Tag Archives: Recession

Food inflation is here!

Chips are disappearing from bags, candy from boxes and vegetables from cans, the New York Times warned this week. With rising costs of production and an economy that continues to lag, food inflation has arrived.

It’s not just the increase in costs for food baskets, and it’s not just Michelle Obama’s push to skinny-size America. The great American recession has hit food producers as hard as it’s hit the rest of us:

It’s called “chiseling,” and this time it doesn’t refer to your washboard abs — at least not directly. Chiseling is the practice of selling marginally smaller packages for about the same price.

If market demand doesn’t cover increased production costs for that same 6-ounce can of tuna, the manufacturer has to sell a 5-oz can. Chiseling is smart business. The alternative is to keep failing to cover costs for those same 6 ounces, and eventually go out of business.

Chiseling isn’t just smart business; the policy aligns perfectly with government priorities. First Lady Michelle Obama wants a national size-awareness campaign? Great; smaller packages mean fewer calories. Green initiatives pushing for less packaging? Fantastic; smaller boxes use less cardboard.

For consumers, food is about feeding ourselves and our families. Food producers see the market differently. Green interests, the diet industry, subsidies for sugar and wheat — these are all major hurdles manufacturers have to balance, or else face going out of business.

The US pays about $20 billion a year to farmers in direct farm subsidies. Our $60 billion/year diet industry grows about 6% annually.

With so many mixed market cues it’s a wonder the food industry hasn’t already undergone major restructuring.

The diet industry is business. Non-fat yogurt purveyors want to help dieting folks lose weight, but if everyone were happy with our girths there’d be little market for less-flavorful yogurts.

Same goes for the greenies. Ostensibly their goal is to get us all back to prehistoric emissions levels — but by printing their message in magazines and airing “green” TV ads they contribute to just the emissions build-up they caution against.

Get-fit incentives should counsel consumers to breeze right past the diet industry’s push towards unsustainable calorie counts into the healthy territory of moderation. Instead we’re seeing growth at the extreme ends of the spectrum. A nearly- $60 billion/year diet industry grows over 6% annually, while the super-sized fast food industry tops $170 billion. Just today Denny’s introduced their new maple bacon sundae for their all-bacon, all-the-time festival, “Baconalia.”

Americans are the fattest people in the world. Food production in this country is among the most artificially inflated in the world.

Smaller package sizes are frustrating for hungry folks, but small steps towards portion size deflation beats market collapse and another supersize bailout any day.

Chiseling is the first step towards more reasonable growth in America.

 

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Red State, Blue State

I just returned from my first trip to the Lone Star State, after hearing a lecture by the sweetly-libertarian junior justice on the Texas supreme court. Needless to say I am enchanted—and looking to spend a year or so in Austin if I get the chance.

Ross Douthat in the NYT:

The red-blue contrast is often overdrawn. But it’s a sensible way to understand Obama’s summer struggles. On health care, energy, taxes and spending, he’s pushing a blue-state agenda during a recession that’s exposed some of the blue-state model’s weaknesses, and some of the red-state model’s strengths. . . .

Texas looks like a model citizen. The Lone Star kept growing well after the country had dipped into recession. Its unemployment rate and foreclosure rate are both well below the national average. It’s one of only six states that didn’t run budget deficits in 2009.

Meanwhile, California, long a paradise for regulators and public-sector unions, has become a fiscal disaster area. And it isn’t the only dark blue basket case. Eight states had unemployment over 11 percent in June; seven went for Barack Obama last November. Fourteen states are facing 2010 budget gaps that exceed 20 percent of their G.D.P.; only two went for John McCain. (Strikingly, they’re McCain’s own Arizona and Sarah Palin’s Alaska.) Of the nine states that have raised taxes this year, closing deficits at the expense of growth, almost all are liberal bastions.

The urban scholar Joel Kotkin has called this recession a blue-state “meltdown.”

National Review ran a similar story, tracking soaring U-Haul prices from San Francisco to Houston against plummeting prices for the reverse trip. The Texas legislature is constitutionally permitted to meet a maximum of 143 days per year, and meets for session only once every two years. With our feet we vote for small, federalist government with an eye to the individual, but with our ballots we vote for a huge juggernaut with hands in every pocket.

The Economist looks to business practices to explain the trend reversal. Silicon Valley long enjoyed its “sexier” position, but that sexy meddling has grown bloated.

By contrast, Texas was the best state in that poll. It has coped well with the recession, with an unemployment rate two points below the national average and one of the lowest rates of housing repossession. In part this is because Texan banks, hard hit in the last property bust, did not overexpand this time . . . . Texas also clearly offers a different model, based on small government. It has no state capital-gains or income tax, and a business-friendly and immigrant-tolerant attitude. It is home to more Fortune 500 companies than any other state—64 compared with California’s 51 and New York’s 56. And as happens to fashionable places, some erstwhile weaknesses now seem strengths (flat, ugly countryside makes it easier for Dallas-Fort Worth to expand than mountain-and-sea-locked LA), while old conservative stereotypes are being questioned: two leading contenders to be Houston’s next mayor are a black man and a white lesbian.

Obviously politics, the market, and just about everything moves in cycles. Texas thrives on small business expansion and hearty big business. But the state does little for infrastructure and education. California throws money into education, but also floods the desert to farm rice more properly found in swampy paddies. Neither model spells long-term growth and sustained success. Both do, however, contribute valuable ideas—and lessons, from their past and present stumbles—that should inform national policy moving forward.

This just makes me want to live in Texas. But the larger question is: Why do we vote one way with our feet and another with our heads?

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Do Elite Colleges Produce the Best-Paid Graduates?

In these economic times, what’s the metric for choosing the highest yielding undergrad degree?  Here’s a link to the article, and here’s a link to full metric and rankings.*

Forget U.S. News’s academic rankings and Playboy’s party-school list. For some prospective college freshmen, here’s the important question: Will I make more money if I go to Harvard, or if I go to Harvey Mudd?

PayScale, a site that collects data on salaries for different professions, argues that it can help students answer that question. Today the company is releasing an updated, gigantic data set on the salaries of graduates from hundreds of universities and colleges, as well as salaries and career choices broken down by department/major.

The numbers are from 1.2 million users of PayScale’s site who self-reported their salaries and educational credentials in a PayScale survey over the last year. While the data are not from a randomized scientific sample, they are still pretty tantalizing. Here, for example, are the rankings by median mid-career salary (minimum 10 years out of school) by university:

PayScaleClick image for full methodology.

*NB: I love that Florida is listed twice, once as a “state school” and again as a “party school.”  Ahem.

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“Mancession” far fetched?

I’m a big Christina Hoff Sommers fan, but this article reek of stretching a topic too far to find some tenuous articulation to “women’s issues.”  Even if the “burly” sectors are hardest hit, that translates seamlessly to the softer side.

What do you think?

No Country for Burly Men

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Journalism Lay-offs Chill Death Row Challenges

Talk about the “seen” and the “unseen”! Death row challengers may require passionate journalists to tout their cases as much as they need lawyers to argue their pleas. When journalists (and lawyers!) are consumed w/ keeping their jobs and covering for laid-off colleagues, no one speaks for death row:

Stories that were being written three years ago that supplemented the legal work undertaken by innocence projects are just not appearing, said the director of Florida’s Innocence Project. The cuts have also hit anti-death penalty campaigns seeking to exonerate prisoners who have already been executed.

Source.

This makes me want to start a count of all the “unseen” effects of the recession. If everyone works overtime just to keep their noses clean then the creative projects once fueling the market fall apart. So it goes.

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Recessionista

I pretty much deal with the recession by powering happily forward and refusing to acknowledge the recession. Today I’ll concede for two interesting links:

The Recession can make you a better person.

Reconnecting w/ the cheap food we liked before we knew what was good for us.

And for those of you who prefer to power through, here’s a link to my new favorite site, The Happiness Project. I discovered this for the first time yesterday, but the author had me hooked when I read her advice re Controlling Your Exit, my singular evening obsession that keeps me a frequent teetotaler.

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How the Crash Will Reshape America

This article (Atlantic, March 2009) is so, so good.

Excerpts:

Whither New York?
“A crucial contributory factor in the financial centres’ development over the last two centuries, and even longer,” writes Cassis, “is the arrival of new talent to replenish their energy and their capacity to innovate.” All in all, most places in Asia and the Middle East are still not as inviting to foreign professionals as New York or London. Tokyo is a wonderful city, but Japan remains among the least open of the advanced economies, and admits fewer immigrants than any other member of the Organization for Economic Cooperation and Development, a group of 30 market-oriented democracies. Singapore remains for the time being a top-down, socially engineered society. Dubai placed 44th in a recent ranking of global financial centers, near Edinburgh, Bangkok, Lisbon, and Prague. New York’s openness to talent and its critical mass of it—in and outside of finance and banking—will ensure that it remains a global financial center…

New York is much, much more than a financial center. It has been the nation’s largest city for roughly two centuries, and today sits in America’s largest metropolitan area, as the hub of the country’s largest mega-region. It is home to a diverse and innovative economy built around a broad range of creative industries, from media to design to arts and entertainment. It is home to high-tech companies like Bloomberg, and boasts a thriving Google outpost in its Chelsea neighborhood. Elizabeth Currid’s book, The Warhol Economy, provides detailed evidence of New York’s diversity. Currid measured the concentration of different types of jobs in New York relative to their incidence in the U.S. economy as a whole. By this measure, New York is more of a mecca for fashion designers, musicians, film directors, artists, and—yes—psychiatrists than for financial professionals.

The great urbanist Jane Jacobs was among the first to identify cities’ diverse economic and social structures as the true engines of growth. Although the specialization identified by Adam Smith creates powerful efficiency gains, Jacobs argued that the jostling of many different professions and different types of people, all in a dense environment, is an essential spur to innovation—to the creation of things that are truly new. And innovation, in the long run, is what keeps cities vital and relevant.

This reminds me of this trustafarian first cities concept. Growth requires that people are inspired, which requires that they’re not living to the very Nth degree of their ability. Simply put: If we all have to work 80 hours a week to eke out room and board, there’s no way we’re going to produce art, smarts, or business plans. So in DC, where a huge percent of folks are lawyers (of all things!) we’re just a hare’s breath away from a fight at all times, but not producing anything. It makes sense that growth requires some divine spark, which requires in turn the vitality and relevance Florida extracts from Jane Jacobs, all stemming–as vital, relevant economics is wont to do–from Adam Smith.

And on Suburbanization:

Suburbanization—and the sprawling growth it propelled—made sense for a time. The cities of the early and mid-20th century were dirty, sooty, smelly, and crowded, and commuting from the first, close-in suburbs was fast and easy. And as manufacturing became more technologically stable and product lines matured during the postwar boom, suburban growth dovetailed nicely with the pattern of industrial growth. Businesses began opening new plants in green-field locations that featured cheaper land and labor; management saw no reason to continue making now-standardized products in the expensive urban locations where they’d first been developed and sold. Work was outsourced to then-new suburbs and the emerging areas of the Sun Belt, whose connections to bigger cities by the highway system afforded rapid, low-cost distribution. This process brought the Sun Belt economies (which had lagged since the Civil War) into modern times, and sustained a long boom for the United States as a whole.

But that was then; the economy is different now. It no longer revolves around simply making and moving things. Instead, it depends on generating and transporting ideas. The places that thrive today are those with the highest velocity of ideas, the highest density of talented and creative people, the highest rate of metabolism. Velocity and density are not words that many people use when describing the suburbs. The economy is driven by key urban areas; a different geography is required.

Image from The Atlantic

Image from The Atlantic

And finally one of Florida’s brilliant suggestions:

As homeownership rates have risen, our society has become less nimble: in the 1950s and 1960s, Americans were nearly twice as likely to move in a given year as they are today. Last year fewer Americans moved, as a percentage of the population, than in any year since the Census Bureau started tracking address changes, in the late 1940s. This sort of creeping rigidity in the labor market is a bad sign for the economy, particularly in a time when businesses, industries, and regions are rising and falling quickly.

The foreclosure crisis creates a real opportunity here. Instead of resisting foreclosures, the government should seek to facilitate them in ways that can minimize pain and disruption. Banks that take back homes, for instance, could be required to offer to rent each home to the previous homeowner, at market rates—which are typically lower than mortgage payments—for some number of years. (At the end of that period, the former homeowner could be given the option to repurchase the home at the prevailing market price.) A bigger, healthier rental market, with more choices, would make renting a more attractive option for many people; it would also make the economy as a whole more flexible and responsive.

I will save my full comments until post distraction period, but I love Florida’s suggestion to change foreclosure procedures. It seems so obvious for the banks to keep raising capital through rental rather than hold empty, rapidly em-blight-ing homes empty just to spite the now-homeless previous owners. This would help the banks stay in business, and it would help homeowners pushed from the more-urban-than-the-next-marginal-alternative areas that the author stresses are key to economic (and social! and technological!) growth and expansion.

And let me take this opportunity to note that I’m doing my part to keep Americans nimble; I’ve single-handedly ratcheted up the “moves per year” average among my friends — to the extent, in fact, that I have been accused of having sand in my shoes.

Such a brilliant article!

NB: Omigawd, I didn’t realize that this was the same guy who wrote about the Creative Class…AND he taught at Mason!

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