New Yorker reader Melissa Hamilton decided to do something about Cassie’s situation. She writes:

I think this is a great initiative. I’ve tried unsuccessfully to reach Ms. Sheehan at the New Yorker, as I would feel better sending my cheque through an intermediary (and she’d be the obvious choice) rather than just putting it in the mail. But one way or the other I’m in. We should try to coordinate what we’re doing here, so if you contribute, please let me know and I’ll work with Melissa to keep a running total. Who knows, maybe we’ll get a follow up story in the New Yorker, or, even better, enough money that we can help not only Cassie but some of her needy neighbours.
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While people like Cassie live hand to mouth, Bush has signed yet another monster tax gift to corporations. Here’s what Bill Moyers had to say about that, in an article at Common Dreams:

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On a lighter note, here’s a priceless story from blogger Dave Huth (via reader tinmf), who writes:

Follow the link above, then click on the picture and see how he did it. Priceless.

With the Republicans controlling Congress, thanks to the outrageous Texas gerrymandering and other dirty tricks, what we’ll have to do is fight like hell against the following programs:

• Elimination of environmental & labour protections and other deregulation of business, and the sell-off of most remaining public land and resources for commercial purposes
• Indifference and apology for the outsourcing and offshoring of millions of jobs
• Indemnifying corporations against citizen litigation for misconduct
• Pre-emptive attack on Iran, then Syria, and then, when the House of Saud is overthrown, Saudi Arabia
• Elimination and privatization of government social services
• Flat tax, estate tax repeal, and other subsidies for the rich
• Patriot Act II
• Ban on abortion, after replacement of retiring Supreme Court members with religious zealots
• Other acts eroding the separation of church and state
• Substantive withdrawal from the UN

That fight will have to be in arenas where the neocons don’t yet dominate: In the courts, below the Supreme Court level, the international arena, including the fledgling international court (even though Bush has refused to acknowledge its authority over the US), international trade tribunals (which are realizing that ‘free’ trade laws and globalization are stacked in favour of US corporations, and that the US routinely ignores international trade agreements when it suits their purposes to do so), the media (we’ll need to create a whole parallel media network to counteract the mainstream corporatist media), and the court of public opinion in the US and internationally (while Bush doesn’t care what people outside the US think of him, and of America, there is evidence that most Americans do). We will need to paralyze government by filibuster and by every other means at our disposal. We will need to mobilize online and through more traditional networks to protest in the streets and dog Bush at every turn. And we’ll have to stop being polite and coy in our public discourse, and wear our vehement opposition to Bush’s most heinous measures literally on our sleeves — making armbands and political buttons and bumper stickers and other demonstrations of resistance a constantly visible part of the costume and identity of the nation for the next four years, until moderates and even conservatives get alarmed and realize there is something profound going on, and take the neocon threats to everything their country was founded on much more seriously. The entertainment industry, too, will need to stop pussyfooting around and start producing programs that show Americans with their rights being trampled by government, their environment and jobs being destroyed by ruthless and greedy corporate oligopolies, and rampant government and corporate crime, in place of the citizen-on-citizen crime that currently dominates the cop shows. Using everything we have, we will need to isolate, contain and neutralize a second-term Bush regime.

The ten bullets above represent nothing less than a neocon war on the environment, on American workers, women, children and future generations, on citizen rights and freedoms, internationalism, pragmatism and consensus, on secularism, and on government’s role and responsibility as protector of the weak, the poor and the needy. For the last four years it’s been an undeclared war, but if Bush gets back into office it will be gloves off, and we must be ready. Expect that, for the first time since Vietnam, many unarmed Americans will die in the streets at the hands of fired-up and frightened police, and give up their lives for the principles that once made America a great nation.

When I say “we” will have to fight, I mean of course Americans who see the folly of creeping fascism will have to do so. If Bush wins, I’ll be setting up a permanent category of my blog to help Americans who can’t bear to see what another four years of this madness will do to their country, to immigrate to Canada. And if they’ll let me across the border, I’ll see you on the streets in solidarity. What this extremist ideologue does affects not just America, but the whole world. The whole world is watching, again.

(1) The Truth About Frames

As I’ve mentioned before, I spent a good deal of time in 2003 doing debriefs with business colleagues after major presentations (my own and others’) to assess just how much knowledge was imparted, and how accurately: My conclusion was that almost no knowledge is transferred during business presentations, and not much during business meetings, either. That got me reading about frames, the mental mechanisms, lenses and filters through which we internalize what we see, hear and otherwise sense. George Lakoff has argued that different frames account for the inability of liberals and conservatives to communicate effectively with each other (or change each other’s minds), and that to bridge the gap you need to reframe an issue in a way that is understandable to your adversary, and which also allows them to see a different perspective ‘through new eyes’. He puts it this way:

So if we want to persuade people that a zeal for natural solutions and a reverence for nature is an essential part of the solution to the world’s problems, for example, we need to get people out of their anthropocentric (humans-as-separate) frames and create a new, credible ecocentric (humans-as-intrinsic-part-of-all-life) frames. Until we do so, we’ll be seen as romantics, hopeless idealists, neo-survivalists, even anti-humanists. And if liberals want to persuade conservatives of the value of universal health care and universal high-quality education, they shouldn’t be trying to appeal to conservatives’ sense of fairness and egalitarianism (these are liberal constructs) but rather to fundamental moral principles: “Working people shouldn’t be living in poverty” and “Everybody should have health care.” And rather that talking about the minutiae of Kerry’s programs in these areas, they should be hammering the Bush record using ‘grammar’ that conservatives relate to: “We’re weaker in education, and here’s why. We’re weaker in health care, and here’s why…” A similar approach is needed to bridge the gap between management frames and labour frames, between male frames and female frames, between theistic frames and agnostic frames. In fact, every individual has unique frames, that translate, ignore, or misconstrue the vast majority of what he or she hears from others. It’s amazing that such dysfunctional communication doesn’t cause more catastrophic consequences in business than it does, and it explains why repetition, to the point of being annoying, and many redundant conversations, are needed before important views, ideas and perceptions are imparted and understood. It also explains why so many couples keep arguing over the same things, again and again, without resolution. They might as well be speaking to each other in different languages. In many ways, they are.

Reframing issues is a precarious and challenging process. It’s not a job for amateurs. But there is a simple and subversive way to reframe an issue: Tell a story. The story should have a moral, but it is not necessary (and it is sometimes unwise) to state the moral explicitly. The more I study and learn about stories and narratives, the more awesome and powerful I perceive them to be.

My personal action plan to help prevent social, economic, political and ecological collapse of our planet by the end of this century currently includes these three things:

• Completing and publishing my utopian novel, The Only World We Know, to tell a story about a better way to live.
• Forming a think-tank, tapping into the Wisdom of Crowds, to come up with ways to achieve this better way to live, to get there from here.
• Working on two specific initiatives, resulting in the establishment of Model Intentional Communities and a powerful network of Natural Enterprises, that to me, intuitively, have to be part of the road to this better way to live. Specifically, I want to teach people, especially young people, how to set up MICs and Natural Enterprises successfully, and how to network these brave experiments with others.

But I’ve become aware that making the transition to that better way to live is going to require billions of people to ‘buy in’ and be totally committed to a radically different philosophy, politics, economics, and social framework than the one we have been brought up to believe in. And I’m aware that some of the steps that may be needed to get there will be difficult and confront long-standing taboos — in fact I know I have lost some otherwise-sympathetic readers by merely mentioning the possibility of some of these steps, as a last resort.

Clearly I need to reframe these arguments and possibilities in ways that are less controversial, confrontational, and off-putting to people. I’m beginning to believe that my novel is just the first of a whole series of stories I need to craft, if I have any hope of being credible and successful as anything more than an off-the-wall thinker who got a lot of other people thinking about the need for radical personal, social, political, technological, educational, and economic change, but couldn’t persuasively articulate how to get the job done.

Progressives who care about the state of our world are going to have to become expert story-tellers, very quickly. I’m vowing to learn, and then to teach, that art, as a fourth major program to add to the three bulleted above. So look for a lot more about stories and narrative in the future in How to Save the World. Maybe we can learn together.

(2) The Truth About Drug Costs

In this week’s New Yorker, Malcolm Gladwell smashes a lot of the prevailing wisdom about the skyrocketing cost of drugs. Here’s a synopsis, but please read the whole article if you have time, and if you haven’t subscribed to the New Yorker yet, this should convince you.

• Shortly before its patent for the enormously expensive and profitable heartburn medication Prilosec was to expire, pharma giant AstraZeneca concocted a scheme to get patent approval for a virtually identical drug, Nexium, and then spent half a billion dollars in one year very successfully hoodwinking patients and care-givers into prescribing it as an ‘improved’ medication — at $120/month/patient — instead of the patent-expired over-the-counter Prilosec (now $20/month/patient, to compete with generics).
• Marcia Angell, former editor of the New England Journal of Medicine, has a new book out (The Truth About the Drug Companies) that uses the Nexium story, and others, to charge the “troubled and corrupt” drug industry with overcharging, deceptive research, poor quality products, stealing most ideas from government-funded scientists, and bribing doctors with gifts, and of being “primarily a marketing machine to sell drugs of dubious benefit.” Big pharma is extraordinarily profitable, with an ROI unmatched in any other sector of the economy.
• Angell also criticizes big pharma for spending too much producing and publicizing me-too imitations of competitors’ profitable drugs, instead of on needed, but probably less profitable, new drugs.
• Gladwell says Angell oversimplifies the problem by blaming the pharma companies alone. He also blames: (1) doctors who don’t do their homework and prescribe expensive medications instead of inexpensive alternatives with essentially the same efficacy [this practice is illegal in Canada -- doctors must justify any prescription for a specific brand where a lower-cost generic is available, in the absence of which the pharmacist is compelled to fill the prescription with the lowest cost equivalent]; and (2) insurance companies, which could institute policies for coverage similar to Canada’s policy for pharmacists — and only pay for the cheapest equivalent.
• Gladwell says once drugs patent protection period expires, competition among generic providers is so fierce that Americans actually pay less than other countries for them; only drugs still covered by patents are cheaper in Canada and other places.
• Gladwell also argues that what has contributed most to the double-digit annual increase in aggregate drug costs is not price, but the skyrocketing number of people being prescribed more drugs, higher doses and more ‘cocktails’ of combinations of drugs. By contrast, the double-digit increase in hospitalization costs is due entirely to the increase in the price per patient per day, not to more patients or longer stays. In fact, there are studies suggesting that doctors actually under-prescribe drugs compared to what is recommended in National Institute of Health guidelines, so the suggestion that doctors are pill-pushers is also somewhat dubious.
• Another factor to blame that Gladwell hints at, but does not specifically suggest (but I bet he’s researching it as we speak) is that Americans are actually getting sicker, due to contaminants and poisons in food, water, and air.
• A new class of health-care workers called Pharmacy Benefit Managers are now mitigating drug costs by drawing up and circulating lists of equivalent, cheaper drugs and treatments, to employers and insurers. That’s more aggressive than just determining chemical equivalence of drugs: For example, with Vioxx now off the market as unsafe, PBMs are not just suggesting Celebrex as an alternative, but much cheaper and proven non-steroid anti-inflammatories like generic ibuprofen.
• Gladwell concludes: “It’s up to us; it requires physicians, insurers, patients, and government officials to reach some kind of consensus about what we want from our medical system, and how much we are willing to pay for it. AstraZeneca was able to do some chemical sleight of hand, spend half a billion on advertising, and get away with the ‘reinvention’ of its heartburn drug only because that consensus hasn’t yet been reached.

My only beef with the article is that Gladwell seems to be quick to blame patients for being all too willing to rush into their doctor’s office after they hear ads and ask if “X is right for them”. That’s asking a lot from patients who are dismally ignorant of medicine, prone to overdependence on their doctors, and gullible when they’re worried about the health of loved ones.

(3) An Obscene Story

Also in this week’s (Oct. 25th) New Yorker is writer Susan Sheehan’s heart-rending account of the life of Cassie Stromer, a 76-year-old widow living in Virginia who personifies perfectly America’s poor in this age of disappearing middle class. I can’t summarize this story, you need to read it in its entirety. And, alas, it’s not available online. It’s only 7 pages, so please seek it out in your store or library. This is a story everyone needs to hear. Her annual pension income is $9600, which puts her $300 over the poverty level and disqualifies her from full Medicaid benefits. Much of her income goes to pay for medical expenses, and the way she budgets her money so carefully and lives a meagre but dignified life is nothing short of heroic.

So why is this story obscene? Here’s the last few sentences, which speak for themselves:

Meanwhile, the f***ing politicians, bargaining in backrooms for favours for their corporate donors and friends while drinking expensive champagne and fifty-dollar entrees paid for by taxpayers, continue to spout the rhetoric that “most” Americans have good health care, and that it would be “too expensive” to provide universal health care to all, while insinuating that abuse of the system is widespread and that those that don’t have coverage are somehow responsible for their own misfortune. Cassie’s story belies these cynical and horrendous claims. And the fact that so many brave and proud Americans, tens of millions of undeserving poor with stories like Cassie’s, are mere pawns in this rich-man’s debate, is what’s obscene.

Regular readers know I try to fill the void, with short analyses that are intelligible to the average citizen. Here I go again.

The chart above shows something called the Current Account deficit. It shows that, until the 1980s, the Current Account, which reflects the difference between what people and corporations in aggregate save and what they spend, was flat. The Current Account went seriously into deficit in the early 1980s, but was reined in again, until, during the Clinton Administration it began to spiral out of control. Under Bush’s watch, and more importantly under Greenspan’s watch, this deterioration has accelerated over the last four years, so that now it’s running at a $700 billion annnual rate, and forecast to hit one trillion dollars within the next few years, maybe even the next year.

The chart for the US Trade Deficit is virtually identical to the chart above. On an annualized basis, this deficit — the difference between imports of $1.8 trillion and exports of $1.1 trillion, is also $700 billion, heading quickly towards the one trillion mark. Petroleum products alone account for $200 billion, close to 30%, of this deficit, and that proportion is, of course, climbing at an even faster rate. The cost of oil has risen 50% almost overnight, and further increases are forecast.

What do these numbers mean? Well, the Gross Domestic Product (GDP) — the total value of economic activity — of the US is about $10 trillion per year, which is about 1/4 of the total global GDP. So the current account deficit means that Americans are spending about 10% more than they are earning each year, and importing 20% of what they consume while exporting only 10% of what they produce, and financing the difference. Meanwhile, the US National Debt (the total amount the US government owes), after levelling off during Clinton’s second term, is accelerating at an unprecedented rate, to its current level of $7.5 trillion (as much as the entire country produces in 9 months), and its Net International Investment Position (NIIP — the net indebtedness of the US to the rest of the world, is nearing $3 trillion, 30% of GDP. The US National Debt is capped, and three times Bush has had to go to Congress to get authorization to increase this cap. The situation will inevitably get worse no matter who is elected next month, so the cap, put on to safeguard against reckless spending, will have to be raised many times more in the next few years. And with Bush determined to make the tax cuts permanent, or introduce a ‘flat tax’, the National Debt is likely to accelerate further as government revenues fall. This is like your mortgage broker (Congress, echoed by the IMF) telling you your mortgage payments exceed the maximum safe proportion of your income, then you (the US Government) replying that you’ve decided to take a lower-income job, so you’ll have less money to make the payments, and then the mortgage broker (Congress) replying “OK, well, I guess we’ll allow you to increase your mortgage anyway”. This is insanely irresponsible behaviour.

But the press remains mute.

In short, the American people, corporations and government are all living well beyond their means, and borrowing at an accelerated rate to make up the shortfall. And if interest rates go up, and some economists think they could soon hit double-digits, we’re all screwed.

What are the implications of these deficits, especially considering that they are being incurred by an administration that doesn’t know or care about fiscal and economic matters, under the direction of a Fed Chairman with an ideological bent not to intervene?

• It means the US dollar will continue to weaken, and may even collapse.
• Wachovia’s economist says “it’s just a matter of time before foreigners will become less willing to lend to the US”. That means they will have a choice: Stop selling to Americans, or at least insist that payment be made in a stabler currency than the US dollar. “When that point is reached, interest rates will rise as foreign lending slows.” Those rising interest rates, reflecting the perceived growing risk of repayment, will increase the cost of the US National Debt proportionally, which will require the US government to cut spending elsewhere (i.e. defense and social services, and rollback tax cuts), or run the risk of bankruptcy. It’s been said cynically that that has been the neocon plan all along, but the reality is that cutting social services alone won’t do it — military adventures will have to stop, and sharp tax increases will have to be introduced as well. The alternative is to play a game of “chicken” with foreign lenders, which appears to be the Greenspan approach — let’s see how far foreign sellers will let the deficits go, before they’re willing to hurt their own economies by curtailing sales to the US or demanding they be repaid in a stabler currency. Problem is, in this game of chicken there are only losers.
• Back in 2002, the Institute of International Economics warnedthat the Current Account deficit could rise to 7% of GDP by 2006 (it has already reached that level this year), and that only a level of 2-2.5% was sustainable — anything above 4% will trigger a continued and sustained fall in the US Dollar until that deficit falls back to sustainable levels. This suggests that despite its 25% declines in the past year, it has additional declines of 25-50% in store in the next couple of years. Now suppose you’re a foreign vendor who’s sold a billion dollars worth of goods to American consumers, secured by US Dollar loans — with the US Dollar in free fall, are you going to continue to sell when your profits are wiped out in foreign exchange losses? The answer of course is no, and when the Arabs or the Asians move to the Euro as the currency of all transactions, the game of “chicken” will be called, and the US Dollar will drop through the floor, making US debt repayment and new borrowing unaffordable (at all levels — government, corporate and consumer), precipitating a crash in US stock markets as the value of $US assets tumbles below the value of Euro debts, and hence a crash in markets worldwide as one fourth of the world’s buying power stops buying. As the IIE put it two years ago: “The United States must attract about $2 billion of net capital inflow every working day to finance the deficits at their current level. Since gross US capital outflows have been running about as large as the current account deficit, our gross capital inflows must average about $4 billion per working dayóand totaled about $1 trillion in 2000. Any decline in the level of these inflows, let alone their reversal via a selloff from the $10 trillion of outstanding dollar holdings of foreigners, would produce increases in the US price level and higher interest rates (and almost certainly a fall in the stock market as well). This triple whammy would severely hurt the US economy.”
• In a more recent analysis, the IIE predicted a Euro soaring past $1.50 USD in value (i.e. a USD worth only 0.66 Euros). What is especially astonishing about this is that the European economies are not doing particularly well. What we are seeing is the world embracing another currency not because its supporting economies are strong, but because they are so worried about the overextension and unsustainability of the US economy and its underlying policies.
• The Chinese currency is currently overheated, with inflation there approaching double-digit levels and threatening to lead to economic collapse. Prevailing view is that if China doesn’t immediately revalue its currency upwards by 20-25% (so much for the benefits of offshoring!), it will suffer a hard correction and severe recession. The consequences of that will be a sharp, inflationary increase in the cost of Chinese goods, and great difficulties for the many, many American companies that are now utterly dependent on cheap Chinese goods for their survival. Thanks, Wal-Mart!
• The 50% jump in oil prices is going to start working it’s way through the economy soon. If you look at the cost of materials and overhead for many businesses: chemical companies, plastics manufacturers, agribusiness, transportation, heating utilities, asphalt companies, medi-tech and pharmaceuticals, clothing companies using man-made fibres, furniture companies, floor coverings, cosmetics, household products, paints and dyes, you’ll find that oil cost is a key determinant of their product cost. If half the cost of their products is tied to the cost of oil, expect retail prices to rise accordingly, adding inflationary pressure to the economy big-time.

What should individuals do in light of the precarious condition of interest rates, stock markets, debt levels and trade imbalances? I caution you that I’m not an investment advisor, but these actions would appear to be prudent — and the mainstream media are simply irresponsible for not telling you so:

• Do your best to pay down debts, especially variable-rate debts, and avoid incurring new ones. I know, that’s easy to say and hard to do, but that’s the best protection against interest rate spikes and bubbles.
• Be leery of investments in the stock market, especially in US stocks, and especially those of companies that have offshored much of their production or service to China. They’re especially vulnerable to the triple whammy: Falling US Dollar, rising interest rates, and slowing of consumer demand. That applies to investments in retirement savings plans as well.
• If you’re exposed, as an investor from another country, to volatility in the exchange rate of the US Dollar against your national currency, consider moving your assets into those denominated in your own currency, or at least hedging your positions so if (when) the US Dollar slides further, you don’t take a bath.
• If you’re running an American public company with cash to invest, this might not be a bad time to consider buying back your shares and going private.
• If you’re a consumer with cash to burn, consider buying products that take oil to produce, because they’re going to go up in price; and don’t invest in the companies that make these products, because when prices start to soar, sales will plummet.

The news gets even worse. For reasons that are historical and purely political, Americans get a tax deduction for interest secured by a mortgage on their homes, but not for interest on unsecured or otherwise-secured borrowings. As a result, a horde of usurous companies have been offering unwitting American consumers, who, like their governments and corporations have been living far beyond their means, ‘consolidation’ loans that convert a bunch of unaffordable, unsecured debts into one unaffordable debt secured by their homes. The result, in tens of thousands of cases, is foreclosure on those homes when consumers, unable to afford principal repayments, let alone interest at rates that run as high as 30%, miss payments. One fourth of new US mortgages are now credit card debt consolidation loans, and victims are losing their homes at a rate of 200,000 per year. But what these hapless citizens are doing pales in comparison to the policies of Bush and Greenspan, who are doing exactly the same thing on a massively grander scale — buying and spending more than they can possibly hope to repay, and hoping the world doesn’t foreclose on them.

No wonder they call economics the ‘dismal science’.