Thursday, March 26, 2009

It's the Sun, stupid!


Below is an oped by a new friend whom I have met in NY 2 weeks ago during the 2nd ICCC sponsored by Heartland Institute. The author, Dr. Willie Soon, is a Malaysian-American solar and climate scientist at the Harvard-Smithsonian Center for Astrophysics. This is his personal opinion based upon 18 years of scientific research.

This article further convinced me that the "anthropogenic climate change" theeory is wrong. CO2 is not a pollutant. It's a gas that comes out of our nose and mouth when we exhaule, a gas that comes out from the mouth and nose of our dogs, cows, chickens, other animals. It's a gas that plants, flowers and trees "inhale".

The many scientific evidence that Astrophysicists, meteorologists, geologists, etc. have gathered showed that there is NO correlation between CO2, much less man-made CO2 emission, and global climate. Rather, it's the sun -- solar irradiance, sun spots cycles, other solar activities.

Here are the relevant materials:

(a) Dr. Soon's article, below.

(b) his youtube video,
http://www.youtube.com/watch?v=9rEXe4y1d8Q

(c) a news report, "Gore “not interested” in debate with Dr. Willie Soon and Lord Christopher Monckton",
http://theclimatebet.com/2008/04/09/gore-not-interested-in-debate-with-dr-willie-soon-and-lord-christopher-monckton/

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It’s the Sun, stupid!
New direct evidence demonstrate that changes in solar activity influence climate

Willie Soon
March 2009

The theory that climate change is chiefly caused by solar influences “is no longer tenable,” says US National Academy of Sciences president Ralph Cicerone. Carbon dioxide, he argues, is the key driver of recent climate change. I beg to differ.

The amount and distribution of solar energy that we receive varies as the Earth revolves around the Sun and also in response to changes in the Sun’s activity. Scientists have now been studying solar influences on climate for 5000 years.

Chinese imperial astronomers kept detailed sunspot records. They noticed that more sunspots meant warmer weather on Earth. In 1801, the celebrated astronomer William Herschel noticed that when there were few spots, the price of wheat soared -- because, he surmised, less “light and heat” from the Sun resulted in reduced harvests.

Is it true then that solar radiation, which supplies Earth with the energy that drives our climate, and caused so many climate shifts over the ages, is no longer the principal influence on climate change?

The UN’s climate panel claims there is scientific “consensus” that man-made CO_2 emissions are causing “dangerous” climate change. However, its 2007 Climate Assessment is fraught with serious scientific shortcomings in its discussion of the Sun’s influence on Earth’s climate.

The UN said direct measurements of solar radiation since 1979 show little increase. However, this conclusion depends upon disparate and adjusted measurements that were combined from several satellites and may be incorrect.

Between 1645 and 1715, sunspots were very rare and temperatures were low. Then sunspot frequency grew until, between 1930 and 2000, the Sun was more active than at almost any time in the last 10,000 years. The oceans can cause up to several decades of delay before air temperatures respond fully to this solar “Grand Maximum.” Now that the Sun is becoming less active again, global temperatures have fallen for seven years.

Next, the UN said estimates of the increase in solar radiation over the past 400 years should be reduced. The basis for this claim was a modeling study by the US Naval Research Laboratory. However, the Navy computer program was not designed to reach such conclusions, as it has no routine to calculate solar radiation.

We have known for nearly 80 years that small changes in solar activity can cause large climatic changes. Where sunlight falls, for how long, and with what effect, determine how climate will respond.

The most recent scientific evidence shows that even small changes in solar radiation have a strong effect on Earth’s temperature and climate.

In 2005, I demonstrated a surprisingly strong correlation between solar radiation and temperatures in the Arctic over the past 130 years. Since then, I have demonstrated similar correlations in all the regions surrounding the Arctic, including the US mainland and China.

The close relationships between the abrupt ups and downs of solar activity and of temperature that I have identified occur locally in coastal Greenland; regionally in the Arctic Pacific and north Atlantic; and hemispherically for the whole circum-Arctic, suggesting that changes in solar activity drive Arctic and perhaps even global climate.

There is no such match between the steady rise in atmospheric CO2 concentration and the often dramatic ups and downs of surface temperatures in and around the Arctic.

I recently discovered direct evidence that changes in solar activity have influenced what has been called the “conveyor-belt” circulation of the great Atlantic Ocean currents over the past 240 years. For instance, solar-driven changes in temperature, and in the volume of freshwater output from the Arctic, cause variations in sea surface temperature in the tropical Atlantic 5-20 years later.

These previously undocumented results have been published in the journal /Physical Geography/. They make it difficult to maintain that changes in solar activity play an insignificant role in climate change, especially over the Arctic.

The hallmark of good science is the testing of a plausible hypothesis that is then either supported or rejected by the evidence. The evidence in my paper is consistent with the hypothesis that the Sun causes climatic change in the Arctic.

It invalidates the hypothesis that CO_2 is a major cause of observed climate change -- and raises serious questions about the wisdom of imposing cap-and-trade or other policies that would cripple energy production and economic activity, in the name of “preventing catastrophic climate change.”

Bill Clinton used to sum up politics by saying, “It’s the economy, stupid!” Now we can fairly sum up climate change by saying, “It’s the Sun, stupid!”

Thursday, March 19, 2009

John Rutledge on entrepreneurship


Among my favorite bloggers is John Rutledge, Chairman of Rutledge Capital. I met him 2 years ago in Honolulu, Hawaii, during the Pacific Rim Conference sponsored by 6 free market think tanks -- ATR, SPN, IPN, GIH, LRI, and NF. I doubt that he will remember me, but he was our dinner keynote speaker. After his talk, I joined a group of other participants who "ambushed" him in a long informal talk.

The man is very intelligent. I think he has double degrees -- Physics and Business administration. He was talking about economic growth and competition using some concepts in physics like the law of thermodynamics. His blog is
http://www.rutledgeblog.com/

Last week, he wrote a very inspiring blog entry,
"Mary, my Hero of the Week"
from their Saturday Entrepreneur Show

Here is the story of Mary, 70, who wanted to become a start-up entrepreneur.

March 08, 2009 By: John Rutledge

We have a new Fox Business show for entrepreneurs...
I don’t mean entrepreneurs like Bill Gates or Warren Buffett. they are already wealthy. I mean REAL entrepreneurs that start companies in their kitchen and struggle every day to survive.

Our message is simple. We need to stop waiting for the government to bail us out or some big company to offer us a job. We need to get off the couch, light the blue flame, and do it ourselves by starting and growing our own businesses.

Yesterday we had a ton of calls from people fighting to survive in the tough economy. It breaks my heart to talk with a man running a shower door company, like we did yesterday, who is trying to decide who to fire because he can’t make next week’s payroll or pay the rent. But I admire these people so much that we have to try–and sometimes we can find a way to help.

Every week there is some person on the show that really gets to me. These are my heros. So far my all time champion is Terry–tell you about him later. This week my hero is Mary from Arkansas.

Mary called in to ask us if we thought she was crazy that she is thinking about starting a business.

Mary is 70 years old and has no business experience. But she has developed a dipping sauce in her kitchen that her friends all say is so good that she ought to be selling it. She had 2 questions. Was she crazy at her age to think she and her family could do this in their own kitchen? And how can she get started?

Crazy? Are you kidding, Mary? It is you, and people who have even half your energy, that built this country in the first place. I am humbled by your example. Go get ‘em girl.

Mary’s questions were good ones. Does she need any special equipment? (No) Can she start it in her own kitchen with her family? (Yes. That’s the best way.) Does she need a bigger pan to get started? (she only has a 5 quart pan) (No. Buy a bigger pan when you make some money.) Should she start selling the first (5 quart) batch or wait until she has made a lot more of it? (Waiting is for tourists. Start NOW.) And how can she find customers (lots of ideas including using local restaurants and gift shops, a card table by the road, going on local (free) radio and TV, and friends and family.) I told Mary I would take a jar of her sauce with me next trip to China.

Later in the day I got emails from people all over the country who were inspired by Mary to get their businesses going too. Working on a way to connect the mini entrepreneurs into a virtual marketing network they can each help the other sell into their local markets.

I may be a simp, but Mary gives me hope. I hear so many people whining every week about what they don’t have that I am uplifted to talk with a 70 year old woman in Arkansas who is ready to kick some butt.

Mary, you are my hero.

JR

Pol. Ideology 13: Liberty and Liberty Forum, the LP

Liberty is a philosophical concept often associated or deemed synonymous with freedom, democracy and sovereignty. But while freedom can be a close synonym of liberty, democracy and sovereignty may not be. This is because liberty has two wide connotations: collective liberty and individual liberty. Democracy (the will of the majority) and sovereignty (freedom from foreign colonialism or domination) therefore, connotes more of collective (national, regional, community) liberty and cannot be a substitute for individual liberty.

This distinction is very important because most -- if not all -- public policies and institutional or organizational tools and rules that oppress or harass the individual, are done in the name of the collective, in the spirit of “country/nation first before self” or “community first before the individual”.

There is one case though, when collective liberty can be equivalent to or synonymous with individual liberty: when the collective is done or aggregated in a voluntary way, and not forcibly imposed. Examples of voluntary collectivism are civic organizations, sports clubs, neighborhood associations, among others. Here, individuals join voluntarily, or were invited and sponsored by their close friends or associates, and individuals have the option or freedom to get out of such collective. And the voluntary organization or collective can possibly die when it no longer enjoys the support of its members. This is also the essence of “civil society”.

When a collective is done forcibly, ie, individuals are mandated or coerced to belong to a collective, this is considered “forced collectivism” and cannot be considered as synonymous with individual liberty. The single biggest example of forced collectivism is Government (local or national). There are plenty of public policies that assert or impose forced collectivism, foremost of which are the various taxes and regulations, restrictions and prohibitions unless those regulated will first secure the approval and signatures of the regulators.

In many lectures, symposia and conferences on economics, business and politics, the primacy of individual liberty and the dangers of imposed collectivism are hardly mentioned, or none at all. The mere absence of this reminder or distinction already reflects the triumph of forced collectivism in the minds of the public.

Thus, if one finds a symposium or conference where the primacy of individual liberty is often mentioned, if not made a central theme of the activity, one is considered very lucky.

The annual “Atlas Liberty Forum” by the Atlas Economic Research Foundation (www.atlasnetwork.org) can be considered as one of those very few conferences around the world were individual liberty and the importance of free market is a constant central theme. Some panel discussions that mention collective liberty refer to the voluntary collectivism strand.

When I and a few friends in Manila formed “Minimal Government” around February 2004, we knew that we were free marketers, we knew that we believed in “minimal government = minimal taxes = minimal bureaucracy”, but we did not realize much the distinction between individual and collective liberty, we did not know much about the free market and liberty movement around the world, we barely knew any free market-oriented think tank or institute outside of the Philippines.

These all changed, almost abruptly, when Atlas offered me an international fellowship in April 2004. There were several activities for an international fellow, one of which was attend the “Atlas Liberty Forum”. It was the 4th liberty forum and held in Chicago. That was my first “baptism” of what a liberty forum looks like, and a wide world of free market-oriented independent think tanks from many countries and continents around the world slowly unfolded before my eyes.

The forum and various panel discussions were very helpful and educational, but the most important aspect of the activity that I later realized, was the “liberty networking”. First, my roommate in the hotel would turn out to be among my closest friends in the liberty movement, Mr. Barun Mitra, founder and Director of Liberty Institute in Delhi, India. Second, a number of new friends and allies that I met there five years ago, especially those from Asia, I would meet in other succeeding international and regional conferences and meetings; or at least correspond regularly by email. And third, collaborative work and campaigns among ally think tanks would soon be initiated and sustained.

(With JTR President Mr. You, and Atlas President Alex Chafuen, Atlanta, 2008)

My second attendance of the Atlas Liberty Forum was in Atlanta, Georgia, April 2008. This time, I was a confident participant who knew a number of other international and American participants and speakers. And this time, my interest was more on the panel discussions on fund-raising, though the discussions on liberty issues, like the panel on “Promoting freedom in difficult countries”, were also very informative.

Any serious liberty-oriented think tank or political movement needs substantial financial resources, for obvious reason. But a more specific reason not known to many people, is that more serious free marketers do not solicit or accept any government money (local, national or inter-governmental/multilateral) or funding from any political party, to keep and sustain their full independence from governments and political parties. Whereas most think tanks and political groups, including many NGOs and civil society organizations (CSOs) get substantial funding from governments, inter-governmental or multilateral institutions, and political parties.

Thus, fundraising is a recurrent topic in every annual Atlas Liberty Forum. This coming Liberty Forum will be held in Los Angeles, California, April 24-26 of this year.

Participants of this forum, as well as symposia, training and conferences by allied think tanks and institutes, are constantly reminded, explicitly or implicitly, that they are fighting for a society, they are envisioning a world, where the individual is not taken for granted or oppressed, in the pursuit of collective freedom and economic development.
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My recent short paper on liberty and liberalism,

Liberal Tradition and the Liberal Party



A relatively known political strategist and blogger discussed the question, "What's the matter with Mar?" to refer to the low popularity as a Presidential candidate in the Presidential elections next year of Liberal Party President, Sen. Mar Roxas. The author, Mr. Lito Banayo (http://litobanayo.blogspot.com/2009/02/whats-matter-with-mar.html), asked, "How come he ranks low, even behind his fellow senator Ping Lacson, who has not bothered to move around the country nor advertise his wares yet?"

I think Mar and the LP need to reassert the classical liberal agenda. The primacy of individual liberty, the limits and some dangers of (forcible) collective liberty like nationalism, protectionism and property rights confiscation.

This is because almost ALL political parties in this country, big and small, are warped in the semi-socialist slogan, "country/collective over the individual". Isn't the progress and growth of society ultimately measured by the freedom and progress of the individual?

There are many negative implications of forcing collective liberty over the individual: the individual should not become very rich, he cannot be allowed to become super-rich, his income, his cars, his house/s and properties, his company, his savings, his travels, his consumption, his estate to his children and grandchildren, etc. need to be over-taxed and over-regulated. And the "guardians" of the collective -- the government and its thick army of politicians and bureaucrats -- will get the confiscated incomes and savings to force equality in society, even to the point of rewarding and subsidizing the lazy and irresponsible -- after putting huge share of such resources for the salaries and perks of the "guardians".

This is not to say that LP and Mar should strictly embrace that classical liberal philosophical tradition, but anything closer to that tradition, and away from the populist, collectivist, if not confiscatory mindset, will make Mar and the LP unique. Too many businessmen and entrepreneurs want a break from the choking bureaucracies, taxes and fees that all administrations in the past, regardless of their political parties, have instituted and/or maintained. This group of entrepreneurs will be a huge army of supporters and allies for the party.
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See also:
Pol. Ideology 4: Comments to Minimal Government Manifesto,  December 05, 2005
Pol. Ideology 5: Have Movements for Liberty Progressed? June 26, 2006
Pol. Ideology 6: Quotes from Adam Smith, February 04, 2007
Pol. Ideology 7: Individualism, Entitlement and Freedom, April 30, 2007
Pol. Ideology 8: Ideas on Liberty, September 15, 2007
Pol. Ideology 9: Liberty and Choice, Atlanta and HK Conferences, June 09, 2008
Pol. Ideology 10: Joe Stiglitz and the Market, December 16, 2008
Pol. Ideology 11: Liberalism, Democratism & Authoritarianism, January 04, 2009
Pol. Ideology 12: Lao Tzu, Cooperative Individualism, February 07, 2009

Free Trade 11: Global Petition, Keynes

Yesterday, I wrote this:

There is an on-going global campaign against the wave of protectionism. An international coalition composed of individuals and institutes or think tanks, explicitly free marketer or not, will be formed. This campaign and coalition has been initiated by the International Policy Network (IPN) and the Atlas Economic Research Foundation, two of the closest friends of MG Thinkers.

May I encourage readers to sign this petition, below.

http://atlasnetwork.org/tradepetition/
http://freedomtotrade.list-manage.com/subscribe?u=4a59832f04a5d6164a0b81a24&id=6cdd6e9f9d

This petition will be presented in London during the G20 summit (2-3 April).

Free trade is freedom to trade and exchange.
Zero coercion or restriction.
Period.

regards,

Nonoy Oplas
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Petition:

Free Trade Is the Best Policy

The specter of protectionism is rising. It is always a dangerous and foolish policy, but it is especially dangerous at a time of economic crisis, when it threatens to damage the world economy. Protectionism’s peculiar premise is that national prosperity is increased when government grants monopoly power to domestic producers. As centuries of economic reasoning, historical experience, and empirical studies have repeatedly shown, that premise is dead wrong. Protectionism creates poverty, not prosperity. Protectionism doesn’t even “protect” domestic jobs or industries; it destroys them, by harming export industries and industries that rely on imports to make their goods. Raising the local prices of steel by “protecting” local steel companies just raises the cost of producing cars and the many other goods made with steel. Protectionism is a fool’s game.

But the fact that protectionism destroys wealth is not its worst consequence. Protectionism destroys peace. That is justification enough for all people of good will, all friends of civilization, to speak out loudly and forcefully against economic nationalism, an ideology of conflict, based on ignorance and carried into practice by protectionism.

Two hundred and fifty years ago, Montesquieu observed that “Peace is the natural effect of trade. Two nations who differ with each other become reciprocally dependent; for if one has an interest in buying, the other has an interest in selling; and thus their union is founded on their mutual necessities.”

Trade’s most valuable product is peace. Trade promotes peace, in part, by uniting different peoples in a common culture of commerce – a daily process of learning others’ languages, social norms, laws, expectations, wants, and talents.

Trade promotes peace by encouraging people to build bonds of mutually beneficial cooperation. Just as trade unites the economic interests of Paris and Lyon, of Boston and Seattle, of Calcutta and Mumbai, trade also unites the economic interests of Paris and Portland, of Boston and Berlin, of Calcutta and Copenhagen – of the peoples of all nations who trade with other.

A great deal of rigorous empirical research supports the proposition that trade promotes peace.

Perhaps the most tragic example of what happens when that insight is ignored is World War II.

International trade collapsed by 70 percent between 1929 and 1932, in no small part because of America’s 1930 Smoot-Hawley tariff and the retaliatory tariffs of other nations. Economist Martin Wolf notes that “this collapse in trade was a huge spur to the search for autarky and Lebensraum, most of all for Germany and Japan.”

The most ghastly and deadly wars in human history soon followed.

By reducing war, trade saves lives.

Trade saves lives also by increasing prosperity and extending it to more and more people. The evidence that freer trade promotes prosperity is simply overwhelming. Prosperity enables ordinary men and women to lead longer and healthier lives.

And with longer, healthier lives lived more peacefully, people integrated into the global economy have more time to enjoy the vast array of cultural experiences brought to them by free trade. Culture is enriched by contributions from around the world, made possible by free trade in goods and in ideas.

Without a doubt, free trade increases material prosperity. But its greatest gift is not easily measured with money. That greatest gift is lives that are freer, fuller, and far less likely to be scalded or destroyed by the atrocities of war.

Accordingly, we the undersigned join together in a plea to the governments of all nations to resist the calls of the short-sighted and the greedy to raise higher the barriers to trade. In addition, we call on them to tear down current protectionist barriers to free trade. To each government, we say: let your citizens enjoy not only the fruits of your own fields, factories, and genius, but also those of the entire globe. The rewards will be greater prosperity, richer lives, and enjoyment of the blessings of peace.


Sign the Petition
http://freedomtotrade.list-manage.com/subscribe?u=4a59832f04a5d6164a0b81a24&id=6cdd6e9f9d
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Today, I received a comment from a Filipino friend based in Europe. He wrote,

I just read an interesting passage from John Maynard Keynes on his 'National Self-sufficiency' , which could be interpreted as his proposition that 'de-globalisation' (or a certain degree of protectionism) or national self-suficiency or nationalisation of finance - and not free trade actually promotes peace and development. Keynes wrote:



I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel – these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national. Yet, at the same time, those who seek to disembarrass a country of its entanglements should be very slow and wary. It should not be a matter of tearing up roots but of slowly training a plant to grow in a different direction.

'For these strong reasons, therefore, I am inclined to the belief that, after the transition is accomplished, a greater measure of national self-sufficiency and economic isolation among countries than existed in 1914 may tend to serve the cause of peace, rather than otherwise. At any rate, the age of economic internationalism was not particularly successful in avoiding war; and if its friends retort, that the imperfection of its success never gave it a fair chance, it is reasonable to point out that a greater success is scarcely probable in the coming years.' (Keynes 1933/1972).


My friend added, "I think your ranks or 'the big names' themselves should come back debating the ideas of Keynes, especially that this crisis moment when 'we all seem to be Keynesian now' as the Financial Times put it a few months ago."

It's good that Keynes recognized the internationality or globalized character, of knowledge, science, travel, etc. I think if he were alive today, he will also recognize the globalized character (hence, must not be "caged" in any national boundary) of sports, culture, music, adventure, online networking (facebook, friendster,...).

So why would he propose to "cage" goods to national territories and not be internationally exchanged and traded freely? Is it wrong for my HP laptop, your (probably Nokia) cellular phone, someone's Ford expedition or Toyota Avanza, other people's gadgets, appliances, cars, shoes, salmon, Australian beef, etc. to be traded internationally? I cannot see any point why it is wrong.

Protectionism for me, is dictatorship.
The protectionists are dictating us to whom we can sell, to whom we can buy, at how much quantity, at what price and tax rates, when we can buy or sell, etc.

Under free trade, there is zero restriction, zero coercion.

A Finnish cell phone manufacturer can offer us their best models, but we can say "No, we're not buying from you, we prefer Korean or Japanese cellphones, or we want Taiwanese or Chinese copycats..."

A carinderia (streetside foodshops) owner can say "it's good to patronize onions and vegetables from the Cordilleras (mountain provinces in northern Philippines), but my customers are ordinary folks and jobless people who want the cheapest food possible, and imported onions and vegetables from Taiwan or Vietnam are a lot cheaper than those coming from the Cordilleras..."

A free trader ideologue (like me) can theorize from that carinderia owner's statement that "free trade of onions and veggies will help enable the poorest of the urban poor in the Philippines to deal with the current global economic turmoil and high unemployment. "

Talking about "free trade = peace", maybe the best examples will be Hong Kong and North Korea. HK being the epitome of free trade in Asia, has zero external threat of war (even if one will remove the "China's army" factor). The biggest banks, the biggest clothing and apparel manufacturers and distributors, the biggest hotel chains, the biggest food chains, etc. of the US, Europe, Japan, Canada, Korea, etc. have offices in HK. Any country that dare invade and attack HK will face the most modern fighter planes and armies of those countries mentioned.

In contrast, North Korea, autarkic except limited trade with neighboring China and S. Korea, is suspected by many countries around the world, in Asia especially, of possibly starting a war, or inviting a war, partly because of the absence of free flow of goods and services across its borders, absence of the internationality of the wwweb and the information it brings, etc.

"We're all Keyneysians now" were uttered by people who love more government, more borrowings and taxes, more intervention and regulations, more politicians and bureaucrats. I dont think the owners of yahoo, google, facebook, linux, etc. would ever desire and hope for such kind of a business environment. And yet these are among the companies that make lots of money with almost zero government subsidy and "support".
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See also:
Free Trade 1: Estonia's Free Market, Globalization, May 09, 2006
Free Trade 2: Unilateral Trade Liberalization, May 17, 2006
Free Trade 3: Protectionism Perpetuate Poverty, September 05, 2006
Free Trade 4: FTA in APEC, July 09, 2007
Free Trade 5: Business , Rock Music and Cycling Globalization, July 17, 2007
Free Trade 10: More on Unilateral Trade Liberalization, July 15, 2008

Wednesday, March 18, 2009

Rule of Law 3: AIG Bonuses, Government Bail-outs



A corporation aiming to keep its bright people to produce bright work needs to provide them bright incentives. Bonuses are one of such incentives. So when AIG decided to give bonuses to its people who stuck with it through these past few months, so that those people will help the company recover from its shameful position of being bailed-out by a government just to escape bankruptcy, AIG was doing the right thing.

Unfortunately for AIG, by soliciting and accepting bail-out money from taxpayers and the politicians in the first place, AIG has politicized its corporate nature. It has abdicated its corporate independence and embraced political dependence. The moment it accepted the bail-out money, it should expect intervention anytime anywhere by politicians and taxpayers. The current howl against AIG giving bonuses to its personnel is understandable, but AIG's desire to keep its people is also understandable, and that those bonuses are stipulated in the contract between the company and its personnel, and that contract was made before the financial crisis emerged.

If the rule of law is to be respected, US legislators and the President should stay away from internal arrangement and contract between employers and employees. The rule of law also stipulates that AIG should pay each and every single dollar and cents that it owed the US Treasury. There are harsh penalties if the debtor will not fulfill its obligations. This gives teeth to the rule of law.

If giving bonuses will keep good staff or attract new people who can make the company recover financially so it can pay all its debts to the government and other private creditors, so be it. What the US politicians and taxpayers are howling is that by giving huge bonuses at the time the company is bleeding financially and asking for billions of $ of bail-out money, the likelihood of that company paying back all its debt to the government and taxpayers will become small.

The politicians and bureaucrats who extended the bail-out, as well as private citizens who supported the bail-out, are playing double-talk when they howl against the AIG bonuses. Governments and corporations have their own set of profligacies and wastes. That is why it is important that they keep to themselves those profligacies, and not extend or infect the other. Government bail-outs are perfect tools of co-inflicting those profligacies.

Should AIG justify and proceed the bonuses?
I say Yes.
Should AIG get more bail-out money?
I say No.

AIG should limit the foolishness of losing its corporate independence and embracing political dependence. The sooner it can do it, the better for its staff, shareholders and clients. By cutting or reducing its bail-out loan, the better. When it has brought down its bail-out debt to zero, then it can give double, triple, or whatever multiple, of current bonuses or whatever profligacies to its people.
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On a related note, I wrote this last October 07, 2008:

Failing Big Business Marries Big Government

One Cato scholar I read said the Democrats and other big-government advocates among the Republicans passed the bail-out bill because it will give them additional power to regulate big banks and other financial institutions, on top of SEC, Fed, other US government agencies' regulation work. He called it, "where failing big business marries big government".

Private enterprises should be allowed to grow big or go bankrupt -- without government intervention. The job of the government is to ensure the rule of law, that parties honor their obligations and contracts with other parties, and that robbers, thieves and killers along the way are neutralized.

Meanwhile, I am wondering where the left, the socialists, anti-imperialists, the anti-capitalists, anti-market, etc.. position themselves first on the bail-out debate last week, and the implementation of the bail-out and more regulations in the coming weeks and months as a result of the bail-out law.

If they have to be consistent as leftists and socialists, they should have clapped and supported the bail-out plan and its full implementation. Because it means more taxes, more regulations, more protection for the irresponsible.

Leftists and socialists who oppose the bailout and its future implementation have no right, or are inconsistent, to do so. The job of opposing more government regulations and taxation is the task of the free marketers, not the statists and leftists.

About the Lehman brothers investigation in the US congress yesterday, I was curious -- why did Congress investigate the firm that the government did not rescue and now bankrupt? Why did it not investigate first the firms that got tax money, that's why they're not bankrupt yet? Why save IndyMac, Fannie and Freddie, and AIG, but not Lehman and Washington Mutual?

Regulators and politicians who chose whom to save and whom to allow to sink, whom to investigate and demonize in a congressional hearing and whom to spare from investigation and given tax money, are practicing double-standard. So I don't see the logic of trusting the same regulators and politicians or institutions to do more regulatory powers. Only big government can do such double standard.

Have no sympathy for Lehman and its top executives who were receiving millions of dollars in compensation and perks while the firm was bleeding. It's good that such firm has already collapsed. But the same corproate callousness and irresponsibility could be said of Freddie and Fannie and other firms bailed out and soon to be "rescued" by the US government.
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See also:
Rule of Law 1: Entrepreneurship and Government Permits, September 16, 2008
Rule of Law 2: Property Rights and Lefts, March 02, 2009

World water forum


Water, clean drinking water, should be the second most important or most urgent thing needed for human survival, next to air. And like education, health care, housing, other sectors, there is a continuing debate over who can better provide clean drinking water to billions of people in the planet -- the government or private water companies (with heavy government regulation, of course).

This is among the subjects being tackled by the Fifth World Water Forum (March 16-22, 2009) which began in Istanbul, Turkey, the other day. Reports showed however, that many activists opposing water privatization begun to create trouble, with violent protests that have diverted attention from the above agenda.

Kendra Okonski, IPN Research Fellow and editor of The Water Revolution, said of the protestors:

Whether it’s Tokyo, Mexico City or Istanbul, a few global activists show up like clockwork at the World Water Forum to protest and make noise. Unlike the bona fide participants in the forum, they offer few – if any – concrete solutions to real water problems. In fact, these activists harm the world’s one billion people who lack clean water and the 2.6 billion without sewerage.

Caroline Boin, IPN Research Fellow, explained that the status quo with water is harmful and unsustainable:

The activists attack the World Bank, multinationals and the very notion of profit. But less than five percent of global water management today is private. The real culprits are governments who mismanage and misallocate water to farmers and other special interests, as well as the politically connected, in poor countries. Not only does this harm the poor, it also harms the environment by encouraging waste.

The International Policy Network (IPN) published two new studies on water management -- in Bolivia (by David Bonnardeaux) and Chile (by María de la Luz Domper).

Monday, March 16, 2009

Pharma mergers and government




Last week saw two huge mergers in the global pharmaceutical industry. The first was the Merck-Schering-Plough merger that amounted to $41 billion take-over of Schering-Plough. The second was the Roche-Genentech merger where the former bought the latter for nearly $47 billion. These 2 mergers happened within 2 months after the Pfizer-Wyeth merger (see my discussion on this last January 28, 2009).

Such large mergers in a short period of time did not seem to happen in any other industry. So one may wonder, what triggered such moves, aside perhaps from the on-going global financial crisis?

There are two important development that seem to stand out. One is internal to the industry, the other is external. The industry-related development is the growing competition by generic manufacturers as the patents and IPRs of key blockbuster medicines by innovator pharmaceutical companies are nearing expiration. Almost all industries in the world face this kind of competition from various players within the industry. So this factor is understandable.

The second development, external to the industry, is the growing or creeping take-over by governments of health care, particularly of medicines, through more rigid regulations. For instance, many countries have medicines price control, intellectual property rights (IPR) busting like compulsory licensing of effective but "expensive" medicines, and parallel importation. In the US in particular, the current administration is very vocal on more government role and intervention in public health, and it can include more regulations of innovator pharmaceutical companies who produce more effective, more revolutionary, but "more expensive" medicines.

An Editorial by the WSJ last week, "Mergers and Inquisitions", pointed this out (http://online.wsj.com/article/SB123664413584778083.html?mod=djemEditorialPage). The Editor wrote,

"Deal-making is fast reshaping the pharmaceutical industry, and we wish we could say it was a sign of creative destruction. More likely it is the industry's way of anticipating, and building insurance against, the coming era of government-run health care."

The number of "block-buster" medicines that come on stream globally seem to be dwindling, whereas the number of generics manufacturers seem to be expanding. The current trend of governments -- and supported by huge inter-governmental bodies like the WHO -- is favoring generics production and patent busting of innovator companies, all in the name of "access for all to effective medicines". But this can lead to a danger of "absence for all of future revolutionary medicines". Like more revolutionary medicines against evolving strands of AIDS, cancer, TB, etc.

If I were an innovator pharmaceutical company and the trend of IPR-busting will continue, I will shift to innovating more revolutionary medicnes for skin whiteners, dandruff removers, fat burners, height enhancers, pimple removers, breast and penis enlargers, and so on. There are no IPR-busting laws or regulations for these medicines, so that innovators can be assured of huge profit.

Pakistan demonstrations



A friend from Lahore, Dr. Khalil Ahmad, of the Alternate Solutions Institute (Pakistan's first and possibly only free market think tank), posted that they are in the "midst of a revolution".

This afternoon, the demonstrations by lawyers and other activists turned violent, and scored have been wounded.

I told Khalil that it's "People Power" revolt. I just hope that it will not be as bloody like what happened in Tibet and Myanmar the past 2 years, where scored have been killed by the government soldiers.

In Philippines' People Power 1 and 2 in 1986 and 2001, respectively, there was regime change, the incumbent Presidents on those periods were toppled, no bloodshed. It's just that many participants in People Power 2, like myself, regretted we did it because we installed an equally corrupt but more politically-shrewed President.

This thing, I believe, though dangerous, must come and must happen, as part of Pakistan's political evolution. Despots must learn their lesson that the people cannot be oppressed for long without them asserting their civil and political rights.