Recession forces workers to reassess values

Many want a more balanced life with less stress and more time with loved ones.

“I broke my back for this company, missed my kids growing up, and for what? Nothing!” said a 48-old unemployed man.

The disgruntled former manager was one of 1,100 workers questioned in a Florida State University study about the impact of the recession on their lives and priorities.

Nearly half said the worst financial downturn since the 1930s had increased their appreciation of family, and a similar number admitted it had helped them recognise the importance of people over things.

“The most telling part of this, and the one that offered the greatest level of variability in responses, what they felt most strongly about, was the issue of family,” said Wayne Hochwarter, a professor of business studies at the university who conducted the study.

“That is an important component of life that is so easy to neglect because you have to make a living. And in a lot of families both mom and dad have to make a living.”

Hochwarter described the financial downturn as a “wakeup call” for many people who thought they were doing what was best for their family, but who now question the choices they made.

Nearly 40 percent of workers admitted the job was not as important to them now as it once was, and 23 percent realised they had put it ahead of family and free time.

More than 70 percent of workers said most days at work it felt like the day would never end.

Hochwarter and his team, research associates Tyler Everett and Stuart Tapley, also found the impact of the recession was different on men and women.

While men thought their job was not giving them what they thought it would and left them feeling stressed and like they were going nowhere, women felt their job was taking them further and further away from their family.

“They could feel this distancing effect with other aspects of their life,” Hochwarter said. “The end result may be the same but perhaps the avenues are a bit different.”

He hopes people’s reassessment of their priorities will have a lasting impact and lead to more balanced lives with reasonable working hours and fewer intrusions on free time.

But Hochwarter is doubtful it will last.

“I’m fearful that the advent of technology will make it harder and harder for people to stay away from work.”

Dubai deal just the kickoff in a long game

Dubai World, the holding company harbouring the emirate’s flagship property firm Nakheel, builder of palm-shaped islands, is the playing field for one of the biggest emerging markets debt dramas ever, and an announcement is expected soon.

“We have a long way to go before we have any real clarity on how this restructuring will pan out,” a London-based banker specialising in lending to the Middle East said.

All restructurings are unhappy in their own way and the size, scope and political dimensions of Dubai World’s make it unique. Bankers view political support from Abu Dhabi or the UAE as critical to the restructuring rather than the terms, which will change as negotiations progress.

“The solution is still looking pretty political. Banks will want to see more explicit support governmentally and ideally at the UAE level,” a senior emerging markets banker said.

Dubai World’s ability to generate cashflow is the next most important variable. Bankers believe cashflow generation is limited and see the restructuring as a play on land and real estate with slower recovery potential than RUSAL.

A downturn in commodity prices limited RUSAL’s ability to service and repay debt, which improved as prices rose. A quick exit is not expected for Dubai as property units Nakheel and Limitless have little cashflow and their value is their assets.

Dubai World has been in talks with a panel made up of Standard Chartered, HSBC, Lloyds, Royal Bank of Scotland, Bank of Tokyo-Mitsubishi, Emirates NBD and Abu Dhabi Commercial Bank, which are believed to have two-thirds of total exposure.

RUSAL’s restructuring saw interest payments rescheduled and a “pay as you go” process included where any extra funds were used to service as much debt as possible.

A similar plan is envisaged for Dubai World, which would include provisions to capitalise interest which could be added to the principal through a “Payment in Kind” or PIK arrangement that would turn interest payments off until they could be met. Interest payments would also be rescheduled to match cashflow.

The restructuring could bring all of Dubai World’s debt instruments together into a deal with common terms, creating an instrument that can be referenced and traded, creating its own liquidity that will give creditors a better idea of valuation and where they stand regarding their debt.

“If you have one big massive debt instrument it will build its own liquidity – people will make a price on the paper which will give a level of transparency which will be helpful for those holding the paper that want to get rid of it,” the senior banker said.

The impact on the Gulf’s banking sector could be limited by the use of a repo arrangement that could let local banks borrow from the central bank using the paper as security which would improve regional liquidity, bankers said.

“Do you ask local banks to take a hit and recapitalise them or do you allow them to take a non-performing asset and put it into repo facility or offer a guarantee structure like the Asset Protection Scheme in the UK?” the senior banker said.

Negotiations are likely to be lengthy. RUSAL’s debt restructuring took about seven and a half months from the presentation of proposals and the standstill was extended three or four times.

Banks are likely to want to appoint their own restructuring officer to analyse Dubai World’s proposals. Aidan Birkett was appointed to advise Dubai World by the Dubai government but bankers will want to run the proposals past their own advisers, accountants and auditors which are acting in the interests of shareholders and creditors.

Mixed record
Dissents in the ranks is a threat to the restructuring as bondholders in Nakheel will have a different idea of how the restructuring should unfold to senior lenders and may refuse to play ball.

“Whatever the proposal, creditors will say that it doesn’t work for them and will form their own group to influence the restructuring,” the London-based banker said.

Only one Middle Eastern restructuring has been resolved so far – Kuwait’s Global Investment House reached a deal with creditors in December to reschedule $1.7bn of debt and entered new three-year facilities with 53 lenders.

“The other restructurings are out there and are going nowhere as there is not a unanimous consenting creditor group,” the senior banker said.

Other restructurings such as Kuwait’s Investment Dar had to go to court to overcome resistance from minority dissenters, which could also be an option for Dubai World if its restructuring proves divisive.

Investment Dar, which owns half of British carmaker Aston Martin, was put under the protection of Kuwait’s $5.2bn Financial Stability Law package on March 14 after 20 percent of creditors fought the company’s restructuring plan.

All litigation and judgements against the company by dissenting minority investors will be stayed until the restructuring plan has been agreed by the court. The restructuring plan is expected to offer full repayment and will now be monitored by the Central Bank of Kuwait.

Iwokrama and climate change

In cooperation with the Government of Guyana and the Commonwealth, the Iwokrama International Centre and its partners are seeking a new means to bring the world’s remaining rainforests into the world’s economy without losing them in the process. It will have far-reaching repercussions for the way nations live, work, trade, govern and interact with each other.

But time is at a premium.

An age of responsibility
At this defining moment in human history, world leaders need to demonstrate through new and carefully formulated policies, based on the principles of responsible free-market capitalism, that the costs of financial globalisation can be minimised and better controlled, while still allowing the generation of wealth on which all economies depend.

But an even larger problem is the future viability of life on earth. While our understanding of the intricate relationship between human wealth and wellbeing and their impact on the ecology of the planet on which we live is now greater than ever, we are still witnessing increased natural loss – rapidly worsening environments, declining species and other eco-systems under ever-increasing pressure. Current food and water shortages are graphic illustrations of how the natural balance is tipping out of control.

Just as they are committed to financial reform, world leaders must be equally imaginative and committed in their approach to reversing global eco-system degradation. A pioneering initiative at Iwokrama in Guyana, South America, to bring the remaining rainforests into the global economy represents one radical way of achieving a sustainable low carbon model for economic development within the limits of the natural world.

A changing global context
The economic model inherited from our forefathers was based on two underlying assumptions – namely that natural resources were infinite and so could be treated as ‘externalities’ to mainstream economics; and that natural eco-systems were assumed to be able to accommodate the environmental impact of man’s activities. That may have been true in 1800 (when the global population was 1 billion) and even in 1900 (when it had risen to 1.5 billion) but is certainly no longer valid in today’s globalised economy with 6.7 billion people consuming at levels previously unimaginable.

Pursuit of past growth had little regard for the associated environmental costs – the degradation of eco-systems, the pollution of watercourses, the exhaustion of natural fisheries and in rising atmospheric levels of CO2. Pre-industrial emission levels at 280 parts per million (ppm) in the atmosphere had only risen to 310 ppm by 1959. Half a century later the level has risen to 387 ppm, the highest concentration in the last 650,000 years. Despite media coverage, political rhetoric, multilateral agreements arising from the Earth Summit in 1992 and the subsequent Kyoto Protocol, the problem worsens.

A strong body of scientific opinion believes that levels above 450 ppm will be dangerous to mankind. The Intergovernmental Panel on Climate Change (IPCC) model shows that such CO2 levels are “very likely” to lead to temperature increases above two degrees, at which point forest fires and retreating ice will trigger irreversible and incalculable consequences. At the current rate of emission increase, we have only 25 years (if we are lucky) before we pass the point of no return. While that does not mean that life as we know it will cease to exist, the damaging impacts of climate change will become unstoppable.

Every activity involving greenhouse gas emission has a real cost and every activity that contributes to their conservation a real value. It is extraordinary that so much attention has focused on addressing emissions from aviation, accounting for less than three percent of the global total; but so little action has been taken to curtail the unnecessary burning of tropical forests – responsible for 20 percent of all emissions. The EU is likely to spend €86bn per annum on achieving a 20 percent share for renewable energy (and a corresponding 20 percent reduction in carbon emissions) by 2020. That is a laudable step on the path to eventual cuts of 50 percent and even 80 percent by mid-century. But climate change is a global problem requiring truly global solutions. EU investments will be undone unless forests are factored into global policy making.

Lord Stern acknowledged this in his report and so have the IPCC, the World Bank and an increasing number of other organisations, NGOs and individuals including the UN Secretary-General. However, until there is specific action to deliver a financial value for the services of the standing forests so that developing countries and their people can continue to derive livelihoods from them rather than being forced to convert the forests for short-term value in the global marketplace, the world will continue to lose 13 million hectares of forest land per annum – or an area 1800 times that of the Beijing Bird’s Nest Olympic Stadium every hour – at the very moment that it can least afford to do so.

The world is witnessing a clash between food security, energy security and environmental security, with profound financial instability now added to the mix. So long as money is made out of food and energy but no living derived from the delivery of the eco-system services provided by rainforests (such as rainfall generation and biodiversity protection), precious trees (and 1.2 billion people around the globe who directly depend on them for their existence) will continue to be lost. In a global market place dominated by quarterly earnings and five∞year electoral cycles, too little attention is being paid to inter-generational time frames and our collective responsibility to the generations to come. Paying for eco-system services would be a new and welcome trend in remedying this.

The services of the forest
There is more life in tropical forests than anywhere else on earth. Over 50 percent of species of living organisms live in rainforests and over half of these species are new to science. These teeming forests occupy only seven percent of the Earth’s surface but account for a huge amount of the world’s natural carbon capture and storage (CCS) – an estimated 1.2 billion tonnes per year. This concentrated life cycle is part of an interconnected system that pollinates plants, absorbs wastes and pollutants from the atmosphere, controls erosion; generates rainfall, moderates climate through the provision of shade and trans∞evaporation, produces oxygen; maintains biodiversity and conserves and sequesters carbon.

But these eco-system services are being lost at an accelerating rate. Cut down a rainforest and soon afterwards there is desert, as poor soil is washed away, with the loss of biodiversity which, if retained, could have wider medical benefits for mankind. Another example is the biotic pump that transfers heat and water thousands of miles across the earth – especially for farmers in Brazil or coastal residents in the southern United States. The rainfall value of the Brazilian forests has been calculated at $20 per hectare per annum – just for its contribution to generating over 70 percent of the country’s electricity from hydro power.

In carbon terms, it seems extraordinary that the world places so much hope and potential investment in engineered CCS, while ignoring the vital CCS function of the standing forest. By allowing the loss of an estimated 100 tonnes of carbon per hectare at a possible cost of $50 per tonne and by ignoring the value of the natural functions of the forest, the world is in effect imposing upon itself an annual bill of $234bn just to capture the emissions coming from burning forests.The overall combined value of the world’s power generation capacity is worth hundreds of billions of dollars, yet the services of rainforests are currently pocketed without payment. Unless we place a financial value on the services of the natural world, mankind will reap a bitter harvest.

Valuing rainforests
Against this background, the Iwokrama rainforest is uniquely placed to play a leading role in reversing this prospect by establishing financial mechanisms to allow the continued sustainable use of forests.

In 1989 the Government and people of Guyana donated 371,000 hectares of pristine forest to be administered by the Commonwealth on their behalf and on behalf of the international community. Under an Act of Parliament in 1996, the Iwokrama International Centre was established to manage the forest. The initial vision was to pioneer best practice in the sustainable management of tropical forests and, through extensive research programmes, to establish baselines through which the impact of climate change could be monitored on biodiversity within the Iwokrama reserve. For 12 years, with the generous report of the Commonwealth Secretariat and recent sponsorship including from KPMG International, Shell International, Stephenson Harwood, the Rumi Foundation and Caribbean Airlines, Iwokrama has been a strong example of international cooperation, good governance, community benefit sharing and scientific research.

This year a unique investment was made by Canopy Capital in the services of Iwokrama’s forest in a pioneering transaction, through which private financial investors committed to the public good have recognised the vital role of the forest’s ecosystem services. Their initial payments have enabled the further protection and sustainable use of the Iwokrama forest.

Guyana’s low carbon initiative
Iwokrama’s pioneering move with Canopy Capital complements the wider initiative of President Jagdeo of Guyana in establishing a low-carbon model of economic development for his country. Securing value for the services of the forest is a key component of this initiative which would, in the words of the President:

“…break the false debate which suggests that it is necessary to choose between national development and combating climate change. All countries, rich and poor, must put development first. We should be asking how we can forge new economies that avoid the high-carbon path that characterised development across the world in the past.”

Canopy Capital, in close cooperation with the Iwokrama International Centre and the Government of Guyana, is now formulating a further financial instrument to enable international institutions and other private investors to participate in the value which it is anticipated the international community will attribute to the services of the forest in the future. Under a capital-protected mechanism, income generated from the instrument would be shared equitably between investors, Iwokrama and the Government and people of Guyana. Investors would receive assurance of the forest’s protection and the continuing delivery of the services for which they are paying; the Iwokrama Centre, working closely with the local communities, would allocate income towards its research and conservation activities; and the Government of Guyana would apply its share of the proceeds towards adaptation to climate change and sustainable development. Should nothing actually change to drive value properly to the services of the forest during the life of the instrument, capital would be returned to the investors. The launch of such an instrument, recognising the value of forest services generated in defined area of rainforest over a defined period of time, will be a path∞breaking initiative.
 
This initiative could encourage the international community to recognise the value of all standing forests and develop mechanisms to allocate funds for their ongoing protection as the best, most immediate and cost-effective manner in which the world can tackle climate change. Markets for forest services will not develop on their own; they will need a regulatory framework or at least policy support (perhaps similar to the carbon markets which have risen from $0 to $60bn in three years). It remains to be seen whether such instruments can be developed following the outcome of the Copenhagen Conference of the UNFCCC at the end of 2009 and through new activities pursued by the World Bank and other international financial institutions. Recent volatility in financial markets has led to fundamental questions about how global financial flows are regulated, and what is truly valuable. Just as the link between currencies and gold was abandoned in 1971 when conditions no longer made it practical, changing conditions now demand that the world begins to value its natural capital as never before.

Canopy Capital and the Iwokrama Centre believe that, instead of converting finite natural capital into extractable goods, it would be to mankind’s benefit to redirect capital to the maintenance of the significant eco-system services of the world on which everything else depends.

Making the breakthrough
The Iwokrama International Centre offers the world the opportunity to convert the vision of Iwokrama’s Patron, The Prince of Wales, and leaders like President Jagdeo and Prime Minister Stoltenberg of Norway into a specific model that could define the mechanisms through which tropical forests throughout the world could be at last preserved for the benefit of generations to come – whilst fulfilling core Millennium Development Goals (especially poverty alleviation and sustainability) in the immediate term.

Whether representing Governments, managing global corporations or merely acting as individuals, we are all stakeholders in the business of survival. We are in this leaky boat together and together we hope that a model of cooperation between the Government of Guyana, the Iwokrama International Centre and Canopy Capital can demonstrate that a new era of truly sustainable growth lies within our grasp.

We hope too that global leaders gathered in Davos will recognise the economic value of standing forests and the importance of putting them on the balance sheet of the world economy.

787 powers on

The lightweight carbon-composite plane (pictured) has been delayed three times by production setbacks, putting it at least 15 months behind schedule. Some customers have been told they will have to wait two years longer for their planes.

The new airplane, which promises to cut fuel costs by 20 percent, has racked up 896 orders worth about $150bn at list prices. But Boeing has found it harder than expected to put together the plane using its far-flung network of suppliers.
The delays mirror problems that rival Airbus, a unit of Europe’s EADS, had in producing its A380 superjumbo, which ended up two years late.

Boeing has been working on the 787 programme since April 2004, and is now in the final stages of producing the first batch of planes to be used for static and flight testing.

The process, known in the aerospace industry as “power on,” is a series of tasks and tests that brings electrical power to the airplane and starts the electrical systems working. It is a crucial moment in the development of the plane as it gives Boeing an idea of how the plane’s systems work together and what problems might need to be addressed.

With the power-on tests complete, Boeing confirmed that it was aiming for the first test flight of the plane in the fourth quarter of this year. The plane maker has put back the first test flight target date several times. It was originally planned for last summer.

First deliveries of the 787, to Japan’s All Nippon Airways , are scheduled for the third quarter of next year. The original target date for first delivery was May 2008.

Boeing has also announced that it will be involved in Mitsubishi Heavy Industries’ regional jet programme, but its main focus will continue to be on large aircraft, Boeing’s Japan.

Boeing Japan President Nicole Piasecki said that Boeing is in talks with Japan’s largest heavy machinery maker over the programme, though she declined to elaborate on the content of their discussions.

Mitsubishi Heavy’s ¥150bn ($1.39bn) project, dubbed the Mitsubishi Regional Jet (MRJ), will hold 70-90 passengers and go head-to-head with planes made by Canada’s Bombardier Inc and Brazil’s Embraer

“I can’t reveal details about what we’re talking about right now, but we will be involved in a minimal way in the MRJ programme,” she said.

“… we will not be selling the aircraft, we will not be investing in the programme per se. Our customers are counting on us to focus on the large airplane side.”
Mitsubishi Heavy aims to sell 1,000 regional jets in 20 years.

Boeing already has a dominant presence in Japan, with the country’s airlines having bought almost all their planes from the world’s biggest-selling commercial aircraft maker. All Nippon Airways is scheduled to be the first airline to receive The 787 Dreamliner.


The Boeing 787 by numbers
• When completed, the 787 will carry between 210 and 330 passengers, depending on the seating layout and configuration.
• The unit cost for each aircraft will vary between $146m for the cheapest 787-3 option, to $200m for the most expensive 787-9 model.
• By the time of the aircraft’s rollout ceremony in July 2007, Boeing had racked up over 600 orders – making the 787 the fastest-selling wide body airliner in history.
• Final assembly of the 787 involves a team of between 700 and 1,200 people. This is less than the traditional number that would be required on a project of this size, since many components are assembled away from the company’s Washington factory.
• Originally scheduled for completion in May 2008, production has been repeatedly put back and the 787 is now expected to enter service in late 2008.

Still ahead of the curve

Over a stellar career spanning almost 80 years, Oscar Niemeyer has created some of the most controversial and iconic buildings of the twentieth century. Like his work, his life has been extraordinary; at 100 years of age, he is still working prolifically, arriving at his office in Rio de Janeiro every morning and toiling with an energy that would put many people half his age to shame.

A string of high-profile projects, including the 1956 commission for designing every building in Brazil’s capital, Brasília, have ensured Niemeyer’s legacy. It is a legacy which is truly international; Niemeyer designed the Communist Party Headquarters in Paris, was part of the team that worked on the UN Building in New York, and is currently working on a cultural centre in Asturias, northern Spain.

Niemeyer’s work is characterised by vast open spaces and immense white swathes of reinforced concrete which echo Brazil’s sweeping sandy beaches and sun-bleached mountainsides. It is a body of work in stark contrast to that of many of his modernist contemporaries; he eschews the harsh angles and straight lines of twentieth-century brutalism in favour of soft curves inspired by the human body and other natural forms.

Often his buildings look like they have just landed from outer space; the hyperboloid structure of the Cathedral of Brasília still looks like one of the most modern, uncompromising – and alien – buildings in the world even now, more that 50 years after it was built.

The creation of the city of Brasília itself can be seen as an attempt to impose an order not found in other Brazilian cities like the rambling Rio de Janeiro, as well as an attempt by the country’s former president, Juscelino Kubitschek, to stamp his mark on the nation’s landscape.

Brasília’s success as a feat of architectural prowess is unquestionable – its success as a city for people to live and work in, however, is debatable. To some it is a symbol of the massive differences in wealth across Brazil, with the rich living in glass and concrete modernist palaces and the poor – including many of those who physically built the city – living in bedroom apartments on the outskirts.

Even Niemeyer himself said in a 1998 interview, “To be really honest, I prefer Rio de Janeiro much more than Brasília. I like the mess, even with the violence… I want the beach, the mountains, the chaos. I still want Rio.” For the tourist though, Brasília is still well worth a visit, if only to marvel at its Bond-villain-layer-like magnificence.

It is ironic that the final outcome of the Brasília project clashes so fundamentally with Niemeyer’s own political beliefs. A lifelong Communist, Niemeyer endured political exile for twenty years after the coup in 1964 which saw Brazil enter a military dictatorship. His friend Fidel Castro once famously said: “Niemeyer and I are the last Communists on this planet.”

As you would expect from a man who has had such a long and varied life, Niemeyer has a wealth of anecdotes. One of his favourites is about an occasion when Castro came to visit him several years ago: “Fidel came to see me here, late at night, and the elevator broke down. It’s very old. So I rang a neighbour and asked if my friend could come through his apartment. He was in his pyjamas and, I think, a little surprised to watch four giant bodyguards and then Castro walking past his bedroom. Fidel gave him a cigar.”

When Niemeyer returned to the country of his birth in 1985, he still had ambitious plans – and he entered into one of the most productive periods of his career. In 1988 he was awarded the hugely prestigious Pritzker Prize for Architecture in recognition of his work. For many, this would be a fitting end to a life spent pushing boundaries, and a crowning achievement to an illustrious career. Niemeyer, however, has never been one to rest on his laurels.

In 1996, at the age of 89, he created perhaps his most successful work, the Niterói Contemporary Art Museum (opposite) – a building so distinctive that some have claimed that it overshadows the works of art housed inside. Perched on the side of a cliff overlooking the ocean, the Niterói somehow manages to simultaneously blend in with its surroundings and to look distinctly other-worldly, and combines an ethereal elegance with a virtuoso feat of heavy engineering.

For Niemeyer, people have always come before buildings, a fact which makes for a slightly awkward relationship between his works – epic monuments designed for the political and social elite – and his life as a socially conscious everyman. As well as designing houses for presidents and massive public edifices though, Niemeyer has been known to create on a slightly more domestic scale; he recently designed and built a house as a gift to his driver, an employee and friend for over 50 years. In his own words, “One needs to have a worthy place to live, and the state should provide it to everybody. But I insist that the answer to this change is not architecture. It is revolution.”

“Anyone who is going to be an architect should invest part of his time in the knowledge of humanism. I spent my life at this desk, but I never fooled myself. I always knew that life is much more important than this—to feel is more important, to be nice to people is more important. To be useful is much more important to me than my architecture.”

The dollar versus the euro

As far as rates and the price of major exports and imports go, the dollar has been a stable world leader for decades. Recent trends in the global economy would suggest that the greenback’s incumbency in this position is in threat of usurpation given the growth, stability and wide-reaching trade of the euro.

Those trading deep in the American markets may consider this heresy. Indeed, several months ago Iran attempted to trade oil using the euro – in an attempt to upset the dollar as worldwide currency- and were battered by cries of outrage from the US. Understandably the worldwide consequences of replacing the dollar with a different currency as international benchmark would hit America and many of the world’s central banks with hard and lasting results.

Hegemony of the dollar

Few would remember a time when international trade was considered in terms of anything other than the dollar. One must go back to the pre First World War period to find sterling as the last international working currency. The sterling was dismounted, as the events beginning in August 1914 provided opportunity for the dollar to jump on the coat- tails of the high prices of gold it had at its disposal.
Since that last change, the past ninety years have seen few currencies strong or large enough to challenge or even have the potential to face the supremacy of the dollar. No other economy has come close to the internal and external size and weight of the dollar.
The greenback has sat aloft it’s perch looking down on a network of currencies all in competition with one another. These comparatively smaller currencies have had no where near the amount of network externalities that the dollar has commanded due to the hard-as-rock placemat that is the dollar. America’s commitment to the rule of law, free capital markets and price stability have over the course of time encouraged it’s credibility.
Even when the dollar hit turmoil over long periods of time few currencies were able to topple it as the world leader. Indeed, there have been many prolonged periods when the dollar has looked uncomfortable: the slow growth of the US economy over two decades beginning in the early 1970s; the high inflation experienced between 1973 and 1981 (including three years of double-digit price increases); and the large external deficits for over twenty years beginning in the 1990s. These potentially catastrophic periods would seem like perfect opportunities for another currency to take over as international trading currency, but the dollars survival only embeds its credibility.
Throughout these periods of difficulty, no other economy has been strong enough to take its place. There have been very few close calls, although some currencies have seemingly been in advantageous positions. After the Second World War, the deutsche mark became the world’s second largest currency. How close it was to overtaking the dollar is debateable, as it never attained a market share greater than a quarter of that of the dollar. Unsurprising, given that the former West German market was one-fourth the size of that in the US. Of course politics in the west at the time would never have allowed Germany such economic power. Another challenger was the Japanese yen, whose economy grew to nearly half that of the American recently but has never fully seemed to realise her potential.
When the euro initially became a physical reality, those relying on trading in American dollars must have considered the risk of an up-and-coming, fresh, and widespread currency. As speculation holds such a force in the markets, as do transitional considerations, the likelihood of a switch to Eurocentric economical supremacy adjusted the market sufficiently enough to upset dollar exchanges.

The rise of the euro and the fallings of the dollar

Two factors must occur for the euro to be classed as the dominant market trader. Firstly, the dollar must be on a severe low. As the greenback falls to its lowest rate since 2002, now seems like a good time for the euro to make great headway. Having said that, past evidence teaches us that the dollar will regain stability within an estimated five year period. Secondly, the euro must be in a strong position to overtake its rival. This is an incredibly political issue. Euroland supremacy and a coherent state are needed to even force the issue toward consideration.
The European Union and single government still has its doubters, which must be considered one of the greatest principles in protecting the dollar as the world’s heavy weight champion. The EU simply needs to attain credibility. Although the US maintains excellent GDP, considering Europe as a single unit makes output look more of a competitor. Europe is a strong place of investment for the US, hence the effects of the US credit crisis arriving on European shores. The problems hosted originally in America have led to the Federal Reserve Bank of New York being forced to make $24bn available to the European Central Bank and the Swiss National Bank in order to free up liquidity, which also further hits the rate of the dollar. Effectively, the US sub-prime mortgage losses contaminated worldwide money markets.
Whilst around 15 percent of European exports go to the US, 10 percent of American exports come to Europe. In 2006, European investment in America totalled €600bn, with €630bn from US firms being invested in the euro zone. Of course this shows the great amount of trade that goes on between Europe and the US, but by no means indicate a reliance: other major markets are vastly influential on where both nations stand. Whereas the US do business predominantly with Canada and the South Americas, more and more business is being carried out between Europe and the orient. Much more is happening between Europe, China and large firms in Japan. Macroeconomic policy is still being hindered by individual European states’ failure to posit themselves in a unilateral arrangement. Other issues such as climate change and the free movement of goods are debates that stoke up great debates in Brussels, discouraging real economic change. The major argument for the euro may come in its growth in worldwide foreign exchange reserves. Still far behind the dollar in worldwide reserves, the euro has seen excellent growth over the last few quarters. Indeed, it has outgrown the dollar on usage at a surprising rate, given recent dollar inflation figures.

Shifting trade and time for a change?

Whilst this may seem like the US are falling behind by shifting world markets, the dollar is still far from being dislodged by the euro. The role played by the greenback is still of huge significance to the European economy, and American exporters are benefiting significantly from trade abroad. Yet, domestically, questions are being asked of the US banking policies. Earlier in the year, American consumers were urged to spend large and save less. Although this freed up cash in the short term, it appears this was taken too far.
The current situation has alerted growing economies such as that of India and Russia, who may fancy a shift in order to cause a shake-up of worldwide US dominance. The change in the pricing of oil, for instance, would not only shift focus to Europe and the fluctuations of the euro, but the dollar would have far less weight in the markets. Another major issue for both the dollar and the euro would be the ramifications for most of the world’s bank’s reserves. Central banks hold most of their foreign exchange reserves in dollars. As countries would start to trade in euro, banks would be forced to exchange dollars for the newer currency, an issue the US would not take lightly. Further, the dollar being the universal hegemonic currency has allowed the US to distribute debt at a far cheaper rate. Resettling the exchange rate would also see banks on their knees, something they can ill afford at this time. Indeed, a massive loss in revenue would result in huge rises in interest rates for a period on both sides of the Atlantic. Of course there is no rule specifying that reserves can only be held in one currency, but the expense of branching out could be enormously expensive and impractical for trade with other banks.
With this in mind, it would seem that switching to a euro based economy would be beneficial to few, but in the long term the euro zone would hit new peaks. In a euro denominated economy, American banks would not be overwrought by having to provide funds for Europe. As the euro zone’s outward investment competes with America’s, it makes sense that self- reliance may be the way of the future for Europe. For weeks now, the credit market has been seized up. European banks have been injecting monies in order to free up the blockage, attempting to free up liquidity. Even if the EU were to get itself in another such mess, funds would be a lot easier to get hold of with the euro at hand from other countries. The US on the other hand, would no longer be able to afford another slip.
With the current crisis surrounding the markets showing no sign of wearing off, there are two ways the currency dilemma will play out. Firstly, make the euro the main trading unit. Short term, this seems unlikely, as the world’s central banks have distanced themselves from foreign currency interaction as a means to mending the recent problems. However, the European Central Bank has a mandate to establish the euro by whatever means necessary. Considering that, if European political leaders step in, chances are refuge will be sought using exchange rates as a counter balance. The long term solution for Europe will be relinquishing the dollar and working solely on the euro as a means of trade. Of course this will only happen if politicians across Europe start pulling in a similar direction. The second, and less overbearing short term answer is to support the stumbling dollar. At this point, it seems that all is down to politics, and out of the hands of the world’s leading bankers. This may all come down to the period surrounding the next American election, the US Treasury, and the European counterpart.

Looking long term

Take a few dollars and an AMEX card anywhere in the world, and you’ll be fine: a statement among the world’s elite that sprung up in the nineteen eighties. Is this something to be said of the euro in the next few years?
Some commentators has suggested that, like the last change that saw the dollar take over the sterling, war would need to occur for such a dramatic change to take place. Realistically, this isn’t such a threat to the dollar. However, the modern era of automated payments offers the potential of a terrorist attack on computer systems, which is something governments and major banks are petrified of. This could destroy the credibility of the dollar and pave the way for the euro.

A squandered golden opportunity

A group of multi-national European scientists has used gene-splicing techniques to create an extraordinary tomato. It boasts a deep purple skin and flesh, and contains levels of antioxidants 200 percent higher than unmodified tomatoes. When fed to highly cancer-susceptible mice, the tomatoes significantly extended the miceís lifespan.

These studies have received wide attention, but an equally momentous achievement of genetic modification has been largely ignored for almost a decade. That innovation is Golden Rice, a collection of new rice varieties that is bio-fortified, or enriched, by genes that express beta-carotene, the precursor of vitamin A, which is converted in the body, as needed, to the active form.

Most physicians in North America and Europe never see a single case of vitamin A deficiency in their professional lifetimes. But the situation is very different in poor countries, where vitamin A deficiency is epidemic among the poor, whose diet is heavily dominated by rice (which contains neither beta-carotene nor vitamin A) or other carbohydrate-rich, vitamin-poor sources of calories.

In developing countries, 200-300 million children of preschool age are at risk of vitamin A deficiency, which can be devastating and even fatal. It increases susceptibility to common childhood infections such as measles and diarrhoeal diseases, and is the single most important cause of childhood blindness in developing countries. Every year, about 500,000 children become blind as a result of vitamin A deficiency, and 70 percent die within a year of losing their sight.

In theory, we could simply supplement childrenís diets with vitamin A in capsules, or add it to some staple foodstuff, the way that we add iodine to table salt to prevent hypothyroidism and goiter. Unfortunately, neither the resources hundreds of millions of dollars annually nor the infrastructure for distribution are available.

Biotechnology offers a better, cheaper, and more feasible solution: Golden Rice, which incorporates beta-carotene into the genetically altered rice grains. The concept is simple. Although rice plants do not normally synthesise beta-carotene in the endosperm (seeds), they do make it in the green portions of the plant. By using gene-splicing techniques to introduce the two genes that express these enzymes, the pathway is restored and the rice grains accumulate therapeutic amounts of beta-carotene. 

Golden Rice offers the potential to make contributions to human health and welfare as monumental as the discovery and distribution of the Salk polio vaccine. With wide use, it could save hundreds of thousands of lives every year and enhance the quality of life for millions more.

But one aspect of this shining story is tarnished. Intransigent opposition by anti-science, anti-technology activists Greenpeace, Friends of the Earth, and a few other groups has spurred already risk-averse regulators to adopt an overly cautious approach that has stalled approvals.

There is absolutely nothing about Golden Rice that should require endless case-by-case reviews and bureaucratic dithering. As the British journal Nature argued in 1992, a broad scientific consensus holds that ìthe same physical and biological laws govern the response of organisms modified by modern molecular and cellular methods and those produced by classical methods…. [Therefore] no conceptual distinction exists between genetic modification of plants and microorganisms by classical methods or by molecular techniques that modify DNA and transfer genes.

Put another way, government regulation of field research with plants should focus on the traits that may be related to risk invasiveness, weediness, toxicity, and so forth rather than on whether one or another technique of genetic manipulation was used.

Nine years after its creation, despite its vast potential to benefit humanity and a negligible probability of harm to human health or the environment  Golden Rice remains hung up in regulatory red tape, with no end in sight. (Cancer-preventing tomatoes, take notice.) 

By contrast, plants constructed with less precise techniques such as hybridisation or mutagenesis generally are subject to no government scrutiny or requirements (or opposition from activists) at all. That applies even to the numerous new plant varieties that have resulted from wide crosses, hybridisations that move genes from one species or genus to another  across what used to be considered natural breeding boundaries.

Judith Rodin, the president of the Rockefeller Foundation, announced last October that her organisation will provide funding to the International Rice Research Institute to shepherd Golden Rice through national regulatory approval processes in Bangladesh, India, Indonesia, and the Philippines. This is good news, but what is really needed is a multi-faceted, aggressive reform of the regulatory process so that all new genetic constructions will have a chance to succeed.

In an April editorial in the journal Science , Nina Fedoroff, an eminent plant geneticist who serves as senior scientific advisor to US Secretary of State Condoleezza Rice, wrote: A new Green Revolution demands a global commitment to creating a modern agricultural infrastructure everywhere, adequate investment in training and modern laboratory facilities, and progress toward simplified regulatory approaches that are responsive to accumulating evidence of safety.

The Golden Rice story makes it clear that we do not yet have the will and the wisdom to make that happen.

About the author

Henry I. Miller, the author of The Frankenfood Myth, is a physician and fellow at the Hoover Institution, and was an official at the US National Institutes of Health and at the Food and Drug Administration from 1977-1994.

Surrounded by friends? It’s all in your genes

Are you a social butterfly, or do you prefer being at the edge of a group of friends? Either way, your genes and evolution may play a major role, U.S. researchers reported recently.

While it may come as no surprise that genes may help explain why some people have many friends and others have few, the researchers said, their findings go just a little farther than that.

“Some of the things we find are frankly bizarre,” said Nicholas Christakis of Harvard University in Massachusetts, who helped conduct the study.

“We find that how interconnected your friends are depends on your genes. Some people have four friends who know each other and some people have four friends who don’t know each other. Whether Dick and Harry know each other depends on Tom’s genes,” Christakis said in a telephone interview.

Christakis and colleague James Fowler of the University of California San Diego are best known for their studies that show obesity, smoking and happiness spread in networks.

For this study, they and Christopher Dawes of UCSD used national data that compared more than 1,000 identical and fraternal twins. Because twins share an environment, these studies are good for showing the impact that genes have on various things, because identical twins share all their genes while fraternal twine share just half.

“We found there appears to be a genetic tendency to introduce your friends to each other,” Christakis said.

There could be good, evolutionary reasons for this. People in the middle of a social network could be privy to useful gossip, such as the location of food or good investment choices.

But they would also be at risk of catching germs from all sides – in which case the advantage would lie in more cautious social behavior, they wrote in the Proceedings of the National Academy of Sciences.

“It may be that natural selection is acting on not just things like whether or not we can resist the common cold, but also who it is that we are going to come into contact with,” Fowler said in a statement.

Fighting deflation with inflation

For years, the Federal Reserve has been fighting the “silent killer” known as inflation, but the emergence of an even more destructive economic threat, deflation, has made its former adversary a preferred foe.

The threat of a spiral down in prices, wages and economic activity inspired an unprecedented response last week from the Fed, which pushed interest rates near zero.

It’s easy to see why the central bank has gone nuclear, considering the poor record of fighting deflation. Highlights — or, low points — include the Great Depression of the 1930s and Japan’s lost decade of the 1990s.

Many economists give Fed chief Ben Bernanke, a student of deflation and the Depression, high marks for aggressive action to prevent just such a problem.

They figure Bernanke ultimately would prefer a struggle against inflation rather than a debilitating slide into deflation. In fact, it may be just what he has engineered for the central bank further down the line.

“They can always control inflation in the future, but deflation can be very destructive,” said William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Massachusetts.

“They always say inflation is the silent killer … a lot of people are not aware that they are being robbed. Deflation is basically, you don’t have a job — you have no money. It’s right in front of you and it’s harsh reality.”

The U.S. deflation chronicles expand during this holiday-shortened week with the publication of key gauges of prices, both real and expected.

Japan is on the same theme with consumer prices, as well as unemployment, industrial output and retail sales.

The euro zone offers national data on consumers, including German consumer sentiment, French consumer spending and Italian consumer confidence.

The U.S. housing market, whose two-year implosion caused the current economic crisis, will figure prominently in data on Tuesday. So too will the final reading on third-quarter gross domestic product, which includes price readings.

MOST WORRYING

Officials fear deflation because it brings a severe loss of confidence, which creates expectations that prices of goods, services and a range assets of will grow cheaper by the day.

Normally, consumers welcome falling prices and businesses are cheered by lower costs. But the self-reinforcing nature of the deflation spiral causes spending throughout the economy to halt. In the case of the Great Depression, that led to widespread unemployment and bankruptcies.

For policy-makers, inflation expectations are a key element in heading off deflation before it starts.

Tuesday’s inflation expectations gauge in the final Reuters/University of Michigan consumer sentiment report for December will be studied closely.

The preliminary report earlier this month showed one-year inflation expectations fell to their lowest in five years.

It also showed 22 percent of consumers expected deflation during the year ahead, the highest proportion to anticipate declining prices in the past half century.

Falling home prices have been a prominent deflationary influence, dropping more than 20 percent since the air began rushing out of the housing bubble in 2006.

This has been a key focus of the Fed, which last week reaffirmed its commitment to buy mortgage securities to put a floor under house prices and revive home lending.

“Right now I think the jury is out on whether or not you are going to see some kind of stabilization in the real estate market,” said Thomas di Galoma, head of U.S. Treasury trading at Jefferies & Co. in New York. “I think until you see the stabilization there, it is going to be very tough for the Fed to fight the deflationary spiral that we seem to be in.”

CRISIS OVER, CRISIS BEGINS

Still, the Fed’s efforts have been considerable, and may have already sown the seeds of recovery. If this is true — a big if — it also means inflation, although not immediately.

Liabilities on the Federal Reserve’s balance sheet, stemming from its sundry rescue efforts for the financial system, rose to a record $2.295 trillion in the latest week, Federal Reserve data showed on Thursday.

Its attempts to resuscitate the credit markets have born fruit. Since the Fed’s rate decision last week, the premium that highly rated corporations pay to borrow money dropped to its lowest in about a month compared with government bonds.

Risky companies benefited even more, with rates on high-yield bonds posting their biggest three-day drop on record relative to U.S. Treasuries, a key borrowing measure.

While the Fed has cranked up the printing press and cut interest rates to the bone, economists also expect a massive fiscal stimulus package, possibly as much as $1 trillion, from the incoming administration of President-elect Barack Obama.

All of this spells inflation, even if not in the coming year, according to Roland Manarin, president of Manarin Investment Counsel, Ltd., in Omaha, Nebraska.

“Forget about deflation,” Manarin said. “Long term, we are facing steep inflation.”

Is the web helping us evolve?

Some of today’s most vaunted tech philosophers are embroiled in a ferocious argument. On one side are those who think the Internet will liberate humanity, in a virtuous cycle of e-volving creativity that may culminate in new and higher forms of citizenship. Meanwhile, their diametrically gloomy critics see a kind of devolution taking hold, as millions are sucked into spirals of distraction, shallowness and homogeneity, gradually surrendering what little claim we had to the term “civilization.”

Call it cyber-transcendentalists versus techno-grouches.

Both sides point to copious evidence, as Nicholas Carr recently did, in a cover story that ran in the Atlantic, titled, “Is Google Making Us Stupid?” In making the pessimists’ case, Carr offered up studies showing that the new generation of multitaskers aren’t nearly as good at dividing their attention effectively as they think they are. According to Carr, focus, concentration and factual knowledge are much too beneficial to toss aside in an avid pursuit of omni-awareness.

A related and even more worrisome trend is the decline of rigorously vetted expert knowledge. You wouldn’t expect this to be a problem in an era when humanity knows more — and shares information more openly — with every passing year, month and day. Wikipedia is a compendium vastly larger than all previous encyclopedias combined, drawing millions to contribute from their own areas of micro-expertise. But the very freedom that makes the Internet so attractive also undermines the influence of gatekeepers who used to sift and extol some things over others, helping people to pick gold from dross.

In the past, their lists and guides ranged from the “Seven Liberal Arts” of Martianus Capella to “The Great Books of the Western World,” from Emily Post’s “Etiquette” to the Boy Scout Manual, from compulsory curricula to expert scientific testimony. Together, this shared canon gave civilized people common reference points. Only now, anyone can post a list — or a hundred — on Facebook. Prioritization is personal, and facts are deemed a matter of opinion.

Carr and others worry how 6 billion ships will navigate when they can no longer even agree upon a north star.

Of course, an impulse toward nostalgia has been rife in every era. When have grandparents not proclaimed that people were better, and the grass much greener, back in their day? Even the grouches’ ultimate dire consequence has remained the same: the end of the world. Jeremiahs of past eras envisioned it arriving as divine retribution for fallen grace, while today’s predict a doom wrought by human hands — propelled by intemperate, reckless or ill-disciplined minds. The difference, from a certain angle, is small.

Take the dour mutterings of another grumbler, Internet entrepreneur Mark Pesce, whose dark rumination at last year’s Personal Democracy Forum anticipates a dismal near-future commonwealth. One wherein expertise is lost and democracy becomes a tyranny of lobotomized imitation and short-tempered reflex, as viral YouTube moments spread everywhere instantaneously, getting everybody laughing or nodding or seething to the same memes — an extreme resonance of reciprocal mimicry or hyper-mimesis. And everybody hyper-empowered to react impulsively at almost the speed of thought.

“All of our mass social institutions, developed at the start of the liberal era, are backed up against the same buzz saw,” Pesce said. “Politics, as the most encompassing of our mass institutions, now balances on a knife edge between a past which no longer works and a future of chaos.”

From there, it seems only a small step is needed to incite the sort of riled-up rabble that used to burst forth in every small town; only, future flash mobs will encompass the globe. Pesce’s scenario is starkly similar to dystopias that science fiction authors Frederik Pohl and Cyril Kornbluth portrayed, back in the 1950s, as in “The Marching Morons,” or Ray Bradbury in “Fahrenheit 451,” with civilization homogenizing into a bland paste of imitation and dullard sameness, punctuated by intervals of mass hysteria.

Indeed, it is this very sameness — the “flat world” celebrated by pundit Thomas Friedman — that could demolish global peace, rather than save it. Arguing that an insufficiency of variety will eliminate our ability to inventively solve problems, Pesce dramatically extrapolates: “Fasten your seatbelts and prepare for a rapid descent into the Bellum omnia contra omnes, Thomas Hobbes’ war of all against all … Hyperconnectivity begets hypermimesis begets hyper-empowerment. After the arms race comes the war.”

Wow. Isn’t that cheery? Well, with Michael Crichton no longer around to propound that there “are things mankind was never meant to know,” perhaps Carr and Pesce are auditioning to fill in, offering the next vivid anthem for a rising renunciation movement — the nostalgic murmur that technology and “progress” may have already gone too far.

Responding to all of this — on the Encyclopaedia Britannica Blog — Clay Shirky, the technology forecaster and author of “Here Comes Everybody,” presents an equally impressive array of evidence showing that the ability of individuals to autonomously scan, correlate and creatively utilize vast amounts of information is rising faster, almost daily. In the human experience, never before have so many been able to perceive, explore, compare, analyze and argue over evidence that questions rigid assumptions. How can this not lead to insights and exciting new breakthroughs at an accelerating pace?

Perhaps even fast enough to get us ahead of all our modern perplexities and problems.

Nor is this refrain new. From Jefferson and Franklin to Teilhard de Chardin and J.D. Bernal, the tech-happy zealots of progress have proclaimed a rebellious faith in human self-improvement via accumulating wisdom and ever-improving methodology.

Even some artists and writers began siding with the future, as when Bruno Bettelheim finally admitted that it was OK to read fairy tales, or when H.G. Wells stood up to Henry James over whether stories can involve social and scientific change. Confronting stodgy culture mavens, modernists and science fiction writers spurned the classical notion of “eternal verities” and the assumption that all generations will repeat the same stupidities, proclaiming instead that children can make new and different mistakes! Or even (sometimes) learn from the blunders of their parents.

Before the Internet was more than an experimental glimmer, Marshall McLuhan fizzed: “But all the conservatism in the world does not offer even token resistance to the ecological sweep of the new electric media.”

This surge of tech-zealotry is taken further — to a degree that seems almost fetishistic — by fans of a looming “positive singularity,” in which a humanity that is aided by loyal and super-smart artificial intelligence (AI) will soon transcend all known limitations, toppling all barriers before an unstoppable can-do spirit. All we need is to keep exponentiating knowledge and computing power at the rate we have, and soon those AI assistants will cure all ailments, deliver clean energy, and solve the riddle of our minds. Singulatarians such as Ray Kurzweil and John Smart foresee a rosy Aquarian age just ahead, one of accelerating openness and proliferating connectedness, unleashing human potential in something radiantly self-propelled and exponentially cornucopian.

Oy! Teilhard’s bodhisattva has returned! And part of me wants to believe the transcendentalists, who think we’ll all have godlike powers just in time to end poverty, save the planet, and give the baby boomers eternal life. Hal-AI-lujah!

But, alas, even the coiner of the term “technological singularity” — author Vernor Vinge — will tell you that it ain’t necessarily so. If these wonders are going to come to pass, it won’t happen in a way that’s smooth, organic, automatic or pain-free. As Edward Tenner pointed out in “Why Things Bite Back,” there are always surprising, unintended consequences. The ultimate, pragmatic purpose of free debate is to find most of these error modes before well-made plans go awry. A practical aim that is forgotten by those who worship self-expression entirely for its own sake.

Anyway, emergent properties help those who help themselves. Very few good things ever happened as gifts of circumstance, without iteration and hard work. Above all, we’ll need to improve the tools of the Enlightenment, at an ever-increasing pace, so that Howard Rheingold’s vaunted citizen-centered smart mobs really are more smart than mobs!

Too bad for us, then. Because, looking at today’s lobotomizing social nets, avatar worlds and dismal “collaborationware,” any rational oddsmaker would have to favor the grouches by a 10-point spread.

So, is the Google era empowering us to be better, smarter, more agile thinkers? Or devolving us into distracted, manic scatterbrains? Is technology-improved discourse going to turn us all into avid, participatory problem solvers? Or will the Web’s centrifugal effects spin us all into little islands of shared conviction — midget Nuremberg rallies — where facts become irrelevant and any opinion can be a memic god?

Alas, both sides are right. And both are missing key points. If I must simplistically choose between Teilhardists and renunciators, my sentiments go with the optimists who helped bring us to this party we’re all enjoying — the worldwide culture and Internet that lets me share these thoughts with you and that empowers the grouches to be heard. Luddism has always been a lame and deep-down hypocritical option.

But no, this latest tiff seems to boil down to another of the infamously oversimplifying dichotomies that author Robert Wright dismantles in his important book, “Nonzero.” No. 1 on our agenda of “ways I might grow up this year” ought to be giving up the foul habit of believing such tradeoffs. Like the hoary and obsolete “left-right political axis,” or the either-or choice we are too frequently offered between safety and freedom.

But let’s illustrate just how far off base both the mystics and the curmudgeons are, by offering a step-back perspective.

Only a generation ago, intellectuals wrung their hands over what then seemed inevitable: that the rapidly increasing pace of discovery and knowledge accumulation would force individuals to specialize more and more.

It may be hard to convey just how seriously this trend was taken 30 or so years ago. Sober academics foresaw an era when students might study half a lifetime, just to begin researching some subfield of a subfield, excruciatingly narrow and dauntingly deep, never knowing if they were duplicating work done by others, never cross-fertilizing or sharing with other domains. It reflected the one monotonic trend of the 20th century — a professionalization of all things.

It’s funny, though. You just don’t hear much about fear of overspecialization anymore. Yet has the tsunami of new knowledge ceased? If anything, it has speeded up. Then why did that worry go away?

As it turned out, several counter-trends (some of them having nothing to do with the Internet) seem to have transformed the intellectual landscape. Today, most scientists seem far more eclectic, agile and cross-disciplinary than ever. They seek insights and collaboration far afield from their specialties. Institutions like the Sixth College at the University of California at San Diego deliberately blend the arts and sciences, belying C.P. Snow’s “two cultures forever schism’d.” Moreover, the spread of avocations and ancillary expertise suggests that the professionalization trend has finally met its match in a looming age of amateurs.)

If anything, our worry has mutated. Instead of fretting about specialists “knowing more and more about less and less,” today’s info glut has had an inverse effect — to spread people’s attention so widely that they — in effect — know just a little about a vast range of topics. No longer do our pessimists fear “narrow-mindedness” as much as “shallow-mindedness.”

Indeed, doesn’t Carr have a point, viewing today’s blogosphere as superficial, facile and often frivolous? When pundit mistress Arianna Huffington crows about there being 50,000 new blogs established every day, calling them a “first draft of history,” is that flattering to history?

Don’t get me wrong — I want to believe this story. My own metaphor compares today’s frenzy of participatory self-expression to a body’s immune system that might sniff out every dark abuse or crime or unexamined mistake. I still believe the age of amateurs has that potential. But, in darker moments, I wonder. If our bodies were this inefficient — with such an astronomical ratio of silliness to quality — we’d explode from all the excess white blood cells before ever benefiting from the few that usefully attack an error or disease.

Above all, can you name a problem that all this “discourse” has profoundly or permanently solved — in a world where problems proliferate and accumulate at a record pace? No, let’s make the challenge simpler: Can Shirky or Huffington point to even one stupidity that has been decisively disproved online? Ever?

Sure, there are good things. Professional journalism has added many innovative cadres and layers that show more agility and zest than the old newspapers and broadcasting networks, often aided or driven by a stratum of actinically focused semipro bloggers. I am well aware of — and grateful to — the many excellent political and historical fact-checking sites that debunk all kinds of mystical or paranoid nuttiness. But still, the nutty things never go away, do they? Debunking only serves to damp each fever down a little, for a while, but the infections remain. Every last one of them.

What the blogosphere and Facebook cosmos do best is to engender the raw material of productive discourse — opinion. Massive, pyroclastic flows of opinion. (Including this one.) They can be creative and entrancing. But they are only one-half of a truly creative process.

Such processes that work — markets, democracy, science — foster not only the introduction of fresh variety and new things but also a winnowing of those that don’t work. Commerce selects for better products and companies. In elections, the truth eventually (if tardily) expels bad leaders. Science corrects or abandons failed theories. It’s messy and flawed, but we owe almost everything we have to the way these “accountability arenas” imitate the ultimate creative process, evolution, by not only engendering creativity but also culling unsuccessful mutations. To make room for more.

Today’s Web and blogosphere have just one part of this two-stage rhythm. Sure, bullshit makes great fertilizer. But (mixing metaphors a bit) shouldn’t there be ways to let pearls rise and noxious stuff go away, like phlogiston and Baal worship? Beyond imagination and creativity and opinion, we also need a dance of Shiva, destroying the insipid, vicious and untrue.

To the nostalgists, there is only one way of accomplishing this — the 4,000-year-old prescription of hierarchy. But all those censors, priests and credentialed arbiters of taste had their chance, and all our instincts, as children of the Enlightenment, rebel against ever letting them get a grip on culture once again! Authoritarian gatekeepers would only wind up stifling what makes the Net special.

But there is another option. A market could replicate the creative (and creatively destructive) power of evolution in the realm of good and bad ideas, just as our older markets sift and cull myriad goods and services. That is, if the Web offered tools of critical appraisal and discourse. Tools up to the task.

Tentative efforts have been taken to provide this second half of the cycle, where amateur participants might manifest, en masse, the kind of selective judgment that elite gatekeepers and list makers used to provide. Wikipedia makes a real effort. A few debate and disputation sites have tried to foster formal set-tos between groups opposing each other over issues like gun control, experimenting with procedures that might turn debate from a shouting and preening match into a relentless and meticulous exploration of what’s true and what’s not. But these crude efforts have been given a just scintilla of the attention and investment that go to the fashionable, honey pot concepts: social networks and avatar spaces, “emotional” self-expression, photo/art/film sharing, and ever more ways to gush opinions.

Am I sounding like one of the curmudgeons? Look, I like all that stuff. Heck, I can self-express with the best of ’em. It’s how I make my living! But all by itself, it is never, ever going to bring us to a singularity — or even a culture of relatively effective problem solvers.

Note that my complaint isn’t the same as Carr’s about our fellow citizens becoming “nekulturny” and losing the ability to read (as in the Walter Tevis novel “Mockingbird.”) Sure, I wish (for example) that some of the attention and money devoted to shallow movie sci-fi remakes would turn to the higher form of science fiction, with its nuanced Gedanken experiments about speculative change. But we’re in no danger of losing the best mental skills and tools and memes of the past. It’s a laughable fret.

What we need to remember is that there is nothing unique about today’s quandary. Ever since the arrival of glass lenses and movable type, the amount that each person can see and know has multiplied, with new tools ranging from newspapers and lithographs to steamships and telegraphs, to radio and so on. And every time, conservative nostalgists claimed that normal people could not adapt, that such godlike powers should be reserved to an elite, or perhaps renounced.

Meanwhile, enthusiasts zealously greeted every memory and vision prosthetic — from the printing press to lending libraries to television — with hosannas, forecasting an apotheosis of reason and light. In 1894, philanthropist John Jacob Astor wrote a bestselling novel about the year 2001, a future transformed by science, technology, enterprise and human goodwill.

Of course, life can be ironic. Astor died with a famed flourish of noblesse oblige aboard the sinking Titanic — the first of many garish calamities that began quenching this naive zeal for progress. For a while. And so it has gone, a bipolar see-saw between optimists and pessimists.

In reality, the vision and memory prosthetics brought on consequences that were always far more complicated than either set of idealists expected. Out of all this ruction, just one thing made it possible for us to advance, ensuring that the net effects would be positive. That one thing was the pragmatic mind set of the Enlightenment.

So let’s conclude by returning to a core point of the cyber-grumblers. Yes, for sure, some millions, perhaps billions, will become couch or Net potatoes. Unimaginative, fad-following and imitative. But there is a simple answer.

So what? Those people will matter as little tomorrow as couch potatoes who stay glued to television matter today.

Meanwhile, however, a large minority — the “creative minority” that Toynbee called essential for any civilization’s success — will continue to feel repelled by homogeneity and sameness. They’ll seek out the unusual and surprising. Centrifugally driven by a need to be different, they’ll nurture hobbies that turn into avocations that transform into niches of profound expertise.

Already we are in an era when no worthwhile skill is ever lost, if it can draw the eye of some small corps of amateurs. Today there are more expert flint-knappers than in the Paleolithic. More sword makers than during the Middle Ages. Vastly more surface area of hobbyist telescopes than instruments owned by all governments and universities, put together. Following the DIY banner of Make magazine, networks of neighbors have started setting up chemical sensors that will weave into hyper-environmental webs. Can you look at all this and see the same species of thoughtless, imitative monkeys that Mark Pesce does?

Well, we are varied. We contain multitudes. And that is the point! Those who relish images of either gloom or apotheosis forget how we got here, through a glorious, wonderful, messy mix of evolution and hard work and brilliance, standing on the shoulders of those who sweated earlier progress. Now we sprint toward success or collapse. If we fail, it will be because we just barely missed a once-in-a-species (perhaps even once-on-a-planet) chance to get it right.

I don’t plan to let that happen. Do you?

No, what’s needed is not the blithe enthusiasm preached by Ray Kurzweil and Clay Shirky. Nor Nicholas Carr’s dyspeptic homesickness. What is called for is a clear-eyed, practical look at what’s missing from today’s Web. Tools that might help turn quasar levels of gushing opinion into something like discourse, so that several billion people can do more than just express a myriad of rumors and shallow impulses, but test, compare and actually reach some conclusions now and then.

But what matters even more is to step back from yet another tiresome dichotomy, between fizzy enthusiasm and testy nostalgia. Earlier phases of the great Enlightenment experiment managed to do this by taking a wider perspective. By taking nothing for granted.

If we prove incapable of doing this, then maybe those who worry about the latest generation’s devolution are right after all.

© Salon 2008. www.salon.com

Very clever

Scientists have dreamed of creating artificial forms of human intelligence since the early days of the computer, and every year they edge nearer to that goal. The accepted test for a computer to be deemed “intelligent” is that 30 percent of the humans interacting with it think they are dealing with a real person. This is the so-called Turing test, laid down by British mathematician Alan Turing in 1950.

To keep the test focused on a machine’s intelligence, rather than its ability to render words into audio, the conversation is limited to a text-only channel, such as a computer keyboard and screen. Every year the top artificial conversational entities (ACEs) from around the world are gathered together and entered into the Loebner Prize, created by American sociologist Hugh Loebner as a way of encouraging scientists to build machines capable of passing the Turing test. None ever have, but this year several almost did.

At the 2008 running of the event, held in October, all of the ACEs managed to fool at least one of their human interrogators. The eventual winner, called Elbot, managed to trick 25 percent – tantalisingly close to the 30 percent threshold.

“This has been a very exciting day with two of the machines getting very close to passing the Turing test for the first time,” said test organiser Professor Kevin Warwick from the University of Reading’s School of Systems Engineering. “Although the machines aren’t yet good enough to fool all of the people all of the time, they are certainly at the stage of fooling some of the people some of the time.”

Even where the human interrogators correctly realised that they were talking to a machine, they rated its conversational abilities very highly, says Warwick. “This demonstrates how close machines are getting to reaching the milestone of communicating with us in a way in which we are comfortable. That eventual day will herald a new phase in our relationship with machines, bringing closer the time in which robots start to play an active role in our daily lives.”

Elbot inventor Fred Roberts, an artificial intelligence consultant from Germany, received a $3,000 award for his machine’s performance. “I wish I was as good at conversation as Elbot,” he joked afterwards.

And was does Elbot have to say? Visit www.elbot.com and you can chat with it. “How do you feel about winning the Loebner Prize?” we asked. “Let’s not talk about amassing wealth, alright?” answered Elbot. Quite an intelligent response.