Farm Subsidies May Derail Hongkong Round

Farm subsidies are politically explosive on both sides of the Atlantic. In the US, either major party would find it hard to significantly rollback subsidies provided to say corn and rice farmers. Is it Free Trade, if developing countries have to go up against huge conglomerates, who are are highly subsidized and mechanized? Sure small farmers benefit from these subsidies, but I would venture that a bulk go to large agri businesses. Fortunately, both the US and EU are realizing this is an issue that the developing countries are going to be united on. How can developing countries be expected to open up their financial sevices, energy, and water sectors, in the name of the wonders of the Free Market, when our own farm sector is highly subsidized? Ultimately, these subsidies hurt the poorest countries: poor countries prefer Trade over AID. We can help our own small farmers by buying locally grown organic produce.

In a report to be released Wednesday, Oxfam International highlights three American commodity crops vulnerable to lawsuits and eight agricultural products in the European Union that could be sources of cases.

Several independent experts agree with Oxfam's assertion that complaints could be brought against the United States' corn, rice and sorghum programs, while the 25-country European Union could be challenged on subsidies for tomatoes, tobacco, butter, wine and spirits, citrus juices and processed fruits like canned peaches and pears.

According to the report, the subsidies for the 11 crops and products noted by Oxfam total $9.3 billion for the United States out of the country's $19.5 billion in subsidy payments, and $4.2 billion for the European Union out of $44.8 billion, on an annual basis.

Oxfam, a nongovernmental advocacy group involved in world poverty issues, has lobbied strenuously for rich countries to reduce agricultural subsidies so that developing countries in Africa and elsewhere can better compete and grow their economies. But several outside experts agree that more cases are likely if meetings of the World Trade Organization next month in Hong Kong do not produce a substantial agreement toward reducing so-called trade-distorting subsidies

Brazil's successful challenges to the European Union's sugar program and parts of the United States' cotton program have opened the door for more challenges before the W.T.O., trade experts say. The European Union unveiled an overhauled sugar program last week that cuts support prices 36 percent.

"Those cases point out some of the vulnerabilities that both the E.U. and the U.S. have with some of their present farm programs," said Clayton Yeutter, a former secretary of agriculture and United States trade representative. If negotiations do not produce progress, "it would not be surprising to see additional W.T.O. dispute settlement challenges of this nature," he said.

The talks in Hong Kong are part of a round of trade discussions that began in 2001 in Doha, Qatar. They were termed a "development round," meant to lift the world's poor nations out of poverty by giving their farmers better access to developed world markets.

American trade officials said on Tuesday that they could not comment on the accuracy of the Oxfam estimates, but that the United States is trying to eliminate the kinds of farm subsidies that could run afoul of the W.T.O. rules.

Blair Calls on Rich Nations to Open Their Markets

Blair is using his pulpit to convince the developed countries to open their markets to products from the poorest countries. I hope Blair raises both fair working conditions and environmental concerns during the discussions.
For the poorest countries, whose labour costs are low but who often find the very high tariffs selling into the wealthy countries' markets, it is essential if they're to stand on their own two feet that they're allowed access into our markets.

So if we fail at Hong Kong to move this on... we will do damage, not strangely just to the poor countries, though obviously that is one of the main purposes of this trade round, but we'll also damage our own country and other European countries.

We'll damage the prospects in America and Japan. So this is a situation in which the wealthy world and the developing world has a lot to gain from trading with each other.

The US actually has helped countries (such as Bangladesh) by setting aside part of its garment imports for poor countries. Free Trade agreements are one piece, we also need the anti-sweatshop movement to monitor working conditions, the environmental NGO's to monitor pollution. Finally, we need to allocate some of our purchase dollars to support the good companies.

Globalization and Your T-Shirt

I LOVED this book , I was pleasantly surprised at how good a read it was. One of my favorite business writers, Roger Lowenstein, wrote a glowing review in the NYTimes (" THE really good writers do not write 'about' their subjects so much as use them to tell a story"). While I knew a little about US agricultural subsidies, and the garment industry, the author supplies details in such an entertaining style, that I found it hard to put down the book. The description of the t-shirt factory in Shanghai reminded me of a visit I made to a similar factory in Southeast Asia.

If you are interested in Fair Trade this book is a must read. Using the garment industry as a prism upon which to view globalization, the author takes you from the cotton fields of Texas, to the garment factories in China, back to the t-shirt printing factories in the US, to the used t-shirt processors in New York, and finally to the Tanzania's army of entrepreneurs who supply their country with used clothing from the US.

Ever wonder what happens to all those t-shirts that even Goodwill can't sell? It turns out that there is a whole industry that takes those garments, exports them to Africa, where savvy business people are able to identify which items will sell at what price. There are many amazing tidbits in the book, but this one really stands out: the market forces in Tanzania's Mitumba industry, and how that micro-market sets the price of a used t-shirt from the US.
I'm a firm believe that Free Trade does work, and that Comparative Advantage is something that will prevail in the garment industry. I was shocked by how bizarre (and ever changing) the rules that govern clothing imports are.

Brassieres are allowed free access only if the firm producing them has used components in which 75% of the value of the fabric has been sourced in the US. A debate over which part of the brassiere "count" toward the 75% went on for some time and was finally negotiated to include cups, sides, wings, and backs, but to exclude straps, bows and labels.

So Cups are ok, Straps are not. The hilarious thing is that these rules change constantly. The idea is to make the rules convoluted and to change them often, with the hope that the manufacturers give up and produce the garments in the US. Eventually all these trade barriers will disappear: the Comparative Advantage of the overseas garment industries cannot be denied much longer. It is reminiscent of the situation in the UK over a hundred years ago: rather than allowing cotton underwear from South Asia into England, the population was essentially forced to wear, domestically made, wool underwear for years. Ouch, I mean Itchy! Besides, as I pointed out earlier, developing nations need aid, AND access to the US market.

Free Trade is a good thing, but it does have problems. Our purchase power can nurture Fair Trade companies and redefine the nature of Free Trade. It is important that the anti-sweatshop, and even the anti-globalization, movements soldier on. Their work has led to both important improvements in factory conditions all over the world, and to more consideration of environmental and labor concerns in trade negotiations. As consumers, we can use our purchase power to help improve the lot of workers worldwide. Nothing is more powerful than a brand with market share, but is synonymous with fair labor conditions and sustainability.

Please read this book, you will enjoy it, and you will have a different perspective on trade issues . I guarantee.

Get Me Operator Assistance Now!

Ever wish you could get to an operator right away? Paul English put together this handy cheat sheet, if you want to get an operator and bypass everything else. Hat Tip to Dan Gillmor.

Another handy item: use Bugmenot if you want to log into a web site without registering.

CAFTA Reminder

CAFTA goes into effect on January 1st.

The World Ain't Flat

I agree with Brad Setser, the World Ain't so Flat, but Tom Friedman gets all the buzz, partly because "The World is Flat" is a best-seller:

"A world where one major economy consumes something like 70% of its income and another something like 40% of its income is not very flat. And we should not forget that there remains an enormous chasm between per capital income in China (roughly $1,500 at market exchange rates) and per capita income in the US ($40,000). We may be headed for a flat world, but we are not there yet ... "

One of Wall Streets most senior Economic strategists, Morgan Stanley's Stephen Roach doesn't buy it either. If you read carefully, Roach is critical of a world where all the consumption is in the US, and all the manufacturing is in the East: he does not believe this is sustainable. How can Friedman ignore the asymmetry that exists in the World Economy?

"I give Friedman a lot of credit for bringing globalization to the masses (see his The World Is Flat: A Brief History of the Twenty-first Century, Farrar, Straus, and Giroux, 2005). But to me, “flat” just doesn’t cut it in today’s world. Yes, IT-enabled connectivity has shrunk the world in many new and important respects. But the world is struggling mightily with what this connectivity has brought. China and India are reshaping the global economy as never before.

... Globalization may well be win-win in the long run, but in the here and now it is profoundly asymmetrical. It has given rise to a multitude of new entrants on the supply side of the global equation but very few new consumers on the demand side. With the important exception of India, Asia remains very much an external demand story -- aiming its rapidly growing production platform at providing stuff for the overly-indulgent American consumer. Two numbers say it all: In 2004, Chinese consumption fell to a record low of 42% of its GDP, whereas America’s consumption share held near a record 71%. With 35-40% of Chinese exports going directly to the US, there can be no mistaking the dichotomy of the roles played by the rich and the wannabes. With the rest of Asia now increasingly integrated into a China-centric supply chain, the region remains far more skewed toward US-centric external demand than internal consumption. India’s consumption-led growth dynamic is encouraging, but with per capita spending of only about US$400 per year, the global impact remains trivial at this point in time.

... Over the past five years, industrial world labor markets have suffered from both jobless and now wageless recoveries. The US, with the world’s most flexible labor market, has been on the leading edge of these trends. While hiring has picked up over the past 24 months, the private sector job count remains more than 10.5 million workers below the profile that would have been generated by a more typical hiring cycle. Moreover, the inflation-adjusted hourly pay rate is virtually unchanged over the 46 months of this recovery -- underscoring the rare confluence of surging productivity growth and stagnant real wages. At the same time, structural unemployment remains a serious problem elsewhere in the developed world -- especially in both Europe and Japan. And make no mistake -- workers in the developed world are far from pleased over this outcome and the global context in which it has arisen.

... The global labor arbitrage, as I have dubbed it, adds a critical new and surprising wrinkle to globalization. The time-honored Ricardian models of comparative advantage have always broken down economies into two broad sectors -- tradables (i.e., manufacturing), and nontradables (i.e., services). The theory was that rich high-wage economies would gladly give up market share in manufacturing to low-wage workers in poorer economies in exchange for lower-cost goods. This exchange would then prompt a migration of vulnerable workers in the rich countries from openly-tradable manufacturing to sheltered, non-tradable services industries. Economies in the developed world would then thrive as increasingly knowledge-based systems, and the developing world would flourish as a manufacturing center. Courtesy of the Internet, this model has now broken down. IT-enabled breakthroughs have not only revolutionized the logistics of supply-chain management in manufacturing but they also have transformed once non-tradable, information-based activities such as software programming, engineering, design, accounting, lawyers, medical, and financial analysis into tradables. In an era increasingly dominated by the ultimate disruptive technology, the distinction between tradables and nontradables has become blurred. Employment and real wage compression in the developed world is a direct outgrowth of this blurring -- and so is the politics of the labor backlash it has spawned. The hyper-speed of an increasingly asymmetrical globalization is hardly the stuff of a flat world.

... As I speak with businesspeople, government officials, investors, and political leaders around the world, I am struck by one thing these seemingly diverse groups all seem to have in common -- they recognize the unexpected pitfalls of globalization but they have no plan as to how to repair the damage. "

Bay Leaf Cafe

We were in downtown Palo Alto yesterday, and finally had lunch at The Bay Leaf Cafe. I had the Arthichoke Tofu wrap and it was fantastic. Definitely a welcome addition to the Peninsula restaurant scene, plus Wifi access is available!

"The goal of the café is to provide tasty and healthy food using organic ingredients, contribute its share in creating a sustainable earth for all."

Pension Funds are Loading Up on Hedge Funds

US Pension funds are starved for returns, and they are loading up on Hedge Funds.

"While most pension plans have modest stakes in hedge funds, others have invested more than 20 percent of their assets. Weyerhaeuser, the paper company, has 39 percent of its pension fund's assets in hedge funds. In Congress, there has been a push for amendments that would make it easier for hedge funds to manage even more pension money, without having to comply with the federal law that governs company pensions.

... Pension officials who have been shaken by market downturns and persistent deficits are attracted by hedge funds' promise of richer, or more consistent, returns. But the trend has caused some consultants and academics to voice cautions. They question whether hedge funds, with risks that are hard to measure, are appropriate for pension funds, whose sole purpose, by law, is to pay out predetermined benefits to retired workers."

Whoa! Having worked at a small Hedge Fund, they do fill a need in terms of providing exposure to financial instruments and strategies, that tend to be uncorrelated to what are found in a typical portfolio. Traditionally, they target high net-worth individuals, and sophisticated investors usually allocate 1-10% of their portfolio to Hedge Funds. But 39%, or even 20%???? Hedge Funds and other alternative investments may have a place in the portfolios of those who can afford them, but they are meant to smooth out returns. To rely on them as the main source of returns is not a good long-term strategy for a Pension Fund.

The scary thing is that there is a Hedge Fund bubble right now: thousands of funds with NO extended track record are open to new investors. A recent paper by Andrew Lo and his MIT colleagues gives a good summary of the current state of the Hedge Fund World. Among their conclusions:

"Our preliminary findings suggest that the hedge-fund industry may be headed into a challenging period of lower expected returns, and that systemic risk is currently on the rise."

A short background on why Pension Funds are desperate for higher returns: The US Pension Benefit Guaranty Corp, the pension equivalent of the FDIC, reported a $23B deficit, and the risk of a goverment bailout is rising. With the need to fund pensions for thousands of retirees, companies like GM are finding themselves at a competitive disadvantage.

The Edukators

This German feature film, follows three Berliners, who have become frustrated with the inequities in the Global Capitalist system. They start breaking into the mansions and villas of the extremely wealthy, rearrange their furniture and leave simple messages like

"Your Days of Plenty Are Numbered. The Edukators."

By doing so, they believe that their ability to break into these seemingly secure homes, would make their victims less comfortable inside their mansions. The film has an interesting plot twist involving one of these victims.

I personally subscribe to an "enlightened" form of capitalism, and did not necessarily agree with "The Edukators" views or methods. But I found their idealism refreshing and inspiring. Plus those shots of the German countryside and mountains are fantastic.

Great flick to watch over Thansgiving, I highly recommend it. Rent it from your locally owned video store, buy it, or Netflix it.

Buy Nothing Today

Remember, today is Buy Nothing Day!

UPDATE: David Lazarus explains why some self-restraint is in our best interest.

Roughly half of all American households now carry debt on their credit cards. The average amount owed is more than $9,000, according to Cardweb.com, which analyzes trends in the credit card industry.

The U.S. savings rate reached its lowest level in the third quarter since the Great Depression -- minus 1.1 percent. It was the first time average Americans spent more than they earned over a three-month period since savings stats began being compiled in 1947.

A tough new bankruptcy law took effect last month, making it harder for people to get a fresh start with a Chapter 7 filing that wipes out most outstanding obligations. Many consumers will have to settle instead for a Chapter 13 filing that still requires that debts be repaid.

Thanksgiving Day

We volunteered at Martin de Porres House of Hospitality's annual Thanksgiving meal. It was a well-organized operation, I estimated that about 350 low income and homeless people were served Thanksgiving meals, and about 60 volunteers were present. A group of local musicians have been coming annually for years, this year we had a 7 piece band playing blues, rock and roll, and jazz standards. It was quite a party!

What a great experience, and a truly inspiring place. Nestled between the Mission District and Portrero Hill in SF, Martin de Porres House of Hospitality is part of the Catholic Worker movement -- which is dedicated to provide meals and services "... towards those on the margin of society". The people who come to the soup kitchen or the volunteers need not be Catholic.

Paul Blustein and Deficits 101

Paul Blustein is one my favorite Finance journalists. In an earlier post, I raved about his books on the IMF and Argentina, both exceptionally written.

His day job is with the Washington Post and he has a recent series of must-read articles (for those wanting to understand World Trade). So for our readers who have time over the holidays, dive in and enjoy. If you like the links, go read his books!

Excellent discussion of the US Trade and Budget Deficits
I think there's pretty broad agreement among economists on both the right and left about what ought to be done. First of all, the U.S. needs to increase its savings--and since we've never succeeded at getting individual Americans to save more (though IRA's and so forth), that basically means reducing DISsaving. And the biggest dissaver of all is the U.S. government, through its budget deficit. Now, how you cut the budget deficit is something I am DEFINITELY not supposed to comment on.

Second, Asian countries need to raise the value of their currencies. If China un-pegged its yuan from the dollar and let the yuan rise, that would almost certainly cause other Asian currencies to rise too. Then Asians would have more purchasing power on world markets, and they would probably import more--that would also help to balance transpacific trade.

Third, Europe needs to take steps to increase its growth, so that Europeans would import more too. But Europe is a far smaller part of the global imbalance problem than is Asia.

U.S. Trade Deficit Hangs In a Delicate Imbalance
In contrast with the United States, where the personal savings rate recently has sunk into negative territory -- with people spending more than their income -- South Korea's personal savings rate is about 7 percent, and its national savings rate of 33 percent ranks among the highest in the world. The rate reflects the thrift not only of individuals but also of government and business; the South Korean government has run budget surpluses in recent years, so it need not borrow large sums as the U.S. government must.

As U.S. Trade Gap Grows, So Do Asian Banks' Foreign Reserves
"While central banks care less than private investors about the return on their investments, they're not completely clueless," said economist Nouriel Roubini of New York University. "At some point, they have to consider the severe losses they could suffer" from a big decline in the dollar. China provides a striking example; if its currency rose 20 percent against the dollar, the nation's central bank would lose well over $100 billion on its holdings of U.S. securities.

And then there are the political implications of central banks such as China's or Russia's holding so many U.S. securities. "The ability to send a 'sell' order that roils markets may not give China a veto over U.S. foreign policy, but it surely does increase the cost of any U.S. policy that China opposes," Roubini wrote recently with his colleague Brad Setser in the journal Foreign Affairs.

Costco and Wal-Mart

I should reserve my comments, until after I watch the documentary, but Fortune Magazine's Geoffrey Colvin was a bit too much for me:

The new world also makes it impossible for employers to pay people as they used to. Maybe the most important part of the new world for many Americans is the advent of a genuinely global labor market, in which workers around the world compete. Of course nobody in Mumbai can directly take the job of a retail clerk on the floor of a Wal-Mart. But a lot of labor is fungible; a given person could work in a store or factory or office. So global competition for workers in factories or info-based jobs, where work can be offshored, pushes down the pay of millions of others—bad news for Wal-Mart employees and potential employees.

A big chunk of the documentary concerns the fact that many Wal-Mart workers don’t get very good medical coverage—or any at all. Again, welcome to 2005. Everybody’s medical coverage is getting stingier because in a global economy, where U.S. workers compete with those in Datang and Wal-Mart competes for capital with every other business on earth, American companies can’t continue paying the world’s highest health-care costs. Don’t blame Wal-Mart; blame America’s inability to devise a national health plan that takes the burden off employers.

Yo Geoffrey, have you heard of Costco? It doesn't have to be the Wal-Mart way, "Costco's high-wage approach actually beats Wal-Mart at its own game on many measures".

When you can, vote with your $, choose Costco over Wal-Mart.

Costco CEO Jim Senegal has said: “We pay much better than Wal-Mart. That’s not altruism. It’s good business.”

Chief Financial Officer Richard Galanti explained: “From day one, we’ve run the company with the philosophy that if we pay better than average, provide a salary people can live on, have a positive environment and good benefits, we’ll be able to hire better people, they’ll stay longer and be more efficient.”

The Washington Consensus and Income Inequality

I just finished scanning this article from EPI. I was struck by the further concentration of wealth into the upper income brackets, in some "model" Latin American countries.

"The Washington Consensus is the label given to the policy prescriptions championed by the international financial and trade institutions. (The International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO) are sometimes collectively referred to as the Bretton Woods institutions, or BWIs.) These prescriptions were embraced by local elites throughout the Americas over the past two decades, often (but not always) under pressure from the BWIs. The exact parameters of the Washington Consensus exist in the eye of the beholder, but there are common broad elements that all agree form its central core: fiscal discipline, tax reform, interest rate liberalization, privatization (including foreign takeovers of domestic companies and resources), deregulation of product, labor, and financial markets, and trade liberalization. These policies were sold as a way to increase economic growth and productivity in their economies and to avoid the boom and bust cycles that characterized the 1970s. They have, inarguably, failed to deliver."

The Gini Index is one measure of income inequality: the higher it is , the more concentrated income is in the wealthier members of a society. Observe the change in Income Inequality from the late 1970s (black) to the early 2000s (gray). Chile (3rd from left) and Argentina (1st from left) are the countries most identified with the Washington Consensus, yet in the early 2000s, income inequality grew rapidly:

The exception: Brazil (2nd from left), "... where inequality declined very slightly". Argentina went through an economic crisis, but I'm not sure what happened in Chile. Using this metric, the U.S. (1st from right) fared poorly as well.

Hmmmm. These rough measures of income inequality, combined with objections over US Farm subsidies and tarrifs, no wonder the FTAA is encountering resistance.

Speaking of the Washington Consensus: Paul Blustein wrote excellent books on the IMF and Argentina, which are so engaging, they come through as thrillers. He notes that Argentina was widely acknowledged to have had fiscal problems years before its Financial Crisis -- and that there WERE debates inside the IMF. I hope that the IMF/World Bank staff start inviting members of the Environmental and Labor movements into some of their staff discussions. Free Trade agreements are not objectionable and theoretically they can be beneficial to countries who are part of them. The perception though is that while the point of view of corporations are well represented, the environmental and social justice sectors are not. Free Trade agreements affect everyone, and a growing segment of the population want sustainability and just working conditions taken into account.

Its like having an Energy Task force and inviting input from energy companies, and NOT inviting any environmentalists.

Peter Drucker on CEO Pay

Peter Drucker, who passed away early this month, is widely regarded as the father of Management Theory. Besides being an academic, he actively consulted with both Corporations and Non-Profit agencies.

From my favorite Business publication's excellent profile:

In the 1980s he began to have grave doubts about business and even capitalism itself. He no longer saw the corporation as an ideal space to create community. In fact, he saw nearly the opposite: a place where self-interest had triumphed over the egalitarian principles he long championed. In both his writings and speeches, Drucker emerged as one of Corporate America's most important critics. When conglomerates were the rage, he preached against reckless mergers and acquisitions. When executives were engaged in empire-building, he argued against excess staff and the inefficiencies of numerous "assistants to." In a 1984 essay he persuasively argued that CEO pay had rocketed out of control and implored boards to hold CEO compensation to no more than 20 times what the rank and file made. What particularly enraged him was the tendency of corporate managers to reap massive earnings while firing thousands of their workers. "This is morally and socially unforgivable," wrote Drucker, "and we will pay a heavy price for it."

• It was Drucker who introduced the idea of decentralization -- in the 1940s -- which became a bedrock principle for virtually every large organization in the world.

• He was the first to assert -- in the 1950s -- that workers should be treated as assets, not as liabilities to be eliminated.

• He originated the view of the corporation as a human community -- again, in the 1950s -- built on trust and respect for the worker and not just a profit-making machine, a perspective that won Drucker an almost godlike reverence among the Japanese.

• He first made clear -- still the '50s -- that there is "no business without a customer," a simple notion that ushered in a new marketing mind-set.

• He argued in the 1960s -- long before others -- for the importance of substance over style, for institutionalized practices over charismatic, cult leaders.

• And it was Drucker again who wrote about the contribution of knowledge workers -- in the 1970s -- long before anyone knew or understood how knowledge would trump raw material as the essential capital of the New Economy.

He had numerous important admirers: Jack Welch, Andy Grove, Newt Gingrich, etc. Funny how his views on CEO pay never got widely implemented.

The Education of Brad Pitt

Africa needs foreign aid, but ALSO access to markets.

NIKE Puts Its Green Foot Forward

Someone asked me recently whether or not Fair Trade is really "charity in disguise"? In a previous post, I likened Fair Trade, to a better version of Free Trade, or "Free Trade 2.0". Fair Trade promotes the idea that the true cost of production is not properly reflected in most of the products we purchase. Fair Trade also seeks to motivate us consumers to understand that a small portion of our collective purchase power, can really nurture small companies, and encourage established corporations to innovate.

A favorite target of the Fair Labor activists in the past, is among the most well-known brands on the planet: Nike. Nike has responded to their efforts by taking working standards more seriously. Now Nike is challenging the traditional approach to making sneakers:

The new ethos at the Beaverton (Ore.) sneaker giant is known as sustainable design. Following a corporate-wide mission called "Considered," Hoke, 41, Nike Inc.'s chief design guru, urges his designers to create products that deliver more based on less -- less energy, less chemical content, less waste. He also tells the team to forget about glues, adhesives, plastics, and other toxic materials used in traditional sneakers. "I'm very passionate about this idea," he says. "We are going to challenge ourselves to think a little bit differently about the way we create products."

The premise for Considered begins with the deconstruction of a traditional sneaker. Hoke wants designers to rely on geometry, not chemistry, to figure how to rebuild a shoe. Shunning adhesives, designers are coming up with snap-fit systems that may be reinforced with organic cotton stitching. These fibers hold together mid- and top soles composed of natural leather instead of synthetics. In a basketball shoe, designers are replacing a plastic heel cup with one made out of natural materials. Instead of a foam lining pack, "we're looking at fillers of bamboo fiber, which are renewable" he says. "We're taking out what is not necessary."


Wow! One of the best-known brands is realizing that profitability, goes hand in hand with sustainability and social justice. When those sneakers hit the market, I probably will try on a pair of swooshes.

US Products Just Not Good Enough

The Chinese don't seem to think much of US products:

"Aside from coffee and denim, there were not many American brand products that interested her. She covets Chanel clothing and Louis Vuitton bags, dreams of owning a BMW or Mercedes-Benz someday, and struggles to think of an American brand that appeals to her. "There are more choices for European brands, more styles, so they are more interesting," she said.

... The United States is buying $6 worth of goods from China for every $1 worth of goods it ships to China. With American imports from China climbing at a clip of nearly 30 percent a year, American exports to China would have to nearly triple each year just to keep the deficit from widening further.

Many economists say that it is the United States' total trade deficit that is a more disturbing reflection of overall American weakness in trade. But it is the bilateral deficit between China and America that sets off fires on both sides.

China's economy is galloping along just as a long series of America's weaknesses are combining to hurt American exports. With many of America's name brands made in China these days, from clothing to cars, the Chinese are beginning to wonder what a "Made in U.S.A." label really has to offer."

Apparently Intelligent Design is NOT Science

Take it from the Vatican's Chief Astronomer:

'Intelligent design isn't science even though it pretends to be," the ANSA news agency quoted Coyne as saying on the sidelines of a conference in Florence. "If you want to teach it in schools, intelligent design should be taught when religion or cultural history is taught, not science.'

Now back to what we normally talk about ......

Buy Nothing, A Week from Now

It's that time of the year again, to cut back on our consumer spending. Besides the fact that the
Trade Deficit is out of control, who really wants to go shopping a week from now?

"For 24 hours, millions of people around the world do not participate -- in the doomsday economy, the marketing mind-games, and the frantic consumer-binge that's become our culture. We pause. We make a small choice not to shop. We shrink our footprint and gain some calm. Together we say: enough is enough. And we help build this movement to rethink our unsustainable course."

Companies embrace ethical ways to work

U.S. companies are starting to wake up:

' ... some companies - publicly held and privately owned - have been setting the pace as good corporate citizens. Beyond simply focusing on the bottom line, they care about how they do business and how they affect the customers and communities they serve. What's most needed in the United States is a change in mind-set, embracing the idea that "business is about more than making the most money you can," says editor Kelly. Firms that embrace CSR (corporate social responsibility) acknowledge that their responsibilities go beyond their shareholders to include all stakeholders, such as customers, employees, suppliers, and local communities.
... "I'm a strong believer in commitment to a place," says Mr. Abrams, once sole owner of the firm. His values were tested when long-term workers told him they wanted to stay their entire careers with his company, but needed a bigger stake than an hourly wage. He had various options, but took the giant leap to employee ownership: Anyone who works at the company for five years becomes a full owner regardless of his or her job.'

Corporate Social Responsibility is exactly what we need: companies who see profits, sustainability, and social justice as part of their mission.

Is Europe’s Monetary Policy Set by the Fed?

According to the data , NO:

'The widely held belief of a clear leadership of the Fed in setting monetary policy, with the ECB following after a lag, may be unwarranted. For most of the period under study, in fact, the evidence points to a symmetric relation between the Fed and the ECB, with a two-way influence between US and European interest rates. Only since 9/11, and the ensuing higher economic uncertainty, do the results show a clear leading role for the Fed. Still, the authors suggest that the ECB’s “waiting strategy” in monetary policy is appropriate to Europe’s economies, which are much less flexible than the US economy.'

Plus the fact that the ECB has the challenge of setting monetary policy for economies/countries, that are much less in sync than the regional economies of the US.

Class Matters: On Income Inequality

Mallaby on inequality:
"But in 1980, the top fifth of families earned 7.7 times as much as the bottom fifth; by 2001, that ratio had risen to 11.4. So even though the bottom fifth of households made modest gains, the inequality ratio jumped by almost 50 percent. If you measure inequality by wealth rather than earnings, the results are even more preposterous.

Inequality in the United States is now more pronounced than in any other advanced country. Comparing the top 10 percent of households with the bottom 10 percent, the United States during the 1990s was nearly twice as unequal as Sweden and about a third more unequal than France.

Why does this matter? Inequality is socially acceptable and even economically desirable to the extent that it reflects differences in talent, risk-taking and hard work. But if it reflects the circumstances of birth, it is immoral and wasteful. The problem with the 50 percent jump in the inequality ratio is that it gives the offspring of the rich such fundamentally different education, health care and social horizons that it's hard for the rest to catch up. Sharper class differences mean more rigid class differences as well. Talent is squandered.

... At the most selective private universities in 2003, more freshmen had fathers who were doctors than the combined total whose fathers were hourly workers, teachers, clergy or members of the military.

If this is morally intolerable and economically wasteful, what is government doing about it? Shockingly little, is the answer. According to data compiled by the Century Foundation, the U.S. poverty rate before accounting for the effect of government programs is fairly typical for an advanced country. But U.S. government interventions reduce the final poverty rate by just over a third, whereas Canada's cut it by nearly two-thirds, and those of Britain, Sweden and Holland cut it by about three-quarters."

The US model will prevail over the Canadian-European models in a WTO world. The race to the bottom means that China and rest of East Asia, will be less inclined to copy the Western European model of generous state benefits. Our best hope is to help shape Free Trade accords to reflect our environmental and social justice values. In a future post, I will comment on the inequality numbers from Latin America. Stay tuned.

Blair Urges Trade Deal to Tackle Poverty

Tony Blair wants to link trade to a host of issues: poverty, global warming, etc.

Wheel of Time

We were at the Red Vic Movie House in SF last weekend, and we saw Werner Herzog's beautifully shot documentary. The movie, set in India and Austria, gives a unique inside look into Tibetan Buddhism and Culture. Definitely worth watching, buying, or renting. And, there's always Netflix.

In the film, the Dalai Lama cites the need to promote sustainability, justice, and peace. In their separate visits to China this week, I hope President Bush and the Terminator raise the issue of Tibet with China's leadership.

Heifer International

dystopiabustout has a nice post on Heifer.

Fair Trade, Is Free Trade 2.0

The buzz in the technology world these days is Web 2.0. While a consensus on its precise meaning has not been reached, most observers agree that "open standards", "user participation and interaction", "collective intelligence" are essential components. So Encarta is Web 1.0, Wikipedia is Web 2.0; Ofoto is Web 1.0, Flickr is Web 2.0.

In the Fair Trade movement we believe that by "harnessing the collective purchase power" of consumers we can help nurture companies that focus not just on profitability, but also on sustainability and social justice. Consumers are encouraged to make themselves aware of how products are made and in what conditions. Companies who go through an open certification process earn not just marketing credentials, but expertise in setting up equitable work environments.

While acknowledging that Free Trade is good, Fair Trade promotes the use of collective purchase power, consumer awareness/participation, and corporate responsibility .

For fun, let me do a similar riff: Chuck Taylor is Trade 1.0, No Sweat is Trade 2.0

The Girl in the Cafe

We just rented this movie, which is an unusual mix of romantic comedy, against a backdrop of a G8 summit and the Millenium Development Goals. I recently pointed out an interesting set of podcasts, in which Bono summarized the current state of the fight against extreme poverty. Some celebrities and filmakers have really embraced this issue, and this movie is an excellent example of that.
Go rent it from your local video store, or give it to someone for the Holidays. As always, there's Netflix.

UPDATE: Speaking of celebrity activists, the NYTimes Magazine has a related article this morning.

Al Gore at Net Impact conference

dystopiabustout has the goods.

Corporations and the Public Interest

Here is a short interview with Steven Lydenberg, a long-time fund manager at Domini Social Investments . Steve is one of the pioneers of Socially Responsible Investing, and is the author of a recent book where he argues :

"... that a more transparent disclosure of social and environmental impacts would help define value for socially conscious investors."

He has shown that one need not sacrifice performance in the process of supporting companies who want " ... to compete on social and environmental issues." The Domini Social Equity Fund has been around for over 10-years and tracks it's benchmark (S&P 500) quite well (chart courtesy of Yahoo Finance):



Our collective investment dollars can influence large corporations and reform the investment industry as well:

"It's remarkable how much we know about the financials of these corporations ... and how little we know about what they're doing when it comes to safety, promotion of women and minorities, environmental management."

Fair Trade Soft Drinks: Double-Bean Elixirs

Soda Drinkers rejoice, you now have "... environmentally friendly and socially responsible choice of cold beverages". The good folks over at GREEN MOUNTAIN Coffee Roasters are doing a soft launch at select retailers in the Northeast. I'm not a soda drinker myself, but when I was a kid, I would have loved to have access to these ''Double-Bean Elixirs''!

"Fair Trade certification of the Double-Bean Elixirs helps ensure that small scale coffee and sugar producers receive a fair price for their crops, which in turn enables them to support their families and their communities. Being organic, as well Fair Trade Certified, this wonderful coffee soda is also good for the natural environments where farmers work and live. Furthermore, consumers can enjoy not only the delicious taste but also the satisfaction of knowing their purchase makes a difference in the world ..."

Santa Barbara Wines: Small is Beautiful, AND Fun

What strikes me about this article is the passion and the amount of fun these winemakers are having. Not only are they learning more about the process and business of making wine by avoiding working for the large wine conglomerates, they are having a blast. It reminded me of the excellent documentary "Mondovino", which gave an overview of the negative effects of globalization and consolidation in the wine industry. These Santa Barbara winemakers are going against the trend. I wish them luck.

Bono talks Africa and World Poverty: Podcast alert

Excellent article, and three-part podcast from the SF Chronicle:

Part I:
"Bono talks about his organization, his meetings with President Bush and the need for Corporate America to get involved in helping the poorest nations."

Part II:
" ... the lead singer for U2 tells The San Francisco Chronicle's editorial board how and why he courted the religious right to help his efforts to eradicate AIDS in Africa."

Part III:
" ... tells The San Francisco Chronicle's editorial board why he's tackling some of Africa's biggest problems. Bono also tells of the support he's received from Hollywood and hip-hop artists."

Alan Blinder is right, Sort Of

Alan Blinder argues that:

"Progressives should welcome freer trade because it's so much better than the alternative. Protection serves to entrench entrenched interest groups. We're supposed to be against that. Protectionism also amounts to legalized pickpocketing of the consumer, including those who can least afford it. We're supposed to be against that, too. Certain types of protectionism--especially for agriculture and the textile/apparel industries--have particularly pernicious effects on nations, e.g., in Africa, where people are on the edge of starvation. I certainly hope that we progressives are against that."

I agree that free trade is good, but the current system (i.e. WTO) we have in place has problems. Take the case of agricultural subsidies that the rich countries provide their agricultural sectors. Or the opening of developing countries to speculators, long before their financial sectors are stable enough. But I do agree that free trade can lift people out of poverty.

Top-flight economists like Professor Blinder need to come up with ways to change the current system, which is focused solely on profit. Besides profits, we need some emphasis on sustainability and social justice. Prince Charles highlighted this challenge in a recent speech in San Francisco:

"We have to accept that globalization comes at an alarming price for the future ... That price may be paid in terms of displaced rural communities ... and the destruction of social and cultural systems built up over many centuries."

In this blog we promote the idea that a small shift in our collective purchase power, say 0-20% of our spending, can help "Fair Trade" companies, thrive. Let's start with our 2005 Holiday spending.

If we focus on profits alone, we have a race to the bottom.



So I agree Free Trade is good, but Fair Trade is better. Why be satisfied if our collective purchase power can make things better?

WAL-MART: The High Cost of Low Price

The highly anticipated documentary by Robert Greenwald is slated to hit your neighbor's house next week: check here for a screening near you.

There are also a few theatrical screenings scheduled.

Congratulations to Robert Greenwald and his crew, they have certainly been on a roll the last few years.

To-Go Ware

I love To-Go Ware's products, but I especially love the Utensil Set. I never knew that bamboo utensils would feel so good to use on a regular basis. Hint: they would make an awesome holiday gift.

They are available through several retailers, and through their online store.

World Centric

"World Centric is a volunteer run organization working to reduce economic injustice and environmental degradation through education, community networks & sustainable enterprises."

I met with the people behind this fledgling organization at the last Green Festival in SF. Among other things they sponsor Courses, Films and Speakers. At the festival, they showcased some of the Fair Trade products they normally sell through their online store : nuts, chocolate, honey, tea, clothing, and biodegradable products.

The members I spoke to were well-informed and quite commited to making the world a better place. If you live in the Silicon Valley area and want to hook up with some good folks check them out. When we lived there a few years ago, we attended several talks/films sponsored by PPJC. It's nice to see another group, with a different focus, in the heart of the Peninsula.

ORGANIC MILK

The NYTimes has an interesting article on Organic Milk which reinforced my belief that small dairy farmers remain the best source for this product.

Some highlights:

• "Organic milk accounts for more than 3 percent of all milk sold in the United States. But with an annual growth rate of 23 percent in an era when overall milk consumption is dropping by 8 percent a year, organic milk has made the nation's $10.2 billion-a-year dairy industry take notice."
• "Horizon Organic, which controls 55 percent of the market, is selling $16 million worth of organic milk a month. It is owned by Dean Foods, the nation's largest dairy producer. Groupe Danone, the French dairy giant, owns Stonyfield Farm. Large grocers, including Whole Foods Market and Safeway, have organic house brands. Wal-Mart even sells it."
• "Milk is considered a gateway to organic food. Along with produce it is one of the first organic products a consumer will buy, according to the Hartman Group, a research firm in Bellevue, Wash"
• 'But choosing organic milk doesn't guarantee much beyond this: It comes from a cow whose milk production was not prompted by an artificial growth hormone, whose feed was not grown with pesticides and which had "access to pasture," a term so vague it could mean that a cow might spend most of its milk-producing life confined to a feed lot eating grain and not grass. Exactly how much time cows should spend grazing before their milk can carry the government's organic label is under scrutiny. Several hundred farmers and organic advocates want organic dairy rules tightened so that cows have more than what they call token access to pasture.'

Monitoring Tech Companies

A group of researchers and investors are pledging to follow the activities of technology companies, as these companies do business in countries with less than stellar human rights records.

The effort is being led by Reporters Without Borders and several socially responsible investment managers. As always, we can do our part, by shifting some of our support to companies who are at least open to this new effort. Even if they don't do anything about it right away, acknowledging the problems exists, is a good first step.

SF Green Fest 2005

What an inspiring festival. Lots of things to blog about over the next days. I was struck by how good the products were: ornaments, food, health and beauty, building and construction, home furnishings, academic degrees ....

These companies and non-profits will need our collective purchase power to survive and flourish. Let's start by spending 10% of our Holiday purchases on some of the companies who were at this year's inspiring festival.