December 17, 2008

Op-Ed Columnist

The Great Unraveling

By THOMAS L. FRIEDMAN

Hong Kong

The stranger, a Western businessman, slipped into the chair next to me at an Asia Society lunch here in Hong Kong and asked me a question that I can honestly say I’ve never been asked before: “So, just how corrupt is America?”

His question was occasioned by the arrest of the Wall Street money manager Bernard Madoff on charges of running a Ponzi scheme that bilked investors out of billions of dollars, but it wasn’t only that. It’s the whole bloody mess coming out of Wall Street — the financial center that Hong Kong moneymen had always looked up to. How could it be, they wonder, that such brand names as Bear Stearns, Lehman Brothers and A.I.G. could turn out to have such feet of clay? Where, they wonder, was our Securities and Exchange Commission and the high standards that we had preached to them all these years?

One of Hong Kong’s most-respected bankers, who asked not to be identified, told me that the U.S.-owned investment company where he works made a mint in the last decade cleaning up=2 0sick Asian banks. They did so by importing the best U.S. practices, particularly the principles of “know thy customers” and strict risk controls. But now, he asked, who is there to look to for exemplary leadership?

“Previously, there was America,” he said. “American investors were supposed to know better, and now America itself is in trouble. Whom do they sell their banks to? It is hard for America to take its own medicine that it prescribed successfully for others. There is no doctor anymore. The doctor himself is sick.”

I have no sympathy for Madoff. But the fact is, his alleged Ponzi scheme was only slightly more outrageous than the “legal” scheme that Wall Street was running, fueled by cheap credit, low standards and high greed. What do you call giving a worker who makes only $14,000 a year a nothing-down and nothing-to-pay-for-two-years mortgage to buy a $750,000 home, and then bundling that mortgage with 100 others into bonds — which Moody’s or Standard & Poors rate AAA — and then selling them to banks and pension funds the world over? That is what our financial industry was doing. If that isn’t a pyramid scheme, what is?

Far from being built on best practices, this legal Ponzi scheme was built on the mortgage brokers, bond bundlers, rating agencies, bond sellers and homeowners all working on the I.B.G. principle: “I’ll be gone” when the payments come due or the mortgage has to be renegotiated.

It is both eye-opening and depressing to look at our banking crisis from China. It is eye-opening because it is hard to avoid the conclusion that the U.S. and China are becoming two countries, one system.

How so? Easy, in the wake of our massive bank bailout, one can now look at China and America and say: “Well, China has a big-state-owned banking sector, next to a private one, and America now has a big state-owned banking sector next to a private one. China has big state-owned industries, alongside private ones, and once Washington bails out Detroit, America will have a big state-owned industry next to private ones.”

Yes, an exaggeration to be sure, but the truth is the differences are starting to blur. For two decades, a parade of U.S. officials came to China and lectured Beijing on the necessity of privatizing its banks, said Qu Hongbin, the ch ief economist for China at HSBC. “So, slowly we did that, and now, all of a sudden, we see everybody else nationalizing their banks.”

It’s depressing because China in many ways feels more stable than America today, with a clearer strategy for working through this crisis. And while the two countries are looking more alike, they appear to be on very different historical trajectories. China went crazy in the 1970s, with its Cultural Revolution, and only after the death of Mao and the rise of Deng Xiaoping has it managed to right itself, gradually moving to a market economy.

But while capitalism has saved China, the end of communism seems to have slightly unhinged America. We lost our two biggest ideological competitors — Beijing and Moscow. Everyone needs a competitor. It keeps you disciplined. But once American capitalism no longer had to worry about communism, it seems to have gone crazy. Investment banks and hedge funds were leveraging themselves at crazy levels, paying themselves crazy salaries and, most of all, inventing financial instruments that completely disconnected the ultimate lenders from the original borrowers, and left no one accountable. “The collapse of communism pushed China to the center and [America] to the extreme,” said Ben Simpfendorfer, chief China economist at Royal Bank of Scotland.

The Madoff affair is the cherry on top of a national breakdown in financial propriety, regulations and common sense. Which is why we don’t just need a financial bailout; we need an ethical bailout. We need to re-establish the core balance between our markets, ethics and regulations. I don’t want to kill the animal spirits that necessarily drive capitalism — but I don’t want to be eaten by them either.

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"The Thing Itself"

December 14, 2008

Op-Ed Columnist

Cars, Kabul and Banks

By THOMAS L. FRIEDMAN

If there is anything I’ve learned as a reporter, it’s that when you get away from “the thing itself” — the core truth about a situation — you get into trouble. Barack Obama will have to make three mammoth decisions after he takes the oath of office — on cars, Kabul and banks — and we have to hope that he bases those decisions on the things themselves, the core truths about each. Because many people will be trying to throw fairy dust in his eyes.

The first issue will be whether to bail out Detroit. What is the core truth about Detroit? Auto executives will tell you that it’s the credit crisis, health care, retirement costs and unions. Sure, those are real. But the core truth is that for way too long Detroit made too many cars that too many people did not want to buy. As even General Motors conceded in its apology ad last week: “At times we violated your trust by letting our quality fall below industry standards and our designs become lackluster.” Walk through any college campus today. You don’t see a lot of Buicks.

Over the years, Detroit bosses kept repeating: “We have to make the cars people want.” That’s why they’re in trouble. Their job is to make the cars people don’t know they want but will buy like crazy when they see them. I would have been happy with my Sony Walkman had Apple not invented the iPod. Now I can’t live without my iPod. I didn’t know I wanted it, but Apple did. Same with my Toyota hybrid.

The auto consultant John Casesa once noted that Detroit’s management has gone from visionaries to operators to caretakers. I would say that they have now gone from caretakers to undertakers. If they are ready to bring in some visionaries and totally restructure — inside or outside of bankruptcy — so they can make money selling cars that people will want to buy, then I say help them. I’d hate to see the Detroit auto industry go under. But if all we are doing is prolonging auto undertakers, then we have to let nature take its course.

After Detroit, Mr. Obama will be asked to bail out Afghanistan. Watch out. The tide has turned against us there because too many Afghans don’t want to buy our politics, or, more precisely, the politics of our ally, the corrupt government of President Hamid Karzai. That is “the thing itself.”

The main reason our Iraq bailout — a k a “the surge” — has had a positive effect is because Iraqis voted with their own guns and their own lives, taking on both Al Qaeda and pro-Iranian Shiite militants. Iraq has avoided bankruptcy for the moment — a total meltdown — because enough Iraqis wanted what we were selling: freedom from extremists. That is the thing itself, and right now I’m not seeing enough of that thing in Afghanistan. Beware of a Kabul bailout.

But maybe the most flagrant area where we continue to avoid looking at “the thing itself” is with our banks. What we are dealing with there is the effect of a credit bubble that began in the late-1980s with the advent of global securitization — the chopping up and bundling into bonds of everything from home mortgages to student loans to airplane leases, and then selling them around the world.

When you take this much leverage and this much globalization and this much complexity and start it in America, and then blow it up, you have a nuclear financial explosion. The deflating of this credit bubble i s so wealth-destroying that even the most prudent banks have been ravaged by it.

What to do? The smartest people I know in banking are praying that Obama’s Treasury Department will tackle “the thing itself.” That is, do a real analysis of what the major banks are worth in a worst-case scenario. Then determine, if, on that basis, they have viable, survivable equity-to-asset ratios.

Those that do should get more government investment. Those that are close should be forced to find new investors and merge. And those not viable should be shut down and have their bad assets bought by a government-owned body (which would sell them over time) and their deposits shifted to healthy banks to make those banks even healthier. Some experts believe we still need to close 1,000 banks.

This process will be painful, but probably by the end of a year the market will clear, investors will come in, and the surviving banks will be ready to lend to each other and you and me. The “thing itself” here is that banks still don’t want to lend because they still don’t know the true value of their own balance sheets, let alone anyone else’s.

The market has to clear. We can do it painfully and quickly, as we did with th e dot-coms, or we can be Japan and drag it out.

So whether it's cars, Kabul or banks, we have to stop wishing for the worlds we want and start dealing with the things themselves. If Obama does, his first year will be excruciatingly painful, but he could have three years after that to be creative. If he doesn’t, I fear that cars, Kabul and banks will dog his whole presidency.

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Only China Can Save The Sharks

When the buying stops, the killing can too.

Commentary: Only China can save our sharks

By Peter Knights
Special to CNN

Editor's Note: Peter Knights is Director of WildAid, an international conservation organization focused on ending the demand for illegal and unsustainable wildlife products. He has researched the trade in shark fin for 10 years and has worked on conservation programs in 45 countries.

SAN FRANCISCO, California (CNN) -- At certain times in history, great nations find themselves shaping the future of the world. For many of our most endangered wildlife species, China finds itself in that role today.

Old customs of consuming certain wildlife as foods, medicines and decoration and new economic success have blended to create a recipe for extinction for a number of wild animals unless the growing appetites can be curbed.

Rare animal consumption in China was formerly limited to a tiny affluent minority, but incredible economic growth of 10 percent a year has led to a booming number of new consumers. After the SARS outbreak, authorities reported seizing 980,000 live animals from wildlife markets. China is now the primary market for tiger bone, rhino horn, elephant ivory, live snakes, pangolins and a whole host of wildlife products.

Perhaps the greatest example of this boom is its role in the largest mass slaughter of any large animals going on today. Every year the fins from up to 70 million sharks are being used to make shark fin soup -- the vast majority going to China and Hong Kong.

Though the cartilage from the fins has no real flavor and is basically just protein, this soup retains a cachet that can fetch more than $100 per bowl. It is bought for business dinners, banquets and weddings as an indication of high spending to "honor" guests, but it is leading to environmental vandalism on a massive scale worldwide.

Fishing for fins has spread to the most remote parts of the planet as easily accessible shark populations have already plummeted, some by up to 95 percent in the last fifteen years.

Although most shark fishing is completely unrestricted, in the few areas they are protected they are still being heavily poached. In the Galapagos Marine Reserve, up to 10,000 fins (2,500 sharks) have been seized in a single shipment and endangered sea lions and dolphins are used as bait.

In 2006, Australian authorities seized 365 Indonesian boats fishing illegally in their waters mostly for shark fins. Only threatening to fire upon boats if they didn't heave to and burning the offending boats eventually stemmed this tide. But as I recently discovered, the shark finners just moved on to Papua New Guinea, where there are no controls.

Reporter Lisa Ling and the "Planet in Peril" team filmed as we hauled up illegal longlines inside the Cocos Island Marine National Park in Costa Rica and as we chased off the same boats two days in a row. I have traveled around the world to witness the inability of even developed nations to protect their waters from illegal fishing.

Drug trafficking has shown that even draconian laws and billions spent on law enforcement cannot stem the tide if the demand in consuming countries remains high. For wildlife and especially fisheries, regulation is weak and enforcement is invariably poor.

That is why WildAid focuses on trying to end the demand -- the only long-term solution. WildAid believes that "when the buying stops, the killing can, too." The organization has broadcast this message to up to 1 billion people a week with the help of more than 100 celebrity ambassadors from the worlds of movies, music and sport.

The encouraging news is that when people in China know what's going on, they do care. Our initial research revealed that 75 percent of Chinese didn't even know "fish wing" soup, as it is called there, was derived from sharks. They didn't know that sharks mature late and reproduce slowly and that nearly one third of shark species are considered endangered or vulnerable.

So we embarked on one of the largest conservation awareness initiatives, reaching hundreds of millions of Chinese.

China's most popular star, Yao Ming, championed the program pledging to never again eat shark fin soup, generating 300 news stories. We covered Beijing with his image, appealing for the sharks, and a host of Chinese and international Olympians recorded messages that Chinese state television and video billboards broadcast widely.

A top survey company in Beijing, CTR, found that 55 percent of those surveyed remembered our campaign, 94 percent of those became aware of the issue, 89 percent subsequently thought the soup should be banned or regulated and 82 percent said they would stop or reduce their consumption. We got similar results from previous work in Hong Kong, Taiwan and Thailand.

For the health of our oceans, we must hope that China can show global leadership in banning or strictly regulating shark fin soup and continue to educate the public, saving our sharks and other endangered species. We hope that this great culture that has lasted for thousands of years can conserve, rather than destroy, these animals that have survived for nearly 400 million years and yet face annihilation in our lifetimes, all for a bowl of overpriced soup.

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Mass Murder for Soup

This segment on one of your herd's more noble adventures around the globe was part of CNN's (excellent) Special Report, "Planet in Peril: Battle Lines" that aired several times tonight & will be repeated so hope you get to see it. You can see the video and photos on the website at this link:

http://www.cnn.com/2008/WORLD/asiapcf/12/10/pip.shark.finning/index.html?iref=newssearch

Here is part of the shark transcript, my comments follow it:

Shark fin soup alters an ecosystem

By Lisa Ling
Special to CNN

KAOSHIUNG, Taiwan (CNN) -- There is no animal on earth more vilified than the shark. Pop culture references and annual, over-hyped reports of attacks on swimmers or surfers have put sharks on the top of the list of the world's most feared living things.

There is however, a creature far more predacious than the shark: Humans.

Sharks existed before there were dinosaurs and they pre-date humans by millions of years. Yet, in a relatively short period of time, humans and their technological arsenal have driven most shark populations to the verge of extinction.

This is bad news for the world's oceans. Sharks are the top predator in the ocean and are vital to its ecosystem. The rapid reduction of sharks is disrupting the ocean's equilibrium, according to Peter Knights, director of WildAid International.

"These are ecosystems that have evolved over millions and millions of years," said Knights. "As soon as you start to take out an important part of it, it's like a brick wall, you take out bricks [and] eventually it's going to collapse."

When sharks attack humans, it inevitably makes news - it is a sexy story. What is rarely reported is that worldwide, sharks kill an average of 10 people every year. It's usually when people venture into a shark's habitat and not20the other way around. By contrast, humans kill around 100 million sharks every year - a number that has ballooned in recent years because of the enormous demand for shark fins to make shark fin soup. Lisa Ling visits 'ground zero' in battle to protect sharks »

Shark fin soup is a delicacy reserved for the wealthy on special occasions and it has been part of Chinese culture for centuries. For years, only rich Chinese mostly in Hong Kong, Taiwan and Singapore consumed it, so the impact on the overall shark population was negligible.

Over the last decade, the exploding middle class in China has changed the fate of the shark. With an unprecedented number of people making more money than ever, the demand for all things that signal an improvement in status is gargantuan. The ability to serve and consume shark fin soup is among the most revered of activities, because it signifies that one has made it.

Shark fin soup can be expensive. A bowl of imperial shark fin soup can cost upwards of $100. These days, shark fin soup is so fashionable that it's becoming commonplace. Buffets serve versions of it for as low as $10 a bowl. The irony is that shark fin is flavorless -- its cartilage has a chewy consistency. Tens of thousands of sharks are being killed for a gelatinous thing in a soup.

To satiate the appetites of upwardly mobile Chinese, fishermen traverse all corners of the Earth's oceans in search of sharks or, more specifically, their fins. Because space is limited on fishing vessels and shark bodies are bulky and not considered as valuable, fishermen often catch the sharks, saw off their fins and toss the sharks back into the water. Without their fins, sharks cannot swim and they sink to the ocean floor, where they're picked at by other fish and left to die. See photos of Taiwan's shark finning trade »

The "Planet in Peril" crew traveled with Knights to Taiwan's southern port city of Kaohsiung, which is considered one of the world's main hubs for shark fins. We watched as the fishermen unloaded their catch. Thousands of fins were thrown from one of the ships that had spent months fishing the international waters of the Pacific. See a map of where the 'Planet in Peril' crew traveled for their worldwide investigation »

Because of the sensitivity over this issue, few people were willing to talk to us.

Shark finning is not illegal. Taiwan has no law against fins taken from international waters coming into its ports.

However, Taiwan does have what it calls a "plan of action" that requires the bodies of the sharks the fins came from to be accounted for and not dumped into the sea.

But at this port, we see more fins than bodies as a forklift scoops up large piles of fins and dumps them into a truck. There are no signs of anyone monitoring the weight ratio or making sure there's no illegal fishing of the five shark species protected under international treaty.

"The laws are weak and when you take the fins off, identifying these species is almost impossible," Knights said. "You can see they all look almost identical and yet they're makos and threshers and blue sharks; there [are] all kinds of species there, but identifying them and monitoring them and having a regulated fishery is virtually impossible."

Taiwan is not alone. Shark finning thrives off weak regulations around the world and only a few countries demand that sharks arrive i n port with fins attached.

Knights says it comes down to economics.

"The fin is one of the most expensive pound-for-pound item from the sea. And the beauty about the fin is that it's very compact ... it doesn't take up your hull and you can make a lot of money from it," said Knights.

Fins can sell for $500 per pound, according to WildAid, which is campaigning for a global ban on shark finning.

In recent years, Cocos Island has become another battleground in the fight to save the shark.

Located 300 miles off the coast of Costa Rica, the only way to get to this uninhabited islet in the eastern Pacific is by boat. Cocos Island, recently declared a national park, is a nearly pristine and richly preserved ecosystem where thousands of sharks have roamed for centuries. Scientists think there are more sharks there than any other place on Earth.

Fishermen come from all over the world to catch the sharks that swim around the island. It is illegal for fishing boats to get within three miles of the island, but the law is routinely ignored. On any given day, one can see numerous fishing boats no more than a mile away from the island.

The fate of the shark is grim. Increasing public awareness of the shark's role in the marine ecosystem and the rapid rate of extinction because of the demand for shark fin soup may be the best hope for the shark, which has inhabited the planet for 400 million years.

"Can you imagine if it was Yellowstone Park and people were shooting up grizzlies? No one would ever get away with it. But this ocean, because it's out of sight, out of mind, [shark finning] carries on," said Knights.

It is just profoundly incomprehensible that millions of my kind would permit the mass slaughter of sharks, in the most barbarous way, to the brink of extinction, for a bowl of soup. Doesn't anyone see or care about the disequilibrium and injustice in that? Why isn't this savage, wholly unnecessary murder, completely & immediately ostracized as being beyond the pale of acceptability? WHO are we????

Oh, I know, sharks have to be monetized because they are there, and we can. That is how we justify all the atrocities and crimes that we commit on others. But to decimate the sharks in the cruelest of ways for an elective, non-essential gustatory delectation??-----It is a monstrous act that in its very elements of intent and perpetration, constitutes an abject relationship to the world, the depravity of which gravely dishonors and condemns ourselves. Where are those among us who stand up and say, NO MORE! ??

This visual (video) report is a rather sobering look at who we are and what we do, but at a minimum we bear an absolute responsibility to look deeply at the truth about ourselves. To exterminate the sharks for soup without moral examination and introspection is cowardly and reprobate.

SINS OF OMISSION: When I force myself to LOOK at the ghastly sights, those excruciating, bloody pictures of the beasts sliced up alive and tossed overboard hemorrhaging to fall to the ocean depths to bleed out & suffocate, awesome animals who were just swimming naturally & unmolested in the previous moment, animals whom I, in complicity with my tribe, attack & cause to suffer, whose life & place I snatch as a mass murderer does-----that compulsory LOOKING, when I would rather look away, not see, and cloak myself in the sin of not-knowing, is a first act of penance for the penitent.

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Secretary of Food

If ever a system were in need of overhaul, it is our process (theory & practice) of unhealthful food production. Yet we seem incapable of making the most obvious changes in the structure of factory farming that everyone agrees and bemoans is harmful to all-----detrimental to humans, especially children, to animals, and to the land. Kristoff has written a thoughtful piece to move us in the right direction. We need to totally kick out the lobbyists and their politicians from any proximity to food policy and decision-making, sever & excise them like a predatory cancer. Any awake, thinking, sensible people would never have surrendered their agriculture, and treatment of their farm animals, to the hijacking industrial operators whose exclusive purpose is maximum monetization regardless of atrocious, barbaric consequences, to "TYCOONS WHOSE BUSINESS MODEL IS ABUSING ANIMALS."

Food should not be fast, nor should it be cheap.

Highly recommend:
Michael Pollan, THE OMNIVORE'S DILEMMA
Matthew Scully, DOMINION

December 11, 2008

Op-Ed Columnist, N.Y. Times

Obama’s ‘Secretary of Food’?

By NICHOLAS D. KRISTOF

As Barack Obama ponders whom to pick as agriculture secretary, he should reframe the question. What he needs is actually a bold reformer in a position renamed “secretary of food.”

A Department of Agriculture made sense 100 years ago when 35 percent of Americans engaged in farming. But today, fewer than 2 percent are farmers. In contrast, 100 percent of Americans eat.

Renaming the department would signal that Mr. Obama seeks to move away from a bankrupt structure of factory farming that squanders energy, exacerbates climate change and makes Americans unhealthy — all while costing taxpayers billions of dollars.

“We’re subsidizing the least healthy calories in the supermarket — high fructose corn syrup and hydrogenated soy oil, and we’re doing very little for farmers trying to grow real food,” notes Michael Pollan, author of such books as “The Omnivore’s Dilemma” and “In Defense of Food.

The Agriculture Department — and the agriculture committees in Congress — have traditionally been handed over to industrial farming interests by Democrats and Republicans alike. The farm lobby uses that perch to inflict unhealthy food on American children in school-lunch programs, exacerbating our national crisis with diabetes and obesity.

But let’s be clear. The problem isn’t farmers. It’s the farm lobby — hijacked by industrial operators — and a bipartisan tradition of kowtowing to it.

I grew up on a farm in Yamhill, Ore., where my family grew cherries and timber and raised sheep and, at times, small numbers of cattle, hogs and geese. One of my regrets is that my kids don’t have the chance to grow up on a farm as well.

Yet the Agriculture Department doesn’t support rural towns like Yamhill; it bolsters industrial operations that have lobbying clout. The result is that family farms have to sell out to larger operators, undermining small towns.

One measure of the absurdity of the system: Every year you, the American taxpayer, send me a check=2 0for $588 in exchange for me not growing crops on timberland I own in Oregon (I forward the money to a charity). That’s right. The Agriculture Department pays a New York journalist not to grow crops in a forest in Oregon.

Modern confinement operations are less like farms than like meat assembly lines. They are dazzlingly efficient in some ways, but they use vast amounts of grain, as well as low-level antibiotics to reduce infections — and the result is a public health threat from antibiotic-resistant infections.

An industrial farm with 5,000 hogs produces as much waste as a town with 20,000 people. But while the town is required to have a sewage system, the industrial farm isn’t.

“They look profitable because we’re paying for their wastes,” notes Robert P. Martin, executive director of the Pew Commission on Industrial Farm Animal Production. “And then there’s the cost of antibiotic resistance to the economy as a whole.”

One study suggests that these large operations receive, in effect, a $24 subsidy for each hog raised. We face an obesity crisis and a budget crisis, and we subsidize bacon?

The need for change is increasingly obvious, for health, climate and even humanitarian reasons. California voters last month passed a landmark referendum (over the farm lobby’s furious protests) that will require factory farms to give minimum amounts of space to poultry and livestock. Society is becoming concerned not only with little boys who abuse cats but also with tycoons whose business model is abusing farm animals.

An online petition at www.fooddemocracynow.org calls for a reformist pick for agriculture secretary — and names six terrific candidates, such as Chuck Hassebrook, a reformer in Nebraska. On several occasions in the campaign, Mr. Obama made comments showing a deep understanding of food issues, but the names people in the food industry say are under consideration for agriculture secretary represent the problem more than the solution.

Change we can believe in?

The most powerful signal Mr. Obama could send would be to name a reformer to a renamed position. A former secretary of agriculture, John Block, said publicly the other day that the agency=2 0should be renamed “the Department of Food, Agriculture and Forestry.” And another, Ann Veneman, told me that she believes it should be renamed, “Department of Food and Agriculture.” I’d prefer to see simply “Department of Food,” giving primacy to America’s 300 million eaters.

As Mr. Pollan told me: “Even if you don’t think agriculture is a high priority, given all the other problems we face, we’re not going to make progress on the issues Obama campaigned on — health care, climate change and energy independence — unless we reform agriculture.”

Your move, Mr. President-elect.

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Great NY Times column today by Tom Friedman:

December 10, 2008

Op-Ed Columnist

While Detroit Slept

By THOMAS L. FRIEDMAN

As I think about our bailing out Detroit, I can’t help but reflect on what, in my view, is the most important rule of business in today’s integrated and digitized global market, where knowledge and innovation tools are so widely distributed. It’s this: Whatever can be done, will be done. The only question is will it be done by you or to you. Just don’t think it won’t be done. If you have an idea in Detroit or Tennessee, promise me that you’ll pursue it, because someone in Denmark or Tel Aviv will do so a second later.

Why do I bring this up? Because someone in the mobility business in Denmark and Tel Aviv is already devel oping a real-world alternative to Detroit’s business model. I don’t know if this alternative to gasoline-powered cars will work, but I do know that it can be done — and Detroit isn’t doing it. And therefore it will be done, and eventually, I bet, it will be done profitably.

And when it is, our bailout of Detroit will be remembered as the equivalent of pouring billions of dollars of taxpayer money into the mail-order-catalogue business on the eve of the birth of eBay. It will be remembered as pouring billions of dollars into the CD music business on the eve of the birth of the iPod and iTunes. It will be remembered as pouring billions of dollars into a book-store chain on the eve of the birth of Amazon.com and the Kindle. It will be remembered as pouring billions of dollars into improving typewriters on the eve of the birth of the PC and the Internet.

What business model am I talking about? It is Shai Agassi’s electric car network company, called Better Place. Just last week, the company, based in Palo Alto, Calif., announced a partnership with the state of Hawaii to road test its business plan there after already inking similar deals with Israel, Australia, the San Francisco Bay area and, yes, Denmark.

The Better Place electric car charging system involves generating electrons from as much renewable energy — such as wind and solar — as possible and then feeding those clean electrons into a national electric car charging infrastructure. This consists of electricity charging spots with plug-in outlets — the first pilots were opened in Israel this week — plus battery-exchange stations all over the respective country. The whole system is then coordinated by a service control center that integrates and does the billing.

Under the Better Place model, consumers can either buy or lease an electric car from the French automaker Renault or Japanese companies like Nissan (General Motors snubbed Agassi) and then buy miles on their electric car batteries from Better Place the way you now buy an Apple cellphone and the minutes from AT&T. That way Better Place, or any car company that partners with it, benefits from each mile you drive. G.M. sells cars. Better Place is selling mobility miles.

The first Renault and Nissan electric cars are scheduled to hit Denmark and Israel in 2011, when the whole system should be up and running. On Tuesday, Japan’s Ministry of Environment invited Better Place to join the first government-led electric car project along with Honda,=2 0Mitsubishi and Subaru. Better Place was the only foreign company invited to participate, working with Japan’s leading auto companies, to build a battery swap station for electric cars in Yokohama, the Detroit of Japan.

What I find exciting about Better Place is that it is building a car company off the new industrial platform of the 21st century, not the one from the 20th — the exact same way that Steve Jobs did to overturn the music business. What did Apple understand first? One, that today’s technology platform would allow anyone with a computer to record music. Two, that the Internet and MP3 players would allow anyone to transfer music in digital form to anyone else. You wouldn’t need CDs or record companies anymore. Apple simply took all those innovations and integrated them into a single music-generating, purchasing and listening system that completely disrupted the music business.

What Agassi, the founder of Better Place, is saying is that there is a new way to generate mobility, not just music, using the same platform. It just takes the right kind of auto battery — the iPod in this story — and the right kind of national plug-in network — the iTunes store — to make the busi ness model work for electric cars at six cents a mile. The average American is paying today around 12 cents a mile for gasoline transportation, which also adds to global warming and strengthens petro-dictators.

Do not expect this innovation to come out of Detroit. Remember, in 1908, the Ford Model-T got better mileage — 25 miles per gallon — than many Ford, G.M. and Chrysler models made in 2008. But don’t be surprised when it comes out of somewhere else. It can be done. It will be done. If we miss the chance to win the race for Car 2.0 because we keep mindlessly bailing out Car 1.0, there will be no one to blame more than Detroit’s new shareholders: we the taxpayers.

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Goodbye To All That

DOOR BUSTER SALE
On November 28, 2008, a worker was trampled to death as customers stormed a Walmart store in Mineola, New York, for cheap goods on the day after Thanksgiving (symbolic irony not lost here). Jdmytai Damour, 6'5" tall and 270 pounds, was killed when a crowd 2000 strong broke down the electronic doors in a frantic pursuit of bargains on big-screen TVs, clothing, and other stuff. He died of asphyxiation related to trampling. Those hundreds of people who did make there way into the store literally had to step over or around him, or on him, to get into the Walmart store, and those locked out when the store was closed, howled and shouted in protest at not being allowed in to partake of the bargains, notwithstanding the homicide. Look at where we as a species have arrived with our depraved, obssessive consumption: SHOPPING HAS BECOME A BLOOD SPORT, surely the nadir in shameful, desensitized, reckless human behaviour. Love of stuff trumps all constraints and sense of right behaviour....obliterates all regard for the other. What have we become?

CONSUMPTION
As a nation, we save zero now and are consuming 6% more than we are producing, but twenty years ago we were saving 8% of earnings. We have had a credit party like we have never seen before. But spending borrowed money is not an economy, and it has destroyed the financial security of the nation and of individuals. It is complete folly to allow consumption to constitute two-thirds of U.S. GDP, and to have dismantled the industrial base and outsourced jobs overseas, because it has made us vulnerable---I think now we all see how it has weakened the American nation. We manufactured ourselves into the wealthiest country in the world, and then consumed our way into bankruptcy, all the while transfering that great wealth to Asia and the Middle East. Neither a smart nor strategically secure monetary transformation, forged in the crucible of mad love for cheap goods. In that exchange, we ended up with nothing but junk, and not anything vital to life, and they ended up with economic wealth and power. Want more flat screeen TVs????

I knew that seismic changes in human behaviour were inevitable when I recently saw a $5 million black diamond bra modeled in a Victoria's Secret fashion show described as, "The new sexy is glamourous this season." Inanity and excessive behaviour like that makes my brain explode, the quintessence of the mindless consumption that exacts way too high a price on species, planet and scarce resources. We know no bounds, yet it is urgent that the human species self-impose limits in all avenues of conduct. Desperately we need to get a grip.....this devouring depletion CANNOT be what freedom is for--- to exhaust the earth.

SHRINK
As the society sheds the superfluous goods and services, millions of jobs, unecessary jobs, will be lost. But new jobs will be created in the green economy of energy independence & efficiency, and its attendant manufacturing. The point is that these parts of the economy must generate in the private sector in order to create anew capital formation in the economy now broke, as opposed to more borrowing & governmental spending/endebtedness to prime the pump. This process of new and dynamic industry arising from the ashes of moribund commercial activity is the Shumpeterian process described as "gales of creative destruction." (Joseph Schumpeter, 1883-1950, 20th-century economist)

DELEVERAGING THE CONSUMER
Seems that most people are finding that they can do with LOTS less stuff, looks like many are relinquishing the flotsom & jetsom of modern life, turning instead to savings for more security. Maybe the pendulum swings from addicted consumerism to revulsion at the mountains of detritus all around us. Demand destruction will be the strongest brake on retailing & sales, as Americans come off the binge and to their senses. Maybe we will be devotedly good at frugal. I think (hope) this is the next stage, and that tons of retailers will fold up shop, with "we don't need it, thank you" reverberating all the way down the line to the (foreign) originators: over the next ten years, a cascading tectonic seachange away from the consumption binge of the last decades. In the U.S., we have to start producing our own industrial goods again, of quality and life-time durability, and say goodbye to the cheap, disposable, inconsequetial junk enriching foreign saving nations. GET SMART, AMERICA!

Partial Transcript
December 7, 2008, CNN:

CHRISTINE ROMANS, CNN HOST: Welcome to YOUR MONEY. I'm Christine Romans.
Nothing is more critical to your money than your job and American jobs are disappearing fast. 1.9 million jobs have vanished so far this year bringing the unemployment rate now to 6.7 percent. The losses have spiked at the end of year. More than half a million of you lost your job in November alone, that's the biggest one-month cut in almost 34 years. More than 300,000 jobs were cut in October. More than 400,000 in September. That's more than a million jobs lost in just the past three months.

ALI VELSHI, CNN HOST: Retail trade losing 91,000 jobs in November, that's when they're supposed to be ramping up and the job losses are coming at companies where the names will be very, very familiar to you. A huge week for job cut announcements, AT&T slashed 12,000 workers. Credit Suisse, 5,300, DuPont laying off 2,500 employees. Viacom making 850 cuts and NBC announced plans to cut 500 jobs worldwide. That's more than 20,000 this week alone.

So is there any relief in sight? We are joined by a fantastic panel, Peter Schiff the president of Euro Pacific Capital, Lakshman Achuthan is the managing editor of the Economic Cycle Research Institute and Jim Ellis is the assistant managing editor of "Businessweek." Thanks to all of you for being here.

I want to start with you, Peter; you have been writing about and describing a coming crash and recession for some years now. I hate to say that some of the things that you've written about is outlandish as they seem do seem to be bearing out right now.

PETER SCHIFF, PRESIDENT, EURO PACIFIC CAPITAL: Sure, you know the problem, too, a lot of the jobs that are now being destroyed in our economy never should have been created in the first place, they were a function of our bubble economy. The fact that Americans were borrowing money and spending too much and as they can no longer spend because we're broke, all of these phony service sector jobs will have to disappear.

As painful as it is for the people who are in those jobs, the government has to stand aside and let it happen. We can't try to keep people in nonviable jobs. We have to go back to making things and it will be a very painful process and Americans are going to have to rein in their spending and start saving money.

VELSHI: I just want to ask you one thing, and I know this is theory that you've worked on, but we're now talking about officially close to 2 million jobs lost this year alone and it could be substantially more. I've heard you say it will mean millions of job losses to set this economy straight. What is the real equation there for people? What does your science and your academia tell you what to do when 5 million people are unemployed?

SCHIFF: That's how markets work.

VELSHI: Don't we have an obligation as a nation, as a modern economy to make sure that 5 million people aren't living in tents?

SCHIFF: There's nothing we can do. The government can't create jobs; they'll destroy jobs trying to do it. The government doesn't have any money all they have is a printing press. We need to free markets to create jobs; if the government wants to help they should reduce their burden on the economy. We should be cutting government spending. We should be cutting taxes and we actually should be raising interest rates. We're doing all of the wrong things and we're going destroy this economy.

ROMANS: Nobody is talking about doing any of those things. You're right. What they're talking about doing is spending a whole lot of money in fiscal stimulus and we have the Federal Reserve doing everything that it possibly can to keep the economy.

SCHIFF: Remember, we're in trouble, because we borrowed and spent too much money. We're not going to borrow and spend our way out of it. We have to do the opposite of what we've been doing. We're simply digging ourselves into a deeper hole right now.

ROMANS: Lakshman, we're not doing what Peter says we should be doing and no one says we are going to do that. What are we doing and will it work?

LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: Well one thing we are doing is we're probably cutting taxes which I think is one of the things you are prescribing. What we are doing here is they are throwing an ungodly amount of money at the economy. Not only the U.S., all of the major economies in the world are doing this, even China is doing it in a coordinated way.

VELSHI: You're a proponent of the idea that that will ultimately work.

ACHUTHAN: Look. What this will do is it will mitigate to a degree the pain on the way down. We are in a severe recession. As you were pointing out this economy went from a mild recession to a very, very severe recession. The numbers today they don't tell you anything about the future they just tell you that a few weeks ago we really accelerated to the downside.

When you look at the forward-looking indicators on the business cycle, they don't look years ahead, they look quarters ahead, they are tanking. They are at the worst readings they've been at in 60 years so we've got more numbers like we saw today on Friday coming in the months ahead and the one thing, the business cycle, the sharper the downturn, it tends to get a sharper upturn.

All of the things that we're doing here in the desperation of the moment are going to create all kinds of big questions on the other side in terms of the ideology of free markets, inflation and other things. Printing presses with the currencies.

ROMANS: But Jim Ellis says, it is too soon too start worrying about that, right? We are facing the beast that we're facing right now and then somewhere down the road there will be a recovery and a bubble that will have to be popped again, but what are we doing right now and will it work?

JIM ELLIS, ASSISTANT MANAGING EDITOR, "BUSINESS WEEK:" Well right now we basically have to find ways to free up the credit markets and get people to lend again and as bad as we ran into trouble with people borrowing a lot and spending, we've got to get people spending again. That is something that I think some people, particularly fiscal conservatives really worry about, but that's the bubble to come. That's next year's fight or the fight after.

Right now, the only thing to do is to get money coursing back do the economy and that will be a real challenge for the new president if and then we're talking about doing that and basically accepting deficits that we haven't seen in years.

VELSHI: Hold on, Peter, we are going to have this discussion in a way where our viewers can understand how they fit into it. This is a very smart discussion. You need to know how this affects you.

ROMANS: Just because we've spent an awful lot of money does it mean that it is right to spend more money?

SCHIFF: My mother always taught me that two wrongs don't make a right. We shouldn't bail out Wall Street. We shouldn't bail out Detroit. It will cost the economy more than the cost of the bailout which is more than the politicians think. We'll run into the hundred of millions to prop these companies up. The real cost is the damage to the economy that we do, because by propping it up, what are we destroying. What companies are going fail so they can stay in business?

ROMANS: You've made the point and a lot of these Congressmen have been making the point that there are dealerships across country and there are plants. Lakshman let's talk about around the country and you have a map that you can show us of how things have changed.

ACHUTHAN: Basically, as this recession has taken hold, job losses have gone from the coast and they've squeezed into the middle of the country and this is how a recession works. It's become more and more pervasive. It's no mystery that California is in trouble and they're really screaming right new.

VELSHI: And you can see Michigan was in trouble back then.

ACHUTHAN: These are the ones that were on the early edge of it and then as the recession has taken hold over the course of the year you've seen job losses just really cover the map.

VELSHI: Let's advance that to October. ACHUTHAN: We're having a little bit of a delayed holdout in the middle of the country from the commodity bubble with both oil prices. Basically, the recession has fully gripped this country and you're seeing that in the latest data. There is a very pervasive job loss. It's regional and its industry wide.

And this is what a recession is. So in the middle of that, right? Ideological arguments that have merit aside, do you want to put a slug of people out of work right there? And if you do, you are going go from what's a severe recession. People act surprised by this number today. I mean, get over it. If you look at forward numbers they're going to get a lot worse.

SCHIFF: People will get put out of work and there's nothing we can do about it. What government policy is doing now is making sure that there are no new jobs waiting for them. We have to let the market work, we can't centrally plan the economy and have the bureaucrats in Washington try to figure out how to run the economy and try to make this green economy and how to micromanage the auto industry. It's never worked.

ACHUTHAN: All of that is a nice discussion before you get into a severe, global recession.

VELSHI: Jim started by saying this will ultimately be a decision made in Washington. The American people would like to know whether the government can help or will help.

ELLIS: The government can undoubtedly can help, the question is whether they'll want to shoulder the burden and shoulder the financial burden that goes with that.

VELSHI: With what money?

ELLIS: I have a feeling that the same way the government has come in and come up with really innovative ways to pump money into the financial system to make sure we have a banking system. They'll say something like manufacturing still does matter in the U.S. It's very difficult to imagine a modern society that's a leader society and economically that doesn't have the manufacturing.

VELSHI: That's a point that Peter will agree with.

SCHIFF: The solution is to save our money. Remember, he's talking about we need spending. When you're overweight the solution isn't that you eat more. When you're broke the solution isn't to spend more. If we're going to have manufacturing in this country, we have to stop spending money.

ELLIS: If people don't spend.

SCHIFF: We'll have a real economy.

ACHUTHAN: Some of the excesses have already been corrected. You have home prices coming down. You've had a lot of jobs lost. You're already having some of that creative destruction already happening. SCHIFF: Spending is not an economy.

ROMANS: We have to leave it there guys. He brings up a good question what we've got get to. That is where do you get the money? We borrow the money. We don't have the money and that's part --

VELSHI: How do we pay it back?

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