Jay Kimball

When Does the Wealth of a Nation Hurt its Wellbeing?

Posted on 16 November 2010 | by Jay Kimball | 44 Comments

With Bush-era tax cuts about to expire, a lot of attention is being focused on extending tax cuts for the rich – suggesting it will help the economy grow. Frank Rich, in his weekly op-ed piece at the New York Times, deconstructs that idea and examines the issue through the lens of income inequality.

The top 1 percent of American earners now have tax rates half what they were in the 1970s. And they took in 23.5 percent of the nation’s pre-tax income in 2007 — up from less than 9 percent in 1976. During the boom years of 2002 to 2007, that top 1 percent’s pre-tax income increased an extraordinary 10 percent every year. In that same period, the average inflation-adjusted hourly wage went down more than 7 percent and the poverty rate rose.

Top 1% Tax Rate and pre-tax Income Trends — (source: IRS micro data, Piketty and Saez)

The rich have been getting richer as their tax rate has steadily eased. And they are taking the added wealth and using it to influence public policy, to the detriment of the middle class.

“How can hedge-fund managers who are pulling down billions sometimes pay a lower tax rate than do their secretaries?” ask the political scientists Jacob S. Hacker (of Yale) and Paul Pierson (University of California, Berkeley) in their deservedly lauded new book, Winner-Take-All Politics

…Inequality is instead the result of specific policies, including tax policies, championed by Washington Democrats and Republicans alike as they conducted a bidding war for high-rolling donors in election after election.

And as Frank Rich points out, the American Dream is not well. Rather than middle class wage earners moving up the ladder, there are less and less people becoming wealthy, and more and more of the wealthy simply becoming wealthier.

Nor are the superrich helping to further the traditional American business culture that inspires and encourages those with big ideas and drive to believe they can climb to the top. Robert Frank, the writer who chronicled the superrich in the book Richistan, recently analyzed the new Forbes list of the 400 richest Americans for The Wall Street Journal and found a “hardening of the plutocracy” and scant mobility. Only 16 of the 400 were newcomers — as opposed to an average of 40 to 50 in recent years — and they tended to be in industries like coal, natural gas, chemicals and casinos rather than forward-looking businesses involving the Green Economy, tech or biotechnology. This is “not exactly the formula for America’s vaunted entrepreneurial wealth machine,” Frank wrote.

Those in the higher reaches aren’t investing in creating new jobs even now, when the full Bush tax cuts remain in effect, so why would extending them change that equation? American companies seem intent on sitting on trillions in cash until the economy reboots. Meanwhile, the nonpartisan Congressional Budget Office ranks the extension of any Bush tax cuts, let alone those to the wealthiest Americans, as the least effective of 11 possible policy options for increasing employment.

The middle class is experiencing the twin stress of falling income and increasing expenses. The most significant household expense is healthcare.

Healthcare, housing, food household expense as a share of GDP — (source: Congressional Budget Office)

Healthcare costs represent a stunning 17% of GDP. Politicians that cut taxes without a plan for how to cover the costs of Medicare are dooming the middle class to a future of just working to pay for out of control medical costs.

With the Income Inequality Gap growing, perhaps we can understand why, during the 2010 midterm election, only 40 percent of voters approved of an extension of all Bush tax cuts.

Measuring Income Inequality: The Gini Index

No society can sustain itself without a healthy middle class. No healthy society ignores it’s poor. As income inequality increases, social stability decreases.

Economists, the US Department of Labor, and analysts at the CIA, track Income Inequality using a metric known as the Gini Index (also known as the Gini Coefficient).

It is one of the essential metrics in the Political Instability Index, which is used to assess the level of threat posed to governments by social unrest. Zimbabwe, Chad and Congo rank most unstable, with Canada, Denmark, and Norway ranking most stable. Notably, the US, once the standard-setter of a stable democracy and middle class, has quickly fallen to an underwhelming rank 110 out of 165 countries.

The Gini Index is proportional to the Income Inequality of a nation. A Gini Index value of 0 indicates equal income for all earners. A Gini Index of 100 means that one person had all the income and nobody else had any.

A lower Gini Index indicates more equitable distribution of wealth in a society, while higher Gini Coefficients mean that wealth is concentrated in the hands of fewer people. Societies with high Gini Index tend to be unstable.

The chart below shows the historic trend of the Gini Index for the US, with tax rate and pre-tax income data for the top 1% of US earners in the background. On the right are various countries, with their associated Gini Index. Developed nations that take care of their own tend to have Gini indexes in the twenties and 30s. The US Gini Index is on track to breach 50 by the end of the decade, putting the US in the dubious country club of third world dictatorships and failing nations.

US Gini Index trend, with top 1% tax rate and pre-tax income — (source: US Department of Labor, CIA World Factbook, IRS)

If you are a business leader, ask yourself, “Do I want to be living and building a business in world like that?” If the answer is NO, think about what public policy you are supporting through your contributions to politicians, associations and the Chamber of Commerce. Are the politicians you are supporting interested in a healthy middle class?

Business paid billions of dollars to politicians in the 2010 election. Paraphrasing W. W. Jacobs in his classic cautionary tale, The Monkey’s Paw, “Be careful what you wish for, you might get it.”

Iris Parker Pavitt

Posted on 26 October 2010 | by Jay Kimball | Leave a Comment

I was reading an article at Time’s Ecocentric blog called European Energy Companies Funding Climate Skeptic Campaigns in the U.S. I am concerned about climate change and the behind the scenes attempts by big oil to create FUD (Fear, Uncertainty and Doubt) around global warming.

So I was reading the article, and when I got to the end, I like to read the comments. And there, at comment #2, MeMeMine69 wrote the following:

Are WE not the new neocons when we condemn our kids to a CO2 death, just to get them to turn the lights off more often? Climate change has done to us what Bush did to the neocon’s reputation.

System Change, not Climate Change.

Environmentalism is strong, successful and progressive. Just remove the CO2 mistake from the equation and let’s all just carry on. Why does it seem like we WANT this crisis to happen? I can’t do this anymore.

I’m liberal. I’m progressive and a New Green Denier.

I’m ahead of the curve because this can’t continue without alienating the rest of the voters who don’t believe this “promise of unstoppable warming” to happen to the planet Earth.

My reply:

Hi MeMeMine69.

Most of the kids I know are not afraid, they are energized, and part of the solution. They give me hope.

Think back to the 70s, when it was kids that helped their parents realize the importance and opportunity of recycling.

One of my heros is Iris Parker Pavitt. Iris served as a teen delegate to the UN Commission on Sustainable Development, and is a coordinator for FEAST (Farm Education And Sustainability for Teens), and is a member of the Farm to Cafeteria Program, to bring healthy organic foods to school food programs.

Here’s a great interview with Iris:

http://www.youtube.com/watch?v=4Wtrknd2rqY&feature=related

I am happy to have her in our community, and I assure you, there are kids like Iris all over the world.

Take heart!

Iris is just one of many kids who are engaged, informed, and active in leaving the world better than we found it.

I love these kids – Let’s give them wings!

Measuring A Country’s Health By Its Height

Posted on 25 October 2010 | by Jay Kimball | Leave a Comment

NPR had a fascinating story this morning on how height equals health. Northern Europeans are now the world’s tallest people, led by the Dutch. The average Dutch man is 6 feet tall, while the average American man maxes out at 5-foot-9. What’s going on, and why does height matter?

Heigh of men in industrialized countries — (source: Department of Economics University of Munich)

John Komlos, economist at the University of Munich, in his study Underperformance in affluence: the remarkable relative decline in American heights in the second half of the 20th-century says. “Height is like holding a mirror to society’s well-being.”

Health insurance is an important factor:

Good health care and good nutrition during pregnancy and early childhood are two reasons why the Dutch have grown so tall, Komlos says. In addition, the Dutch guarantee equal access to critical resources like prenatal care. That’s not the case in the United States, where 17 percent of the population has no health insurance.

Highlights from NPR’s report Measuring A Country’s Health By Its Height

Through most of American history, we’ve been the tallest population on the planet. Americans were two inches taller than the Englishmen they fought in the Revolutionary War, thanks to abundant food and a healthy rural life, far from the disease-ridden cities of Europe.

But we’re no longer at the top. Northern Europeans are now the world’s tallest people, led by the Dutch. The average Dutch man is 6 feet tall, while the average American man maxes out at 5-foot-9.

The height of Americans reached a plateau in the 1960s. As a nation, we have not grown taller but we also have not lost stature. Komlos says groups of people usually don’t lose height unless they’re in the midst of a famine or a war. “It has practically never occurred in peacetime,” he says.

Economists are interested in these biological questions about nations because while height is a reflection of health and nutrition, those factors usually result from economic well-being.

Economic success and height even correlate to some degree on an individual level. Taller people tend to be smarter, and to earn more.

Andreas Schick, a graduate student at Ohio State University in Columbus, is trying to figure out why. He thinks it gets down to the fact that someone who is healthy and well-fed enough to grow tall — or to the individual’s maximum potential genetic height — is also someone who is able to grow a strong, capable brain.

“If you’ve reached your maximum height, that probably means you’ve reached your physical and mental development,” Schick says. “That helps you reach your maximum potential, be that intellectually or socially.”

But the fact that Americans aren’t getting taller means more and more children won’t have the chance to reach their maximum potential, Komlos says.

And that has ramifications for the future. “A population that is not taking care of their children and youth is going to be in difficulties in a generation or two,” he says.

At Howard University Hospital in Washington, D.C., two miles northwest of the White House, Rana says he sees children in difficulty every day. Many of his young patients suffer health problems from obesity — too many empty calories and fat. Others are not getting enough to eat.

“You would be shocked by how many kids go without food in this town,” he says. “What you have to do is go to clinics like ours and ask people: Did you have a meal today?”

For more on healthcare, see:

Better, Cheaper, and Fairer Health Care

Nobel Laureate Joseph Stiglitz on Sustainability and Growth

California’s Prop 23 Morphing into Prop 26

Posted on 25 October 2010 | by Jay Kimball | 5 Comments

In California’s election, voter support for Prop 23 is waning. That’s good news, but the fight is not over. If you didn’t like Prop 23, you’re really not going to like Prop 26. Out of state Big Oil was backing Prop 23, and, seeing that as a lost cause, they are shifting their support to Prop 26.

Prop 26 is another Big Oil backed initiative. Prop 26 would make it more difficult for state and local government to impose mitigation fees on business activities that cause harm to the environment or public health and safety. For example, fees imposed on tobacco companies to fund health-related programs, on industries for toxic waste cleanup and on alcohol retailers for law enforcement. In other words, when companies do us harm, through increased pollution, health risk, toxic waste, and crime, Prop 26 shifts the cost of those problems to the tax payer, and away from those businesses that caused the problem.

It’s all about AB32

Prop 23 was all about gutting California’s AB32 law, which requires the state to cut emissions of carbon dioxide and other greenhouse gases 25 percent by 2020.

So what are oil companies worried about? Why are the pumping tens of millions of dollars into Prop 23 and Prop 26 initiatives?

As the chart below shows, California is on the front line in the transition to alternative fuel vehicles. The US consumes more oil for transportation, than anything else. No state is making the transition to alternative fuels faster than California.

Alternative Fuel Vehicles Growth in California — Alternative fuel vehicles as share of all newly registered vehicles. (Source: RL Pike & Co.)

While AB32 is bad news for out of state Big Oil, it’s good news for California’s cleantech industry and general economic and environmental health of the state. It creates new cleantech jobs and positions California to be a global leader in this emerging industry. And it’s good news for the world, which will benefit from California’s cleantech innovations, much the way it did with decades of hi-tech chip, computer and communications innovations that put Silicon Valley on the map.

From the chart below, we can see that Cleantech jobs in the California Bay Area are on a fast growth path. Silicon Valley is becoming Cleantech Valley.

cleantech job growth in California — (source: US Bureau of Labor Statistics)

As sustainable business thinker Andrew Winston recenlty said:

“One global economy, the clean one, is growing, and the global battle for the new jobs is on. Some countries – such as China, Germany, Spain, Portugal, and many others – are going after these jobs aggressively. The other part of the economy – the dead fuel economy – is not going to be a growth engine (with the important exception of natural gas, which may provide a useful, medium-term bridge to the future).”

Clean economy jobs are growing ten times faster than the statewide average. AB32 is driving that growth as we transition to a clean energy economy.

cleantech jobs — Clean energy puts more people to work, while building the cleantech economy of the future.

AB32 is largely funded by revenue from fees. As AB32 ramps up it will require the implementation and collection of significantly higher fees to fund the implementation and enforcement of the Air Resources Board’s (ARB) scoping plan to reduce greenhouse gas (GHG) emissions to 1990 levels by 2020. If Big Oil succeeds in passing Prop 26, they take the teeth out of AB32 and pass the cost of policing businesses to the tax payers. Voting NO on Prop 23 and Prop 26 keeps big business accountable when they do harm.

Prop 23 Support is Fading

California voters are catching on to the fact that Prop 23 was an initiative promoted and funded by out of state Big Oil companies.
Dan Morain at the Sacramento Bee writes:

Heading into the final two weeks before the Nov. 2 election, the main funders, Texas-based Valero and Tesoro oil companies, seem to have concluded it makes no sense to throw more of their oil-stained millions at the bad idea.
Yes-on-23 strategist Rick Claussen told me last week that there would be no final push unless backers came through with $10 million fast. The week came and went without an infusion.

Why did out of state Big Oil give up on Prop 23? 3p’s article Investors Nervous About Proposition 23 offers us a clue:

Laura Campos, Director of Shareholder Activities at the Nathan Cummings Foundation, said that shareholders are “concerned Tesoro’s support for the highly controversial Proposition 23 could lead to a decrease in shareholder value by damaging the company’s reputation and negatively impacting the business environment in a state where Tesoro has significant operations.”

As oil company manipulation of California politics has gained public exposure, shareholders are concerned that voters will vote with their feet, and not shop at gas stations of the Prop 23 proponents.

And this week, as if to help drive the final nail into the Prop 23 coffin, the White House went public with its opposition to Prop 23.

Prop 26 is a Stealth Prop 23 For Big Oil

While out of state Big Oil may be giving in on Prop 23, they are not giving up on taking the teeth out of AB32. They are shifting the fight to Prop 26, which hasn’t been in the public eye much.

If we want to understand who benefits from Prop 26, we need to follow the money. Prop 26 is funded almost exclusively by oil, tobacco and alcohol companies.

Here are the top five contributing industries pushing Prop 26:

Oil & Gas $3,734,500

Pro-Business $3,377,323

Food & Beverage $2,054,500

Alcohol Producers $1,971,843

Tobacco $1,250,000

The biggest individual contributors include:

California Chamber of Commerce $3,337,323

Chevron Corporation $2,500,000

American Beverage Association $1,950,000

Philip Morris USA Inc. * $1,250,000

Anheuser-Busch Companies, Inc. * $925,000

ConocoPhillips $525,000

Cypress Management Company, Inc. * $500,000

MillerCoors $350,000

Wine Institute * $275,593

Chartwell Partners LLC $250,000

Occidental Petroleum $250,000

Source: California Secretary of State, Campaign Finance Division and Maplight.org

KQED radio recently hosted a debate on Prop 26, between John Dunlap, a proponent of Prop. 26, and Lenny Goldberg, executive director of the California Tax Reform Association and an opponent of Prop. 26. A commenter on that debate summed it up nicely:

What Mr. Dunlap and the industries supporting Prop 26 are really trying to do is overturn a unanimous (7-0) California Supreme Court decision (the Sinclair case mentioned at the beginning of the show) that said fees can be charged to address public health, environmental or other social problems directly associated with the production or use of a product. These legitimate regulatory fees are not “hidden taxes” as the proponents suggest. What voters really have to decide is, was the Supreme Court correct in saying, essentially, the polluter pays for their pollution. The alternative is that the public pays through poorer health or through their tax dollar (either through higher taxes or shifting tax revenues away from other services like education and law enforcement).

As I mentioned above, AB32 fosters job growth as we transition to a cleantech economy. When Big Oil tries to gut AB32, they hurt the California economy. But more than that, by promoting Prop 26, they are thumbing their nose at the citizens of California and shunning their responsibility for their toxic industry. A paper by the California Alliance for Environmental Justice, “Toxic Twins”, provides examples of Tesoro and Valero – two major Big Oil proponents of Prop 23 – and their toxic corporate behavior in California.

For more on out of state big oil, and a comprehensive list of backers of Prop 23, see Oil Change International’s excellent interactive map for info on who is funding Prop 23.

David and Goliath

I leave you with this inspiring video of Joel Francis, a Senior at Cal State LA. Joel challenges the Goliath of Big Oil – multi-billionaire Charles Koch, of Koch Industries – to a debate. Koch is one of the major contributors to Prop 23, along with a variety of other initiatives and politicians working against a transition to a clean energy economy.

In Joel’s challenge, he says:

“Mr. Koch, I get that you and your corporation don’t want to be part of our clean energy future. That’s your free market choice. But that doesn’t mean you get to wreck its development for everyone else.”

Joel Francis Debate Challenge Prop 23 — click link above to see the video

There is an age old attempt going on, of companies indirectly trying to shape the public understanding of key issues.

Let’s make sure we all do our homework.

Time just posted a good article on European Big Oil companies funding climate skeptics, that relates to all this. It’s worth reading.

And with elections across the country in their final days, if you want to see if your representatives are receiving money from big oil, check out http://dirtyenergymoney.org/.

For more on the California’s Prop 23 initiative, see:

Google: Implications of California’s Proposition 23

World Statistics Day Energy Quiz

Posted on 21 October 2010 | by Jay Kimball | Leave a Comment

In celebration of World Statistics Day, the US Energy Information Administration (EIA) has a short informative quiz on Energy. It is full of surprises. Check it out and see how you do.

Energy Quiz

Masdar: The World’s First Zero-Carbon City

Posted on 27 September 2010 | by Jay Kimball | 15 Comments

Keywords: Masdar, zero carbon city, UAE, United Arab Emirates, peak oil, climate change, global warming, electric cars

Masdar, the world’s first zero-carbon city, pokes a sustainable finger in the eye of the oil-addicted west. Masdar, created by the United Arab Emirates (UAE) government, is an ultra-sustainable city growing up in the desert outside of Abu Dhabi.

The irony of this:

The oil-addicted west consumes vast amounts of oil, funding the middle east’s oil-free sustainability initiatives.
As the US contines the love affair with gas guzzling SUVs, Masdar outlaws combustion-engine vehicles, replacing them with a network of electric cars.
As western powers bicker over global warming details, Masdar shades itself from the warming world with rooftop arrays of solar panels.
Partnering with MIT, Masdar’s Institute of Science and Technology offers programs in science and engineering with a focus on sustainability and renewable energy.

The Masdar development (detailed below) is designed by the British architect Norman Foster. In an interview with Time’s Bryan Walsh, you can feel Fosters frustration:

“It shows there is another side of this place that is totally unexpected. I think that as you read about some of this in Western newspapers, you’ll be shocked. Your immediate reaction would be, Why aren’t we doing this? We’re expanding London, and we’re just repeating the old model of sprawl. Why elsewhere is there not one experiment like this? Why not in the U.S., with its total dependence on oil? Why can’t this collective of European wisdom and power create a similar initiative? I have to ask myself, Why is this initiative, which in urban terms is the most progressive, radical thing happening anywhere, happening here?”

The oil-rich UAE isn’t doing this because they can – they are doing it because they must. Masdar is a model city for the hotter, less secure, walled-city future of a post-petroleum climate-changed world.

The UAE, with just 4.5 million people, but billions in oil money, has funded a rapidly expanding infrastructure. As a country matures, their social complexity increases, along with energy consumption. It takes vast energy to build and operate cities. And Dubai, at the heart of the UAE has become an icon of conspicuous consumption. They already consume more natural gas than they can produce, becoming a net importer to feed the need for electricity. Hence Masdar’s emphasis on solar power.

Using GapMinder’s Trendalyzer with energy consumption data from BP’s Statistical Review of World Energy 2010 and income data from the IMF, we can see some powerful trends unfolding in the UAE. (N.B. data presented for 1965 through 2008, 1 year steps, circle area proportional to population size, per capita energy use in tonnes of oil equivalent).

Note UAE’s (the green line) stunning near vertical increase in per capita energy consumption over the past 20 years.

With an eye to their future, as global oil production peaks (middle east oil experts predict 2014), the UAE is laying the foundation for a sustainable future.

Highlights of In Arabian Desert, a Sustainable City Rises

Architecture critic Nicolai Ourousoff reports on Masdar in the New York Times:

masdar city plan — click for larger image

Designed by Foster & Partners, a firm known for feats of technological wizardry, the city, called Masdar, would be a perfect square, nearly a mile on each side, raised on a 23-foot-high base to capture desert breezes. Beneath its labyrinth of pedestrian streets, a fleet of driverless electric cars would navigate silently through dimly lit tunnels.

Norman Foster, the firm’s principal partner, has blended high-tech design and ancient construction practices into an intriguing model for a sustainable community, in a country whose oil money allows it to build almost anything, even as pressure grows to prepare for the day the wells run dry. And he has worked in an alluring social vision, in which local tradition and the drive toward modernization are no longer in conflict — a vision that, at first glance, seems to brim with hope.

But his design also reflects the gated-community mentality that has been spreading like a cancer around the globe for decades. Its utopian purity, and its isolation from the life of the real city next door, are grounded in the belief — accepted by most people today, it seems — that the only way to create a truly harmonious community, green or otherwise, is to cut it off from the world at large.

He began with a meticulous study of old Arab settlements, including the ancient citadel of Aleppo in Syria and the mud-brick apartment towers of Shibam in Yemen, which date from the 16th century. “The point,” he said in an interview in New York, “was to go back and understand the fundamentals,” how these communities had been made livable in a region where the air can feel as hot as 150 degrees.Among the findings his office made was that settlements were often built on high ground, not only for defensive reasons but also to take advantage of the stronger winds. Some also used tall, hollow “wind towers” to funnel air down to street level. And the narrowness of the streets — which were almost always at an angle to the sun’s east-west trajectory, to maximize shade — accelerated airflow through the city.

With the help of environmental consultants, Mr. Foster’s team estimated that by combining such approaches, they could make Masdar feel as much as 70 degrees cooler. In so doing, they could more than halve the amount of electricity needed to run the city. Of the power that is used, 90 percent is expected to be solar, and the rest generated by incinerating waste (which produces far less carbon than piling it up in dumps). The city itself will be treated as a kind of continuing experiment, with researchers and engineers regularly analyzing its performance, fine-tuning as they go along.

masdar solar panels — Credit: Duncan Chard for The New York Times

But Mr. Foster’s most radical move was the way he dealt with one of the most vexing urban design challenges of the past century: what to do with the car. Not only did he close Masdar entirely to combustion-engine vehicles, he buried their replacement — his network of electric cars — underneath the city. Then, to further reinforce the purity of his vision, he located almost all of the heavy-duty service functions — a 54-acre photovoltaic field and incineration and water treatment plants — outside the city.

It’s only as people arrive at their destination that they will become aware of the degree to which everything has been engineered for high-function, low-consumption performance. The station’s elevators have been tucked discreetly out of sight to encourage use of a concrete staircase that corkscrews to the surface. And on reaching the streets — which were pretty breezy the day I visited — the only way to get around is on foot. (This is not only a matter of sustainability; Mr. Foster’s on-site partner, Austin Relton, told me that obesity has become a significant health issue in this part of the Arab world, largely because almost everyone drives to avoid the heat.)

The buildings that have gone up so far come in two contrasting styles. Laboratories devoted to developing new forms of sustainable energy and affiliated with the Massachusetts Institute of Technology are housed in big concrete structures that are clad in pillowlike panels of ethylene-tetrafluoroethylene, a super-strong translucent plastic that has become fashionable in contemporary architecture circles for its sleek look and durability. Inside, big open floor slabs are designed for maximum flexibility.

The residential buildings, which for now will mostly house professors, students and their families, use a more traditional architectural vocabulary.

What Masdar really represents, in fact, is the crystallization of another global phenomenon: the growing division of the world into refined, high-end enclaves and vast formless ghettos where issues like sustainability have little immediate relevance.

For more on Zero Carbon initiatives, see:

Top Business Leaders Deliver Clean Energy Plan

Author: Jay Kimball