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>Thinking in Straight Lines

>by Dmitry Orlov

ClubOrlov (July 17 2010)

Let’s face it, we, the civilized, educated, enlightened part of humanity like things to be straight. Let primitive tribesmen live in picturesque and practical round huts – we require abstract boxes of steel and concrete clad in plate glass, with plenty of nice straight lines, true vertical and horizontal planar surfaces and lots of ninety-degree angles to please the eye. Let these tribesmen spend their days meandering up and down picturesque winding paths laid down by grazing animals – when we build a road, we take a map and apply a ruler to it, and anything that’s in the way of that ruler, picturesque or not, must be dynamited and bulldozed because everyone knows that traveling in straight lines is more efficient.

This is good enough for most of us, and so we have come to regard straight lines as natural. In fact, in our world there are just two types of natural phenomena that give rise to straight lines: objects drop or hang down in straight vertical lines, and light beams travel in straight lines; beyond plumb lines and lines of sight everything is either a curve or a squiggle. But since most of our environment is artificial – and crammed full of straight lines and flat horizontal and vertical surfaces – we hardly ever have to confront this fact. Of course, the more scientifically astute among us know that straight lines are but a convenient fiction. We start with a conceptual framework of space that consists of x, y and z axes, and proceed to coerce our observations to fit this framework until the mismatch becomes too obvious to ignore, as with objects dropped from orbit, or with light from far-away galaxies that’s so warped by nearby galaxies that the image looks like a smear.

But the fiction is indeed very convenient. To start with, all straight lines are interchangeable and compatible. When we build, we tend to put things either on top of or next to other things, and if they involve straight lines, then no intricate fitting is involved – we can just slap it together any which way and efficiently move on to our next box-building exercise. When we go to a lumberyard, what we buy is not so much wood as straight lines cut through wood. Trees know a lot more than we do about constructing maximally efficient structures out of wood, but we like straight lines, and so we cut through the strongest part of the tree – the concentric rings of wood that make up the trunk – for the sake of making a perfectly straight stick. We could build beautiful, strong, long-lasting structures using round timbers grown to order (as some of us do) but generally we don’t because we are mentally lazy, always in too much of a hurry, and have made a fetish of straight lines.

Quite unsurprisingly, our preference for straight lines carries over into the way we think about relationships between things – the mental models we construct of our world. For instance, we consider it a matter of moral rectitude and straight dealing that the price be linearly proportional to the amount of stuff we get: if you pay twice as much, you should get twice as many potatoes. Quantity discounts are acceptable and sometimes expected, but pricing on a curve is generally seen as underhanded. We mistrust curves. Stepwise functions are fine, though, because they are made up of straight line segments. We can put up with having tax brackets, but try taxing people based on a nonlinear formula, and there is sure to be a tax revolt. Were the potato market a product of biological evolution rather than of human artifice, it would perhaps work like this: the price would be some nonlinear function that’s directly proportional to the customer’s net worth, and the number of potatoes dispensed would be some nonlinear function that’s inversely proportional to his net girth. Place your moneybags on one sliding scale, your flab-bags on the other, and some potatoes come out. Such a natural regulatory mechanism would prevent fat, rich gluttons from out-eating the rest of us, but it cannot be, for we have a very strong cultural preference for a simple linear relationship between price and quantity.

Straight lines are popular with grocers and their customers, but nobody loves a straight-edge more than the technocrat. Real-world data generally look like a collection of unique artifacts described by a multitude of qualitatively dissimilar properties and inferred relationships, all fluctuating unpredictably over time in a way that resists the direct application of the straight-edge. Therefore, the first step is to quantify the properties and, if at all possible, ignore the relationships. The next step is to choose just two parameters and to plot these artifacts as points on a piece of graph paper. Then, finally, a technocrat can grab a straight-edge, slap it down on the piece of paper, move it around a bit to find what looks like a good fit, and draw a straight line. Voilà: a linear relationship between two complex phenomena has been found, which can now be treated as real and objective – something that can be shared with one’s colleagues and be used as a basis for setting policy – because it involves a straight line which tells that one thing is proportional to some other thing, so that we know what result to expect when we perturb one or the other.

Straight lines are popular with engineers as well. Engineers work hard to design linear, time-invariant systems in which the output is directly proportional to the input any time you like. To them, deviations from linear behavior are defects. They are to us as well: we can hear it if the audio amplifier has nonlinear effects because it distorts the sound, and we can see it if the optics distorts the image. We can tell a straight line from a crooked one without any tools. But the mathematical tools which engineers use when they design these linear time-invariant systems are particularly good, as mathematical tools go. Mathematics can be quite fun as a sort of advanced parlor game for philosophers, but most math is rather problematic from an engineer’s point of view. You can describe just about anything using a set of differential equations, but most of the interesting phenomena – the behavior of an airfoil in an airstream, for instance, or the behavior of high-temperature gases in a combustion chamber – produce equations that can’t be solved analytically, and can only be approached using numerical methods, using a computer. A mathematical model is constructed, and random numbers are thrown at it to see what comes out. But linear time-invariant systems are described using a singularly well-behaved class of differential equations which do have closed-form, analytical solutions that directly provide answers to design questions, and so engineering students are drilled in them ad naseam and then go on to design and build all kinds of machinery that behaves as linearly as possible, from humble volume knobs to complex aircraft control surfaces. In turn, this well-behaved, predictable machinery allows us to achieve linear effects within the economy: build more stuff – get proportionally more money; spend more money – get proportionally more stuff. But, just as one might suspect, this only works up to a point.

Let us recall: straight lines are but a convenient fiction. There is no physical analogue of a mathematical straight line that goes from minus infinity to plus infinity. The best we can do is use all of our artifice to create relatively short straight line segments. Truth be told, the engineers can’t create linear systems; they can only create systems that exhibit linear behavior in their linear region. Outside of that region, nature does what it always does: make crazy curves and squiggles and generally behave in random and unpredictable ways. An example of what happens when we exceed the limits of the linear region from our everyday experience is the phenomenon of overloading an audio amplifier. The resulting effect is called clipping, and it sounds like a particularly unpleasant, harsh, grating noise. There are only two solutions: turn down the volume (return to the linear region), or get a more powerful amplifier.

In the economic realm, the effects of exceeding the limits of the linear region can be even more unpleasant. While within that region, building more houses generates more wealth, but just outside of that region strange things begin to happen rather quickly: house prices crash, mortgages go bad, and building any more houses becomes a singularly bad idea. In the linear region, having more money makes you richer, in the sense of being able to buy more stuff, but outside of that region one is forced to realize that since most money has been loaned into existence, it is in fact composed of debt, and once this debt goes bad, no matter how good your net worth looks on paper you are still facing destitution, greatly exacerbated by the fact that you are out of practice when it comes to being poor. In the linear region, investing more money in energy production produces more energy, but just outside that region it produces less energy, and may also inadvertently destroy entire industries and ecosystems.

If linearity is a fiction that is only useful up to a point, then what about time-invariance? Clearly, it too must have its limits. Stepping on the accelerator may produce the same acceleration every time, but the amount of fuel in the tank decreases monotonically until there is none left. When it comes to more complex, dynamic systems – industries, economies, societies – they may continue to respond to external stimuli in a linear and time-invariant manner up to a point, but behind this stable façade their capabilities erode, their resources dwindle, their complexity increases, and beyond a certain point an entirely different process begins: the process of collapse. Such systems generally do not become smaller, spontaneously become less complex or reduce their resource use while continuing to respond to external stimuli in a controlled, linear manner.

But so strong and so deeply ingrained is our habit of thinking in straight lines that often we cannot imagine that we can ever leave the linear region, or, once we do, that we have done so, even when the evidence is staring us in the face. Forensic analyses of airplane crashes have revealed that sometimes, as his last act, the pilot ripped the control console off the cockpit floor – an act that requires superhuman strength – so hard was he pulling back on the yoke to bring up the airplane’s nose. I am sure that there are plenty of pilots – in all walks of life – who will prefer to crash, gripping the controls with all their might, gaze fixed on the distant, irrelevant or fictional horizon, than to push the eject button. Their entire life’s experience has been confined to the linear region, and so they cannot imagine that it can ever end.

One particularly significant example of this thinking is the belief in Peak Oil, generally expressed as the idea that global oil production already has or will soon reach an all-time peak, and will then gradually decrease over a time span of several decades. Oil depletion is being modeled as a linear function of oil production: a few percent a year, holding more or less steady from one year to the next. At the same time, the use of oil by industrialized societies is often quite usefully characterized as an addiction. Let us exercise this metaphor a bit and see where it takes us. Suppose you have a junkie who has an ever-increasing heroin habit and who has to go out and hustle harder and harder to score his next fix. Now, suppose global heroin production peaks, prices go up, supply dwindles, and our junkie has to start cutting the dose. Not too far along what you then have is a sick junkie, in withdrawal, who cannot go out and hustle for his next fix. And very soon after that you have a collapse of the heroin market because the junkies have all been forced to kick the habit to one extent or another. This disruption of the heroin market, even if temporary, causes heroin production to decrease even faster, production costs and associated risks to go up, and so forth. Beyond a certain point, the heroin market would no longer be characterized as a linear, time-invariant system where the more you pay the more of it you get any time you like, because there would be so little of it around.

Similarly with oil. Right after Hurricane Katrina there was some disruption of gasoline supplies in some of the southern US states. People have written to me to tell me that the result was instant mayhem: society at all levels swiftly stopped functioning. The shortage was temporary and was quickly forgotten, but were it a long-term, systemic shortage, we would no doubt observe all the usual effects: much extra fuel evaporated from topping off fuel tanks and burned from driving around with a full tank and full jerrycans in the trunk, much fuel wasted from driving around looking for gasoline and from idling in long lines at filling stations, a lot of siphoning of gas from tanks and motorists left stranded as a result, a lot of people unable to get to work, and, shortly after that, hoarding, looting and rioting, commerce at a standstill, use of federal troops to restore public order, curfews and limitations on all travel, bank holidays and a balance of payments crisis, and, finally, the general inability to pay for further oil production or imports. All of these disruptions cause oil production to fall even faster, along with all other economic activity, until there is simply not that much demand for the stuff. As much of the global oil industry is idled, drilling rigs, refineries and pipelines fall into disuse and become inoperable. Instead of a nice few-percent-a-year gradual decline, we would have what Douglas Adams would have described as a “spontaneous existence failure”.

I am sure that some people would like me to whip out my straight-edge, plot some straight lines and make some projections: What is my price forecast? What production numbers are we talking about, ten or twenty years out? Well, that to me feels like a complete waste of time. I’d rather spend time learning how to train trees for round timber construction. The future is certain to be nonlinear, but I am quite sure that there will be trees in it. The reason I bring this up is that there are a few of pilots out there who I hope will have the presence of mind to push the eject button instead of clutching at the controls with their eyes locked on the artificial horizon.

http://cluborlov.blogspot.com/2010/07/thinking-in-straight-lines.html

Bill Totten http://www.ashisuto.co.jp/english/

Categories: Uncategorized

>What If He’s Right?

>by James Howard Kunstler

Comment on current events by the author of
The Long Emergency
(2005)

www.kunstler.com (July 19 2010)

Just when America was celebrating the provisional end of BP’s Macondo oil blowout, and getting back to important issues like Kim Kardashian’s body-suit collection, along comes Matthew Simmons with a rather strange and alarming outcry on doings in the Gulf of Mexico that contradicts the mood of renewed festivity, as well as just about every shred of reportage from any media outlet, mainstream or otherwise.

Matt Simmons’ Houston-based company has been the leading investment bank to the US oil industry for a long time, financing exploration and drilling in places like the Gulf of Mexico. Simmons, 68, recently retired from day-to-day management of the company. For much of the decade he has been what may be described as a peak oil activist. His 2005 book, Twilight in the Desert, warned the public that Saudi Arabia’s oil production had reached its limits and, more generally, that an oil-dependent world was entering a zone of serious trouble over its primary resource. He took this aggressive stance despite risking the ire of the people he did business with.

Matt Simmons is a sober individual and a very nice man (I’ve met him twice over the years), a button-downed corporate executive who’s been around the oil business for forty years. His knowledge is deep and comprehensive. From the beginning of the BP Macondo blowout incident in April, he’s taken the far out position that the well-bore is fatally compromised and that BP has been consistently lying about their operations to stop the flow of oil. Perhaps most radically, Simmons claims that an oil “gusher” is pouring into the Gulf some distance from the drilling site itself.

Last week, Simmons came on Dylan Ratigan’s MSNBC financial show, but he did a longer interview over at the King World News website {1}. Simmons’s current warning about the situation focuses on the gigantic “lake” of crude oil that is pooling under great pressure 4000 to 5000 feet down in the “basement” of the Gulf’s waters. More particularly, he is concerned that a tropical storm will bring this oil up – as tropical storms and hurricanes usually do with deeper cold water – and with it clouds of methane gas that will move toward the Gulf shore and kill a lot of people. (I really don’t know the science on this and welcome any reader to correct me, but I suppose that the oil “lake” deep under the Gulf waters contains a lot of methane gas dissolved at pressure, and that as the oil rises toward the ocean’s surface, and lower pressures, the gas will bubble out of solution.)

Simmons makes two additional points that are pretty radical: he says that several states along the Gulf ought to begin systematic evacuations in counties along the shore now. From his experience in Houston with Hurricane Rita (2005), he says a last-minute evacuation is bound to be a disaster – the highways jammed hopelessly, drivers ran out of gas, and then the gas stations ran out of gas. Based on where the nation’s collective state-of-mind is these days, I can’t imagine that any Gulf state governor or mayor will heed this warning and begin preparing an evacuation now. (The practical problems are obvious for householders but what if it really is a matter of life and death?)

Secondly, Simmons maintains – as he has from near the beginning of the blowout – that the US military should take over operations from BP and ought to set off a “small” nuclear device down in the well-bore to fuse the rock into glass and seal the site permanently. Simmons says, based on his experience growing up in Utah near the government’s underground nuclear testing sites in neighboring Nevada, where scores of very large atomic bombs were set off for years with no measurable consequences above ground, that a small nuclear explosion down in the Macondo well is unlikely to have any effect above the undersea rock surface. I have no idea, personally if this is true.

Matt Simmons is taking a position so “out there” that even the radical peak oil website TheOilDrum.com won’t comment on his remarks (at least not as of early Monday morning July 19). I don’t know how to evaluate Simmons’s contentions myself, except to say that I don’t believe Simmons is a nut, or that he’s lost his marbles. We also must suppose that someone in his position is able to talk with an awful lot of the best people in the oil industry. Simmons has put his reputation on the line. A lot of bystanders and commentators are treating him as a fool. Simmons himself is painfully aware of his lonely stance and seems, in his public appearances, to be a very regretful messenger.

In the past twenty-four hours, BP has reported some possible leaks coming out of the seabed some distance from the well-bore. Nobody has been able to confirm yet exactly what is happening down there. One other thing Simmons said is that BP should be barred from the media airwaves since, he says, they have lied consistently in order to cover up their criminal negligence and culpability. The company itself cannot be saved because the claims against it are much greater than the value of its assets – but the people running the company could be sent to jail, so the incentive to keep lying remains high.

Jesse at the Jesse’s Cafe Americain website {2} makes an excellent point that if Matt Simmons is correct, and it turns out that the US government has been played by BP, then remaining public trust in the competence and legitimacy of government could evaporate. This is not a happy thing to contemplate at a time when the state of the nation and its economy are so fragile. What follows could make the current political situation seem like little more than, well, than a tea party, compared to the politics-to-come.

Readers here at Clusterfuck Nation are probably well aware of my past declarations of being allergic to conspiracy theories and crazy ideas generally. I’m not really equipped to evaluate Matt Simmons’s warnings about the exact nature of the Macondo blowout and what might happen in the months ahead. But I am confident, having met the guy and corresponded with him and read his books, that he is a straight shooter. I’m sure that he is sincere in proclaiming his extreme discomfort with the position he’s taken. Listen and decide for yourselves {3}.

Links:

{1} http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/7/17_Matt_Simmons.html

{2} http://jessescrossroadscafe.blogspot.com/

{3} http://www.kingworldnews.com/kingworldnews/Broadcast/Archive.html

_____

A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press. The title is The Witch of Hebron.

Mr Kunstler’s biography is at see http://kunstler.com/bio.html.

http://kunstler.com/blog/2010/07/what-if-hes-right.html

Bill Totten http://www.ashisuto.co.jp/english/

Categories: Uncategorized

>The Ways of the Force

>by John Michael Greer

The Archdruid Report (July 14 2010)

Druid perspectives on nature, culture, and the future of industrial society

By now those of my readers who have joined me on the current Archdruid Report project – the creation of a “green wizardry” using the heritage of the appropriate technology movement of the Seventies – should have downloaded at least one of their textbooks and either have, or be waiting for the imminent arrival of, the rest. Now it’s time to get into the core principles of green wizardry, and the best way to do it involves shifting archetypes a bit. Give me a moment to slip on a brown robe, tuck something less clumsy or random than a blaster into my belt, and practice my best Alec Guinness imitation: yes, Padawans, you’re about to start learning the ways of the Force.

Well, almost. The concept that George Lucas borrowed from Asian mysticism for his Star Wars movies is an extraordinarily widespread and ancient one; very nearly the only languages on earth that don’t have a commonly used word for an intangible life force connected to the breath are those spoken nowadays in the industrial nations of the modern West. I’ll leave it to my readers to make up their own minds about what the remarkable durability of this idea might imply, and to historians of ideas to debate whether it was one of the sources that helped shape the modern scientific concept of energy; the point that needs making is that it’s this latter concept that will be central to this week’s post.

That’s understating things by more than a little. Everything we’ll be exploring over the weeks and months to come has to do with energy: where it comes from, what it can and can’t do, how it moves through whole systems, and where it goes. In the most pragmatic of senses, understand energy and you understand the whole art of green wizardry; in the broadest of senses, understand energy and you understand the predicament that is looming up like a wave in front of the world’s industrial societies, and what we can and can’t expect to get done in the relatively short time we have left before that predicament crests, breaks, and washes most of the modern world’s certainties away.

Let’s start with some basic definitions. Energy is the capacity to do work. It cannot be created or destroyed, but the amount and kind of work it can do can change. The more concentrated it is, the more work it can do; the more diffuse it is, the less work it can do. Left to itself, it moves from more concentrated to more diffuse forms over time, and everything you do with energy has a price tag measured in a loss of concentration. These are the groundrules of thermodynamics, and everything a green wizard does comes back to them in one way or another.

Let’s look at some examples. A garden bed, to begin with, is a device for collecting energy from the sun by way of the elegant biochemical dance of photosynthesis. Follow a ray of sunlight from the thermonuclear cauldron of the sun, across 93 million miles of hard vacuum and a few dozen miles of atmosphere, until it falls on the garden bed. Around half the sunlight reflects off the plants, which is why the leaves look bright green to you instead of flat black; most of the rest is used by the plants to draw water up from the ground into their stems and leaves, and expel it into the air; a few per cent is caught by chloroplasts – tiny green disks inside the cells of every green plant, descended from blue-green algae that were engulfed but not destroyed by some ancestral single-celled plant maybe two billion years ago – and used to turn water and carbon dioxide into sugars, which are rich in chemical energy and power the complex cascade of processes we call life.

Most of those sugars are used up keeping the plant alive. The rest are stored up until some animal eats the plant. Most of the energy in the plants the animal eats gets used up keeping the animal alive; the rest get stored up, until another animal eats the first animal, and the process repeats. Sooner or later an animal manages to die without ending up in somebody else’s stomach, and its body becomes a lunch counter for all the creatures – and there are a lot of them – that make their livings by cleaning up dead things. By the time they’re finished with their work, the last of the energy from the original beam of sunlight that fell on the garden bed is gone.

Where does it go? Diffuse background heat. That’s the elephant’s graveyard of thermodynamics, the place energy goes to die. Most often, when you do anything with energy – concentrate it, move it, change its form – the price for that gets paid in low-grade heat. All along the chain from the sunlight first hitting the leaf to the last bacterium munching on the last scrap of dead coyote, what isn’t passed onward in the form of stored chemical energy is turned directly or indirectly into heat so diffuse that it can’t be made to do any work other than jiggling molecules a little. The metabolism of the plant generates a trickle of heat; the friction of the beetle’s legs on the leaf generates a tiny pulse of heat; the mouse, the snake, and the coyote all turn most of the energy they take in into heat, and all that heat radiates out into the great outdoors, warming the atmosphere by a tiny fraction of a degree, and slowly spreading up and out into the ultimate heat sink of deep space.

That’s the first example. For the second, let’s take a solar water heater, the simple kind that’s basically a tank in a glassed-in enclosure set on top of somebody’s roof. Once again we start with a ray of sunlight crossing deep space and Earth’s murky atmosphere to get to its unintended target. The sun passes through the glass and slams into the black metal of the water tank, giving up much of its energy to the metal in the form of heat. Inside the metal is water, maybe fifty gallons of it; it takes a fair amount of heat to bring fifty gallons of water to the temperature of a good hot bath, but the steady pounding of photons from the sun against the black metal tank will do the trick in a few hours.

Most of what makes building a solar water heater complex is a matter of keeping that heat in the water where it belongs, instead of letting it leak out as – you guessed it – diffuse background heat. The glass in front of the tank is there to keep moving air from carrying heat away, and it also helps hold heat in by way of a clever bit of physics: most of the energy that matter absorbs from visible light downshifts to infrared light as it tries to escape, and glass lets visible light pass through it but reflects infrared back the way it came. (This is known as the greenhouse effect, by the way, and we’ll be using it over and over again, not least in greenhouses.) All surfaces of the tank that aren’t facing the sun are surrounded by insulation, which also helps keep heat from sneaking away. If the system’s a good one, the pipes that carry hot water down from the heater to the bathtub and other uses are wrapped with insulation. Even so, some of the energy slips out from the tank, some of it makes a break for it through the insulation around the pipes, and the rest of it starts becoming background heat the moment it leaves the faucet for the bathtub or any other use.

Here’s a third example: a house on a cold winter day. The furnace keeping it warm, let’s say, is fueled by natural gas; that means the ray of sunlight that ultimately powers the process came to Earth millions of years ago and was absorbed by a prehistoric plant. The plant died without being munched by a passing dinosaur, and got buried under sediment with some of its stored energy intact. Millions of years of heat and pressure underground turned that stored energy into very simple hydrocarbons such as methane and ethane. Fast forward to 2010, when the hydrocarbons found their way through pores in the rock to a natural gas well and got shipped by pipeline, possibly over thousands of miles, to the house where it gets burnt.

The furnace turns the energy of that ancient sunlight to relatively concentrated heat, which flows out through the house, keeping it warm. Now the fun begins, because that concentrated energy – to put things in anthropomorphic terms – wants nothing in the world half as much as to fling itself ecstatically into dissolution as diffuse background heat. The more quickly it can do that, though, the more natural gas has to be burnt to keep the house at a comfortable temperature. If you’re the green wizard in charge, your goal is to slow down the dionysiac rush of seeking its bliss, and make it hang around long enough to warm the house.

How do you do that? First, you have to know the ways that heat moves from a warm body to a cold one. There are three of them: conduction, which is the movement of heat through solid matter; convection, which is the movement of heat carried on currents of air (or any other fluid); and radiation, which is the movement of heat in the form of infrared light (mostly) through any medium transparent to those wavelengths. You slow down conduction to a crawl by putting insulation in the way; you slow down convection by sealing up cracks through which air can move, and doing a variety of things to stop convective currents from forming; you slow down radiation by putting reflective barriers in the way of its escape. If you don’t do any of these things, your house leaks heat, and your checking account leaks money ; if you do all of these things – and they can be done fairly easily and cheaply – the prehistoric sunlight in the natural gas you burn has to take its time wandering out of your house, keeps you comfortable on the way, and you don’t have to spend anything like so much on more natural gas to replace it.

There are four points I’d like you to take home from these examples. The first is that they’re all talking about the same process – the movement of energy from the sun to the background radiation of outer space that passes through systems here on earth en route, and accomplishes certain kinds of work on the way. At this point, in fact, the most useful thing you can take away from this entire discussion is the habit of looking everything that goes on around you as an energy flow that starts from a concentrated source – almost always the sun – and ends in diffuse heat radiating out into space. If you pick up the habit of doing this, you’ll find that a great deal of the material that will be covered in posts to come will suddenly seem like common sense, and a great many of the habits that have are treated as normal behavior in our society will suddenly reveal themselves as stark staring lunacy.

An exercise, which I’d like to ask those readers studying this material to do several times over the next week, will help get this habit in place. Draw a rough flow chart for one or more versions of this process. Take a piece of paper, draw a picture of the sun at the top, and draw a trash can at the bottom; label the trash can “Background Heat”. Now draw the important components in any system you want to understand, and draw arrows connecting them to show how the energy moves from one component to another. If you’re sketching a natural system, draw in the plants, the herbivores, the carnivores, and the decomposers, and sketch in how energy passes from one to another, and from each of them to the trash can; if you’re sketching a human system, the energy source, the machine that turns the energy into a useful form, and the places where the energy goes all need to be marked in and connected. Do this with a variety of different systems. It doesn’t matter at this stage if you get all the details right; the important thing is to start thinking in terms of energy flow.

The second point to take home is that natural systems, having had much more time to work the bugs out, are much better at containing and using energy than most human systems are. The solar water heater and the house with its natural gas furnace take concentrated energy, put it to one use, and then lose it to diffuse heat. A natural ecosystem, by contrast, can play hot potato with its own input of concentrated energy for a much more extended period, tossing it from hand to hand (or, rather, leaf to paw to bacterial pseudopod) for quite a while before all of the energy finally follows its bliss. The lesson here is simple: by paying attention to the ways that natural systems do this, green wizards can get hints that can be incorporated into human systems to make them less wasteful and more resilient.

The third point is that energy does not move in circles. Next week we’ll be talking about material substances, which do follow circular paths – in fact, they do this whether we want them to do so or not, which is why the toxic waste we dump into the environment, for example, ends up circling back around into our food and water supply. Energy, though, moves along a trajectory with a beginning and an end. The beginning is always a concentrated source, which again is almost always the sun; the end is diffuse heat. Conceptually, you can think of energy as moving in straight lines, cutting across the circles of matter and the far more complex patterns of information gain and loss. Once a given amount of energy has followed its trajectory to the endpoint, for all practical purposes, it’s gone; it still exists, but the only work it’s capable of doing is making molecules vibrate at whatever the ambient temperature happens to be.

The fourth and final point, which follows from the third, is that for all practical purposes, energy is finite. It’s become tolerably common for believers in perpetual technological progress and economic growth to insist that energy is infinite, with the implication that human beings can up and walk off with as much of it as they wish. It’s an appealing fantasy, flattering to our collective ego, and it makes use of a particular kind of mental trap that Garrett Hardin anatomized quite a while ago. In his useful book Filters Against Folly (1986), Hardin pointed out that the word “infinite” – along with such synonyms as “limitless” and “boundless” – are thoughtstoppers rather than meaningful concepts, because the human mind can’t actually think about infinity in any meaningful sense. When somebody says “X is infinite”, in other words, what he is actually saying is “I refuse to think about X”.

Still, there’s a more specific sense in which talk about infinite energy is nonsense by definition. At any given place and time, the amount of energy that is available in a concentration and a form capable of doing any particular kind of work is finite, often distressingly so. Every ecosystem on earth has evolved to make the most of whatever energy is available to do the work of keeping living things alive, whether that energy takes the form of equatorial sunlight shining down on the Amazon rain forest, chemical energy in sulfur-laden water surging up from hot springs at the bottom of the sea, or fat stored up during the brief Arctic warm season in the bodies of the caribou that attract the attention of a hungry wolf pack.

Thus it’s crucial to recognize that available energy is always limited, and usually needs to be carefully coaxed into doing as much work as you want to get done before the energy turns into diffuse background heat. This is as true of any whole system, a garden as much as a solar hot water system, a well-insulated house, or any other project belonging to the field of appropriate tech. Learn to think in these terms and you’re well on your way to becoming a green wizard.

_____

John Michael Greer, The Grand Archdruid of the Ancient Order of Druids in America (AODA), has been active in the alternative spirituality movement for more than 25 years, and is the author of more than twenty books, including The Druidry Handbook (Weiser, 2006) and The Long Descent: A User’s Guide to the End of the Industrial Age (New Society, 2008). He lives in Cumberland, Maryland. 

http://thearchdruidreport.blogspot.com/2010/07/ways-of-force.html

Bill Totten http://www.ashisuto.co.jp/english/

Categories: Uncategorized

>Specie, Script, and War

>The Contradictory Practices of the Global Economic System

by Professor John Kozy

Global Research (May 06 2010)

“Wars are never fought for altruistic reasons. They’re usually fought for … business. And then, of course, there’s the business of war.”
- Arundhati Roy

Ms Roy’s view is widely held, and it’s certainly true – as far as it goes. But the view has a logic to it that, to my knowledge, no one has ever elucidated.

People assume that the economy is a system. But it isn’t. How the world-wide economy works has developed mostly by happenstance over millennia. It embodies contradictory practices and produces horrific consequences.

Primitive peoples extracted from nature what they needed or fashioned it into things they could use. When they produced more than they needed, they bartered the excess for what they could not produce themselves. It’s called trading. Commodities are traded for commodities, and over time some commodities became media of exchange, the most prevalent of which are precious metals that are converted into specie (coin). But this system works only when the commodities traded have equal value. When they don’t, trade becomes a form of theft, which leads to unfairness and conflict.

Trade implies that all nations can be neither net exporters nor net importers. Net exporters amass huge amounts of specie while net importers relinquish theirs. Net exporters become rich while net importers are bankrupted. To keep this system working, colonial wars were fought, peoples were subjugated, and their lands were plundered. Theft became a global practice.

The colonial wars fought after the discovery of the Americas by Europeans were fought for this reason. England, France, Spain, Portugal, and Holland, not themselves rich in mineral resources, all not only fought wars of conquest but fought each other to gain control of what precious metals could be extracted from the so called New World. Trade required access to these metals. No inhumane act was beyond use. Genocide, enslavement, piracy, cruelties of all kinds were commonly practiced. These practices continue today. These wars were necessitated by the need for specie which the trading economy requires.

But specie is a limited resource. Not only is it not distributed throughout the world uniformly, it is finite. It is also inconvenient for many transactions, so scrip (paper money), originally valued in units of specie, became common. But the holders of specie, bankers, quickly realized that they could issue more scrip than could be redeemed by the specie they held, since all depositors would not want their specie back at the same time. The practice is called fractional reserve banking and is a Ponzi scheme, a banking fraud. The specie of new depositors is used to redeem the scrip issued to past depositors. Ultimately, when more scrip was issued than could be redeemed by the available specie, the link between scrip and specie – the standard – was abandoned. Since then scrip functions as a medium of exchange only because people believe it can be traded for commodities. The entire world-wide economy functions merely on faith. But the world is too complex, too dangerous, to rely on an economy based on faith.

Over time, some nations became highly developed, net exporting manufacturing powers. Others stagnated as net importers. Then something unanticipated happened. Because it was viewed as cheaper to manufacture products abroad and import them than manufacture them domestically, manufacturing in developed countries declined as did the incomes of their peoples. The developed nations began, for various reasons, to import more and more and export less and less. Without commodities to trade, they trade scrip. But as the so-called developed nations manufacture less and less, less and less is available for the holders of scrip to buy. The scrip eventually becomes worthless, and the entire system collapses.

As natural resources become scarce domestically, the economic infrastructure created in earlier times still requires them. As domestic oil production shrinks, for instance, the need for imported oil increases. But no products are being manufactured domestically to barter for the oil. Without commodities or a credible scrip, trade cannot be relied upon to provide the required commodities.

How can such nations acquire the resources needed? There is but one answer – conquest for plunder! Human life becomes the medium of exchange. The world has been turned topsy-turvy. Rather than an economy that functions to fulfill the needs of people as it originally did, people are sacrificed to fulfill the needs of the economy, and the economy exists for no purpose whatsoever. It just is. The current attempt by the European Union and the IMF to resolve the sovereign debt crisis by sacrificing the well being of people to preserve the European economy demonstrates this topsy-turviness. The European Union, which is nothing but a trading association, has made the economy more important than the welfare of its people.

Yet conquest is only a temporary solution. The conquests carried out by Western nations in the sixteenth century for precious metals have now been undone. These nations are, like the United States, virtually bankrupt. And conquest itself is expensive; its costs are high in both money and lives. As more and more sophisticated weaponry is developed, the costs grow higher and higher. How long can bankrupt nations afford them?

Western economists have propelled this system and are now claiming that countries like China, for instance, need America as much as and perhaps more than America needs them. But is that true? Are these economists trapped in a closed box? They are right only if China travels the same trail to development that has been blazed by the Western world. But what if the peoples of the developing world don’t do that? What if they realize that the trail leads only to trouble? What if they switch their manufacturing from products for export to products for domestic consumption? What if they realize that dependence on foreign commodities is a road to ruin? What if the Chinese and other developing nations realize that becoming self-sufficient is a much safer policy? Economists call that autarchy and have been denigrating it for decades. Look what their denigrations have wrought!

If the human race is to survive, it will have to abandon this economy of plunder. The weapons of war have become too horrendous, the costs too great, the damage too sweeping, and the evil too extensive. The Earth is being turned into a wasteland, a huge landfill, a gigantic burial ground.

Some believe technology will save the day. But since the dawn of science in the sixteenth century, it hasn’t shown much promise. The proliferation of products of convenience it has yielded has not ameliorated a single major problem. Suppose, for instance, that alternative forms of energy are produced. Can wind power replace oil? Perhaps, but the economic conundrum will not be solved if the turbines have to be imported from China.

Many today advocate a return to a specie standard – the gold standard. But there is nothing special about gold as specie. Gold is just another commodity, although gold has some physical properties that make its use as specie preferable. China recently agreed to lend Venezuela $20 billion which Venezuela will repay with oil, a bartering arrangement which shows that any valued commodity can be used to ensure the value of scrip. Furthermore, since the amount of specie is limited, fractional reserve banking would still be required if the amount of scrip needed to finance the volume of trade is to be made available. Nothing would really change. Net exporting nations would quickly impoverish net importing nations by simply redeeming scrip for gold.

But Arundhati Roy is right. Wars are fought for business, but business and the economy are synonymous. Wars will continue to be fought for the economy as long as this economy is not abandoned. War is a logical consequence of it, not, as most seem to believe, a means utilized by it. No attempt to eliminate war and preserve the economy can succeed. A globalized economy leads only to a global disaster, as everyone should have now seen. Net exporters become rich while net importers are impoverished. Self sufficiency (autarchy), not trade, is the only possible way to extricate the human race from the consequences of the specie/scrip/plunder economy. A nation that doesn’t need the resources found in other lands has no reason to go to war. Globalized trade, rather than being a path to peace and prosperity, inevitably leads to war, poverty, and destruction. The economists have it all wrong.

_____

John Kozy is a retired professor of philosophy and logic who blogs on social, political, and economic issues. After serving in the US Army during the Korean War, he spent twenty years as a university professor and another twenty years working as a writer. He has published a textbook in formal logic commercially, in academic journals and a small number of commercial magazines, and has written a number of guest editorials for newspapers. His on-line pieces can be found on http://www.jkozy.com/ and he can be emailed from that site’s homepage.

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Bill Totten http://www.ashisuto.co.jp/english/

Categories: Uncategorized

>The food bubble

>How Wall Street starved millions and got away with it

by Frederick Kaufman

Harper’s Magazine (July 2010)

The history of food took an ominous turn in 1991, at a time when no one was paying much attention. That was the year Goldman Sachs decided our daily bread might make an excellent investment.

Agriculture, rooted as it is in the rhythms of reaping and sowing, had not traditionally engaged the attention of Wall Street bankers, whose riches did not come from the sale of real things like wheat or bread but from the manipulation of ethereal concepts like risk and collateralized debt. But in 1991 nearly everything else that could be recast as a financial abstraction had already been considered. Food was pretty much all that was left. And so with accustomed care and precision, Goldman’s analysts went about transforming food into a concept. They selected eighteen commodifiable ingredients and contrived a financial elixir that included cattle, coffee, cocoa, corn, hogs, and a variety or two of wheat. They weighted the investment value of each element, blended and commingled the parts into sums, then reduced what had been a complicated collection of real things into a mathematical formula that could be expressed as a single manifestation, to be known thenceforward as the Goldman Sachs Commodity Index. Then they began to offer shares.

As was usually the case, Goldman’s product flourished. The prices of cattle, coffee, cocoa, corn, and wheat began to rise, slowly at first, and then rapidly. And as more people sank money into Goldman’s food index, other bankers took note and created their own food indexes for their own clients. Investors were delighted to see the value of their venture increase, but the rising price of breakfast, lunch, and dinner did not align with the interests of those of us who eat. And so the commodity index funds began to cause problems.

Wheat was a case in point. North America, the Saudi Arabia of cereal, sends nearly half its wheat production overseas, and an obscure syndicate known as the Minneapolis Grain Exchange remains the supreme price-setter for the continent’s most widely exported wheat, a high-protein variety called hard red spring. Other varieties of wheat make cake and cookies, but only hard red spring makes bread. Its price informs the cost of virtually every loaf on earth.

As far as most people who eat bread were concerned, the Minneapolis Grain Exchange had done a pretty good job: for more than a century the real price of wheat had steadily declined. Then, in 2005, that price began to rise, along with the prices of rice and corn and soy and oats and cooking oil. Hard red spring had long traded between $3 and $6 per sixty-pound bushel, but for three years Minneapolis wheat broke record after record as its price doubled and then doubled again. No one was surprised when in the first quarter of 2008 transnational wheat giant Cargill attributed its 86 percent jump in annual profits to commodity trading. And no one was surprised when packaged-food maker ConAgra sold its trading arm to a hedge fund for $2.8 billion. Nor when The Economist announced that the real price of food had reached its highest level since 1845, the year the magazine first calculated the number.

Nothing had changed about the wheat, but something had changed about the wheat market. Since Goldman’s innovation, hundreds of billions of new dollars had overwhelmed the actual supply of and actual demand for wheat, and rumors began to emerge that someone, somewhere, had cornered the market. Robber barons, gold bugs, and financiers of every stripe had long dreamed of controlling all of something everybody needed or desired, then holding back the supply as demand drove up prices. But there was plenty of real wheat, and American farmers were delivering it as fast as they always had, if not even a bit faster. It was as if the price itself had begun to generate its own demand – the more hard red spring cost, the more investors wanted to pay for it.

“It’s absolutely mind-boggling”, one grain trader told the Wall Street Journal. “You don’t ever want to trade wheat again”, another told the Chicago Tribune.

“We have never seen anything like this before”, Jeff Voge, chairman of the Kansas City Board of Trade, told the Washington Post. “This isn’t just any commodity”, continued Voge. “It is food, and people need to eat”.

The global speculative frenzy sparked riots in more than thirty countries and drove the number of the world’s “food insecure” to more than a billion. In 2008, for the first time since such statistics have been kept, the proportion of the world’s population without enough to eat ratcheted upward. The ranks of the hungry had increased by 250 million in a single year, the most abysmal increase in all of human history.

Then, like all speculative bubbles, the food bubble popped. By late 2008, the price of Minneapolis hard red spring had toppled back to normal levels, and trading volume quickly followed. Of course, the prices world consumers pay for food have not come down so fast, as manufacturers and retailers continue to make up for their own heavy losses.

The gratuitous damage of the food bubble struck me as not merely a disgrace but a disgrace that might easily be repeated. And so I traveled to Minneapolis – where the reality of hard red spring and the price of hard red spring first went their separate ways – to discover how such a thing could have happened, and if and when it would happen again.

The name of the Minneapolis Grain Exchange may conjure images of an immense concrete silo towering over the prairie, but the exchange is in fact a rather severe neoclassical steel-frame building that shares the downtown corner of Fourth Street and Fourth Avenue with City Hall, the courthouse, and the jail. I walked through its vestibule of granite and Italian marble, past renderings of wheat molded into the terra-cotta cartouches, and as I waited for the wheat-embossed elevator I tried not to gawk at the gold-plated mail chute. For more than a century, the trading floor of the Minneapolis Grain Exchange had been the place where wheat acquired a price, but as I stepped out of the elevator the opening bell tolled and echoed across a vast, silent, and chilly chamber. The place was abandoned, the phones ripped out of the walls, the octagonal grain pits littered with snakes of tangled wire.

I wandered across the wooden planks of the old pits, scarred by the boots of countless grain traders, and I peered into the dark and narrow recesses of the phone booths where those traders had scribbled down their orders. Beyond the booths loomed the massive cash-grain tables, starkly illuminated by rays of sunlight. In the old days, when brokers and traders looked into one another’s faces, not computer screens, they liked to examine the grain before they bought it.

Now an electronic board began to populate with green, red, and yellow numbers that told the price of barley, canola, cattle, coffee, copper, cotton, gold, hogs, lumber, milk, oats, oil, platinum, rice, and silver. Beneath them shimmered the indices: the Dow, the S&P 500, and, at the very bottom, the Goldman Sachs Commodity Index. Even the video technology was quaint, a relic from the Carter years, when trade with the Soviet Union was the final frontier, long before that moment in 2008 when the chief executive officer of the Minneapolis Grain Exchange, Mark Bagan, decided that the future of wheat was not on a table in Minneapolis but within the digital infinitude of the Internet.

As a courtesy to the speculators who for decades had spent their workdays executing trades in the grain pits, the exchange had set up a new space a few stories above the old trading floor, a gray-carpeted room in which a few dozen beige cubicles were available to rent, some featuring a view of a parking lot. I had expected shouting, panic, confusion, and chaos, but no more than half the cubicles were occupied, and the room was silent. One of the grain traders was reading his email, another checking ESPN for the weekend scores, another playing solitaire, another shopping on eBay for antique Japanese vases.

“We’re trading wheat, but it’s wheat we’re never going to see”, Austin Damiani, a twenty-eight-year-old wheat broker, would tell me later that afternoon. “It’s a cerebral experience”.

Today’s action consisted of a gray-haired man padding from cubicle to cubicle, greeting colleagues, sucking hard candy. The veteran eventually ambled off to a corner, to a battered cash-grain table that had been moved up from the old trading floor. A dozen aluminum pans sat on the table, each holding a different sample of grain. The old man brought a pan to his face and took a deep breath. Then he held a single grain in his palm, turned it over, and found the crease.

“The crease will tell you the variety”, he told me. “That’s a lost art”.

His name was Mike Mullin, he had been trading wheat for fifty years, and he was the first Minneapolis wheat trader I had seen touch a grain of the stuff. Back in the day, buyers and sellers might have spent hours insulting, cajoling, bullying, and pleading with one another across this table – anything to get the right price for hard red spring – but Mullin was not buying real wheat today, nor was anybody here selling it.

Above us, three monitors flickered prices from America’s primary grain exchanges: Chicago, Kansas City, and Minneapolis. Such geographic specificities struck me as archaic, but there remain essential differences among these wheat markets, vestiges of old-fashioned concerns such as latitude and proximity to the Erie Canal.

Mullin stared at the screens and asked me what I knew about wheat futures, and I told him that whereas Minneapolis traded the contract in hard red spring, Kansas City traded in hard red winter and Chicago in soft red winter, both of which have a lower protein content than Minneapolis wheat, are less expensive, and are more likely to be incorporated into a brownie mix than into a baguette. High protein content makes Minneapolis wheat elite, I told Mullin.

He nodded his head, and we stood in silence and watched the desultory movement of corn and soy, soft red winter and hard red spring. It was a slow trading day even if commodities, as Mullin told me, were overpriced ten percent across the board. Mullin figured he knew the real worth of a bushel and had bet the price would soon head south. “Am I short?” he asked. “Yes I am”.

I asked him what he knew about the commodity indexes, like the one Goldman Sachs created in 1991.

“It’s a brainless entity”, Mullin said. His eyes did not move from the screen. “You look at a chart. You hit a number. You buy.”

Grain trading was not always brainless. Joseph parsed Pharaoh’s dream of cattle and crops, discerned that drought loomed, and diligently went about storing immense amounts of grain. By the time famine descended, Joseph had cornered the market – an accomplishment that brought nations to their knees and made Joseph an extremely rich man.

In 1730, enlightened bureaucrats of Japan’s Edo shogunate perceived that a stable rice price would protect those who produced their country’s sacred grain. Up to that time, all the farmers in Japan would bring their rice to market after the September harvest, at which point warehouses would overflow, prices would plummet, and, for all their hard work, Japan’s rice farmers would remain impoverished. Instead of suffering through the Osaka market’s perennial volatility, the bureaucrats preferred to set a price that would ensure a living for farmers, grain warehousemen, the samurai (who were paid in rice), and the general population – a price not at the mercy of the annual cycle of scarcity and plenty but a smooth line, gently fluctuating within a reasonable range.

While Japan had relied on the authority of the government to avoid deadly volatility, the United States trusted in free enterprise. After the combined credit crunch, real estate wreck, and stock-market meltdown now known as the Panic of 1857, US grain merchants conceived a new stabilizing force: In return for a cash commitment today, farmers would sign a forward contract to deliver grain a few months down the line, on the expiration date of the contract. Since buyers could never be certain what the price of wheat would be on the date of delivery, the price of a future bushel of wheat was usually a few cents less than that of a present bushel of wheat. And while farmers had to accept less for future wheat than for real and present wheat, the guaranteed future sale protected them from plummeting prices and enabled them to use the promised payment as, say, collateral for a bank loan. These contracts let both producers and consumers hedge their risks, and in so doing reduced volatility.

But the forward contract was a primitive financial tool, and when demand for wheat exploded after the Civil War, and ever more grain merchants took to reselling and trading these agreements on a fast-growing secondary market, it became impossible to figure out who owed whom what and when. At which point the great grain merchants of Chicago, Kansas City, and Minneapolis set about creating a new kind of institution less like a medieval county fair and more like a modern clearinghouse. In place of myriad individually negotiated and fulfilled forward contracts, the merchants established exchanges that would regulate both the quality of grain and the expiration dates of all forward contracts – eventually limiting those dates to five each year, in March, May, July, September, and December. Whereas under the old system each buyer and each seller vetted whoever might stand at the opposite end of each deal, the grain exchange now served as the counterparty for everyone.

The exchanges soon attracted a new species of merchant interested in numbers, not grain. This was the speculator. As the price of futures contracts fluctuated in daily trading, the speculator sought to cash in through strategic buying and selling. And since the speculator had neither real wheat to sell nor a place to store any he might purchase, for every “long” position he took (a promise to buy future wheat), he would eventually need to place an equal and opposite “short” position (a promise to sell). Farmers and millers welcomed the speculator to their market, for his perpetual stream of buy and sell orders gave them the freedom to sell and buy their actual wheat just as they pleased.

Under the new system, farmers and millers could hedge, speculators could speculate, the market remained liquid, and yet the speculative futures price could never move too far from the “spot” (or actual) price: every ten weeks or so, when the delivery date of the contract approached, the two prices would converge, as everyone who had not cleared his position with an equal and opposite position would be obligated to do just that. The virtuality of wheat futures would settle up with the reality of cash wheat, and then, as the contract expired, the price of an ideal bushel would be “discovered” by hedger and speculator alike.

No less an economist than John Maynard Keynes applied himself to studying this miraculous interplay of supply and demand, buyers and sellers, real wheat and virtual wheat, and he gave the standard futures-pricing model its own special name. He called it “normal backwardation”, because in a normal market for real goods, he found, futures prices (for things that did not yet exist) generally stayed in back of spot prices (for things that actually existed).

Normal backwardation created the occasion for so many people to make so much money in so many ways that numerous other futures exchanges soon emerged, featuring contracts for everything from butter, cottonseed oil, and hay to plywood, poultry, and cat pelts. Speculators traded molasses futures on the New York Coffee and Sugar Exchange, and if they lost their shirts they could head over to the New York Burlap and Jute Exchange or the New York Hide Exchange. And despite the occasional market collapse (onions in 1957, Maine potatoes in 1976), for more than a century the basic strategy and tactics of futures trading remained the same, the price of wheat remained stable, and increasing numbers of people had plenty to eat.

The decline of volatility, good news for the rest of us, drove bankers up the wall. I put in a call to Steven Rothbart, who traded commodities for Cargill way back in the 1980s. I asked him what he knew about the birth of commodity index funds, and he began to laugh. “Commodities had died”, he told me. “We sat there every day and the market wouldn’t move. People left. They couldn’t make a living anymore.”

Clearly, some innovation was in order. In the midst of this dead market, Goldman Sachs envisioned a new form of commodities investment, a product for investors who had no taste for the complexities of corn or soy or wheat, no interest in weather and weevils, and no desire for getting into and out of shorts and longs – investors who wanted nothing more than to park a great deal of money somewhere, then sit back and watch that pile grow. The managers of this new product would acquire and hold long positions, and nothing but long positions, on a range of commodities futures. They would not hedge their futures with the actual sale or purchase of real wheat (like a bona-fide hedger), nor would they cover their positions by buying low and selling high (in the grand old fashion of commodities speculators). In fact, the structure of commodity index funds ran counter to our normal understanding of economic theory, requiring that index-fund managers not buy low and sell high but buy at any price and keep buying at any price. No matter what lofty highs long wheat futures might attain, the managers would transfer their long positions into the next long futures contract, due to expire a few months later, and repeat the roll when that contract, in turn, was about to expire – thus accumulating an everlasting, ever-growing long position, unremittingly regenerated.

“You’ve got to be out of your freaking mind to be long only”, Rothbart said. “Commodities are the riskiest things in the world”.

But Goldman had its own way to offset the risks of commodities trading – if not for their clients, then at least for themselves. The strategy, standard practice for most index funds, relied on “replication”, which meant that for every dollar a client invested in the index fund, Goldman would buy a dollar’s worth of the underlying commodities futures (minus management fees). Of course, in order to purchase commodities futures, the bankers had only to make a “good-faith deposit” of something like five percent. Which meant that they could stash the other 95 percent of their investors’ money in a pool of Treasury bills, or some other equally innocuous financial cranny, which they could subsequently leverage into ever greater amounts of capital to utilize to their own ends, whatever they might be. If the price of wheat went up, Goldman made money. And if the price of wheat fell, Goldman still made money – not only from management fees, but from the profits the bank pulled down by investing 95 percent of its clients’ money in less risky ventures. Goldman even made money from the roll into each new long contract, every instance of which required clients to pay a new set of transaction costs.

The bankers had figured out how to extract profit from the commodities market without taking on any of the risks they themselves had introduced by flooding that same market with long orders. Unlike the wheat producers and the wheat speculators, or even Goldman’s own customers, Goldman had no vested interest in a stable commodities market. As one index trader told me, “Commodity funds have historically made money – and kept most of it for themselves”.

No surprise, then, that other banks soon recognized the rightness of this approach. In 1994, J P Morgan established its own commodity index fund, and soon thereafter other players entered the scene, including the AIG Commodity Index and the Chase Physical Commodity Index, along with initial offerings from Bear Stearns, Oppenheimer, and Pimco. Barclays joined the group with eight index funds and, in just over a year, raised close to $3 billion.

Government regulators, far from preventing this strange new way of accumulating futures, actively encouraged it. Congress had in 1936 created a commission that curbed “excessive speculation” by limiting large holdings of futures contracts to bona-fide hedgers. Years later, the modern-day Commodity Futures Trading Commission continued to set absolute limits on the amount of wheat-futures contracts that could be held by speculators. In 1991, that limit was 5,000 contracts. But after the invention of the commodity index fund, bankers convinced the commission that they, too, were bona-fide hedgers. As a result, the commission issued a position-limit exemption to six commodity index traders, and within a decade those funds would be permitted to hold as many as 130,000 wheat-futures contracts at any one time.

“We have not seen US agriculture rely this much on the market for almost seventy years”, was how Joseph Dial, the head of the commission, assessed his agency’s regulatory handiwork in 1997. “This paradigm shift in the government’s farm policy has created a new era for agriculture”.

Goldman and all the other banks that followed them into commodity index funds had figured out how to safeguard themselves, but there was a lot more money to be made if the banks could somehow convince everyone else that an inherently risky product designed to protect the banks – and only the banks – was in fact also safe for investors.

Good news came on February 28, 2005 when Gary Gorton, of the University of Pennsylvania, and K Geert Rouwenhorst, of the Yale School of Management, published a working paper called “Facts and Fantasies About Commodities Futures”. In forty graph-and-equation-filled pages, the authors demonstrated that between 1959 and 2004, a hypothetical investment in a broad range of commodities – such as an index – would have been no more risky than an investment in a broad range of stocks. What’s more, commodities showed a negative correlation with equities and a positive correlation with inflation. Food was always a good investment, and even better in bad times. Money managers could hardly wait to spread the news.

“Since this discovery”, reported the Financial Times, investors had become attracted to commodities “in the hope that returns will differ from equities and bonds and be strong in case of inflation”. Another study noted as well that commodity index funds offered “an inherent or natural return that is not conditioned on skill”. And so the long-awaited legion of new investors began buying into commodity index funds, and the food bubble truly began to inflate.

A few years after “Facts and Fantasies” appeared, and almost as if to prove Gorton and Rouwenhorst’s point, the financial crisis hit mortgage, credit, and real estate markets – and, just as the scholars had predicted, those who had invested in commodities prospered. Money managers had to decide where to park what remained of their endowment, hedge, and pension funds, and the bankers were ready with something that looked very safe: in 2003, commodity index holdings amounted to a not particularly awe-inspiring $13 billion, but by 2008, $317 billion had poured into the funds. As long as the commodities brokers kept rolling over their futures, it looked as though the day of reckoning might never come. If no one contemplated the effects that this accumulation of long-only futures would eventually have on grain markets, perhaps it was because no one had never seen such a massive pile of long-only futures.

From one perspective, a complicated chain of cause and effect had inflated the food bubble. But there were those who understood what was happening to the wheat markets in simpler terms. “I don’t have to pay anybody for anything, basically”, one long-only indexer told me. “That’s the beauty of it”.

Mark Bagan, CEO of the Minneapolis Grain Exchange, invited me to his office for a talk. A self-proclaimed “grain brat”, Bagan grew up among bales, combines, and concrete silos all across the United States before attending Minnesota State to play football. As I settled into his oversize couch, admired his neatly tailored pinstriped suit, and listened to his soft voice, it occurred to me that if the grain markets were a casino, Mark Bagan was the biggest bookie. Without him, there could be no bets on hard red spring.

“From our perspective, we’re price neutral, value neutral”, Bagan said.

I asked him about the commodity index funds and whether they had transformed the traditional wheat market into something wholly speculative, artificial, and hidden. Why did anyone except bankers even need this new market?

“There are plenty of markets out there that have yet to be thought of and will be very successful”, Bagan said. Then he veered into the intricacies of running a commodities exchange. “With our old system, we could clear forty-eight products”, he said. “Now we can have more than fifty thousand products traded. It’s a big number, building derivatives on top of derivatives, but we’ve got to be prepared for that: the financial world is evolving so quickly, there will always be a need for new risk-management products.”

Bagan had not answered my question about the funds, so I asked again, as directly as I could: What did he make of the fact that speculation in commodity index funds had caused a global run on hard red spring?

Bagan slowly shook his head, as though he were an elementary-school teacher trying to explain a basic concept – subtraction? ice? – to a particularly dense child. The Goldman Sachs Commodity Index did not include a single hard red spring future, he told me. Minneapolis wheat may have set records in 2008 and led global food prices into the stratosphere, but it had nothing to do with Goldman’s fund. There just wasn’t enough speculation in the hard red spring market to satisfy the bankers. Not enough liquidity. Bagan smiled. Was there anything else I wanted to know?

Plenty, but there was nothing more Bagan was about to disclose. As I left the office, I remembered the rumors I’d heard at a grain-crisis conference in Washington, DC, a few months earlier. Between interminable speeches about price ceilings and grain reserves, more than one wheat expert had confided, strictly on background, that at the height of the bubble, Minneapolis wheat had been cornered. No one could say whether the culprit had been Cargill or the Canadian Wheat Board or any other party, but the consensus was that as the world had cried for food, someone, somewhere, had been hoarding wheat.

Imaginary wheat bought anywhere affects real wheat bought everywhere. But as it turned out, index traders had purchased the majority of their long wheat futures on the oldest and largest grain clearinghouse in America, the Chicago Mercantile Exchange. And so I found myself pushing through the frigid blasts of the LaSalle Street canyon. If I could figure out precisely how and when wheat futures traded in Chicago had driven up the price of actual wheat in Minneapolis, I would know why a billion people on the planet could not afford bread.

The man who had agreed to escort me to the floor of the exchange traded grain for a transnational corporation, and he told me several times that he could not talk to the press, and that if I were to mention his name in print he would lose his job. So I will call him Mr Silver.

In the basement cafeteria of the exchange I bought Mr Silver a breakfast of bacon and eggs and asked whether he could explain how index funds that held long-only Chicago soft red winter wheat futures could have come to dictate the spot price of Minneapolis hard red spring. Had the world starved because of a corner in Chicago? Mr Silver looked into his scrambled eggs and said nothing.

So I began to tell him everything I knew, hoping he would eventually be inspired to fill in the blanks. I told him about Joseph in Egypt, Osaka in 1730, the Panic of 1857, and futures contracts for cat pelts, molasses, and onions. I told him about Goldman’s replication strategy, Gorton and Rouwenhorst’s 2005 paper, and the rise and rise of index funds. I told him that at least one analyst had estimated that investments in commodity index funds could easily increase to as much as $1 trillion, which would result in yet another global food catastrophe, much worse than the one before.

And I told Mr Silver something else I had discovered: About two thirds of the Goldman index remains devoted to crude oil, gasoline, heating oil, natural gas, and other energy-based commodities. Wheat was nothing but an indexical afterthought, accounting for less than 6.5 percent of Goldman’s fund.

Mr Silver sipped his coffee.

Even 6.5 percent of the Goldman Sachs Commodity Index made for a historically unprecedented pile of long wheat futures, I went on. Especially when those index funds kept rolling over the contracts they already had – all of them long, only a smattering bought in Kansas City, none in Minneapolis.

And then it occurred to me: It was neither an individual nor a corporation that had cornered the wheat market. The index funds may never have held a single bushel of wheat, but they were hoarding staggering quantities of wheat futures, billions of promises to buy, not one of them ever to be fulfilled. The dreaded market corner had emerged not from a shortage in the wheat supply but from a much rarer economic occurrence, a shock inspired by the ceaseless call of index funds for wheat that did not exist and would never need to exist: a demand shock. Instead of a hidden mastermind committing a dastardly deed, it was old Mike Mullin’s “brainless entity”, the investment instrument itself, that had taken over and created the effects of a traditional corner.

Mr Silver had stopped eating his eggs.

I said that I understood how the index funds’ unprecedented accumulation of Chicago futures could create the appearance of a market corner in Chicago. But there was still something I didn’t get. Why had the wheat market in Minneapolis begun to act as though it too had been cornered when none of the index funds held hard red spring? Why had the world’s most widely exported wheat experienced a sudden surge in price, a surge that caused a billion people -

At which point Mr Silver interrupted my monologue.

Index-fund buying had pushed up the price of the Chicago contract, he said, until the price of a wheat future had come to equal the spot price of wheat on the Chicago Mercantile Exchange – and still, the futures price surged. The result was contango.

I gave Mr Silver a blank look. Contango, he explained, describes a market in which future prices rise above current prices. Rather than being stable and steady, contango markets tend to be overheated and hysterical, with spot prices rising to match the most outrageously escalated futures prices. Indeed, between 2006 and 2008, the spot price of Chicago soft red winter shot up from $3 per bushel to $11 per bushel.

The ever-escalating price of wheat and the newfound strength of grain markets were excellent news for the new investors who had flooded commodity index funds. No matter that the mechanism created to stabilize grain prices had been reassembled into a mechanism to inflate grain prices, or that the stubbornly growing discrepancy between futures and spot prices meant that farmers and merchants no longer could use these markets to price crops and manage risks. No matter that contango in Chicago had disrupted the operations of the nation’s grain markets to the extent that the Senate Committee on Homeland Security and Governmental Affairs had begun an investigation into whether speculation in the wheat markets might pose a threat to interstate commerce. And then there was the question of the millers and the warehousers – those who needed actual wheat to sell, actual bread that might feed actual people.

Mr Silver lowered his voice as he informed me that as the price of Chicago wheat had bubbled up, commercial buyers had turned elsewhere – to places like Minneapolis. Although hard red spring historically had been more expensive than soft red winter, it had begun to look like a bargain. So brokers bought hard red spring and left it to the chemists at General Mills or Sara Lee or Domino’s to rejigger their dough recipes for a higher-protein variety.

The grain merchants purchased Minneapolis hard red spring much earlier in the annual cycle than usual, and they purchased more of it than ever before, as real demand began to chase the ever-growing, everlasting long. By the time the normal buying season began, drought had hit Australia, floods had inundated northern Europe, and a vogue for biofuels had enticed US farmers to grow less wheat and more corn. And so, when nations across the globe called for their annual hit of hard red spring, they discovered that the so-called visible supply was far lower than usual. At which point the markets veered into insanity.

Bankers had taken control of the world’s food, money chased money, and a billion people went hungry.

Mr Silver finished his bacon and eggs and I followed him upstairs, beyond two sets of metal detectors, dozens of security staff, and a gaudy stained-glass image of Hermes, god of commerce, luck, and thievery. Through the colored glass that outlined the deity I caught my first glimpse of the immense trading floor of the Chicago Mercantile Exchange. The electronic board had already begun to populate with green, yellow, and red numbers.

The wheat harvest of 2008 turned out to be the most bountiful the world had ever seen, so plentiful that even as hundreds of millions slowly starved, 200 million bushels were sold for animal feed. Livestock owners could afford the wheat; poor people could not. Rather belatedly, real wheat had shown up again – and lots of it. US Department of Agriculture statistics eventually revealed that 657 million bushels of 2008 wheat remained in US silos after the buying season, a record-breaking “carryover”. Soon after that bounteous oversupply had been discovered, grain prices plummeted and the wheat markets returned to business as usual.

The worldwide price of food had risen by eighty percent between 2005 and 2008, and unlike other food catastrophes of the past half century or so, the United States was not insulated from this one, as 49 million Americans found themselves unable to put a full meal on the table. Across the country demand for food stamps reached an all-time high, and one in five kids came to depend on food kitchens. In Los Angeles nearly a million people went hungry. In Detroit armed guards stood watch over grocery stores. Rising prices, mused the New York Times, “might have played a role”.

On the plane to Minneapolis I had read a startling prediction: “It may be hard to imagine commodity prices advancing another 460 percent above their mid-2008 price peaks”, hedge-fund manager John Hummel wrote in a letter to clients of AIS Capital Management. “But the fundamentals argue strongly”, he continued, that “these sectors have significant upside potential”. I made a quick calculation: 460 percent above 2008 peaks meant hamburger meat priced at $20 a pound.

On the ground in Minneapolis I put the question to Michael Ricks, chairman of the Minneapolis Grain Exchange. Could 2008 happen again? Could prices rise even higher?

“Absolutely”, said Ricks. “We’re in a volatile world”.

I put the same question to Layne Carlson, corporate secretary and treasurer of the Minneapolis Grain Exchange. “Yes”, said Carlson, who then told me the two principles that govern the movement of grain markets: “fear and greed”.

But wasn’t it part of a grain exchange’s responsibility to ensure a stable valuation of our daily bread?

“I view what we’re working with as widgets”, said Todd Posthuma, the exchange’s associate director of market operations and information technology, the man responsible for clearing $100 million worth of trades every day. “I think being an employee at an exchange is different from adding value to the food system”.

Above Mark Bagan’s oversize desk hangs a jagged chart of futures prices for the hard red spring wheat contract, mapping every peak and valley from 1973 to 2006. The highs on Bagan’s chart reached $7.50. Of course, had 2008 been included, the spikes would have, literally, gone through the roof.

Would the price of wheat rise again?

“The flow of money into commodities has changed significantly in the last decade”, explained Bagan. “Wheat, corn, soft commodities – I don’t see these dollars going away. It already has happened”, he said. “It’s inevitable”.

_____

Frederick Kaufman is a contributing editor of Harper’s Magazine. His last article for the magazine, “Let Them Eat Cash”, appeared in the June 2009 issue.

http://www.harpers.org/archive/2010/07/0083022

Bill Totten http://www.ashisuto.co.jp/english/

Categories: Uncategorized

>Text of Urgent ACTA Communique

2010/07/18 2 comments

>International Experts Find that Pending Anti-Counterfeiting Trade Agreement Threatens Public Interests

American University Washington College of Law, Washington, DC

wcl.american.edu (June 23 2010)

This statement reflects the conclusions reached at a meeting of over ninety academics, practitioners and public interest organizations from six continents gathered at American University Washington College of Law, June 16 to 18 2010. The meeting, convened by American University’s Program on Information Justice and Intellectual Property, was called to analyze the official text of the Anti-Counterfeiting Trade Agreement (ACTA), released for the first time in April 2010. Negotiating parties released the text only after public criticism of the unusually closed process and widespread disquiet over the negotiations’ presumed substance. See Wellington Declaration {1}, EU Resolution on Transparency and State of Play of the ACTA Negotiations {2}.

We find that the terms of the publicly released draft of ACTA threaten numerous public interests, including every concern specifically disclaimed {3} by negotiators.

* Negotiators claim ACTA will not interfere with citizens’ fundamental rights and liberties; it will.

* They claim ACTA is consistent with the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS); it is not.

* They claim ACTA will not increase border searches or interfere with cross-border transit of legitimate generic medicines; it will.

* And they claim that ACTA does not require “graduated response” disconnections of people from the internet; however, the agreement strongly encourages such policies.

ACTA is the predictably deficient product of a deeply flawed process. What started as a relatively simple proposal to coordinate customs enforcement has transformed into a sweeping and complex new international intellectual property and internet regulation with grave consequences for the global economy and governments’ ability to promote and protect the public interest.

Any agreement of this scope and consequence must be based on a broad and meaningful consultative process, in public, on the record and with open on-going access to proposed negotiating text and must reflect a full range of public interest concerns. As detailed below, this text fails to meet these standards.

Recognizing that the terms of the agreement are under further closed-door negotiation over a text we do not have access to, a fair reading of the April 2010 draft leads to our conclusion that ACTA is hostile to the public interest in at least seven critical areas of global public policy: fundamental rights and freedoms; internet governance; access to medicines; scope and nature of intellectual property law; international trade; international law and institutions; and democratic process.

The following specific comments are based on a review of the publicly released text which is highly bracketed and the conclusions are therefore tentative.

FUNDAMENTAL RIGHTS AND FREEDOMS

ACTA would authorize or encourage private and government enforcement measures that would curtail enjoyment of fundamental rights and liberties, including domestic and internationally protected human rights to health, privacy and the protection of personal data, free expression, education, cultural participation, and right to a fair legal process, including fair trial and presumptions of innocence.

THE INTERNET

ACTA would

* Encourage internet service providers to police the activities of internet users by holding internet providers responsible for the actions of subscribers, conditioning safe harbors on adopting policing policies, and by requiring parties to encourage cooperation between service providers and rights holders;

* Encourage this surveillance, and the potential for punitive disconnections by private actors, without adequate court oversight or due process;

* Globalize ‘anti-circumvention’ provisions which threaten innovation, competition, free (freedom-respecting) software, open access business models, interoperability, the enjoyment of user rights, and user choice;

ACCESS TO MEDICINES

ACTA would threaten global access to affordable medicines, including by:

* Authorizing customs authorities to seize goods in transit countries, even when they do not infringe any laws of the producing or importing countries;

* Implicating non-infringing active pharmaceutical ingredient suppliers whose materials may be used downstream in infringing products without their knowledge;

* Limiting key flexibilities on injunctions, including in patent cases, that are necessary for government use, for court-ordered royalties, and for innovation prizes and other policies that de-link cost of research and development from the price of products;

* Expanding its scope to patents in many areas of the agreement, which is an inappropriate subject of a counterfeiting policy.

SCOPE AND NATURE OF INTELLECTUAL PROPERTY LAW

ACTA would distort fundamental balances between the rights and interests of proprietors and users, including by

* introducing highly specific rights and remedies for rights holders without detailing correlative exceptions, limitations, and procedural safeguards for users;

* shifting enforcement burdens to public authorities and private intermediaries in ways that are likely to be more sensitive to proprietary concerns;

* requiring formula-driven assessment of damages, potentially unrelated to any proven harm or gain;

* omitting strong disincentives to abuse of enforcement processes by right holders;

* including rigid injunction, damages and heightened civil and criminal enforcement requirements that will restrict government flexibility, impede innovation and slow the development and diffusion of green technology;

* threaten the continuation or development of innovative public intererst exceptions, such as common law approaches to permitting copies of works by “authorization.”

INTERNATIONAL TRADE

ACTA would raise barriers to the trade in knowledge imbedded goods, disproportionately harming developing countries dependent on imports and exports of essential goods. Specifically, ACTA will extend ‘ex officio’ and in transit border search and seizures to a broad range of “suspected” intellectual property infringements, even including alleged patent infringements involving complex questions of law and fact that are impossible to judge by custom authorities.

INTERNATIONAL LAW AND INSTITUTIONS

ACTA would conflict with a large number of existing international laws and processes. Specifically, ACTA contains provisions that:

* Conflict with the World Trade Organization Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) by allowing seizures based on the law “of the party providing the procedures” instead of “the country of importation” (TRIPS Article 52) and by failing to fully protect and incorporate key protections against abuse (for example Articles 41.1, 48.1, 48.2, 50.3, 53.1, 56), flexibilities to promote public interests (for example TRIPS Article 44.2), requirements for the proportionality of enforcement measures (for example Articles 46, 47), and provisions providing for balance between the interests of proprietors, consumers and the greater society (for example TRIPS Articles 1, 7, 8, 40, 41.2, 41.5, 54, 55, 58).

* Conflict with the WTO Doha Declaration on TRIPS and Public Health and World Health Assembly Resolution 61.21 by limiting the ability of countries to use the TRIPS flexibilities “to the full” to promote access to medicines;

* Undermine the World Intellectual Property Organization (WIPO) Development Agenda, particularly recommendation 45′s commitment to “approach intellectual property enforcement in the context of broader societal interests and especially development-oriented concerns”;

* Undermine the roles of WIPO and WTO by creating a new and redundant international administration.

DEMOCRATIC PROCESS

ACTA alters traditional and constitutionally mandated law making processes by:

* Exporting and locking in controversial and problematic enforcement practices, foreclosing future legislative improvements in response to changes in technology or policy;

* Requiring substantive changes to laws of many countries without legislative process;

The process of ACTA’s negotiation is fundamentally flawed. Specifically, the negotiations:

* Have not been conducted in public as are many multilateral negotiations;

* Have not been accompanied by evidence demonstrating the public policy problems sought to be addressed;

* Have proceeded under conditions that restrict public input to select stakeholders, held off-the-record and without access to the latest version of the rapidly changing text;

* Lack a balanced representation of stakeholders, especially from civil society.

LINKS:

{1} http://www.google.com/url?q=http%3A%2F%2Fpublicacta.org.nz%2Fwellington-declaration%2F&sa=D&sntz=1&usg=AFrqEzfubbC70zfhmFyirMRjPZ4kr2vUPQ

{2} http://www.google.com/url?q=http%3A%2F%2Fwww.europarl.europa.eu%2Fsides%2FgetDoc.do%3FpubRef%3D-%2F%2FEP%2F%2FTEXT%2BTA%2BP7-TA-2010-0058%2B0%2BDOC%2BXML%2BV0%2F%2FEN&sa=D&sntz=1&usg=AFrqEze0LJTmjtyUTkRz83RCgSGUKYea-g

{3} http://www.google.com/url?q=http%3A%2F%2Fwww.ustr.gov%2Fabout-us%2Fpress-office%2Fpress-releases%2F2010%2Fapril%2Foffice-us-trade-representative-releases-statement-ac&sa=D&sntz=1&usg=AFrqEzfNswTHzwtNHUVVm9uNU4-oSK6NyQ

ADDITIONAL RESOURCES

Contact list for press interviews
https://spreadsheets.google.com/ccc?key=0Au_Z_zC1yrj6dHlYd0lmaHFJQmVuYlpBX2I3Q2xqcXc&hl=en

Detailed explanation of issues in declaration
https://docs.google.com/Doc?docid=0Ae_Z_zC1yrj6ZGdxODVrOTlfNTVjOHZjN25oaA&hl=en

Section by section analysis of the ACTA text
https://sites.google.com/site/iipenforcement/acta-section-analysis

Attendees of the Drafting Conference
http://www.wcl.american.edu/pijip/go/june2010-attendees

TO ENDORSE:

Please send your name, organization, city and country to acta.declaration@gmail.com

ENDORSEMENTS:

EU Members of Parliament

Kader Arif
Socialists and Democrats (S&D)
Spokesperson, S&D Members of the International Trade Committee (INTA)
France

Jan Philipp Albrecht
Greens | European Free Alliance (EFA) Working Group on ACTA
Germany

Sandrine Belier
Greens | EFA Working Group on ACTA
France

Karima Delli
Greens | EFA Working Group on ACTA
France

Christian Engstrom
Greens | EFA Working Group on ACTA
Sweden

Heidi Hautala
Greens | EFA Working Group on ACTA
Finland

Yannick Jadot
Greens | EFA Working Group on ACTA
France

Ska Keller
Greens | EFA Working Group on ACTA
Germany

Eva Lichtenberger
Greens / EFA Working Group on ACTA
Austria

Mariko Peters
Green Party, House of Representatives of the Netherlands
Spokesperson on Foreign Affairs, Defense, Europe, Media&Culture

Judith Sargentini
Greens / EFA Working Group on ACTA
Netherlands

Carl Schlyter
Greens | EFA Working Group on ACTA
Sweden

Oriol Junqueras Vies
Greens | EFA Working Group on ACTA
Spain

Parliamentarians from Negotiating Countries

Jeanine Hennis-Plasschaert
Member of Parliament
The Netherlands

Mariko Peters
Member of Parliament
The Netherlands

Martijn van Dam
Member of Parliament
The Netherlands
Academic Endorsements

Hal Abelson
Professor of Comp. Sci. and Engineering, MIT
Cambridge, MA

Antonio de la Piedra Abenojar
Vrije Universiteit Brussel
Belgium

Andrew A. Adams
Professor Meiji University, Tokyo, Japan

Jack Allnutt
Student
University of Manchester
Manchester, UK

Russell G. Almond
Associate Professor
Florida State University, College of Education
Tallahassee, FL

Tatiana Andia
Professor
Universidad de los Andes – Cider
Bogota, Columbia

Ruben Dario Gomez Arais
Professor National School of Public Health. University of Antioquia
Medellin, Colombia

Laurent Audouin
Assistant Professor
Universite Paris 11
Paris, France

Brook K. Baker
Professor
Northeastern University Law School / Health Global Access Project (NYC, Phila., DC)*
Boston, MA

Shamnad Basheer
Ministry of HRD Professor in IP Law
National University of Juridical Sciences
Kolkata, India

Adam C. Bell
Professor and Dean
Dept. of Mechanical Engineering
Dalhousie University
Halifax, Canada

Ivana Bentes
Researcher and Professor
Communication and Director of School of Communication
Federal University of Rio de Janeiro
Rio de Janeiro, Brasil

Gregor v. Bochmann
Professor
University of Ottawa
Ottawa, Canada

Annemarie Bridy
Associate Professor
University of Idaho College of Law
Moscow, ID

Dr. Ferran Izquierdo Brichs
Lecturer in International Relations
Universitat Autònoma de Barcelona
Altafulla, Spain

Abbe Brown
Lecturer in Information Technology Law
University of Edinburgh
Scotland, UK

Kenneth Rochel de Camargo
Associate Professor, Social Medicine Institute
Rio de Janeiro State University
Rio de Janeiro, Brasil

David Carlson
Dean, Library Affairs
Morris Library
Southern Illinois University Carbondale
Carbondale, IL

Michael A. Carrier
Professor of Law – Rutgers Law School
Camden, NJ

Michael Carroll
Professor of Law, Director of Program on Information Justice and Intellectual Property
American University Washington College of Law
Washington, DC

Brian W. Carver
Assistant Professor
School of Information
UC Berkeley, CA

Q-Jin Choi, M.D.
Dept. of History of Medicine & Medical Humanities
Seoul National University College of Medicine
Seoul, South Korea

Margaret Chon
Associate Dean for Research and Centers
Seattle University School of Law
Seattle, WA

Richard Clawson
Postdoctoral Fellow
King Abdullah University of Science and Technology
Thuwal, KSA

Fatima Conti
Universidade Federal do Para – ICB
Belem, Brazil

Ray Corrigan
Open University
Oxford, UK

Joanne Csete
Associate Professor
Columbia University Mailman School of Public Health
New York, NY

Marcos Dantas
Prof. Dr. Escola de Comunicação da UFRJ
Federal University of Rio de Janeiro
Rio de Janeiro, Brasil

Dion Dennis
Associate Professor
Department of Criminal Justice
Bridgewater State College
Bridgewater, MA

Alexander S. Dent
Assistant Professor of Anthropology
George Washington University
Washington, DC

Miguel Dias
Librarian
Algarve’s University
Faro, Portugal

JS Diaz
Berkman Center for Internet and Society, Harvard University
Cambridge, MA

Kevin Donovan
Student, School of Foreign Service
Georgetown University
Washington, DC

Peter Drahos
Director,Centre for the Governance of Knowledge and Development
Australian National University

Graham Dutfield
Professor of International Governance
University of Leeds School of Law
Leeds, UK

Nick Efford
University of Leeds
Leeds, UK

Guilhem Fabre
Professor, Universite Le Havre
Paris, France

Mark Federman,
Ontario Institute for Studies in Education
University of Toronto
Toronto, Ontario, Canada

Alex Feerst
Center for Internet & Society, Stanford Law School
San Francisco, CA

Sean Flynn
Associate Director of Program on Information Justice and Intellectual Property
American University Washington College of Law
Washington, DC

Michael Geist
Professor, University of Ottawa
Ottawa, Ontario, Canada

Shubha Ghosh
Vilas Research Associate & Professor of Law
University of Wisconsin Law School
Madison, WI

Henning Grosse Ruse – Khan
Max Planck Institute for Intellectual Property, Competition and Tax Law
Munich, Germany

Eldar Haber
PhD Candidate
Zvi-Meitar center for advanced legal studies
Tel-Aviv University, Israel

Debora Halbert
Associate Professor of Political Science
University of Hawaii at Manoa
Manoa, Hawaii

Joseph Lorenzo Hall
ACCURATE Postdoctoral Research Associate, UC Berkeley School of Information
Berkeley, California

Bernard Hanson
Universite de Mons, Belgium

Sebastian Haunss
Political Scientist
University of Konstanz
Konstanz, Germany

Cynthia M. Ho
Vickrey Research Professor of Law
Loyola University Chicago School of Law
Chicago, IL

Jeanette Hofmann
London School of Economics and Political Science
London, UK

Adam Holland
Boston University School of Law
Boston, MA

Monica Horten
PhD Candidate
Communications and Media Research Institute
University of Westminster, UK

Bernt Hugenholtz
Professor, University of Amsterdam
Amsterdam, Netherlands

Dan Hunter
Professor of Law & Director, Institute for Information Law & Policy
New York Law School
New York, NY

Tamir Israel
Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic
University of Ottawa
Ottawa, Ontario, Canada

Peter Jaszi
Professor, Faculty Director of the Glushko-Samuelson Intellectual Property Clinic
American University Washington College of Law
Washington, DC

David R. Johnson
New York Law School
New York, NY

Eric E. Johnson
Assistant Professor of Law
University of North Dakota School of Law
Grand Forks, ND

Alexander Jones
Student, Georgia Tech
Atlanta, GA

Margot Kaminski
Yale Law School
New Haven, CN

Mark Kelly
Student, Carleton University
Ottawa, ON, Canada

Keechang Kim
Professor
Korea University Law School
Seoul, Korea

Bill Kirkpatrick
Assistant Professor, Department of Communication
Denison University, Granville, OH

Armando Kirwin
Student, University of Texas
Austin, TX

Martin Kretschmer
Professor of Information Jurisprudence
Bournemouth University, UK

Ross Lazarus
Associate Professor
Harvard Medical School
Boston, MA

Nari Lee, LL.D (Kyushu)
Program Director
Munich Intellectual Property Law Center (MIPLC)
München, Germany

Hervé Le Crosnier
Researcher and Teacher
University of Caen, France

France Lert
Senior Researcher
Universite Versailles
Saint-Quentin, France

Lawrence Lessig
Harvard Law School
Cambridge, Massachusetts

David Levine
Assistant Professor
Stanford Law School
Stanford, CA

Harry R. Lewis
Gordon McKay Professor of Computer Science
School of Engineering and Applied Sciences, Harvard University
Cambridge, MA

Jorge Machado
Professor of Public Policy Management
University of São Paulo, Brazil

Jonas Maebe, PhD
Ghent University
Ghent, Belgium

Alana Maurushat
Lecturer, Faculty of Law, The University of New South Wales
Deputy Director, Cyberspace Law and Policy Centre
Australia

Mark A. McCutcheon
Centre for Language and Literature
Athabasca University
Athabasca, Alberta, Canada

Mark McKenna
Associate Professor
Notre Dame Law School
Notre Dame, IN

Lisa McLaughlin
Associate Professor
Miami University-Ohio
Oxford, Ohio

Scott McLaughlin, Dr.
University of Huddersfield
Huddersfield, UK

Heloisa Gomes Medieros
Lawyer and Masters Student
Universidade Federal de Santa Catarina
Santa Catarina, Brasil

Juan M. Medina, PhD. Candidate
International Law, Instituto Ortega y Gasset
Madrid-Spain

Hiram Meléndez-Juarbe
Associate Professor
University of Puerto Rico Law School
San Juan, PR

Axel Metzger
Professor of Law. University of Hannover
Hannover, Germany

Gabriel J. Michael
Doctoral Student
George Washington University
Washington, DC

Danny Mittleman
Associate Professor
College of Computing and Digital Media
DePaul University
Chicago, IL

Michael R. Morris
Ph.D. Candidate
University of Edinburgh

Heather Morrison, PhD Candidate
Simon Fraser University School of Communication
Vancouver, Canada

Milton Mueller
Professor
Syracuse University School of Information Studies
Syracuse, NY

Charles Nesson
Weld Professor of Law, Founder, Berkman Center for Internet and Society
Harvard Law School
Cambridge, MA

ES Nwauche
Director
Centre for African Legal Studies Port Harcourt Nigeria
Dong Suk Oh
Ajou University Law School
Democratic Legal Studies Association
Suwon City
Republic of Korea

Ville Oksanen
Lecturer and Researcher
Aalto University, Finland

Kevin Outterson
Associate Professor of Law & Co-Director of the Health Law Program
Boston University School of Law
Boston, MA

Claudia Padovani
Department of Political and Historical Studies
Univerity of Padova, Italy

Pedro Paranagua
Professor
Duke University
Durham, NC

Francisco Carpena Perez
Profesor Educacion Secundaria
Colegio Concertado “La Inmaculada”
Yecla, Spain

Varun Piplani, PhD Candidate
Georgetown University
Washington, DC

Rufus Pollock
Mead Fellow in Economics
Emmanuel College, University of Cambridge
Cambridge, UK

James Popham, PhD Candidate
University of Saskatchewan
Saskatoon, Saskatchewan, Canada

Kenneth L. Port
Professor of Law and
Director, Intellectual Property Institute
William Mitchell College of Law
St. Paul, MN

Julien Rabier
Student, Université Paris II Panthéon Assas, Paris, France
Hafiz Aziz Rehman, PhD Candidate
Australian National University College of Law
Canberra, Australia

Witold Rakoczy
Senior Lecturer
AGH University of Science and Technology
Cracow, Poland

Paulo Rena
Law Scholar, Universidade de Brasilia
Brasilia, Brasil

Graham Reynolds
Professor, Dalhousie University Schulich School of Law
Halifax, Canada

Martine Courant Rife
Professor of Writing, Lansing Community College
Lansing, MI

Nagla Rizk
Associate Professor Economics Department
American University in Cairo
Cairo, Egypt

Natalia Romero
Researcher
Delft University of Technology
Delft, Netherlands

Pam Samuelson
Professor of Law
UC Berkeley Law School
Berkeley, CA

Helene Scarna
Faculte de Pharmacie
Universite Claude Bernard Lyon
Lyon, France

Wendy Seltzer,
Senior Researcher
Berkman Center for Internet & Society
Harvard University, Cambridge, MA USA

Susan Sell
Professor of Political Science and Int’l Affairs, Director
George Washington University
Washington, DC

Xavier Seuba
Senior Lecturer in Public International Law
Universitat Pompeu Fabra
Barcelona, Spain

Lea Bishop Shaver
Associate Research Scholar
Yale Law School
New Haven, CN

Aaron Shaw
Berkman Center for Internet and Society
arvard University
Cambridge, MA

Chen Shen
Student, Simon Fraser University
Vancouver, Canada

Jessica Silbey
Associate Professor of Law
Suffolk University Law School
Boston, MA

Alberto Cerda Silva
Professor in Law
University of Chile Law School
Santiago, Chile

Richard Smith
Professor, School of Communication
Simon Fraser University
Vancouver, BC, Canada

Andrew Snider
York University
Toronto, Canada

Christopher Jon Sprigman
Associate Professor of Law
University of Virginia School of Law
Charlottesville, Virginia

Elizabeth Stark
Yale University
New Haven, CN

Peter Suber
Berkman Fellow
Harvard University
Cambridge, MA

Samuel E. Trosow
Associate Professor
University of Western Ontario
Canada

Rebecca Tushnet
Georgetown Law
Washington, DC

Chris Tyler
Professor, Centre for Development of Open
Technology, School of Computer Studies, Seneca College
Toronto, Ontario, Canada

David Vaile, Executive Director
Cyberspace Law and Policy Centre, University of New South Wales
Sydney, Australia

Annie Vinokur
Emeritus Professor of Economics
Universite Paris Ouest La Defense
Paris, France

Eric Von Hippel
Professor, MIT Sloan School of Management
Cambridge, MA

Ben Wagner
Researcher
European University Institute
Fiesole, Italia

Kimberlee Weatherall
Lecturer in Law
University of Queensland
Queensland, Australia

Liana Weber Pereira
Law Academic
Universidade Federal de Mato Grosso do Sul, Campo Grande, Mato Grosso do Sul, Brasil

Sarah K. Wiant
Professor
Washington and Lee University School of Law
Lexington, VA

Jeremy Wickins MA, LLB,
University of Sheffield,
Sheffield, UK

Jisuk Woo, Ph.D., J.D.
Professor
Graduate School of Public Administration
Seoul National University
Seoul, Korea

Jonathan Worth
Senior Lecturer Coventry University, UK

Peter K. Yu
Kern Family Chair in Intellectual Property Law & Director
Drake University Law School
Des Moines, IO

Marc Zune
Professor of Comp. Sci. and Engineering
University of Louvain
Belgium

Research Group on Public Policies for Access to Information
Universidade de São Paulo, Brasil

School of Communication of the Federal University of Rio de Janeiro
Rio de Janeiro, Brasil

Study Group on Copyright and Information, Federal University of Santa Catarina
Santa Catarina, Brasil

Civil Society Endorsements

Acción Internacional para la Salud
Lima, Peru

African Commons Project
South Africa

Ageia Densi
Córdoba, Argentina

ALTERNATIVES

Montreal, Canada

American Medical Student Association
Reston, VA

Article 19
London, UK

Asociación Civil Nodo Tau
Argentina

Asociación de Internautas
Spain

Association for Progressive Communications
Melville, South Africa

Associazione Partito Pirata Italiano

Berne Declaration
Lausanne, Switzerland

BetterBio
Boston, MA

Brazilian Institute for Consumer Defense (IDEC)
São Paulo, Brasil

Bytes for All Pakistan
Pakistan

Canadian HIV/AIDS Legal Network
Toronto, ON, Canada

Canope
Paris, France

Center for Internet and Society
Bangalore, India

Center for Technology and Society (FGV Direito Rio)
Rio de Janeiro, Brasil

CIPPIC, the Samuelson-Glushko Canadian Internet Policy & Public Interest Clinic
University of Ottawa, Faculty of Law
Ottawa, Ontario, Canada

Colorado Local’s Emporium of Alternative Farms (LEAF)

Comunica-CH (Swiss Platform on Information Society)
Wolf Ludwig
Neuchatel, Switzerland

Connecting.nyc.Inc.
New York, NY

Consumers International
Kuala Lumpur

Corporate Europe Observatory
Brussels, Belgium

Cultural Action
Seoul, South Korea

Electronic Frontier Finland

Electronic Frontier Foundation
San Fransisco, CA

Electronic Frontier
Norway

Electronic Frontiers Australia Inc
Australia

Esfera Hacks Políticos
São Paulo, Brazil

European AIDS Treatment Group

European Digital Rights
Brussels, European Union

Evolved Development
New Zealand

EXGAE
Barcelona, Spain

FACIL
Quebec, Quebec, Canada

Federación Médica Colombiana – Observamed
Bogota, Columbia

Foundation for a Free Information Infrastructure e.V.
Berlin, Germany

Foundation for Media Alternatives (FMA)
Quezon City, Philippines

Freedom Against Censorship Thailand
Bangkok, Thailand

Free Knowledge Institute
Barcelona, Spain

Free Knowledge Foundation
Madrid, Spain

Freedom for IP
Seattle, WA

German Business Ethics Network (DNWE)
Munich, Germany

GPOPAI (Institute)
Sao Paulo, Brasil

Health Action International (Europe, Africa, Asia – Pacific, and Global)*
Amsterdam, Netherlands

Health GAP (Global Access Project)
New York, Philadelphia, Washington DC

House of Digital Culture
Brasil

IFARMA Foundation
Bogota, Colombia

Information & Culture Society for the Disabled Korean
Seoul, South Korea

Instituto Overmundo
Rio de Janeiro, Brasil

Intellectual Property Institute
William Mitchell College of Law
St. Paul, MN

Intellectual Property Left (IPLeft)
Seoul, South Korea

Interaction Law
Washington, DC

Interlink, Eindhoven, the Netherlands

International Association of IT Laywers
Denmark

Internet Governance Project
Syracuse, NY

Internet Industry Association (Australia)

IP Justice
San Francisco, California

IT for Change
Bangalore, India

The Julia Group
Stockholm, Sweden

Knowledge Ecology International
Washington, DC

Knowledgeland
Amsterdam, the Netherlands

Kenya ICT Action Network
Kenya

Korean Pharmacists for a Democratic Society
Seoul, South Korea

Korean Medical Action Groups for Health Rights
Seoul, South Korea

Korean Progress Network Jinbonet
Seoul, South Korea

Labor, Health, and Human Rights Development Center
Agege, Lagos, Nigeria

La Quadrature du Net
France

Les Verts, France

LOKOJ Institute
Dhaka, Bangladesh

Movimento Mega Não! (Mega no! Moviment)
Brazil

Movimento ScambioEtico
Italy

National Research Officer
South African Municipal Workers’ Union

New America Foundation, Open Technology Initiative
Washington, DC

New Mexico Local’s Emporium of Alternative Farms (LEAF)

ONG Derechos Digitales
Santiago, Chile

Open Culture Foundation
Sydney, Australia

Open Rights Group

ORDU – Romanian Organization for User Rights
Romania

Orchuulga Foundation
Seattle, WA

Oxfam America

Panoptykon Foundation
Warszawa, Poland

Pirate Parties International
Brussels, Belgium

Pirate Party Australia

Pirate Party Austria

Pirate Party Brazil

Pirate Party Canada

Pirate Party Chile

Pirate Party Germany

Pirate Party Ireland

Pirate Party Netherlands

Pirate Party of New Zealand

Portuguese Pirate Party Portugal

Pirate Party UK

Pirate Party (Massachusetts, USA)
James O’Keefe, Co-Organizer

Programa LaNeta S.C., México

Proyecto BiblioFyL, Capital Federal
Bueno Aires, Argentina

Public Citizen
Washington, DC

Public Interest Advocacy Centre
Ottawa, Ontario, Canada

Public Knowledge
Washington, DC

Quintessenz
Mag. Georg Markus Kainz, Chairman
Vienna, Austria

Red Mexicana de Accion frente al Libre Comercio (RMALC)
Mexico

SaferNet Brazil
Salvador, Sao Paulo, Brasilia, Brazil

Sol Ut Press
Chicago, IL

Stopp ACTA
Vallorbe, Switzerland

Strawberrynet Foundation
Romania

Students for Free Culture

Tech Liberty NZ
New Zealand

Telecomix Netactivist Clusters
Sweden

Transparência Hacker Community
São Paulo, Brazil

Treehouse Institute, United Kingdom

Union des Consommateurs, Montréal, Québec
Universities Allied for Essential Medicines

United States Pirate Party
Scottsdale, AZ

WeRebuild.EU
Sweden

Vancouver Fair Copyright Coalition
Vancouver, BC, Canada

Vrijschrift / ScriptumLibre
Workum, Netherlands

Young Pirates Party
Germany

ZaMirNET
Croatia

INDIVIDUAL ENDORSEMENTS

Justin G. Abram, Lansing, MI
William Adams, Northampton, MA
Mark Akrigg, Founder, Project Gutenberg Canada, Toronto, Canada
Georges Aleth, Paris, France
Derek Allison, Denver, CO
Patrik Alzen, Söderköping, Sweden
Jonathan Amesquita
Jeff Arnason
Pedro Augusto, Center for Techology and Society – Getulio Vargas Foundation
Davis M.J. Aurini, Calgary, Alberta, Canada
Renata Avila, Creative Commons-Guatemala, Guatemala
Stephane Bakhos
Nicholas Baldwin, Rome, NY
Elizabeth Ball, Sidney, BC, Canada
Andrew Ball, Vancouver, BC, Canada
Daniel Ballard, Sequoia Counsel PC, Sacramento, CA
Paul Baracos, ICx – 360 Surveillance, Victoria BC, Canada
JéfteFernando de Amorim Barbosa, Barbosa, Faculdade Maurício de Nassau, Pernambuco, Brasil
Scott Barker
Arthur Barstad
Catherine Bell, Instructor, Mount Holyoke College, South Hadley, MA
Odile Benassy, Universite de Paris, France
Katrine Bennett, Tunbridge Wells, UK
Kelly Berger, Seattle, WA
Jens Best, Berlin, Germany
Michael Biggs, Waterloo, Ontario, CA
Max Bigras, San Luis Obispo, CA
Mats Björkenfeldt, Stockholm, Sweden
Fancois Blanchard
Jeremiah Blatz, New York, NY
David L. Blevins, Reston, VA
RD Bobbitt, North Carolina
Christopher Bodenlos, Easton
Jeroen Boer
Daniel Boulet, Loa Corporation, Edmonton, Alberta, Canada
Jamie Bowman
Jim Bracher
Chris Brand, New Westminster, BC, Canada
Patrick Brashers, Clay County Electric Cooperative Corp., Corning, AK
S.R. Braun, Dallas, TX
Jon Bremnes, OC & C Strategy Consultants, London, UK
Nick Briz
Beatrice Brociner, Marseille, France
Chantal Brodeur, Hamilton ON, Canada
Colin Broughton, Eleven Engineering, Inc. , Edmonton, AB, Canada
Toni Brown
Hugh Brown, University of British Columbia, Vancouver, BC, Canada
Terry Browning, UK
Steve Brudenell
Jan Buchmann, Zurich, Switzerland
Andreas Bummel, Committee for a Democratic United Nations, Germany
Thomas Burke, Ireland
Rebecca Burn-Callander, London, UK
Lee Burt, Sacramento, CA
Randy Bush, Bainbridge Island, WA
Roberto Bustamante Vento, Centro peruano de estudios sociales
Rachelle C.
Robert Cailliau, Prevessin-Moens, France
Fátima Cambronero, Presidenta Ageia Densi, Córdoba, Argentina
Nuno Cardoso, International Coordinator of the Portuguese Pirate Party, Lisbon, Portugal
João Carlos Rebello Caribé, Social Media Consultant, Rio de Janeiro, Brazil
Koichi Kameda de Figueiredo Carvalho, Center for Technology and Society at Fundação Getulio Vargas
Cadence Lauren Case, Brooklyn, NY
Josh Casiano
Alejandro Casteleiro, Spain
Jay Chang, Philadelphia, PA
Olivier Charbonneau, Associate Librarian, Concordia University, Montréal, Canada
Todd Charron, Toronto, Canada
Daniel Chase, Boston, MA
Sebastien Chateau-Dutier, Le Mans, France
Alvin Y H Cheung, Hong Kong
Prudence Cho, American University Washington College of Law, Washington, DC
William Cibien
Kyle Clements, Canada
Jason Clemons, Raleigh, NC
Jason Cocking
Derrick Cogburn, Internet Governance Project, Syracuse, NY
Nick Coghlan
Maxime Combes, Aitec-IPAM, France
Devon Cooke, Storybubble Pictures Inc. , Vancouver, Canada
Matthew E. Cooper, Strategic Technology Group, Saint Louis, MO
Scott Corkern
Patricia Maria Cornils, Brasil
Thiago Henriques da Mata Guimaraes Correa, Ordem dos Advogados do Brasil, Rio de Janeiro, Brasil
Fiorello Cortiana
André Cotte, LaSalle QC, Canada
Paul Cousins, Royal Canadian Mounted Police, Regina, Saskatchewan, Canada
Olivier Coux, France
David Crafti
Bryan Craggs
Laura Creighton
Michael E. Cullinan, Wilsonville, OR
Benjamin J. Curnett, Ansted, WV
Stephen J. Cunningham, Chapel Hill, NC
John Dada, Fantsuam Foundation, Kafanchan, Nigeria
John K. Dahlman, Baltimore, MD
Jose daLuz
Robert Dahm
David Daley, Indivica, Inc.
Jonathan David, EFF, IEEE, San Jose, CA
Phillip S Davis, Muncie, IN
Matt Dawes, Copyright Adviser, Australian Digital Alliance, Canberra, Australia
Jacob A. De Raadt, Grassroots Consulting Services, Langley, BC, Canada
Miguel Decleire, Brussels, Belgium
Jelle de Jong, PowerCraft Technology, Netherlands
Nicolas D. DeLage, Boston, MA
Zachariah Delventhal, St. Louis Park, MN
Juan Carlos De Martin, NEXA Center for Internet & Society, Politecnico di Torino (Italy)
Mary J. Didier, Suresnes, France
Gilbert Dion, Montreal, Quebec, Canada
Cory Doctorow, Boingboing.net
Dave Doering, TechVoice, Inc., Orem, UT
Drew Donnelly, Washington, DC
Pat Donovan, Ottawa, Ontaria, Canada
Raymond J. Dowd, New York, NY
Gabriel C. Drummond-Cole
John A. Dry
Sue Duerr, Germany
Miles Dumble, Essex, UK
Nick Dynice, Long Beach, CA
Maria Teresa Buitrago Echeverri, Bogota, Colombia
Chris Edgette, Piedmont, CA
Jacob Ediger, Madison, WI
Mattheijs Eikelboom, ASTRON, Dwingeloo, Netherlands
Gregory Engels, Co-Chairman of Pirate Parties International, Offenbach, Germany
Brian Erickson
Walker Evans
Gordon Falk, Cornerstone Christian School Inc., Moose Jaw, Canada
Patrick Fitzgerald
Michael Fenbers
Jack Feser, Urbana, IL
Richard Floyd, Port Townsend, WA
Tim Fluharty, Torrance, CA
Jennifer Fontecchio, Greer, SC
Dan Fornika, Vancouver, BC, Canada
Richard Forno, Arlington, VA
Jocelyne Fournier, Dunkerque, France
Lucia Freitas, Sao Paulo, Brasil
Alfonso Fuca, Ecaussinnes, Belgium
Arnau Fuentes, Molins de Rei, Spain
David Garland, Studio 700, Wizard Information, Minneapolis, MN
Bruce Gehiere, Kingston, ON, Canada
Hamish Gibson, Pirate Party UK, Dalmally, Scotland
Karl Giesing
Robert Gifford, Kankakee, IL
Dan Gillmor
Benoit Girard, Quebec City, Canada
Robert Giseburt, Xinet, Inc., St. Joseph, MO
Geoffrey Glass, Burnaby, BC, Canada
Michael Glunz, Zürich, Switzerland
Bruno Godin, Vancouver, Canada
Lori Goldbach
Alex Goldman, AG Internet Knowledge, LLC
Marco Gomes, Center for Health Policy and Innovation, South Africa / Canada, Johannesburg, South Africa
Thomas David Goodman, Bay City, MI
Marcio Grandchamp, Rio de Janeiro, Brasil
Bas Grasmayer, The Netherlands
Johan Greefkes, Powell, OH
Aetzel Griffioen, Rotterdam, The Netherlands
Elatia Grimshaw
Robin Gross, IP Justice, San Francisco, California
Adam Gruttner
Andres Guadamuz, Edinburgh, Scotland, UK
Pat Gunn, Carnegie Mellon University, Pittsburgh, PA
Ture Gustafson, Goldem Media Studios, Montreal, Canada
Chad Guzinski, Brookings, SD
Eldar Haber
Michael J. Hager, Cleveland, OH
Norman Haimes, Ontario, Canada
Harry Halpin, University of Edinburgh, United Kingdom
David Hammerstein, TransAtlantic Consumer Dialogue
Baudouin O. Hannecart, Brussels, Belgium
Keith Harasyn, London, ON, Canada
Thomas Harris, Hollywood, FL
James William Hays, Siler City, NC
Bjorn Hedin, Alberta, Canada
Henk Hesselink, Amsterdam, The Netherlands
Rob Heverly
Kevin J. Hiebert, President, Gastown Webspace Inc., Vancouver, Canada
Abram Hindle, Toronto, Canada
Dan Hipp
Eberhard M. Hoenes, Wuppertal, Germany
Matthew Hogan, Ithaca, NY
Patrick Hogan, Nashville, IL
Michael Holloway, Toronto, ON, Canada
Aaron Holmes, Airdrie, Alberta, Canada
Sebastian Holzer, Antwerp, Belgium
Robert Hoover, Stowe, VT
Wes Hopkins, Ottawa, Ontario, Canada
Emanuel Hoogeveen, Amsterdam, the Netherlands
Lisa Horner, Global Partners and Associates, London, UK
Ben Howden, Howden Acupressure, Montreal, QC
Liam R. Howlett, Wind River, Ottawa, Ontario, Canada
Stephen Hoy, London, UK
Len Hulsbos
Sean Hunt
Raa’Shaun L. Hunter, Hunter Technology Consulting, Flint, MI
Saleh W. Igal, Dallas, TX
Vesa Ikonen, Helsinki, Finland
Joichi Ito, CEO, Creative Commons, Japan
Edmund Jackson
Meredith Jacob, American University Washington College of Law, Washington, DC
Hyobum Jang, Seoul, South Korea
Mike Jeffers, Mintel International, Chicago, IL
Erick Johnson, New York City, NY, USA
Glenn Johnson, Hamilton, ON, Canada
Stuart Johnson
Jason T. Johnson, Brandon, FL
Warren Johnson, Vancouver, BC, Canada
Esther Joly, Ouvaton coopérative SA, Paris, France
Ernest Jones, Lindon, UT
Kerryck Jones, Waterloo, Ontario, Canada
Leonardo Manfrinato, Justi, Rio de Janeiro, Brasil
Willem Mucher, Albertville, France
Omar Kaminski, Instituto Brasileiro de Direito da Informatica, Curitiba, PR, Basil
Joe Karaganis, Media, Technology, and Culture Brooklyn, NY
Alex Kavanagh, Tinwood Ltd, Newcastle upon Tyne, UK
James Kawano, Visual Effects Artist, Vancouver, Canada
David Kawczynski
Paul Kay, Birmingham, England
Timothy T. Kearney
John Kelley, San Diego, CA
Wesley Kenzie, Vancouver, Canada
Geoff Kerson, Halifax, Canada
Michael Kesler, DataWolf, North Richland Hills, TX
Georges Khaznadar, Dunkerque, France
Sylvia Kierkegaard, International Association of IT Lawyers, Denmark
Eui-Dong Kim, Dentists for a Healthy Society, Seoul, Korea
Erin Kinser
Joel Kirchartz
Kumsook Ko, Ecofem, Seoul, South Korea
Eric Koenig, AMEC Earth & Environmental, Inc., Albuquerque, NM
Frederick, Koenig, Vienna, VA
Jake Kolb
Jimmy Koo, American University Washington College of Law, Washington, DC
EF Koreman, St Oedenrode, Netherlands
Issac Kotlicky, Social Security, Baltimore, MD
Matt Kraai, Upland, USA
Kai Kretschmann, Friedrichsdorf, Germany
Till Kreutzer, Germany
Gaelle Krikorian, Paris, France
Myron A. Kuziak, Neudorf, Saskatchewan, Canada
Gustavo Lago, Rio de Janeiro, Brazil
Daniel Lahey, Seattle, WA
Julien Lamarche, MediaMiser, Ottawa (Ontario, Canada)
John Larson, Denver, CO
David Latimer
JesseLatimer, LEAPNOW: Transforming Education, Calistoga, CA
Steven Leach, MicroComputer Interfacing, Grass Valley, CA
Vadim Lebedev, MBDSYS, Saint Denis, France
Philippe Leconte, Brussels, BELGIUM
Eric Legrand, D2T, Yvelines, France
Yann Leho, Plemet, France
Adam Leighton, Washington, DC
Ronaldo Lemos, Center for Technology and Society (FGV Direito Rio) , Rio de Janeiro, Brasil
S. Leone, University of Rhode Island, Narragansett, RI, United States
Andrew Lewman, The Tor Project, Boston, MA
Rena Lewis, Ojai, CA
Jacob Lickers, Tecmo Koei Canada Ltd., Toronto, ON, Canada
Daniel Lieberman, Shelburne Falls, MA
Caroline Liptak, Melbourne, Victoria, Australia
Jeno Liptak, Melbourne, Victoria, Australia
Michael Lockhart, Kelowna, BC, Canada
Maria Paz Canales Loebel, Santiago, Chile
Chris Logan
Elise Lowy
Antti Luoma, Helsinki, Finland
Matthew Lynch, Madison, WI, USA
Georgia Lyon, Adelaide, Australia
Alexander Macfie, London, UK
Marília Maciel, Center for Technology and Society of the Getulio Vargas Foundation, Rio de Janeiro, Brazil
Rebecca MacKinnon, New America Foundation
Patrick Maigron, Institut Telecom, Evry, France
Diego Makarausky de Oliveira, Rio de Janeiro, Brasil
Julia Makay, Fair Copyright for Canada, Vancouver, British Columbia, Canada
Mario A. Mariani, Syracuse University, Syracuse, NY
Renan Albuquerque Marks, Mato Grosso do Sul, Brazil
Stephen C. Marney, Kensingtoin, MD
Michael Masnick, Floor64 Inc., Sunnyvale, CA
Francoise Massit-Follea, Project Vox Internet II, Paris, France
Robert Massung
Matt Mastracci, Calgary, Alberta, Canada
Nicholas Matear, KPK Goldsmith, Inc., BC, Canada
Evan Mathis
Eric Matthies
Neal May, Ames, IO
Peter Maybarduk, Public Citizen, Washington, DC
Will McCollum, McMonkee Projects
Terence McCormack, Brooklyn, NY
Jeremiah McCoy
Jay McDaniel, Fredericksburg, VA
Jim McDonnell, Brussels, Belgium
Todd McKinney, Hyper9, Inc., Austin, TX USA
Lee McKnight, Internet Governance Project, Syracuse, NY
Michael A. McLean, Raleigh NC
Russell McOrmond, Ottawa, Ontario, Canada
Jon McRae
Tomislav Medak, Multimedia Institute, Zagreb, Croatia
George Meijer, Piratenpartij Nederland, Doesburg, Netherlands
Michael F. Meyer, Old Tappan, NJ
James Michmerhuizen, Boston, MA
Christian Mihr, Berlin, Germany
Dushan Milic, Hamilton, ON, Canada
Mark Miller, President, Modern Arts, Charlotte, NC
John T. Mitchell, Interaction Law, Washington, DC
Joachim Moench, Chief Administrative Officer, Pirate Parties International
Robin Möllemann, Mönchengladbach, Germany
Luiz Fernando Moncau, Center for Technology and Society (FGV Direito Rio), Rio de Janeiro, Brasil
Marcel Mondy, Marseille, France
Glen Moody, London, UK
Brendan Moore, Toronto, Canada
Carl Moore II
James Moore, RL Polk, Ypsilanti, MI
Cândida Maria Nobre de Almeida Moraes, Jornalista, João Pessoa-PB, Brasil
Richard Morra, Woodcliff Lake, NJ
Ms. Stacey Morris, Staunton, VA
Robert W Morrow, Toronto, Canada
David M. Morse, Wilmington, DE
Christopher Morton
Manfred Mueller
Stephen Murgan, Louisville, KY
Jose Murilo, Brazilian MInistry of Culture, Brasilia, Brasil
Robert Murphey, Pasadena, TX
Christopher James Murray, Kingston, Canada
Antoine Nélisse, Belgium
Killian Nelson, Thornton, PA
Cameron Nicholson, Founder, FenixNet Computer Services
Mattias Nilsen, Malmo, Sweden
Stefan Norman, Pirate Party Australia
Douglas T. Oberg
Ann Marie O’Connell, Plymouth, MI
Leanne O’Donnell, Melbourne, Victoria, Australia
Zizia Oliviera
Simon O’Neill
Andrew Ottoson, Wichita, KS
Michael Owens
Mike Palmedo, Washington College of Law, Washington, DC
Luigi Palombi
Ron Panion, Heggen Law Office, PC, Missoula, Montana
Virginia (Ginger) Paque, Maracay, Venezuela

Brian Peaslee
Pencho Parvanov, Sofia, Bulgaria
Haresh Patel
Gregg Patkowski, Toronto, Canada
Jason Paul, Waterloo, Canada
Fred Paul, Philadelphia, PA
Brian Pegel, The Netherlands
R.F. Pels, the Netherlands
Tom Pendleton, Adams, TN
Douglas Perkins
Matthew Perryman, Auckland, New Zealand
David Personette
Ian Peter, Ian Peter and Associates Pty Ltd, Byron Bay, Australia
Nicolas Pettiaux, A L’Ere Libre, Namur, Belgium
Andrea Phillips
James Phillips, Edmonton AB, Canada
Skai Phoenix
Ermanno Pietrosmoli, Fundación Escuela Latinoamericana de Redes (EsLaRed) , Venezuela
Philippe Piquer, Brussels, Belgium
Richard C. Pitt, Pacific Data Capture, British Columbia, Canada
David Pizzuto
Dafne Sabanes Plou, Argentina
Malla Pollack
Dirk Poot, NitroNarc Laboratories, Hoeven, the Netherlands
Richard Potter, i-lawmarketing.com, Milford, ON, Canada
Louis Pouzin, EUROLINC, Paris, France
Olier, Raby, Sherbrooke, Quebec, Canada
Michael Rahe, Berlin, Germany
AHM Bazlur Rahman, Bangladesh NGOs Network for Radio and Communication (BNNRC), Bangladesh
Ana Ramalho,IViR – Institute for Information Law, University of Amsterdam, Netherlands
Jochen Reck
David Records, Records Consulting, LLC Byron Center, MI
Alexander Reid, Portland, OR
Miguel Reimer
Niels Remmerswaal, The Hague, The Netherlands
Pascal Renaud, IRD (Institut de recherche pour le développement) , Paris, France
James Philip Renken, Brooklyn, NY
Peter Reynolds, Morwell, Australia
Ronald Wayne Rezendes, San Diego Chess Club, San Diego, CA
Lenka Reznicek, Chicago, IL
Pyeng-do Rhee, Korean Federation of Medical Groups for Human Rights Seoul, South Korea
Jeff Rhyason
Alex Richardson
Tyler Rick
Jonathan Robin
Bruce Robinson
Jennifer Robles, Livermore, California
Everton Rodrigues, Movimento Musica para Baixar, Rio Grande do Sul, Brasil
Mark J. Rondeau, Self-Similar Group, New York, NY USA
Andy Roon, Marceco Ltd., Grand Rapids, MI
Sandrine Rousseau
Daniel Riaño Rufilanchas, Madrid, Spain
Simon Ruggier, Waterloo, Ontario, Canada
Laurel L. Russwurm, Ontario, Canada
Claire Ryan, Total Import Solutions, Cork, Ireland
Paul Salamone
Olavo Sampaio, Rio de Janeiro, Brazil
Carlton A. Samuels, Jamaica
Diego Saravia, Hipatia, Salta, Argentina
Len Sassaman, Researcher, K.U. Leuven
Michael Sauers, Nebraska Library Commission, Lincoln, NE
Stephen Schaller, St. Lambert, Quebec, Canada
Roy S. Schestowitz, Manchester, UK
Monica Schieck, Rio de Janeiro, Brasil
Helmut Schulz, Brevard NC
Richard Schultz, Saratoga, California
Gérald SÉDRATI-DINET
David Sepa, Waterloo, Canada
Joao Sergio da Silva Costa, Sergio da Silva, Cataguases/MG, Brasil
Dale Sheldon-Hess
Aaron Sher, Bloomfield, NY, USA
Chris Sherrod, Plano, TX
Fred D. Shiplack, Regina, Sask. Can.
Daniel Shookowsky, Software Developer, Downingtown, PA
Tao Shuangwen
Angelica Baptista Silva, Oswaldo Cruz Foundation, Rio de Janeiro, Brasil
Peter da Silva, Houston, TX
David Simon
Jaron Sims
Mark Sironi, SS&C Technologies Burlington, MA
Sivasubramanian M. Sivasubramanian, Isoc India Chennai
Sylvie Siyam
Richard G. Sjolin, Beaverton, OR
Zephyr Skye
Andrew Slayman, Denver, CO
Dirke Smith, Vancouver, BC, Canada
Kyle Randolph Smith, Jefferson County Education Service District, Madras, OR
Tim Smith, Oracle DBA/Banner Administrator, Sierra College, Rocklin, CA
Robert Smits, Nanaimo, Duncan & District Labour Council, Nanaimo, BC, Canada
Jonathan Snow, Troy, MI
Will Soutter, Student, Durham University, UKChandler Sobel-Sorenson

Kamil Sosnowski, Sopot, Poland
Bruno Peres Ferreira de Souza, Souza, Sao Paulo – Brazil
Carlos Affonso Pereira de Souza Souza, Centro de Tecnologia e Sociedade, Rio de Janeiro – Brazil
Daniel M. Spector
Christina Spiesel
Sydney Z. Spiesel
Tommy Stedham, Tuscaloosa, AL
Josh Steffes, Fairbanks, AK
Aladdin Steiman-Cameron, Indianapolis, IN
Ali Sternburg
Adrienne Stevenson, Ottawa, ON, Canada
Len Stolwyk
Leon Stone, Albany, NY
Mike Strean, iostrean, Beach Park, IL
Mark Street, Melbourne, Australia
Eduardo A. Suarez, National University at La Plata, Argentina
David Sutherland, Bartlett, TN
Martin Svensson, Munich, Germany
Harvey Sweeney
Robert Szarka, Bizgrok Inc., Norwich, CN
Tapani Tarvainen, Chairman, Electronic Frontier Finland (EFFI)
Donald W. Taylor, Fulcrum Technologies (Open Text Inc.), Ottawa, Ontario, Canada
Eric Taylor, Tucson, AZ
Samuel Taylor
Alex Teholiz, DeWitt, MI
Corin Tentchoff, Gibsons, Canada
Jonathan James Thiessen, Kitchener, ON, Canada
Tshepo Thlaku Ungana-Afrika, Pretoria, South Africa
Michelle Thorne, Berlin, Germany
Denis Tonn, Kelowna, BC, Canada
Alexander Torok, Cluj, Romania
Matthew John Toseland, Scarborough, UK
Joseph F. Turcotte, Centre for International Governance Innovation Waterloo, ON, Canada
Jeremy Valcourt, La Salle, MB, Canada
Heather Valli, Carrboro, NC, USA
Ot Van Daalen, Bits of Freedom
Wytze Van der Raay, Stichting NLnet Labs, Amsterdam, Netherlands
Michael Van Eeten, Internet Governance Project, Syracuse, NY
Marco van Hulten, MSc KNMI, De Bilt, Netherlands
Ellen van Wettum, Veenendaal, Netherlands
Jason Daniel, Van Hoy
Joana Varon Ferraz, Rio de Janeiro, Brazil
Nathan Vegdahl, Blender Institute, Amsterdam, Netherlands
Alberto Velázquez, Mexico City, Mexico
Ryan Vidler, Ontario, Canada
Miguel Said Vieira, Sao Paulo, Brasil
Gerrit Visser, Toronto, Ontario, Canada
Peter Vollebregt, Houten, the Netherlands
Julia Vyse, Montreal, Canada
Paul Waltraud, Paris, France
David Watt, Canada
Sydney Weidman, Winnipeg, Manitoba, Canada
Rose M. Welch, Lawton, OK
Trevor Wermund
Ante Wessels, Foundation for a Free Information Infrastructure, Amsterdam, Netherlands
Sebastian Westerm
Brian Westphal, Ypsilanti, MI
Wolfgang G. Wettach, Baden-Wuerttemberg, Tuebingen, Germany
Jerry Weyer
Alan G. Wheelwright
Gary Whitten, Maxwell Systems Inc. , Baltimore, MD
Andreas Wittenstein, President, BitJazz Inc., Woodacre, CA
Kristofer Widholm, Brooklyn, NY
Robert D. Williams, Columbus, OH
Lucas Winters
Bill Wittur Bottree.com
Klaus-Jürgen Wolf, Dietzenbach, Germany
Petri Wolu
Graham Woodland, London, UK
Jeff Woods, Albuquerue, NM
Winthrop Yu, Philippines
Patrick Yue
Christian Yetter, Hawon-ri, Jeju-do, South Korea
Joshua Zelinsky
Karl Zimmerman, Amherst, MA

http://www.wcl.american.edu/pijip/go/blog-post/text-of-urgent-acta-communique-english

Bill Totten http://www.ashisuto.co.jp/english/

Categories: Uncategorized

>Pending Global Treaty Threatens Free Internet

>and Fundamental Rights

by Steve Watson

Prisonplanet.com (July 10 2010)

Over ninety academics, practitioners and public interest organizations from six continents have collectively warned that a secretive global treaty, currently being negotiated by governments of the world’s largest economies would see tight controls placed on the internet and would threaten other fundamental rights and freedoms.

The Anti-Counterfeiting Trade Agreement (ACTA) {1} has received fleeting public attention, yet it has been quietly evolving for a number of years. On it’s face ACTA is described as a countermeasure directed at the rise of counterfeit goods, medicines and pirated copyright protected material, including “piracy over the Internet”.

If officially ratified, however, ACTA would mark the formation of a major new global legal infrastructure with relation to standards on intellectual property rights enforcement.

It would also see the formation of an international governing body to oversee implementation of the agreement. That body would operate beyond the jurisdiction of national governments and even beyond that of the World Trade Organization (WTO), the World Intellectual Property Organization (WIPO) or the United Nations. ACTA would effectively challenge already defined national court precedents regarding consumer rights and “fair use” laws and could fundamentally alter or remove limitations altogether on the application of intellectual property laws.

The US, along with all the countries of the European Union as well as Japan, Canada, Australia, New Zealand and a handful of other countries, have been involved in the ACTA negotiations since 2006. Leaked drafts of the agreement in 2008, 2009 and most recently in April 2010 have raised concern over the legal scope of the proposed treaty. The secrecy surrounding the negotiations has also prompted further worry over the draconian provisions within the agreement. The Electronic Frontier Foundation {2}, along with other notable watchdog organisations, have called for more transparency on ACTA.

A group of international experts was convened last month by the Program on Information Justice and Intellectual Property at The American University Washington College of Law to debate the proposed treaty. The group later released a communique {3} that makes worrying reading. “ACTA is the predictably deficient product of a deeply flawed process”. The statement reads. “What started as a relatively simple proposal to coordinate customs enforcement has transformed into a sweeping and complex new international intellectual property and internet regulation with grave consequences for the global economy and governments’ ability to promote and protect the public interest”.

The communique bullet points the following four key conclusions:

* Negotiators claim ACTA will not interfere with citizens’ fundamental rights and liberties; it will.

* They claim ACTA is consistent with the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS); it is not.

* They claim ACTA will not increase border searches or interfere with cross-border transit of legitimate generic medicines; it will.

* And they claim that ACTA does not require “graduated response” disconnections of people from the internet; however, the agreement strongly encourages such policies.

Those who endorsed the statement include professors from leading universities across the globe and several European members of parliament who have formed a working group on ACTA. The group identified at least seven critical areas of global public policy in which ACTA is hostile to the public interest. They define these as: “fundamental rights and freedoms; internet governance; access to medicines; scope and nature of intellectual property law; international trade; international law and institutions; and democratic process”.

With specific reference to internet governance, the group says ACTA would:

* Encourage internet service providers to police the activities of internet users by holding internet providers responsible for the actions of subscribers, conditioning safe harbors on adopting policing policies, and by requiring parties to encourage cooperation between service providers and rights holders;

* Encourage this surveillance, and the potential for punitive disconnections by private actors, without adequate court oversight or due process;

* Globalize ‘anti-circumvention’ provisions which threaten innovation, competition, free (freedom-respecting) software, open access business models, interoperability, the enjoyment of user rights, and user choice;

* Internet law professor Michael Geist has previously spoken out against ACTA {4}, noting that “The provisions would pave the way for a globalized three-strikes and you’re out system”, referring to a proposal within the treaty to have internet service providers cut off service – without access to a trial or counsel – to anyone accused at least three times of illegally sharing copyrighted material. Geist has also noted that “offenders” could even be imprisoned for sharing copyrighted material {4}.

The three strikes policy mirrors that contained within the recently passed Digital Economy Bill {5} in the UK, with similar provisions also outlined in Australian legislation, indicating that ACTA negotiations may also be driving national government policy on internet regulation proposals. “The US government appears to be pushing for Three Strikes to be part of the new global IP enforcement regime which ACTA is intended to create …”, Gwen Hinze at the Electronic Frontier Foundation has previously noted {6}, “… despite the fact that it has been categorically rejected by the European Parliament and by national policymakers in several ACTA negotiating countries, and has never been proposed by US legislators”.

The agreement would also force internet service providers to crack down on sites that offer file sharing and peer to peer software, even though those sites may be entirely legitimate. ACTA could even see popular Web sites like YouTube and Flickr shut down because of a provision in the treaty that would force them to monitor everything uploaded to the site for copyright violations.

The upshot is that all current and future innovations that allow knowledge and information to be distributed on a mass scale are directly threatened by ACTA simply because it presumes such technology will be used by a minority to distribute material that is deemed copyrighted.

ACTA represents another huge warship in an armada directing it’s guns at the free internet. We have previously highlighted countless similar legislative programs {7} that have either been enacted or are working their way into law in the US, Australia, New Zealand, Britain, and many other European countries. In addition, ACTA is so much more than an internet censorship bill, it covers physical goods and even medicines, while systematically re-writing previously established laws on trade and intellectual property.

Links:

{1} http://en.wikipedia.org/wiki/Anti-Counterfeiting_Trade_Agreement

{2} http://www.eff.org/action/sunlight-acta

{3} http://www.wcl.american.edu/pijip/go/acta-communique

{4} http://www.michaelgeist.ca/content/view/4511/125/

{5} http://www.infowars.net/articles/april2010/080410net.htm

{6} http://www.eff.org/deeplinks/2009/11/leaked-acta-internet-provisions-three-strikes-and-

{7} http://www.prisonplanet.com/the-lights-are-going-out-for-free-speech-on-the-internet.html

Further Reading: Text of Urgent ACTA Communique
http://www.wcl.american.edu/pijip/go/acta-communique

Further reading: Anti-Counterfeiting Trade Agreement – Wikipedia Entry
http://en.wikipedia.org/wiki/Anti-Counterfeiting_Trade_Agreement#Secrecy_of_negotiations

_____

http://www.prisonplanet.com/academics-politicians-pending-global-treaty-threatens-free-internet-fundamental-rights.html

http://www.countercurrents.org/watson100710.htm

Bill Totten http://www.ashisuto.co.jp/english/

Categories: Uncategorized

>Why Not Shift the Burden to Big Spenders?

>by Robert H Frank

The New York Times (October 07 2007)

IN his memoir, Alan Greenspan joins a growing list of Republicans who now accuse President Bush of fiscal irresponsibility. As even veteran supply-siders now concede, the president’s tax cuts have added hundreds of billions of dollars to the national debt.

Mr Greenspan, who supported those cuts in testimony before the Senate Budget Committee in 2001, when he was the Federal Reserve chairman, now says he thought the president would be more disciplined about spending. It was an unreasonable expectation. Federal spending has risen during every modern presidency, even Ronald Reagan’s.

Mr Greenspan may have failed to convince critics that he bears no responsibility for the fiscal meltdown that is now under way, but his book has provoked long-overdue debate about what caused the crisis and what might be done about it. As all serious participants in this debate now agree, no strategy can succeed without increasing federal revenue substantially. The leading Republican presidential aspirants, advocating further tax cuts, have elected to skip this debate. Their Democratic counterparts have proposed allowing Mr Bush’s tax cuts for top earners to expire as scheduled. That step alone, however, would not be nearly enough.

Given the political risk of proposing painful tax increases in an election year, many fear that the crisis will remain unresolved. Yet a simple remedy is at hand. By replacing federal income taxes with a steeply progressive consumption tax, the United States could erase the federal deficit, stimulate additional savings, pay for valuable public services and reduce overseas borrowing – all without requiring difficult sacrifices from taxpayers.

Under such a tax, people would report not only their income but also their annual savings, as many already do under 401(k) plans and other retirement accounts. A family’s annual consumption is simply the difference between its income and its annual savings. That amount, minus a standard deduction – say, $30,000 for a family of four – would be the family’s taxable consumption. Rates would start low, like ten percent. A family that earned $50,000 and saved $5,000 would thus have taxable consumption of $15,000. It would pay only $1,500 in tax. Under the current system of federal income taxes, this family would pay about $3,000 a year.

As taxable consumption rises, the tax rate on additional consumption would also rise. With a progressive income tax, marginal tax rates cannot rise beyond a certain threshold without threatening incentives to save and invest. Under a progressive consumption tax, however, higher marginal tax rates actually strengthen those incentives.

Consider a family that spends $10 million a year and is deciding whether to add a $2 million wing to its mansion. If the top marginal tax rate on consumption were 100 percent, the project would cost $4 million. The additional tax payment would reduce the federal deficit by $2 million. Alternatively, the family could scale back, building only a $1 million addition. Then it would pay $1 million in additional tax and could deposit $2 million in savings. The federal deficit would fall by $1 million, and the additional savings would stimulate investment, promoting growth. Either way, the nation would come out ahead with no real sacrifice required of the wealthy family, because when all build larger houses, the result is merely to redefine what constitutes acceptable housing. With a consumption tax in place, most neighbors would also scale back the new wings on their mansions.

A progressive consumption tax would also reduce the growing financial pressures confronting middle-class families. Top earners, having received not only the greatest income gains over the last three decades but also substantial tax cuts, have been building larger houses simply because they have more money. Those houses have shifted the frame of reference for people with slightly lower incomes, leading them to build larger as well. The resulting expenditure cascade has affected families at all income levels.

The median new house in the United States, for example, now has over 2,300 square feet, over forty percent more than in 1979, even though real median family earnings have risen little since then. The problem is not that middle-income families are trying to “keep up with the Gateses”. Rather, these families feel pressure to spend beyond what they can comfortably afford because more expensive neighborhoods tend to have better schools. A family that spends less than its peers on housing must thus send its children to lower-quality schools.

Some people worry that tax incentives for reduced consumption might throw the economy into recession. But total spending, not just consumption, determines output and employment. If a progressive consumption tax were phased in gradually, its main effect would be to shift spending from consumption to investment, causing productivity and incomes to rise faster.

Should a recession occur, a temporary cut in consumption taxes would provide a much more powerful stimulus than the traditional temporary cut in income taxes can. People would benefit from a temporary consumption tax cut only if they spent more right away. In contrast, consumers who fear that they might lose their jobs in a recession are often reluctant to spend the dollars they are no longer paying as income tax.

Failure to address the current fiscal crisis is not an attractive option. With baby boomers retiring and most voters now favoring universal health coverage, budget shortfalls will grow sharply. Annual borrowing from abroad, now more than $800 billion, will also increase, causing further declines in the slumping dollar. And the personal savings rate, which has been negative for the last two years, will fall still further, causing future reductions in economic growth.

THE progressive consumption tax is perhaps the only instrument that can reverse these trends at acceptable political cost. It has been endorsed by a long list of distinguished economists of varying political orientations. It was proposed in the Senate in 1995 by Sam Nunn, the Georgia Democrat then serving his final term, and Pete V Domenici, Republican of New Mexico, who called it the Unlimited Savings Allowance tax. In short, this tax is not a radical idea.

Although the Bush tax cuts for the nation’s wealthiest families threaten American economic prosperity, they have done little for their ostensible beneficiaries. When the wealthy spend millions of dollars on ever-more-elaborate coming-of-age parties for their children, they only raise the bar that defines a special occasion. Even purely in terms of self-interest, they and their families would have fared much better if the money had been spent to repair aging bridges and inspect the cargo containers that enter the nation’s ports.

_____

Robert H Frank, an economist at the Johnson School of Management at Cornell University, is the author of Falling Behind: How Rising Inequality Harms the Middle Class (2007) Contact: www.robert-h-frank.com.

Copyright 2007 The New York Times

http://www.nytimes.com/2007/10/07/business/07view.html?ei=5124&en=5dc544a64b1d288a&ex=1349409600&partner=permalink&exprod=permalink&pagewanted=print

Bill Totten http://www.ashisuto.co.jp/english/

Categories: Uncategorized

>Sending Off the Ref

>The government’s disastrous new deregulation programme means that the poor will be fouled by the rich.

by George Monbiot

Published in the Guardian (July 13 2010)

Twelve bookings and one dismissal: the World Cup final wasn’t pretty. Both sides argued with the referee, but no one was stupid enough to believe that the match would have been a fairer or a better one without him. Yet we have been asked to imagine that the outcome of the power struggle between corporations and the public would be fairer and better if there were no referee.

The referee is government. It is always biased and often bought, but in principle in a democratic society it exists to prevent us from being fouled. More precisely, it is supposed to prevent those who have agency – the rich and powerful – from planting their studs in the chests of those who don’t. When the government walks away from the game the rich can foul the poor with impunity. Deregulation is a transfer of power from the trodden to the treading. It is unsurprising that all conservative parties claim to hate big government.

This one has just lit its long-promised bonfire of regulations. The Conservatives claim that deregulation will save money and relieve business of unnecessary burdens. But the government’s new policies go far beyond simplifying a cumbersome bureaucracy.

Last week the health secretary Andrew Lansley sought to shift responsibility for improving diets and preventing obesity from the state to society. He blamed the problem on low self-esteem and deplored what he called “a witch hunt against saturated fats, salt and sugars” {1}. In future poor diets would be countered by “social responsibility, not state regulation”. From now on, he announced, communities will be left to find their own solutions. The companies which make their money from selling junk food and alcohol will be put in charge of ensuring that people consume less of them. I hope you have spotted the problem.

This is care in the community for public health, whose outcomes will be similar to those of the previous Tory government’s care in the community for mental health. Volunteers have neither the power nor the motivation to fight slick, well-financed PR professionals working for big business.

Lansley would do well to read the analysis published by the Government Office for Science. “For an increasing number of people, weight gain is the inevitable – and largely involuntary – consequence of exposure to a modern lifestyle. This is not to dismiss personal responsibility altogether, but to highlight a reality: that the forces that drive obesity are, for many people, overwhelming.” {2} Advances in neurobiology, it argues, show that the hunger drive is far stronger than “satiety cues” (knowing we’ve eaten enough), and easily exploited by advances in taste technologies and presentation.

The same study points out that obesity rates are much higher among the poor than the rich; that they are likely to double between now and 2050 {3}, and that, by then, the problem will cost the NHS GBP 10 billion a year at today’s prices, and the economy GBP 50 billion. This was all before the food companies were let off the leash. So much for deregulation saving money.

Lansley’s assault on public health is just one skirmish in the Tories’ new war on regulation. The government has now set up a task force to deregulate the farming industry{4}. Farming is the major cause of the loss of biodiversity in the UK. It is one of the two top causes of water pollution. It has the highest rates of death and injury of any industry in this country {5}. Now the industry has been asked to police itself.

The chair of the task force is the former director general of the National Farmers’ Union. His deputy is a senior NFU official. The rest of the task force is composed of another farmer, three corporate executives, a county council official and … well this is where it gets interesting. The eighth member, the government tells us, is “a Nuffield Scholar who has been involved with developing an animal welfare scheme” {6}. In reality he is yet another farmer, who supplies milk to Sainsbury’s. This selective citation suggests dishonesty on the part of Caroline Spelman’s food and farming department. The last member is the head of public affairs at the Game and Wildlife Conservation Trust. This group purports to protect wildlife, but it runs fox snaring courses {7} and gives advice on setting spring traps to catch smaller predators {8}. There is no one on the task force representing rural workers, and no one outside the industry seeking to defend the landscape or the wider environment, water quality or animal welfare.

Private Eye reveals this week that the government may scrap property developers’ obligations to provide social housing {9}. This won’t save money or streamline the state, but it will allow developers to create enclaves for the rich and ghettos for the poor, ensuring that the UK becomes an even more divided society. The department for transport tells me that it will be discouraging local authorities from erecting speed cameras {10}. The department’s own studies show that deaths and injuries are reduced by 42% where cameras are deployed {11}. This, among more obvious benefits, saves the NHS and the emergency services a packet. Again the poor will be hurt most: pedestrians in the poorest areas are three times more likely to be killed or injured by cars than pedestrians in the richest areas {12}. Drivers will instead be urged to regulate themselves: the department tells me that it wants councils to use “more publicity campaigns” instead.

As the economist Willem Buiter observed, “self-regulation is to regulation as self-importance is to importance” {13}. The financial crisis was caused by government expectations that the banks could police themselves. That provoked the state spending crisis, which the government is now using as an excuse to administer more of the poison which started it.

The difference in approach between this government and the last is quantitative. New Labour capitulated to the corporations across all the industries I have mentioned here, but it didn’t go as fast or as far. The Tories can carry off this coup partly because the opposition has squandered the moral authority required to fight it. Hearing Andy Burnham criticising Andrew Lansley for deregulating the health sector is a bit like watching the Dutch side going into conniptions about a Spanish foul: they might have been right, but by that stage in the game it wasn’t a credible protest.

So here’s what’s going to happen. The failure of big business to police itself will cause a series of crises: in public health, social provision, quality of life, the environment. The state will have to shell out billions to put them right. Eventually (think of BSE, the railways, tobacco advertising) the government will be forced to re-regulate, but not before large numbers of people have been hurt. In the meantime we’ll be instructed to pull our socks up and take responsibility for issues out of our control. It’s an age-old story from which governments learn the square root of nothing. It happens as predictably as a punch-up when the referee quits the pitch.

www.monbiot.com

References:

1. Andrew Lansley, 7th July 2010. A new approach to public health. Speech to the UK Faculty of Public Health Conference. http://www.dh.gov.uk/en/MediaCentre/Speeches/DH_117280

2. Government Office for Science, 2007. Tackling Obesities: Future Choices. Project Report, 2nd Edition. http://www.foresight.gov.uk/Obesity/17.pdf

3. It suggests that “By 2050, 60% of males and 50% of females could be obese … The proportion of men having a healthy BMI (18.5–25kg/m2) declines from about 30% at present to less than 10% by 2050. Similarly, the proportion of women in this ‘healthy weight’ category drops from just over 40% to about 15% by 2050″.

4. http://ww2.defra.gov.uk/files/2010/07/090709-farmreview-tor.pdf

5. http://www.guardian.co.uk/environment/2010/jun/21/green-campaigners-farm-review-nfu

6. http://ww2.defra.gov.uk/files/2010/07/090709-farmreview-members.pdf

7. http://www.gwct.org.uk/education__advice/frequently_asked_questions/predation/729.asp

8. http://www.gwct.org.uk/education__advice/frequently_asked_questions/predation/731.asp

9. Private Eye, 9th July 2010, page 3.

10. DfT press office, 9th July 2010.

11. http://www.dft.gov.uk/think/focusareas/driving/speedurban?page=FAQ&whoareyou_id=

12. DfT Road Casualty Statistics 2007. http://www.dft.gov.uk/pgr/statistics/datatablespublications/accidents/casualtiesgbar/roadcasualtiesgreatbritain20071

13. http://voxeu.org/index.php?q=node/3232

Copyright (c) 2006 Monbiot.com

http://www.monbiot.com/archives/2010/05/10/moneys-hunger/

Bill Totten http://www.ashisuto.co.jp/english/

Categories: Uncategorized

>Post-Consumer Prosperity

2010/07/15 1 comment

>Finding new opportunities amid the economic wreckage.

by Robert H Frank

prospect.org (March 24 2009)

The economic bonfire fueled mostly by consumption in recent years has ended. As we have watched the familiar statistics plummet, with credit cards maxed out and home-equity loans a thing of the past, the reality has slowly become clear: We won’t return to the economic world of 2007 anytime soon, if ever.

But would we want to? In the boosterish world of CNBC, life without an ever-rising Dow Jones average and year-to-year gains in holiday-sales figures would self-evidently forecast protracted misery. Yet matters are less hopeless than they seem. There is an easily attainable future in which we consume less than at the peak of the boom and yet still enjoy far better opportunities to construct a fulfilling life for ourselves.

Such optimism is possible if we look past traditional economic models, in which happiness depends primarily on absolute levels of consumption. These models assume, preposterously, that an investment banker remains just as satisfied with his twin-engine Cessna even after learning that his Nantucket summer neighbor commutes to the island in a Gulfstream G200. As all evidence suggests, however, satisfaction depends more on relative consumption than on absolute consumption. Many people, for example, recall being happy during their student days, even though they were living at a much lower material standard. If everyone consumes a little less for a while, most people will adapt pretty quickly.

More important, because much of our current consumption generates harmful side effects, we can gain considerable ground simply by changing the mix of things we consume. One useful step, for example, would be to slow the race for what economists call positional goods – the things people feel they need largely because others have them. Evidence suggests that across-the-board reductions in the growth of spending for such goods would cause little hardship.

One way to change spending patterns is through our tax code. In the next few years, we will need to revamp the tax system to pay not just for the ambitious plans of the current administration but also for increased debt resulting from the economic-stimulus program and the deficit spending of the previous administration. Taxes do more than pay for public services. Taxing any activity both generates revenue and discourages the activity. Our current system taxes mostly useful activities, such as savings and job creation. Perversely, it also encourages us to build larger houses and drive oversize vehicles. Instead, we could switch to a system that taxes only activities that generate harmful side effects. That step alone would generate more than enough revenue to pay for President Barack Obama’s ambitious proposals without requiring difficult sacrifices from anyone.

Another way to break our current consumption pattern is to get rid of wasteful spending. As economists are fond of saying, there is no free lunch – by which they mean that having more of one good thing requires making do with less of something else. An apparent exception occurs when existing arrangements are wasteful. In that case, we can have more of everything by eliminating waste.

But which waste? For decades, conservatives have been cutting taxes on the promise to eliminate superfluous public programs, often by mis-characterizing ones that provide good value – as when Governor Bobby Jindal of Louisiana recently denounced “volcano monitoring”. Many conservatives are no doubt sincere in their belief that the lion’s share of our economy’s waste lies in the public sector. The truth, however, is the reverse. Not only is there considerably more waste in the private sector, but private waste is also far easier to eliminate than public waste.

One important form of private waste is caused by garden-variety market failures like congestion and pollution. This type of waste yields easily to simple disincentives like carbon taxes, gasoline taxes, and congestion fees.

A less widely recognized but far larger form of private waste stems from “positional arms races”, which are well illustrated by the familiar metaphor in which everyone stands up to get a better view, yet no one sees any better than before. It is the same with many forms of consumption. Hedge-fund managers need a 40,000-square-foot house and Gulfstream jet only because their peers have them. Evidence suggests that if top earners all spent less on such things, their lives would be no less fulfilling than before. And like the waste that stems from pollution and congestion, the waste caused by positional arms races can be curtailed sharply by a relatively simple change in tax policy.

Individual demands are heavily shaped by the social environment. As the economist Richard Layard has written, for example, “In a poor society a man proves to his wife that he loves her by giving her a rose, but in a rich society he must give a dozen roses”. For the last three decades, virtually all income gains in the United States have gone to top earners. Recipients have spent most of their extra income on positional goods, things whose value depends heavily on how they compare with similar things bought by others. Like mutually offsetting weapons in a military arms race, consumption of this sort is largely wasteful. Many of the most spectacular increases in high-end consumption in recent years appear to have been driven almost entirely by positional forces. If people acted in tandem, resources could be diverted from positional consumption at little sacrifice.

Although there is scant evidence that middle-income families in America resent the spending of top earners, they are nonetheless affected by it in tangible ways. Additional spending by the rich shifts the frame of reference that defines what the near rich consider necessary or desirable, so they too spend more. In turn, this shifts the frame of reference for those just below the near rich, and so on, all the way down the income ladder. Such expenditure cascades help explain why the median new house built in the US is now about fifty percent larger than its counterpart from thirty years ago, even though the median real wage has risen little since then.

Higher spending by middle-income families is driven less by a desire to keep up with the Joneses than by the simple fact that the ability to achieve important goals often depends on relative spending. Because of the link between housing prices and neighborhood school quality, for example, the median family would have to send its children to below-average schools if it failed to match the spending of its peers on housing. Instead, middle-income families have opted to save less, borrow more, work longer hours, and commute longer distances than ever before, all in an effort to keep pace with escalating consumption standards.

Although additional outlays for positional consumption goods – such as houses beyond a certain size – don’t accomplish much, they crowd out other forms of spending that would produce real improvements in the quality of life. If houses grew less rapidly, for example, we could invest in mass-transit systems that would yield shorter, less stressful commutes that would free up more time to spend with friends and family. Or we could support medical research and safety investments that would reduce premature death. The list goes on.

Wasteful positional arms races occur because people take too little account of the costs that certain types of consumption impose on others. When one job applicant spends more on an interview suit, for example, others must spend more as well, or else accept lower odds of getting a callback. Yet when all spend more, no one’s odds of landing the job are any higher than before.

If we had perfect information, the ideal remedy for positional waste would be to tax different goods in proportion to the extent to which their use generates negative side effects. In practice, we lack the detailed information necessary to implement this remedy. But a steeply progressive tax on each family’s total annual consumption would serve almost as well.

The amount a family consumes each year is simply the difference between what it earns and what it saves. Under a progressive consumption tax, people would report their income to the Internal Revenue Service as they do now and also their annual savings, much as they currently document contributions to 401(k) and other retirement accounts. The difference between these two amounts, less a large standard deduction – say, $30,000 for a family of four – would be the family’s taxable consumption. Rates would start low, perhaps only at ten percent. In this illustration, a family that earned $50,000 and saved $5,000 would have a taxable consumption of $15,000 and pay only $1,500 in tax. By comparison, it would pay about twice that amount under the current income tax.

As taxable consumption rises, the tax rate on additional consumption would also rise. With a progressive income tax, marginal tax rates cannot rise too far without threatening incentives to save and invest. Under a progressive consumption tax, however, higher marginal tax rates actually strengthen those incentives.

To see why, consider a family that currently spends $10 million a year and is debating whether to add a $2 million wing to its mansion. If the top marginal tax rate on consumption were 100 percent, the project’s cost (including tax) would be $4 million. Alternatively, the family could scale back, building only a $1 million addition. Then it would pay $1 million in additional tax and could deposit $2 million more than before in savings. Federal revenue would rise by $1 million, and the additional savings would stimulate investment, promoting growth.

Either way, the nation would come out ahead, and the wealthy family would have made no real sacrifice. Because the tax would induce most other wealthy families to scale back, it would lower the bar that defines an acceptable mansion for families in their circle. In effect, it would create real resources out of thin air.

Even more striking gains would result from the tax’s indirect effect on the expenditure cascades that have made life more difficult for middle-income families. If the rich spent less on housing, gifts, and other things, the near rich would spend less as well, and so on, all the way down. All told, a progressive consumption tax could easily boost the nation’s effective income by several trillion dollars a year.

Some may worry that tax incentives for reduced consumption might create or prolong an economic downturn. But it is total spending, not just consumption, that determines output and employment. If a progressive consumption tax were phased in gradually when the economy was at full employment, its main effect would be to shift spending from consumption to investment, causing productivity and incomes to rise faster.

Activities that cause congestion and pollution are another major source of private-sector waste. Like the waste caused by positional arms races, private waste occurs because people take too little account of how their actions affect others. Fuel-use decisions, for instance, are driven primarily by concern about personal costs and benefits, and only secondarily, if at all, by concern about the costs that additional carbon emissions, smog, and congestion impose on others.

The simplest way to induce consumers to take such external costs into account is by taxing the activities in question. The cost of eliminating acid rain, for example, fell dramatically once government began charging for the right to emit sulfur oxides into the atmosphere.

Existing efforts to curtail environmental waste have barely scratched the surface. A carbon tax, in tandem with higher taxes on gasoline, could sharply curtail traffic jams, smog, suburban sprawl, greenhouse gases, and various other harmful effects associated with fossil fuel consumption. Taxes of this sort generally turn out to be much less burdensome than people expect. Europeans, for instance, have responded to gasoline taxes of more than $2 per gallon by driving more fuel-efficient vehicles whose operating costs, including tax, are no higher than most Americans now pay. There is no evidence that Europeans are less happy with their cars than Americans are with theirs.

Conservatives complain that higher taxes make the economic pie smaller. But taxes on harmful activities have precisely the opposite effect. And when the economic pie grows larger, it’s always possible for everyone to have a larger slice than before. By eliminating waste, these taxes free up resources for things we actually value.

With the economy in the midst of the deepest downturn since the Great Depression, now is not the time to impose these taxes on low- and middle-income households. Yet national renewal on the scale Obama has proposed will require major sources of new revenue in the long run. We can’t borrow money from the Chinese to pay for universal health care, expanded investment in education and infrastructure, increased scientific research, and more. Future taxes will clearly have to rise by more than suggested in the president’s recent budget proposals. But raising taxes has always been the third rail of American politics. If we postpone decisions about how to raise more revenue until after the economy has regained its footing, we are likely to remain saddled with our current dysfunctional system.

Recent research in behavioral economics shows a way to structure tax increases to avoid reflexive opposition. Studies suggest that tax resistance is rooted in loss aversion – according to which a loss of any given magnitude causes much more pain than the pleasure from a gain of the same size. Adding any new tax right now would mean further cuts in consumption, which would trigger additional paroxysms of loss aversion. New taxes would be much easier to accept if they required not an absolute reduction in current consumption but rather only a smaller increase in future consumption.

Evidence for this claim comes from experience with Save More Tomorrow, a program devised by the economists Richard Thaler and Shlomo Benartzi. Under their program, employees of a company can commit now to divert some portion of their next pay raise into their 401(k) account. Employees with this option save dramatically more than those whose only option is to save more right away.

In the same spirit, Congress could enact Tax More Tomorrow legislation. That is, it could enact legislation today calling for new taxes to begin phasing in only after economic growth has resumed in earnest – for example, only after the unemployment rate has again fallen below a suitable target, perhaps six percent. Loss aversion would thus be sidestepped, because the typical family’s income net of tax would still be higher each year than the year before. Consumers and producers can adapt to new taxes more efficiently if they are phased in gradually. Gasoline taxes, for example, could be increased by ten cents per gallon for each of the twenty months after the target unemployment rate is reached.

The same unemployment rate could trigger launch of the progressive consumption tax. At first, we could collect income taxes as before and levy a progressive surtax only on consumption in excess of some high threshold – say, $500,000 annually. The threshold could then be lowered gradually until the consumption tax completely replaced the income tax. Or, as the economist Larry Seidman has proposed, we could retain the current income tax permanently and supplement it with a progressive surtax levied only on extremely high levels of consumption. Since this surtax would apply to less than one percent of households, Seidman’s approach would be administratively far simpler and hence likely to provoke less political resistance. In either form, such legislation would calm the bond market’s fears of lingering deficits and deter speculative attacks on the dollar.

Adopting a progressive consumption tax that would take effect only when the economy again reached full employment would promote both short-term stimulus and long-run fiscal balance in a single stroke. Any family that was contemplating a large purchase in the coming years would have a powerful incentive to spend that money right away to avoid the future consumption levy. A strategically implemented progressive consumption tax is thus a conspicuous exception to the general rule that tax policy decisions confront us with painful tradeoffs between short- and long-term objectives.

Should a recession occur, a temporary cut in consumption taxes would actually provide a much more powerful stimulus than the traditional temporary cut in income taxes. People would benefit from a temporary consumption-tax cut only if they spent more right away. In contrast, consumers who fear that they might lose their jobs in a recession are often reluctant to spend a temporary income-tax cut.

As President Obama said in his Inaugural Address, the time has come to put away childish things. It is also time to discard childish ideas. It is not true, as we were urged to believe in recent years, that an invisible hand driven by greed serves up the greatest good for all. Even the gaudiest array of private-consumption goods, by itself, cannot sustain a flourishing society. We need a well-nourished public sphere as well. Nor can our government continue to spend hundreds of billions of dollars more each year than it takes in. Continued prosperity will require large, ongoing public investments in our long-neglected public sphere – investments that will have to be paid for with additional tax revenue.

Although big sums are involved here, the task is manageable. If we take the relevant evidence at face value, there is nothing controversial about the claim that by slowing the rate of growth in spending on positional consumption and cutting back on activities that pollute the planet, we can free up more than enough resources to pay for Obama’s ambitious agenda for national renewal. Nor is there any controversy about the policy instruments needed to bring about this change.

Pollution taxes have proven their effectiveness in the environmental domain. In addition to generating a lot of revenue, they provide powerful incentives for the private sector to undertake much of the required investment for successful transition to sustainable energy sources. And as the European experience has shown, people are able to adapt to these taxes in ways that leave their standard of living essentially undiminished.

Progressive consumption taxation has a similar pedigree. It has long been proposed, for example, by distinguished economists on both sides of the aisle. In a 1943 article published in the American Economic Review, Milton Friedman, the patron saint of free-market conservatism, proposed such a tax as by far the best way to pay for the war effort. In 1995, a progressive consumption tax was proposed in the Senate under the bipartisan sponsorship of Republican Pete Domenici and Democrat Sam Nunn. This tax is not a fringe idea. On the contrary, it is a veritable poster child for the kind of bipartisan policy wisdom the president has been actively seeking.

An opportunity to enact fundamental reform occurs only rarely. The current crisis has given us one, but the window for seizing it will remain open only briefly. If we act quickly, we can ensure a future in which Americans consume less, yet have far more.

_____

Robert H Frank, a Cornell University economist, is a visiting faculty member at New York University’s Stern School of Business. His next book, The Economic Naturalist’s Field Guide: Common Sense Principles for Troubled Times, will be published in May.

http://www.prospect.org/cs/articles?article=postconsumer_prosperity

Bill Totten http://www.ashisuto.co.jp/english/

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