.
We need to look ahead, and when we do it’s hard not to get excited. The entire field of immunology has taken off along with so much else in this age of biotechnology.
I have had occasion to write about innovation and its sources in the pages of The American. As I explained in “The Golden Age of Medical Innovation” (March/April 2007), the critics have paid too much attention to the annual count of new drug approvals by the FDA and too little attention to two crucial developments. One is the increasing importance of research that occurs after a drug is approved. Newer drugs, especially so-called biotech drugs including monoclonal antibodies, involve complex biological processes that are themselves subject to ever more sophisticated research on everything from DNA to drug interactions. Basic research and clinical trials have been running side by side, often with drugs themselves serving as research tools to find out what happens when a particular receptor is suppressed (such as the epidermal growth factor receptor, or EGFR, to cite a target that is important for cancer and much more). Sometimes, scientists harvest a series of improved treatments using existing drugs without actually getting a new one approved. Rituxan, originally approved for certain types of non-Hodgkin’s lymphoma cancer, is now approved for other types of cancer along with multiple sclerosis, rheumatoid arthritis, and Crohn’s Disease, and is being researched to treat lupus, idiopathic thrombocytopenia purpura, and chronic lymphocytic leukemia.
The other phenomenon that has been largely lost in popular discussion of drug R&D and its discontents is the extraordinary role played by “follow-on” drugs (a much more accurate term than “me-too”). The story with statin cholesterol-reducing drugs, where a decade or more of research on follow-ons revolutionized the prevention and treatment of coronary heart disease, is a familiar one. Similar stories are playing out now, but much faster. Competition among rapidly developed drugs to attack a promising target (such as tumor necrosis factor inhibitors for rheumatoid arthritis) can bring about revolutions in treatments as doctors and patients dance through one drug after another while dealing with the unique mix of side effects and drug resistance that plague each individual patient.
The interested reader can get a flavor of this blend of basic science and practical drug development by reading the fascinating discussion by Jan Vermorken, et al., of evolving treatments for head-and-neck cancer in the September 11, 2008 issue of The New England Journal of Medicine. Much of this story involves Erbitux, the monoclonal antibody that put Martha Stewart in jail after a disappointing FDA decision put the owners of ImClone, the developer, into a panic. The many years of up-and-down research and results on that drug, costing hundreds of millions or even billions of dollars back when no revenues were in sight, is probably as good an example as any of the vagaries and payoffs from high-risk drug research informed by ongoing work in pure science.
Hilleman set out to develop vaccines for the chief life-threatening viral and bacterial infectious diseases of childhood. Amazingly, he came close to clearing the table.
In another recent article in The American, I addressed the thorny question of the role of publicly supported basic research in drug development (“The Indispensable Industry,” May/June 2008). To put it in the simplest terms, a close look reveals a striking pattern that seems to be little noticed by the critics of private drug development: no matter how far-flung the curiosity-driven NIH-supported research is, the only results that seem to get translated into useable drugs are the ones that are grabbed by drug firms and put through the difficult research necessary to produce appropriate quantities of promising substances to run through years of arduous clinical trials. Take away the private sector, and basic research nearly always languishes with little practical effect, as is unceasingly and tragically illustrated by the dearth of new drugs and vaccines for malaria and tuberculosis. Sometimes, the drug firms themselves do perform crucial basic research, as in the case of Genentech’s Avastin for cancer and Lucentis to prevent blindness. These were the fruits of the firm’s own top-tier basic research forces.
Just Two Words
But there is something else in drug development that hardly gets talked about: the sheer energy and determination that you find in the private sector. Combine that with substantial financial resources and you get what John Maynard Keynes called “animal spirits,” a singular motivating force in creative capitalism. When this force attacks big problems, the results can be both spectacular and unexpected, sometimes with fabulous benefits for mankind. It so happens that animal spirits are very much involved in one of the great blessings of modern medicine: an armamentarium of vaccines, mainly given to children, which have been saving lives by the millions at astonishingly low costs. “The most cost-effective treatments ever created by mankind” is a typical summary of the value of vaccines for mumps, measles, rubella (German measles), and half a dozen or so others, including those for diphtheria, whooping cough, hepatitis A, and hepatitis B.
Where, you might ask, did all those life-saving vaccines come from? Amazingly, for half or more of them, the answer can be summarized in two words: Hilleman and Merck. You’ve likely never heard of Maurice Hilleman even though he probably saved more lives than any other scientist in the 20th century. For most of his career, Hilleman was a biologist at Merck, where he developed one vaccine after another, stretching through four extraordinary decades of productive work. Along the way, he pioneered new ways to create, test, and manufacture vaccines, and played a crucial role in the creation of an entirely different class of drugs known as interferons.
We know a lot about Hilleman’s career thanks to a wonderful book published last year by Paul Offit: Vaccinated: One Man’s Quest to Defeat the World’s Deadliest Diseases. Offit was the perfect vehicle for getting this story the attention it deserves. A prominent academic immunologist at Children’s Hospital of Philadelphia and the University of Pennsylvania Medical School, Offit is also a vaccine developer. He is a co-inventor and co-developer of Rotateq, the first fully successful vaccine for rotavirus, a cause of deadly dehydration that kills thousands of children annually in poor nations.
Offit is attuned to public policy. He has been a member of the Advisory Committee on Immunization Practices, whose child vaccination recommendations are gospel for physicians and payers. His previous book, The Cutter Incident, was an insightful historical account of how litigation over an early miracle vaccine—for polio—helped shape (very much for the worse) the entire litigation environment of vaccines and pharmaceuticals. Offit’s academic journal articles and newspaper op-eds on the consequences of unscientific attacks on vaccine safety are required reading for anyone interested in this contentious topic.
Offit’s Vaccinated is informed by 11 interviews with the 85-year-old Hilleman in 2005, during the last months of his life before he succumbed to cancer. Judging by dozens of meaty quotes, Offit is a probing interviewer, capturing a great scientist’s personality and working style to a degree that cannot be matched without personal experience with the subject, and is seldom matched even then.
His basic strategy was simple: solve whatever problems had to be solved in order to reach the goal, which was usually a new vaccine.
Who was Maurice Hilleman and what did he do? Born to a German-American family in 1919 and raised on a Montana farm near his birthplace, Hilleman was a brilliant student on scholarship at Montana State University. After graduation he moved to the Midwest intellectual mecca at the University of Chicago, where in 1944 he finished a Ph.D. in microbiology based on groundbreaking research on the chlamydia bacterium (previously thought to be a virus). To the dismay of his new intellectual peers, Hilleman left academia to work for a pharmaceutical firm, E.R. Squibb, where he achieved advances in flu vaccine development and manufacturing. In 1948, he moved to the Walter Reed military hospital in Washington. His work there culminated in an extraordinary episode in 1957 when he correctly forecast the arrival of a new Asian Flu to which almost no one was immune. He led the development and manufacturing (by private firms) of a vaccine in time to save hundreds of thousands of lives and perhaps many more.
In 1957 Hilleman returned to the private sector, this time at Merck, where he was head of virus and cell biology in Merck’s relatively new vaccine enterprise. Hilleman apparently set out to develop vaccines for the chief life-threatening viral and bacterial infectious diseases of childhood. Amazingly, he came close to clearing the table. First was the mumps, with the approval in 1967 of the “Jeryl Lynn” vaccine based on a mumps virus taken from his daughter of that same name. A measles vaccine arrived the next year. In 1969, we got a vaccine for rubella. Hilleman soon concocted the immensely useful idea of combining these three vaccines into a single shot. Approved in 1971, this proved a blessing to untold millions of small children and their mothers. The 1981 vaccine for hepatitis B (not really a childhood disease, of course) was a scientific and technological tour de force essentially from start to finish. In 1995 came the hepatitis A vaccine. For chicken pox, pneumococcus, and Hib (haemophilus influenzae type b), Hilleman transformed relatively untested vaccines into the mass-produced tools with which we are now familiar. It is hard to imagine the cumulative benefits of this research. (Hilleman also developed a vaccine for a destructive form of chicken cancer, rescuing a substantial part of the poultry industry.) Hilleman’s work sometimes ranged beyond vaccines. Starting in the late 1950s, he figured out how to mass-produce a newly discovered virus-killing substance in chickens called interferon. He soon detailed interferon’s basic physical, chemical, and biological properties, discovering that it was produced in many animals, including humans, and that it could impede or kill many viruses, such as those involved in cancer. He correctly predicted that interferon could be used to treat chronic infections and cancer. Today, it is used against hepatitis B, hepatitis C, and several types of cancer.
Problem Solving for Fun and Profit
This is more than the history of medicine, science, and technology. It is also business history, a classic story of problem solving for fun and profit and humanity. How was Hilleman able to accomplish so much in basic research, drug development, and manufacturing technology, often working essentially from scratch because vaccine development was still in its infancy when he set to work? The answer lies in Hilleman’s decision to work at Merck instead of pursuing a top-tier academic career. He realized that to attack the most pressing illnesses susceptible to immune-based prevention, he would have to marshal massive forces even after solving the purely intellectual puzzles. Merck had supported that kind of work before in Max Tishler’s research on the vitamin B complex. Offit tells us relatively little about internal Merck affairs, but it is clear that Hilleman enjoyed an extraordinary degree of autonomy combined with generous funding increases for low-profit products (now there’s a combination we’d all like to have!).
The Nobel Prize committee was not willing to award a prize to an industry scientist. It is hard not to see this as a miscarriage of scientific justice.
Hilleman sometimes exercised an iron fist over such normally mundane matters as manufacturing, where any deviation from his recipe could result in undetectable dangers. Indeed, Hilleman was apparently a bit of a tyrant, demanding almost as much of his staff as of himself, facilitated by his mastery of the art of profanity. Nonetheless, he retained the respect and often the devotion of his hard-driven staff along with near-legendary status among his academic peers.
In 1984, when Hilleman reached Merck’s mandatory retirement age of 65, he refused to retire and Merck kept him on. One result was the hepatitis A virus vaccine that arrived in 1995, along with a steady stream of academic work of all sorts until shortly before his death in 2005. Hilleman never jettisoned the problem solving method of a successful Montana farmer. Like Orville and Wilbur Wright when they built the first successful heavier-than-air flying machine, Hilleman’s basic strategy was simple: solve whatever problems had to be solved in order to reach the goal, which was usually a new vaccine. The list of problems included daunting scientific puzzles, excruciating judgments about whether dangerous side effects had been defeated, and the vagaries of regulation (much easier before the FDA got into the action).
As the 80-plus-year-old Hilleman approached death, Offit and other academic scientists lobbied the Nobel committee to award Hilleman the Nobel Prize for Medicine, based partly on his vaccine work and partly on his contributions to the basic science of interferons. The committee made clear that it was not going to award the prize to an industry scientist. (Offit has assured me that the situation was even more hopeless than he describes in his book.) It is hard not to see this as a miscarriage of scientific justice. Perhaps Hilleman would have done better if his volcanic personality had not included a surprising element of self-effacement. None of the vaccines or the crucial agents or processes he created were named after himself. At one point, he even called the developer of a new rubella vaccine to say that he thought it should replace his own because it was better. Hilleman’s absence from the academic and public spotlight was quite extraordinary. In one of the most striking of the dozens of anecdotes told by Offit, Hilleman’s death was announced to a meeting of prominent public health officials, epidemiologists, and clinicians gathered to celebrate the 50th anniversary of the Salk polio vaccine. Not one of them recognized Hilleman’s name!
Next…
Thanks to Offit and his book, Hilleman’s light and the extraordinary research achieved by the Merck company will shine for many, many years. What about vaccine research itself? There have been formidable obstacles. One was the liability system, which in the 1980s nearly killed off the child vaccine market before Congress removed child vaccines from the liability system altogether. Another, more persistent problem has been low reimbursement rates, especially by government, for traditional child vaccines (including most of Hilleman’s crop). This can discourage new research and production, and cause shortages. The situation was sufficiently worrisome to trigger a 2003 report by the federally sponsored Institute of Medicine entitled “Financing Vaccines in the 21st Century: Assuring Access and Availability.” Reimbursement seems to have improved recently. Better yet, newer vaccines are sufficiently protected by patents so that prices are set through ordinary market forces rather than government fiat. Merck and its competitors, such as GlaxoSmithKline and Sanofi-Aventis plus smaller firms, have developed a series of important new vaccines—notable among them are the pneumococcal vaccine, a vaccine for the human papilloma virus (which causes cervical cancer), and two rotavirus vaccines (including the one co-invented by Offit). Traditional vaccine research is now flourishing but will probably never again be dominated by a single person’s laboratory like the one run by Hilleman in his prime.
Hilleman was apparently a bit of a tyrant, demanding almost as much of his staff as of himself, facilitated by his mastery of the art of profanity.
But we need to look ahead, and when we do it’s hard not to get excited. The entire field of immunology—roughly speaking, the harnessing of the human immune system to fight disease—has taken off along with so much else in this age of biotechnology. We are discovering faster and more efficient ways to manufacture traditional vaccines (especially for the flu), better methods for identifying newly arrived infectious agents such as avian flu (the dreaded “bird flu” that could cause an epidemic on the scale of the one in 1918 that killed millions worldwide), and new techniques for developing vaccines once their targets have been identified.
And there is the extraordinary prospect of therapeutic vaccines, i.e., vaccines that harness the immune system to attack illnesses already present in the body rather than just preparing the body to reject infections that have not yet been encountered. None has been approved, but a brain cancer vaccine from the biotech firm Dendreon received a favorable rating from an FDA advisory committee and may yet gain approval from the FDA (despite its reluctance to approve highly innovative drugs in this era of attacks on it for paying too much attention to new benefits and too little attention to safety). Alzheimer’s Disease vaccines have achieved striking results against the beta-amyloid plaques typically found in the brains of Alzheimer’s patients. Other therapeutic vaccines are in various stages of testing.
It’s about time for the biotech revolution to hit the vaccine industry in a big way. It has already upended the treatment of rheumatoid arthritis and a few cancers, and is starting to do the same for multiple sclerosis and other conditions including rare diseases like psoriasis. Now let us see what happens in this once-quiet corner of the biopharmaceutical market. As Hilleman’s career demonstrates, when industrial science is harnessed to the profit motive, enormous advances in human welfare are possible.
John E. Calfee is a resident fellow at the American Enterprise Institute, which is about to publish a new book on recent developments in the vaccine market, U.S. Vaccine Markets: Overview, Case Studies, and Comparisons with Pharmaceuticals and Other Biologics, by economists Ernest Berndt, Rena N. Denoncourt, and Anjli C. Warner of MIT. It provides the best summary yet published of vaccine development in the past two decades, along with a preview of what is on the way.
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