I watched the documentary, Life and Debt this morning. I can’t say I liked the tone used to tell this story. Clearly, the target audience was Americans, and yet the narrator intentionally insults her audience in the way the story is framed with regards to tourists. The insults distract from the point, making it hard to focus on the true message. As such, I feel my response is more confrontational and contradictory than I would have expected.
Local markets, especially for agriculture are a tough thing; even in the US, local producers face stiff (and some claim unfair) competition from imported goods. While there is no doubt that the government’s fiscal policies and interactions with other countries and world organizations are a huge factor in this, consumers have a responsibility as well (beyond just who they select as their government representatives). A century ago, Americans spent nearly half of their disposable income on food. As markets have opened up, food has become comparatively cheaper and American consumers now expect to pay far less. In fact, according to Gallup, Americans spend 25% less on food today (inflation-adjusted) than they did in 1944 (source). When this gets factored in with other changes, Americans now spend 13.3% on food (source). If consumers want to see a stronger market for domestic goods, they must choose to spend accordingly.
My wife and I intentionally pay a premium for local goods, especially meat and produce. For example, we pay ~$35 for a whole frozen chicken, several times over the price of chicken at the local supermarket. This takes more than just budgeting your finances to spend a greater % on food. It also means eating seasonally and/or canning. If you live in New England and want a strawberry in January, you can get one at the supermarket from Peru, from you freezer/can, or just go without. To put it another way, consumers must make the mental shift from thinking of food items as commodities (all onions are the same) and shift to think of a local onion as something entirely different than an imported onion.
I believe my American experiences conveyed above hold true to Life and Debt’s Jamaica. The documentary showed many Jamaicans lamenting the fact that people are consuming imported food. The Jamaicans have limited funds and when evaluating the value proposition of an onion, they are choosing the imported one as it appears to be more onion for less money. Consumers must learn to see the difference in the good itself as well as the value to the larger economy that can come of it.
However, in the global economy, not everything can be made locally in quantity. When the movie delved into the banana trade, they spoke about how it costs Jamaicans $11 to produce 40lbs of bananas while the South American countries can produce the same for $5. What to do? Why would a non-Jamaican consumer (or 3rd party buyer) pay more than twice as much for a banana? It seemed that Europe offered a good deal to the Jamaicans to purchase those bananas at such a price, but that can’t be expected to last indefinitely. In fact you could argue that the banana policy that is good for Jamaica is having a negative impact to the lives of banana plantation workers in South America.
Other markets (take the US for example) have lost the majority of entire industries to foreign competition, but the US has been more successful (not by luck, but by the policies the US itself puts into place globally) in upskilling the workforce to do replacement work. This is how we like to think of globalization rising the water for all boats. While that may be true in a nation like the US with a great deal of natural resources, influence, and existing capital, life is clearly much more difficult for countries like Jamaica who have little of those benefits.
This brings us to the organizations like the WTO and IMF, which are not much different than the predatory banking institutes we discussed in Inside Job. These groups were formed by the 1st world countries for their own benefit and that mission continues. I wouldn’t go so far as to say that these organizations set out to hurt 3rd world nations, but they do what’s in the best interest of 1st world nations, whether it hurts or helps the poor. Clearly the “free market”, left as is, will not come to the aid of the Jamaicas of the world, nor will they be able to pull themselves out of their poor economies by themselves with the global economy and policies as is. Changing this dynamic will require the nations in power to move from entirely self-motivated policies to something more magnanimous; seeing themselves as stewards of the world’s citizens, not just those of their own country; taking us back to the consumer citizen. The governments in control of the global economy (and thereby WTO, IMF, etc.) are representative of their citizens (some much more than others) and are charged with caring for the interests of their constituents. These citizens must demand, as a group, that their representatives change their mission to look after the larger good. I know this is no small feat, but I see it as the only way to bring change to the system.
How to do it? Getting the word out to the 1st world’s citizens is key. Documentaries, such as this one are a great way to do that, but Life and Debt missed this opportunity in two key ways. First, they did not connect the dots sufficiently for the audience on what they can do to bring change. Raising awareness with no funneled action isn’t beneficial. The other problem is that the film is overly confrontational with the very people it is trying to get help from. One could easily walk away from this film with the impression that Jamaica doesn’t really want American tourism business (although I’m sure they do). Hopefully, future documentaries of the same type will find a better balance of challenging the viewer to drive engagement, without alienating them all together. For a good example of this done well, see Black Gold.
I recently watched a documentary entitled Black Gold, about the global coffee market and its impacts, specifically, on a group of farmers in Ethiopia as part of a macroeconomics class. Here are my thoughts in response.
I found this documentary quite interesting from a variety of aspects. To me, the theme is that economics (global or local) is about politics … and vice versa. Take Mr. Tadesse at the eight minute mark of the documentary speaking to the crowd of farmers he represents. He walks them through the economics of how the average price for a cup of coffee is $2.19 and that a kilo of coffee beans produces 80 cups of coffee, thus a kilo of coffee beans is valued at $230. Yes, these farms are only paid $0.23 per kilo, implying that there is a 1,000% profit that is being consumed by the “middle man”. This argument clearly lays out to the farmers why they need Tadesse representing them as the head of the co-op, trying to remove the middle-man and thus bring further profits to the farmer. This could easily be a speech by a politician to a corn farmer in Iowa. Of course what Tadesse is leaving out is that the value of a kilo of unroasted coffee beans on a farm in Ethiopia is very different than the value of a cup of coffee. The middle men to in fact add value and deserve some profit in the process. Someone needs to hand-pick (at $0.50 a day) out the bad ones, then transport them to a shipping port, move them across the world to another port, unload and transport to the roaster, roast the beans and repackage them, transport that to the retailers who grind them and heat and water to make coffee. Coffee that is put in a cup, in an air-conditioned building with tables, chairs, and Wi-Fi. That’s a great deal of additional value provided along the way and it is reasonable to expect those value providers to make a profit doing it. But that doesn’t rally the farmers and convince them to pay Tadesse’s salary and travel expenses.
Please don’t get me wrong, there’s a lot to be said for the farmers in this case. They clearly are not getting their fair share of the profit chain that they create. One can easily draw parallels to what is going on domestically with fast food workers and the minimum wage. Capitalism and the principles of economics teaches us how the invisible hand of the market will find the right wage and nobody can argue that even at the wages they make now (fast food workers and/or coffee growers) people are still willing to do the work, so the wage is balanced. Hopefully though, more and more consumers will realize that we are humans with a social contract with other humans and that paying people a living wage is in everyone’s best interest. We’ve read in our textbook how as wages go up, buying power increases, driving output which, if controlled properly, can grow overall GDP. The documentary makes this point towards the end by saying that if Africa’s share of world trade increased by 1% it would generate $70 billion, which is 5x the amount of aid the continent receives in aid. A compelling case, but it gets us back to politics. Every country tends to look out for the best interests of its own economy and it may end up being financially better for a country like the US to send aid to Africa instead of allowing them better terms in the global market. This is, of course, entirely different than what is morally right for the US to do.
It’s a complex game as coffee beans are grown by farmers in dozens of countries, all with different currencies, cost of livings, etc. Yet, they all get funneled into the same global market. For most consumers, a coffee bean is a coffee bean, regardless of its origin, hence a global price per kilo is reasonable. If these farmers from disparate countries were to unionize (for lack of a better term), they could then attempt to set a global price that would be much higher, by controlling production of coffee in each of the countries. This is clearly what the International Coffee Agreement was designed to do when it was originally signed in 1962. Of course at that time, the demand for coffee was shrinking and the post-WWII politics of capitalism vs. communism were in full swing, so an agreement was made to not only limit production of coffee but also limit demand in countries like the US, thus increasing the price. However, as with so many other things, the market changes and when demand not only rose over the next few decades, but then changed to prefer a milder bean (Arabica vs. Robusta) caused the types of beans in demand to change, which impacted coffee-growing nations differently depending on which varieties they exported. For example, Brazil, a large producer of mostly Robusta beans was not pleased with the shift to Arabica beans. This conflict causes the ICA to breakdown in 1989, leading to the average indicator price to plummet to ~$50.
The other issue that comes into play, as we learned in class, is the exchange rate. Even when the ICA was in place, you still had the issue of exchange rates. A global price of say $200 does not necessarily translate into the same standard of living for all coffee producers in all regions of all countries, unless all those nations pegged their currency to the dollar. Perhaps Tadesse was on to something: when the documentary was made, the global price was up to ~$110. In recent years, it spiked as high as over $300, but has since fallen back to $118 as of today. What I wasn’t able to determine was as those prices tripled did that mean the price paid to the farmer triple? Not necessarily.
I do feel better about my decision to buy “fair-trade” products whenever possible. In fact, at ~27 minutes into the documentary, we saw one of my favorite roasters in Tadesse’s cabinet, Dean’s Beans. I’ll be sure to continue to do what little I can to help improve the system for these global farmers.
Blame attribution is something we all like to do when something goes wrong and the financial crisis covered in “Inside Job” is no different. Knowing what I did about the crisis from information sources such as NPR, I had assigned blame to the private financial institutions (AIG, Morgan Stanley, Countrywide, etc.) as they created this mess, they fed the beast, and then when the bubble popped, the leaders took their money and ran. The lack of apparent guilt and remorse just made me even more certain of the blame. However, after watching “Inside Job”, I think the US government is even guiltier than the private companies.
While I’m not one to give a “pass” to wrong doers (citizens or organizations), government’s job is to make the rules and enforce them in order to ensure things are fair. Imagine a soccer game where the referees didn’t show and the players self-regulated. I doubt anyone would be surprised if the rules were broken. Most athletes and the high-school level and beyond break the rules regularly, and just don’t get caught (“It’s only a foul if you get caught” mentality). If we take this soccer analogy further and say that there are enough goals for every player to continually score on goal with no risk of themselves being scored on, we might have the business climate leading up to this crisis: no referees, no rules, and no downside. Why? Because the referees weren’t there.
Private industry in the United States is incredibly productive and innovative due to the business freedoms that encourage and reward innovation and hard work. That often leads self-interested folks to say that no regulation is needed and that the free market will self-correct (Adam Smith’s invisible hand). That may be the case in a TRUE free market, but that is not reality either. When governmental rules are put in place to regulate the market, but it is the industry titans themselves that set those rules, we get into oligopolistic scenarios, the antithesis of a free market. An independent (or “balanced” at a minimum) government is needed in order to put rules in place to protect its citizens, national economy, and the global economy as a whole. Short-term wins need to be balanced against long-term risks. In fact, corporations owe a debt to the nation as a whole for the security and infrastructure it provides for those companies to operate profitably. Perhaps nobody has explained this “social contract” concept as well as Senator Elizabeth Warren when campaigning in 2011 (link)
As covered in the documentary, this lack of regulation began decades previously with the Regan administration attempting to boost the economy by removing regulation. With this school of thought continuing (through a particular school of thought made popular in industry and academia) through all subsequent US administrations, the regulation was loosened and loosened. Even when the government became aware of what now seems all the warning signs (CDOs, leverage ratios, etc.), they didn’t turn a blind eye, they actually endorsed this behavior.
Does this lack of regulation by the government provide a free pass to the corporations? Absolutely not. These financial leaders, men and women with years of experience and the intelligence to build such complex financial offerings, should have been more responsible. They knowingly focused on short-term revenue and ignored the inherent risks to their corporations and to the global economy. They had the smarts to foresee this crisis and the responsibility to prevent it. However, there are so many players in any market and they are, by definition, motivated by profit. We don’t expect our professional athletes to self-sacrifice a championship (and their related compensation) just because it would be for the betterment of their conference. Instead, rules are setup ahead of time to guide and motivate the teams in other ways to accomplish what is best for all. Likewise, it is the government’s responsibility to regulate markets in a fair and balanced way so as to respect the social contract, ensure fair and level playing grounds, and look out for the long-term interests of its people. Those were all violated in the case of this recent financial crisis and thus the government has the lion’s share of the blame.
How and why I upgraded to a treadmill desk, creating a much healthier work/life balance, losing weight, all the while not adding any time to my day for exercise. This post was originally on Avaya’s site as well as B2C.
After years of back problems resulting in physical therapy, I knew I needed to make a change. The biggest problem for me was the 11 hours a day I spend at my desk, hunched over my keyboard. While I know that good posture could help out a lot, the truth is that as I get in to “the zone”, I stop paying attention to posture and the next thing I know, my body is aching.
The plight of strain caused by sitting at a desk is unfortunately not unique to me. Harvard Business Review did a great article on how Sitting Is the Smoking of Our Generation. I don’t think the title is an embellishment; like smoking, sitting at your desk is a bad health choice people willingly make every day. CBS News ran a story on how your desk job is making you fat.
After some thought, I decided to haul our unused and dusty treadmill out of the basement up to my second floor (did I mention my back isn’t doing great?) home office. With my wife’s woodworking skills we built some functional (not attractive) tables of the appropriate height out of 4x4s for the posts and plywood for the tabletop.
We then placed the existing tables on top of these new tables, effectively raising my desktop to be about 5 feet off the ground. This allowed me to place my phone (an Avaya Desktop Video Device on the left), three monitors, and my MacBook Pro at a healthy viewing height, with proper spacing and positioning (verified by OSHA’s website). To make the keyboard and mouse accessible, we built a wood shelf from a 2×8 board long enough to not only go across the handlebars, but also extend further to give me more counter space. This was the trickiest part as my handlebars are slanted, requiring some more creative building to get a shelf mostly level. Below is what that setup looks like.
The results have been great. In the first five months, I averaged six miles a day, with my all-time best being 11 miles in a single day. I typically walk at a pace of 2.0 mph, which is about as fast as I can comfortably go while still being able to type, work, and if on the phone, talk. When on a conference call that I need to speak on, I will reduce the speed to 1.5mph as my treadmill wasn’t really meant for this use and thus is a little loud in the background. I’m also doing more and more video conferencing which adds an interesting wrinkle as I look a little odd to others on the conference. Depending on the situation, I may pause the treadmill until the video call is over.
I finally read Nicholas Carr’s “Is Google Making Us Stupid?” in The Atlantic this week at the prompting of my summer professor, Shari Worthington. I applaud Mr. Carr’s relatively balanced take on the topic. While reading the first half I found myself making several notes, only to find Nicholas make the same counter arguments in the second half of the article. However, I believe his lingering fear over the Internet’s impact to the way we think is unfounded. For example, he says that
The Internet is a machine designed for the efficient and automated collection, transmission, and manipulation of information, and its legions of programmers are intent on finding the ‘one best method’—the perfect algorithm—to carry out every mental movement of what we’ve come to describe as “knowledge work.”
As those of us more familiar with the workings and “design” of the Internet can attest, this is simply not the case. Sure, programmers, like anyone practicing a science are always interested in perfection, but the architecture of the Internet is really more like rules to make sure the variety of technologies, designs, and people don’t step on one another. There is no grand conspiracy on how information is organized and presented to the masses. Instead, like nature, lots of attempts are put forth and natural selection determines the ones that survive until the next challenge. Sure, Google wants you to trust its organization of what is out there, but there is nothing stopping from you using other services.
Mr. Carr speaks to how he and his friends are noticing a change in how they read books. While I wouldn’t attempt to argue that as we have more and more information available to us it becomes harder to focus on any one source (my wife and I both watch TV at night with laptops in our laps), Carr makes too large a leap by saying that this is due to the Internet causing a rewiring in our brains. I find it more likely that other factors such as age, ambient light, or a smartphone buzzing in your pocket are more likely at fault. I know that when I got on an airplane and pull out a book, I get completely immersed in my reading, but if I try to do 30 minutes of reading in the living room with kids running around, I can’t get past the second page. There is also research that suggests one’s attention span declines with age.
My favorite part of the article was when Carr brings in the legendary Frederic Taylor’s time/motion studies during the industrial revolution as a lens to use to look at the information revolution. A great approach, but Mr. Carr and I see different things through that looking glass. While Taylor was attempting to optimize manual labor in order to drive costs down and increased productivity and profits, Carr misses that Google isn’t getting profitable by rearranging how I make breakfast in the morning. The order I make my eggs and toast is irrelevant to them. Instead, Google is pioneering methods to know which eggs and bread I used and more importantly what I’m reading while I consume them in order to put the most relevant advertising in front of me. Taylor was about maximizing profit through work optimization. Google is after profit through data gathering. The Taylor lens simply blurs this phenomenon instead of bringing it into focus.
This blurring effect seems to bleed into Mr. Carr’s analysis of Google’s Sergey Brin whom he quotes saying
Certainly if you had all the world’s information directly attached to your brain, or an artificial brain that was smarter than your brain, you’d be better off.” Carr interprets this as “idea that our minds should operate as high-speed data-processing machines.
Actually, Brin is conveying that if we had all that information easily accessible like that, it would maximize the productivity of one’s intelligence. And therein lies the true comparison to Taylor and the Industrial Revolution. Like factories of the time that benefited from plugging into the new electrical grid to power their productivity, the Internet fuels the new knowledge economy. Google, as the face of the Internet, is not looking to grow profit by changing the way you think. Instead, they charge a utilization fee (in the form of advertising) for plugging into their grid of knowledge.
To take this analogy one step further, while all factories with electricity were not successful, all humans with access to the Internet will not gain wisdom and new ideas. Innovation comes from pulling together new ideas from existing information. Imagine if Albert Einstein’s brain had immediate access to all of the world’s data: What other connections/discoveries could he have identified?
Carr actually touches on this point when referencing Richard Foreman‘s fear that we “risk turning into ‘pancake people’—spread wide and thin as we connect with that vast network of information accessed by the mere touch of a button.” I think Mr. Foreman is close, yet misses the mark. Yes, our new ready access to information has definitely allowed us to spread wide, and by definition somewhat thinner. And while discovery can come from going deeper in the narrow stovepipe of just one area, it can also come from going wide and seeing multi-disciplinary connections that others have never seen before. This is where our new information age offers the most opportunity for innovation and wisdom.
Bernard of Chartres (a 12th century philosopher) once said that
“We are like dwarfs on the shoulders of giants, so that we can see more than they, and things at a greater distance, not by virtue of any sharpness of sight on our part, or any physical distinction, but because we are carried high and raised up by their giant size.” (source)
Likewise, Google and the larger Internet allow us to see further than those before us. If that makes us dwarves in Carr’s eyes, so be it.