Let me get the good stuff out of the way first. ET carries a great interview with investor Jim Rogers where he talks about his worries, and his investments, and currency collapses, and India’s stupid economic policies, and… The entire piece is a must read, but I love the ending-
What will you tell a confused fund manager who seeks your advice?
Become a farmer. The world has tens of thousands of hotshot fund managers right now. If I am correct, the financial community is not going to be a great place to be in for the next 30 years. We have many periods in history when financial people were in charge, we had many periods when people who produced real goods were in charge — miners, farmers, etc.
The world, in my view, is changing and is shifting away from the financial types to producers of real goods, and this is going to last for several decades as it always has. This may sound strange but it always happens this way. Ten years from now, it may be farmers who will drive the Lamborghinis and the stock brokers will drive tractors or taxis at best.
In a reply to a comment by Debby (“…there can no market, forget free market, if there are no more resources to convert into finished products and sell. Let’s not be short-sighted…”) on this post of his, Sauvik refers to the Simon-Ehrlich wager. You might want to read the wiki article for more information, but what strikes out is this quotation from a WIRED article profiling Simon (must read)-
All of [Ehrlich’s] grim predictions had been decisively overturned by events. Ehrlich was wrong about higher natural resource prices, about “famines of unbelievable proportions” occurring by 1975, about “hundreds of millions of people starving to death” in the 1970s and ’80s, about the world “entering a genuine age of scarcity.” In 1990, for his having promoted “greater public understanding of environmental problems,” Ehrlich received a MacArthur Foundation Genius Award.” [Simon] always found it somewhat peculiar that neither the Science piece nor his public wager with Ehrlich nor anything else that he did, said, or wrote seemed to make much of a dent on the world at large. For some reason he could never comprehend, people were inclined to believe the very worst about anything and everything; they were immune to contrary evidence just as if they’d been medically vaccinated against the force of fact. Furthermore, there seemed to be a bizarre reverse-Cassandra effect operating in the universe: whereas the mythical Cassandra spoke the awful truth and was not believed, these days “experts” spoke awful falsehoods, and they were believed. Repeatedly being wrong actually seemed to be an advantage, conferring some sort of puzzling magic glow upon the speaker.
Ehrlich is one among many Malthusian scaremongers, Garett Hardin being another influential one (whose idea of the “tragedy of the commons” has, interestingly, been used by “free-marketeers”). Norman Borlaug, in an interview I linked to here, doesn’t have any kind words for those like Ehrlich-
Reason: What do you think of Paul Ehrlich’s work?
Borlaug: Ehrlich has made a great career as a predictor of doom. When we were moving the new wheat technology to India and Pakistan, he was one of the worst critics we had. He said, “This person, Borlaug, doesn’t have any idea of the magnitude of the problems in food production.” He said, “You aren’t going to make any major impact on producing the food that’s needed.” Despite his criticisms, we succeeded, of course.
Reason: When an alleged expert like Ehrlich is being negative like that, does that discourage people? Does it hurt the efforts to boost food production?
Borlaug: Sure, because we were funded by a foundation….They’d hear his criticisms, and I’m sure there were some people at Rockefeller saying, “Maybe we shouldn’t fund that program anymore.” It always has adverse effects on budgeting.
Reason: Why do you think people still listen to Ehrlich? One can go back and read his doomsday scenarios and see that he was wrong.
Borlaug: People don’t go back and read what he wrote. You do, but the great majority of the people don’t, and their memory is short. As a matter of fact, I think this [lack of perspective] is true of our whole food situation. Our elites live in big cities and are far removed from the fields. Whether it’s Brown or Ehrlich or the head of the Sierra Club or the head of Greenpeace, they’ve never been hungry.
Reason: You mentioned that you are afraid that the doomsayers could stop the progress in food production.
Borlaug: It worries me, if they gum up all of these developments. It’s elitism, and the American people are vulnerable to this, too. I’m talking about the extremists here and in Western Europe….In the U.S., 98 percent of consumers live in cities or urban areas or good-size towns. Only 2 percent still live out there on the land. In Western Europe also, a big percentage of the people live off the farms, and they don’t understand the complexities of agriculture. So they are easily swayed by these scare stories that we are on the verge of being poisoned out of existence by farm chemicals.
Bruce Ames, the head of biochemistry at Berkeley, has analyzed hundreds and hundreds of foods, including all of the basic ones that we have been eating from the beginning of agriculture up to the present time. He has found that they contain trace amounts of many completely natural chemical compounds that are toxic or carcinogenic, but they’re present in such small quantities that they apparently don’t affect us.
Here’s a Simon-Hardin exchange, and Simon’s answer to the supposed paradox of increasing population without depleting resources; from the WIRED piece-
Julian Simon: The facts are fundamental.
Garrett Hardin: The facts are not fundamental. The theory is fundamental. – from a 1982 debate with the UC Santa Barbara biologist The doomslayer-doomsayer debate, Simon thinks, is an opposition between fact and bad theory, a case of empirical reality versus abstract principles that purport to define the way things work but don’t.
“It’s the difference,” he says, “between a speculative analysis of what must happen versus my empirical analysis of what has happened over the long sweep of history.”
The paradox is that those abstract principles and speculative analyses seem so very logical and believable, whereas the facts themselves, the story of what has happened, appear wholly illogical and impossible to explain. After all, people are fruitful and they multiply but the stores of raw materials in the earth’s crust certainly don’t, so how can it be possible that, as the world’s population doubles, the price of raw materials is cut in half?
It makes no sense. Yet it has happened. So there must be an explanation.
And there is: resources, for the most part, don’t grow on trees. People produce them, they create them, whether it be food, factories, machines, new technologies, or stockpiles of mined, refined, and purified raw materials.
“Resources come out of people’s minds more than out of the ground or air,” says Simon. “Minds matter economically as much as or more than hands or mouths. Human beings create more than they use, on average. It had to be so, or we would be an extinct species.”
The defect of the Malthusian models, superficially plausible but invariably wrong, is that they leave the human mind out of the equation. “These models simply do not comprehend key elements of people – the imaginative and creative.”
As for the future, “This is my long-run forecast in brief,” says Simon. “The material conditions of life will continue to get better for most people, in most countries, most of the time, indefinitely. Within a century or two, all nations and most of humanity will be at or above today’s Western living standards.
“I also speculate, however, that many people will continue to think and say that the conditions of life are getting worse.”
But you don’t have to be one of those people, one of those forever Glum and Gloomy Gusses. All you’ve got to do is keep your mind on the facts.
The world is not coming to an end.
Things are not running out.
Time is not short.
Enjoy the afternoon!
What is it with our obsession with big weather? After this season’s record-setting onslaught of tropical storms and hurricanes — 23 from Arlene to Katrina to Wilma — and after the hurricane-induced mega-disaster of New Orleans, one would think we might want a respite, an end to disaster for a time. Yet as another giant storm plowed into the coast of Nicaragua last week, we watched again with awe — and perhaps, I will risk venturing, with an unacknowledged yen for apocalypse, a yearning that dares not say its name. But it has a name.
Call it catastrophilia.
[C]atastrophilia is the sublime’s bastard cousin, arising from the discovery of a marketable product — disaster — in the violence of natural phenomena. And it is the marketing and sale of that product for public consumption that rides beneath the surface of good intention that we see in coverage of big weather. Catastrophilia’s signature formal element is the presence of a frame — a television set, a windshield or window, a video lens, some form of transparent barrier that creates the illusion of involvement yet provides the safety of distance. The frame creates the sense of spectacle, which one watches but in which one does not participate. One can walk away as one pleases, press down on the accelerator, write a check to the Red Cross, change the channel, and the entire situation — the destruction of New Orleans, say — evaporates as if it had never happened in the first place. Ask any tornado survivor — or anyone right now in the Gulf Coast, anyone recovering from the seven hurricanes that have struck Florida since August 2004 — how long it takes to piece one’s life together after such a disaster. But catastrophilia rides on momentum, needs another hurricane forming in the tropics. After Hurricane Rita, which, in catastrophilic terms, was a bit of a disappointment, donations to the Red Cross became sluggish. You’re only as good as your last disaster.
The truth is that catastrophilia is an absolute end in itself, a phenomenological cul-de-sac, a sideshow tent. Its fixation on big weather is a distraction from history, rather than an engagement with it. It draws us to what historian Daniel Boorstin called a truly “spontaneous event,” like sports or crime stories, that offer a momentary respite from the daily deluge of “pseudo-events,” manufactured news, “spin” spun to a fare-thee-well.
When you mix catastrophilia with what Ayn Rand called the “death premise,” you end up with a deadly cocktail that is anti-life every which way. And the modern day environmentalist movement is proof of that. Read what Ed Cline says on the parallels between the attacks on capitalism and the attacks on “skeptics.”
The jerks running the Indian government came up with a wonderful proposal yesterday, front page news for the ET-
The overseas borrowing, or external commercial borrowing (ECB) policy, as it is officially known, is administered by the government, along with the central bank and currently works on a first-come-first-serve basis. In other words, at the start of the financial year, the annual ceiling for foreign borrowings is fixed by these authorities, after which firms are granted approvals based on their financing needs and adherence to norms such as pricing.
According to a senior government official, the finance ministry has written to RBI, suggesting that foreign borrowings should be auctioned instead of being administered. “This is a scarce resource and we have said a mechanism designed to auction foreign borrowing entitlements should be put in place,” the official, who requested anonymity, said. The planned policy change will be discussed next week at a meeting of a high-level committee which sets India’s ECB policy and which is headed by finance secretary Ashok Chawla.
The ET, as usual, has an unprincipled dissent–
Government proposal to auction entitlements to external commercial borrowing (ECB) by corporates in order to reduce discretion and improve transparency is a case of the remedy being worse than the disease. Agreed, the present system administered by the government and the RBI, with the latter keeping a gimlet eye on the overall quantum and cost of borrowing, is not the best.
It often results in ‘deserving’ corporates being denied the opportunity to access cheaper overseas funds simply because the annual ceiling has been reached. Moreover, though the RBI specifies the all-in cost ceilings for various maturities (these have been temporarily suspended till December 2009), these are not always in tune with ground realities.
But perhaps what irks corporates most is all ECB proposals, irrespective of the quantum of borrowing, require the prior RBI approval. And since the RBI often withholds approval (without assigning any reason) or grants it after much delay, they are severely handicapped vis-a-vis their competitors.
The question that must be asked is who gave the government the bloody right to determine who borrows how much from where. If the poor RBI has to go around with a bucket and mop “sterilizing” the inflows, maybe it should simply stop that and let the market fix the dollar-rupee exchange rate without “any” government interference. That, of course, is asking too much. Dumbness, it seems, is a virtue when it comes to government appointments and policies.