Category: Business, Economics

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Good Places Gone Bad

Condos next door, Puerto Escondido

In my life I’ve been very lucky to spend time and live in some desirable places: venues like Greenwich Village, Martha’s Vineyard, Little Compton Rhode Island, Chesapeake Bay, the coast of Maine. I took vacations to rare places like Tortola, the Leeward Islands and, years ago, Cozumel.

Now we learn that Cozumel, home to great scuba diving and laid-back Mexican charm, has been totally taken over by giant cruise ships. They disgorged some “1.2 million cruise ship passengers aboard 390 ocean liners in the first three months of 2023.” The place is now like St. Thomas and much of the Caribbean, host to hordes of vacationers seeking a charm that has vanished.

New York, the Vineyard—where we owned a small house—and even the fisherman’s backwater of Little Compton have been taken over by the rich and infamous who have transformed what was charming and unique into vacation spots for the masses with condos, hotels, Airbnbs, and freaks on mopeds.

You’re probably aware of how the process works. The word gets out from savvy travelers who tell their friends and cohorts about their wonderful discoveries. As in politics, word of mouth is a powerful change agent. Then come the speculators, sensing big profits, and the developers who build on models of what they know will sell.

The glowing reviews in respected travel publications just fan the flames and bring more vacationers who want a piece of the action. I wrote a blog last year about how some of us in Oaxaca respond to this.

Every new Travel+Leisure piece or New York Times article just brings in more of these vagrant deadbeats. They descend on us like the locusts. So we, or some of us, find a perverse joy in taking their money and making fun of them.

In smaller communities like Puerto Escondido, where I spend a good deal of time, demand can outrun supply, so prices go up and services go down. The infrastructure (water, health services, electric, internet, etc.) cannot keep pace. When my partner built a house here twelve years ago on a quiet street away from downtown there now loom five-story condos that are often in violation of the building codes. Trucks and construction noise abound. Real estate values skyrocket. Some old-timers want to move out.

One likely reason people are constantly searching for the perfect getaway is to escape from American culture. This is part of what drove me to Mexico some fourteen years ago. Today it’s the advent of Trump, the continuing tolerance of gun violence, the collapse of a working polity, the coarseness of American life, climate change—any or all can drive one to search for a better land.

And yet we know the transformation of good places into tourist havens has been going on for many years. It might be that laissez-faire economics also has something to do with this. People are encouraged to do whatever they want in the name of freedom, and desirable communities enforce few regulations. And many such places seem happy to sell out charm and uniqueness for the tourist dollar.

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American Food, Part II

Holiday promotions are part of the food and beverage industry too. Miller Lite knows how much you love to drink beer under the Christmas tree, and their Keg Stand will cost you $50, beer not included. They tell us supplies won’t last long.

The apparatus holds the tree on top with “room for a quarter-barrel keg (which holds the equivalent of about 83 bottled beers) and ice bucket underneath. Finally, a hole in the top of the box allows the tap’s spout to fit through so revelers can pour a beer right next to the tree.” Miller also sells beer-infused ice cream bars. Well, who knew?

The wizards of the food industry are constantly bombarded by the food police and the advocates of organic food. I think the only thing wrong with organic food is the folks who promote it and their high-handed convictions in the cause. They feed on many platitudes and attitudes about food.

I’ve maintained that people with some degree of education generally know what foods to eat and what’s good for them. (Is that true, I wonder?) Still, food science marches on. Researchers claim that fat (not obese) people live longer. So, how much weight is too much, guys? Another elaborate study on fruit flies tells us that human taste buds operate like those in the bugs to make up for diet deficiencies.

You want science like this to control your diet and your life? I mean, what’s wrong with sandwiches? Stuff ‘em with lettuce if you want your greens. Did you know that pizza is the best-liked food in the world? How frightening is that? I live around the corner from a great farmers market so I’m fortunate not to be subject to the onslaught of the packaged, processed, fatty foods that outrage the food police.

We all seem to be captive to our childhood preferences in food. For many years I had a thing for French toast and bacon in the morning. Those associations with breakfast die hard. You know about Proust and the madeleine dipped in tea? Taste, memory and associations together make us into creatures of the past.

So sometimes, as I said here, we simply have to give way to our built-in historic preferences. The alternative is food guilt, and who needs that?

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How to Beat the Inflation

“Buy less” is the most obvious answer. Yet often this isn’t possible. In Mexico, one quart of Haagen-Dazs vanilla at my supermarket now costs $15.00 US, almost what it costs in the USA. That outrageous price certainly won’t keep me from buying it. Only if the price goes to $20 would I perhaps reconsider.

I’ll bet most of you are like this with items you lust after. You cut back on things like socks and underwear, making do with holey old stuff. Beer, for some, is another non-negotiable. What do people do in rural red states, forced to buy gas to commute to their uninspiring jobs? Hard to figure that one, when there ain’t much budget left to cut.

Maybe that’s why the hard right is making such headway. If Biden does manage to get through Congress his billions to help these folks, they will piss it away on gasoline or beer, and then what? You bite the hand that feeds you.

I am just as bad. The pickup cartridge on my lovely vinyl-playing setup is going south after many years of usage. It is of course an essential link in getting the music to my ear, and a new one of equal quality will cost about $500, plus shipping here (maybe another $100). Not buying it renders my whole collection mere wall decoration. Buying a cheaper one is cutting off one’s nose to spite the face. How many quarts of Haagen-Dazs is that worth?

These kinds of quandaries are of little concern to people with real money. Instead they complain about the stock market dropping and worry about what they should do—as if there were any choice but to just hang on. Suzie Orman was interviewed on CNN the other night. Actually she looked pretty good for a 70-year-old dispensing commonplace advice. Her counsel on the stock market? Just do nothing and hang on; the market will come back; it always does (like it did in the 1930s?).

For the rest of us, my uncalled-for advice is like Suzie’s: just hang on. Or you could try one of the four tips from a popular Google site: “ask for a raise.”

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Politics Visits the Dismal Science

A lot of people, myself included, avoid serious dealing with economics. You hear their gurus make pronouncements clouded with jargon, impenetrable concepts, and fixed ideas. They frequently disagree and like to argue. Many disdain the world of politics, though that is a living part of economics.

Now Larry Summers, the king of controversy, has joined with Ezra Klein on his show in a long but surprisingly enlightening discussion about the present inflation, how it developed, and what to do about it. This may be intimidating to some of you, yet very illuminating if you choose to get into it.

The problem both of them confront is the heavy downside of the strong U.S. economy. Both seem to agree that Biden’s American Rescue Plan was needed and welcome. But “it ran the economy hot.” Notwithstanding obvious benefits to the labor market, Summers believes, our virulent inflation resulted. Planners seemingly ignored the long-term consequences of runaway demand.

And the doctor who prescribes you painkillers that make you feel good to which you become addicted is generous and compassionate, but ultimately is very damaging to you. And while the example is a bit melodramatic, the pursuit of excessively expansionary policies that ultimately lead to inflation, which reduces people’s purchasing power, and the need for sharply contractionary policies, which hurt the biggest victims, the most disadvantaged in the society, that’s not doing the people we care most about any favor. It’s, in fact, hurting them.

For Summers this echoes and replays what happened in 1982, when Paul Volcker came in and instituted draconian reforms that finally tamed record inflation, though at the cost of a recession. There was outrage among many of the lefties, but the medicine worked. Now, once again, demand is out of whack, meaning too much money chasing too few goods. Ezra Klein seemingly accepts this but asserts that supply disruptions have played a role too: Ukraine and China and Covid have had their effects.

I think they both agree that the Fed must act soon and strongly. There is really no other instrument to control what seems likely—a long-term inflation of some 6% a year. The politics of all this become pretty obvious. Politico tells us:

Democrats worry about growth-killing [Fed] rate hikes in the middle of a midterm election year. But inflation is even worse for them politically. Recent polls show that price spikes are by far the top concern among voters. An NPR/Ipsos survey showed that 40 percent of Americans are worried about higher prices and 94 percent are aware of rising costs for food, energy, housing and other items.

One aspect of all this struck me. Left-leaning Democrats typically look for immediate relief to help the beleaguered victims (and counter the upcoming threat of the midterms). Bernie Sanders and others have proposed windfall excess profits taxes on Big Oil. Others want to rescind the federal gas tax.

More conservative Democrats like Larry Summers look for longer-term, painful fixes. I’m reminded of the blowback President Biden received for speaking his mind about Putin. He took a lot of undeserved flak for that, much of it from his own administration, which “overreacted and undercut him.” The State Department and the Kremlin both signaled unhappy long-term consequences from his remark.

Not everyone is on the same page regarding Putin, and unfortunately not everyone is on the same page regarding inflation. Summers and Klein did try to bridge that gap in a good, reasoned exchange.

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Things We Find Beyond Our Control

Here are a few: Covid, the climate, Putin, the Congress, guns, cockroaches, Mark Zuckerberg. This man is a disease, worse than Covid. I want to focus on him because Facebook (now renamed “Meta”) seems maybe, at last, to be losing its sway over our mindless populace.

The latest evidence came last Tuesday when,

with a single earnings report and a disastrous conference call, Mark Zuckerberg wiped out $240 billion in value from his company. Meta’s was the largest one-day loss by a U.S. company ever, and the ripple effects were closer to tsunamis throughout Silicon Valley. . . . Meta’s market value of $900 billion at 3:59 p.m., was suddenly worth about $720 billion just 30 minutes later—reflecting a spectacular 22 percent fall in after-hours trading for one of the largest and most powerful companies in the world.

The numbers here are amazing. “If the drop holds, . . . the company’s overall value, known as its market capitalization, is on track to drop by a figure greater than the size of the entire Greek economy, based on data from the World Bank.”

There are many reasons behind Facebook’s rout, the most likely being the company’s reliance on a business model that uses your personal data to fuel its targeted online ad sales. But most people (at least the older ones) don’t use FB because of its business model. They want to see the latest pix of their grandkids or exchange recipes. Who cares if they reveal their personal data?

The government, for one, is beginning to care about big tech dominance. For some months now, “both parties want to regulate Facebook.” There is even talk of international regulation. Investors finally came to realize that the Zuck has likely overreached himself with a concept that promotes virtual reality over reality.

Some of you know that I have two sizeable Facebook sites: one to promote my book on Charles Mingus, the other in my own name. Unless I were to set up an email newsletter or recast my blog on something like Medium, I don’t know how I could easily reach you all. I deeply wish I could ditch Facebook and find other ways to communicate.

Considering the other megamonsters—Google, Apple, and Microsoft—why can’t we finally find ways to curb their immense power? Are we so absorbed in the virtual world that we cannot conceive, much less institute, ways to deal with the challenges of authoritarianism and climate change? The whole move to replace the reality of our natural world with virtual reality seems to me a clear instance of escapism, a dodge to avoid commitment to the only life we have.

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The Nutmeg’s Curse

The reviews of Amitav Ghosh’s new book, The Nutmeg’s Curse, have not always been positive. Some have declared it to be anti-science. Yet others, like Roy Scranton, found that it “elegantly and audaciously reconceives modernity as a centuries-long campaign of omnicide, against the spirits of the earth, the rivers, the trees, and even the humble nutmeg, then makes an impassioned argument for the keen necessity of vitalist thought and non-human narrative.” I’m with Roy, with a few reservations.

The overall best review I found with a contemporary context is here, in The New Yorker.

Ghosh begins with a narrative of how the 17th century Dutch arrived at the Banda Islands in the Pacific to capture, enslave and kill the islanders in order to insure a monopoly on, of all things, the nutmeg, that highly treasured spice. He finds these events a paradigm for how colonialism and the “free” market have come to dominate trade by subjugation. The result is also tied inextricably to climate change and the rebellion of nature it embodies.

The U.S. has led this robust decadence through military and economic dominance. These are Ghosh’s carefully chosen words:

The job of the world’s dominant military establishments is precisely to defend the most important drivers of climate change—the carbon economy and the systems of extraction, production, and consumption that it supports. Nor can these establishments be expected to address the unseen drivers of the planetary crisis, such as inequities of class, race, and geopolitical power: their very mission is to preserve the hierarchies that favor the status quo.

And our New Yorker reviewer Olufemi O. Taiwo finds that

Ghosh sees potential in what it calls a “vitalist” politics, and in an associated ethic of protection that would extend to “rivers, mountains, animals, and the spirits of the land.” Ghosh identifies this ethos, in contrast to the world-as-resource view, with peasants and farmworkers in Asia, Africa, and Latin America—places and people long seen as peripheral to history.

So in one way the book is a history of vitalism, culminating in the Gaia concept: “that living organisms interact with their inorganic surroundings on Earth to form a synergistic and self-regulating, complex system that helps to maintain and perpetuate the conditions for life on the planet.”

In Ghosh’s terms:

The awareness of a Gaia-like earth did not wither away of itself because of literacy; it was systematically exterminated, through orgies of bloodletting that did not spare Europe, although its violence was directed most powerfully at the Indigenous peoples of the Americas. Yet, not only has that awareness survived among the Indigenous people of the Americas; many of them also credit their perceptions of the Earth with having made their own survival possible, in the face of exterminatory violence. Never have these perceptions of the Earth mattered more than at this moment when the mechanistically ordered world of modernity is disintegrating before our very eyes.

As I said earlier, I have a few reservations about this really wonderful book. One is that vitalism can be undercut (and often is) by superstition and turgid magical thinking. Ghosh documents this but not sufficiently so.

Also, it’s hard for an old rationalist like me to accept this total spiritualizing of nature. Yet the alternatives seem to have led the world deeply astray. If you accept Ghosh’s arguments about our awful colonialist appropriation of nature, his approach to vitalism, or something like it, must follow.

The book makes you think of the many varieties of human wretchedness and, maybe, of human possibilities for redemption. More than a critique, this is an indictment of much Western thinking. In its way it is finally a religious statement.

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Choices and Observations: Reengaging with the U.S.

costco interior

As most of you know, it costs a lot to live here, and not just in dollars. To live in the United States these days you constantly adjust your thinking about what you buy or don’t buy. And because the political situation is such an imponderable mess, you just put on your blinders each day.

My kids live in Charlottesville, certainly not (in most ways) a typical U.S. town. Home to a major university and a lot of wealth, there are maybe 8,000 black people (19% of the total population) living at the lower economic end. White people mostly live firmly separate lives from them, and those with bucks enjoy a kind of preppy culture, fed by the university and its traditions.

My kids have two boys, aged 4-1/2 and 1-1/2. They recently bought a big new house and are living the good life, though there are always money concerns. They buy a lot of stuff. Costco is the staple of life for folks like this, and it’s one of the great success stories of Charlottesville. The store size and the immense quantity of stuff available boggles the mind of a Mexican vecino.

Costco’s prices are good though you have to buy in quantity. Everything is big, including the shopping carts. The quality is excellent, the store help quite accommodating. People love the concept—and talk about it. At a dinner party I heard much about the variety of wines, cheeses and gourmet items. What a massive consumer culture informs the U.S.!

Politically, the left-right split normally prevents any kind of political commonality, so people here generally tune out its nasty cultural implications, disregarding them because there are no obvious solutions and because the triggers are hidden and dangerous. For liberals, it’s easy to talk about the latest Republican outrage or laugh at Matt Gaetz, but such conversation can be short-lived. Ventilating just doesn’t get you very far, and one gets fed up with the negativity.

So the genteel side of life in Charlottesville controls a lot of what happens here. And that’s not all bad. I know some music faculty here, but it’s hard to imagine far-out jazz finding an audience. Still, a jazz scene somehow flourishes, often minus black people. All the extremist splits in American society are here, most of them covered over. Cultural survival requires it.

P. S.  Costco wins with the millennials and everyone else.

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The Coronavirus Blues

Ten Reasons Why a ‘Greater Depression’ for the 2020s Is Inevitable

Why Our Economy May Be Headed for a Decade of Depression

 Welcome to the End of the ‘Human Climate Niche’

I want to call it the coronavirus blues, that empty, groping housebound depression that keeps you from engaging with all that free time. It’s a coma of aimlessness—not really to be compared to clinical depression, though maybe a second cousin. Wearing a mask intensifies the detachment. Even with walks outside one feels alienated from life; taking off the mask doesn’t help much .

Social isolation causes it, and one way or another it seems to infect everybody. Camus called it a “feeling of exile, that sensation of a void within which never left us, that irrational longing to hark back to the past or else to speed up the march of time, and those keen shafts of memory that stung like fire.”

These thoughts are reinforced from reading recent remarks by Nouriel Roubini, the infamous Dr. Doom who was one of a very few who predicted the housing debacle and near-global collapse of the financial system in 2006. Now he predicts something even worse to come, what he calls the Greater Depression, which will make your coronavirus blues look like small change. (How the word depression got to be applied to economic collapse is another story.)

Roubini considers ten factors or trends that will be exacerbated to produce a severe global depression, a series of events that make another crisis inevitable. A summary of the ten: fiscal deficits and private-sector debt; the healthcare crisis and the aging; the coming deflation; currency debasement; digital disruptions like automation; deglobalization and protectionism; populism; the standoff of the U.S. and China; cyberwars accelerating to cold wars; and the environmental disruptions.

Finally in the list he considers man-made climate change.

The Paris Accord said 1.5 degrees. Then they say two. Now, every scientist says, “Look, this is a voluntary agreement, we’ll be lucky if we get three—and more likely, it will be four—degree Celsius increases by the end of the century.” How are we going to live in a world where temperatures are four degrees higher? And we’re not doing anything about it. The Paris Accord is just a joke. And it’s not just the U.S. and Trump. China’s not doing anything. The Europeans aren’t doing anything. It’s only talk.

And then there’s the pandemics. These are also man-made disasters. You’re destroying the ecosystems of animals. You are putting them into cages—the bats and pangolins and all the other wildlife—and they interact and create viruses and then spread to humans. First, we had HIV. Then we had SARS. Then MERS, then swine flu, then Zika, then Ebola, now this one. And there’s a connection between global climate change and pandemics. Suppose the permafrost in Siberia melts. There are probably viruses that have been in there since the Stone Age. We don’t know what kind of nasty stuff is going to get out. We don’t even know what’s coming.

Roubini is one of those economic savants who puts it all together in one totally depressing yet horribly believable package. For some reason, skeptics like this make entire sense to me. His grim analysis, oddly, can offer a program to treat your coronavirus despair, unlike other doom-sayers such as David Wallace-Wells. One takes a kind of weird comfort in thinking that somehow these cheerless predictions can turn into a recipe for reform and, one hopes, reconstruction.

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Hard Truths about Climate Change

Climate math: What a 1.5-degree pathway would take

How McKinsey Destroyed the Middle Class

Op-Ed: The McKinsey I hope the world gets to know

Do we really have any chance to come to grips with climate change? Like many of us, I go back and forth on that one. Some recommend throwing out the whole capitalist system. If that seems a bit unlikely, you’d need to know how to redirect the system and what it would really take to decarbonize global business.

A pretty convincing roadmap for that is provided by McKinsey, the firm some love to hate. The critics hate its high-pressure culture, its stress on process, its success. But the business of America is still business, and McKinsey’s leaders have recently tried to transform their firm’s role to reflect the totally changing world we’re living in. I almost went to work for McKinsey in 2006, which would have been to the delight of my capitalistic forebears, but that didn’t happen and I’m grateful.

Anyhow, McKinsey recently issued a report on Climate Math that challenges business to meet the demands for a 1.5-C degree warming limit. This is very much worth your reading so you can understand in some coherent detail the challenges in achieving that goal.

 . . . With further warming unavoidable over the next decade, the risk of physical hazards and nonlinear, socioeconomic jolts is rising. Mitigating climate change through decarbonization represents the other half of the challenge. Scientists estimate that limiting warming to 1.5 degrees Celsius would reduce the odds of initiating the most dangerous and irreversible effects of climate change.

The report offers five necessary and difficult steps to get to that goal. “The good news,” they say, “is that a 1.5-degree pathway is technically achievable. The bad news is that the math is daunting.”

None of what follows is a forecast. Getting to 1.5 degrees would require significant economic incentives for companies to invest rapidly and at scale in decarbonization efforts. It also would require individuals to make changes in areas as fundamental as the food they eat and their modes of transport. A markedly different regulatory environment would likely be necessary to support the required capital formation.

The report traces five needed interdependent “shifts” in areas that we all know, with varying means and prospects of achieving reform:

    • reforming food and forestry
    • electrifying our lives
    • adapting industrial operations
    • decarbonizing power and fuel
    • ramping up carbon capture and carbon sequestration activity.

Each of these areas plays out in three scenarios the report envisions, not as predictions but as “snapshots” to get where we have to go.

All the scenarios, we found, would imply the need for immediate, all-hands-on-deck efforts to dramatically reduce GHG [greenhouse gas] emissions. The first scenario frames deep, sweeping emission reductions across all sectors; the second assumes oil and other fossil fuels remain predominant in transport for longer, with aggressive reforestation absorbing the surplus emissions; and the third scenario assumes that coal and gas continue to generate power for longer, with even more vigorous reforestation making up the deficit . . . .

Relying so much on reforestation seems to me dubious at best, despite the report’s qualifications. The final pages state in bold type, “It is impossible to chart a 1.5-degree pathway that does not remove carbon dioxide to offset ongoing emissions. The math simply does not work.”

The challenges here are immense and the report does not shy away from them. But finally we are getting serious analysis of how feasible (or unlikely) the 1.5-degree goal is.

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Turning Off Fossil Fuel Funding

Why the Climate Movement’s Next Big Target Is Wall Street

Want to Do Something About Climate Change? Follow the Money

BlackRock C.E.O. Larry Fink: Climate Crisis Will Reshape Finance

The financing spigot has provided way over half a trillion dollars during the last three years to America’s fossil fuel producers. That’s from just four Wall Street banks—JPMorgan Chase, Citibank, Wells Fargo and Bank of America. This money invariably goes for the worst kinds of anti-climate projects, like oil pipelines.

Only a very few of the largest companies, like Exxon Mobil, can self-finance their projects. The others are wired to the biggest banks and investment firms, and the climate movement is beginning to take note of the problem.

Though many banking institutions have branded themselves as green, the world’s top 33 largest banks collectively provided $1.9 trillion in financing for coal, oil, and gas companies since countries put forth the Paris Climate Agreement in 2015.

Bill McKibben has organized StopTheMoneyPipeline.Com to “demand that banks, asset managers and insurance companies stop funding, insuring and investing in climate destruction.” Just getting started, the group has targeted Chase, BlackRock Asset Managers (with its nearly $7 trillion in investments) and Liberty Mutual Insurance—all of whom could stop fossil financing tomorrow without any real damage to their business.

McKibben writes that “These titans may be too big to pressure. Yet if we could get just one offending bank to move toward divesting from fossil fuels, the ripple effects would be both swift and global.” And even now, BlackRock’s website leads off with the statement that “Sustainability, and climate change in particular, are transforming investments.” They post a letter from CEO Larry Fink about “how climate risk is an investment risk” and how sustainable strategies are the future. Maybe Fink and McKibben can now have lunch.

Several writers predict a sort of domino effect if even one of these “banks” (what an outmoded term for these guys!) gets serious about this kind of funding strategy. Fink wrote that he believes “we are on the edge of a fundamental reshaping of finance.” He would “introduce new funds that shun fossil fuel-oriented stocks, move more aggressively to vote against management teams that are not making progress on sustainability.”

We would note that sustainability is always a tricky and ambiguous word, but let’s give Larry credit for evidently trying finally to monitor the fossil funding spigot.  According to one of Bloomberg’s opinion writers, his letter marks the end of the road for coal.