Stop the non-sense: Save the Children

In a world that enjoys ever increasing wealth, it is often forgotten how many still live in poverty and how high child mortality remains. Fortunately according to a new report from the United Nations Children’s Fund (Unicef), more children are now surviving beyond their 5th birthday. To be specific the number of deaths has fallen from 12.5m in 1990 to 8.8m in 2008, the lowest on record with dramatic falls in Latin America and the former Soviet Union while progress in Africa has been slower. The report notes big improvements in preventing malaria but much more needs to be done to treat the other 2 main causes of deaths: pneumonia and diarrhoea. In a world often obsessed by material wealth or consumed by big political battles about issues such abortion and climate change, it is unacceptable to lose sight of the most urgent issue, saving our children who die from diseases we know how to defeat. This will not be achieved only by offering yet more financial aid to poor nations. The key remains getting the governments of those countries most affected by child mortality to honestly provide decent basic public services to their citizens. This battle requires money and goodwill of different nations working together but this is the war that we should be fighting and winning.

The Value of an Education

Good news students! A new report from the OECD was able to measure how much more graduates can expect to earn compared to job seekers without a degree. In the U.S. the lifetime gross earnings of male graduates are almost $370,000 higher than those without degrees. This is a nice payback for the ever inflating  cost of  a university education. The trend is similar in other countries but perhaps the best value of an education should not be measured in terms of financial benefits but rather in terms of other personal and social benefits.  Knowledge in an ever complex world allows perhaps individuals to make better informed decisions on all sorts of matters and societies that are better educated may be a better steward of freedom and democracy. Knowledge and education however do not always guarantee those benefits, it may be worth to remember that while  many individuals without college education have achieved great success, a few highly read intellectuals have led humanity straight down to a path of madness (socialism, eugenics, etc).

The Damage Done on Sept. 11th

On yet another anniversary of the tragedy on Sept. 11th, humanity has much to reflect on its aftermath. That fateful day which will live in infamy,  terrorists who attacked America did not bring down only the New York’s World Trade Center towers. On that day, the prospects of peace in a world which had seen the end of the cold war era and collapse of communism,  crumbled like the Towers’ beams. On that day the Middle East conflict graduated from its regional status to a global one with far reaching consequences. Thousands of lives have been lost in wars and terrorist attacks without remarkable improvements to any of the people involved. In the end the aftermath of 9/11 comes at a huge cost paid not only by those who have lost their lives, but by all of us as governments around the world have restrained freedoms (spying  on us, torturing and jailing individuals without due process) and wasted billions of dollars in the name of security. Most important of all, we are left with the huge opportunity cost of not being able to shift, after the end of the cold war, the world’s minds and resources to more vital challenges (poverty, child mortality, development, climate change, etc). The damage done on 9/11 is that our entire planet is still crumbling under the weight of yet more senseless wars and our species’ gift for continuously falling short of its potential.

Health Care is Sick in America

American politicians are arguing about health care in another attempt to reform the broken system. America’s health-care system is by far the costliest in the world. Despite health care spending per person is almost double that of other rich countries, millions of Americans are without health insurance and quality of health care is not much better than elsewhere. Beyond the large numbers of uninsured, the problem is that it continues to grow at an unsustainable pace and is starting to have a huge impact on business and employment. The health care industry has been quite good at raising fears of rationing by more government intrusion in the health sector but the reality is that in America federal & state agencies (Medicare, medicaid, etc) already control a large portion of the market. The key to reform, regardless of political affiliation, is that the majority of Americans who have health insurance must come to terms with the fact that the current model of receiving any treatment covered by insurance without incurring some of the costs is a recipe of disaster for everyone. The problem with health care is  that market forces have been paralyzed by overregulation and until health care consumers can shop based on price, America will continue to get sicker and bogged down by its blindfolds in an ever more competitive global economy.

Exploring Space: a Big Leap for Humankind

On July 20, 1969, the United States’ Apollo carrying 3 astronauts landed on the moon. Armstrong who is the first man to ever put foot on a mass outside the earth famously stated that his first step was a huge leap for mankind. While history will forever celebrate this day (and talk has advanced of shipping man to Mars despite astronomical costs and risks), much more progress to human knowledge has been achieved by satellite missions (Hubble Space Telescope, Viking, Chandra X-ray Observatory, Cassini-Huygens, Mars rovers, WMAP, Voyager). Basically these machines, perhaps not as popular as Mr. Armstrong, have provided so much insights about our universe to revolutionize our understanding of it and its origins. While politicians may want to capture the public’s imagination of landing on Mars, it will be useful to remember that dollars spent on (man-less) missions have yielded much more return on investment than any huge spending on a single landing mission ever will. However just like basic economics, politicians seem unable to grasp the basics of how science progress is made: usually in small patient steps rather than with big splashing leaps.

Independence Day: Hayek explains Liberty

While America celebrates its day of Independence, people around the world are embracing the dangerous arms of government and giving up freedoms. Throughout history in times of economic upheaval, government has appeared to run to the rescue of economies in verge of collapse only to make matters worse. The Great Depression saw one of the largest expansion of the US Federal Government and yet despite the huge amount of dollars spent, the US fully recovered only after world war II. To add insult to injury, many do not seem to realize that it is government that heavily contributes to economic collapse. While the media rightly exposes on the disgraceful acts of Wall Street titans, it fails to expose the primary role of government in this collapse: the folly of the Federal reserve to inflate bubbles with low interest rates, the folly of the US Govt to inflate the housing markets through subsidized loans (Fannie Mae & Freedie Mac) and the failure of regulators in over a dozen agencies to properly expose abuse. Politicians tell us now that the failure of the market requires more restrictions of economic freedom and the creation of yet more regulators in Washington. Their solution is tie up small & mid-size businesses in regulations while unemployment explodes while bailing out their friends in large corporations despite these very subsidies have already led to collapse of historic firms such as GM & Chrysler, etc. Amidst this nonsense and the rush to curtail economic freedoms, it is valuable to re-evaluate the importance of liberty, the limits of government and power in the word of masters such F.A. Hayek.

Protectionism: How to Bankrupt An Industry

The bankruptcy of Chrysler and especially General Motors (GM) represent a watershed moment in America’s history. These companies and the car industry had such an influence on America’s culture that they became protected by the U.S. government. Unfortunately by protecting its car industry America’s politicians hindered its ability to become efficient and innovative and thus made it vulnerable to nimbler foreign competitors. To be clear the industry’s collapse has nothing to do with the current financial crisis, but started in the 1970s when the car industry rather than compete with incoming Japanese products by making cheaper and better, they hid behind politicians. Rules on fuel economy distorted the market facilitating production of light trucks and SUVs while the government restricted the import of small, efficient Japanese cars. While managers and politicians failed on a grand scale, leveraging their political muscles, the unions contributed quite a bit to this failure fighting against innovation and demanding costly benefits that the industry could not afford. If Detroit had spent less time lobbying for protectionism and more time on improving its products it might have prospered. The great lesson from this failure is that even major industries can become vulnerable when protected from the pressures of competitions and politicians trying to protect them with trade restrictions will do them much more harm than good adding up to a major ripoff for both consumers and taxpayer.

The Aging World and the Coming Storm

Despite the complaints about health care, the reality is that people over the last century have gotten healthier not just wealthier. We are living longer just as the rise of the middle class and women entering the workforce in mass, have led fertility rates to decline. The resulting sustantial increase in the  number of elderly people will create serious problems in coming years as a growing number of them will rely on a smaller labor pool (generally referred to an increase in the old-age dependency ratio). As the chart atop shows by 2050 Japan and major European countries could have a dependency ratio close or above 50% meaning that about 2 workers will have to bear the high cost of supporting social services for the elderly. This will be impossible unless payroll taxes rise to punitive levels or benefits are significantly reduced which may not be politically viable given the large share of the elderly voting in democracies. Although China and the United States are in slightly better shape, the trend is evident worldwide and as emerging countries become richer, the dependency ratio for the world is on the track to more than double to over 25% by 2050. Today it is popular to bash business for the bursting of the financial bubble but when citizens will discover that their highly indebted governments have overpromised benefits that cannot be delivered they may turn on democratic politicians and political parties which thrives on promising gullible voters utopian visions of prosperity for the purpose of gaining power. If you though pandemic flu and economic crisis were enough just wait for the coming storm that may threaten the core of world’s democracies.

Abruzzo Quake Reminds us of our Fragility

Earthquakes are common on planet earth but in the age of abundant internet videos & photos, experiencing these tragedies can aquire a deeper meaning: the web brings people living far away much closer to places and events that are quite distant in reality. As images and news arrived from Italy’s Abruzzo region with over 200 deaths and thousands wounded and homeless, we can almost experience the sadness and awe at the destruction. Crumbled brick buildings remind us of the power of nature always changing through shiting tectonic plates or evolving ecosystems. More powerfully, hands and bodies buried in the rubble remind us that life like earth itself is precious and yet fragile. It takes often tragedies to awaken our minds from the narrow focus of our daily lives and to be reminded that life should be treasured every day. As these images fade in memory unfortunately so does our appreciation for how quickly it could all end and for the simple great things that life offers every day: from the smile of a child to a sunset that fades into a distant and yet stunning horizon line.

A Stimulus to Bury our Kids in Debt

With the credit crisis crippling the global economy, governments are spending like drunken sailors to stabilize the financial system and spur growth once again using Keynesian policies. The United States especially has approved a giant fiscal stimulus, tax cuts and bail-outs that is increasing public debt. The crisis demand action but the problem is that (see IMF chart above) that government debt of rich countries is set to grow from 83.3% of GDP in 2008 to almost 100% in 2010. With aging populations and costly entitlements system these action may spell disaster. In addition while politicians talk about crisis and the majority of economists support the stimulus, some economists are against because government is not able to spend a dollar in a way that it generates a dollar or more in value. In addition for every dollar that the government takes out of the private sector is a dollar the private sector doesn’t have to spend anymore. The key problem here is that in order to finance all this spending, the government has either to raise taxes or print more money which creates inflation and can cause great harm to the average consumer and will place a huge burden on future generations. In other words, new president, same spending policies designed to bury our kids in debt. [On this subject see Stossel's video on Bailouts]