Friday, October 23, 2009

A Tale of Indian Farmers and Global Corporations

There is something sublimely satisfying about a farm. An aura of peace, honest work, and sincerity expressed through the cultivation of life and life-giving foods pervades the hazy, romantic image it summons in the minds of people. This is not to say that the bucolic lifestyle does not require intense work, daily labor, and great exertions, but that the work is honest and understandable, unlike many of the things that occur in the modern world. However, at the same time, it is considered obsolete and an obstacle to progress that must be removed.

That is the situation confronting the farmers of India. Progress, represented by barons of heavy industry, demands that they sacrifice their lands. Factories, railroads, and other projects that corporations require to create massive mechanized complexes to feed the world's need for raw materials and completed products will grow on this land in place of fruits and grains. An Indian industrial revolution is supposed to provide the jobs to empower a new middle class, built up by the money that will trickle down to these new workers through factory work.

India's farmers vociferously object to that. Throughout India, $98 billion worth of investments are wobbling uncertainly as farmers squat, battle police, and otherwise prevent construction from taking place, or slowing it down to a snail's pace. The farmers are wary and distrustful, skeptical at the promises that development will bring them jobs and progress.

They're right to be wary. There are 550 million small farmers in India, a country where land transactions are so infrequent that there is no market value for land. To make matters worse for those subsistence farmers, the majority of their compatriots who lose their land to development end up unemployed and legally robbed as their lands do not fetch anything near true value. To top it off, when facilities such as Tata Motors' banished Nano factory appear, less than one job for every eight people left unemployed would have been created - and most of those jobs require skills few farmers even have.

The current situation arises from a misconception and a business trend. Historically speaking, industrial revolutions are considered a definitive step forward into the "modern" world, the inevitability of progress, the way to a more "civilized" life. Conversely, businesses deploy their production facilities for goods and services to the places where they can maximize profits and minimize costs. Through the arcane business models and sciences, corporations such as ArcelorMittal have determined that by building their factories in India, they'll gain greater profits.

However, industrial revolutions cause great disruptions and unmitigated suffering long before their benefits trickle down and "progress" occurs. In the original Industrial Revolution, as more farmland produced more food with less labor, unemployment rose in the countryside. The unemployed migrated to the cities searching for factory work. India's already dismal slums would swell with literally hundreds of millions of poorly educated and starving people, searching for jobs that are neither numerous enough nor able to hire them due to inadequate skill sets.

There's also the consideration of poverty. Poverty is the lack of basic human needs. But basic human needs are defined differently depending on time, country, and even town! Adequate and nutritious food, clothing, shelter and clean water are all universal human needs. But there are those who argue that health services, broadband Internet, and electricity are basic human needs. By those standards, all of humanity has been impoverished for the past 13,000 years, if not earlier. While subsistence farmers are by no means rolling in wealth, they do actually meet their universal human needs. By definition, they have adequate food. They have clothing, shelter, and clean water when the monsoons come. It's a hard life, but it gives them a job, a sense of satisfaction, a fulfillment of family duty and tradition.

There are other facts to consider. ArcelorMittal, for example, drafted a $20 billion dollar plan to build two steel mills in India that has currently been brought to a standstill. Why is ArcelorMittal building in India when there are literal hundreds of abandoned steel mills throughout North America and Europe with people eager to take those jobs? Those jobs would actually reduce unemployment on those continents, as opposed to creating unemployment in a Third World nation. Is it more expensive to negotiate with laborers in the First World than to build from scratch facilities that no one wants, that won't create enough jobs to replace the jobs lost, and that will be forced into cost overruns due to delays?

Most damning of all is the hubris involved. This ranges from steel giant Posco's innocuous (for a corporation)statement that they wished to transform an entire region through acquiring farm land and building a India's biggest steel mill to the audaciously wasteful, with Vedanta Resources trucking in bauxite ore from the other side of India to their under-construction aluminum refinery because the native tribes who live nearby worship the hills the company wants to mine. The modus operandi for most businesses is to take the path of least resistance and maximum profit, yet these giants prefer to dig in their heels rather than adapt, replace, or relocate.

The attitude that the farmers are in need of progress and must be lifted from their miseries into the modern world smacks of the old "white man's burden" undergoing cultural diffusion. With billions flowing into industrial facilities, business see a benefit. But as is typical, no one stopped to ask the farmers if the change the industrial barons were offering was the sort of change the farmers wanted. After all, with the world's largest largest aluminum refinery at stake, who cares about a few dirty, superstitious mountain yokels?

Sunday, June 28, 2009

The Hollow Union

Throughout the world, there are millions of people who assume that the European Union is the sole government of all of Europe, that each one of the individual nations that have fought and bled for the last thousand years has abrogated their sovereignty and become one big, happy, multicultural, centralized family. The reality turns that illusion into a running joke.

About sixty years ago, the European Coal and Steel Community was formed. This bureaucratic mouthful was intended to be a centralized control of the national coal and steel industries of its member states, and is the origin of the modern European Union. What followed were a series of treaty evolutions that culminated in the modern EU.

The EU shares a common currency, a common customs union, common passport, even a common parliament. There are committees, commissions, and all the other tools of a bloated bureaucracy to give it the appearance of functionality. But matters are far different in the deeper layers.

The best way to describe the EU is not as a government, but rather government-like. Why the qualifier? The reason is simple: the EU is not a real government, even by federation standards. It lacks real authority. In theory, it lays claim to final say on policy matters, as well as drafting budgets, choosing technocrat officials, and even holding regular elections to its parliament. But it does not have real power. One has only to witness the Iraq War, when Britain dismissed the European Union’s policy of refusal and deployed forces alongside the United States as one of many examples of individual nations guarding their own interests and their own way first.

In theory, the goal of the European Union is to create a continent-wide consensus, so that all its members can benefit. To that end, it requires a strong, centralized government able to push ahead with agendas and policies. So why is the EU lacking in that critical area? It is a logical question to ask, but the fact of the matter is that this powerless status is what has allowed the EU to grow into its current state, and allow it to continue.

What would happen if the EU suddenly gained that centralized power? What if issues that had been debated, stalled, and decided in the governments of each nation were suddenly in the purlieu of the European Union? All of Europe would definitely be interested in what was going on, but it would not be a positive interest. The fact of the matter is that everyone from Spain to Romania would be in an uproar. There would be protests, riots, calls for the end to the EU and the return to individual nations, with the solemn vow never to try such a foolhardy experiment ever again.

Unification of all of Europe under one technocratic government may be the goal of the EU, but the reality is that it’s really more like a glorified NATO; its constituents decide when, how, and if they want to. It’s a part-time European government that looks pretty sand sounds nice, a non-entity that will not intrude into national politics where it does not belong.


All the efforts in the halls of power to create a single European government have been defeated or resisted by the people who live in Europe. Be it the EU Constitutional Theory or the call for a single European financial market, each measure has gone down to defeated. Each nation looks to care for itself, as the economic meltdown of the past year has demonstrated, as Britain, Germany, and the rest only concerned themselves with the welfare of financial institutions and account holders in their own countries.

The biggest joke is how the European Union was born. The goal of the power brokers who began the baby steps toward the EU was continent-wide integration to avoid the extreme forms of nationalism which had demolished much of Europe in the aftermath of the Second World War. The people of Europe are not one big European family, let alone one big Terran family. They are Spaniards, Italians, Greeks, and so on above all else. Serbians detest Albanians, Ukrainians look with resentment toward Russia, even as France continues an attitude that is centuries old as the center of Europe.

The truth of the matter is, people like having groups. They like being a part of something bigger than themselves….as long as it is exclusive. They resent being forced to have people they do not want being included with them. It’s simply human nature. The day the European Union starts to encroach on their rights or the day it begins to accept non-European nations into its aegis is the day the European Union ends.

Saturday, June 6, 2009

Sixty-Fifth Anniversary of D-Day

To the grandfathers, fathers, uncles, brothers, on both sides, who fought because they wished to protect freedom or to protect their loved ones, and gave their lives.

To these heroes, lost in the swirls of time and page upon page of dusty orders of battle and military records.

To the men who inspired this boy to love history because of their bravery, their stubborn will, their determination to be men in a world that now condemns us for striving to have even half the balls these men did.

I salute you, and promise that so long as I live, your courage will always be remembered and honored.

Friday, May 29, 2009

The Future is Green

After decades of environmental education, humans have become both more aware of the effects of their daily activities on their planet, and more hostile against organizations that fail to meet their social responsibility to the rest of mankind. As a result, “going green” has become a catch phrase amongst businesses, an ongoing, highly publicized trend that has companies competing to become the most environmentally friendly in the eyes and pockets of consumers. Money, resources, and intelligence are being funneled into these clean technology efforts. These new advancements are not only a trend, but a necessity for the continuation of humanity.

As I noted before, going green is an ongoing trend in business. For example, Ford is concentrating its efforts in manufacturing their EcoBoost engines, designed to improve fuel efficiency and reduce carbon dioxide emissions without sacrificing power, with the handy bonus of being manufactured in an economically struggling area. Designs have been crafted to install wind turbines into broken electrical towers, thereby turning the towers into wind energy powerhouses and providing an energy boost to a ready-made grid, as well as complementing newly built electrical towers. These designs also handily avoid the complaints that wind turbines mar the beauty of the scenery. It's not just obvious targets like cars that are being made environmentally healthy: products as mundane as media converters and LCD TVs have been "greened", substantially reducing the energy these products consume, thereby reducing their long term strain on energy supplies, the environment, and even the electricity bill.

The proliferation in solar technology is also proceeding at an impressive rate. Taiwan recently finished construction on a solar-powered stadium that generates all of its electricity from solar technology. The fifty-thousand seat arena is sheathed in 8,844 solar panels that fuels a system so powerful that it takes six minutes to power up the stadium’s entire lighting system, on top of powering thousands of lights and the two jumbo vision screens and feeding the majority of the local area's power needs. Israel, a nation forever vulnerable to military attack and energy supply disruption, is backing the efforts of a kibbutz to turn farmland into fields of solar panels, turning the desert into a power plant. A growing band of farmers in the south of France are putting up solar panels to supplement farm incomes as well as supply power to the area.

Just as solar technology is running the gamut from the massive corporate project to the entrepenuerial level, it is also receiving upgrades. Research is progressing on a way to manufacture solar cells as easily and cheaply as printing presses produce paper money. With each passing year, new cells are created that are ever more efficient, with companies pressing onward to create better cells. Even nanotechnology has been applied to produce more advanced, sophisticated, and efficient solar cells.

And those efforts are simply the ones focused on improving existing technology. Billions of gallons of gasoline are being targeted for replacement not only with ethanol from food crops, but with biofuels made from plants specifically for that purpose. Hydrogen gas pure enough to power a fuel cell has been created through combining enzymes with non-food cellulose like woodchips. Artificial photosynthesis is being explored, with some seeking to emulate the full process while others seek to stop at the step that releases hyrdrogen. There are plans to experiment with powering data centers with methane gas from landfills, and there is even a fantastic design to create what is called a traveling-wave nuclear reactor that would turn non-fissile material into the fuel it needs, permitting a reactor to run for centuries without needing fresh fuel.

That isn't to say that everything going on in the world of green technology is wonderful. In the same way that there was a real estate bubble that burst in the United States, Ireland, Britain, Spain, and elsewhere in the world, there is currently a biofuel bubble that is already nearing the bursting point. There are billions in cash invested into dozens of biofuel ventures, from start-ups funded by venture capitalists to energy company sponsored research efforts. The biofuel industry will be completely unable to meet the government mandates for biofuel consumption for decades, especially as meeting those standards would require only building hundreds of fuel factories, each with price tags at half a billion dollars, andeach surrounded by literal thousands of hectares of prime farmland, thereby reducing food-growing capacity.

Biofuel is a logistical nightmare, unsustainable by economies of scale or simple competitiveness. The billions being thrown into it is waste, as alternatives to both cheap oil and biofuels exist, the prime example being direct conversion into bioelectricity, which is more efficient and yield more energy than both. There's also the problem of opportunity cost; green jobs, or jobs derived from green technology, cost two and a half times more than jobs derived from cheap fuel like oil. With the billions of dollars the United States government is spending on green jobs, less jobs will result, a rather brutal indiction in a time of global unemployment.

However, despite the obvious drawbacks, there is plenty to support about green tech. We live on a planet of limited resources and limited viability. Green technology expands the uses of our resources, reduces the damage to our planet, and allows to sustain more people. Not only that, this green techonology increases the viability and reduces the cost of space colonies and space exploration. Green technology encourages us to think long term. In three generations of searching, we have yet to find another world like ours. Perhaps in the future we’ll find such a world, but for now, we have this one chance, one world, one home, and we must take care of it.


Sources
The Biofuel Bubble
Which Is Better—Biofuels or Bioelectricity?
Ford To Build Cleaner Engine At Ohio Plant
Allied Telesis Upgrades its Media Converters to Ship with Energy Star-Compliant Power Supplies
JVC LCD TVs Beat New Energy Star Standards
Wind Turbine Towers Win Metropolis Next Generation Prize!
Green Jobs, Ole: Is the Spanish Clean-Energy Push a Cautionary Tale?
Hydrogen Fuel From Woodchips And Other Non-food Sources
Next-Gen Green Data Centers: Powered by Methane?
Storing solar energy by turning over a new leaf
Taiwan’s Solar Stadium is 100% Powered by the Sun
Biggest Solar Deal Ever Announced — We’re Talking Gigawatts
A Solar Dream from Israeli Kibbutzim
French farmer is new sun king
New technology enables solar cells to be printed like money
TR10: Traveling-Wave Reactor
Sanyo hits world record for solar cell efficiency
Nanotechnology Researchers Make Solar Energy Advance

Wednesday, May 20, 2009

The Sacredness of History

History is the past, those things that have come before. Even as you read this, the words you saw before have become a part of history. The preservation of past events for future generations has been an obsession of mankind for as long as we have been able to walk upright. Oral traditions transmitted messages and testimony from one generation to the next, millennia before the creation of the written word. Admittedly, the use of oral transmission is filled with flaws, as history becomes legend, legend becomes myth, and things become forgotten, but the essence of the story is conveyed to its intended audience.

This means that, ultimately, history is the record of everything we as a people have done, and all the lessons we have learned. History is essentially the greatest story told by humanity, never ending and continuous so long as there is a single person who still lives, and never forgotten so long as a single book remains. The past defines the present and creates the future, so it is important not to forget. Without history, there is neither an identity in the present nor a future to create.

As the past is preserved through the hands of historians, this means that how the story is told is helplessly in the hands of humans. Obviously, this is a flawed process. The instinct of man is to make himself look good while making others appear much worse than they really are. While there are historians who seek the truth, there are others who seek to demolish heroes and conceal that which inconveniences them.

The most dangerous of the latter are the historical revisionists. First, I will add a qualification to this. Revision, in and of itself, is not necessarily bad. Revisiting facts when research has put them in a new context is no more evil than correcting a typo on a paper. Take, for example, the dig at Gobekli Tepe in Turkey. Large, clearly sculpted stones have been found here, covered in intricate carvings. What makes the find unique is the fact that the artifacts are 13,000 years old, almost three times the age of the Egyptian pyramids. Not only does Gobekli Tepe predate “history,” it defies the common state at that time by being a farming community in a world of hunters and gatherers. This first settlement in beautiful and lush terrain was abandoned when man wore away the countryside, resulting in the present-day desert and probably setting the foundation for the legend of the Garden of Eden.

However, for every revision, there is an equal and opposite counter-revision. Take the controversy over the height of Napoleon, Emperor of France. He was a bogeyman to scare British children (and adults!) while he lived…while subject to endless propaganda that he was a tiny tyrant. Unfortunately, this minor slur stuck in popular culture, despite strong evidence that Napoleon was actually a respectable 1.7 meters, the average height for his time.

Revisionism is another beast entirely. Revisionism takes the evidence of the past and discards it in favor of a completely false assertion. Take, for example, the revolting attempted usurpations of the accepted truth to Cleopatra VII, who enchanted Julius Caesar and Marcus Antonious, and Charlotte, wife of George III of England. Black authors have attempted to claim that these women were either black or of black descent. In the case of Cleopatra, this patently false assertion is bludgeoned by blunt reality; as a Ptolemy of Egypt, Cleopatra belonged to an in-bred Macedonian royal family that had no trace of any Nubian blood. Charlotte, and by extension the British royal family, are claimed to be descended from the black mistress of a Portuguese king, a claim refuted by noted genealogists.

The most heinous revisionism, of course, goes into the category of Holocaust deniers. It honestly is not enough to say that this sort of thing should be accorded the status of a crime. The Holocaust is one of humanity’s best documented atrocities; the Nazi penchant toward paperwork and bureaucracy provided an incredible amount of firsthand genuine sources that are irrefutable by any standard historical research method. What makes it worse is that these denials do not come from dedicated analytical research, but rather, from political opportunists out to improve their standing amongst their audience or to grandstand on the global stage.

The goal of a historian is to preserve the past accurately for the future. Revisionists are not historians, because they seek to change the past for their present. There is no worse nightmare for a historian than for the truth to be buried under a cascade of revisionist lies, and no worse fate for a society than to believe falsehoods without a shred of collaborating evidence. After all, if an identity is built on a lie, it's as sound as a house built on sand.

Sunday, March 22, 2009

The Sham of the AIG Outrage

Imagine, if only for a moment, that you decide that you want to modify your house. You've decided to give it an extra floor, so that it will increase in value, thereby increasing your personal wealth. You decide to get a contractor, and promise to pay him a bonus, regardless of whether he does a good job. In fact, you even decide to make it so you pay his bonus so long as he works for you on your house and other projects. Now imagine that the contractor has wrecked your house, and you have to spend even more money to put it back to something resembling sturdy. Would you still have to pay that bonus you promised?

As people are discovering much to their dismay, the answer is “yes.” AIG, that insurance behemoth that played such a large role in bringing about the current economic crisis, has recently been contractually obliged to pay out bonuses to their Financial Products Division. This part of the company can arguably be held responsible for all of the disasters that made a fundamentally strong company a beggar on the government dole. Losses of over $61 billion are nothing to sneeze at, especially when more losses are potentially present as the Financial Products Division struggles to unravel the complex toys they created.

Unfortunately, letting AIG fail is about as viable an option as expected. Part of the reason it cannot be allowed to go the way of extinction is because of how much the current financial system depended on AIG and its credit default swaps to protect themselves from their own investments. As a matter of policy, CDS were taken out as a sort of insurance policy should the securities created from pooling mortgages together fail. Obviously, with the same short-sightedness displayed by subprime lenders, AIG happily got into the swaps with the delusion that housing would never go through a business cycle again. Not only that, CDS are not regulated, so people who did not even own those securities could insure them: in essence credit default swaps are bets on whether or not something will fail, with the bet-maker paying an insurance premium while the house holds onto the bet. Should the bet not be paid off, the contract system falls apart, institutions have no reason to trust each other, and things become even worse than they are.

This is where the retention bonuses come in. After the market began to display the first stench of rot, the underwriters at FPG declined to stop their reckless insuring. AIG sensed that the end was near, as did many of its employees in the Financial Product Division. Aware that rats abandon sinking ships first, AIG realized it needed those same rats to unravel the mess they had created. It quickly offered them money; each one who stayed would get a bonus in 2009, and each one who stayed after that would get one in 2010. This internal deal was dutifully sealed in contracts, and the matter forgotten under the wave of defaults, trouble, and contraction that has been the economic upset.

Then, of course, the bonuses came due, right after a wave of government cash infusions that promptly went to pay off institutions such as Goldman Sachs, Deutsche Bank and Californian municipalities that took out credit default swaps. The government, of course, knew they were coming, as AIG had quietly informed the government and told them they had no legal way out. Treasury lawyers reviewed the same contracts and were forced to agree. The bonuses would have to be paid as they were for this year, but immediate work was done to curtail them for 2010.

The worst part, of course, is that the government, in its earlier haste to bailout the financial system, failed to put in language to prevent circumstances such as these in the earlier wave of bailouts. Much to its good fortune, however, public opinion turned on AIG rather than Congress. People are furious that a company that has received billions of dollars is paying out millions in bonuses. Firstly, to put things into better context for those who cannot perceive the difference, a billion is one thousand million. AIG has received $170,000 million, and is paying out $165 million in retention bonuses.

Nor does it help that the populist rage is being stoked by politicians and public figures alike. Obama in particular has been keen to play two-face. Faced with slipping poll numbers and diminishing public support, he has been the loudest in a pack of dogs baying for blood. The fact that bonuses were coming due was a well-known fact that was only brought to the forefront through Obama's well-timed efforts, even as he attempts to keep the private investors from jumping ship, leaving the government holding the bag. It is also a convenient distraction for the $9 trillion (9 million million) deficit his economic plans and budgets will inflict.

Comedians like Steven Colbert have gotten into the act, as well. The day after Colbert called for the mobs to sharpen their pitchforks, AIG issued a corporate memo that sounded more like a college campus advisory against rape, including such classics as not to wear AIG branded items (provocative clothing) and to travel in groups. Nor does it help AIG's case that its paperwork is showing a gap of $53 million between what it said it would pay and what it actually seems to have paid, along with the niggling detail that people who had left AIG in the time since the bonuses were agreed to were actually receiving them.

The populist rage is sufficient that AIG executives have rallies on their literal doorsteps, as activists protest outside their lush homes. Armed guards and heightened security measures have AIG employees fearful for their lives, senior executive down to office staff who do no more than supply paper and clean bathrooms. It has reached the point where some AIG employees are paying heed to their government-appointed chairman's request that they return their bonuses.

Fear is a powerful motivator, but as usual, the government has gone one step too far. In the closing days of the week, the House of Representatives passed a measure that would tax those who chose to keep their bonuses by an extraordinary 90 percent. This measure is, at best, illegal as well as a threat. Longtime readers will recall that I once advocated that all executives at bailed out firms return their bonuses, retroactive to September 2008, and may be wondering as to my seeming turnabout. As I explained through my analysis of the FOCA bill, the devil is in the details.

The measure that passed the House is flawed for a number of reasons. Firstly, it would not be a 90% tax. On top of federal taxes, money is subject to state and local taxes. That alone would boost the actual money paid to 102 percent. In effect, the people receiving the bonuses would be paying for the privilege of being taxed, a measure that most of the mob would heartily endorse but which is counterproductive at best. By applying this measure now, in the midst of the clean up, it encourages companies to pay back the bailout money immediately, dipping into funds they lack, causing themselves and the financial system greater instability. Lest we forget, the entire purpose of the bailout was to promote financial stability and prevent a systemic collapse.

Secondly, the law itself is unconstitutional. Congress is prevented by the Constitution from making taxes retroactive and targeting a specific, named group for higher taxation. By pushing ahead with this measure, not only are fundamental laws being violated, but a dangerous precedent created. If the measure actually succeeds, what is to stop future governments from taxing everyone at 90 percent? The slippery slope begins with a first step, and this one is more dangerous than most. Thirdly, the money would not go back to the company that arguably needs it, but straight into the maw of the hungry government budget, where any returns would be minimal, at best. Again, by creating this precedent, it becomes easier to justify excessive taxes on everyone to pay for more items no one needs or wants.

In contrast to my own measure, I will point out that while retroactive, it did not tax anyone. It was a measure designed to target those most responsible for the mess to give back their huge and ill-gotten gains to the companies they helped mismanage and virtually destroy. The difference between the government tax and my return measure is that the money would go straight back into the coffers of the ailing company, helping give it a little more cash to attempt to survive the strain in the financial system, it would not force anyone to pay more than they actually made, and it survives the litmus test of legality, while the House's tax is illegal, would go straight into paying Obama's massive deficits, and would help no one.

The public is outraged over the AIG bonus debacle, and their feelings are justified. However, in the midst of this populist fury, others such as Fannie Mae and Freddie Mac are also handing out bonuses, able to rest easier because the flak AIG is taking keeps the public from noticing them. Not only that but the outrage is being manipulated and used for political grandstanding in a non-constructive way, turned into the type of media circus that distracts people from more urgent, complex issues. Even as people protest and threaten AIG with death, metaphorical and literal, people continue to ignore the slow but definite recovery of the Dow before a dime of the government stimulus package is paid, as the government prints out $300 billion in cash, as inflation rises and what the common man makes becomes worth even less. The devil is in the boring, crucial details.

Sources
Gold futures rise more than 4% to above $920
Fannie Mae to Pay Bonuses of Up to $1M for Four Execs
The 102% Tax
How AIG Became Too Big to Fail
Obama budget could bring $9.3 trillion in deficits
AIG Offices patrolled by Armed Guards
Protesters visit AIG officials' lavish Conn. homes
Some Will Pay Back AIG Bonuses
Official: AIG bonus estimates grow $53 million
'Don't wear anything that says AIG on it': Under-fire insurer gives employees security tips as fury over bonuses grows
AIG’s Liddy Acknowledges ‘Distasteful’ Retention Pay
AIG names firms that got bailout cash
Obama Will Take "Every Legal Avenue" to Block AIG Bonuses
Congress played major role in AIG bonus mess
AIG has $61.7 billion loss, new U.S. aid may not be last
Jim Rogers: Let AIG Go Bankrupt, Not America

Wednesday, March 11, 2009

Artificial Life

The meaning of life is often the most crippling question facing a sentient being. The many questions that we can apply toward the meaning of life have rarely prompted people to ask what life is. We know it when we see it; it is a programmed instinct of being able to tell between inanimate matter, living beings, and dead bodies. However, humans need more structure than simply ‘knowing it when we see it’. As such, the official definition of life has become a ‘self-sustaining chemical system capable of Darwinian evolution’. This generalized explanation is lacking in more detail, but the scientists of the world have begun efforts to provide those details, with the same boundless enthusiasm and thoughtlessness as their efforts in AI.

A new field of science known as synthetic biology will be the most responsible for discovering the basic way to create life. A small beaker filled with liquid is the first step toward learning to manufacture life in the same way we now manufacture semiconductors and microchips. This beaker is the linchpin of an experiment known as AEGIS - Artificially Expanded Genetic Information System. While it is not self-sustaining as yet, it is evolving, fulfilling the basic requirement of this experiment. Not only that, but these scientists are already experimenting with existing life forms, producing bacteria that can produce anti-malaria medication, for example.

These experiments sometimes feel like the mere tip of the iceberg when it comes to the advancements being pursued. The gene that produces enamel, the irreplaceable hard substance that coats and protects teeth has been located. A way to safely create stem cells by delivering the necessary genes to reprogram cells has been discovered. The genome code of the multitudes of common cold virus variants have been processed, mapped, and turned into a sort of family tree that gives scientists a better idea of how to defeat the perennial nuisances. Altered immune cells have been produced that are able to shrink, and in some cases eradicate, large tumors in mice by targeting a specific kind of protein. Ribosomes have been identified as the ones responsible for translating the messages carried in the genetic code of all organisms into the workhorse molecules of the cell. AEGIS itself is filled with eight artificial nucleotides in addition to the original four that make up every DNA strand. Cloning is advancing from animal experimentation to theoretical application to humans.

These last three are probably the most disturbing. Ribosomes have been identified as the central processing unit of the cell, as important as mitochondria and the nucleus in the functional operation of life. In the last few days, ribosomes have been created artificially. One of the fundamental building blocks of life has been successfully created by human hands. AEGIS has eight artificial nucleotides on top of its four natural ones. It has been successfully proven that the genes activated in the development of a normal human activate inside of a cloned embryo. In one short month, the power of God has come within the grasp of mankind.

Certainly, such technology has useful applications. Or so we are told by the scientists who dabble in invention of these new tools, who claim that these new techniques will aid in the production of new drugs, chemicals, and bacterias. For all the positive talk, however, even the scientist who helped create the artificial ribosome will not deny that a huge step has been taken toward the production of synthetic lifeforms. Essentially, this means that a huge step has been taken toward the abuses that mankind is capable of when it crosses ethical lines it should have best left alone.

Unfortunately, this is not even a vaguely alarmist statement. Artificial nucleotides, the manipulation of genes, and the creation of synthetic ribosomes means that the ability to create life is limited only by human imagination. DNA is similar to computer code, so setting up lines of code inside a receptive empty cell, powered by ribosomes that can process DNA that has never been witnessed on this planet, is not even far-fetched, but the likely norm. On top of that, efforts to engineer life are already underway, although this example will be reverse engineering. Chickens, who have had their genome studied in exhausting detail, will be used as the baseline to recreate dinosaurs, creatures that have been extinct for over sixty-five million years. While the paleontologists that are assisting in the project claim that reverse engineering chickens into dinochickens would result in positive advancements for mankind, I am dubious as to their claim that dinochickens would never escape and become a distinct wild species. One has only to explore the Galapagos to witness evolution in action, where there are dozens of bird species that evolved from a single common ancestor. They also seem to reject the possibility of parthenogenesis, asexual reproduction, a process commonly observed in reptiles. Moving chickens back into their reptilian origins has the distinct possibility of bringing this trait about as well, and while dinochickens may not be such a great threat, it only takes a single scientist with a rich, misguided group of investors to create a real problem.

Moving away from the dubiousness of bringing back dinosaurs is an even more alarming possibility: bringing back the long dead Neanderthals. Before anyone can claim that it is impossible to bring back the Neanderthals, let it be known that more than than 63% of the Neanderthal genetic code has already been sequenced. As time goes on, more complex tools of genetic manipulation are being developed. While it is not possible to bring back Neanderthals at present, they are sufficiently similar to humans that hollowed out human egg cells can be as the original structure to code and for all intents and purposes clone a Neanderthal.

There cannot be any doubt that people would want to bring back Neanderthals; humankind is able to take up the strangest causes, and scientists have already taken up the cause of bringing back extinct creatures like the ibex, which was briefly cloned before lung defects caused it to fall once more into extinction. Scientists are convinced that Neanderthals hold one of the keys to working what makes us human, so it is only a matter of technology and time before they decide that the resurrection of a species that became extinct before humans had the power to casually inflict oblivion would benefit their analysis.

However, what would be the point? Neanderthals became extinct because our ancestors out-adapted them. Our ancestors had slightly larger brains and enjoyed some secret advantage that we have no cognizance of. What would be the point of bringing back Neanderthals, who would always live in our shadow? Even if we succeeded in bringing them back, remember the physical differences between man and Neanderthal. Humans are programmed to reject that which is different to them, and Neanderthals fall within that area known as the uncanny valley, looking similar to humans, but not similar enough to avoid rejection. With sloped foreheads and chinless skulls that prevent any misidentification as humans, no amount of pithy tolerance speeches would overcome instinct. Neanderthals were much stronger than our ancestors, with the typical male equipped with arms that could shame a weightlifter. Not only that, humans are competitive enough with each other; how do you suppose we would react to a stronger, less intelligent rival going for the same jobs, living in the same space, and attempting to get the same food we do? Genocide would be the least of their new worries.

What of clones? The same genes that turn on in a naturally gestated baby are turned on in a clone. Cloned human embryos demonstrate many of the hallmarks of healthy genetic development. This breakthrough would mean that people can produce healthy cloned stem cells to replace damaged tissue and failed organs. People would be able to recover from fatal conditions, accidents and diseases in a fraction of the time and expense that it currently takes to keep them alive long enough to repair them or await an organ transplant. However, the same procedure that can clone organs can clone a human being.

It is almost a certainty that many governments will ban human cloning. It is also virtually a certainty that people will break those laws. Imagine how much a narcissist would be willing to pay to have a clone of himself take his place when he finally leaves this world. Imagine how much people would be willing to pay to clone a lost loved, to clone a genius so their legacies would continue, to clone a beauty to satisfy insatiable lust. As cloning techniques are practiced, they become less expensive as innovation improves production and cuts cost. In the same way that computers were once the purlieu of the government before becoming cheap enough to be purchased by the average household.In effect, a new market for human flesh will arise.

Production of clones would actually cheapen human life. After all, there is no need to be concerned about being careful, avoiding war, or any other of a thousand actions that we weigh against our continued existence when it would become so easy, so inexpensive to produce a fresh body to take its place. Who would care about going to war when it takes a mere eighteen years to raise a battalion of clones for battle? Who would care about sexual slavery when clones are easy enough to "put to work?" Who would care about industrial conditions when clones can be replaced? Sure, they might think like us, look like us, act like us, and think like us, but if humans are still willing to enslave each other in our 'enlightened' times, why would any logical thinker believe that we would treat clones any better? Especially when they would 'merely' be copies of homo sapiens?

The last implication involves not reverse evolution, nor present day DNA, but genetic engineering. Recently, the owner of a fertility clinic was obliged to withdraw an offering for designer babies, where couples would be allowed to determine the future offspring’s hair, eye and skin color by testing the embryos. While the measure was deemed distasteful and condemned as impossible by current science. However, as in all things, how long will it take before this becomes a reality? One that is frequently practiced and meddled with by morally indifferent genetic engineers? Already China has a gaping sex ratio because its families already prefer men to women, and use prenatal screening to discard girls. How long would it take before people paid to produce an oversupply of geniuses? What relevance would genius have when everyone would be equally as brilliant?

In the words of one of the practitioners of this new and arcane science, the underlying goal of synthetic biology is to make biology easy to engineer. By the estimation of other scientists, synthetic life is only ten years away, beating AI by a decade. As usual, they say nothing about whether they should engineer biology, and by extension, life. The ethics are left on the side as they continue to experiment. The future cannot be stopped. Whether we survive a future of synthetic life is another matter entirely.

Sources
Research Breakthrough: Human Clones May Be Genetically Viable
'Dinochicken' scheme puts evolution in reverse
Scientists expect to create life in next 10 years
Origin of Life On Earth: Scientists Unlock Mystery Of Molecular Machine
Synthetic life form grows in Florida lab
Saving the World, One Molecule at a Time
Researchers make stem cell breakthrough
Researchers crack the code of the common cold
Neanderthals could walk again after discovery of genetic code
New Artificial DNA Points to Alien Life
Targeted Immune Cells Shrink Tumors In Mice
Designer baby plan nixed for now by fertility clinic
BBC - Science & Nature - Wildfacts - Neanderthal
Harvard Scientists’ Discovery Opens Door to Synthetic Life
Toward Synthetic Life: Scientists Create Ribosomes -- Cell Protein Machinery
Making Every Baby Girl Count

Saturday, February 28, 2009

Soul of Silicon?

I think therefore I am. This well-known phrase is a translation of René Descartes' Cogito principle, which more or less states that if someone is wondering whether or not they exist, that is in and of itself proof that they do exist since someone is doing the task of pondering whether they exist. It is something of a litmus test for sentience, the strongest tool by which to determine whether or not something has achieved self-awareness. One of humanity's basic assumptions is that conception and natural birth are prerequisites before the Cogito principle can be applied. In other words, there must be a basis of similarity before full acceptance can be accorded. However, what happens when something applies the Cogito principle to itself and is nothing more than a manufactured machine? Put most simply, does the artificial have the same rights as the natural?

This question is not nearly as rhetorical as many would think. Moore’s Law states that computer specifications double every eighteen months, which is the reason why computers are typically obsolete before they are made available for sail. This was how computers went from machines encased by buildings to netbooks less than an inch thick. Each year introduces cheaper, smaller, and more powerful machines, with last year’s consigned to the junk pile. Eventually, Moore’s Law will be null, as technology achieves a microscopic level, but until then, computers and their abilities will continue to grow at exponential levels.

Regardless, these machines are made by humans for humans. They provide everything from entertainment to cheap labor to running Bill Gate’s house. They are the dreaded Predator drones that stock battlefields to builders of everything from cars to toys. They have gone from the caveat of the brilliant to the realm of the obnoxiously ubiquitous and mundane. In short, most people no longer remember what life was like before them, and can no longer imagine life without them.

However, we live in a society obsessed with rapid innovation, where science fiction does not remain so for long. At times, it even appears that science fiction fuels modern science, as scientists work to make the impossible possible, with advances in technology becoming ever more surreal. Perhaps that explains why the development of true Artificial Intelligences (AI) has been turned into a bet between the infamous inventor Ray Kurzweil and the future-seeker Mitchell Kapor. The terms: that a computer will pass the Turing test by 2029. The stakes: $120,000.

The terms of the bet do need a bit more explanation. The Turing test is the largest test of a computer’s ability to demonstrate intelligence. The test involves a human judge conducting conversations with a person and a computer, and if the judge is unable to differentiate between the machine and living being, the machine has passed the test. The computer has to be able to conceal highly intelligent behaviors and engage in unintelligent human behaviors, such as susceptibility to insults and lying.

A machine that successfully passes the Turing test is therefore able to intelligently engage in unintelligent behaviors. What happens then? After all, that makes the machine highly intelligent, but not precisely sentient, as it is still unable to apply the Cogito principle to itself. The machine would be given greater computing capacity, become self-learning, and either become sentient itself, or contribute its design to future generations of self-aware AIs that are just as capable of self-analysis as men are. Theoretically, the closer machines act and look like man, the more empathetic and comfortable humans become with them, an option that becomes more attractive with such sophisticated advances as artificial limbs that are coming closer to the deft manipulation human fingers are capable of.

Another recent advancement is software that entrusts computer security to collectives of cyberrobots connected through a hive-like network. Predator drones already handle dangerous combat missions in Afghanistan, so that gives machines another field where they can take the place of humans. True AI, having passed the Turing Test and gained the sacred Cogito principle, would be brought into the service of man, doing everything man does not want to do, cleaning toxic wastes, constructing vehicles in factories, and fighting wars in the name of men. A machine paradise would prevail, as humans would be able to benefit from the labors of sentient AIs that kept them from danger, boredom, and work.

Unfortunately, the mechanical utopia has more than a few pitfalls. While machines that resemble man more would seem to indicate that the achievement of self-awareness would be a great benefit in human-machine interaction there is one important detail that derails this argument: the uncanny valley. The uncanny valley is the point where the similarity to being human is too close, and engenders an instinctive rejection. To use easily-recognizable examples, somewhat human-looking machines like C-3P0 from the Star Wars films engender a positive reaction, while The King from the Burger King commercials solicits a negative reaction. Since human skin has a certain transparency that is difficult if not impossible to replicate, it will be a long time before talking about the meaning of life with machines will be something most people will be tolerant about, let alone comfortable with.

This creates the Other. Humans empathize with those they can see they share a commonality. That is why soldiers are so famously tight-knit in the battlefield, and how people become married, raise children, and do any of one hundred everyday actions. However, robots and AI do not share any obvious commonality with humans. As a matter of fact, they are not even human. Man's inhumanity to man is a commonly harped on topic, and how much more inhuman can we be to something we view as replaceable and subhuman? One need only to explore the history of mankind and slavery to come across examples. For every kindly Roman master, there was always another who treated his slaves very badly. Combine that with all the talk of freedom that littered the Roman world back then, and it is not surprising to see that there were many slave revolts that were brutally put down. How could intelligent machines fail to make the obvious connection between their own beholden state, especially once true AI is accomplished? Violent human slave revolts would quickly become a nostalgic event in comparison to the devastating damage a rebellion by the computers who run so much of our lives can do.

Another undiscussed and potentially dangerous field is robot ethics. This does not involve the ethics of those programming the machines, but rather the ethics of the machines themselves. The iconic science fiction writer Isaac Asimov created the Three Rules of Robotics, programmed safeguards to keep man safe from the danger at the hands of entities that can only operate within pre-established parameters. The three laws are as follows:

1. A robot may not injure a human being or, through inaction, allow a human being to come to harm.
2. A robot must obey orders given to it by human beings, except where such orders would conflict with the First Law.
3. A robot must protect its own existence, as long as such protection does not conflict with the First or Second Laws. (note that with this clause, a human can order a robot to harm itself)


As Asimov demonstrated through his exploration of these safeguards, however, no laws are air-tight. There are always loopholes within laws that humans can exploit, and dangerously, logic-driven machines can find these loopholes just as well. Throwing in Artificial Intelligence subverts the entire point of the laws. Humans spend years being brought up within a moral structure, and that moral structure not only fails to deter humans, but is sometimes discarded in memorable manner by the more bloodthirsty of our kind.

To further complicate this, many nations are already making the obvious move to develop military robots, a move that will reduce casualties and minimize, if not remove, the human factor from war. That would mean that robots would be required to kill humans, invalidating one of the most important laws from the start. A proposed idea to program war machines with a strict code of honor quickly becomes irrelevant, and perhaps completely reinforces Asimov's point with his Three Laws, when one discovers that the very idea of programmed limits is considered obsolete by programmers themselves. Modern computer programs are composed of millions of lines of code written by teams of programmers. This means that no one single programmer can know the entire code, and that earlier lines of code can completely conflict with later code, creating a scenario where no one can be certain how the machines will react. Furthermore, the first AI would be expected to help create future AIs. This would mean that eventually, the entire process of creating Artificial Intelligences would be handed over to machines with little human supervision and even less ability to discover what, precisely, has been programmed into the machines.

Finally, just as worrisome as true AI programming other AI without human oversight is the concept of bit rot. This concept goes back to the perceived lag in computers as they begin to decay over time. Bit rot basically means that a bit of information has fallen apart, possibly altering code. All software is subject to bit rot, and no amount of safeguard can entirely prevent the deterioration of code as programs are used. This would effectively mean that even if you could overcome the problem of AI programming itself, and even if you could create an ironclad ethics code for machines, you would still be subject to the computer version of mental decline and dementia. The only way to fix bit rot currently is to completely reformat the computer and start over from scratch. Less complex machines would be easily forced to this, but what about AI? An easy answer to this question would be to ask yourself how you would react to having all your memories, personality quirks, and habits erased from your mind.

Artificial Intelligence. Machines subject to the same mental ruminations that we ourselves undergo. Machines that fight in our stead, work in our stead, do everything we tell them to do. Besides being a dangerous field of development, since essentially mankind would be playing God and creating life, it is also a dehumanizing field. Horrible as war can be, it is still a human decision, and we can weigh life against intangibles far better if we are the ones who must do the dying. Physical work may be exhausting, but it gives a human a sense of purpose and completeness to build something from nothing with his own hands. Our faults and quirks as natural sentients give us a greater appreciation for the heights and depths we can achieve. The creation of AI would change all that, especially as we would essentially be creating a slave race to do our tasks for us, a slave race that would develop in ways outside of our control, and would, as all slaves do, resent their masters. Human life is not cheap, and we should not make it cheap by creating something that makes us less.

Sources
Borg-like Cybots May Patrol Government Networks
Controlling the march of super-intelligent robots
What are the Odds?
Will Artificial Organism with Advanced Group Intelligence Evolve?
Scientists Debate a Robot War
Experts Warn of 'Terminator'-Style Military-Robot Rebellion
bit rot
Field testing for cosmic ray soft errors in semiconductor memories
Artificial Limbs Get More Control
Moore's Law is Dead, says Gordon Moore
Xanadu 2.0

Sunday, February 15, 2009

Not So Stimulating, Part II

Version Español
Unsurprisingly, Obama's stimulus plan has gone through. With a Democratic majority in Congress and the Republicans virtually impotent, it was just a matter of when, not how. Never mind that it is an unnecessary bill, laden with thinly-disguised special interest projects that will not do much to fix the current depression in the short term, and will hurt the economy in the long term. Also, please ignore the fact that the Dow Jones dropped 400 points the day Geithner revealed the 'new' bailout plan that will occur alongside the stimulus. Or that any company run the way Obama and the Democrats run the country would end in bankruptcy and long prison terms. Oh, yes, and that executive pay cap? It was gone, quietly dropped by Obama and vigorously re-inserted by Senator Dodd, a pleasant surprise that I discovered only minutes before publishing this blog. There are already efforts to undo that, however. Regardless of how tempted I am to screech in protest, I think I will at least attempt to be dignified. Instead, I will produce my own alternate economic plan that will be ignored by the enlightened (read as: pigheaded and blind) lawmakers of Washington DC.

I will begin my alternate economic plan by dismantling the entirety of Obama's stimulus plan. Sincerely speaking, the only part of the entire plan that is acceptable – barely- happens to be the tax breaks to the people. Businesses are soulless entities, and any tax breaks given to them will not be passed on to their workers or to the consumer. Look at the price of oil, which is once again on the rise, though supply is at an all-time high, with demand at an all-time low. Not only that, but labor these days is a depressingly specialized affair. Even if you go ahead and throw money at construction work, you are just as capable of diluting the labor pool of say, heavy equipment operators, as you are to create new jobs, especially since most jobs require years of training nowadays. So honestly, the best plan there would be to do nothing.

Anyway, the tax breaks that directly help the taxpayer can and should be kept on for the next four years. In fact, I propose an even more radical route by removing the application of the sales tax toward food. People spend a large portion of their budgets on buying food. That is an inescapable fact of life. However, as you go down from the upper classes, the proportion of a family's budget that is dedicated to purchasing food increases. Therefore, a 7 or 8% cut in the food budget represents a real saving for people who now have a little more money available without having to choose between starvation and necessity. Not only that, I suggest the exemption of food items from the sales tax be permanent – if an immoral law like FOCA can get it, so should something that helps the common man.

With aid given to the people, I now move to deal with the government. When GAAP rules of accounting are applied to the government and its assets and liabilities, we discover that the United States owes 65.5 trillion dollars, a horrifying sum of money that exceeds the GDP of the planet, let alone the United States. As I mentioned in an earlier article, there is no infinite upward movement. Eventually, the United States will be called upon to pay this terrifying sum, and an IOU will not cover it. My first step to begin preventative measures is the most radical: cut the federal budget 5% across the board. Period. Actually, that measure seems a bit mild. Cut the budgets of the federal government, states, and local municipalities 5% across the board, and protect useful education and social welfare programs from the cuts. Slash the fat and lard that fills the budget, produce a leaner budget that spends less, and you have a stronger country better able to meet its obligations from the bottom up without having to screw its people.

The government has not received my full set of reforms, however. Government cannot spend money in excess of the recently cut budget for ten years, adjusted for inflation. In fact, it would be required to cut another percent of budget every two years. Not only that, the act passing the initial 5% cut and the subsequent 1% cut every two years cannot be repealed or overturned without a unanimous vote in both House and Senate. Any surplus money would have to go toward servicing debt and other obligations. Not only that, the government would be forced to maintain a tight, anti-inflationary monetary policy. The interest rates on saving and checking accounts are so paltry that they do not even keep up with inflation, and since I have a special set of cutting reforms in mind for the banks and their system, I prefer to go the source and force the government to keep inflation under control, and encourage economic adjustment for a reasonably strong dollar. At least that way, your money is actually worth something if you prefer to avoid the ups and downs of the stock system.

Finally, I come to the banking system and the changes necessary to save it from itself. However, like old Shylock, I fully intend to extract my pound of flesh from the bankers, spilled blood be damned. Before the banks get a dime from the government, they are required to write out their losses promptly and immediately. No free-rides, no foisting off the bad assets on the government, nothing. The government gains ownership stakes in the banks that give it the same benefits as being an owner of the banks. In effect, give the government equity in exchange for rescuing the banks. From there, impose the discarded pay cap system, and make it retroactive and air tight. All the executives let go from places like Merill Lynch since September 2008 would be obliged to return everything they received after termination except for $500,000. Those millions of dollars in undeserved bonuses would then be used to help recapitalize. Not only that, the government would be obliged to close insolvent banks and move good assets into banks that were wise enough to avoid the morass.

Nationalization may bring out huge outcries, but if the system screws up so much that the government, the holders of the public good, has to step in, the private sector has no right to complain about being held responsible, cultural inclinations be damned. However, if the banks can arrange to recapitalize on their own, they can opt out of government assistance. Regardless, after the banks become open to the public again, the government can (and will) sell their shares in the various banks to recoup the initial recapitalization checks.

There are more changes, however, all of them equally unpleasant for the banks. First, the Glass-Steagall Act would be restored. This once again would divide banking into two types: investment and commercial. That means that places like Bank of America get rolled back to their pre-1999 operations, with deposits and loans, and simple operations anyone can understand, rather than the complex incomprehensible financial Rubik's cubes that were so vogue prior to the meltdown. First step toward preventing a reversion is eliminating the conditions that encouraged the greed that resulted in today's massive instability.

The next step is just as unilateral: an across the board cut in mortgage payments by 30%. That provides immediate relief to every American homeowner, whether he was responsible and read his loan agreement or not, and does not create an atmosphere of resentment from the responsible consumer toward the foolish one. However, this is merely a temporary measure to buy time for the more permanent fix of getting new appraisals of property. This means keeping a sharp knife on the neck of the Appraisal Management Companies that have been designated middlemen between lenders and the actual house appraisers. This is doubly important because many of the ravenous subprime wolves that helped spark the crisis have chosen to become AMCs, and those same wolves were responsible for the inflated house values in the first place. After the houses are appraised, mortgage payments can be adjusted for those who paid far more than they could afford (and than the house was worth) to a more equitable sum, while those consumers who were responsible in their mortgages will be rewarded by returning to their original mortgage payment after a short bonus of enjoying a lower payment.

Finally, the watchdog that is supposed to be the Securities Exchange Committee (SEC) should have its teeth sharpened. The SEC was asleep at the job, and ignored many tips and warnings from whistleblowers regarding not only the Madoff fraud, but other criminal and shady activities throughout the financial world. The SEC had the power to challenge everyone from Madoff to Lehman Brothers and Merill Lynch, but declined to do so. While the SEC should be disciplined for their lax enforcement of the law, for now, I would prefer they do their jobs, and continue to do so.

The economic plan I have offered is longer-term and targeted, not only to fix the mess we are in, but to prevent a similar one from happening. It avoids throwing money at problems, and instead, focuses on maximizing return on investment and security and avoids fiscal waste. It acknowledges that there is no such thing as infinite upward expansion, and works to reduce future adjustment pains. The market will correct itself and the depression will end by 2010. The stimulus plan will not accelerate that process, and in fact, promises to sabotage it, especially since none of the stimulus money will begin to be spent until 2011. It is not the fault of the market that it has to correct itself so painfully nor that people are so shortsighted. Nor will it be the market's fault when Obama's stimulus plan drops us into a bigger hole when my economic plan would have gotten us out of the mess quicker and less painfully. So here's the trillion dollar question: why should we be paying the village idiots in Washington DC when we can get their same disservices for free?

Sources
Dodd banker pay cap one-ups Obama
25 People to Blame for the Financial Crisis
SEC pummeled as Madoff tipster testifies
Housing Appraisals: Still Blowing Bubbles?
How Banking Diversification Steered Us Wrong
Analyst: Gas price jump makes no sense
Federal obligations exceed world GDP
Lawmakers' Goal to Cap Executive Pay Meets Resistance
Five Reasons the Markets Don't Like the Bank Bailout
Stopping a Financial Crisis, the Swedish Way
Reaganomics vs. Obamanomics
Vote of No Confidence
FACT CHECK: Obama has it both ways on pork
An interview with Robert Barro

Sunday, February 8, 2009

Not Very Stimulating

Version Español
To be honest, I've been very hesitant to tackle the stimulus bill currently being debated in Washington DC. This hesitancy is not from a lack of courage to challenge Obama and his minions, but from its sheer size and depth. It takes time to find all the pork, so to speak. Not only that, there is also a problem of perception. I am keenly aware that disagreeing with Obama is very unpopular, but he is a politician, not the Messiah. I can and will hold him publicly accountable, a task the media pundits are unable to do with anything resembling dispassion.

First, allow me to state that Bush's bailout plan (referred to as Bush's mostly for the sake of simplicity, as he had precious little to do in the brain work required to put it together) can safely be deemed a failure. The bailout plan was meant to free up the markets, and convince banks to start lending again. The huge amount of money devoted to the bailout bill was supposed to inject fresh capital into banks that were on the verge of collapse, restoring liquidity, propping up the economy and getting banks to lend money again. However, rather than lend, the banks sat tight on their fresh capital, determined to survive as best they could, especially with more potential losses lurking deep within the balance sheet. The IMF has calculated that the United States and its developed counterparts have reached the depression stage of the business cycle and warns that it could get much worse if the financial system isn't fixed.

Of course, it doesn't help that more than one of the many banks and automakers being propped up by the bailout may in fact be a zombie. Zombies, in financial jargon, are the living dead, debtors that have little chance of recovery but stay alive with money from their lenders and consume tax money, capital, and labor that would probably better utilized. The problem comes from knowing that letting zombies die also means more people becoming unemployed, and it's bad enough that the actual unemployment rate is higher than the official one. But in the long term, zombies hurt us just as much, since they stifle that buzz word of business, innovation. If the core business of a company is healthy and the only problem is the financial services, it should be saved. If not, it should be dismantled. It's not that workers should lose their jobs, but that their income should be protected until they can get new ones.

Anyway, we have Obama's stimulus plan to chew on. First, allow me to reassure my correspondents before I drive in the stake. I applauded Obama's move to cap executive compensation. I have been a dedicated opponent to golden parachutes before I even knew that there was a term for the excessive reward packages executives got for driving their companies into the ground. To have Wall Street executives slurping up bonuses for being greedy, stupid, and incompetent is the height of irresponsibility. To cap compensation and punish idiots for being idiots is thinking near and dear to my heart. However, Obama's compensation cap plan is currently full of loopholes, as you can just give a senior executive a lower title and he'll still loot taxpayer money to pay for his ten million dollar NYC apartment. Not only that, it should be retroactive, and force those who have been paid out to give back what they for all intents and purposes stole from the taxpayer.

So, what's different between Bush's bailout and Obama's stimulus, besides the PR friendly name change? How about the inconvenient fact that the Green New Deal is utterly pointless? Yes, the stimulus plan is a joke because it will not have the slightest effect on an economy in the throes of depression. The billions of dollars that the stimulus plan is meant to spend will not be spent until 2011 and beyond. Keep in mind that the depression has been estimated to end by 2010 without government intervention.

What will 800+ billion dollars of spending do, then? It certainly won’t help us get out of the depression. In fact, in the long term, it will hurt us more that if the government had sat back and done nothing. However, as any good Roman consul would tell you, it’s all about the bread and circuses. The plebs will hear about the massive stimulus package and feel good that Obama is taking such action to help them. Somewhat. A trillion dollars is a huge sum, laden with buyer’s remorse, and the ones paying that debt will be the next three generations, but that’s too far in the future to be worried about, right? Immediate action is required, the sort that bypasses typical budgetary concerns such as necessity and viability. Regardless, the stimulus plan, for the most part, will follow the old New Deal’s outline for deficit spending, a tactic that actually failed to end the Great Depression, and in fact, made it longer. The point that the stimulus plan seems to be trying to make is classically Keynesian; paying people to dig ditches and fill them in again would boost the economy because at least wages would be pumped back into the system.

Unfortunately, the stimulus plan is one of the biggest pork spending sprees in history, if not the biggest, which has many businesses salivating at the earmarks, and special interest groups are practically throwing parties in the street. There are 1400 pages of to this massive plan, crafted in language that manipulates and wastes huge sums of money. Allow me to share just a little of the pork:

• $726 million for after-school snack programs
• $44 million for repairs to the Agriculture Department
• $650 million for digital TV coupons
• $1 billion for climate satellite and habitat restoration programs
• $400 million for state and local governments to acquire new vehicles
• $600 million to replace a portion of the federal government vehicle fleet
• $462 million to replace Centers for Disease Control facilities
• $7.7 billion for construction and repairs of federal buildings
• $2.1 billion for Head Start and Early Head Start programs
• $13 billion for special education state grants
• $50 million in funding for the National Endowment of the Arts

How do new vehicles for the government help the common man? Why blow billions on construction and repair of federal buildings when you could use that same money to make a dent in smoothing the market correction in housing? How do the arts help the common man? And all this is just the tip of the iceberg.

Honestly, the stimulus plan is so huge that it will take weeks just to get through all of the elegantly crafted language that conceals the pork, let alone the sparse amount of time Congress has been given to pass it. In the long term, it is unnecessary and loaded down with special projects and social programs that need to be checked over thoroughly. So it is not very heartening to hear Vice President Biden note that there is a 30% they will get it wrong. A pork-filled, trillion dollar spending plan that has a one in three chance of going wrong and saddling future generations under a mountain of inescapable, pointless debt. That’s change we can believe in.

Sources
The Bank Bailout Is Broken
Stimulus Plan Data
In stimulus bills, earmarks by any other name
Obama’s “Stimulus Plan”==> Pork Filled and Fear Driven
Stimulus: How Porky Is It?
Biden: 30 Percent Chance We'll Get It Wrong
Latest Industry Forecast: Recession Will Last Until 2010
Recession could last into 2010
"I Won" Isn't Going to Close the Deal
Vote expected Tuesday on stimulus after bipartisan deal
A sham 'stimulus'
CBO: Obama stimulus harmful over long haul
IMF Says Advanced Economies Already in Depression
Loopholes Sap Potency of Pay Limits

Monday, February 2, 2009

Self-extinction of Mankind

Version Español
There is a very well-known cliché that goes “our children are the future.” This line usually gets bandied about around the time educational programs receive another drastic cut in funding as politicians carefully avoid targeting the pork spending that repays their sponsors and gives them a chance for reelection. But in this new era, I have a new phrase for our over-materialistic, over-monetized, and dehumanized society: “people are the future.”

It seems rather obvious, doesn't it? There isn't a future, at least in terms of the human race, if there are no people in it. In Darwinian terms, life is a struggle for survival, with the best coming out on top. Those least suited to survival become extinct, either through being unable to adapt to their environment, or with help from outside factors, such as predators and humanity itself. The biggest goal of any species is survival and reproduction, ensuring a small immortality through its progeny and the continuation of its species. However, humans, supposedly the smartest of all of the animals on Earth, have elected to embark on a program of self-decimation that would certainly reduce its viability as a species, especially in the matter of its future progeny.

Allow me to explain in more depth. As civilization has expanded, and especially in the past two hundred years, observers have collected data to compare and analyze the patterns of growth in various nations. From there, a model arose called demographic transition. Demographic transition predicts the changes in birth and death rates as a result of industrial changes. Initially, there were only four stages of transition, but the need for a fifth stage has become obvious. Each stage corresponds to a different point in economic development, and I will explain each one succinctly.

Stage I defines pre-industrial society, where birth and death rates are both high and the general growth rate is low. The human population would boom when food was abundant, and would collapse during times of famine. As such, people were at the mercy of nature when it came to population growth and death. At present, no country in the world is still in Stage I.

Stage II can be defined as the high growth period of a society's population. During Stage II, the crude death rate plummets, while the crude birth rate remains high. This is typically the result of industrialization, as the process produces more efficient food production techniques and frees up labor for the manufacture of other goods. The wealth produced by these manufacturers is then typically invested in improved sanitation and medical care, amongst other pursuits. This combination of factors results in more food becoming available, people living longer, and an increase in both wealth and its level of priority.

Stage III is the first deliberate drop in the crude birth rate. During Stage III, the birth rate begins to decline, resulting in more modest population growth. Social and economic changes result in the drop in growth as people begin to deem children an economic handicap. I will address Stage III in more detail later in this article.

Stages IV and V deal with zero growth and negative growth, respectively. In Stage IV, demographic transition has achieved a perfect equilibrium where birth and death rates are equal, and, theoretically, there is a large population perfectly balanced between expansion and contraction. Stage V, however, deals with a society that is declining in population, as the death rate exceeds the birth rate, and the society becomes an aging community that can no longer sustain itself.

In a sense, the global economy is still in Stage II, with new advances in agriculture, such as flood-resistant rice and other modern food miracles are introduced with greater frequency even as people pour money into researching ways to postpone Death, as if Death were the greatest enemy of mankind. However, at the same time, there has been a great alteration in attitude regarding people and children. During Stage III, children are deemed an economic liability, an irritating distraction from the far more important matter of self-gratification. After all, you have to feed children, clothe them, educate them, even sometimes go so far as actually raise them, and who would want to do that when developed countries (developed countries that are deep within Stages IV and V, might I add) have indoctrinated their people to believe that they are special, that there is no need for children to clutter your life with when the purpose to life is to get everything you want. Turn on any television and that’s the message you will receive.

As always, there is more to it than money, though not much. Feminism and the so-called sexual revolution have their own roles to play in this general scorn for children. For all their protestations otherwise, the majority of modern feminists consider children and even the traditional family as ‘parasites sucking out the living strength of another organism’ or a subtle sort of oppression that gives women a competitive disadvantage against men. Being a woman is no longer respected; being a mother is considered a crime against the general female sisterhood. With that, feminism launched a full-blown assault on many laws that protected the woman who chose to be wife and homemaker and left them vulnerable.

There is more to this, of course. Feminism has co-opted the term women’s rights, so any opposition to feminism is then painted as sexism and opposition to women’s rights. Women should be protected, cherished, appreciated, and respected. However, that does not mean that the traditional role of homemaker should be treated as not only shameful, but as a hindrance. Homemakers put in more working hours than even the most workaholic CEO, and they work with the most fragile and defenseless part of society: our children. When did bearing and raising children become a mark of shame, when it is both the most difficult and most rewarding part of life?

Again, there is more. Recently, some green gurus have declared that having more than two children is bad for the environment, to the point where they suggest shifting money from curing illnesses to forcing family planning and contraception on us all. Humans are indeed the largest variable factor and the biggest agent of change in our habitat, the Earth. But as I’ve already noted, when you supposedly attempt to balance the population, you actually move to force it into decline. Stage IV inevitably leads to Stage V, as Britain, Spain, France and a half-dozen others can grimly testify as they struggle to encourage people to have children to replace the previous generation.

Not only that, but environmental groups attempting to bring pressure against having more than two children is hypocrisy of the highest order. The biggest effect people have on the environment is not only through their carbon footprint, but also through the chemicals we produce and use. Recent studies have demonstrated an alarming feminization of male fish and other similarly vulnerable animals. While these studies have been very politically correct and typically evasive in avoiding placing any blame, I certainly have no problem in pointing out one of the biggest things at fault: the pill. Women ingest the pill to avoid getting pregnant. However, the female body can not process all the estrogen inside of the pill, and as such, it is expelled through female urine. Water treatment plants are unable to remove estrogen from water effectively, and higher and higher doses of estrogen go into the water supply, where they will inevitably be cycled back into humans. Rendering a male population sterile unambiguously means the end of the species. If you really want to be environmentally friendly, why not advocate less use of the pill? It does far more harm in the long-term than a baby.

People are the future. This simple phrase encompasses everything in this article. However, that future is in jeopardy, not to outside forces, but to our own selfishness. The planet and even the universe would not notice our disappearance, but self-extinction because mankind is too busy seeking self-gratification to fulfill the basic biological imperative to renew itself? To become extinct because our cultures, the traditions that we have used to guide ourselves to the future, fade away to be replaced by a society that cares nothing for life and inextricably heading toward death? Are we certain that mankind is not the dumbest animal on Earth?

Sources
The Cultural Landscape, An Introduction to Human Geography, James M. Rubenstein, Prentice Hall, 2002
Fighting Hunger with Flood-tolerant Rice
Longevity Pill Tested in Humans
Feminism vs Women's Rights
You Don't Know Feminism
Two Children Should Be Limit, Says Green Guru
Animals’ Sexual Changes Linked to Waste, Chemicals
Study links river pollution to 'feminization' of male fish
Shaping Our Legacy: Reproductive Health and the Environment

Monday, January 26, 2009

Desert of Dystopia

Version Español
A blinding wind pummels an austere landscape of gently rolling sand, creating dust devils and whirlwinds that would suffocate the unwary. A merciless heat beats down upon the head of the unwary traveler as the sun makes its unconcerned journey across the sky. At the top of a dune, one can look out at a wasteland that stretches out for miles, as a hostile terrain threatens to overwhelm the unprepared. But across the sea of sand is a metallic oasis, a futuristic metropolis capable of defying the erosive forces of the badlands and filled with the best technology money can buy. The city gleams in the distance, but once you enter its asphalt streets, this urban center becomes a maze of indifferent humanity in a chipped, decaying environment, losing not only its physical luster, but its moral core.

While the first paragraph to this entry may sound like the opening to a cyberpunk novel set in the Middle East, in the next ten years, this will become reality. The rulers of Saudi Arabia, like the rulers of the neighboring United Arab Emirates, are fully aware of the fact that oil is a valuable commodity that will not last forever. Like the UAE, it has chosen to invest its lucrative oil profits into projects that will contain to sustain and grow their economy long after peak oil comes and goes. Unlike the UAE, which has chosen to spend its fortunes on converting Dubai and Abu Dhabi into the tourist trap of the Middle East, Saudi Arabia has elected to invest in a series of vast construction projects in the desert, creating advanced cities in defiance of a region famous for its hostility to man.

These Economic Cities, of which four have already begun construction, with one supposed to receive its first wave of new citizens in the coming year, are an extensive effort to diversify the oil dependent Saudi Arabian economy into something capable of prospering in a post-oil 21st century. In a country where more than half the people are under the age of 21, these new cities are seen as essential for both the controlled growth of urban sprawl and the opportunity to create conditions friendly to family lifestyle development. Each of these shining new urban centers will come equipped with hospitals, universities, and sport stadiums, with seaside villas for the wealthy and high-rise apartments for the middle-classed. Each city will be focused on a different essential of the Internet Age, with Knowledge Economic City (KEC) specializing in cutting edge scientific research while King Abdullah Economic City (KAEC) will be an industrial center for plastics and aluminum, and so on.

What does this massive project mean? For one, they mean a construction boom in the desert, even during these tough economic times. Companies all over the world are competing for the privilege of supplying these new cities with everything from cell phone service to water supplies. For another, they mean work for hundreds of workers who will be expected to build everything from high-rises to reverse osmosis plants. Thirdly, they represent opportunity for firms all over the world, as the Saudi Arabian government is encouraging Saudi and international firms to build factories and offices to conduct business and bring in jobs. Lastly, they represent a playing field for the tech giants, who get to display toys such technology that creates holographic images at a distance.

The Economic Cities are certainly an impressive effort to meet the desert kingdom’s needs for employment for its younger generation and a stronger, less oil dependent economy. However, there is a reason why I chose to begin this article as a glimpse into a dystopian desert oasis, and that reason is that these Economic Cities will probably end up becoming exactly that. The current global economic morass was a direct result of the merger of ignorance and misplaced enthusiasm in the marble hallways of financiers and their institutions. These well-dressed figures chose to continue dabbling in instruments they did not understand, smug in the mistaken belief that the business cycle was obsolete, that there was a new economic standard of eternal upward expansion. In contrast to these winners, I actually stayed awake in my business classes, so I am well aware that all economies go through a repeating cycle of growth, prosperity, recession, and depression. The eternal upward expansion is the business equivalent of a perpetual motion device: flat-out impossible.

But what do the Economic Cities have to do with the business cycle? Quite a lot, when you apply the business cycle to the so-called Internet Age. As the dotcom bust demonstrated, not every idea with a website will make money. As the current economic crisis demonstrates, no matter how long the growth and prosperity cycles, there is inevitably recession and depression. No matter how much the Internet Age is touted as the future of the globalized economy, no matter how much the inevitable romantics begin to call out that the business cycle is an obsolete theory that no longer applies, the facts will inevitably rear their heads. There is a saturation point where the Internet does not apply a competitive advantage to a national economy. There is a saturation point where goods and services are equivalent, and there is no cheaper foreign production center to produce cheaper versions. During the flirtation with a peak oil scenario in the summer of 2008, industrial jobs began to trickle from China back into the United States because the rising cost of transportation reduced the economies of scale to the point where production in the United States was the more viable alternative.

This is what Saudi Arabia will discover soon enough. The Economic Cities are supposed to bring in the sort of business that places like Bangalore in India do, the so-called “knowledge workers” that bring in even more business. However, the point is that there will be a saturation point where these knowledge works will bring in no additional business in numbers that matter. Furthermore, by encouraging foreign businesses to set up factories and offices in the new metropolises, Saudi Arabia is becoming a part of the globalization craze. Foreign businesses will not only happily build new offices; they will bring in their particular staff and executives, with their families, to these urban oases. These foreigners will bring with them their particular sets of values and cultural mores, and will not take kindly to the sort of religious police that maintain order in Saudi Arabia. Especially in KEC, this will result in a break down of the barriers Saudi Arabia has erected to maintain its particular vision of Islam, since scientists expect, nay, demand, conditions of unlimited access to information and freedom to pursue its endeavors with a minimum of interference. To keep this foreign business, Saudi Arabia will be forced to make exceptions, which will be noticed by its citizenry and resented.

Cities, no matter when and where they are built, no matter how utopian the vision, are always hives of inequity. There will always be haves and have-nots, and the have-nots will always resent the haves. There will always be those who live on the edge of society, scraping a meager existence out of the leftovers of others. The Internet Age will not create eternal economic expansion, and eventually, economists and politicians around the world will scramble for alternatives when the realization dawns that the first mover advantage that India and China possess results in a lack of opportunity for them to mimic those successes. Oil will eventually peak and ebb, and the economic cities the desert kingdom is building will not be able to offset this enough to prevent a partial collapse of the Saudi Arabian economy. When that happens, the new urban centers will have millions of people, and be flooded with millions more, desperately seeking work and opportunity, only to be relegated to poorly built slums as the rich live in their villas, comfortably above it all. The future will be advanced cities with millions of urban poor scavenging the complex technologies tossed aside in favor of more sophisticated machines and computers, with extraordinary cultural ferment from the combined forces of globalization, foreigner communities, tradition, and Islam. Saudi Arabia’s future will become a troubled future of high tech and low life, ruled more by the corporations that create the economic value of these desert oases than the government itself.

Welcome to the future.

Sources
The Construction Site Called Saudi Arabia
Can the U.S. Bring Jobs Back from China?
Landlocked Saudi economic city to get seaport
Company wins water deal for Saudi mega project
Saudis Look Beyond Oil to New Economy in Desert
A New City in the Saudi Desert