242 (9 December 2015)

Welcome to week 242!  The articles below caught my attention this week.  Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by an Internet title search.

(12 November 2015): “America’s poorest white town: abandoned by coal, swallowed by drugs” (http://www.theguardian.com/us-news/2015/nov/12/beattyville-kentucky-and-americas-poorest-towns)

——–According to a U.S. census survey, Beattyville, Kentucky is “the poorest white town—98% of its 1,700 residents are white—in the country.  It was also by one measure . . . among the four lowest income towns in the country. . . . Beattyville sits at the northern tip of a belt of the most enduring rural poverty in America.  The belt runs from eastern Kentucky through the Mississippi delta to the Texas border with Mexico, taking in two of the other towns—one overwhelmingly African American and the other exclusively Latino—at the bottom of the low income scale.  The town at the very bottom of the census list is an outlier far to the west on an Indian reservation in Arizona.  The communities share common struggles in grappling with blighted histories and uncertain futures. . . . To the young, such places can sometimes feel like traps in an age when social mobility in the US is diminishing and they face greater obstacles to a good education than other Americans.  At the same time, each of the towns is distinguished by problems not common to the rest.  In Beattyville it is the drug epidemic, which has not only destroyed lives but has come to redefine a town whose fleeting embrace of prosperity a generation ago is still visible in some of its grander official buildings and homes near the heart of the town.”

********The articles on all four towns, one each in Kentucky, Mississippi, Texas, and Arizona, are accessible at the link above.  The online story about Beattyville is much more extensive than the print version of 4 December 2015.  Embedded in the story is a 23-minute video, which I watched, about “The Poverty Tours (April-May 1964)” of then-president Lyndon Johnson.  No doubt different reactions will be evoked by viewing it.  What struck me was the sense of a moral imperative to do something about poverty.

********One thing that really struck me about the Beattyville article was the connection between soft drinks, aka, “pop,” food stamps, cash, and drugs.  As it turns out, “Close to 57% of Beattyville residents claim food stamps.  They are paid by electronic transfer on the first of the month.  That same day, cases of Pepsi and Coca-Cola are marked down sharply in supermarkets and disappear off the shelves, often paid for with food stamps.  They are then sold on to smaller stores at a lower price than they would pay a distributor, in effect turning several hundred dollars of food stamps into cash at about 50 cents on the dollar.”  That cash can then be used to purchase drugs, like OxyContin.  Perhaps that is another reason why Maine’s Department of Health and Human Services wants “to ban food stamp recipients from using their benefits to purchase candy and soda” (http://www.pressherald.com/2015/11/23/maine-renews-push-to-prohibit-food-stamp-recipients-from-purchasing-soda-and-candy/).  All this reminds me of the discussion of the merits of “in-kind transfers” versus cash payments, a discussion of which is given by Harvard professor Edward Glaeser (http://www.pressherald.com/2015/11/23/maine-renews-push-to-prohibit-food-stamp-recipients-from-purchasing-soda-and-candy/) in light of the ideas of Milton and Rose Friedman.  No doubt Rose Director Friedman has not received the notice she deserves.  Rose Director was a graduate student in economics at the University of Chicago, along with her eventual husband Milton Friedman.  She completed “all the work for a Ph.D. except for writing a thesis” (http://news.uchicago.edu/article/2009/08/18/rose-friedman-distinguished-economist-dies).  In here obituary in The New York Times (http://www.nytimes.com/2009/08/19/business/19friedman.html) she is quoted as saying “I’ve always felt that I’m responsible for at least half of what he’s gotten.”  Who will write Rose Director Friedman’s story?

(25 November 2015): “The Pickle Problem” (http://www.npr.org/sections/money/2015/11/25/457408717/episode-665-the-pickle-problem)

********This is an 18-minute podcast from NPR’s Planet Money.  It provides an exploration of how food bank directors across the U.S. sought to arrive at a more effective means of directing different types of free foods to those who actually wanted it.  Unsurprisingly, the use of market-like practices played a role—economists from the University of Chicago were consulted—but some resistance had to be overcome.  Even then, the extension of market-like practices were not embraced when it came to food banks trading with one another.  Here is a good example of the roles played by the invisible hand and the invisible handshake in the distribution of food by food banks.

(4 December 2015): “In Pennsylvania, a Steel Mill and Its Workers at a Crossroads” (http://www.nytimes.com/2015/12/04/business/in-pennsylvania-a-steel-mill-and-its-workers-at-a-crossroads.html)

——–“Since Aug. 15 [stainless steel producer] Allegheny [Technologies] has locked out 2,200 workers at 12 plants in six states in what has become one of the nation’s largest and longest work stoppages in years.  As unions have weakened in recent decades, more corporations have turned to lockouts to wring givebacks from their workers.  In this latest showdown, Allegheny has taken on the nation’s biggest, most combative industrial union.”  If the United Steelworkers lose, “it could prompt another wave of me-too-concessions and represent a further humbling of organized labor just as it was starting to gain ground on other fronts.”  Robert S. Wetherbee, “the president of Allegheny’s Flat-Rolled Products division, said the company needed to drive a hard bargain because the market had shifted significantly.  Stainless steel prices are down 30 percent since April and Chinese producers are gaining a greater share of the business.  The company’s flat-rolled division, he said, lost money in 10 of the last 11 quarters.”  Wetherbee notes, “We’re faced with a once-in-a-generation opportunity to bend the cost curve on a major part of our costs. . . . If we’re going to be competitive, we have to be in a position where we have a different benefit structure for the next generation we hire.”

********As the article notes, the proposed bend to the cost curve includes the introduction of two-tiered contracts, which are abhorred by the United Steelworkers and other unions because “they sell out future generations and sow tensions between older and younger workers.”

(4 December 2015): “Bye, bye, bananas” (https://www.washingtonpost.com/news/wonk/wp/2015/12/04/the-worlds-most-popular-banana-could-go-extinct/)

——–“In the mid 1990s, the most popular banana in the world—a sweet, creamy variety called Gros Michel grown in Latin America—all but disappeared from the planet” due to the spread of a fungus called “Panama disease, which first appeared in Australia in the late 1800s” and jumped continents.  “The damage was so great and swift that in a matter of only a few decades the Gros Michel nearly went extinct.”  After half a century, “a new strain of the disease is threatening the existence of the Cavendish, the banana that replaced the Gros Michel as the world’s top banana export, representing 99 percent of the market, along with a number of banana varieties produced and eaten locally around the world.  And there is no known way to stop it—or even contain it.”  Although Tropical Race 4, which is the mutation of Panama Disease, has not yet made its way to Latin America, researchers say it is just a matter of time.

********As the article points out, monoculture agriculture carries substantial risks.  Reporter Roberto A. Ferdman concludes by noting, “Now that it looks like the Cavendish could suffer the same fate as the last commercially produced banana . . . it’s becoming a little clearer that it probably wasn’t the type of banana but rather the type of production that needed changing.”  Perhaps the cultural move, at least in the more developed world, to greater appreciation of variety, will one day makes its way to bananas, too.

(5 December 2015): “Fed chair Janet Yellen is learning the importance of politics in economics” (https://www.washingtonpost.com/business/economy/yellen-learning-the-games-politicians-play/2015/12/04/83bb492a-83ce-11e5-9afb-0c971f713d0c_story.html)

——–“Janet L. Yellen stepped into the top job at the Federal Reserve last year with more experience than anybody who has led the central bank in its 100-year history.  But she is finding that success demands not just economic expertise, but a political prowess she is still learning to master.”  With the Fed meeting in “less than two weeks to decide whether to finally raise interest rates” her ability to force consensus, “while being responsive to Capitol Hill’s critiques” is important.  Document and interviews “with more than 20 associates reveal how Yellen is trying to navigate this challenging moment.”

********There isn’t much analysis in the article but there is a clear indication of how Janet Yellen goes about her work.  Her approach seems to be part of a continued evolution of leadership from relatively top down (Alan Greenspan), to greater transparency (Ben Bernanke), and to greater inclusion.  A valuable look at a decision maker and her work.

(5 November 2015): “Tastes Like Chicken: How to Satisfy the World’s Surging Appetite for Meat “ (http://www.wsj.com/articles/how-to-satisfy-the-worlds-surging-appetite-for-meat-1449238059)

——–[This is an article in the 2050 series.]  Roughly 60 billion chickens are “now slaughtered for meat each year.”  This number is expected to grow as agriculture faces the challenge of “How to feed the 2.4 billion additional people expected to join the global population by 2050.”  Scientists, like Paul Siegel, a professor emeritus of animal and poultry sciences at Virginia Tech, seeking to help companies “breed chickens that will grow faster on less feed and require fewer drugs to stay healthy.”  Eventually poultry is expected to surpass pork in terms of total production; currently pork is first, poultry second, and beef third.  “Rising household incomes among rapidly growing populations of developing countries” are expected to allow more people to purchase animal-based protein, which typically deliver all of the amino acids that cells need that the body cannot produce itself; typically nuts and vegetables only provide some of those amino acids.  A comparison of the amounts of grain needed to produce one pound of weight gain, as well as the time to market, shows that chicken has a decided advantage.  For example, a one pound gain of chicken meat requires 1.9 pounds of grain and 1-2 months, whereas a one pound gain of pork require 2.9 pounds of grain and 6-7 months’ fish (Tilapia) is the closest to chicken in terms of grain needed (1.5-1.8 pounds) and time to market (5-8) months, but it requires four times the amount of water as chickens.  All this suggests that the relative cost of producing chicken will be less than fish, pork, and beef, and its consumption will increase.

********The article includes a five-minute video showing a chicken production facility in Thailand operated by Cargill, just one of many facilities that are expected to be operating in the future.  Although Dr. Siegel is confident that chicken is the best bet to provide animal protein to a growing population, he notes that “people may have to accept some tradeoffs in the way it is produced.”  The article closes with his comment, “Free range is very nice . . . but how many people are you going to be able to feed with free range?”

(5 December 2015): “Craft Brewers Take Issue With AB InBev Distribution Plan” [SR](http://www.wsj.com/articles/craft-brewers-take-issue-with-ab-inbev-distribution-plan-1449227668)

——–AB InBev has announced a new plan to help reverse declining beer sales in the U.S.  Its new incentive program “could offer some independent distributors in the U.S. annual reimbursements of as much as $1.5 million if 98% of the beers they sell are AB InBev brands . . . Distributors whose sales volumes are 95% made up of AB InBev brands would be eligible to have the brewer cover as much as half of their contractual marketing support for those brands . . . AB InBev . . . estimates participating distributors would receive an average annual benefit of $200,000 each.”  Craft brewers worry that the plan “will make it harder to get shelf space for their IPAs and porters” and make it more difficult to distribute their product.  Contributing to this is the three-tier distribution in the U.S., “in which brewers must sell beer to distributors who then sell it to retailers.  The bulk of the nation’s beer distribution is handled by distributors with agreements to sell either AB InBev or MillerCoors beers, according to the National Beer Wholesalers Association.”  Currently, “At least one distributor has dropped a craft brewer as a result of the incentive program.  Deschutes Brewery President Michael Lalonde said Grey Eagle Distributing of St. Louis last week decided it will drop the Oregon brewery behind Mirror Pond Pale Ale because it ‘had to make a choice to go with the incentive program or stay with craft.’”  Recent purchases of craft brewers by AB InBev is also contributing to the concern of craft brewers.

********It appears that craft brewers have good reason to be concerned.  I found it interesting that Deschutes Brewery, which has been reported as considering Asheville, North Carolina for a new brewery (http://www.citizen-times.com/story/news/local/2015/10/23/brewery-announcement-could-come-2016/74218526/), was mentioned in the article.  Might a conglomeration of craft breweries constrain the incentive program of AB InBev?  How would that work?

(6 December 2015): “The Arithmetic of Compassion” (http://www.nytimes.com/2015/12/06/opinion/the-arithmetic-of-compassion.html)

——–[From The Opinion Pages.]  “We all can relate to the saying ‘One death is a tragedy; a million deaths is a statistic.’  Our sympathy for suffering and loss declines precipitously when we are presented with increasing numbers of victims.”  Terms like “psychic numbing,” coined by psychiatrist Robert Jay Lifton, “compassion face,” as well as “pseudoinefficacy” and the “prominence effect” all get at the phenomenon of caring less, often much less, for additional people enduring some misfortune.  “The poet Zbigniew Herbert called this ‘the arithmetic of compassion.’”

********This seems to qualify as an author-bylined article, one of great interest.  The authors, Scott Slovic and Paul Slovic, are the editors of Numbers and Nerves: Information, Emotion, and Meaning in a World of Data (2015).  You can learn more about the book at: http://www.decisionresearch.org/wp-content/uploads/2015/10/N-N-Flyer.pdf.  The Table of Contents is on page 2.  As also noted on page 2, Scott is a professor of literature and the environment at the University of Idaho and Paul is a professor of psychology at the University of Oregon.  Regarding the book, its “essays and interviews . . . explore the quandary of our cognitive responses to quantitative information, while also offering compelling strategies for overcoming insensitivity to the meaning of such information.”

(9 December 2015): “Chinese Glacier’s Retreat Signals Trouble for Asian Water Supply” (http://www.nytimes.com/2015/12/09/world/asia/chinese-glaciers-retreat-signals-trouble-for-asian-water-supply.html)

——–“The extreme effects predicted of global climate change are already happening in western China.  Glacier retreat here and across the so-called Third Pole, the glaciers of the Himalayas and related mountain ranges, threatens Asia’s water supply. . . . Permafrost is disappearing from the Tibet-Qinhai Plateau, jeopardizing the existence of plants and animals, the livelihoods of its people and even the integrity of infrastructure like China’s high-altitude railway to Lhasa, Tibet.  The fact that Chinese scientists are raising alarms about these changes is a key reason that the Chinese government has been engaging fully in climate change negotiations in recent years.”  According to a scientific report released in November, the consequences for China’s 1.4 billion people from climate change are disastrous.  The include “rising sea levels along the urbanized coast, floods from storms across China and the erosion of glaciers. . . . Temperatures in China are expected to rise by 1.3 to 5 degrees Celsius, or 2.3 to 9 degrees Fahrenheit, by the end of the century, and temperatures have risen faster in China in the last half-century than the global average.”

********Scientists at the Mengke Glacier in western China note that the glacier receded an average of 26 feet per year from 1993 to 2005 and an average of 54 feet per year from 2005 to 2014.  At some point, of course, acceleration will slow, as there will be no more glacier to melt.  You can learn more about the 900-page report, which is available only in Chinese, at: http://www.nytimes.com/2015/11/30/world/asia/chinese-report-on-climate-change-depicts-somber-scenarios.html.  The economic and social consequences of these changes are hard to imagine.  Increased migration within countries and internationally will definitely be one consequence.  Along those lines, a historian’s perspective might be of use.  William Spellman, of the University of North Carolina at Asheville, has written on the topic in The Global Community: Migration and the Making of the Modern World (2002).  You can learn more about the book at: http://www.amazon.com/Global-Community-Migration-Making-Modern/dp/0750922435/.

(9 December 2015): “If It Owns a Well or a Mine, It’s Probably in Trouble” (http://www.nytimes.com/2015/12/09/business/anglo-american-to-cut-85000-jobs-amid-commodity-slump.html)

——–“The pain among energy and mining producers worsened again on Tuesday, as one of the industry’s large players [Anglo American] cut its work force by nearly two-thirds and Chinese trade data amplified concerns about the country’s appetite for commodities.”  According to Daniel Yergin, energy historian and vice chairman of HIS, “The world of commodities has been turned upside down . . . Instead of tight supply and strong demand, we have tepid demand and oversupply and overcapacity for commodity production.  It’s the end of an era that is not going to come back soon.”

********Another example of the importance of China in driving global commodity demand, as well as the importance of supply-related developments in the oil industry.  Combined these have contributed to significant downward price pressures on the commodities and some produced goods.  It emphasizes, I think, the relevance of climate change in China and the response of the Chinese government to it.

(9 December 2015): “Organic vs. Non-GMO Labels.  Who’s Winning?” [SR](http://www.wsj.com/articles/organic-vs-non-gmo-labels-whos-winning-1449619118)

——–“Surging sales of foods marketed as made without genetically modified crops are outpacing sales of food labeled organic in U.S. grocery stores.  That is frustrating some organic companies and farmers, who invest significant sums to meet government standards and to get their foods certified.  The organic industry is responding with marketing campaigns touting that its foods—in addition to being made without genetically modified organisms, or GMOs, as such crops are known—also abide by other requirements.”  Although the USDA “has certified organic foods since 2002,” there is no federal certification for non-GMO foods.  That certification is done by private groups, “mainly the Non-GMO Project” of Bellingham, Washington.

********As the article points out, although the difference may seem like hairsplitting, it is not without consequence as “One category’s growth can come at the expense of another’s, since specialty foods often compete for the same limited shelf space in supermarkets.”  You can learn more about the Non-GMO Project at: http://www.nongmoproject.org/.

May you have a good week!

Bruce

 

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