From: The New York Times
Stimulus for Skeptics
By DAVID BROOKS
A few years ago, Kenneth Rogoff and Carmen M. Reinhart wrote the definitive guide to the current economic downturn, a book called “This Time Is Different.” Rogoff and Reinhart studied data from eight centuries of financial crises. They found that banking-crisis recessions are worse than normal recessions. They last longer.
In these recessions, it took an average of six years for housing prices to stop their decline. Unemployment rates were high or rising for an average of five years. Government debt increased by an average of more than 86 percent.
The general lesson I take from this history is that policy makers stuck in a financial recession should probably think about the long term. You’re going to be stuck with a lousy economy anyway. Anything you do to try to boost the growth numbers next month or next quarter is going to be overwhelmed by the underlying forces — the continuing housing overhang, the gradual deleveraging process, the lingering mood of fear and anxiety.
You might as well use the winter of recuperation to take care of the fundamentals. Work hard to fix the education system, the tax code, the fiscal mess and the regulatory system. None of these things will produce short-term benefits. But when the recession finally does run its course, the economy will be ready to surge. Paradoxically, you have more power to influence these fundamental issues than you do next month’s jobs report.
There’s only one problem with this long-term orientation. Suppose in the middle of the winter of recuperation the economy stops recuperating? Suppose instead of grinding forward, the economy starts sliding back? In these circumstances, do you still have the luxury of thinking about the long term? Don’t you have to try to reverse things here and now?
This is the problem the Obama administration is facing. Like everybody else, it has seen a sluggish economy come grinding to a halt. There is clearly now a significant risk of a double-dip recession. That would be terrible for America’s workers, fiscal situation and psyche. This prospect is enough to shock even us stimulus skeptics out of our long-term focus. It’s enough to force us to contemplate the possibility of another stimulus package.
The next question is this: Does the administration have any stimulus ideas that could actually stimulate? Thursday night the president gave one of the most forceful and compelling domestic policy speeches of his presidency. His proposals were drawn from the middle of the ideological spectrum and were selected to appeal to people who don’t put a lot of faith in government spending. There’s a payroll tax cut, a small business tax cut, infrastructure spending, subsidies so states don’t have to lay off cops, firefighters and teachers, and a plan to use unemployment insurance to subsidize temporary work for the unemployed to get them back involved in the labor force.
Republicans have supported most of these ideas at one time or another. Still, let’s not sugarcoat things. Recent stimulus packages have not exactly lived up to the hype. Temporary tax cuts generally don’t lead to much job creation. Given the long lead times involved, infrastructure spending is an odd way to combat a double dip that might be starting right now. Job subsidies often go to companies that would have hired the people anyway. One recent study showed that a plurality of the people hired under the last stimulus package already had jobs; they were just switching from one to another.
In short, the administration is putting forth a package to prevent a double-dip recession that may not come to pass with a series of measures that may not work.
Yet it’s hard to walk away. The prospect of a double dip is truly horrifying. What happens if next months job’s report comes in negative? Or the one after that? Believe me, Congress will be rushing to do something then.
Personally, my bottom line is this: I think the president has earned a second date. He’s put together a moderate set of stimulus ideas. His plan may not be enough to jolt prosperity, but it might maintain its current slow growth.
If he comes up with his own deficit proposal that pays for his programs with some serious entitlement reforms (and not merely with some boilerplate “let’s tax the rich” plan), then Republicans would be wise to work with him to make his growth ideas more effective.
The mainstream economic view is that we should combine near-term stimulus with long-range austerity. Up until now, the political system has been unable to perform this two-stage approach. Republicans won’t touch spending, and Democrats won’t touch entitlement reform.
The president clearly wants to give it a final shot. His tone on Thursday was feisty and will please Democrats. But the substance was heterodox and worth pursuing. In this moment of peril, the country needs an insurance policy against the double dip.
Friday, September 9, 2011
Wednesday, September 7, 2011
What I Read Today - Wednesday September 2011
From: The New York Times - Editoral Page
In the Land of DenialThe Republican presidential contenders regard global warming as a hoax or, at best, underplay its importance. The most vocal denier is Rick Perry, the Texas governor and longtime friend of the oil industry, who insists that climate change is an unproven theory created by “a substantial number of scientists who have manipulated data so that they will have dollars rolling into their projects.”
Never mind that nearly all the world’s scientists regard global warming as a serious threat to the planet, with human activities like the burning of fossil fuels a major cause. Never mind that multiple investigations have found no evidence of scientific manipulation. Never mind that America needs a national policy. Mr. Perry has a big soapbox, and what he says, however fallacious, reaches a bigger audience than any scientist can command.
With one exception — make that one-and-one-half — the rest of the Republican presidential field also rejects the scientific consensus. The exception is Jon Huntsman Jr., a former ambassador to China and former governor of Utah, who recently wrote on Twitter: “I believe in evolution and trust scientists on global warming. Call me crazy.” The one-half exception is Mitt Romney, who accepted the science when he was governor of Massachusetts and argued for reducing emissions. Lately, he’s retreated into mush: “Do I think the world’s getting hotter? Yeah, I don’t know that, but I think that it is.” As for the human contribution: “It could be a little. It could be a lot.”
The others flatly repudiate the science. Ron Paul of Texas calls global warming “the greatest hoax I think that has been around for many, many years.” Michele Bachmann of Minnesota once said that carbon dioxide was nothing to fear because it is a “natural byproduct of nature” and has complained of “manufactured science.” Rick Santorum, a former senator from Pennsylvania, has called climate change “a beautifully concocted scheme” that is “just an excuse for more government control of your life.”
Newt Gingrich’s full record on climate change has been a series of epic flip-flops. In 2008, he appeared on television with Nancy Pelosi, the former House speaker, to say that “our country must take action to address climate change.” He now says the appearance was a mistake.
None of the candidates endorse a mandatory limit on emissions or, for that matter, a truly robust clean energy program. This includes Mr. Huntsman. In 2007, as Utah governor, he joined with Arnold Schwarzenegger, then the governor of California, in creating the Western Climate Initiative, a market-based cap-and-trade program aimed at reducing emissions in Western states. Cap-and-trade has since acquired a toxic political reputation, especially among Republicans, and Mr. Huntsman has backed away.
The economic downturn has made addressing climate change less urgent for voters. But the issue is not going away. The nation badly needs a candidate with a coherent, disciplined national strategy. So far, there is no Republican who fits that description.
In the Land of DenialThe Republican presidential contenders regard global warming as a hoax or, at best, underplay its importance. The most vocal denier is Rick Perry, the Texas governor and longtime friend of the oil industry, who insists that climate change is an unproven theory created by “a substantial number of scientists who have manipulated data so that they will have dollars rolling into their projects.”
Never mind that nearly all the world’s scientists regard global warming as a serious threat to the planet, with human activities like the burning of fossil fuels a major cause. Never mind that multiple investigations have found no evidence of scientific manipulation. Never mind that America needs a national policy. Mr. Perry has a big soapbox, and what he says, however fallacious, reaches a bigger audience than any scientist can command.
With one exception — make that one-and-one-half — the rest of the Republican presidential field also rejects the scientific consensus. The exception is Jon Huntsman Jr., a former ambassador to China and former governor of Utah, who recently wrote on Twitter: “I believe in evolution and trust scientists on global warming. Call me crazy.” The one-half exception is Mitt Romney, who accepted the science when he was governor of Massachusetts and argued for reducing emissions. Lately, he’s retreated into mush: “Do I think the world’s getting hotter? Yeah, I don’t know that, but I think that it is.” As for the human contribution: “It could be a little. It could be a lot.”
The others flatly repudiate the science. Ron Paul of Texas calls global warming “the greatest hoax I think that has been around for many, many years.” Michele Bachmann of Minnesota once said that carbon dioxide was nothing to fear because it is a “natural byproduct of nature” and has complained of “manufactured science.” Rick Santorum, a former senator from Pennsylvania, has called climate change “a beautifully concocted scheme” that is “just an excuse for more government control of your life.”
Newt Gingrich’s full record on climate change has been a series of epic flip-flops. In 2008, he appeared on television with Nancy Pelosi, the former House speaker, to say that “our country must take action to address climate change.” He now says the appearance was a mistake.
None of the candidates endorse a mandatory limit on emissions or, for that matter, a truly robust clean energy program. This includes Mr. Huntsman. In 2007, as Utah governor, he joined with Arnold Schwarzenegger, then the governor of California, in creating the Western Climate Initiative, a market-based cap-and-trade program aimed at reducing emissions in Western states. Cap-and-trade has since acquired a toxic political reputation, especially among Republicans, and Mr. Huntsman has backed away.
The economic downturn has made addressing climate change less urgent for voters. But the issue is not going away. The nation badly needs a candidate with a coherent, disciplined national strategy. So far, there is no Republican who fits that description.
What I Read Today - Wednesday September 7, 2011
From: The New York Times
The Whole Truth and Nothing But
By THOMAS L. FRIEDMAN
Kishore Mahbubani, a retired Singaporean diplomat, published a provocative essay in The Financial Times on Monday that began like this: “Dictators are falling. Democracies are failing. A curious coincidence? Or is it, perhaps, a sign that something fundamental has changed in the grain of human history. I believe so. How do dictators survive? They tell lies. Muammar Gaddafi was one of the biggest liars of all time. He claimed that his people loved him. He also controlled the flow of information to his people to prevent any alternative narrative taking hold. Then the simple cellphone enabled people to connect. The truth spread widely to drown out all the lies that the colonel broadcast over the airwaves.
“So why are democracies failing at the same time? The simple answer: democracies have also been telling lies.”
Mahbubani noted that “the eurozone project was created on a big lie” that countries could have monetary union and fiscal independence — without pain. Meanwhile, in America, added Mahbubani, now the dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, “No U.S. leaders dare to tell the truth to the people. All their pronouncements rest on a mythical assumption that ‘recovery’ is around the corner. Implicitly, they say this is a normal recession. But this is no normal recession. There will be no painless solution. ‘Sacrifice’ will be needed, and the American people know this. But no American politician dares utter the word ‘sacrifice.’ Painful truths cannot be told.”
Of course, there is a big difference between America and Libya. We can vote out our liars, unlike certain Arab — and Asian — countries. Still, Mahbubani’s comparison warrants some reflection this week, which coincides with the 10th anniversary of 9/11 and the president’s jobs speech. It is a great week for truth-telling.
Can you remember the last time you felt a national leader looked us in the eye and told us there is no easy solution to our major problems, that we’ve gotten into this mess by being self-indulgent or ideologically fixated over two decades and that now we need to spend the next five years rolling up our sleeves, possibly accepting a lower living standard and making up for our excesses?
For me, this is the most important thing to say both on the anniversary of 9/11 and on the eve of President Obama’s jobs speech. After all, they are intertwined. Why has this been a lost decade? An answer can be found in one simple comparison: How Dwight Eisenhower and his successors used the cold war and how George W. Bush used 9/11. America had to face down the Russians in the cold war. America had to respond to 9/11 and the threat of Al Qaeda. But the critical difference between the two was this: Beginning with Eisenhower and continuing to some degree with every cold war president, we used the cold war and the Russian threat as a reason and motivator to do big, hard things together at home — to do nation-building in America. We used it to build the interstate highway system, put a man on the moon, push out the boundaries of science, teach new languages, maintain fiscal discipline and, when needed, raise taxes. We won the cold war with collective action.
George W. Bush did the opposite. He used 9/11 as an excuse to lower taxes, to start two wars that — for the first time in our history — were not paid for by tax increases, and to create a costly new entitlement in Medicare prescription drugs. Imagine where we’d be today if on the morning of 9/12 Bush had announced (as some of us advocated) a “Patriot Tax” of $1 per gallon of gas to pay for education, infrastructure and government research, to help finance our wars and to slash our dependence on Middle East oil. Gasoline in the U.S. on Sept. 11, 2001, averaged $1.66 a gallon.
But rather than use 9/11 to summon us to nation-building at home, Bush used it as an excuse to party — to double down on a radical tax-cutting agenda for the rich that not only did not spur rising living standards for most Americans but has now left us with a huge ball and chain around our ankle. And later, rather than asking each of us to contribute something to the war, he outsourced it to one-half of one-percent of the American people. Everyone else — y’all have fun.
We used the cold war to reach the moon and spawn new industries. We used 9/11 to create better body scanners and more T.S.A. agents. It will be remembered as one of the greatest lost opportunities of any presidency — ever.
My fervent hope is that on Thursday Mr. Obama will set an example and tell the cold, hard truth — to parents and kids. I know. Honesty, we are told, is suicidal in politics. But as long as every solution that is hard is off the table, then our slow national decline will remain on the table. The public is ready for more than Michele Bachmann’s fairy-dust promise that she can restore $2 a gallon gasoline.
For once, Mr. President, let’s start a debate with the truth. Tell us what you really think will be required to get us out of this stagnation, what kind of collective action and shared sacrifice will be needed and why that can lead not just to muddling through, not just to being O.K., but to restoring American greatness.
The Whole Truth and Nothing But
By THOMAS L. FRIEDMAN
Kishore Mahbubani, a retired Singaporean diplomat, published a provocative essay in The Financial Times on Monday that began like this: “Dictators are falling. Democracies are failing. A curious coincidence? Or is it, perhaps, a sign that something fundamental has changed in the grain of human history. I believe so. How do dictators survive? They tell lies. Muammar Gaddafi was one of the biggest liars of all time. He claimed that his people loved him. He also controlled the flow of information to his people to prevent any alternative narrative taking hold. Then the simple cellphone enabled people to connect. The truth spread widely to drown out all the lies that the colonel broadcast over the airwaves.
“So why are democracies failing at the same time? The simple answer: democracies have also been telling lies.”
Mahbubani noted that “the eurozone project was created on a big lie” that countries could have monetary union and fiscal independence — without pain. Meanwhile, in America, added Mahbubani, now the dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, “No U.S. leaders dare to tell the truth to the people. All their pronouncements rest on a mythical assumption that ‘recovery’ is around the corner. Implicitly, they say this is a normal recession. But this is no normal recession. There will be no painless solution. ‘Sacrifice’ will be needed, and the American people know this. But no American politician dares utter the word ‘sacrifice.’ Painful truths cannot be told.”
Of course, there is a big difference between America and Libya. We can vote out our liars, unlike certain Arab — and Asian — countries. Still, Mahbubani’s comparison warrants some reflection this week, which coincides with the 10th anniversary of 9/11 and the president’s jobs speech. It is a great week for truth-telling.
Can you remember the last time you felt a national leader looked us in the eye and told us there is no easy solution to our major problems, that we’ve gotten into this mess by being self-indulgent or ideologically fixated over two decades and that now we need to spend the next five years rolling up our sleeves, possibly accepting a lower living standard and making up for our excesses?
For me, this is the most important thing to say both on the anniversary of 9/11 and on the eve of President Obama’s jobs speech. After all, they are intertwined. Why has this been a lost decade? An answer can be found in one simple comparison: How Dwight Eisenhower and his successors used the cold war and how George W. Bush used 9/11. America had to face down the Russians in the cold war. America had to respond to 9/11 and the threat of Al Qaeda. But the critical difference between the two was this: Beginning with Eisenhower and continuing to some degree with every cold war president, we used the cold war and the Russian threat as a reason and motivator to do big, hard things together at home — to do nation-building in America. We used it to build the interstate highway system, put a man on the moon, push out the boundaries of science, teach new languages, maintain fiscal discipline and, when needed, raise taxes. We won the cold war with collective action.
George W. Bush did the opposite. He used 9/11 as an excuse to lower taxes, to start two wars that — for the first time in our history — were not paid for by tax increases, and to create a costly new entitlement in Medicare prescription drugs. Imagine where we’d be today if on the morning of 9/12 Bush had announced (as some of us advocated) a “Patriot Tax” of $1 per gallon of gas to pay for education, infrastructure and government research, to help finance our wars and to slash our dependence on Middle East oil. Gasoline in the U.S. on Sept. 11, 2001, averaged $1.66 a gallon.
But rather than use 9/11 to summon us to nation-building at home, Bush used it as an excuse to party — to double down on a radical tax-cutting agenda for the rich that not only did not spur rising living standards for most Americans but has now left us with a huge ball and chain around our ankle. And later, rather than asking each of us to contribute something to the war, he outsourced it to one-half of one-percent of the American people. Everyone else — y’all have fun.
We used the cold war to reach the moon and spawn new industries. We used 9/11 to create better body scanners and more T.S.A. agents. It will be remembered as one of the greatest lost opportunities of any presidency — ever.
My fervent hope is that on Thursday Mr. Obama will set an example and tell the cold, hard truth — to parents and kids. I know. Honesty, we are told, is suicidal in politics. But as long as every solution that is hard is off the table, then our slow national decline will remain on the table. The public is ready for more than Michele Bachmann’s fairy-dust promise that she can restore $2 a gallon gasoline.
For once, Mr. President, let’s start a debate with the truth. Tell us what you really think will be required to get us out of this stagnation, what kind of collective action and shared sacrifice will be needed and why that can lead not just to muddling through, not just to being O.K., but to restoring American greatness.
Sunday, September 4, 2011
What I Read Today - Sunday September 4, 2011
From: The Oz Principle - Getting Results Through Individual and Organizational Accountability
by Roger Conners, Tom Smith and Craig Hickman
HOW TO RECOGNIZE WHEN YOU’RE BELOW THE LINE
Whenever you get stuck in the victim cycle, you can’t get unstuck until you first acknowledge that you’re functioning Below The Line and paying a high price for it. Only with that acknowledgment can you begin assuming a See It attitude that gives you the perspective you need to get Above The Line. Oftentimes, unable to overcome the inertia of the victim cycle on your own, you need feedback from an objective person such as a friend or spouse, or as in the case of GE, a customer in Philadelphia with a failed refrigerator compressor.
However, you can greatly improve your ability to recognize your predicament by looking for one or more of the following telltale clues:
• You feel held captive by your circumstances.
• You feel you lack any control over your present circumstances.
• You don’t listen when others tell you, directly or indirectly, that they think you could have done more to achieve better results.
• You find yourself blaming others and pointing fingers.
• Your discussions of problems focus more on what you cannot do, rather than on what you can do.
• You fail to confront the toughest issues you face.
• You find yourself being sought out by others so they can tell you what someone else did to them this time. • You resist asking probing questions about your own accountability.
• You feel you are being treated unfairly and you don’t think you can do anything about it.
• You repeatedly find yourself in a defensive posture.
• You spend a lot of time talking about things you cannot change (e.g., your boss, shareholders, the economy’s performance, government regulations).
• You cite your confusion as a reason for not taking action.
• You avoid the people, the meetings, and the situations that require you to report on your responsibilities.
• You find yourself saying: “It’s not my job.” “There’s nothing I can do about it.” “Someone ought to tell him.” “All we can do is wait and see.” “Just tell me what you want me to do.” “If it were me, I’d do it differently.”
• You frequently waste time and energy “boss or colleague bashing.”
• You spend valuable time crafting a compelling story detailing why you were not at fault.
• You repeatedly tell the same old story about how someone took advantage of you.
• You view the world with a pessimistic attitude.
by Roger Conners, Tom Smith and Craig Hickman
HOW TO RECOGNIZE WHEN YOU’RE BELOW THE LINE
Whenever you get stuck in the victim cycle, you can’t get unstuck until you first acknowledge that you’re functioning Below The Line and paying a high price for it. Only with that acknowledgment can you begin assuming a See It attitude that gives you the perspective you need to get Above The Line. Oftentimes, unable to overcome the inertia of the victim cycle on your own, you need feedback from an objective person such as a friend or spouse, or as in the case of GE, a customer in Philadelphia with a failed refrigerator compressor.
However, you can greatly improve your ability to recognize your predicament by looking for one or more of the following telltale clues:
• You feel held captive by your circumstances.
• You feel you lack any control over your present circumstances.
• You don’t listen when others tell you, directly or indirectly, that they think you could have done more to achieve better results.
• You find yourself blaming others and pointing fingers.
• Your discussions of problems focus more on what you cannot do, rather than on what you can do.
• You fail to confront the toughest issues you face.
• You find yourself being sought out by others so they can tell you what someone else did to them this time. • You resist asking probing questions about your own accountability.
• You feel you are being treated unfairly and you don’t think you can do anything about it.
• You repeatedly find yourself in a defensive posture.
• You spend a lot of time talking about things you cannot change (e.g., your boss, shareholders, the economy’s performance, government regulations).
• You cite your confusion as a reason for not taking action.
• You avoid the people, the meetings, and the situations that require you to report on your responsibilities.
• You find yourself saying: “It’s not my job.” “There’s nothing I can do about it.” “Someone ought to tell him.” “All we can do is wait and see.” “Just tell me what you want me to do.” “If it were me, I’d do it differently.”
• You frequently waste time and energy “boss or colleague bashing.”
• You spend valuable time crafting a compelling story detailing why you were not at fault.
• You repeatedly tell the same old story about how someone took advantage of you.
• You view the world with a pessimistic attitude.
What I Read Today - Sunday September 4, 2011
From: The Wall Street Journal
Can the World Still Feed Itself?
Yes, says Nestle's chairman Peter Brabeck-Letmathe, but not if we burn food for fuel, fear genetic advances and fail to charge for water
By BRIAN M. CARNEY
Vevey, Switzerland
As befits the chairman of the world's largest food-production company, Peter Brabeck-Letmathe is counting calories. But it's not his diet that the chairman and former CEO of Nestlé is worried about. It's all the food that the U.S. and Europe are converting into fuel while the world's poor get hungrier.
"Politicians," Mr. Brabeck-Letmathe says, "do not understand that between the food market and the energy market, there is a close link." That link is the calorie.
The energy stored in a bushel of corn can fuel a car or feed a person. And increasingly, thanks to ethanol mandates and subsidies in the U.S. and biofuel incentives in Europe, crops formerly grown for food or livestock feed are being grown for fuel. The U.S. Department of Agriculture's most recent estimate predicts that this year, for the first time, American farmers will harvest more corn for ethanol than for feed. In Europe some 50% of the rapeseed crop is going into biofuel production, according to Mr. Brabeck-Letmathe, while "world-wide about 18% of sugar is being used for biofuel today."
In one sense, this is a remarkable achievement—five decades ago, when the global population was half what it is today, catastrophists like Paul Ehrlich were warning that the world faced mass starvation on a biblical scale. Today, with nearly seven billion mouths to feed, we produce so much food that we think nothing of burning tons of it for fuel.
Or at least we think nothing of it in the West. If the price of our breakfast cereal goes up because we're diverting agricultural production to ethanol or biodiesel, it's an annoyance. But if the price of corn or flour doubles or triples in the Third World, where according to Mr. Brabeck-Letmathe people "are spending 80% of [their] disposable income on food," hundreds of millions of people go hungry. Sometimes, as in the Middle East earlier this year, they revolt.
"What we call today the Arab Spring," Mr. Brabeck-Letmathe says over lunch at Nestle's world headquarters, "really started as a protest against ever-increasing food prices."
Mr. Brabeck-Letmathe has extensive experience at the intersection of food, politics and development. He spent most of his first two decades at Nestlé in Latin America. In 1970, he was posted to Chile, where Salvador Allende's socialist government was threatening to nationalize milk production, and Nestlé's Chilean operations along with it. He knows that most of the world is not as fortunate as we are.
"There is a huge difference," he says, "between how we live this crisis and what the reality of today is for hundreds of millions of people, who we have been pushing back into extreme poverty with wrong policy making." First there's the biofuels craze, driven by concerns over energy independence, oil supplies, global warming and, ironically, Mideast political stability.
Add to that, especially in Europe, a paralyzing fear of genetically modified crops, or GMOs. This refusal to use "available technology" in agriculture, Mr. Brabeck-Letmathe contends, has halted the multi-decade rise in agricultural productivity that has allowed us, so far, to feed more mouths than many people believed was possible.
Then there is demographics. Recent decades have seen "the creation of more than a billion new consumers in the world who have had the opportunity to move from extreme poverty into what we would call today a moderate middle class," thanks to economic growth in places like China and India. This means a billion people who have "access to meat" for the first time, Mr. Brabeck-Letmathe says.
"And the demand for meat," he says, "has a multiplier effect of 10. You need 10 times as much land, 10 times as much [feed], 10 times as much water to produce one calorie of meat as you do to have one calorie of vegetables or grain." Even so, we are capable of satisfying this increased demand—if we choose to. "If politicians of this world really want to tackle food security," Mr. Brabeck-Letmathe says, "there's only one decision they have to make: No food for fuel. . . . They just have to say 'No food for fuel,' and supply and demand would balance again."
If we don't do that, we can never hope to square the drive for biofuels with the world's food needs. The calories don't add up. "The energy market," Mr. Brabeck-Letmathe argues, "is 20 times as big, in calories, as the food market." So "when politicians say, 'We want to replace 20% of the energy market through the food market,'" this means "we would have to triple food production" to meet that goal—and that's before we eat the first kernel of what we've grown.
Even if we could pull this off, we will never get there by turning our backs on genetically modified crops and holding up "organic" food as the new gold standard of safety, purity and health. Organic production is all the rage in the rich West, but we can't "feed the world with this stuff," he says. Agricultural productivity with organics is too low.
"If you look at those countries that have introduced GMOs," Mr. Brabeck-Letmathe says, "you will see that the yield per hectare has increased by about 30% over the past few years. Whereas the yields for non-GMO crops are flat to slightly declining." And that gap, he says, "is a voluntary gap. . . . It's just a political decision."
And it's one thing for rich, well-fed Europe to say, as Mr. Brabeck-Letmathe puts it, "I don't want to produce GMO [crops] because frankly speaking I don't want to produce so much food." That, he says, he can understand.
What's harder for him to understand is that Europe's policies effectively forbid poor countries in places like Africa from using genetically modified seed. These countries, he says, urgently need the technology to increase yields and productivity in their backward agricultural sectors. But if they plant GMOs, then under Europe's rules the EU "will not allow you to export anything—anything. Not just the [crop] that has GMO—anything," because of European fears about cross-contamination and almost impossibly strict purity standards. The European fear of genetically modified crops is, he says, "purely emotional. It's becoming almost a religious belief."
This makes Mr. Brabeck-Letmathe, a jovial man with a quick smile, get emotional himself. "How many people," he asks with a touch of irritation, "have died from food contamination from organic products, and how many people have died from GMO products?" He answers his own question: "None from GMO. And I don't have to ask too long how many people have died just recently from organic," he adds, referring to the e. coli outbreak earlier this year in Europe.
Nestlé itself has at times been painted as an enemy of the world's poor—for 30 years it has contended with a sporadic boycott movement over the sale and marketing of infant formula in the Third World, a push that some rich Westerners find unethical. On the other hand, under Mr. Brabeck-Letmathe, Nestlé's corporate strategy has emphasized that all food markets are intensely local. Americans may increasingly buy all drinks by the gallon and chocolate bars by the pound, but in many parts of the world a trip to the store might yield a single Maggi cube—the Nestlé-made bullion cubes that are ubiquitous in many countries. In these countries, single servings of many products are sold in little foil packets to allow people to match their spending to their cash flow.
This is, Mr. Brabeck-Letmathe contends, an extension of Nestlé's original reason for being. Nestlé exists, Mr. Brabeck-Letmathe says, because as Europe's population "urbanized," as people moved to the cities and traded their ploughshares for time cards, "somebody had to ensure that people" who worked 12 hours a day in a factory could feed themselves. For the first time in history, "you need[ed] a food industry. You need[ed] somebody who takes a product, who treats it so that its shelf life allows it to be transported, to be brought into the consumption center. That's why we have canning, that's why we have pasteurization, that's why we have all these things."
The vast majority of us would have no idea any longer how to feed ourselves if we turned up one day to find the supermarket empty. We rely on industrialized food production, distribution, preservation and storage to make our urban lifestyles, our very lives, possible. And "it was not the state that took care of this thing. It was private initiative." Today, Nestlé employs some 300,000 people, takes in some $100 billion a year in revenue—and yet represents just 1.5% of a global food industry that feeds billions.
But for private initiative to work that kind of miracle, you need a market. Mr. Brabeck-Letmathe even worries about the absence of a functioning market for water. Some 98.5% of the fresh water the world uses every year goes to agricultural or industrial use. And in most cases, there is no market for how that water is allocated and used. The result is waste, overuse and misuse of the water we have. If we don't do something about that, Mr. Brabeck-Letmathe fears, we will soon run ourselves dry.
Up to now, he says, our response to water shortages has focused "on the supply-side": We build another dam, or a canal to bring water from one place to another. But "the big issue," he contends, "is on the demand side," and the "best regulator" of demand is prices.
"If oil becomes scarce," he notes, "the oil price goes up. But if water does, well, we still pump the same amount. It doesn't matter because it doesn't cost. It has no value." He drives this point home by connecting it back to biofuels: "We would never have had a biofuel policy—never," he contends, "if we would have given water any value." It takes, Mr. Brabeck-Letmathe says, "9,100 liters of water to produce one liter of biodiesel. You can only do that because water has no price."
He cites Spain as an example of an agricultural sector in need of adjustment. "The total [output] of the Spanish agricultural system," he says, "is less in value than the subsidies they receive between the Common Agricultural Policy, the subsidies for tax relief, the subsidies for water."
'Take away the emotion of the water issue," Mr. Brabeck-Letmathe argues. "Give the 1.5% of the water [that we use to drink and wash with], make it a human right. But give me a market for the 98.5% so the market forces are able to react, and they will be the best guidance that you can have. Because if the market forces are there the investments are going to be made."
The world's population is projected to hit nine billion by mid-century, up from 6.7 billion today. So, can we feed all those people? Mr. Brabeck-Letmathe doesn't hesitate. "We can feed nine billion people," he says, with a wave of the hand. And we can provide them with water and fuel. But only if we let the market do its thing.
Mr. Carney is editorial page editor of The Wall Street Journal Europe and coauthor of "Freedom, Inc.," (Crown Business, 2009).
Can the World Still Feed Itself?
Yes, says Nestle's chairman Peter Brabeck-Letmathe, but not if we burn food for fuel, fear genetic advances and fail to charge for water
By BRIAN M. CARNEY
Vevey, Switzerland
As befits the chairman of the world's largest food-production company, Peter Brabeck-Letmathe is counting calories. But it's not his diet that the chairman and former CEO of Nestlé is worried about. It's all the food that the U.S. and Europe are converting into fuel while the world's poor get hungrier.
"Politicians," Mr. Brabeck-Letmathe says, "do not understand that between the food market and the energy market, there is a close link." That link is the calorie.
The energy stored in a bushel of corn can fuel a car or feed a person. And increasingly, thanks to ethanol mandates and subsidies in the U.S. and biofuel incentives in Europe, crops formerly grown for food or livestock feed are being grown for fuel. The U.S. Department of Agriculture's most recent estimate predicts that this year, for the first time, American farmers will harvest more corn for ethanol than for feed. In Europe some 50% of the rapeseed crop is going into biofuel production, according to Mr. Brabeck-Letmathe, while "world-wide about 18% of sugar is being used for biofuel today."
In one sense, this is a remarkable achievement—five decades ago, when the global population was half what it is today, catastrophists like Paul Ehrlich were warning that the world faced mass starvation on a biblical scale. Today, with nearly seven billion mouths to feed, we produce so much food that we think nothing of burning tons of it for fuel.
Or at least we think nothing of it in the West. If the price of our breakfast cereal goes up because we're diverting agricultural production to ethanol or biodiesel, it's an annoyance. But if the price of corn or flour doubles or triples in the Third World, where according to Mr. Brabeck-Letmathe people "are spending 80% of [their] disposable income on food," hundreds of millions of people go hungry. Sometimes, as in the Middle East earlier this year, they revolt.
"What we call today the Arab Spring," Mr. Brabeck-Letmathe says over lunch at Nestle's world headquarters, "really started as a protest against ever-increasing food prices."
Mr. Brabeck-Letmathe has extensive experience at the intersection of food, politics and development. He spent most of his first two decades at Nestlé in Latin America. In 1970, he was posted to Chile, where Salvador Allende's socialist government was threatening to nationalize milk production, and Nestlé's Chilean operations along with it. He knows that most of the world is not as fortunate as we are.
"There is a huge difference," he says, "between how we live this crisis and what the reality of today is for hundreds of millions of people, who we have been pushing back into extreme poverty with wrong policy making." First there's the biofuels craze, driven by concerns over energy independence, oil supplies, global warming and, ironically, Mideast political stability.
Add to that, especially in Europe, a paralyzing fear of genetically modified crops, or GMOs. This refusal to use "available technology" in agriculture, Mr. Brabeck-Letmathe contends, has halted the multi-decade rise in agricultural productivity that has allowed us, so far, to feed more mouths than many people believed was possible.
Then there is demographics. Recent decades have seen "the creation of more than a billion new consumers in the world who have had the opportunity to move from extreme poverty into what we would call today a moderate middle class," thanks to economic growth in places like China and India. This means a billion people who have "access to meat" for the first time, Mr. Brabeck-Letmathe says.
"And the demand for meat," he says, "has a multiplier effect of 10. You need 10 times as much land, 10 times as much [feed], 10 times as much water to produce one calorie of meat as you do to have one calorie of vegetables or grain." Even so, we are capable of satisfying this increased demand—if we choose to. "If politicians of this world really want to tackle food security," Mr. Brabeck-Letmathe says, "there's only one decision they have to make: No food for fuel. . . . They just have to say 'No food for fuel,' and supply and demand would balance again."
If we don't do that, we can never hope to square the drive for biofuels with the world's food needs. The calories don't add up. "The energy market," Mr. Brabeck-Letmathe argues, "is 20 times as big, in calories, as the food market." So "when politicians say, 'We want to replace 20% of the energy market through the food market,'" this means "we would have to triple food production" to meet that goal—and that's before we eat the first kernel of what we've grown.
Even if we could pull this off, we will never get there by turning our backs on genetically modified crops and holding up "organic" food as the new gold standard of safety, purity and health. Organic production is all the rage in the rich West, but we can't "feed the world with this stuff," he says. Agricultural productivity with organics is too low.
"If you look at those countries that have introduced GMOs," Mr. Brabeck-Letmathe says, "you will see that the yield per hectare has increased by about 30% over the past few years. Whereas the yields for non-GMO crops are flat to slightly declining." And that gap, he says, "is a voluntary gap. . . . It's just a political decision."
And it's one thing for rich, well-fed Europe to say, as Mr. Brabeck-Letmathe puts it, "I don't want to produce GMO [crops] because frankly speaking I don't want to produce so much food." That, he says, he can understand.
What's harder for him to understand is that Europe's policies effectively forbid poor countries in places like Africa from using genetically modified seed. These countries, he says, urgently need the technology to increase yields and productivity in their backward agricultural sectors. But if they plant GMOs, then under Europe's rules the EU "will not allow you to export anything—anything. Not just the [crop] that has GMO—anything," because of European fears about cross-contamination and almost impossibly strict purity standards. The European fear of genetically modified crops is, he says, "purely emotional. It's becoming almost a religious belief."
This makes Mr. Brabeck-Letmathe, a jovial man with a quick smile, get emotional himself. "How many people," he asks with a touch of irritation, "have died from food contamination from organic products, and how many people have died from GMO products?" He answers his own question: "None from GMO. And I don't have to ask too long how many people have died just recently from organic," he adds, referring to the e. coli outbreak earlier this year in Europe.
Nestlé itself has at times been painted as an enemy of the world's poor—for 30 years it has contended with a sporadic boycott movement over the sale and marketing of infant formula in the Third World, a push that some rich Westerners find unethical. On the other hand, under Mr. Brabeck-Letmathe, Nestlé's corporate strategy has emphasized that all food markets are intensely local. Americans may increasingly buy all drinks by the gallon and chocolate bars by the pound, but in many parts of the world a trip to the store might yield a single Maggi cube—the Nestlé-made bullion cubes that are ubiquitous in many countries. In these countries, single servings of many products are sold in little foil packets to allow people to match their spending to their cash flow.
This is, Mr. Brabeck-Letmathe contends, an extension of Nestlé's original reason for being. Nestlé exists, Mr. Brabeck-Letmathe says, because as Europe's population "urbanized," as people moved to the cities and traded their ploughshares for time cards, "somebody had to ensure that people" who worked 12 hours a day in a factory could feed themselves. For the first time in history, "you need[ed] a food industry. You need[ed] somebody who takes a product, who treats it so that its shelf life allows it to be transported, to be brought into the consumption center. That's why we have canning, that's why we have pasteurization, that's why we have all these things."
The vast majority of us would have no idea any longer how to feed ourselves if we turned up one day to find the supermarket empty. We rely on industrialized food production, distribution, preservation and storage to make our urban lifestyles, our very lives, possible. And "it was not the state that took care of this thing. It was private initiative." Today, Nestlé employs some 300,000 people, takes in some $100 billion a year in revenue—and yet represents just 1.5% of a global food industry that feeds billions.
But for private initiative to work that kind of miracle, you need a market. Mr. Brabeck-Letmathe even worries about the absence of a functioning market for water. Some 98.5% of the fresh water the world uses every year goes to agricultural or industrial use. And in most cases, there is no market for how that water is allocated and used. The result is waste, overuse and misuse of the water we have. If we don't do something about that, Mr. Brabeck-Letmathe fears, we will soon run ourselves dry.
Up to now, he says, our response to water shortages has focused "on the supply-side": We build another dam, or a canal to bring water from one place to another. But "the big issue," he contends, "is on the demand side," and the "best regulator" of demand is prices.
"If oil becomes scarce," he notes, "the oil price goes up. But if water does, well, we still pump the same amount. It doesn't matter because it doesn't cost. It has no value." He drives this point home by connecting it back to biofuels: "We would never have had a biofuel policy—never," he contends, "if we would have given water any value." It takes, Mr. Brabeck-Letmathe says, "9,100 liters of water to produce one liter of biodiesel. You can only do that because water has no price."
He cites Spain as an example of an agricultural sector in need of adjustment. "The total [output] of the Spanish agricultural system," he says, "is less in value than the subsidies they receive between the Common Agricultural Policy, the subsidies for tax relief, the subsidies for water."
'Take away the emotion of the water issue," Mr. Brabeck-Letmathe argues. "Give the 1.5% of the water [that we use to drink and wash with], make it a human right. But give me a market for the 98.5% so the market forces are able to react, and they will be the best guidance that you can have. Because if the market forces are there the investments are going to be made."
The world's population is projected to hit nine billion by mid-century, up from 6.7 billion today. So, can we feed all those people? Mr. Brabeck-Letmathe doesn't hesitate. "We can feed nine billion people," he says, with a wave of the hand. And we can provide them with water and fuel. But only if we let the market do its thing.
Mr. Carney is editorial page editor of The Wall Street Journal Europe and coauthor of "Freedom, Inc.," (Crown Business, 2009).
Friday, September 2, 2011
What I Read Today - Friday September 2, 2011
From: The New York Times
The Vigorous Virtues
By DAVID BROOKS
There’s a specter haunting American politics: national decline. Is America on the way down, and, if so, what can be done about it?
The Republicans, and Rick Perry in particular, have a reasonably strong story to tell about decline. America became great, they explain, because its citizens possessed certain vigorous virtues: self-reliance, personal responsibility, industriousness and a passion for freedom.
But, over the years, government has grown and undermined these virtues. Wall Street financiers no longer have to behave prudently because they know government will bail them out. Middle-class families no longer have to practice thrift because they know they can use government to force future generations to pay for their retirements. Dads no longer have to marry the women they impregnate because government will step in and provide support.
Moreover, a growing government sucked resources away from the most productive parts of the economy — innovators, entrepreneurs and workers — and redirected it to the most politically connected parts. The byzantine tax code and regulatory state has clogged the arteries of American dynamism.
The current task, therefore, is, as Rick Perry says, to make the government “inconsequential” in people’s lives — to pare back the state to revive personal responsibility and private initiative.
There’s much truth to this narrative. Stable societies are breeding grounds for interest groups. Over time, these interest groups use government to establish sinecures for themselves, which gradually strangle the economy they are built on — like parasitic vines around a tree.
Yet as great as the need is to streamline, reform and prune the state, that will not be enough to restore America’s vigorous virtues. This is where current Republican orthodoxy is necessary but insufficient. There are certain tasks ahead that cannot be addressed simply by getting government out of the way.
In the first place, there is the need to rebuild America’s human capital. The United States became the wealthiest nation on earth primarily because Americans were the best educated.
That advantage has entirely eroded over the past 30 years. It will take an active government to reverse this stagnation — from prenatal and early childhood education straight up through adult technical training and investments in scientific and other research. If government is “inconsequential” in this sphere, then continued American decline is inevitable.
Then there are the long-term structural problems plaguing the economy. There’s strong evidence to suggest that the rate of technological innovation has been slowing down. In addition, America is producing fewer business start-ups. Job creation was dismal even in the seven years before the recession, when taxes were low and Republicans ran the regulatory agencies. As economist Michael Spence has argued, nearly all of the job growth over the past 20 years has been in sectors where American workers don’t have to compete with workers overseas.
Meanwhile, middle-class wages have been stagnant for a generation. Inequality is rising, and society is stratifying. Americans are less likely to move in search of opportunity. Social mobility has been flat for decades, and American social mobility is no better than European social mobility.
Some of these problems are exacerbated by government regulations and could be eased if government pulled back. But most of them have nothing to do with government and are related to globalization, an aging society, cultural trends and the nature of technological change.
Republicans have done almost nothing to grapple with and address these deeper structural problems. Tackling them means shifting America’s economic model — tilting the playing field away from consumption toward production; away from entitlement spending and more toward investment in infrastructure, skills and technology; mitigating those forces that concentrate wealth and nurturing instead a broad-based opportunity society.
These shifts cannot be done by government alone, but they can’t be done without leadership from government. Just as the Washington and Lincoln administrations actively nurtured an industrial economy, so some future American administration will have to nurture a globalized producer society. Just as F.D.R. created a welfare model for the 20th century, some future administration will have to actively champion a sustainable welfare model for this one.
Finally, there is the problem of the social fabric. Segmented societies do not thrive, nor do ones, like ours, with diminishing social trust. Nanny-state government may have helped undermine personal responsibility and the social fabric, but that doesn’t mean the older habits and arrangements will magically regrow simply by reducing government’s role. For example, there has been a tragic rise in single parenthood, across all ethnic groups, but family structures won’t spontaneously regenerate without some serious activism, from both religious and community groups and government agencies.
In short, the current Republican policy of negativism — cut, cut cut — is not enough. To restore the vigorous virtues, the nanny state will have to be cut back, but the instigator state will have to be built up. That’s the only way to ward off national decline.
The Vigorous Virtues
By DAVID BROOKS
There’s a specter haunting American politics: national decline. Is America on the way down, and, if so, what can be done about it?
The Republicans, and Rick Perry in particular, have a reasonably strong story to tell about decline. America became great, they explain, because its citizens possessed certain vigorous virtues: self-reliance, personal responsibility, industriousness and a passion for freedom.
But, over the years, government has grown and undermined these virtues. Wall Street financiers no longer have to behave prudently because they know government will bail them out. Middle-class families no longer have to practice thrift because they know they can use government to force future generations to pay for their retirements. Dads no longer have to marry the women they impregnate because government will step in and provide support.
Moreover, a growing government sucked resources away from the most productive parts of the economy — innovators, entrepreneurs and workers — and redirected it to the most politically connected parts. The byzantine tax code and regulatory state has clogged the arteries of American dynamism.
The current task, therefore, is, as Rick Perry says, to make the government “inconsequential” in people’s lives — to pare back the state to revive personal responsibility and private initiative.
There’s much truth to this narrative. Stable societies are breeding grounds for interest groups. Over time, these interest groups use government to establish sinecures for themselves, which gradually strangle the economy they are built on — like parasitic vines around a tree.
Yet as great as the need is to streamline, reform and prune the state, that will not be enough to restore America’s vigorous virtues. This is where current Republican orthodoxy is necessary but insufficient. There are certain tasks ahead that cannot be addressed simply by getting government out of the way.
In the first place, there is the need to rebuild America’s human capital. The United States became the wealthiest nation on earth primarily because Americans were the best educated.
That advantage has entirely eroded over the past 30 years. It will take an active government to reverse this stagnation — from prenatal and early childhood education straight up through adult technical training and investments in scientific and other research. If government is “inconsequential” in this sphere, then continued American decline is inevitable.
Then there are the long-term structural problems plaguing the economy. There’s strong evidence to suggest that the rate of technological innovation has been slowing down. In addition, America is producing fewer business start-ups. Job creation was dismal even in the seven years before the recession, when taxes were low and Republicans ran the regulatory agencies. As economist Michael Spence has argued, nearly all of the job growth over the past 20 years has been in sectors where American workers don’t have to compete with workers overseas.
Meanwhile, middle-class wages have been stagnant for a generation. Inequality is rising, and society is stratifying. Americans are less likely to move in search of opportunity. Social mobility has been flat for decades, and American social mobility is no better than European social mobility.
Some of these problems are exacerbated by government regulations and could be eased if government pulled back. But most of them have nothing to do with government and are related to globalization, an aging society, cultural trends and the nature of technological change.
Republicans have done almost nothing to grapple with and address these deeper structural problems. Tackling them means shifting America’s economic model — tilting the playing field away from consumption toward production; away from entitlement spending and more toward investment in infrastructure, skills and technology; mitigating those forces that concentrate wealth and nurturing instead a broad-based opportunity society.
These shifts cannot be done by government alone, but they can’t be done without leadership from government. Just as the Washington and Lincoln administrations actively nurtured an industrial economy, so some future American administration will have to nurture a globalized producer society. Just as F.D.R. created a welfare model for the 20th century, some future administration will have to actively champion a sustainable welfare model for this one.
Finally, there is the problem of the social fabric. Segmented societies do not thrive, nor do ones, like ours, with diminishing social trust. Nanny-state government may have helped undermine personal responsibility and the social fabric, but that doesn’t mean the older habits and arrangements will magically regrow simply by reducing government’s role. For example, there has been a tragic rise in single parenthood, across all ethnic groups, but family structures won’t spontaneously regenerate without some serious activism, from both religious and community groups and government agencies.
In short, the current Republican policy of negativism — cut, cut cut — is not enough. To restore the vigorous virtues, the nanny state will have to be cut back, but the instigator state will have to be built up. That’s the only way to ward off national decline.
Thursday, September 1, 2011
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