Author Archives: emilykawano

Econ-Utopia: The (Sometimes) Triumph of the Commons

By Jonathan Elsberg, CPE Staff Economist

One of the more attention-grabbing ideas that has crossed academic disciplinary boundaries, as well as entered into everyday language, is the notion of the “tragedy of the commons.” Made most famous by late Professor of Human Ecology Garrett Hardin in an essay by that name, the idea is not too complicated, very powerful–and rather alarming.

The tragedy describes a situation in which there is public access to a resource. It is to the advantage of each individual to use a little bit extra of the resource, but when all individuals do this simultaneously, the resource is ruined for everyone. Dozens of references to the “tragedy” can be found in newspapers in just the last year, dealing with issues such as depleted fisheries, email spam, risky growth in hedge-fund investing, and worker migration and associated destruction of local communities.

While resources available “in common” sometimes have been tragically exploited, reality is (happily) more complicated, and tragedy is not destiny. One aspect sometimes overlooked by pessimistic analysts is that there are different kinds of common property resources. Some resources are totally open to any and all users, and are properly called “open access” rather than “commons”. These are the ones that are most likely to suffer tragic overuse. The earth’s atmosphere, and its ability to absorb global warming pollution, is one example.

Often, the “cure” recommended for these tragic commons is either strict government control or the conversion of the resource into pure private property. Under the ruling ideology of our times, it is the latter that gets the most promotion.

However, many resources are held in common by a group which is able to sustainably use the resource without resorting to the use of strict private property. The members of the group, be it a local community, professional organization, or national society, control and share access to the resource, yet establish and follow rules of behavior that override greedy urges and keep individual’s use of the resource to an acceptable level. These successful cases of working social rules and norms are arguments against the call for knee-jerk privatization of common properties, or for total government control.

Some examples include the sharing of fishing zones in Alanya, Turkey, maintenance of acequia irrigation systems around New Mexico, U.S.A., and the Ozone Transport Commission NOx Budget established among eight northeastern U.S. states to reduce smog-related air pollution.

These are important lessons, because some potentially tragic commons cannot be fully privatized or put entirely into the hands of the government. For example, avoiding global warming will require extensive international cooperation (there is disagreement on whether this cooperation can be built from the ground up, or must be imposed by a powerful, central world power). Not only will the citizens and businesses of each country have to take responsibility for their CO2 emissions, but each government will have to help establish a working institutional framework for such responsibility within its borders. However, each government, business and individual faces the tragic temptation – allow all the others to control their CO2, while we fake compliance and reap the economic advantages.

No international treaty will hold if the signers don’t want to follow it. Only through combined dedication to the well-being of the whole along with creative, yet feasible, new institutions to guard against cheating will the individual community members make triumphant rather than tragic choices. It is through the study of past common property success and failures that we can learn to succeed more often.

Sources:

Herman Daly, “Logic that leads to a plundered world,” The Guardian (London, England), September 1, 2003, pg. 25. www.guardian.co.uk/wto/article/0,2763,1033054,00.html

Nives Dolšak and Elinor Ostrom, eds., The Commons in the New Millennium: Challenges and Adaptations, MIT Press, 2003. (I especially recommend the chapter by Einar Eythórsson on Icelandic fisheries. It is an excellent analysis of a privatization scheme with mixed positive and negative results.)

Garrett Hardin, “The Tragedy of the Commons,” Science, Vol. 162, No. 3859, Issue of 13 Dec 1968, pp. 1243-1248. (Also available online at www.garretthardinsociety.org/articles/art_tragedy_of_the_commons.html.)

Tor Hundloe and Daryl McPhee, “No reason why we can’t have our fishcake and eat it,” Courier Mail (Queensland, Australia), August 25, 2003, pg. 11.

Barney Jopson, “Don’t turn to hedge funds when depressed,” Financial Times (London, England), March 31, 2003, pg. 25.

Las Vegas (New Mexico) Citizens’ Committee for Historic Preservation, “Historic Acequias of Las Vegas, New Mexico” web-brochure. www.nmhu.edu/research/cchp/tours/acequias/default.htm.

Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action, Cambridge University Press, 1990.

Jonathan Turley, “Uncle Sam and spam,” Milwaukee Journal Sentinel, (Wisconsin, USA), April 28, 2003, pg. 13A.

(c) 2003 Center for Popular Economics

Econ-Atrocities are a periodic publication of the Center for Popular Economics. They are the work of their authors and reflect their author’s opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.

Econ-Atrocity: Bolivia–The Battle Over Natural Gas

By Noah Enelow

You would think the discovery of massive natural gas deposits in the heart of a developing country would present itself as an enormous windfall. All this country would have to do is find a source of financing, extract and refine the gas, sell part of it on the world market, and keep the rest, along with the profits, for domestic development.

Unfortunately, in Bolivia it hasn’t worked out quite so rosily. The battle over natural gas has exacerbated the country’s class and ethnic tensions to the point of warfare. Dozens of people have been killed in massive street protests; the president has resigned; the country is in chaos. What happened?

Upon first glance at the problem, there appear to be two root causes. The first issue was that the gas would have had to be exported through Chile, a longtime rival of Bolivia, which usurped Bolivia’s only seaport over a hundred years ago. The deal would thus enrich Chilean export companies at the expense of the Bolivians. The second issue was that the extraction and refining of the gas were to be undertaken entirely by a multinational company, Repsol-YPF. Their contract, signed long before the latest and largest gas deposits were discovered, was to provide the Bolivian public sector with 18% of the profits from sales. The rest would leave the country – a typical pattern for extractive industries in underdeveloped countries.

But those two issues are the just the tip of the iceberg. The peasants who make up the bulk of the protesters have good reason to believe they’d never see a dime of even those meager profits. Over the last two centuries, numerous raw materials have been extracted from Bolivia: silver, rubber, guano, and tin. The result? Underdevelopment, poverty, and disease. The leading cash crop of Bolivia, coca leaf, has been targeted for eradication by both the domestic government and the United States, as part of the “War on Drugs”.

Furthermore, as Bolivia has become increasingly beholden to the IMF’s structural adjustment program, life has steadily grown worse for the poor. In the last 3 years, the poorest 10% of the people have seen their incomes decline 15%, as the wealthiest 10% have seen their incomes increase 16%. Social services have been slashed while taxes have increased, to pay off the country’s high debt. How far can one expect a country to tighten its belt when its poverty rate is 70%?

Finally, the entire conflict is rife with ethnic and class tensions. The Bolivian elites are overwhelmingly of Spanish descent, while the poor are overwhelmingly indigenous. As a group, the former have proven untrustworthy, unaccountable, and corrupt; the latter grow more irate by the day.

The resignation of the U.S.-endorsed president, Gonzalo Sanchez de Lozada, who supported the gas plan, thus represents a victory for the poor. But the struggle is not over. The primary representative of the indigenous people, the self-described socialist and coca grower Evo Morales, in a recent speech declared the West a “culture of death”; meanwhile, in Sanchez’s resignation speech, he referred to Morales as a “narco-syndicalist” and warned of the power of the coca growers.

Is an agreement possible? A broad, highly organized coalition of labor and indigenous groups, the National Coalition in Defense of our Gas, has drawn up a list of demands. These include the formation of a constituent assembly to ensure greater popular participation in government, and the re-nationalization of Bolivia’s gas resources. The coalition has given the new president, Carlos Mesa, a 90-day truce to allow him to implement their demands. Will the two sides of Bolivia forge a new social contract, or will the country’s exports continue to enrich the few while leaving the many impoverished? Stay tuned.

References:

The Americas.org website contains a fantastic wealth of information about Bolivia. Numerous alternative sources and viewpoints are present alongside updates from the BBC and mainstream media.

Laura Carlsen. “Resources War: Lessons From Bolivia.”

Newton Garver, “Bolivia in Turmoil“, Counterpunch 10/17/03.

Keith Slack, “Poor Vs. Profit in Bolivian Revolt.”

(c) 2003 Center for Popular Economics

Econ-Atrocities are a periodic publication of the Center for Popular Economics. They are the work of their authors and reflect their author’s opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.

Econ-Atrocity: Bad for Children, Bad for the Economy

(6/25/03)
By Anita Dancs, Staff Economist for the Center for Popular Economics and Research Director of the National Priorities Project

With great fanfare, President Bush signed the ‘No Child Left Behind Act’ in 2001. Contrary to Administration claims, this Act will leave many children behind. The Act sets out requirements on public schools in an effort to raise student achievement, but it also promises additional funding. Despite these promises, the Bush Administration’s proposed budget for the coming year would underfund the Act by $7 billion. State and local governments mired in fiscal crises in recent years, will have to find ways of meeting the Act’s requirements while also dealing with rising Medicaid costs, underfunded homeland security mandates, and neglected roads.
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Econ-Atrocity: CEO Pay Still Outrageous

By Holly Sklar

You know CEO pay is still out of control when Fortune magazine puts a smiling pig in a suit on the cover and headlines its pay roundup, “Have they no shame? Their performance stank last year, yet most CEOs got paid more than ever.”

Fortune, remember, is a leading business magazine, not a union publication.

Median CEO pay at the 100 large companies in Fortune‘s survey rose 14 percent last year to $13.2 million. Half earn more than the median, half earn less. Median CEO pay at the 365 large companies measured by BusinessWeek rose 6 percent to $3.7 million, including salary, bonus and long-term compensation such as exercised stock options.
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Econ-Atrocity: Beyond good intentions: Is U.S. newly-found interest in Africa real?

By Leonce Ndikumana, Assistant Professor, University of Massachusetts, Amherst

American interest in Africa has been traditionally peripheral, opportunistic at best. In the past, aid to African countries supported client regimes that the United States and its allies needed to prevent the expansion of communism on the continent, as in the case of former Zaire under the late Mobutu Sese Seko. In these circumstances, the objective of economic aid was not economic development of African countries, but instead aid often contributed to propping up dictatorships that catered to the interests of the West.
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Econ-Atrocity: Bilingual Education Yes, Ron Unz No

By Rob Fetter and Stephanie Luce, CPE Staff Economists

Since the Bilingual Education Act of 1968 provided federal funding to school districts to assist them in adopting bilingual education programs, bilingual programs in many languages across the U.S. have flourished. Those committed to bilingual education continue to push their states and school districts to improve their programs, but bilingual education advocates have a new challenge: to fight off ballot initiatives that would eliminate the successes won to date.

On November 5, voters in Massachusetts and Colorado will vote on ballot initiatives that would end existing bilingual education programs in both states. The proposed initiatives – Constitutional Amendment 31 in Colorado and Question 2 in Massachusetts – would require students to go through a one-year “structured English immersion” program. Teaching materials would be in English only. After the first year, students would be integrated into regular classrooms and be prohibited from speaking in their native language. Further, teachers could be personally sued if found speaking in other languages in the classroom, and barred from public employment for five years. English learners in grades 2 and higher would have to take an annual test for English proficiency. Read more

South Dakota Econ-Utopia: Corporate Farms Lose in the Voting Booth

By Jonathan Elsberg, CPE Staff Economist

The voters of South Dakota have recently upheld one of the least known but most progressive set of laws in the land. Along with eight other Midwestern states, South Dakota restricts corporations’ ability to own or operate farms. In the case of South Dakota, this restriction was first legislated in 1974 (Title 47, Chapter 9A) and beefed up in 1998 through an amendment to the State Constitution (Article XVII, Sections 21-24), which boldly states that “No corporation or syndicate may acquire, or otherwise obtain an interest, whether legal, beneficial, or otherwise, in any real estate used for farming in this state, or engage in farming.”

Corporate interests attempted to water-down these restrictions with their proposed Amendment A. However, Amendment A was defeated in the June primary elections, meaning that South Dakota’s restrictions on corporate farming will remain intact for the time being.

This is good news for the family farmers of South Dakota, and the rural communities to which they belong. The number of family farms in the state has held steady since 1999, while in the rest of the country family farm have been in the decline. Representatives from the Stand Firm! Coalition (which opposed Amendment A) attribute at least part of this family farm maintenance to the restrictions on corporations. The principle of defending family farming from corporations was recognized by the state’s legislature when it past the 1974 Family Farm Act, which stated that “The Legislature of the State of South Dakota recognizes the importance of the family farm to the economic and moral stability of the state, and the Legislature recognizes that the existence of the family farm is threatened by conglomerates…and is jeopardized by downward vertical integration in farming.”

This idea is not merely theoretical or anecdotal. Researchers Dr. Rick Welsh and Dr. Thomas Lyson recently analyzed Census of Agriculture and Economic Census data to see if corporate farming restrictions have beneficial effects on the states that use them. They found that, in general, states with such laws suffered lower poverty and unemployment and had more farms realizing cash gains in their agriculture-based counties. Additionally, they found that the stronger the restrictions on corporate farming, the better (in general) the outcome for the communities involved.

Unfortunately, South Dakota’s anti-corporate farming laws are not in the free and clear just yet. Recently, U.S. District Judge Charles Kornmann ruled that the existing anti-corporate amendment to the state’s Constitution does not meet the requirements of the United States Constitution’s commerce clause. This ruling is being appealed to the U.S. Circuit Court, but if upheld, it will require South Dakotans to reformulate their laws in a way that protects family farms – as they have repeatedly shown they wish to do – while passing constitutional muster.

It should be noted that Judge Kornmann did not take issue with the right of South Dakota to restrict corporate agriculture. While ruling that that the anti-corporate statutes generally serve “a legitimate [i.e., constitutional] local purpose,” his judgment did find flaw with right-of-way access for utilities and with compliance with the Federal Americans with Disabilities Act. However, South Dakota law states that if any part of a statute is found unconstitutional, the entire statute is nullified. It was into this legal limbo that pro-corporate interests injected Amendment A. If needed, the existing anti-corporate statutes can easily be modified so that they comply with Judge Kornmann’s findings and also continue to protect family farmers and their communities.

Sources and additional information:

Center for Rural Affairs, “Amendment A Fails in South Dakota,” in the July 2002 issue of the CFRA Newsletter.

For additional information on corporate farming issues, see the CFRA’s “Corporate Farming and Market Access” page: www.cfra.org/issues/corporate.htm.

Fritz Herrick, “People victorious over agribusiness in South Dakota,” Madison, Wisconsin Independent Media Center, 6 June 2002 http://madison.indymedia.org:8081/front.php3?article_id=5312.

Argus (South Dakota) Leader editorial, “Amendment A defeat a step backward for S.D.,” 5 July 2002: www.southdakotaelections.com/Story.cfm?Type=Editorials&ID=291 .

Dr. Rick Welsh and Dr. Thomas A. Lyson’s article, “Anti-Corporate Farming Laws, the ‘Goldschmidt Hypothesis’ and Rural Community Welfare,” is available from the website of Nebraska’s “Friends of the Constitution” at www.i300.org/what’s_new.htm#anti_corp.

The full text of Title 47, Chapter 9A of the South Dakota Codified Statues can be read at http://legis.state.sd.us/statutes/Index.cfm?FuseAction=DisplayStatute&FindType=Statute&txtStatute=47-9A

The full text of Article XVII, Sections 21-24 of the South Dakota Constitution can be read at http://legis.state.sd.us/statutes/Index.cfm?FuseAction=DisplayStatute&FindType=Statute&txtStatute=0N-17

The full text of the proposed and rejected Amendment A can be read at www.state.sd.us/sos/2002/2002bqprimary.htm.

If you have access to the Lexis-Nexis online database, you can read Judge Kornmann’s decision. Click “Legal Research” –> “Federal Case Law” –> enter “south dakota farm bureau” into the Keyword box and change the Court drop-list to “District Courts,” then click the “Search” button. Judge Kornmann’s ruling is the first case returned: “S.D. Farm Bureau v. Hazeltine,” filed 17 May 2002.

(c) 2002 Center for Popular Economics

Econ-Atrocities are a periodic publication of the Center for Popular Economics. They are the work of their authors and reflect their author’s opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.

Econ-Atrocity: Who got all of the 1990s boom?

By Michael Ash, CPE Staff Economist

A recent finding from two researchers at the Federal Reserve Board implies that rich people did all of the extra consuming during the 1990s “boom.”

They reached their conclusion by looking at savings, the flip side of consuming. While the historic pattern has been that the rich save and the poor eat hand-to-mouth, the pattern of savings stratified by income class reversed over the past decade. The savings rate of high-income households declined very sharply, and the increased savings of the poor partly paid for the upper-class consumption spree.

The overall savings rate (savings as a percent of income) fell from 5.9 to 1.3 percent over the 1990s. Table 1 shows savings stratified by income class.
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Econ-Atrocity: Aid and AIDS

By Kiaran Honderich, CPE Staff Economist

(Reprinted from CPE’s newsletter, “The Popular Economist,” Spring, 2002.)

Over the last year activists have made important progress in the battle against global AIDS. Developing countries won a partial victory at the WTO ministerial meeting in Doha in November, affirming their right to produce affordable generic drugs in a health crisis. And the appalling mainstream consensus that treatment with antiretroviral drugs was too expensive and complex to be made available in poor countries–writing off literally tens of millions of lives at a stroke–is finally giving way to acknowledgement that treatment is possible in resource-poor settings, although it seems likely to be rolled out in a way that neglects rural populations. These battles are by no means finished–the WTO is still hashing out whether poor countries too small to produce their own generic drugs should be permitted to import them from another country; if Bush gains fast track authority then he will be able to take back the gains of Doha; and South Africa’s ANC government is being dragged kicking and screaming by activists towards the treatment programs that its country needs–but real progress is being made.
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Econ-Atrocity: Ten Reasons Why You Should Never Accept a Diamond Ring from Anyone, Under Any Circumstances, Even If They Really Want to Give You One

By Liz Stanton, CPE Staff Economist

  1. You’ve Been Psychologically Conditioned To Want a Diamond. The diamond engagement ring is a 63-year-old invention of N.W.Ayer advertising agency. The De Beers diamond cartel contracted N.W.Ayer to create a demand for what are, essentially, useless hunks of rock.
  2. Diamonds are Priced Well Above Their Value. The De Beers cartel has systematically held diamond prices at levels far greater than their abundance would generate under anything even remotely resembling perfect competition. All diamonds not already under its control are bought by the cartel, and then the De Beers cartel carefully managed world diamond supply in order to keep prices steadily high.
  3. Read more

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