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I have some more thoughts as a follow-up to my previous post about poverty and the economy — about solutions to the problem of poverty. First, the basics. Since poverty occurs when there is an imbalance between earnings and the cost of living, to move an individual out of poverty, either the person’s earnings must be increased, or his/her cost of living reduced. There are several ways we could consider doing that for the working poor segment of the population (whether here or overseas).

One idea that comes up a lot is to raise the minimum wage, or make it apply to more segments of the local or world population. At first glance, it seems obvious that if people doing the lowest-paid jobs in our society were earning more for their work, the gap between their earnings and the cost of living would be smaller. However, when you analyze the situation more carefully, the result is less clear. For one thing, according to classical economic theory, in a perfectly competitive market economy the presence of a minimum wage leads to unemployment, which could drive more people into poverty (see this Wikipedia article for a more detailed description of why). I am not sure whether this would really happen or not — economists disagree about whether this applies to the real economy — but it is a possible problem with the idea of raising the minimum wage. Another consideration is that raising the wages of the people who earn the least would certainly have some effect on prices. I’m not sure how much we could expect prices to increase, as compared to the increased earnings of the working poor, but clearly the poorest people are the most affected by price increases, and it would certainly reduce the positive impact of their higher wages. So maybe this isn’t the best idea.

Another possible method of alleviating poverty for working people is government subsidies, which could take the form of cost of living reductions (housing subsidies, food aid, free health insurance) or increases in take-home income (through tax deductions/refunds or some type of direct grant). This method might be more effective at reducing poverty than raising the minimum wage, because it should not lead to unemployment or price increases. On the other hand, sometimes people receiving government subsidies are stigmatized, and there is also the issue that subsidies may be a disincentive for people to work. One idea that I think avoids these problems is tax reform. For instance, right now in the U.S., every working person pays 6.2% of the first $92,000 earned in any calendar year for Social Security, and 1.45% of all earnings for Medicare (the employer matches these amounts). This tax could be restructured so that, for instance, the first $30,000 earned in a year was exempt from both taxes, and there was no upper income cut-off (perhaps with an adjustment of the rates), to shift the burden of this tax to those who can better afford to pay it. Alternatively, the special Social Security and Medicare taxes could be completely eliminated, and regular income tax rates adjusted to make up the revenue, because our income tax structure already ensures that people earning the most (whether from employment or investments) pay the most (loopholes aside), and people earning very little pay nothing. The current Earned Income Tax Credit also allows working poor people to receive a tax refund, which is a small direct grant to people who are working to support families; it could be increased. How about linking it to geography, and making sure that anyone working full-time (or legitimately unable to work due to disability) is brought up to at least the minimum income needed for their family to get housing, health care, child care, and food in the area where they live? I wonder how much this would cost to put into action, as compared to the rather ineffective and inefficient collection of subsidies we have now.

A third possible method of alleviating poverty among the working poor, for the longer term, is education. Now, I am a firm believer in education, and I believe that everyone in the world should have the right to a decent education. Also, statistics consistently (and not surprisingly) show that people with more education earn more, and they quickly recoup the investment of time and money spent on education. However, although I am certain that education is beneficial to the individuals receiving the education, and I believe it is beneficial to society as a whole to have a better-education world population, I am not sure that improving education will reduce poverty among the working poor in the U.S. The reason is that I don’t see how improving education will eliminate the need for the low-wage workers that are at the base of our economy — someone will still need to pick our vegetables, work in our fast-food restaurants, and clean our offices. If they are better educated, will they really earn more for types of work that do not require any special training? Possibly if the entire population were well-educated, they would demand a premium for doing boring work, but other than that, I doubt that improving education would make a big change in the poverty rates among the people doing those jobs.

On the other hand, I think increasing the education level in the developing world could have a real impact on poverty there (and on economics-based illegal immigration world-wide). This is because a higher general level of education enables a country to participate on a more equal footing in the global economy — to move from an economy based on subsistence agriculture and exporting agricultural products and natural resources, which does not provide many well-paying jobs, to one more like an industrialized nation. Several countries I am aware of in Central and South America have successfully made this transition in the last few decades, and while there have certainly been factors other than education contributing to these transitions, clearly they would have been impossible without improvements in the general level of education in those countries. There are certainly negative consequences of such transitions (such as increased energy use, probably leading to increased environmental impact), but for me, the morality of the situation is clear. The benefits to the individuals living in the developing world, if their educational systems are reformed and their economies become more industrialized, are such that we cannot morally deny them the chance for a better life.

So by all means, let’s push for better education here and around the world, to improve everyone’s standard of living in the longer term. And in the meantime, I think it’s time for something like an expanded Earned Income Credit that would bring everyone up to a basic level of income. And I think it’s time for me to find out what the current Presidential candidates are planning on doing about poverty, as well as the energy and constitutional questions I’ve been exploring in recent articles. More on that later…

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I have been thinking lately about the U.S. economy, and how it is related to poverty. Here are some thoughts:

• Many people in this country are living in poverty (see my previous article on homelessness for more detailed analysis). Some of these people are unable to work, due to physical disability, mental illness, or other factors. But many of them are working in jobs which do not earn them enough to meet the basic needs of housing, food, and health care for themselves and their families.
• Many people are living and working in this country illegally. The ones I am most aware of come here, mainly from Mexico, because they have very few opportunities for employment at home, and hope they will have a better life here. And although their life here seems very difficult by my standards, they generally say that it is much better than it would be back home.
• People in both of these categories (the working poor and the illegally employed) are staffing our fast food restaurants and grocery stores, picking our fruits and vegetables, cleaning our office buildings and hotels, and working in low-skilled manufacturing jobs. Presumably, if the illegally employed were sent home, and the working poor earned enough to live on, prices would be higher. Though perhaps that would be offset by lower taxes, as we would presumably have less need for Medicaid, Food Stamps, Welfare, Section 8, and other programs where government agencies take care of some of the basic needs of the working poor.
• Overseas, the inexpensive goods we import are being produced in ways that would not be legal here: with child labor, long workdays and work weeks, low wages, and large environmental impact. These practices also keep our prices down.

To me, it is clear that the social and environmental cost of our low prices is too high. What I am less clear about is how to reduce the social and environmental costs, and what effect it would have on our economy. I think I need to do some reading…

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I finally finished reading Chalmers Johnson’s book Nemesis: The Last Days of the American Republic, which prompted me to think about the differences between the United States that our founding fathers envisioned, and wrote into the Constitution, and the United States we are living in today. Here are some thoughts.

• The Constitution set up a system of government with a separation of powers into three branches (legislative, executive, and judicial), specifying a system of checks (each branch has the ability to hold the other two branches accountable and reign in their power) and balances (each branch holds some of the power). However, today’s executive branch has upset the balance of power, and the legislative and judicial branches are not exercising their checks on its power. For instance, the Constitution gives the legislative branch the power to declare war, but instead the President declared war and gave Congress misleading “intelligence” so they would approve his declaration. Also the President is currently asserting that he is above the law, and can detain people without charges and use domestic electronic surveillance without a warrant; although the Constitution requires the President to uphold all the laws of the land, Congress and the judicial system have allowed these actions to continue. Finally, as I discussed in an earlier article, several presidents’ use of the CIA has also gone well beyond the bounds of the Constitution.
• The Constitution also specified that the US was supposed to be a democracy. However, there is no true democracy without an informed citizenry, and (as I wrote about briefly in a previous article), we have a situation today where the executive branch regularly feeds misinformation to the media, and the media reports it as fact instead of investigating. So, the public has no basis for understanding what its elected officials are really doing, and what is really going on in our government, and we don’t really have the ability to make informed decisions on whether to retain or get rid of our elected officials.
• The Constitution also specified that the US was supposed to have a representative government, where the elected officials would represent the public interest. However, with all the money it takes to get elected and then stay in office, our “representatives” are currently representing the interests mainly of their large donors and lobbyists, not the public. I believe that if the public was really informed about the effects of our policies, they would demand better representation, but since the news media are mostly owned by large corporations, the same ones who can afford to buy representation, they don’t have much incentive to provide us with this type of information.
• Finally, in direct conflict with the principles outlined in the Declaration of Independence, stating that all people in the world have a fundamental right to self-government, the United States has become an empire whose aim is the domination of the entire planet through both economic and military means. I’ve written about these ideas in several previous articles and I believe that the evidence is clear; if you are unconvinced, read Chalmers Johnson’s book Nemesis: The Last Days of the American Republic, which documents the world-domination strategy of the military-industrial complex and the CIA, and John Perkins’ Confessions of an Economic Hit Man, which documents the methods of economic domination.

I am not certain what can be done about these issues… I think the first step would be to make sure the public is aware of what is really happening in the world, but I don’t think this will happen any time soon. For instance, the public is increasingly aware of what is going on in Iraq, but that doesn’t seem to translate into skepticism about other actions of our government. I think this is in part because the news media (as discussed above) is controlled by corporate interests that do not want the present situation to change. Also, the people in the United States who would have the means (time and ability) to seek out good information, if they wanted to, are living pretty comfortably and probably don’t have much incentive to make changes.

Probably it will take a major crisis to bring the situation to the attention of the public. Chalmers Johnson thinks that this crisis will come soon, and he may be right: the current level of military spending is not sustainable, the overseas military presence we have now is not sustainable, and clearly some people in the world are rebelling against our domination strategies. Eventually we’ll also have an acute energy crisis to deal with. The question is whether either crisis will lead to further erosion of the Constitution, or whether the public will insist that those responsible be held accountable, and demand restoration of the system of government our founding fathers envisioned. We’ll see.

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We hear a lot about global warming, technology, and energy in the news, but it’s hard to get an overall picture of our energy situation. So, I decided it was time to do some research, and I’ve collected below some information about the present and projected future of energy production and usage by the world’s people. But before I present the supporting facts, let me present my conclusions:

• Over the next few decades, if we do not drastically change our energy usage habits, we will need to find a way to generate large amounts of energy from sources other than fossil fuels, because the fossil fuels are not an infinite resource, and because using fossil fuels contributes to global warming.
• Taking into account capacity and the energy cost of producing more energy, the best potential for developing significant new energy sources lies in solar and wind power. Biofuels such as ethanol, in spite of current hype, have essentially zero potential for contributing in a positive way; other mechanisms, such as nuclear and hydropower, can contribute some, but are unlikely to make much of a difference.
• I think we need to give some serious thought to making drastic changes to our energy usage habits, especially given that the world’s population is increasing, and that as the developing world develops, the people there will tend to catch up to our levels of energy use. The transportation sector has a lot of potential for efficiency increases, which could include trip reduction, trip consolidation (mass transit for people as well as goods transport), and more efficient vehicles. The main potential for efficiency in the industrial sector is probably for people to consume and purchase less, which would also lead to a decreased need for commercial transportation. Pursuing home and commercial building efficiency is worthwhile, but since these sectors are smaller parts of the world’s energy consumption, efficiency increases in these areas are less likely to make a huge difference.
• Although technology can certainly help, major reductions in energy use in the transportation and industrial sectors will require lifestyle changes, which are difficult to promote. And while no one likes to think about it much, population control is probably one of the best means for limiting growth in energy consumption.
• Public policy can provide incentives for needed changes in both production and consumption of energy. One thing we could do is shift the focus of our energy policies: add funding for solar and wind technology, stop funding subsidies and research for biofuels, and abandon the legal hassles of trying to build more nuclear and hydroelectric plants. We could also change our tax structures to add economic costs to activities that consume energy, produce greenhouse gases, and add to the world’s population; or conversely, we could give economic benefits, through our tax structure, to energy conservation activities. And we could also replace subsidies for inefficient transportation modes (such as highways) in our government budgets with subsidies for more efficient modes (such as railroads).

So, here are the facts and reasoning behind the above conclusions. A quick note on units: In this article, energy consumption and generation are given in terms of instantaneous rate (power), in watts (W) — by “power” I don’t mean just electric power, but energy use/production in any form. 1 kW (kilowatt) = 1,000 watts. 1 MW (megawatt) = 1,000,000 watts. 1 GW (gigawatt) = 1,000,000,000 watts. 1 TW (terawatt) = 1,000,000,000,000 watts.

World Energy Usage and Projections

• According to a recent article I read in Science News (”Reaching For Rays”, only available with subscription), and the Wikipedia article “World Energy Resources and Consumption” global energy consumption happens at a rate (i.e. power) of about 13-15 TW.
• Given a world population of something over 6 gigapeople, the average person on earth is consuming roughly 2.2 kW, either directly or indirectly. However, the distribution is not equal: the United States consumes about 11 kW per person, while in the developing world, consumption is about 0.5 kW per person, according to the Wikipedia energy article cited above. China is currently using about 2.2 kW per person, but I imagine a significant fraction of that amount is used by industry that makes goods for other nations.
• The Science News article cited above projects that world energy use will double by 2050, due to population growth and development. The world’s population is expected to approximately double by that time.
• We use energy for many purposes. The US Department of Energy divides energy consumption into four sectors, and according to its Energy Outlook 2007 report, worldwide:
  • 37% of the energy we produce is for industrial uses, including agriculture, mining, manufacturing, and construction.
  • 20% is for transportation uses, including personal and commercial transportation.
  • 11% is for residential uses, including home heating, lighting, and appliances.
  • 5% is for commercial uses, including lighting, heating and cooling of commercial buildings, and water and sewer services.
  • The remaining 27% (wow!) of the energy the world produces is lost in the generation, transmission, and distribution of electricity.

Current Energy Sources and Future Potential

• According to both the Science News and Wikipedia energy articles cited above, fossil fuels (coal, petroleum, and natural gas) currently provide 86% of the energy we consume, amounting to about 13 TW of power. The earth contains finite amounts of these fuels: according to the World Coal Institute, the world’s coal reserves are equivalent to 155 years at current usage levels, our petroleum reserves are equivalent to 41 years of current usage, and our natural gas reserves are equivalent to 65 years of current usage. Using fossil fuels also leads to greenhouse gas production and global warming, so we will probably have to reduce their use in the future. In any case, if energy use grows as projected, or even if it stays at today’s level, over the next several decades we will need to come up with other sources to replace fossil fuel energy.
• We currently generate about 900 GW of nuclear power in 435 nuclear power plants, according to the Wikipedia energy article cited above. Building a new plant adds 1-2 GW of power production, which means we would have to build about 1000 new nuclear power plants worldwide to begin to generate power that would make a significant contribution to our future needs… and deal with the hassles of finding places to put them, and store the waste. The energy cost to build, operate, and de-commission a nuclear power plant (including costs to mine and dispose of the fuel) is about 1-5% of the energy the plant can expect to produce, according to this nuclear power web site, which appears to have done a fairly careful analysis, and this comparison of energy paybacks.
• Biomass (including wood, ethanol, biodiesel, etc.) is currently supplying about 260 GW of the word’s power, including fuel used for heating, but not including fuel used for cooking, according to the Wikipedia energy article. Consuming biofuels produces greenhouse gases — actually, even more than generating the same amount of energy from fossil fuels, because biofuels have lower energy content. The potential for developing more biomass power production is limited, in spite of the current hype about biodiesel and ethanol. For instance, according to this editorial by Tad Patzek, if we converted all of the US annual corn production into ethanol, we could only replace about 6% of the US annual consumption of gasoline. Of course, it also costs a significant amount of energy to produce corn and refine it into ethanol (all the analysis I have seen indicates that producing ethanol from corn costs more energy than you get out, which means it is clearly a no-win proposition). Some biofuels may actually do slightly better than break-even on energy cost, but even this is not clear. Furthermore, as the world’s population grows, we will need to use more land for food production, not convert agricultural land into biofuel production; converting more currently wild land into such uses is not an appealing possibility. So, the end result (see this video presentation for more details) is that the potential of future net biomass energy production in the world is minimal, compared to our future needs.
• The Wikipedia energy article cited above states that we currently have about 826 GW of hydropower in production. According to the Science News article cited above, there is about 500 GW of new hydroelectric power that could be developed in the world. This is fairly insignificant compared to our future needs.
• The Wikipedia energy article states that we are generating about 100 GW of geothermal power, including electric generation, direct heating, and more passive methods. I’m not sure what the future potential of geothermal power is.
• We are currently generating about 93 GW of solar power, according to the Wikipedia energy article cited above, which is mostly solar heating, and a small amount of electricity generation. The potential is much larger: according to the Science News article cited above, the total power of sunlight hitting the earth is approximately 120,000 TW. Of course, we can’t really expect to use all that energy. One reason is that solar cells are not 100% efficient at converting sunlight to usable energy (e.g. electricity) — the Science News article says the best cells today are only about 20% efficient. Also, we cannot cover the entire surface of the earth in solar cells: 75% of the earth’s surface is covered by water, and about 48% of the land area is currently being used for agricultural or forestry purposes (see this Nova web page), which we probably cannot afford to reduce, as discussed above. We probably also need to preserve some or most of the un-developed land on the planet (about half of the land total), and remote areas may not be practical locations for generating power either. So perhaps an area comparable to the 2-3% of the earth’s land currently being used for housing, industry, and roads could be devoted to solar cells, and maybe the existing buildings could have solar cells on their roofs, giving a total of about 5% coverage. That would mean a potential of about 300 TW of power, taking into account efficiency, which is certainly significant. To generate 1 TW of power (i.e. to start making a difference when compared to our current energy usage), we would need about 3700 square kilometers of solar cells. According to this article on solar-cell “payback”, with current technology, the cells have an up-front energy cost of about 20% of their eventual energy generation (which is spread over 20-40 years).
• We currently have about 58 GW being generated by wind, according to the Wikipedia energy article. The worldwide potential for wind energy is about 72 TW, according to this analysis of wind power potential, which analyzes wind speeds in comparison to those needed to run actual, available wind turbines. A typical turbine generates about 1.5 MW of power, so it we’re talking about roughly 1 million turbines before the generation becomes significant, when compared to our energy needs. The energy cost to build and operate a wind turbine is about 5% of the energy generated over its lifetime, according to this comparison of energy paybacks.

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I started this blog mostly so that I could do some research into US foreign aid and report the results, which I have been doing. But I haven’t written an article lately, and I realized that the reason was that I had really come to the conclusion that the Program Our Government Calls “Foreign Aid” (POGCFA for short) has very little to do with what you would think from its name: helping foreign countries. Instead, the POGCFA is mostly just a US corporate welfare program. So, analyzing what it is and isn’t doing well in the area of foreign aid seems to be rather pointless, and I am going to give up doing further analysis of the POGCFA and concentrate on other subjects. But before I do, here is a summary of why I think the POGCFA is not a real foreign aid program, based on my previous articles and the information sources cited by them:

• A real foreign aid program would analyze humanitarian need and send aid to the countries where the need is greatest, designated for humanitarian purposes (food, water, health care, education). But as I’ve reported in previous articles, the POGCFA does not give the most aid to the countries generally recognized to have the greatest level of humanitarian need. Also, the POGCFA spends a lot of the money it calls foreign aid on the military, drug enforcement, and economic “development” aimed at preparing foreign countries to trade beneficially with US companies, rather than for humanitarian purposes.
• A real foreign aid program would be providing aid either directly to foreign governments or better yet to humanitarian non-governmental organizations based in the countries, because they would presumably be in the best position to know what their country needs. It would also use local labor, local management, and local methods to complete projects in foreign countries, in order to provide much-needed employment, make sure most of the aid money stays in the foreign country, spend money efficiently (salaries are lower), draw upon local knowledge, and respect local cultures. However, the POGCFA is currently giving most of its aid money to for-profit companies based in the US, who conduct the projects with US personnel, so much of the money comes back into the US economy.
• A real foreign aid proram would give grants of money, and if interested in loans, concentrate on micro-credit going directly to small entrepreneurs. Instead, the POGCFA promotes large loans to foreign governments, which are terrible for the countries in the long run and provide little benefit to the average person there in the short term (see this article on loans for more information).
• A real foreign aid program would avoid getting involved in foreign politics and the governing of foreign countries. But the POGCFA demands that foreign governments accept its economic policies, supports foreign political and military groups that are willing to work for its agenda, distributes propaganda, assasinates political leaders, and in some cases simply goes into a foreign country and openly and directly takes over.

So I guess that rather than campaigning to change the current US foreign aid program, we ought to campaign to eliminate the POGCFA, and start over with a real foreign aid program based on needs, and aimed at actually helping foreign countries. What a concept!

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