So you might all understand Chavez better!

I would just like to introduce here a small piece of information quite frequently ignored and that could help to shed some light on who this Hugo Chavez is and whether he is a good president and a good leader for Venezuela.

At this moment, almost eight years into Chavez’s XXI Century Socialism, gasoline is being sold in Venezuela at 3.7 cents of dollar per liter or less than 15 dollar cents per gallon.

With this marvel of a public policy Chavez, besides stimulating a runaway consumption of gasoline with all its environmental consequences, based on the international cash-opportunity cost manages to transfer a regressive subsidy of about 10 billion dollars, or about 10% of Venezuela GDP, or about 100% of the GDP of a country like Bolivia, from the poor who do not buy gasoline, to those that love to guzzle it up.

For comparison the gasoline price in an oil country that seems to been doing things right is 52 times higher and in the USA of Mr. Bush, Chavez´ sworn enemy, and the Cuba of Castro, Chavez´ best buddy, the price is only about 25 times higher. Even in the land that has inspired the term of oil-Saudism the price is seven times as high.

Now you try to draw your own conclusions of what Chavez is all about! Are you clear now?

Now so to also help you understand the current opposition groups that are against Chavez, let me inform you that they do not mention this issue either. Are you clearer yet?

A dissonant harmonization

The IMF has a compact agenda and is governed by an as homogeneous group of power agents you can get – Central Bank bankers – while the World Bank is much more split up, on all fronts. In this respect there can be no doubt whatsoever about who will have to shut up the most, if collaboration between IMF and the World Bank starts morphing into a silencing harmonization.

Imposing too strict harmonization safeguards on all those bright and dedicated professionals who work in the Bank and in the Fund, and dare to be creative, risks silencing the voice of those the world needs the most.

The following are the three observations I sent in reply to the IMF and World Bank's public request of comments on the proposed improvements to Bank-Fund collaboration. Though the issue has a quite innocuous ring to it, “of course they should collaborate,” to me it goes very much to the heart of how to handle the world of tomorrow in a world where relations and interdependency of countries are intensifying, day by day.

The first comment relates to the overriding issue of world governance, the second to what I refer to as the biodiversity of ideas, and the last to give an example of a specific area where previous collaboration might have had some negative consequences. (As this is no new issue to me and as I have been an Executive Director at the World Bank and recently finalized a book, Voice and Noise, I also appended some very specific and relevant extracts from it.)


1. How should we try to achieve Good Governance for our World, from the center or through participation?
“The Bank and the Fund share the same goal of raising living standards in their member countries, but their approaches to this goal are complementary, with the IMF focusing on ensuring the stability of the international financial system and the World Bank concentrating on long-term economic development and reduction of poverty.”

Clearly the differences in the two approaches, which are indeed complementary in the long term, provide room for many conflicting positions on how best to balance the different objectives in the short term. In this sense, what is really at stake when discussing “collaboration,” or “harmonization,” as it has also been called, is whether international financial organizations should try to settle all their many differences in-house and present a common front, or whether they should spell out their differences and let the countries decide for themselves.

As so many of the local and global issues have by nature no clear and absolute answers, their debate could naturally provoke local or global confusion, and inaction, at a moment when both individual countries and the world at large is in deep need of responsible decision making, and this could speak for more collaboration. But, if one were to consider the possibility that the Bank and the Fund, by harmonizing their differences, could in effect be killing the debate, in a sort of collusion of intellects, then this could also make a mockery of all those many recent discussions about the need to ascertain stronger “ownership” by the individual countries of their own decisions.

There is no clear solution to the above, but I for one have a feeling that if the World and individual countries cannot simply get their act together in a participatory way, then we are simply heading toward a one-centered world in a sort of End of History Empire, or into a Cold War II scenario, something that is perhaps even more worrying when the probable need for a new standoff between sides could seriously interfere with the need of solving urgent mutual global problems, such as the destruction of the environment.

As neither of the previous alternatives carries much appeal to me, I sincerely wish to keep alive, for as long as possible, the dream of our world being able to handle the challenges among all of us, and in that sense I would not favor killing the debate but instead being even more forthright about the difficulties, about the pro and cons, and allowing and stimulating the participation of all.

Yes there comes a moment where we as a world cannot afford destructive pariahs, who will have to be controlled, therefore diminishing the bio-diversity of governments, and perhaps also that way, little by little, leading us into the same end results listed above but, given a choice between being dominated or being co-opted, I must much prefer the second.

In a nutshell, collaboration between the Bank and the Fund, beyond fairly basic needs, does not go in the direction of world democracy and, if we are not willing to defend democracy on a world scale, our strength to promote it for individual nations is much reduced.

2. The need for a biodiversity of ideas
One of the most dangerous parts of the collaboration between the Bank and the Fund is that as it will occur between two already “serious consensus-grinding machines,” it could only further the reduction of the much needed biodiversity of ideas.

Frankly, and to be a bit blunt about it, to think that limiting the discussions on how to balance stability with the development movement to an internal Bank and Fund pre analysis, as if they are the anointed sole bearers of truths, is too arrogant.

In the same way as the next world-saving medicine might find its origins in a little organism in a tropical forest with a large biodiversity, so could the next world-saving idea be found in the poorest of the poorest underdeveloped nations. Do not shut them out or tell them what to do, but invite them instead to the debate. It behooves us all.

At a moment when the world is in need of a renaissance of ideas, do not slap it with some consensual dogmas.

3. An example of a doubtful harmonization

I hereby permit myself to quote in length the following self-explicatory note from my Voice and Noise.

The Financial Sector Assessment Handbook—a postscript

In September 2005, the World Bank and The International Monetary Fund published the Financial Sector Assessment Handbook and as I read it, it is a perfect example of what I mean by excessive harmonization, so I need to make a special comment here.

You might have already read extensively in the chapter “BASEL—Regulating for what?” about my strong belief that the world is giving too much emphasis to how to avoid crises potentially occurring in the financial sector, as opposed to how that sector is performing its role intermediating credits, generating growth, and distributing opportunities for access to capital. Yes, bank crises are setbacks, but, if in their wake they leave continuous step-by-step advances in development, we might still prefer that to a financial sector that receives a perfect bill of health but does little for the rest of the economy. In fact, such avoidance of a crisis is most probably just a temporary mirage. Developing is balancing various risks, not looking to eliminate one.

Well, in this handbook, which is more than 450 pages long, only a very few pages, perhaps fewer than ten, salute the flag of assessing and helping the banks perform their true function in development, the WB’s basic agenda. Instead, most of this handbook centers on how to supervise banks and minimize the risk of bank failures, the IMF’s basic agenda. Chapter Four contains most of the little there is about development, and “4.6.4 Development Obstacles Imposed by Unwarranted Prudential Regulation,” gives us sixteen complete lines about how entry or start-up regulation and uneven supervisory practices can hamper competitiveness and create “undue reliance on tools that are likely to disadvantage small new firms (such as excessive mandatory collateralization requirements for bank loans).” If I have ever seen what amounts to mere flag-waving, this is it, but, on the other hand, I must admit that these flag-wavers are at least quite transparent. Under the interesting subtitle “The Demand-Side Reviews and the Effect of Finance on the Real Sector,” we can read, “development assessments are interested in the users and the extent to which the financial services they receive (including from abroad) are adequate to their needs. Development assessments must express a general view on this issue, though in many countries, especially low-income countries, detailed quantification may be beyond the scope of the assessment. Friends, I rest my case. It is quite obvious that on this vital issue, WB has been harmoniously silenced.

Pssst… just between us, I feel that what’s valid for us is equally valid for the IMF. The Fund could also benefit from the clarity of not having to harmonize with someone who has other institutional objectives. End of quote.

PS. The Malan Report It states: "Good examples of collaboration involve the Financial Sector Assessment Program (FSAP)". So as you can see they did not listen one iota to what I said.

PS. As an ED I had stated much of this at the Board or the World Bank

My Voice and Noise on the Millennium Development Goals

We must aim higher!

The first of the MDGs has us trying to reduce in half by 2015 the proportion of people living on less than one dollar a day and of their suffering hunger and its intentions are good, and the world needs to support it by reaching a high economic growth, much more equitably distributed around the world, though where can we find the World’s Gini coefficient?

Nonetheless, I feel that we should always remind ourselves to consider that goal an absolute minimum—not only because of humane and civilized motivations, but also because a person earning a dollar a day and not having hunger, does really have very little to do in making a world that is increasingly more interconnected become more sustainable or politically viable.

No! As, instructed by a Chinese proverb, we need to aim to the stars since even if we don’t reach them we will at least reach much higher than if we aim at something on our level. In this sense, I believe we need to review all our current efforts, as if the income goal was at least 10 dollars a day or, if it makes you feel better … 9.99.

There should be life beyond 2015

Yes I agree that the MDGs are undoubtedly useful to focus and to call to arms all those willing to fight for a better future. Nonetheless I have currently the uneasy feeling that the year 2015, more than the general timeline it should represent, is turning more into a finishing line, after which all the runners might lie down to catch their breath. Hey, we have even heard about proposals of borrowing against aid commitments after 2015, to spend it all before 2015! Colleagues, when I look around the table I imagine that most of us will have grandchildren come January 2016, and it might behoove us to think of life after 2015.

The Private Sector’s MDGs

How I would like to see a group of leading hands-on entrepreneurs from the private sector develop what they believe should be the MDGs, and compare their ideas with what we currently have. We might be up for some surprises!

The Amazon

An informal letter I sent to my Executive Director colleagues at the World Bank in 2004

Dear Friends and Colleagues

Today we approved a US$505 million Programmatic Reform Loan for Environmental Sustainability to Brazil. Frankly, how could it be otherwise, when in fact we should be on our knees thanking a country like Brazil that with so many other problems commits to repaying 100% of principal plus interest of an environmental-sustainability loan that will benefit the whole world and all of us.

Honestly, I do believe the World Bank should occupy a stronger leadership in these matters from the very beginning, advocating for the cooperation of the rest of the world. If silly windmill projects can have access to carbon credits, the Brazilian environmental program to help stop deforestation should too.

For instance, if 20% of a loan like this were to be repaid by some international-support mechanism, this would not only motivate the Brazilian government to sell environmental protection locally, but it would also be a clear sign that in these matters, Brazil does not stand alone. Of course any external assistance would have to come with the clear understanding that it does not impose additional conditions on the country, as this is the best and perhaps only way to guarantee true sustainability and ownership of such programs.

This morning we had a two-hour discussion about the Development Committee agenda. Frankly, however, the issue of how the world can help in crucial global matters, as in the case of the Amazon—where the need of avoiding the very negative externalities of large deforestation have to compete with so many other urgent local needs, as well as with the rising opportunity costs of not exploiting the forests—should be a foremost issue. If it already is there—for instance hidden in a global taxation initiative—I very much welcome it but, if not, we should strive to put it there.

Last year at least 25,000 hectares were deforested in the Amazon. At a low carbon value of US$20 per hectare/year, this would indicate a value of about US$50 million a year if the program were successful at stopping deforestation. Add ten years of stopped deforestation, and the value of this would be—in approximate Kyoto terms—about US$500 million a year for the rest of the world. If this is so, how come we can spend so much time and money on expensive initiatives such as the Extractive Industry Review, and not come up with something more reasonable for the Amazon, than to have the Brazilians pay for it, 100%?

Per

Published in Voice and Noise, BookSurge 2006 and there is also an article that touches upon the same theme and that I published in Spanish in Venezuela early 2004 

PS. We need to stop the Amazon from smoking… now!

A humble suggestion to the Gates/Buffett Altruism Dream Team

William Easterly offered his advice to what he calls “the new Bill and Melinda Gates/Warren Buffett Axis of Altruism” with his “4 Ways To Spend $60 Billion Wisely” Washington Post, July 4.

Three of Easterly’s suggestions, number 2. It's not about the money, 3. Beware of technological quick fixes and 4. Don't believe your own press, sounded extremely sensible to me, but, on number 1. The business world and the developing world are worlds apart, I choked, since given the track record of Bill Gates and Warren Buffett I had imagined the potential good they could do if, with that kind of financial resources, they tried to help some poor developing countries to break out from their aid dependency, by teaching them a little bit about what it takes doing business. Gates/Buffett should know! And learning to do business by doing business is an as-good-as-it-gets- approach to sustainability.

I am not too experienced in this aid-business, but having recently been one of those rare Executive Directors of the World Bank who got there with only a private sector background, I know exactly that the following is what I would tell team Gates/Buffet to do:

Take at least half of the money and set up an organization that copycats the International Finance Corporation (IFC), which is the entity the World Bank Group uses to promote sustainable private sector investment in developing countries, helping to reduce poverty and improving people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses.

Such an organization, with such Directors as Gates/Buffett could have a tremendous and sustainable impact on the poor developing countries helping them for instance to put up schools for certified bilingual nurses; construe retirement home for foreign senior citizens; do environment projects designed to compensate, against cash payments, for the developed world’s many environmental sins; and exploit all those great new opportunities that are out there to be taken, the moment poor countries learn not to focus exclusively on agriculture and textiles.

But besides helping the poor countries directly, hopefully in a self sustainable way too, they would also do so indirectly by putting some competitive pressure on the rest of all the development actors and that are currently living sort of cozily in quite uncontested markets.

So Team Gates/Buffett, why don’t you follow that old advice of doing what you’re good at, pro-bono (not that Bono) instead of making a too a drastic career change that will just risk wasting your talents. By the way, if the would need a manager to start it up? Well Peter Woicke, the former managing director of IFC who had to retire because of age, at an unseemly young age, might be available to help out, the first steps.

Distinctively Alike

We so frequently hear about the importance of finding ones identity that sometimes we forget that our human reality is also to share so many identities and so that even though we should feel identified we also need to fight against being miniaturized and put into little boxes as is preached for better than none by Amartya Sen the Nobel Price in Economics who also a professor in philosophy, might also line up for a Nobel Peace Price.

Sen, in his most recent book Identity and Violence attacks vehemently those who seed divisions fomenting bad identities, quite frequently with bad intentions. From his own memories as a child in the India of the 40’s Sen remembers “the speed with which the broad human beings of January were suddenly transformed into the ruthless Hindus and fierce Muslims of July . . . hundreds of thousands perished at the hands of people who, led by the commanders of carnage, killed others on behalf of their ‘own people’”. Sen concludes that “Violence is fomented by the imposition of singular and belligerent identities on gullible people, championed by proficient artisans of terror”.

Unfortunately, Sen does not face difficulties finding more recent examples and Rwanda, Yugoslavia and even the prisons of Abu Graib are all places where terror find its origin in a “you know, they are so different from us”. Of course from Sen’s book to our Venezuelan reality of "pro chavistas and not chavistas”, those divisive and senseless identities that we did not even dream of less than a decade ago, there is too little distance for us not to feel deeply anguished.

Friends, let us at all times discredit those who try to instigate us buying into an identity that only looks to divide and let us instead search for with run-amok-humanity all those identities that unites us, like Venezuelan, fathers, mothers, children and our taste for arepas.

Friends, let us not allow anyone to divide us, in us and them, because as humans, in each one of us there is so much of them, and in each one of them there is so very much of us, and so that, at the moment of truth, we are all in fact distinctively alike. If this sound like a sure recipe for a collective multiple personality disorder, so be it, the mental health of our Venezuela depends on it.

Translated from El Universal, Caracas, June 1, 2006

PS. Social media, which allows polarization and redistribution profiteers to send out their hate and envy messages at zero marginal cost, has become social harmony’s worst enemy.

Other posts in which I started to fight odious polarization profiteers

Red and blue, or, red or blue

Communications in a polarized world

On faith-based organizations as reality checks

In the company of many fellow students from many developing countries, we—all participants of a seminar on international labor standards and global jobs organized by the World Bank Institute—went to visit an impressive state-of-the-art One Stop Career Center, created in order to find jobs for the unemployed.

During the presentation, we heard the official in charge tell us that the results achieved there came from a joint effort, a full partnership, among civil servants, like himself, the private sector, and faith-based organizations. I understood the role of the agency as coordinators and suppliers of information; the role of private enterprise as suppliers of jobs; but I could not make head or tails about the role of faith-based organizations. So I asked. The answer left many of us speechless.

In more or less these words, the director told us. “Yes, we the civil servants do organize all the activities intended to match an unemployed person with any of the opportunities that, yes, private enterprise does indeed provide, but all our efforts would come to naught, were it not for the members of faith-based organizations, who go out there on the streets and into homes and find the unemployed, wake them up, feed them, comb them, stimulate them to come, and, if there are jobs reasonably suited for them, try to make sure they take them, and that they keep them.”

I believe most of us thought that although in our countries this responsibility was usually the role of the social workers, this might very well be one essential ingredient we were all missing. After all, we so frequently could see our public employment agency’s offices empty; even though there were good working agreements between the public and the private sector; even when there were thousands of social workers; even when there were millions of unemployed.

Agreed, but what about the private employment agencies? Yes, they are great . . . as long as the unemployed wakes up, has breakfast, takes a bath, combs his or her hair, and pursues with dedication a job, of course with the intention of keeping it. And so welcome to the real reality, friends. Sometimes reality itself could really do with some faith too.

I wrote this many months after the visit when I recently read about an organization that was expelled from what seemed to be quite useful work at a prison—just because it was faith-based. The reason for it has to do with the Constitution of the USA, the first Amendment, something that I as a foreigner know very little about. Nonetheless I felt it was a shame that what only seemed to be an excessive faith in a no-faith principle could lead people to refuse good help, so unnecessarily.

The patriotism of foreign owned ports

As an outside observer I followed the recent debate in the USA and here are my facts and my conclusion.

Fact 1: A port is a national security asset that cannot really be shipped away.

Fact 2: Probably, as usual, the owner of the port is the last to know about what is happening. At least check the management.

Fact 3: The real security controls are in the hands of government, coastguards and workers.

Fact 4: If something happened in a port and the management company was American there would most probably be no major consequences but, if the management company belonged to UAE, then all hell would break loose and they could easily lose all their investment. Therefore, because of how real life economic incentives are lined up, perhaps foreign owners have a larger interest in the security of the ports than the locals.

Fact 5: Any money not invested in the ownership of a port is money available for investment in other things that from a national security angle could be much, much worse, like paying off with much less money those real traitors that always have a price.

Fact 6: Also a real security issue with a port is that it operates efficiently, in economic terms.

CONCLUSION: It is always sad to see whenever and wherever patriotism stands in the way of good and effective patriotism.

The true nature of remittances

Mr. Chairman, I see references over and over again to the remittances of foreign workers in developed countries back to their not-so-developed homelands and so I feel once again compelled to remind my colleagues about the true nature of these flows. The remittances come from very private earnings.

Picture yourself working in a foreign country for less than minimum wages, alone, perhaps sleeping in lousy quarters, not understanding all that they say to you, and still you take a substantial part of your earnings and send them home. That’s what these remittances are all about. They are quite close to being like sacred religious donations.

Please do not confuse these flows with other financial flows. Do not even think of taxing them or assisting third parties to lay their hands on them. Be extremely careful. Do I exaggerate? I hope so but I have already read in World Bank publications about the securitizing these flows! Come on!

My 3 bullets for justice in prisons

• In too many countries around the world when judges sentence people to prisons, they are in fact sentencing them to another Auschwitz in terms of the absolute disrespect those places show for the most basic human rights, and worse the judges cannot even start to claim they didn’t know. When will the International Criminal Court in The Hague start to investigate these crimes against humanity?


• Justice is something very difficult to understand with precision, since it is situated along a continuum that becomes finite only when it reaches Divine Justice. On the other hand, injustices are much easier to identify and, in our countries, prisons themselves represent one of the greatest injustices. In terms of the use of scarce resources, as an economist I am convinced that programs of Judicial Reforms would be better served by improving prisons than by investing in Supreme Court buildings.


• The world needs to adhere to a minimum set of global good-prison practices and allow for ISO 9000-type quality certifications of its prisons and jails.

Some bullets on immigration

• In today’s globalized world I find it sad to hear so many very local Americans believing that when they ship one of the criminal mara gang members over the border, to someone much less resourceful, they have gotten rid of their problem.
  
  
• Would it not be more transparent and effective, instead of going on as if nothing has happened, to bite the bullet and accept that an American Union between North and Central America already exists, de-facto, and issue a common passport for all the citizens of the enlarged AU.
  
  
• Having a real AU would make it possible for many of those over 11 million currently illegal immigrants to be freed from their also de-facto mother of all jails, and go home even on a temporary basis, since they now permanently do not dare to leave, just because they do not know whether they can later return.
  
  
• Doing so would also help the USA to realize that if it had spent an Iraq-war sized budget assisting Central America, as EU did with Spain and others, the whole immigration debate could have been a very moot issue, with exception perhaps for all the aging baby boomers moving south to find care and services.
  
  
• Sometimes, when I see how all the Central Americans toil away in the USA and help their families back home, I just ask myself whether this is not just part of the process whereby the USA manages to remain strong, renewing its working, social and family ethics.
  
  
• How can you think of building a Maginot line, if it is not in the Bering Strait and the Panama Canal?

The ethics of solving the shortage of caretakers

An older population, many of whom will experience longer periods of chronic illness and dependency before dying will require a growing number of caretakers. If there are enough caretakers, the issue will be to find the resources to compensate them. However, if there are not enough trained caretakers, no financial resources would suffice, and you have to find practical solutions.

The practical solutions available for solving the shortage of caretakers in developed countries are the following four:

1. Increase their productivity, but unless you wish to run the risk of being dehumanized on a Charlie Chaplin Modern Times assembly line cared for by robots… there might be a limit to how much this can help.

2. Move the careneeders to another place (if there are caretakers available anywhere else), and this you should do as early as possible if at an older age you do not appreciate finding yourself in strange surroundings as much as you did when younger.

3. Import caretakers, and this you should do as early as possible if when older you do not appreciate finding yourself in the company of strangers as much as you did when younger.

4. Give incentives for having more children and grandchildren—which is not such a crazy idea when you start considering how much society is, one way or another, currently rewarding people for not having children. (Talk about externalities!)

The Presidents Council of Bioethics www.bioethics.gov (USA) published in September 2005 its report titled Taking Care. It makes all types of thoughtful recommendations about the issue of Ethical Caregiving in Our Aging Society. As much I appreciate its effort, I do not think that the report spells out sufficiently the need for much more forceful and immediate work on achieving practical solutions. If those solutions are not found, the frontiers of what is currently considered ethical caretaking will just have to move to take up for the slack. No matter how horrendous it sounds, euthanasia and other flexibilities needed to bridge intergenerational conflicts might then turn out to be thought of as the only ethical solutions to the problems. In this respect, the most clear and real unethical behavior today is that of not anticipating and providing timely solutions.

Extract from my Voice and Noise

Red and blue, or, red or blue?

On the radio, C-Span recounted details about “Intelligent design,” which according to its defenders is a valid scientific alternative to the evolution theories of Darwin. I could not resist post-scripting the following to my American friends.

Unity is a very precious thing for a country (I should know as a Venezuelan), and there are some issues better left alone. This is clearly one. Pitting “intelligent design” against “evolution theories” can never lead to anything good, and you surely must all be aware that you will never ever reach something close to a mutually satisfactory conclusion.

As a Christian, I know we are challenged by a lot of apparent contradictions in our faith but, as a Christian, I also believe that we are supposed to find ways to make peace with those demons of contradiction, so as not to let the devil triumph. Friends, how can I put this warning any clearer to you? Well, if we were still in the “good old days” of the Cold War, I could have advanced the thesis that the very bad Communists had seeded this destructive and divisive debate in the heart of your heartland.

That said, I cannot refrain from mentioning that, if you absolutely have to, I would prefer the term “Divine Design,” since “Intelligent Design” sounds to me like opening the door to an equally unnecessary debate about more mundane issues such as quality controls.

I switched channels and I heard Faith Hill singing “Is everything A-OK in the good ole USA?”

The above is from my Voice and Noise of 2006

PS. No Faith Hill, sadly, purple/violet is gone, USA is more red or blue than ever

PS: A speech at the World Bank, May 2004, on "Communications in a polarized world"

PS. Social media, which allows polarization and redistribution profiteers to send out their hate and envy messages at zero marginal cost, has become social harmony’s worst enemy.

PS. Distinctively alike

PS. One prime reason for my criticism of regulators risk weighted bank capital requirements not gaining much traction, is that in these times of extreme polarization it's hard to make it a red against blue issue, and violet is so out of fashion.

PS. A tweet January 17, 2021: "Will America end up with red or blue hotels, red or blue grocery stores, red or blue schools, red or blue universities, red or blue social media, red or blue tv-channels, red or blue newspapers, red or blue states, red or blue counties, red or blue taxes?"

On The First Blahw of Petropolitics

I normally enjoy reading Thomas L. Friedman’s articles and I envy the quality of his pen but frankly, his recent “The First Law of Petropolitics”, Foreign Policy, May/June 2006 reads like what we in Venezuela refer to as “discovering the tepid water”, discovering common knowledge, although, in fact, if he really feels that he must advice his own government “that the price of crude should now be a daily preoccupation of the U.S. secretary of state, not just the treasury secretary” then I can only conclude that the USA has a much more serious problem than oil. Of course to place huge oil income directly into the pockets of the politicians in countries with weak institutions, will distort their minds and make them act like bullies, what’s new?

Friedman also thinks he makes an important point concluding in reference to consumer countries such as the USA that “we can affect the global price of oil by altering the amounts and types of energy we consume” which is of course also very correct. But, where he goes absolutely wrong, and in his bio we see no reference to studies in economy, is when he says “we cannot affect the supply of oil in any country”. Of course you can! That day consumer countries would be willing to guarantee a decent price for oil over a long period, well that day producers would immediately produce more but, while what the consuming nations really seem to be looking for is oil at the $5 per barrel predicted by the prestigious The Economist as late as in March 1999, then you can obviously only expect to be creating the conditions for oil at over $100. Want to help? Then ask your treasury secretary to offer good long term prices for oil, subject that most of the revenues are distributed directly to the citizens of the producing country.

By the way, and back to the demand, what is currently on the board for fighting USA’s oil addiction seem just like nicotine patches and chewing gums for a non meant new-year promise, and will only serve to guarantee that the modern day successors of Mark Twain will also be able to argue that “it is easy to quit, as they have done it a thousand times”. Instead, $7 per gallon, that should indeed do it!

Levying a new federal consumption tax on gas that would increase its price to about the level at which it has been in Europe, would reduce demand for imported oil, provide the government with about $300 billions in taxes to balance the accounts and benefit the environment. Yes, it would destroy many jobs, but it also would create new ones. Better to bite the bullet now before the current economic imbalances erode confidence in the dollar, and anyhow take the price to $7 but then, with no gain to pay for the pain. That, of course, would require leadership, which is even scarcer than oil.

oil addiction Mark Twain

Thomas Friedman leadership scarcity

Fair prices!

And while waiting in the line I see a “Fair Trade Certified” coffee that on its label promises that its purchase will improve the lives of coffee farmers by insuring they receive a guaranteed “fair price for their harvest”.

I could not resist such an enticement and I bought a cup of it. It was great, and like any truly good coffee it made my mind wander. What does a fair price mean? That the coffee grower can afford to send his kids to school, afford good decent healthcare, and buy a car? Or that his kids will not go to bed starving. I hope he gets at least the last.

Or does fair in this context mean that he is getting prices that are fairly similar to those quoted for coffee on the commodities exchanges without risking being taken to the cleaners by some savvy distributors? Who knows? I finish up my coffee with a lingering suspicion that perhaps a fair price might still not be enough.

Would it not be better to certify “unfair prices” or, in perhaps more marketing digestible terms “fair price plus 100%”? Whatever, at the end of the day, if I were a farmer, I know that I would much rather get European farm prices than fair prices.

Justice begins with having just prisons

They are sending them to another Auschwitz.

In too many countries around the world when judges sentence people to prisons, they are in fact sentencing them to another Auschwitz in terms of the absolute disrespect those places show for the most basic human rights, and worse the judges cannot even start to claim they didn’t know. When will the International Criminal Court in The Hague start to investigate these crimes against humanity? Also, many ongoing judicial-reform processes would do well to reflect upon the fact that civilized prison systems do more for justice than majestic Supreme Court buildings.

Forget justice and fight the injustices

Justice is something very difficult to understand with precision, since it is situated along a continuum that becomes finite only when it reaches Divine Justice. On the other hand, injustices are much easier to identify and, in our countries, prisons themselves represent one of the greatest injustices. In terms of the use of scarce resources, as an economist I am convinced that programs of Judicial Reforms would be much better served by improving prisons than by investing in Supreme Courts.

We need minimum standards

The world needs to adhere to some absolutely minimum set of global good prison practices and allow all prisons to be subjected to an ISO 9000-type quality certification.