By Gregg Easterbrook
August 5, 2007
Suppose 245,000 americans had died in terrorist attacks since Sept. 11, 2001. The United States would be beside itself, utterly gripped by a sense of national emergency. Political leaders would speak of nothing else, the United States military would stand at maximum readiness, and the White House would vow not to rest until the danger to Americans had been utterly eradicated.
Yet 245,000 Americans have died because of one specific threat since 9/11, and no one seems to care. While the tragedy of 3,000 lives lost on 9/11 has justified two wars, in which thousands of U.S. soldiers made the ultimate sacrifice, the tragedy of 245,000 lives lost in traffic accidents on the nation's roads during the same period has justified . . . pretty much no response at all. Terrorism is on the front page day in and day out, but the media rarely even mention road deaths. A few days ago, the National Highway Traffic Safety Administration announced that 42,642 Americans died in traffic in 2006. Did you hear this reported anywhere?
This phenomenon is not just American, it is global. Traffic deaths are the fastest-rising cause of death in the world. Yet you've heard far more about H5N1 avian influenza, which has killed 192 people worldwide since being detected five years ago, than about the 6 million people who have died in traffic accidents in the same period. Last year alone, 1.2 million people were killed on the world's roads, versus about 100,000 dead as a result of combat. The last decade is believed to be the first time in history that roads posed a greater danger to human beings than fighting (which is partly a reflection of the decline of war).
Global prosperity is rising fast, which means that global car ownership is rising fast, and both of those things are good -- but they also mean that global traffic deaths are rising as well. Worldwide, traffic deaths look exactly like a pandemic -- increasing in most nations, with local rapid spikes.
Two forces seem at play in skewed perceptions of these risks. The first is the fundamental difference between harm because of accidents and harm because of deliberate action; the second, society's strange assumption that traffic fatalities cannot be avoided.
The loss of life caused by terrorism on 9/11 -- or similar losses in other acts of terror or war -- has a wholly different moral standing than loss of life in accidents. Terrorists are criminals whose intent is homicide. Those who act illegally or immorally must be opposed even if that means engaging in complex, expensive, perilous undertakings, as the United States has since the darkness of 9/11. A life lost in a traffic accident is very sad, but it does not involve an offense against morality or human dignity. Most traffic accidents are just that -- accidents. In that sense, it may be reasonable that 3,000 deaths because of terrorism have a disproportionate effect on national policymaking.
Next, cars and trucks possess utility. They are vital to our economy and to our personal freedom. Having millions of cars and trucks roaring every which way is necessary for the American economy to be so productive. Environmental Protection Agency figures show that, in the last three decades, vehicle-miles traveled have risen 170% in the United States. Some of this may be unnecessary, but most vehicle-miles happen because they serve someone's interest. If the use of cars were restricted, accidents would certainly decline, but so would economic productivity and personal freedom.
Here's where the big faults in our thinking come into play. Do the media downplay road dangers in part because the auto industry is the No. 1 advertiser on TV and among the top advertisers for newspapers? Detroit would much rather Brian Williams or Katie Couric titter about Paris Hilton, or the L.A. Times feature articles on Waziristan, than hear about 42,642 dead on the roads last year.
Typical Americans are to blame as well. Because we don't want to contemplate dying in a car crash, we seem to assume that highway fatalities cannot be reduced, that they fall into the "stuff happens" category. This isn't so. Risks of driving or of crossing the street -- each year more pedestrians die in the United States than the death toll of 9/11 -- could be reduced significantly without any sacrifice of freedom by car owners.
Relative to passenger-miles traveled, traffic fatalities have declined in the United States owing to anti-lock brakes, air bags, impact engineering (a hidden safety feature of most new vehicles) and the big rise in shoulder-harness use (your seat belt is much more important to safety than air bags). Tougher laws and social awareness have reduced drunk driving. Yet fatalities per mile traveled have not fallen as much as might be expected given improved technology and less alcohol-impaired driving. There appear to be two key reasons: cellphones and horsepower.
Driving while yakking may seem harmless to you, but try telling that to the loved ones of the hundreds or even thousands who die each year in totally avoidable phone-related accidents. Holding a cellphone while driving will become illegal in California in 2008. But the odds of getting stopped are slight. Automated cameras now issue speeding tickets; why can't they issue tickets to owners of cars photographed with a driver using a phone?
Another idea is to pass laws under which, if a driver is on the phone at the moment of a crash, he or she is presumed to be at fault. It is well past time for legislatures to stop waffling on this issue and take action. People make phone calls while driving because they know they can get away with it. This is more important than human life?
The ever-rising horsepower of cars, SUVs and pickup trucks is another reason road fatalities stay high. Twenty years ago, the average new passenger vehicle had 119 horsepower and went from zero to 60 in 13 seconds; this year's averages are 220 horsepower and zero to 60 in 9.5 seconds. New cars, SUVs and pickup trucks of this model year are the "fastest and most powerful vehicles since the EPA began compiling data," the federal agency recently said. Even many new family sedans are ridiculously overpowered. Car & Driver magazine recently tested the new, 268-horsepower Toyota Camry: It did zero to 60 in 5.8 seconds, which was Corvette acceleration a generation ago.
Cars with high horsepower and rapid acceleration are easy to lose control of, especially for young drivers. Tap the accelerator in a tight curve for just an instant in that Camry -- to say nothing of socially irresponsible monstrosities such as the 520-horsepower Porsche Cayenne SUV -- and you can lose control. High-horsepower cars enable cutting off and other forms of aggressive driving; cutting off and sudden lane changes are leading causes of highway collisions. A generation ago, a small percentage of American drivers had high-horsepower vehicles. Now the majority do! Is it a coincidence that road rage and high horsepower have occurred simultaneously? High horsepower makes road rage possible, which in turn adds to the death count.
The proliferation of high horsepower cars is doubly wrong because it links to ever-rising petroleum use and greenhouse gases. Automakers have significantly increased powertrain efficiency in the last 20 years -- but the gains have gone into horsepower, not fuel efficiency. Other things being equal, if new-vehicle horsepower were reduced by one-third, miles per gallon would rise by one-third. One decade of sales of new vehicles with one-third higher horsepower accounts for the amount of oil the United States imports from the Persian Gulf region. Reduce horsepower by a third and end U.S. Persian Gulf oil dependence. Yes, it's that simple. If only we'd actually do it!
Because horsepower is an arms race -- if one automaker offers more, all must -- federal legislation to limit horsepower would offer a good-news trifecta: Higher mpg, reduced greenhouse-gas emissions and lower road fatalities as average motorists stop acting like they're at a NASCAR track.
Why doesn't Congress act to end the horsepower wars? Please don't counter that "no one can tell me what I can drive." The Constitution says you've got a right to own a gun and to read a newspaper. Firearms and materials related to 1st Amendment expression are the only categories of possessions given protected status by the Constitution; courts consistently rule that vehicles on public roads can be regulated for public purposes such as safety.
Horsepower regulation and serious enforcement against cellphone use while driving might save thousands of lives a year. Such reforms might also prevent many billions of dollars in economic losses and make a big dent in the other road-danger figure no one talks about -- 2.6 million Americans injured in traffic crashes last year.
Other reforms, such as pedestrian-activated warning lights at crosswalks, could also reduce traffic deaths in the United States. Numerous reforms could reduce traffic deaths in developing countries. As a nation, we find common ground in agreeing that even one death from terrorism cannot be tolerated. Why are tens of thousands of annual road deaths OK?
Gregg Easterbrook is a fellow of the Brookings Institution and author of "The Progress Paradox." Lauren Hovel of Barnard College provided research assistance for this article.
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Monday, September 10, 2007
Sunday, August 19, 2007
China's toxic toymaker
Aug 16th 2007
From The Economist print edition
Alamy
The death of Zhang Shuhong could herald the demise of China's many anonymous subcontractors
Get article background
UNTIL a brief notice appeared in China's state-run People's Daily on August 14th announcing that Zhang Shuhong had hanged himself, almost no one had ever heard of him. The Economist could not find a picture of him. Even in Foshan, a manufacturing centre in southern China where he owned part of a factory that produced dolls for Mattel, a big American toy-maker, he was an obscure figure.
That is not unusual. There are legions of equally faceless sub-contractors, who are collectively responsible for much of the astonishing growth in Chinese exports. But when Mattel announced a recall of the flawed toys Mr Zhang had made, and especially after he took his own life in response, he became one of China's most famous businessmen—and the embodiment of all the world's misgivings about what comes out of its factories.
The same day that he died, Mattel recalled 436,000 cars daubed with lead-based paint and more than 18m toys containing small magnets which could come loose and be swallowed by children, with dire medical consequences. The recall was Mattel's second of the month. Earlier, the company's Fisher-Price unit had found lead paint on its toys, at least some of which came from Mr Zhang's factory. All of the flawed items were made in China, where 65% of Mattel's products are sourced. The first recall will cost the firm about $30m, and the second might prove more expensive still.
The consequences might have been worse still were it not for the fact that Mattel is hardly the only company to have been caught selling sub-standard Chinese goods of late. Pet food, lorry tyres and toothpaste have all suffered recent product recalls. Nokia has just warned that some of its mobile-phone batteries made in China are prone to overheating, although the factory at fault belonged to Japan's Matsushita.
Some of America's more populist politicians are taking this list as proof that anonymous Chinese subcontractors are not to be trusted, that America needs much more elaborate safeguards against tainted goods and that firms that had outsourced manufacturing to faraway lands would have done better to keep their factories closer to home. Charles Schumer, a tub-thumping senator from New York, has called for the creation of an “import tsar” to police foreign goods.
No doubt many importers will examine their supply chains more carefully, if only for fear that they will be sued by customers who have bought poisonous furniture or explosive mobile telephones, and shunned by others who hear about such fiascos. This sudden scrutiny will probably bring other scandals to light. Mr Zhang's problems, after all, appear to have stemmed from the contaminated paint he bought from another, as yet unidentified, local industrialist. On the assumption that Mr Zhang was not the local industrialist's only customer, there must be other firms that have not yet disclosed their own shortcomings, or are not yet aware of them.
There are several ironies in this. One is that in China, it is often said that subcontractors making electronics or trainers or toys are not the worst violators when it comes to safety and labour standards. Their products are typically bought by big firms, like Mattel, and the order is large enough for the purchaser to set standards and carry out regular inspections. Smaller foreign firms ordering smaller lots, in luxury goods for example, have a far weaker negotiating position.
Monitoring contract manufacturers from abroad is not easy. Visits to factories are hard to arrange, are often cancelled, and, when they do occur, are sometimes elaborately stage-managed. Reporters are particularly unwelcome, but even customers do not always know what is going on. Mattel, for example, had done business with Mr Zhang for 15 years.
The other irony is that, broadly speaking, quality is improving (something that worries the Japanese). The Chinese authorities are aware of and embarrassed by the recent string of scare stories, and are anxious to revive China's faltering reputation. They have started a high-profile campaign to raise standards and punish slapdash manufacturers.
Getting to know you
What Chinese manufacturing lacks is not so much quality control as accountability. Foreign firms feel obliged to use contractors like Mr Zhang to cope with capricious and corrupt local officials, and the arbitrary justice they mete out. Yet firms like Mr Zhang's are inscrutable and transient, with no brand or reputation to speak of. When Japan was industrialising, ambitious companies did some contract manufacturing, but they also worked hard to build their own brands, as Matsushita did with Panasonic. In South Korea Samsung has prospered by keeping both production and marketing in house. Yet in China, firms like Mr Zhang's eschew brands of their own, and keep a low profile, in order to win contracts from several competing foreign firms.
Until now, this anonymous arrangement suited both the contractors and their clients. It would undermine the brands that Adidas, Puma and Nike have spent so much to promote if their customers knew that a Taiwanese contractor called Yue Yuen produced shoes for all of them in China. Likewise, Hewlett Packard, Dell and Apple do not advertise that they all make use of a firm called Hon Hai. Conversely, it is only by keeping the lowest of low profiles that the likes of Yue Yuen and Hon Hai can sell to several competitors.
But this whole system might founder on the question of quality control. To distinguish themselves from their dodgier rivals, Chinese contractors will have to become better known. In that sense, the suicide of a faceless figure like Mr Zhang, and the furore it has prompted, might prove the death-knell of all China's anonymous industrialists.
From The Economist print edition
Alamy
The death of Zhang Shuhong could herald the demise of China's many anonymous subcontractors
Get article background
UNTIL a brief notice appeared in China's state-run People's Daily on August 14th announcing that Zhang Shuhong had hanged himself, almost no one had ever heard of him. The Economist could not find a picture of him. Even in Foshan, a manufacturing centre in southern China where he owned part of a factory that produced dolls for Mattel, a big American toy-maker, he was an obscure figure.
That is not unusual. There are legions of equally faceless sub-contractors, who are collectively responsible for much of the astonishing growth in Chinese exports. But when Mattel announced a recall of the flawed toys Mr Zhang had made, and especially after he took his own life in response, he became one of China's most famous businessmen—and the embodiment of all the world's misgivings about what comes out of its factories.
The same day that he died, Mattel recalled 436,000 cars daubed with lead-based paint and more than 18m toys containing small magnets which could come loose and be swallowed by children, with dire medical consequences. The recall was Mattel's second of the month. Earlier, the company's Fisher-Price unit had found lead paint on its toys, at least some of which came from Mr Zhang's factory. All of the flawed items were made in China, where 65% of Mattel's products are sourced. The first recall will cost the firm about $30m, and the second might prove more expensive still.
The consequences might have been worse still were it not for the fact that Mattel is hardly the only company to have been caught selling sub-standard Chinese goods of late. Pet food, lorry tyres and toothpaste have all suffered recent product recalls. Nokia has just warned that some of its mobile-phone batteries made in China are prone to overheating, although the factory at fault belonged to Japan's Matsushita.
Some of America's more populist politicians are taking this list as proof that anonymous Chinese subcontractors are not to be trusted, that America needs much more elaborate safeguards against tainted goods and that firms that had outsourced manufacturing to faraway lands would have done better to keep their factories closer to home. Charles Schumer, a tub-thumping senator from New York, has called for the creation of an “import tsar” to police foreign goods.
No doubt many importers will examine their supply chains more carefully, if only for fear that they will be sued by customers who have bought poisonous furniture or explosive mobile telephones, and shunned by others who hear about such fiascos. This sudden scrutiny will probably bring other scandals to light. Mr Zhang's problems, after all, appear to have stemmed from the contaminated paint he bought from another, as yet unidentified, local industrialist. On the assumption that Mr Zhang was not the local industrialist's only customer, there must be other firms that have not yet disclosed their own shortcomings, or are not yet aware of them.
There are several ironies in this. One is that in China, it is often said that subcontractors making electronics or trainers or toys are not the worst violators when it comes to safety and labour standards. Their products are typically bought by big firms, like Mattel, and the order is large enough for the purchaser to set standards and carry out regular inspections. Smaller foreign firms ordering smaller lots, in luxury goods for example, have a far weaker negotiating position.
Monitoring contract manufacturers from abroad is not easy. Visits to factories are hard to arrange, are often cancelled, and, when they do occur, are sometimes elaborately stage-managed. Reporters are particularly unwelcome, but even customers do not always know what is going on. Mattel, for example, had done business with Mr Zhang for 15 years.
The other irony is that, broadly speaking, quality is improving (something that worries the Japanese). The Chinese authorities are aware of and embarrassed by the recent string of scare stories, and are anxious to revive China's faltering reputation. They have started a high-profile campaign to raise standards and punish slapdash manufacturers.
Getting to know you
What Chinese manufacturing lacks is not so much quality control as accountability. Foreign firms feel obliged to use contractors like Mr Zhang to cope with capricious and corrupt local officials, and the arbitrary justice they mete out. Yet firms like Mr Zhang's are inscrutable and transient, with no brand or reputation to speak of. When Japan was industrialising, ambitious companies did some contract manufacturing, but they also worked hard to build their own brands, as Matsushita did with Panasonic. In South Korea Samsung has prospered by keeping both production and marketing in house. Yet in China, firms like Mr Zhang's eschew brands of their own, and keep a low profile, in order to win contracts from several competing foreign firms.
Until now, this anonymous arrangement suited both the contractors and their clients. It would undermine the brands that Adidas, Puma and Nike have spent so much to promote if their customers knew that a Taiwanese contractor called Yue Yuen produced shoes for all of them in China. Likewise, Hewlett Packard, Dell and Apple do not advertise that they all make use of a firm called Hon Hai. Conversely, it is only by keeping the lowest of low profiles that the likes of Yue Yuen and Hon Hai can sell to several competitors.
But this whole system might founder on the question of quality control. To distinguish themselves from their dodgier rivals, Chinese contractors will have to become better known. In that sense, the suicide of a faceless figure like Mr Zhang, and the furore it has prompted, might prove the death-knell of all China's anonymous industrialists.
Saturday, August 18, 2007
Fixing the College Loan Mess
from New York Times
Congress has reacted to the college loan scandal with several strong proposals that would go a long way toward ending corruption while making loans more affordable for students and taxpayers. The House has passed a bill that would make it a crime for lenders to solicit business by offering college officials anything of value and force lenders to disclose any existing deals. And both houses are on the verge of approving legislation that would cut some $19 billion in wasteful subsidies to the Federal Family Education Loan Program.
Under that program, the government pays commercial lenders to make loans to students and protects them from defaults. The money saved by cutting subsidies would be spent on Pell Grants, need-based loans, scholarships for aspiring teachers and loan forgiveness for graduates who go into public service. The bill would also lift federal student loan borrowing limits and cap payments at 15 percent of the borrower’s taxable income.
Another important proposal by Representative Tom Petri, Republican of Wisconsin, would trigger a study of an auction system in which lenders would compete for the right to issue loans. If successful, it could drive down costs to both taxpayers and borrowers and eventually lead to the end of subsidies.
Senator Michael Enzi, Republican of Wyoming, has offered a worthy proposal that would phase out a lucrative and clearly unethical program that permits colleges to skim off loan profits while serving as middlemen for the lenders. Created at a time when it seemed that the college loan business might not be profitable enough to attract real lenders, this program is no longer necessary. It’s also prone to exploitation by for-profit schools that accept unqualified students solely to strip them of the money they receive through federally backed grants and loans.
Sunday, June 10, 2007
Microsoft Finds Legal Defender in Justice Dept.
Nearly a decade after the government began its landmark effort to break up Microsoft, the Bush administration has sharply changed course by repeatedly defending the company both in the United States and abroad against accusations of anticompetitive conduct, including the recent rejection of a complaint by Google.
The retrenchment reflects a substantially different view of antitrust policy, as well as a recognition of major changes in the marketplace. The battlefront among technology companies has shifted from computer desktop software, a category that Microsoft dominates, to Internet search and Web-based software programs that allow users to bypass products made by Microsoft, the world’s largest software maker.
In the most striking recent example of the policy shift, the top antitrust official at the Justice Department last month urged state prosecutors to reject a confidential antitrust complaint filed by Google that is tied to a consent decree that monitors Microsoft’s behavior. Google has accused Microsoft of designing its latest operating system, Vista, to discourage the use of Google’s desktop search program, lawyers involved in the case said.
The official, Thomas O. Barnett, an assistant attorney general, had until 2004 been a top antitrust partner at the law firm that has represented Microsoft in several antitrust disputes. At the firm, Justice Department officials said, he never worked on Microsoft matters. Still, for more than a year after arriving at the department, he removed himself from the case because of conflict of interest issues. Ethics lawyers ultimately cleared his involvement.
Mr. Barnett’s memo dismissing Google’s claims, sent to state attorneys general around the nation, alarmed many of them, they and other lawyers from five states said. Some state officials said they believed that Google’s complaint had merit. They also said that they could not recall receiving a request by any head of the Justice Department’s antitrust division to drop any inquiry.
Mr. Barnett’s memo appears to have backfired, state officials said. Prosecutors from several states said they intended to pursue the Google accusations with or without the federal government. In response, federal prosecutors are now discussing with the states whether the Justice Department will join them in pursuing the Google complaint.
The complaint, which contends that Google’s desktop search tool is slowed down by Microsoft’s competing program, has not been made public by Google or the judge overseeing the Microsoft consent decree, Colleen Kollar-Kotelly of the Federal District Court in Washington. It is expected to be discussed at a hearing on the decree in front of Judge Kollar-Kotelly this month.
The memo illustrates the political transformation of Microsoft, as well as the shift in antitrust policy between officials appointed by President Bill Clinton and by President Bush.
“With the change in administrations there has been a sharp falling away from the concerns about how Microsoft and other large companies use their market power,” said Harry First, a professor at the New York University School of Law and the former top antitrust lawyer for New York State who is writing a book about the Microsoft case. “The administration has been very conservative and far less concerned about single-firm dominant behavior than previous administrations.”
Ricardo Reyes, a spokesman for Google, declined to comment about the complaint.
Bradford L. Smith, the general counsel at Microsoft, said that the company was unaware of Mr. Barnett’s memo. He said that Microsoft had not violated the consent decree and that it had already made modifications to Vista in response to concerns raised by Google and other companies.
He said that the new operating system was carefully designed to work well with rival software products and that an independent technical committee that works for the Justice Department and the states had spent years examining Vista for possible anticompetitive problems before it went on sale.
He said that even though the consent decree did not oblige Microsoft to make changes to Vista in response to Google’s complaint, Microsoft lawyers and engineers had been working closely with both state and federal officials in recent days in search of an accommodation.
“We’ve made a decision to go the extra mile to be reasonable,” Mr. Smith said. “The discussions between the company and the various government agencies have been quite fruitful.”
Microsoft was saved from being split in half by a federal appeals court decision handed down early in the Bush administration. The ruling, in 2001, found that the company had repeatedly abused its monopoly power in the software business, but it reversed a lower court order sought by the Clinton administration to split up the company.
Google complained to federal and state prosecutors that consumers who try to use its search tool for computer hard drives on Vista were frustrated because Vista has a competing desktop search program that cannot be turned off. When the Google and Vista search programs are run simultaneously on a computer, their indexing programs slow the operating system considerably, Google contended. As a result, Google said that Vista violated Microsoft’s 2002 antitrust settlement, which prohibits Microsoft from designing operating systems that limit the choices of consumers.
Google has asked the court overseeing the antitrust decree to order Microsoft to redesign Vista to enable users to turn off its built-in desktop search program so that competing programs could function better, officials said.
State officials said that Mr. Barnett’s memo rejected the Google complaint, repeating legal arguments made by Microsoft.
Before he joined the Justice Department in 2004, Mr. Barnett had been vice chairman of the antitrust department at Covington & Burling. It represented Microsoft in the antitrust case and continues to represent the company.
In a recent interview, Mr. Barnett declined to discuss the Google complaint, noting that the decree requires complaints by companies to be kept confidential. He defended the federal government’s overall handling of the Microsoft case.
“The purpose of the consent decree was to prevent and prohibit Microsoft from certain exclusionary behavior that was anticompetitive in nature,” Mr. Barnett said. “It was not designed to pick who would win or determine who would have what market share.”
“We want to prevent Microsoft from doing those things that exclude competitors,” he added. “We also don’t want to disrupt the market in a way that will be harmful to consumers. What does that mean? We’ve never tried to prevent any company, including Microsoft, from innovating and improving its products in a way that will be a benefit to consumers.”
Prosecutors from several states said that they believed that Google’s complaint about anticompetitive conduct resembled the complaint raised by Netscape, a company that popularized the Web browser, that was the basis of the 1998 lawsuit.
Richard Blumenthal, the Connecticut attorney general, declined to talk about the substance of the complaint, or which company made it. But he said the memo from Mr. Barnett surprised him.
“Eyebrows were raised by this letter in our group, as much by the substance and tone as by the past relationship the author had had with Microsoft,” said Mr. Blumenthal, one of the few state prosecutors who has been involved in the case since its outset.
“In concept, if not directly word for word, it is the Microsoft-Netscape situation,” Mr. Blumenthal said. “The question is whether we’re seeing déjà vu all over again.”
The administration has supported Microsoft in other antitrust skirmishes as well.
Last year, for instance, the United States delegation to the European Union complained to European regulators that Microsoft had been denied access to evidence it needed to defend itself in an investigation there into possible anticompetitive conduct. The United States delegation is led by Ambassador C. Boyden Gray, who had worked for Microsoft as a lawyer and lobbyist.
Robert Gianfrancesco, a spokesman for the delegation, said that Ambassador Gray had not formally removed himself from involvement in Microsoft issues but was not involved in the complaint to European regulators, which was handled by other American diplomats in the delegation.
In December 2005, the Justice Department sharply criticized the Korean Fair Trade Commission after that agency ordered major changes in Microsoft’s marketing practices in Korea.
And in 2004, the Justice Department criticized the European Commission for punishing Microsoft for including its video and audio player with its operating system.
Antitrust experts attribute the Bush administration’s different approach to Microsoft to a confluence of political forces as well as significant changes in the marketplace.
A big factor has been the Bush administration’s hands-off approach to business regulation. For its part, Microsoft, which spent more than $55 million on lobbying activities in Washington from 2000 to 2006 and substantially more on lawyers, has become a more effective lobbying organization.
“The generous and noncynical view is that there has been a fundamental change in philosophy about the degree to which antitrust should be used to regulate business activity,” said Andrew I. Gavil, an antitrust law professor at Howard University who is a co-author of the Microsoft book with Professor First, the New York University law professor. “In the Microsoft case, you can see how that change has manifested itself.”
The retrenchment reflects a substantially different view of antitrust policy, as well as a recognition of major changes in the marketplace. The battlefront among technology companies has shifted from computer desktop software, a category that Microsoft dominates, to Internet search and Web-based software programs that allow users to bypass products made by Microsoft, the world’s largest software maker.
In the most striking recent example of the policy shift, the top antitrust official at the Justice Department last month urged state prosecutors to reject a confidential antitrust complaint filed by Google that is tied to a consent decree that monitors Microsoft’s behavior. Google has accused Microsoft of designing its latest operating system, Vista, to discourage the use of Google’s desktop search program, lawyers involved in the case said.
The official, Thomas O. Barnett, an assistant attorney general, had until 2004 been a top antitrust partner at the law firm that has represented Microsoft in several antitrust disputes. At the firm, Justice Department officials said, he never worked on Microsoft matters. Still, for more than a year after arriving at the department, he removed himself from the case because of conflict of interest issues. Ethics lawyers ultimately cleared his involvement.
Mr. Barnett’s memo dismissing Google’s claims, sent to state attorneys general around the nation, alarmed many of them, they and other lawyers from five states said. Some state officials said they believed that Google’s complaint had merit. They also said that they could not recall receiving a request by any head of the Justice Department’s antitrust division to drop any inquiry.
Mr. Barnett’s memo appears to have backfired, state officials said. Prosecutors from several states said they intended to pursue the Google accusations with or without the federal government. In response, federal prosecutors are now discussing with the states whether the Justice Department will join them in pursuing the Google complaint.
The complaint, which contends that Google’s desktop search tool is slowed down by Microsoft’s competing program, has not been made public by Google or the judge overseeing the Microsoft consent decree, Colleen Kollar-Kotelly of the Federal District Court in Washington. It is expected to be discussed at a hearing on the decree in front of Judge Kollar-Kotelly this month.
The memo illustrates the political transformation of Microsoft, as well as the shift in antitrust policy between officials appointed by President Bill Clinton and by President Bush.
“With the change in administrations there has been a sharp falling away from the concerns about how Microsoft and other large companies use their market power,” said Harry First, a professor at the New York University School of Law and the former top antitrust lawyer for New York State who is writing a book about the Microsoft case. “The administration has been very conservative and far less concerned about single-firm dominant behavior than previous administrations.”
Ricardo Reyes, a spokesman for Google, declined to comment about the complaint.
Bradford L. Smith, the general counsel at Microsoft, said that the company was unaware of Mr. Barnett’s memo. He said that Microsoft had not violated the consent decree and that it had already made modifications to Vista in response to concerns raised by Google and other companies.
He said that the new operating system was carefully designed to work well with rival software products and that an independent technical committee that works for the Justice Department and the states had spent years examining Vista for possible anticompetitive problems before it went on sale.
He said that even though the consent decree did not oblige Microsoft to make changes to Vista in response to Google’s complaint, Microsoft lawyers and engineers had been working closely with both state and federal officials in recent days in search of an accommodation.
“We’ve made a decision to go the extra mile to be reasonable,” Mr. Smith said. “The discussions between the company and the various government agencies have been quite fruitful.”
Microsoft was saved from being split in half by a federal appeals court decision handed down early in the Bush administration. The ruling, in 2001, found that the company had repeatedly abused its monopoly power in the software business, but it reversed a lower court order sought by the Clinton administration to split up the company.
Google complained to federal and state prosecutors that consumers who try to use its search tool for computer hard drives on Vista were frustrated because Vista has a competing desktop search program that cannot be turned off. When the Google and Vista search programs are run simultaneously on a computer, their indexing programs slow the operating system considerably, Google contended. As a result, Google said that Vista violated Microsoft’s 2002 antitrust settlement, which prohibits Microsoft from designing operating systems that limit the choices of consumers.
Google has asked the court overseeing the antitrust decree to order Microsoft to redesign Vista to enable users to turn off its built-in desktop search program so that competing programs could function better, officials said.
State officials said that Mr. Barnett’s memo rejected the Google complaint, repeating legal arguments made by Microsoft.
Before he joined the Justice Department in 2004, Mr. Barnett had been vice chairman of the antitrust department at Covington & Burling. It represented Microsoft in the antitrust case and continues to represent the company.
In a recent interview, Mr. Barnett declined to discuss the Google complaint, noting that the decree requires complaints by companies to be kept confidential. He defended the federal government’s overall handling of the Microsoft case.
“The purpose of the consent decree was to prevent and prohibit Microsoft from certain exclusionary behavior that was anticompetitive in nature,” Mr. Barnett said. “It was not designed to pick who would win or determine who would have what market share.”
“We want to prevent Microsoft from doing those things that exclude competitors,” he added. “We also don’t want to disrupt the market in a way that will be harmful to consumers. What does that mean? We’ve never tried to prevent any company, including Microsoft, from innovating and improving its products in a way that will be a benefit to consumers.”
Prosecutors from several states said that they believed that Google’s complaint about anticompetitive conduct resembled the complaint raised by Netscape, a company that popularized the Web browser, that was the basis of the 1998 lawsuit.
Richard Blumenthal, the Connecticut attorney general, declined to talk about the substance of the complaint, or which company made it. But he said the memo from Mr. Barnett surprised him.
“Eyebrows were raised by this letter in our group, as much by the substance and tone as by the past relationship the author had had with Microsoft,” said Mr. Blumenthal, one of the few state prosecutors who has been involved in the case since its outset.
“In concept, if not directly word for word, it is the Microsoft-Netscape situation,” Mr. Blumenthal said. “The question is whether we’re seeing déjà vu all over again.”
The administration has supported Microsoft in other antitrust skirmishes as well.
Last year, for instance, the United States delegation to the European Union complained to European regulators that Microsoft had been denied access to evidence it needed to defend itself in an investigation there into possible anticompetitive conduct. The United States delegation is led by Ambassador C. Boyden Gray, who had worked for Microsoft as a lawyer and lobbyist.
Robert Gianfrancesco, a spokesman for the delegation, said that Ambassador Gray had not formally removed himself from involvement in Microsoft issues but was not involved in the complaint to European regulators, which was handled by other American diplomats in the delegation.
In December 2005, the Justice Department sharply criticized the Korean Fair Trade Commission after that agency ordered major changes in Microsoft’s marketing practices in Korea.
And in 2004, the Justice Department criticized the European Commission for punishing Microsoft for including its video and audio player with its operating system.
Antitrust experts attribute the Bush administration’s different approach to Microsoft to a confluence of political forces as well as significant changes in the marketplace.
A big factor has been the Bush administration’s hands-off approach to business regulation. For its part, Microsoft, which spent more than $55 million on lobbying activities in Washington from 2000 to 2006 and substantially more on lawyers, has become a more effective lobbying organization.
“The generous and noncynical view is that there has been a fundamental change in philosophy about the degree to which antitrust should be used to regulate business activity,” said Andrew I. Gavil, an antitrust law professor at Howard University who is a co-author of the Microsoft book with Professor First, the New York University law professor. “In the Microsoft case, you can see how that change has manifested itself.”
Tuesday, May 01, 2007
Why Wolfowitz Should Stay
By NUHU RIBADU
Abuja, Nigeria
FOR the past few weeks, the world has been riveted by the difficulties of Paul Wolfowitz, president of the World Bank, regarding a potential conflict of interest involving the salary of his partner, also a senior official there. With the bank’s board deliberating this week over how to handle the charges, the controversy now needlessly and regrettably threatens Mr. Wolfowitz’s presidency, which has been largely defined by his energetic support for a new Africa that is struggling to emerge.
Over the last two years, Mr. Wolfowitz has effectively directed the bank’s energies toward fighting poverty and improving human life. He is a champion of using international development institutions to deal with some of the world’s major problems. And he has been a steadfast supporter of the efforts of African organizations to rescue our people from the scourge of misrule, which leads to poverty, disease and early death.
Over the last three years, Nigeria, once the emblem of outlandish corruption, has become a leading reformer, and the Economic and Financial Crimes Commission, which I head, has been at the cutting edge of these efforts. The enormous challenges we face would have proved almost insurmountable without external help, especially from the World Bank under Mr. Wolfowitz.
When disgruntled lawmakers here tried to cut off our financing and shut down critical aspects of our operation, a World Bank grant of $5 million allowed us to bring to closure important cases of political corruption involving key members of Nigeria’s ruling elite, including members of the executive branch and Parliament.
Today our work receives accolades from all corners of the globe, and the financial and moral support of our thoughtful and courageous allies has played a crucial role in our success. In a country that never saw a single conviction for fraud or corruption before the beginning of our reform campaign, we now have 150 convictions, with 400 more cases awaiting decision in the courts. We have also recovered $5 billion in stolen property. We have brought powerful politicians and businessmen to account through the criminal justice system.
These developments are gradually improving the integrity of our national life. Two weeks ago, Nigeria had its first general election intended to pass power from one elected government to another. While the election did not meet the high standards we set for ourselves, it did reveal that for citizens, the fight against corruption was a top priority — right up there with food, health care and education. In other words, Nigerians made the same connection between runaway corruption and human suffering that Mr. Wolfowitz rightly does.
Corruption is the greatest challenge to progress across much of the developing world, and as we in Nigeria know from bitter experience, this is particularly so in Africa. As Mr. Wolfowitz remarked in a recent speech, some two million Africans die from AIDS-related illnesses each year, while nearly 3,000 African children die each day from malaria and nearly 40 million are not in school. All this, he noted, despite $300 billion in international aid to Africa over the last 20 years.
Corruption has not only produced injustice and a chronic failure to effectively manage international support, it has also led to the squandering of Africa’s considerable human and natural resources. Nigeria has made nearly half a trillion dollars from oil in less than five decades — a figure that dwarfs that of international aid to the whole of Africa. And yet, around 70 percent of Nigerians live in conditions of dispiriting poverty, on incomes of less than a dollar a day. Corruption kills far more effectively than AIDS, malaria or war.
On my recent visit to the World Bank in Washington, I was greatly impressed with the remarkable changes in policy and direction that Mr. Wolfowitz had undertaken, as well as by the diversity of talents he had convened to execute his vision of a fairer world. The bank’s secretary and two vice presidents are Africans — one was my colleague in the Nigerian cabinet. Another vice president is Salvadoran.
Mr. Wolfowitz spoke eloquently for those of us in poor countries last month when he exhorted citizens of the industrial world: “As we go back to our comfortable beds tonight, we should think about the voiceless millions who may not even have beds at all, who go to sleep hungry, sick and uncertain about their future. For many it’s literally a matter of life and death.”
And he has matched words with deeds through initiatives to promote greater international cooperation with poor countries, especially regarding the recovery of assets from pilfered resources. Effective efforts at fighting corruption cannot stop at our borders when up to 80 percent of the “grand corruption” perpetrated in Africa is dependent on international mechanisms that facilitate money laundering.
Mr. Wolfowitz has made a praiseworthy effort to halt the illicit drain of money from the coffers of poor countries. Just this simple step — denying a haven for money stolen from a poor country — addresses more than half the problem of corruption in Africa.
It would be a terrible shame to bring all these efforts to a premature halt. Mr. Wolfowitz has openly acknowledged responsibility for the mistake he made. He has apologized and expressed willingness to accept the decision of the bank’s board of directors. But the board should consider how important his error really was, especially considering that the bank’s internal documents suggest that Mr. Wolfowitz tried to follow the rules from the beginning.
The board should avoid lending credence to the widespread suspicion that Mr. Wolfowitz is really being punished for his previous role in the United States Department of Defense. And it should consider the benefit Mr. Wolfowitz has brought to countries like Nigeria.
Tuesday, April 10, 2007
Challenge to Emissions Rule Is Set to Start
The fight over cars and carbon dioxide moves today from the Supreme Court to a federal courtroom in Burlington, Vt., in a case that automakers say could reshape vehicles sold on the East and West Coasts.
The industry is suing to block a 2004 California regulation on global warming from taking effect. The rule would require a 30 percent cut in emissions of greenhouse gases from cars and trucks sold in Vermont and New York, which follow California’s air quality rules, to be fully phased in by the 2016 model year.
In court filings, automakers have argued that regulating the emissions will increase pollution, cause more traffic deaths and lead domestic automakers to stop selling most of their passenger models in states that adopt such regulations.
The companies have disputed that global warming is a problem, even though they have acknowledged it in different forums as a serious problem. And they tried, mostly unsuccessfully, to close much of this case to the public.
“This is a huge issue to consumers, because it may well determine what vehicles are available for them to purchase,” said Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, which includes General Motors, Toyota and most other large automakers. “If it’s a big issue for consumers, it’s a big issue to us.”
Environmental groups and the offices of the attorneys general in Vermont and New York, which is a party to the case, say the automakers are overstating the complexity and hardship of such a regulation.
“It’s that sky-is-falling approach, but the sky didn’t fall with catalytic converters,” Attorney General William H. Sorrell of Vermont said, referring to the antipollution technology forced on the industry in the 1970s.
Last week, in a 5-to-4 decision in Massachusetts v. Environmental Protection Agency, the Supreme Court ruled that the agency has the authority to regulate heat-trapping gases in automobiles. The Bush administration has long opposed that.
Instead, more than 12 states, including California, Massachusetts, New York and Vermont, have already or are in the process of moving to regulate such emissions.
California has the authority to set air-quality rules, and Northeastern states have long chosen to follow those rules instead of Washington’s. The Supreme Court victory was important for the states, because the approval of the environmental agency is needed before California can regulate emissions involving global warming.
Automakers have sued to block the California regulation in federal courts in California, Rhode Island and Vermont, though just the Vermont case has gone forward. That case is scheduled to enter the trial phase today.
The battle has exposed fault lines among automakers. Two trade groups representing the major manufacturers are involved in the suit, one dominated by domestic producers and one by foreign.
They have clashed in their legal strategies, and just G.M. and DaimlerChrysler, two of the more outspoken companies opposing the new regulation, are directly listed as plaintiffs. The trade groups had initially sued separately but are now plaintiffs in a consolidated suit.
The main legal argument uniting the industry is their contention that states cannot regulate carbon dioxide emissions because that would be little different from regulating fuel economy, and Washington has the sole authority to set mileage standards. The recent Supreme Court ruling, however, appeared to undermine that argument.
The industry estimates that the new regulation would impose a 50 percent increase in fuel economy for passenger cars and small sport-utility vehicles but a more modest increase for large trucks, effectively making it harder for a company like G.M. to bring smaller vehicles like the Chevrolet Malibu into compliance than its Hummers.
An expert hired by automakers said, according to court filings, that DaimlerChrysler, Ford Motor and G.M. “will need largely to exit” from the passenger car and small truck markets.
Environmental groups say the industry is ignoring the potential effects of its move to bolster alternative fuels like ethanol, as well as the advent of hybrid electric technology and other technologies.
Automakers argued in a court filing in January that “defendants make unsubstantiated predictions that global climate change is having a number of alarming adverse effects.”
Michael J. Stanton, the president of the Association of International Automobile Manufacturers, a plaintiff group, said in an interview the position did not represent the views of the mostly Asian automakers who are his constituents, some of whom are trying to create “eco-friendly” reputations.
“We believe that there is enough information out there to address climate change and we know that cars — passenger cars and light trucks — contribute, and we want to be part of the solution,” Mr. Stanton said.
The regulation California adopted in 2004 was to begin taking effect with 2009 models and to be phased in over eight years. President Bush and Congress more recently discussed fuel economy rules that could potentially accomplish similar reductions for gases tied to global warming, though no firm plan is in place.
Among other points, the industry says more fuel efficient cars could be dangerous, because they will be cheaper to drive and lead people to drive more and potentially have more accidents.
“Everybody’s getting a good laugh out of the safety claim,” said David Bookbinder, a lawyer for the Sierra Club, which is a party to the case. “Detroit is saying it’s a bad idea for everybody to drive more.”
The industry is suing to block a 2004 California regulation on global warming from taking effect. The rule would require a 30 percent cut in emissions of greenhouse gases from cars and trucks sold in Vermont and New York, which follow California’s air quality rules, to be fully phased in by the 2016 model year.
In court filings, automakers have argued that regulating the emissions will increase pollution, cause more traffic deaths and lead domestic automakers to stop selling most of their passenger models in states that adopt such regulations.
The companies have disputed that global warming is a problem, even though they have acknowledged it in different forums as a serious problem. And they tried, mostly unsuccessfully, to close much of this case to the public.
“This is a huge issue to consumers, because it may well determine what vehicles are available for them to purchase,” said Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, which includes General Motors, Toyota and most other large automakers. “If it’s a big issue for consumers, it’s a big issue to us.”
Environmental groups and the offices of the attorneys general in Vermont and New York, which is a party to the case, say the automakers are overstating the complexity and hardship of such a regulation.
“It’s that sky-is-falling approach, but the sky didn’t fall with catalytic converters,” Attorney General William H. Sorrell of Vermont said, referring to the antipollution technology forced on the industry in the 1970s.
Last week, in a 5-to-4 decision in Massachusetts v. Environmental Protection Agency, the Supreme Court ruled that the agency has the authority to regulate heat-trapping gases in automobiles. The Bush administration has long opposed that.
Instead, more than 12 states, including California, Massachusetts, New York and Vermont, have already or are in the process of moving to regulate such emissions.
California has the authority to set air-quality rules, and Northeastern states have long chosen to follow those rules instead of Washington’s. The Supreme Court victory was important for the states, because the approval of the environmental agency is needed before California can regulate emissions involving global warming.
Automakers have sued to block the California regulation in federal courts in California, Rhode Island and Vermont, though just the Vermont case has gone forward. That case is scheduled to enter the trial phase today.
The battle has exposed fault lines among automakers. Two trade groups representing the major manufacturers are involved in the suit, one dominated by domestic producers and one by foreign.
They have clashed in their legal strategies, and just G.M. and DaimlerChrysler, two of the more outspoken companies opposing the new regulation, are directly listed as plaintiffs. The trade groups had initially sued separately but are now plaintiffs in a consolidated suit.
The main legal argument uniting the industry is their contention that states cannot regulate carbon dioxide emissions because that would be little different from regulating fuel economy, and Washington has the sole authority to set mileage standards. The recent Supreme Court ruling, however, appeared to undermine that argument.
The industry estimates that the new regulation would impose a 50 percent increase in fuel economy for passenger cars and small sport-utility vehicles but a more modest increase for large trucks, effectively making it harder for a company like G.M. to bring smaller vehicles like the Chevrolet Malibu into compliance than its Hummers.
An expert hired by automakers said, according to court filings, that DaimlerChrysler, Ford Motor and G.M. “will need largely to exit” from the passenger car and small truck markets.
Environmental groups say the industry is ignoring the potential effects of its move to bolster alternative fuels like ethanol, as well as the advent of hybrid electric technology and other technologies.
Automakers argued in a court filing in January that “defendants make unsubstantiated predictions that global climate change is having a number of alarming adverse effects.”
Michael J. Stanton, the president of the Association of International Automobile Manufacturers, a plaintiff group, said in an interview the position did not represent the views of the mostly Asian automakers who are his constituents, some of whom are trying to create “eco-friendly” reputations.
“We believe that there is enough information out there to address climate change and we know that cars — passenger cars and light trucks — contribute, and we want to be part of the solution,” Mr. Stanton said.
The regulation California adopted in 2004 was to begin taking effect with 2009 models and to be phased in over eight years. President Bush and Congress more recently discussed fuel economy rules that could potentially accomplish similar reductions for gases tied to global warming, though no firm plan is in place.
Among other points, the industry says more fuel efficient cars could be dangerous, because they will be cheaper to drive and lead people to drive more and potentially have more accidents.
“Everybody’s getting a good laugh out of the safety claim,” said David Bookbinder, a lawyer for the Sierra Club, which is a party to the case. “Detroit is saying it’s a bad idea for everybody to drive more.”
Sunday, April 08, 2007
The Widening College Loan Scandal
Congress needs to address the college loan scandal that has unfolded since New York’s attorney general, Andrew Cuomo, began to investigate the troubling — and possibly illegal — payments to universities that steer students to so-called preferred lending companies. These kickbacks are part of a wider pattern of shady dealing that, we now find out, reaches into the federal government as well.
The Times reported last week that a senior official at the Department of Education who helped oversee the federal student loan program held shares of the parent company of the student loan company Student Loan Xpress. That came one day after financial aid officials at three universities that listed Student Loan Xpress as a preferred lender — Columbia University, The University of Texas at Austin and the University of Southern California — were found to have sold shares in the company. The official at Columbia, who earned more than $100,000 on the sale, bought his shares for about $1 each and sold them for about $10.
These cases show what lenders will do to win a slice of the business — last year students took out $85 billion in loans — and the all-too-frequent willingness of universities to go along. Financial aid officers are offered gifts and trips, and universities are offered hundreds of thousands of dollars in payments, if they place a company on their list of preferred lenders that most students use when looking for loans. Universities have also been offered large payments to switch from the government’s student loan program to private lenders whose huge profits are based in part on government subsidies.
This program is clearly in need of serious and immediate reform. For starters, Congress needs to make it illegal for colleges and universities to accept anything of value from lenders. It should also require universities to choose preferred lenders through an open process that guarantees the best rates and treatment for student borrowers.
The Times reported last week that a senior official at the Department of Education who helped oversee the federal student loan program held shares of the parent company of the student loan company Student Loan Xpress. That came one day after financial aid officials at three universities that listed Student Loan Xpress as a preferred lender — Columbia University, The University of Texas at Austin and the University of Southern California — were found to have sold shares in the company. The official at Columbia, who earned more than $100,000 on the sale, bought his shares for about $1 each and sold them for about $10.
These cases show what lenders will do to win a slice of the business — last year students took out $85 billion in loans — and the all-too-frequent willingness of universities to go along. Financial aid officers are offered gifts and trips, and universities are offered hundreds of thousands of dollars in payments, if they place a company on their list of preferred lenders that most students use when looking for loans. Universities have also been offered large payments to switch from the government’s student loan program to private lenders whose huge profits are based in part on government subsidies.
This program is clearly in need of serious and immediate reform. For starters, Congress needs to make it illegal for colleges and universities to accept anything of value from lenders. It should also require universities to choose preferred lenders through an open process that guarantees the best rates and treatment for student borrowers.
Saturday, April 07, 2007
The non-aligned movement
The quality of aid matters as much as the quantity
MAIMONIDES, a 12th-century rabbi and philosopher, argued that it is better to give anonymously, like the sages who secretly placed coins under the doors of the poor, than to flaunt your generosity. Better still, he said, to pool your charity—by contributing to a tzedakah box, for example—so that neither the poor nor their benefactor know the other's identity.
The club of 22 governments who dominate foreign aid would not rate very highly by the Torah's reckoning. This week they met in Paris to measure progress on two big commitments made in 2005. In July of that year, those world leaders who gathered for the G8 summit in Gleneagles in Scotland promised to increase aid to $130 billion, and double aid to Africa, by 2010.
But giving freely only gets you past the lowest rank of benefactors in Maimonides' scheme. An earlier pledge, made in Paris four months before, would have impressed him more. Donors promised to be more self-effacing in their charity, to “harmonise” their efforts with other benefactors, and “align” them with the priorities of governments they were trying to help.
Sadly, progress on both pledges is weak.
Such uncertainties should worry a prudent African finance minister. Can he count on seeing some of the extra $25 billion the continent is promised by 2010? Of the G8 leaders who signed that pledge, half have already departed, two are on their way out, and the remaining pair will be gone before 2010. Even if donors meet the target, the aid may arrive in a sudden and unmanageable rush a year or two before the deadline.
Only about 65% of aid actually arrives on schedule, according to the OECD. Finance ministers must cope with shortfalls and windfalls. Zambia was due to receive $930m in 2005, but ended up with just $696m. Vietnam which was expecting about $400m, got roughly $2 billion.
Because the aid they receive is such a capricious, volatile commodity, governments dare not make full use of it. They could hire legions of extra teachers, clinicians and civil servants, but only if they are prepared to fire them when the aid spigot is closed. They could put AIDS-sufferers on anti-retroviral therapies, but only if they are willing to discontinue treatment once the money stops. Not surprisingly, some governments choose to hoard aid rather than spend it. In 2001-03, Ghana received an extra $1.3 billion of aid; $1.2 billion collected in the vaults of its central bank.
Aid is also poorly co-ordinated. A trio of researchers compared donors with a gaggle of crop-growers, spraying water hither and thither, leaving some plants parched, others deluged. After the Indian Ocean tsunami, according to a report in El Pais, an Acehnese girl developed measles symptoms thanks to three identical jabs from different aid agencies.
Where donors and governments do see eye to eye, there may be little need for aid agencies at all. The British government, for example, could simply write a cheque to its Tanzanian counterpart. Some donors do just this, bankrolling governments they trust, and letting them manage the money themselves. About £1.2 billion ($2.4 billion) of British aid will top up government budgets in this way next fiscal year.
Other donors are less enthusiastic. They may want to trumpet their good deeds, or have real or imagined doubts about the recipient's book-keeping and budgeting. Even countries with “moderately strong” exchequers were not always trusted to audit their aid money, the OECD notes. “The very countries that helped us reform our systems, then don't use our systems,” complains Paul Lupunga, a senior Zambian official.
The Paris declaration says that donors must be accountable to beneficiaries. For now, most prefer to please their voters.
MAIMONIDES, a 12th-century rabbi and philosopher, argued that it is better to give anonymously, like the sages who secretly placed coins under the doors of the poor, than to flaunt your generosity. Better still, he said, to pool your charity—by contributing to a tzedakah box, for example—so that neither the poor nor their benefactor know the other's identity.
The club of 22 governments who dominate foreign aid would not rate very highly by the Torah's reckoning. This week they met in Paris to measure progress on two big commitments made in 2005. In July of that year, those world leaders who gathered for the G8 summit in Gleneagles in Scotland promised to increase aid to $130 billion, and double aid to Africa, by 2010.
But giving freely only gets you past the lowest rank of benefactors in Maimonides' scheme. An earlier pledge, made in Paris four months before, would have impressed him more. Donors promised to be more self-effacing in their charity, to “harmonise” their efforts with other benefactors, and “align” them with the priorities of governments they were trying to help.
Sadly, progress on both pledges is weak.
Such uncertainties should worry a prudent African finance minister. Can he count on seeing some of the extra $25 billion the continent is promised by 2010? Of the G8 leaders who signed that pledge, half have already departed, two are on their way out, and the remaining pair will be gone before 2010. Even if donors meet the target, the aid may arrive in a sudden and unmanageable rush a year or two before the deadline.
Only about 65% of aid actually arrives on schedule, according to the OECD. Finance ministers must cope with shortfalls and windfalls. Zambia was due to receive $930m in 2005, but ended up with just $696m. Vietnam which was expecting about $400m, got roughly $2 billion.
Because the aid they receive is such a capricious, volatile commodity, governments dare not make full use of it. They could hire legions of extra teachers, clinicians and civil servants, but only if they are prepared to fire them when the aid spigot is closed. They could put AIDS-sufferers on anti-retroviral therapies, but only if they are willing to discontinue treatment once the money stops. Not surprisingly, some governments choose to hoard aid rather than spend it. In 2001-03, Ghana received an extra $1.3 billion of aid; $1.2 billion collected in the vaults of its central bank.
Aid is also poorly co-ordinated. A trio of researchers compared donors with a gaggle of crop-growers, spraying water hither and thither, leaving some plants parched, others deluged. After the Indian Ocean tsunami, according to a report in El Pais, an Acehnese girl developed measles symptoms thanks to three identical jabs from different aid agencies.
Where donors and governments do see eye to eye, there may be little need for aid agencies at all. The British government, for example, could simply write a cheque to its Tanzanian counterpart. Some donors do just this, bankrolling governments they trust, and letting them manage the money themselves. About £1.2 billion ($2.4 billion) of British aid will top up government budgets in this way next fiscal year.
Other donors are less enthusiastic. They may want to trumpet their good deeds, or have real or imagined doubts about the recipient's book-keeping and budgeting. Even countries with “moderately strong” exchequers were not always trusted to audit their aid money, the OECD notes. “The very countries that helped us reform our systems, then don't use our systems,” complains Paul Lupunga, a senior Zambian official.
The Paris declaration says that donors must be accountable to beneficiaries. For now, most prefer to please their voters.
All washed up
WE WERE right, all along. That is the thrust of the latest report from the Intergovernmental Panel on Climate Change (IPCC), a United Nations body set up to pronounce authoritatively on the science of global warming. In 2001 it predicted that global warming would lead to many ills, including greater numbers of extinctions, growing shortages of water, higher incidence of tropical diseases, and lower yields from agriculture, fishing and forestry in some places. Now the scientists who write the reports say they have much stronger evidence that such calamities are indeed occurring—faster, in many cases, than they originally thought.
The previous IPCC report, in February, examined the evidence that the globe was actually warming. It called the trend “unequivocal”, and expressed “very high confidence” that it was largely man-made. The new report assesses the likely impact of global warming. It was released on April 6th, after a week of negotiations between scientists and governments over the wording. Representatives of China, Russia, Saudi Arabia and America in partiuclar were said to have tried to water down the report, prompting a last-ditch all-night haggle.
The resulting document predicts the same sorts of consequences as its predecessor did in 2001, but with much greater confidence and precision, says Camille Parmesan, a professor at the University of Texas who vetted part of it. By her count, the chapter on current impacts alone rests on a review of over 1,000 academic studies, most of them already published—compared with about 100 last time around.
In a paper published in 2003, Professor Parmesan concluded that half of all species were already altering their behaviour or shifting their range in response to global warming. Others have found that some 26% of coral reefs have already died as a result of warming waters, and that the remainder will probably disappear if average water temperatures rise by another degree—along with the fisheries and tourism they sustain. In a synthesis of such studies, the report concluded that 30% of species face an increased risk of extinction if temperatures rise by 2ºC (3.6ºF).
This sort of finding suggests that the effects of global warming will be “non-linear”, says Paul Epstein, a Harvard University professor who has reviewed the entire report. For one thing, most projections of the impact derive from estimates of changes in average temperature. But many of the ill effects hinge on changes in the minimum temperature, which has been rising twice as fast. This trend is particularly strong near the poles, where the climate is changing fastest. Winters no longer get cold enough in many places to kill off different pests and diseases. So noxious species of ants and bees are marching northwards across America, ticks carrying Lyme disease are proliferating in Scandinavia and tropical highlands around the world are witnessing an invasion of mosquitoes carrying malaria, dengue fever and Japanese encephalitis. “The winter is the most wonderful thing that was ever invented for public health,” Dr Epstein says, “and we're losing it.”
Multiple factors will amplify the effects of global warming on agriculture and forestry. Warmer and drier conditions in many places will reduce yields. Meanwhile, pests such as tree-killing beetles and crop-killing fungi will both increase their range and breed more rapidly. And an increasing incidence of extreme weather, be it floods or droughts, will both damage crops directly and nurture species that prey on them. The poor, especially in tropical climes, will be hardest hit by all this, since they have little means of adapting to such changes.
The report is supposed only to inform policymaking, not to direct it. But the point of the frightening statistics about impending water shortages, epidemics and crop failures, says one of the authors, is to jolt politicians into preparing for the coming afflictions. In other words, the report intends to end the debate between those who think mankind's main effort should be trying to reverse climate change and those who would prefer to concentrate on adapting to its effects. Both strategies, it implies, are urgently needed.
The previous IPCC report, in February, examined the evidence that the globe was actually warming. It called the trend “unequivocal”, and expressed “very high confidence” that it was largely man-made. The new report assesses the likely impact of global warming. It was released on April 6th, after a week of negotiations between scientists and governments over the wording. Representatives of China, Russia, Saudi Arabia and America in partiuclar were said to have tried to water down the report, prompting a last-ditch all-night haggle.
The resulting document predicts the same sorts of consequences as its predecessor did in 2001, but with much greater confidence and precision, says Camille Parmesan, a professor at the University of Texas who vetted part of it. By her count, the chapter on current impacts alone rests on a review of over 1,000 academic studies, most of them already published—compared with about 100 last time around.
In a paper published in 2003, Professor Parmesan concluded that half of all species were already altering their behaviour or shifting their range in response to global warming. Others have found that some 26% of coral reefs have already died as a result of warming waters, and that the remainder will probably disappear if average water temperatures rise by another degree—along with the fisheries and tourism they sustain. In a synthesis of such studies, the report concluded that 30% of species face an increased risk of extinction if temperatures rise by 2ºC (3.6ºF).
This sort of finding suggests that the effects of global warming will be “non-linear”, says Paul Epstein, a Harvard University professor who has reviewed the entire report. For one thing, most projections of the impact derive from estimates of changes in average temperature. But many of the ill effects hinge on changes in the minimum temperature, which has been rising twice as fast. This trend is particularly strong near the poles, where the climate is changing fastest. Winters no longer get cold enough in many places to kill off different pests and diseases. So noxious species of ants and bees are marching northwards across America, ticks carrying Lyme disease are proliferating in Scandinavia and tropical highlands around the world are witnessing an invasion of mosquitoes carrying malaria, dengue fever and Japanese encephalitis. “The winter is the most wonderful thing that was ever invented for public health,” Dr Epstein says, “and we're losing it.”
Multiple factors will amplify the effects of global warming on agriculture and forestry. Warmer and drier conditions in many places will reduce yields. Meanwhile, pests such as tree-killing beetles and crop-killing fungi will both increase their range and breed more rapidly. And an increasing incidence of extreme weather, be it floods or droughts, will both damage crops directly and nurture species that prey on them. The poor, especially in tropical climes, will be hardest hit by all this, since they have little means of adapting to such changes.
The report is supposed only to inform policymaking, not to direct it. But the point of the frightening statistics about impending water shortages, epidemics and crop failures, says one of the authors, is to jolt politicians into preparing for the coming afflictions. In other words, the report intends to end the debate between those who think mankind's main effort should be trying to reverse climate change and those who would prefer to concentrate on adapting to its effects. Both strategies, it implies, are urgently needed.
Wednesday, April 04, 2007
$500 Million Pledged to Fight Childhood Obesity
The Robert Wood Johnson Foundation plans to spend more than $500 million over the next five years to reverse the increase in childhood obesity. It is one of the largest public health initiatives ever tried by a private philanthropy.
“This is an epidemic that is going to cost the country in terms of morbidity and mortality and economically,” said Dr. Risa Lavizzo-Mourey, the foundation’s president and chief executive. “The younger generation is going to live sicker and die younger than their parents because of obesity.”
The foundation estimates that roughly 25 million children 17 and under are obese or overweight, nearly a third of the 74 million in that age group, according to Census Bureau data and a 2006 study published in The Journal of the American Medical Association.
Many of those children are poor and live in neighborhoods where outdoor play is unsafe and access to fresh fruits and vegetables is limited. “In many cases, the environment makes it almost impossible for them to choose healthy lifestyles,” Dr. Lavizzo-Mourey said. “We’re going to try to change that.”
The foundation plans to invest in programs to improve access to healthy food, encourage the development of safe play spaces, increase research to enhance understanding of obesity and prod governments into adopting policies to address the problem, among other things.
Philanthropy has long fueled improvements in health, from John D. Rockefeller, whose money produced a yellow fever vaccine, to Bill and Melinda Gates, who are underwriting new health technologies and vaccines to address a variety of global problems. (lack of gov. fund)
Several states have mandated changes in school menus, increased physical education requirements and begun reporting students’ body mass index scores to parents.
“This is an epidemic that is going to cost the country in terms of morbidity and mortality and economically,” said Dr. Risa Lavizzo-Mourey, the foundation’s president and chief executive. “The younger generation is going to live sicker and die younger than their parents because of obesity.”
The foundation estimates that roughly 25 million children 17 and under are obese or overweight, nearly a third of the 74 million in that age group, according to Census Bureau data and a 2006 study published in The Journal of the American Medical Association.
Many of those children are poor and live in neighborhoods where outdoor play is unsafe and access to fresh fruits and vegetables is limited. “In many cases, the environment makes it almost impossible for them to choose healthy lifestyles,” Dr. Lavizzo-Mourey said. “We’re going to try to change that.”
The foundation plans to invest in programs to improve access to healthy food, encourage the development of safe play spaces, increase research to enhance understanding of obesity and prod governments into adopting policies to address the problem, among other things.
Philanthropy has long fueled improvements in health, from John D. Rockefeller, whose money produced a yellow fever vaccine, to Bill and Melinda Gates, who are underwriting new health technologies and vaccines to address a variety of global problems. (lack of gov. fund)
Several states have mandated changes in school menus, increased physical education requirements and begun reporting students’ body mass index scores to parents.
Taking Aim at All Those Plastic Bags
By a 10-1 Board of Supervisors’ vote, San Francisco became the first major American city to ban the use of non-biodegradable plastic bags by supermarkets, drug stores and other large retailers.
The paper-or-plastic question has long been a vexing one. Paper bags, of course, are biodegradable and recyclable, and are made from trees, a renewable resource. But the production of paper bags generates significantly more air and water pollution; manufacturing and recycling them requires more energy than their plastic cousins do, according to the Environmental Protection Agency.
Paper bags also take up comparatively more space in landfills, where they are slow to degrade, like most everything in a landfill. A study for the American Forest and Paper Association estimated that about seven billion paper bags were used in the United States in 2003.
On the other hand, plastic bags made of polyethylene, which dominate the market, are non-biodegradable and are made from crude oil and natural gas, both nonrenewable resources. They can be recycled, but are mostly discarded.
The E.P.A. estimated that only 5.2 percent of the plastic bags and sacks in the municipal waste stream in 2005 were recycled, compared with 21 percent of paper bags and sacks. And there are also horror stories about animals swallowing them and starving to death.
Plastic bags have virtually taken over the grocery market since they were first put at check-out stands in 1977. Ninety percent of all grocery bags are now plastic, according to the Progressive Bag Alliance, an industry group of plastic bag manufacturers. Estimates of the number of plastic bags used around the world each year vary wildly — from 100 billion to as many as one trillion.
Whatever the number, it’s a lot. And that has made for a lot of plastic bag litter — which, the E.P.A. says, can take 1,000 years to decompose.
One reason for the abundance of plastic bags is economic. A standard plastic grocery bag costs about a penny to produce, according to the plastics industry, compared with 4 cents to 5 cents for a paper bag. Compostable plastic bags would cost from 8 cents to a dime, the industry says, although supporters of the San Francisco action say the cost would drop as more local governments require them.
Because of a tax, Ireland has cut the use of plastic bags by 90 percent, according to the Irish government.
Ikea, the Swedish home furnishings and accessories chain, has just begun charging customers 5 cents per plastic bag in the United States, which it donates to American Forests, a conservation group. On average, its United States stores have gone through about 70 million a year. In Britain, Ikea says, it has seen a 95 percent drop in plastic bag use since it began charging for them there last spring.
Yet another alternative is to sell consumers reusable bags.
“The paper versus plastics question takes us off the issue, which is consumption,” says Vincent Cobb, who offers reusable bags and containers on the Internet. He admits to using plastic bags, which he calls a “fantastic product,” but not as many as in the past.
“Getting into the habit of bringing your own shopping bag,” he says, “can slash this problem across the board.”
The paper-or-plastic question has long been a vexing one. Paper bags, of course, are biodegradable and recyclable, and are made from trees, a renewable resource. But the production of paper bags generates significantly more air and water pollution; manufacturing and recycling them requires more energy than their plastic cousins do, according to the Environmental Protection Agency.
Paper bags also take up comparatively more space in landfills, where they are slow to degrade, like most everything in a landfill. A study for the American Forest and Paper Association estimated that about seven billion paper bags were used in the United States in 2003.
On the other hand, plastic bags made of polyethylene, which dominate the market, are non-biodegradable and are made from crude oil and natural gas, both nonrenewable resources. They can be recycled, but are mostly discarded.
The E.P.A. estimated that only 5.2 percent of the plastic bags and sacks in the municipal waste stream in 2005 were recycled, compared with 21 percent of paper bags and sacks. And there are also horror stories about animals swallowing them and starving to death.
Plastic bags have virtually taken over the grocery market since they were first put at check-out stands in 1977. Ninety percent of all grocery bags are now plastic, according to the Progressive Bag Alliance, an industry group of plastic bag manufacturers. Estimates of the number of plastic bags used around the world each year vary wildly — from 100 billion to as many as one trillion.
Whatever the number, it’s a lot. And that has made for a lot of plastic bag litter — which, the E.P.A. says, can take 1,000 years to decompose.
One reason for the abundance of plastic bags is economic. A standard plastic grocery bag costs about a penny to produce, according to the plastics industry, compared with 4 cents to 5 cents for a paper bag. Compostable plastic bags would cost from 8 cents to a dime, the industry says, although supporters of the San Francisco action say the cost would drop as more local governments require them.
Because of a tax, Ireland has cut the use of plastic bags by 90 percent, according to the Irish government.
Ikea, the Swedish home furnishings and accessories chain, has just begun charging customers 5 cents per plastic bag in the United States, which it donates to American Forests, a conservation group. On average, its United States stores have gone through about 70 million a year. In Britain, Ikea says, it has seen a 95 percent drop in plastic bag use since it began charging for them there last spring.
Yet another alternative is to sell consumers reusable bags.
“The paper versus plastics question takes us off the issue, which is consumption,” says Vincent Cobb, who offers reusable bags and containers on the Internet. He admits to using plastic bags, which he calls a “fantastic product,” but not as many as in the past.
“Getting into the habit of bringing your own shopping bag,” he says, “can slash this problem across the board.”
Sunday, April 01, 2007
Poor Nations to Bear Brunt as World Warms
The world’s richest countries, which have contributed by far the most to the atmospheric changes linked to global warming, are already spending billions of dollars to limit their own risks from its worst consequences, like drought and rising seas.
In its fourth assessment of global warming, the Intergovernmental Panel on Climate Change used its strongest language yet in drawing a link between human activity and recent warming.
Do rich nations have an obligation to help poorer ones prepare for potential changes caused by global warming?
But despite longstanding treaty commitments to help poor countries deal with warming, these industrial powers are spending just tens of millions of dollars on ways to limit climate and coastal hazards in the world’s most vulnerable regions — most of them close to the equator and overwhelmingly poor.
Next Friday, a new report from the Intergovernmental Panel on Climate Change, a United Nations body that since 1990 has been assessing global warming, will underline this growing climate divide, according to scientists involved in writing it — with wealthy nations far from the equator not only experiencing fewer effects but also better able to withstand them.
Two-thirds of the atmospheric buildup of carbon dioxide, a heat-trapping greenhouse gas that can persist in the air for centuries, has come in nearly equal proportions from the United States and Western European countries.
In contrast, Africa accounts for less than 3 percent of the global emissions of carbon dioxide from fuel burning since 1900, yet its 840 million people face some of the biggest risks from drought and disrupted water supplies, according to new scientific assessments.
Scientists say it has become increasingly clear that worldwide precipitation is shifting away from the equator and toward the poles. That will nourish crops in warming regions like Canada and Siberia while parching countries — like Malawi in sub-Saharan Africa — which are already prone to drought.
Many other experts insist this is not an either-or situation. They say that cutting the vulnerability of poor regions needs much more attention, but add that unless emissions are curbed, there will be centuries of warming and rising seas that will threaten ecosystems, water supplies, and resources from the poles to the equator, harming rich and poor.
There are some hints that wealthier countries are beginning to shift their focus toward fostering adaptation to warming outside their own borders. Relief organizations including Oxfam and the International Red Cross, foreseeing a world of worsening climate-driven disasters, are turning some of their attention toward projects like expanding mangrove forests as a buffer against storm surges, planting trees on slopes to prevent landslides, or building shelters on high ground.
Some officials from the United States, Britain and Japan say foreign-aid spending can be directed at easing the risks from climate change.
Industrialized countries bound by the Kyoto Protocol, the climate pact rejected by the Bush administration, project that hundreds of millions of dollars will soon flow via that treaty into a climate adaptation fund.
The lack of climate aid persists even though nearly all the world’s industrialized nations, including the United States under the first President Bush, pledged to help when they signed the first global warming treaty, the Framework Convention on Climate Change, in 1992.
A $3 billion Global Environmental Facility fund maintained by contributions from developed countries has nearly $1 billion set aside for projects in poorer countries that limit emissions of greenhouse gases. But critics say those projects often do not have direct local benefits, and many are happening in the large fast-industrializing developing countries — not the poorest ones.
Technology also aids farmers in the north.
Robert O. Mendelsohn, an economist at Yale focused on climate, said that in the face of warming, it might be necessary to abandon the longstanding notion that all places might someday feed themselves. Poor regions reliant on unpredictable rainfall, he said, should be encouraged to shift people out of farming and into urban areas and import their food from northern countries.
Another option, experts say, is helping poor regions do a better job of forecasting weather. In parts of India, farmers still rely more on astrologers for monsoon predictions than government meteorologists.
In its fourth assessment of global warming, the Intergovernmental Panel on Climate Change used its strongest language yet in drawing a link between human activity and recent warming.
Do rich nations have an obligation to help poorer ones prepare for potential changes caused by global warming?
But despite longstanding treaty commitments to help poor countries deal with warming, these industrial powers are spending just tens of millions of dollars on ways to limit climate and coastal hazards in the world’s most vulnerable regions — most of them close to the equator and overwhelmingly poor.
Next Friday, a new report from the Intergovernmental Panel on Climate Change, a United Nations body that since 1990 has been assessing global warming, will underline this growing climate divide, according to scientists involved in writing it — with wealthy nations far from the equator not only experiencing fewer effects but also better able to withstand them.
Two-thirds of the atmospheric buildup of carbon dioxide, a heat-trapping greenhouse gas that can persist in the air for centuries, has come in nearly equal proportions from the United States and Western European countries.
In contrast, Africa accounts for less than 3 percent of the global emissions of carbon dioxide from fuel burning since 1900, yet its 840 million people face some of the biggest risks from drought and disrupted water supplies, according to new scientific assessments.
Scientists say it has become increasingly clear that worldwide precipitation is shifting away from the equator and toward the poles. That will nourish crops in warming regions like Canada and Siberia while parching countries — like Malawi in sub-Saharan Africa — which are already prone to drought.
Many other experts insist this is not an either-or situation. They say that cutting the vulnerability of poor regions needs much more attention, but add that unless emissions are curbed, there will be centuries of warming and rising seas that will threaten ecosystems, water supplies, and resources from the poles to the equator, harming rich and poor.
There are some hints that wealthier countries are beginning to shift their focus toward fostering adaptation to warming outside their own borders. Relief organizations including Oxfam and the International Red Cross, foreseeing a world of worsening climate-driven disasters, are turning some of their attention toward projects like expanding mangrove forests as a buffer against storm surges, planting trees on slopes to prevent landslides, or building shelters on high ground.
Some officials from the United States, Britain and Japan say foreign-aid spending can be directed at easing the risks from climate change.
Industrialized countries bound by the Kyoto Protocol, the climate pact rejected by the Bush administration, project that hundreds of millions of dollars will soon flow via that treaty into a climate adaptation fund.
The lack of climate aid persists even though nearly all the world’s industrialized nations, including the United States under the first President Bush, pledged to help when they signed the first global warming treaty, the Framework Convention on Climate Change, in 1992.
A $3 billion Global Environmental Facility fund maintained by contributions from developed countries has nearly $1 billion set aside for projects in poorer countries that limit emissions of greenhouse gases. But critics say those projects often do not have direct local benefits, and many are happening in the large fast-industrializing developing countries — not the poorest ones.
Technology also aids farmers in the north.
Robert O. Mendelsohn, an economist at Yale focused on climate, said that in the face of warming, it might be necessary to abandon the longstanding notion that all places might someday feed themselves. Poor regions reliant on unpredictable rainfall, he said, should be encouraged to shift people out of farming and into urban areas and import their food from northern countries.
Another option, experts say, is helping poor regions do a better job of forecasting weather. In parts of India, farmers still rely more on astrologers for monsoon predictions than government meteorologists.
Patents Over Patients
WE could make faster progress against cancer by changing the way drugs are developed. In the current system, if a promising compound can’t be patented, it is highly unlikely ever to make it to market — no matter how well it performs in the laboratory. The development of new cancer drugs is crippled as a result.
The reason for this problem is that bringing a new drug to market is extremely expensive. In 2001, the estimated cost was $802 million; today it is approximately $1 billion. To ensure a healthy return on such staggering investments, drug companies seek to formulate new drugs in a way that guarantees watertight patents. In the meantime, cancer patients miss out on treatments that may be highly effective and less expensive to boot.
In 2004, Johns Hopkins researchers discovered that an off-the-shelf compound called 3-bromopyruvate could arrest the growth of liver cancer in rats. The results were dramatic; moreover, the investigators estimated that the cost to treat patients would be around 70 cents per day. Yet, three years later, no major drug company has shown interest in developing this drug for human use.
Early this year, another readily available industrial chemical, dichloroacetate, was found by researchers at the University of Alberta to shrink tumors in laboratory animals by up to 75 percent. However, as a university news release explained, dichloroacetate is not patentable, and the lead researcher is concerned that it may be difficult to find funding from private investors to test the chemical. So the university is soliciting public donations to finance a clinical trial.
Potential anticancer drugs should be judged on their scientific merit, not on their patentability. One solution might be for the government to enlarge the FDA's “orphan drug” program, which subsidizes the development of drugs for rare diseases. The definition of orphan drug could be expanded to include unpatentable agents that are scorned as unprofitable by pharmaceutical companies.
The reason for this problem is that bringing a new drug to market is extremely expensive. In 2001, the estimated cost was $802 million; today it is approximately $1 billion. To ensure a healthy return on such staggering investments, drug companies seek to formulate new drugs in a way that guarantees watertight patents. In the meantime, cancer patients miss out on treatments that may be highly effective and less expensive to boot.
In 2004, Johns Hopkins researchers discovered that an off-the-shelf compound called 3-bromopyruvate could arrest the growth of liver cancer in rats. The results were dramatic; moreover, the investigators estimated that the cost to treat patients would be around 70 cents per day. Yet, three years later, no major drug company has shown interest in developing this drug for human use.
Early this year, another readily available industrial chemical, dichloroacetate, was found by researchers at the University of Alberta to shrink tumors in laboratory animals by up to 75 percent. However, as a university news release explained, dichloroacetate is not patentable, and the lead researcher is concerned that it may be difficult to find funding from private investors to test the chemical. So the university is soliciting public donations to finance a clinical trial.
Potential anticancer drugs should be judged on their scientific merit, not on their patentability. One solution might be for the government to enlarge the FDA's “orphan drug” program, which subsidizes the development of drugs for rare diseases. The definition of orphan drug could be expanded to include unpatentable agents that are scorned as unprofitable by pharmaceutical companies.
Truth in College Lending
By rights, a student who calls a college financial aid office should reach one of the college’s aid officers. But that is often not the case, as a front-page article by Jonathan Glater of The Times pointed out last week. Many colleges route student calls to representatives of loan companies who pretend to work for the college but who actually have a vested interest in selling the costliest possible loans.
Colleges portray this as a harmless, cost-saving convenience that allows them to serve students without hiring more staff members. But it is part of a troubling — and possibly illegal — process that finds colleges steering students to “preferred lenders” in exchange for kickbacks based on volume.
Some financial aid officers argue that students are getting the best possible loan rates. That seems dubious, given that “preferred lender” agreements uncovered by prosecutors are based on the payments made to the colleges and make no mention of the interest rates the students will be charged. Deceptive packaging is also a problem. Some lenders name their loans after colleges and universities and use college mascots and logos on Internet sites and correspondence.
Colleges portray this as a harmless, cost-saving convenience that allows them to serve students without hiring more staff members. But it is part of a troubling — and possibly illegal — process that finds colleges steering students to “preferred lenders” in exchange for kickbacks based on volume.
Some financial aid officers argue that students are getting the best possible loan rates. That seems dubious, given that “preferred lender” agreements uncovered by prosecutors are based on the payments made to the colleges and make no mention of the interest rates the students will be charged. Deceptive packaging is also a problem. Some lenders name their loans after colleges and universities and use college mascots and logos on Internet sites and correspondence.
Being Nice to the Bacon, Before You Bring It Home
Thus was one meat consumer introduced to the culture of meat producers.
When Burger King announced last week that it would favor producers who treated their animals more humanely it was welcome news to animal welfare advocates. But it also served to remind the rest of us that if we are meat eaters, we are slaughterers, too. At least by proxy.
To farmers and ranchers who raise animals for food, the feeding, housing and killing of livestock is an unbroken continuum that delivers a product to people far removed from its production — city folk who work in advertising, or whatever it is that city people do.
Animals are for petting, not killing. Meat, unrelated, is for eating.
Beginning in the 1990s, animal welfare advocates like People for the Ethical Treatment of Animals (PETA) began virtually force-feeding the consuming public on certain realities of so-called factory farming.
For the sake of production efficiencies and a low-cost food supply, they explained, cows, pigs and poultry are often condemned to sunless, sometimes squalid lives, only to die with needless cruelty. These advocates led protests against the largest hamburger chains, beneficiaries of the factory system.
After initial resistance, in 2001 the chains agreed to some improvements. McDonald’s and Burger King imposed some guidelines for their meat and egg suppliers: extra water, wing-room and fresh air for egg-laying hens; mandatory electric-shock stunning of pigs and cattle before slaughter.
Retailers clearly see advantages in appealing to the demographic of kinder and gentler meat-eaters, according to Ron Paul, president of Technomic, a Chicago-based research and consulting firm for food suppliers. “There is a growing realization that the humane movement is a long-term movement,” he said. “It’s not going to go away.”
It might seem hypocritical to address the quality of life of a creature being raised exclusively to be killed for food. Mr. Waldau, who has degrees in law, religion and philosophy, said that the issue was not meat eating per se, but one’s responsibility for one’s choices as a consumer. Whether to eat the meat of animals treated abysmally during their lifetimes or to buy so-called blood diamonds or clothing made in sweatshops, become parallel questions, he said.
When Burger King announced last week that it would favor producers who treated their animals more humanely it was welcome news to animal welfare advocates. But it also served to remind the rest of us that if we are meat eaters, we are slaughterers, too. At least by proxy.
To farmers and ranchers who raise animals for food, the feeding, housing and killing of livestock is an unbroken continuum that delivers a product to people far removed from its production — city folk who work in advertising, or whatever it is that city people do.
Animals are for petting, not killing. Meat, unrelated, is for eating.
Beginning in the 1990s, animal welfare advocates like People for the Ethical Treatment of Animals (PETA) began virtually force-feeding the consuming public on certain realities of so-called factory farming.
For the sake of production efficiencies and a low-cost food supply, they explained, cows, pigs and poultry are often condemned to sunless, sometimes squalid lives, only to die with needless cruelty. These advocates led protests against the largest hamburger chains, beneficiaries of the factory system.
After initial resistance, in 2001 the chains agreed to some improvements. McDonald’s and Burger King imposed some guidelines for their meat and egg suppliers: extra water, wing-room and fresh air for egg-laying hens; mandatory electric-shock stunning of pigs and cattle before slaughter.
Retailers clearly see advantages in appealing to the demographic of kinder and gentler meat-eaters, according to Ron Paul, president of Technomic, a Chicago-based research and consulting firm for food suppliers. “There is a growing realization that the humane movement is a long-term movement,” he said. “It’s not going to go away.”
It might seem hypocritical to address the quality of life of a creature being raised exclusively to be killed for food. Mr. Waldau, who has degrees in law, religion and philosophy, said that the issue was not meat eating per se, but one’s responsibility for one’s choices as a consumer. Whether to eat the meat of animals treated abysmally during their lifetimes or to buy so-called blood diamonds or clothing made in sweatshops, become parallel questions, he said.
Saturday, March 31, 2007
Divvying up the cake
March 19, 2007
From The Economist print edition
From The Economist print edition
TONY BLAIR'S most famous pronouncements on wealth aim at opposite ends of the income distribution. The prime minister once declared that Labour would abolish child poverty within a generation. He also said he had no burning ambition to make sure that David Beckham, a commodity with a sideline in football, earns any less. In putting these two thoughts together, Mr Blair was sticking to a consensus that has held for the past 20 years. Broadly, this says that the rich can get as rich as they like, so long as the poor are getting better-off too.
However, new figures out this week suggest that the bargain isn't working. The number of poor children, as defined by the government, has grown by 100,000 in the past year. Furthermore, overall income inequality has grown too (see chart), despite hefty redistribution under Gordon Brown, the chancellor of the exchequer.
The failure of this part of the bargain is starting to call into question the other part. Using tax data going back a century, Tony Atkinson, an economist, has calculated that the incomes of the richest 1% have followed a U-shape for the past 60 years, and are now back to the level they were at just after the second world war, when Britain was still a place of great estates and silver soup tureens. Yet ever since Margaret Thatcher's government in the 1980s, this rise has been tolerated, on three conditions: that average incomes are rising too, that there is enough income mobility to prevent the place from feeling too oligarchic, and that those at the bottom are getting less poor.
These terms may be breaking down now, presenting a problem not just for Mr Blair but for his successor—almost certainly Mr Brown—and also for the other main parties. The Conservatives are also keen to reduce child poverty. In a deliberately provocative speech, David Cameron, the Tory leader, adopted the metaphor of a caravan crossing the desert to highlight the importance of making sure that the income growth of the poorest keeps pace with the rest. The provocation was all the greater since the phrase had been coined by Polly Toynbee, who writes for the Guardian and is an unabashed soaker of the rich.
The trouble is that all three of the conditions have taken a turn for the worse. Average incomes have now grown slowly for the past four years. The last time they slowed to this extent was in the mid-1990s, when there was greater appetite for bringing the rich low. Admittedly, part of this pique was owing to the fact that some of them were running utility companies that had been privatised. But the current recipients of windfalls—private-equity partners and money managers—are not much more loved. Getting rich by starting a company is one thing; getting rich by moving money around is another.
As a result of these movements at the top end, Britain “now has a more American pattern of income distribution”, according to Oliver Letwin, the Conservative Party's philosopher-in-chief. But, Mr Letwin notes, there is not yet an American-style culture of giving back to society in return for success. Nor is there a British version of the idea that anyone can make it if they apply themselves, even though Britain has a slightly more fluid society than America's. Instead, people worry that the great shift in social mobility that came with the expansion of higher education and of white-collar work has come to an end, leaving the people who did not benefit from it more stuck than ever. The view that freedom might increase inequality but would promote more social mobility has turned out to be false, says David Laws, the Liberal Democrat spokesman on work and pensions.
Meanwhile, this week's figures suggest that the incomes of those at the bottom are stalling. On March 28th the Institute for Fiscal Studies (IFS), a think-tank, noted that Labour's good record on child poverty—over half a million children have been lifted out of poverty since 1998—is less impressive when the focus is shifted to very poor children. If the poverty line is drawn at 40% of median household income rather than 60%—the government's definition—there has been no improvement since 1997. Adults without children have fared even worse: there are more of them living in relative poverty now than since records began in 1961.
Frank Field, a former Labour welfare minister, thinks these things, together with worries about unaffordable housing, are shifting the consensus on levels of taxation that has remained intact for decades. After Mr Brown's tax-cutting budget, new levies on the rich still look unlikely. But the 20-year-old settlement that Mr Blair so eloquently summed up is now looking increasingly shaky.
Millions face drought in SW China
Low rainfall in the province of Sichuan has forced officials to deliver clean water to the worst-hit areas.
Six million livestock and half a million hectares of land are affected, Sichuan's governor said.
Many areas of China are regularly hit by water shortages or droughts, with some blaming climate change.
Most of Sichuan received no major rain in February, and no significant rain predicted before the end of March.
Stunted crops
Lack of rainfall and unusually warm temperatures are to blame for the drought that has hit farmers in Sichuan province, causing losses of nearly 300 million yuan ($38m, £19m), the official Xinhua news agency said.
Last year, much of Sichuan and neighbouring Chongqing were hit by a severe drought which severely stunted crop growths in many areas.
Other parts of China have experienced abnormal weather conditions recently.
Hundreds of thousands of people in the north-west of the country needed emergency water supplies earlier this year because of low rainfall in Shaanxi province.
Silent orchestration
From The Economist print edition
LAST month Ian Gillan, lead singer with Deep Purple, an elderly heavy-metal band, made an angry attack on the group's record label, Sony BMG. His tirade against the company's “opportunistic fat cats” was provoked by the CD release of a 1993 live performance, which the rock star claimed was the band's “worst gig ever”. On March 1st, two days after Mr Gillan's outburst, the European Commission announced its own re-release, saying it would look again at the merger that created Sony BMG in 2004. Europe's anti-trust authorities have until July 2nd to decide whether the merger should now be picked apart.
Before the merger, there were five record “majors”—Universal, Sony, Bertelsmann, Warner and EMI—which together accounted for 80-85% of recorded music sales in western Europe. Once Sony and Bertelsmann fused their record subsidiaries into Sony BMG, the merged entity had an average 20-25% share in national markets. This is not enough clout on its own to trouble the trustbusters: in fact Sony BMG has a smaller European presence than Universal, the leading record company. At issue is whether the four majors together might now reach an unspoken understanding about prices.
The evidence is not yet in. But what about the theory? Cartels—in which pacts among companies are formally agreed—are notoriously difficult to sustain, not to mention illegal in most instances. Witness the tensions that dog OPEC, the cartel of oil-producing countries. A tacit understanding faces even bigger challenges. Suppliers must co-ordinate without negotiation on a mutually profitable price, then stop anybody undercutting it. In principle, industry consolidation makes it easier for firms to synchronise their actions. A merger that turns five big firms into four, for example, cuts their bilateral links from ten to six.
Co-ordinating a price is one thing; sticking to it is another. Companies face the same dilemma that has undone countless hypothetical prisoners in economics textbooks. There is an incentive to collude with other suppliers to boost prices, just as two prisoners have good reason to keep mum about their crime. But there is also a temptation to renege to gain sales, much as one prisoner might end up ratting on another.
Yet in the right circumstances a tacit understanding can endure. Those among equal partners have the best chance of lasting. A rough parity in market shares should mean that the benefits of high prices are split evenly, minimising the risk that one firm breaks ranks. Firms with similar costs and capacity will also share a common view of what the “right” price is. If, on the other hand, one firm has lots of spare capacity or lower costs than its competitors, it will find undercutting them hard to resist.
Symmetry helps, but the temptation to cheat will be too great if rival firms cannot monitor each other's behaviour and respond quickly if one of them reneges. The obvious riposte to cheating is to abandon price co-ordination altogether. But a cleverer response is to suspend it temporarily—introducing “promotional” prices on selected goods, for example—as a prelude to a bloodier price war should the treachery continue. If the short-term gains from cheating are small relative to the long-term losses from lower industry prices, the threat of prompt retaliation may be enough to sustain tacit collusion.
Markets in fast-moving and relatively cheap goods are easiest to police. Where transactions are “lumpy”, as in the commercial aircraft industry, the short-term profits from undercutting rivals are too big to resist.
Even if an understanding can be co-ordinated and policed, it could still be broken by outside forces, such as smaller competitors or new entrants. That is why the consolidation of Europe's package-holiday industry might not ring too many alarm bells in Brussels. The number of big firms is shrinking from four to two, but unless the commission is convinced that one of them could dominate the market on its own, it is likely to tread carefully.
In 1999 the commission blocked a merger between two of the four big British tour operators, Airtours (now MyTravel) and First Choice, only to see the decision annulled by the courts. It had argued that the big firms might arrive at an implicit understanding to restrict industry supply. The courts disagreed, ruling that it is difficult to collude tacitly on something as complex and opaque as tourism capacity, harder still to discipline cheating, and impossible to prevent smaller competitors or new entrants from expanding supply and spoiling the incumbents' game.
It's hard to sing in harmony
What about the record industry? Wholesale record prices are highly visible—a few prices in company catalogues account for the bulk of sales—which suggests that firms could plausibly co-ordinate on an agreed tariff. Sales turnover is rapid, which means a cheat cannot make much money before its rivals have a chance to retaliate. The main suppliers also interact in a variety of markets and on joint ventures like compilations, so there are ample opportunities to dole out selective punishment.
But tacit collusion may still be beyond them. For one thing, the prices they publish are not always the ones they are paid. Record companies offer retailers targeted discounts in return for shelf space and marketing resources. And although one CD looks much like another, music is a gloriously “differentiated” product, so firms cannot infer what their rivals are doing from their own sales data. If, say, EMI's market share slumps, is it because a competitor is cutting prices or because the new album from its biggest star is no good?
The commission initially cleared the Sony-Bertelsmann merger on the basis that prices were not fully observable. It was forced by the courts to look at it again. Sony BMG has already lost one battle, forced to recall the offending Deep Purple album. It won't want to lose another.
Monday, March 26, 2007
Mr. Puck’s Good Idea
From time to time, consumers are reminded of the power they have, and the power of the choices they make. There is no better example than the rising popularity of organic food — a matter of conscience and of taste. More and more people are buying local, organic produce and trying to find meat and eggs and dairy products from farms that are not part of the horror of factory farming.
Not surprisingly, people who shop that way also like to dine out that way. That will now be easier thanks to Wolfgang Puck, the universal restaurateur. He has decided that his culinary businesses will now use products only from animals raised under strict humane standards.
Mr. Puck is not the first chef and restaurateur to decide to forgo factory-farmed meat and eggs. You can find a few restaurants upholding these standards in nearly every major American city. But Mr. Puck runs an empire, not a restaurant. His outreach is enormous, and so is his potential educational impact. In fact, he has come late to this decision, perhaps because it affects a corporation, not the menu of a single restaurant.
For one thing, Mr. Puck’s new standard will help correct a misimpression. Many diners assume that most of the cruelty in factory farming lies in producing foie gras and veal. But Americans consume vastly more chicken, turkey, pork and beef than foie gras and veal, and most of the creatures those meats come from are raised in ways that are ethically and environmentally unsound. Until recently, most Americans have been appallingly ignorant of how their food is produced. That is changing. And Mr. Puck’s gift for showmanship will help advance Americans’ knowledge that they can eat well and do right all at the same time.
Not surprisingly, people who shop that way also like to dine out that way. That will now be easier thanks to Wolfgang Puck, the universal restaurateur. He has decided that his culinary businesses will now use products only from animals raised under strict humane standards.
Mr. Puck is not the first chef and restaurateur to decide to forgo factory-farmed meat and eggs. You can find a few restaurants upholding these standards in nearly every major American city. But Mr. Puck runs an empire, not a restaurant. His outreach is enormous, and so is his potential educational impact. In fact, he has come late to this decision, perhaps because it affects a corporation, not the menu of a single restaurant.
For one thing, Mr. Puck’s new standard will help correct a misimpression. Many diners assume that most of the cruelty in factory farming lies in producing foie gras and veal. But Americans consume vastly more chicken, turkey, pork and beef than foie gras and veal, and most of the creatures those meats come from are raised in ways that are ethically and environmentally unsound. Until recently, most Americans have been appallingly ignorant of how their food is produced. That is changing. And Mr. Puck’s gift for showmanship will help advance Americans’ knowledge that they can eat well and do right all at the same time.
Sunday, March 25, 2007
Down the YouTube?
IT HAS been a terrible month for Google, the biggest search engine and the internet’s reigning superpower, and for its subsidiary, YouTube, the pioneer and precocious leader of online video. Users may love them, but the old-media companies, feeling increasingly exploited, loathe them, sue them, and gang up on them. And that matters, because neither Google nor YouTube, as quintessential “new-media” companies, own any of the content that they organise so well.
Viacom is suing them for $1 billion, alleging massive copyright theft; it is also teaming up with an innovative new online-television company, Joost, to make its videos available legally. Walt Disney is allied with Apple and its iTunes store, which is increasingly a squeaky-clean (in terms of copyright law) video retailer besides being a music store. And the NBC/News Corporation venture, which may yet be joined by Sony and others, embraces not only a vast library of video content but also an equally staggering distribution alliance. The videos will play not only on the venture’s new (as yet unnamed) site to be launched this summer, but on the websites of Yahoo!, Time Warner’s AOL, and Microsoft’s MSN, the three biggest web portals. At a stroke the venture will, legally, reach almost the entire American internet audience.
Of greater concern to YouTube, however, is the clear evidence that NBC and News Corporation both realise that they must not try to trap viewers on specific websites, but rather let them watch videos “on the sites where they live,” as Peter Chernin, News Corporation’s president, puts it. Teenagers will be able to post video clips on their own MySpace pages; even bloggers using independent services will be able to embed videos on their personal diaries. They will be able to discuss and annotate the clips and films with their own gossip, and thus be “social” in exactly the same way that YouTube allows. Just as on YouTube, the audience will be in control, by rating videos and spreading them “virally” throughout the entire web.
The only remaining difference will be that the content spread in this manner will be entirely and uncontroversially legal, and that advertising revenues will remain under the full control of the content owners. For the first time, it will be in the interests of the media companies to spill their best content onto the web. This is in stark contrast to the situation on YouTube today.
All this points to a clear trend. All over the chaotic and confusing field of online video, once naughty revolutionaries are suddenly becoming shockingly well behaved. BitTorrent, a peer-to-peer file-sharing service that accounts for a big chunk of all internet traffic, has in the past been used for illegal trading of films. But it recently announced a new identity, in which it licences films from Hollywood and shares the rental and sales revenues with the studios. Joost, which was launched by the founders of Skype and KaZaa, another peer-to-peer service that was once used to trade pirated music, has been designed from scratch to be impeccably legal and to make money for participating content owners.
The future, in short, appears to favour old-fashioned, professionally produced content from which traditional media companies can make money. This comes as a shock after a year when YouTube seemed to herald the dawn of a new and different media era—that of “user-generated”, or amateur, content.
Was YouTube—and the bigger “Web 2.0” movement that it symbolised—just a brief bout of silliness, an echo of the dotcom bubble of the late 1990s? It was not. YouTube has already changed society and democracy in lasting ways, by lowering the barriers to entry for talented amateurs to reach an audience, and by providing an outlet for the creative impulse of millions. This is hardly trivial. But what YouTube has not done is to make professional content less attractive. YouTube has earned its place in the history books; just not on a profit-and-loss account.
Viacom is suing them for $1 billion, alleging massive copyright theft; it is also teaming up with an innovative new online-television company, Joost, to make its videos available legally. Walt Disney is allied with Apple and its iTunes store, which is increasingly a squeaky-clean (in terms of copyright law) video retailer besides being a music store. And the NBC/News Corporation venture, which may yet be joined by Sony and others, embraces not only a vast library of video content but also an equally staggering distribution alliance. The videos will play not only on the venture’s new (as yet unnamed) site to be launched this summer, but on the websites of Yahoo!, Time Warner’s AOL, and Microsoft’s MSN, the three biggest web portals. At a stroke the venture will, legally, reach almost the entire American internet audience.
Of greater concern to YouTube, however, is the clear evidence that NBC and News Corporation both realise that they must not try to trap viewers on specific websites, but rather let them watch videos “on the sites where they live,” as Peter Chernin, News Corporation’s president, puts it. Teenagers will be able to post video clips on their own MySpace pages; even bloggers using independent services will be able to embed videos on their personal diaries. They will be able to discuss and annotate the clips and films with their own gossip, and thus be “social” in exactly the same way that YouTube allows. Just as on YouTube, the audience will be in control, by rating videos and spreading them “virally” throughout the entire web.
The only remaining difference will be that the content spread in this manner will be entirely and uncontroversially legal, and that advertising revenues will remain under the full control of the content owners. For the first time, it will be in the interests of the media companies to spill their best content onto the web. This is in stark contrast to the situation on YouTube today.
All this points to a clear trend. All over the chaotic and confusing field of online video, once naughty revolutionaries are suddenly becoming shockingly well behaved. BitTorrent, a peer-to-peer file-sharing service that accounts for a big chunk of all internet traffic, has in the past been used for illegal trading of films. But it recently announced a new identity, in which it licences films from Hollywood and shares the rental and sales revenues with the studios. Joost, which was launched by the founders of Skype and KaZaa, another peer-to-peer service that was once used to trade pirated music, has been designed from scratch to be impeccably legal and to make money for participating content owners.
The future, in short, appears to favour old-fashioned, professionally produced content from which traditional media companies can make money. This comes as a shock after a year when YouTube seemed to herald the dawn of a new and different media era—that of “user-generated”, or amateur, content.
Was YouTube—and the bigger “Web 2.0” movement that it symbolised—just a brief bout of silliness, an echo of the dotcom bubble of the late 1990s? It was not. YouTube has already changed society and democracy in lasting ways, by lowering the barriers to entry for talented amateurs to reach an audience, and by providing an outlet for the creative impulse of millions. This is hardly trivial. But what YouTube has not done is to make professional content less attractive. YouTube has earned its place in the history books; just not on a profit-and-loss account.
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