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27 October 2010

Unrealistic Expectations

As shown in his letter in the October 26, 2010 Wall Street Journal, Rolf Goehler, like most anti-establishment types, does not understand that the national economy is built on unrealistic expectations. The Fed has dual and contradictory roles: control inflation and support economic growth. A steadily, but slowly, deteriorating means of exchange is necessary to provide an incentive for consumption and capital investment; however, when the monetary authorities overlook a dangerous detachment of inflation from the rate of business and employment growth they risk a burst in the bubble.

This is apparently what led to the Great 2007/8 Recession. Managing the economy in a politically acceptable way that promotes comfortable welfare means keeping a balance between supply and demand that allows the public to sustain its self-deception that things will usually get better. The policies that Goehler decries are perfectly rational as long as the policy makers don’t lose sight of the need never to let go.

14 October 2010

Global Warming Conundrum

The human condition involves living with the unforeseen consequences of our actions, including splitting the atom and burning organic fuels. Scientists did not necessarily anticipate the geopolitical impact of nuclear weapons and Neanderthals certainly did not worry about fire’s effects on the world’s climate.

Global Warming is not a catastrophe—yet. It is merely a consideration that has to be taken seriously as we plan for the future. It has never been realistic to think that we can attain life in the Garden of Eden. It is only reasonable to arm our descendents with the intellectual tools that will allow them to deal with the next challenges they surely will face.

Somebody will probably make money by innovating a solution to a problem like Global Warming. Good for him, her or them! Harold Lewis, Emeritus Professor of Physics, University of California, Santa Barbara, shouldn’t complain as he did in resigning from the American Physical Society, that money is being spent to convince the public and scientists that Global Warming is a problem. Solving problems is not a zero-sum game. There will always be plenty of problems to solve. The important thing is to foster and maintain the wits to deal with them as they arise.

02 October 2010

USAID’s Supply-Side Approach

The U.S. Agency for International Development has long been one of the primary units of the federal government to promote private sector involvement in the reconstruction and growth of emergent markets around the world. In the case of natural disasters, it relies on Non-Governmental Organizations to perform the humanitarian and engineering tasks needed to put hard-hit societies back on their feet. In the case of hardships created by our own military interventions, it also relies on NGOs to build institutions that it believes will form the basis of a democratic, U.S.-friendly governmental structure.

The approach it takes to accomplishing this latter objective in societies in transition to economic viability relies also on private American (and possibly other nationality) commercial companies to create the entrepreneurial opportunities that are thought to contribute to improved welfare and, ultimately, to lay the foundation for political stability and justice. This is a top-down, supply-side approach to building a fair and equitable society often in regions of the world that do not have a history of widespread participation in the management of their political or economic affairs. Some USAID resources are devoted to this effort--e.g., education, health care, and micro credit programs. However, impatience with their results and doubt about their ability to forestall civil unrest have prompted attempts to speed up the transformation of those societies through military action or the enlistment of allied profit-making companies.

One recent event staged by USAID to achieve the latter goal was the September 29, 2010, Afghanistan Mining and Business Opportunities Conference in New York. Sadly, the lack of real opportunities for American or other Western businesses in Afghanistan’s long-suspected but never adequately surveyed mineral deposits is mirrored in the disinterest of the country’s traditional tribal society freely to collaborate with foreign enterprises on commercial projects. Such poor odds have never daunted USAID, however. Thirty years ago, it tried to reinforce the Egypt-Israel peace treaty with a private sector enterprise promotion program targeted at U.S. corporate investors. That effort did little to change the public sector and political insider domination of the country’s thriving tourism, oil production, telecommunications, consumer products and government contracting sectors.

Investment promotion, in the extractive sector or in the consumer sector, is a top-down proposition. It doesn’t produce results without demand from local partners or local consumers. Federal government program expenditures on trade and investment promotion will usually fail to increase U.S. business income or to transform the target countries’ welfare and politics unless they directly generate greater demand in those markets. The trick is to assure that those funds are used for purposes that make an immediate difference in the prospects for the investor’s or the exporter’s commercial success. Pulling that off requires clever use of political leverage to compel compliance with standards of performance that are acceptable in the U.S. It will take more imagination than just producing a convincing PowerPoint Presentation.

01 October 2010

The High Cost of Thinking Your Health Is Worth Everything

We all have heard the words of sympathy and encouragement from relatives and friends, “Your health is everything.” Our medical care providers have heard them as well. Unfortunately, they commonly take those words even to give license for insulting behavior towards patients when it comes to their other obligations in life, like making a living, caring for their loved ones, or budgeting their expenditures.

Extremely long waits in doctors’ offices are among the most frequent examples of this attitude. A much more consequential example is often the selection of the costliest remedies for patients’ infirmities. Gone are the days of the proverbial prescription, “Take two aspirin and call me in the morning.” The irony of modern medicine is that our increased ability to diagnose what ails us has classified many more of us as sick. Moreover, it has multiplied the cost of treating those ailments with ever more sophisticated pharmaceuticals and devices.

It is an anomaly of modern medicine that it has made it possible, when expense is not an issue, to postpone death beyond a period of enjoyable living in order to avoid facing its irreversible termination. Treatments for sufferers of terminal illnesses are often judged by the number of months they are likely to extend the individual’s life. Apparently, if his own funds are not adequate, that individual has the right to use Medicare funds to add a minimal percentage to his longevity on the credit of future tax payers.

No one questions the right of a wealthy person to try whatever it takes to live forever at his own expense. Does equity require that society also make those extreme measures available to the less well-off? Even the wealthiest patients might choose to use their resources in some other way. Equity does not entitle a poorer person to undertake a humanitarian program in a forsaken part of the globe. But when it comes to prolonging his own existence, does society owe him the resources to make the attempt?

These are questions that need to be answered if the nation wants to resolve its health care dilemma. It won’t be simple or free of political risks to arrive at a solution. It’s not clear that ObamaCare has placed us on the right path. But, at least, it has gotten the discussion going.

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