“The Nukes We Need.” Dr. Strangelove Lives!

Just when you begin to feel that sanity might descend upon the earth you come across something that convinces you that you wait in vain. There was an article in the November/December, 2009 edition of Foreign Affairs, The Nukes We Need: Preserving the American Deterrent, by Lieber and Press that caused the latest concern.



KEIR A. LIEBER is Associate Professor in the Security Studies Program at Georgetown University's Edmund A. Walsh School of Foreign Service. DARYL G. PRESS is Associate Professor of Government at Dartmouth College and Coordinator of the War and Peace Studies Program at the John Sloan Dickey Center for International Understanding.


One would think that after 50 years of study, the conclusion that tactical nuclear weapons are worthless would have sunk in. Not so! These authors are determined to demonstrate a need for low yield nuclear weapons, perhaps even a need for more sophisticated weapons.


The authors begin with a highly dubious premise.

“The success of nuclear deterrence may turn out to be its own undoing. Nuclear weapons helped keep the peace in Europe throughout the Cold War, preventing the bitter dispute from engulfing the continent in another catastrophic conflict. But after nearly 65 years without a major war or a nuclear attack, many prominent statesmen, scholars, and analysts have begun to take deterrence for granted. They are now calling for a major drawdown of the U.S. nuclear arsenal and a new commitment to pursue a world without these weapons.”

One could just as easily claim that it was miraculous that peace prevailed in spite of the presence of nuclear weapons. Those who make such claims apparently share the same asylum as those who claim that Ronald Regan brought the Soviet Union to its knees with his support of the absurd “Starwars” missile defense system.


This supposed need for low yield nuclear weapons is also based on a premise that strains credulity.

“Unless the world's major disputes are resolved -- for example, on the Korean Peninsula, across the Taiwan Strait, and around the Persian Gulf -- or the U.S. military pulls back from these regions, the United States will sooner or later find itself embroiled in conventional wars with nuclear-armed adversaries.”

“Preventing escalation in those circumstances will be far more difficult than peacetime deterrence during the Cold War. In a conventional war, U.S. adversaries would have powerful incentives to brandish or use nuclear weapons because their lives, their families, and the survival of their regimes would be at stake. Therefore, as the United States considers the future of its nuclear arsenal, it should judge its force not against the relatively easy mission of peacetime deterrence but against the demanding mission of deterring escalation during a conventional conflict, when U.S. enemies are fighting for their lives.”

The authors are telling us that we should be losing sleep over inevitable land wars in Korea, China or/and Iran. I know it was said before World War One that no one could afford a modern war, and that it would have to wind down within days, but this time such a statement would be appropriate. I expect to sleep well tonight.


This is the scenario that is of concern to them.

“The central problem for U.S. deterrence in the future is that even rational adversaries will have powerful incentives to introduce nuclear weapons -- that is, threaten to use them, put them on alert, test them, or even use them -- during a conventional war against the United States. If U.S. military forces begin to prevail on the battlefield, U.S. adversaries may use nuclear threats to compel a cease-fire or deny the United States access to allied military bases. Such threats might succeed in pressuring the United States to settle the conflict short of a decisive victory.”

The authors agree that a response involving massive destruction and death from high-yield nuclear weapons would not be productive. However they believe that it would be perfectly reasonable to respond to a tactical nuclear strike, or even the threat of a nuclear strike in this fashion.

“The least bad option in the face of explicit nuclear threats or after a limited nuclear strike may be a counterforce attack to prevent further nuclear use. A counterforce strike could be conducted with either conventional or nuclear weapons, or a mix of the two. The attack could be limited to the enemy's nuclear delivery systems -- for example, its bombers and missile silos -- or a wider range of sites related to its nuclear program. Ideally, a U.S. counterforce strike would completely destroy the enemy's nuclear forces. But if an adversary had already launched a nuclear attack against the United States or its allies, a response that greatly reduced the adversary's nuclear force could save countless lives, and it could open the door to decisive military actions (such as conquest and regime change) to punish the enemy's leadership for using nuclear weapons.”

It is hard to know where to start in discussing this statement. Remember, we are talking about a scenario in which a country is losing a conventional war to the U.S. and any allies. Presumably this limited nuclear strike or threat of a limited strike, perhaps on its own land (certainly not on U.S. territory), is to be responded to with a massive strategic response to eliminate all delivery systems, strategic as well as tactical. It is not clear how going from a threat of use to actually using large numbers of nuclear weapons is likely to “save countless lives.” That would appear to be the dumbest thing imaginable. There is also the impossibility of carrying out the described mission. Any country smart enough to build viable nuclear weapons is smart enough to know that you have to make at least some of them mobile if you ever plan on using them. Since our intelligence is not good enough to detect and locate large fixed facilities in closed countries, it is not clear how we might detect a few trucks carrying nuclear delivery systems out the hundreds of thousands that might be tooling around the countryside.


We are in the process of ramping down nuclear arsenals. It is of no value to be conjuring up new uses for nuclear weapons. Mutually assured destruction was an ugly concept, but it worked. We should stick with it, rather than attempt to make nuclear war appear feasible.


There is a nice summary of the status of tactical nuclear weapons in the world that can be found here.


The world will be a better place when we have fewer nuclear weapons—and fewer people making a living trying to argue that they are useful.

Putting Predictions to the Test: Pundits Flunk

There is a psychology professor named Philip Tetlock who spent twenty years evaluating people who make their living by making predictions in the fields of politics and economics. He studied 284 people who ended up making 82,361 predictions over the course of that period. He wrote a book summarizing his findings: Expert Political Judgment: How Good Is It? How Can We Know? The book came out in 2005. I stumbled across a reference to Tetlock’s work just yesterday. His conclusions are fascinating. There is a great review of the book in the New Yorker magazine by Louis Menand.

“It is the somewhat gratifying lesson of Philip Tetlock’s new book.... that people who make prediction their business—people who appear as experts on television, get quoted in newspaper articles, advise governments and businesses, and participate in punditry roundtables—are no better than the rest of us. When they’re wrong, they’re rarely held accountable, and they rarely admit it, either. They insist that they were just off on timing, or blindsided by an improbable event, or almost right, or wrong for the right reasons. They have the same repertoire of self-justifications that everyone has, and are no more inclined than anyone else to revise their beliefs about the way the world works, or ought to work, just because they made a mistake. No one is paying you for your gratuitous opinions about other people, but the experts are being paid, and Tetlock claims that the better known and more frequently quoted they are, the less reliable their guesses about the future are likely to be. The accuracy of an expert’s predictions actually has an inverse relationship to his or her self-confidence, renown, and, beyond a certain point, depth of knowledge. People who follow current events by reading the papers and newsmagazines regularly can guess what is likely to happen about as accurately as the specialists whom the papers quote. Our system of expertise is completely inside out: it rewards bad judgments over good ones.”

Tetlock set up a system whereby he could perform statistical analyses by forcing the questions to be posed in a three component format. The three components might be stay the same, increase, or decrease; or they might be stay the same, get better, get worse.

“....the experts performed worse than they would have if they had simply assigned an equal probability to all three outcomes—if they had given each possible future a thirty-three-per-cent chance of occurring. Human beings who spend their lives studying the state of the world, in other words, are poorer forecasters than dart-throwing monkeys, who would have distributed their picks evenly over the three choices.”

Now that Tetlock has the knife firmly implanted, he proceeds to twist it.

“Tetlock also found that specialists are not significantly more reliable than non-specialists in guessing what is going to happen in the region they study. Knowing a little might make someone a more reliable forecaster, but Tetlock found that knowing a lot can actually make a person less reliable. ‘We reach the point of diminishing marginal predictive returns for knowledge disconcertingly quickly,’ he reports. ‘In this age of academic hyperspecialization, there is no reason for supposing that contributors to top journals—distinguished political scientists, area study specialists, economists, and so on—are any better than journalists or attentive readers of the New York Times in “reading” emerging situations’.”

Most might find this surprising, but psychologists spend their lives observing the biases, prejudices and emotional attachments that cause a supposedly rational human to make irrational decisions.


Tetlock was interviewed by CNN in 2009 concerning the financial crisis and the associated punditry. He had this advice about trying to assess a pundit’s credibility.

“The most important factor was not how much education or experience the experts had but how they thought. You know the famous line that [philosopher] Isaiah Berlin borrowed from a Greek poet, ‘The fox knows many things, but the hedgehog knows one big thing’? The better forecasters were like Berlin's foxes: self-critical, eclectic thinkers who were willing to update their beliefs when faced with contrary evidence, were doubtful of grand schemes and were rather modest about their predictive ability. The less successful forecasters were like hedgehogs: They tended to have one big, beautiful idea that they loved to stretch, sometimes to the breaking point. They tended to be articulate and very persuasive as to why their idea explained everything. The media often love hedgehogs’.”

Given the inaccuracy of “experts,” why do people still cling to their predictions? Tetlock had a very revealing answer.

“We need to believe we live in a predictable, controllable world, so we turn to authoritative-sounding people who promise to satisfy that need. That's why part of the responsibility for experts' poor record falls on us. We seek out experts who promise impossible levels of accuracy, then we do a poor job keeping score.”

Interesting stuff!

China Splurges in Africa: Can Both Benefit?

Western nations have spent decades lavishing aid on African countries to little avail. Dambisa Moyo addressed this failure in her book Dead Aid. She argued that the African countries would be better off if the Western countries had provided more funds in the form of direct commercial investments. She pointed out that China is the one country that had stepped up in this area. She provided a chapter titled “The Chinese Are Our Friends” in which she convinced herself that this was a good thing. Recognizing the distrust the Western nations had for China’s motives, she argued that both China and Africa would benefit.

“Bartering infrastructure for energy reserves is well understood by the Chinese and Africans alike. It’s a trade-off, and there are no illusions as to who does what to whom and why. There are those who see China as merely using Africa for its own political and economic ends....But for Africa it’s about survival. In the immediate term, Africa is getting what it needs—quality capital that actually funds investment, jobs for its people and that elusive growth. These are the things that aid promised, but has consistently failed to deliver.”

While people understand that China is acting in its own interests it seems to be doing it in a way that generates approval among the various nations.

“First, across the continent, favorable views of China (and its investments in Africa) outnumber critical judgments by at least two to one in almost every country....Second, in nearly all African countries surveyed, more people view China’s influence positively than make the same assessment of US influence.”

The discussion of China’s role has continued with two interesting recent articles: one enthusiastically positive, the second, ambivalent at best.


Deborah Brautigam has an article on the Foreign Affairs website: Africa’s Eastern Promise: What the West Can Learn from Chinese Investment in Africa. She provides a summary of China’s activities from her point of view.

“The first prong of Beijing's efforts is to offer African states resource-backed development loans, an initiative inspired by its experience at home. In the late 1970s, eager for modern technology and infrastructure but with almost no foreign exchange, China leveraged its natural resources -- ample supplies of oil, coal, and other minerals -- to attract a market-rate $10 billion loan from Japan. China was to get new infrastructure and technology from Japan and repay it with shipments of oil and coal. In 1980, Japan began to finance six major railway, port, and hydropower projects, the first of many projects that used Japanese firms to help build China's transport corridors, coal mines, and power grids.”

“Since 2004, China has concluded similar deals in at least seven resource-rich countries in Africa, for a total of nearly $14 billion. Reconstruction in war-battered Angola, for example, has been helped by three oil-backed loans from Beijing, under which Chinese companies have built roads, railways, hospitals, schools, and water systems. Nigeria took out two similar loans to finance projects that use gas to generate electricity. Chinese teams are building one hydropower project in the Republic of the Congo (to be repaid in oil) and another in Ghana (to be repaid in cocoa beans).”

Much of this infrastructure development is being performed by the Chinese themselves. Much of the money they put up goes back into their own economy. That is a smart move on their part. It is up to the African country involved to strike a deal that ensures sufficient labor and training are obtained by locals so that they have bettered themselves by the time the Chinese leave. Some countries strike a smart bargain, some don’t.

“In its second major experiment, China is helping to build special trade and economic cooperation zones in Africa. Seven such zones are in the works: two in Nigeria; the others in Egypt, Ethiopia, Mauritius, Zambia, and, possibly, Algeria. Special economic zones were an important feature of China's early development; today, China has more than one hundred such areas. The economists Paul Collier, author of The Bottom Billion, and John Page, of the Brookings Institution, argue in a recent report for the United Nations Industrial Development Organization that special economic zones can be a very promising strategy for industrialization and employment in Africa's least developed countries. It allows countries to improve poor infrastructure, inadequate services, and weak institutions by focusing efforts on a limited geographical area. And a targeted focus on boosting manufactured exports can help countries overcome the exchange-rate appreciation and the weakening of local non-energy industries that often accompany natural-resource exports.”

Brautigam seems to think that part of China’s motivation is to provide additional locations where they can offload low margin manufacturing (requiring cheap labor), and to create areas where it can move some of its environmentally damaging industries. That is what many developed countries did to China when it was hungry for investment. Now they will pass on the lesson learned.


As for the criticism that China will deal with any country, no matter how noxious the leadership might be, she has a ready reply.

“China may wind up supporting some dictatorial and corrupt regimes, but -- and this is an inconvenient truth -- the West also supports such regimes when it advances its interests. And given the limits of the West's success in promoting development in Africa so far, perhaps Westerners should be less judgmental and more open-minded in assessing China's initiatives there.”

The second article is by Howard W. French, The Next Empire. It appeared in the May, 2010 issue of the Atlantic magazine. From the snarky title one might expect that French’s assessment will be somewhat less rosy that Brautigan’s.


French spent time on the ground going across several countries in Africa observing and talking to people before ending up in the Democratic Republic of the Congo. French is clearly suspicious and is on the lookout for negative things. If one looks hard enough there will always negatives to be found. Nevertheless, his report, while not exactly balanced, is not biased either. He even brings up a discussion he had with Dambisa Moyo. It was encouraging to note that she continues to be enthusiastic about the Chinese activities.


French uses the Congo-China agreement to illustrate the difficulties one can encounter.

“In spring 2008, Congo’s beleaguered government unveiled a package of Chinese investments totaling $9.3 billion, a figure later reduced, for complex reasons involving International Monetary Fund pressure, to $6 billion—still roughly half of Congo’s GDP. China will build massive new copper and cobalt mines; 1,800 miles of railways; 2,000 miles of roads; hundreds of clinics, hospitals, and schools; and two new universities. Speaking before the parliament, Pierre Lumbi, the country’s infrastructure minister, compared the package to the Marshall Plan, and called it ‘the foundation on which the growth of our economy is going to be built’.”

“In exchange, China will get almost 11 million tons of copper and 620,000 tons of cobalt, which it will extract over the next 25 years—a ‘resource for infrastructure’ swap that China first pioneered, on a smaller scale, in Angola in 2004. Congo will choose from a menu of Chinese construction companies—pre-vetted and supplied with credit by China’s Export-Import Bank—which typically begin (and end) their work quickly, dispatching hundreds or thousands of workers to do the job.”

French’s fear, and the fear of many Congolese he talked with, is that the Chinese will deliver exactly what they promised, but when they leave there will be schools without a school system, hospitals without medical staff, and infrastructure the country cannot maintain. That is a valid criticism, but who is at fault here? By French’s own account, he suspects the government officials who negotiated the deal were more interested in lining their own pockets than protecting their citizens. This is exactly the same result obtained with so much aid funding over the years. It is inappropriate to use this example to fault the Chinese or their general approach. Other countries showed greater foresight in ensuring they were moving in a sustainable direction when negotiating deals.


China’s activities do not resemble classical colonialism, they certainly do not involve aid grants, and there clearly is no altruism involved. Perhaps they most closely resemble the good business practices that Dambisa Moyo pleaded for the Western countries to impose on Africa in place of aid. In any event, there appear to be more positives than negatives at this point. Let us hope for the best. Africa could use a break.

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

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



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


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


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


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


Wright begins his tale by pointing out a few of the numerous places in the Bible where Yahweh is described as one god among others.

“Though much of the scripture assumes the existence of only one God, some parts strike a different tone. The book of Genesis recalls a time when a bunch of male deities came down and had sex with attractive human females.”

“Psalm 82 says: ‘God had taken his place in the divine council: in the midst of the gods he holds judgment.’ And God himself, addressing the other council members a few verses later, says, ‘you are gods’.”

The word “el” means god in Hebrew. It can also mean God. However, since Hebrew did not have the convention of capitalization, one could only try to derive the meaning from context. There are many instances in the Bible where Yahweh and El appear in the same section. Translators, assuming one God, translate accordingly. However, there are instances where the translation makes more sense in the context of two gods.

“The many Biblical references to the existence of multiple gods are in a sense amazing. For, though the bible was composed over many centuries, the later parts of it passed through the hands of later editors who decided which books and verses to keep and which to discard—and who seem to have had a bias against polytheism. So these hints of Israelite polytheism that remain in the Bible are probably....’only the tip of the iceberg’.”

If Yahweh began as a minor god, he had to grow and acquire stature. His competition was El, the god of the Canaanites and probably also that of the northern kingdom of Israel. El was viewed as the chief god with a “divine council.” The tradition for replacing a god with another in ancient times was to incorporate the two as the same deity.

“...in the sixth chapter of Exodus, during one of Moses’ conversations with God. God says, ‘I am Yahweh. I appeared to Abraham, to Isaac, and to Jacob as El Shaddai, but by my name Yahweh I did not make myself known to them.’ Even Yahweh himself says that he started out life with the name El.!’"

A second component of god replacement was to acquire the attributes and capabilities of the god to be replaced. The writers of the Bible went to great lengths to put Yahweh in situations where he performed deeds that were duplicates of actions presumed to have been accomplished by other gods.



There are many reasons why a nation would devolve to a single god and monotheism. Consider the poor ruler who must contend with multiple prophets claiming competing utterances from different gods. That is no way to run a ship. A king with a single god and a single prophet who he can control is a happy man. One of the more clever actions of Josiah was to centralize the worship of Yahweh in the temple of Jerusalem.

“Archeologists have found written references from the eighth century BCE not just to ‘Yahweh’ but to ‘Yahweh of Samaria’ and ‘Yahweh of Teman.’ In a theocracy, this sort of divine fragmentation threatens national unity. Josiah, by confining the legitimate worship of Yahweh to the temple in Jerusalem, was asserting control over Yahweh’s identity and thus over Judah’s.”

Judean history introduced a strong distrust of international entanglements. As a small, weak country, the best they could hope for was vassal status relative to stronger neighbors. There was no advantage, nor any desire to honor anyone else’s god. The path to monotheism required the Judeans to rid themselves of their own alternate gods. This was a transformation attempted by Josiah, but it would take many years after his abrupt death to complete.


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


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

European Multinationals: Slumming in America; Labor and Globalization

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



Two articles appeared recently in “The American Prospect” that discuss labor issues and globalization. The first, written by Lance Compa, is titled Slumming in America. Compa is interested in working conditions as a human rights issue. He provides an overview of traditional labor practices in Europe and illustrates the differences with standard practices in the United States.

“Get back to work, or we'll hire permanent replacements to take your jobs! That's what management at Robert Bosch, a German multinational firm with 270,000 employees worldwide, told union members who exercised their right to strike in December 2005.”

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

“The 2005 strike wasn't taking place in Europe, however, but at Bosch's packaging equipment plant in New Richmond, Wisconsin, where the company was demanding wage cuts and higher health-insurance payments. Bosch acted legally under U.S. labor law, which uniquely allows employers to permanently replace workers who strike. Most other countries permit only temporary replacements. Some prohibit replacements altogether. Faced with permanent replacement, the Wisconsin workers returned quickly on management's terms.”

Europe’s labor practices demonstrate by contrast the United States’ resemblance to a banana republic.

“Striker replacement is just one feature of U.S. labor law that runs counter to international standards on freedom of association. Other features withhold protections for farmworkers, household domestic employees, ‘independent’ contractors who are really dependent on one employer, and low-level "supervisors" who aren't really part of management at all. Worker protections are further undercut by the disparity in U.S. labor law requiring authorities to seek injunctions against union unfair labor practices but not against employer unfair labor practices.”

“Non-interference in workers' organizing is the key international standard on freedom of association. The most common violations allowed under U.S. law are aggressive, one -- sided, fearmongering campaigns that employers launch when workers try to form unions. Managers can haul workers into captive -- audience meetings, forbidding any talk-back, to hear ‘predictions’ of workplace closure if employees form a union, as long as the predictions are not threats. This prediction-versus-threat distinction pleases judges and lawyers but leaves workers baffled and scared.”

Globalization has driven labor leaders not only into the arms of their counterparts in other countries, it has also initiated an alliance with human rights organizations. The concern is to not only prevent human rights violations in the United States and other third world countries, but to prevent the contamination of the rest of the world with U.S. practices.

“....U.S.-style management interference is also making inroads in Europe... a U.K. poultry-processing company named Cranberry Foods used an American anti-union consulting group to spoil workers' organizing in a plant near Manchester. Some U.S.-based anti-union consultants are setting up shop in Eastern European countries that recently joined the European Union.... trade unions and human-rights groups are developing strategies to turn back the U.S. union-busting model.”

The second article, by Louis Uchitelle, Globalization, Union-Style discusses the developing union strategy for dealing with multinational corporations. With the law and judges on the side of the employer, unions must consider other tactics.

“American law gives workers the right to choose to be represented by unions, but today that happens less and less as managers, ignoring the law, block the process. With employers firing or harassing employees who try to organize unions, only one in seven organizing drives eventually produces a contract. So the American labor movement has turned abroad for the organizing leverage it is losing at home.”

“The deterioration in a single generation is considerable, particularly in the last decade. Only 12 percent of the nation's workers (and just 7 percent of private-sector workers) are represented by unions today, with a further decline likely as union organizing dries up. The National Labor Relations Board (NLRB) reports a ‘precipitous drop’ since the late 1990s in the chief means of union expansion: workplace elections to certify bargaining units. Only 1,304 elections took place last year, down 60 percent in little more than a decade, with only 44,000 workers gaining representation in the elections won by unions. That number, too, has declined precipitously.”

The author uses the attempt by the communication Workers of America (CWA) to unionize T-Mobile’s 26,000 technicians and call center employees as an example.

“The CWA has been trying for years to organize T-Mobile's 26,000 technicians and call-center employees. It even endorsed Deutsche Telekom's 2001 acquisition of the company, then known as VoiceStream, in the belief that Deutsche Telekom's acceptance of unions, required by German law and custom, would carry over to the United States and that the CWA's organizing drives could then proceed without interference from company managers.”

Deutch Telekom is accused of “going native” and using standard U.S. management techniques to hinder the union’s efforts. To counter this, CWA has established ties with similar workers for Deutch Telekom in Germany.

“As part of this strategy, in 2008 the CWA reached out to ver.di, its German counterpart. Wilhelm led the fourth visit of ver.di officials to the United States in support of the CWA's organizing efforts. A former telephone installer, he rose to be a director of ver.di and, as such, holds a seat on Deutsche Telekom's board of supervisors. That puts him in regular contact with Rene Obermann, the company's chief executive. Indeed, ver.di officials occupy several of the board's seats, as provided by Germany's co-determination law.”

“Beyond engaging Obermann, Wilhelm and his union colleagues lobby shareholders and convene press conferences, hoping that descriptions of a worker's lot at T-Mobile across the Atlantic will stir up public anger in Germany. In case that is not enough, ver.di, with 2.3 million members, can appeal for support to the German government, which owns 32 percent of Deutsche Telekom.”

The T-Mobile effort is still underway, but the approach has become more common and has been of value. The goal is to get the European companies to at least be neutral with regard to union organizing.

“As globalization spreads, allowing corporations to play off workers in different nations, it also promotes global unionism. In the process, a cross -- border labor movement is beginning to add muscle to American unions. The United Steelworkers, the United Auto Workers, the Teamsters, the United Food and Commercial Workers, and the Service Employees International Union are all engaged in the novel tactic. SEIU is perhaps the most successful to date. Working in part through UNI Global Union, a relatively new Geneva-based federation of 900 unions in numerous countries, it is managing to organize thousands of American security guards whose employers were acquired by foreign multinationals.”

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

“That is partly because the company's American managers have resisted, despite the formal agreement. ‘They push back, they argue that unionization will destroy profitability, they threaten to quit if SEIU signs up their employees, and that makes Swedish executives in Stockholm nervous,’ says Tom Woodruff, SEIU's executive vice president. ‘They don't want to have to send Swedes to run the American operation’."

This approach does appear to have some successes.

“What stands out in this data is the role of the foreign company operating in America. One-third of the dwindling number of companies organized successfully in recent years were foreign-owned, according to a study by Kate Bronfenbrenner, director of labor education research at Cornell University's School of Industrial and Labor Relations. One of her colleagues, Richard Hurd, estimates that one-half of all workers organized into bargaining units in the United States in recent years benefited from neutrality agreements. Most of them involved foreign companies with operations in the United States, but in some cases, an American company acquiesced to neutrality in exchange for a union's support in dealing with the federal government, or with state governments, on a regulatory matter or other issue important to the company's managers.”

Most of society’s ills can be attributed to income inequality and its effects. The Republican Party, and the businesses and churches that nourish it, all require large numbers of poor and ignorant people to thrive. Income inequality is no accident. It is hard to see how this issue can be addressed without a strong labor movement in the country.

The Costs of Obesity

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



The CBO presented this summary statement.

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

This table summarized the data they had to work with.

The CBO then considered three scenarios to project health care cost forward to the year 2020. The steady state or baseline solution with obesity ratios staying constant at the 2007 values would see costs increase by 65% due to the basic trend towards increased medical costs. The second scenario assumed

“....a rising prevalence of obesity—namely, that recent trends (from 2001 to 2007) in adults’ body weight will continue. In that scenario, the prevalence of obesity would rise to 37 percent by 2020, and per capita spending would increase to $7,760—about 3 percent higher than spending in the first scenario.”

The final case assumed a reversal of the trend toward obesity, returning to the 1987 levels by 2027.

“In that scenario, the prevalence of obesity among adults would drop to 20 percent by 2020. Per capita spending would increase to $7,230 in 2020—about 4 percent lower than spending in the first scenario.”

These results were somewhat surprising in that a significant change in the health status of a large fraction of the population yielded such a small effect. Actually, the effect is not small in terms of dollars—we’re talking a swing of $100 billion here—but it is small compared to the overall inflation in medical costs.


The CBO study was limited to adults. During this time period childhood obesity increased dramatically. Data is available here.

“Among pre-school age children 2-5 years of age, obesity increased from 5 to 10.4% between 1976-1980 and 2007-2008 and from 6.5 to 19.6% among 6-11 year olds. Among adolescents aged 12-19, obesity increased from 5 to 18.1% during the same period.”

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

“Obese children and adolescents are more likely to become obese as adults. For example, one study found that approximately 80% of children who were overweight at aged 10–15 years were obese adults at age 25 years. Another study found that 25% of obese adults were overweight as children. The latter study also found that if overweight begins before 8 years of age, obesity in adulthood is likely to be more severe.”

This information leaves one wondering if there is not perhaps an explosion of obesity-related issues in our future that is not considered in the CBO study.


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


The George Washington University study looks at costs from the individual’s perspective. They include the effects of wage differentials, productivity, and absenteeism, as well as health care costs, but not all related costs could be accounted for.

“The picture we have created is only a partial look at the individual costs related to obesity. Existing literature provides information on health- and work-related costs, but with the exception of fuel costs, there is no published academic research that gives us insight into consumer-related costs, such as clothing, air travel, automobile size or furniture. Anecdotal evidence suggests these costs could be significant.”

The following summary is provided.

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


This table also hides the disparity in costs between differing levels of obesity.

“....where we were able to break down the costs by class of obesity, we found the incremental costs of morbid obesity are much higher than the incremental costs of moderate obesity. We observed this trend in direct medical costs, premature mortality, absenteeism, and fuel consumption. For example, the direct medical costs for morbid obese individuals are 3.5 times higher than the direct medical costs for moderately obese individuals. As a result, Allison (1999) estimates one-fifth of total incremental costs of obesity at the societal level are due to morbidly obese patients, although the morbidly obese comprise only 5.7% of the population (Flegal et al., 2010).”

These results indicate that while obesity is not a dominant driver in national costs, for individuals the opposite conclusion can be drawn. Obesity-related costs almost doubled for men when non-medical factors are considered; they more than tripled for women.


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

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

Let us recall this quote from Steve Eisman.

“I thought that there would never again be an opportunity to be involved with an industry as socially destructive and morally bankrupt as the subprime mortgage industry. I was wrong. The for-profit education industry has proven equal to the task.”

Eisman was one of the main characters in the book The Big Short by Michael Lewis. He was one of those who made a financial killing by investing short against the subprime loan mess in the housing market. He delivered the above statement while testifying before a congressional committee. The Government Accountability Office has already issued a report detailing how these institutions encouraged fraud and engaged in deceptive and questionable marketing practices. As of yet, congress has congress has not had the courage to act and reign in the rampant abuse in this industry.


Another voice has been heard. The Education Trust has just issued a report titled: Subprime Opportunity: the Unfulfilled Promise of For-Profit Colleges and Universities. Like Eisman, the report draws a direct comparison between for-profit colleges and the subprime mortgage industry. This report, combined with a little data from Businessweek will make the analogy complete.

“The rationing of opportunity that marginalizes an important sector of American society has ironically become an extraordinarily profitable opportunity for corporations that claim to serve the underserved. In the lead-up to the collapse of the subprime lending industry, homeownership was billed as the cornerstone of the American Dream, as banks aggressively marketed risky financial products to those who could not afford them.”

“The developing showdown between for-profit colleges and the government is another example of how the aspirations of the underserved and the unfulfilled promise of the American dream combine with lax regulation to make the rich, richer and the poor, poorer.”

As was the case with subprime mortgages, the for-profit schools target those least likely to be served by traditional schools. Many such individuals have neither the academic background nor the motivation to complete a degree program and compete in the economy with other degree holders. To entice them with easy loans and promises of a rosy future is not doing them or the nation a favor. What we have here is the opportunity to run a scam to pilfer money from the national treasury via federally subsidized loans that the schools can then pocket as profit.

“The rapid rise of the for-profit industry has largely been driven by the aggressive recruitment of low-income students and students of color—a fact that is not disputed by the sector, but rather heralded as a sign of its commitment to underserved populations. Low-income and minority students make up 50 and 37 percent of students at for-profits, respectively.”

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


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

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

The Education Trust report tells the tale of a woman who graduated with $30,000 of debt; ten years later, with fees and interest, it had ballooned to $60,000. It also pointed out that

“The consequences of default are severe. Student loan debt is not dischargeable in bankruptcy, so it can follow a student for a lifetime. Defaulters can have their wages garnished, their income tax refunds intercepted, and their Social Security payments withheld.”

“These unmanageable debt burdens and high default rates indicate that for-profit schools do not provide students with the education necessary to secure employment at a level that allows them to repay the hefty loans they must borrow.”

Now we have the poor and defenseless being induced, through deceptive—and occasionally fraudulent—means to assume a level of debt that they cannot possibly pay off. One thing is left yet to complete the analogy with subprime mortgages—the rich have to get richer. Businessweek magazine has provided the needed data.

“While for-profit colleges get poor grades for their high dropout rates, student loan defaults, and heavy dependence on federal student aid, their executives excel in another subject: making money. Strayer Education, a for-profit college chain that receives three-quarters of its revenue from U.S. taxpayers, paid Chief Executive Officer Robert Silberman $41.9 million last year. That's 24 times the compensation of the highest-paid Ivy League university president, Columbia University's Lee Bollinger, who received $1.75 million in 2008, including the value of housing and other benefits, according to a study published Nov. 14 by the Chronicle of Higher Education. Silberman's annual pay, including cash and stock-based compensation, would have ranked him eighth on a list of the highest-paid executives at the largest 1,000 U.S. companies, according to Equilar, an executive-pay researcher.”

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

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

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

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



There was a report issued in October by the Institute of Medicine, The Future of Nursing: Leading Change, Advancing Health, recommending an expanded role for nurses as a means of improving healthcare and reducing costs. The specific points of emphasis were:

“Nurses should practice to the full extent of their education and training.”

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

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

“Effective workforce planning and policy making require better data collection and information infrastructure.”

If nurses are to play an expanded role in the existing system they will need a voice that can speak with as much influence as that possessed by doctors and hospitals. A recent article in the Washington Post points out that nurses are getting organized on a national level and are becoming more aggressive.

“National Nurses United, the largest nurses union in the country, has helped organize strikes or threatened them this year at hospitals in California, Pennsylvania, Maine, Michigan and Minnesota. The Oakland, Calif.-based union has tapped into concerns of registered nurses worried about losing jobs at a time when hospitals and health-care organizations are under enormous pressure to cut costs.”

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

“The union also sported a high-profile campaign during the recent midterm elections by attacking Republicans for their positions on health care. They targeted Meg Whitman, who lost to Jerry Brown in California's governor's race, and Sharron Angle, who was defeated by Democratic incumbent Harry Reid in Nevada's Senate race.”

There are 3 million registered nurses in this country. Suitably organized, they could be a potent force. When questioned about aggressive tactics, the Union leader, Rose Ann DeMoro replied:

"’Absolutely,’ she said. "If you are going to advocate for nurses and patients, and if you are meek, these hospitals will roll right over you’."

You have to like that reply. Go for it nurses!


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


The author tells the story of a food concession worker in Ohio who worked for the French-owned company Sodexo (380,000 workers in 80 countries). Contrast the conditions experienced by the worker in Ohio and by the Sodexo workers in France.

“Sodexo touts that it's ‘a great place to work.’ But on her part-time hours and low pay ($9 an hour or less until recently, after she began organizing and got a raise and a full work week), Snell had to raise her five children with the help of Medicaid, food stamps, and public assistance. When her Medicaid coverage ended, she could not afford Sodexo's insurance or her heart medicine and then needed bypass surgery.”

“French Sodexo union leaders Jean-Michel Dupire and Gerard Bodard say that after visiting Columbus last spring, they were shocked by differences between the lives of Americans like Snell and French Sodexo workers -- and the difference between Sodexo's self-image and reality. In France, anyone can easily join a union, and everyone in the food services is under union contracts. Most French Sodexo workers earn the minimum wage (about $12 an hour), but they have comprehensive public health insurance, a much more generous public pension, full work weeks, and six weeks paid vacation. (Snell will get her first few vacation days next year.)”

The French workers are worried that Europe could be contaminated by the atrocious working conditions in the U.S.

"’I think we'll help each other,’ Bodard says, ‘because we're working for a global company, and the only way for us to go is to build global power. In France, we've put pressure on Sodexo and given publicity [to U.S. conditions] so everyone in the sector knows about it’."

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

"’The French workers stood by us and want to help us get a union,’ Snell says. ‘They actually cried when we told them our stories. ... By workers from other states and countries going together, it shows we really want a union’."

This type of activity seems to have been going on for some time.

“Such tangible global solidarity will be key to developing global union power that can counterbalance the expanding influence of multinational corporations. SEIU Executive Vice President Tom Woodruff, director of Change to Win's Strategic Organizing Center, believes unions must unite across borders to organize, because union membership as a fraction of the workforce is declining nearly everywhere. ‘Only if unions build organizing across borders can workers get a fair share from their employers,’ he says. ‘More U.S. unions and unions in other countries are involved, but global campaigning is really an underdeveloped technology’."

I cannot even recall the last time I encountered an encouraging story about the labor movement. Let’s hope there are more to come.

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

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

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

“China's leaders once tried to insulate themselves from greater engagement with the outside world; they now realize that fulfilling their domestic needs demands a more activist global strategy. Rhetorically promoting a "peaceful international environment" in which to grow their economy while free-riding on the tough diplomatic work of others is no longer enough. Ensuring their supply lines for natural resources requires not only a well-organized trade and development agenda but also an expansive military strategy. The Chinese no longer want to be passive recipients of information from the outside world; they want to shape that information for consumption at home and abroad. And as their economic might expands, they want not only to assume a greater stake in international organizations but also to remake the rules of the game.”

Clearly China is a major player in the world because of the size of its economy, the size of its population, and its strategic location in the heart of Asia. The question to ask is: “Does this make China a ‘revolutionary power,’ one able to ‘remake the rules of the game’?” If China were able to continue its economic growth into the indefinite future and maintain a healthy and stable government and citizenry throughout that process, then one would have to agree with that description. Many people, including Economy herself, have doubts.


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


The author adds some new information on China’s plans for the future. The ambition incorporated in these plans is staggering.

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

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

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

“In China, the amount of water available per person is one-fourth the global average. China is water rich in absolute terms, but given the number of people, the levels of pollution, and the location of China's water resources, water is scarce throughout much of the country -- and China's leaders fear serious future shortages due to rapidly growing household and industrial demand. Consequently, they are moving quietly but aggressively to dam and divert the water resources of the Qinghai-Tibetan plateau, a move that will affect millions of people outside the country's borders. China's river-diversion initiatives are generating significant concern in Bangladesh, India, and Kazakhstan, among other countries, and paving the way for future regional disputes: the economic livelihood of millions of people outside China's borders depends on access to these water resources.”

The author seems to be saying that China has to succeed in this ambitious plan because it has no other choice: the current path is unsustainable.


Is the planned path sustainable, even assuming one can get there? Let us remind ourselves of some of the author’s own words from her book.

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

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

“....an investigation conducted by the Ministry of Water Resources found that drinking water in 115 out of 118 cities surveyed was polluted, largely by arsenic....and fluoride....”

And now they want to add 400 million more people to their cities. Taking some water away from other countries does not seem sufficient to make this work. Also for consideration:

“Beijing is one of twenty Chinese cities among the thirty world cities with the most polluted air. A 2005 survey determined that half of China’s cities did not meet the governments own air quality standards. Moreover, according to the World Bank, in 2007 only 1 percent of China’s urban population breathed air considered safe by European Union standards....China’s sulfur dioxide emissions, which cause acid rain, are now the highest in the world, affecting one-third of China’s territory. Acid rain poisons the country’s fisheries, ruins cropland, and erodes buildings....Japan and South Korea also blame China for much of their problems with acid rain, a situation that has contributed to ongoing tensions in the region.”

“A joint study by the World Bank and SEPA in 2007 estimated that 650,000 to 700,000 people in China die prematurely from air pollution annually. In the country’s most polluted cities, when children breathe, it is the equivalent of smoking two packs of cigarettes per day.”

And now they want to add 400 million more people to their cities? Somehow this does not add up.


All the changes the author described will require enormous levels of resources. That has to presuppose a continuous healthy growth in the economy. Can they really pull that off? Here are the thoughts on that subject from one observer.

“STRATFOR thus sees the Chinese economic system as inherently unstable. The primary reason why China’s growth has been so impressive is that throughout the period of economic liberalization that has led to rising incomes, the Chinese government has maintained near-total savings capture of its households and businesses. It funnels these massive deposits via state-run banks to state-linked firms at below-market rates. It’s amazing the growth rate a country can achieve and the number of citizens it can employ with a vast supply of 0 percent, relatively consequence-free loans provided from the savings of nearly a billion workers.”

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

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

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

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

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

“Which brings us to the issue of dependence. Since China cannot absorb its own goods, it must export them to keep afloat. The strategy only works when there is endless demand for the goods it makes. For the most part, this demand comes from the United States. But the recent global recession cut Chinese exports by nearly one fifth, and there were no buyers elsewhere to pick up the slack. Meanwhile, to boost household consumption China provided subsidies to Chinese citizens who had little need for — and in some cases little ability to use — a number of big-ticket products. The Chinese now openly fear that exports will not make a sustainable return to previous levels until 2012. And that is a lot of production — and consumption — to subsidize in the meantime. Most countries have another word for this: waste.”

China has done virtually nothing to create an internal consumer economy. They must continue to keep the value of their currency low because raising it and lowering imports would be a disaster.


As Economy points out, there are about 100,000 protests annually by Chinese citizens. Does this sound like stability? Recently, during the naval dispute with Japan, China authorized some anti-Japanese protests. This article describes what happened.

“Many reports from China say small anti-Japanese demonstrations were approved by the authorities in the last few days.”

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

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

“In Chengdu, the capital of Sichuan province, for example, the authorities approved an anti-Japanese rally on Oct. 16 for about 100 university students. But word of the protest spread quickly over the Internet and the demonstration drew more than 10,000 people. The protest turned violent and the police had a hard time restoring order.”

The price of food is increasing in China, as described in this article.

“China's government announced food subsidies for poor families Wednesday as it tries to cool a double-digit surge in prices that communist leaders worry might stir unrest.”

“Inflation is politically volatile in China, where poor families spend up to half their incomes on food. Rising incomes have helped to offset price hikes, but inflation erodes gains that help support the ruling Communist Party's claim to power.”

There seem to be more signs of instability than stability in China today. Two decades from now China will probably have a stable economy and society. I am doubtful that China will arrive at the precise point for which it is now planning, and I believe it is impossible to predict the path it will follow to get wherever it ends up.

The Gates Foundation and World Health: Closing in on Polio

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



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


More about the history and activities of the Foundation can be found here. The Foundation’s web site is also a good source of information. Perhaps of most value to those interested in the foundation’s goals, motives and approaches, is a message composed annually by Bill Gates, a form of annual report directed at the world. Not surprisingly Gates has an approach that one might expect from a technology-oriented businessman.

“Although innovation is unpredictable, there is a lot that governments, private companies, and foundations can do to accelerate it. Rich governments need to spend more on research and development, for instance, and we need better measurement systems in health and education to determine what works.”

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

“We have a framework for deciding which innovations we get behind. A key criterion for us is that once the innovation is proven, the cost of maintaining it needs to be much lower than the benefit, so that individuals or governments will want to keep it going when we are no longer involved. Many things we could fund don’t meet this requirement, so we stay away from them. Another consideration for us is the ability to find partners with excellent teams of people who will benefit from significant resources over a period of 5 to 15 years.”

Gates collects the major initiatives under three headings: Global Health Program, Global Development Program, and the United States Program. The latter is focused on education with components addressing teacher effectiveness, on-line and interactive training, and computer and internet availability. The teacher effectiveness thrust has aroused the ire of many education stakeholders. That was previously discussed here and here. The global development activities are focused on agricultural productivity, improving financial tools and availability, and sanitation.


Gates’ review lists under global health activities: pneumonia and rotavirus vaccine delivery, development of a malaria vaccine, and developing the means for reducing the risk of contracting HIV. These are all worthwhile activities, yet the Foundation’s work still comes under criticism occasionally. Much of the complaining seems to come from journalists looking for a good story, or someone whose idea did not get funded. Most of the same criticisms could be directed at the United Nations, for example. However, there are some valid reasons for concern related to placing a narrow focus on a few large-scale projects. Laurie Garrett, in an article in Foreign Affairs (January/February, 2007), The Challenge of Global Health, argues that such narrow focus can detract from the development of general health infrastructure in poor countries and ultimately lead to poorer health delivery.

“Less than a decade ago, the biggest problem in global health seemed to be the lack of resources available to combat the multiple scourges ravaging the world's poor and sick. Today, thanks to a recent extraordinary and unprecedented rise in public and private giving, more money is being directed toward pressing heath challenges than ever before. But because the efforts this money is paying for are largely uncoordinated and directed mostly at specific high-profile diseases -- rather than at public health in general -- there is a grave danger that the current age of generosity could not only fall short of expectations but actually make things worse on the ground.”

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

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

“The years ahead could witness spectacular improvements in the health of billions of people, driven by a grand public and private effort comparable to the Marshall Plan -- or they could see poor societies pushed into even deeper trouble, in yet another tale of well-intended foreign meddling gone awry. Which outcome will emerge depends on whether it is possible to expand the developing world's local talent pool of health workers, restore and improve crumbling national and global health infrastructures, and devise effective local and international systems for disease prevention and treatment.”

But we came here to praise Bill Gates, not to criticize him. The suggestion for this post came from an article in Businessweek magazine highlighting Gates’ contribution to the effort to eliminate polio throughout the world via an aggressive vaccination program.

“Bill Gates’ eureka moment came in June 2009 in an underground conference room at the World Health Organization's headquarters in Geneva. After a decade of giving away millions to eradicate polio, the billionaire philanthropist was being briefed on hours-old data showing how two doses of a new polio vaccine protected 37 percent more children than conventional ones.”

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

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

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

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

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

Sometimes, when money talks good things happen. Thank you Bill (and Melinda).

Could the United States Become “Japan”?

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



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


Richard Katz, in a March/April, 2009 article in “Foreign Affairs” provides a clear and succinct description of the differences between Japan then, and the United States now.

“The consequences of the 2008 U.S. financial crisis will be different from Japan's slump in the 1990s for three reasons: the cause of the current crisis is fundamentally different, its scope is far smaller, and the response of policymakers has been quicker and more effective.”

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

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

“The United States' subprime mortgage fiasco of 2007-8, in contrast, was primarily the result of discrete, correctable mistakes brought on by ideological excess and the power of financial-industry lobbyists rather than intractable structural problems.”

It is really hard to comprehend the scale of the speculation that occurred in Japan

“The scope of the Japanese crisis and the scope of the U.S. crisis are also fundamentally different. From 1981 to 1991, commercial land prices in Japan's six biggest cities rose by 500 percent. The subsequent bust brought prices down to a level well below that of 1981; as of 2007, they were still 83 percent below the 1991 peak. In the United States, the real estate bubble was not as inflated, and the bust has been less severe. From 1996 through the 2006 peak, housing prices in the 20 biggest U.S. cities rose by 200 percent. Most forecasters think prices will drop by 30-40 percent from the peak levels before bottoming out in 2009 or 2010. No one is suggesting that prices will fall below the level of 1996.”

“Most of the United States' nonfinancial corporations are still healthy. Whereas the debt of Japanese corporations was several times their net worth, in the United States, corporate debt amounts to only half of companies' net worth, the same level that has prevailed for decades. The ratio of nonperforming loans among nonfinancial companies is only 1.6 percent, and productivity growth remains solid.”

The present policy makers had the advantage of having Japan’s response to learn from.

“The Japanese and U.S. crises differ in many ways, but the starkest contrast is in the response of policymakers. Denial, dithering, and delay were the hallmarks in Tokyo. It took the Bank of Japan nearly nine years to bring the overnight interest rate from its 1991 peak of eight percent down to zero. The U.S. Federal Reserve did that within 16 months of declaring a financial emergency, which it did in August 2007. It has also applied all sorts of unconventional measures to keep credit from drying up.’

“It took Tokyo eight years to use public money to recapitalize the banks; Washington began to do so in less than a year. Worse yet, Tokyo used government money to help the banks keep lending to insolvent borrowers; U.S. banks have been rapidly writing off their bad debt. Although Tokyo did eventually apply many fiscal stimulus measures, it did so too late and too erratically to have a sufficient impact. The U.S. government, by contrast, has already applied fiscal stimulus, and the Obama administration is proposing a multiyear program totaling as much as five to six percent of U.S. GDP. When it comes to crisis management, it is far better to do too much than too little.”

In reading about this issue, one is struck by how fundamentally different the two countries are, and by how easy it is to be optimistic about the future of the United States, and by how difficult it is to foresee a healthy Japan.


The mood in the United States is one mainly of anger. Anger, properly focused, can be a positive attribute. A recent New York Times article describes the mood in a Japan experiencing twenty years of deflation and diminished expectations as “resigned.” It is hard to see resignation as a component of a bright future.

“Just as inflation scarred a generation of Americans, deflation has left a deep imprint on the Japanese, breeding generational tensions and a culture of pessimism, fatalism and reduced expectations. While Japan remains in many ways a prosperous society, it faces an increasingly grim situation, particularly outside the relative economic vibrancy of Tokyo, and its situation provides a possible glimpse into the future for the United States and Europe, should the most dire forecasts come to pass.”

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

“But perhaps the most noticeable impact here has been Japan’s crisis of confidence. Just two decades ago, this was a vibrant nation filled with energy and ambition, proud to the point of arrogance and eager to create a new economic order in Asia based on the yen. Today, those high-flying ambitions have been shelved, replaced by weariness and fear of the future, and an almost stifling air of resignation. Japan seems to have pulled into a shell, content to accept its slow fade from the global stage.”

If you think the real estate market is in bad shape in your area, consider Japan, even twenty years after the crash.

“Yoshinori Kaiami was a real estate agent in Osaka, where, like the rest of Japan, land prices have been falling for most of the past 19 years. Mr. Kaiami said business was tough. There were few buyers in a market that was virtually guaranteed to produce losses, and few sellers, because most homeowners were saddled with loans that were worth more than their homes.”

Japan also faces a challenging demographic future, one that many countries will face, but Japan will get there first. Nicholas Eberstadt tells the story in a “Foreign Affairs” article, The Demographic Future.

“Broadly speaking, all the developed economies will face demographic slowdowns and population aging in the coming decades, but Japan stands to be the most heavily burdened by the looming trends. It has had the steepest and longest fertility falloff in modern history. In 2008, the country recorded around 40 percent as many births as it had 60 years earlier. Japanese childbearing is currently estimated to be nearly 35 percent below the replacement level. But Japan has also enjoyed rapid and continuing improvements in public health since the end of World War II. The Japanese have an average life expectancy of 83 years, higher than any other country in the world. Taken together, the country's fertility, migration, and mortality trends are propelling Japan into demographic decline, and into a degree of aging thus far contemplated only in science fiction.”

“Over the next two decades, according to U.S. Census Bureau estimates, the surfeit of deaths as compared to births is expected to drive Japan's total population down from 127 million to 114 million, a ten percent decrease. The relative decline in the working-age population is projected to be even steeper, from 81 million to 67 million, or a 17 percent decrease. All the while, the number of Japanese senior citizens would be rising -- and by 2030, the country's median age will be above 52 years, with 30 percent of the total population 65 or older. The economic implications of these impending changes are far from positive. Even with healthy aging and later retirement, these trends suggest a marked contraction in the country's labor supply. Moreover, the social and economic strains from Japan's looming old-age boom could further complicate efforts to maintain even the country's current sluggish rates of economic growth.”

That is a future that the United States will not face for some time.

“The United States will avoid the demographic stagnation and decline that faces most other OECD countries. The U.S. population, according to U.S. Census Bureau projections, is set to grow by 20 percent, or over 60 million people (from 310 million to 374 million), between 2010 and 2030. By such projections, the United States' population growth rate will nearly match India's. According to these calculations, the United States' rate of population growth approximates that of the world's average, meaning that the U.S. share of global population is not set to shrink. Virtually every age group in the United States is set to increase in size over the next 20 years. Unlike all other affluent countries, the United States can expect a growing pool of working-age people (a moderate but steady rise averaging 0.5 percent per year over the next 20 years), and it can expect a slower pace of population aging than virtually any other state in the OECD.”

“The United States' demographic exceptionalism is explained by the country's relatively high fertility rate and its continuing influx of immigrants.”

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


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