Feds Force Farmers to Let Tons of Cherries Rot

LigonLeonardCherryFarmer2009-09-07.jpg “Leonard Ligon, a farmer near Traverse City, Mich., stands in mounds of tart cherries that he had to dump because of a price-stabilization program. Mr. Ligon says he discarded 72,000 pounds of the crop.” Source of photo and caption: online version of the WSJ article quoted and cited below.

(p. A5) Farmers in Michigan and six other states are harvesting a bumper crop of tart cherries. But the bounty is turning out to be the pits for farmers whose fruit is rotting in orchards instead of bubbling in cherry pies.

Under a Depression-era federal program designed to keep prices from plummeting, tart-cherry farmers are being told by fruit processors to leave up to 40% of their crop unharvested.
“It’s kind of heartbreaking,” said Rob Manigold, a tart-cherry farmer near Traverse City, Mich. Michigan grows about 75% of all the tart cherries in the U.S.
. . .
The tart-cherry industry operates under a government-sanctioned plan called a federal marketing order that dates to 1933. It allows farmers and processors to legally regulate supply to keep prices stable. Other commodities that operate under similar programs include some types of dates, olives and kiwifruit.
. . .
This year, the industry board, a 18-member panel of growers and processors, determined that there were more than enough cherries in the fields to satisfy demand and to replenish the reserves. So the board limited how much processors can put on the market in the U.S. That leaves farmers with cherries they can’t sell and are left to rot.
Bern Kroupa, a 61-year-old fruit farmer outside Traverse City in Michigan’s northern lower peninsula, said this year he is going to let about a quarter of his crop — about 500,000 pounds — rot.
. . .
Leonard Ligon, another tart-cherry grower near Traverse City, Mich., generated a lot of local press last week when he dumped 72,000 pounds of cherries alongside a country road on his farm. “I wanted to make the public aware of the plight of the tart-cherry farmer,” he said. “I could call it a mulch pile.”

For the full story, see:
LAUREN ETTER. “Bumper Cherry Crop Turns Sour; Tons of Unharvested Fruit Rots Under Government Program to Keep Prices Stable.” The Wall Street Journal (Sat., AUGUST 22, 2009): A5.
(Note: ellipses added.)

Global Warming Laws May Increase Food Prices

(p. A5) Some of the nation’s biggest food and agriculture companies are planning to release a flurry of studies in coming weeks that scrutinize the potential impact of climate-change legislation, warning that it could lead to higher food prices.
. . .
In a letter sent last month to Sens. Barbara Boxer, the California Democrat, and Republican James Inhofe of Oklahoma, the coalition said the House bill “will increase food and feed prices and reduce the international competitiveness of our businesses.”
The letter said Congress “must take extreme care to avoid adverse impacts on food security, prices, safety, and accessibility to necessary consumer products.” The letter also criticized the House bill for failing to provide transitional assistance to “low-income households struggling with rising food prices.”
When the group’s studies are released, possibly by the end of August, they are likely to reignite tensions between food and ethanol producers that have raged since 2007 when Congress passed energy legislation that gave a big boost to the corn-ethanol industry.
The food industry has complained that the energy bill pushed up prices for corn and other key food ingredients that resulted in higher consumer prices as the ethanol industry siphoned more corn to make ethanol.

For the full story, see:
LAUREN ETTER. “Food Firms Fret Over Potential Impact of Climate Bill; Coalition, Including Agricultural Giants, Plans to Draw Attention to Concerns That Legislation Could Lead to Higher Food Prices.” The Wall Street Journal (Weds., Aug. 13, 2009): A5.
(Note: ellipsis added.)

Omaha’s MidAmerican Energy “Is Ready to Assist BYD’s Foray into the U.S. Auto Market”

WangChuanfuBYDchairman2009--09-7.jpg “Wang Chuanfu, the chairman of Chinese auto maker BYD, with one of the company’s cars at the automobile show in Detroit in January.” Source of photo and caption: online version of the WSJ article quoted and cited below.

(p. B5) XIAN, China — BYD Co., the Chinese auto maker part-owned by Warren Buffett’s company, is finalizing plans for an all-electric battery car that would be sold in the U.S. next year, ahead of the original schedule, Chairman Wang Chuanfu said.
. . .
One source of Mr. Wang’s confidence in attacking the U.S. car market is BYD’s ties with MidAmerican Energy Holding Co., the unit of Mr. Buffett’s Berkshire Hathaway Inc. that paid about $230 million for a 9.9% stake in BYD.
MidAmerican Chairman David Sokol, who was also interviewed in Xian, said MidAmerican is ready to assist BYD’s foray into the U.S. auto market in “any way we could be helpful.” MidAmerican also might invest in BYD’s new initiatives in the U.S., which, in addition to automobiles, could involve solar panels and battery technology for power utilities.
Mr. Sokol also said MidAmerican hopes to boost its BYD stake if the chance arises. “If in the future there is an opportunity for us to continue to invest in BYD, we will be happy to increase our stake over time, but we will do it in cooperation with BYD,” he said. Mr. Wang said an increase is “negotiable.”

For the full story, see:
NORIHIKO SHIROUZU. “BYD to Sell Electric Car in U.S. Market Next Year.” The Wall Street Journal (Sat., AUGUST 22, 2009): B5.
(Note: ellipsis added.)

Obama Industrial Policy Risks Funding Dead Ends

(p. B1) President Obama has cast himself as a reluctant interventionist in two of the nation’s major industries, Wall Street and Detroit. The federal aid, he says, is a financial bridge to a postcrisis future and the hand-holding will be temporary.

Even so, the scale of the government investment and control — especially by the auto task force now vetting plans at Chrysler and General Motors — points to an approach that has been shunned by the United States more than other developed nations.
“By any coherent definition, this is industrial policy,” said Marcus Noland, a senior fellow at the Peterson Institute for International Economics.
. . .
(p. B7) . . . a more comprehensive, industrial-policylike approach to Detroit carries its own perils, economists say. In trying to manage the industrial shrinkage, they say, there is a fine line between easing the social impact and protecting jobs in ways that inhibit economic change and renewal. In pursuit of new growth, governments risk encouraging overinvestment in areas that prove to be technological dead ends.
In the Japanese experience, economists see evidence of both dangers. Problems, they say, are typically byproducts of what economists call “political capture.” That is, an industrial sector earmarked for special government attention builds up its own political constituency, lobbyists and government bureaucrats to serve that industry. They slow the pace of change, and an economy becomes less nimble and efficient as a result.
Economists say the phenomenon is scarcely confined to nations with explicit industrial policies and cite the history of agricultural subsidies in America or military procurement practices.
But going down the path of industrial policy certainly holds that risk. “You have to bear in mind the opportunity costs of these kinds of government interventions, and remember that life is not an economic textbook and that politics can easily override economic rationality,” said Mr. Noland, an author, with Howard Pack, of “Industrial Policy in an Era of Globalization: Lessons From Asia.”

For the full story, see:
STEVE LOHR. “Highway to the Unknown; Forays in Industrial Policy Bring Risks.” The New York Times (Weds., May 19, 2009): B1 & B7.
(Note: the online title is “In U.S., Steps Toward Industrial Policy in Autos.”)
(Note: ellipses added.)
The full reference to Noland and Pack’s book is:
Noland, Marcus, and Howard Pack. Industrial Policy in an Era of Globalization: Lessons from Asia, Policy Analyses in International Economics. Washington, D.C.: Peterson Institute, 2003.

Electric Mitsubishis and Nissans May Leapfrog Hybrid Toyotas

(p. B6) Both Nissan and Mitsubishi have their own reasons for rushing out an all-electric car. Having invested little in hybrids, they hope to leapfrog straight to the next technology.
. . .
“You don’t see many competing technologies survive in a key market for very long,” said Mr. Shimizu, the Keio University professor.
And more often than not in the history of innovation, a change in the dominant technology means a change in the market leader.
“Electric cars are a disruptive technology, and Toyota knows that,” Mr. Shimizu said. “I wouldn’t say Toyota is killing the electric vehicle. Perhaps Toyota is scared.”

For the full story, see:
HIROKO TABUCHI. “The Electric Slide.” The New York Times (Thursday, August 20, 2009): B1 & B6.
(Note: The online version of the article had the title: “Toyota, Hybrid Innovator, Holds Back in Race to Go Electric.”)
(Note: ellipsis added.)

Four Month Wait for Blood Test in Brits’ Government Health Care

(p. 6) Founded in 1948 during the grim postwar era, the National Health Service is essential to Britain’s identity. But Britons grouse about it, almost as a national sport. Among their complaints: it rations treatment; it forces people to wait for care; it favors the young over the old; its dental service is rudimentary at best; its hospitals are crawling with drug-resistant superbugs.

All these things are true, sometimes, up to a point.
. . .
Told my husband needed a sophisticated blood test from a particular doctor, I telephoned her office, only to be told there was a four-month wait.
“But I’m a private patient,” I said.
“Then we can see you tomorrow,” the secretary said.
And so it went. When it came time for my husband to undergo physical rehabilitation, I went to look at the facility offered by the N.H.S. The treatment was first rate, I was told, but the building was dismal: grim, dusty, hot, understaffed, housing 8 to 10 elderly men per ward. The food was inedible. The place reeked of desperation and despair.
Then I toured the other option, a private rehabilitation hospital with air-conditioned rooms, private bathrooms and cable televisions, a state-of-the-art gym, passably tasty food and cheery nurses who made a cup of cocoa for my husband every night before bed.

For the full commentary, see:
SARAH LYALL. “An Expat Goes for a Checkup.” The New York Times, Week in Review Section (Sun., August 8, 2009): 1 & 6.
(Note: the online title is “Health Care in Britain: Expat Goes for a Checkup.”)
(Note: ellipsis added.)

Clunker-Like Subsidies May Mainly Affect Timing of Purchases

(p. A6) The next program to test the effect of government funds comes this fall. Consumers who buy high-efficiency appliances such as refrigerators, washing machines and dishwasher can receive rebates of up to $200 on certain products; no trade-ins would be required. The $300 million program was included in the $787 billion stimulus law.

As with the clunkers program, it’s unclear whether the rebate program will offer anything more than a short-term economic boost.
“The people who will most like likely respond to this are the people who need appliances, and they were probably going to buy appliances anyway,” said Erik Hurst, an economist at the University of Chicago’s Booth School of Business. “If all you’ve done is move that from tomorrow to today, then the economy is going to lag even more tomorrow.”

For the full story, see:
SUDEEP REDDY. “Dealers Get More Time to File for Clunker Rebates.” The Wall Street Journal (Weds., AUGUST 25, 2009): A6.

Economists “Mistook Beauty, Clad in Impressive-Looking Mathematics, for Truth”

PlanglossianEconomistsCartoon2009-09-06.jpg Source of caricatures: online version of the NYT article quoted and cited below.

Nobel Prize winner Paul Krugman is no friend of the free market, and more importantly, his manner of dealing with opponents is a long way from gracious civility.
But he is not always completely wrong:

(p. 36) Few economists saw our current crisis coming, . . .
. . .
(p. 37) As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth.

For the full commentary, see:
PAUL KRUGMAN. “How Did Economists Get It So Wrong?.” The New York Times, Magazine Section (Sun., September 2, 2009): 36-43.
(Note: ellipses added.)

DissentingEconomistsCartoon2009-09-06.jpgThe economist on the left is probably intended to resemble Keynes, but he also bears some resemblance to Hayek. Source of caricatures: online version of the NYT article quoted and cited above.

“Axel Springer Has Dared to Compete with Itself”

The European newspaper publisher Axel Springer, discussed in the story quoted below, appears to be following the advice of Christensen and Raynor in their book The Innovator’s Solution. In that book, they suggest that incumbent firms need to be willing to set up units that compete with their older business models, if they hope to survive the introduction of disruptive innovations.

(p. B4) PARIS — As the death toll in the American newspaper industry mounted this month, the German publisher Axel Springer, which owns Bild, the biggest newspaper in Europe, reported the highest profit in its 62-year history.
. . .
Axel Springer generates 14 percent of its revenue online, more than most American newspapers, even though the markets in which it operates — primarily Germany and Eastern Europe — are less digitally developed than the United States.
One reason, Mr. Döpfner said, is that Axel Springer has dared to compete with itself. Instead of trying to protect existing publications, it acquired or created new ones, some of which distribute the same content to different audiences.
At one newsroom in Berlin, for example, journalists produce content for six publications: the national newspaper Die Welt, its Sunday edition and a tabloid version aimed at younger readers; a local paper called Berliner Morgenpost, and two Web sites.

For the full story, see:
ERIC PFANNER. “European Newspapers Find Creative Ways to Thrive in the Internet Age.” The New York Times (Mon., March 29, 2009): B4.
(Note: ellipsis added.)

The Christensen and Raynor book mentioned above, is:
Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

Let Venture Capitalists Invest Their Own Money in Entrepreneurs

(p. A17) Venture-capital funds deal solely with privately purchased equity securities in start-up companies, which are not traded in public markets. They have as their limited partners only people who meet the S.E.C.’s definition of a “qualified client” (meaning they possess a substantial amount of money to invest). These investors, who typically allocate a small percentage of their portfolios to venture capital, are familiar with risk, but it is long-term risk, stretching out 7 to 10 years. They put their faith not in publicly traded securities but in entrepreneurs, emerging technologies and new markets.

Because their business is contained within the ecosystem of limited partners, venture-capital funds and the companies in which they invest absorb all the risk: there can be no domino effect in the world financial system.
. . .
It would be a shame to impose any new limits now, when venture capital is the asset class that can best help build and nurture the companies that bring about growth and job creation. The figures are compelling. In 2008, venture-backed companies that went public in previous years accounted for 12.1 million jobs and $2.9 trillion in revenues for the United States Treasury.
The names of companies financed by venture capital are legendary: Cisco, Google, Facebook, Apple, Federal Express, Staples, Yahoo, Amazon, Genentech and on and on. The privately purchased equity securities that helped start these companies supported new technological and scientific ideas, all of which led to new jobs.

For the full commentary, see:
ALAN PATRICOF and ERIC DINALLO. “Stopping Start-Ups.” The New York Times (Mon., August 31, 2009): A17.
(Note: ellipsis added.)

Government Regulations Stifle Creative Venture Capital

(p. A9) This is a good time to recall that the venture-capital industry was born as a reaction to New Deal regulations that stifled capital and prolonged the Depression. The country’s first venture-capital firm (other than family-run funds) was American Research and Development, planned in the 1930s and launched after World War II in Boston.

Its leader was longtime Harvard Business School professor Georges Doriot, who is the subject of a fascinating recent biography, “Creative Capital,” by Spencer Ante. Mr. Ante, a BusinessWeek editor, tells me that as he researched the topic “one of the most surprising things I learned was how concerned financiers and industrialists had become about the riskless economy in direct response to the New Deal. Even in the 1930s, people understood that small business was the lifeblood of the economy.”
American Research and Development backed early-stage companies deemed too risky by banks and investment trusts at the time. The firm was an early investor in Digital Equipment Corp., the Boston-area company that revolutionized computing.
Despite financial success, the history of the firm is a reminder that our regulatory system, by its nature focused on avoiding risk, has a hard time dealing with investment firms whose mission is to take risks. Doriot was a well-known name in commerce and academia from the 1940s through the 1970s. He was the first French graduate of Harvard Business School, a founder of the INSEAD business school and a leading adviser to the U.S. military.
But even as a pillar of Boston’s commercial and academic worlds, Doriot had many run-ins with federal regulators. Over the years, regulators dictated compensation for the American Research and Development staff, tried to force disclosure of the performance of its early-stage companies, and second-guessed how it tracked the valuations of its investments.
The Securities and Exchange Commission hounded the company so often that Doriot once wrote a three-page memo saying, “ARD has more knowledge of what is right and wrong than the average person at the SEC.” He was prudent enough not to send it. He did mail another memo to the SEC enforcement office in Boston, in 1965: “I rather resent, after 20 years of experience, to have two men come here, spend two days, and tell us that we do not know what we are doing.”
. . .
No venture capital firm has asked to be bailed out, and none are too big to fail. As hard as it is for regulators to understand, the nature of venture capital is such that it should not even aspire to be a low-risk enterprise

.

For the full commentary, see:

L. GORDON CROVITZ. “No Such Thing as Riskless Venture Capital; New regulations could retard the innovation our economy needs.” The Wall Street Journal (Weds., AUGUST 9, 2009): A19.

(Note: ellipsis added.)