In Case You Missed It

As in David Nutt, (former) chairman of the Advisory Committee on the Misuse of Drugs (ACMD) in the UK, has been fired for doing his job. Isn’t it great to know that we haven’t made any progress since Galileo was forced to renounce his work and writings concerning the theories of Nicolaus Copernicus, who had suggested that the sun, not the Earth, was the center of the universe almost 400 years ago? Somehow this case seems even more totalitarian. A scientist, whose job is to give advice on drug law, has lost his job for giving the advice he was hired to give because it doesn’t fit in with the government’s get tough on drugs sales pitch to the deluded public. Yes, it’s not only America where you have to blow the populist trumpet hoping that the semi-literate masses will vote for you come election day, the UK it seems is every bit as bad.

It’s even worse knowing that things weren’t always so bad for the Labour Party and the UK. In fact it was only 2004 when the government actually listened to the advice given to them by their drug experts and downgraded cannabis from a Class B to C (the UK uses a system where A is the most harmful illegal drug and C the least). Since the reclassification didn’t result in an upswing of smokers and in fact saved an estimated 199,000 police hours, this action had its predictable reaction - the tabloid press hard sell along the lines of “drugs are bad, how can you be doing this to our children? Will someone please think of the children!” - this time mostly revolving around a scare story involving new and improved skunk weed which was so potent it caused psychosis. Enter a new British PM losing popularity by the day who is easily influenced by the polling numbers and suddenly you had the leader of a nation saying things like, “I think people know my view about cannabis and particularly about this lethal version of it, skunk.” Before you know it, the UK found itself back where it started, busting 72-year-old milkmen for delivering weed to old ladies as the government re-upgraded cannabis to Class B in January earlier this year. Of course this move came despite a report at the time from the ACMD recommending that cannabis remain a Class C drug.

So, what do you do when you are a scientist whose job it is to help formulate drug policy by providing unbiased scientific evidence only to see your work ignored? You try to draw attention to your cause, attempting to influence public opinion with facts and evidence; much to the dismay of the British government, David Nutt has been quite good at this. He was head of the team who devised a radical new system for classifying drugs - one based on harm to individuals and society instead of old-wives tales. Ultimately, it was this stance that forced Nutt’s resignation as he once again tried to remind people that drugs such as alcohol and tobacco are more harmful than LSD, ecstasy or cannabis. Additionally, he released a paper pointing out that ecstasy, a Class A drug, is in fact more benign activity than equestrianism. This latter report earned him a rebuke from his boss in the government, Jacqui Smith, the Home Secretary at the time.

The influence of the tabloid press in Britain is something I don’t claim to understand very well. I picture it as having a British version of the Fox News effect in the US, an important tool in ensuring that the semi-literate view the world through a haze of confusion. In the correspondence between Nutt and Home Secretary Alan Johnson, the man responsible for demanding Nutt’s resignation, Johnson practically admitted that misinforming the public is part of the plan. Johnson’s letter to Nutt stated, “I cannot have public confusion between scientific advice and policy and have therefore lost confidence in your ability to advise me as chair of the ACMD.” Huh? Really? If ministers care so little for independent scientific advice, maybe they should save public money by sacking the entire group of experts and instead appoint a committee of tabloid editors. After all, rags like the Daily Mail are onside with the firing, publishing an article comparing Agassi smoking crystal meth to the ‘nutty’ Professor Nutt. Why do they love that term drug tsar so much?

The pandering of the current Home Secretary to the tabloid press is another sad example of the disconnect between public policy and facts. Alan Johnson and his government now face a mass revolt from the official drug advisory board. As resignations begin to come in, one has to wonder if this is actually what the government wants. Nasty facts get in the way, especially when your nation is facing an epidemic of addiction to legal prescription drugs - there are over 1.5 million over-the-counter addicts in the UK today. Who knows, maybe it’s a Scientology plot? Far be it for me to suggest that simply legalizing cannabis would be some kind of panacea but it would be nice if government policy, in all areas, were determined by facts instead of fear. Reefer Madness, here we go again.

Protectionism. And Poland and Poznan, where I call home these days. While waiting for the tram the other day I noticed an ad for a popular magazine in these parts, Wprost, kind of a Polish version of Time if you will. My rudimentary Polish allowed me to decipher the gist of the cover story, which basically boiled down to “Buy Polish”. A subtle sign, but, in case you missed it, protectionism is back and ready to reek havoc on the globalization dream of the neo-liberal economic movement. P is also for patriotism, a bullet proof cloak that protectionists love to drape around themselves, especially in times of crisis. It may sound strange for me to admit it, but one thing the neolibs have right in theory is that the free flow of goods and services around the globe can benefit the world. Without open markets each country wastes resources producing goods in which it has a comparative disadvantage, and consumes too little of imported goods. Of course we’ve never actually got to the point of true free trade, all trade is managed, but the pendulum is about to start swinging toward protectionism again.

When the Group of 20 countries met in mid-November, everyone agreed to “refrain from raising new barriers” to trade or investment over the following 12 months. Showing how much the agreement meant, India increased tariffs on steel, iron and soybeans a few days later. The APEC leaders made a similar pledge that same month. However, promises quickly lose their authority when the world seems to be collapsing and workers are being thrown out of work en masse. Recent economic downturns have had global trade as a major engine of growth to help pull the world’s economies out of recession, Japan in the 80’s, China after 9/11, however, this time is different. The similarities to 1931 keep popping up, this time it’s trade barriers.

While it’s a stretch to compare the current US stimulus package with the Smoot-Hawley Tariff Act of 1930, which raised tariffs on over 20,000 imported goods, there is a clause that raises alarm bells. The stimulus package contains a “Buy American” rider, the American Steel First Act, which would ensure that only US-made steel will be used in $64 billion of federally funded infrastructure projects. The as-yet-unpassed senate bill is even worse as it stipulates that all stimulus-funded projects use only American-made equipment and goods. Trade war anyone? Combine this with the anti-NAFTA rhetoric thrown around during the election campaign and we’ve got a recipe for disaster. There’s already rumblings up north about the clause as Canadians feel they’re being unfairly left out of the bidding extravaganza. Along with the rest of the world, they see the move as another example of the US trying to force the world to follow one set of rules while creating another rulebook for themselves. The tipping point will come and the resulting domino effect of retaliatory trade barriers will prove disastrous for world trade and the global economy.

Back in December the World Bank released a forecast that world trade would fall for the first time since 1982, 2.1%, compared to growth of almost 10% in 2006 and the estimated 6.2% for 2008. Smoot-Harley wreaked havoc on trade, with US imports from Europe declining from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Overall, world trade declined by some 66% between 1929 and 1934. Need an effect to match with the cause? US unemployment in 1930, before the passage of the bill was at 7.8% in 1930, jumped to 16.3% in 1931, 24.9% in 1932, and 25.1% in 1933. The latest US unemployment number, 7.2%. Add to that the importance of international trade to the economy today compared to then. In 1930 global trade as a percentage of GDP was in the single digits, in 2007 it hit $16 trillion, equal to 31 percent of world GDP. Another factor was brought up in Davos on Satuday by British PM Gordon Brown. The Institute of International Finance predicted capital flows to emerging markets would slow to $165 billion in 2009 from a record $929 billion two years ago. “What you’re seeing is a form of financial protectionism where banks retreat to their home base,” Brown said. French finance minister Christine Lagarde said at a Jan. 31 press conference in Davos that bank bailouts and fiscal stimulus plans are “implicit protectionism.” Additionally, the binge of new borrowing by the US and other central governments will surely put a squeeze on on other borrowers, in terms of a shortage of available financing and higher long term interest rates.

Much of the world is focusing their attention on China as countries look for ways to boost national economies. With America and the world already pointing fingers at what is perceived to be currency manipulation to maintain an exporting edge, Chinese officials announced a series of measures to boost domestic production last month. State banks are being directed to lend more to exporters, government research funds are being set up and a measure to provide $12 billion worth of letters of credit to Hong Kong exporters. This comes at a time when American quotas on many Chinese garments have just expired on the heels of a WTO challenge in which the US accuses China of providing illegal subsidies. Meanwhile Indonesia has imposed a series of measures that will make it harder to import Chinese goods. Train producers are crying foul, claiming the Chinese market is closed to importers while at the same time Chinese manufacturers are using technology acquired from western companies on the condition it not be used in production meant for export for just that purpose.

There are many other signs sprouting up of the growing tide of protectionist policies. Ecuador announced it was lifting tariffs across the board, with the levy on imported meat jumping from 25% to 85.5%. India raised steel tariffs and Russia has boosted levies on imported cars. France has pledged $7.6 billion to shield home industry from “foreign predators“. “British jobs for British workers“, a slip of the tongue by British PM Gordon Brown a couple of years back is coming back to haunt him as strikes rage across Britain, with much of the fury aimed at foreigners. France was paralyzed on Thursday by a nationwide strike, Greece has seen mass riots along with a few other EU members. You may be asking yourself where is the WTO in all this? I thought we had agreements in place to stop just such a thing from happening. Nope. The rules have too many loopholes such as not requiring government stimulus plans to be open to all bidders.

The next meeting of the so-called Group of 20 comes in April. By then the world should have erected enough barriers of trade to make the Great Wall look like child’s play. True free trade with an even playing field creates certain economic advantages. Unfortunately, what has been created over the past 60 years courtesy of GATT through the WTO, along with the World Bank and the IMF, is a playing field so tilted that it finally fell over. Sadly, instead of ending a system where an EU cow receives more in government subsidies than half of the world’s population earns in daily wages, about $2, the focus will continue to be on throwing money at the banking system. Of course the WTO is trying to maintain calm, releasing a 14-page report last week claiming “there has been only limited evidence so far of increases in tariffs or non-tariff barriers, or increased resort to trade remedy actions“; the EU and China are pretending to play nice, while doing exactly what the WTO claims isn’t happening, placing new duties and lodging anti-dumping complaints, the Doha dream suddenly seems beyond reach.

Some idea of the vicious circle of these protectionist measures can be illustrated by the increase in tariffs being imposed by the EU on Chinese fasteners. Duties will rise from 63% to 87% on 200 different kinds of screws and bolts. So not only could China consider retaliatory measures, but the cost of producing everything using those fasteners in Europe will go up, from cars to DIY projects. This increases the price to the ultimate consumer, leaving them poorer than they would have been without the duties, thus reducing their spending on other goods. While the Obama administration is seen by the world as a breath of fresh air, there is a waft of the musty, protectionist policies of the past. Anti-NAFTA talk and Chinese currency manipulation were themes of his campaign while Treasury Secretary-designate Timothy Geithner is an outspoken critic of China’s yuan policy. Aid to US auto-makers and now the stimulus package with it’s “buy American” clause, a flag waving, trade war instigating, global economy killer. Could it be that the Democrats really don’t know how economics works? Well, I suppose that would make them just like the rest of us.

As passed by the House, Section 1110 of the American Recovery and Reinvestment Act of 2009 says, “None of the funds appropriated or otherwise made available by this act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron and steel used in the project is produced in the United States.”