Year: 2010

Is 11% of maybes that important to drug manufacturers, or can they just lower prices and give more away?

Posted on by Marc Jampole

The latest issue of AARP Bulletin has a survey on the awareness by consumers of advertising for prescription drugs.  The poll contrasts the percentage of peoples 18-49 and 50+ who experience different types of advertising for prescription drugs.   

Although supposedly focused on the concerns of those more than 50 years of age, AARP Bulletin once again shows that it may have taken over as the magazine of cultural issues and trends for Middle America now that Parade is little more than a postage stamp.  The survey touches on many hot button issues, including health care, the cost of prescription drugs and the use of media by both businesses and the public.

The survey, conducted by Social Science Research Solutions, a private research firm, shows hardly any difference in the rate at which those two age groups, younger and older, see ads for prescription drugs (sometimes squeamishly called “ethical pharmaceuticals”) on/in TV, magazines, radio, newspapers, Internet, pharmacies and email.

The most interesting finding, though, is that only 11% of younger people and 9% of older people have ever asked their physician for a prescription of a drug they saw in an ad.

How many times do we see ads on TV for prescription drugs to cure or ameliorate erectile dysfunction, obesity, diabetes, depression, high blood pressure, high cholesterol and chronic pain?  I think you’ll find that whatever the time of day and whatever the magazine, the objective of a large percentage of all ads is to sell directly to the public those drugs that only a doctor can order.

It seems so unethical, and now we see that it doesn’t even do much good. 

Drug companies are pouring hundreds of millions of dollars a year into advertising to reach a mere 9-11% of any market.  Pfizer, maker of Lipitor for high cholesterol and Viagra for low you-know-what, spent $1.2 billion on advertising all by itself in 2007, the latest year I could find online.  

All that money is only affecting 9-11% of the total market for each of its drugs! An absolute waste of money!

Perhaps the drug companies would be better off if they did not advertise to the public at all, but limited their marketing to physicians.  I’m not saying that drug companies should not have websites and brochures that explain in lay terms the benefits and side effects of their drugs.  I’m talking about the obtrusive and sanctimoniously obnoxious outreach in TV, email, magazine and other advertising.

Better that the drug companies not spend these enormous sums on advertising and instead lower their prices to consumers and hospitals.

Voters reject Tea Party extremists but embrace mainstream media’s glorification of Republicans.

Posted on by Marc Jampole

I am dismayed by the number of house seats that fell to Republicans in yesterday’s election, and a little surprised.  Although I study the impact of propaganda every day, it still befuddles me whenever I see people falling for a line of hooey, even if it is fed to them in large doses day after day, by the news media.

And make no mistake about it: the single largest factor contributing to Republicans recapturing the House of Representatives so emphatically is the mainstream news media, which for the past 18 months have told the story of national issues and the election campaign completely from the Republican point of view. 

Here are some specific actions that the mainstream news media took to help Republicans, all of them documented in the OpEdge entries over the past year and a half:

  • Reported on health care reform and other issues from the Republican point of view.  Let’s take healthcare reform as an example: the news media did not clearly explain what the legislation would do; reported false information about death panels and loss of benefits; highlighted side shows such as covering abortions; defined the terms of the debate in ways that would help the Republicans; and did not educate citizens on the degree of private sector involvement in current government healthcare programs.
  • Gave more coverage to right-wing rallies and widely reported the outlandish estimates for these affairs, while providing minimum coverage to rallies of progressives and Democrats. 
  • Focused coverage on right-wing anger, e.g., at healthcare reform, and not on left-wing anger, e.g., that reform did not go far enough.
  • Played into the short-term thinking that gave Republicans a free pass for 8 years of destructive policies, but blamed our economic woes on less than 2 years of Obama rule.
  • Covered only the Republican primaries in national news, virtually ignoring all Democratic races.  For some reason, national media could find not one Democratic primary race that had any national significance or unusual angle.
  • Gave much more extensive coverage to the Republican candidates during the election season, especially in human interest stories. 

What the news media couldn’t do is prettify the extremist statements of the most prominent Tea Party candidates.  I have identified 10 Tea partiers who received extensive coverage in national news media and strong backing from Sarah Palin. Their record: 3-7, with all the women going down to defeat.  For Republicans, though, it’s a little better, since one of the Tea Party’s “Big 10” lost to a Republican.

Here’s the tally:

Angle/Senator Nevada – LOSE

Fiorina/Senator California – LOSE

McMahon/Senator Connecticut – LOSE

Miller/Senator Alaska – LOSE to Republican Murkowski

O’Donnell/Senator Maryland – LOSE

Paladino/Governor New York – LOSE

Paul/Senator Kentucky – WIN

Rubio/Senator Florida – WIN

Toomey/Senator Pennsylvania – WIN

Whitman/Governor California – LOSE

The less extremist Republicans who did win are still to the right of where most voters stand on particular issues, such as specific clauses in healthcare reform, the need to provide continuing unemployment benefits and the role of government in repairing our frayed infrastructure.  But the Republicans did not win on issues; they won on a big-picture message: The Democrats made the recession worse than it could have been by expanding government interference in the economy.

For those who are blaming the Democrats for failure to make their basic messages—and there are many on both sides of the aisle making that claim—I respond: isn’t it the mainstream news media that rejected the Democrats’ basic messages?  Of course it is.  The messages that the recession would have been worse without government intervention and that we need more financial regulation were fine and accurate.  They would have resonated with voters if allowed to get through to them.  Instead, the news media preferred to present unmitigated anger and frustration, proposing in the commentary that these emotions were only bubbling up on the right.

LA Times blames continued recession on the honest people paying off their underwater mortgages.

Posted on by Marc Jampole

Yesterday the Los Angeles Times identified the true culprit in our continued recession.  All this time I thought it was Congress to blame for not passing a larger stimulus bill that would have included more aid to those out of work and more spending on our basic infrastructure of roads, bridges, mass transit and public schools.

Turns out I was wrong (thinly veiled sarcasm).  Turns out, at least according to La-La’s Land’s newspaper of record, that the recession would be over a lot sooner if all those honest people who continue to pay off their mortgage even though the mortgage is now worth more than the house would just stop it.  According to the article titled “Millions of homeowners keep paying on underwater mortgages,” those committed to meeting their contractual obligations are keeping money out of the economy that would otherwise be spent on consumer goods.  

Here’s how reporter Don Lee puts it:

“Because, with home prices stagnant in much of the country, payments on mortgages that are underwater could absorb billions of dollars that might be used for other forms of consumer spending — a drag on family finances, the housing market and the overall economy.”

In simple English, the LA Times wants people to stop paying their mortgages so that they’ll have more money to spend on new cars, refrigerators, phones, flat-screen TVs, vacations and clothes, hopefully leveraging their new-found funds, which means not only spending the difference but also borrowing more.

Like most economists and economic reporters of all persuasions, Lee and the experts he quotes can only fathom one way to get out of the recession: spend more.  They fail to see that spending more only works out in the very short term, for two reasons:

  1. Sooner or later you have two choices only: either pay back the money, which will cripple a spending-induced economy or screw your creditors (meaning the American public, since the banks who loan the money will no doubt receive bailout assistance again).
  2. In the long run, an economy based on ever greater spending will consume resources and pollute the earth.

Some of my readers will remember the word “potlatch” from a college introductory course on anthropology.  It comes from the native American tribes in the Pacific Northwest.  According to Merriam-Webster’s, it means “a ceremonial feast or festival of the Indians of the northwest coast given for the display of wealth to validate or advance individual tribal position or social status and marked by the host’s lavish destruction of personal property and an ostentatious distribution of gifts that entails elaborate reciprocation.”  A potlatch is thus a mindless celebration of wastefully conspicuous consumption.  Preparing for these potlatches was a major economic driver in Indian societies.

We’ll never know for sure when potlatches would have depleted the resources of the Northwest tribes, because before it happened, European settlers arrived with diseases that reduced the population by 75%.  We do know that a potlatch of monumental building depleted the resources on the Pacific island of Rapa Nui and led directly to the total eradication of the population there.

We in the United States have developed a potlatch society and the only economic advice that most experts can offer for exiting the economic doldrums is to go on another potlatch.  But it just won’t work anymore.

Some final notes on the upcoming election and a reminder to hold your nose and vote for the Democrat

Posted on by Marc Jampole

Meg Whitman’s spending to win election as Governor of California is now up to $162 million, which the Associated Press reports is more than Al Gore spent on his 2000 election campaign for president of the entire country, not just its biggest state. 

When you do the math, it works out to an incredible $4.78 per voter.  Included in this enormous sum is $142 million of Whitman’s own money, much of which she has because tax rates are so low on the wealthy and ultra-wealthy in this country.  Whitman’s great extravagance in attempting to buy an election is exhibit #1 in the argument not to continue the temporary tax cuts Bush II and his Craven Congress gave rich folk in 2003. 

Exhibit #2 and #3, respectively, would be Carly Fiorina who spent untold millions of her personal fortune to become a U.S. Senator from California, and Linda McMahon, who is spending $50 million of her wrestling stash for her Senatorial run in Connecticut. 

Let’s turn now to the Republican’s chief ally in the mainstream media, The New York Times:  Yesterday, the Times outdid itself in its year-long effort to help the Republican Party.  On page A17 of the national edition, it published three feature articles in third-of-the-page strips across the page.  The topics: the gubernatorial elections in Florida, Texas and Maine.  In all cases, the writer wrote the article from the Republican candidate’s point of view.  In all cases, the article had a large photo of the Republican candidate campaigning and a small insert formal head shot of the Democratic candidate.  In other words, you didn’t even need to read the stories to see, and understand, a pro-Republican slant. 

At least the Times also has to cover the news, and so was forced to run a story that detailed the unethical and perhaps illegal machinations of Carl Paladino, Republican candidate for governor of New York, as the financial guardian of his aunt’s property.  As the article reports, the mother of Paladino’s illegitimate child ended up owning the home.  

This election reminds me of the presidential elections of 1968 and 2000.  In 1968, the young, minorities and progressives were very angry at Vice President and Democratic candidate for president, Hubert Humphrey, who refused to come out against the Viet Nam war.  These groups sat on their hands and didn’t vote in large numbers and the result was that Nixon won the election, the war dragged on for another 7 years and Nixon began his campaign of illegal activities.  In 2000, lots of progressives were turned off to Al Gore, perhaps from reading too many articles in which Maureen O’Dowd said Gore was a nerd and Georgie Porgie a cool guy.  Lots of progressives voted for Ralph Nader and Georgie Porgie won.  Georgie, AKA Bush II, proceeded to get the country into two senseless wars, establish a global torture gulag, assault civil and privacy rights in the United States, give tax cuts to the rich, gut environmental and financial regulations and pretty much run the United States into the ground while enriching his cronies.

I’m therefore asking readers not to stay home on election day, but instead go to your place of voting, take a deep breath, hold your nose and vote for the Democratic candidate.

It’s not that I like the Democrats, whom I find to be a craven, compromising bunch who always have to balance their good intentions with the demands of the corporate special interests that fund their campaigns.

But the Democrats are certainly the lesser of two evils in the current election, especially those Dems going up against Tea Party candidates.  The Republicans have narrowed their base to include only the most right-wing of elements, and if given a chance, will continue its 30-year agenda to take money from the middle class and poor and give it to the wealthy, while ending government regulations, pursuing needless wars and ignoring the pressing need nationwide to repair our infrastructure of roads, bridges, mass transit and public schools.

The only voters to whom I am not giving the advice, “Hold your nose and vote for the Democrat” is in the state of Connecticut, in which the choice for U.S. Senator is between Tea Party Linda McMahon and the known liar Richard Blumenthal, who has pretended to be an ex-Viet Nam vet on multiple occasions.  In Connecticut, maybe the best thing to do is write in a candidate.

Call for nominations for OpEdge’s Ketchup Award, named after the condiment Reagan officials called a vegetable serving.

Posted on by Marc Jampole

Many people act as if they really believe the first line to St. John’s gospel, “In the beginning was the word.”  They think by using a word or phrase they can create or deform the reality being described or make people look at it from a different perspective. 

For example, when corporations started using the term “downsizing” to describe massive layoffs of employees, the idea was to conceal the human misery that layoffs cause by shifting the focus from the people to the ephemeral entity that is a corporation.  With this newly created compound noun, they sought to replace the message, “2,000 people are losing their jobs” with the more positive message, “The company is getting smaller (and stronger).”

Of course, most people saw through the ruse, so in time another new phrase entered the lexicon of terms to describe massive firings: right-sizing.  People quickly saw through that one, too.

(A quick note: companies sometimes do have to terminate the employment of many people when changed market conditions or foolish moves by management threaten the continued operation of the business.  What I’m talking about here is the language they use, and not the actions they take.)

Examples of these euphemisms are everywhere: “pre-owned” to describe a used vehicle; “police action” to describe a war; “special methods of questioning” and “refined interrogation techniques” to describe torture.    

Sometimes, the replacement term is a piece of jargon that sounds weird until it is repeated endless times, such as the use of the word “product” to describe something intangible like insurance, software or a professional service.

So far, most of the examples I’ve given are simple euphemisms: synonyms that pretty up the situation or concept.  Sometimes, though, the new term is meant to manipulate or completely distort, usually for an ulterior motive.  My favorite example of all time is the Reagan Administration’s attempt to consider as a vegetable that goopy combination of tomato paste and corn syrup we know as ketchup.  Reagan’s folks wanted to define ketchup as a vegetable and not what it is, a condiment, so that they could cut the budget for the school lunch program and still say that the children were getting a balanced, healthy meal, ignoring the low nutritional value of ketchup compared to fresh or canned tomatoes, green beans, carrots, kale or other real vegetables (not to mention that to constitute one serving of vegetable, someone would have to choke down a half-cup of ketchup).

Other times, the new label is an out-and-out lie, as when earlier this year Tea Party elder mis-statesman and former Congressman Dick Armey said that the founders of Jamestown, all capitalists to their core, were socialists.  Armey turned these early American entrepreneurs into socialists rather than admit that a capitalist venture could ever fail and to hammer home his false message that any and every economic failure must stem from socialistic actions.  

As a writer and a student of language and society, I find these new words and phrases to be quite fascinating, especially when they spread lies or manipulate the public.  That’s why I decided to bestow an award each year on the weirdest, funniest and/or most manipulative new or newly reported label, word or phrase used by an organization or individual to distort or recreate reality.

It’s called the Ketchup Award, after the Reagan Administration’s favorite vegetable, and I’m asking my readers to send me nominations by December 31.  I’ve mentioned the awards twice on OpEdge, so consider this blog entry the final call for submissions.

If you would like to nominate a new or newly reported distortion for the first annual Ketchup Awards, just post it in a comment on one of my blog entries, send your nominations to the OpEdge FaceBook page or email ketchupawards@gmail.com.  Please include the phrase and the person or organization who said it in your nomination.  No need to include any links, but keep in mind that my staff and I will have to verify the word or phrase, who said it and that it was actually said in 2010, and a link will make it much easier for us to do so.

In a special blog entry on or around January 15, 2011, I will list at least 10 finalists and make three awards:  3rd Place gets One Dollop; 2nd Place Two Dollops; and the grand prize winner will get The Full Squeeze. 

There will be no prize for the submitter of the winning entries, except for the recognition you will receive on OpEdge and the warm feeling you’ll get inside knowing that you have helped to unmask a charlatan.

Thanks in advance for your nominations.

Virginia decides to keep a 4th-grade history book that contains a big lie about the Civil War.

Posted on by Marc Jampole

I’m guessing that by this point, a lot of OpEdge readers have seen the news that a new history book that the Virginia Department of Education has approved for use in 4th grade passes off the bold-faced lie that thousands of African-Americans fought for the Confederacy during the American Civil War.  As the Washington Post pointed out, “Scholars are nearly unanimous in calling these accounts of black Confederate soldiers a misrepresentation of history.”  

The absurd notion that slaves who were worked to death, beaten, raped and often saw their families torn apart would fight for their oppressors appears in “Our Virginia: Past and Present,” which was distributed to Virginia’s public elementary schools for the first time last month. The author, Joy Masoff, who is not a trained historian, said she found the information about black Confederate soldiers through Internet research, all of which led to the same source, the Sons of Confederate Veterans.

And what is the reaction of Virginia education officials?  According to the Washington Post, the Virginia Department of Education says it intends to contact school districts across the state to caution them against teaching the passage which proposes this lie.

Let’s set aside the fact that Virginia education officials never should have used a text book not written by a professional historian, and instead look at their reaction to discovering that Virginia was duped by apologists for the “Old South.” All Virginia state education officials are going to do is issue a warning to ignore the false material in the book.  I have two concerns:

  • What about the benighted or racist teacher who decides to teach the paragraph regardless of the advice from the Board of Education, or the teacher who never gets the memo?
  • What about the students who read more than what is assigned, the ones who devour the entire book because they love history? For example, when I heard about this fiasco, the first thing I thought about was my son, now finishing his undergraduate degree in structural engineering, who read every word of his 4th-grade history book within weeks of getting it because he loved history so much.

I know it costs a lot of money to toss out one history book and buy another and I know money is tight for public education everywhere in the country.  But Virginia made a mistake selecting a book written by a non-professional historian and the mistake could lead to impressionable young minds getting a distorted view about an important, if tragic, aspect of our nation’s history.

Let’s put it in terms of a hypothetical question to which I believe we all know the answer:  Is the state of Virginia and/or any of its school districts going to spend any money over the next five years to improve football facilities at any public school or public university?

To my way of thinking, any money earmarked for improving football programs would be better spent ensuring that 4th-graders have professionally written, accurate history books which do not spread lies, and especially lies about the shameful period of history when the United States of America allowed slavery and about the heroic fight by the Army of the United States against immoral slave owners who had enough political control of 13 states to convince them to try to secede from the union.

Another example of a mainstream media outlet lying in the headline and first paragraph of a news report.

Posted on by Marc Jampole

Once again, a news report tells a lie in the headline and first paragraph before giving the true story in the article.  First let’s analyze the article in question, after which we’ll take a look at why such an approach is so perniciously manipulative.

Last Friday, Associated Press released an AP-GfK study on the attitude of likely voters towards the new federal healthcare law that Congress passed earlier this year.

The results of the study divided respondents into four groups:

  • Those who think the law should be strengthened – 36%
  • Those who want to leave the new law as is – 15%
  • Those who want modifications to narrow its scope – 10%
  • Those who want the law repealed – 37%

 When we do the math, we find that 61% do not want the law repealed against 37% who do (the other 2% probably did not respond).   In an election, 61% is considered to be a mandate.

But AP’s headline and first paragraph reported the story in a way that distorted these numbers:

Headline: “AP-GfK Poll: Americans split on health care repeal”

First paragraph: “First it was President Barack Obama’s health care overhaul that divided the nation. Now it’s the Republican cry for repeal.”

Huh!?  Since when does a 61-37% landslide majority translate into a divided nation? 

While the survey also shows that 52% still oppose the legislation, the headline and first paragraph do not talk about opposition to the law.  They talk about repeal, and it’s clear that a vast majority of likely voters do not want to repeal the new law.  (Keep in mind, too, that of the 52% who say they oppose the law, many and perhaps a majority oppose it because they want it to be stronger.)

As I’ve discussed before in OpEdge, most people skim the news, only reading the headline and first paragraph of most articles.  That’s why reporters are trained to structured news stories as an “inverted pyramid,” which means that you put the most important information in the first paragraph and bury less important information lower in the story.

In other words, most people who read this article will come away thinking that the country is divided about repeal, when in fact only a minority of voters want to repeal the law.  By pretending the country is divided on one of the Democrats crowning achievements of the past Congressional session, the Associated Press story is lying to the country in a way that helps the Republicans in the upcoming elections.  

And a lot of people will see the story, since AP stories usually get carried in hundreds of newspapers across the country and appear on hundreds of websites.  Moreover, this particular piece of propaganda was the lead story on the Yahoo! homepage for much of the morning of October 25.

And thus another right-wing lie will gain credence among the American people, with the help of the mainstream news media.

We should be asking more of business owners and executives than merely creating wealth for themselves.

Posted on by Marc Jampole

I’ve been thinking lately about the idea of business ethics, and specifically about the actions that ethical business owners should and should not take in the course of running their businesses.  I’m not talking about what’s legal, but instead about what’s right, which is something altogether different. For example, we know that it was mostly legal for banks and mortgage brokers to write all those subprime loans, but it turns out that it wasn’t right because it ended up hurting our economy and our society.  In the same way, businesses make all kinds of “business” decisions that are legal, but which may not be helping society.

All the time we read public businesses extolling the fact that their job is to maximize value for their shareholders.  But don’t they have a responsibility to the communities that buy their products and services, build their roads, sewers and infrastructure, and protect their assets and employees? 

Many corporations and businesses talk about their social responsibility, and what they usually mean is contributing to nonprofit organizations, serving on boards and exhorting their employees to do the same.  All good, but what I’m talking about is not what a business does with its excess profits and the executives’ and other employeess time, but how you run the business.

Those who have been following my blog for even a few weeks know that I take a fairly left-leaning stance on most political and social issues, and that I believe that as a society we need to address the related environmental issues of global warming, pollution and depletion of our natural resources.  So it won’t surprise you to see that a concern for social equity and environmental protection drives the following principles, which I am recommending to all businesses, large and small.

So here is the OpEdge “Pledge to America” that I believe owners of private companies and leaders of public companies should take:

  1. Subsidize mass transit for employees, but do not pay for parking for any employee who does not absolutely require an automobile to do the job. 
  2. Recycle and insist that the buildings in which you have operations or offices be “green,” which means making the facilities more energy efficient, recycling building waste and using recycled and recyclable building materials.  
  3. Pay all of the premiums for the most benefits-rich healthcare plan available for your employees.
  4. Make sure that it is clearly understood that the company will not tolerate any discrimination against employees, prospective employees, vendors or customers because of a person’s race, age, sex, sexual orientation, religion, disability, illness, obesity or lifestyle. By the way, besides being the right thing to do, it’s also the law of the land.
  5. Make sure that all employees, regardless of location across the globe, are paid the same rates for the same work and enjoy the same safety protections and that all facilities hew to the highest environmental standards, even if located in a country with relatively low standards.
  6. Do not mandate overtime as a way of life.  Getting rid of overtime not only helps the employee, but it helps the business as well.  People who work too much get tired and start making mistakes.  Everyone needs to get away from the office or factory floor to refresh and pursue their own interests. 
  7. Do not pay the owner or executives a total compensation package more than 20 times what the average full-time employee makes.  That seems like a lot (and by the way, my share of the take is smaller than 20 times the average of my employees), yet the ratio is much higher than that in the United States.  In fact in the United States, the average CEO makes about 350 times what her or his employee makes; it was about 42 times as great as the average worker in 1960.

I am guessing that many of my readers, including most of the business owners in the audience, are going to get angry at me for making these recommendations, especially the last one.  On the surface, it seems to be patently un-American to limit one’s pay, and almost all of these recommendations take money out of the pockets of owners and operators.   After all, isn’t it the owner who invests in the business, takes the risk, knows the most, has created the product or service and has to take responsibility for what the organization does?  Doesn’t the owner therefore deserve all she or he can get?

But how much is the business owner’s position based on nothing more than luck.  I’ve gone over this line of thinking before.  Business owners work hard, but so do most other people.  The business owner, though, has usually had a lot of luck.  Here are some of the luck factors that make some people wealthy and others not so well off:

  • Having a wealthy or prominent family.
  • Being born with a special skill or more intelligence than the average person.  No matter how hard a 5’0’’ male athlete works on his game, he’s not going to be able to keep up with the 7-foot Shaquille O’Neal.  No matter how much a person of average intelligence studies, he or she won’t be able to keep up with someone with a photographic memory.
  • Marrying into a wealthy or prominent family.
  • Growing up in a family that has not been devastated by substance abuse, criminality or mental illness.
  • Being in the right place at the right time.
  • Meeting a mentor or someone connected who will take a special interest.
  • Not having an accident or dying young in a war.

In other words, as the philosopher Daniel Robinson points out in Praise and Blame: Moral Realism and Its Application, very successful people typically deserve much less credit for their success than we give them.  Much of their success is based on factors beyond their control. 

I’m really just asking the question that many ask all the time when hearing that Alex Rodriguez is making $25 million a year to play baseball or that Lady Gaga made tens of millions from a concert tour.  Does he, or she, deserve it?  And my answer is, yes, but only to a certain point.  After that, it’s a matter of the luck of the draw or the social conditions.

Another argument against my recommendations is that it will raise business costs so much that the owner or executive will have to lay off employees or even close down the business.   My answer to that is that in theory there may be some businesses that could be threatened if they implemented all my recommendations, and in those cases, I suggest that you start by limiting your income and then see what else you can do.  Remember: if your average employee is making $50,000 a year, I’m asking you to limit your total compensation to a maximum of $1.0 million a year.  I think that’s quite enough for anyone, even if the spouse isn’t working.

New York Times pities poor Japan, victim of too much investment in jobs and down to third largest economy in the world.

Posted on by Marc Jampole

On the front page of this Sunday’s New York Times, Martin Fackler strings together a series of anecdotes of decline and relative depravation to prove the point of his headline, “Japan Goes From Dynamic to Disheartened.”  The time frame, of course, runs from the real estate bubble that dismantled Japan’s economy in the late ’80s and early ’90s to today—20 years of economic stagnation, or so Fackler and most other say. 

The litany of Japan’s trouble sounds familiar, because we’ve heard it before—a family selling a house for less than they owe the bank; a new frugality among the young (as if it were a bad thing!); the downsizing of new houses.

Fackler has some calming words for his readers, though.  Twenty years of stagnation probably won’t happen to the U.S. after the bursting of our real estate bubble.  Why?, you may ask:

“….largely because of the greater responsiveness of the American political system and Americans’ greater tolerance for capitalism’s creative destruction.  Japanese leaders at first denied the severity of their nation’s problems and then spent heavily on job-creating public works projects that only postponed painful but necessary structural changes, economists say.”

In other words, we won’t make Japan’s mistake of investing in new roads, mass transit systems, bridge repairs, school facilities and other public works.  By the way, from Rome under the Antonines, to Western Europe after the Black Plague, China in the Song Dynasty, New England before the Civil War and the United States in the 1930s-1960s, history tells us again and again that job-creating public works help all economies grow.

Fackler offers no proof, and does not even bother to cite the “economists” who say that public works will extend a recession into decades.  Fackler accepts the free market as the only way to solve problems and government intervention as bad as the basic premises of his article.  In fact, the very fact that he offers no other real contrast between Japan and the United States suggests that creating another opportunity to communicate free market ideology was the raison d’être, or prime motive, for writing the piece.

Let’s refute Fackler in three ways:

  1. He never proves that investment in public works extended the recession, he just says it.  It’s likely that without public investment at whatever level Japan really made it, that the recession would have been much worse.  No matter how the right-wing pundits try to twist the figures, the recovery programs of the United States and Western European countries prevented the recession from turning worse.
  2. When he contrasts Japan with the United States, he conveniently forgets about the last 11 years since our dot-come bubble burst in which incomes and investments have stagnated in the United States.
  3. Is it really true that Japan has stagnated?  Everyone has been saying so for 20 years, but that’s the same “everyone” who says that because gross domestic product is up, we’re out of the recession even as unemployment dances around 10 percent.

We do know that China recently passed Japan to become the world’s second largest economy, but Japan is still way ahead of #4 India. 

Let’s look at other key measures of economic well-being, all from the Economist’s Pocket World in Figures 2011. I think we’ll see that Japan is still doing pretty good on the whole:

  • Most economic purchasing power – 3rd in world
  • Standard of living – 29 (U.S.A. is 20!)
  • Human development, which measures overall well-being – 9 (U.S.A. is 13!)
  • Trader of goods – 4
  • Surplus in balance of payments – 3 (U.S.A. is biggest debtor nation!)

Okay, China is kicking Japan’s butt in the competitive part of economics, but China is also kicking our butt and everyone else’s too.

Let’s look at Japan’s real problem: The fact that it rates first in median age in the world, first in percentage of people over the age of 60 and first in the percentage of people over the age of 80.  That’s a lot of people who aren’t in the market for a new home. 

In other words, Japan is the oldest nation and the one which is aging the fastest. As I discussed in yesterday’s blog entry, economists and policy makers haven’t done much work on the question of how to create a thriving economy when the population is aging and either stagnating or shrinking.  Virtually all of economics assumes that the way to economic nirvana is growth, specifically in population and productivity. 

Perhaps Japan’s economic stagnation is not a problem, just the natural result of an aging society.  Perhaps Japan is as rich as it ever was but no richer, but that the distribution of its wealth among its residents has left pockets of distress, much as it has in the United States.      

Where are all the economists studying economic systems in which the population shrinks?

Posted on by Marc Jampole

Growth is not always good. Sometimes it’s a malignant cancer that will kill an individual.  Sometimes it leads to eradication of resources, which causes extinction of a species, or as we are seeing now, many species.

Yet every economist whose views I can remember reading in the mass media takes population growth as one of the givens of all economic systems.  Without population growth, all economic systems are bound to fail, say the most doctrinaire.  Funny, they always cite ancient Rome (Edward Gibbon and others), yet always neglect Western Europe in the 14th century after the Black Plague took out a third of the population and the price of labor skyrocketed, leading to the time of the greatest average economic well-being in the entire history of the West (See Barbara Tuchman’s A Distant Mirror and Fernand Braudel’s Capitalism and Civilization).

I can understand the right-wing preoccupation with growth.  Yet when liberal economists such as Paul Krugman and Robert Reich talk about the need to stimulate greater spending, they are saying that we have to grow our way out of the recession.  In a warming world of diminishing resources, why aren’t these estimable gentlemen instead giving us a cookbook for adjusting to no growth and, dare I say it, economic shrinkage resulting from a necessary decrease in population?

The latest to suggest we have to breed our way out of economic disaster is Philip Longman in “Think Again: Global Aging” in the latest issue of Foreign Policy.

Longman accurately describes the graying of the planet as Western European nations, the United States, Japan and China all get older.  The article is worth reading for the facts, but his recommendation unfortunately falls back on the old “let’s breed our way to economic security” argument.

His concern is that there won’t be enough young people to pay for all the old people around.  The man shows no imagination!  Since we know the population is both aging and shrinking, why can’t we plan for it by allocating more resources now to pay for future retirement and medical needs?   Can’t we begin to channel more of our young people into careers serving the elderly and fewer into careers serving our very young?  

Isn’t it clear to Longman that if we don’t reduce our population, we threaten the existence of ourselves and most other animal life on the Earth?

Of course, I am confident our numbers will be reduced, in some combination of the following ways:

  • Famine
  • War
  • Epidemic
  • Responsible human action.

I vote for D.  But try as I may, I can’t find a contemporary or recent economist willing to provide a game plan on how to make it happen.  There wasn’t even anything useful on the website of Negative Population Growth.

I am not an economist, so I can’t construct an elaborate and mathematically verifiable theory of the no-growth economy, but I can suggest some specific actions we might take to manage the downward economic size that negative population growth will entail:

  • Job-sharing, which really means cutting the number of hours that are considered full time, which will have the net effect of raising the price of labor; what I’m saying is that people will work 30 hours a week and make what they’re making now working 40.
  • Return to some labor-intensive ways of doing some things such as farming to give more people jobs, which will also pollute the environment less by substituting humans for mechanical power while again raising the value of labor, and in the case of agriculture also lead to healthier food.
  • Create a new set of human and civic needs to be filled by the economy creating more jobs, such as more mass transit, regular infrastructure improvements, more public parks, cleaner streets, more services for the homeless and universal health care.
  • Establish active immigration programs from the poorer countries to the Western nations and Japan, which are losing population, to keep at a steady state or even growing those advanced economies whose people are leading the way in population shrinkage.    
  • Reallocate educational resources towards professions serving the elderly.

What I find interesting about this list of mine is that everything I’m recommending requires either a more equitable distribution of wealth and/or a greater reliance on government services or regulation.   That may explain why right-wing economists want no part of a no-growth world.

I want to close with a plea to my readers to let me know if you know of any economists or books that focus on creating a successful economic system for a shrinking population.