RBI Overheating India’s Economy: On Materialist Greed Fueling Ceaseless Consumerism

A phenomenon as massive as the global coronavirus pandemic, which ran from 2020 to 2022, is bound to have major economic ripple, or wave, effects in its wake. India’s record high 9.2% growth of GNP in the 2023-2024 fiscal year illustrates the robust thrust of pent-up demand met with increased supply. To the extent that consumption over savings is the norm in any economy, a couple years off can subtly recalibrate economic mentalities to a more prudent economic mindset wherein saving money is not so dwarfed by spending it. Moreover, putting the brakes on a consumerist routine and societal norm can theoretically lead to putting the underlying materialism in a relative rather than an absolute position and thus in perspective. Yet such a “resetting” must overcome the knee-jerk instinct of any habit to restart as if there had been no change. Coming back to college, for example, after a summer away, students tend to pick up their respective routines right away as if the recent summer were a distant memory. India’s astonishing rate of economic growth just after the pandemic demonstrates that the penchant for consumerism and economic growth as a maximizing rather than satisficing variable returned as if the steeds in Socrates’ Symposium—only those horses represent garden-variety eros sublimated to love of eternal moral verities, to which Augustine substituted “God.”

The full essay is at "RBI Overheating India's Economy."

Adding Anti-Trust to Monetary Policy: The Case of Groceries

Monetary inflation is a complex phenomenon. Not only can its causes be several; it can make it more difficult to distinguish immediate and medium-term economic conditions from more long term, or structural changes impacting our species economically.  Of the former, the relationship between inflation and whether the markets are competitive or oligarchic (or even monopolies) can be better understood, and this in term can put us in a better position to assess the impact of longer-term changes, such as those stemming from the huge increase in the population of human beings since before the industrial age. The price of food (i.e., groceries) is a case in point. Specifically, the impact from presumably temporary shocks during the Covid pandemic should be distinguished from the impact of oligopolistic markets in keeping prices high, and of the increase in human mouths more generally (and longer term) representing increased demand for foodstuff in on a relatively fixed planet.

In addition to a spike in the prices of raw materials, or, moreover, factors of production, and a growth in the money supply above the growth in GNP, the gradual consolidation of an industry from market competition to oligopoly and even a monopoly can increase inflation. The consolidation of the U.S. meat-producer market, for example, could be expected to result in higher meat prices at grocery stores. Similarly, barriers to entry facing discount grocery stores could result in food prices staying high even after a temporary increase in factor costs. In short, government action to keep markets competitive or return them to the discipline of competition should go side by side with monetary policy, lest it be assumed that inflation is primarily a result of the growth in the monetary supply. Otherwise, keeping interest rates higher than would otherwise be the case could unnecessarily put a damper on job growth.

In June, 2024, the U.S. official unemployment rate increased to 4.1 percent; the next month, that figure was even high, standing at 4.3 percent. This triggered the “Sahm rule,” according to which “a recession is imminent or underway if the three-month moving average of the unemployment rate rises by 0.5 percentage points or more relative to its prior 12 month low.”[1] The U.S. economy added 114,000, rather than the expected 175,000 jobs in July, and some people were nervous that a recession might be on the way.[2]

Accordingly, U.S. Sen. Elizabeth Warren wrote, “Fed Chair Powell made a serious mistake not cutting interest rates. . . . He’s been warned over and over again that waiting too long risks driving the economy into a ditch. The jobs data is flashing red.”[3] The Fed kept the interest rate in place in order to fight inflation even though 4.3 percent is above the acceptable range for unemployment according to the Fed. In fact, Austan Goolsbee, President of the Chicago Federal Reserve, said at the time that 4.3 percent was something the Fed “has to respond to” by cutting interest rates.[4] Besides, he added, the “trends show inflation coming down across the board, multiple months in a row” as the labor market was cooling.[5]

Anyone shopping in a grocery store, however, would beg to differ, however, as the rise in food prices during the Coronavirus pandemic had not come down after the shocks, which included shipping as well as hoarding, had ended following the pandemic. Meat prices in particular had stayed very high even though such levels would be expected to attract new suppliers (or more supply) in a competitive market. But the meat-producer industry had been consolidating so a few large companies could essentially dictate prices to grocery stores, a related industry that had itself become oligopolistic. That the discount chain, Aldi, was not in the San Francisco region of California, for example, even in 2024 while Safeway and Whole Foods kept prices high suggests that the competitive mechanism, which protects consumers from the excessive greed of producers unrestrained by market discipline, was not working, for the basic logic of market competition holds that higher prices (and profits) attracts new producers such that supply increases and prices fall rather than stay high unless the cost of a factor of production has increased and stayed high.

To be sure, limits to the supply of food (and the cost of fuel for shipping) could be expected to become more salient as the human population level continues to increase dramatically. Whereas the 20^th century had begun with about 2 billion human beings on the planet, the 21^st century mark stood at 6 billion; by just 2023, that number had increased to 8 billion. At some point, the Earth’s agricultural potential being relatively fixed, could be expected to run up against increased demand for food. The common experience of having to pay more for groceries during and even after the pandemic due to temporary shocks and the lack of competition that would otherwise increase supply and thus reduce prices could be just a taste of what humans could expect in the 22^nd century.

That a species’ population can increase beyond its ability to feed itself was posited by Thomas Malthus (1766-1834) in An Essay on the Principle of Population, published in 1798. The theological significance alone was startling, as the possibility threw off the notion that God had designed Creation and so the existence of God could be inferred from the excellence of the design found in nature itself. Malthus also claimed that famine, war, or disease is nature’s means of naturally correcting a schizogenic (i.e., maximizing) population, and subjecting the creatures who are in God’s image to such hardship hardly seems like part of the design of an omnibenevolent deity.

Therefore, the mechanism of a competitive market assumes not only lower barriers to entry, but also the capacity for increased supply when prices are relatively high, and this second assumption may be increasingly untenable as our species continues to grow while the natural resources of Earth remain relatively fixed, allowing of course for efficiency gains from technological advances. At the very least, from this macro perspective, governments should not shy away from enacting and enforcing anti-trust mechanisms so prices reflect not only demand, but also whatever supply is possible, given the Earth’s natural resources, especially in terms of energy and food (and also housing). Moreover, concurrent and sustained increases in several industries oriented to human sustenance ought to be especially concerning regarding toll from both uncompetitive markets and our species’ growth.

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1. Alicia Wallace et al, “Markets End the Day Sharply Lower . . . “ CNN.com, August 2, 2024.
2. David Goldman, “Elizabeth Warren: The Fed Made ‘a Serious Mistake,” CNN.com, August 2, 2024.
3. Ibid.
4. Ibid.
5. Ibid.

Increasing Income Inequality in the U.S.: Deregulation to Blame?

Most Americans have no idea how unequal wealth as well as income is in the United States. This is the thesis of Les Leopold, who wrote How to Make a Million Dollars an Hour. In an essay, he points out that the economic inequality increased through the twentieth century. His explanation hinges on financial deregulation. I submit that reducing the answer to deregulation does not work, for it does not go far enough.
In 1928, the top one percent of Americans earned more than 23% of all income. By the 1970’s the share had fallen to less than 9 percent. Leopold attributes this enabling of a middle class to the financial regulation erected as part of the New Deal in the context of the Great Depression. In 1970 the top 100 CEOs made $40 for every dollar earned by the average worker. By 2006, the CEOs were receiving $1,723 for every worker dollar. In the meantime was a period of deregulation beginning with Carter’s deregulation of the airline industry in the late 1970s and Reagan’s more widespread deregulation. Even Clinton got into the act, agreeing to shelve the Glass-Steagall Act, which since 1933 had kept commercial banking from the excesses of investment banking. The upshot of Leopold’s argument is that financial regulation strengthens the middle class and reduces inequality by tempering the wealth and income of those “on the top.” Deregulation has the reverse effect.

The increasing role of the financial sector in the second half of the 1900s means that finance itself could claim an increasing share of compensation.  

Leopold misses the increasing proportion of the financial sector in GDP from the end of World War II to 2002. The ending of the Glass-Steagall act in 1998 does not translate into more output on Wall Street relative to other sectors. Indeed, the trajectory of the increasing role of finance in the U.S. economy is independent of even the deregulatory period. Leopold’s explanation can be turned aside, moreover, by merely recognizing that the “young Turks” on Wall Street have generally been able to walk circles around the products of their regulators. Even though financial deregulation can open the floodgates to excessive risk-taking, such as in selling and trading sub-prime-mortgage-based derivatives and the related insurance swaps, I suspect that the rising compensation on Wall Street has had more to do with the increasing role of the financial sector in the American economy.
The larger question, which Leopold misses in his essay, is whether the “output” of Wall Street is as “real” as that of the manufacturing and retail sectors, for example. Is there any added value to brokering financial transactions, which in turn are means to investments in such things as plants and equipment used to “make real things”? Surely there is value to the function of intermediaries, but as that function takes on an increasing share of GDP, it is fair to ask whether the overall value of “production” is inferior.

Given the steady increase of the financial sector as a percent of GDP, one would expect a more steady divergence of these two lines. Reagan's deregulation fits the divergence pictured, though one would expect a further increase in divergence after the repeal of the Glass-Steagall Act in 1998.  Source: Les Leopold

As for the rising income and wealth of Wall Streeters, increasing risk, which is admittedly encouraged by deregulation, is likely only part of the story. If the financial products are premium goods as distinct from the goods sold at Walmart, for instance, then as the instruments are increasingly complex one would expect the compensation to increase as well.
Leopold is on firmest ground in his observation that Americans are largely oblivious to the extent of economic inequality in the United States. Few Americans have a sense of how much more economic inequality there is in the U.S. than in the E.U., where the ratio of CEO to average worker compensation is much lower. One question worth asking centers on what in American society, such as in what is valued in it, allows or even perpetuates such inequality, both in absolute and relative terms. The relative terms suggest that part of the explanation lies in cultural values having relative salience in American society. Possible candidates include property rights and the related notion of economic liberty, the value placed on wealth itself as a good thing, and the illusion of upward mobility that allows for sympathy for the rich from those “below.”
In short, beyond actual regulations, particular values esteemed in American society and the increasing role of the financial sector in the American GDP may provide us with a fuller explanation of why economic inequality increased so during the last quarter of the twentieth century and showed no signs of stopping during the first decade of the next century. Americans by in large were wholly unaware of the role of their values in facilitating the growing inequality, and even of the sheer extent of the inequality itself. In a culture where political equality has been so mythologized, the acceptance of so much economic inequality is perplexing. At the very least, the co-existence of the two seems like a highly unstable mixture from the standpoint of the viability of the American republics “for which we stand.” Yet absent a re-calibration of societal values, the mixture may be an enduring paradox of American society even if the democratic element succumbs.

Source:

Les Leopold, “Inequality Is Much Worse Than You Think,” The Huffington Post, February 7, 2013.

An Empire's Economic Scale Demands a Market System: The Case of China

A trend of increased-scale economies can be observed through history as city-states have given way to the increased military power of centralized Medieval kingdoms. Many of those expanded into Early Modern kingdoms as advances in military technology make it possible for kings to extend the territory under their control. Even empires have gotten bigger. Modern-day Germany was once considered an empire, as were Switzerland and the Netherlands. Today these polities are states in a modern form of empire, the EU. Similarly, the emergent United Colonies of America was considered to be an empire within the British Empire, with the individual colonies being viewed on both sides of the Atlantic as Early Modern kingdom-level polities on par with the states of the E.U. in the twentieth century. Similarly in China, as kingdoms were added, an old form of empire took shape. Because these enlargements came about gradually over centuries, it has been difficult for the human mind to recalibrate how the modern large empire-scale economies should be designed to take into effect the distinct challenges of the scale. We can see such an adjustment in the case of China as economic centralization came to be replaced by regulated markets, albeit with a sizeable involvement still of the government in the economy. 
Communism, for lack of a better word, has somehow morphed into Capitalism in China, as if a genetic mutation had taken hold through mitosis. This reflects an important trend that can be traced back to Deng Xiaoping (1904-1997), who “abandoned many orthodox communist doctrines and attempted to incorporate elements of the free-enterprise system into the Chinese economy” beginning in the late 1970's, according to the Encyclopedia Britannica. Decades later, upon becoming prime minister, Li Keqiang announced in 2013 that the central government would reduce the state’s role in the economy. The Chinese government issued a set of policy proposals to reduce “government intervention in the marketplace” and give “competition among private businesses a bigger role in investment decisions and setting prices.”[1] According to the proposals, a tax on natural resources would be expanded, market forces would play a larger role in determining bank interest rates, and, according to the government, policies would be enacted to “promote the effective entry of private capital into finance, energy, railways, telecommunications and other spheres.”[2] Foreign investors would be given more opportunities to invest in finance, including banking, logistics and healthcare. Foreign exchange controls would also be loosened further.
The proposals were enough for Stephen Green, an economist with Standard Chartered, to remark, “This is radical stuff, really.”[3] Huang Yiping, chief economist at Barclays, pointed to lower growth projections and massive amounts of debt as giving the Chinese government a rather practical motive in continuing the trend of refurbishing communism. Many experts doubted, however, whether the Communist Party would “abandon the state capitalist model, break up huge, state-run oligopolies or privatize major sectors of the economy that the party considers strategic, like banking, energy and telecommunications.”[4] Additionally, corrupt government officials would doubtlessly resist losing what the New York Times called their “secret stakes in companies,” not to mention all the bribes.[5]
Even so, it is astounding that the prime minister, a communist, would say: “If we place excessive reliance on government steering and policy leverage to stimulate growth, that will be difficult to sustain and could even produce new problems and risks. The market is the creator of social wealth and the wellspring of self-sustaining economic development.”[6] Marx and Lenin would hardly recognize the Chinese Communist Party. Because China has over a billion people, the old “command-and-control” economic model based on centralized directives on production quotas and prices had become increasingly difficult to coordinate. Bottlenecks in supply causing shortages on the shelves could eventually occur, with political instability increasingly likely.  The sheer scale of China, an empire of former kingdoms, has rendered centralized control highly inefficient.

The Emperor Kangxi of the Qing Dynasty. He ruled for 60 years, greatly expanding the size of the empire.      Source: Chinahighlights.com

Interestingly, even as Emperor Kangxi (1654-1722), the second emperor of the Qing Dynasty (1644-1911), expanded the empire by taking over central Asian Muslim kingdoms, he resisted the preceding Ming Dynasty’s laissez-faire policy on internal trade and industry by turning some crucial industries into monopolies. Interestingly, John D. Rockefeller would probably have concurred, based on his own theory that the coordination in a monopoly in a vital industry such as oil could put an end to destructive competition. In any case, Kangxi apparently saw no contradiction between expanding the empire and centralizing some important sectors of the economy. Similarly, Mao saw no internal tension in collectivized consolidation on a large scale. As tempting centralization has been for Chinese dictators seeking increased control and thus power, government regulation of competitive markets is eminently better in empire-scale economies, not only of China, but the E.U., U.S., and Russia as well. 

1. David Barboza, “China Plans to Reduce the State’s Role in the Economy,” The New York Times, May 24, 2013.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.

Food as a Human Right: A Basis in Rousseau

The natural right to food unconditionally in society is based, I contend, on the assumption that it is because a person without food is in society that he or she is going without. In other words, were he or she in the state of nature, acquiring enough food would not be a problem. Rousseau makes this point in his Discourse on Inequality[1].

Jean-Jacques Rousseau (1712-1778)  Source: Wikimedia Commons.

Basing a human right to food on Rousseau’s philosophy risks the criticism that rights cannot possibly exist in the philosopher’s beloved state of nature, as rights depend on there being a government. However, Rousseau adopts wise Locke’s notion that one’s labor added to land makes it one’s property as a matter of right even without the institution of government. For my purpose here, it is enough to claim that a food-sustenance is a human right in political society. It is precisely on account of how that society differs from the state of nature than the human right is necessary only in society.

“As long as men remained satisfied with their rustic cabins; as long as they confined themselves to the use of clothes made of the skins of other animals, . . . ; in a word, as long as they undertook such works only as a single person could finish, and stuck to such arts as did not require the joint endeavours of several hands, they lived free, healthy, honest and happy, as much as their nature would admit, and continued to enjoy with each other all the pleasures of an independent intercourse.” In other words, with people being limited in production or collection to their own needs, there is likely to be enough for all. From “the moment one man began to stand in need of another's assistance; from the moment it appeared an advantage for one man to possess the quantity of provisions requisite for two, all equality vanished.” From natural differences between people even in the state of nature, as soon as some people of superior strength and industriousness desire food enough for many, perhaps to sell or give away the surplus for money or power, more scarcity than is due to nature is apt to set in for other people not so constituted.

With more labor necessary to produce or collect a surplus beyond one person’s own needs, “boundless forests became smiling fields, which it was found necessary to water with human sweat, and in which slavery and misery were soon seen to sprout out and grow with the fruits of the earth.” With artifice being superimposed on nature’s provisions that otherwise are open to all, the output is skewed in distribution toward some.

Furthermore, with the economic interdependence that comes with society and an economy of different sectors and specialization of labor, the connection that everyone has to nature’s fruits is broken for many and fewer hands remain to work the land even though everyone must eat. “The more hands were employed in manufactures, the fewer hands were left to provide subsistence for all, though the number of mouths to be supplied with food continued the same.” The natural right to food as unconditional kicks in, and is due to, the fact that the must eat continues, being based on nature, even as instituting an economy puts the supply of food at risk for some. Hence, the right is natural because we must eat on a regular basis, even if people establish and superimpose an economy on nature’s fruits, distorting their relatively equal distribution. The right is a right because it is only necessary once society, including an economy and government, has taken people out of the state of nature.

On Securing the Human Right, See: "Should Charities Replace Government?"

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1. Rousseau, Jean-Jacques, Discourse on the Origins of Inequality, Harvard Classics, Charles W. Eliot, ed., Vol. 34 (Cambridge: Harvard University Press,1910).

Income Inequality: Natural or Artificial?

In the United States, the disposable income of families in the middle of the income distribution shrank by 4 percent between 2000 and 2010, according to the OECD.[1] Over roughly the same period, the income of the top 1 percent increased by 11 percent. In 2012, the average CEO of one of the 350 largest U.S. companies made about $14.07 million, while the average pay for a non-supervisory worker was $51,200.[2] In other words, the average CEO made 273 times more than the average worker. In 1965, CEOs were paid just 20 times more; by 2000, the figure peaked at 383 times. The ratio fell in the wake of the dot-com bubble and then in the financial crisis and its recession, but in 2010 the ratio began to rebound. According to an OECD report, rising incomes of the top 1 percent in the E.U. accounted for the rising income inequality in Europe in 2012, though that level of inequality was “notably less” than the one in the U.S.”[3]  Nevertheless, in both cases the increasing economic gap between the very rich and everyone else was not limited to the E.U. and U.S.; a rather pronounced global phenomenon of increasing economic inequality was clearly in the works by 2013.

Accordingly, much study has gone into discovering the causes and making prognoses both for capitalism and democracy, for extreme economic inequality puts “one person, one vote” at risk of becoming irrelevant at best. One question is particularly enticing—namely, can we distinguish the artificial, or “manmade,” sources of economic inequality from those innate in human nature? Natural differences include those from genetics, such as body type, beauty, and intelligence. Although unfair because no one deserves to be naturally prone to weight-gain, blindness, or a learning disability, no one is culpable in nature’s lot. No one is to be congratulated either, for a person is not born naturally beautiful or intelligent because someone else made it so. This is not to say that artifacts of society, as well as their designers and protectors, cannot or should not be praised or found blameworthy in how they positively or negatively impact whatever nature has deigned to give or withhold. It is the artificial type of inequalities, which exist only once a society has been formed, that can be subject to dispute, both morally and in terms of public policy.
A society's macro economic and political systems, as well as the society itself, can be designed to extenuate or diminish the level of inequalities artificially; it is also true that a design can be neutral, having no impact one way or the other on natural inequalities. How institutions, such as corporations, schools, and hospitals, are designed and run can also give rise to artificial inequalities. In his Theory of Justice, John Rawls argues that to be fair, the design of a macro system or even an institution should benefit the least well off most. Under this rubric, artificial inequalities would tend to diminish existing inequalities. Unfortunately, a society’s existing power dynamics may work against such a trajectory, preferring ever increasing inequality because it is in the financial interests of the most powerful. Is it inevitable, one might ask, that as the human race continues to live in societies the very rich will get richer and richer while “those below” stagnate or get poorer? Jean-Jacques Rousseau (1712-1778) distinguishes natural and artificial (or what he calls “moral”) inequalities with particular acuity and insight. He answers yes, but only until the moral inequalities reach a certain point. Even if his “state of nature” is impractical, we can make more sense of the growing economic inequalities globally but particularly in the U.S. by applying his theory.

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1.Eduardo Porter, “Inequality in America: The Data is Sobering,” The New York Times, July 30, 2013.

2. Mark Gongloff, “CEOs Paid 273 Times More Than Workers in 2012: Study,” The Huffington Post, June 26, 2013.

3. Kaja B. Fredricksen, “Income Inequality in the European Union,” OECD, Economics Department Working Paper No. 952, 2012.

The 2012 U.S.Trade Deficit: An Analysis

Coming in at 2.7% of GDP, the U.S. trade deficit fell to $107.5 billion in the third quarter of 2012—down 9 percent from the second quarter’s $118.1 billion, which was 3% of the economy at the time. The current account includes merchandise, services, and investment flows. The surpluses in services and investment were out-done by the deficit in merchandise to produce the overall trade deficit. According to the New York Times, the “improvement in the current account in the third quarter reflected a decline in the deficit on goods and a small increase in the surplus on services, led by a gain in foreign earnings made by financial services, insurance and professional services provided by companies in the United States. The surplus on investment earnings narrowed to $50.8 billion, down from $52.1 billion in the second quarter.” Most of the decline in the deficit on goods reflected a decline in the foreign oil bill, according to Paul Ashworth at Capital Economics.

Analysis:

Lest we get bogged down in the purportedly significant differences between 2.7% and 3.0%, $107.5 billion and $118.1 billion, and $50.8 billion and $52.1 billion, respectively, we might take note of the rather stark difference between goods on the one hand (i.e., sustained deficits) and services and investment (i.e., sustained surpluses). Although it was no doubt true that the economic slow-down in China and the debt/austerity-induced recession in the E.U. were reducing demand for American exports, a basic imbalance between exports of American-made and imports of foreign goods is clear from the numbers year after year. Indeed, in 2006 the current account deficit had reached a record $800.6 billion—suggesting that something fundamental was “out of whack.”

                                               This graph isolates the deficits in goods imported/exported.   source: thismatters.com 

The question may be whether Americans were importing too many foreign goods or were too uncompetitive in making goods. Regarding the former, being able to buy a relatively inexpensive television made in China is not in itself a bad thing, particularly to the consumer. The question is perhaps whether the price was artificially low, due for instance to a relative lack of environmental regulations, lower labor costs, or government/bank subsidies. However, even if due to these factors, a low price is undoubtedly welcome to any consumer.

Regarding American competitiveness, was it hampered by labor and environmental standards or simply by unmotivated workers and bad management? Whereas American consumers benefit from cheap imported products, no such benefit can be found in the U.S. to any sector from a relative inferiority in competitiveness.

There is, however, the argument that an “advanced” economy oriented to professional, business and financial services rather than manufacturing can enjoy a higher standard of living if the services are more premium than the goods would be. The pristine notion of the “knowledge economy” captures this point very well. That not all Americans are willing or even able to participate at this level suggests that the term could never completely cover an entire economy. Hence, it is necessary even in an “advanced,” or “high tech” and “professional,” economy to tackle the problem of competitiveness in manufacturing.  Does it come from high regulatory costs (which can be viewed as part of a demand by Americans for a certain “standard of living” writ large), a lack of product development, or an inefficient labor or management force?  Whereas wanting a decent wage-floor or environment as a condition of manufacturing has merit—the cost being that society may have to support people who would otherwise be working in manufacturing—a dearth of ingenuity, bad employee attitudes, and inept management have no such positive aspect.

I was born and raised in a medium-sized industrial city in the “rust belt.” Furniture was the first industry, following which machine tools were the dominant manufacture until competition from Europe took out most of the factories. Speaking a few years ago with a European who had been sent over to oversee a factory that had been taken over by a European company, I was not surprised when he admitted, “the workers here just are not good. They are not motivated and they don’t pick up on the training very good.” Years before that, I had watched a program on the American public broadcasting network about a man’s effort to prepare inner-city black people for job interviews. Midway through his talk, the man admitted to the folks attending, “from your attitude even here, I have to admit I can’t see how anyone would hire you, so I don’t see any reason to continue here.” The man ended the workshop at that point. Doubtless his decision prompted little if any self-criticism from the participants. A bad attitude is perhaps almost impossible to correct from the outside—even with the inducement of money!—given the nature of a bad attitude. Regarding people under thirty, perhaps a year or two at a military “boot-camp” might break down the attitude’s intransience and build up self-confidence and self-respect, not to mention basic civility. Absent such a strategy, perhaps the segment of the American population unwilling (or able) to become part of the “knowledge economy” is inevitably lost—not being able to compete even on a factory floor. The cost to the rest of society goes well beyond money.

While visiting Miami, I witnessed repeated incidents on the buses from the mainland to Miami Beach of black men shouting and even hitting each other, as well as bumping into (and even falling on!) tourists. The black drivers ignored the shouts (including a drunk black man loudly and repeatedly calling a pregnant white woman a “fucking bitch”) and even fist-fights. Even with tourists begging the drivers that the aggressive passenger be dismissed from the bus, the drivers just drove on. In two cases, the drivers asked the men being hit if they wanted to press charges. They replied that they did not, so rather than get the aggressor off the buses or call the police, the drivers simply started driving again. This happened twice in the last 24 hours of my visit!  Near the beginning of my visit, I myself was pushed against the open bus door of a bus at a rail station while I was attempting to board a bus because I had not allowed all of the black passengers to enter first. The black driver refused to call the police or even tell the aggressive black man who had squeezed me to leave the bus. The driver simply replied to me—as I was pinned to the open front-door—“no, I won’t call the police. You shouldn’t have gotten on then. That’s how it is here.” I should have called the police! I was so stunned at the violence and systemic cover-up that I simply wanted to get to my destination. Just after I took my seat, a nice older black woman asked me where I was from. I told her that I had grown up in Illinois. “It must be worse in Chicago,” she remarked. “No,” I countered, “it is worse here. The blacks there are better.” In spite of being the only white person on the bus, I went on. “Even with the blacks killing each other in south Chicago, the people are better there.” She asked if north Chicago was white and the south part black. “No, the north part of the city itself is integrated, while I think the south is black. I was referring to the north—the blacks there are much better than the ones here. Here—I can’t leave soon enough.” Silence . . . complete silence. It then occurred to me that the entire bus—which still had not left the tri-county rail station—had been listening to this white guy talk about blacks very directly.

As it happened, a month or so later I was in Chicago taking a bus when a black man tried to enter the bus by pushing three old white women in line in front of him. The driver, who was also black, saw the attempt and quickly said, “Hey, what do you think you are doing? Get back out of the bus and let those women on first. Who do you think you are?” Then the driver turned to us in the bus and remarked, “It’s all about him, isn’t it?” The offender must have been startled, for he merely replied, “But it is cold out.” The driver pointed out that it was cold for the women too. The three women ended up sitting near me, and I told them (and the front half of the bus) about what I had witnessed in Miami on the buses there—and that it really was better in Chicago and even warmer despite the cold—even in terms of people moving past each other in the isle. “In Miami, the driver would not have intervened and you all would have been pushed out of the way of the guy who was behind you in line. Even complaining to the driver would have had no effect, and the man would have gotten away with it—whereas here that attitude is an exception. It was therefore countered, or pushed back, and therefore not allowed to become the default.” I don’t know whether the driver heard my compliment.

While it is easy to point to the bad attitude of many of the black passengers in Miami, I contend that the incompetence and attitude of the bus drivers there were just as problematic, and my anecdote from a bus in Chicago demonstrates that the attitude need not be enabled rather than challenged. The fact that the drivers in Miami all reacted the virtually the same way suggests that the decadence is systemic there. Put another way, the rudeness and aggression had become the norm and thus could not be checked. Perhaps this is why the drivers simply ignored even the violence—though this is hardly a viable excuse.

In terms of passive aggression, I witnessed drivers of buses going between downtown and Miami Beach regularly and knowingly cram too many passengers (even tourists!) on the buses and then demand that the extra passengers (who had already paid) shout back into the bus for others to step back so the extras could “get behind the yellow line.” To allow passengers known to be beyond capacity on board and then put them in an impossible situation while refusing to take control of the bus by making an announcement for people standing to move back evinces not only incompetence, but also an almost-sadistic mindset. On several occasions, I saw order itself fall apart on buses there as frustrated passengers—even tourists!—openly challenged the unjust and incompetent drivers on this very point.

Leaving Miami, my overall conclusion was that that county should not be part of the United States of America because of the rudeness, aggression and even the break-down in order—all tacitly sanctioned by county managers and employees. The rudeness, by the way, was nearly everywhere, rather than just on buses. I could not imagine any of the aggressive passengers or enabling drivers lasting more than a few days working in a factory, and the bus company managers (who knew of the incidents, according to local passengers) were doubtless virtually unemployable in the private sector too.

In short, the serial merchandise trade-deficits may point to an America that even many Americans do not know exists. That is, the structural imbalance may reflect a decline in American society—both in terms of labor and management—that manifests in a significant number of Americans compromising manufacturing or even being virtually unemployable. Put another way, I suspect that the condition in the American factory was at least as of 2012 part of a much more serious problem wherein even the social contract itself was under threat, or at the very least the American empire was in decline.

Source:

The Associated Press, “US Shirks Trade Deficit As Oil Falls,” The New York Times, December 19, 2012.

The Receding Chinese-American Economic Paradigm in 2011: Imbalances within Mutual Benefit

“For decades,” according to The Wall Street Journal, “plentiful Chinese labor kept down costs of a range of goods bought by Americans.” Then, roughly in 2010, the Chinese government began supporting higher wages to reduce labor unrest and boost domestic consumption while reducing reliance on exports. Partially as a result of this, the world saw higher prices for commodities in 2011; oil was another factor as protests in the Middle East increased political risk in the calculations of future supply (amid speculation). A shrinking workforce in China was also putting pressure on the labor cost. Even though relatively cheap labor was still in the interior of the country, higher transportation costs mitigated the cost advantage. The prevailing paradigm was showing cracks. To be sure, it certainly had them.

In that paradigm, inflation was “damped pretty dramatically in the U.S. because it exported work to China and other places at 20% or 30% of the cost,” Hal Sirkin of the Boston Consulting Group said. Imports into the U.S. from China had increased China’s foreign currency reserves to over $3 trillion in the first decade of the twenty-first century; two-thirds of the reserves were U.S. dollars. The Chinese government used some of those dollars to purchase U.S. Treasury bonds; those purchases in turn relieved pressure on U.S. interest rates to increase. The continued cheap credit made it more possible for American consumers to purchase Chinese imports. It was a marriage of Chinese workers and American consumers, with both governments happy to oversee the nuptials.

Although in some ways good for all parties, the positive feedback loop made it difficult for China and the U.S. to have balanced economies. China relied too much on exports—with a supportive yuan currency making them artificially cheap for Americans—while the U.S. was enabled to accumulate trillions in additional federal debt without much self-discipline.  Therefore, from the rising labor costs in China and the related emphasis on domestic consumption (and a slowing appreciating yuan), inflation in both China and U.S. could be expected. It is no coincidence that the price of gold was quite high as the paradigm began to shift.

As the paradigm began to shift, it could be expected that should the Chinese foreign currency reserves be reduced, less foreign demand of U.S. Treasury bonds could eventuate, which in turn would put pressure on U.S. interest rates to increase. The rates could increase anyway to thwart the import-led inflation even if there is not excessive money supply. In other words, it could be expected that the imbalances in the slipping paradigm would give rise to corresponding imbalances afterward.

It is perhaps all too easy for us to tolerate imbalances as long as there is an overall equilibrium. China’s increasing dollar reserves and the U.S. Government’s increasing debt could co-exist with a tacit agreement wherein both Chinese workers and American consumers would benefit. Mutual benefit is not, however, a sufficient justification for tolerating fundamental imbalances either within a country or in the global economy.  For a sustainable economic paradigm, mutual benefit is necessary but not sufficient; they system as well as its parts should be in balance. To insist on this amid mutual benefit requires self-discipline because part of the benefit is spent in the restoration and playing out of balance. It is thus perhaps not an accident that the paradigm of imbalances amid mutual benefit was dominant for decades; the system itself might tell us something about modernity and ourselves.

Source:

Shai Oster, “China’s Rising Wages Propel U.S. Prices,” Wall Street Journal, May 9, 2011, p. A2.

The E.U.: The Growth Union

In relying only on austerity and cheap bailout loans, the German-led strategy has proffered a false sense of European integration in the E.U. Even as expanding the bailout funds to roughly 800 billion euros and strengthening the E.U.’s means of enforcing limits on state deficits and debt are along the line of continued incremental shifts of governmental sovereignty from the state governments to that of the E.U., the related austerity (and recession) sparked a populist backlash in several states. At the state level (and this level has a major role at the E.U. level—unlike in the U.S.), the state-rights (i.e., anti-E.U.) parties have been the beneficiaries even if they could not gain outright majorities. The National Front in the state of France is an obvious example, as it captured 18% of the vote in the run up to the general election in 2012.  Other things equal, such a spike translates into brakes on further European integration in the medium term.

Different takes on the E.U. and austerity: Sarkozy, Hollande, and Le Pen of France    NYT

The full essay is in Essays on the E.U. Political Economy, available in print and as an ebook at Amazon.

On the Irrational Exuberance of a Market's Bubble: The Tech Industry

I contend that the degree of uncertainty related to the expectation of future profits in the social media companies means that that industry ought to be treated by investors as if it were in a bubble, even if it turns out that the expectations were spot on. That is to say, investors should buy in lightly, and supported by a diversified portfolio. So perhaps the question of whether the industry is in a bubble is not as vital as the media may suppose; the extent of uncertainty, which was clearly evident for instance in LinkedIn's trading at 540 times its prior year's profit, is itself a factor not to take lightly. So call it bubble or not, the difference between known and expected revenues is itself worthy of consideration, and when that difference is significant, the wise and prudent investor naturally treads lightly, even if it seems that others may make out like bandits.

On March 17, 2011, USA Today observed, “Tech and Internet stocks turned into bad words after the dot-com bust in 2000. But the get-rich-quick feelings toward tech are back. . . . Given the near-hysteria about promising but largely unproven companies, investment [practitioners] warn that things could start getting out of hand.” So why did the government not step in and stop it from going so far and then crashing?  This is easier said than done. Beyond the difficulties in having regulators intercede to stop transactions that may be necessary to avert a party from bankruptcy, the sheer ambiguity in ascertaining whether a bubble does in fact exist can have a paralyzing effect. "It's a boom, not a bubble, when you hear the sound of dynamite profits," according to Bing Gordon, a partner at a venture-capital firm and a board member of social-gaming company Zynga, which was valued at $9 billion in March of 2011.

However, a big boom can explode in a giant bust; Gordon’s distinction doesn’t carry much water. Neither does that of Geoff Yang, a founding partner of Redpoint Ventures. "There is effervescence, but no bubble." Effervescence can manifest, however, as an attribute of the sort of irrational exuberance that characterizes bubbles. That the market mechanism not only does not temper, but may even magnify the volatility from, this all-too-human psychology, whether in pushing a “boom” or “bubble,” is the real problem. Government regulation will not be able to effectively pull up this root until its nature is uncovered. In the meantime, we are left with the problem of discerning whether a bubble can even be identified as it is expanding. Consider, for example, Facebook in 2010.

In 2010, Facebook had about $2 billion in revenue according to USA Today. MSNBC puts the company’s profit for that year at $600 million. Facebook was being valued at $75 billion, based on private transactions from the SharesPost market. If an accurate valuation, USA Today claimed that “this would make the social-media upstart more valuable than Disney.” It would also mean that Facebook had a price-earnings ratio (P/E) of 125.  This essentially means that higher future profits were expected.  The average P/E ratio for the technology sector was about 25, making 125 extraordinarily high.  This could be taken as being indicative of irrational exuberance,  as one typically compares a company’s number with the average of its sector.

However, the technology sector was quite broad at the time, and one would expect companies on the forefront like Google, Yahoo and Facebook to have much higher numbers than other companies in the sector. Even a very high P/E ratio for such companies relative to a sector’s average does not necessary point to there being a bubble. However, even lesser-known companies, such as Color (a photo-sharing and social-networking start-up) was being valued at around $100 million by venture firms even though the company had an untested product in a crowded market. According to The Economist, competition among angel investors has helped drive up valuations of social-media start-ups by more than 50% from May 2010 to May 2011.

Furthermore, in March of 2011 USA Today claimed, “Even big companies are said to be drinking the Internet Kool-Aid. There is speculation that Google and Facebook have considered bidding as much as $10 billion for online microblogging service Twitter.”  In December of 2010 according to USA Today, “The New York Times reported that Twitter was valued at $3.7 billion after a funding round. In March of the following year, it was pegged at about $7.2 billion, according to SharesPost.” The sheer variance between these figures indicates high risk, but this did not seem to bother those drinking the kool-aid. Such psychology is a red-flag that a bubble is likely in the works. It is like a tornado watch: conditions are right for one to form.

The risk can be seen by uncovering fallacies in the way the private tech companies are valued. According to USA Today, “Until companies finally go public and the stocks actively trade on major exchanges, the small and relatively thin trading on private markets sets the price. . . .  Private marketplaces, including SecondMarket and SharesPost, allow owners of shares of private companies such as Digg, Facebook, Zynga and Twitter to sell to high-net-worth individuals and institutions. Typically, the sellers are employees at these firms looking to cash in on shares they've received. And the buyers are sophisticated investors who understand they could lose their entire investment. These online services provide a way for employees to sell their shares now rather than waiting for an IPO that may never occur. However, with the great power that such marketplaces offer comes confusion. Many of the valuations put on companies are overinflated based on limited sales of shares occurring on the relatively small markets. . . . Before long, estimates for the value of popular Internet companies can soar.” In short, one should not generalize from a highly particularized market to project a total market value because there are unique dynamics going on in that market that would not apply were the firm listed on the NYSE.

Crucially, the generalization is in the direction of overstating; hence, it can camouflage irrational exuberance while feeding it. Therefore, risk is increased by how private companies are restrictively “traded” even as the risk is cloaked—making it even more dangerous. “Given such huge risks, the level of the public's infatuation with shares of privately held Internet companies is again taking on a feel of a mania, Gary Freedman, securities lawyer, said, according to USA Today. He noted that several ingredients that inflate bubbles were all present, including a broad acceptance of the companies' products.  Intensifying the distortion, according to him, was the fact that there was very little financial information on these private companies. "It's the same mania," he claimed. "Markets are cyclical. It's really no different than looking at the Internet bust and the housing market." Lest one conclude from this a slam-dunk case, USA Today pointed out that the not all of the practitioners were on board.  That is to say, there was serious difference on whether there was any bubble at all.

USA Today represented the other side as follows: “proponents of the next breed of Internet companies say the valuations aren't absurd this time because the companies have fundamentals behind them. ‘We're talking about real companies with real revenue and real profit,’ says Jeremy Smith of SecondMarket. A major shift in technology is bound to create companies with massive market values, the proponents say. The emergence of social media (more than 500 million accounts on Facebook alone), combined with mobile phone use (4.5 billion), is disrupting all of technology, so giant winners are to be expected, say venture-capitalists such as Cohler and Yang. ‘I think this boom is going to last awhile,’ Ted Schlein, a managing partner at KPCB, averred. ‘The trend lines are unlike anything we've seen in history,’ He says the enormous size of the social and mobile Internet market — tens of billions of people — dwarfs the markets for the fledgling Internet (billions) and personal computers (hundreds of millions), putting companies such as Facebook, Twitter and Zynga in prime position to strike it rich in IPOs. ‘This is just the beginning of a big market run,’ says Tim Draper, founder of a venture-capital firm.” John O'Farrell, a partner with Andreessen Horowitz, a venture capital firm that owns stakes in Facebook, Twitter, Zynga and Groupon agreed. “These are serious businesses with huge global market opportunities ahead of them. To an uninformed person, the valuations may look like a bubble, but we believe they will in fact prove to be very low valuations.”

Indeed, LinkedIn’s IPO on May 19, 2011 shot up immediately, more than doubling from the company’s initial pricing at $45. The IPO began at $83 and was over $100 (up around 140%) at noon. That's 540 times the company's 2010 net income! That valuation of an internet company was the largest since Google’s IPO in 2004. According to the Associated Press on the day of the IPO, “Renaissance Capital, an IPO research and investment firm, said LinkedIn's 84 percent increase at the market opening Thursday was the biggest for a U.S. IPO since the 2009 debut of OpenTable Inc., a restaurant reservations website. IPO analyst Scott Sweet, the founder of IPO Boutique, credits the increase to LinkedIn selling a relatively small number of shares, 7.8 million. [However,] (t)he demand reflects investors' belief that Internet services that connect people with common interests will be able to make more money as the Web's audience steadily expands.” This seems to be the question regarding any social media bubble; namely, will the internet audience continue to expand such that anticipated revenue increases from advertising and premium packages will beBusiness Insider

To be sure, the emergence of social media had been a huge phenomenon in defining or characterizing daily life in the first decade of the twenty-first century. Anything so big would tend to attract a lot of money. Even so, the P/E ratios were at nosebleed territory.  Facebook’s ratio of 125, for example, harkened back to the dot.coms in the 1990s. Like a jet that steeply climbs after take-off and then eventually levels off, the social media companies could not be expected to continue their climb forever; they were bound to level off at some point, and then the extended boom would be truncated or even turned to a bust if the market gets stung by the high P/E ratios.

The question seems to be whether too much stock is placed on the expectation of future profit. For example, in June 2011, Groupon filed to go public in an IPO that could value the company at as much as $20 billion, according to The Wall Street Journal. The company was only two and a half years old at the time, with a loss of $413.4 million in 2010 and another $113.9 million in the first quarter of 2011. With revenues during the quarter of $644.7 million, the company's management could make the argument that it was investing for future expansion and profitability. Even so, it could be argued that it is the extent of expectation that renders the company's valuation part of a bubble.

In fact, a bubble can be defined as an expectation of an “extended boom.” The “bubble” lies in the difference between the expectation and the reality that even such a boom is apt to end. The more things change, the more they stay the same. The next bubble is always said to be something different—something new—even as it is easy to relate it back to the last one. Identifying a bubble in progress with some degree of consensus does not seem to be likely. Were such identification even probable, what would government regulators do to let the air out of the balloon? Limit how high LinkedIn’s price could soar on the morning of its IPO? Prohibit LBOs if the price seems too high?

If Facebook, itself iffy with a P/E ratio of 125, wants to buy Twitter for $10 billion even though the latter had been valued at just over $3 billion a few months before, would blocking the purchase lessen the bubble? Were Twitter in trouble in spite of its growing presumed market value, would its bankruptcy take the air out of the bubble only to provoke a recession?  The aim of the regulators would have to be to release air from the balloon without triggering a recession (which is the downside of a bubble anyway). If anything is clear, it is that much more knowledge is needed for the market to be managed, let alone designed, so bubbles are identified and depressed before doing so could do harm to an economy as a whole. In the meantime, we can expect bubbles to top up because markets are susceptible to the human psychology of irrational exuberance. Such a condition is not surprising; what is astonishing is the human propensity to engage in denial while being completely blind to it even as it is in progress.

Sources:

Jon Swartz and Matt Krantz, "Is a New Tech Bubble Starting to Grow?" USA Today, March 16, 2011.
Nicholas Carlson, "Facebook 2010 Profit? Try $600 Million," MSNBC.com,
Michael Liedtke, "LinkedIn IPO Price Jumps Up Value to Over $4 Billion," The Huffington Post, May 17, 2011.
The Associated Press, "LinkedIn Shares More Than Double in NYSE Debut," CNBC.com, May 19, 2011.
The Economist, "Another Digital Gold Rush," May 14, 2011, pp. 85-87.
Anupreeta Das and Geoffrey A. Fowler, "Groupon to Gauge Limits of IPO Mania," The Wall Street Journal, June 3, 2011, p. A1.

Food Prices Rising: Will the Global Population Growth Outstrip Food Supply?

I contend that it is in our interest as a species to see that our population size is managed toward a steady state rather than as a maximizing variable (i.e., schizogenic). In fact, we have a right and obligation as one body to see that our various limbs are coordinated such that none engages in hypertrophy. That is to say, the whole has the right to protect its viability by arresting excessive growth in one of the parts. That much of the world's population growth takes place in the developing world does not mean that this right, or obligation, of the world is somehow a plot by the developed countries to oppress the poorer countries. In fact, much of the pain of the higher food prices is in the developing world rather than in the industrialized countries, so it is in the interest of the developing countries to accede to the world’s demand that their population growth be stopped.

According to USA Today, by mid-March in 2011 the World Bank’s food index had soared 29% from its level just the previous January and was a mere 3% below its 2008 peak. From March in 2010, Corn had increased 52%, sugar, 60%, soybeans, 41%, and wheat 24 percent.  The paper reports that the surge in food prices had many causes, including 1) rising population, which means increased demand for food, 2) speculators, who bid up commodity prices to artificial heights unrelated to supply, 3) soaring oil prices, which increase resource costs to the farmers and transporters, 4) trade policies, which become restrictive when shortages arise within a country (increasing the price on the world market), and, ironically, 5) improved standards of living in emerging nations, as new middle class consumers buy more meat. Of all of these factors, I contend that the rising population is the most fundamental, followed up by the related factor of oil.

A few months into 2011, the world's population stood at 6.8 billion, more than double the three billion in 1960. For a person of 50 years, the world's population had doubled in his or her lifetime. Although Thomas Malthus, the early 19th-century scholar who proposed that the world population could exceed the Earth’s ability to feed everyone, was controversial in his day because how could an omnibenevolent deity's design include such a harmful flaw, Malthus's theory has been virtually ignored in the 21st century as of 2011 as India and China in particular have continued to grow in population at unsustainable rates (especially India--China having a quasi-one-child policy that has moderated its increase). Dan Seiver, a financial economist at San Diego State University, pointed at the time to the green revolution as still being implemented in parts of the world; he is thus not yet ready to concede that the Mathusian thesis has arrived. However, in his work, he discounts the relatively high population growth rate; the increased efficiency or yield from the continued dissemination of "green" technology would have very great to outweigh the fixed (and in fact constricting) constraint of the world’s fertile land area that is used to grow food. In fact, according to the World Bank’s Hassan Zaman, the percentage of the U.S. corn crop that was used to make ethanol went from 31% in 2008 to more than 40% projected in the 2010-2011 growing season. While it is true that unlike the supply of oil in the ground, the land is being consumed, it can indeed be overused if it is not allowed to lie fallow, for example, to rest for a growing season. As the growing population exerts more and more pressure on the land to produce more and more, the land, like a horse pushed too far on a long journey on a hot August day, will tire and slow down. This would tend to happen just as the world needs each agricultural acre more. Therefore, if we as a species are unwise and expedient now in how we manage our land, our descendants will pay for our selfishness later.

While the effect of higher food prices is modest in the developed world, 50% or more of a family budget goes toward food in many emerging markets. American consumers spend about 9% of their income on food, and another 3% for dining out. The difference is not because food is more expensive in the developing world; rather, the percentage is so high because the typical income there is so low. “For many people who spend two-thirds or three-quarters of their income on food, even small price increases disrupt normal routine,” says Hassan Zaman, lead economist for the World Bank in poverty reduction and equity. “They start sacrificing non-food items, such as clothing, and then start eating less.” Indeed, the rising cost of food has been one factor in the protests in the Middle East that were not so pristinely "pro-democracy" as the media represented. 

USA Today reports, for example, that "(w)hen Mohamed Bouazizi set fire to himself in Tunisia in December [of 2010], it wasn’t because he was yearning to vote. It was because he couldn’t feed his family and police had confiscated the fruits and vegetables he was trying to sell." Although perhaps not focused on gaining a vote, however, Bouazizi had had enough of police-state tyranny so his protest was not merely economic. Perhaps the economic, at least when it manifests in vast inequalities supported by an infrastructure tilted by powerful vested interests rather than by a differential in talent and effort, is inherently political.

In short, developing countries should be amenable to population control even if the directives come from international organizations. Such countries should not resist the world acting as one body just because much of correction needed for sustainable human living on Earth would take place in the developing countries.  We as a species can no longer afford to be petty or partisan with such matters as concern our species' continued existence. If the world does not act as one mind over its body and engage in some much needed weight-control, the patient will grow too big and soon die of a heart attack. In the end, it is not a developed/developing contest, but, rather, a decision for all of us: are we to continue growing like a virus or are we better than that?  If we continue to refuse to take responsibility for our species as a whole, perhaps the cock roach will deserve to survive us.

It is ironic that we vaunt ourselves as being made in the image of God while our species refuses to step up to the plate even to manage itself so it can survive. Many of the world's religions teach us to submit to something greater--to something wholly other. It is more difficult, it would seem, for us to submit to the good of our species as a whole, even as we as a species run up against the semi-permeable membranes that delimit us on our planet in so many ways.

I contend that we are getting closer Malthus’ "the threshold point." Future population growth (and the added consumption, such as of food and energy, that is inevitable with such growth) could have dramatic implications for human life. The previous growth did not have such implications, at least  with respect to the world as a whole, so that growth was qualitatively different than that which we shall face if we continue to add billions to the global human population.  This qualitative distinction is precisely what we as a species have been having such a difficult time in grasping. To the chagrin of financial chartists, who try to divine stock movements in the future based on past trends, what was the case yesterday may not be the case tomorrow anymore. We got hits of this when the global financial system almost collapsed in September of 2008 and the Japanese nuclear plant almost had a meltdown in March of 2011. There being no financial market or no Japan would have been a wake-up call to us all concerning the assumptions we all implicitly make about there being a tomorrow like today. The sun may rise again, but we may not be around to watch it. Being made in God’s image does not guarantee us a seat. To grasp this vital point requires moving one's eyes from the rising prices on the shelves at our favorite local grocery store to consider the big picture with respect to the human race on planet Earth.  To act on this point requires significant reform of international organizations, such that they would be more than the sum of their parts.

If coordination between countries such as through the U.N. is not sufficient to arrest growth in the worst offenders, a transfer of a degree of sovereignty adequate for the tasks needed to avert reaching the threshold point beyond which the Earth can no longer support the human race is needed. This is particularly true if the worst offenders do not have the political will to correct themselves even if doing so is in their own interests. All too often, continuing in the status quo is too convenient to be resisted with enough energy to reverse the entropy even if correction is urgently needed. Lest the fear of a world government or federation enable the insufficient coordination to be presumed as the best we can do, the governmental sovereignty that is transferred should be accompanied with a design of checks and balances such that political consolidation does not occur. This is not, in other words, an argument for one world government. Rather, it is an observation that the human race as a species as reached a point where the species itself needs manage itself with respect to the planet as a constraint. Otherwise, the continued viability of our species will be in jeopardy. The fear of nuclear war during the last half of the twentieth century was just the dawning of this recognition. The question now is whether we act on our new awareness and situation with respect to the Earth.