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      in World Politics

      America’s True Hyperreal Heroes

      by

      At the very moment that US President Joe Biden is busy demonstrating how little power he wields, whether in reigning in the neocolonial and militaristic behavior of the Israeli government or in attempting to push key legislation through Congress, Elon Musk, who has never been elected to any public office, is flaunting his unchallenged personal power over what may be the most disruptive force in today’s global economy: cryptocurrency.

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      Gregory Barber, writing for Wired, notes that through his tweeting, Musk has become a self-contained agent of volatility. He can send the value of different cryptocurrencies north or south, whenever he feels like it. As Barber frames it, “Musk is creating and destroying small fortunes, 280-characters at a time.” In his email promoting the article, Barber speculates: “Perhaps it’s strategic, or just whimsy, or maybe it’s a kind of performance art to inspire us all to wonder at the value of things. We might never know Musk’s true motives.”

      Today’s Daily Devil’s Dictionary definition:

      True motives:

      In the current society built on the principle of hyperreality, intentions that though detectable, will never be exposed in public, even by the media who understand that reporting on reality could only confuse their consumers who have become addicted to the manipulated representation of reality rather reality itself.

      Contextual Note

      Elon Musk is a true hyperreal hero, whose only serious rival on the world stage has been Donald Trump. Both are committed to finding ways to obscure the public’s ability to understand some serious public issues. But, contrary to Barber’s assertion, their true motives have never been in doubt. They can be summarized in two words — money and power — and two pathologies — greed and narcissism.

      Because most people in the United States have been taught to revere money and power — money as the key to power, power as the means of obtaining wealth — for all their obvious faults, their admirers not only continue to admire them but also celebrate their consummate ability to epitomize hyperreality. In the Calvinist tradition, wealth and power in the community were signs of divine favor. With the fading of the Puritan ethic of sober achievement, in their excess, Musk and Trump have attained the status of secular gods.

      Embed from Getty Images

      American culture struggles helplessly with the idea of truth. Where the condition for basic survival is to be constantly selling something to other people (ideally by creating a marketplace), truth tends to disappear into a misty horizon, spawning a destabilizing doubt that it even exists. But rather than resigning themselves to the absence of truth, Americans now want to reduce it to the question of facts. Fact-checking is all the rage.

      But serious philosophers and psychologists have always understood that the idea of truth means much more than establishing facts. Paradoxically, facts themselves can represent a convenient way of burying the truth. Journalists and public figures know this. A typical New York Times article on a potentially controversial issue typically contains a breathless series of short paragraphs citing facts, events and expert statements.

      The authors avoid providing logical connections between the paragraphs in an effort to let the facts accumulate. After aligning litanies of factoids and well-chosen quotes, the authors can be certain that no reader will be capable of stitching together anything that leads them towards an underlying meaning. “True motives” will be lost in the onslaught. Here at The Daily Devil’s Dictionary, we have cited examples of these logicless developments, for instance here and here.

      Both of our hyperreal heroes have been publicly disciplined for tweeting irresponsibly. Perceived as less dangerous, Musk still has a Twitter account whereas Trump had his taken away just before leaving the White House. Musk once declared that “Twitter is a war zone,” whereas Trump was accused of using it to foment civil war. His “true motive” appears to have been an attempt to create enough havoc to justify remaining in the White House. It didn’t work for Trump, but Israeli Prime Minister Benjamin Netanyahu may have been inspired by Trump’s example after failing to form a new majority earlier this year.

      According to Barber, Musk’s tweets “drop from the sky without warning. He controls the narrative, and thus the market effect.” This is not just hyperreal posturing or playing an expected public role with melodramatic or comic effect, as both Trump and Musk are wont to do on practically any occasion. Musk’s tweets concerning cybercurrency give him a power to make money instantly, at the expense of millions of other people. It sounds dangerous and downright unethical, but as a lawyer quoted by Barber explains, “You can’t police based on what you think is somebody’s subjective heart-of-hearts intent.” Is “heart-of-hearts intent” a synonym of “true motive”? In US culture, people tend to think so.

      Barber notes that only “a small number of people” possess something comparable to Musk’s hyperreal power. He cites Warren Buffett and the Federal Reserve chair, Jerome Powell. Neither of them is addicted to tweeting. But what is the true source of irresponsibility in this story? Is it Musk himself? Or is it Twitter as an institution that facilitates manipulation? Could it be cryptocurrency, which, as a pure product of purchasers’ greed, with no direct link to anything of substance, might justifiably be called hypercurrency? All three combine to define the hyperreal landscape that surrounds us, along with our media who amplify the drama the others generate.

      Historical Note

      Throughout history, political leaders have managed to control events by influencing the behavior of tens of thousands, and sometimes millions, of people. Think of Julius Caesar, Genghis Khan, Napoleon and Hitler. Whatever extraordinary narrative their culture invented for them and whatever personal charisma on their part contributed to their success, what these figures from the past did was rooted in the reality of government, administration, coercive force and concrete economic relationships.

      Hyperreality today sits atop all those features of power but thrives in an independent world of its own. It may be that without the example of Hollywood we never would have reached this stage. Musk and Trump alike are more like entertainment figures — both writing the script and playing the role — than to leaders of social, political or cultural movements.

      Two centuries ago, P.T. Barnum provided the model for hyperreality that would fully blossom in the 20th century thanks to the disruptive technology of movies, television and finally the internet. Barnum invented an entire sector of entertainment based on the misrepresentation of facts when, after purchasing an aging slave, Joice Heth, put her on display, claiming she was 161 years old and had been young George Washington’s nurse. Barnum understood how facts and symbolism combine to draw the public to his spectacles.

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      George Washington was already known as “the father of the nation.” Barnum provided an exotic, black mothering figure for the father of the country. At the same time, the supposed relationship served to justify slavery and racism by promoting the idea that blacks in a situation of service could nurture whites, and whites would protect and nurture blacks.

      Barnum later became famous for organizing his three-ring circus, but before that he built his reputation around presenting facts or the appearance of facts. He created the American Museum in Manhattan. It featured both authentic historical artifacts and a freak show, prolonging the spirit of deception he developed around Joice Heth. With his partner James Bailey, he launched hyperreality’s ultimate theme with a circus they called “The Greatest Show on Earth.” Barnum himself never sought to be a hyperreal hero. He simply propagated the values of the culture of American hyperreality that would be refined by a later generation of architects of hyperreality.

      William Randolph Hearst modeled the modern idea of the news. Sigmund Freud’s American nephew, Edward Bernays, invented the art of public relations built around the science of advertising designed as a form of mind control. Trump and Musk have come to represent the ultimate hyperreal heroes, but they have built their identities around the culture created by geniuses like Barnum and Bernays combined with the culture of Hollywood’s larger-than-life screen heroes. They are not alone. There are plenty of hyperreal supporting actors and extras who give depth to the representation. But they are the ones talented enough and sufficiently narcissistic to occupy center stage and ultimately influence the audience’s behavior.

      *[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news. Read more of The Daily Devil’s Dictionary on Fair Observer.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      in World Politics

      Europe’s Thirst for Virtual Water: Blueberry Fields Forever?

      by

      Blueberries have long established themselves among the superfoods. They are tasty, low in calories and full of beneficial nutrients. Most importantly, they are a rich source of antioxidants that serve to protect against a range of diseases, most notably cancer. This might explain why the demand for blueberries has steadily increased over the past few years. Between 2015 and 2019, Europe’s blueberry imports increased from 45,000 tons to 113,000 tons. Between 2018 and 2019 alone, the volume of imports rose by more than 40%.

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      Blueberries consist mostly of water. In fact, some 85% of the fruit is H2O. And that’s where the problem starts. In Western Europe, most of the blueberries you find in supermarkets today are imported from Spain; more precisely, from one province in the autonomous region of Andalusia, Huelva, located in the southwest, where Spain borders Portugal. Andalusia is known for the beauty of its major cities like Seville, Granada and Cordoba, and its beach resorts of Marbella, Torremolinos and Malaga.

      Andalusia also happens to be among the poorest autonomous regions in Spain. In 2019, it ranked close to the bottom with respect to GDP per capita; only Estremadura and Melilla ranked lower. In 2016, around 40% of the population lived in poverty; among children, the poverty rate stood at 44%.

      The Blueberry Dark Side

      Andalusia has also been the launching pad for Vox, Spain’s radical populist right. In the regional elections of 2018, Vox gained 11% of the vote, which put the party in a pivotal position. Since neither the left nor the right commanded a majority in the region’s parliament, Vox found itself in a position of kingmaker. At the time, Vox came out in favor of the center right. In Huelva, like across Andalusia, Vox is a major political player. In the November national election of 2019, Vox garnered more than 20% of the vote in Huelva, second only to the socialists who won 36%.

      Vox is a political force to be reckoned with. The party promotes itself as an ardent defender of ordinary hardworking people and of the unity of the Spanish state, threatened by Catalan and Basque independence aspirations. At the same time, the party has vigorously rejected any human responsibility for climate change. Environmental concerns are certainly not on the party’s agenda.

      This brings us back to blueberries from Spain. Over the past several years, the cultivation of blueberries in Huelva province has progressively expanded. Between 2016 and 2020, blueberry spring exports (February to May) increased by more than 80% in volume and more than 40% in value. At the same time, land devoted to blueberries increased from 4.4 squared miles to roughly 14 square miles. As a result, production more than doubled, from 20,815 tons in 2014-15 to 45,506 tons in 2019-20. Altogether, the cultivation of the three major “red fruits” produced in Huelva — blueberries, strawberries and raspberries — provides employment to over 100,000 people, generating roughly €1 billion ($1.2 billion) in revenue.

      Embed from Getty Images

      This is one side of the equation, one that Huelva’s authorities like to propagate. Unfortunately for them, the other (dark) side has once again been making international headlines. Here the focus is on the disastrous impact that cash crops have had on the natural environment, in particular on the Donana national park, a wetland reserve and UN Heritage site that is a refuge for over 2,000 different species of wildlife and serves as a way station for millions of migratory birds every year.

      The national park was already on the receiving end of an environmental catastrophe that severely affected its delicate ecological balance. In 1998, a dam burst at a mine near Seville, releasing up to 5 million cubic meters of toxic slush into the Guadiamar River, the main water source for the park. Cleaning up the mess cost the Spanish state some €90 million. It spent a further €360 million to restore parts of the park. Some of the money came from the European Union. It took several years for the park’s wildlife to recover.

      Yet little was learned from the disaster. By 2016, UNESCO threatened to put the park on its danger list. And for good reason: As The Guardian reported at the time, Donana was “said to have lost 80% of its natural water supplies due to marsh drainage, intensive agriculture, and water pollution from the mining industry.” The article cited a report from the World Wildlife Fund (WWF) that charged that farmers had been drilling more than 1,000 illegal wells that accelerated “the park’s destruction, as drought-resistant plants replace water-dependent ones in the region.”

      Ecological Crisis

      The expansion of cash crop cultivation in Huelva has only added to the ecological crisis, once again ringing alarm bells not only in individual countries that are among Huelva’s most important customers, such as Germany and the United Kingdom, but also in Brussels. A recent report on the website of Germany’s premier news program, ARD’s “Tagesschau,” set the tone: “Spain’s national park is drying out.” The main reason: Huelva’s red fruit industry has not only encroached on park land but, more importantly, has systematically starved the park of its most important lifeline — water. According to the report, estimates are that roughly 1,000 of the wells dug to irrigate the plantations are illegal. In other words, nothing had changed since 2016.

      By 2020, the European Commission had had enough. It took Spain to court. In December, it charged that Spain had looked the other way and allowed the continued illegal appropriation of groundwater, in the process inflicting serious damage to the nationally and internationally protected Donana wetlands. For all practical purposes, the failure lay largely with the regional Andalusian government. Five years ago, the regional government advanced a plan to protect Donana; five years later, according to an article in Spain’s leading newspaper El Pais, only 17% of the measures had been realized, 43% were incomplete, the rest — nada.

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      The regional government has, however, made an effort to go after Huelva’s most egregious water thieves. In March, two ex-mayors — one a socialist, the other a conservative — were put on trial together with 13 farmers, all of them accused of illegal appropriation of water. At the same time, the government has tried to shut down illegal wells. But with over a thousand currently in operation, the backlog is great, and more often than not the authorities have met with determined resistance.

      At the same time, however, the regional government has continued to license new water rights. In 2017, for instance, the government conceded more than 270,000 cubic meters of public groundwater to a cooperative society, which allowed the cooperative to more than double its production of blueberries in the Sierra de Huelva. All this, as a public official in charge of water management claimed, was done in the name of “sustainable development.” Donana’s endangered wildlife would probably disagree. But then, they don’t have a voice, and those speaking in their name, such as the WWF, have to a large degree been unheeded.

      Virtual Water

      Spanish blueberries produced in Huelva are a prime example of the ludicrousness of a development strategy based on international trade. Spain is a semi-arid, water-poor country. The distribution of water across the national territory is highly unequal. Water is relatively abundant in the north and relatively scarce in the south. Agriculture accounts for a large junk of the country’s total water use, roughly 60%. Yet agriculture contributes just 3% to the country’s GDP and employs roughly 4% of the active workforce. Particularly in the south, decades of agricultural practices have exhausted the soil and turned once fertile land into desert, shrinking the supply of arable land.

      Under the circumstances, producing a crop as water-intensive as blueberries in a semi-arid region borders on the absurd. The amount of water required to produce a certain amount of a product is generally referred to as a water footprint. The water footprint of blueberries is around 840 liters per one kilogram of fruit. This means that embedded in every kilo of blueberries for sale in the local supermarket are more than 800 liters of water. This is what is nowadays known as “virtual water” — the amount of water hidden from and invisible to the end consumer. Virtual water has become an increasingly important concept in international trade theory. What it means in practical terms is that with every kilo of blueberries we import from Spain, we bring in more than 800 liters of water.

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      By now, the absurdity of the situation should be obvious. Not only do we import water from a water-scarce region, but by importing the virtual water embedded in blueberries, we contribute to the depletion of a scarce resource in the exporting region which, in turn, is a major cause of the gradual destruction of one of Western Europe’s largest natural wetlands. And things are likely to get even worse. The upsurge in demand for blueberries and other red fruits has brought new producers into the market.

      As a result, prices have substantially declined, compelling producers to expand production and explore new market opportunities. Just the other day, after years of negotiations, Brazil gave a green light to the importation of blueberries from Huelva after the red fruits industry passed an on-the-ground inspection by a delegation of Brazilian authorities. And Brazil might only be the beginning. Huelva authorities have already set their eyes on even larger markets, notably China and India. In the meantime, environmental advocates are pinning their hopes on the European Court of Justice, which is supposed to consider the case over the next few months. Judgments rendered by the court are binding. Member states are obliged to comply with court decisions without delay. If found guilty, Spain might have to pay heavy fines.

      The WWF, which has been among the most vocal and determined advocates of the Donana national park, is confident that the court will rule in its favor. As Juan Carlos del Olmo, the secretary general of WWF Spain, put it, “Spain is about to be condemned for allowing the destruction of Doñana, a heritage that belongs to all Europeans.” He emphasized that the “Spanish authorities and especially the Regional Government of Andalusia, which have both turned a blind eye to this situation for years,” need “to take real measures to halt the degradation of Doñana.” This means, above all, closing the illegal wells that are “looting the aquifer and destroying biodiversity.”

      2020 marked the fifth anniversary of the United Nations Sustainable Development Goals, to which Spain has committed itself “at the highest level.” This includes ensuring “the lasting protection of the planet and its natural resources.” It is not entirely obvious how the export of massive amounts of virtual water from Huelva’s blueberry fields is supposed to contribute to the latter goal.

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      in US Politics

      Turn off the gas: is America ready to embrace electric vehicles?

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      In Detroit, auto plants have for decades churned out trucks built with Motor City steel and fueled by gasoline. But this week’s rollout of the Ford F-150 Lightning electric truck offered a vision of the future in America’s automotive heartland: aluminum-clad pickups running off of electric powertrains with lithium batteries.An electric model of the nation’s best-selling vehicle at an accessible $40,000 has the potential to shift the auto industry’s course, and do more to advance the transportation sector’s electrification than any recent development, analysts say.“Offering a well-known vehicle at a competitive price could really help push the EV agenda in the US,” said Jessica Caldwell, executive director of insights at Edmunds.com.Meanwhile, Ford characterized the Lightning’s introduction as a “watershed moment,” but it also represents a major gamble. The F-150 embodies American ruggedness, and it raises the question: isthe truck market’s meat-and-potatoes base ready to embrace environmentally friendly electric vehicles (EVs)?It’s uncharted territory, said Autotrader executive analyst Michelle Krebs. The success of the Lightning or any EV hinges on a major infrastructure build-out that’s far from certain.“There’s no EV pickup market at the moment, so we just don’t know how big it could be, or what consumer acceptance will be,” she said.Truck consumers are generally unwilling to switch to cars just to go electric, Krebs said. So pitching them on the Lightning not only opens a new market for Ford, but is a critical step in the nation’s efforts to rein in greenhouse gas emissions, of which the transportation sector accounts for 29%. The EV transition is a key component of Joe Biden’s climate plan, which calls for the nation to cut emissions by 50% from 2005 levels by 2030, and net-zero emissions economy-wide by 2050.Though EVs only make up less than 2% of new-vehicle sales in the US, there’s perhaps no better line to push the needle on those figures than the F-Series. Last year, Ford generated about $42bn in the sale of over 800,000 F-Series trucks, according to data from the company and Edmunds.com. Sales of the F-150, the line’s light-duty truck, exceeded 556,000.The Lightning feature that seems to be catching the most attention isn’t under the hood or in the cab, but on the price tag. With EV tax incentives, the truck’s base model could cost about $32,000 – less than a $37,000 gas-powered F-150 with a crew cab. By contrast, the GMC Hummer EV and Rivian R1T, are priced at $80,000 and $70,000 though they are slightly flashier.The Lightning also marks one of the first attempts to electrify a well-known, everyday vehicle that appeals to a mass market. Previously, EVs were mostly small, unconventionally designed cars that appealed to environmentally minded people who made a personality statement with their vehicle, Caldwell said. The “pendulum has swung” in terms of design, she added.The Lightning’s range is also notable. One charge will take a base model Lightning 230 miles, or, for an additional $20,000, the extended range trim will travel 300 miles. It can haul up to 2,000lbs of payload and tow up to 10,000lbs. However, Ford doesn’t offer any data on range with a heavy payload or tow, and Car And Drive estimated it at as little as 100 miles.That’s the type of detail that could keep consumers away from not just the Lightning, but all electric pickups. On a 150kw DC fast charger, the extended-range trim targets up to 54 miles of range in 10 minutes, or just under an hour for a full charge.It’s not hard to imagine a scenario in which someone who may be buying a truck to tow a camper a long distance once or twice per year opting for a gas-powered F-150 instead being inconvenienced with an hour-long stop to recharge every 100 miles or so, Caldwell said.But several once-in-a-while Lightning features are generating a buzz, like a drain hole in case the cab needs to be hosed out. Its dual battery system can power tools in the field, or a house for three days during an outage. The F-150 Hybrid was utilized as a mobile generator in the recent deadly Texas blackouts.The Lightning’s power is another selling point – it can go 0-60mph in just over four seconds, offers 775lb-feet of torque, and the extended range model targets 563 horsepower.That was enough to impress Biden, who test drove a Lightning during a Michigan stop last week. “This sucker’s quick,” he declared.Among those who will need to harness the truck’s full power and hauling capacity are contractors. It’s worth consideration, said Dave Alder, an electrician in Detroit, especially if it could save on gas money. But he worried about where he would charge it, and said it’s a bit of a “If it’s not broken, don’t fix it” situation with his gas-powered Chevy Silverado.The Lightning has the support of the United Auto Workers union, which at times has been skeptical of electrification. The truck will be built at the Rouge Electric Vehicle Center in Dearborn, which sits just outside of Detroit and next to the Dearborn Truck Plant that produces gas-powered and hybrid F-150s. Lightning production is slated to start next spring, with the trucks hitting the lot in mid-2022.Critical to its success is an infrastructure build out, and Biden’s $2tn infrastructure plan includes $174bn to support the EV transition.The president has framed his pitch by repeatedly claiming the US is in an electrification race with China.“The future of the auto industry is electric. There’s no turning back,” Biden said during the Lightning’s unveiling. “The question is whether we will lead or we will fall behind in the race to the future.”Buy-in from the auto industry could help Biden push his proposal with Congress, though it’s uniformly opposed by the GOP. Republican leadership has pointed to the lack of infrastructure as a chief reason for opposing spending on the EV transition, but at the same time opposes funding an infrastructure build-out.American consumers have said they won’t buy an EV without the infrastructure in place, Krebs said, which leaves the industry facing a “chicken and egg” situation.“That’s key – they have got to have the charging infrastructure in place or this will all go kaput,” she said. More

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      in US Politics

      Workers matter and government works: eight lessons from the Covid pandemic

      by

      Maybe it’s wishful thinking to declare the pandemic over in the US, and presumptuous to conclude what lessons we’ve learned. So consider this a first draft.1. Workers are always essentialWe couldn’t have survived without millions of warehouse, delivery, grocery and hospital workers literally risking their lives. Yet most of these workers are paid squat. Amazon touts its $15 minimum wage but it totals only about $30,000 a year. Most essential workers don’t have health insurance or paid leave. Many of their employers (including Jeff Bezos and Elon Musk, to take but two examples) didn’t give them the personal protective equipment they needed.Lesson: Essential workers deserve far better.2. Healthcare is a basic rightYou know how you got your vaccine without paying a dime? That’s how all healthcare could be. Yet too many Americans who contracted Covid-19 got walloped with humongous hospital bills. By mid-2020, about 3.3 million people had lost employer-sponsored coverage and the number of uninsured had increased by 1.9 million. Research by the Urban Institute found that people with chronic disease, Black Americans and low-income children were most likely to have delayed or foregone care during the pandemic.Lesson: America must insure everyone.3. Conspiracy theories can be deadlyLast June, about one in four Americans believed the pandemic was “definitely” or “probably” created intentionally, according to the Pew Research Center. Other conspiracy theories have caused some people to avoid wearing masks or getting vaccinated, resulting in unnecessary illness or death.Lesson: An informed public is essential. Some of the responsibility falls on all of us. Some of it on Facebook, Twitter and other platforms that allowed misinformation to flourish.4. The stock market isn’t the economyThe stock market rose throughout the pandemic, lifting the wealth of the richest 1% who own half of all stock owned by Americans. Meanwhile, from March 2020 to February 2021 80 million in the US lost their jobs. Between June and November 2020, nearly 8 million fell into poverty. Black and Latino adults were more than twice as likely as white adults to report not having enough to eat: 16% each for Black and Latino adults, compared to 6% of white adults.Lesson: Stop using the stock market as a measure of economic wellbeing. Look instead at the percentage of Americans who are working, and their median pay.5. Wages are too low to get by onMost Americans live paycheck to paycheck. So once the pandemic hit, many didn’t have any savings to fall back on. Conservative lawmakers complain that the extra $300 a week unemployment benefit Congress enacted in March discourages people from working. What’s really discouraging them is lack of childcare and lousy wages.Lesson: Raise the minimum wage, strengthen labor unions and push companies to share profits with their workers.6. Remote work is now baked into the economyThe percentage of workers punching in from home hit a high of 70% in April 2020. A majority still work remotely. Some 40% want to continue working from home.Two lessons: Companies will have to adjust. And much commercial real estate will remain vacant. Why not convert it into affordable housing?7. Billionaires aren’t the answerThe combined wealth of America’s 657 billionaires grew by $1.3tn – or 44.6% – during the pandemic. Jeff Bezos, with $183.9bn, became the richest man in the world. Larry Page, a co-founder of Google, added $11.8bn to his $94.3bn fortune. Sergey Brin, Google’s other co-founder, added $11.4bn. Yet billionaires’ taxes are lower than ever. Wealthy Americans today pay one-sixth the rate of taxes their counterparts paid in 1953.Lesson: To afford everything the nation needs, raise taxes at the top.8. Government can be the solutionRonald Reagan’s famous quip – “Government is not the solution to our problem, government is the problem” – can now officially be retired. Trump’s “Operation Warp Speed” succeeded in readying vaccines faster than most experts thought possible. Biden got them into more arms more quickly than any vaccination program in history.Furthermore, the $900bn in aid Congress passed in late December prevented millions from losing unemployment benefits and helped sustain the recovery when it was faltering. The $1.9tn Democrats pushed through in March will help the US achieve something it failed to achieve after the 2008-09 recession: a robust recovery.Lesson: The federal government did not just help beat the pandemic. It also did more to keep the nation afloat than in any previous recession. It must be prepared to do so again. More

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      in US Politics

      Markets fall as US consumer prices see sharpest monthly climb since 2008

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      US consumer prices soared in April as post-lockdown demand and shortages drove up the cost of a wide range of goods, from used cars and home furnishings to airline tickets.The news triggered a further slide in markets unsettled this week by the threat of rising prices, which could force central banks to abandon zero0-interest rate policies that have helped stoke share prices. The Dow Jones index fell 1.3% in early trading and the tech-heavy Nasdaq lost 2.5%.The Consumer Price Index (CPI) climbed 4.2% during the month from a year earlier, the labor department said, the biggest 12-month increase since September 2008, the height of the financial crisis. The figure was significantly higher than economists had predicted.CPI measures the prices consumers pay for goods and services, including clothes, groceries, restaurant meals, recreational activities and vehicles. This month’s rise saw increases across the board and was driven by many factors.The Biden administration’s economic stimulus package has pumped money into the economy just as it reopens from coronavirus lockdown measures. Fresh demand for goods and services has also outpaced supply, which is still recovering from the lockdowns at the start of the pandemic, leading to shortages for a broad range of goods from lumber and steel to ketchup.Used car and truck prices in particular have surged as a global shortage of microchips has dampened production of new vehicles. The price of a used car rose 10% over the month and topped $25,000 for the first time, about $2,800 higher than in April last year, according to the research firm JD Power.The figures are inflated by a collapse in prices last year as the US economy shut down, but they still caught economists by surprise. Economists surveyed by Bloomberg had expected a 3.6% increase in CPI over the year and a 0.2% increase from March. The monthly increase was 0.8%. The news led US stock markets to fall again after a sharp selloff on Tuesday.The Federal Reserve has predicted a spike in inflation in the wake of the coronavirus pandemic but has said it believes it will be short-lived. Last month Fed chair Jerome Powell said the central bank was watching price increases but was not yet concerned about inflation, arguing “one-time increases in prices are likely to only have transitory effects on inflation”.Others are more concerned. Former treasury secretary Larry Summers has warned the US could face a period of high inflation unseen since the 1970s. Talking to Bloomberg TV he said it was “plain wrong” to suggest that inflation cannot surge unexpectedly.“It may be that a way will be found to bring it under control,” he said. “But as I look at $3tn of stimulus, $2tn of savings overhang, a major acceleration coming from Covid in the rear-view mirror, rates expected by the Federal Reserve to be at zero for three years even in a booming economy, record growth this year, major expansion of the Fed balance sheet, and much new fiscal stimulus to come – I’m worried.”Investors too are now worried that the rise in prices will be higher and more sustained than the central bank believes, and that in order to contain the price surge the Fed may have to increase interest rates sooner than expected from the near zero level it set in March last year as the pandemic struck.“April inflation data far exceeded market expectations,” the Economist Intelligence Unit wrote in a note to investors. “We had expected to see a big jump in year-on-year inflation in April, given the comparison to the depth of the recession in April 2020. However, the month-on-month increase in prices, coming on top of a 0.6% monthly increase in March, was surprisingly strong.”“We do not expect this increase to be replicated again in May, but this will still be enough to lift inflation expectations for the full-year 2021,” the Economist Intelligence Unit wrote. More

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      in US Politics

      AstraZeneca’s boss is a boardroom superstar but a potential £2m cherry is pushing the point

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      A majority is a majority, but a rebellion of 40% against an executive pay policy is too large to be pinned solely on those brain-dead fund managers who outsource their thinking to proxy voting agencies.At AstraZeneca some serious institutions, with Aviva Investors and Standard Life Aberdeen to the fore, clearly thought the company was pushing things too far by adding a potential £2m cherry on top of their chief executive, Pascal Soriot’s, already substantial pay package. The rebels had a point.Yes, Soriot is a boardroom superstar thanks to AstraZeneca’s success in supercharging the development and production of the Oxford University vaccine for no profit. Communication with regulators went awry at times, and Soriot himself obviously wasn’t getting his hands dirty in the labs. But the boss, even when operating from Australia, is doing an excellent job of standing up to irritating and ungrateful EU commissioners, which is also part of the pandemic operation. And, amid it all, the company didn’t miss a beat on its day job and had time to spend $39bn buying the rare disease specialist Alexion, which looks a promising deal.Yet exceptional effort in an exceptional year is roughly what one expects from a chief executive on Soriot’s pay package. In the last three years, his incentives have performed wonderfully and he has earned £13m, £15m and £15m, so is firmly established in the £1m-a-month category, which very few chief executives of FTSE 100 companies can say. Even for an international hero, it feels a decent whack.The company’s claim was that “the world drastically changed in the last 12 months, and so did AstraZeneca”, and thus adjustments should be made outside the normal three-yearly cycle for tweaking pay.That argument would have felt stronger if AstraZeneca was not already at the adventurous end by UK standards. Last year, Soriot earned 197 times the median pay among his workforce. And, critically, the new arrangement will take his variable pay – annual bonus plus long-term incentives – to 900% of his £1.33m salary. A few years ago 500% was regarded as high by FTSE 100 standards.That precedent-setting detail helps to explain why the rebellion was so strong. Those fund managers who care about controlling boardroom pay inflation saw the risk of knock-on effects elsewhere. Loyalty to Soriot probably swayed a few doubters and helped AstraZeneca prevail, but the company did not need to pick a fight at this time – it gave Soriot a chunky rise a year ago.Some real pay shockers (think Cineworld) have slipped through in recent months. If the wider message in the AstraZeneca vote is that fund managers are not all asleep, that would be no bad thing.Seatbelts on for more stock market turbulenceLast Friday investors preferred to see a silver lining in a weak set of US unemployment numbers – only 266,000 jobs created in the month of April, against forecasts of 1m. If a lack of new jobs implied no inflationary wage pressures in the US economy, at least the stock market could take a few days off from worrying about rises in interest rates, ran the theory.Inflationary pressures, though, come in many forms, and here is a piece of data that spooked the stock market on Tuesday: China’s producer prices index rose at an annual rate of 6.8% in April, up from 4.4% in March.That is the highest level for three years and a sign, probably, that the boom in prices of raw copper, iron ore and other raw materials is finally feeding through to goods. The FTSE 100 index fell 175 points, or 2.5%, following other stock markets down.The benign view says a flurry of higher prices is almost to be expected as the global economy reopens. In that case, central banks’ mistake would be to move too early and choke off recovery. Yet it is clearly also possible that we could be at the start of a big move on prices, with the next leg delivered by the Biden’s administration’s huge infrastructure programme. If so, the mistake would be to delay rate rises.Do not expect quick or clear answers. Inflation data can give mixed messages for months. Do, though, anticipate more bumpy days for stock markets. Investors’ default assumption is to assume the US Federal Reserve will play nicely and look through the short-term signals. Life could quickly get ugly if there is any deviation from that assumed path. More

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      in World Politics

      Big Pharma’s Big Free Lunch

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      A vast majority of the planet’s population had every reason to welcome the Biden administration’s belated backing of a proposed patent waiver for COVID-19 vaccines. To anyone not invested in the pharmaceutical industry or not named Bill Gates, it was a no-brainer. Economist David Adler and Dr. Mamka Anyona, writing for The Guardian, convincingly argue that “the system of pharmaceutical patents is a killing machine.”

      The good news coming from the White House predictably triggered bad news on Wall Street. CNBC reported that within hours, share prices of major vaccine producing pharmaceutical companies “including Moderna, BioNTech and Pfizer, dropped sharply.” The alarm may have been exaggerated. “Johnson & Johnson shed a modest 0.4%,” and closed higher at the end of the week. Pfizer and the others had also gained ground by Friday.

      It’s Time to Invest in Curiosity

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      The brief Wall Street plummet was enough to provoke the ire of Stephen J. Ubi, president of the Pharmaceutical Research and Manufacturers of America, ready to demonstrate the bad faith everyone might expect from a powerful industrial lobbyist. “In the midst of a deadly pandemic,” he explained indignantly, “the Biden Administration has taken an unprecedented step that will undermine our global response to the pandemic and compromise safety. This decision will sow confusion between public and private partners, further weaken already strained supply chains and foster the proliferation of counterfeit vaccines.”

      Today’s Daily Devil’s Dictionary definition:

      Public and private partners:

      A euphemism invented to hide the practice of getting taxpayers (the public) to pay for research that will guarantee future profits for commercial firms (private partners) by gifting them a monopoly permitting exorbitant margins on sales to the public, whose tax dollars funded the research

      Contextual Note

      The pharmaceutical industry will tend to judge any political decision made in the name of human health and the prosperity of all as an act of “sowing confusion.” In our ultra-rationalist economy, profit has become the sole measure of value. Compromising profit is evil, and, as Milton Friedman endlessly repeated, “There’s no such thing as a free lunch.” Calling into question the pricing strategies of private companies in the supposed free market is considered a dangerous heresy.

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      When a government puts up money and resources to stimulate research, guarantees massive purchase orders and transfers the intellectual property to private companies, the companies that benefit don’t consider it “a free lunch.” There’s a reason for this: A lunch at an expensive restaurant in New York may set you back $100 or more. A Coney Island hot dog costs less than $5. But the kind of transfer of wealth from the public to the private sector is routinely measured in billions, if not tens of billions.

      The current system of research funding and pharmaceutical production has admittedly produced a certain form of consumer abundance. But the driver of the system even in ordinary times is the management of scarcity and human misery. There seems to be an iron-clad rule that many take to be a law of nature: The misery of the many serves the prosperity of the few. The enduring good fortune of the wealthy enterprises ensures their capacity to partially respond to the needs of the many — but only partially, thanks to the sacrosanct scarcity principle.

      Ubi begins his complaint by reminding us that we are “In the midst of a deadly pandemic.” He doesn’t bother to mention that the pandemic might have been controlled months ago if, from the start, we had followed the advice of those who preached in favor of coordinated research and “patent pools.” As Alexander Zaitchik explained in his New Republic article on the crucial role Bill Gates played in defending patents, there was a brief moment when the World Health Organization and health professionals were ready to coordinate global research by suspending considerations of private interest and monopolistic profit in response to an impending global threat. That, alas, was seen as stealing Big Pharma’s lunch and violating the consecrated principle of public-private partnerships.

      When the pandemic began to spin out of anyone’s control, US President Donald Trump and French President Emmanuel Macron proudly declared war against the virus. In a veritable world war against a truly evil enemy, with the well-being of every nation’s citizens at stake, reasonable people might expect private interests to give way to the public good. Not in today’s economy. The public sector has accepted its structural dependence on the private sector’s greed to accomplish even its most modest goals. Instead of pooling their efforts, the world’s nations acted as if every other nation was a rival, if not an enemy. Call it the triumph of the spirit of competition.

      Historical Note

      Ubi complains that the Biden administration took “an unprecedented step.” That is simply untrue. The Defense Production Act (DPA), passed in 1950 during the Korean War, authorized “the federal government to shape the domestic industrial base so that, when called upon, it is capable of providing essential materials and goods needed for the national defense.” According to The New York Times, the DPA “has been invoked hundreds of thousands of times” in recent years to ensure the procurement needs of the military. Is global health a less deserving cause than equipping an aircraft carrier?

      Waiving the patents, according to Ubi “will undermine our global response to the pandemic and compromise safety.” Some might see this as a threat. That actually makes sense, since threats are an item in every effective manager’s toolbox. But it becomes the equivalent of blackmail. In all likelihood, the Big Pharma behemoths would refuse to cooperate with the transfer of technology and know-how at a time when all processes need to be accelerated to achieve a lasting effect. They are the ones who possess the clout required to “undermine our global response” and “compromise safety.”

      Most astonishing is Ubi’s claim that the “decision will sow confusion between public and private partners.” Although President Biden’s initiative is only a modest step forward, the waiver would be a welcome occasion to begin to clarify what a presumed “partnership” means. For the public, it could signal the breakthrough some believe they see in Biden’s stance. For the first time in at least two decades, the idea of putting a valuation on the public contribution and translating it into intellectual property rights becomes conceivable.

      Embed from Getty Images

      In the recent past, public investment in all kinds of innovation has been quietly transferred at a fixed price to private interests. In most cases, the price takes little account of actual cost and even less of commercial value. This is as true of Silicon Valley as it is of Big Pharma. The richest billionaires have benefitted from more than a few free lunches.

      Ubi fears that the waiver will “further weaken already strained supply chains.” A year ago, the question of supply chains emerged as a major issue as the wealthy nations discovered they no longer had easy access to the masks, PPE and medical supplies needed to respond to the pandemic. In a competitive globalized world, nearly every nation suddenly found itself at a disadvantage. Ubi is right to signal “strained supply chains.” But the whole point of the waiver is to reduce supply chain bottlenecks at a moment of crisis.

      Ubi’s final point concerns his fear of “counterfeit vaccines.” But liberating intellectual property reduces the attraction of counterfeits, an effect associated with the protected monopoly of exclusive brands. Illicit imitations of every type of commodity will continue to be an issue for local or national law enforcement. The medical profession is far more capable than retail stores to combat counterfeiting.

      The CNBC article concludes with warnings about “China’s ability to piggyback on U.S. innovation to further its vaccine diplomacy aims.” It mentions Russia as well. The idea of cooperation appears nowhere in its reasoning. That is what’s expected from a media whose sole focus is on what affects the stock market. It cites The Washington Post editorial board’s echo of Bill Gates’s self-interested reasoning. With such well-funded resistance in the financial and political world, the likelihood of a serious change of outlook seems limited. DC lobbyists, generously funded politicians and conformist media clearly have more power than the American people and far more than the seven billion people that populate nations not called the United States.

      *[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news. Read more of The Daily Devil’s Dictionary on Fair Observer.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      in World Politics

      Corruption, an Unnecessary Evil

      by

      Since the United Nations Convention Against Corruption was adopted in October 2003, International Anti-Corruption Day is observed annually on December 9. In the context of the ongoing pandemic, António Guterres, the UN secretary general, had a clear message: “Corruption is criminal, immoral and the ultimate betrayal of public trust. It is even more damaging in times of crisis — as the world is experiencing now with the COVID-19 pandemic. The response to the virus is creating new opportunities to exploit weak oversight and inadequate transparency, diverting funds away from people in their hour of greatest need.”

      Corruption impacts every aspect of society and involves all kinds of companies, large and small, in an array of industries. Certain sectors are seen as carrying a higher risk of corruption — oil and gas, armament, construction, among others — but no industry is spared. The World Bank estimates that more than $1 trillion in bribes is paid each year. In the health sector alone, an estimated $450 billion, or around 6% of total expenditure, is lost to fraud annually. Some argue that bribery is part of doing business, but such practices increase costs and put companies at risk of severe financial, legal and reputational damage.

      Tackling Corruption: The Solution Is?

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      For society at large, the effects of corruption are far-reaching and have severe economic repercussions, create unfair competitive advantages and result in the loss or decreased quality of public services. The consequences of this can be devasting. Martin Manuhwa, head of the Federation of African Engineering Organisations, notes that when public contracts are not awarded based on honest and fair bidding, “Infrastructure collapses. Roads develop potholes, and people die. Basically, corruption kills.”

      Looking for Accountability

      Historically, citizens have expected governments to hold companies accountable for corrupt behavior, but their track record of doing so is spotty. Following the 2008 global financial crisis, the United States began enforcing the Foreign Corrupt Practices Act more vigorously. Since then, the US has been a world leader in prosecutions and investigations of foreign bribery, but countries such as the United Kingdom, Switzerland, Israel, France and Spain have recently increased efforts as well.

      However, a recent report from the European Commission found that only 30% of Europeans believe their governments’ anti-fraud efforts are effective. Indeed, Transparency International’s Exporting Corruption 2020 project finds that although high-profile settlements make headlines, the enforcement of foreign bribery laws is very low amongst most Organisation for Economic Co-operation and Development countries; in 2020, only four out of the 47 OECD members actively pursued prosecutions.

      Embed from Getty Images

      Over the past two decades, there has been a proliferation of company-wide anti-corruption compliance systems and industry-level regulations designed to discourage bribery. Governments are often “quite happy” to pass the cost and responsibility of enforcement off to someone else, but self-regulations are often inadequately administered and lack audits performed by independent, disinterested parties. Tools such as the OECD’s Guidelines for Multinational Enterprises provide companies with recommendations for implementing compliance programs. It is then up to the companies to conduct internal audits and ensure employees and contractors are following their anti-corruption policies. Companies are motivated by a variety of factors: legal requirements, the risk of fines and prosecution, reputational damage and, for some, a genuine desire to act more ethically. But while there are self-reported cases of foreign bribery, the temptation to cover up infractions is compelling. 

      Various efforts by industries to self-regulate have also emerged. Non-binding, industry-led initiatives or “soft laws” attempt to set anti-corruption norms by asking companies to adhere to a set of principles. For example, the Extractive Industries Transparency Initiative “invites” multinational companies to disclose money they pay states to extract natural resources.

      In industry-level self-regulating organizations (SROs), member companies develop policies for a particular industry and they, as opposed to an independent agency or government regulator, monitor and enforce member compliance. One example is the Banknote Ethics Initiative (BnEI). The organization was created by some banknote producers to “provide ethical business practice.” Members agree to abide by BnEI’s Code of Ethical Business Practice and to undergo an audit “carried out by a third-party auditor” in order to become accredited. According to their website, audits are conducted by two entities: GoodCorporation and KPMG. But if there are only two options for auditing members of an SRO, are auditors actually independent?

      While SROs can help set standards for industries in the absence of effective government regulation, there is also an inherent conflict of interest. As the NGO Truth in Advertising argues, “Self-regulators are, by definition, funded by the companies they claim to regulate. Don’t for a second believe that any self-regulator wants — or even would be permitted by its constituent members — to do all that it can to prevent harmful or deceptive business practices that are proving lucrative for the industry.” The OECD and the UN Environment Programme add that self-regulatory processes are often burdened by a lack of enforcement and inadequate sanctions of member companies, lower incentives to voluntarily report bad practices and are dominated by a small number of companies that prioritize what is in their best interests.

      An International Anti-Bribery Standard

      A new development offers hope for addressing the global corruption problem. In 2016, the International Organization for Standardization (ISO) introduced the ISO 37001 Anti-Bribery Management Systems. Created using input from existing recommendations and from countries, non-profits and esteemed multilateral institutions, the standard provides an auditable, independent benchmark of international compliance principles and enables organizations of all sizes, public or private, to prevent, detect and address bribery.

      To become certified, an anti-bribery management system meeting the standard’s requirements must be implemented, an individual overseeing compliance needs to be appointed, and financial controls, monitoring and reporting processes need to be in place. Audits are done over a three-year period (to ensure policies are not simply on paper) and are performed by independent certifying bodies.

      Numerous companies and governments have since pursued certification as ISO 37001 has increasingly become recognized as the reference for anti-bribery. Anti-corruption lawyer Jean-Pierre Mean says the advantage of certification is benchmarking and reassuring organizations that they have implemented effective measures. Moreover, “It also demonstrates that you have a system that works to stakeholders, personnel, shareholders, and the community at large.”

      As a sign of confidence in the standard, prosecutors in Brazil, the US, Denmark, Switzerland and Singapore have required companies to pursue ISO 37001 certification as conditions of settlements in many lawsuits. While certification cannot guarantee bribery will not take place, it is universally recognized proof of a company’s willingness to prevent it. Companies and governments should require ISO 37001 certification from potential partners as a prerequisite to doing business, discarding superfluous and therefore suspicious self-regulation.

      Increased efforts to curb bribery have had varying levels of success. Government enforcement of existing laws needs to be strengthened as evidence has shown that self-regulation is flawed. The introduction of ISO 37001 as an independent standard for anti-bribery holds the most promise, but more companies and governments need to pursue certification for change to happen. Corruption may be as old as it widespread, but it can also be avoided.

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More