Andrew Taylor

Well written editorials from a UH student

Archive for March 2009

Presidential progress that hopefully progresses

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His tone confident and rhetoric solid, President Obama informed the nation of progress that is becoming evident and answered questions with confidence and real solutions on Tuesday during a news conference at the White House.

Journalists are not economists, and neither is the president. Our nation’s problem and most pertinent crisis is our economy.

This is no surprise, and almost the whole briefing focused on it. As a nation, we are eager to feel better times and even more eager for our country to improve.

The president’s budget, which he continually mentioned, looks encouraging, but is not an ending solution to our economic woes. It is neither a “silver bullet” nor a “quick fix”.  The most crucial aspect of this crisis for Obama is time, and unfortunately it is not on his side.

In his address last night, Obama mentioned that Treasury Secretary Timothy Geithner had announced a plan that will “partner government resources and private investment to buy up the assets that our preventing our banks from lending money.” These government resources, which are our tax dollars, will be the capital private investors use to purchase these bank assets. The problem, as economists such as Paul Krugman see, is it creates an unfair, old situation unlikely to resolve our country’s banking and financial crisis.

Wall Street working with taxpayer dollars to solve our crisis by buying “toxic” assets is basically a risk-free situation for the investors and an enormous gamble for Obama and our country.

If the investors profit, they cash in. If they lose on this, they can walk because it wasn’t their capital to begin with.

The wager for this bet is Obama’s credibility and support from Congress, something he can’t afford to lose. If Geithner’s plan is implemented and fails to provide an adequate remedy, Obama could find himself in a bigger bind.

“This plan has already saved the jobs of police officers and teachers,” Obama said Tuesday. “It’s creating construction jobs to rebuild roads and bridges.”

What he did not mention was our unemployment rate is still on the rise and nearing double digits. Time is of the essence, and although our government could surely use a “silver bullet” for the economic crisis, careful decision-making is crucial.

At this moment, mistakes can’t be afforded. If mistakes occur, doubt and opposition from Congress and Americans will follow.

Written by aktaylor

March 26, 2009 at 8:34 pm

Posted in Uncategorized

In Debt?! ME too!!!!!

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In the midst of an economic crisis where the credit market has taken a considerable beat-down, loans tend to shrivel up like raisins or even disappear.

Student loans are to the education system what the spinal cord is to the human body.

The task of researching, or even just trying to figure student loan rhetoric out, could easily cause one to become frightened or subject to nausea. Take that task and add our current economic situation and things become worse.

In the 2007-08 year, 42 percent of undergraduates (including full time and part time students) borrowed federal Stafford loans, according to Some students also borrow from private institutions.  As our economy continues to plunge, borrowing from private institutions is fraught with dangers.

“In each year between 2000-01 and 2006-07, an estimated 60 percent of bachelor’s degree recipients borrowed to fund their education,” the Web site stated. “Average debt per borrower rose 18 percent from $19,300 to $22,700 over this time period. Average debt per bachelor’s degree recipient increased from $10,600 to $12,400.”

Unsurprisingly, costs of a degree are rising as well.

“Sixteen percent of full time students in public four-year institutions faced tuition and fee increases of less than 3 percent in 2008-09. 23 percent (of borrowers) faced increases of 9 percent or more,” reports.

When considering the state governors who are faced with massive budget deficits, containing tuition increases is anything but an easy task. This year, the UH Student Government Association proposed a tuition freeze, a proposal that is hoped to be heard and accepted by our state government.

To aid the task of reducing costs, UH downtown alumnus rep. Garnett Coleman introduced a last minute bill to increase the UH student center fee.

UH System Chancellor and President Renu Khator and the UH board of Regents are also working diligently on lowering costs for students. A UH system update on March 13 showed them tracking only 16 of 412 bills to limit tuition or fees.

There seems to be a lot of focus on Tier 1 status coming from our board and president. Hopefully, that enthusiasm is also behind curbing tuition increases as well.

In the current American Recovery and Reinvestment Act, $30.8 billion is being allocated to promote college affordability. According to the U.S. Department of Education, $17 billion of the allocated money will be used to close the shortfall in Pell grant programs and boost grant amounts by $500 to $5,350 in the first year and more in the second year, serving an estimated 7 million low and moderate-income young people and adults.

$13.8 billion has been allocated to boost the tuition tax credit from $1,800 to $2,500 for families earning up to $180,000 per year.

The environment for student loans and college affordability looks bleak. When paired with high unemployment rates and companies scaling back, school is an intelligent choice.

Our government officials should do everything to keep college costs down. As people get laid off and join the unemployed, gaining new skills or education is a way to move an economy forward. The importance of college affordability cannot be overlooked.

Written by aktaylor

March 26, 2009 at 7:10 pm

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Leaf Legalities leave poor situation

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With an Economic crisis rivaling the great depression, financially our nation is in the medical equivalent to cardiac arrest. As our economy continues to decline our leaders are looking for ways to create revenue, spur economic growth, while simultaneously trying to not let taxation get out of hand. Marijuana is what some economists would call a waiting gold mine. Another analogy would be that Marijuana legalization would be a blue chip investment as far as taxation is concerned.
“The most common phrase you hear from the states is ‘everything is on the table,’” said Arturo Perez, a fiscal analyst with the National Conference of State Legislatures. Our Nations government is in just as much fiscal trouble as state governments.  In an article produced by the NCSL News, it is reported that most states face budget shortfalls and the size of these shortfalls have increased. “Even though some states have taken corrective actions, the current FY 2009 gap still stands at $47.4 billion. This is on top of the $40.3 billion shortfall already closed for this fiscal year.”
In order to balance state budgets and reduce shortfalls, states cut funding on certain projects and programs. Unfortunately that could mean reductions in funding to schools, parks and recreation, and public service jobs. “These figures are absolutely alarming, both in their magnitude and in the painful decisions they present to state law makers,” said Corina Eckl, fiscal program director from NCSL. “The easy budget fixes are long gone, only hard and unpopular options remain.”
What does not seem to be a hard decision would be the move to legalize and tax marijuana. “If marijuana were legal, enforcement costs would be negligible and governments could levy taxes on the production and sale of marijuana. Thus government expenditure would decline and tax revenue would increase,” said Jeffery Miron Professor of Economics at Harvard University. He justifies his reasoning and position, “Prohibition entails direct enforcement costs, and prohibition prevents taxation of marijuana production and sale,” said Miron.
Miron also debates the difference between legalization and decriminalization, “The policy change considered in this report, marijuana legalization, is more substantial than marijuana decriminalization, which means repealing criminal penalties against possession but retaining them against trafficking.” Miron finds swaying statistics and moving calculations, due to the data he uses most of the figures are actually on the low side and could actually be much higher if he had more substantial records.  “This report estimates that legalizing marijuana would save 7.7 billion per year in government expenditure on enforcement of prohibition.  5.3 billion of this savings would accrue to state and local governments, while 2.4 billion would accrue to the federal government,” said Miron. “ The report also estimates that marijuana legalization would yield tax revenue of 2.4 billion annually if marijuana were taxed like all other goods and 6.2 billion annually if marijuana were taxed at rates comparable to those on alcohol and tobacco,” Marion finds.
If the figure for savings, 7.7 and earnings, 6.2 are totaled this equals 13.9 billion dollars. 13.9 billion dollars is roughly .017 of the Bailout. 13.9 billion could buy 8,687,500 apple computers at regular market price. That would be an upwards of nine million total computers for schools in one year providing that schools get a discounted price.
Another invaluable thing to consider is the incentive effect created by prohibition. When you fight drug use with prohibition you run into complications due to economic impacts. This happened during the early 1930’s with alcohol prohibition, and it is happening again. “It’s one of those things where you do not know how to do it all. If you’re going to fight drugs, and that’s an expensive thing to do, then you run into shortages with tax money,” said Dr. Steven Craig Economics professor at UH. “So then you go, OK_ let the police keep some of the profit from confiscation, then we’re forgetting about the incentive effect,” Craig said.  “And now you have the police sort of in a symbiotic relationship with the drug dealers, … and that’s not what you want, that’s really bad.
“Distortion in the stuff that we care about, police distortion that’s what is important to me,” Dr. Craig said.

“Marijuana should be treated like alcohol or cigarettes, said Jason Yu Senior communications major. “Legalize it but penalize users for violations like driving under the influence,” said Yu. “Also there should be an age restriction as far consumers similar to alcohol,” Yu said.
“I think it’s idiotic for the government to waste the money on small time marijuana criminals and funds that keep them in jail. I think they could spend that money in many better ways,” said Corina Chiccoli, a senior Advertising major.
The prohibition of marijuana almost exactly resembles the prohibition for alcohol, the only difference being the constitutional amendment. Police distortion and tax shortages are things to worry about and should be recognized. Dr. Steven Craig put it perfectly “Experience is the ability to recognize mistakes when you’re making them again.”

Written by aktaylor

March 12, 2009 at 6:28 pm

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The Role of Technological/Scientific diffusion from Asia and the Arab World in European Development

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The role of technological/scientific diffusion from Asia and the Arab world in European development

“Technology in the form of stone tools originated literally hand in hand with humankind.” Technology in the context of creating a tool and using it can be traced back to primates. Monkeys and apes were the first to biologically create and use tools. The following order is the account written by the author in regards to history, “(Australopithecus- which were primates that were on earth, nest the kin of “Lucy”(the ladder evolution stage) was kin to Paranthropus, then next came Homo habilis, Homo erectus, Homo sapien neanderthalensis, and then finally Homo sapiens sapiens.” The tools these groups used were at the beginning very basic starting with “simple choppers, fire, fine blades, and ending with elaborate tool kits used by Homo sapiens. The history of our species the Homo sapiens is a fundamental stepping stone to understanding the history of the technological and scientific diffusion from Asia and the Arab world in European development. (McClellan, Dorn 2006, 3)
The Paleolithic people were not the first place winners of the technology- science contest but history has noted one of their achievements, their “lunar carvings can be interpreted as a record of the moon cycle.” The Paleolithic people remained hunters, and did not practice any sustained forms of food production. Active food seeking was the Paleolithic way of life. Towards the end of the Paleolithic era some natural phenomenon or event caused a sudden change in environment. Different theories aside the conclusion was for the next era to solve a transformational problem, and discover new ways to deal with new surroundings. “They had no compelling incentive to revolutionize their way of life.” (McClellan, Dorn 2006, 15, 16)
The Neolithic era beginning with the Neolithic revolution began around “12,000 years ago at the end of the last Ice Age” and was the initial transformation in history from a food gathering life style to a food producing one. This transformation “originated in a few regions before eventually spreading around the world.”  The reason this transformation happened in a few regions before others was due to their habitat. The Neolithic people who did not benefit from a natural form of water still relied mainly on pastures to find food source. However at this time some nomadic people were settling down, learning to build houses, and to produce their own food. The Neolithic people really took the first step towards larger advancements that would come later in history. “Gardening contrasts with intensified agriculture using irrigation, plows, and draft animals which later developed in the first civilizations in the near east.” The Neolithic era holds some of the greatest early achievements in history. Although there practices never reached an intensity comparable to later civilized societies their technological creation of wool, pottery, kilns and monumental achievements such as Stonehenge proved that the societies of the Neolithic area had found ways to sustain life’s necessities. “Although Neolithic farming never attained the levels of intensification later achieved by civilized societies, Stonehenge and the other megalithic (“large stone”) structures show that even comparatively low-intensity agriculture can produce sufficient surpluses to account for monumental building.”(McClellan, Dorn 2006, 17, 18, 25)
The Urban Revolution as it is often called followed the Neolithic, and was the first major turning point in the history of life that was not surpassed until the Industrial Revolution in the later 1800s. “As an episode in human history and the history of technology, the urban revolution proved to be unrivaled in its consequences until the Industrial revolution that took root in eighteenth-century Europe.” The Urban revolution brought on the common problems and characteristics of high-density population civilizations. This was the emerging point for regulated political and economic systems, written language, education, monumental buildings and organization of regions or “states.” The “Techno-economic revolution” or “Urban Revolution” was a result of a need for intensified agricultural production to sustain increasingly large populations” The sporadic and scattered uprising of civilizations in the new and old worlds were due to the locations near water whether it be a sea or a river. In what is known as the “Hydraulic Hypothesis” the civilizations that arose discovered methods of irrigation and high intensity farming. “The fact alone that pristine civilizations arose in hydro-logically distressed regions-gives credence to what is called the hydraulic hypothesis.” (McClellan, Dorn 2006, 31, 32 )
In China a similar revolution occurred, the use of the Yellow River was an origin for Neolithic villages. As the settlers developed irrigation agriculture, rise to civilizations began. “Yu the Great, the founder of the Hsia (the semi-mythical first dynasty) and the Shang (Yin) dynasty (1520-1030BCE) both mark the beginning of the Chinese civilization, both Rulers claimed to “control the water”.” It holds true that the fundamentals of building a large civilization in any part of the world at this time had to include irrigation farming, and “hydraulic management.”(McClellan, Dorn 2006, 36)
In Mesoamerica a new age had come, this age consisted of the technology of the mastery of bronze. To the New World this is still called the Bronze Age. After the civilizations of Mesoamerica experienced their own agricultural revolution like the rest of the world, the Mesoamerica civilization developed additional technologies. The Bronze Age brought an economic value to Mesoamerica. They now had something to trade and specialize in. Along with the development of bronze, and the brewing of beer, the humans of Mesoamerica began to domesticate livestock for labor and transportation purposes. The Mesoamerica civilization continued to mirror that of Asia and followed with advancements in monumental buildings of pyramids (advanced architecture), writing, and institutions to teach writing and mathematics. “Writing and reckoning were first and foremost practical technologies with practical origins meeting the practical needs of early civilizations.”  The base for history and keeping track of the past in numerical sense was now possible through Egyptian writing, and reckoning. As did all intense agricultural civilizations, Mesopotamia had a calendar system based upon astrological observations. The calendrical system used by the Mesopotamian society was highly accurate. Each society had their very own way to mathematically compose a calendar, but the calendar the Egyptians used very closely resembles the one we use today. “Calendars, astronomy, astrology, Meteorology, and magic formed part of a general pattern, repeated in Mesopotamia, Egypt, India, china and the Americas.” This not only marks a significant development in science but also in mathematics.(McClellan, Dorn 2006, 47, 51)
The Ancient Greek civilization “originated as a cluster of small city-states around the Aegean Sea.” The Ancient Greeks are known to be the pioneers or originators of natural philosophy. Science in Greece was actually foreign born. The science ancient Greeks used was from the Mediterranean coast of Asia Minor. The region known as Iona was the center of Greek civilization. The coastal land of Iona provided a more sustainable place to build a city with its fertile land and frequent rainfall. Three of the most known philosophers even in history originated from Greece, “Socrates of Athens, Plato of Athens and Aristotle of Stagira.” The scientific discoveries and theories made during the era of ancient Greece are not to be understated. The world would forever be changed due to the studies and findings achieved. (McClellan, Dorn 2006, 59, 60)
As the source for all civilizations has been food production and agricultural development, so was that for Europe and the European empire. “Nor indeed did an urbanized civilization arise at all until around the tenth century, when a unique form of agricultural intensification began to change Europe into an urbanized civilization. Once it found a way to intensify its agriculture Europe achieved a very different character.”
How Europe transformed from a very un-advanced society into the world leader in science and industry is an important part of history. The population of Europe increased drastically, and was approaching the same situation almost all the civilizations in the world faced, the need to intensify agriculture and make the transition to an advanced civilization. Europe however, had a unique situation that was unlike any other countries basis for agricultural transformation. Europe being naturally irrigated could not solve its agricultural difficulties like eastern civilizations, the only option they had was to make better use of the land they have. Two of the technological tools that were fundamental factors for success in Europe’s Revolution was the use of the plow to make the soil usable. The Europeans used two kinds of plows, The Mediterranean scratch plow, and the heavy plow. The Mediterranean scratch plow was a light plow that worked soft soils, and the heavy plow which was originally invented by the Romans had to be pulled by large herds of oxen. The heavy plow was effective in increasing agricultural production by softening the soil of the lower wet land soil. “A second innovation that contributed to an increase in agricultural production involved the substitution of the horse.”  The European development of the iron horseshoe and advancement in the horse collar transformed the horse into the new mode of transportation. The horse would end up having positive economic effects too. The horse allowed for less expensive trade, easier and longer travel, enhanced village life, and greater economic participation from villages.
It is also noteworthy that Europe’s three field rotation system increased agriculture production from “33 to 50 percent.”(McClellan, Dorn 2006,176, 178, 179 )
Aside from agriculture Europe also made use of technological innovations that represent European feudalism. Advances like the armored knight, charger, and stir up created a tough war uniform and advanced war tactics. Given this feudal turn to Europe civilization, there was no desire for a strong central government. “The advent of the knight and European feudalism further forged appropriately local relations between villages and the knights and lords who governed them.” Due to the feudal system of knights, primogeniture, and respectively a lack of land there was a problem with over population. In response to the overpopulation Pope Urban II launched the first crusade. Shortly after launching the second crusade, the European engineers found fascination in alternate power methods. The waterwheel became widely used through out villages to provide energy. The waterwheel had enough power to support saw mills, flour mills, and hammer mills. With the introduction to labor saving machines, slavery in Europe eventually died off.  (McClellan, Dorn 2006, 180)
The Europeans were influenced by their Greek neighbors and the older teachings of the Islamic and French knowledge. “Against the background of weakly organized learning in the early middle ages, the appearance of the European University in the twelfth century and its rapid spread across Europe mark an institutional watershed in the history of science and learning” The university was not controlled by the state, but more so independent with a loose tie to the church. “They functioned mainly to train the clergy, doctors, lawyers, administrators, and teachers increasingly required to run the affairs of the state, the church, and the private sector as Europe in the middle ages continued to flourish.” After the fall of Toledo, The town picked up the job as the translation center for scholars who studied classic texts written in Arabic.  By 1200 the Europeans recovered several centuries’ worth of knowledge and text. In the process of translation they also discovered other famous works of philosophy including the works of Aristotle. “The epidemic of Bubonic and pneumonic plagues wiped out a quarter to a third of the population.” This catastrophic blow to Europe’s economy was devastating but eventually things revived and went back to normal.(McClellan, Dorn 2006, 183, 192)
The Cannon and gun technologies that Europe was skilled at were originally an invention of the Chinese. The Chinese ultimately were surpassed by Europe in firearm technology and craftsmanship, and immediately surpassed by Europe with their invention of the cannon. “Already in the fifteenth century, gunpowder and firearms began to play a decisive role on the battlefield in Europe, and by the end of the century they had transformed the politics, sociology, and economics of war.” The military advantages of Europe continued to grow, but required larger budgets from the Government. The introduction of the rifle or “musket” made for even stronger armies in the 1600s. “The military revolution therefore shifted power from local feudal authorities to centralized kingdoms and nation-states.” The transition from feudal authority to monarchy or kingdoms would prove to be a lasting effect on the European society. (McClellan, Dorn 2006, 194, 195)
The role of technological/scientific diffusion from Asia and the Arab world in European development played a very significant part in history for Europe and the rest of the world. Without China, Mesopotamia, Greece, and all the other civilizations before the rise of the European empire would not be what it is today. With out China Europe would not have guns, with out Greece Europe would not have its coveted philosophical teachings, and without Rome and Mesopotamia Europe’s agricultural revolution might not have flourished.

McClellan, James E. III 2006. Science and Technology in World History. Baltimore, MD. The johns Hopkins University Press

Written by aktaylor

March 3, 2009 at 9:40 pm

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Global Terrorism

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Assignment one: Global Terrorism

“Terror is the violent or destructive acts committed to intimidate a people or government.” Therefore, terrorism is defined as “the systematic use of terror especially as a means of coercion.” Acts of terror and terrorist groups unfortunately exist in our society and claim innocent lives everyday. Although it is almost unanimously agreed upon that terrorism is something we should rid our civilization of, the task usually proves to be difficult, lengthy, and egregiously costly. Following my reading of The Trillion Dollar War by Joseph E. Stiglitz and Linda J. Blimes, I have acquired a greater understanding of the effects of global terrorism and a significantly greater knowledge of how terrorism effects our entire civilization mentally, physically, and fiscally. In/through out the upcoming pages, I will reflect on the opinions and facts of the authors, as well as express my thoughts based upon the evidence at hand. (Merriam-Webster 2004, 739)
In order to effectively address global terrorism, it is important to start by acknowledging how terrorism exists today. Anyone could be a terrorist, figuratively speaking, just by their actions. In today’s day and age, it seems that we are able to argue whether a person or group is or is not a terrorist based merely on the fulfillment of an arbitrarily objective checklist of qualities. However, the basic fact is that terrorism is global and continues to be geographically omnipresent. Terrorism stays alive/endures/thrives due to constant movement and growth. “We need a global security strategy, not just an Iraq strategy. Al Qaeda – which was not present in Iraq before the overthrow of Saddam Hussein – moved into Iraq because it saw an opportunity. Even if we can rid Iraq of Al Qaeda once again, it would simply mean that Al Qaeda would move to Afghanistan, Pakistan, Sudan, or elsewhere.”  Here the authors state that simply ridding one country or area of a terrorist group does not completely delete it. The simple act of chasing terrorist groups has no substantial benefit to our society. “One of the direct opportunity costs of the surge in Iraq is our inability to stabilize Afghanistan. With 232 deaths of American and NATO troops, 2007 was the bloodiest year of the Afghanistan war, and our NATO allies are becoming increasingly disillusioned.” Based on the authors’ facts, this is compelling and irrefutable evidence that trying to fight terrorism on a single front can not only be disastrous and deadly, but futile and inadequate in respect to the original mission. Terrorist groups/regimes practice a nomadic lifestyle in order to proliferate and endure/thrive/survive. Therefore, the task of fighting terror is an increasingly difficult one. Without clear strategy, available human power, and capital, terrorism is virtually impossible to eliminate. (Stiglitz, Blimes 2008, 227, 227-228)
Terrorism affects us in a myriad of different ways—first and foremost, civilization. It has effects upon the economy of every [single] country on this planet, as well as a corresponding lasting effect on our structural design of government.
It is especially clear that after the tragedy of 09-11-2001/September 11, 2001, acts of terrorism can illicit very powerful, deep-rooted fears from/out of the hearts and minds of a nation. My goal of this paragraph is to uncover the true effects of terrorism and present facts, no matter how unfathomable or frightening they may be. In the following paragraph(s), I will break up the effects and analyze each one, specifically. In the immediate wake of 09/11, president George W. Bush and his administration quickly created a plan to punish the perpetrators of these attacks. Due to the excessive amounts of fear and vengeance the president and his administration possessed, little to no trouble was afforded/exhausted/wasted in quickly setting their sites on who to forge war with/contend with. “The decision to go to war was based on a number of false premises. One asserted a link between Saddam Hussein and the terrible attacks of 9/11 on the World Trade Center and the Pentagon.”  The weeks and months immediately following 9/11 were a breeze for the Bush administration to convince the justice hungry American people for support on a so called war against terror. It is apparent now that there was no evidence linking Saddam Hussein to the U.S. attacks of 9/11. “Faulty intelligence led to claims that Iraq had weapons of mass destruction even though the inspectors of the International Atomic Energy Agency said there were none”  This is a very key fact that questions the initial validity of the Bush administration to lead a misguided war. A combative undertaking where our clear enemy was in a different country, we occupied and invaded one country on a larger scale and with an expedited pace—this was a mistake.  With the approval ratings of George W. Bush being at all-time low, American resentment of the war grows louder each day. As the length of the war continues, and our original target enjoys another day of freedom, we are reminded of the severity of costs our mistake accumulates. (Stiglitz, Blimes 2008, x, x)
The misguided invasion, occupancy of Iraq and neglected situation in Afghanistan not only outrage our own citizens, but effect our global standing as well. “America’s standing in the world has never been lower. Anyone who travels abroad knows this. It is also confirmed by every poll and opinion survey.” It is then safe to say that Americans are not the only ones in strong resentment of the Iraq war. “The war has dramatically changed this picture: compared to 2002, favorable ratings of America are now lower in twenty-six of the thirty-three countries surveyed by the Pew Research Center. The situation has worsened in most Muslim countries in the Middle East and Asia- and even among historically steadfast U.S. allies.”  The misguided invasion and occupancy of Iraq along with the neglected situation in Afghanistan not only outrages our own citizens, but affects our global standing, as well.
There is entirely too much significance/substantiality in the international opposition towards the present conflict. The further we continue our mistakes, the worse off we will become as a nation. “Most disturbing is that America is no longer seen as a bastion of civil rights and democracy. The Iraq war “for democracy” has almost given democracy a bad name.”  Although some may see the global opinion of the U.S. as dubious/insignificant, it has myriad effects on how we relate with other nations. The best and most appropriate way to analyze this is by looking at the economics side to this argument. It can start off rather simple, but become rather complex. Criticism of American Democracy can easily spill into criticism of American business. As a nation with one of the highest GDP’s and most successful stock markets, we are an economic leader in the world. However, our economic success is not based solely on our fundamentals, the better other nations do, the more potential our success has to increase. Therefore, when other nations have unfavorable views towards us socially, it is likely they will economically, as well. “American firms, especially those that have become icons, like McDonald’s and Coca-Cola, may also suffer, not so much from explicit boycotts as much from a broader sense of dislike of all things American.”  The author’s macroeconomic thoughts are a very realistic, relevant example of a way that one country’s view of our country can stretch into different cost categories. (Stiglitz, Blimes 2008, 160, 160, 161, 129)
Our own nation’s economy is tremendously hurt by the Iraq war. Using conservative realistic figures and models the authors present, the total cost for the Iraq war sum to over a sobering three trillion dollars. “There is no free lunch- one cannot fight a war, especially a war as long and as costly as this war without paying the price.”  “The president and his advisers expected a quick, inexpensive conflict. Instead, we have a war that is costing more than anyone could have imagined. The cost of direct U.S. military operations-not even including long-term costs such as taking care of wounded veterans-already exceeds the cost of the twelve-year war in Vietnam and is more than double the cost of the Korean war.” They have managed to underestimate and overspend for every fiscal year we have been in Iraq. Most of the figures based through out the authors’ work are moderate and based on the best-case scenario. Obviously, the quicker we can exit from Iraq, the more we will save. However, we have bills that will continue to stay with us long after the troops come home. In fact, these costs can only then rise. “Even if both wars end tomorrow, our financial obligations will not. U.S. taxpayers owe billions of dollars to veterans who have become eligible for mandatory disability compensation, plus medical care and benefits.”  The debt we have created just by doing right by our brave veterans is enormous, and will undoubtedly be passed on for generations. Yet, it is not even close to the total debt the government has created. Post Traumatic Stress Disorder could end up being the biggest medical expense the government pays for when everything starts to get paid out. P.T.S.D., which just happens to be diagnosed at historically high rates, will cost in the ballpark of 25-44 billion dollars. Along with P.T.S.D., there are many other things related to the government’s debt towards the Department Veterans Affairs. Compensation of the soldiers’ life, veterans’ medical, veterans’ disability and veterans’ social security benefits all total to upwards of “630 billion dollars.” (Stiglitz-Blimes 2008, 56, 6, 35, 57)
There are also three other costs to add up when thinking of a total running budget of the war in Iraq. First there is total operations to date, which sums the amount we have spent since the invasion, future operations, future veterans costs (broken down above), other military costs, and interest costs. This all amounts to a tremendous “2,655 billion dollars in money spent and owed.” “But these are just budgetary costs. They do not include the costs to the economy-the full economic costs of those who have been killed or injured, the cost inflicted by the soaring oil prices, the weaker future growth as a result of investment ”crowded out” by the soaring deficit.” The budgetary costs already reaching figures around three trillion, show compelling evidence that we’re already way over spent and quickly moving towards the most expensive war in U.S. history. It’s also important to keep in mind that the figures just mention from the authors book were only for Iraq! If you add the total for Iraq, and Afghanistan the sum exceeds 3,496 trillion dollars. (Stiglitz, Blimes 2008, 57, 56)
Another very meaningful, yet depressing true cost of the Iraq and Afghanistan conflict is the seemingly endless obstacles they face when they get home. “A problem with the transition from DOD to VA is that the disability ratings process is ‘one size fits all’, the same basic procedures are followed inside the department and during the transition to the VA for all individuals. The 11% of cases that are those wounded or severely wounded in war are funneled through exactly the same system as the other 89%-the career service members transitioning to retirement.” This is not only shameful of our government, but extremely unacceptable. “The result is that veterans often need to undergo a second round of medical diagnostic tests in order to qualify for VA disability benefits and medical care.” It is clear that the need for serious revision and redesign of our post war veteran care is urgent and should be mandatory. The pain and suffering of our brave troops should not worsen or even continue at the fault of the U.S. government. The government needs to re allocate funding to better serve our brave men and women upon their return. (Stiglitz, Blimes 2008, 69, 69)
To the point of absurdity, the costs still are yet to be far from over. As the previous figures have shown how much the government has spent, owe and will owe, there are still costs that are substantially detrimental to society. These come in the form of the costs to society due to the loss of labor. Often, not only are soldiers unable to have the same productive capacity upon return, as a result neither do their families or loved ones. “We estimate that these social costs add at least $300 billion to $400 billion to the total war bill.”  The government does not pay any compensation to the care taker of a returned veteran, also the prices paid to veterans for the wages they would have earned had they returned with no disability, are not paid. “In addition, the U.S. government’s disability stipend does not compensate for the pain and suffering of the veteran and his family, or the impairment in quality of life.”  These social costs can be much more valuable than the government will ever be able to compensate for, and these social costs will only grow lager as the war goes on. (Stiglitz, Blimes 2008, 91, 93)
Another inadequate compensation from the government is the social cost when one loses their life. The government has a very low pay out to families for a soldier’s death.  The amount is insufficient when one’s value is looked at economically. “The official military pay out when one dies amounts to only $500,000. This is in the form of a $ 100,000 “death gratuity” and $400,000 in life insurance paid to the family survivors.” It is a fact that you can receive more compensation from a senseless car accident than what the military will award you. It makes sense naturally to think that the actual cost of lives lost is much greater than simply the total compensation the government pays out. “In many cases, those killed in Iraq were young men and women in peak physical condition, at the beginning of their working lives. The true economic loss from their deaths could be much higher.” Finding a way to more accurately represent the values of the lives lost the author uses a value that is used widely in most insurance company markets and in the private sector. “To take one example, if someone is killed in an environmental disaster, the Environmental Protection Agency estimates that the loss from that death is $7.2 million.” It is only now that we can more accurately represent the true economic and social value of the tragic loss of our brave men and women in the course of battle. “The social costs of the Iraq war’s fatalities rise to greater than $50 billion in 2007 dollars.” With original government budgets not even adequately representing a fraction of the estimated total, it is no doubt that the moral of the war is at record low, recruiting is a serious challenge, and that we will significantly feel the effects on our future economy. (Stiglitz, Blimes 2008, 93, 95, 95, 96)
The last but not least major cost of the war, and probably most affected and discussed, are the costs to our economy from a macroeconomic standpoint. As the presidential elections of 2008 come to the wire, the most important issue has become the economy. The wars in Iraq and Afghanistan both have an immense effect upon it. “Today no serious economist holds the view that war is good for the economy.”  It is very important to realize that any amount of money spent on the Iraq and Afghanistan war, is money we could have spent at home. As our nation deals with enormous pressing issues such as a dire energy crisis, market meltdown, roads and infrastructure deterioration, education inefficiencies and a healthcare crisis, saying that money is tight would be a tremendous understatement! Not only would government spending on our national crises boost our economy in the long run, it would positively affect other nations as well. With the advantage of a prosperous peace time economy, a super power like the U.S. could join in with other countries to help solve world problems like poverty, starvation, genocide, Aids, water deficiencies, and various pandemics. The macroeconomic effects of this war can start when the Iraq war began. Oil prices which were a fourth of what they are now before we invaded Iraq have sky rocketed at increasing rates and will likely not go down in the future. Americans can feel the effects of rising fuel and energy costs in their bank accounts daily. It has been clear that this alone has had a severe impact on not only our stock markets, but just about every aspect of our economy. Higher fuel costs translate to people spending less on everything else. “If even half of the difference between the current price ($95-$100 a barrel) and the price before war ($25 a barrel) is attributed to the war, then the oil costs of the war today are $35 a barrel”  “more generally, attributing just half of the price increase in the post-Iraq world to Iraq over the period for which we have futures markets (2015) brings the direct costs of the oil price increase alone to somewhat in excess of $1.6 trillion.”  The only people to profit from this were of course the oil companies. Through out the war, Exxon-Mobil has seen increasing profits and returns for every year of the Iraq war. (Stiglitz-Blimes 2008, (115, 118, 118)
Government spending which was briefly touched earlier has a gigantic effect on our economy as well. It can be seen easily and more clearly as an opportunity cost. The government could ask itself what would the benefits be if we spend the same amounts on investment and solutions to national problems instead of war. “Switching just $800 billion (over the fifteen years we project we will be engaged in Iraq) to domestic investment would result in increased GDP of $320 billion.”  In every way we can analyze the cost and benefits, all options yield a better result for effects on our economy. (Stiglitz, Blimes 2008, (121)
The most important things to continually think about are the lessons we can learn from this war, and how to prevent further mistakes of this magnitude. “One of the fundamental lessons of this war is the failure of institutions such as the U.S. congress and the United Nations to provide adequate checks and balances.”  It’s clear that the presidents ability to manipulate congress and walk over the UN, point out the failures of our checks and balances. The system we currently have was designed by our founders when times were very different, and our country was not as powerful as it is today. The author outlines many great ideas on how to reform our country to where wars like the current one are harder to wage. The main ideas of the reforms are to increase public knowledge of what the government does and how it pays for it. Also, it is important to increase routine analysis of the progress of a war, and if it is getting worse, to require an explanation and plan that is transparent and easily available. Clearly we also need to reform the budget accounts for any money that becomes military related. “This set of budget accounts should be transparent and presented on both a cash and accrual basis.”  Defense Budgets should be required to be not only transparent and auditable, but required for submission to congress and a person held accountable.  Stiglitz and Blimes also encourage that “the military should be prohibited to call upon the National Guard or reserves.”  “There should be a presumption that the costs of any conflict lasting more than one year should be borne by current tax payers, through the levying of a war surtax.”  The first reforms the authors put together are great ideas on how to ensure that we as a country make wise decisions and are intelligent about the way we run our country. The authors also created a second set of nine more returns to ensure that our troops are treated not as second class citizens, but first class citizens. The First two are reforms to make sure that no soldier goes with out the health care benefits and disability compensation he or she deserves. In reform twelve: “a veteran’s benefit trust fund should be set up and locked so that the veteran’s health and disability entitlements are fully funded as obligations occur.” This is an intelligent way of making sure that the funds we need to ensure correct care of our soldiers is always there and never a problem. The next two reforms include making sure all people who take part in the conflict or war are treated equally and that a new department should be created to take care of our veterans. The concluding reforms focus on the current shameful wide gapped process of veteran claims and increasing incentive to education for military personnel.  The costs and effects of this tremendously egregious war will stay with our country for generations, but depending on the next leader of our country, we have a clear outline on how to recognize our mistakes and then learn from them. Reform and change of the current policies is a necessity, and we must make sure that the next leader of our great nation agrees. (Stiglitz, Blimes 2008. 186,190,196,197,200)

Stiglitz, Joseph E., Blimes, Linda J. 2008. The Three Trillion Dollar War. New York, N.Y.: W.W. Norton and Company Inc.
Webster-Merriam. 2004. The Merriam-Webster Dictionary. Springfield M.A.: Merriam-Webster Inc.

Written by aktaylor

March 3, 2009 at 9:32 pm

Genetic Modification of Food

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The commonly applied term GMO, which refers to Genetically Modified Organism, is accordingly at the root of genetically modified food. Though opposing arguments are often made to the contrary, some would argue that this is detrimental to health, or even life. However, without GMO’s, adequately feeding people in large urban areas would be extremely difficult, if not near impossible. Therefore, people argue that the overall effect of genetically modified food or genetically modified organisms is overall positive, and ultimately necessary. It is my goal to cover adequately the whole term Genetic Modification of Food, its respects to economic development, effects on countries, sustainability, cost benefit analysis and future potential.
“Transgenics, or genetically modified organisms (GMO’s), are the result of transferring one or more genes, usually from a wild species or a bacterium, to a crop plant.” Just as some scientists would cross the genetics of a rose to produce a different-colored rose; other scientists do the same thing, thought with a directed emphasis on food-based agriculture. This process is practiced for the same reasons it is done for all genetic modification: a different, more unique species. As in the case of agriculture, varied, more uncommon species could arise in the form of a bell pepper that is resistant to insects, a cow that produces more milk, or a strain of rice that is more tolerant to flooding. A main goal of GMO’s is to significantly increase the productivity gains of an organism. As a natural law of economics holds true, we are all profit maximizers. Although we currently use GMO’s in agriculture in the United States, it has a whole contrasting set of importance in struggling developing countries and is a fundamental aspect of their economy. (World Bank 2007, 177)
The start of transgenics started in developing countries “1996.”. This is a direct result of the research and development of industrial revolutionized countries spreading their technology. However, like most global movements in technology, the spread is never completely automatic and simultaneous. Despite technology in industrial countries becoming more advanced due to greater funding, U.S. funding is minuscule compared to other things our government spends money on. Limited funding is an enormous problem in the absolute growth in transgenics. As a result of limited technology, other countries have less to work with. “But their use has been limited to certain crops (soybean and maize used for animal feed, and cotton), traits (insect resistance and herbicide tolerance), and countries with commercial farming (Argentina and Brazil).” With greater funding in a global sense, by The Consultative Group on International Agricultural Research, for instance, technology would spread more rapidly and reward benefits on a larger scale. Funding is the main pitfall for lack of technological discoveries; and therefore, a paucity of vital progressions to developing countries. (World Bank 2007, 177)
Africa has yet to significantly benefit from GMO’s due to lack of technology and unavailability of usable gains in their regionally specific crops. “Africa has benefited the least from transgenic crops, in part because locally important food crops such as sorghum and cassava have attracted little attention from commercial biotechnology firm.” The methods in which funding are allocated for transgenics can prove to be threatening to a country’s agriculture, and this is a very evidence-based correlation. In the event of higher funding, it is likely that abilities concerning small-holder crops could be studied. Therefore, advancements could be made that would provide great potential for favorable results, by way of an increase in growth for our global agriculturally slower-growing communities. “Transgenics could reduce the impact of several of Africa’s intractable problems, such as animal diseases, drought, and Striga (a devastating parasitic weed) much faster if they were integrated into breeding programs.”(World Bank 2007, 178)
In Asia, a transgenic enhancement of rice known as “Golden Rice”, a strain of rice enhanced with Bt, has increased vitamin A values. This is having tremendously positive effects which are consistently growing. Seeing how rice is the world’s number one crop, the earth’s populations will have garnered an unprecedented gain! The Bt strain not only comes equipped with increased vitamin A, it is also more sustainable and comes with higher yields. ” Advanced field testing of Bt rice shows higher yields and an 80 percent reduction in pesticide use.” It is obvious that if we can research other crops and agricultural science to a greater scope, with respect to relevance, disease and scarcity, the benefits and possibilities could be so great that stating that it is worth its cost would be a gross understatement! “The estimated health benefits of Golden Rice are large, because rice is the staple of many of the world’s poor who suffer from vitamin A deficiency. In India alone 0.2-1.4 million life-years could be saved annually through widespread consumption of Golden Rice; this would be more cost-effective than current supplementary programs for vitamin A.”(World Bank 2007, 177)
The interest in transgenics can be seen by the adoptions of its methods and the numbers and statistics concerning them. “The only transgenic widely adopted by smallholders has been Bt cotton for insect resistance.” Asian countries have adopted this strain of crop technology by the millions. Profitability and low-cost are two crucial essentials of success for transgenics. Both were apparent in the Bt cotton strain and had direct impacts. (World Bank 2007, 177)
Transgenics has been a staple for nearly a century in American and European industrialized countries. Its spread would eventually reach developing countries decades later. “Actually this process began back in the 1920s when radiation was viewed as benign, if not beneficial, prior to the dreaded radioactivity of the atomic bomb.” American and European countries definitely conduct more research than developing countries. Nonetheless, this extensive task is met face to face with opposition and self-destructing conflicts as well. Resentment and opposing opinions of public interest groups, lobbyists, private firms, and NGOs provide arguments that often stall or slow down the mutant sized growth of transgenics. “In terms of all the arguments used against food irradiation or genetically modified food, mutation breeding should be even more vigorously opposed except for the fact that it has been done for so long, has been so beneficial and without the slightest evidence of any harm whatsoever.” Still, arguments are made that certain methods of transgenics produce side effects or negative effects on the crop/food and the people/animals consuming them. (DeGregori 2003, 126-127)
In addition to genetically modified crops, the correspondingly modified organisms such as animals and fish have improved productivity and sustainability. Advances in animal and fish genetics have provided substantial benefits as well. Through the use of artificial insemination and genetically specific fish, farming output yields have been higher and the health of the animals has strengthened. In America, it seems as though our motto is “bigger is better” and “go big or go home.” These notions can be easily proven when you drive–it seems that every new car is a larger version of its previous model. Nationally, we pride ourselves on the enormity of our cities, inundated by tall buildings and three-story-plus houses. It is blatantly evident that we have an obsession with the abundance of size. The advancements made to livestock and aquatic life have a pin-point impact on their size. “Over 1980-2005 in the developing world, the annual off-take from a flock of chickens with a total live weight of 1,000 kilograms increased from 1,290 kilograms and that of pigs improved from 140 kilograms to 330 kilograms live weight.” Proportionately, larger livestock means more to sell at the market and a greater supply for feeding purposes. “Similarly for fish, genetically improved tilapia is shaping aquaculture into one of the fastest growing sectors in Asian agriculture. In 2003, improved strains from a single project-for the genetic improvement of farmed tilapia (GIFT)-accounted for 68 percent of the total tilapia seeds produced in the Philippines, 46 percent in Thailand, and 17 percent in Vietnam.” Despite irrefutable results, genetic improvements of fish and livestock have only reached some developing countries. This is partially due to methods of transferring the tools, processes of genetic modification and the lack of research and funding. “Even so, genetic improvements in animals and fish have reached only a small share of developing-country farmers, partly because of constraints in the delivery systems for these technologies. Livestock breeding services in much of the developing world are still generally subsidized, crowding out the private sector.” A solution to policy creation/reform as well as feeble funding for research and development are the only way to fully develop and explore the potential for transgenics. Following these solutions, it is imperative to spread technology to other developing countries, and in a broader aspect, a greater significant movement as a whole. (World Bank 2007, 162)
The benefit of Genetically Modified Organisms has been stated above, continuously. Alas, it is important to stress one indubitable justification for transgenics–its efforts towards fighting world hunger. We are sadly reminded daily of the fact that in less fortunate, developing countries, poverty and famine are life-threatening problems for entire societies. This one indisputable reason alone is why we should look into this sort of technology and continue to do so for years to come. “Though transgenics have been taken up more rapidly in commercial farming, they have considerable potential for improving the productivity of smallholder farming systems and providing more nutritious foods to poor consumers in developing countries.”(World Bank 2007, 177)
With every benefit there is cost. Although all the costs of Genetically Modified Organisms have not be completely proven yet, there are some very foreseeable and respectable criticisms–controversial or not. One argument states that if we genetically alter or clone everything, the quality of uniqueness if compromised. “In recent decades, the world has largely avoided major disasters from genetic uniformity, in part because of frequent turnover of varieties, which brings new sources of resistance.” Other negative aspects or potential hazards to the transgenics movement include the transportation risks/spread of disease and overpopulation of livestock near urban areas, which would result in climate issues that are irreversible and egregious waste problems. When transporting animals or fish from one country to another, this undertaking can cause harm by exposing a country to a disease it may not have experienced before. “The movement of live animals and aquatic products makes the accidental spread of disease more likely.” Also, a issue that has made headlines in the news recently and continues to foster attention is that of livestock proximity to urban areas and its bodily gas causing a rise in green house gasses. “But intensive production methods and the growing concentrations of animals near urban and periurban areas of developing countries can increase waste pollution and the incidence of diseases such as tuberculosis and avian flu.” As mentioned earlier, although the full extent of transgenics effects may not be known entirely, it seems that the benefits outweigh the costs. Thus, transgenics endures as a promising future frontier, in spite of steadfast opposition. (World Bank 2007, 60)
As useful as this Technology may become, especially under the rubric of a potential to save lives, transgenics has grown very slowly and has yet to ostensibly accelerate. This tepid proliferation has been attributed to five main culprits. “Neglect of pro-poor traits and orphan crops” is a substantial pitfall in the progress of transgenics. “Investments in research and development on transgenics are concentrated largely in the private sector, driven by commercial interests in industrial countries.” This presents a strain in the public sector to also invest in transgenics, which it hasn’t advocated, thus far. Commercial research has been conducted for crops with profits and, ultimately, a viable market in mind. The poor based countries and farmers get the short end of the deal here. This is a situation where a continent like Africa gets less benefit, if any at all. “Because the private sector cannot appropriate benefits of research and development on smallholder food crops, this research must be led by the public sector. Yet the public sector has underinvested in research and development generally and biotechnology specifically.”(World Bank 2007, 178)
“Risks.” The uncertainties and continuing concerns of genetically modified food/organisms have existed and are still created despite actual evidence that, to this current day, it can be safe to take to market. “At the same time, the shift of the U.S. food supply from small, local farms to huge, global agribusinesses has opened new niches for pathogens, as well as the potential for more systematic disease prevention.” The risks are always a slowdown for increased research and development funding in genetically modified organisms. Global-opinion regarding transgenics has the power to be just as influential to its progression as actual funding and research. “Public perception of risks can be as important as the objective risk assessment based on scientific evidence in ensuring acceptance of the technologies.” (World Bank 2007, 178) (Ward, Warren 2007, 18)
“Weak regulatory capacity.” The weakness of an inferior governing body or official group overseeing and regulating product marketing or research is one of the biggest bottlenecks of transgenics all together. The “low capacity” or “weakness” that a regulatory body has instills doubt in people and leaves them more susceptible to fear of transgenics and new products. As discussed earlier in the chapter on costs of transgenics, the disbelief of the benefits or good that transgenics produce will almost always be fueled by opposing commercial business groups or various forms of NGO/special interest groups. “In a very balanced report, the potential benefits for poor countries of genetically modified crops, the critics were unfazed and responded by vilifying this fine report. Since many of the mutated crops are already being grown in developing countries, mutation breeding cannot be so vilified, nor can the arguments be made that it has done nothing for the poor.” (World Bank 2007, 178)
“Limited access to proprietary technologies.” The process of research in regard to transgenics is not a quick one by any means. Since most of transgenics are controlled commercially, the work that must be done to conduct research and development can be lengthy and hasten the output of the conducted work, overall. “With an increasing share of genetic tools and technologies covered by intellectual property protection and largely controlled by a small group of multinational companies, the transaction cost of obtaining material transfer agreements and licenses can slow public research on and release of transgenics.” (World Bank 2007, 178)
“Complexity of trade transgenics.” The convolutions of trade when it comes to importing and exporting transgenics and its supply methods in other countries lead people to worry on two fronts: (1)An economic aspect of loss of foreign markets due to no differentiation between imported product and exported product. (2) Extinction of the non-genetically modified brand and the fear of negative health effects of the transportation of transgenic foods. The problem persists through out the system of transgenics and is also a problem in trade. With the lagging growth and scarcely-conducted research, trade methods have yet to be mastered and still have room for error. These potential errors of spoilage or damage that can directly cause health risks/effects still continue to hinder transgenic progress. “The 1950s and 1960s showed genetic improvement technologies such as crop and animal breeds were often location specific and generally did not travel well from temperate north to the tropical south.” “They have to consider the costs of segregating the storage and shipments of transgenics from conventional varieties and obtaining clearance for transgenics for consumption in the importing country.” The clearance of transgenics in the buying arena is crucial because the effects of flooding the market with only imports could bankrupt local farmers who have not yet caught up to speed, or who simply lose competitiveness. (World Bank 2007, 159)
Whether one believes transgenics are a boon to technology or an impediment to our global agricultural market, the resulting benefits to date are proof-positive that transgenics provide higher output productivity, greater sustainability, and better nutrition to poor cultures and smallholder farmers who greatly benefit from these gains. We have also learned of the possibilities of increases in nutrition and the potential to save millions of lives in numerous countries just by transgenic crop enhancement. With the current global situation we are faced with, a brighter future will require an increase in government subsidized investment in the research and development of transgenics. It is also necessary to find a median point to regulate, and from there, determine scientific facts based upon objective data, not the subjective. Many factors hold paramount relevance to the viable future of transgenics(GMO’s)–an unwavering transparency of protocol at all times and individual-confidence inspired by present-day, as well as long-term, knowledge of the costs and benefits affecting the public. Further, to ensure lasting success, these measures must be carried out on the national level as trade is overseen by a higher regulatory staff that will implement technology-advancing administration.

The World Bank. 2007. world development report 2008. Agriculture for Development. Washington, D.C.: The International Bank for Reconstruction and Development / The World Bank.
DeGregori, Thomas R. 2003. The Environment, Our Natural Resources, and Modern Technology. Malden, MA. Blackwell Publishing Inc.
Ward, John W, Warren, Christian. 2007. Silent Victories. The History and Practice of Public Health in Twentieth-Century America. Oxford, NY. Oxford University Press Inc.

Written by aktaylor

March 3, 2009 at 9:20 pm

Bad Business Bears Better Ethics… Hopefully

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Warren Buffett addressed Berkshire Hathaway shareholders Friday about company performance in 2008.

In a comedic and witty way, Buffett simultaneously accepted responsibility and also blamed others.

Buffet’s company, Berkshire Hathaway, recorded its worst financial year since he took control in 1965.

“Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so,” Buffet said in his letter. “For Berkshire Hathaway, investments fell from $90,343 per share to $77,793, a decrease caused by a decline in market prices, not by net sales of stocks or bonds.”

As bad as the economy may seem, Berkshire Hathaway has companies that seem impervious to dire market conditions. GEICO insurance seems to be one of them, with GEICO increasing productivity and sales in 2008.

“As we view GEICO’s current opportunities, (CEO Olza “Tony” Nicely) and I feel like two hungry mosquitoes in a nudist camp. Juicy targets everywhere.” Buffett said.

Later in his letter, Buffett addressed the housing crisis.

“Commentary about the current housing crisis often ignores the crucial fact that most foreclosures do not occur because a house is worth less than its mortgage” he said, describing so-called “upside-down” loans. “Rather, foreclosures take place because borrowers can’t pay the monthly payment that they agreed to pay.”

Buffet describes homeowners who typically default these days as people who have made significant personal investments in their home and who simply cannot afford the payments.

The U.S.’s most successful investor goes on to characterize home investment as other than for eventual appreciation, resale and profit. He also advises against buying more home than one can afford.

“The home purchased ought to fit the income of the purchaser,” Buffett said. “Home purchases should involve an honest-to-God down payment of at least 10 percent and monthly payments that can be comfortably handled by the borrower’s income. That income should be carefully verified.”

What Buffett says is very accurate and also perfect advice for soon to be homeowners, and also for lenders.

Should those lenders have been more careful to begin with, the country would likely not be in the current fiscal quagmire.

Lori Whisenant, director of business law and ethics studies at C. T. Bauer College of Business discussed business ethics as taught at UH.

“As an MBA student in Bauer, students must uphold the Bauer Code of Ethics,” Whisenant said.  “For undergraduate students, GENB 4530 is designed to help students understand the challenges of creating and maintaining an ethical corporate climate.”

In 2005, Whisenant, with the assistance of other administrators and input from others on the Bauer staff, developed the Bauer Code of Ethics and Professional Conduct, known as the Bauer Code. This is the first code of ethics for the C. T. Bauer College of Business.

Economics senior Kyle Randazzo said he realizes the economic situation and had his own opinion in regards to business ethics.

“A problem arises when globalization changes,” he said. “U.S. national and international economic decisions must change as well if we expect to prosper as an entity.”

Political science and economics double major Fatima Maniar said corrupt business ethics are also partially responsible for the economic crisis.

“It’s hard to regulate and enforce business ethics. The level of importance a person places on enormous profits and money could determine how ethically they practice business ethics,” she said.

Good business ethics would have gone a long way to prevent this present financial debacle.  Still, we have faced worse as a country, and triumphed.  As Buffett told his stockholders, “America’s best days are still ahead.”

Written by aktaylor

March 3, 2009 at 8:45 pm

Posted in Uncategorized