Xinhua News Agency Interviews Schwerin

A dozen years ago, when my wife and I took the first of our five trips to China, talking about the environment was almost forbidden. Economic development, no matter what the cost, was the government and peoples’ sole focus. This position was short-sighted but understandable given the hundreds of millions of Chinese living in poverty. In the dozens of lectures I made over the years, I tried to convince a wide variety of audiences that they would pay a steep price for this myopic approach, but very few were listening. Fast forward to 2013 and read the words of an editorial in The Global Times, an arm of The People’s Daily: “Recent atmospheric pollution has really sounded a warning to us. . . .The public should understand the importance of development as well as the critical choice between development and environment protection should be made by genuinely democratic methods.”

It is no surprise, therefore, that when I was recently interviewed by the Xinhau News xinhuaAgency, China’s largest news organization, the correspondent’s questions focused largely, although not entirely, on the environment. For a link to the article click here

An excerpt from the translation of the article follows:

“Business enterprises have enormous influence and power that transcend geographic borders. In fact, some large transnational companies have revenue that exceeds the GNP of many countries,” Schwerin said. “The policies established by companies affect its employees’ living standards, the surrounding community’s strength and vitality, the health of a region’s ecosystem and the quality of its air, water and soil. Decisions made by executives in the oil, coal, agriculture and heavy manufacturing industries can determine the level of pollution in the community in which it operates and the well-being of its citizens.”

For a full translation of the article click here

 

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How taxing is it?

 

“Heredity and environment play a role, but what really makes you what you are is Tax Policy!” This whimsical wisdom was offered in a comic in the March 18th issue of Barron’s Financial Weekly newspaper. Tax policy has long been used by many governments to encourage or discourage certain economic and social behaviors. Taxes are a necessary evil; the argument is: Should they be used to change behavior? We believe that taxes can be an important policy tool in areas where there is convincing evidence that the benefits significantly outweigh the costs. A properly constructed tax policy can accomplish two important goals. First, it raises revenues needed to balance budgets and reduce debt. Second, it alters behavior to serve societal goals. In some cases it discourages unhealthy habits and, thereby, minimizes the financial burden on those who may otherwise end up paying the increased costs.

The first tax we’ll consider, on sugary products such as sodas, has been prominently in the headlines in the U.S. obesityMany countries in Europe have already instituted or are seriously considering taxes on a variety of unhealthy foods including sodas. In the past 18 months, Hungary, with one of the lowest life expectancy rates in the European Union, has imposed taxes on sugar and the ingredients in energy drinks to raise revenue for the country’s underfunded health system. As Hungary’s health minister explained, “those who follow a certain [unhealthy] life styles should pay for it in a small way.”

Obesity rates in Europe have risen in recent years; they are, however, still below those in the U.S. where more than a third of adults and 17% of children are obese. Obesity increases the likelihood of developing type-2 diabetes, heart disease, high blood pressure, strokes and some cancers. Obesity-related diseases account for approximately $147 billion or almost 10% of U.S. medical spending a year. One in twenty people in the U.S. drinks more than 4 cans of soda every day. This is about 8 times what is considered safe. It is certainly reasonable for those who ignore health warnings to be held accountable and pay their share of the medical costs that would otherwise be borne by those taking proper care of themselves. As an aside, not only does the U.S. fail to tax sugary products, we actually protect our sugar growers with price supports. A tax on sugary foods such as soda, would raise revenue for an underfunded health care system and encourage healthy lifestyle changes. What could be a sweeter ending?

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It doesn’t make any sense VII

guns and shoes

Seven nationwide cases of tampering with drug bottles, and now we have packaging standards throughout the industry. Ten thousand gun deaths per year, and nothing.

The NRA is more powerful than big pharma, the airline industry and our government. What can we do to change that?

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Global Warming – Fact or Fiction?

President Obama, in his second Inaugural Address, significantly elevated the priority of climate change. “We will respond to the threat of climate change, knowing that failure to do so would betray our children and future generations,” he stated. The President said he’d strive to rally the public behind the necessary changes. Record heat, devastating droughts and severe hurricanes and tornadoes haven’t yet persuaded our elected leaders to take action on global warming. It will not, therefore, be easy to build a consensus strong enough to force legislators to confront industry titans who fund their political campaigns.

A new book by John J. Berger, Ph.D. couldn’t be more timely. Berger, the author of numerous books, is an internationally-respected energy and natural resource expert trained in ecology. His latest book, Climate Myths: The Campaign Against Climate Science, persuasively dissects eleven arguments often used by those who deride the seriousness of climate change. Prateek Gupta_Global WarmingMany polluters in the fossil fuel and allied industries are spending large sums of money to obscure the facts about global warming in much the same way the tobacco industry did. It is up to the other 74% of Americans (according to an August 2012 Washington Post/Kaiser Family Foundation poll), to exert their will with their legislators so that the President’s proposals can become law.

Let’s briefly scrutinize a few of the popular myths that Berger lays bare. First myth: global warming alarmists are greatly exaggerating the impact of climate change. The Intergovernmental Panel on Climate Change (IPCC), a multinational research alliance operating under the auspices of the U.N. and World Meteorological Organization, has projected a variety of scenarios that estimate the average global temperature by the end of the 21st century. Contrary to what the deniers proclaim, the world appears to be tracking the high emissions projections (the most dangerous). Those forecasts, if realized, would greatly affect plant and insect life, raise sea levels and dramatically alter weather patterns. Many ecosystems would not be able to adjust; higher latitudes and the interior of continents would warm even more than the global average.

Second myth: climate change takes place slowly so we can afford to wait and see what happens. In fact, reports Berger, the climate can’t tolerate the stabilization of carbon emissions at even current levels without producing devastating floods, tornadoes and droughts. Greenhouse gases will continue rising for hundreds of years since they already saturate the atmosphere faster than natural processes can remove them. We cannot assume that advancing technology will make it any easier – our children’s choices will be constrained by a larger population and greater energy demand. They will also face depleted resources and ecological damage from decades of greenhouse gas emissions. Building fossil fuel powered generating plants today commits the world to polluting technologies for decades to come.

Third myth: fighting climate change would raise energy prices and taxes, lower household income, reduce investment and cost the economy jobs. Studies done by disinterested parties have actually come to the opposite conclusion. For example, the non-profit Tellus Institute concluded that reducing carbon emissions would unleash innovation and lead to the creation of 800,000 new jobs, the average household would realize energy savings of $530 per year and wages and salaries would rise by $14 billion. What is incontrovertible is that fossil fuel producers would have to retrench – guess who has funded those doomsday predictions. Because it is hard to quantify, most studies, both for and against climate change action, ignore the significant social, economic and environmental benefits of reducing emissions.

We must listen to the majority rather than the monied before we go over the environmental precipice. Berger’s book provides plenty of ammo – it’s time to use it!

 

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Old Problems Need New Thinking

Over the past 18 months, Wide Angle Thinking has addressed a number of critical problems. The subjects included: pollution and global warming, terrorism and war, debt and deficits and health and health care. We also discussed a number of specific policies that just “don’t make any sense.”

It doesn’t take a great deal of awareness to realize that many societal activities fail to accomplish their stated objectives. Life for many is working poorly, if at all. Why? Most problems stem from basic misconceptions about the purpose of life and how best to accomplish that purpose. Nonetheless, people seldom change their distorted beliefs until the problems they cause lead to crisis. At that point, the need to alter beliefs and behavior is undeniable. Let’s look at some of the major problems plaguing the planet and see what misunderstandings caused them and, more importantly, how better ways of thinking can solve them.

Pollution and global warming – The misconception here is that everything is separate and autonomous. global surface tempThose who waste and destroy resources or emit toxins are usually not the ones who suffer the immediate consequences. Cause and effect can be widely separated in a world where oceans are immense and the atmosphere unbounded. When we understand the connection among all things, we realize that ignorant behavior can’t be in our self-interest. We see that we are connected to and dependent upon nature’s resources; being good stewards is not an option, it’s a necessity. Continue reading

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It doesn’t make any sense VI

A well-educated citizenry is critical for the prosperity and well-being of society. On that most people agree. So why is athletics placed above academics? Why are fast, easy on-line courses placed above a challenging 21st century curriculum? It doesn’t make any sense; yet that’s what’s happening!

According to an article in the NY Times, some football coaches have become the highest-paid employees of their states. educationThese same high-priced coaches are often summarily fired when the team is losing and their multi-year contracts result in significant cost to the school and its academic programs. When the University of Tennessee recently fired its football coach, the University announced it would forgo $18 million in academic scholarships the athletic department had planned to make to the university so the fired coach and his staff could be paid millions in severance. This is not an isolated case – over the last decade one in ten major universities has replaced their head football coach because of unsatisfactory win-loss records. Basketball coach firings follow a similar script.

Another Times story points out how federal student-loan programs finance questionable online degrees that saddle ill-prepared students with mountains of debt. student debtEven well-reputed institutions of higher learning are more focused on getting high rankings from influential publications than preparing their graduates to enter the workforce and contribute to society. Until we get our educational priorities straight, we can’t expect much else to go right.

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Look Out Below

The 2012 U.S. Presidential campaign focused, in large measure, on the efficacy of increasing taxes on wealthy Americans to help reduce the country’s unsustainable deficits and ballooning debt. Fuel for this debate is the fact that income inequality is now at levels not seen since the Great Depression. A study by the Economic Policy Institute, a research group in Washington, found that the top 1 percent of households in the U.S. now holds a larger share of overall wealth than the bottom 90 percent. The concentration of income in the hands of a few is more than a fairness issue. According to Jonathan D. Ostry and Andrew G. Berg, two economists at the IMF, countries with high levels of inequality had shorter periods of economic expansion and, therefore, less growth over time. Continue reading

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The Coming Fiscal Cliff – Jump!

Federal Reserve Chairman Ben Bernanke coined the term “fiscal cliff” to describe the situation which will begin in 2013 when income tax rates rise and federal spending declines. The non-partisan Congressional Budget Office (CBO) forecasts that a recession will likely occur under this scenario. If, on the other hand, politicians stop the spending cuts and tax increases, government debt will continue to rise and interest on that debt is bound to skyrocket. As the CBO stated, “the more the debt [is] increased, the greater would be the negative consequences.” What we are faced with is pain in the short term or significantly more pain in the longer term. What to do?

Delaying the inevitable is foolhardy; Greece and Spain tried this and their unemployment rate is running around 25% and rising. U.S. politicians have long avoided needed tax and spending changes because they are vehemently opposed by special interest groups. Nonetheless, reforms will be far less detrimental than the status quo. A list of steps that can be taken to move us toward solving our serious economic problems follows:

  1. Raise taxes on higher income earners; it is fair and necessary. We all need to make sacrifices and those who have benefited disproportionately over the past decade can afford to do their part. The argument that such an action will hurt jobs is spurious. Business owners hire or fire employees based on the demand for their products. If demand is low, a higher tax rate will not hinder hiring any more than a lower tax rate will encourage it.
  2. Cut out subsidies to most businesses and organizations. Two obvious examples are Public Television and the oil industry. The latter doesn’t need help and the former can attract private sector advertisers if the programs are sufficiently unique or capture an adequate audience. Truly worthy programs should be able to attract private support if advertising dollars are inadequate. Since the number of people facing financial difficulties may increase, tax deductions for donations to organizations helping the poor and disadvantaged make sense. With other deductions eliminated, social service agencies should attract increased support when it is needed most. Museums, orchestras and other middle-class entitlements may be worthy of support; unfortunately, there is no money in the kitty.
  3. Reduce defense spending dramatically. Our defense spending is greater than that of the next 17 countries combined, yet there is no evidence that it has been effective or in our self-interest. What have we gotten for the trillions spent in Iraq and Afghanistan? Have countries in the Middle East become our friends with all of the money given to them for military expenditures? Even if there were a philosophical or political reason for us being the world’s policeman, we can’t afford it.
  4. Revamp Social Security. Raise the retirement age to better reflect the population’s increased longevity, raise the cap on payroll taxes and reduce inflation adjustments which were enacted without providing money to pay for them.
  5. Overhaul Medicare. The gap between what citizens pay into Medicare and what they receive is actuarially unsustainable. Means testing deserves consideration and greater self-responsibility needs to be encouraged. As an example, exercising and adopting healthy eating, drinking and exercising habits should be prerequisites to obtaining Medicare reimbursement for treating obesity, alcoholism and diabetes. We currently spend an enormously disproportionate amount of money on medical services in the last few months of life. Analysis of the efficacy of these expenditures coupled with professional end-of-life counseling will prove to be economical, pragmatic and compassionate.
  6. Reform the tax code. Mortgage interest deductions and subsidies for large families are unjustifiable. The former benefits go mostly to the well off and the latter often results in a disadvantaged, undereducated workforce that will need public support for many years.

None of these changes will be easy to enact; oil companies, home builders and seniors, among others, think they are entitled to the government’s largesse. But the problems get harder to fix the longer we wait. Jumping off the fiscal cliff now will undeniably be unpleasant; putting it off until we have no other choice is equivalent to economic and social suicide.

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“It doesn’t make any sense” V

“Or does it?”

Harvard University recently revealed that about half of the undergraduates in a course given in the Spring semester were suspected of cheating on a take-home exam. Can you guess what course was involved? None other than “Introduction to Congress.” The course, by the way, was long considered one of the easiest at Harvard.

And while we’re on the subject, Alan Abelson, one of our favorite journalists, relates the following story in his column in Barron’s:

Have you heard the one about the old country preacher who had a teenage son he felt should begin to think seriously about choosing a profession? Well, if you haven’t heard it, you’re about to, thanks to Edward McDermott, a reader whose humorous snippets we’ve shared with you from time to time.

The preacher decided that while his son was at school he’d try to get an inkling of which way the boy was leaning by slipping into his room and placing on a table four objects: a Bible, a silver dollar, a bottle of whiskey, and a copy of Playboy. The idea being that he’d hide behind the door of the boy’s bedroom when his son came home from school and furtively watch to see which object the lad would pick up.

If it’s the Bible, he reasoned, the kid was going to be a preacher like me and what a blessing that would be! If he picked up the silver dollar, the preacher thought, he’s going to be a businessman and that’d be fine, too. If he picks up the bottle, the preacher flushed, he’s going to be a no-good drunken bum. And — just to think about it made the preacher shiver with foreboding — if the boy picks up that magazine, he’s going to be a skirt-chasing womanizer.

When his son got home, he casually walked into his room and dropped his books on the bed. Then, he spotted the four objects on his bedside table and studied them a moment or two. He picked up the Bible and placed it under this arm. He picked up the silver dollar and dropped it into his pocket. He uncorked the bottle and took a large swallow, while he gazed admiringly at the magazine’s centerfold.

“Lord have mercy,” the old preacher fumed, “he’s gonna run for Congress.”

 

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Leaders on Trial

Political leaders everywhere face unprecedented challenges but have had little success meeting them. A new approach is needed. In an Op-Ed recently published by the Millennium Post in Delhi, India, David outlines a simple, yet practical solution. The text of the article also appears below:

“Bereft of leaders, an Asian giant is destined for a period of lower growth. The human cost will be immense.” This bold statement was headlined in the June 9, 2012 issue of the widely-respected magazine, The Economist. The article focused on India but could have described most countries in the world. They all face most of the following challenges: pervasive poverty, pollution and corruption; deficient medical, educational and natural resources. Most are self-created; bureaucratic inefficiencies, bloated budgets and a denigrated eco-system being some of the most obvious. When the ecosystem is degraded, people’s health and vitality withers. When the gap between the rich and poor widens, social unrest harms every level of society. When budgets are not balanced, the economy eventually suffers and unemployment skyrockets. Short-term, selfish thinking is at the heart of our problems. No one trusts the self-serving leaders whose actions are dishonest, inequitable or unsustainable. Complex challenges require cooperation and collaboration neither of which is possible unless citizens trust their leaders. Continue reading

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