Category Archives: ECON-FINANCE

Five Zombie Economic Ideas That Refuse to Die – By John Quiggin | Foreign Policy

Five Zombie Economic Ideas That Refuse to Die – By John Quiggin | Foreign Policy.

This could be useful to the work you & Dave M. are doing?

The global financial crisis that began with the collapse of the U.S. subprime mortgage market in 2007 ended by revealing that most of the financial enterprises that had dominated the global economy for decades were speculative ventures that were, if not insolvent, at least not creditworthy.

Much the same can be said of many of the economic ideas that guided policymakers in the decades leading up to the crisis. Economists who based their analysis on these ideas contributed to the mistakes that caused the crisis, failed to predict it or even recognize it when it was happening, and had nothing useful to offer as a policy response. If one thing seemed certain, it was that the dominance of the financial sector, as well as of the ideas that gave it such a central role in the economy, was dead for good.

Three years later, however, the banks and insurance companies bailed out on such a massive scale by governments (and ultimately the citizens who must pay higher taxes for reduced services) have returned, in zombie form. The same reanimation process has taken place in the realm of ideas. Theories, factual claims, and policy proposals that seemed dead and buried in the wake of the crisis are now clawing their way through the soft earth, ready to wreak havoc once again.

Five of these zombie ideas seem worthy of particular attention and, if possible, final burial. Together they form a package that may be called “market liberalism,” or, more pejoratively “neoliberalism.” Market liberalism dominated public policy for more than three decades, from the 1970s to the global financial crisis. Even now, it dominates the thinking of the policymakers called on to respond to its failures. The five ideas are:

The Great Moderation: the idea that the period beginning in 1985 was one of unparalleled macroeconomic stability that could be expected to endure indefinitely.

Even when it was alive, this idea depended on some dubious statistical arguments and a willingness to ignore the crises that afflicted many developing economies in the 1990s. But the Great Moderation was too convenient to cavil at.

Of all the ideas I have tried to kill, this one seems most self-evidently refuted by the crisis. If double-digit unemployment rates and the deepest recession since the 1930s don’t constitute an end to moderation, what does? Yet academic advocates of the Great Moderation hypothesis, such as Olivier Coibion and Yuriy Gorodnichenko, have stuck to their guns, calling the financial crisis a “transitory volatility blip.”

More importantly, central banks and policymakers are planning a return to business as usual as soon as the crisis is past. Here, “business as usual” means the policy package of central bank independence, inflation targeting, and reliance on interest rate adjustments that have failed so spectacularly in the crisis. Speaking at a symposium for the 50th anniversary of the Reserve Bank of Australia this year, European Central Bank head Jean-Claude Trichet offered the following startlingly complacent analysis:

We are emerging from the uncharted waters navigated over the past few years. But as central bankers we are always faced with new episodes of turbulence in the economic and financial environment. While we grapple with how to deal with ever new challenges, we must not forget the fundamental tenets that we have learned over the past decades. Keeping inflation expectations anchored remains of paramount importance, under exceptional circumstances even more than in normal times. Our framework has been successful in this regard thus far.

The Efficient Markets Hypothesis: the idea that the prices generated by financial markets represent the best possible estimate of the value of any investment. (In the version most relevant to public policy, the efficient markets hypothesis states that it is impossible to outperform market valuations on the basis of any public information.)

Support for the efficient markets hypothesis has always relied more on its consistency with free market ideas in general than on clear empirical evidence.

The absurdities of the late 1990s dot-com bubble and bust ought to have killed the notion. But, given the financial sector’s explosive growth and massive profitability in the early 2000s, the hypothesis was too convenient to give up.

Some advocates developed elaborate theories to show that the billion-dollar values placed on companies delivering dog food over the Internet were actually rational. Others simply treated the dot-com bubble as the exception that proves the rule.

Either way, the lesson was the same: Governments should leave financial markets to work their magic without interference. That lesson was followed with undiminished faith until it came to the edge of destroying the global economy in late 2008.

Even now, however, when the efficient financial markets hypothesis should be discredited once and for all, and when few are willing to advocate it publicly, it lives on in zombie form. This is most evident in the attention paid to ratings agencies and bond markets in discussion of the “sovereign debt crisis” in Europe, despite the fact that it was the failure of these very institutions, as well as the speculative bubble they helped generate, that created the crisis in the first place.

Dynamic Stochastic General Equilibrium (DSGE): the idea that macroeconomic analysis should not be concerned with observable realities like booms and slumps, but with the theoretical consequences of optimizing behavior by perfectly rational (or almost perfectly rational) consumers, firms, and workers.

DSGE macro arose out of the breakdown of the economic synthesis that informed public policy in the decades after World War II, which combined Keynesian macroeconomics with neoclassical microeconomics. In the wake of the stagflation of the 1970s, critics of John Maynard Keynes like University of Chicago economist Robert Lucas argued that macroeconomic analysis of employment and inflation could only work if it were based on the same microeconomic foundations used to analyze individual markets and the way these markets interacted to produce a general equilibrium.

The result was a thing of intellectual beauty, compared by the IMF’s chief economist, Olivier Blanchard, to a haiku. By adding just the right twists to the model, it was possible to represent booms and recessions, at least on the modest scale that prevailed during the Great Moderation, and derive support for the monetary policy.

But when the crisis came, all this sophistication proved useless. It was not just that DSGE models failed to predict the crisis. They also contributed nothing to the discussion of policy responses, which has all been conducted with reference to simple Keynesian and classical models that can be described by the kinds of graphs found in introductory textbooks.

Economist Paul Krugman and others have written that the profession has mistaken beauty for truth. We need macroeconomic analysis that is more realistic, even if it is less rigorous. But the supertanker of an academic research agenda is hard to turn, and the DSGE approach has steamed on, unaffected by its failure in practice. Google Scholar lists 2,600 articles on DSGE macro published since 2009, and many more are on the way.

The Trickle-Down Hypothesis: the idea that policies that benefit the wealthy will ultimately help everybody.

Unlike some of the zombie ideas discussed here, trickle-down economics has long been with us. The term itself seems to have been coined by cowboy performer Will Rogers, who observed of U.S. President Herbert Hoover’s 1928 tax cuts: “The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover … [didn’t] know that money trickled up.”

Trickle-down economics was conclusively refuted by the experience of the postwar economic golden age. During this “Great Compression,” massive reductions in inequality brought about by strong unions and progressive taxes coexisted with full employment and sustained economic growth.

Whatever the evidence, an idea as convenient to the rich and powerful as trickle-down economics can’t be kept down for long. As inequality grew in the 1980s, supply-siders and Chicago school economists promised that, sooner or later, everyone would benefit. This idea gained more support during the triumphalist years of the 1990s, when, for the only time since the breakdown of Keynesianism in the 1970s, the benefits of growth were widely spread, and when stock-market booms promised to make everyone rich.

The global financial crisis marks the end of an economic era and provides us with a position to survey how the benefits of economic growth have been shared since the 1970s. The answers are striking. Most of the benefits of U.S. economic growth went to those in the top percentile of the income distribution. By 2007, just one out of 100 Americans received nearly a quarter of all personal income, more than the bottom 50 percent of households put together.

The rising tide of wealth has conspicuously failed to lift all boats. Median household income has actually declined in the United States over the last decade and has been stagnant since the 1970s. Wages for males with a high school education have fallen substantially over the same period.

Whatever the facts, there will always be plenty of advocates for policies that favor the rich. Economics commentator Thomas Sowell provides a fine example, observing, “If mobility is defined as being free to move, then we can all have the same mobility, even if some end up moving faster than others and some of the others do not move at all.”

Translating to the real world, if we observe one set of children born into a wealthy family, with parents willing and able to provide high-quality schooling and “legacy” admission to the Ivy League universities they attended, and another whose parents struggle to put food on the table, we should not be concerned that members of the first group almost invariably do better. After all, some people from very disadvantaged backgrounds achieve success, and there was no law preventing the rest from doing so.

Contrary to the cherished beliefs of most Americans, the United States has less social mobility than any other developed country. As Ron Haskins and Isabel Sawhill of the Brookings Institution have shown, 42 percent of American men with fathers in the bottom fifth of the income distribution remain there as compared to: Denmark, 25 percent; Sweden, 26 percent; Finland, 28 percent; Norway, 28 percent; and Britain, 30 percent. The American Dream is fast becoming a myth.

Privatization: the idea that nearly any function now undertaken by government could be done better by private firms.

The boundaries between the private and public sectors have always shifted back and forth, but the general tendency since the late 19th century has been for the state’s role to expand, to correct the limitations and failures of market outcomes. Beginning with Prime Minister Margaret Thatcher’s government in 1980s Britain, there was a concerted global attempt to reverse this process. The theoretical basis for privatization rested on the efficient markets hypothesis, according to which private markets would always yield better investment decisions and more efficient operations than public-sector planners.

The political imperative derived from the “fiscal crisis of the state” that arose when the growing commitments of the welfare state ran into the end of the sustained economic growth on which it was premised. The crisis manifested itself in the “tax revolts” of the 1970s and 1980s, epitomized by California’s Proposition 13, the ultimate source of the state’s current crisis.

Even in its heyday, privatization failed to deliver on its promises. Public enterprises were sold at prices that failed to recompense governments for the loss of their earnings. Rather than introducing a new era of competition, privatization commonly replaced public monopolies with private monopolies, which have sought all kinds of regulatory arbitrage to maximize their profits. Australia’s Macquarie Bank, which specializes in such monopoly assets and is known as the “millionaires’ factory,” has shown particular skill in jacking up prices and charges in ways not anticipated by governments undertaking privatization.

Privatization failed even more spectacularly in the 21st century. A series of high-profile privatizations, including those of Air New Zealand and Railtrack in Britain, were reversed. Then, in the chaos of the global financial crisis, giants like General Motors and American International Group (AIG) sought the protection of government ownership.

Sensible proponents of the mixed economy have never argued that privatization should be opposed in all cases. As circumstances change, government involvement in some areas of the economy becomes more desirable, in others less so. But the idea that change should always be in the direction of greater private ownership deserves to be consigned to the graveyard of dead ideas.

Despite being spectacularly discredited by the global financial crisis, the ideas of market liberalism continue to guide the thinking of many, if not most, policymakers and commentators. In part, that is because these ideas are useful to rich and powerful interest groups. In part, it reflects the inherent tenacity of intellectual commitments.

Most importantly, though, the survival of these zombie ideas reflects the absence of a well-developed alternative. Economics must take new directions in the 21st century if we are to avoid a repetition of the recent crisis.

Most obviously, there needs to be a shift from rigor to relevance. The prevailing emphasis on mathematical and logical rigor has given economics an internal consistency that is missing in other social sciences. But there is little value in being consistently wrong.

Similarly, there needs to be a shift from efficiency to equity. Three decades in which market liberals have pushed policies based on ideas of efficiency and claims about the efficiency of financial markets have not produced much in the way of improved economic performance, but they have led to drastic increases in inequality, particularly in the English-speaking world. Economists need to return their attention to policies that will generate a more equitable distribution of income.

Finally, with the collapse of yet another economic “new era,” it is time for the economics profession to display more humility and less hubris. More than two centuries after Adam Smith, economists have to admit the force of Socrates’s observation that “The wisest man is he who knows that he knows nothing.”

Every crisis is an opportunity. The global financial crisis gives the economics profession the chance to bury the zombie ideas that led the world into crisis and to produce a more realistic, humble, and above all socially useful body of thought.

UN warned of major new food crisis at emergency meeting in Rome | Environment | The Guardian

UN warned of major new food crisis at emergency meeting in Rome | Environment | The Guardian.

Environmental disasters and speculative investors are to blame for volatile food commodities markets, says UN’s special adviser

russia wildfires July’s wildfires in Russia have led to a draconian wheat ban, pushing up prices. Photograph: Maxim Shipenkov/EPAThe world may be on the brink of a major new food crisis caused by environmental disasters and rampant market speculators, the UN was warned today at an emergency meeting on food price inflation.

The UN’s Food and Agriculture Organisation (FAO) meeting in Rome today was called last month after a heatwave and wildfires in Russia led to a draconian wheat export ban and food riots broke out in Mozambique, killing 13 people. But UN experts heard that pension and hedge funds, sovereign wealth funds and large banks who speculate on commodity markets may also be responsible for inflation in food prices being seen across all continents.

In a new paper released this week, Olivier De Schutter, the UN’s special rapporteur on food, says that the increases in price and the volatility of food commodities can only be explained by the emergence of a “speculative bubble” which he traces back to the early noughties.

“[Beginning in ]2001, food commodities derivatives markets, and commodities indexes began to see an influx of non-traditional investors,” De Schutter writes. “The reason for this was because other markets dried up one by one: the dotcoms vanished at the end of 2001, the stock market soon after, and the US housing market in August 2007. As each bubble burst, these large institutional investors moved into other markets, each traditionally considered more stable than the last. Strong similarities can be seen between the price behaviour of food commodities and other refuge values, such as gold.”

He continues: “A significant contributory cause of the price spike [has been] speculation by institutional investors who did not have any expertise or interest in agricultural commodities, and who invested in commodities index funds or in order to hedge speculative bets.”

A near doubling of many staple food prices in 2007 and 2008 led to riots in more than 30 countries and an estimated 150 million extra people going hungry. While some commodity prices have since reduced, the majority are well over 50% higher than pre-2007 figures – and are now rising quickly upwards again.

“Once again we find ourselves in a situation where basic food commodities are undergoing supply shocks. World wheat futures and spot prices climbed steadily until the beginning of August 2010, when Russia – faced with massive wildfires that destroyed its wheat harvest – imposed an export ban on that commodity. In addition, other markets such as sugar and oilseeds are witnessing significant price increases,” said De Schutter, who spoke today at The UK Food Group’s conference in London.

Gregory Barrow of the UN World Food Program said: “What we have seen over the past few weeks is a period of volatility driven partly by the announcement from Russia of an export ban on grain food until next year, and this has driven prices up. They have fallen back again, but this has had an impact.”

Sergei Sukhov, from Russia’s agriculture ministry, told the Associated Press during a break in the meeting in Rome that the market for grains “should be stable and predictable for all participants.” He said no efforts should be spared “to the effect that the production of food be sufficient.”

“The emergency UN meeting in Rome is a clear warning sign that we could be on the brink of another food price crisis unless swift action is taken. Already, nearly a billion people go to bed hungry every night – another food crisis would be catastrophic for millions of poor people,” said Alex Wijeratna, ActionAid’s hunger campaigner.

An ActionAid report released last week revealed that hunger could be costing poor nations $450bn a year – more than 10 times the amount needed to halve hunger by 2015 and meet Millennium Development Goal One.

Food prices are rising around 15% a year in India and Nepal, and similarly in Latin America and China. US maize prices this week broke through the $5-a-bushel level for the first time since September 2008, fuelled by reports from US farmers of disappointing yields in the early stages of their harvests. The surge in the corn price also pushed up European wheat prices to a two-year high of €238 a tonne.

Elsewhere, the threat of civil unrest led Egypt this week to announce measures to increase food self-sufficiency to 70%. Partly as a result of food price rises, many middle eastern and other water-scarce countries have begun to invest heavily in farmland in Africa and elsewhere to guarantee supplies.

Although the FAO has rejected the notion of a food crisis on the scale of 2007-2008, it this week warned of greater volatility in food commodities markets in the years ahead.

At the meeting in London today, De Schutter said the only long term way to resolve the crisis would be to shift to “agro-ecological” ways of growing food. This farming, which does not depend on fossil fuels, pesticides or heavy machinery has been shown to protect soils and use less water.

“A growing number of experts are calling for a major shift in food security policies, and support the development of agroecology approaches, which have shown very promising results where implemented,” he said.

Green MP Caroline Lucas called for tighter regulation of the food trade. “Food has become a commodity to be traded. The only thing that matters under the current system is profit. Trading in food must not be treated as simply another form of business as usual: for many people it is a matter of life and death. We must insist on the complete removal of agriculture from the remit of the World Trade Organisation,” she said.

Food price graphs

Republican Economics as Social Darwinism

t r u t h o u t | Robert Reich | Republican Economics as Social Darwinism.

Really good Op-Ed

by: Robert Reich  |  Robert Reich’s Blog | Op-Ed

John Boehner, the Republican House leader who will become Speaker if Democrats lose control of the House in the upcoming midterms, recently offered his solution to the current economic crisis: “Liquidate labor, liquidate stocks, liquidate the farmer, liquidate real estate. It will purge the rottenness out of the system. People will work harder, lead a more moral life.”

Actually, those weren’t Boehner’s words. They were uttered by Herbert Hoover’s treasury secretary, millionaire industrialist Andrew Mellon, after the Great Crash of 1929.

But they might as well have been Boehner’s because Hoover’s and Mellon’s means of purging the rottenness was by doing exactly what Boehner and his colleagues are now calling for: shrink government, cut the federal deficit, reduce the national debt, and balance the budget.

And we all know what happened after 1929, at least until FDR reversed course.

Boehner and other Republicans would even like to roll back the New Deal and get rid of Barack Obama’s smaller deal health-care law.

The issue isn’t just economic. We’re back to tough love. The basic idea is force people to live with the consequences of whatever happens to them.

In the late 19th century it was called Social Darwinism. Only the fittest should survive, and any effort to save the less fit will undermine the moral fiber of society.

Republicans have wanted to destroy Social Security since it was invented in 1935 by my predecessor as labor secretary, the great Frances Perkins. Remember George W. Bush’s proposal to privatize it? Had America agreed with him, millions of retirees would have been impoverished in 2008 when the stock market imploded.

Of course Republicans don’t talk openly about destroying Social Security, because it’s so popular. The new Republican “pledge” promises only to put it on a “fiscally responsible footing.” Translated: we’ll privatize it.

Look, I used to be a trustee of the Social Security trust fund. Believe me when I tell you Social Security is basically okay. It may need a little fine tuning but I guarantee you’ll receive your Social Security check by the time you retire even if that’s forty years from now.

Medicare, on the other hand, is a huge problem and its projected deficits are truly scary. But that’s partly because George W. Bush created a new drug benefit that’s hugely profitable for Big Pharma (something the Republican pledge conspicuously fails to address). The underlying problem, though, is health-care costs are soaring.

Repealing the new health-care legislation would cause health-care costs to rise even faster. In extending coverage, it allows 30 million Americans to get preventive care. Take it away and they’ll end up in far more expensive emergency rooms.

The new law could help control rising health costs. It calls for medical “exchange” that will give people valuable information about health costs and benefits. The public should know certain expensive procedures only pad the paychecks of specialists while driving up the costs of insurance policies that offer them.

Republicans also hate unemployment insurance. They’ve voted against every extension because, they say, it coddles the unemployed and keeps them from taking available jobs.

That’s absurd. There are still 5 job seekers for every job opening, and unemployment insurance in most states pays only a small fraction of the full-time wage.

Social insurance is fundamental to a civil society. It’s also good economics because it puts money in peoples’ pockets who then turn around and buy the things that others produce, thereby keeping those others in jobs.

We’ve fallen into the bad habit of calling these programs “entitlements,” which sounds morally suspect – as if a more responsible public wouldn’t depend on them. If the Great Recession has taught us anything, it should be that.anyone can take a fall through no fault of their own.

Finally, like Hoover and Mellon, Republicans want to cut the deficit and balance the budget at a time when a large portion of the workforce is idle.

This defies economic logic. When consumers aren’t spending, businesses aren’t investing and exports can’t possibly fill the gap, and when state governments are slashing their budgets, the federal government has to spend more. Otherwise, the Great Recession will turn into exactly what Hoover and Mellon ushered in – a seemingly endless Great Depression.

It’s also cruel. Cutting the deficit and balancing the budget any time soon will subject tens of millions of American families to unnecessary hardship and throw even more into poverty.

Herbert Hoover and Andrew Mellon thought their economic policies would purge the rottenness out of the system and lead to a more moral life. Instead, it purged morality out of the system and lead to a more rotten life for millions of Americans.

And that’s exactly what Republicans are offering yet again.

How Much Is Left? The Limits of Earth's Resources, Made Interactive: Scientific American

This is (probably, I can’t get to it because of the state firewall) a nifty interactive tool for presenting the state of the world’s resources.

This Web-only article is a special rich-media presentation of the feature, “How Much Is Left?,” which appears in the September 2010 issue of Scientific American. The presentation was created by Zemi media. Find all our other interactive offerings here.

via How Much Is Left? The Limits of Earth’s Resources, Made Interactive: Scientific American.

Earth's helium reserves will run out within 25 years

Earth’s helium reserves ‘will run out within 25 years’ | Mail Online.

By Niall Firth
Last updated at 11:19 PM on 23rd August 2010

Helium

Helium is sold so cheaply that it is used to fill balloons for children, when it is actually a precious resource

It is more commonly known as the gas that fills cheap party balloons and makes your voice squeak if you inhale it.

But helium is actually a precious resource that is being squandered with Earth’s reserves of it due to run out within 25 to 30 years, experts have warned.

Earth’s resources of helium are being depleted at an astonishing rate, an effect which will spell disaster for hospitals which use it to cool MRI scanners.

The world’s biggest store of helium – the most commonly used inert gas – lies in a disused airfield in Amarillo, Texas, and is being sold off far too cheaply.

But in 1996, the US government passed a law which states that the facility – the US National Helium Reserve – must be completely sold off by 2015 to recoup the price of installing it.

This means that the helium, a non-renewable gas, is being quickly sold off at increasingly cheap prices, making it uneconomical to recycle.

Nasa uses the gas to clean its rockets of fuel while liquid helium is used to cool nuclear reactors and space telescopes.

Nobel laureate Robert Richardson, a professor of physics at Cornell University in New York,  told New Scientist magazine that once our helium reserves are gone there will be no way of replacing it.

He also warned that although some substitutes can be found for some applications where helium is used, it will be impossible to use a different material for MRI scanners

He told the magazine: There are some substitutes, but it can’t be replaced for cryogenics, where liquid helium cools superconducting magnets for MRI scanners.

What helium is used for

Airships: Helium gas is seen as a safer alternative to hydrogen for lifting airships and blimps because it is non-flammable

Doctors Giving Patient MRIMRI scanners: Its low boiling point makes it perfect for cooling metals to make them superconductive. it is used to cool the superconducting magnets in an  MRI scanner

Nasa rockets: Nasa uses helium to clean out rocket engines and pressurise the inside of rocket fuel engines

‘There is no other substance which has a lower boiling point than helium. It is also used in the manufacture of fibre optics and liquid crystal displays.

‘The use of helium in cryogenics is self-contained, in that the helium is recycled. The same could be done in other industries if helium was expensive enough that manufacturers thought recovering it was worthwhile.’

Helium is formed through the slow radioactive decay of rocks on Earth and nearly all of our reserves have been formed as a by-product of the extraction of natural gas.

The only way to obtain more helium would be to capture it from the decay of tritium – a radioactive hydrogen isotope, which the U.S. stopped making n 1988.

The US stores around 80 per cent of the world’s helium and so its decision to let it go at an extremely low price has a massive knock-on affect on its market.

But Professor Richardson said that low price of helium meant that it was being ‘squandered’ rather than being treated as a precious resource.

He said: ‘The problem is that these supplies will run out in a mere 25 years, and the US government has a policy of selling helium at a ridiculously low price.’

And he said that the only way to deal with the problem would be for the free market in helium to prevail.

He said this will mean that a helium balloon of the kind used at children’s parties would cost $100 in the future as the price soared.

Pakistan seeks to salvage economy as more flee floods

Pakistan seeks to salvage economy as more flee floods | Reuters.

Main Image
Main Image
Main Image

Flood victim Kunjah carries her younger brother while taking refuge with her family in a relief camp in Sukkur, in Pakistan’s Sindh province August 26, 2010.

Credit: Reuters/Akhtar Soomro

//

SUKKUR, Pakistan/WASHINGTON | Thu Aug 26, 2010 5:36pm EDT

SUKKUR, Pakistan/WASHINGTON (Reuters) – Pakistan ordered fresh evacuations from Sindh province on Thursday as the country struggled to bring relief to millions displaced by flooding and sought international help to rescue its economy.

Pakistan’s finance minister and central bank governor joined International Monetary Fund talks in Washington that are focused on salvaging the economy.

Finance Minister Abdul Hafeez Shaikh said his country wants to keep pursuing an $11 billion IMF loan program and demonstrate its resolve to make tough economic decisions, dismissing reports that Pakistan might abandon the program.

“We want to remain on track with the IMF program because that is a reform program that we are ourselves undertaking,” he told reporters outside the IMF headquarters.

Separately, the U.S. State Department said it had “threat information” that foreign aid workers and Pakistani ministries responding to the natural disaster may be targeted by militants.

In northern Sindh, local authorities issued a new evacuation order for Shahdadkot, a town of about 300,000, for the remaining few tens of thousands of people to leave as floodwaters approached the town.

“Shahdadkot is certainly in danger,” said relief commissioner for Sindh Riaz Ahmed Soomro. “People have been asked to evacuate, but it’s a very big town. People had built an artificial embankment but the pressure is increasing.”

Downstream in Thatta, the towns of Sujawal, Daro and Mirpur Batoro, with a combined population of 400,000, were ordered evacuated after the swollen Indus river broke through an embankment early Thursday morning.

Many residents of the Indus delta area, about 100 km (62 miles) east of Karachi, had already left, but “thousands” remained, said Saleh Farooqi, director general of the National Disaster Management Agency’s Sindh office. “If a second levee breaks, more towns could be inundated.”

Floodwaters are beginning to recede across the country, but because of high tides in the Arabian Sea and the possibility of more rain, the risk of flooding remains in Sindh.

The spokesman for the powerful Pakistani Army said difficulty in reaching certain areas, where 800,000 people are accessible only by air, could fuel social unrest.

“If the aid doesn’t reach certain areas, then yes, the people will become restive,” said Major General Athar Abbas.

The worst floods in decades have made the government more unpopular, heightening concerns about a nation that is already battling Islamist militants.

In Sukkur, to the north, flood victims crowded relief camps and said incidents of disease were increasing.

“The children are getting sick,” a man who called himself Bangul told Reuters. “I myself am not feeling well.”

He said some people had started returning to their villages, even though many were still flooded. “We can only see the roof and minaret of the mosque,” he said. “We think maybe it will take six months to dry up and then we can go back.”

POSSIBLE TALIBAN THREAT

Pakistan’s government, and its ally the United States, have warned that the Islamist militants the military is battling may try and exploit the chaos. Washington sees Pakistan as a frontline state in its war against the Taliban and al Qaeda.

“We have information of … potential targeting of foreign relief workers in Pakistan as well as government ministries,” U.S. State Department spokesman P.J. Crowley told reporters in Washington, saying both countries were doing their utmost to protect aid workers and to ensure relief operations continue.

While aid groups in Pakistan brushed off the reported threats, the outgoing U.N. humanitarian chief, John Holmes, told reporters at the United Nations he took them seriously but added: “we will not be deterred.”

One Pakistani government official said he did not think the Taliban would attack as this would trigger a public backlash, while army spokesman Abbas said he had not received reports of any threat to aid workers.

Azam Tariq, a spokesman for the Tehrik-e-Taliban Pakistan (Taliban Movement of Pakistan), told Reuters: “We will not tolerate American aid. They want to use it for their own interest and don’t want to help the people of Pakistan. They have their own nefarious designs.”

In Washington, Finance Minister Shaikh appealed for understanding from the international community as he joined the IMF talks, which began on Monday.

The delegation is expected to seek easier terms under the IMF program agreed in 2008 to ensure the country can meet fiscal and monetary targets and keep qualifying for IMF funds.

Pakistan aimed to ensure fiscal austerity, stay within fiscal targets and reform public sector corporations to set the stage for economic growth, he said.

IMF spokesman Gerry Rice said the talks were currently focused on “getting a better sense of the impact of the floods on the economy.” He urged donors to give grants, not loans, for rebuilding projects to avoid adding to Pakistan’s debt burden.

The talks are likely to last until late next week. The delegation is scheduled to meet World Bank President Robert Zoellick on September 1.

The floods have damaged at least 3.2 million hectares (7.9 million acres) — about 14 percent of Pakistan’s entire cultivated land — according to the United Nation’s food agency. The total cost so far in crop damages is about 245 billion rupees ($2.86 billion).

According to the United Nation’s Office for the Coordination of Humanitarian Affairs, 60 percent, or $274.7 million out of $459.7 million, of funding for emergency response has been met.

(Reporting by Augustine Anthony, Kamran Haider, Zeeshan Haider and Rebecca Conway in Islamabad, Faisal Aziz and Sahar Ahmed in Karachi, Robert Birsel in Sukkur, and Arshad Mohammed and Paul Eckert in Washington; Writing by Chris Allbritton; Editing by Sanjeev Miglani and Eric Beech)

Stop wasting food, save the world's energy

Stop wasting food, save the world’s energy – opinion – 18 August 2010 – New Scientist.

The scandal of food waste is even worse when you consider how much energy is being thrown away, say Sheril Kirshenbaum and Michael Webber

IT IS no secret that meeting the world’s growing energy demands will be difficult. So far, most of the focus has been on finding oil in areas that are ever more difficult to access – think BP’s Deepwater Horizon well – bringing new fossil fuels such as tar sands online and increasing energy efficiency.

Yet we have been overlooking an easier way. We could save an enormous amount of energy by tackling the huge problem of food waste. Doing so is likely to be quicker than many of the other options on the table, while also saving money and reducing emissions.

The energy footprint of food is enormous. Consider the US, where just 5 per cent of the global population consumes one-fifth of the world’s energy. Around 15 per cent of the energy used in the US is swallowed up by food production and distribution. Most of that comes from farming with mechanised equipment, fertilisers and pesticides, irrigation and so on. Then there’s the energy cost of sorting, processing and packaging.

On top of that, each item of food on an American plate has made an average trip of over 2400 kilometres by boat, plane, train or automobile. Then there’s unloading, stocking grocery stores and meal preparation. By the time all of these steps are accounted for, food takes a significant bite out of the US’s total annual energy budget of about 100 million terajoules.

We have to eat, of course, but what about the food that we produce but do not eat?

Between one-quarter and one-third of the food produced in the US gets wasted, for a variety of reasons. A great deal spoils or is discarded before even reaching consumers, on farms, in fisheries and during processing. Buyers often reject perfectly edible produce because of minor blemishes. Food gets tossed in the trash in the home just because we bought or served too much, or let food spoil. Over a year, the average American family of four spends almost $600 on food that they do not eat.

Between one-quarter and one-third of all the food produced in the US gets wasted

Whatever the reason, food waste has a large cumulative impact. A recent analysis by one of us (Michael Webber) and Amanda Cuéllar at the University of Texas at Austin found that close to 2.2 million terajoules embedded in food waste was discarded in the US in 2007 – the energy equivalent of about 350 million barrels of oil (Environmental Science & Technology, DOI: 10.1021/es100310d).

This means that at least 2 per cent of the total US energy budget is literally thrown in the trash. For comparison, 350 million barrels of oil is nearly double Switzerland’s total annual energy consumption. Only a small fraction of what is wasted is ever recovered.

Global energy consumption is projected to increase by close to 50 per cent between 2006 and 2030. That makes reducing our dependency on fossil fuels even more challenging.

Tackling food waste should be added to the toolbox of policy options because its relative impact is on the same scale as more popular measures such as biofuel production and offshore drilling. Although we will never eliminate food waste completely, we can assuredly create the means to discard less by coming up with the right incentives for producers and consumers.

The first step involves identifying efficiency savings along the production chain, which might include improved farming practices or more funding for agricultural research. We already have the means to create varieties of vegetables and fruit that spoil more slowly than before, but the approach involves genetic engineering and there is consumer resistance, so public acceptance of new technologies should be encouraged.

Companies can do their bit, too. Hotels are already saving significantly on water and energy by encouraging their guests to use towels more than once. In the same manner, restaurants might reduce food waste by reducing their often profligate portion sizes.

Supermarkets could benefit by selling perfectly edible fruits and vegetables that are currently discarded because of blemishes. Such measures would not only reduce food waste but also save companies money and demonstrate that they are environmentally conscious, which in turn would enhance their reputation and increase their profits.

However, businesses function based on the demands of their customers, so ultimately we need to change people’s actions. This will be tricky.

Foremost, the public needs to be better educated about proper storage of foods to keep them edible for longer. Shoppers could be supplied with easy-to-digest, accurate information about the proper shelf life of products, so that they are able to plan meals more carefully and end up with less spoilt food at the end of the week.

Another problem is “use by” dates, which are extremely conservative and can encourage consumers to throw away perfectly edible food. Similarly, “sell by” dates are usually meant as guidelines for retailers to ensure they do not keep stock too long, not as guidance to consumers about when the food will spoil. We need to improve the way we label foods.

Initiatives targeted at consumers could also have ripple-out effects: not only will educating people about food waste reduce pressure on their wallets, it would also lead to fewer trips to the store, saving on gasoline and reducing carbon emissions. Most important, it would help to promote a culture that places a higher value on food, energy, and the way their complex relationship affects us all.

Sheril R. Kirshenbaum is a research associate at the Center for International Energy and Environmental Policy (CIEEP) at the University of Texas at Austin and co-author of Unscientific America: How scientific illiteracy threatens our future (with Chris Mooney).

Michael E. Webber is associate director of CIEEP

Royal Dutch Shell and Exxon profits almost double

http://www.bbc.co.uk/news/business-10799128

Second-quarter profits at oil giant Royal Dutch Shell have almost doubled after the firm completed a year-long corporate restructuring programme. The firm reported profits of $4.5bn (£2.9bn) on a current cost of supplies basis, up from $2.3bn a year ago.

Chief executive Peter Voser also defended deep sea oil drilling in the wake of rival BP’s massive oil spill in the Gulf of Mexico.

Meanwhile, US oil giant Exxon Mobil reported quarterly profits of $7.6bn. Continue reading Royal Dutch Shell and Exxon profits almost double