Ethical Code for the XXI century

The Story of Cap and Trade

2010-03-26T09:56:00.001+01:00

You can watch it here.

Dignified and un-degraded treatment of passengers by security officials in European airports

2009-12-27T17:37:00.005+01:00

I've just submitted my second petition to the European Parliament. The first was requesting policies to enforce a mandatory 10 year warranty on all domestic and personal electronic appliances (to ensure that the rate of obsolescence of devices stops increasing, and products are designed to last).

The text of my new petition is as follows:

The security regulations and practices in place in European airports, by which passengers are subject to (public) body searches, forced to remove vestiments, the private contents of their luggage exposed and examined, and subject to the prepotence of designated officials, violate at least two articles in the legally binding (by the Treaty of Lisbon) Charter of Fundamental Rights of the European Union, namely:

Chapter I, Article 1 - Human dignity is inviolable. It must be respected and protected.
Chapter I, Article 4 - No one shall be subjected to (…) degrading treatment or punishment.

This is not acceptable, and I therefore petition the European Parliament to put in place and enforce policies that ensure the dignified and un-degraded treatment of passengers. Namely forbidding the following practices:

Enforcing removal of vestiments
Performing body searches unless in strict privacy by a police officer and only when the same conditions as apply to investigations of criminal offenses by suspects are verified.
Publicly disclosing the contents of luggage.

The security of citizens is also a guaranteed right (under Chapter II, Article 6 of the same Charter), so airport authorities have to research and deploy less intrusive processes to ensure security for the specific case of air transportation.

Climate

2009-12-23T10:06:00.004+01:00

"If climate was a bank, it would already have been saved."

Read somewhere on the internet...

Factory farming and global warming

2009-10-30T00:46:00.000+01:00

If you are busy changing light bulbs, dreaming of a hybrid car (or maybe you already drive one) it's possible that you worry about the consequences of global warming. If you do seriously worry but you are a regular meat eater then this documentary is for you. Bad news: it's time for you to rethink your diet. A vegetarian in a Hummer is greener than a meat eater in a Prius. This and other incredible facts about the impact of factory farming on climate changes are revealed on "Meat the truth". The truth which was a little too inconvenient for Al Gore. The good news: you can start with one vegetarian day every week :) Good for the planet and all the animals living on it (you, me and everybody else included).

the financial crisis...

2009-08-25T23:36:00.005+02:00

I wrote a post in August last year where then I described my perception of the way financial systems operate and the eminent risks of collapse, this was before Lehman Brothers failed (16 Sep.) and the crisis became official...

Our governments, stood and watched while this shadow banking system and the money they created and handled grew uncontrollably. Probably they were making big profits and the governments were collecting their share in tax, or they saw the share of importance of these transactions relative to GDP growth increase and found it good for their economic indicators... even when the first warnings came with the Bear Stearns funds collapsing in 2007 and before that of the Long Term Capital Management in 1998, still no regulation was introduced that would require these banks to fulfill similar requirements to depository banks as to have minimum reserves of liquid assets (gold, money, savings) to cover the needs to repay investors. As a result a lot of money, in the form of debt and backed by "toxic" assets (subprime mortgages) instead of real value (money, savings, gold, resources), entered circulation. As more debt seemed to originate more economic activity, it was allowed to grow, and with the interests that apply on loans over loans over loans it did grow... and keeps growing...

But unless a miracle happens, it will never be repaid... because we cannot possibly keep up with it with our incomes (not even with a major technological breakthrough or productivity increase, the economy cannot possibly create more value than the limits given by the size of the population, their demand for a comfortable life, their time available to produce and spend and the finite resources available), so that part of the debt that cannot be repaid will either mean failed banks or failed corporations (and corresponding unemployment increase) or failed privates (and homeless people), or a bit of all... I'm hoping that a sudden realization of this logic by the financial system operators brings about a loss of trust and a major bank collapse, and even if corporations fail and money disappears, we at least keep our houses.

Loosing the job is not the worst that can happen, if people are willing to work, there are ways to quickly set alternative monetary systems (such as LETS and others) that allow people to exchange goods and services with each other within communities. Secondly, this happening governments would eventually, re-nationalize the full banking system, re-take control of the monetary policies and re-start issuing money against value actually produced in the country and making it available as credit for corporations and privates, at low or no interest.

Lending with interest is such an attractive activity because you can rip enormous profits without working much... but it is unsustainable in the long term as it causes debt to increase exponentially. Most of the money that exists is backed up by debt (a lot of it toxic), so there is no money available to pay the interest on that debt, which comes on top. Unless banks create more debt to pay those interests, which in turn require more interest to be payed... hence the exponential growth of debt...

This financial phenomena has already brought about the fall of the Roman Empire, and caused the Catholic Church to proclaim lending with interest a sin. The only ones who were allowed to do it were the Jewish people, who came to become prominent bankers and wealthy people, and then blamed by the misery of others leading Europe to the holocaust of second world war... lending with interest is also correlated with inflation, and being able to influence the interest rate gives central banks the capability (or the illusion) to control the inflation in the long term, although they can never be sure what the consequence of their policies will be... however it seems if there were no interests and governments were capable of adequately manage the amount of money in circulation, inflation should purely depend on demand and supply. Focus would turn to making markets more transparent and with more competition as to keep prices stable.

If there is no interest associated to giving credit, there is no profit to be made and there is no reason why privates would want to do it. Therefore banking would have to be purely a state business, as is education, justice, and security... there would be no interest on loans, but also no interest on deposits (as they are also loans from privates to banks).

From the point of view of a single transaction, it seems to make sense that interests are due. After all if Jim lends Jack 100 dollars for a year, and Jack goes off and doubles that money by improving his business or spends the money in something nice, but works hard the rest of the year to re-earn it, and simply returns back the 100 dollars, then Jack won from the situation, and Jim lost because he could not use that money for a year and he took a risk of not recovering it. So it seems that a compensation is owed to Jim for his loss and the risk he took.

But from a wider perspective, loans are not necessarily made between individuals, but from a community which has a lump of idle money (savings) that would anyway not be used in the short term. And if Jack uses the loan to improve his business or for purchasing something, that money goes to pay salaries in the community, to produce goods or services that the community can enjoy, or to pay for products and services produced by the community, in any case the community benefits from it, even if they risked loosing it in the hands of Jack. So interest is not necessarily due, if the community trusts Jack to do well with the money and repay it. The overall benefits for all would surely surpass the risks of defaulting.

As communities evolve beyond the basic needs of survival and security (which still embeds the spirits of our older generations that lived the war and poverty), new levels of consciousness arise among the new generations and a sense of purpose and altruism necessarily evolves (that's one of the reasons a lot of young people are now concerned about the environment, volunteer work and fair trading - refer to Maslow's psychology insights on this, or Ken Wilber's levels of consciousness), this necessarily re-positions economic views in a different perspective. The view that each person acts selfishly to maximize his wealth or profit which guided economic principles of the sixties/seventies until now are now outdated and should give place to concepts as Altruist Economics proposed by Robin Upton

tough shoulders needed...

2009-08-23T23:57:00.000+02:00

“The entire world economy rests on the consumer; if he ever stops spending money he doesn't have on things he doesn't need -- we're done for."

Bill Bonner, author, publisher and columnist on economics and money

of permanent economic growth

2009-08-23T12:28:00.001+02:00

“Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.”

Kenneth Boulding, economist

the law, is the law

2009-08-23T12:14:00.001+02:00

Lisa, In this house we obey the law of thermodynamics!

Homer Simpson

Monetary Reform now!!

2009-08-04T21:05:00.001+02:00

Watch this documentary. Money as Debt II by Paul Grignon

As I've already discussed here, the financial system as it is, is the biggest threat to our survival, it needs to be reformed urgently.

Documentary films!!

2009-05-21T10:52:00.001+02:00

Lots of interesting documentaries for free!

http://www.documentary-film.net/

Wind power using kites

2009-03-28T19:14:00.003+01:00

Another nice TED talk about using kites to harness the power of wind.

http://www.exchangemagazine.com/morningpost/2009/week13/Tuesday/032416.htm

F**K YOU BUDDY

2009-02-01T23:17:00.002+01:00

I found a great website where you can watch all sorts of documentaries for free...

here's a nice one made by BBC, it's called THE TRAP, episode 1: F**K YOU BUDDY

About consuming and autenticity

2009-01-17T11:28:00.003+01:00

Another movie from TED (I think there was one already here before). This one about consuming and authenticity...it isn't great, but it does mention some interesting points:

http://www.ted.com/index.php/talks/joseph_pine_on_what_consumers_want.html

ISRAEL'S YOUNG CONSCIENTIOUS OBJECTORS

2008-12-18T21:56:00.002+01:00

These are teenagers that refuse to join the army and demand peace with Palestine.

They are in jail because of that.

http://december18th.org/

Electric cars

2008-10-23T19:36:00.002+02:00

Here is an interesting documentary about electric cars and the oil industry. It is a dutch program, but most of it is made of interviews in english, with (dutch) subtitles.

http://www.vpro.nl/programma/tegenlicht/afleveringen/40004478/media/40102294/

Sarah Palin...

2008-10-16T19:18:00.001+02:00

...and it's time we had that bresh of freth air...

Sen. McCain

Oceans

2008-10-08T22:38:00.002+02:00

Today I was confronted with two pieces of information regarding the oceans.

The first, a movie, regarding the garbage on the oceans, particularly in some areas of the Pacific Ocean. Makes you wonder...I had once seen a documentary about the same subject, where a girl showed a huge amount of tooth brushes, lighters, toys and other plastics collected at a beach in Hawaii.

Now, I just arrived from a lecture by Dos Winkel, an underwater photographer and conservationist, about the state of the seas and of the fish. He presents a grim image of the state of the oceans, as nets plough the bottom of the seas in search for fish, catching everything in their way, and leaving only devastation, for what is mostly only by catch.
Furthermore, all the garbage we dump in the sea causes the fish we eat to be contaminated with toxic metals, and other contaminants, while it is increasingly advertised as healthy.

The film of the speech I attended will soon be available online. Meanwhile the dutch version is available here I hope (couldn't see it on a mac...).

By the way, there are plenty of nice lectures on all kinds of subjects available for viewing in the studium generale of the TUDelft.

Regress...

2008-09-17T21:44:00.003+02:00

If there is one field where we have not achieved any progress over the last 20 years, that field for me is transportation.

For me it's worse traveling now than it was before.

Airplanes are cheaper and go everywhere at anytime, but they are the exact same airplanes as ever (no major evolution). And airports are chaotic and never has there been more hassle with security as now, and flights are always late.

Traveling by car is getting more dangerous as the highways are full of cars and trucks, gasoline gets more expensive everyday and traffic jams are worse all the time.

Traveling by train, if you live in Germany, is ridiculously expensive (to visit my parents in law, 300 km away, costs 300€ for 2 people if you get the ticket the day before, it costs 60€ gasoline by car...). To get anything cheaper you have to get your tickets in the most inconvenient times. And you have to change 4 times train before you reach your destination.

Climate Justice

2008-09-09T15:19:00.002+02:00

"Climate change was first seen as a scientific problem, then an economic one," explained report author Kate Raworth. "Now it is becoming a matter of international justice.

I wonder...if it changes to an international justice problem, then nothing will ever be done about it...I think it is best to leave it in the economic view...

America

2008-08-31T14:46:00.001+02:00

"People, the world over, have always been more impressed by the power of our example than by the example of our power"

Bill Clinton, 2008

Contrasts

2008-08-29T19:21:00.004+02:00

I just arrived from Malaysia, where I spent a couple of weeks traveling around.
Malaysia is a cheap country. Food is cheap, accommodation is cheap, transport is cheap, most things for sale are cheap. Oil is cheap...
Malaysia is also a warm country, tropical, humid, rainy at times, so we can not blame the locals for abusing the air conditioning...apart from the fact of setting it to polar temperatures. Everything is air conditioned, houses, shops, cars...

What led me to write this post however, is that in Malaysia, it is common place to leave your car running while you go shopping or while you have a pause along the highway to rest, just so that the car is still cold when you come back.

We live a confortable life in the western world, and can't blame them for wanting one also. Nobody keeps themself from buying and using airco in the car, or heating in the winter. All people should have access to a comfortable life.

It is easy to provide comfort, if people are willing and/or able to pay for it. Shouldn't we also provide education.

creative capitalism

2008-08-27T23:08:00.003+02:00

There was a nice article on Time a few weeks ago, on creative capitalism, explained and defended by Bill Gates:

http://www.time.com/time/business/article/0,8599,1828069,00.html

Portugal, what's wrong with you?

2008-08-26T17:33:00.003+02:00

As an emigrated portuguese I keep an eye on what goes on back in my country with the Público newspaper RSS feed. A brief summary of the news I've seen pass in the last couple of weeks:

Robbery to the BCE bank branch, police shoots down robbers
Robbery to security van in highway A2 with explosives
Robbery to jewelry and murder of the owner
Robbery to construction site and police shoots son of thief
Robbery to gas station in Cascais using robbed cars with Carjacking
Stolen car causes accident and kills 3 people
Robbery to Post Office in Setubal
Robbery to gas station in Caparica by 2 men in disguise
Robberies to houses in Gaia, thief caught by police
Robbery to gas station in Fogueteiro by 3 armed men
Robbery to the BCP bank branch in Sintra by 2 armed men
German citizen shot in the head in Boliqueime

Today alone I registered 6 of the above occurrences... despair is taking over in times of crisis?

Another angle on the oil price crisis

2008-08-03T13:58:00.010+02:00

Yesterday we went out to dinner with friends and one of our friends happened to be working in banking, more precisely in oil futures and options in London financial industry. He is a financial engineer. We asked him what he thought was going on with the oil price and he gave an interesting insight.

The reason, according to him, why oil price and other prices in general (as food) suddenly went up, was related with two factors. The first one, the sub-prime crisis in America. The trillions of dollars in mortgages that cannot be repaid, require the government to issue dollars to finance the losses. The availability of more dollars not matched by a corresponding increase in production (GDP) causes the value of money to drop. And since most goods in international markets are indexed to dollars, including oil, the prices went up as dollar went down. He does not believe in current unbalances in production and demand or speculation, although he doesn't exclude it may yet happen. The second factor, which had to do only with the price of oil, was related with problems in America to refine oil into gasoline, forcing them to look for gasoline in the european market, which caused prices to rise because of more demand.

Now what amazed me the most was his explanation of the financial system. A great amount of the money currently circulating in financial markets, does not exist, nor is there any real chance it will ever exist, and believing that it exists requires a faith as great as believing in God himself.

How it works most of the time, according to my friend, is like this. Say for example Jim has 100 euros. Jack comes along to get a credit with Jim. He asks for 100 euros. Jim does not really hand him the 100 euros, but rather he hands a note that says "I owe you 100 euros". Jack trusts Jim, because he's such a nice fellow and he knows Jim actually has 100 euros somewhere and he will be able to collect it any time in the future when he really needs it. Now Jim knows Jack trusts him, and is convinced he'll get some more money in the future anyway and Jack is not in a hurry to collect so he goes ahead and spends his actual 100 euros somewhere else.

Jack takes the note Jim gave him and goes into a car stand where John works and asks to buy a car, the car costs 100 euros, Jack doesn't have the money but he has the note from Jim, which is good for 100 euros. John also trusts Jim and accepts the note from Jack in exchange for the car. John goes down to Jill's furniture store, and again manages to get the note pushed through in exchange for a complete new set of furniture for his living room. So up to now a lot of transactions have been made purely trusting on Jim's ability to cover that 100 euro note, sometime in the future.

This whole financial system is based on trust and faith. It is enough that the word comes out that Jim is not to be trusted and that note he gave away looses its value and the whole system collapses. So the only way to slow down these fluxes of virtual money is to force interest rates on these credits (by the way have you noticed how interest rates have risen since 2004?)

source http://www.bank-banque-canada.ca/

Of course this happens at a scale much larger than Jack and Jim and the purchase of a few items, it goes on at the scale of countries, and global gigantic financial transactions...

Finance specialists actually attempt to measure the amount of money flowing in the economy, and that amount grows at a rate of 10/12% a year. The GDP which should equal the production of value in an economy grows currently at less than 2%. So there is clearly a lot of virtual money flowing around to purchase futures, options, insurance on profit losses and other crazy financial products, which cannot ever be matched by real hard cash...

This brings us to what happened in the States with the sub-prime loans. Mortgages taken by people who had to make extraordinary effort to pay the installments, to buy houses which were extremely over-valued by speculation. Then the economy slows a bit, unemployment raises or people get sick (and have no health coverage) and they can't pay back, the bank takes their house, a lot of houses appear in the market, their over-valued price drops like stones, the bank has no way to recover the money, the government steps in to issue more money, money drops value, etc...

"The problem for financial markets is that the virtuous circle which pushed asset prices higher in the middle of this decade may be turning vicious. Banks lend money against the collateral of assets, most notably in the form of housing. As house prices increase, the collateral rises in value and the banks are willing to lend more. That enables buyers to bid up prices even further. But when banks stop lending, buyers are unable to purchase assets. Some investors are forced to sell to pay off loans. The value of collateral falls, making banks even more reluctant to lend. Markets freeze up, as neither buyers nor sellers have the confidence to do business." (in Economist 5th July 08)

This was the second person I've met in the last 2 months who says he's working in the financial system to make as much money as possible as quickly as possible and then get out, because everything is so virtual and ethereal, that it is hard to believe it exists at all...

The catch is this though, it is a system that you can't believe can ever work, but if you don't believe it and remove the trust it comes tumbling down... let's pray my sisters and brothers...

Which trucks are actually coming?

2008-08-03T13:36:00.004+02:00

It is somewhat difficult, when you're out on a nice walk, to distinguish of all the sounds you hear which ones are potential trucks coming around the corner, as suggested in the example in the previous post.

So I decided to make a list of the main potential trucks that people keep talking about lately, and that generate all sorts of dangers, debates, doubts and dilemmas:

Global Warming due to CO2
Oil peak and the end of reserves
Resource depletion (forests, water, arable land, minerals, etc.)
Global financial system crash
Asteroid hitting the planet
Polar caps meltdown and the Gulf Stream disturbance
Iran nuclear arsenal
Demographic explosion
Terrorism and religious fanaticism
Economic recession or another great depression
China and India economic growth
Russian military revivalism
Pandemics and Epidemics
Crash of Pension schemes due to aging population
Loss of Biodiversity
Violations of human rights
End of democracy

If you're actually reading this post, you may like to comment and add to the list, choose the ones that scare you the most, the ones which are less likely to cause any hassle, an so on.

Thanks already for any contributions!

Is this an optimistic blog?

2008-07-14T18:06:00.002+02:00

I was telling Ignacio the other day that I felt I was becoming a pessimist about society's fate because of the kind of stuff I'd been writing here and reading else where. And I'm naturally such an optimistic person... So he proposed the following illustration, imagine you're out for a walk on a beautiful day and then at one point you're standing in the middle of a road and you hear a noise coming from behind the corner which sounds like a truck coming your way at high speed, what do you do?

1 - You ignore it and hope it cannot possibly be a truck.

2 - You immediately assume it is a truck, panic and say that it's hopeless to do anything and stay where you are waiting for your doom.

3 - You assume it is a truck and decide to take it head on.

4 - You look for an alternative way and avoid the truck since it is such a beautiful day and you're looking forward to enjoying it

The first person is an optimist, but is also a fool. The second person is clearly a pessimist. The third person is a lunatic optimist, and we'd like to think we're more like the 4th person, trying to establish the case that there is a truck coming and discussing the alternative ways to avoid it, cause it is a beautiful day.

How do you measure up against the mold on your bread?

2008-07-09T23:40:00.002+02:00

An interesting video I came upon in youtube, that links in nicely with our ongoing discussions. Basically, my take on it is that any economic system (like our global economy nowadays) attempting to achieve sustained growth is bound to fail, sooner or later. Resource depletion sets in at some point, and the system suffers a drastic correction from its state of overshoot to either a much lower equilibrium point. Given the news in the last few months (food prices, oil prices, economic crisis, raw material shortages...), I´m getting the feeling that we´re going to find out pretty soon where the ceiling is...

how much oil is left?

2008-07-08T22:26:00.007+02:00

source: The Economist

The current known oil reserves are expressed in the above figure. I've added up roughly and came up with a value of 1.100 bn barrels (1 US bn = 1.000m) . If we keep spending at current rate, that is 90 m barrels a day, we have oil left for 12.200 days, that is about 34,5 years, assuming that the demand does not increase, which is unlikely since countries like China and India are demanding ever more. Of course somehow miraculously, it seems that every year, the reserves left tend to equal the ones of the previous year, which indicates that either they find them as quick as they deplete them or they can't do arithmetics very well... or they are just afraid to tell the truth.

The big challenges facing our society are securing energy, food and water for a 6 bn population (and growing). This is the main challenge that can bring about major catastrophe such as a war at a large scale, not Global Warming or Climate Change. There is no sensible measure we can take to correct climate. Any drastic measure will not bring about control of the situation, because such a system does not respond linearly. Whatever happens we'll just have to adapt to the new circumstances, with ingenuity, as we've done in the past. However securing energy, food and water, is something we can do, and should be doing harder.

We need and we must improve energy usage efficiency, develop further the renewable energy infrastructure, promote energy micro-generation and storage, develop desalination techniques and make them more accessible. We need to use more sustainable agriculture methods, that favor diversity of food species and rotation to prevent soil exhaustion and plant diseases, rather than usage in large scale of pesticides. We need to increase global population mobility such as not to exhaust local resources and allow people to go where the jobs are. And this is just the beginning.

the only politician today that gets it...

2008-06-22T11:41:00.003+02:00

It is amazing how some people may still be convinced that too much of a good thing is even better. Even as a child I quickly learned that cake was good but too much of it caused stomach pain. Of course I couldn't restrain myself as a child...

In today's economy, some people figured out that some markets, when left little regulated and with low taxation, with enough competition will work better than if governmentally controlled. But from there to conclude that every single one should be made to run free and wild as the solution to sustain economic growth, is for me, not so obvious, and is asking for stomach pains. It requires a blind faith to believe that, and not having eaten enough cake as a child...

A government exists because we as a individual people alone cannot enforce justice and a more balanced wealth distribution in society, so we trust a few elected to represent us in doing so. Getting rid of government, or eliminating any government intervention in economy and markets only serves the interests of a very few, no matter how much these very few may claim that it benefits all. Capitalism has no self restrain mechanisms. Ask yourself, if you were a millionaire capitalist, whether you would give away your fortune to save the world if scientists told you it would end tomorrow if you didn't. You probably would say yes now, just because you're not actually a millionaire and it doesn't disturb you to consider giving away something you don't have anyway. But the day you have it, you'd say let the other millionaires do it, why should I? People who have obscene amounts of money feel entitled to it, and feel entitled to more. Only very rarely will someone like that feel the urge to distribute it, like Bill Gates claims to be doing...

So we still need government to guarantee justice and fair redistribution of wealth, besides other things we can't achieve alone. Why do we need that exactly? Because history has demonstrated that the bigger the gap between the richest and the poorest in a society the likelier it is that social unrest will rise and destroy that society (revolutions, civil and international wars, genocide, etc.). Yes history has also demonstrated that extreme socialist totalitarian regimes don't work either, but again here the problem was some people believing in too much of a good thing again...

So here goes a quote from a modern aware and awaken American politician, he says:

"But our history should give us confidence that we don't have to choose between an oppressive, government-run economy and a chaotic and unforgiving capitalism. It tells us that we can emerge from great economic upheavals stronger, not weaker. Like those who came before us, we should be asking ourselves what mix of policies will lead to a dynamic free market and widespread economic security, entrepreneurial innovation and upward mobility. And we can be guided throughout by Lincoln's simple maxim: that we will do collectively, through our government, only those things that we cannot do as well or at all individually and privately."

The problem is believing that there are still out there such people that we can trust to elect to represent us in doing so. I hope at least this one politician succeeds in his country. This paragraph was taken from Barack Obama's "The Audacity of Hope". I'm now reading through chapter 5 (Opportunity) and found he has similar views on the evolution from government controlled to free market economy and the challenges it causes, and also the possible benefits of a recession in terms of bringing about important structural changes, as I described here in previous posts.

the thermodynamics of economics

2008-06-21T16:30:00.012+02:00

With this post, I intend to make the proposition that an ever growing economy violates the second law of thermodynamics and is therefore physically not possible. This is not an easy task, especially since I flunked thermodynamics a couple of times at college until I eventually just barely passed it... and I never actually learned much of economics...

I once discussed the application of thermodynamic principles to explain totalitarian political regime behaviours. How controlling a people to submission and acceptance could be achieved in the same way a fridge controls natural decomposition of food to submission by extracting heat from inside and expelling to the outside by a gas circuit. The equivalent for gas in that case was information, the heat were human actions, and the inside-outside were defined by the country's borders. Now it's about economics.

I quickly googled what other people have written about the relation between economics and thermodynamics, and I found there is already some material. I haven't read much yet, but I'll do it and quote later if there's interesting stuff. Now first we should try to understand what this second law is all about... it has been formulated in many variants:

You always waste some energy during an energy transformation. This means that an energy transformation is never 100% efficient, something is always wasted in other forms besides the ones directly intended. For example, when transforming electrical energy to light, some energy is wasted as heat.
Energy tends to flow spontaneously from being concentrated in one place to becoming diffused or dispersed and spread out, unless it is hindered from doing so. This means that a cube of ice will melt at room temperature.
In a closed system (one which is sealed in such way that it restricts energy exchange with the outside), the amount of energy available to do work will never increase spontaneously. Which in turn means that the amount of energy NOT available to do work will never decrease. This amount of unavailable energy is also called Entropy. So entropy may remain, but will never decrease. This is why you need to eat, your body only miraculously would generate energy by itself, or even transform it from other sources like the sun (unless you're a plant).

Brig Klyce suggests as example the following: "Consider simply a black bucket of water initially at the same temperature as the air around it. If the bucket is placed in bright sunlight, it will absorb heat from the sun, as black things do. Now the water becomes warmer than the air around it, and the available energy has increased. Has entropy decreased? Has energy that was previously unavailable become available, in a closed system? No, this example is only an apparent violation of the second law. Because sunlight was admitted, the local system was not closed; the energy of sunlight was supplied from outside the local system. If we consider the larger system, including the sun, available energy has decreased and entropy has increased as required."

So this law and thermodynamics is about energy and energy transfers between systems, energy which can be quantified in calories and joules. The energy equivalent in economic world are commodities and services that can be traded between parties, and since everything has an economic value, and that value is measured in money, we can say that the equivalent to energy unit in the economic system is money.

Now consider a very simple economic system consisting of two naked men, Jack and Jim (I actually considered which combination would sound the least sexist, 2 men, 2 women or one of each, and I couldn't decide, so 2 men it is...), one holding a burger and the other holding a beer. They are locked in a jail and have no contact with the outside world.

Jack says to Jim, I'm thirsty, I'll give you my burger if you give me your beer, Jim says that's fine since I'm hungry but not thirsty. An economic transaction occurred worth one burger which has the same value as one beer. Jack drinks half the beer, and Jim eats half the burger. Then Jim says to Jack, I could really use a beer to push down this burger, and Jack says great 'cause since I drank that beer my stomach got a bit emptier and I got hungrier. So a new trade occurs, worth half a beer which is the same as half a burger. Jack eats the rest of the burger and Jim finishes the beer.

Now, if we exclude further scatological or morbid possibilities, none of these men has anything else left to trade. Unless the warden comes by, food will not miraculously appear in their hands. So the amount of available economic tradable goods decreased, hence economic entropy increased as foreseen by the second law of thermodynamics. Even if the men start now trading services, like scratching each other's back, that is still another form of exchanging the same beer and burger in the form of the energy they supplied the men when they got digested (which is a very inefficient use of that energy, according to the same law, since the body taxes heavily this conversion by wasting additional energy to produce movement, body heat, blood circulation, thoughts, growing hair, etc.). The men would eventually just shrivel and die.

Had the men a watch and a flash-light instead of food they could have exchanged them forever (or until they broke and became useless), which would mean economic entropy would have remained constant, as the transaction would always be of the same value (speculation would only postpone or accelerate the transaction but not change its value), but it would never decrease. That is, even if one of the men figured a new way a watch could be used for, besides telling time, it would only still be worth a flash-light. No new economic worthy item would suddenly appear.

Now, if Jack and Jim are allowed visits and their wives would bring them more food, then the economy (the amount of transactions) inside their cell could grow, and if the supply from the wives would be infinite (suppose it's only limited by the fact that they can only carry a certain amount in their bags on each visit, but they can come visit forever and eventually buy a bigger bag at some point). Then there is no reason why this growth could not be sustained forever. In fact other inmates could join them in the trading, taping from their own wives, thus growing the jail economy even further. Unless, of course, the warden (understood here as government) imposes too many rules on what the wives can supply or takes for himself too high percentage of the goods in the form of taxes, which reduces dramatically the efficiency of the economy in the prison and limits the growth rate. Inmates can even start trading today the delivers they expect to get from their wives next month, increasing even further the economy! Hell, some of them can even sell insurance in case one wive doesn't show up, the economic potential is enormous.

If the wives suddenly became unemployed and unable to bring more food, and the infinite source of supply suddenly fails Jack and Jim are in shit because of thermodynamics, at least until they manage to get themselves new lovers, which they could do by posting adds in a classifieds magazine. However it is not going to be easy for them, considering they're inmates.

Today's economic growth has been sustained on the premise of infinite supply (of oil, food, steel, chips, etc.) within the reasonably foreseeable future and in removing obstacles to the economic transactions thus making them more efficient. The infinite supply is the economical potential - as long as this potential is there, money will flow just like electric current will flow if there is an electrical energy potential and wires to guide it. The speed at which it flows will depend on the resistance it will find along the way. Obviously for the capacitors in this system, which are the capitalists, the less resistance the faster they will accumulate money.

Now considering Ignacio's (Astroperit) last post, which claims oil's infinity is somewhat limited and considering our economy is so heavily dependent on it, thermodynamics tells us we're in serious trouble 'cause the wives won't deliver and we haven't been exactly posting classifieds. Economic growth is just not possible, just as we have been advocating in this blog. Unless we dramatically change the basis of our economy and tap on the one other source that looks infinite, at least in the expected longevity timeframe of human kind, the Sun and all its other energy manifestations, which do not involve waiting for generation of hydrocarbons: its light, the flowing air masses, the tides, the waves and rivers, even hydrogen from water. With the additional benefit that we would stop unbalancing our atmosphere by messing with the CO2 proportions. Everybody has to start seriously considering energy efficiency and micro-self-generation. In a world of finite resources (and that is where we are right now, because we're so many!), economies can only be sustained by renewable energy sources and recycling. Sure oil is renewable, if you give it a few million years...

What´s going on with Oil prices?

2008-06-18T22:28:00.005+02:00

What is your first impression when you look at this graph (taken from Wikipedia)?

Something is really going on, right? This is clearly not just ´noise´, or market volatility (up today, down tomorrow, but something is clearly driving a trend in the price of oil in here. What can it be?

Well, if according to my rudimentary understanding of economics, when prices shoot up like that, it can be due to two causes:

a) Especulation on the part of investors.

b) Change in the supply-demand relation (large increase in demand and/or drop in supply).

A mix of these two causes explains pretty much any sudden increase in prices: Whale oil in the late 19th century, internet stocks ten years ago, Spanish real state market over the last 20 years, etc... But how about now? Could it be that especulation is not the main driver? In such a case, why is supply not keeping up with demand (as it did until 2003-2004, apparently, according to the graph) ?

By now, you probably suspect that today´s post is about Peak Oil. If you think this is some bad translation of a mountain´s name in Northern Spain, then you really, really need to check out this documentary:

http://www.imdb.com/title/tt0776794/

In very basic terms, Peak Oil is the point in time in which globally we reach the maximum extraction rate of crude oil. Perhaps somewhat unintuitively, it coincides with the point at which around half of the available crude oil reserves have been extracted. It does not mean that there is no more oil in the ground, and it does not mean that we´ve run out of oil, but it does mean that once past Peak Oil, tomorrow there will be less oil produced than today (or only the same, in the best case). The main thing is, this is not just a crazy theory from some wackos in a compound in Texas, but it actually originates from within the oil industry itself! As I will explore eventually in this blog, whenever it happens - there´s quite a bit of uncertainty in the date - it will drive a change of global proportions, in the same order as Global Warming, but with a much shorter fuse.

The consequences of this simple fact -undisputable as it that will happen at some point, the only question being ´When´ - its consequences are massive, and I must admit that I was caught quite unaware of all the potential ramifications. The most obvious impact is that, once past Peak Oil, global oil consumption cannot grow anymore, and in fact it is forced to reduce itself as a consequence of the daily reduction of extracted crude. This in itself sounds already quite serious, but just image the way in which global demand for oil may be forced to go down... Voluntary reduction in consumption? Not bloody likely. Poor people being priced out of buying more gas? Possibly. Major recession destroying industrial capacity, and thus demand? Well, you can see the scenarios are multiple and they can be mixed & matched in any possible combination, but none of them is encouraging. In the end, reaching Peak Oil basically means the end of economic expansion, at least globally, and the end of the classical Bussiness Cycle. What then? This is the question I´ve been struggling with for the past couple of weeks. I do not have an answer yet, but I will be posting my thoughts on this topic, until I exhaust everybody´s interest, or until the lights go out and I have to pick up my bow, Mad-Max style, to hunt some rabbits to feed my family.

For those interested in starting with a little more info on this issue, as usual wikipedia offers the best all-around primer on Peak Oil:

http://en.wikipedia.org/wiki/Peak_oil

And this just in: Matt Simmons, an oil industry expert whom I´ll be referencing more in my next posts, was interviewed today in Bloomberg TV and had nothing but rosy pictures and good news for everybody!

What GDP isn´t - By RFK

2008-06-10T22:29:00.002+02:00

First post ever!! Wheeee!

Now that I got that off my chest...
Today I found this video of a speech delivered by RFK during his run for the 1968 US presidential primary - three weeks before he was shot and killed in a California hotel, while celebrating his primary victory (he would probably have won the election too, against Nixon... Imagine that!!). Just a bit US-centric, but still very current in today´s world.
Anyway, I think it meshes nicely with an ongoing discussion I´m having with The Sousa about GDP, growth and society. Seems amazing what politicians would say 40 years ago, isn´t it? It is a bit depressing to compare how the caliber of the political discourse has dropped in the meantime.

oil price and recession, is it all that bad?

2008-06-10T17:54:00.005+02:00

A recession may be caused by a sudden dramatic decrease in consumption by the society at large at the same time as businesses and governments make high investments and accumulate debt. This causes an excess of production and commodity prices to plunge. And to adjust to such low commodity demand and decline in profits corporations would lay off lots of people. Unemployment and social unrest would peak. There would be protests on the streets demanding work. Foreigners would be blamed for lack of work and xenophobic movements would rise. State tax revenues would drop, but social assistance for unemployed would rise. State finances could collapse. On the other hand the excess offer of labour in the workforce market will lower wages for those that do work (there will always be someone willing to do the job for less) and this will lead to more social unrest. A feeling of mistrust towards the economy would affect society and markets, and fear of investment would prevent money being available to initiate revivals and creation of jobs. Migration movements would be attempted and blocked by closed border policies. A negative spiral could be induced making matters ever worse eventually degenerating into sparks of war or revolutions, eventually creating tendencies to accept authoritarian and totalitarian regimes. This is a scenario similar to what occurred in the Great Depression in 1928. This is the worst we fear about a serious recession. And could a recession be induced by the oil price rising so much and the present food crisis? Can these problems slow down consumption and cause a recession? The crisis in American credit markets is already a sign of such a recession. Real state prices plunged and people with credits could not pay them back and were forced to cut consumption.

But could a recession also be beneficial?

I have a feeling that the notion that things tend to evolve slowly and that we should expect social habits to become more sustainable with time as awareness to environment problems increases is not entirely true. Real evolutions or important jumps occur out of dramatic changes or occurrences. Maybe a serious recession is what the western world needs to finally adjust its life-style to one that is more sustainable. One that accounts for the fact that resources are finite, the world population cannot grow indefinitely, and indefinite economic growth is not attainable. Maybe I'm a hypocrite because I think I'm not among those that are likely to loose their jobs with a recession and therefore are not so afraid, although I could just as well loose it (after all who would need spacecraft in times of crisis?).

But after discussion at lunch today with friends, we came up with a number of potentials benefits of a recession:

Transportation costs would rise, making local production viable instead of importing, thus creating jobs specially for commodities that are basic (food and clothing).
People would be forced to use energy more efficiently and new energy sources would finally be better developed and explored. This would benefit the environment.
Less willingness to consume would mean that people would prefer long lasting products over perishable ones, thus forcing producers to adjust. This could potentially reduce the present consuming fever in the long term and change the consumption paradigm, which in turn benefits again the environment by depleting less resources.
Major structural chances (social, economical, industrial) could occur which actually are for the better. If people see this as an opportunity to worked together out of it. For example transportation systems and in particular public ones could be totally re-designed and improved in quality and efficiency (we could get rid of oil).
People might finally be convinced that consuming cannot be the ultimate goal in life and that other economic paradigms are possible. Economists would be forced to find them.
With lack of jobs, possibly with predominant impact on low payed jobs, people might get the incentive to study more to apply for jobs at the other end of the wage scale.
Consuming less or having less choice when consuming could potentially simplify a lot our excessively sophisticated life-styles thus reducing stress, and liberating more quality time to be with those you like.
Family planning would increase as educated people would figure that they cannot afford larger families and we might get a grip on world demographic explosion

Maybe it's just wishful naïve thinking and things may turn for the worst. But it seems we're getting ever closer to it, and if we get there, it's best to think on the positive aspects than to allow us to enter the negative spiral!

investment project

2008-06-10T17:25:00.003+02:00

I had an idea for a project and experiment. To create a private investment fund for micro-credit. It consists of:

- Collecting contributions in a current bank account

- Add Google adds to this blog and revert the revenues to that bank account

- Use the funds to invest in micro-finance projects to reduce poverty around the world such as:

- Re-invest any earnings the same way and see if we can make the fund grow.

If anyone is interested let me know. If you now see some adds appearing in the blog don't be scared, I'll try and filter only adds that relate to the topics we discuss here

- Fair Trade

- Eco-Consuming

- Eco-Tourism

- Micro-Credit

Monkeys

2008-06-08T12:53:00.002+02:00

I'm back from vacation, I see my long posts did not inspire much reaction from anybody, no wonder :), you're all a bunch of monkeys!!

I found this one at my father's blog (www.horabsurda.net)

the dilemma of the kiwi

2008-05-16T16:45:00.004+02:00

One last post before we leave, this afternoon my friend Daniel and me were discussing about this responsible consuming thing, and how often people who want to do it are confronted with conflicting facts about stuff they consume. And it reminded me of this children's story of the son and his father taking the donkey to town to sell fruit. The first time the son goes with his father, he rides the donkey together with the fruit, and when they arrive in town people start commenting how shameful it was that such a strong young boy would let his old father walk while he was comfortably riding the donkey. He felt so ashamed that the next week he told his father he'd prefer to walk instead. This time when they got to town people started commenting how ridiculous such a strong man would let a weak little boy walk, while he lazily rode the animal. The week after the boy asked the father if both should ride the donkey this time. When the people saw the beast arriving in town, loaded with fruit and the 2 people, they started commenting how disgraceful they treated the poor animal. So the next week when the boy was about to suggest, out of shame, that they should carry the donkey, the father said wisely, that he should not mind so much what other people say, they will always find something to comment about, that's what they do.

So people who want to consume with a conscience often encounter the boy's dilemma, you buy the kiwi from New Zealand, and people tell you, but that comes all the way around the world in a ship that spends tremendous amount of fuel and pollutes, it is not environmentally friendly; then you buy the kiwi from Spain, and people tell you that in Spain kiwis should not grow there in the first place so they use enormous amounts of fertilizer which is not environmentally friendly, plus they subsidise farmers in Spain such that the New Zealanders and others are jobless; then you decide not to eat kiwi, and your unhappy because once in a while a kiwi would be nice.

Daniel and I seem to agree that acting with conscience is to act to the best of your knowledge and to the most reliable information source you have. It is not easy to compute the impact of one kiwi, let alone all the things you consume every day. I try not to be fundamentalist about anything, but to be conscious of what I do and why. Moderation is, i think, an even more reliable guideline for behaviour than responsible consuming. And also willingness to accept the best and most sensible explanation you get as the most likely to be correct and adapt to new ideas instead of stubbornly attach to dogmatic ideas.

What does this all mean then?

2008-05-15T18:14:00.009+02:00

After such a long tale, I should at least give some conclusions, there are several, so here they are, as I see them:
- Government controlled economies cannot cope with a complex trade world that constantly evolves in which offer must match demand in a more dynamic and efficient way. Furthermore this type of systems tend to be despotic and limiting of peoples desires to express freely and make choices that affect their lives freely (and without being flooded with possibilities as demonstrated in Alex's post)
- Free markets are more dynamic and efficient, but the cost of that is that increase in demand is met by a greedy principle to match it (profit maximization is what drives corporations), and a decrease in demand has as impact that it will result in closure of businesses and if not always permanent at least transitional loss of jobs and their corresponding social consequences.
- Corporations will always act in self interest to maximize profit and return benefit to the shareholder, only when it suits this purpose will they ever show any social concern. Government should be the main driver of common welfare.
- In today's age of global trade, knowledge based economies and unbounded communication and exposure capability supported by internet, skilled individuals hardly need to be backed up by a corporation. What does a Google engineer need Google for? Secure his or her payment? If Google considers this person worth receiving a big salary, the free engineering market will secure him, via projects where this person's skills are required, that exact same salary, or more, because this person would be able to claim for himself the profit that Google makes on them. Power to the people means power to the individuals to contribute directly with their skills to the economy, without the need for Government or Corporative backing.
- Efficiency of a market cannot be an argument for making it free when it is obtained at the cost of fairness. It is not fair that you should only be allowed to get complex surgery if you can afford it. A human life is worth the same regardless of that person's income, and if you subvert this logic you're hurting society beyond repair.
- Resource limited or resource intensive markets cannot be made free at the cost of exhausting that resource, appropriate regulation and taxing are required. Taxing pollution and other economical externalities of free markets cannot stay in the nice theoretical papers of economists it needs implementing and enforcing now, against all corporative interests.
- Government incentives to corporate spins-offs or start-ups rather than mergers and acquisitions should be put in place. For example do not tax the first or provide optimal credit possibilities and tax heavily the second. Anti-trust laws must be enforced and not wavered as is often the case, bowing to corporate interests.
- Power to the people also means the power to influence corporate behaviour by our collective consumering patterns. Consumering passes the right message, it tells the corporation what you believe in. So use it responsibly and as informed as possible. The traditional power to the people by influencing government will always apply and requires involvement and information. Where there is a human need, it will be met with an offer in some magical way.
- Any change, but in particular a change in economical paradigm must be brought about, in any place of the world, in a sustainable way, that considers the specificities of the local populations, culture, anxieties, and current in place economic processes, and most importantly its impact on the environment and resources. It may require time, but it's always better not to rush and make each step securely. Try a solution and reverse if evidence shows it ineffectual or counter-productive.
- Gigantic corporations are as likely to become inefficient as massively government controlled economies. The trade off between scale-economies and the loss of flexibility and corporate dynamism means the consumers stand to loose, not only the gigantic corporation will not be able to adapt to market demands as foreseen in the free market model, but they are likely to abuse of scarcity power, and accumulate undistributed wealth. Besides in the world of internet, scale-economies can be obtain by smaller enterprises coming together to purchase together.
- Markets where competition cannot be guaranteed because of scarcity power (for example limited bandwidth for mobile phone operations), than the government should detain and explore or make available at production cost the limited resource. It should not be privatized and owned corporately, this is not at the best interest of the consumers and citizens, who ultimately own the resource as it pertains to their country.
- Government should not discard its responsibilities to provide universal welfare and solidarity to citizens under the false pretense that it will be better administered by private enterprise. That's why we pay taxes for. Citizens expect tax policies to be applied under the principle of fairness, and balanced redistribution of wealth.
- Financial markets where enormous corporative profit is obtained is not fairly taxed compared to consumer and workforce markets. In particular speculation investment involving vital resources as food should be more heavily taxed or even discouraged by law as its consequences are often inhuman.
- News editors and journalist have as much power in today's society as the judicial system and should therefore be regulated under a similar state funded but independent institution and not be confused with entertainment, or state/corporative interest based opinion making.

Most of all when it comes to pointing fingers we're as much to be blamed for injustices we witness as any body else as we've allowed it to happen under our noses, and we should come together to denounce them.
Eventually other ideas will occur and I'll post them in the future, this is the main message I wanted to pass with this series of posts. Once more, if you had the patient to read, you have my admiration. Thanks.

Some of the literature I've been reading about these subjects:

The Undercover Economist, Tim Harford
The Silent Takeover - Global capitalism and the death of democracy, Noreena Hertz
Freakonomics, S.Levitt & S.Dubner
Cheap? The real cost of living in a low price, low wage world, David Bosshart

Can it get any worse?

2008-05-13T13:58:00.006+02:00

In this post, the seventh of the series, I will bring the adventure in the Banana Republic of Chitita to an end. Not that the country will disappear, but the characters will, it's the natural way. So in this post, my alter-ego is an old man, who has lived to see the enormous economical and social change in his country.

I'm an old man now. I've gained as much in cynicism as I've lost in naiveness. I'm not as enthusiast and I've grown embittered and sad. And as I write down my last report, and look back to all that has happen to us, I cannot help feeling that I had been wrong about my vision of life. It is not like a snowball that due to some uncontrollable forces starts to develop downhill towards a nicer warmer valley. My first impression was that we never actually reached that promised valley in the first place. It was as if in that valley there was a wild river and we just fell into that, and kept riding it in a mad roller coaster, which seemed out of control. And as we rolled down, sometimes still breathing, sometimes drowning, it was as if the river went through narrow canyons and we could not come out of it. But now near the end I see that life is more like a pinball machine. There is this ball, which represents things (the economy, society, happiness, and so on) that gets thrown up by circumstances and then starts coming down, and as it comes down, it bounces and ricochets in all sorts of complex phenomena and it gains momentum towards the bottom, and then someone has to bounce it back with a pad, back to the top or at least keep it in the board, because if not... the game may be over. But it seems that each time this ball is thrown back up it gains weight, and when it comes down it comes heavier and demands all our strength to pad it back up, and then you get tired and old... and you hope someone will pick up the pad and do it...

Can it get any worse? The answer to that is the same as before, but how could it ever get any better from where we were is a more subtle matter. What had lead us to catastrophe before was a series of misfortunes, now what could bring us back could only be a series of good-fortunes.

But first let me tell you a bit more how things got bad:
As you'll remember I'd been fired, evicted, and run out of money. I had spent most of it trying to buy expensive banana to get my hair back, and not only did I not get it back as I kept losing more and more. There was no other job I knew how to do so I tried to keep doing agriculture. Some friends and I went to the woods and what was left of it and tried to clear another part of it to grow some orange trees, we figured other people by now would be missing them too. Unfortunately we were met by more dogs, and now it was forbidden to plant in those woods since they had become protected natural reserve, although there were no animals left in it and the trees were sick. They claimed, that this was exactly why they felt they had to protect it now, funny that nobody thought about it before they started devastating the woods in the first place. Some other people managed to cultivate some arid land way on the outskirts of the country, with enormous effort to water it, but as soon as they had a crop, that could mean some competition to the Chitita Corp. they were bought out of business and offered minor jobs at the corporation.

A lot of people went into business by themselves doing other things, like polishing shoes or cleaning toilettes for the top managers of the corporation. Some actually had it very good. A middle class of people dedicated to provide other more value added services of marketing, engineering and consultancy had it very easy. But even in that middle class there were discrepancies that began to exacerbate, those people dedicated to education, health and justice empowerment, saw their positions in society being constantly undermined by bad government and eventually lost motivation and lost quality of life. Yes, we had become mostly a services country by now. Mind me, when I say that things were bad, they were not actually bad in absolute terms for the whole of the country. Even me in my poorest phases now, I had never been again as hungry as I had been many years before when our crops failed. And I did not feel as restricted and censured in my behaviour as in those times, even if strict censorship had been replaced by a softer form called “politically correct”. But relatively, things had never been so unequal. Before, in the old days, we all ate from the same pot, whether government or worker. Now, the richer kept getting richer and the poorer, poorer. There was clearly a deficit of fairness and a great amount of greed. And the growth of this gap meant that if you weren't part of the right group, your hopes for a cross-over and for a brighter future were getting slimmer and slimmer as the gap got bigger and bigger and that hopelessness lead many people astray, to quit education and to fall into vice or uncontrolled consumerism.

In the meantime, and on top of this social unrest, the land which had been intensively cultivated for the last years started to give in and became exhausted. The crops started to fail. Not only that, but due to the excessive fertilizer usage most of our water was contaminated and a lot of new diseases that we had never know before started to appear. The rich drank bottled foreign water and therefore were immune. Lucky for them. I too got sick. But since I could not afford to pay for the private medical insurance, I had to just tough it out, the pain, the fever, the coughing. After that I could not hold a plough any more. I became a bum.

Chitita Corp. converted from a fruit plant into a pharmaceutical plant, to provide medicine for all the now sick people. And there was a lot of sick out there in the world who wanted to buy some of that medicine too, so it was great business for them. Now the pharmaceutical plant, made a lot of pollution, and often had to dump some of its chemical waste back into the lakes, this made the water even worse and created a whole new set of diseases of treat. And the pharmaceutical became even bigger, and so on, in a growing spiral.

Jobs for bums were difficult to come by and I eventually sold my 4 sqm. apartment to a family of 5, for some money. And I went to live out in the street, I wasn't scared, I'd often slept under the orange trees as a young boy, the cold did not scare me, even if I had been sick. But after the first nights out, I started to get really scared. Our country had developed an intense night entertainment industry, including night clubs where people could get seriously drunk, drugged and even buy young men and women for sexual pleasure. Now the nights were crowded with a strange fauna of owls, going about these places in enthusiastic moods. It was not uncommon that shouting and fighting would start and eventually lead to shooting, that would hurt innocent by-standers. Most people were now carrying guns for protection. Robbery attempts had gone up dramatically, insurances were at a premium. Many blamed it on the poorer foreigners who kept pouring in, running away from their own poor countries and misery. Our country was in an official state of war with our neighbour, it was said that the neighbour had become a fanatic religious terrorist and hate us deeply, for whatever what, I could not tell then, and I never even knew the neighbour was religious at all, we'd never heard of it.

At my age I did not hate anybody any more, and I blamed no-one for our situation but myself. After all if I hadn't been so lazy all those years ago, maybe my wife would not have forced me to make those cupboards and we would have kept reserves for that bad winter, and then we wouldn't have been so desperate to bring about all those changes. Maybe we would have done it like the neighbour and built only one road, and built up our production capability slowly, and caring for its impact in the environment and the people, a step at the time. Maybe we wouldn't have needed Cap to help us with the food corporation, maybe my wife could have done it just fine, after all she'd been doing it for so long and kept doing it afterwards for the corporation, and she could not possibly have been blamed for the weather when that calamity happened. But even the neighbour who had built up his economy in a more sustainable way, was not entirely protected from cheating in the free market and bad will, and that made his economy collapse, so who knows what would have happened if things hadn't happened the way they happened.

At that point, as it was, the country was in the hands of an enormous corporation, and the corporation was in fact itself, a country, a virtual one, without land or borders, but nevertheless a country, and an egotistic one at that, that cared only for its own inhabitants, the employees, event then, mostly for its managers, who had millionaire salaries and bonuses. It had a logo for a flag, a jingle for a hymn, which was played continuously by this Merdia guy driving his van around (everybody figured by now he was no scientist, just a loud mouth). And it had its own army, a private security force of angry dogs. It could take over our country if it wanted, there was no more Waldy around to prevent it. Our own democracy was a joke. At the beginning we cared to debate ideas and needs and to choose the best candidate, now the election campaign debates had turned into a circus. The candidates would just have vans shout out their names very loud and then would meet in a public arena and throw cream pies at each other and the one that came out the cleanest and smartest looking was chosen to represent us, but nobody really expected them to do much. Mostly they would do their utmost to issue laws that pleased the corporation, expecting a nice job there in return. Unemployment was rampant, but the country kept exporting tremendously, mostly goods that were bought at cheap price for speculation, or to be packed with a nice brand and promotion campaign and then resold at twice the purchase price as fashion items for enormous profits. Our country, as I said, offered an assortment of services, provided by just a few educated people with good corporate connections. The rest of the people started parallel illegal markets to make money, involving mostly drugs, falsified corporate branded fashion items and electronics. The little money people got was immediately spent on consuming cheap goods for pleasure, like an addiction. Needs were exacerbated by fashion and publicity, and by quick obsolescence of goods. People drank much more, not out of pleasure or laziness, or even because they had worked a hard 16 hours long day at the plant, but because they had no work, no future and wanted to forget about their families demanding them for more than they could provide.

One night as I was sitting around a fire together with another group of bums at the end of an alley, I noticed an old lady, wrapped in a blanket, shivering. I asked if she was cold. Her eyes were frozen and in them I saw death approaching, she said only these words: “my baby... in the basket”. My heart shrank. I thought of him, I had hated him, I would have had him expelled, where was he then? I thought of my wife, had she forgotten us? Had she cared for the baby? When I looked back the old woman had given up living. Do coincidences exist? Really? If not, I cannot explain why when I got on my feet, I saw my wife approaching. She was looking around, walking slowly, sometimes kneeling to see the bums. I came closer and said hello. She had a tear falling out the corner of her eye, which she immediately wiped. “Hello my dear, how are you?”, she said in a mellow voice. I hadn't seen her in so long, she kept her beauty intact, her hair just a bit greyer. I said I was fine, all things considered, and asked her about the baby. It seems he had gotten a fantastic education abroad and was now the new CEO of the Chitita Corp. She then took my arm, and asked me in my ear: “What have I done?”. I wanted to explain to her that it was not her fault, it was in fact mine , and she continued: “Do you remember the song?”. The song was an ancient myth of our country, it was a set of very old verses passed from mother to daughter, of which my wife had been the keeper. It went like this:

"From your womb, a flower will grow, her stem of white, her leaves of green, her petals of gold her eyes of blue. With her petals she covers the sun that burns the land, with her leaves she covers the land from the snow that freezes, her stem is strong and her eye is smart, and she will love you, like you will love her, oh Sousalandia."

I have failed my country and my people, I sold us, my wife said, but I still love you, will you help me? I could never refuse her anything, so I followed her. She had abandoned the corporation, and with the money she had, we bought a van of our own and drove around the countries shouting what unfair deeds the corporation had been doing. Every time we denounced something the corporation went to great length to amend their ways, and we discovered we had the power to change things. They were afraid the bad publicity would prevent people from buying their products, so we kept at it until we were too tired and old. Many times we got mysterious flat tires and engine break downs, as if to prevent us from proceeding, but it didn't deter my wife and her determination to make things right again. Sometimes I'd ask her if she didn't prefer we'd go somewhere far and start another little farm, just with a few tomatoes and oranges. She would tell me, she'd been everywhere and this place did not exist any more. Everywhere there were roads now. There was no going back.

When one day we returned to our country, ready to retire, we came across something fantastic in the park. My wife pointed at a woman who spoke to the people around her. But this was not just any woman, this, we could see was a special being. You could feel it before you even listened to her. Her skin was a beautiful mulatto brown tonality that expressed in the most splendid way the mix of ethnics of our country of today, her eyes were blue but orientally drawn backwards. She wore a simple white and green dress, and a golden sun-flower in her hair. She moved in a gracious way that told you she was a mother. But not that mother that has 3 children and runs around them in immense worries. She is the woman that has grown into the wisdom and maturity that is required to mother someone, her name was Fairy Trady. And we listened to her, this is what she was saying:

“A child is put into this world unprotected and unable. It's her mother's job to raise her, to educate her in the basic ways of the world, to feed her, to decide for this child on how to dress, how to behave. To censor the behaviours that offend her own principles and to give those principles to the child. When that child becomes of a certain age, then it is given to the hands of the teacher. And the teacher knows better of the complex ways of the world, its dangers, but also its opportunities, and from the teacher and his example, that young person learns for himself what is right and what is wrong, for him, for his fellow man and the land he inherited. And one day that person is ready to take his life in his own hands, without the mother and without the teacher. The teacher, has his own interests, he benefits from having the student, that's what he's paid for, and will keep telling the young person that he is not ready to take on the world, that he needs supervision. But that bond also has to be broken. It's the natural way. Likewise is a country. It is born into the dictating hands of a ruler, that shapes it and brings it up, some more strict and censoring, some more benevolent and compassionate. One day, that bond is freed and in comes the corporations, that teach that country to do business, to relate to the world, to produce and to trade. But one day, that bond too must be broken. The people does not need for ever a paternalistic figure that cares for every aspect of their life. They need guidance, support and motivation, but not a cradle. They don't fit in it any more. The real power to the people will come only when the people is truly empowered, not just to choose government or choose the corporation they'll work for, or what they will buy, but empowered to contribute as an individual, as a skilled individual, to the country economy. And in today's age of global communication and trade, that individual does not need the teacher or the corporation to sort out the complexity of the world, it is there, ready to be explored. The corporation will survive, because the teacher doesn't die, but its role should be that of teaching and of bringing skilled people together in projects and associations with the world but then letting them free. It is unfair that the teacher becomes rich out of exploring the student. And as for the mother, she will always love and look out after her child, and make sure she eats well and is warmly dressed, and healthy, and that the world treats it right, no matter how far they may be.”

My wife and I looked at each other, and without words we knew that the prophecy could still become true, a new flower had grown into the womb of our land, and things may just be getting better. Now whether this vision was really true or just the dream and delusion of an old man in his death berth, I cannot really tell any more, as I am now dead. I do know this, things may be getting better or worse, but they'll always be getting somewhere. Fairness will make things better, greed will make things worse, for all. Thank you, if you read this far. But if you're wondering what does this whole tale mean, and what am I trying to say, then read the next post as well.

Can it get any better?

2008-05-12T15:49:00.011+02:00

This is now the sixth post on a series about economics of the free markets and society. If you read the previous post you will remember my alter-ego in the Banana Republic of Chitita (the BRC) has been reporting on how his country has evolved from a government controlled economy to a free market economy. So you'll now find me 10 years down the road from the last post, when a number of reforms were put in place to adapt the country to the new free market economy and how everything was wonderful in this new system.

But can it get any better? Well, just when you think it can't get any better, well that's probably when it can't. Not only it can't, but in this case, things actually began to deteriorate. That's the whole point of life, things are either getting better or getting worse, but they are always getting somewhere. What things? I'll get to that in a minute.

First let me tell you a bit more of how good we had it. Although we'd been working like dogs, 16 hours a day for little wages, our economy was growing stronger and stronger. Our government, in spite of our ever increasing production and exporting capability, kept our currency deliberately under-valued in the international market, such as to make our exports grow. And boy did we grow! Everybody was buying our cheap fruit. We basically took everybody else out of the orange and tomato business. Other countries were even growing suspicious of our dumping and wanted to impose new tariffs on our products, but luckily we had signed a World Free Trade alliance that prevented them from doing just that, suckers!

We also had elected Cor Uptible as our first president. He had promised to fight for higher wages, paid vacation and pension. So he actually went to my wife, who was then the CEO of the Chitita Corp., and asked for all these things. She said that the actual owners of the corporation would not be very pleased with it and it was better not to ask for those things just now, because, they were still consolidating business and if we asked too much they might leave the country, and that was not nice. So Cor decided it was better to wait for a more appropriate moment. In the mean time he went about privatizing all the things that were still the government's responsibility, schools, hospitals, even old Waldy, the dog became privatized and joined the Chitita private security force. The rest of us could not have it that Cor had failed to negotiate our demands, we lived in a free country and we'd certainly do something about it. We got unionized. Yes, this was actually suggested by our friend Com Unist. All the workers should unite to fight the oppressing bosses. So we started a big protest, we threatened to go on strike, and eventually they broke in. We got our pay raise of 1% and paid vacation of one week. I had never been on vacation before, and I had never left our country, except to go to the neighbour. So I decided to travel to see the outside world with my own eyes, I'd never been so excited like this in my whole life. So I travelled for a whole week and visited other countries, and saw how they had it nice as well. People in general were a bit colder and distant and didn't talk to each other, but they looked beautiful. I've been in a country where everybody dressed corporate brand clothes and got facial surgery, I wanted so much to have one myself, but I couldn't afford it. I realized that our country still had a long way to go until everybody could afford so many luxury goods, but I was glad we were on the right track.

When I got back to Chitita, something terrible had happened, I was told. Just the day before a van with loud speakers had driven by and a guy called Merdia, who was claiming to be a fantastic scientist had been shouting for all to hear, that he had made an important discovery, and that was that eating oranges caused men to get bald. I was shocked. I had never realized that relation although I'd been eating oranges all my life and had in fact by now gotten to be considerably bald. It was so obvious, how could I have not realized it? He said also that on the other hand eating bananas would make hair grow twice as fast. And then he moved on to shout that in other countries.

This was terrible indeed, this meant our currency had just lost roughly half of its value because nobody would be buying oranges anymore, and we were basically poor. The union called on all the workers and we rushed to the farm to cut down all those orange trees. But when we got there, and to our astonishment, by some miraculous coincidence, all the orange trees were already gone, and in their place, surprise, surprise, banana trees. I didn't even know bananas could grow so far up North, but as I was later explained this were a sort of Genetically modified banana (don't ask me to explain that), we were rich again, bananas would be selling like crazy as they make hair grow back! I couldn't wait to have some of those bananas myself. Now what was more concerning to me was, of course, who had done this. The answer was a fleet of bulldozers. And next to it another fleet of agriculture machines was ready to take over the ploughing, the picking, and the watering of the fields. Just 10% of us men were required from now onwards to manoeuvre the machines, those would receive appropriate education, and the rest would be laid off, and would be free to pursue another more fulfilling career in another area. I was glad to be free, but was very worried what I would do if I did not got chosen to work with the machines, I only knew how to plough and water and pick fruit. What career did they mean?

I got laid off. This was the worst day of my life up until then. I got some money as severance, but it would only last me for a couple of months. What was I to do? I went to my wife to see what she could do for me, and she said she was sorry, but I was getting kind of on the old side, did not have the same stamina of some of the young folk, and investing in my education would be a bad managerial decision. But that I should look on the bright side of things. The guys who did stay would be producing much more with the help of the machines and the whole economy would go much better, which meant things would be better for all, and that was the best thing that could happen to us all. That's one way of seeing it, but I couldn't help feeling bad.

A bad thing never comes alone. When i got home, that is the barn to where I'd been relocated some time before, there was an eviction note on the door. I was to be relocated again to a new social building with a hundred floors and 4 square meter apartments, I got a flat on the 80th floor with a fantastic view, but a bit cramped. At least I didn't end up in the street, like some other foreign colleagues, I guess my wife must have had some pity on me. The reason I got evicted however was this. Rumours had it that the barn was needed for chickens. I was very surprised to know that we were going to produce chickens, since the neighbour produced so many already, and wondered who'd had such a stupid idea. It turned out, I later discovered, that we were not going to produce them after all. Chitita Corp. bought an incredible amount of chickens from the neighbour and stored them in the barn, they told the neighbour they wanted to feed a lot of hungry people, who had lost their jobs. I was so happy they'd thought about us and waited to receive my portion of chicken, but somehow it never came. The reason it seems was because, all of a sudden a strange disease attacked the remaining chickens of the neighbour killing most of his productions, since there was then so little chickens in the market, their price went sky high, and a lot of people in the World suddenly became extremely hungry for chicken.

Our Chitita did the human thing, and provided them from the stored chickens at a high price, because those chickens had been intended for the poor of our country.

The neighbour who had not put in place all the reforms we did, and had his economy relying solely on chickens and beer, was shaken by this event, and was in a bad situation. He went a bit cuckoo and one day came barging through our country with a bulldozer trying to destroy our plantation. Why would he do that? We'd even offered to sell back to him some of our chicken... Chitita Corp. issued a note saying he'd become a terrorist and put back the barb-wire around the plantation to protect it from other possible crazy terrorists. People with envy of our wealth and progress. And can you believe that even that wasn't enough. Another guy, an ex-colleague of mine, who had been fired from Chitita, infiltrated into the plantation and attempted to sabotage the irrigation system and a couple of plough machines. They caught him too. It turned out that he was some how related to the neighbour, a cousin or something, which I found totally strange, because he had never mentioned anything about it, and certainly they didn't look a bit alike, since the neighbour was white and this guy was black. You never know. Well, the end result was, the whole plantation security was scaled up, and now big X-ray machines were installed at every road entering in our country. Trade continued as usual, but people had to be a bit restrained as some, we realized, were potentially dangerous.

The union people got together to protest again against the corporation, but all the guys who remained working there had actually quit the union, so all we could do was shout for work at the doorsteps of the government. They let the new dogs (angry Dobermans) on us, and we had to run for our lives. We went to the pub and got drunk. I run out of money. Man, how I started to miss the old days. Even people who had not been here in the old days were missing the old days. Someone said quite wisely: "Oh things were much better, back in the days when things were much worse". And all these stupid foreigners who kept coming in thinking this was some sort of El Dorado, where you find work in a blink and make lots of money, just made things worse. Some of us started hating the foreigners; even people who not long ago had been themselves foreigners hated the new foreigners.

I missed my wife too... yes she was strict, and wouldn't allow me to drink beer and made me work a lot, but it was for my own good. She really cared for me back then. Even people who never knew her as head of the country wanted her back. Now what have we become? Our government had been for the last 10 years either lead, by Cor Uptible, or Cor Uptus, his cousin. We could not tell the difference anymore. And nobody cared to vote. They were just selling away everything and making more laws to please Cap and his people in the hope of getting in to the top management of the corporation where good money was to be made. Now can this get any worse? And that I hope will be the topic of the next post.

How's life in the wonderful market economy?

2008-05-11T08:48:00.021+02:00

In the fifth post of this series, I have to admit I somehow grew attached to the characters of my wife's and mine alter-egos, in Sousolandia and I think I could use them to further explore the effects of such a radical economical change. Forgive me if you just find the whole thing dumb.

So this post will find me a couple of years down the road from that incredible time when we changed our country from a Government controlled economy to a free market economy. And things could not have turned out better. This is it. We love it. We have reached the Nirvana of the economic paradigm, prosperity for all has arrived and the end of hardship. Ok, maybe, I should admit that we still work hard, but at least now we can get a lot of good stuff for it, stuff I never even dreamed I'd be needing, but without which I cannot live anymore (Whisky is among them).

How did we get here? So you'll remember that Cap, Cap Italist, the great foreign agriculture expert, came luckily our way, and out of his immense generosity offered to help us with the production. My wife, of course told him, she'd gladly accept it, but that he should always keep in mind that she was dictating the rules, and that of course she counted on my advice, because she didn't want things to somehow turn bad for me or the baby (the one we found on a basket), she loved us immensely of course. Oh yes, the baby has been growing fine, beautiful boy, he needs even more stuff than I do. My wife adores him. The funny thing is that some years before, when things had been going relatively OK, I had even proposed we'd get some of our own, which she then found that it wasn't such a good idea because we wouldn't be able to feed them on such low crops. Funny how things turn out.

Cap was fine with it, in fact he said he loved our rules, and even propose to suggest some of his own which could help improve things even more. He called them Reforms. First of all, he said Sousolandia sounded very old fashioned and that the outside people would not associate it with a modern fruit exporting country. So he came up with a beautiful alternative, Chitita, the Banana Republic. I raised my arm and told him, that in fact, we were neither a Republic, nor did we produce bananas. To which he smartly retorted that "one has to look into the future, my boy". I liked Sousolandia, but Chitita was just as fine.

With a name like that many more people came and we all got work down at the plantation. We even had to expand it. So we started to cut down parts of that useless forest that was surrounding our farm, sure it was beautiful, with all those birds, and flowers, and lake, but it was completely useless, nothing really worth anything was being produced there. I thought I'd miss the times when I was a child playing in those woods, but then again I'm not a child anymore, and we need to increase production. By then we were producing so many tomatoes and oranges, which we were using to trade for everything else that we realized that it was such a burden to carry them around to do business, so Cap suggested the Monetary Reform. That is for each tomato and orange we produced, which for us were worth more or less the same, my wife, the government, would issue a little paper saying "I'm worth an Orato" (that's what we called our currency), and then we just needed to use those papers to trade instead of fruit. Because we started carrying lot's of paper, she then made some which said "I'm worth 5, 10 or 100 Oratos".

The neighbour did the same and created the Chikollar, which was worth a chicken. So in order to trade with him we had to maintain a table to convert Oratos to Chikollars, depending on the level of production and exporting of either country and how appreciated those products were in the market, which oscillated with the fashion. Then we figured out that everybody else was doing the same and we had to expand our table to foresee all possible conversions from all currencies to all currencies. This also turned out to be complicated then one country said that they produced something that was worth more than anything else in the planet, diamonds, and that we should all just calculate the worth of our currency with respect to that (he was right, I'd seen one of these diamonds in the neck of my wife, a little present from Cap, to celebrate their everlasting friendship, it seems it had cost him a few thousand tomatoes and oranges). That made life easier; we all indexed our currency as a fraction of a diamond. Now doing business was really smooth. I hardly ever really saw a tomato or orange again, but some one must have been buying them because our papers were always worth something. Sometime we could tell that the selling was not going well because all of a sudden the paper value would drop, and you'd need more of it to buy something, and they called that inflation. Oh yes, Cap was giving us paper money for our work at the plantation, a fixed amount, which he adjusted every year so that we didn't feel so much this inflation (my wife had to push him to do so, but never mind).

The other thing Cap proposed was to buy the right to plant the land. He said that the land would still belong to the country, but he wanted to own the right to plant it how he saw fit, because if others would be coming to interfere this could make things very inefficient, and after all if he was going to invest most of his possessions in it, he wanted to be sure he wasn't going to get ripped off, dispossessed of his most valuable belongings and expelled once the plantation was yielding lots of fruit. My wife agreed to it, they signed a contract which she swore to honour and we received a few diamonds in return. So we had the Privatization Reform. But he didn't stop there. He asked my wife: "Why is it that you only take loans from the neighbour? You know he's always ripped you people off, he asks too much interest.” we had never really thought about that one. He was after all the only other person we knew until then, and even if he was not entirely fair, we at least trusted him. But Cap said that now we were trading with all kinds of other people and if we trusted them to trade and balances our currency; why not trust them with loans? In fact there'd be so many others offering nice loans that we would find much better interest rates, and use the money to invest in the plantation. How can you argue against that? My wife immediately started the Liberalization of the Capital Market Reform. Cap was very pleased with us, and told us how smart he thought we were to come up with all these nice reforms. It was very nice of him to say so, especially since most of these ideas were actually his.

My wife in the meantime got very busy attending to the needs of everybody in the country, we had grown now to a considerable size in population, most of them Foreigners, but now some were having their own children here, which I guess makes them nationals. She had to make sure everybody stayed more or less healthy, but unfortunately there was no more hot water bottle in bed and herbal tea as before, everybody was just getting an Aspirin, and had to pay money for his or hers. She had to make plenty of rules for how people should behave, because everybody was accustomed to something else from the places they come from. She also had to teach them all to speak our language. To sponsor all these things, health, justice, education and others she needed funding. Before in the old days when it'd been just her and me and Waldy, she would take all of our production and basically decided how much each would get in oranges and tomatoes and use the rest as she needed and that was it. Now she wasn't in control of the plantation anymore but she had to make sure to get some funding out of it somehow. So she came up with her own reform, the Tax Reform. She decided that since Cap was making so much money out of our production she would tax a percentage of the profit he was making. He thought that was again a very smart idea and agreed, but he convinced her that most of that money could be better used if re-invested on the plantation to make it even bigger, and that he could think of a number of other ways to get tax. Namely he said "Look at all those people in your country, they're earning such big wages, that's basically all profit, because they don't have to invest any money in tools and fertilizers, I do that for them, so why don't you also tax their enormous profits? And since you have all this trouble in issuing money to match the production why don't you also tax all the sales to cover your expenses. This way you can lower my taxes, I produce more, and everybody gets a salary raise and then you can tax them more. All so logical and simple. And that's how she introduced wage tax and sales tax, and lowered the tax on the food corporation profits.

All these reforms were not easy to introduce, there was always so much protest all the time about everything that she started to get really fed up. People were just used to the old ways and would not accept easily change, even if for the better. And so she started dreaming of her old job, when she was planning the production. Now the whole enterprise was so big and interesting that surely the job must be fantastic. She kind of mentioned her anxieties to Cap (who she now considered to be a kind of spiritual Guru) and he told her that in fact, he'd been thinking of making her his own personal assistant, to oversee the production locally while he had to be away so often to do international business. She asked "But what about the government? Who takes care of the people?". He said, in his infinite wisdom, that the people would take care of themselves, that in fact this would be a fantastic opportunity for them. After all, weren't they always complaining of how you did things? So they probably think they can do it better. Some of them were even calling my wife a despotic tyrant. Could she believe it? She did. She would not be talked of, in the outside world, as a tyrant. She loved her people more than anything in the world, me, the baby, and all the people who came afterwards, and their children as well. So she decided to do what was best for all, and for her as well (she was earning more as an assistant to Cap, then as the head of the Government) and let the people decide for themselves. And she created the greatest of all of the reforms, the Democratic Reform. This was a beautiful day, and everybody congratulated our country for joining the train of the progressive countries of the free world, and we pledged to every year commemorate this day with big parades. We called it Freedom day. We were now all free to decide for ourselves who'd represent us. A marvellous thing.

So the next day a big bunch of us decided to stand for election and become the new President of the Republic. We knew not much of what the job entailed, but it seemed like the smart thing to do. Maybe we could follow on the footsteps of my wife who'd been offered such a great job after she left the government in the corporation top management. After a while it seemed unlikely that all of us would get elected so we started debating to see if we could find the guy with the best ideas to represent us. So a guy stepped up and proposed that if we all voted for him, he would trash the contract where we sold the planting property rights to Cap, and we could kick him out of the country and take over from him the control of the food plant, and make money for ourselves. His name was Com, Com Unist. Nobody took him serious, because we all knew we had neither the international connections nor the money or the skills to manage this thing as Cap did. So another guy stepped up and said he would rather convince Cap to share a bit more of his profits with all of us, since we were doing most of the hard work, and demand some benefits like vacation and a pension scheme. We all thought that was more reasonable, and we chose him. And that's how Cor, Cor Uptible, became the first president of our free Republic. Long live the Republic.

Everything was just grand, Cor is much less strict than my wife used to be, and we basically can do what we please. The only one who wasn't much happy these days was Waldy, our old Münsterländer. His services had not been needed much lately, since we did not have to repel anybody anymore. In fact the barb wire around the whole farm had been removed and roads appeared from all directions. Waldy kept barking, mostly at foreigners, but he wouldn't scare anybody. We gave him the task to patrol the streets and bark at drunken people, but even that was starting to be too much for old Waldy. He never really did like Cap either, strange dog.

Now, can this get any better? That I hope will be the topic of the next post.

How do you go from a controlled to a free market economy?

2008-05-10T21:05:00.014+02:00

I know i promised to blame somebody for the problems of free market economy on the previous post, but maybe its a bit early for that just yet, it's not nice pointing fingers, so I'll leave it for later. If you just came across this post, this is the fourth of a series, it's best to read the others to know what I'm talking about, unfortunately, they're rather long...

However I thought of an analogy which may help visualize what pushes an economy to abandon government controlled economy for a free market one. I apologize already for the inaccuracy and extreme simplification of this example. But just bear with me and even if you find it bullshit, you may find it somewhat funny.

Imagine this little country, out in the middle of nowhere called Sousolandia, and it has 3 inhabitants, that's my wife and I, and our dog Waldy. Our country is actually a farm, where we produce tomatoes and oranges, the basis of our nutrition. So we're not rich, but we're honoured. We're well protected from foreigners because we barb-wired the place and we have Waldy.

We are a government controlled economy, my wife is the government and she also controls the main corporation of our country, the food plant, I'm the working class, the middle class and rich when I'm lucky. Waldy is the army. Every year she tells me how much of the land to fill up with tomatoes and then in the rest we let the orange trees grow. She's no big agriculture expert, so she looks roughly at what we've been producing for the last couple of years and gives her best guess, and I just do it, and then we just hope the weather is going to be nice on our tomatoes. So every year we get a crop of tomatoes and oranges which is most of the time plenty for us to eat, and when we have some exceeding we try and sell it to our neighbour.

Oh yes, our neighbour, I forgot about him, he's the only other country we contact with and he's also a farm one day walk away from ours. He produces chickens and beer. When we have exceeding we go there and try to change our oranges and tomatoes for a few chickens. Normally a couple of oranges and a couple of tomatoes are enough to get one chicken. He claims to be a believer in free trade, but the matter of fact is that he then claims that since his cousin is also producing some oranges and tomatoes, he doesn't feel too good about receiving ours, so we often offer him double, which he then happily accepts. So he's effectively taxing us. That's why when he comes around to ask for our products when his cousin fails to deliver, my wife also asks him double. Reciprocation. And those beers? My wife strictly forbids me of having any, she won't have a drunken husband in the house. So I bring along some of my own food to trade secretly for a couple of beers which I smuggle in my pants. The neighbour really rips me off on those beers, but they're worth every orange and tomato I let him have for it.

So our little economy had been going wonderfully for a number of years, everything was smooth, except for the odd year when the weather wouldn't help and we'd hold on to our stomachs over winter. Often if nothing serious happens, systems like this may remain stable for ages. In mathematical terms they are in equilibrium in a local minimum. This means that in the terrain of all possible solutions to have a stable economy we've came to rest in a little snowy tall valley between two high peaks. We found stability, but any push may drive us over one of the peaks on either side and we can find ourselves rolling down the slope in an ever growing snowball.

And that's exactly how we came to be today a free market economy. So let me tell you how that happened.

One fine year, not too long ago, a number of things happened or developed that took our little economy out of balance. We'd been having 5 very mild years in a row, and our production had been running at a good output level. We were happy and confidently planned the new year counting on another wonderful crop, we did not think it necessary to store reserves and clearly this trend of good weather was here to stay for ever. The work itself had no real secrets to me anymore, and I eventually even found myself with lots of spare time on my hand, I'd water the plants in the morning, a couple of strokes on the land to plough after lunch, and then wait for it to grow and the time to pick up the results. In fact I had so much free time that I would often indulge in some of that beer I had stacked away and imprudently appear drunk before my wife. She started suspecting I was getting lazy and irresponsible, and that I had too much time on my hands, on a few occasions she actually caught me totally pissed, my pants wet, snoring away under the orange trees. She got into a rage and saw this as a serious social problem in our country and decided that I was actually under employed. So she thought of a fantastic project to guarantee me full employment, which she thought was her moral duty. I was to build new cupboards for the house, cupboards in every room, even in the cellar, where we don't need cupboards. Well she should know better, after all she's the government.

So I started the challenging task of building cupboards. To do this I had to borrow some tools from the neighbour, which actually was costing us additional food, and I decided I'd cut some of the orange trees for wood, and I had to clear some of the tomatoes for space to have the workshop. And I worked a lot on those cupboards, I hardly had any time to enjoy a little beer, and I was getting exhausted of accumulating the tasks. I simply wasn't used to it. So much work.

On top of it, April came, and with it came the rain. And it rained and rained and rained and it flooded a good portion of the remaining of our tomatoes. With the parts I took out for workshop and the trees we lost to cupboards, the crop was miserable. I was discouraged and blamed my wife for her incredibly bad planning and lack of foresight. How could she not have seen this coming? Does she think good weather really lasts forever? Shouldn't we have made reserves (or preserves) for such a case, instead of filling the cellar with cupboards?

When in August we went to our neighbour to trade some of that dripping fruit for some tasty chicken (and hopefully a little beer), we had another surprise coming our way. The neighbour had invented a miraculous grain that doubled the production of chickens and had built a road to other countries who were all dying to eat some of those chicks and drink some of his beer, so he was trading it for exorbitant prices. When we showed up with our meagre fruit, he laughed and so we came back with a very few dirty small sick chickens, and not a single beer in my pants, and feeling distraught. When we got home, Waldy was barking wildly, there was something at the door steps, a basket. We thought, oh great, could it be that someone came by and dropped some aid in the form of food? Would some foreigner be that generous?

We took a closer look, and a noise came out of it, a shriek, it turned out to be a baby... with a paper on it saying that it'd be happy if someone would take care of it... Not only these foreigners don't help, but they still impose. I told my wife, we could not possibly have another mouth to feed in this country, we don't have enough food. My wife took to the child immediately and would not hear of it. I said it was too much, I wouldn't have it, I wouldn't have any smelly immigrant coming into our house, and I’d strike and make things even worst if she didn't listen. Not only this bum baby would not help a bit with all the work, but it would literally be taking food out of our mouths into his. I felt so outraged that my mind was filled with thoughts of revolt. I wanted civil war, I wanted to get Waldy on my side and together over throw her and make her go and plough those fields herself to see what it's like, and let the planning to me, after all I'd been working those fields myself, who knows more about it than me? That next winter was the coldest and hungriest of our lives, and all through it Waldy and I conspired in the cellar for the Revolution that was to come soon. We hardly spoke to my wife anymore, and I hated that baby.

It was then, as winter was fading, that she had a fantastic idea that could actually save us. She said: "Why don't we do like our neighbour?", I said: "What? Make beer?", she said: "No stupid, build a road and start trading with other countries? We will not tax them like we do to the neighbour, so they'll have more incentive to buy from us, and I tell you what, if you don't like my planning skills, we'll let an expert foreigner come in and plan it for us, he'll make this farm produce so much that you'll be able to get as much beer as you like, and if you don't complain about the baby, I'll make the beer legal, so the neighbour cannot rip you so much", "How do you know the neighbour has been ripping me off on the beer?", I asked, "His wife told me, now what do you say? We don't have a choice, this is just going to get worse, we'll never eat chicken or drink beer again". What could I have said the prospect of infinite cool beer, sounded just well to me. Maybe those other countries would even have other stuff that was as cool as beer, I'd heard rumours of the existence of a television, a sports cars and smelling cosmetics, and those sounded all just super awesome to me.

So we told the neighbour we would not be taxing him anymore if he wouldn't tax us, he had no problem with that since now he was also selling exceeding tomatoes and oranges to other countries so he was free to take as many from us as from his cousin, so we asked him for a loan and we built ourselves a road which connected us to other countries and we invested again in our farm, we expanded the production to include other fruits and vegetables, way beyond our own needs, such that we could trade for lots of other cool stuff. This was not easy, and demanded a lot of work, so now i wasn't so concerned about having other people in the house and we actually put out a sign on the road that we'd give free boarding a food for help in the farm, and a few foreigners came by to offer their services, some of them looked very hungry, and poor, I was often afraid they'd rob us or kill us during the night, well, some were really weird, I tell you. But they turned out to be nice people in the end and we welcomed them. One day a foreigner came who claimed to be an expert in agriculture; my wife blinked to me and invited him in. He said he'd be glad to take over the burden of planning the crops, he had good knowledge of the needs in the outside world, and he happened to have some valuable possessions which he'd be willing to trade in for more tools and fertilizer. Can you imagine? Fertilizer? So we could never go wrong, he'd make sure our production would be just optimal. His name was Cap, Cap Italist. My wife gave him a big kiss, which I found totally unnecessary, and she gave him my room to sleep in and sent me off to sleep in the barn, since the rest of the house was already packed. And that's how we came to be a free market economy. So far I can't complain, I don't really like sleeping in the barn but at least i don't get to hear the baby cry, but I hardly ever see my wife anymore, she often has business dinners with Cap, she claims he's explaining the new agricultural methods, which are going to make us rich! She started drinking beer herself. I told all this to the neighbour and I made also my own private loan which I traded down the road for cheap Whisky. Whisky!! Man, life is good in the free market world! Next year I'll pay back the neighbour and get a whole lot of new stuff including an I-Pop, or whatever that is.

So you see one day you're in a tall snowy valley, cosy but often cold, and then something crazy happens, and you find yourself rolling down the mountain in a snow ball and you think you're going to crash and die, but eventually the snow melts, you find yourself in a warmer valley, better than the one before, all is well, and that my friend I call Progress!!

Would you like to know how life in the new free market economy is? That I hope will the subject of the next post.

Now, what's the problem with this new model?

2008-05-10T17:40:00.010+02:00

Well, none, if you happen to be on the right end of the game. For some (a growing majority) on the wrong side, things have progressively been getting worse, and for them there are one or two inconvenient problems. We'll get to that later.

First, who invented this fantastic free market system? I honestly don't know, some of the prophets of this new branch of the economy religion were Milton Friedman and Friedrich Hayek, but I can't tell much more about them and the others. But, to me, there's nothing remarkably new about it. Free markets, where the government regulation and taxation are minimized and Offer miraculously matches Demand have always existed. They used to be called Black Markets. And they used to appear everywhere where there was a chance to do some business which was not well seen by the rest of society, or where there was a chance to do it without paying taxes. In Europe there are still black markets for Polish plumbers or Portuguese brick layers, or more frightening, black market for foreign women as sexual slaves.

Take the drugs market, do you know of a drugs dealer that pays taxes on his profit? Do you know any law that regulates how this dealer should sell his stuff, how to pack it, and at what price? Maybe the drugs dealers have some sort of code of conduct that I'm not aware, but traditionally it's a very Free market, very black market (no pun intended). The dealer is free to trade the product with the consumer without strong regulation and taxation. Now is it an efficient free market? Will the consumer get a reasonable price for what he or she gets? Traditionally not. This market is often dominated by cartels, which means they have a monopoly and charge more because of that, competition which could bring down the price is strongly discouraged often with violence, plus restrictions on importing and the risk of police crack down puts the product at a premium.

Now let's look at another innovative aspect of these free markets, the possibility, via free financial markets, where capital flows globally, to invest in goods anywhere in the world. You can actually put your money on a fund, which will use it to buy tons of rice in say Vietnam, because a big tsunami destroyed all the rice fields in Thailand, and you believe the price of the rice will go up, and therefore these tons will be worth double when sold, and by keeping them stored somewhere you actually contribute for the shortage of rice which will also ultimately make that rice price climb (now for the sake of this example, never mind the indians who'd love having that rice at least one bowl a day, who'll be hearing strange noises in their stomachs). Now what did you normally call it when you put your money on something you believe has a good chance of returning you a profit, without you needing to actually make an effort to earn it? Gambling? I don't know, I mean gambling is for example when you bet (invest?) on a horse who has a chance to double your money... does it sound familiar? What do you call it when you bet on a horse, which you know has been given a nice doses of steroids to win?

Now, having said that, I have nothing particularly strong against black markets and gambling. I mean, apart from the slaves and drugs and such, in other black markets you can get some really good deals (my mother used to take us to the gipsy market in Carcavelos, close to where we lived, all the time to buy clothes, there was so much competition there, and so little regulation, that you could get some really attractive Levi's look alike pants or fake Lacoste shirt for peanuts), and nobody really gets hurt. And gambling, I mean, if you do it at your own risk and don't bother others with your debts who am I to judge you... but gambling with food? go gamble on gold, who cares if the rich can't afford it, but food? Doesn't it sound just a little bit more distasteful than a horse race addicted person.

So we basically legalized some concepts which were already there, but were considered distasteful, because some economists realized that these often worked more efficiently than what we had, and now we consider it very tasteful indeed. Keep in mind that Efficiency does not relate directly to Fairness.

So are these new bla... pardon me, free markets really that efficient? According to Tim Harford, in The Undecover Economist, a market is efficient when you can't make somebody better off, without making someone else worse off. What does this mean?

It means this, if I'm a drug dealer and I'm charging an enormous premium on my cocaine, and ripping the hell off of a regular junky, and then i decide to lower it a bit, I'm not making my position any worse off because at that new lower price I may even sell it to the poorest of all the junkies who couldn't afford it before, and make some additional income, but I will certainly make both those junkies better off (worse in terms of health of course). That means my market was not efficient in the first place, and by lowering the price I made it more efficient. Now if by lowering more I cannot cover my importing cost, then I'll be worse off and the market was already efficient before. Or if instead I raise the price and my regular junky cannot afford it anymore, then I don't sell it and he doesn't consume it and I've wasted a selling opportunity, then the market was again already efficient before. This potential of reaching an efficient point is what makes free markets so interesting, they are like self-control mechanisms. If the government had interfered and fixed the price of cocaine, then the market would not be free and could not adjust in such a situation.

According to that same economist there are 3 factors which reduce the efficiency of free markets, and they are:

Scarcity power - being the only one that can deliver the product, the boss of the drugs cartel
Asymmetry of information - when I know more about the cocaine ingredients, namely the amount of flower in it, than the junky
Externalities - the impact that the junky stealing money from people on the street to buy my cocaine will have on those people

Such a market plagued by all these factors is inefficient, not to mention highly unfair. If you were the government how do you fight these issues (I mean how do you improve the market, not how you arrest the dealers)?

Allow markets to be highly competitive to reduce scarcity power - let all the gangsters in on the game
Allow access to information to all parties to reduce asymmetry - force them to put a label on the cocaine bag
Identify and charge taxes on each market's externalities - apply fines on junkies who steal or their dealers and give that money to the victims.

So the problem with the new free market model, is basically this: The economists would love that the free markets were highly efficient distributing benefits to all in it, low prices for consumers and enough profit for the producers to stay in business, so they keep coming up with new recipes involving any combination of some of the medicine above, but most of these markets not only are highly inefficient but are highly unfair, and what's more they don't want to be efficient. And who's to blame? Well, that I hope will be the topic of the next post.

Was our economy always like that?

2008-05-07T18:04:00.009+02:00

Well, according to this book I'm reading (The silent take over, by Noreena Hertz), it was a bit different. Until about 30 years ago (before Thatcher and Reagan came into power in late 70's, early 80's), in most of western countries, including most of Europe, the heavy industry (the big corporations, like steel, energy, transport, oil, even food) were state-owned. This meant the state decided how much to produce and at what price to sell. This worked well, especially during the war when basically production was required at a maximum rate and there was social cohesion towards a common goal.

In democratic countries, politicians who wanted to stay in power had the incentive to please the electorate (government by the people, for the people). And they had the incentive to stay in power because they were in control of an enormous machine, the main bulk of the national economy (according to S.Levitt/S.Dubner, in Freakonomics, humans respond extremely well to incentives), and power made them happy. So workers conquered a lot of benefits in those days, which were not there before (payed vacation, unemployment benefits, retirement pensions, health care, better education, and so on). These were nevertheless hard-fought battles with a lot of striking and protesting, leading up to major confrontations, like the 68' student movements. That economic model was based on the economic theories by John Maynard Keynes, who advocated that government should intervene in the economy to guarantee full-employment and welfare. This model resulted from the analysis of the American Great Depression, when a vicious cycle of under-spending lead the economy into a negative spiral, such that many people lost their jobs. The idea was that if under-spending lead to recessions, than a lot of government spending would solve it.

So governments and their associated industries grew to become enormous, heavy monsters, which provided work for many people, but became extremely inefficient. Governments had to plan production for the year and they would do it by looking at figures from the past 5, 10 years, which would not always apply to the circumstances faced in the new year (aging of population, changes in preferences, bad weather or other catastrophes, or like in my country the fact that many people returned from the ex-colonies in the mid 70's). Often production was too low, causing the country to have to import (at high costs since the economies were protected with trade tariffs) and inflation would ramp, or was too high, and the producers could not sell the exceeding because the prices were fixed (i remember as a kid watching on TV farmers dumping excessive tomatoes they'd been asked to produce on the streets of our capital because they couldn't sell it). Subsidies would be put in place, taxes raised, purchase power reduced, international loans asked, debt increased, more taxes raised, and so on, down the drain. In very small countries, or countries which are rich in valuable resources (like oil) this government controlled economies may work, but as economies grow in complexity it tends to become highly inefficient, and government cannot plan it anymore (this is what lead to the collapse of the Soviet Union).

It could have happened to other European countries as well, if democratic alternating had not allowed for experimenting with other models. And this is what happened when Thatcher became elected in Britain in 1979, and Reagan in the US shortly after. The Keynes theories were abandoned and replaced by new ideas which embraced the concept that private and free markets tend to regulate themselves. That is offer will equal demand in some magical way. This magical way relies on the fact that private enterprise will aim at maximizing profit, therefore reducing waste, increasing efficiency and optimizing production. The governments saw an opportunity to cash fresh money by selling their enterprises, thus relieving the tax payers, improving the efficiency of the economy, thus making life better for all in it. Some of the reforms required to liberalize the markets were painful because in the transition periods a lot of people got worse off (for example massive lay-offs because private corporations require less workers, more competition for your job, less security, etc.), this made some of these right-wing governments unpopular, but, once this radical change started and economies became more dynamic, there was no stopping it. It was a domino effect, either you were in or you were out at the risk of seeing your economy collapse, like it did in most of Eastern Europe. Even the left-wing governments that followed (Blair, Schröder, Chirac) could not (and had no desire to) do anything to prevent it, in fact they pursued it even harder.

One more note: what lead to the collapse of the Eastern Europe economies was, i believe, more the fact that the economy of the rest of the world grew so much in production (GDP) that the money of these economies became worthless (they had little or no exports to make it worth anything to others) and vital imports (food, energy, parts) extremely expensive, when considering on top the trade tariffs that came with it. So they collapsed, not so much because they were communists, but because they didn't grow as much. It's the difference that causes the problem, not the absolute size.

And that's how we arrived at the model I described in the previous post. So from a starting point where governments were ruling the economy to a point where corporations now control the economy.
Now what's the problem with that? It all sounds efficient and fantastic. And that i hope will be the topic of the next post.

Macro-Economics, what is that?

2008-05-05T20:17:00.023+02:00

I found the diagram above in Wikipedia, and I think I'll spend a few posts making considerations on it. First i should try and explain what it means. I have no real knowledge on Economics, but it doesn't seem so difficult. This picture depicts the way our national economies work today. It is like a machine with its different parts, and the economists, which are the engineers of these types of machine love to oil it and make it run better and faster and bigger. So how does it work?

There are 3 national players and an international one, and 3 markets where transactions occur.

The first player consists of the households, the families (or as we are also known, the consumers), of which some work, some are retired, some are too young, and some are sick, and some are hard working, and some are lazy, some are smart and some are less. It's us. Out of those that can and will work we offer labour to the workforce market. In return we receive wages. With these wages we consume goods and services from the commodities market, or we make savings and investments in the financial market expecting to receive interests in return or we make loans for our private consumption (buying a house or a car).

The second player consists of the corporations, and they demand labour from the workforce market and resources (like energy) or raw materials in order to produce goods and services, which are sold to other corporations, households and government in the commodities market in return for profit. They obtain capital from the financial market in the form of loans or investment (shares) which they use to set up their logistics and improve their production capability. Banks which are corporations controlling the financial markets will often make investments in commodities for speculation (such as food, causing the prices to rise and some people to starve).

The third player is our government, these are some of our own kind which we elect to represent us, they collect taxes from wages and profits and transfer benefits or redistribute wealth and provide welfare (education, social subsidies, health, roads, justice, police, defense, etc.). They also provide laws to regulate private and corporate behavior. They make savings and investments in the financial market and often also require loans. They used to have also the power to manage money issuing to control inflation, but since the euro this capability is limited to the political power of each nation in the European institutions, so their influence in the economy is basically in tax policy, interest rates and regulation.

The forth player is represented in the picture as Foreign, and are all the other countries out there, with which we do business, that is we import and export goods and services, and we receive or supply capital via direct investment or aid through the financial markets.

Modern economic theories requires that regulations and protectionism in the functioning of these described markets be kept to a minimum, competition to a maximum, and information shared, such that they work fine. When this happens, then in some magical way, production will match consumption (when there is demand new companies will appear, when there is exceeding some companies will go bankrupt), prices will be kept to an acceptable value that consumers can afford and employment... well, no one can guarantee anything about that, but if the economy grows then there should be nothing to worry about.

To have an idea of how well the labour market is doing we look at unemployment rates. To have an idea of how well the commodity market is doing we look at GDP (Gross Domestic Product attempts at estimating how much a country is producing by calculating how much it consumes - from the magical formula Consumption = Production - GDP = Consumption + Investment + Government Spending + Exports - Imports) for size and inflation (the commodities price variation) for dynamics. To know how well the financial market is doing, well you can look at interest rates or the bank profit declarations, it's normally doing well except when you hear of sub-prime crisis (which means banks have lent money at high interest rates to people who can't pay back)!

So everything should be alright and everybody happy when unemployment and inflation are low and GDP and interest rates are high (if the central bank lowers interest rates it normally means it thinks corporations are in trouble and need to borrow money, and lowering will stimulate the economy). And how do you do that? What is the fuel that powers the engine? Well most people would claim it's to consume, consume, consume... corporations profits stay high and they employ more people, government collects more taxes, wages increase, there's more money around for people to spend, spending makes people happy, government collects more taxes and may decide to lower them, stimulating even further the economy, more corporations appear, prices lower, people consume more, and so on in a virtuous cycle, or so we wished... (but that's another post)

Did it always look like this, our economy? This will be the topic of the next post.

The paradox of choice

2008-04-30T10:03:00.003+02:00

I found this video which, although a bit out of the subject of this blog, is nevertheless interesting as it discusses the society of masses we live in, and how the sheer amount of choice we have at our disposal can lead to paralysis. Hope you enjoy it!

http://www.ted.com/index.php/talks/view/id/93

A couple of months ago I had the problem of the mobile phone. The battery of my old and trusty nokia 3310 was letting me down, so I decided to get a new phone, only to spiral in the thoughts of looking for the cheapest and more basic phone and then realizing that I could get a little bit more phone for a little bit more money, and not wanting to feel like I had made the wrong choice. It took me 3 weeks to decide...
In the end I got a spare battery from a friend for my own phone, and I couldn't be happier!

Feeding themselves

2008-04-14T21:47:00.004+02:00

The poor may be poor, but they are not stupid, certainly not any stupider than you and me. Here's an interesting note i found:

"You are absolutely correct that it is a mistake to define the main problem of the poor "as massive hunger, and hence the solution as providing food". But the optimum solution to tackle the cause of hunger is to give the poor and hungry that ultimate form of voucher: cash. Except in the rare cases of total market failure (like Darfur and North Korea), cash has huge advantages over food aid. Cash transfers are more than 50% cheaper to administer. They reduce the risk of dependency and disincentives; allow individual choice between consumption and investment; have multiplier effects on income and employment; stimulate markets by increasing purchasing power; and encourage the use of other social services such as health and education. That is why cash is predominantly used to help the poorest in OECD countries in the form of pensions, child benefits, disability grants and so on. Why not in developing countries too?"
by Nicholas Freeland, Regional Hunger and Vulnerability Programme, Johannesburg, in Economist, 12-04-08

Amazon an international patrimony

2008-04-10T20:50:00.005+02:00

Every once in a while i get this text in a chain email, i thought i'd translate it, because i like it... i can't really prove its authenticity, nevertheless...

"During a debate in a university in the States (around year 2000), the then Brazilian Minister for Education, Cristóvão Buarque, was questioned about what he thought about internationalizing the Amazons (a topic that reoccurs often in some sectors of American society, and that bothers tremendously the Brazilians). A young American student asked this question, saying that he hoped to get the answer of a humanist and not that of a Brazilian. This was Mr. Buarque's answer:

In fact, as a Brazilian i would simply argue against the internationalization of the Amazons. As much as our governments don't show the proper care for this patrimony, it is ours. As a humanist, and feeling the risk of the environmental degradation the Amazons are suffering, i can well imagine its internationalization, as well as of everything else which is important for humanity.

If the Amazons, under humanistic ethics, should be internationalized, then let us also internationalize the oil reserves of the whole world. Oil is as important to the well-being of humanity as is the Amazons for our future. nevertheless, the owners of these reserves, feel they are entitled to raise or lower its extraction and raise or not its price.

In the same way the financial capital of rich countries should be internationalized. If the Amazons are a reserve for all the human beings, then it cannot be burned by the will of one owner or one country. Burning the Amazons is as serious as the unemployment caused by arbitrary decisions made by global speculators. We cannot allow that the financial reserves are used to burn entire countries by the lust for speculation.

Even before the Amazons, I'd like to see the internationalization of all the great museums in the world. The Louvre should not belong to France alone. Each museum is the guardian of the most beautiful pieces produced by the human genius. We cannot leave this cultural heritage, like the natural heritage of the Amazons, to be manipulated and destroyed by the taste of one owner or one country. Not too long ago, a Japanese millionaire decided he should be buried with a painting of one of the great masters. Before that, that painting should have been internationalized.

During this meeting, the United Nations are holding the Millennium Forum, but some of the presidents of some countries could not attend due to restrictions at the US border. Therefore, i think that New York, as the home of the United Nations, should be internationalized. At least Manhattan should belong to the whole of humanity. As well as Paris, Venice, Rome, London, Rio de Janeiro, Brasília, Recife, each city, with its specific beauty, its world History, should belong to the entire world.

If the US want to internationalize the Amazons, because of the risk of leaving it at the hands of the Brazilians, let's then internationalize all the nuclear weapons of the US. Even because they have already demonstrated that they are capable of using them, provoking a destruction thousands of times bigger than the regrettable burns made in the Brazilian forests.

In their debates, the current candidates to the US presidency, have defended the idea of internationalizing the Amazons in exchange for the debt. Let's start using this debt to guarantee that each child of the World has the possibility to EAT and go to school. Let's internationalize the children, treating them, all of them, regardless of the country where they were born, as a patrimony of the entire world. Even more than what the Amazons deserve. When the leaders treat the poor children of the world as a Humanity patrimony, they will not let them work when they should be studying, that they die when they should live.

As a humanist, i accept to defend the internationalization of the World. But as long as the World treats me as a Brazilian, i will fight for the Amazons to be ours. Ours alone!"

Local storing of energy II - a solution

2008-04-08T19:26:00.002+02:00

I've discussed this thing of storing locally energy at each house with my friend and colleague Norbert, and we came up with a nice recommendation for a viable solution.

Use a tank of compressed air!

The air can be compressed mechanically from a wind/water mill, or with a compressor powered by cheap electricity at night. Burying the tank to keep the air cool may increase the tank capacity, and also has the advantage of reinforcing the tank such that it withstands higher pressures.

To use the energy you let the air out through a turbine, which can in turn generate electricity from the same motor of the compressor (or a separate one, whatever). The heat generated by the spinning turbine, or heat collected from solar energy can also be recuperated to warm up the compressed air as it comes out of the tank to increase the pressure.

One just needs to calculate how big a tank is needed, depending on how much energy you want to store...

There already exists a car running on compressed air.
There exists also power plants which use compressed air to compensate the periods of high demand from the power grid.

As clean and renewable as it gets!

Local storing of energy

2008-04-06T20:53:00.006+02:00

How about this? I'm not an expert in high power networks, but here's a typical load profile for an electrical network over a day (there are other seasonal fluctuations as well):

In theory a network needs to be dimensioned to satisfy the highest demand, and eventually to dump or store extra energy which is not used in periods of less demand (for example by pumping water into dams).

The difference between the highest and lowest peak in the load profile is 20GW, for this example, which i got from wikipedia). The problem I see is that the peak control is made at a macro-scale, requiring the network to be over-dimensioned to meet the demand (for example additional gas plants are required which can be fired quickly to meet sudden peaks of demand).

What if every building (including residences) were to consume and simultaneously store part of the energy they require to operate locally? They would store during periods when the overall demand was lowest, and at the time of high peaks they would use that energy, disconnecting from the electrical network, thus reducing the maximum load and the need for an over dimensioned network - resulting in balancing the load at a micro-level. There is clearly an efficiency problem in the losses due to energy conversion for storage and usage, but the benefit could exceed the loss (somebody should do the math...).

Eventually as new storage technology (batteries, hydrogen cells, nano-capacitors...) becomes available this could turn out to be a good solution to reduce the need for more power plants. Also an infrastructure that supports DC rather than AC might also help, to reduce the number of conversions, and the losses in the electrical distribution. Another advantage is that buildings making use of renewable energy collectors, could re-direct the energy from these sources to this storage system to complement the need for usage of network power.

The control of the charge/discharge cycles of the buildings could be done by digital data transferred to/from the network central, via internet, to the circuits on the buildings and each region could be controlled separately to balance the load as required. An intelligent system which knows the overall power demand, the storage capability of each building and acquires in real time rates of consumption could smartly and optimally manage the charge/discharges cycles. As I said, I'm not an expert, it's just a thought...

Construction Costs of a Power Plant vs. Costs of up-to-date House isolation

2008-04-03T23:00:00.000+02:00

I have tried to retrieve information on the actual construction costs of nuclear and thermal power plants and the amount of energy they in average produce per year and to compare them with the costs for up-to-date state house isolations and the Amount of Energy which in average can be saved per year.

The result of this simple comparison was at the first look surprising to me. If the amount of money necessary to construct a power plant would be invested to isolate houses, only 1/10 of the Energy, which would be produced with the power plant, would be saved by the isolation.

Honestly I was a bit disappointed by the result and I found it quite amazing that such sophisticated technology like a nuclear power plant could have such a big advantage in the cost-benefit ratio compared to a quite simple straightforward technology.

But of course there are factors to be considered, which have just not been considered in the comparison and which would probably are in favour to the simpler technology of isolation:

- Maintenance Costs
- CO2 equivalent effort
- Resource consumption on the long term
- Effort for guaranteeing the safety of the technology
- Effective Costs of possible environmental damage due to error in the technology

Especially the last point is difficult to compare as the costs in case of an incident at an nuclear power plant would be very high due to it’s long term impact (long term radio active contamination due to an hazardous incident radioactivity or due to a inadequate final storage).

Let me know what you think!
------------------------------------------------------------------------------------------
Below the actual numbers of the comparison and the links, from where I retrieved the information:

1) Construction Costs and Energy Production of Power Plants

Power Plant Construction Costs Energy Production per year
Gundremmingen DE (nuclear) ~4.0 Mrd € (4*10^9 €) ~20 TWh (20*10^12 Watt Hours)
Lippendorf DE (thermal) ~2.3 Mrd € (2.3*10^9 €) ~13 TWh

2) Example Costs for House Isolations and Amount of saved Energy

Isolation Costs for a house with of 160m^2 surface ~29.000 €
Saved Energy per year 103 kWh/m^2 * 160 ~> 16.500 kWh

3) Calculations

a) 4*10^9 / 29.000 € => 138.000 Houses with 160 m^2 could be isolated.
b) 138.000 * 16.500 kWh => 2.2 TWh Energy saved by the isolation

Links:

Bedeutung von Kern- und Fusionskraftwerken
Kernkraftwerk Gundremmingen
Energiesparen im Haushalt

We can solve it...

2008-04-03T09:08:00.000+02:00

Al Gore and his foundation 'Organisation Alliance for Climate Protection' search for people to join:

http://www.wecansolveit.org/

Another change of the economical system?

2008-03-30T22:30:00.000+02:00

I think the movie of Annie Leonard contains a lot of truth and important points. For me the key point is the currently established economical system, which requires permanent growth.

From my point of view this system is causing most of the currently observed problems. Such a system could only work for a long time in an environment of unlimited resources, otherwise such a system will hit at a certain time borders. And that is what we are currently facing - the system starts obviously hitting it's borders.

Only these days some people start to understand the impact of the changes caused by us since the start of industrialisation, with it's genius idea of mass production, which lead after about 150 years simplified to a list of huge problems:

- overpopulations of humans
- crisis on energy to maintain the system
- severe interference with the biosphere of the planet (changing the climate, extinction of enormous amount of species - plants and animals - and hence reducing the natural bio diversity)
- Prosperity in limited areas of the planet on the cost of other regions

It is extremely remarkable that it took only 150 years to get to this situation! And still only few people would admit that we have to change!

From my point of view it will be required to find a way to have a economy (I assume there will be no system without), which is based on balance instead of growth.

For a very long period in history the human societies lived in balance with their environment (at least on the level of problems they had to face compared to the once we have to face!!). But why? One reason is for sure that consume had a totally different meaning compared to what it means today in our society. In former times things were bought and produced because they were needed and they were used as long as they could be used. Yes, of course the real rich had some luxury but I would assume that is negligible. So "normal" people had their 1 or 2 pairs of shoes, some clothes, and the stuff they needed for there living. Stuff was inherited from parents and was further used! What is happening nowadays? Out of fashion, old, used? Of course we throw the things to the trash. This is luxury! Of course we do not realize anymore what luxury life we actually live. I would assume that Design, latest Fashion and so on were less important then functionality and durability in previous times.

I am pretty sure that we will need to step back, step back to a system, where the individual will have to limit it’s rate of consumption of goods. To a system with the aim to maintain balance not growth.

The first argument against such a system from industry, companies and so on will be that balance will mean stagnancy. I disagree, even if the overall economy for a society would be kept stable on a certain level of energy consumption, of acceptable impacts on the environment would this really imply that no progress is possible anymore? I doubt that! Why should it? Companies could still compete with each other to get a bigger share on the overall economy and new technology will provide advantages against competitors as they do now.

it goes too far…

2008-03-30T16:36:00.000+02:00

who needs islamic terrorists, when there are so many already among us?

Stop the clash of civilizations

2008-03-27T20:33:00.000+01:00

the pope reads our blog!!

2008-03-19T21:49:00.000+01:00

The pope has apparently been reading our manifesto and came up with similar ideas for his new seven deadly sins. Except for genetic modifications and cloning which we have left out, he adopted environment pollution, social injustice, causing poverty and being obscenely wealthy. He also has "taking drugs" as a sin, which we generally addressed as "respect yourself and your body", under the "respect the other" bullet.

Nothing against it, but Ben, you should quote your sources next time!

What I found interesting in this article is the claim that the original sins are currently becoming virtues, and the part on social sins, when a society sins, who should actually pay for it?

The real cost of things

2008-03-01T12:26:00.000+01:00

I looked at the movie that Bruno recommended, and it made me think about the real cost of things. Indeed we are nowadays able to buy goods which cost so little, it is hard to imagine that the cost one pays pays indeed for the work and materials that went into the making of the product.
When one thinks of selling the product of the own work, to price the product one considers all the costs: raw materials, time cost - how much time went into the making of the product- , tools cost - which tools are required, how much they cost and last -, premises - rental cost of the premises, including utility bills, even if one is working at home, these are costs that should be taken into consideration.
Now, you can argue that by making products in Asia or low cost countries, that you pay less for work, the raw materials having the same cost you achieve a lower cost product. this product still must be brought into our shops in the west, and that costs energy.

We take energy for granted. We go to the gas station, complain about the prices, fill up, turn our light switches on, and energy is always there. But just like any other product, when pricing energy one should take all factors into consideration.

But...how do you put a price on the production of oil or natural gas?

The price of research to find where the oil field is, the cost of getting a drilling platform to the place, people to drill it, and boats to get it to where it is needed (not mentioning the extra costs due to political situations), but, what about the raw material cost? How much does it cost to really produce the oil that is there under the ground? sometime in the past huge forests had to be grown and huge amounts of time had to be invested - by nature - in order for us to have that oil there. We are consuming the work nature did during millions of years, and we are not paying back the real value that nature deserves.

It is just like if we get someone to make the most elaborate work, takes him, days, moths, years to finish it, and at the end, we pat him on the back, and kick him out of the door with no reward, consuming the work of all that time in one afternoon. The result...not only we did not truly appreciate the result, but after all that time with no proper pay...there is nobody that can do the same work...

Is it fair to abuse nature like this?

Police brutality

2008-02-14T20:28:00.001+01:00

what is a responsible social consumer?

2008-02-12T19:31:00.000+01:00

watch this movie! NOW!!

why we became consumers instead of workers

2008-02-12T17:25:00.000+01:00

Labor and capital are traditionally intertwined. Labor generates capital and capital pays for labor. During the last century of industrial development, labor and capital have been fighting each other to get their own ways and that interaction actually has resulted in progress. Workers claiming rights on one hand such as health care and vacations, and capitalists demanding productivity and efficiency on the other, and although that results in a conflict of interests, at the end, economic progress was achieved. The result of this polarization and its dynamics is our current prosper western society.

This prosperity has generated surplus. This surplus has been applied in science and technology. Technology provided alternatives to mechanical work, and consequently human labor has had to move towards the provision of services.

Capital, in the meantime, has become more mobile with globalization and the reduction of dislocation barriers, and therefore did not require being attached to local labor anymore. It can dislocate to wherever labor is cheaper or offers better conditions (tax cuts, subsidies, political stability, etc.).

So labor lost its power to claim or protest against conditions imposed by the capital. Protesting methods such as strikes and other worker defense strategies don't work anymore. If faced with too much trouble, investments are just placed somewhere else abroad. Since the nature of labor is currently services, the dislocation costs are very low, even moving a complete factory may be cost effective. The only workers who can still use traditional protest methods are public servants, because the state cannot dislocate itself abroad. Left wing parties, traditionally in charge of labor defense policies have no more weapons to fight, and become center-right parties, licking-up boots to the big capital. The ones which remain insisting in this note of defending labor are looked at as unrealistic old-fashioned communists.

The balance between capital and labor has become uneven, with capital having the better hand. Since labor cannot struggle against capital anymore, it starts giving up its hard-fought rights to be able to preserve itself. People work longer, take less vacation, accept less benefits, receive lower salaries, loose unemployment benefits, accept short term contracts and the possibility that the employer fires them easily and so on.

Now, capital may not be dependent on labor anymore, but they will always be dependent on consumers. Consumers hold now the power to act as counter-weight to capital to maintain the economic dynamic (work-money-consume). If the country has valuable resources (like oil, diamonds and gold) then work is probably not so important, but for countries that rely on manufactured goods for export, it is crucial.

It is clear that without work, consumers cannot afford the products and services provided by the capital, but capital seems not to get this. Each of the big corporations tries to make its own operation efficient and expects the others to sustain the purchase power of the consumers... someone else should give them work, I have to reduce costs, they think. This will not work in the long run.

Consumers have to take over the role of claiming rights from the capitalist, at the risk that the economic dynamics may collapse. The signs are there with the collapse of the subprime lending market, and the housing market in the US, consumers are at the end of their spending capacity.

A social minded consuming is necessary. Don't buy from businesses that don''t respect and discard workers, don't buy from businesses that don't respect the environment, don't buy from businesses that don't respect the suppliers of raw materials, don't buy from businesses that use toxic chemicals in their products and don't buy from businesses that don't offer proper solutions for disposal, mostly don't buy if you don't really need it, and when you do need it be prepared to pay the fair price.

Consumers of the world unite!

Child brides

2008-01-22T09:48:00.000+01:00

(photo S.Sinclair/UNICEF)

Child brides (10 to 14 years old) are forced on older male husbands by muslims (Afganisthan, Egypt), christians (Ethiopia) and hindus (Nepal, India) . All of these countries signed human rights conventions forbidding this practice, but in practice they just don't enforce it - "Every year, about 150,000 pregnant teenagers die due to complications – in particular due to a lack of medical care, let alone sex education. (UNICEF)"

Self-discrimination

2008-01-21T10:28:00.001+01:00

Discrimination occurs when individuals or groups of them in a given society, are not allowed the same rights or access to the same opportunities that everybody else has, because of a particular characteristic of that group, such as colour, creed, genre, and so on.

People will always group or be grouped and referred to on particular characteristics (the women, the Catholics, the liberals, etc..), and this is normal and acceptable. And calling someone a white or a black or making a joke on his religion might qualify as an offense depending on the tone used, but does not constitute discrimination. Discrimination is when you say, because you're black you cannot ride on the bus. This is obviously deplorable.

Because in modern societies we're afraid of being accused of discrimination we become sometimes complacent to self-discrimination. This is done by people who discriminate themselves based on the same criteria. Groups who will claim special rights that nobody else has, or not attend to community duties, because they claim to be different. In a community where anybody has the right to wear whatever clothes they want, forbidding the use of a scarf is discrimination. In a corporation where there are strict rules of dressing, like a military or police institution, allowing special groups to wear a scarf when everybody else is obliged to use a cap, is indulging in self-discrimination. It is allowing that group to say we're different and demand special rights. In such case then the use of head-wear should be free for all, and another policeman should be allowed to use a Napoleon hat or a helmet with horns if he wishes to. Otherwise this is also discrimination, and I find this equally deplorable.

There is a fine line between not discriminating and accepting others to self-discriminate. And the amount of self-discrimination phenomenas has been increasing lately. Having said this, I tend to accept positive discrimination, within limited time-frames or contexts, of groups who have for long been subject of negative discrimination in order to boost their access to equal opportunities and rights. But it has to be done to correct assymetries rather than sustain an inverse discrimination. And I actually appreciate that any special groups within a society will act to protect and promote the best of their culture heritage, such as language, music, art and festivities (without infringing the accepted rules of that society).

Liberalism or savage capitalism?

2008-01-21T10:12:00.000+01:00

I'm not an expert, but I believe, liberalism is about the notion that free, properly regulated and competitive markets, are the best way to create value, both for the consumer in particular and the economy in general, and to sustain growth and prosperity.

Regulation is the lubrication of the system. Markets which are too protected or too taxed or with complex regulations will not function properly, and those without any regulation may run wild.

The idea is that this free competitiveness and the ability to perform smooth and fair business will bring about innovation. And innovation is the key to achieve an edge towards your competitors, which ultimately results in benefits for the consumers and value created for the economy (consumers will be willing to spend the extra buck on the innovative product/service).

It all sounds nice and simple. But in free markets, after some time, you often get a phenomena called market consolidation. The least competitive stakeholders get bankrupt, the most competitive become desirable and are bought and merged creating more powerful corporations. The idea here is that a large business will run at lower costs because of economies of scale, and therefore be more competitive at global levels. Politicians like these big corporations because they provide large quantities of "stable" jobs.

What then happens is the market gets reduced to a few big corporations, often one monopolist, or just a few confortably settled in a nice cartel, and things stagnate. New businesses find it very difficult to enter that market because it becomes protected by the stakeholders already in. Then there is no drive to be innovative and no value is created, profits are maintained by keeping costs low and firing a lot of people, thus creating artificial growth (although they will claim that competition comes at global level, and they will spend a lot of money in publicity to try and look good...). Innovation will come only when the artificial growth cannot be sustained any longer.

Market consolidation may be a part of the game, but if regulation does not work properly, it may turn into a cancer. How many cancers is Europe suffering from right now? I'm no doctor either, but I suspect a few in banking and insurances, pharmaceuticals, telecommunications, car makers... It's the small, medium, dynamic businesses that push the economy, and regulation should facilitate them entering the markets.

Religious Fanaticism

2008-01-19T10:25:00.000+01:00

The need for praising your creator, for having moral guidelines and a prospect of a follow-up to the earthly life and for having spiritual comfort on your daily life is a legitimate one. This is for a lot of people the sense of religion.

But those who have to shout out or aggressively push their own religious beliefs to others, have difficulty believing in them in the first place, and all the shouting is part of the process of strengthening those beliefs within themselves, or the fear of being wrong.

Today, sticking to those ancient belief systems and associated rituals (Christian, Islamic, Hindu... maybe excluding Buddhism, which has been kept up-to-date in addressing modern men spiritual needs) that are meant to connect you to your creator and give you a purpose for the after life and compassion for your fellow man are difficult to sustain, since they are permanently challenged by more rational modern ways of thinking and life styles. Hence religious fanaticism rises.

Religious fanatics are people who, don't allow themselves to question their beliefs, because the doubts would make the castle of cards on which they stand crumble...

On the Evolution of beliefs

2008-01-18T20:45:00.001+01:00

oddly enough, while our understanding of the world and technology has evolved significantly during human kind history, our beliefs have stood still.

500 years ago, no-one believed the world was round, no-one even though of theories of evolution, telephone, cars, 50 years ago people didn't imagine mobile phones or the internet as plausible futures. Yet, all these and much more came into our lives and we understand them, we use them we accept them as normal. Yet, religion is somehow engraved in our minds and out there such that it is next to impossible to get it out. It passes through the generations as a precious monument you are not allowed to touch or question!

Grab a man from 500 years ago and bring him into todays world. You would have big difficulties explaining him how our world functions, and the possibilities are, what the laws are. You would even have difficulties explaining him about our social structure and behaviour, and our manners. These as well have evolved to take progress into consideration. The things we believe, however, have remained the same...that same man would be able to understand what a church is and what happens there...

Why can't religion adapt to the passing of times...

Rumsfeld Flees France, Fearing Arrest

2008-01-12T14:10:00.000+01:00

(World News. Posted October 29, 2007)

"Anti-torture protesters in France believe that the defense secretary fled over the open border to Germany, where a war crimes case against Rumsfeld was dismissed by a federal court.

Former U.S. Defense Secretary Donald Rumsfeld fled France today fearing arrest over charges of "ordering and authorizing" torture of detainees at both the American-run Abu Ghraib prison in Iraq and the U.S. military's detainment facility at Guantanamo Bay, Cuba, unconfirmed reports coming from Paris suggest.

U.S. embassy officials whisked Rumsfeld away yesterday from a breakfast meeting in Paris organized by the Foreign Policy magazine after human rights groups filed a criminal complaint against the man who spearheaded President George W. Bush's "war on terror" for six years.

Under international law, authorities in France are obliged to open an investigation when a complaint is made while the alleged torturer is on French soil. "

We can't help feeling restless...

2008-01-12T14:05:00.000+01:00

(Cavaco Silva, President of the Portuguese Republic, New Year's speech)

"(...) We can't help feeling restless before the inequalities in the distribution of wealth that the statistics show us. Without questioning the principle of merit recognition and the need to capture the best talents, i wonder whether the salaries received by top managers aren't, frequently, unjustified and disproportionate, when compared to the average salary of their employees."

Keep the borders open

2008-01-09T17:59:00.000+01:00

(in The Economist, 05-01-08)

"The backlash against immigrants in the rich world is a threat to prosperity everywhere."

Do not oppress

2008-01-08T14:53:00.000+01:00

What goes on in airports these days seems to me of such authoritarian and despotic nature that it is appalling. You're often treated as a suspect without crime or cause. You're searched, interrogated and hassled. All this in the name of your own security. It stinks like rotten fish. It is invasive and abusive most of the times. The airport security officers who by the nature of their job and because in most cases they are not proper authorities (but rather private security companies) should be extra polite and apologetic, are often taking joy in their little power game. Those officers protect us from the terrorists, but who protects us from them? Constitutional rights should protect us from this type of harassment, like for example when police officers require a warrant to search someone, which is given only when a court finds this person suspect based on evidence. But apparently the constitutions foresee exceptions in treating suspects for more delicate cases. Soon we'll be letting each other search and suspect each other at will. This is also terrorism.

There is more each time...

2008-01-04T18:45:00.000+01:00

(Maintena in Pública 30-12-07)

"large amounts of money in less hands

consuming industry

advertising epidemics

fashions that change

VIP areas / premium products

houses of people that don't use them

boring reality shows of millionaires

television and corruption accepted as they are

bags of garbage per capita

technology and design at the service of luxury

saturation of information

branches for vices and services

exclusive clothes for dogs and the poor"

Don't discriminate

2007-12-28T17:47:00.000+01:00

Let me tell you about this guy i know, he's a young, handsome doctor. Nurses at hospital where he works all find him cute. He's married though. Has 2 children. The eldest is a boy of 7 and learns to play the piano, the youngest is a girl of 3, his little princess. He has a comfortable salary and drives a latest model Audi. Lives in a nice neighbourhood, where he's known and respected. His wife studied history but does not work, she actually prefers to care for the house and volunteers to help at the local elderly centre. He is smart and ambitious, he has an incredible sense of humour and is such a pleasant company to be around with, he is a warm guy. He also sponsors the studies of his younger brother who learns informatics. He is someone you can fully trust, both professionally, for he has natural gift to perform as a doctor, and as a friend. Oh yes, one more not so relevant detail, Islam is his religion and his skin is fairly dark. Now let me tell you about his neighbor though. This neighbour has a 24 year old son. And this son is currently in jail. He was arrested for bombing and terrorism. He killed 8 people by blowing up a car. He did it because this people were politically, religiously and economically different from him. He has plenty of hatred. He's been taken by a fanatical group as a young boy and indoctrinated to hate those people. He acted without mercy or regret. He wished he could have killed more. He hasn't spoken to his father in more than 8 years, since he ran away from home. He has friends who think and feel like him. Oh, and another detail, this boy's skin is white, he has been raised catholic and lives in northern Ireland.

I'm not saying all Islamic are handsome doctors and all Catholics are merciless terrorists, but i am saying that not all Islamic are terrorists and not all Catholics are fine people. There is good and bad and just normal people, regardless of their religion or colour.