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10.12.2010

Is Global Warming a Bubble about to Burst?

Shows the pattern of temperature and ice volum...Image via Wikipedia
Have you wondered lately about how real Global Warming is? Here in Italy we've had the coolest summer in the last 20 years and the coming winter bodes ill: more rain and bad weather. And that seems to be the case in many parts of the globe: flooding, rains, waves of unusual cold weather.

Is a second Ice Age coming? Of course not.
We've gone through bouts of "unusual" weather before and countless divergences from the "norm" (whatever that "norm" is).

The UN Panel on Climate Change has confirmed the planet is heating up and everyone agrees it's Man's Fault. Glaciers are melting, ice on the poles is collapsing in the sea, white bears are threatened with extinction, whole countries at sea level will find themselves under water, extreme events like floods and tsunami will accelerate, etc etc Politicians are meeting in China to prepare for the next round after the Copenhagen disaster. That meeting collapsed in large part as a result of the so-called "Climate Gate", i.e. the airing  of emails from some important scientists that questioned the conclusions of the UN Panel.

Now comes another blow to the fans of Global Warming. A respectable physicist and a major scientist of our time, Professor Harold Lewis who is Emeritus Professor of Physics at the University of California, Santa Barbara, has just called Global Warming a fraud in his letter of resignation to the American Physical Society    I can't resist quoting large chunks from from it:
Dear Curt [This is the President of the Society - Curtis G. Callan Jr, Princeton University]
When I first joined the American Physical Society sixty-seven years ago it was much smaller, much gentler, and as yet uncorrupted by the money flood (a threat against which Dwight Eisenhower warned a half-century ago)...
How different it is now. The giants no longer walk the earth, and the money flood has become the raison d’être of much physics research, the vital sustenance of much more, and it provides the support for untold numbers of professional jobs. For reasons that will soon become clear my former pride at being an APS Fellow all these years has been turned into shame, and I am forced, with no pleasure at all, to offer you my resignation from the Society.
It is of course, the global warming scam, with the (literally) trillions of dollars driving it, that has corrupted so many scientists, and has carried APS before it like a rogue wave. It is the greatest and most successful pseudoscientific fraud I have seen in my long life as a physicist [highlight added]...
So what has the APS, as an organization, done in the face of this challenge? It has accepted the corruption as the norm, and gone along with it. For example:
1. About a year ago a few of us sent an e-mail on the subject to a fraction of the membership... In its better days, APS used to encourage discussion of important issues, and indeed the Constitution cites that as its principal purpose. No more. Everything that has been done in the last year has been designed to silence debate
2. The appallingly tendentious APS statement on Climate Change was apparently written in a hurry by a few people over lunch... So a few of us petitioned the Council to reconsider it... In response APS appointed a secret committee that never met, never troubled to speak to any skeptics, yet endorsed the Statement in its entirety... The original Statement, which still stands as the APS position, also contains what I consider pompous and asinine advice to all world governments, as if the APS were master of the universe...
3. In the interim the ClimateGate scandal broke into the news, and the machinations of the principal alarmists were revealed to the world. It was a fraud on a scale I have never seen, and I lack the words to describe its enormity. Effect on the APS position: none. None at all. This is not science; other forces are at work.
4. So a few of us tried to bring science into the act (that is, after all, the alleged and historic purpose of APS), and collected the necessary 200+ signatures to bring to the Council a proposal for a Topical Group on Climate Science, thinking that open discussion of the scientific issues, in the best tradition of physics, would be beneficial to all, and also a contribution to the nation...
5. To our amazement, Constitution be damned, you declined to accept our petition, but instead used your own control of the mailing list to run a poll on the members’ interest in a TG on Climate and the Environment. You did ask the members if they would sign a petition to form a TG on your yet-to-be-defined subject, but provided no petition, and got lots of affirmative responses...
6. As of now you have formed still another secret and stacked committee to organize your own TG, simply ignoring our lawful petition.
APS management has gamed the problem from the beginning, to suppress serious conversation about the merits of the climate change claims. Do you wonder that I have lost confidence in the organization?
I do feel the need to add one note, and this is conjecture, since it is always risky to discuss other people’s motives... Some have held that the physicists of today are not as smart as they used to be, but I don’t think that is an issue. I think it is the money, exactly what Eisenhower warned about a half-century ago. There are indeed trillions of dollars involved, to say nothing of the fame and glory (and frequent trips to exotic islands) that go with being a member of the club. [highlight added] Your own Physics Department (of which you are chairman) would lose millions a year if the global warming bubble burst. When Penn State absolved Mike Mann of wrongdoing, and the University of East Anglia did the same for Phil Jones, they cannot have been unaware of the financial penalty for doing otherwise. As the old saying goes, you don’t have to be a weatherman to know which way the wind is blowing...
I want no part of it, so please accept my resignation. APS no longer represents me, but I hope we are still friends.
Hal
I've cut out some minor points but you're welcome to follow the link and  read the whole letter.

It's an eye-opener.

Now, this "Hal" is someone with an extraordinary cv:  Former member Defense Science Board, chmn of Technology panel; Chairman DSB study on Nuclear Winter; Former member Advisory Committee on Reactor Safeguards; Former member, President’s Nuclear Safety Oversight Committee; Chairman APS study on Nuclear Reactor Safety; Chairman Risk Assessment Review Group; Co-founder and former Chairman of JASON; Former member USAF Scientific Advisory Board; Served in US Navy in WW II; books: Technological Risk (about, surprise, technological risk) and Why Flip a Coin (about decision making).

Has the man gone crazy? I don't think so. He mentions several times in his letter the trillions of dollars that are behind the Climate Change hoax...if it is a hoax, of course - let's not jump to conclusions quite yet. But when there is that kind of money involved, it is worrisome.Opportunities for corruption are only too numerous...

Let me count the ways in which this Climate Change hypothesis (better call it that - it's a neutral term) is not entirely convincing. And the ways I'm counting are just those that I see from my modest standpoint as an informed citizen, nothing more.
1. There is a world-wide and historic tendency to collect temperature near urban agglomerations (this is natural, that's where the weather stations were first located). But this tilts averages towards the high end and distorts historic trends, since cities are notoriously warmer environments than the countryside; so it is just possible that the warming trend that has been detected is not quite as warm as it is made out to be.
2. As the historical data shows (to the extent that it is credible) ice temperatures have been going through ups and downs at least as large (if not larger) than the one we are now experiencing (see chart above going back 450 thousand years); it is therefore hard to see why one would conclude that the present warming is caused by human activities;
3. With global warming there should be an acceleration in extreme events, but is it really happening? The devastating floods in Pakistan this summer and now in China and Vietnam seem to point to this. Everytime we turn on the news we hear of another humongous catastrophy. True enough. But to what extent are these caused by global warming? I suspect that the soaring number of victims is caused just as much by demography: the earth is overpopulated and people have been settling now for decades in highly marginal and unstable environments. That was very strikingly the case in Pakistan in the Sindh valley, where farmers have settled in areas where none used to live 35 years ago. Hence the disaster when the Indus river and its affluents overflowed.
4. Admitting that the present warming  is only a natural divergence from the "norm", how much should we worry? How much should we invest to prevent future disasters?  Nature has an amazing capacity to regenerate itself. If you leave it alone, it tends to regenerate itself faster than if you try to "help it out". With the BP spill in the Golf of Mexico we have been reminded how true this is - yet that truth was given little space. From past experience,  it was known by scientists that the chemicals meant to dissolve the spilling oil can do more damage to flora and fauna than the oil itself. Instead of refraining from using these chemicals, millions were spent to pour them all over the place. There are two advantages to doing this stupid thing: one, the chemical producers make money, and two, you look like you're doing something and you earn political kudos. Bah!
5. Last but not least, the main point made by our professor of physics in his letter of resignation: there are trillions of dollars involved in research and in "green technology". The vested interests in global warming are HUGE! And the effects can be worse than a Tsunami. Take for example wind turbines. They are all the rage across Europe. Here in Italy, forests of loud and unsightly windmills are covering beautiful stretches of coastline and even lovely inner valleys although it is well known that on the Italian peninsula, in places far away from the sea, the wind is  fickle and unreliable. But there is political support and money incentives - so the wind turbines go up, regardless. A perfect example of how the hype around climate change has encouraged governments to adopt market-distoring measures distorting the market all the while feeling virtuous about it.

What makes me sad in all this is the role of the UN. It should have been above dispute. It should have remained clean and honest. This UN Panel on Climate Change was supposed to attract the best minds and the best science...What happened? I don't know. Perhaps it got out of hand: too many scientists, too many people involved and not enough quality control. Quality control? Yes, that may not have been done the right way. In principle, you should establish TWO committees: a large one that does the work and a small one which spotchecks the other's output. I don't believe that the UN Panel's work followed that procedure - yet it is standard procedure in my specialty, programme evaluation (something I've done for over 20 years).

What a pity, this was clearly a lost opportunity.  My hope is that something will be done - that the debate will re-open and produce the basis for a CREDIBLE global warming summit. Then it could still be held, if not this year in Mexico, next year somewhere else.

Wouldn't it be nice if climate change could be addressed directly without the hype, accusations and finger pointing that offuscate the real issues? Real issues like how to make agriculture resilient to higher temperatures, or how to contain the effects of natural disasters with measures to stabilize fragile environments or stop people from settling there without adequate protection.

Climate warming is not a bubble about to burst (just look at the chart above: the polar ice, whether for human causes or not, is definitely rising).What should burst is the hype around it, but with human nature being what it is,  I doubt that it will...
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10.08.2010

Is China a Flaming Dragon or a Harmonious Bird Song?

Detail from The Procession of the Trojan Horse...The Trojan Horse procession - Detail from a Domenico Tieopolo (1773) painting

Knowing something more about China is particularly important these days as we are facing a real  invasion of Europe by the Chinese - so far peaceful, since these are mainly tourists, students and businessmen. The latest episode, of course, being the Chinese offer to the Greek to help them out with a €5 billion fund, certainly a welcome breath of fresh air for the battered Greek economy (and, consequently the Euro)...and a Trojan Horse entry into Europe, as the Chinese Premier Wen Jiabao also called, inter alia, for dropping the last barriers against their high-tech exports.And the whole thing is threatening to degenerate in a war of words over currency exchange rates, the EU now joining the US in accusing China of keeping the Renmimbi too low. I bet this is a war that is going to last a long time, because the Chinese are not about to give up manipulating their currency, or, more generally, give up their ways...

Recently I watched on TV a fascinating report about Chinese youth and how it is preparing itself to invade the world and about its young businessmen and how they expatriate themselves to better tackle the West. It was aired on ARTE - I think I've mentioned this Franco-Germain TV channel before: they produce some fabulous documentaries, especially in their THEMA series. If you have a chance to watch ARTE, don't miss it! This was one of the better ones. Frankly I learned a lot about the Chinese forma mentis and it was a true eye-opener.

I'd like to share with you what I learned and then you tell me what you know, and let's see if we agree!
Let me tackle the second documentary first: the student side. The documentary, realized by Ms. Meerman, followed 5 students over a whole schoolyear at the prestigious "Middle School" in Chongqing, a town in Central China (urban population: 6 million; the municipality as a whole has over 31 million - numbers in China are always enormous!). It showed how the school prepares its 1500 students for the entrance exams in top Chinese universities, the most desirable ones being  Beijing Normal and Tsinghua. These kids follow a harrowing study programme, six days a week, from 7:30 am to 10:30 pm, and work even on Sunday. Most live at school in dorms as they come from poor families in the countryside. A minority of better-off urban families offer their children outside accomodations, but all families have one thing in common: the sacrifice they make to see their children through this school. For it is very expensive and the State does not pay for it. As a result, the pressure on the kids is immense and everyone is expected to succeed.

This brought to mind the kind of intense pressure French parents place on their children to enter the Grandes Ecoles. It's strikingly the same. But in China, the rethoric used by the School Director in his speeches to his students and teachers is of a kind you never hear in the West: how China has to honour its ancient glorious past and reconquer its place in the world, ahead of everyone, particularly the United States. Yes, the Chinese are convinced the 21st century is theirs and they are preparing their youth to make it to the top. One kid mentioned how his fondest dream was to become rich like Bill Gates! In short, the Chinese are on their way up, an emerging economy fast becoming a developed one, and all this is only normal hype. Nothing to really worry about, we've been ourselves through precisely this stage in our own development.

What the documentary however didn't say was perhaps even more significant: a couple of days later, reading the New York Times, I learned that China is suffering from a wave of faked and plagiarized research, affecting scholars and probably discouraging future Chinese cooperation with scientists abroad. Last summer, a study of the China Association for Science and technology found that 55% of 32,000 scientists they interviewed said they knew someone guilty of fraud. Not only that. The culture of fakery has apparently also invaded the world of students, who, under the pressure to succeed, cave in and adopt cheating as a normal, even culturally acceptable, behaviour. Here is the link to that fascinating article : Rampant Fraud Threat to China Brisk Ascent

Turning now to the other documentary: the business side. This was illustrated by interviews, ably produced by Christian Schidlowski, with four young Chinese living in Hamburg, Germany - reportedly the largest Chinese community in Europe. By the way, in the Chinese language, Hamburg is called "Hanbao", which literally means "the Chinese fortress"...The Trojan Horse again!

The four Chinese interviewed were very different: a single mother working in a bank and specializing in financing maritime transport; a young entrepreneur who'd established a flourishing tourism agency in Hamburg and wanted to stimulate German investment in a magnesium mine in China; a young female manager who'd flown in from China to inaugurate with the Hamburg Mayor in attendance a very flashy tea house/restaurant/cultural centre in a new Chinese-style pavilion; and a middle-level manager of the China Shipping company outposted in their Hamburg office. All four very ambitious, all adapting to Germany in different ways - from total immersion in Germany and feeling they belonged to both countries equally, to rejecting Germany and wanting to return home. Which is natural.

The funniest scene was filmed in China, when the young entrepreneur took two German investors to visit the magnesium mine. The delegation was received by local authorities in the traditional manner, including a vast banquet dinner, with glass after glass of Mao Tai - a terribly strong drink (53°) that you cannot refuse without hurting your hosts' feelings. Even the cameraman had to drink and as a result ended with perfusions in the hospital. Early the next morning, the delegation went on a visit to the mine and stood for the customary official photographs... looking a little worn-out. We were not told whether they invested in the mine or not.

The documentary made you feel that these Chinese were exactly like so many expatriate people you meet in your own life:  friendly and open, they like to eat (well) and drink (a lot), they worry about good schools for their children and want them to learn Chinese so they do not forget their cultural roots, and above all, they want to make money.  They want the Good Life.

What these Chinese said about Germany,  their host country, was particularly interesting. The Chinese viewpoint on us is something you rarely come across. It would seem that they admire Germans for their capacity to turn out  "precise" or high quality work: they feel that in this respect, China, in spite of all its extraordinary advances over the past 30 years - the roads built and the forest of skyscrapers, the fast trains etc - still has something to learn from the West.  But  the one that struck me most was the young woman working in the bank. She explained how she found it sometimes difficult both at work and in the university to express her opinion, particularly when she had to disagree or criticize - when, for example, she had to reject a not well-justified demand for financing. It was hard for her to do this because it went counter to one of her most important values: harmony.

The Chinese feel that dissent breaks down harmony, and they view harmony as a major feature in inter-personal relations. Of course, it is something that goes back to Confucius and it is at the heart of their culture. The Mayor of Hamburg, coming out of the tea house inauguration, declared that there were several things we could learn from the Chinese, chief among them serenity. Serenity? Yes, it is linked to harmony. Obviously. All that sounds very peaceful and civilized.

But it occured to me that there is a more ominous side to this. If one views dissent as a threat to harmony, what remains of our cherished Western concepts of Human Rights and Individual Freedom? In the West, the right to dissent is fundamental. In China, to dissent is impolite. It goes counter to their culture, to the way they are, the way they inter-relate. That is worrisome. And it goes a long way to explain how the Communist Party manages to remain in power even though it has unleashed an astonishing wave of private capitalism, flowing over China and out of it like a Tsunami.

It is impolite to dissent with the Party... So is China a flaming dragon or a harmonious bird song? Take your pick!

A footnote: as I was about to publish this, news came out that the Nobel Prize for Peace went to Literary critic, writer, and political activist Liu Xiaobo, who is serving an 11-year sentence in a Chinese prison. The Chinese state media immediately blacked out the news and Chinese government censors reportedly blocked Nobel prize reports from websites. So I imagine no one will read my post in China!

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10.05.2010

Italy, an Example of What Not to Do to Get out of the Recession ?

emblem of the Italian Republic
Is Italy adrift, is it about to drown? Everything seems to conspire against recovery in this once happy, go-lucky country - really the second economic power in Europe after Germany. Yes, the second if one includes the "submerged economy": some 20 to 30 percent of total GNP (those are all the small businesses that don't pay tax and thus escape being counted in the statistics).

The numbers are dire. ISTAT, the Italian statistical bureau, has announced that Italian labour productivity has plunged to minus 2,7 percent in August, while Germany's and France's were both up. Actually labour productivity in Italy has been slipping steadily over the past ten years, at an average of 0,5 percent. Doesn't sound like much, but it is, if you consider that in the same time period Germany's productivity has risen by 16% and France's by 20%.

This growing gap is really worrying  the Italians who count - I mean responsible politicians and businessmen and women, foremost among them Emma Marcegaglia, the very vocal and active President of Confindustria, the Italian industrial managers association. Bini Smaghi, a Vice-President at the European Central Bank, had some devastating things to say about his country (see the article attached below).  Marchionne, the head of Fiat, a couple of days ago had some harsh words that made headlines in all the national papers. He said Italy was "senza bussola" (without a compass), that it had lost the "sense of the institutions", i.e. "as if someone had opened the doors of the zoo and all had gotten out". He complained that in his travels around the world (and since he is also at the helm of Chrysler, he travels a lot) it is becoming harder and harder to explain what is happening in Italy.

Indeed, what exactly is happening in Italy?

First, whatever statistics you use to describe the situation, particularly official ISTAT numbers, have to be taken with a HUGE grain of salt. As I've said, you need to correct them with whatever is happening in the "submerged economy" and of course, that's a bit of a black box. It used to be a roaring sector of the Italian economy, competing successfully against the globalization tide - largely a result of  its ability to keep wages low since it didn't pay taxes nor participated in the costly national security system.

Probably because of the submerged economy, the Italian model has always baffled foreign observers. The country several times over the past fifty years has managed  to unexpectedly jump forward, defeating all dismal predictions: in the 1960s first (the famous "economic miracle" after excruciating poverty in the post-war period). Then  in the 1980s, with the "made in Italy" formula that broke new ground in international trade and secured for Italy a very profitable niche market. There was a slow down in the 1990s and then a tiny rebound in the early 2000s, but by 2007, on the eve of the Big Recession, the economy had slowed down again. Except for agriculture, commerce and some specialized luxury industries (example: nautical), Italy was in slow-down mode in practically all its sectors.

Why? Because Italy was (and is) suffering from long-standing problems, some of which have afflicted the country since its foundation in the 1860s - like a machiavellically complex bureaucracy inherited from the Austrian Empire (and other empires before it), coupled with a fiscal system that seems especially designed to slow the economy down and discourage anybody from working. Italian conventional wisdom is that you can work and live happily in this country only as long as the government doesn't notice you exist. They have an extraordinary centuries-old saying that beautifully expresses this state of affairs: "piove,  governo ladro!" It rains, the government is a thief!

But there are other problems, of course, chief among them the trade-unions, some of the strongest, most radically communist-inspired in Europe. Italy really suffers from an obsolete model of industrial relations. There are three big unions, two of which are beginning to show a certain sense of responsability, but the third, the Cgil, will have none of it. So far. There is yet another meeting tomorrow with the major business managers in the country. Something might come out of this encounter, but I doubt it. In any case, it will take a long time to undo the damage the trade unions have done to the economy - a damage that can be summarized in two short sentences: they've kept salaries too high in relation to productivity; they've kept out the young and protected for too long people useless in their jobs, thus becoming a machine to protect vested interests. A cause of rigidity in the labour market. No wonder small enterprises stay small in Italy: it is the only way to escape becoming unionized (by law you have to keep your staff below 15 people).

The other big problems are the cost of energy (rising) and globalization, with its accompanying phenomena of trade competition and outsourcing. As to the cost of energy, it affects everyone - and not just Italy. So I won't go into it here.Globalization is far more interesting and has taken an unexpected turn in the Italian submerged sector. As I've said, it's hard to figure out what might be going on in there, but there are some indirect indications. For example, the textile industry in Prato (north of Florence). An interesting report from the Monash Asia Institute (Australia) showed how small enterprises in Prato are increasingly falling into the hands of Chinese immigrants, both legal and illegal.As the author of that report writes, "Prato’s Chinese community thus accounts for approximately one fifth of the entire Chinese population (100,000) in Italy", or about  10% of a population of 180,000 - three times the average percentage of the Chinese community in Europe.

That's a lot! Prato is a real Trojan Horse for the Chinese invasion! The situation in Prato was also recently investigated by the New York Times which pointed how the Chinese, working in about 3,200 small textile businesses have managed to beat the Italians at their own game. As the NYT put it,  the Chinese, taking advantage of Italy's "weak institutions and high tolerance of rule bending", have succeeded in creating "a thriving, if largely underground, new sector while many Prato businesses have gone under." In short, we are seeing ruthless, jungle-like capitalistic competition at its worst, with the authorities apparently unable to intervene. No rule of law here.

That sort of thing hurts precisely the one Italian sector - the "underground" or submerged economy - that had so far escaped from not only taxes but downturns in the business cycle. No more. It looks like outsourcing is a two-way street, and the "made in Italy" is becoming blurred with the "made in China". That is a very frightening prospect and many Italian managers are having sleepless nights over this.

Is the Italian model - the "made in Italy" niche in international trade - a thing of the past? Hard to say, but I am not all that pessimistic. Bottom line, it's intelligence that wins the day, and the Italians have shown over their history that they have a lot of it. Even if contrary to the Americans,  they don't invest in Research and Development anywhere near the necessary funds and Italian venture capital investments are minuscule. In 2009, only €98 million were invested in Italy as compared to €500 million in France. Five times as little!

Yet, even on a shoe-string, they manage to go forward. Let me mention just one initiative that was recently reported in the Sole 24 Ore: a major Italian bank, Intesa Sanpaolo, has set up a yearly "Start-Up Initiative" (now at its 5th year) bringing together young entrepreneurs and venture capitalists. This year's event was focussed on innovations in green technology, and the next one is programmed for nanotechnologies. Then the Bank will move abroad, with meetings planned in London, Frankfurt and Israel. The beneficiaries of this initiative are young Italian entrepreneurs with a bright idea (the example reported in the Sole 24 Ore was production of biocarburant in Ghana). To participate in the event, these young people have to face a hard selection process: out of a total 170, only 26 were approved by the Bank to present their business plan. Perhaps this selection process is too harsh - who knows - but at least something is done, and candidates with innovative ideas are obviously numerous. That speaks for a young, dynamic society, doesn't it?

Then there's another positive factor at work: Italians, believe it or not, are fairly chauvinistic. Not as much as the French, but they do like to defend their culture and their cuisine. More importantly, they often put their money into it - and that, in economic terms, makes a lot of difference. Developing countries have always had a hard time developing because over time their elites have stashed away their money in Switzerland and other havens instead of investing at home. Italian business is not like that - and, above all, Fiat, the very symbol of Italian industry. Today, it produces more cars in its Polish factory than in all its five Italian factories combined. Yet, the €20 billion it plans to invest to overhaul its production, as Marchionne recently remarked, will not go to Poland (which might have made more economic sense) but to Italy. And that is bound to make a big, big difference!

All is not yet lost for Italy - as soccer fans say, "Forza Italia!" But don't misread me. That's not meant as a reference to Berlusconi's party or the slogan he so cleverly crafted for his party. Not at all. Berlusconi is another story for another post: in my view, his time is past, he's an old man, he hasn't done the half of what he should have done to fight the recession...We'll see who, among the younger managerial generation, will make it to the top and push the country back on track! 
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10.03.2010

Is Structural Unemployment a Bad Joke?

U.S. Job Seekers Exceed Openings by Record Ratio

I can't believe it! One of my favourite economists  let me down last week. I'm speaking of Paul Krugman, one of the best columnists on the New York Times, a Nobel Prize in Economics in 2008, someone who's remarkable in every way.

Read the article I attached below. It's unbelievable, I tell you!  He just did himself in - that is, of course, in my humble opinion. He went for every conventional wisdom in the book. What a pity!

Yet I fully support his basic message - it makes a lot of sense: it is URGENT that governments tackle the problem of unemployment. For as I've said before in an earlier post, this is truly the BIGGEST problem we are facing NOW. But to tackle unemployment, we have to know what kind of beast it is. And it's not just a disease linked to the business cycle and a lack of demand, as Krugman (and most economists with him) would have it. Sure, it is that too, but it is ALSO a structural disease - something much deeper, like cancer. And like that dread disease, it's been lurking in the background, half-hidden from view, for a long time now - in my view, for at least the past 30 or 40 years .  And this time around, with the Great Recession, it has made cyclical unemployment - the one caused by a crash in demand - much, much worse. And longer lasting. And harder to get out of.

Anyone with kids fresh out of college, with their brand new university degree under the arm, will tell you that structural unemployment is no figment of the imagination.

It exists, and how!

Back in the fabled '60s when I graduated, it was easy to get a job. I immediately started with First National City Bank (as it was called in those days) and went on to a big publisher at the time, Harper & Row. Since then, they've both changed name and capital assets, and I've moved on to greener pastures in Europe. But I never had any trouble finding a job, my Columbia University degree always acting as a wonderful passport into the job market. But contrary winds started to blow in the 1970s when the price of petrol quadrupled and the boom years based on cheap energy came to an end. Things picked up with the Internet/personal computer revolution in the 1980s, but that too petered out, after 9/11 and the collapse of the Twin Towers in New York (btw, no correlation intended and none exists!). The result? Young people  in the West, trained the way I was, no longer easily breeze into the job market. They have to work at it hard and learn to wait patiently for an opening.

And the same fate befalls quite a few graduates from developing countries who can't find a job at home and take the immigration route.

And it's not just a problem of the young. See the picture above! People seeking jobs are 6 times as many as the job openings in the US. And it's just as bad in some European countries, if not worse (see Spain or Ireland). If you've worked your whole life and you're forty or fifty years old, it's not just an unemployment problem, it's a nightmare.


So this is the long-standing problem that needs to be addressed. Krugman is right in one thing at least: the way governments say they are going to tackle structural unemployment is next-to-useless. It is practically an excuse for inaction. They always talk about (and sometimes invest in) programmes to recycle/train people in new skills or in updating their old skills. As if that was the whole answer to structural unemployment.  It is that too, but it is much, MUCH MORE. 

As I've said before, it requires an integrated approach similar to the one used by the World Bank and other major players in the development community - from the United Nations Development Programme to technical agencies and major Non-Governmental Organizations such as Oxfam or CARE. It is a well-tested approach - it's been in use for the past 40 years and is predicated on four essential steps:
(1) evaluate first the state of research to identify opportunities for quick innovation;
(2) set up lead institutions to guide investment and/or establish public-private partnerships to finance innovative, lead projects;
(3) test them out with small, short pilot projects and finance the best ones, those with the highest returns and easiest to duplicate;
(4) train people for the new projects: that is when training people to update their skills or give them new ones come into play. It's the last step in the process.

For you don't just train people in anything they don't happen to know just for the pleasure of it. People receiving training need an assurance that at the end of what is always a big effort - especially for adults who've been out of school for a long time- it will pay off in terms of a new, well-paid secure job. So everything has to be done first (see the first above-mentioned 3 steps) BEFORE embarking on a training programme.

What is needed is a concerted effort from every vital element in society - from the research people in universities and private laboratories to venture capitalists to public servants in the state treasury and finance. 

And to suggest that structural unemployment doesn't exist is a very, very bad joke...That kind of argument won't get us anywhere!

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9.27.2010

The Printed Book is Dead, Long Live the E-book...Right? Wrong!

Panorama of Matera

The death of the printed book? That and other portentous matters were discussed at the WFF in Matera (Italy) last week (23-26 September 2010). WFF? Sounds good and very international... some kind of new United Nations agency?


No, nothing as boring as that. WFF is the Women's Fiction Festival, a meeting of writers, editors, publishers and literary agents from the US, UK and Italy (not to mention bloggers and journalists). Now in its seventh year, it has achieved the enviable status of "BEST writers' meeting in continental Europe", drawing such heavy weights as Man Booker Prize finalist Simon Mawer with his extraordinary The Glass Room and Eileen Dreyer, New York Times best selling author and winner of numerous awards in not one but three completely different genres (medical thrillers, fantasy and historicals).

But it doesn't stop there. WFF is not limited to English speakers. It has drawn publishers from Italy, Germany and Holland and some important Italian writers, such as Licia Troisi, the immensely successful young author of three fantasy trilogies that have sold across the world (Germany, France, Russia etc) who also happens to be...an astrophysicist, currently working on her Ph.D. And Enrica Bonaccorti, a writer, actress and TV personality who came to present her latest novel, L'uomo immobile, a harrowing story about a man immobilized after a car accident. WFF has also helped considerably in discovering and promoting new authors, such as Gabriella Genisi, Cristina Obber and Alessandra Oddi Baglioni.

All this thanks to the dynamism and organizational genius of a very special lady, Elisabeth Jennings, who started life as a translator and has become a successful published writer in her own right. Having followed her husband to Matera, she decided that this was the perfect place for a writers' conference, particularly one focussed on romance writers. A wild bet, yet how right she proved to be! With its extraordinary location over a canyon and filled with stone-age houses, it certainly is a uniquely romantic town in Europe - not to be missed should you visit Italy. And Liz Jennings has managed to involve the local authorities and national sponsors such as the publisher Harlequin Mondadori, all to create a remarkably well organized festival, including good food, music, fireworks and excellent simultaneous English-Italian translation. Bravo to Liz and her team!

With this stellar cast, you can easily imagine that the discussions were lively - the public was composed not only of aspiring writers but many already successfully published, including those from the English Writers in Italy,a group formed in 2006 bringing together all English and American authors living in Italy. Topics ranged far and wide, from fine points in how to do forensic or historical research to the changing role of literary agents in the United States and Europe as e-publishing is fast taking a hold.

For that was the really HOT TOPIC: e-publishing. A published writer and expert in digital publishing, Charles Jones told us that, the way he saw it, the advent of the e-book did not spell the death knell of publishing. He saw it as a golden opportunity for aspiring writers.

Maybe.

Actually, for the moment, things don't look good at all: traditional publishers are in a panic, laying off staff - particularly editors - and fighting with Amazon.com over their "business model" (i.e. their cut). As a fallback position, they have chosen to publish authors with a "platform" (i.e. people with a strong following because they are celebrities or key professionals in their field) rather than debut authors. Better safe than sorry seems to be their motto. More the pity, because literature, like any human endeavour, needs new blood to go forward. Newspapers aren't doing any better, cutting back on their book reviews - most notably the New York Times. The only major American paper that has  decided to go counter trend is the Wall Street Journal: it is coming out these days with a new book review section. We'll see how it goes, but, as I said, most major actors on the publishing scene are feeling gloomy.

I wonder why. To my mind, e-books cannot replace the printed version. It's just another distribution channel, and a highly effective one. It is able (unlike the printed word) to reach out to the most distant and isolated areas of our planet. E-readers are fabulous portable libraries - and since we have all become travellers, they are the only comfortable way to carry novels on the plane or to the beach. And you can read whenever you are stuck somewhere - in traffic, queuing up at the post office, waiting for the doctor. If you drive, you can use the audio version and listen to your favorite novel.

In short, reading opportunities are multipled. E-books don't reduce the book market, they EXPAND it! It is odd that such a simple notion hasn't occurred to traditional publishers - nor even to Amazon.com who's at the heart of it with its Kindle. Because if the market is an expanding one, then the pricing strategy should be changed to take that fact into account.What Amazon should do (and other librairies too) is to offer prices that are structurally linked: whomever has bought an e-book should be able to get the printed version at a discount and vice-versa. That way, you'd be riding the tiger of an expanding market. I've had the experience of really liking a book in economics that I had bought for reading on my Kindle, and being discouraged from buying the printed version by the price. It was galling to have to pay for it all over again.

Yet, for a certain type of book, you really do want the printed version. To use as a reference, as something to share with your friends, as an object to put on your shelf at home. For all these things, an e-book doesn't work and the printed version is irreplaceable. Why can't publishers understand this? Their business is not threatened, far from it, it's expanding. People have NEVER read so much as they do now: Americans are up to reading on average a whopping 22,000 words a day and spending 11.8 hours a day absorbing all kinds of written information. 22,000 words a day! It makes one dream (remember novels average 80 to 100,000 words). Why should such a small portion of it be allocated to novels? It's all a question of marketing and adjusting to the digital age!

As the Italians say: coraggio!
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9.20.2010

The Illegal Immigrants Conundrum: Is French Expulsion of the Roms a Solution?

A Polish Romani womanImage via Wikipedia
Nicolas Sarkozy, intent on reviving his support on the right, has launched France into a busy summer of bulldozing down illegal Roma encampments. A prize of  €300 (close to $400) was offered to those who left voluntarily and, of course, the flight home was paid for.



So far, this summer,  it has cost the French Treasury some €300 million to deport 1,700 Roms back to their countries of origin, Romania and Bulgaria. That compares with an average of 8,000 Roms deported every year since 2008 - annual deportation averaged only 2,000 before the European Union was enlarged to include Romania and Bulgaria, the countries with the largest Rom populations in Europe.

Are 1,700 or even 8,000 persons per year a lot of people?

Hardly, considering that France has between 350,000 and 500,000 Roms - but most with a French passport.

So if it's only a trickle, why does it matter?

Because of the way the French government is doing it.  First,  it is rushing through the dismantling of encampments and creating havoc. Second, it claims its action is based on checking out the dates on the Roms' entry visas. Yes, as citizens of Romania and Bulgaria, the newest entrants to the EU, these particular Roms need a visa and it has limited validity. That should change in 2014, when those restrictions - whose legality is not entirely clear and may be in contradiction with a 2004 EU Directive - will come to an end.

What is new - and interesting -  in the process is that the French Government has for the first time agreed with Romania and Bulgaria to finance programmes for Roms' reinsertion at home. Something the European Union had promised those countries when they acceded to the Union in 2007, but has never done to the extent promised.

Actually the problem of Roma integration is particularly acute in other countries in Europe: the Czech Republic and Slovaka within the Union and Serbia outside (but trying to get in). Not to mention Spain, Italy etc.
Until recently, the French procedure seemed to be on track and offered what looked like a promising new way to deal with the immigrant problem that is plaguing Western Europe. It was (is) based on three elements:
(1) eject only those who are illegal,
(2) give them a money reward if they cooperate, and
(3) work out with their home countries a system to reintegrate them at home, thus (hopefully) discouraging their return.

Unfortunately last week, the procedure hit a major snag. An official French Government circular was uncovered by Le Monde and other newspapers that made for juicy stuff: the circular specifically named the Roma as those to be expelled as a matter of priority. That smelled of ethnic cleansing and there was the expected uproar on the Left everywhere in Europe. With the vote we saw in the European Parliament.  The French government instantly withdrew the circular but matters took a turn for the worse when Viviane Reding, the EU Justice Commissioner, unjudiciously likened the French Roma expulsion to Nazi deportation. Ms. Reding's rabid declaration gave Nicolas Sarkozy a golden opportunity to mount his white horse in Brussels and shoot everyone down. Unfortunately he made public a private conversation he had with Angela Merkel, the German Chancellor, saying that Germany would embark on a similar policy of Roma expulsion - we shall never know what they said to each other but, as might be expected given the German sensitivity to comparisons with Nazi policies, they immediately denied Germany had any intention to dismantle the Roma camps.

In this silly flap over what the French are really doing to the Roms, there is a tendency to lose sight of two basic questions: one is the right of EU citizens to move freely across borders within the European Union. This important point was brought to the attention of the EU commission in a very interesting report, dated 1 September 2010 (here is the link: The Situation of Roma in France and in Europe - Information Note). The other is how to solve the problem of Roma poverty and emargination. A galling issue that affects some 7 to 10  million people across Europe (yes, that's how large the problem is!)

No one argues against the right of free movement for EU citizens: it is part and parcel of what it means to belong to the EU. And of course, least of all the French Government who contends that it is only deporting illegal immigrants. Perhaps they are and we shall leave the EU Commission to figure that one out.
What worries me more is the long-term problem of Roma poverty. As long as they are poor and uneducated, they cannot be integrated in our society. This is exactly the kind of problem we face in developing countries: poverty, emargination, lack of education, lack of job opportunities, lack of housing, lack of sanitation and health care, lack of everything. I rather liked the offer of the French Government to finance programmes of reinsertion of the Roma in their country of origin. But what is the content of these programmes? How long will they last? How much funding?

I bet not enough. Never enough and not long enough either.

Reinsertion of the Roms is basically a long-run development problem.That means it should be treated as such, with the proper means and dedication, using everything we have learned so far in development aid and what makes it work. Guiding principles like an "integrated approach", "giving voice to the beneficiaries", allowing "appropriation of the programme objectives by the recipient population" etc etc. We do know how to make it work after 60 years of aid in the Third World (yeah, with many failures and mistakes, but we've learned how to do it, how to avoid the worst pitfalls...)

Can't we do the same for the poor in our own countries? And can't we extend poverty eradication programmes to ALL the poor within the EU borders, regardless of whether they are Roms or not? Isn't high time we really, really paid attention to the problem of income inequality and poverty?
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