China and Africa

You may not think much of Africa from an economic point of view, but last year it supplied more than 15% of our oil. It is also becoming a major player in metals, timber and other natural resources. Also, its population of 800 million is now larger than Europe’s and is predicted to exceed North America’s in the next twenty years.

Yes, on the whole Africa is still a third world continent but it’s changed more in the past forty to fifty years than at any other time. China has realized its current and future importance and has moved in in a big way. They are a major buyer of African oil; it supplies a third of their imports. They’ve sold military aircraft to Uganda. They’re building dams, bridges, power stations, highways, schools, drug plants, phone networks, etc. And a lot of the building is done by government companies that care little about earning a profit and are thus able to underbid most of the competition.

They also care little about whom they deal with. For example, Mugabe has been to China several times. They moved into Sudan when we barred our oil companies from investing there.

To improve their position in Africa they have forgiven debt from some countries and will be subsidizing 10,000 Africans who have been invited to study in China.

I’d say that China is becoming a formidable competitor in the global market and they have the added advantages of not having to make a buck nor care for human rights.

Once the GOP was a voice of reason

And former senator and current minister, John Danforth, in an article in today's NY Times gives one hope that one day it will again be known as the party that had a balanced view of the world and was able to keep religion out of politics.

Danforth laments that conservative Christians have taken over his party. He fears that the GOP will become the political extension of a religious movement. In his view the job of the government is to "hold together as one people a very diverse country". If politicians become an arm of a particular religious cause, that job becomes impossible.

A quote I really love: "As a senator, I worried every day about the size of the federal deficit. I did not spend a single minute worrying about the effect of gays on the institution of marriage. Today it seems to be the other way around."

Not Looking Good

The following is from the website of the Millennium Ecosystem Assessment, www.millenniumassessment.org . The BBC claims its the most comprehensive survey ever into the state of the planet and the news ain't good. A landmark study released today reveals that approximately 60 percent of the ecosystem services that support life on Earth – such as fresh water, capture fisheries, air and water regulation, and the regulation of regional climate, natural hazards and pests – are being degraded or used unsustainably. Scientists warn that the harmful consequences of this degradation could grow significantly worse in the next 50 years. “Any progress achieved in addressing the goals of poverty and hunger eradication, improved health, and environmental protection is unlikely to be sustained if most of the ecosystem services on which humanity relies continue to be degraded,” said the study, Millennium Ecosystem Assessment (MA) Synthesis Report, conducted by 1,300 experts from 95 countries. It specifically states that the ongoing degradation of ecosystem services is a road block to the Millennium Development Goals agreed to by the world leaders at the United Nations in 2000. Although evidence remains incomplete, there is enough for the experts to warn that the ongoing degradation of 15 of the 24 ecosystem services examined is increasing the likelihood of potentially abrupt changes that will seriously affect human well-being. This includes the emergence of new diseases, sudden changes in water quality, creation of “dead zones” along the coasts, the collapse of fisheries, and shifts in regional climate. The MA Synthesis Report highlights four main findings: Humans have changed ecosystems more rapidly and extensively in the last 50 years than in any other period. This was done largely to meet rapidly growing demands for food, fresh water, timber, fiber and fuel. More land was converted to agriculture since 1945 than in the 18th and 19th centuries combined. More than half of all the synthetic nitrogen fertilizers, first made in 1913, ever used on the planet has been used since 1985. Experts say that this resulted in a substantial and largely irreversible loss in diversity of life on Earth, with some 10 to 30 percent of the mammal, bird and amphibian species currently threatened with extinction. Ecosystem changes that have contributed substantial net gains in human well-being and economic development have been achieved at growing costs in the form of degradation of other services. Only four ecosystem services have been enhanced in the last 50 years: increases in crop, livestock and aquaculture production, and increased carbon sequestration for global climate regulation. Two services – capture fisheries and fresh water – are now well beyond levels that can sustain current, much less future, demands. Experts say that these problems will substantially diminish the benefits for future generations. The degradation of ecosystem services could grow significantly worse during the first half of this century and is a barrier to achieving the UN Millennium Development Goals. In all the four plausible futures explored by the scientists, they project progress in eliminating hunger, but at far slower rates than needed to halve number of people suffering from hunger by 2015. Experts warn that changes in ecosystems such as deforestation influence the abundance of human pathogens such as malaria and cholera, as well as the risk of emergence of new diseases. Malaria, for example, accounts for 11 percent of the disease burden in Africa and had it been eliminated 35 years ago, the continent’s gross domestic product would have increased by $100 billion. The challenge of reversing the degradation of ecosystems while meeting increasing demands can be met under some scenarios involving significant policy and institutional changes. However, these changes will be large and are not currently under way. The report mentions options that exist to conserve or enhance ecosystem services that reduce negative trade-offs or that will positively impact other services. Protection of natural forests, for example, not only conserves wildlife but also supplies fresh water and reduces carbon emissions. “The over-riding conclusion of this assessment is that it lies within the power of human societies to ease the strains we are putting on the nature services of the planet, while continuing to use them to bring better living standards to all,” said the MA board of directors in a statement, “Living beyond Our Means: Natural Assets and Human Well-being.” “Achieving this, however, will require radical changes in the way nature is treated at every level of decision-making and new ways of cooperation between government, business and civil society. The warning signs are there for all of us to see. The future now lies in our hands.” The MA Synthesis Report also reveals that it is the world’s poorest people who suffer most from ecosystem changes. The regions facing significant problems of ecosystem degradation – sub-Saharan Africa, Central Asia, some regions in Latin America, and parts of South and Southeast Asia – are also facing the greatest challenges in achieving the United Nations’ Millennium Development Goals. In Sub-Saharan Africa, for example, the number of poor people is forecast to rise from 315 million in 1999 to 404 million by 2015. “Only by understanding the environment and how it works, can we make the necessary decisions to protect it. Only by valuing all our precious natural and human resources can we hope to build a sustainable future,” said Kofi Annan, secretary general of the United Nations in a message launching the MA reports. ”The Millennium Ecosystem Assessment is an unprecedented contribution to our global mission for development, sustainability and peace.” The Millennium Ecosystem Assessment (MA) Synthesis Report is the first in a series of seven synthesis and summary reports and four technical volumes that assess the state of global ecosystems and their impact on human well-being. This report is being released together with a statement by the MA board of directors entitled “Living beyond Our Means: Natural Assets and Human Well-being.” The four-year assessment was designed by a partnership of UN agencies, international scientific organizations, and development agencies, with guidance from the private sector and civil society groups. Major funding is provided by the Global Environment Facility, the United Nations Foundation, the David and Lucile Packard Foundation, and The World Bank. The MA Secretariat is coordinated by the United Nations Environment Programme (UNEP). The MA is recognized by governments as a mechanism to meet part of the assessment needs of four international environmental treaties – the UN Convention on Biological Diversity, the Ramsar Convention on Wetlands, the UN Convention to Combat Desertification, and the Convention on Migratory Species. It is supported by 22 of the world’s leading scientific bodies, including The Royal Society of the U.K. and the Third World Academy of Sciences. The MA’s work is overseen by a 45-member board of directors, co-chaired by Dr. Robert Watson, chief scientist of The World Bank, and Dr. A. H. Zakri, director of the United Nations University’s Institute of Advanced Studies. The Assessment Panel, which oversees the technical work of the MA, includes 13 of the world’s leading social and natural scientists. It is co-chaired by Angela Cropper of the Cropper Foundation, and Dr. Harold Mooney of Stanford University. Dr. Walter Reid is the director of the Millennium Ecosystem Assessment.

Three bits from the Wall Street Journal

On the very day that I posted my concerns about the lack of movement by our government re oil the Journal reports that a bipartisan group of twenty-six national security officials from both Republican and Democratic administrations has written President Bush calling for a “major new initiative to curtail U.S. consumption” of oil. The group is looking for better gasoline mileage, greater support of hybrid vehicles and, surprisingly to me, support of cars that can burn ethanol. The group is going beyond the president and seeking the support of automobile manufacturers and farmers. A quote from one of the group: “We don’t have the time to wait for perfect solutions,” such as Bush’s hydrogen initiative.

The editorial page is usually quite partisan in espousing the virtues of the GOP. But, not today. They blast Tom DeLay for “betraying the broader set of principles that brought him into office, and which, if he continues as before, sooner or later will sweep him out.”

And, finally, an op-ed that is really worth reading. It’s by David Rieff. He questions the ‘utopianism’ of our efforts to transform the world. He asks for a “little proportion about Iraq”. Has Sistani, a fairly conservative cleric, used our push toward democracy primarily as a way of gaining control for the Shiites? Once that control is achieved, how will we feel about the imposition of sharia? And he points out the difficulties of using the road from Baghdad airport two years after the war’s end as well as the fact that Iraq is still importing oil.

Most importantly, he asks, “Does the lack of democracy in the world really pose the kind of threat to the US that most Americans believed the Soviet empire did during the Cold War? And even if it does, do we really have the wisdom to change the world (my emphasis), or, as President Bush has put it, to spread the peace that freedom brings?” Hubris has brought down many people and many nations. It stands a very good chance of bringing us down as well unless we take a very clear look at who we really are and whom we want to become.

All Quiet on the Energy Front

That’s in DC, now that the government has given the go-ahead to drill in the Arctic. It’s amazing to me how little the government talks about energy, let alone acting about it. Here we have a world where oil is approaching $60 a barrel; more and more reputable scientists are talking about the end of oil in this century; greenhouse gases increase daily (what will happen when China becomes as large a car-centered country as we are?); the high oil price is funding one axis of evil, Iran, and most of the ‘problem’ states.

And where does our government spend its energies? Domestically, we’re ‘starving the beast’ (while grandstanding for the life of Terri Schiavo). Internationally, we’ve dramatically strengthened the terrorists.

We fail to see that ‘To everything there is a season. A time to live, a time to die.’ Oil will not be here forever and, at the rate at which we are consuming it, will be gone much sooner than we think. Why hasn’t the government started talking and doing?

There is always hope

In January two new species of lemur were discovered in Madagascar. This month a new species of fairy shrimp was discovered in the lake bed of the Idaho desert.

Species come, species go. Perhaps, one day we will discover a new species of man who will take better care of our planet.

National Defense Strategy

The National Defense Strategy, as issued by the Defense Department, is clearly a document written by the superpower. It has many sound ideas, but I wonder how people would read this document if it were issued by a smaller country. And, as with any document written by a government agency, it espouses grand ideas which have been trampled in reality.

Let’s look at some items that would drive us up the wall if they came from Iran, for instance.

• “We will promote the security, prosperity, and freedom of action of the United States and its partners by securing access to key regions, lines of communication, and the global commons.”

• “It is unacceptable for regimes to use the principle of sovereignty as a shield behind which they claim to be free to engage in activities that pose enormous threats to their citizens, neighbors, or the rest of the international community.” Who decides what is an enormous threat? Our holding people in Guantanamo and other places could be viewed as an enormous threat to our citizens.
  

• “Our strength as a nation state will continue to be challenged by those who employ a strategy of the weak using terrorism, international fora, judicial processes, and terrorism.” Read that again. Bad guys use international fora (i.e., forums for we Anglophiles) and judicial processes. One international forum is the UN. I thought that we were a nation of laws, not of men.

Now, let’s look at the divide between the words and reality.

• “Strengthen alliances and partnerships.” Maybe the administration has gotten religion and will actually do something here to rectify the fraying of our alliances and partnerships caused by the Iraq war.

• “In Iraq, an American led effort toppled the regime of Saddam Hussein, a tyrant who used WMD…” Everything I’ve read says he did not have WMD.

• “We will have no global peer competitor…” What about a country called China?

• “We will maintain important advantages in other elements of national power – e.g., political, economic, technological, and cultural.” Do our record twin deficits help our economy? What are we doing to upgrade the math and science education of our kids; we rank far behind most advanced nations.

• “Positive developments in Iraq and Afghanistan strengthen US influence and credibility.” Are there more terrorists today than two years ago? Most rational observers would say yes.

Our brave new world

The National Association of Realtors reports that 40% of new home buyers put $0 down. In some ways, I suppose, this is good in that it allows people to own their own houses. However, some of these mortgages carry very high interest rates (e.g., 8 ½%) and I wonder how these people can carry the mortgage and still live a reasonable life. They are gambling that the housing market will continue to rise and they will eventually come out ahead.

In an era of a housing boom, might some people be better off renting? A recent newspaper article reported on the comparative decline in the costs of renting versus owning. Relying on my aging memory, in 2000 rental costs in Boston, for example, were about 80% of the costs of buying; now they’re around 55%. Investing the difference would make sense and be less risky for many of these young kids.

And I thought North Carolina was a democratic state

Many public officials in North Carolina seem to have forgotten who they work for. UNC, some municipalities and other public agencies hope to ask the state legislature to limit the freedom-of-information rights of North Carolinians, according to a report in the News & Observer. They want to be able to sue those who exert their FOI rights. This has already happened in Burlington, NC, where in 2002 the city sued a reporter who asked for the minutes of a closed hearing.

Here’s a quote from the executive director of NC’s League of Municipalities, "We need to have open government, but governments need to operate." So, although the citizens of North Carolina are paying the salaries of all government employees, they don’t have the right to ask questions of their employees? Hmm

Weekend politics

What is going on? Why do those who, for political reasons, support the re-inserting of the feeding tube into Terri Schiavo have to seek anonymity when trying to influence the Senate? During the weekend ‘debate’ about interfering in this case, an unsigned, un-attributed memo listing the ‘talking points’ of the proposed legislation was distributed on the Senate floor.

Here’s what Senator Lautenberg, Democrat from NJ, wrote about this to the Senate leadership:

“The distribution of anonymous materials on the Senate floor is troubling. There is a policy in place – at least among the Democratic conference – requiring that any materials to be distributed to Senators on the floor must bear the signature of one or more Senators. This is an important safeguard to identify the source of information and protect the integrity of such materials. Those who would attempt to influence debate in the United States Senate should not hide behind anonymous pieces of paper.”

Hold The Presses

John Snow, the Treasury Secretary, says Social Security is in worse shape than he thought. Problems will arise in 2017, not 2018 as originally thought. And the reserves will be depleted in 2041, rather than 2042. I've always admired people who can see the future in such clear terms. Such people are able to see distinctly what will happen in 12 or 37 years.

Right! And I have a bridge you can buy cheap.

Some reason rather than emotion re the Terri Schiavo case

In this article, the Columbia Journalism Review cuts through a lot of the faux tears of the politicians pontificating about this sad case. While it refers to the GOP's memo to their base exulting at this "political issue", the article goes on to talk about the Texas Futile Care Law signed by Governor George Bush. This law authorizes institutions - without getting the families okay - to remove devices such as feeding tubes when conditions similar to Ms Schiavo's are reached.

Just when did the President get religion? I thought it was before he was elected Governor.

P.S. My father is rolling over in his grave when he hears Ms Schiavo's name pronounced by the media and others. In Italian, 'ch' is pronounced as 'k'. It's pronounced Skiavo, not Shiavo.

The Perfect Way To Spend A Driving Hour

I drove my wife's car to Connecticut this weekend and, while looking through her CDs, found an album I hadn't played in a while, Susanna McCorkle's, "Most Requested Songs". I remembered why I bought it - impeccable taste and fantastic musicianship. And, I remembered when I first heard her signature song, "The Waters of March"; it was on my last trip to Canada to oversee our return to the States after eight years in the North.

The album is a mix of Brazilian songs, old favorites and songs you'll likely be hearing for the first of many times. McCorkle really makes the old favorites new; you've never heard "Thanks for the Memories" quite like this. Nor will you ever forget her rendition of "For All We Know".

This album is so beautiful you wonder why she was so despondent that she committed suicide.

Business 101

Another excerpt from Eichenwald's book on Enron:

At the end Dynegy is negotiating to acquire Enron. Hugh Tarpley, Dynegy's head of mergers and acquisitions, reviews a mountain of data supplied by Enron and sees that they are projecting earnings of $2.25 per share in 2002. He asks Enron for their 2002 business plan. The response: "We don't have a business plan available." Tarpley then asks how did they get their 2002 projections. The answer: "We just increased the prior year's results by 25%".

I think it was Fortune that named Enron the innovative company of the year for seven years running. I guess one of their innovations was the lack of common sense. Another was their lack of shame.

Is It Over?

Winter, that is.

Yesterday I drove around with my window open half-way. There is more water than ice on the surface of Olga’s Pond. They were raking out the brush at the Post Office. I didn’t need my headlights when I returned home from the Finance Committee meeting. Kids were playing without their heavy coats. Temperatures are in the 40s. People seem happier. The shovel I had broken and thrown in the snow has emerged. The snow has just about left my porch. I put my thermostat down to 60. The potholes on our dirt roads are starting to be filled in. The Red Sox open in a little over two weeks. Easter is a week away.

But – and there’s always a but with New England weather – snow is predicted for tomorrow, the first day of Spring. Not much, it’s true, but………………..

Do they have nothing better to do?

Today the Senate will conduct a hearing on the use of steroids in baseball. I guess this is a really important issue that affects the health, security, prestige and well-being of the nation.

Yesterday Cardinal Bertone inveighed against the evils found in The DaVinci Code. Perhaps, he was hired to boost the sales of the book.

The Straw?

You remember the FBI’s a few months ago dropping a software system that would have brought them into the 21^st century. Of course, this was after they had sunk a couple of hundred million into it. Would an attempt to introduce private accounts into Social Security wind up as another technical fiasco?

In general I’m in favor of private accounts as an adjunct to Social Security as we know it, but the conversion costs cannot be justified.

However, other issues have arisen. A recent Wall Street Journal article spoke of the technical and other logistical issues that private accounts would be likely to engender. One “minor” item: the SSA estimates they would need between 7,735 and 33,630 new employees just to answer the phones; and naturally these new employees would be experts on the new private accounts. There are lots more potential glitches in a move of this magnitude. It doesn’t appear to be a smart move today.

One more world penetrated

In the old days the great majority of computer software advances were made by computer programmers resident in the US or employed by US companies. Today I read of the first internationally recognized achievement of a Chinese software group: the discovery that some hash functions, used in much of internet commerce, are vulnerable. All of our worlds are changing.

A Stand-Up Guy

Harry Stonecipher was forced to resign as CEO of Boeing last week because of an affair with a female executive of the company. Unlike so many of his CEO colleagues, here's what Stonecipher said, "I violated my own standards. I used poor judgment." Rather than blame the board, he praised it for taking action when it found something inappropriate.

We all screw up. In today's world, it is the rare person who admits to doing so. Three cheers for Stonecipher.

More Accounting 101

Today's NY Times had an excerpt from Kurt Eichenwald's book on Enron, "Conspiracy of Fools". 'Fools'is an appropriate term, along with 'crooks'. When the shit hit the fan, they discovered that the accounting and finance people had no idea as to what their cash flow and debt repayments would be for the next day, week, month, year. And these people were being paid in the millions!

Again, where were the auditors in reviewing internal controls?

Still the best job around

Raise your child to be a CEO of a public company. Even if the company has to restate results for prior years (as 414 public companies had to last year), the CEO still gets to keep the bonus that was based on incorrect results. Some examples:
Time Warner restated its revenue down by $679,000,000 for the period 2000 to June 2002. The CEO received a bonus of $10,000,000.
Xerox's reported revenue was reduced by $6.4 billion for the period 1997 - 2001. The CEO kept $5,200,000.
Tyco's restated revenue was less by $90,100,000 from 1998 - 2002. The CEO's bonus was $12,500,000.

That is, the CEO received a bonus although the real results were far short of the goals needed to earn the bonus. Yes, it would cost many of these companies a lot of money to get this money back. But, Lord. where is the sense of morality and fairness on the part of these CEOs.

Welcome to Doomsday?

Bill Moyers in the latest New York Review of Books fears that the rise to influence in the federal government of the very fundamentalist Christians and very ideological partisans will result in ecological catastrophe. His reasons: they are convinced that God has given them dominion over the world and so they can do what they wish no matter the ecological cost and they will be brought to heaven when the world ends as we sinners writhe in unimaginable pain.

He goes on to list what the Bush administration has done to make this a worse place to live in. Can we do anything about it?

A Modern Woman

Fatima Yaqoub is a member of the new Iraqi government yet, among other anti-feminist ideas, she believes that husbands can have 4 wives. She is a staunch advocate of Sharia, another law promulgated by the divinity. The likely prime minister also believes in Sharia. What will our government do if the new Iraqi government becomes a theocracy?

Love Thy Neighbor

A recent study by Cornell of American attitudes towards Islam found that the 'highly religious' in our midst were somewhat less charitable than those who are 'not very religious'. Some findings:

• 42% of the highly religious (hr) believe that Muslims should register their whereabouts with the government; 15% of the not very religious (nvr) believe this.


• 34% of the hr believe that the government should monitor mosques and other Islamic gathering places; 13% of the nvr think the same.


• 40% of the hr believe that the government should infiltrate Islamic organizations; 19% of the nvr agree.

And 65% of the hr believe that Islam is more likely to encourage violence than other religions. Savonarola, Anne Hutchison, the Crusaders, etc. would agree, I'm sure.

Deficits Do Matter

Here's what Warren Buffet has to say about one of my pet peeves.

Fines? We don't need no stinking fines!

You read a lot about fairly stiff fines levied on white collar criminals. And, being reasonably good citizens, you assume that the fines will be paid. Think again!

Last year the General Accounting Office reported that $25 billion in fines and restitution owed by white collar criminals was uncollected. That's almost 30% of what Bush is asking for to fight our two wars. In 2001 the uncollected amount was only $13 billion. The amount owed you and me by these convicted felons has almost doubled in three years.

Recently the GAO studied the rate of payment in five white collar crime cases. The judge ordered the convicted to pay $568 million in restitution. Only 7% has been collected to date. Yet, the culprits are not being hounded for the money nor do they face criminal prosecution for failing to obey the court's orders.

The government doesn't have any problem hounding students for a few thousand dollars unpaid on their student loans. Yet, it can let five people owing more than a half billion off the hook.

Who's Minding The Store?

When I was studying accounting back in the Dark Ages, the professors always emphasized the importance of internal controls. Without good internal controls, they said, you really don’t have an accounting system. So, imagine my surprise on reading in yesterday’s Wall Street Journal that 500+ public companies have poor internal controls; at least that is what these companies in effect told the SEC when reporting under the Sarbanes-Oxley Act.

Among the companies reporting deficient internal controls were McAfee, Inc. (what does that say about the security software they sell), SunTrust Banks, Inc. (is your money safe there?), Kodak and Toys “R” Us.

While some of these deficiencies are minor, some are not. For example, Kodak had problems with its income tax accounting. Terex had ‘imbalances’ in some accounts. Navistar did not have sufficient specialized accounting personnel.

Where were the company’s auditors?

1500 and counting

That's how many US soldiers have died so far in Iraq. Who knows how many Iraqis have also lost their lives? And what about the wounded and maimed? Who's counting them?

I know wars have been fought over people's right to rule themselves, but how many of them have been worth it? Often, the victor rules in the same way as the despot.

Slowly but inexorably

Movement on abolishing the Electoral College is slow, but there is movement. This week Congressman Jesse Jackson Jr. expects to introduce a constitutional amendments to abolish the College and elect the president by a national majority vote (HJ Res. 36). And – surprise, surprise – Arnold is backing an initiative to enact nonpartisan redistricting before the 2006 elections. Perhaps, California will be the leader on this as they were on Proposition 2 1/2.

The Advantages of Being CEO

While you may be thankful that you don’t own stock in Fog Cutter Capital Corp., you may wish you were the former CEO, Andrew Wiederhorn. Mr. Wiederhorn is currently in jail for pension law and income tax felonies at a previous employer. Yet, he is being paid $5.5 million by Fog Cutter in compensation and reimbursement of his previous crimes. Plus, since he owns more than 10% of the public company’s stock, he was paid over $1 million in dividends in January. This by a company that, as of September 30, has a deficit of $123,000,000, cash of $7,000,000 and a loss for the first nine months of 2004 (the latest period shown on their web site) of almost $5,000,000.

Sometimes crime does pay.