To My High School Classmates

To my classmates:

Four years ago we agreed not to use our class mailing list for political discussions. Now we seem to have forgotten that agreement. Rather than wearing out my welcome on that list I have posted my response to the recent chain letter about the Buffett Amendment here.

I recommend you see Snopes.com article on the Buffett Amendment which says
 

"Origins:   In July 2011, discussion about raising the debt ceiling heated up as the August 2nd deadline for resolving the issue and avoiding a shutdown of the federal government loomed. (Had the matter not been resolved, as of that date the U.S. would have been unable to fund its various programs and other expenditures.)

"Opinions about what should be done were sought from various quarters as news organizations struggled to keep up with the battle waging in Congress and behind closed doors. Business magnate Warren Buffett waded in with his opinion on the matter in an early-morning 7 July 2011 CNBC interviewconducted by Becky Quick. It was during that exchange that the Oracle of Omaha made his now famous statement about rendering ineligible for re-election all sitting members of Congress whenever the deficit exceeded 3% of gross domestic product.

"So yes, it's true that one of the most respected businessmen of modern times did indeed voice the quote now widely ascribed to him in various e-mailed forwards, although his remark was more in the nature of a wry commentary on the workings of Congress than a serious proposal for tackling the budget deficit.  (my emphasis)

"The rest of the lengthier e-mail in circulation has nothing to do with Warren Buffett. (my emphasis again) What is presented as the "Congressional Reform Act of 2011" began circulating on the Internet in October 2009 as the "Congressional Reform Act of 2009." In a nutshell, what is presented as a proposed 28th amendment to the U.S. Constitution isn't something that has been put forward by any member of Congress and thus is nothing more than a bit of Internet-based politicking."

I disagree with the way that Obama has handled the budget deficit/debt problems. He should have crusaded for adoption of the Simpson-Bowles (National Commission on Fiscal Responsibility and Reform) plan even though it did not get the super majority needed to present it to Congress on an up or down vote. Instead he shrugged it off. An enormous failure of leadership!

The various Republican plans that aim to fix the federal government's financial problems with only spending cuts and tax cuts are: (A) voodoo, (B) require a suspension of the laws of mathematics, (C) a pack of lies, or (D) all of the above. (Apologies for the nonparallel construction.) There will have to be some painful and unpopular spending cuts including in the sacred-cow programs of social security benefits and medicare BUT there also have to be tax increases (not just on those making more than $250k/yr) to close the gap. Returning to the tax rates of the Clinton years would go a long way to solving the problem and could be done easily by letting the Bush tax cuts expire. But a far better solution would involved broader tax reform to eliminate the loopholes and simplify the IRS code.

Neither party has had the courage to speak the truth to the public, but the Republicans have been far worse. Don't take my word for it: read this article or the book It's Even Worse Than It Looks: How the American Constitutional System Collided With the New Politics of Extremism. Also highly recommended: White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.

The Last Word on Higher Ed from Ed

In response to my recent bloviations on higher education my friend Stephen Markscheid sent me this:
http://www.ritholtz.com/blog/2012/05/every-majors-terrible/

Enjoy!

The Coming Tsunami of Innovation in Higher Education

In my April 21 post "Hard times for Higher Ed" I wrote about the problems of Assessment and Accountability, i.e. the lack of data about whether students learn anything in college or which types of institutions (if any) are more effective at producing learning gains. I also mentioned a second issue that has troubled me for many years: the lack of innovation in educational delivery systems. I am optimistic that things are about to change on that front. In the last six months there has been an explosion of experimentation and entrepreneurship focused on providing rigorous college or graduate school courses available in non-traditional ways to non-traditional students.


Perhaps we should start the clock in 2004 when Salman Khan (born and raised in  New Orleans) began to tutor a cousin who was a middle school student in math using the Yahoo Doodle instant messaging service. It didn't hurt that Khan had three degrees from MIT and one from Harvard. Khan's home brew tutorials were so effective that other students wanted to join in.  A colleague suggested he put them on You Tube. In 2006 he went live and the Khan Academy now offers over 3200 videos on line as well as numerous other teaching, learning and assessment aids.  Hundreds of thousands of students have viewed Khan's tutorials and they are integrated in the instructional strategies of a growing number of schools.  Khan has won the backing of some of the biggest names in information technology and venture capital.  Earlier this year he was included in Time Magazine's list of the 100 most influential people in the world and the accompanying profile of him was written by Bill Gates.

One of the people who was inspired by Sal Khan's experiment was Sebastian Thrun, a professor of computer science and electrical engineering at Stanford. Thrun taught a very popular artificial intelligence course and posted videos of his lectures and other learning aids on the class web site.  He was encouraged to offer an on-line version of the course to anyone in the world who could access it via the internet.  In October of last year an astonishing 160,000 students from almost 200 countries registered for the course (which did not carry any Stanford credit) and about 23,000 completed the course passing the same exam that was taken by the Stanford students taking the course for credit.  Thrun quickly resigned his tenured position at Stanford and with a few collaborators formed Udacity to offer more such courses.

Thrun's stunning achievement has been a dope slap to the pointy heads that run America's most prestigious universities. Talking about the effect higher education of such technology based distribution, Stanford's president John Hennesy says "There's a tsunami coming." (from this New Yorker article)

Stanford has quickly formed a partnership with Princeton, the University of Pennsylvania and the University of Michigan to offer a wide range of on-line courses through a new company Coursera. Now Harvard and MIT have rushed into battle with edX--a venture that might have spent a bit more time in the incubator before its clumsy public launch on May 2nd. Perhaps the most elaborate implementation of this tsunami model is the Minerva Project, headed by Ben Nelson, a Silicon Valley entrepreneur who founded Snapfish, the on-line photo printing service.  Minerva aims to create budget priced campus based education with Ivy League standards.  World class faculty would pipe in their courses to classrooms around the world.  Local faculty and tutors would lead discussions, organize group work and presumably have a role in assessment and policing cheating.  Nelson's model is appealing because it offers the advantages of the residential experience that a totally internet based system lacks.  And Nelson has recruited a posse of big names for his advisory board including Larry Summers, former president of Harvard and Secretary of the Treasury.  Although Nelson has plausible responses to most all questions about his plan and has pledges of significant funding, to me he projects a note of arrogance and hype in his promotion of Minerva.  I hope that I am wrong.

I don't think that any of these innovations will put conventional higher education out of business but they will certainly force traditional institutions to raise their game.  And they will make elite level instruction accessible to anyone who has an internet connection.  For me the one important element that is missing from the discussion is the absence of defined curricula.  Most younger students (age 17-21) benefit from preset degree programs rather than the chaotic cafeteria plans offered by many universities. Most such students would also benefit from more discipline and more civic and physical education than they experience in universities today.  For many years I have imagined that such a place would look much like the military academies.  Ben Nelson may have something like that in mind for Minerva.  In a recent article on The Atlantic web site he said "We are creating a civilian West Point. The people who will get into and graduate from Minerva will be, bar none, the best students on the planet."  What he doesn't understand is that West Point does not have the best students in the world.  The students at Stanford would eat them up. (If you have any doubts go here.)  But that is not the point.  What we need are institutions that retain and develop all of their students to the greatest extent possible in mind and body and spirit.

See Charlie Rose interview Salman Khan here.  See him interview Sebastian Thrun here.

See Ben Nelson promote the Minerva Project here.

Bursting Bubble or Tsunami? Part 2

The second and final installment from Education News and covered by their Creative Commons License BY-NC-NC. Education New

Bursting Bubble or Tsunami? Part 1

Last week I ranted about universities failure to measure and disclose whether they actually contribute to their abilities to think critically, reason analytically, solve problems and communicate clearly and cogently.  Here is a graphic presentation from Education News about another troubling aspect of higher ed.  Please note that this excerpt is reproduced in accordance with the terms of Creative Commons License CC By-NC-ND granted by Education News.Education News

Hard Times for Higher Ed

American education has been a favorite whipping boy for politicians, journalists and pundits at least since the 1983 publication of A Nation at Risk: The Imperative For Educational Reform. Recently times have been especially tough as the economic crisis has reduced institutional revenues forcing faculty layoffs and concomitant shrinkage in course offerings. At the same time many people who cannot find work have decided to go back to school, placing greater demands on the stressed colleges and universities. In the last year or so and particularly in the last six months two threads of criticism of higher education have echoed concerns that drove me for the fifteen years when I headed first the Exxon Education Foundation and then the ExxonMobil Foundation.

Assessment and Accountability: the lack of data about whether students learned anything in college or which types of institutions (if any) are more effective at producing learning gains. Sure everyone knew that the graduates of Yale and Stanford were smarter that those of North South State University (NSSU) in Nowhere, Oklahamshire. But of course, those students were much smarter and better prepared when they entered Yale and Stanford. Perhaps they would have done as well at NSSU. In fact, insiders knew quite a bit. They knew that certain small and relatively unknown schools such as Hope College in Holland, Michigan and St. Edward's University in Austin, Texas consistently outperformed much more renowned and better endowed and larger schools, but the data was mostly anecdotal and insufficient to sway either policy makers or high school counselors. Furthermore, universities consistently blocked research that might disclose unpleasant findings about how much their students learned. I recall a massive study of student learning of science and math funded by both the National Science Foundation and the Exxon Education Foundation and conducted by Prof. Alexander Astin at Higher Education Research Institute at UCLA. Before the colleges and universities agreed to take part they demanded that the data would be disguised so that no one other than the researchers could see the results of any specific school. The study produced some powerful conclusions that were included in Astin's important book What Matters in College? Four Critical Years Revisited (1993). However, many other potentially game-changing findings were submerged due to the stonewalling of the participants.

This intentional lack of transparency is still a huge problem but things are beginning, very slowly, to change for the better. As the cost of higher education has continued to grow faster than inflation parents, taxpayers and state legislators are demanding that the curtain be lifted. In 2000 the Council for Aid to Education (CAE) launched the Collegiate Learning Assessment (CLA) which presents realistic problems that require students to analyze complex materials and determine the relevance to the task and credibility. Students' written responses to the tasks are evaluated to assess their abilities to think critically, reason analytically, solve problems and communicate clearly and cogently. Scores are aggregated to the institutional level to inform the institution about how their students as a whole are performing. By 2010, over 200,000 U.S. students had tested with the CLA in over 450 institutions. In January 2010 the Organisation for Economic Co-operation and Development (OECD) asked the CAE to create an international version of the CLA for the Assessment of Higher Education Learning Outcomes project covering its 31 member countries.

January 2011 saw the publication of Academically Adrift: Limited Learning on College Campuses by Richard Arum and Josipa Roska. The study using data from the CLA showed that a large fraction of undergraduates register hardly any gains in critical thinking, analytical reasoning, problem solving or communication skills in their first two years of college. Educational journals and blogs immediately filled with articles trying to refute Arum and Roska's findings. While some of the criticism is warranted, most is simply an attempt to deflect attention and has been unsuccessful.

Although Arum and Roska's work is ground breaking, the data is still disguised. Universities that administer the CLA still do not release data that would allow a prospective student to compare School A with School X.

Additional research research is underway and will certainly be helpful, but I say it's time to stop studying the problem and start solving it. Billions of dollars are being spent each year on largely worthless coursework. Students and their families take on crushing debt, often for no gain. These stakeholders have a right to know which institutions measure up and which are failing.

Yesterday New York Times columnist David Brooks took the issue to a wider audience in his article "Testing the Teachers."

Oh, I almost forgot that there were two threads of criticism of higher education that have caught my interest. The other is the lack of innovation in educational delivery systems and how that is about to change.

In the interests of full disclosure:

1. I was on the Board of Trustees of the Council for Aid to Education in the late 1990s and early 2000s when the CLA was being launched.
2. The ExxonMobil Foundation made the first grant to support the planning for the CLA.
3. Richard H. Hersh is a former president of Hobart and William Smith Colleges and Trinity College is one of the founders of the CLA. He has a new book on related topics, We're Losing our Minds: Rethinking American Higher Education. For a humorous introduction to the book watch Hersh on The Colbert Report.

Some Colorful Facts about the US Federal Tax Situation

I highly recommend this colorful set of charts about the Federal tax system. The collection was compiled by Derek Thompson, a senior editor at The Atlantic.

Neither the Democrats nor the Republicans make any sense when it comes to tax reform, which in my view is absolutely essential.  Just letting the Bush tax cuts expire would help a lot with the deficit but we would still have a nightmare of a tax code.  Some thoughtful ideas about how to untangle the mess are set out in Simon Johnson and James Kwak's new book White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.

I have to sign off now and get to the post office with my love letter to the IRS.

Visit to Xiamen and Yun Shui Yao, Fujian, China

March 30 through April 3 we traveled to Xiamen,  an island city in Fujian Province and to Yun Shui Yao, a rural village also in Fujian.

Click here for photo album.

Three Cheers for Good Government: Not Small Government

All the Republican Candidates rail against BIG government.  Obama and company blast away at Big business.  There is a grain of truth in both arguments. However, the claim of neither side is credible in part because neither party admits any merit to the other's charge.  Furthermore, neither party has a record of following up on its promises.

Is big government the problem or is it inefficient government? Government that has been captured by interest groups, lobbyists and big business?  The founding fathers were alert to the dangers of tyranny and invented the system of checks and balances at the heart of the Constitution.  But they could not have imagined the huge limited liability corporations that arose in the 19th century and have continued to expand their global reach.  Although they do not have the power to imprison or tax, these companies have the potential to cause suffering as surely as despotic governments.  If Republicans are so concerned about abuse of power by big government, why aren't they also concerned about abuses by the business sector?  Instead they propose to massively roll back regulation.  They, with help from their masters in the finance industry, have successfully fought implementation of Public Law 111-203 Dodd-Frank Wall Street Reform and Consumer Protection Act.

Of course, the biggest threat to the social order comes when government acts in collusion with big business to promote crony capitalism rather than free market capitalism.  On January 17, 1961 in his Farewell Address to the Nation President Eisenhower warned of the threat to liberty from the "military industrial complex."  Today he might opt for the "financial, prison, military industrial, legislative complex."

Writers' Week

In the last week I have had three different and interesting encounters with writers.

On Tuesday March 20 Hong Kong International School, a K-12 institution where my wife is an administrator, hosted the novelist Chang-Rae Lee for a day or two as a visiting artist.  I was lucky to be able to attend a talk he gave to a group of parents, faculty and high school students.  Lee came to the USA from Korea in 1968 at age 3.  He has published four award-winning novels and directs the creative writing program at Princeton.

As one might expect from such a thoroughbred author, he spoke from a finely prepared script talking about his family life, his education, his decision to abandon a nascent career in finance for his real love, writing.  His talk included a recitation of a long, vivid and moving passage from his first novel Native Speaker.  Lee acquitted himself well in a long Q&A session but it is clear that he is most comfortable with the well polished written form rather than improv.  He had lots of helpful remarks for the aspiring writers in the audience, but is was clear that by writer he mean one composing fiction.  His response to my question about whether he had anything to offer writers of non-fiction was superficial.  You can learn more about Chang-Rae Lee here and here.

The day after meeting Lee I caught up with the ghost of John Updike in the form of a rebroadcast of two interviews by Terry Gross on her NPR Fresh Air program.  Updike died in 2009.  The program was to mark his 80th birthday on March 18.  Listening to this grandmaster in the last years of his life reflect on such a long career was a bright counterpoint to the rising star.  You can listen to the Fresh Air interviews here. 

Finally, on Sunday the New York Times Magazine carried "Why Talk Therapy Is on the Wane and Writing Workshops Are on the Rise". I have had a few friends who worked through their mid-life crises by taking sabbaticals from mainstream careers to enroll in creative writing programs. So far all who have taken this cure have eventually returned to the dark side. However, one of them is still undergoing treatment. I'm rooting for him to stay the course.

(ps-For readers who think I was either an engineering or accounting major: Nope--English and my second choice was physics.)

Sunday (Tuesday) in the Park (at Home) with George (Russ)

Every Tuesday for the last fours years or so I have downloaded Russ Roberts's EconTalk podcast and spent an entertaining hour or more listening to his interview of an interesting character--often, but not always, a fellow economist. Last week (March 6) was typical: an 87 minute talk with Columbia University Professor Charles Calomiris about banks' capital structures, the effect of leverage on risk and the role of financial regulation. While the audio was downloading I made a quick detour to Cafe Hayek, the blog that Roberts shares with his colleague Don Boudreaux. There I stumbled across a video of Russ giving a talk at Southern Methodist University's (SMU) Cox School of Business in Dallas. Since I was the executive-in-residence at Cox 2005-2007 I couldn't resist watching his performance. Between the SMU video and the EconTalk podcast I spent a good part of Tuesday with Roberts.

The video was enlightening as it was the first time I had seen the professor in action and the first time I had encountered him as a soloist rather than in a duet. Roberts teaches economics with stories rather than using arcane mathematics and charts. That makes him much more engaging than the average econ prof. As I watched him pace the stage I thought how much his approach was similar to the ministers that preach in the churches surrounding the SMU campus. Roberts's sermon was about the superiority of the emergent order of a free market economy compared to one where decisions are made by committees or regulatory agencies. He ridiculed the 40 members of L'Académie française who are charged with protecting the purity of the French language. But his real target was politicians. In his talk he derided politicos from both parties although on the podcasts he leans more heavily on Democrats. It was all very entertaining.

But worrisome, too. There was absolutely no hint that emergent free market economies might fail to efficiently deliver certain kinds of goods and services (e.g. public goods, natural monopolies, externalities). There was no consideration that free people might intentionally trade off some of the efficiency of a free market in favor of other values. Although there was brief mention of regulatory capture, there was really no worry about the power that huge global corporations now exercise both directly and through business associations and front organizations. There was prolonged derision for politicians but no serious suggestions as to how the nation's governance could be reformed.

In other forums Roberts has admitted that he does not consider economics a social science. For him libertarian economics is an ideology--one that he promotes with the skill and enthusiasm of an accomplished preacher-man.  Like most good preachers he has some large blind spots and he is very selective about the evidence he brings to his arguments.  Knowing that, I continue to listen to him because one can learn from great preachers even if not subscribing to their creed. But I worry about our college freshman and sophomores who get their first taste of economics from such a smooth talker.  And I worry about the mostly gray heads in the SMU audience who left with all of their preexisting assumptions confirmed.

Abolish the Corporate Income Tax--what do you think??

I have heard a lot of pleas to abolish the corporate income tax over the last forty years. Most of them are premised on the burden of double taxation of corporate earnings: once when earned by the business and a second time when they are distributed as dividends to shareholders.  Supposedly this double whammy reduces investment and ...(you can fill in the blank). That argument has never carried much weight with me because many companies don't pay much or any dividends.  Furthermore, much of the dividend stream is paid to pension funds and other recipients that further defer or entirely avoid the second round of tax.


My problem with the corporate income tax is the strong incentive it gives to debt finance rather than shareholder equity.  What would happen if we abolish the 35% Federal tax on company profit but tax dividend income and capital gains on shares sales as regular income in the hands of the recipients?  Dividends paid to foreigners would be subject to a withholding tax. This change would put a lot of corporate treasurers, accountants and attorneys out of work.  Ditto for auditors, bankers and financial advisers.  In the short term there would be a spike in the unemployment rate.  But all of those people are very clever and would quickly find jobs during real work.


WHAT DO YOU THINK?


PLEASE SHARE YOUR THOUGHTS BY POSTING A COMMENT BELOW.


Highly recommended film: Margin Call starring Zachary Quinto, Stanley Tucci and Kevin Spacey--a fictionalized account of the fall of Lehman Brothers.

Crash Course in Monetary Policy: You will be tested

OK, I'm weird.  I think this discussion between Scott Sumner of Bentley University and Russ Roberts of George Mason University is fascinating.  To quote the blurb on the web site "Sumner argues that monetary policy has been too tight and helped create the [current economic] crisis. He disputes the relevance of the so-called liquidity trap and argues that aggressive monetary policy is both possible and desirable. The conversation closes with a discussion of what we have learned and failed to learn during the crisis."


If you are a glutton for punishment you can take a look at Sumner's blog The Money Illusion.

Straight Talk--Passionate but Grounded

The quality of public discourse in this political season is shocking--but you knew that already.  The Rs are speeding toward the right edge of the flat earth they believe in.  The two Republican candidates that have the most well thought out and consistent platforms, Ron Paul and Rick Santorum, are also the most extreme.  At least you know where they stand and they have spent some time doing their homework.  Some of Santorum's ideas about social programs to strengthen the family are down right progressive.

The Democrats are laying low and enjoying the artillery duel among the Republicans but haven't brought anything new or interesting to the discussion.  The conservative wing of the Republican Party has successfully shifted the location of the whole political discussion so far that even Democratic policy positions fall to the right of 1970s Ripon Society Republicans.

So it was truly refreshing to discover a December 5 lecture by Jeff Sachs on the London School of Economics web site.  Sachs summarizes the ideas in his most recent book The Price of Civilization: Reawakening American Virtue and Prosperity.  In his long and very high-profile career in economics and public policy Sachs has had little to say about US domestic affairs until now.  Even if you are not a fan of Sach's earlier proposals about economic development and foreign aid you will find this talk well done and thought provoking.

Food for Thought at Thanksgiving (Two Servings)

First Course: Gratitude
A Serving of Gratitude May Save the Day by John Tierney from the New York Times Nov 22, 2011


Second Course: Open-mindedness
Levy's Nine Laws of the Disillusionment of the True Liberal By Marion J. Levy, Jr.*  Professor of Sociology and International Affairs, Woodrow Wilson School, Princeton University. His books include The Structure of Society and Modernization and the Structure of Societies. His 'Laws' numbered six when first formulated in 1966 and later grew to nine.

1. Large numbers of things are determined, and therefore not subject to change.
2. Anticipated events never live up to expectations.
3. That segment of the community with which one has the greatest sympathy as a liberal inevitably turns out to be one of the most narrow-minded and bigoted segments of the community. (Stanley Kelley, Jr.'s Reformulation: Last guys don't finish nice.)
4. Always pray that your opposition be wicked. In wickedness there is a strong strain toward rationality. Therefore there is always the possibility, in theory, of handling the wicked by outthinking them.
     Corollary One: Good intentions randomize behavior.
          Subcorollary One: Good intentions are far more difficult to cope with than malicious behavior.
     Corollary Two: If good intentions are combined with stupidity, it is impossible to outthink them.
5. In unanimity there is cowardice and uncritical thinking.
6. To have a sense of humor is to be a tragic figure.
7. To know thyself is the ultimate form of aggression.
8. No amount of genius can overcome a preoccupation with detail.
9. Only God can make a random selection.
* Marion Levy was a much loved member of the Woodrow Wilson School faculty while I was a graduate student there 1969-71.  I never took a course from him but often joined him and fellow students for lunch in the school's cafeteria.  He was chair of the East Asian Studies Department while my  wife was on the faculty 1973-76.

Communists Spawn Culinary Revolution!!

Subtitle: Foodies of the World Unite.  You have nothing to lose but your waistlines.

My old buddy and China hand Scott Seligman and his good friend and collaborator Sasha Gong have co-authored a new cookbook. Called The Cultural Revolution Cookbook, it comes out December 1. Lisa and I are ordering a few copies as Christmas gifts for family and friends.

I have had a look at the book which is a feast for the eyes with not only the usual photos of the dishes but also attractive reproductions of socialist artworks typical of the Cultural Revolution era. I have also sampled several of the dishes prepared by Chef Sasha herself and they were very tasty. This home-style cuisine appeals to me much more than elaborate banquet cooking that many people associate with Chinese food.

I hope that you will consider a copy of the book for you own kitchen and for holiday gifting, too.  You can purchase it here.

In Scott's own words:

The cookbook has the unlikely theme of China’s Great Proletarian Cultural Revolution (1966-1976), of which Sasha was a veteran. On the surface it sounds like an absurd proposition, because food was anything but plentiful during the Cultural Revolution and some people were reduced to eating tree bark and insects to survive. The 17 million young people whom Chairman Mao ordered to the countryside in 1968 by and large felt that leaving their education behind to work side by side with the peasants was a tragic waste of their productive years.

Our thesis, however, is that one of the things that they actually did learn from the peasants was how to make do with what there was. They learned to cook with fresh, wholesome foods that were in season, to conserve scarce fuel and to prepare remarkably tasty and healthful dishes with enough nourishment to get them through long, arduous days in the fields. We think the book will resonate not only with people interested in China, but also those committed to eating locally grown, preservative-free, unprocessed food. In addition to dozens of recipes, the book contains some history, a chronology of the Cultural Revolution, some personal stories and a slew of anecdotes relating to food and ingredients used during that era. It’s also profusely illustrated with socialist realist art from the period –those colorful propaganda posters showing Chinese peasants building socialism. The recipes include few prepared ingredients and pretty much everything needed is available at a well-stocked grocery store.

 

 

 This example from the book should whet your appetite for more-

Stir-Fried Corn and Pine Nuts
Ingredients
2 ears of corn on the cob (or 2 cups of canned or frozen corn kernels)
1 scallion
Ω cup pine nuts
2 Tbsp. cooking oil
Pinch of salt

Recipe
Corn was considered low-class, coarse food during the Cultural Revolution, in large part because Chinese corn was far less sweet than today's American variety. The occasional ear of sweet corn that appeared was highly prized and used in dishes like this.
Place the two ears of corn in their husks in a microwave oven. If the corn has already been husked, wrap it in a wet paper towel first. Microwave for three minutes on high. Remove the husks and silk, or the paper towel, and allow to cool. Then cut the kernels off of the cobs. (If you are using frozen corn, just let it thaw until it is at room temperature; canned corn may be used right out of the can).
Slice the scallion on the bias into small pieces about the same size as the corn kernels.
Place a wok over medium flame and add pine nuts without using any oil. Stir-fry them for a minute until they turn slightly brownish, then remove them from the wok and set them aside.
Add oil to the wok and heat it until it just begins to smoke. Add the scallion pieces and stir-fry very briefly, 10 seconds is enough. Then add the corn and stir-fry for 30 seconds more, Add salt and then return the pine nuts to the wok. Make sure the ingredients are well-mixed and warm. Remove and serve.

Happy Birthday to Bryan Zhi-hui Davis October 20, 2011

Bryan Zhi-hui Davis was born Oct 20th at 12:10 pm in Huntington hospital, Pasadena  CA. 6lbs 13ozs, 21 inches.

Mom, Jessica Ahnert Davis, father Scott Bryan Davis and baby Bryan are doing well.

Primal Scream of Democracy

"Primal Scream of Democracy" is the phrase that Al Gore reportedly used to describe the Occupy Wall Street Crowd in Zuccotti Park. I can't find an authoritative confirmation of Gore's remark but I'll give him the benefit of the doubt and congratulate him on capturing the essence of the protest--at least as I see it from half way around the world.

Another thing that makes me want to scream is the whinny, self righteous, condescending, arrogant and scornful reaction to the OWL participants by many businesses and their hired spokespersons.  Take for example this blog post from a Corporate Social Responsibility (CSR) consultant.  He pleads for more understanding but his subliminal message is that the protesters, not the business leaders, don't understand.  They ought to recognize the blessings of capitalism and abandon their vigil.

I would ask "What is it about the OWL protesters that captains of industry, their chief sustainability officers and Washington politicos don't understand?"  Sure, the protesters don't have talking points; they haven't been media trained and they don't stay 'on message'. They are inchoate, but they understand that Goldman Sachs, AIG, Citi, Moody's, Fannie etc and Washington regulators who were sleeping with Ayn Rand have enriched themselves while robbing millions of Americans of their homes, jobs and dreams. These millions understand that none of the pirates and their accomplices are likely to spend time in prisons. Who would argue with the victims of the biggest heist of all time that capitalism isn't broken?

Those that still have cushy jobs should stop scolding the protesters and get busy fixing what remains of capitalism. Suggestion: start by breaking up the financial institutions which are even larger today than they were in 2008 when they were too big to fail. 

More on the Trade War

Thanks to Scott B Davis for his vote of support for my last post about the insanity of threats against China on account of its exchange rate policies. (See comments on last post.)

If you want more credible views on the same subject to cite at the next cocktail party, see this recent  Bloomberg editorial and today's Tom Friedman pronouncement in the NYT.  There's a more scholarly interview with Nicholas Lardy here.

Insanity:Threats of Trade War with China

Last week via the miracle of streaming video on the internet I watched the Republican presidential candidates debate.  There were many aspects of the discussion that were comment-worthy , one of which was Romney's belligerent remarks about trade relations with China.  Certainly, the central government of China has managed or 'manipulated' the exchange rate of its currency against the dollar for many years, but the overall impact of the Chinese exchange rate policy on the US economy and standard of living has not been as catastrophic as the candidates portray it.  Incidentally, such exaggeration is not limited to the Republicans, indeed Democrats in their heart-of-hearts are more natural China bashers than the Rs.  They just haven't had the opportunity to mouth off in a series of globally televised candidate debates.

Yes, there have been many US manufacturing jobs lost to China in the last two decades or more.  But one must ask several questions:

1. Hasn't the cost of the lost jobs been less than the benefits to the nation of the lower cost goods imported from China?
2. If China had allowed its exchange rate to float would the exodus of US factory jobs have been less, or would the jobs have been lost to competitors in other nations?
3. Was China's exchange rate policy a major cause of the bursting of the housing/financial bubble in 2007-08 and the agonizing deleveraging that still plagues the US and Euro economies?
4. Was the melt down that began in the housing industry in 2007 and quickly spread to the financial industry caused by a transfer of jobs from the US to China?

Bashing China for its trade and exchange rate policies scores points with US voters and distracts them from the domestic failures that certainly are more responsible for America's current economic woes.  However, such tactics risk further shocks to the already vulnerable global economy with potentially more harm to the US.

The article below from the South China Morning Post, Hong Kong's leading English language newspaper, explains the competitive problems that China's manufacturers are having.  It notes that the Chinese currency has appreciated against the US$ by 7.02% since June last year.  But the effective appreciation was actually much more than that: probably more like 11% (7.02% plus the amount by which Chinese inflation exceeded US inflation over the same period). 

China's manufacturing exodus
Relentless rises in production costs and wages are forcing
mainland manufacturers - and product buyers - to the cheaper
markets of Southeast Asia
Denise Tsang in Guangzhou
Updated on Oct 17, 2011
    As overseas buyers flood China's largest and most established trade show,
the Canton Fair, change is afoot in the world's largest exporter.
    Relentless inflation in production costs and wages had forced many
manufacturers to relocate production from the Pearl River Delta or
Yangtze River Delta to Southeast Asian countries such as Vietnam and
Indonesia, some buyers said at the 110th China Import and Export Fair at
the weekend.
    They said moving offered a solution for manufacturers, who had limited
room to raise costs for buyers at a time of a possible double-dip recession
in the United States and European Union, China's largest trading partners.
It also came at a time when Beijing's policy was to force factories to
upgrade or migrate.
    Despite the economic turmoil abroad, the trade fair, held each spring and
autumn in Guangzhou since 1957, was packed with visitors from across
the globe on Saturday, the first day of a 15-day show.
    A bellwether of trade, the show runs across three weeks. This week, it
centres on home appliances, electronic goods, construction materials and
machinery, switching to gifts and home decoration next week, with
garments, shoes and food the theme for the final week.
    "One in every four of my Chinese suppliers have moved to Vietnam and
another 20 per cent will be moving before the Chinese New Year [in
January]," said a Hong Kong-based Canadian trader of home electrical
appliances named Richard, a fair regular for the past 40 years.
    "Labour cost inflation in China is not going away," he said, adding that
inflation was stable relatively in Vietnam and Indonesia. He expected 60
per cent of his company's products to be sourced from Southeast Asian
countries by 2013, but China was now the group's dominant source,
supplying 80 per cent of products.
    Guangzhou-based Lebanese Farhad Ziad, who sources consumer goods
from the mainland for retailers in Lebanon, said he was planning to move
to lower-cost Vietnam next year. "Commodities are too expensive here,"
he said. "Business is tougher and tougher, particularly [now that] there is
political unrest at home in Lebanon."
    He said political turmoil in eastern Europe and North Africa meant that only
about 20 of his customers showed up at the trade show, compared with
more than 50 at the spring fair in April.
    Inflation is also spreading across the supply chain as costs rise for raw
materials, rent, utility bills and labour, while the yuan keeps hitting new
highs against the US dollar.
    Premier Wen Jiabao, who officiated at the fair on Friday and toured
Guangzhou at the weekend, promised to keep the yuan's value stable to
protect exporters.
    The yuan was at 6.378 per US dollar on Friday. It has gained 3.31 per cent
this year, and 7.02 per cent since it was delinked from the dollar in June
last year. Economists expect it to hit 6.25 or 6.20 per dollar by December
31.
    The persistent inflation and the strong currency effectively means China's
days as a low-cost producer are numbered, particularly in the Pearl River
Delta. Shenzhen, for example, recently raised the minimum wage 16.6 per
cent to 1,320 yuan (HK$1,600) a month, the highest in China, and
surpassing the average 1,310 yuan in Zhejiang province in the Yangtze
River Delta.
    Average wages for one exhibitor, Gusto of Zhejiang, which makes
thermoelectrically controlled cooling and warming containers for food and
beverages, jumped 20 per cent this year but it only raised factory-gate
prices by about 10 per cent, marketing manager Jerry Cheng Bangjie said.
This was still not enough to cover a 15 per cent rise in overall cost, he
said. "Buyers bargain very hard and they don't want to swallow the price
increase," he said. "But we swallowed some already."
    Suzhou-based exhibitor TEK Electrical chose to focus on high-end
products by improving functions of its robotic vacuum cleaner. A
spokeswoman said the company kept factory-gate prices the same, but
expanded distribution channels through selling in Hong Kong and
emerging markets like Brazil.
    Yves Renaud, a vice-president of Planterra in Quebec, Canada, which
puts on Christmas decorations for hotels and office buildings, flew to the
mainland for the second time to look for suppliers instead of through
resellers in the US to cut cost.
    "Corporate clients are more careful in spending, but demand is still good,"
he said. "The Chinese suppliers have not given me good deals so far. The
negotiation will be tough."
    The fair attracted a growing crowd of buyers from Latin America countries
such as Brazil and Chile.
    Brazilian trader Ricardo Santana Alves, a fair regular, led a delegation of
eight entrepreneurs, who had come to China for the first time.
    "Many Brazilian traders are coming to China even though it's getting more
expensive," he said in Putonghua. "I may have to learn other languages as
some factories are moving to Southeast Asia."
denise.tsang@scmp.com
Copyright © 2011 South China Morning Post Publishers Ltd. All right reserved

 (I am aware that I am treading on the SCMP's copyright by reprinting the complete article here. Their website has a high paywall which does not permit purchase of individual articles.)