Debt dynamics for dummies

Krugman again does a great job showing that the risks of explosive debt are way overblown.  As he says:

"So even with substantial deficits, the pace of long-term budget worsening is very slow."

It is not difficult to understand debt dynamics.  The ratio of debt to income (GDP) is a measure of the capacity to repay debt.  If the economy grows faster than debt, the debt-to-GDP ratio falls.  GDP grows with demand expansion, and debt grows at the pace of the interest on the debt.  In other words, if the economy grows faster than the rate of interest, then the debt-to-GDP ratio will fall even if the government runs deficits.

The graph below shows the growth rate and the real rate of interest on government bonds for the US since 1990.  As it can be seen, since 2003, with the exception of the Great Recession, the rate of interest has been below the rate of growth.

The debt-to-GDP ratio has only increased (see graph below), because the crisis has caused significant deficits to accumulate.  Note that in the 1990s, a combination of lower interest rates, higher growth and fiscal surpluses had stabilized debt, which starting growing in the Reagan years.

Finally, note the growing deficits in the figure below have reversed with a very mild recovery in 2010. Interest will remain low. What is needed is a stronger recovery to get growth going and that would increase revenue (allow for reduced spending on several things like unemployment insurance) and eventually lead to a lower debt-to-GDP ratio.

The way out of the fiscal problems is growing!  Even dummies should get this right.

Open Source Methods for Self-Sufficient Communities

Lisa Shoreland
Activist Post

After reading about the Open Source Ecology project, I decided to do a little research and see if there were any other groups out there trying to attempt the same thing. What I found is that the majority of the small-scale, self-sufficient community projects are being funded either by universities or government grants.

The problem I think that is inherent in these models is that the interests of big business and governments tend to be at odds with the interests of the developing world. Certainly multinational corporations have a history of exploiting the workers of developing nations, as well as their governments, all in the name of profit.

The open source model has proven to be a huge success in the computing world. Groups like the Free Software Foundation, spearheaded by Richard Stallman in 1985, have changed the application landscape in a completely unprecedented way. They have provided users with quality software often at little or no cost. The resulting explosion in wikis and blogs has fueled a global grassroots movement that has added a level of transparency to global affairs that has never existed before.

There is however a flaw in applying this model to a project such as the Global Village Construction Set currently being worked on at Open Source Ecology.The popularity of computing, itself partially driven by the free software model, is highly desirable to a very large demographic and the effects are immediately apparent. In addition, the connectivity of the Internet has allowed these types of projects to become economically feasible, with tons of programmers offering their services for free in their spare time. In this article we explore some of the barriers to entry of open-source self-sufficient community projects and how they may successfully capitalize on their investment through non-corporate or governmental channels.

A former physicist, Marcin Jakubowski, has started a DIY effort known as Open Source Ecology with their primary project being the Global Village Construction Set. This network of farmers, engineers, and collaborators has a goal of creating an entire platform of open-source, self-sufficient technology with the capabilities of building an entire community with all the modern conveniences. Described as a “mad scientist” by The Atlantic, the project is certainly an ambitious one and probably the most inclusive of any sustainability project I’ve seen to date.

What sets this project apart from the others is its sheer scope, and the commitment to providing solutions using off-the-shelf parts that one can easily obtain at a local store. Not only are they designing and building all the machinery necessary to build a modern community, they are building all the production equipment necessary to build those machines. The equipment they’re producing certainly takes a bit more than a tack welder and some wrenches to build. The video below will show you what I mean.



It all looks really cool, but is their business model feasible?

From what I can gather from their website, it looks to me like most of their profits are coming from individual contributions and from selling their equipment. That can fuel the project into a business, but can it turn it into a globally distributed technology? Not under the current business model it can’t.

People in the developing world lack the resources to implement the technology. They don’t have a local Wal-Mart where they can buy the parts, and they most likely lack the finances to secure all but the very cheapest of technologies. This may make the Global Village Construction Set viable for small-scale projects in developed nations, but will do little to help the market that could use it the most. So is there a way to get this technology into the hands of the world’s poor?

I think in order for these types of projects to gain momentum they are going to have to partner with microfinancing companies like Grameen Bank in order to bring their product to the larger market.  Grameen Bank offers the low interest zero collateral loans needed in the developing world to secure the necessary parts to build these types of equipment. Financing from sales and individual contributions will likely be enough to finish the project, and the Internet certainly provides a cost-effective manner to distribute the equipment plans, but the currently available niche market will unlikely be enough to fuel the project into the future.

If Open Source Ecology is able to effectively market their project to microfinancing organizations, and get them to give out the necessary loans to help lift the impoverished out of their predicament, then a second revolution using the open source concept can be initiated, which will bring real wealth to these people, instead of exploitation at the hands of large corporations.

Lisa Shoreland is currently a resident blogger at Go College, where recently she's been writing on preparing for college and sharing her favorite money saving tips for students. In her spare time, she enjoys creative writing, practicing martial arts, and taking weekend trips.

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EU to ban cars from cities by 2050

Glimpse of the global master plan -- Wiki

Bruno Waterfield 
The Telegraph 

Cars will be banned from London and all other cities across Europe under a draconian EU masterplan to cut CO2 emissions by 60 per cent over the next 40 years.

The European Commission on Monday unveiled a "single European transport area" aimed at enforcing "a profound shift in transport patterns for passengers" by 2050.

The plan also envisages an end to cheap holiday flights from Britain to southern Europe with a target that over 50 per cent of all journeys above 186 miles should be by rail. 

Read Full Article 

For More About Agenda 21 Visit MorphCity

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Earth Institute Searches for Science-Religion Common Ground

I am participating in Columbia University Earth Institute's Fetzer Institute symposium "Common Ground: Science and Religion in Dialogue for a Sustainable Future."

Yesterday, Earth Institute Director Jeff Sachs opened up the conference with the observation that human activity is having a greater impact on the Earth's environment than ever before, becoming a factor shaping the Earth's natural cycles and systems. Sachs calls this new age the Anthropocene; here is Sachs talking about this idea on BBC in 2007:

I called my lecture today 'The Anthropocene'—a term that is spectacularly vivid, a term invented by one of the great scientists of our age, Paul Crutzen, to signify the fact that human beings for the first time have taken hold not only of the economy and of population dynamics, but of the planet's physical systems, Anthropocene meaning human created era of Earth's history. The geologists call our time the holocene—the period of the last thirteen thousand years or so since the last Ice Age—but Crutzen wisely and perhaps shockingly noted that the last two hundred years are really a unique era, not only in human history but in the Earth's physical history as well. The Anthropocene is the period when human activity has overtaken vast parts of the natural cycles on the planet, and has done so in ways that disrupt those cycles and fundamentally threaten us in the years ahead.

Sachs therefore calls for a new ethic of sustainability (one of the missions of this symposium through curriculum development) in a world of strangers. Historical ethical systems had been created to suit smaller human communities in which people generally knew one another. How do we develop a global ethical system in which human activity has global impact but it is difficult to hold all these strangers to account?

James Hansen of NASA's Goddard Institute for Space Studies then gave the keynote address. Hansen explained why he decided to start speaking publicly after for many years bunting speaking invitations to his colleagues such as Michael Oppenheimer. On the main conference screen, Hansen showed photographs of his grandchildren and said that he felt a responsibility to do whatever he could to address the climate change crisis for the benefit of future generations. He mentioned that despite the remark Larry King made to him that "nobody cares about 50 years from now," perhaps from a media perspective, Hansen sees inter-generational justice as fundamental to many moral systems. The past eight years of the Bush Administration trying to stamp out the climate change truth has delivered a bleak message to future generations: "You are on your own, baby," Hansen said.

As for solutions, Hansen was critical of cap and trade schemes, saying they often leave too many loopholes, and that the clean development mechanism (CDM) under the Kyoto Protocol has allowed some countries to increase their carbon emissions, by planting trees elsewhere for example. Instead, Hansen prefers a carbon price through a tax that would be significant enough to change behavior and amass a public fund for investment.

The panel I moderated was titled "Creating a vision for Sustainable Business," featuring Kevin Knobloch of the Union of Concerned Scientists, Rev. Fletcher Harper of GreenFaith, and George Pohle of Suasoria and formerly at IBM. I opened up the panel by linking Jeff Sachs's remarks about the need for an ethic in a world of strangers to a book I am now reading, Cosmopolitanism: Ethics in a World of Strangers, by Kwame Appiah.

In his book, Appiah makes the case that what we believe (based on observation) and what we desire are linked and closely related. Moreover, the facts we believe to be true can change while beliefs can be difficult to disprove. Appiah famously uses the case of witchcraft in Ghana. He asks, isn't it true that people get sick without a clear explanation and isn't it true that some people wish ill on others? What fact can you point to that disproves that witchcraft doesn't exists? And what fact can you point to the universal truths exist? Appiah tries to bridge moral relativism and positivism; his "challenge" is cosmopolitanism, which says:

1. we have obligations to others
2. we should take seriously the specific lives and beliefs of others

Appiah's cosmopolitanism is about keeping a sincere conversation going. As my Unitarian church, while I was growing up, implored, "peace through understanding." Perhaps the "uni" in Unitarian should refer to "one world" instead of a single God.

Carrying on a sincere conversation is a good ongoing process, but can't we agree on some fundamental ethical foundations as well? My study of religions, as a religious studies minor in college for example, taught me that most of the major religions do actually make the case for the Golden Rule or its flip side a variation of "do no harm." Isn't truly good business sustainable business and truly sustainable business good business? I said I hoped this conference would not only advance a conversation but also help find common ground for an ethic of sustainability.

One of the most interesting discussions among the panelists was sparked by a comment about spiritual experiences. Harper has developed an adult education program that asks people to describe spiritual experiences they have had in the natural world. Many people have had profound experiences in the natural world but nobody talks about it (one of the participants later in the evening guessed it might be because Judeo-Christian societies have a fear of Paganism or reverence toward nature). The panelists agreed that introducing nature's power to inspire should be a part of child development as well as curricula development. Some suggested that this spiritual engagement, as well as green jobs, conservation, energy efficiency, smart regulations, and green investment, might comprise an ethical business venture in the post-crisis economy.

Those are my initial thoughts. Time to get back to the second day of the symposium.

Notes from Skoll World Forum

Policy Innovations friend and contributor Carol Holding recently attended the Skoll World Forum and shared some of her notes with us. She looks at the event from a brand and CSR strategy perspective:

The annual gathering at Said Business School, Oxford University, attracted 800+ social enterprise participants in social, academic, finance, corporate, and policy sectors from over sixty countries. It was perhaps the only celebration of capitalism in a country hit by "anti-capitalist warriors" protesting the G20 meetings. As Jeff Skoll, founder of the Skoll Centre noted, the mood was as effervescent as you would expect from a group of "people with a purpose who know their time has come."

Skoll, an American, was the first president of eBay and now chairs Participant Media, the film company that produced An Inconvenient Truth and Syriana. The forum was bookended by speeches from film company leaders, with an opening plenary that included Kenneth Brecher, Executive Director of the Sundance Institute, and a closing plenary with Lord Puttnam, producer of Chariots of Fire, The Killing Fields, and Midnight Express, who now focuses on education and the environment. These speakers engaged the passion of attendees while promoting the ability of video to build awareness and engage people in addressing social ills. But where was the link to building effective business organizations?

A panel on storytelling offered an explanation that should appeal to my branding colleagues: Both are opportunities for intervention. Getting people to be empathetic is the key to activation, as one filmmaker put it, to move them to consider "What would I do?" Marrying that moral imperative to a product could become increasingly important in a world where, as one delegate commented, marketing is the new fossil fuel.

Participants–To my surprise, many wore suits and some ties and had a sophisticated financial orientation, just like traditional entrepreneurs. Sessions were built around subjects like financial models, accountability and measurement, strategies for scaling and business tools such as the talk on branding. A senior editor from Fast Company bemoaned the formal dress but loved the excitement of the conference and wished the topic of social enterprise were given a special section in his magazine. No publication currently owns the space and he sees an opportunity for Fast Company.

This pro-market environment was reinforced by luxe lecture rooms in the modern Said Business School and the Oxford locations used in the evening. Dinner was held in various Oxford College dining halls—I was assigned to Keble, a truly Hogwartsian setting—and the following evening's reception was in the Examination Schools, also steeped in conservative tradition. Evening plenaries were held in the Sheldonian, a magnificent 17th century building where Oxford's honorary degrees are presented.

Sustainability was defined more broadly than the environment, and all environmental entrepreneurs had products with a social justice benefit as well. Three of the nine Skoll Awards went to organizations that had an environmental product or service. For example, I met founders of companies that produced wind turbines and solar panels, both offering low-cost or easy-to-operate products, but distributed in less developed markets.

Academia–There was a fair degree of focus on academia as Social Entrepreneurship struggles to become an accepted discipline within business schools. I spoke to faculty and deans from schools like INSEAD, Cambridge, Vanderbilt, and NYU who likened the field's awkward "adolescent-like" status to Entrepreneurship twenty-five years ago, before there were enough studies conducted and papers published to validate the field. Even the definitions are not set, and sister fields such as Social Enterprise and Social Innovation confuse and dilute the meaning of Social Entrepreneurship.

Zoellick makes case for fairer globalization

I couldn’t help but notice that the title of World Bank President Robert Zoellick’s speech to the National Press Club on Wednesday bore some similarity to a certain blog. His remarks, “An Inclusive and Sustainable Globalization,” outlined the Bank’s vision for the next few years. Increasingly this looks like movement away from the anti-corruption focus of the Wolfowitz era and toward building support for the benefits of globalization.

I appreciate that his definition of “sustainable” globalization extends to both environmental and political sustainability. Here in the US, the political sustainability of globalization has lately been much in the news. As Congress considers punitive action against China and presidential candidates from both parties score easy points with protectionist rhetoric, it is worth remembering that, as Zoellick points out, globalization has lifted 300 million people out of grinding poverty over the last two decades.

Globalization offers enormous opportunities…we shouldn’t try to stop it or shut it down. But we do need to try to channel it and manage it. We need to help those that would otherwise get left behind.

Mind you, he’s not talking about Americans in manufacturing districts being left behind. He’s talking about “indigenous people, women in developing countries, Africans, the rural poor, and their children.” In turning our backs on globalization, we might just as easily be turning our backs to the people on that list.

Protectionism may be politically sustainable, but it hardly seems fair.