Reason Magazine - Topics > International Economics

Canadian Freedom

bdoherty@reason.com (Brian Doherty) — Thu, 18 Sep 2008 15:09:00 EDT

Will Wilkinson draws attention to one result of the latest Cato/Fraser Economic Freedom of the World Report: Canada is now ranked as freer than the U.S. of Archie; 7th freest compared to our 8th.

I'm not prepared to argue with their economic calcalations; still, Canada certainly remains a bad place to speak your mind about certain things.

In other Canada freedom news: amazing and celebrated alt-cartoonist Chester Brown is running for parliament as a Libertarian.

Many years back, I wrote an article that generated more hate mail than anything I ever wrote--over 200 emails--for the website suck.com. (Sorry, the late, lamented website Suck.com.) It was a bit of japery mocking Canadian attempts to distinguish themselves from America. I never thought "more freedom" would be one of those distinguishing characteristics.

Keeping Up with the Joneses, the Singhs, the Alexandrovs, the Itos...

kmw@reason.com (Katherine Mangu-Ward) — Wed, 10 Sep 2008 12:27:00 EDT

Ever wondered what people are spending their money on? The New York Times has a sweet interactive feature with spending in various countries on clothes, recreation, alcohol and tobacco, and more.

As usual, the U.S. is a notably huge consumer. But there are also some quirky results, like Norway, Finland, and Switzerland spending huge amounts per capita on booze and smokes. Ireland, too, but maybe no surprise there.

Go here to see the whole feature.

Save Oil Speculation Now!

kmw@reason.com (Katherine Mangu-Ward) — Fri, 22 Aug 2008 15:55:00 EDT

I wasn't alone in my impotent ink-stained fury over the Stop Oil Speculation Now! website. Normally when an industry creates a write-your-congressman-today rent-seeking front group, they usually try play down their own self-interested agenda, or at least conceal their role in funding the campaign. Oddly, the airlines slapped their names all over the bid to stop everyone else from speculating on the price of oil, even as they carried on with their own fuel hedges.

A competing site has sprung up tearing down the airlines' spin on the oil speculation issue. It's called, with a certain literalmindedness these kinds of sites tend to have in common: The Airline Oil Spin.

While airlines rail against the negative impact of speculating commodity traders on oil prices, it is often overlooked that airlines themselves engage in a form of oil speculation that has been vital to their survival: fuel hedging.

By speculating on the future cost of jet fuel, some airlines have managed to save billions of dollars in potential fuel costs. It seems that airlines are now trying to have it both ways, by condemning the “bad” speculators (the commodity traders) and ignoring the “good” speculators (themselves).

This site has its own non sequitur agenda as well, something about passengers' and workers' rights, which pops up when you click a link that somewhat deceptively suggests that you'll be emailing your congressman in defense of speculators. But at least on the speculation issue, their grasp of economics is slightly better than the gang at Stop Oil Speculation Now!

Bad Air

kmw@reason.com (Katherine Mangu-Ward) — Fri, 22 Aug 2008 14:00:00 EDT

One of the demonstration sports of this year's Olympics has been grousing about Beijing's pollution, speculating on what air quality will be like tomorrow, asking athletes about their breathing, and otherwise pondering particulates in the air.

There's certainly no doubt that Beijing's air is gross. Yesterday was a pretty good day, but according to the World Bank, the city's air quality is much worse than Athens or Barcelona on average, with about twice as much particulate matter in the air as both those former hosts of the Games. Pulmonologist Dr. Janis Schaeffer says Beijing's air quality is 30 percent worse than famously smoggy Los Angeles.

Even as they make grave faces about the problems air pollution has caused, commentators marvel at the efficiency and thoroughness of the preparation for this year's Games, unlike the nail-biting delays and general bumbling in Athens four years ago. How beautiful the Bird's Nest stadium is! What a tremendous effort for the opening ceremonies!

In the big cities, their skyscrapers and malls look just like ours—maybe a little better. In the industrial areas, things look like our country once did, when we were poor and burned coal to get the energy to build things and keep ourselves warm.

The millions who walk among skyscrapers, choking on the foul air but otherwise prospering, are part of the same system that includes Badui, a rural town in western China. "Badui is known locally as the ‘village of dunces,'" Nicholas Kristof wrote in a recent column. "That's because of the large number of mentally retarded people here—as well as the profusion of birth defects, skin rashes and physical deformities."

The defects are probably caused by drinking water contaminated by a nearby fertilizer factory. "Even if you're afraid, you have to drink," Zhou Genger, the mother of a 15-year-old girl who is mentally retarded and has a hunchback, told Kristof. (His description of the village brings to mind Ursula K. LeGuin's haunting—and much anthologized—short story "The Ones Who Walk Away from Omelas," which paints a picture of a hypothetical place where the happiness of an entire people rests on the wretchedness of a single blameless child, confined in a cellar broom closet.)

The fact is, the economic development that dirties China's air and occasionally pulls entire villages down into horrifying idiocy and squalor also lifts tens of millions of people a year out of poverty and into the middle class. A new study forecasts 30 to 40 million Chinese joining the ranks of those with incomes of between $6,000 and $30,000 every year for the next two decades.

In this, China looks like America once did. Growing fast, getting things done the quick and dirty way. While we may not be entirely comfortable gazing at this modern iteration of our industrial era selves, we should understand the tradeoffs, even if we're relieved not to have to make them anymore.

But every time things in China seemed reassuringly normal, or just pleasingly exotic, something comes across the wires that is so bafflingly far from our experience of the world that we can't quite comprehend it.

In China, the decisions that keep progress rolling are sometimes the same decisions that throw people off their land with little or no compensation. Wu Dianyuan, 79, and Wang Xiuying, 77, applied for permits to protest being evicted from the homes in 2001 during the Olympics. Instead of permits, the septuagenarian women won a year of "reeducation-through-labor" in one of China's infamous camps.

Or consider the stories behind the elegant and impressive opening ceremonies. After the broadcast was over, word trickled out about small dishonesties: perhaps the fireworks were tweaked for TV viewers, perhaps the angelic little girl singing "Ode to the Motherland" was really lip-synching to a slightly less attractive girl's voice. But these are small things, and easily forgiven in the name of showmanship.

Then there's this: Filmmaker Zhang Yimou, who directed the ceremony, recently told the Guangzhou weekly newspaper Southern Weekend that only communist North Korea could have done a better job.

"North Korea is No. 1 in the world when it comes to uniformity," he said. "They are uniform beyond belief! These kind of traditional synchronized movements result in a sense of beauty. We Chinese are able to achieve this as well. Through hard training and strict discipline."

Pyongyang holds mass games every year that include such pageantry as 100,000 people moving in lockstep.

From Zhang's perspective, envy of the North Koreans is only natural. After all, he had to settle for a barely adequate three months of 16-hour workdays from his troupe of 2,200 of some of China's best martial artists. He had a mere 900 performers crouching under 40-pound boxes for such long stretches of time that they had to wear adult diapers. He could only keep his cast of thousands on their feet for a mere 51 hours in the summer heat and a downpour during a two-day rehearsal.

All of which suggests another explanation for why we keep harping on China's dirty air. Human beings have long condemned other tribes as unclean (think Christians vs. Jews vs. Muslims, for a relatively recent example)—groups whose standards and rituals are different than ours make us profoundly uncomfortable and the language of contamination is handy for articulating that sense.

We're taught that it's unacceptable to make judgments about the superiority of one culture over another, so we fill that void with endless chatter about the filthy Beijing air. This is easier and more pleasant than grappling with what it means to be standing in a city that looks like New York but where the people have an utterly different conception of human rights.

At the same time, we're grateful for this one point of superiority. By nattering on about the filthy air, we're quietly reassuring ourselves that there are areas where we're still number one. Our model, which is blessedly free from the ingredient of North Korea-envy, is still better at some things. For now.

Katherine Mangu-Ward is an associate editor of reason.

Arming Up With Cell Phones

kmw@reason.com (Katherine Mangu-Ward) — Tue, 05 Aug 2008 16:18:00 EDT

A great article in Forbes about the ongoing revolution in communications, and a profile of a man making big money off the poor and oppressed, but in a good way:

Despite coups, corruption and kidnappings, cell phone maverick Denis O'Brien keeps pouring money into the world's poorest, most violent countries. His bet: Give phones to the masses and they'll fight your enemies for you.

How did he decide to get into the business of building cell towers and selling phones in Papua New Guinea, Fiji, Haiti, Honduras, and El Salvador?:

O'Brien spotted a 3-inch-square ad in the Financial Times inviting bids for a mobile license in Jamaica. He likes to say he was drawn to the region because of all the Irish "troublemakers" banished there by the English after a 1649 invasion. But the real pull was that this was a country where only the elite had access to phones. In a place like that, he could get the masses to love him.

Strange by-products of brand identification:

In an April riot in Port-au-Prince, Haiti the mob not only spared Digicel stores from its burning and looting but even gathered in front of a few of them and cheered.

More on the amazing power of cheap cell phones here and here.

Via Club for Growth

Every Man a Jed Clampett

kmw@reason.com (Katherine Mangu-Ward) — Fri, 25 Jul 2008 15:00:00 EDT

It will not escape the notice of astute readers that heavier-than-air flight requires a fair amount of energy. As a consequence, oil takes up a pretty big chunk of most airlines' operating budgets. So alarms should go off when normally oppositional, hyper-competitive airline companies suddenly join forces, urging all of their frequent flyers to write to their representatives in Congress to Stop Oil Speculation Now!

"Twenty years ago," says a letter [PDF] signed by dozens of airline execs and blasted into thousands of frequent flyer inboxes, "21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts."

Sounds bad, right? "A barrel of oil may trade 20-plus times before it is delivered and used," the airline execs warn. Greedy speculators manipulating oil prices just by pushing paper around? Just who are these speculators, callously driving up oil prices and "hurting our families"? Well, for starters, the airlines themselves.

For years, the stunning success of Southwest Airlines has been a staple feature story on the business pages of major newspapers. In an era of rising prices and busted planes, Southwest seems to float above the fray. Even as the bottom lines of their airborne brethren fall ever lower—other airlines reported a collective $6 billion loss this quarter—Southwest is reporting its 69^thconsecutive profitable quarter. Tickets are still pretty cheap, and there are no new surcharges for checked bags, something the company has been making much of in its ads.

Southwest itself credits its profitability to savvy, forward-looking commodities hedging to compensate for higher fuel prices. In fact, the company has saved about $3.5 billion with hedging since 1998, a figure equal to 83 percent of its profits over that time. Hedging means that a company locks in a price for oil at a fixed date in the future by signing a contract today promising to buy the oil at that price, no matter what happens to the market in the interim. If prices go up, Southwest speculators get to buy below-market rates. If prices go down, they have to pay more than their competitors for the same oil.

"When oil got to $40 a barrel, we thought, 'Oh, wow! It's too late.' Then it went to $60, and to $80, and then to where we are now," Southwest Treasurer Scott Topping told USA Today this week. Topping is in charge of Southwest's hedging operations. "At each step along the way, the question 'Is this something we should continue to do?' became more and more difficult to answer. But our overall philosophy led us to keep buying hedges. It's a matter of discipline." Southwest has hedged so well that the company paid about $2.35 a gallon for jet fuel this quarter. Those with less speculative skill would have had to cough up $3.95 for the same gallon on the spot market.

Southwest, which also signed the Stop Oil Speculation spam, isn't the only airline to hedge on the price of oil−they all do, just not nearly as successfully. Apparently, when airlines buy oil futures on a bet that the prices will eventually go up, it's good business practice, but when people who don't happen to be the treasurers of airlines do the same thing, it's "rampant speculation" that "upsets the natural relationship between supply and demand."

And then there's that other greedy speculator: You. Anyone with a 401(k) or some kind of retirement benefit coming to them probably has a portfolio containing commodities futures, which are increasingly appealing as the dollar falls and the real estate market continues to reel. Or perhaps you own a bit of Southwest stock, which has a pleasing price these days. Futures contracts exist for all kinds of commodities, and the logic is always the same. It's similar to buying stock, or even buying a house. You're hoping to make a smarter bet than the other guy on which way the prices are going to go. It's how markets work. If there were no "speculators," you'd have no 401(k) and airlines would have to change prices every time Hugo Chavez managed to get ahold of a microphone.

The main concern about speculation, and the reason that the trading of many commodities (like onions, for instance) is regulated, is fear that one company might corner the market. Historically, most efforts to corner markets fail, so the danger of prices skyrocketing after a successful attempt is minimal to begin with. But the fear of futures contracts, or speculation, is even more absurd when the commodity is oil. The energy markets are international and incredibly dynamic. Congress can't really prevent people from speculating on commodities in London or Dubai, no matter how much it would like to, so speculation will carry on, affecting the prices Americans pay for oil, whether or not the bet is placed on our shores. A bill that looks a lot like the airlines' list of demands is currently stalled in the Senate, but it came close to passing earlier this week.

It's possible that no amount of speculation will make much of a dent in the price of oil, at least compared with the ever-growing demand for oil from India and China. In their letter, the airlines claimed that "current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs." But on Wednesday, a task force from the Commodity Futures Trading Commission found that "preliminary analysis to date does not support the proposition that speculative activity has systematically driven changes in oil prices."

And last month in The New York Post, reason contributor Alan Reynolds pointed out that since oil hit $100 a barrel, the number of speculators betting that the price will drop has increased dramatically. There are nearly as many traders who now think oil prices will fall as there are who think the price will rise. If prices keep going up, these guys are screwed. They're rooting for prices to go down, just like the rest of us, albeit for different reasons.

Frequent flyers are used to receiving all manner of useless promotional emails. "Fly to Siberia via Cincinnati and Rotterdam for only $363 one way!" The only difference is that the Stop Oil Speculation Now! email is worth little more than a stroke of the delete key. Compared to that, a trip to Siberia might actually be fun.

Katherine Mangu-Ward is an associate editor of reason.

Cheerful Russians and Gloomy Americans: What's the World Coming To?

kmw@reason.com (Katherine Mangu-Ward) — Wed, 23 Jul 2008 16:07:00 EDT

If misery loves company, then the U.S. is in luck: Three-quarters of countries surveyed by Pew Research Center think their economies suck more than last year.

The notable exceptions: India, China, and (weirdly) a newly super-optimistic Russia.

Naturally, those of us who have it pretty good are the biggest whiners: "Some of the most negative evaluations of economic conditions come from citizens of advanced Western countries. Positive views of the economy have declined sharply over the past year in Great Britain, the United States and Spain."

Check out the data here.

China: An Island Nation?

kmw@reason.com (Katherine Mangu-Ward) — Fri, 20 Jun 2008 14:52:00 EDT

China isn't embracing rum cocktails with little umbrellas in them (as far as I know). But given the realities of Chinese geography--shared land borders with 14 other countries, but most of the population clustered away from those borders in the Han "heartland"--they might at least consider adopting some of the better features of island nations (say, hammocks and tropical fruit) to balance out the troublesome isolation:

From Strange Maps:

Only in three places are the Chinese borders naturally permeable: at the Vietnamese frontier, via the Silk Road, and near Russian Far East. Hilly jungles separate China from Laos and Burma, the Himalayas shield it from the Indian subcontinent, almost impassable deserts divide it from Central Asia and the forbidding expanses of Siberia have never appealed to Chinese expansionism (until now, as the Russians fear).
With the exception of the Ming dynasty’s sponsorship of admiral Zheng He’s naval expeditions (as far away as Sri Lanka, Arabia and Africa) in the early 15th century, China has never attempted to be a naval-based power – so for most of its history, China’s ports on the Pacific were hardly windows on the world either.

Check out the original article on Investors Insight, with lots more maps clarifying and expanding on the one above.

Mistakes Were Made...and Fixed

kmw@reason.com (Katherine Mangu-Ward) — Wed, 11 Jun 2008 12:15:00 EDT

Everyone loves to complain about the accelerated pace of modern life. Remember the good old days, they say, when life was leisurely, commerce was more genteel, and everyone watched the same television and read the same newspaper?

Lest we get too nostalgic, keep in mind the upside of a sped-up world:

President Bush put steel tariffs in place in March 2002. Less than two years later, in December 2003, he rescinded them. This is something most politicians don't do. But because the tariffs caused such a sharp rise in the price of steel, small and mid-size businesses complained loudly. The unintended consequences became visible to most American's very quickly.

Remember the bad old days?

The unintended consequences of the New Deal took too long to show up in the economy. As a result, by the time the pain was publicized, the connection to misguided government policy could not be made. Today, in the midst of Internet Time, this is no longer a problem. So, despite protestations from staff at the White House, most people understand that food riots in foreign lands and higher prices at U.S. grocery stores are linked to ethanol subsidies in the U.S., which have sent shock waves through the global system.

When we are bombarded with tons of up to-to-the-minute info from all sides, "Policy mistakes will be ferreted out very quickly. As a result, any politician who attempts to change things will be blamed for the unintended consequences right away."

Related: Virginia Postrel on the paradox of choice.

Breadless Circuses

matt.welch@reason.com (Matt Welch) — Mon, 21 Apr 2008 18:10:00 EDT

Is there anything good that can come out of the sharp inflationary spike in the global price of basic food? Maybe, says the Washington Post's Jackson Diehl:

As prices for bread and rice soar, dictators are tottering.
Oddly, one of them is [Hugo] Chávez, who lost a constitutional referendum in December partly because of the combination of soaring food prices and shortages he has inflicted on Venezuela. Another is Robert Mugabe, who to his surprise lost a presidential election in Zimbabwe three weeks ago, though he has yet to admit it. According to the U.N. World Food Program, the government of North Korea faces another food crisis; bread prices explain in part why Pervez Musharraf lost control of Pakistan's government in February.
Then there is Egypt, where the link between food and freedom -- or the lack of it -- has never been clearer.

Whole thing, including intriguing stuff about Egypt's new "Facebook Party," here.

Then there's this:

Soaring food prices and global grain shortages are bringing new pressures on governments, food companies and consumers to relax their longstanding resistance to genetically engineered crops.
In Japan and South Korea, some manufacturers for the first time have begun buying genetically engineered corn for use in soft drinks, snacks and other foods. Until now, to avoid consumer backlash, the companies have paid extra to buy conventionally grown corn. But with prices having tripled in two years, it has become too expensive to be so finicky. [...]
Even in Europe, where opposition to what the Europeans call Frankenfoods has been fiercest, some prominent government officials and business executives are calling for faster approvals of imports of genetically modified crops.

And finally, negotiators on Capitol Hill and in the White House have decided, given this unbelievably strong sellers' market, that the U.S. doesn't need to add to its cajillion-dollar deficit and generalized moral depravity by throwing another $286 billion at American farm companies over the next 10 years. Just kidding!

They Want to Buy Our Crappy Assets. Run For Your Lives!!!

matt.welch@reason.com (Matt Welch) — Thu, 27 Mar 2008 09:12:00 EDT

Sovereign wealth funds, this year's Dubai Ports World-style ooga-booga man of international finance, are the subject of an interesting Washington Post feature today.

The star of the piece is Bader al-Saad, a former Chase Manhattan and First National Bank of Chicago man who came to the Kuwait Investment Authority in 2003 and started remodeling the state-owned, oil-fed investment fund on the endowments of Harvard and Yale, which meant getting out of the Persian Gulf and looking for diversified opportunities abroad. And it turns out, with the U.S. dollar and American asset prices deflating, those opportunities began presenting themselves in these United States. Excerpt:

It was not Bader al-Saad's idea to buy huge chunks of Citigroup and Merrill Lynch.
It was early January and Saad ... was in his office as usual, reviewing potential deals in Kuwait and elsewhere in the Persian Gulf region, when the banks asked him to invest, he recalled.
"They called us.... We receive calls on most transactions," said Saad, whose fund bought stakes of $3 billion in Citigroup and $2 billion in Merrill Lynch. [...]
He said the next big purchases of assets in the United States may be in the real estate sector, which he expects will peak as an investment target -- in other words, hit rock bottom -- in the next few months. Saad said he also thinks U.S. telecommunications companies and more financial firms would make good investments.
"There are certain opportunities which do not come every day," he said. "We consider the recent crisis as creating some opportunities in certain sectors. I look at history, such as the savings-and-loan problem. It created golden opportunities."

But fear not -- legislators are busy looking for ways to discourage global liquidity from washing in to cash-starved Washington. The EU and U.S.-backed International Monetary Fund are drawing up targeted regulations and extracting you-will-only-come-seeking-profit pledges from the scary foreigners. Future president Barack Obama vows to stop "transferring wealth to these countries." The Council of Foreign Relations has issued a jeremiad against the "New Financial Superpower" [PDF] who will bring us to our knees by, uh, selling the U.S. assets they have already bought? It's all very confusing.

Some thoughts from Marginal Revolutionary Tyler Cowen here. Science Correspondent Ron Bailey explained how foreign ownership is not a threat, but stupid legislation is back in March 2006. And Kenton E. Kelly explained how a bogus security panic is alienating an ally and endangering our country in February 2006.

Ikea: Libertarian Utopia?

matt.welch@reason.com (Matt Welch) — Mon, 10 Mar 2008 06:50:00 EDT

That's what entertaining New York Post film reviewer Kyle Smith argued this weekend. A snippet, complete with Swedish characters FUBARred by the translation to Internetese:

Libertarians should be F„rgglad. I'm not being Sn„rtig when I say IKEA isn't soft cushiony socialism; it's Wal-Mart in Democrat drag.
Outsourcing? IKEA invented it. In the 1960s, when Sweden's furniture cartel tried to drive it out of business by organizing a boycott of suppliers, IKEA went to Poland for materials. Today it outsources its customers, sending us on free buses from Manhattan to Elizabeth, NJ.
Taxes? IKEA hates them. At the onshore tax haven underneath Newark Airport's flight patterns, you pay half -- 3.5 percent -- of the typical New Jersey tax rate. Kamprad is a tax refugee living in Switzerland, not Sweden, and the complicated corporate structure of IKEA, which is run by a taxman-disorienting array of holding companies, drives down its Eurotaxes.
Imagine what would happen if Macy's were subjected to a "ruthless" business model, i.e. one that put customers ahead of job creation. Macy's is run like a Soviet train station, where one guy sells your ticket, another guy inspects it, a third guy tears it, and nobody can tell you what train goes where. The last time I was in Macy's to test-drive a sofa, four different sales gnats came buzzing around me in search of a commission. There were three customers.
Fire the hard-sellers, lower the price of the sofa by $200 and you've got IKEA, where most items can simply be picked up and rolled out the door. At the entrance there is a sign: "No one will bother you." Five words, one libertarian ideal.

Whole thing here. I for one despise my Swedish overlords -- I always feel like I'm in one of those endless cornfield mazes, unable to find my way out, only it's swollen with meandering humanity and the sickly sweet smell of meatball stroganoff -- but I say that while typing on my freshly Ikea'd desk, next to my matching new Ikea bookshelf and file cabinet, all purchased for less than $200.

Market Fears, Loathing in Europe

rbalko@reason.com (Radley Balko) — Wed, 13 Feb 2008 10:02:00 EST

While on a fellowship in Europe, Newsweek editor Stefan Thiel reviewed and compared economics textbooks for college and high school students in France, Germany, and the United States. He writes about what he found in the current issue of Foreign Policy.

“Economic growth imposes a hectic form of life, producing overwork, stress, nervous depression, cardiovascular disease and, according to some, even the development of cancer,” asserts the three-volume Histoire du XXe siècle, a set of texts memorized by countless French high school students as they prepare for entrance exams to Sciences Po and other prestigious French universities. The past 20 years have “doubled wealth, doubled unemployment, poverty, and exclusion, whose ill effects constitute the background for a profound social malaise,” the text continues . . . Capitalism itself is described at various points in the text as “brutal,” “savage,” “neoliberal,” and “American.” This agitprop was published in 2005, not in 1972.
[...]
Equally popular in Germany today are student workbooks on globalization. One such workbook includes sections headed “The Revival of Manchester Capitalism,” “The Brazilianization of Europe,” and “The Return of the Dark Ages.” India and China are successful, the book explains, because they have large, state-owned sectors and practice protectionism, while the societies with the freest markets lie in impoverished sub-Saharan Africa. Like many French and German books, this text suggests students learn more by contacting the antiglobalization group Attac, best known for organizing messy protests at the annual G-8 summits.

One might expect Europeans to view the world through a slightly left-of-center, social-democratic lens. The surprise is the intensity and depth of the anti-market bias being taught in Europe’s schools. Students learn that private companies destroy jobs while government policy creates them. Employers exploit while the state protects. Free markets offer chaos while government regulation brings order. Globalization is destructive, if not catastrophic. Business is a zero-sum game, the source of a litany of modern social problems.

Naomi Klein's Disaster of an Anti-Milton Friedman Case

matt.welch@reason.com (Matt Welch) — Thu, 07 Feb 2008 10:28:00 EST

Was Milton Friedman some kind of grave-dancing disaster capitalist, as the inexplicably popular Naomi Klein has been alleging? The L.A. Times' Paul Thornton takes a look at the longer context of Klein's favorite gotcha Friedman quote, and concludes: nu-uh.

Michael Moynihan puzzled at Klein's Friedman Derangement Syndrome last September, and took on her Friedman-was-a-Pinochite accusation two months later. I called Klein a burn-the-rich economic illiterate in a recent rant, and Julian Sanchez probed the vagaries of anti-consumerist capitalism back in 2003.

Speaking of my ex-colleagues' underappreciated Opinion L.A. blog, don't miss this tale of a Rambo charticle gone horribly wrong, plus Tim Cavanaugh's apt warning to his own colleagues: "People on the wrong end of the plummeting-circulation continuum should show some humility, and maybe even gratitude, toward the customers who are still showing up."

Bill Gates Aims to Save Africa

rbailey@reason.com (Ronald Bailey) — Tue, 29 Jan 2008 15:20:00 EST

The Bill and Melinda Gates Foundation is following in the footsteps of the Rockefeller Foundation by fomenting a Green Revolution for the 21st century. The first Green Revolution blossomed from Rockefeller Foundation funding for plant breeding in Mexico in the 1940s. At that time, Mexico could not feed itself and was importing half of its wheat supplies. The Rockefeller Foundation hired young plant breeder Norman Borlaug to see what could be done to boost the productivity of poor Mexican farmers. Backed by $100,000 in annual funding from the foundation, Borlaug and his colleagues flourished. They created highly productive dwarf wheat varieties enabling Mexico to become self-sufficient in grains by 1956. By 1965, Mexican wheat yields rose 400 percent over their 1950 level.

In 1952, the Rockefeller Foundation began funding a similar effort to boost the productivity of poor Indian farmers. In the mid-1960s, India was importing grains to avert looming famines. The dwarf wheat varieties developed by Borlaug and his colleagues were again decisive in winning the battle against hunger on the subcontinent. Indian wheat production grew from 12.3 million tons in 1965 to 20 million tons in 1970 and the country was self-sufficient in grains by 1974. Green Revolution food production in Asia grew much faster than its population did, increasing calorie availability per person by nearly 30 percent and making wheat and rice cheaper. The Green Revolution prevented the deaths by starvation of perhaps a billion people. In terms of human well-being the Rockefeller Foundation's modest investment in agricultural research arguably paid the biggest dividend in history.

Unfortunately, the Green Revolution did not extend to the entire planet. Sub-Saharan Africa remained largely untouched. As a consequence, average per capita food production in Africa has declined by 12 percent since 1980.

Enter the Gates Foundation. In September 2006, the Gates and Rockefeller Foundations announced a joint $150 million effort to create an Alliance for a Green Revolution in Africa (AGRA). Last week, the Gates Foundation upped its ante on boosting production by another $306 million. About half of these new grants will fund efforts to improve seeds and soils in Africa. The Gates Foundation has clearly identified the right target. "For the poorest people, GDP [gross domestic product] growth originating in agriculture is about four times more effective in raising incomes of extremely poor people than GDP growth originating outside the sector," according the World Bank's World Development Report 2008. But why did the Green Revolution not take off in Africa?

The International Food Policy Research Institute (IFPRI) has noted, "Poor infrastructure, high transport costs, limited investment in irrigation, and pricing and marketing policies that penalized farmers made the Green Revolution technologies too expensive or inappropriate for much of Africa." This list is basically an international bureaucracy's euphemism for saying that government corruption and mismanagement has kept African farmers poor. "Poor infrastructure" means that governments built no roads over which seeds, fertilizers and pesticides could be shipped cheaply to farmers. And conversely, without good roads, farmers can't get their crops to market.

For example, Uganda has just 58 miles of paved roads per million citizens, Mozambique just 87 miles . By contrast, the United States has 8,000. In addition, African governments have a history of imposing price controls on food crops ,which discourage farmers from growing more than they need for their families. Africa has not been alone in pursuing this destructive policy. In the 1960s, India paid its farmers 40 percent less than the world price for their grain. Green revolutionary Borlaug managed to persuade the Indian government to drop grain price controls. Restored market incentives persuaded Indian farmers to rapidly adopt new high yield crop varieties.

Interestingly, modern crop technologies fostered by the Gates Foundation might enable poor farmers to outflank, in part, these corrupt and stupid government policies. For example, seeds that contain traits like pest-resistance and drought-resistance could reduce farmers' dependence on government subsidized pesticides and irrigation systems. In fact, the Gates Foundation has provided nearly $40 million to researchers to develop drought resistant corn varieties for Africa. In addition, the foundation is funding low-cost drip irrigation systems designed by International Development Enterprises that can reduce the cost of irrigation from about $6,000 per acre to about $37.

About half of the $306 million in agricultural grants announced last week will go to the African Soil Health Program which aims to work with 4.1 million small-scale African farmers and regenerate 6.3 million hectares of farm land through better soil management practices. For the time being, AGRA supports only conventional crop breeding and does not fund the development of new varieties by means of genetic engineering. Rich countries have poured almost $600 billion in foreign aid into Africa over the past four decades. Result? Zero increase in per capita incomes. Is the Gates Foundation now pouring in good money after bad? Let's hope not.

The Gates Foundations' new Green Revolution has already provoked resistance from anti-globalization and anti-technology activists. For example, the California-based Food First/Institute for Food Development and Policy held a conference in Mali in November opposing the new Green Revolution. Food First peddled the now standard activist line that the first Green Revolution was a colossal mistake that primarily helped rich farmers become richer.

Like many such fables there is a grain of much exaggerated truth to the claim. Small farmers were slower to adopt Green Revolution techniques but most of them eventually did. Furthermore, higher farm incomes boosted demand for other goods and services, which in turn stimulated the rural nonfarm economy. Real per capita incomes doubled in Asia between 1970 and 1995. By doubling farm yields, tens of millions of acres of forests and wetlands were spared the plow and hundreds of millions of lives saved from starvation. The Green Revolution was not perfect, but critics ignore how bad poverty and hunger would have been without it.

In The Seattle Times, Food First executive director Eric Holt-Gimenez denounced the Gates Foundation's efforts to foster an African Green Revolution. "It's a corporate strategy for colonizing Africa's food and agriculture systems, which thus far have resisted," he said. Considering that today some 200 million Africans subsist on the thin edge of starvation, Africa's food and agricultural systems should be so lucky as to be colonized by new Green Revolution agricultural research and technologies.

Ronald Bailey is reason's science correspondent. His most recent book, Liberation Biology: The Scientific and Moral Case for the Biotech Revolution, is available from Prometheus Books.

Africa: Are Wages Too High?

bdoherty@reason.com (Brian Doherty) — Tue, 22 Jan 2008 21:28:00 EST

Counterintuitive economist's observation for the day: the real problem with wages in Africa is that they are too high. From Yale University development economist Chris Blattman:

...the big fact that jumps out at you when you look at industrial production in Africa is not the ups and downs, but just how little of it there is.
........
One thing that has always struck me in the African countries I have worked is that the real wages (i.e. wages adjusted for the cost of living) of African formal sector workers seem to be incredibly high, at least compared to that of workers in China or India. Given that firms in China and India seem to be more productive than their African counterparts, it creates a double disadvantage for African workers, and raises the question of why the situation continues. Why don't manufacturing wages fall in Africa, stimulating more jobs for more people at wages still higher than those available in agriculture or informal business?
Why, when I run a survey in rural Uganda, do youth with the same education and experience expect a wage three to four times higher than the youth I worked with in India?.....
There are probably lots of plausible reasons. Perhaps we ought to consider (and get data on) the informal sector in Africa, which could be larger and have more moderate wages than the formal sector ones. It may be that all my notions and data about African wages are erroneous.
Another possibility, however, is that the largest employers of skilled workers in most African countries are international NGOs and the local government. They are competing, in many cases, for the same pool of skilled and semi-skilled workers as the manufacturers and service sector firms. Neither the government or NGOs, moreover, seem to set wages according to the local market or local conditions, and it requires little imagination to wonder whether they set their wages higher than the market would normally do.
Could the government and NGOs be distorting local wage markets and pricing African industry out of the world market? I don't know, but this is a question some economist ought to start investigating.

The Center for Global Development, where Blattman is a visiting fellow.

Katherine Mangu-Ward raises some other questions about aid to Africa and what good it does, or doesn't, do.

[Link via Tyler Cowen]

Foreign Aid Hokey Pokey in Kenya

kmw@reason.com (Katherine Mangu-Ward) — Thu, 17 Jan 2008 15:26:00 EST

I recently returned from a trip to East Africa. I spent most of my time in Kenya in areas unaffected by the post-election violence, and saw no demonstrations or looting. Even if I had been in the thick of things, I'm not sure I would have had much to say besides the commentary most outsiders have offered: Man, this totally sucks.

(For great, well-informed, in-country, ant's-eye-view commentary, check out Alex Halperin's blog)

What I did see on my trip was a little political graffiti--and a lot of evidence of the impact of foreign aid on the region. The single decent road I drove on in Tanzania, for example, was a gift from Japan. Everything else was broken gravel at best.

As Kenya, previously held up as a model of stability and relative prosperity in Africa, falls apart, the U.S. and other nations that contribute aid dollars are threatening a tug on the purse strings if the government fails to act. The Kenyan government isn't taking it well:

Kenya’s government also brushed aside threats by its major international donors, including the United States, to review foreign aid.
“Our budget is not dependent on foreign funding,” said Alfred Mutua, a government spokesman. “The government cannot be blackmailed. “You are here as our development partners, you are not here to blackmail and threaten us,” he said referring to foreign donors. “We have said our government will continue as always. They should not try to threaten us.”
Fourteen of Kenya’s leading donors, including the United States, issued a statement this week warning the Kenyan government that they were reviewing foreign aid in light of the crisis. The United States gives the country more than $600 million in aid each year.

There's a certain amount of foreign aid hokey pokey going on in the region: You take the foreign aid out/ you put the emergency aid in/ you take the aid workers out/ and you shake it all about.

Of course, it matters who is administering the money. We're taking money from the hands of the government, which is part of the problem, and putting it into the hands of independent aid efforts. But still, this kind of aid dollars switcheroo doesn't seem to be making much of an impact.

This seems to be a classic case of "do-somethings." But is there a better option than my response (reminder: "Man, this sucks") or just rearranging deck chairs on the Titanic?

New Hampshire = Bangladesh

bdoherty@reason.com (Brian Doherty) — Thu, 17 Jan 2008 04:11:00 EST

A fascinating map in which U.S. states are renamed for countries whose GDP they most closely emulate. Lots of fun.

[Via Bryan Caplan.]

UPDATE: If my remembery were all it ought to be, I'd have tipped Hit and Run's self-reflexive hat to Katherine Mangu-Ward, who blogged this very same thing back in June. Well, it was lots of fun then and still is now!

Guests in the Machine

khowley@reason.com (Kerry Howley) — Mon, 17 Dec 2007 14:54:00 EST

The towers of Marina Bay Sands will reach 50 stories into the sky, narrowing in the middle and splaying at the tops and bottoms, arching toward the water’s edge like giant joysticks in play. A thumb shaped pier, known as the “sky garden,” will hover above the complex, and a lotus-shaped museum will flower from the bay itself. Together the towers will house 2,500 hotel rooms and lord over the heart of the casino complex, a million-square-foot convention center that will sweep from the feet of the towers to the edge of the South China Sea.

Singapore’s first casino, a $5 billion project on some of the most expensive property in the world, has been billed as a microcosm of the city itself. Ambitious, futuristic, pristine, and not especially humble, it is the ideal urban physiognomy of a country straining to stand out among its much larger neighbors. “People know Singapore,” Prime Minister Lee Hsien Loong assured his countrymen in a 2006 address to the nation. “They no longer think that Singapore is somewhere in China. They know Singapore is special.”

Three miles from Marina Bay, in Singapore’s Little India, many thousands of young Bangladeshi and Malay men gather every Sunday—their one day off—to eat, drink, and spend. Weaving through piles of coconuts and stacks of steaming naan, men shout to one another across streets packed tight with bodies. Here the air grows sweaty, the streets smell of garlic, and incense fumes waft from vendor to buyer. This is not the aseptic, polished Singapore of Marina Bay. It is the muscled hodgepodge that will take the Bay blueprints, unload ships full of steel, and build a casino.

As the world gradually learns to locate Singapore on a map (it’s on the tip of the Malaysian Peninsula), Little India is expanding. The Ministry of Manpower says the construction industry will need between 40,000 and 50,000 more foreign workers if projects like the Marina Bay Sands Integrated Resort are to rise from the page. When the visas are granted, these workers will add to a non-resident workforce of 670,000. That may not sound like much by the standards of the United States, where 670,000 doesn’t even capture the number of undocumented workers who cross the border in a single year. But Singapore is a city-state little larger, and far more densely populated, than the city of Chicago. Its growing foreign population is party to a radical experiment in labor mobility.

If any nation has reason to feel threatened by country-level disparities in wealth, Singapore does. The city-state is an oasis of prosperity in a region packed with countries far poorer than, say, Mexico. Yet it has shown itself to be more open to immigrants willing to work than is the relatively empty, relatively well-protected United States. Using the latest data available, the United Nations Department of Economic and Social Affairs puts Singapore’s foreign-born population in 2006 at 42.6 percent. In the U.S., the proverbial nation of immigrants, the foreign born comprised 12.9 percent of the population that same year.

That gap is likely to grow, as neighboring countries spill workers and Singapore’s hungry economy sucks them in. The economy created 176,000 net new jobs last year, with foreigners filling half of those slots, and the Ministry of Manpower predicts that 450,000 new jobs will be created over the next five years. The country’s birth rate is below replacement level and among the lowest in the world, offering little hope to Singaporean isolationists. Employers know they cannot rely on natives to fill their payrolls, and they will increasingly draw from Indonesia, Malaysia, the Philippines, and elsewhere to stave off shortages.

If larger economies were to introduce guest worker programs like Singapore’s, the impact on migrant welfare would be enormous. The number of foreign-born residents in the wealthy countries of the Organization for Economic Cooperation and Development (OECD) is now a mere 7 percent of the total population, as compared with the Asian city-state’s 43 percent. The Harvard economist Dani Rodrik estimates that if OECD nations were to administer small temporary labor schemes, with the imported workers totaling just 3 percent of the countries’ labor forces, the result would “easily yield $200 billion annually for the citizens of developing nations,” dwarfing the $60 billion the same countries offer in official development aid.

Beneath these clean numbers lurks a tangle of ethical quandaries and unanswered questions. For those who want a less restrictive regime, these programs are a compromise and an accommodation. There is no constituency for a policy of open borders in any of the wealthy countries of the OECD, and government-run guest worker programs are a politically viable means of increasing mobility. Like tightly regulated medical marijuana dispensaries, they are a highly regimented alternative to prohibition. In a political environment where full mobility is as unlikely as full drug legalization, such incremental change may be the only alternative to stasis.

In the United States, where guest worker plans have been part of a heated conversation about immigration reform, supporters of mobility rights are operating in an extremely hostile political environment. The events of 9/11 have intensified American nativism, and age-old debates about collective identity are now infused with the lexicon of terror and national security. Five minutes of talk radio should make clear what pro-immigration groups are up against: a fear of chaos, an aversion to illegality, a need for structure and predictability. Singapore, a country best known in the United States for the caning of a graffiti artist, has found a way to combine an obsession with order and a highly fluid economy of movement.

But for supporters of immigrant rights, it has never been clear that this compromise is one worth making. In the United States, opponents of guest worker programs point to historical abuses of Mexican migrants, seemingly threatened ideals of political equality, and America’s history as a land of assimilation and settlement. They question whether the United States can invest in such a program without losing the very values that make it a place worth breaking into. Such moral probity may be heartfelt and is surely anguished, but it ultimately does little to help the poor in the developing world make their lives even a little less wretched.

Guest Workers in Singapore
Gener Manalac said goodbye to his children, and to the Philippines, on June 25, 1993. Things had gone sour for the family ever since the Filipino government refused to renew the lease for Subic Bay, the U.S. naval base where Manalac and his wife earned a solid living for his family of five.

He worked as a crane operator, and she in the military commissary. When the base closed following a contentious political debate in the Philippines, he and his wife were immediately jobless. “The government closed the base,” he explains, “and offered no alternatives.” He describes it as the worst time of his life.

Manalac looked for work but never really expected to find it in central Luzon, where his family waited anxiously as money began to run out. When a recruiter from Bahrain showed up looking for construction workers, he knew his future was no longer in the Philippines. He tried Bahrain, hated it, and returned to look for something else. The something else was Singapore.

Fourteen years later, Manalac is still here. He is now a supervisor for a construction company, and he helps build condos and cluster houses for Singapore’s growing population. His family is still in the Philippines, and he has managed to keep his kids clothed and in school with remittances he sends home monthly. His older daughter is studying to be a nurse, his son a computer engineer. His youngest daughter is 17 and studying English. Manalac has seen his children three times since he left that day in 1993, and he winces as he talks about the separation.

It’s not the experience of fatherhood he might have hoped for, but Manalac is delighted with his good fortune. Fifty-two and no longer trim, he smiles broadly as he describes his climb up the ranks of the construction industry. In 2000 he was promoted; suddenly he was in charge of a team of newly arrived immigrants. He works 15-hour days, six days a week. In what spare time he has, he studies conversational Mandarin in hopes of better communicating with his Chinese coworkers.

And yet Manalac is very much a guest in this country. He says he’ll remain for as long as they’ll have him, though he doesn’t presume to have any right to stay. If he were fired or became unable to work, he’d have to leave within seven days. He is subject to regular medical examinations to ensure that he is HIV-negative. He can’t bring his children here. He can’t bring his wife here. Were his marriage to fail, it would be illegal for him to marry a Singaporean. Were he female, a pregnancy would mean repatriation or abortion. The Singaporean government has made itself very clear: Foreign workers are here to build a nest egg, not to build a nest.

Perhaps the most significant restriction on Manalac is the nature of his work permit and the limits of his freedom to find employment. Only select industries are open to foreigners. On my way to meet Manalac in his apartment in the suburbs, I asked the taxi driver whether he too was a guest here. He laughed. A foreign taxi driver? Absurd.

Manalac is permitted to work only in construction, and only for the employer who brought him here. If he is unhappy with his employer or feels he is being mistreated, he can return to the employment agency and request a new job, but the process is cumbersome and can be difficult to navigate.

None of this seems to bother him in the least. It’s just part of the deal, and the deal has worked out well for him. He says he harbors no resentment toward the government of Singapore: He is angry at his home government for depriving him of a job, not at Singapore for giving him one. He has never really had to wade into the bureaucracy; never had to fight to stay or to change employers. Those that have faced such problems have reason to feel more conflicted about the well-guarded doors Singapore opens for the region’s poor.

If there is one collective experience that should give the world pause about guest worker programs, it is the plight of Indonesian maids. Unlike male workers who are given housing, a day off once a week, and regulated hours, domestic workers often live with families with full control over the terms of their employment. They run a higher risk of abuse than other foreigners, and Asian tabloids are full of horrific headlines to that effect. There are stories of maids being burned with hot irons, scalded with boiling water, sexually abused by male employers and then physically abused by jealous wives.

Behind a locked iron gate in one of Singapore’s outer suburbs live a hundred or so women with stories that might not be quite so tabloid-ready, but painfully illustrate the vulnerabilities of foreign nationals at the mercy of hostile employers. Many claim they have not been paid or have been illegally deployed to do work they weren’t contracted for, and some say they’ve been physically abused. Their cases are wending their way through the court system, and they are biding their time in a shelter set up by a privately funded NGO called the Humanitarian Organization for Migration Economics, or HOME.

Adjudication can take a long time. When I visited HOME, a 29-year-old Indonesian woman named Sri Uli Darti explained that she had been living in the shelter for a year and a half, before which she had been doing time in a Singaporean prison. Loquacious and poised, Sri was something of a media star in July 2007, and her self-possession distinguished her from many of the other women who quietly waited along with her in the Singaporean suburbs.

Two years ago, Sri ran away from the home of her employer, Tan Kok Quan, a prominent lawyer with a firm specializing in intellectual property and real estate law. She had been with him and his wife for nearly three years before she became exasperated enough to leave. The pay was too low, she thought, for a now-experienced maid, and Tan wanted her to do work she considered dangerous, like washing windows from perilous heights. She wanted out, so she went to the Indonesian Embassy and asked for shelter.

The embassy didn’t want her; they gave her back to the employment agency that had brought her here. But she wasn’t there long before the police showed up to retrieve her and place her in a cell at Changi Women’s Prison. The lawyer who had employed her had accused her of stealing a bag of rare coins, and he said he could prove it with the remittance slips Sri had left in her room. The slips added up to more than they had paid her, he argued, so she must have been sending the stolen moneyback to her seven siblings and other family in Northern Sumatra.

Sri was terrified and desperately wanted to go home. She could explain the remittance slips: She had a boyfriend who had given her $6,000, which she sent home to her family. Singaporean employers tend to frown on domestic workers with relationships; there is a fear that they will become pregnant and have to be repatriated, leaving their employers liable for the cost of the return trip. (There also seems to be an assumption that foreign maids are especially libidinous.) “No one would believe me,” she recalls.

In Singapore, the state provides legal counsel to foreign workers only if they face the death penalty. Those who can’t afford it, and few can, hope for pro bono help. As expected, Sri lost. She was sentenced to pay S$3,000 that she didn’t have—the equivalent of about $2,050 in U.S. currency, approximately a year of her pay—and to spend two weeks in jail.

HOME volunteer Lim Tanguy Yuteck visited her in prison and offered to take her case for free, if she wanted to appeal. “She wept during the entire interview,” Lim recalls, “and looked as if her entire world had collapsed.” HOME paid her S$10,000 bail, and Sri began a long period of waiting at the shelter.

Finally, on July 14, 2007, a high court reheard Sri’s case. The judge deemed the prosecution’s case too speculative, and she was acquitted based on lack of evidence. The Straits Times ran a picture of her bawling with relief under the headline “Maid’s 2-Year Nightmare Ends with Acquittal.”

Guest Workers in America
“Give the Senate some credit,” James Suroweicki wrote in the June 11 New Yorker: “In shaping the current immigration-reform bill, it has come up with one idea that almost everybody hates.” Hates was an understatement. President George W. Bush had been pushing for some sort of guest worker program since before the 9/11 attacks, and as that idea inched closer to realization in 2007, his critics grew more vitriolic. Right-wingers who fervently believed the U.S. government would succeed in rebuilding the Middle East excoriated Bush for his starry-eyed idealism, and left-wingers who wanted amnesty suddenly came out against the entrance of hundreds of thousands of new immigrants.

The New York Times complained that no worker should be sent home; National Review complained that no worker would go home. The New Republic said the plan fell within “the tradition of the African slave ship,” and the right-wing Center for Immigration Studies, which wants more deportations of peaceful undocumented workers, called it “morally dubious.”

In Asia and the Gulf States, the term guest worker is most often associated with domestic workers like Sri and construction workers like Manalac. In the United States, the term is almost universally associated with farm workers, and very often with abused, impoverished, exploited farm workers. Memories of the United States’ largest experiment with transient labor have not aged well, and they haunt proposals to bring more workers, agricultural or otherwise, across the border.

The original Bracero Program was an exception to the restrictive 1917 Immigration Act, which prohibited both illiterate immigrants and those “induced…to migrate to this country by offers or promises of employment.” Mexicans, needed to tend farms and lay railroad track, would not be subject to these restrictions. The Bracero Program known to most came later, between 1942 and 1964, during which time millions of Mexicans found work on U.S. farms.

The second Bracero Program was an agreement be-tween two governments. The U.S. government would permit entry of migrant workers and collect paycheck deductions of 10 percent to be deposited in accounts in Mexico. During their time here, migrants were at times housed in dreary camps, used to break strikes, and subjected to abuse. Many returned home to find their promised savings nonexistent.

When President Bush raised the specter of a temporary worker program in 2004, opponents were many and bracero was the first word on their lips. Opponents also spoke of Germany’s experience with Turkish guest workers in the 1960s, many of whom came on one-year visas and never left. As the novelist Max Frisch put it: ‘’We wanted workers, but we got people instead.” The workers who stayed depended heavily on the German welfare state, but they were not granted the option of German citizenship until very recently. The program’s failures have contributed to the idea that “temporary immigration” is a bureaucratic misnomer, a utopian futility akin to a “drug-free zone.”

These historical examples illuminate the obstacles any guest worker plan faces, but they can obscure what we know to be possible in countries like Singapore: large-scale temporary migration. They also fail to account for the guest worker schemes in place in the United States right now. The H2-B Visa program brings thousands of au pairs, hotel workers, and farm workers to the United States every year. Aspects of the program are cumbersome and problematic, but it is not associated with high rates of permanent migration.

Any guest worker scheme is going to involve a large and fallible bureaucracy; such programs are an alternative to prohibition, and their terms must be made palatable to many constituencies if they are to survive. In order to placate Singaporeans who worry that foreigners will push them out of work, the government imposes levies on employers who hire non-Singaporean workers and sets limits on the percentage of a company’s workforce that can be foreign. Manalac, for instance, costs his employer S$80 a month in fees and contributes to the “dependency ceiling” on foreign hires.

Other functional programs have devised a series of incentives that encourage workers to return home. Some, such as South Korea’s, involve some amount of money being withheld until workers leave. Other countries actively enlist the help of governments such as the Philippines, which has an incentive to maintain the goodwill of countries that employ Filipino citizens. Dani Rodrik, the Harvard economist, has suggested decreasing the sending countries’ quotas relative to the number of immigrants who fail to return, which would in turn encourage such countries to provide incentives to returning workers.

In the United States, the plan President Bush was pushing drew crucial lessons from the bracero experience and other experiments in extending mobility rights. Immigrants would need a job offer in order to gain entry, but—crucially—they could change jobs once here. Employers would not be able to threaten workers with deportation, but only with unemployment, the same threat hanging over native-born workers’ heads. The program was designed to maximize opportunities while minimizing abuse, affording foreigners the same protections as their American coworkers.

As originally conceived, the new program would issue 400,000 two-year visas, each renewable up to three times. In May 2007, the Senate slashed that 400,000 to 200,000. In June, they inserted a sunset provision ensuring that the program would end in five years if not renewed. Later that month, they put the whole tortured immigration bill, the largest proposed overhaul in decades, out of its misery.

If support for a guest worker program was hard to find among elites, it wasn’t among Americans generally: A May 2007 USA Today/Gallup poll found 66 percent of the nation supporting “a program allowing people from other countries to be guest workers in the U.S. for a temporary period of time, and then be required to return to their home country.” In 2006, 79 percent told Time pollsters that they supported a guest worker program for undocumented workers already in the United States.

But opposition to an American guest worker program is loud and deeply impassioned, if not broadly shared. Though it’s probably the only politically viable way to significantly increase legal immigration, supporters of immigrant rights are as likely as not to oppose a program that invites immigrants to work but not to stay. “There is little that is more antithetical to the American ideal than a guest worker,” explained the center-left editors of The New Republic in April of 2006, echoing a 2005 piece from the hard-right Human Events that explained, in fine detail, why the “guest worker plan is un-American,” and foreshadowing a May New York Times editorial that called the guest worker program “a shameful repudiation of American tradition.” The pieces referred to different plans, but none of them bothered with the details; the broad outlines of any guest worker plan strike many as offensive.

“Until now,” the conservative activist Phyllis Schlafly wrote in 2005, “the American ideal of an immigrant has been someone who comes here with the ambition to work harder, earn more, save more, perhaps start a business, and succeed in the free-enterprise system.” Guest workers also come to earn and save, but Schlafly was getting at something else: The American ideal of an immigrant is someone who becomes an American.

Because U.S. immigration is so readily conflated with Americanization, the mythology of America’s immigrant past cuts against acceptance of a guest worker program. The story of the American Dream does not include a chapter for those who want to take the money they’ve earned and buy a home with a white picket fence and two-car garage in Mexico. The narrative allows no space for transience. Even the terms we use, from “anchor baby,” to “chain migration,” belie an inability to accept the essentially fluid nature of world migration patterns.

“There is that traditional mythology—that the rest of the world is just dying to be American,” says the Princeton sociologist Douglas Massey. “In the past that wasn’t true. There was heavy return migration of Italians and Poles in the 20th century, but it gets lost in historical memory.”

Because the collective memory is largely shaped by the immigrants who stay, it’s easy to forget how many came and left. According to the historian Mark Wyman, author of Round-Trip to America, at least a quarter of the 23 million immigrants who came to the states between 1880 and 1930 eventually made their way back home. The return migration rate for Italians was even higher, at 50 percent.

Statistics show a similar fluidity today, though these numbers tend to get lost in our culturally narcissistic debates over contemporary immigration patterns. Massey heads Princeton’s Mexican Migration Project, which has been collecting data on immigration for 25 years. In 1997, the Public Policy Institute analyst Belinda Reyes used that data to conduct a study of 42,000 documented and undocumented immigrants from western Mexico. Fifty percent, she found, returned in two years; 70 percent in 10 years. The immigrants who decided to stay were also the most desirable from a policy perspective: the most educated and the most integrated into the labor market. Those most likely to leave were uneducated men—the demographic that peoples guest worker programs from Saudi Arabia to Singapore.

One would expect return migration to increase as the cost of travel drops, and indeed this is what researchers have found. But the cost of border crossing has risen sharply since 1986, when the Immigration Reform and Control Act militarized the border. Human smugglers charge more for their services, and the risk of death has trebled. The result, says Massey, is that return migration has halved. “People used to circulate, but now they don’t, because the cost of reentry is too high. Rather than go out and have to face the gauntlet again, they just stay,” he says.

Massey attributes the growth in the population of undocumented workers over the past two decades to the fact that circulation is more difficult than at any point in history. “In-migration has been fairly flat for 20 years,” he explains, “The explosive growth we realized in the 1990s and 2000 is mainly due to a reduction in out-migration.” Militarization of the border has encouraged huge numbers of workers to stay up north, cementing the idea that American immigration is intrinsically permanent.

Tolerating Inequality
HOME is one of a few new Singaporean organizations advocating improvements in the treatment of guest workers, and if the burgeoning immigrant support infrastructure in Hong Kong is any guide, there will be more to come. These nascent organizations suggest a decreased tolerance for the abuse of foreigners within Singaporean borders. “The Ministry of Manpower has been in the dark ages for the past century,” says Jolovan Wham, HOME’s executive director. But as Jolovan deals with a phone call from a Bangladeshi worker on his mobile phone, an administrative call on his landline, and a family of Sri Lankan refugees in our presence, he explains that the concept of foreign worker rights is becoming slightly less alien.

For HOME, “equal rights” means a minimum wage, decent housing, and at least a single day off from work every week for women like Sri. They’d like foreign workers to be able to move between jobs, and to move into whatever sectors they like. As Jolovan tells it, the government has a total of two responses for everything HOME advocates: “social stability” and, oddly, “free markets.”

Employers are tied to the foreign workers they sponsor through S$5,000 bonds they receive only when the worker is repatriated. If workers were allowed some amount of freedom to change jobs, there would likely be periods during which they would be jobless, leaving no employer responsible for them. “The government is afraid there will be riots,” says Jolovan, “afraid that large numbers of workers hanging around without jobs will lead to social unrest.”

The government’s response to HOME’s request for more regulation is to defer to the market. But given the state-created lack of mobility within the labor market, it’s not at all clear that this makes sense. Workers can’t shop for a good wage once they’re in Singapore, so the usual reasons for giving competition free rein are not in play. “It’s not free,” says John Gee, president of Transient Workers Count Too (TWC2), another foreign worker advocate organization. “That’s the nonsense about the argument. In so many issues we come up with, we’re told, oh well it’s better left up to the market. But the market isn’t operating.”

Despite their criticisms, neither of the organizations that represent foreign workers is pushing for anything like an end to the program. It’s easy to see why: The gains to the immigrants themselves are highly visible. Talking to immigrants in Singapore, it can seem as if the city-state is supporting all of Southeast Asia. Manalac lives with four other foreign workers in a spacious apartment in the suburbs; each is supporting dependents back home. Reyaz Uddin, a young Filipina accountant, is helping to send five of her seven brothers and sisters to school back home. “Also some nephews and nieces,” she explains, “we’re a close-knit family.” Her pay doubled the moment she started working in Singapore, and she seems not at all perturbed by the responsibility of caring for her family. “Maybe I’ll go to Hong Kong next,” she says, with the air of a well-off retiree deciding where to summer.

Little India is dotted with remittance centers, small windowed shops with plastic chairs full of men waiting to send money home to mothers, wives, and children. The need to send cash home has spawned an industry in itself, with over 100 remittance transfer companies now competing to send cash faster, cheaper, and more reliably from Singapore to origin countries. According to a 2006 report from the Asian Development Bank, immigrants in Singapore are sending home between $500 million and $700 million annually.

Thanks to the efficiencies of the remittance system, these immigrants are able to direct their money to parents and children rather than watch it dissipate as entire villages stake a claim. Some guest workers hesitate to visit their homes simply because, as comparatively wealthy and newly high-status returning workers, they will be asked to share their new wealth with distant cousins and relatives they didn’t know they had. In a 2005 study of Bangladeshi migrants in Singapore, the sociologists Md. Mizanur Rahman of the Asia Research Institute and Lian Kwen Fee of the National University of Singapore write that Bangladeshi villagers see money earned abroad as “easy money,” to be generously expended.

The same analysis found that migrants spend a considerable amount of money on “prestige goods” that will help accord them high-status positions when they return. One of Manalac’s five housemates has stuffed his closet-like bedroom with an electric guitar collection and a flat-screen TV. Migrants spend money “conspicuously in order to indicate that it has been earned easily (which is prestigious) and are lavish in their generosity to fellow villagers as well as to village causes in order to secure the goodwill of the community and a higher social standing.” Back home in Bangladesh, prominently displayed Singaporean goods reflect “families’ access to the foreign labor market, a source of prestige for their households.” Families who have sent guest workers abroad are referred to as “Singaporean families.” When outsiders visit a Singaporean family they expect to see goods bought in Singapore, all of which signal heightened status.

It is possible to acquire enough skills and time in Singapore to become a permanent resident, and therefore exempt from visa renewals or employment levies. The vast majority of low-skill foreign workers don’t plan on it, and no one expects them to try to assimilate while they’re here. No one demands that they learn English or teach their kids Singaporean history. “Hierarchy and segregation are part and parcel of the Singaporean psyche,” says Leong Chan Hoong, a psychologist at Singapore National University and an expert in the public perception of foreign workers. “Because of that, you are able to accept foreign workers more readily. You are assured that you will have some space, that your social, spatial identity will not be compromised with the huge influx of foreigners coming in.”

Superficially, it’s strange that states like Singapore and the United Arab Emirates are more welcoming to large numbers of immigrants than the United States and Western Europe. Singaporeans exhibit personality traits that predict hostility to immigrants—a comfort with hierarchy and traditionalism, for example—while residents of the U.S. and U.K. are more likely to exhibit immigrant-friendly traits like egalitarianism and openness to change.

Partly, this is explained by contrasting modes of government. Singapore’s authoritarian regime is unabashedly pro-immigration; it’s not clear that a democratic Singapore would be so welcoming. As important, Chan Hoong explains, is Singapore’s willingness to accommodate conservatives through policies of segregation that Americans would probably find odious. Singaporean conservatives mirror the American right in their fear of cultural erosion and social disorder, but they have largely been placated by a system that invites immigration while emphasizing legality and distance. A comfort with hierarchy expresses itself as a comfort with inequality, and countries that can tolerate inequality can allow huge influxes of poor people.

The Great Migration
To liberal American opponents of guest worker programs, Sri and Manalac are branded second-class citizens, members of an underclass. The editors of The New Republic locate them within a tradition of slavery. It would be better for Manalac and Sri, in other words, if they’d never had the opportunity to come, best if they’d stayed home and scraped by. Their decision to renew their status simply signals the continuation of this confusion and a false consciousness that propels them toward exploitation.

This ordering of priorities—equality first, migration later—should strike students of American history as odd. Over the course of the 20th century, millions of America’s second-class citizens made progress in just the opposite way. They moved north, to cities where they weren’t always welcome and certainly weren’t treated as equals. The story of black progress in America is intimately connected to their mobility rights, and a North that refused to let them travel until they had attained full equality would have greatly decelerated their political, social, and economic advance.

Between 1914 and 1970, 7 million Southern descendents of slaves left en masse for cities in the North and West. The changes wrought during these years—especially during the peak decade of the 1940s—would horrify anyone crying crisis in 2007. Chicago was 2 percent black in 1916, 33 percent black by 1970.

As in Singapore and the United States today, laborers were needed. The cause today is prosperity; the cause then was war. Soldiers heading to the battlefield left labor shortages behind, even as World War I was stimulating the industrial economy. Robert S. Abbott, founder and editor of The Chicago Defender, used his position at the country’s most widely circulated black paper to launch a campaign encouraging the migration; or as he called it, the exodus. For Abbott, this was biblical—a “flight out of Egypt” and on to “the Promised Land.” Supplementing the rhetoric was practical information for helping the poor black Southerner move North: rail timetables and job listings.

White Southerners typically refused to circulate The Defender, and with good reason. The paper was encouraging their labor supply, once literally captive, to pack up and leave. Many of those who did leave were escaping a sharecropping system that often as not left blacks in deep debt at the end of the growing season. Southern whites threatened to throw recruiting agents in jails and arrested blacks near train stations for “vagrancy,” but were unsuccessful in stanching the flow of bodies. The gains for blacks were just too huge.

“That moment in the black rural South,” Nicholas Lemann writes in his history of the Great Migration, The Promised Land, “was one of the few in American history when virtually every member of a large class of people was guaranteed an immediate quadrupling of income, at least, simply by relocating to a place that was only a long day’s journey away.” In 1925 the Howard University philosopher Alain Locke wrote of the “New Negro,” a self-actualized, assertive, urban black man borne of a generation of serfs, elevated from the sad status of his parents simply because he fled the rural South. “Money and dignity,” writes Lemann, “were indisputably in greater supply in Chicago than in the [Mississippi] Delta.”

Not even the effusive Abbott would argue that the blacks who stepped off the train from the Delta during WWI, or at any point afterward, were stumbling into an egalitarian utopia. Housing and labor discrimination were endemic. Like Manalac and Sri, Chicago blacks could not drive yellow taxis or marry anyone they wanted. They had to be physically present to fight for space in white neighborhoods, to picket for equal pay, to agitate for their civil rights. It’s harder to demand just treatment from behind a fence.

The gains for immigrants today are at least as great as they were for itinerant blacks during the first half of the 20th century, simply because the differences in pay for the same work have ballooned. “The gaps in income across countries are now much larger than gaps within countries,” the Harvard economist Lant Pritchett writes in his book Let Their People Come. “Nearly all of the earnings gap between workers in poor countries and rich countries appears to be due to their location, not their personal characteristics.” Pritchett argues that no development intervention comes close to helping individuals from developing nations the way simple, temporary relocation does, and a guest worker program would allow these gains to be broadly shared.

Moral Harms
This dynamic of mobility and advocacy has profound implications for the immigrants of the future. In Singapore, maid abuse is becoming less acceptable and is increasingly seen as déclassé. The government is insisting on better housing conditions for workers as NGOs draw attention to unscrupulous employers. And yet it’s not clear how much the government can liberalize its immigration regime without engendering a backlash that cuts against mobility. A U.S. program would require the same awkward balancing act between compassion and political viability. The existence of a program would depend on a supportive political constituency, but that constituency would likely erode if such workers’ advocates demanded that immigrants receive public services.

As Americans struggle with the implications of immigrants who come to live but not to stay, their single greatest objection to a guest worker plan may have nothing to do with migrant well-being. The gains for immigrants are demonstrably too big and the need too great to lend credibility to those who cast all guest workers as victims. According to the Inter-American Development Bank, migrants send $62.3 billion in remittances to Latin American and the Caribbean last year, keeping 8 to 10 million families above the poverty line. The unexplored opportunities for mutually advantageous cooperation are massive and undeniable. But it seems dirty. “It simply feels exploitative and un-American to allow migrants in without giving them a shot at becoming citizens,” writes Jacob Weisberg in Slate.

The economist Lawrence Summers, a former president of Harvard, has expressed this objection in somewhat loftier terms. In a critique of Harvard’s Pritchett, Summers explains: “Lant’s kind of compassionate libertarianism carries the risk of a morally problematic coarsening that we resist in many other ways.” The problem with guest worker programs, in other words, has nothing to do with the good of guest workers, and everything to do with the moral harm that proximate poverty might cause to their hosts. Allowing workers entry to the United States might be mutually beneficial for employer and employee, all the while producing corrosive cultural externalities. Summers seems to think that guest workers will inure Americans to a system of class stratification and undermine a shared, naive sense of global solidarity.

The moral calculus, then, is to be weighed between the welfare of potential workers and the preservation of an idealized American narrative. Does it reflect better on the American character to lock poor people out than to permit them entry on limited terms? Guest worker programs do clash with deeply held mythologies about our relationship to the global poor. We live in a state of relative political equality nested awkwardly within a deeply unequal world, and it can seem better, kinder, to keep the inequality outside, walling it off and keeping our hands clean. Perhaps American egalitarianism, like a dress too precious to be worn, is a value too dear to expose to the real world. As the essayist Richard Rodriguez, himself the son of Mexican immigrants, has written, “Americans prefer unknowing.”

In the end, the best argument for a guest worker program isn’t Manalac’s experience, but Sri’s. I met Sri a few days after she had been acquitted. She was planning her first trip back to Indonesia in four years, two years of which she had spent battling false accusations in a foreign system stacked against her. Asked what she would do next, she said she’d like to earn some capital to start a business in Indonesia. How would she earn that capital? She smiled. “I’ll come back to Singapore.”

Host countries are right to worry about the moral complexities of a legally divided society. But if they lock down the borders and slam shut the gates, it won’t be Sri they are protecting.

Kerry Howley is a senior editor at Reason.

Do the Rich Owe the Poor Climate Change Reparations?

rbailey@reason.com (Ronald Bailey) — Tue, 11 Dec 2007 13:16:00 EST

Nusa Dua, Bali — The second week of the U.N.'s annual Climate Change conference, also known as the 13th Conference of the Parties to the U.N. Framework Convention on Climate Change (COP-13), took off on Monday. I have covered four previous meetings—Milan, Montreal, Buenos Aires, Nairobi—and I must say that the 10,000 or so U.N. bureaucrats, diplomats, and environmental lobbyists have outdone themselves this time. The conference center facilities at the Nusa Dua beach resort on Bali are spectacular. If it were up to me, I would make Bali the permanent climate meeting site. (I, on the other hand, am ensconced in a perfectly serviceable business hotel about 7 miles from the resort area. In the spirit of multiculturalism, the lobby features a large artificial Christmas tree and an elaborate Santa figure on the reception desk.)

At COP-13 the 192 countries that are signatories to the U.N. Framework Convention on Climate Change (UNFCCC) are supposed to hammer out a "roadmap" for negotiations leading up to a new agreement by 2009 to replace the Kyoto Protocol. Under the Kyoto Protocol, 36 industrialized nations pledged to lower their greenhouse gas emissions (GHG) to 5 percent below the level they emitted in 1990. That treaty expires in 2012. Negotiators are now aiming to mandate a further cut of 25 to 40 percent below 1990 levels by industrialized countries by 2020. Of course, most countries have yet to make the cuts they agreed to under the Kyoto Protocol. But why wait until 2009 to cut a deal? Because that's when George W. Bush—an opponent of the Kyoto Protocol—will no longer be president of the United States. Among other things, the new roadmap aims for an agreement that will corral the United States into making steep cuts in its greenhouse gas emissions after 2012.

Last year at the Nairobi conference, I detected a bit of frustration and anger among the self-styled civil society climate campaigners. Here in Indonesia, the atmosphere is almost triumphal. The Intergovernmental Panel on Climate Change's (IPCC) Fourth Assessment Report (4AR) issued earlier this has further confirmed the "climate crisis" and, of course, everyone's spirits are buoyed by Al Gore's Nobel Peace Prize. Gore is scheduled to visit the COP-13 for an adulatory victory lap on Thursday. Another notable, and welcome, shift in activist rhetoric is the increased expression of concern for the economic development of the world's poor.

The week started off with a cornucopia of "side events." These are sessions in which various climate lobbying organizations tout their proposals for solving the "climate crisis." As my first foray into the climate change meeting, I attended a session sponsored by the World Council of Churches on "The Greenhouse Development Rights Framework," a report supported by the Heinrich Boll Foundation and Christian Aid.

The report outlines an "emergency climate program" that aims to keep the earth's average temperate from rising more than 2 degrees Celsius above pre-industrial levels. Keep in mind that average temperatures have already risen by as much as 0.8 degrees Celsius over the past century. In addition, some scientists believe that the amount of GHG already in the atmosphere will lead to an average temperature increased of 1.5 degrees Celsius even if there were no more emissions. So what allegedly must be done?

According to the study, global GHG emissions must peak by 2015 (seven years from now) and then begin to drop by 6 percent per year until 2050 to reach a level that is 80 percent below 1990 levels. The rich developed countries must cut their emissions by 90 percent by 2050. Even poor countries must cut their emission by 30 percent between 2020 and 2030. Note that these cuts are dramatically deeper than what is actually on the table here at the COP. Martin Khor, head of the international left-wing activist group the Third World Network said during the panel discussion that the latter cuts would come as a "shock" to developing nations such as India, China, and Brazil.

The study's authors argued that there is not only a climate crisis, but also a "development crisis." As evidence, they pointed out that 2 billion people lack clean cooking fuels, 1.5 billion are without electricity, 1 billion have no access to fresh water, and 2 million children die each year of diarrhea. Clearly, the first priority of people living in these conditions must be development. Interestingly, while environmental lobbyists tend to avoid saying words like "wealth" and "growth," "development" means that the world's poor need more wealth generated by economic growth.

Without going into the details, the Greenhouse Development Rights Framework (GDR) proposal foresees levying the equivalent of a climate "consumption luxury tax" on every person who earns over a "development threshold" of $9,000 per year. The idea is that rich people got rich in part by dumping carbon dioxide (CO2) from fossil fuels into the atmosphere, leaving less space for poor people to dump their emissions. In one scenario, Americans would pay the equivalent of a $780 per person luxury tax annually, which amounts to sending $212 billion per year in climate reparations to poor countries to aid their development and help them adapt to climate change. In this scenario, the total climate reparations that the rich must transfer annually is over $600 billion. This contrasts with a new report commissioned by the U.N. Development Program that only demands $86 billion per year to avoid "adaptation apartheid."

The authors do not go into any specifics about what kinds of institutions—private, public or partnerships—would annually transfer $212 billion to poor countries from the U.S. Considering that the $2.3 trillion spent on foreign aid in the past 50 years has largely failed to generate economic growth or permanent improvements in living standards for most people living in poor countries, the institutional question is not trivial. By some estimates lifting trade barriers could produce benefits of $600 billion annually, reducing the number of people living on $2 per day by 144 million. A woman from Papua New Guinea in the audience warned that such climate aid was likely to disappear into the corrupt pockets of poor country politicians rather than lift poor people out of poverty. But the touching faith of climate campaigners in the efficacy of international and national bureaucracies is immune to such realities.

It is not also clear whether the authors think that rich countries must cut their emissions by lowering their living standards, or by adopting not-yet-invented low-carbon energy technologies, or both. One person in the audience was overheard to ask why we don't just divide up all the wealth equally anyway? Of course, the entire "climate crisis" could have been avoided if today's rich countries had eschewed the industrial revolution in the first place. In any case, while a $780 per person climate luxury tax would be painful, it would not bankrupt the U.S., even if bundles of dollar bills were shipped abroad and burned in bonfires.

To get a somewhat different perspective, I attended the International Energy Agency's (IEA) side event, "Energy Policy in a Greenhouse World." The IEA was created in 1974 by the world's rich countries to advise them on energy supply and demand problems. The IEA issues an annual World Energy Outlook (WEO), which looks at various scenarios for energy supply and demand until 2030. This year's report was quite sobering.

IEA analyst Laura Cozzi noted that the world currently emits 27 gigatons of CO2 to produce energy. In a business-as-usual scenario, in which energy demand increases by 50 percent by 2030, CO2 emissions are projected to rise to 42 gigatons. To achieve CO2 atmospheric stabilization at 450 parts per million by 2050, emissions would have to be cut by 19 gigatons to only 23 gigatons by 2030. Such cuts, according to Cozzi, would mean that every electric power plant built after 2012 would have to emit no CO2. That would require the development of a robust carbon capture and sequestration (CCS) technology to bury CO2 in the ground, building vastly more nuclear power plants, the invention of second-generation biofuels, and improvements in energy efficiency at twice the rate that we've seen in the past 25 years.

Just to lift everybody's spirits, Cozzi told the audience that the IEA is "quite worried" about the oil supply/demand balance for the next 7 years. New oil fields to supply an additional 12 million barrels per day must come online by 2016. "We can't rule out a supply crunch in the oil market," said Cozzi.

Cozzi's IEA colleague, Debra Justus, was even more cheery. Justus is working on an energy technology perspective report for 2008. She began with a baseline case in which CO2 emissions would increase to 62 gigatons, or 137 percent by 2050. She outlined two alternative scenarios, one in which the goal is to keep average temperatures from rising more than three degrees Celsius above pre-industrial levels (ACT scenario) and another which aims to stabilize CO2 in the atmosphere at 450 ppm by 2050 (Blue scenario). Achieving the ACT scenario would require an additional $20 trillion over an above projected energy infrastructure costs for the next 50 years and the Blue scenario would cost $50 trillion more. Justus calculates that first scenario implies a price of $50 per ton of CO2 and in the second, CO2 costs $200 per ton.

At the end of the World Council of Churches' discussion, one panel member, Mohamed Adow from drought-stricken northern Kenya, asked the audience to please "remember the suffering and poverty caused by greenhouse gas emissions." But is climate change really the biggest challenge facing the world's poor? When droughts hit rich countries, people do not starve, and few farmers lose their livelihoods. I do not doubt the suffering that recent weather disasters have inflicted on Adow's people, but even Kenya's share of $600 billion in climate reparations is unlikely to make up for that country's rank of 150th out of 179 countries on Transparency International's global corruption index.

Finally, I mentioned at the beginning that the mood of the climate activists here in Bali was triumphal. I suspect that's because many now really believe that an impending climate crisis will at last endow them with the power to completely remold the world's economy in a more egalitarian direction. And that's what they've always wanted, anyway.

Disclosure: I would like to express my deep appreciation to the Atlas Economic Research Foundation for providing a grant to pay for my travel expenses to cover the COP-13 meeting.

Ronald Bailey is Reason's science correspondent. His most recent book, Liberation Biology: The Scientific and Moral Case for the Biotech Revolution, is available from Prometheus Books.

China Holds Lots of U.S. Dollars. Thanks, China!

kmw@reason.com (Katherine Mangu-Ward) — Fri, 30 Nov 2007 09:38:00 EST

Should we be worried about "foreigners" holding large amounts of American dollars? Don Boudreaux says no. The worriers ask: What if foreign investors collectively wake up one morning and decide to dump dollars--either for economic reasons, or for sinister political motives (I'm looking at you China)--to the ruin of the U.S. economy.

But Boudreaux explains that if Beijing has been buying dollars in order to sabotage us at some point in the future--well, the joke's on them:

Suppose that an evil businessman seeks to disrupt the economic future of innocent Ms. Jones. This businessman reasons that if Ms. Jones unexpectedly is fired from her job, she will suffer. And she will suffer even more grievously if any new job that she finds pays her less than the job she lost. So Evil Businessman hires Ms. Jones at a salary well above her true market value. For several years Evil Businessman keeps paying Ms. Jones a salary much higher than she would command on a market not poisoned by the uneconomic motive of Evil Businessman.
And then one day, suddenly and unexpectedly, bam! Evil Businessman fires Ms. Jones, who then discovers that the best new job that she can get pays her an annual salary that is $100,000 less than she "earned" while employed by Evil Businessman.
Without doubting the disappointment and inconvenience Ms. Jones suffers when she is suddenly fired, we can nevertheless doubt that Evil Businessman really hurt Ms. Jones on net. During all the time that he employed her she earned more than she would otherwise have earned. And during this same time, Evil Businessman was paying the price for the later privilege of disrupting Ms. Jones' economic life by firing her.

More on China and the U.S. economy here and here.