GRI Equity Review - February 2006

Venture Capital

Whole Food Markets says it will drop the Fresh & Wild name when it starts opening its first Whole Foods stores in Britain next year.  It bought Fresh and Wild last year and appears to be reengineering the business model to reflect its US approach.  While this will probably work it is strange that they do not keep the current model and brand which is currently successful and appeals to buyers that do not want to be in a supermarket.  This may leave the way open for a Fresh & Wild imitator to grow.

We noted a couple of VC transactions in education: Providence Equity Partners and Goldman Sachs Capital Partners have agreed to acquire Education Management Corp. (Nasdaq: EDMC), a  provider of private post-secondary education. The total transaction is valued at approximately $3.4 billion, with EDMC common shareholders receiving $43 per share. Leverage will be provided by Credit Suisse, Goldman Sachs, Merrill Lynch and Bank of America, while Education Management was advised by Merrill Lynch. www.provequity.com www.gs.com www.edmc.com  Also, Apax Partners has acquired a minority stake in The Learning Annex, a New York-based provider of adult self-improvement education. No financial terms were disclosed.  www.learningannex.com

The VC hype in the middle east was illustrated at the first meeting of the Gulf Venture Capital Association in Manama, Bahrain where one analysts noted 21 venture capital and private equity funds seeking to raise at least $17 billion by the end of 2006.  This ballooning of interest is reflected in industrial growth too as oil revenues boosted by higher prices over the past year have funneled huge amounts of cash into the region.

Another U.S. venture-capital  firm is moving into the increasingly competitive China market.  Ignition Partners, the boutique Bellevue, Washington, firm founded by several former Microsoft Corp. executives, has hired Gary Rieschel, the founder of Silicon Valley’s Mobius Venture Capital, and Duane Kuang, the former director of Intel Capital China, to help run a new $200 million China investment fund.

For those interested a China VC gathering takes place in Shenzhen on April 7th: China Venture Capital Forum 2006 Program.

Fiona Harvey of the FT reports that its a good time to be a green entrepreneur as interest continues to grow.  Her article quotes a number of key players both industrial and financial.

In the UK, Treasury and Revenue & Customs are considering substantial tax rate increases on private equity firms, according to a letter sent to members of the British Venture Capital Association. The news was first reported by The Sunday Times.

To get an rss feed of PE Week wire please go here.

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Interest Rates and Currencies

Interest rates in Europe were increased by 1/4% and many analysts expect further increases.  There is also talk of rates increasing in Japan now that the economy seems to be well on the mend.  And US increases are expected to continue as inflation jumped to 4% in January.  Higher food, car and electricity costs also pushed US producer prices up by more than expected in January with the producer price index rising by 0.3% during the month, above forecasts for a 0.2% rise. Separate figures also suggested that US consumer sentiment unexpectedly weakened in early February, hit by low stock prices and higher gasoline costs as the University of Michigan's preliminary consumer sentiment index for February fell to 87.4 from 91.2 in January.

These increases are putting pressure on mortgage borrowers.  If the housing market does become depressed there will be knock on effects in general consumer spending (because consumption is being buoyed by home equity withdrawals), in housing related sectors like construction and estate brokerage, and in banking where the pain might be very significant as mortgage assets are 60% of US bank assets - a long term high. 

The housing market appears buoyant.  US home prices rose 12.95% on average in 2005, despite a string of mortgage rate rises, says the Office of Federal Housing Enterprise Oversight (OFHEO). Home values in the fourth quarter were up 2.86% on the previous period, at an annualised rate of 11.4%.  Analysts have been predicting that the five-year US housing boom is slowing.  But despite indications of a slowdown, "house price appreciation during 2005 continued to hover at near-record levels," said OFHEO in a statement.  Also, the US has recorded the fastest pace in construction of new houses for more than 30 years with the Commerce Department's building activity index rising 14.5% in January, pushing construction to an annual rate of 2.27 million units (the fastest rate of growth since March 1973, but expected to be a one-off blip caused by unusually warm weather in January). The 14.5% rise in building activity in January followed a 6.9% fall in December.

But this buoyancy may not last.  Interest rates have risen from 1% to 4.5% over the past 18 months and while this does not seem to have slowed the housing market it has certainly increased its sensitivity to shocks.  And as John Mauldin notes that the January 2006 Monthly U.S. Foreclosure Market Report by RealtyTrac , the leading online marketplace for foreclosure properties, shows 103,540 properties nationwide entered some stage of foreclosure in January, a 27% increase from the previous month and a 45% increase from January 2005. The report shows a continuing upward trend in which the national foreclosure rate rose in every quarter of 2005.

America is saying "so long" to its old greenback $10 bill and "howdy" to other colours.  The US Treasury's $10 bill has a host of anti-counterfeiting tricks - such as many more colours, new watermarks and dozens of tiny 10's all over the design.The new, harder-to-counterfeit bill in reds, yellows, oranges and greens entered US circulation at the end of February.  The $10 makeover follows similar colourisation of the $20 bill in 2003 and the $50 note in 2004. The $100 bill one of the most popular with counterfeiters - is due to be redesigned in 2007, but there are no plans to change the $1, $2 or $5 notes, yet.

Trade and FDI

Welcome to the world of block-thy-neighbour protectionism.   We have seen a rapid escalation from Cartoon War to Trade War - sparked by cartoons, Danish products have been boycotted in many places.  The French have blocked a bid by Italian firm Enel for energy company Suez and claim a pre-dated discussion with Gaz de France.  Cries of concern have been raised in the US over the acquisition of the management contracts for 6 ports by a Dubai company.  Even the EU has hamhandedly drafted cross-border regulation of trade in services which is restrictive to new members preventing them from considering supplying the older core members.   Meanwhile the US has managed to get a WTO ruling preventing EU states from banning GM foods!

The short historical story from PPI clearly shows why protectionism does not help.  The Smoot-Hawley Act of 1930 is one of the few Jazz Age policies (apart from Prohibition) to call up echoes in modern America.  It attempted to protect American economy by raising barriers to imports.  For example from 1922-1929 the U.S. egg tariff was 8.0 cents per dozen, in 1930 it was 10.0 cents per dozen.  This initially was a rise in egg tariff of about 30% but as egg prices fell the ratio rose to over 70% completely hindering trade.  Between 1930 and 1932, Australia, Britain, Canada, Cuba, Denmark, India, Italy, France, Germany, Mexico, New Zealand, Spain, Sweden, Switzerland, and others retaliated. By 1933, American exports had dropped from $5 billion to $1.2 billion, and imports dropped equally fast. Total world trade, according to statistics kept by the League of Nations, fell from $68 billion in 1929 to $24 billion by 1933.

The innuendo against Arabs has grown in Washington as the tumult over allowing a Dubai-based conglomerate to operate six U.S. ports continues.  In handling the Dubai ports affair, the US Administration has displayed a refreshing shift from their security apparatus which has singled out most individuals with Arab names, including toddlers and infants, who enter any U.S. airport. While the UAE government may be critisised for legitimate reasons, such as human trafficking, discriminatory security concerns are not appropriate.   It appears that politicians, commentators and the public are increasingly confused about what they want.

In several eastern European capitals, the sombre reality about the future of service liberalisation in the European Union has been sinking in. The east Europeans have realised that they were short-changed by a vote in the European parliament in February that places heavy restrictions on the free movement of services. The goal of the services directive was to remove national barriers. Its main instrument was the country-of-origin principle, which placed service providers under the legal and regulatory control of their home country. The European parliament managed to get rid of this principle altogether, but left some minor bureaucratic improvements in place. For example, service providers will no longer have to carry identity documents with them, or need to establish an office in the host country. But these small advantages will be more than offset by the directive's protectionism. There is a long list of excluded sectors, ranging from healthcare to gambling and lotteries. Governments can also impose restrictions on grounds of public safety, social security, health and the environment. Most importantly, they can enforce domestic employment law and collective agreements.

Most worryingly, however, is the continuing saga of liberalisation of GMO.  For many sound reasons we see liberalisation of the use of GMO in Europe and globally as a far more dangerous risk to global prosperity than the Iraq war.  The outcome of the complaint by the US, demanding that EU states be prohibited from restricting GMOs, is still not clear.  While the US has claimed a victory in their application to prevent EU states individually banning the planting of GMO, Friends of the Earth has pointed out that the ruling does not prevent countries from restricting or banning GMOs. Friends of the Earth today made available online a confidential World Trade Organisation (WTO) ruling on the trade dispute on genetically modified (GM) foods.  The 1000-page WTO report, distributed in February only to the countries involved in the dispute, was leaked to Friends of the Earth, which has published a preliminary analysis.  The leaked report reveals that:  Despite claims of victory by the US Administration and the biotechnology industry -widely reported in the media in February 2006 - the three countries that started the trade dispute against the European Union (US, Canada and Argentina) failed to win most of their arguments; and The World Trade Organisation did not rule on two of the most important questions before it, namely whether GM foods are effectively the same as non-GM foods, and if they are safe. The WTO report is available online:   http://www.foei.org/media/2006/WTO_report_descriptive.pdf  and  http://www.foei.org/media/2006/WTO_report_findings.pdf.  The Friends of the Earth preliminary analysis is online at http://www.foei.org/media/2006/WTO_briefing.pdf

The WTO was also in the headlines in connection with the possible inclusion of Russia.  Oil revenues are now making Russia an ever more attractive place to do business. And bringing Russia into the WTO is an oft-repeated foreign-policy goal of Russian President Vladimir Putin and President Bush. While US movie companies and music makers claim that theft of intellectual property in Russia is unparalleled and a wide spectrum of American businesses, including beef, poultry, and pork producers, and banks and insurance companies, have problems in the Russian market, the combination of oil, Bush and Putin might be enough to get Russia its seat at the trade table.

For trade specialists, you may wish to engage in the Oikos Model WTO on June 12 to 16, 2006 in St. Gallen/Geneva, Switzerland.  Check it out here: www.modelwto.org

Another new resource is the Global Evian Trade Update.  GETUp! is the Evian Group at IMD’s new quarterly publication to inform members of the Evian Group community of the association’s ongoing initiatives, publications and positions.

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Energy

While France and Italy have started bickering about the fate of Suez, Gaz de France and Enel, European Union competition boss Neelie Kroes has said that Europe's gas and electricity industries face a crackdown on anti-competitive behaviour and must open up.   An investigation, which started last summer, looked at whether energy firms on the continent had colluded to keep prices high. Without naming any companies at this stage, Kroes said a number of firms now faced separate investigations and urged energy businesses to look at their own practices and make any necessary changes.  In the UK, Ofgem chairman Sir John Mogg said "Where the report has found evidence of market abuse, we welcome the Commission's commitment to pursue such cases urgently and vigorously".

Also noted below in Activities, energy specialists are encouraged to read Fueling the Future edited by Heintzman and Solomon which presents a broad ranging discussion of various energy futures including authors from traditional sectors and alternative fuels.

Climate Change and Environment

Research commissioned by The Independent reveals that the accumulation of greenhouse gases in the atmosphere has now crossed a threshold, set down by scientists from around the world at a conference in Britain last year, beyond which really dangerous climate change is likely to be unstoppable. A crucial global warming "tipping point" for the Earth, highlighted only in mid-February by the British Government, has already been passed, with potentially devastating consequences.  The implication is that some of global warming's worst predicted effects, from destruction of ecosystems to increased hunger and water shortages for billions of people, cannot now be avoided, whatever we do. It supports the contention by the green guru Professor James Lovelock that climate change is now past the point of no return.  The danger point we are now firmly on course for is a rise in global mean temperatures to 2 degrees above the level before the Industrial Revolution in the late 18th century.

At the moment, global mean temperatures have risen to about 0.6 degrees above the pre-industrial era - and worrying signs of climate change, such as the rapid melting of the Arctic ice in summer, are already increasingly evident. But a rise to 2 degrees would be far more serious. By that point it is likely that the Greenland ice sheet will already have begun irreversible melting, threatening the world with a sea-level rise of several metres. Agricultural yields will have started to fall, not only in Africa but also in Europe, the US and Russia, putting up to 200 million more people at risk from hunger, and up to 2.8 billion additional people at risk of water shortages for both drinking and irrigation. The UK Government's conference on Avoiding Dangerous Climate Change, held at the UK Met Office in Exeter a year ago, highlighted a clear threshold in the accumulation of greenhouse gases such as carbon dioxide (CO2) in the atmosphere, which should not be surpassed if the 2 degree point was to be avoided with "relatively high certainty." 

This was for the concentration of CO2 and other gases such as methane and nitrous oxide, taken together in their global warming effect, to stay below 400ppm (parts per million) in CO2 terms - or in the jargon, the "equivalent concentration" of CO2 should remain below that level. The warning was highlighted in the official report of the Exeter conference, published in February.  However, the CO2 equivalent concentration, largely unnoticed by the scientific and political communities, has now risen beyond this threshold. One of the world's leading experts on the effects of greenhouse gases on climate, Professor Keith Shine, head of the meteorology department at the University of Reading, has calculated the equivalent concentration of C02, taking in the effects of methane and nitrous oxide at 2004 levels, is now 425ppm. This is made up of CO2 itself, at 379ppm; the global warming effect of the methane in the atmosphere, equivalent to another 40ppm of CO2; and the effect of nitrous oxide, equivalent to another 6ppm of CO2.

 "The passing of this threshold is of the most enormous significance," said Tom Burke, a former government adviser on the green issues, now visiting professor at Imperial College London. "It means we have actually entered a new era - the era of dangerous climate change. We have passed the point where we can be confident of staying below the 2 degree rise set as the threshold for danger. What this tells us is that we have already reached the point where our children can no longer count on a safe climate." Professor Burke added: "We have very little time to act now. Governments must stop talking and start spending. We already have the technology to allow us to meet our growing need for energy while keeping a stable climate. We must deploy it now. Doing so will cost less than the Iraq war so we know we can  afford it."

At the same time as the study by The Independent was being released, scientists presented at the annual meeting of the American Association for the Advancement of Science in St Louis, US results from a study by Nasa and University of Kansas researchers, which were also reported in the journal Science.  The study shows that Greenland's glaciers are sliding towards the sea much faster than previously believed.  It was thought the entire Greenland ice sheet could melt in about 1,000 years, but the latest evidence suggests that could happen much sooner, implying that sea levels will rise much faster as well. The comprehensive analysis found that the amount of ice dumped into the Atlantic Ocean has doubled in the last five years.  If the Greenland ice sheet melted completely, it would raise global sea levels by about 7m. Rising surface air-temperatures seem to be behind the increases in glacier speed in the southern half of Greenland since 1996; but the northward spread of warmer temperatures may be responsible for a rapid increase in glacier speed further north after 2000.  More on this here.

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IT

UK consumers bought £8.2 billion ($14.3 billion) of goods online last year - up 28.9% on 2004, according to market analysts Verdict. Shoppers spent an extra £1.8 billion online last year compared with 2004 and internet shopping is closing in on the £9.4 billion spent in department stores in 2005. The online shopping community grew by 25.5% to 14.6 million people between 2004 and 2005.  The surge in "e-retail" means online shopping is now winning its biggest-ever slice of the UK retail market. Overall UK retail sales grew by just 1.5% in 2005 - the slowest rate since the early 1960s. One of the biggest growth sectors in online shopping is among the over-55s, with numbers almost doubling to 2.7 million users between 2004 and 2005. And the amount spent by this sector rose 46.7% to an average £ 458 per head, while shoppers aged 35 to 44 are the biggest spenders, accounting for £ 3 in every £ 10 of retail sales. 

The Electronic Frontier Foundation said the latest version of Google Desktop posed a risk to privacy and warned against using this  software which lets people organise and find information on their computers.  This is because a feature in the software lets Google keep personal data on its servers for up to 30 days. Google says it plans to encrypt all data transferred from users' hard drives and restrict access.  Google is battling efforts by the US Department of Justice to force it to hand over data about what people are looking for. Some of Google's main competitors have already complied with the request for details about people's search habits. The case has focused attention on the issue of personal information held by internet companies. "Coming on the heels of serious consumer concern about government snooping into Google's search logs, it's shocking that Google expects its users to now trust it with the contents of their personal computers," said EFF staff attorney Kevin Bankston. "Unless you configure Google Desktop very carefully, and few people will, Google will have copies of your tax returns, love letters, business records, financial and medical files, and whatever other text-based documents the desktop software can index. The government could then demand these personal files with only a subpoena rather than the search warrant it would need to seize the same things from your home or business," he said. 

Google's new Desktop Search could prove to be the biggest government invasion of privacy of all time. The new tool lets you store your desktop data on Google servers. So when the feds come with a subpoena (or without one, as they frequently do), they'll be able to search through your PC's files. The technology behind the new features is certainly clever, and there's a great deal to be said for it. If you store your data on Google servers, you'll be able to do a search on that PC wherever you are. So if you're traveling, or at another PC, you get immediate access to your data. But that comes at a serious price. Google says that your data will be kept private, but keep in mind that Google also complies with most subpoenas from the government, and so it may be forced to turn over your data to the feds or other law enforcement officials if they come calling. The other issue, of course, is whether Google will be able to keep your data safe from snoops and hackers. It has a very good track record so far -- but who knows what the future holds?   This is a bad enough problem for individuals. But it's far more dangerous for enterprises, because sensitive corporate data is housed on many PCs in an organization. 

Last month we noted Google's kowtowing to Chinese government pressure to rewrite history by screening their China search. These links say it all:

Search Tiananmen at Google Images:   http://images.google.com/images?q=tiananmen
Now search Tiananmen at Google China:   http://images.google.cn/images?q=tiananmen

In another issue concerning the power of Google, the giant could be forced to change its image search service following a court ruling in the US.  A federal judge said that the Google was likely to have violated copyright by displaying small images from the adult magazine Perfect 10. Google had argued that the thumbnail images constituted fair use. The case reflects the growing discrepancy between technological change and the legal system, in particular over copyright and fair use. The case highlights issues of copyright in a digital age. Google in particular has faced a barrage of complaints for linking to copyrighted material online via its news aggregator and its book search service.  For an insightful comment read Nigel Morris-Cotterill's view here.

RightMarch and MoveOn hold diametrically opposite positions in the political spectrum. To bring these two rival political action committees to a common ground usually requires a staggeringly horrifying event taking place.  This time, it's the proposed fees for delivering bulk email to opt-in recipients that MoveOn and RightMarch find difficult to swallow. Computerworld reported how a new coalition sponsored by the Electronic Frontier Foundation will bring the two together along with other interested groups.

Microsoft is giving the EU the runaround on releasing information relating to its anti-competition case.  With potential fines of € 2 million a day to avoid they can afford a few lawyers to obfuscate issues.  As the company states "Hundreds of Microsoft employees and contractors have worked for more than 30,000 hours to create over 12,000 pages of detailed technical documents".  Microsucks claims that the 75 page report it has handed in addresses concerns.  However, the company has not complied with the demand to release computer code to enable competitors software to work properly in Windows.  They have called for an oral hearing that must be held before any fines can be imposed.

The monopolist has released information on their proposed revamp of Windows to be called Vista - there will be 8 versions!  While some complain that there are "too many" versions("distributions") of Linux, if you're the person using one particular Linux, you're glad that choice exists. Free markets have a way of finding the right balance. Enough people must be happy with each of these specific offerings to make them viable products, which means there are a lot of people happy with that specific product and who are glad it exists. The key is not fewer OS choices, but rather to have better interoperability between many more choices, which is why monopolies like Microsoft fight against interoperability.

Following are some very interesting miscellaneous tech data contained in the new "Global Technology/ Internet Trends" report by Morgan Stanley:

• North America accounted for 66% of all Internet users in 1995, for only 23% in 2005.

• South Korea is the most broadband-friendly country in the world: 70%+ penetration.

• At the end of September 2004 there were 193 million broadband subscribers globally (63 mm in Asia, 47 mm in North America).

• In 2004, cell phone users sent 1.1 trillion SMS messages, generating 50 billion USD in revenues for the operators.

• More e-mails are sent in Japan via mobile than via PC.

• In Denmark, VoIP minutes > landline voice minutes.

• 27% of US Internet users read blogs (November 2004).

• Annual ringtones sales (May 2005): 3 billion USD. Cumulative iTunes sales (Sept 2005): 559+ million USD.

• In Sept 2005 PayPal had 87 million accounts, 25 million users.

• "New Economy" is back: Google+Yahoo+eBay+Yahoo Japan+Amazon's valuation in 2000 (Nasdaq peak): 178 billion USD; in January 2006: 332 billion. (Google was not public in 2000, so the researchers included 100 million USD in post-money valuation).

• In 2001 (most recent year for which data are available) US industry spent more on tort litigation (USD 205 billion) than on R&D (USD 148 billion).

• Annual engineering graduates 2004: USA: 76'000; India: 184'000; China: 352'000; Rest of the world: 1'007'000.

• Convergence is happening: nearly 10% of Yahoo IM sessions end in a phone call.

• China: 363 million cell phone subscribers (2005).

• Peer-to-Peer traffic was 60% (and rising) of Internet traffic in 2004 (half of which BitTorrent).

And Gartner has also released interesting data on changing habits:  Spam as a percentage of e-mail was 60% in 2003 and is expected to hit 75% next year and employees are migrating toward other workplace communication tools.

	2003	2007
E-mail	90%	75%
Instant messaging	8%	15%
Wikis and blogs	2%	10%

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Holonics and LOHAS

Holonics * Health * Environment * Education * Living

Holonics

Below is an article by Harold James. Its reproduced here because it presents a concise view of increasing risks our world faces and how they may be resolved.  It offer big picture thinking in a readable, realistic scenario.  James, professor of history and international affairs at the Woodrow Wilson School, Princeton University, is author of The Roman Predicament to be published in May by Princeton University Press.  (Highlighting is ours.)

Modern America in a Roman predicament Before September 11 2001, it was widely assumed that globalisation bred peace and stability. But over the past five years, there has been increased nervousness about this concept in many parts of the world. It is not worry about the state of the world economy, which has proved amazingly robust, but about the framework for world governance. In particular, there is widespread mistrust of the world’s only superpower and increased doubt about the sort of politics that America tries to impose on the rest of the world. As the Bush presidency gets bogged down in the quagmire of Iraq, there is still a widespread assumption that there might be a quick and easy fix. Critics of the administration think that the world’s view of America would be transformed if only the US president sounded kinder. Many officials in Washington believe that if the world understood all they really wanted was peace, prosperity and democracy, the criticism would subside. Such optimistic beliefs are mistaken but are characteristic of an ever-recurring dilemma of an interconnected world. Consider some historical parallels: in 1776, the year of the US Declaration of Independence, Adam Smith and Edward Gibbon published the first volumes of two works that both used history to illuminate Britain’s own problems with the globalisation of that age: The Wealth of Nations and The Decline and Fall of the Roman Empire. In these monumental and parallel works, Smith and Gibbon explored what could be called the “Roman dilemma”. In essence, how peaceful commerce is frequently seen as a way of building a stable, prosperous and integrated international society. At the same time, however, the peaceful liberal economic order leads to domestic clashes and also to international rivalry and even wars. The conflicts disturb and eventually destroy the commercial system and the bases of prosperity and integration. These interactions seem to be a vicious spiral or a trap from which it seems almost impossible to escape. The liberal commercial world order subverts and destroys itself, and Smith’s gloomy (but surprisingly little known) concluding chapters are a long way from the apparently optimistic beginning, with its focus on the immense productivity gains possible as a result of the division of labour. The central problem identified by Gibbon and Smith is that complex societies need rules to function, whether on a national (state) level or in international relations. But we do not always comply voluntarily with rules and rules require some enforcement. In addition, they need to be formulated. The enforcement and the promulgation of rules are both consequences of power, and power is always concentrated and unequally distributed. Even when we think of voluntarily negotiated rules, there is the memory of some act of power, the long shadow of a hegemonic strength – the shadow of Rome – falling on the negotiators. The propensity for subversion and destruction of a rule-based order comes about because – and whenever – there is a perception that rules are arbitrary, unjust and reflect the imposition of particular interests in a high-handed imperial display of power. Yet both options look like different aspects of the old but unsatisfactory Roman solution: conquer and provide prosperity. There is only a difference in emphasis. The first is arrogantly belligerent and the second arrogantly patronising. Both recommend more power and more modernisation. There exists an alternative to the “challenge and response” model that has as its outcome the clash of civilisations. The other path depends on dialogue within a shared natural law framework. Instead of thinking that technical development will automatically produce prosperity and thus solve, as it were by a kind of magic, the problem of values, policymakers in the industrialised world need to think and talk explicitly about values and traditions. What does Islamic tradition have in common with western traditions that respects human dignity; and how can modern America show that it respects these values too? Resolving the issue of the Guantánamo Bay detentions would be an obvious first step to showing how America can accept as well as invent universal values.

In the UK, a landmark investigation into why women lag badly behind men in pay has called for a change of culture in schools and workplaces.  The Women and Work Commission concluded that the gender pay gap is worse in Britain than anywhere in Europe and found that women in full-time work were earning 17% less than men.  The report, however, failed to recommend compulsory pay reviews to ensure women are not being paid less than their male counterparts. Katherine Rake, of sponsor Fawcett Society, said "There is widespread discrimination within the system and there's plenty of research to back that up".  Unfortunately changing culture is not easy and depends on a change in values by the population.  That is happening, though not as quickly as is needed to keep up with the complexities of modern technology and society.

Health

Bird flu has spread through Europe and worries are increasing. Blame has been placed on small holders and migrating birds but it seems that the problem is driven more by intensive farming and international trade practiced by industrial agri-business. It seems to be in the interest of agribusiness to find a scape goat so that their credibility among consumers is not destroyed.  A pandemic whose cause is principally blamed on agribusiness giants would devalue their shares and cause changes in legislation.  Today they are making money and it is a significant part of business; if their methods are discredited their business would face a significant downside risk.  Small holders and migratory birds, two groups unable to speak for selves, are being blamed, but there is little evidence to support that view.  Evidence increasingly points to outbreaks in industrial units where conditions exacerbate the catalysation of virulent forms of the virus.

As the Economist reports:

A research paper in Proceedings of the National Academy of Sciences, published online on February 10th, shows that the H5N1 virus has persisted in its birthplace, southern China, for almost ten years and has been introduced into Vietnam on at least three occasions, and to Indonesia. The authors suggest that such transmissions are perpetuated mainly by the movement of poultry and poultry products, rather than by migrating birds.

This is significant because it strongly supports bird conservationists, who have been arguing that most outbreaks in South-East Asia can be linked to movements of poultry and poultry products, or infected material from poultry farms, such as mud on vehicles or people's shoes. Conservationists also argue that live animal markets have played an important role in the H5N1's spread. Such markets were the source of the first known outbreak in Hong Kong in 1997 when 20% of the chickens in live poultry markets were infected.

Grain also offers a clear analysis of the poultry industry's central role in the bird flu crisis:

Backyard or free-range poultry are not fuelling the current wave of bird flu outbreaks stalking large parts of the world. The deadly H5N1 strain of bird flu is essentially a problem of industrial poultry practices. Its epicentre is the factory farms of China and Southeast Asia and -- while wild birds can carry the disease, at least for short distances -- its main vector is the highly self-regulated transnational poultry industry, which sends the products and waste of its farms around the world through a multitude of channels. Yet small poultry farmers and the poultry biodiversity and local food security that they sustain are suffering badly from the fall-out. To make matters worse, governments and international agencies, following mistaken assumptions about how the disease spreads and amplifies, are pursuing measures to force poultry indoors and further industrialise the poultry sector. In practice, this means the end of the small-scale poultry farming that provides food and livelihoods to hundreds of millions of families across the world. This paper presents a fresh perspective on the bird flu story that challenges current assumptions and puts the focus back where it should be: on the transnational poultry industry. 

According to the International Association for the Study of Obesity (IASO), global fattening poses an equal threat to global warming! On every continent childish waistlines are expanding, driven by low-energy lifestyles and high-energy foods. New estimates published suggest that the proportion of school-age children in Europe who are obese has risen almost 50% since the late 1990s and will nearly double to 6.4 million by 2010. The number who are overweight is expected to grow by 1.3m a year to a total of 26m across the EU in four years time, more than one in three of the child population. Similar increases in child obesity have been seen in north and south America, the Middle East and the Pacific Region. As prosperity grows, so do bottoms.

Meanwhile health labels are to be put on some of the biggest-selling food brands in the UK because of growing fears about the crises of obesity and diet-related illnesses.  Five of Britain's largest food manufacturers will announce an agreement today to place labels on the front of all their products, including Walkers crisps, Dairylea, Shredded Wheat and Kit Kat. The companies, Danone, Kellogg's, Kraft, Nestle and PepsiCo, have been under pressure to be more open about the nutritional values of their wares.

But there is hope.  Also in February, reports suggested the West's passion for fast food may be on the turn with restaurant closures announced by McDonalds in the UK and a collapse in profits at Britvic.

In the UK, a total ban on smoking in almost all enclosed public spaces will come into force in summer 2007.

On World Water Day, 22 March 2006, the Globalisation Institute will be releasing Water for Life a report focusing on water poverty.  Water poverty, the report says, is arguably the most serious problem the world faces. But the fight against water poverty is marred by ideological opponents of markets putting ideological purity before water purity. The empirical evidence is clear: in the majority of cases, privatisation has led to significant investment, increased access to water and sanitation, reduced costs for ordinary people, and improved public health.  But, still today, over a billion people worldwide do not have access to safe drinking water, and 2.6 billion people have no sanitation facilities. More than two million people die each year from diarrhoea, and over six million people are blind as a result of trachoma, a disease strongly related to lack of face washing. In Sub Saharan Africa, 42% of the population lacks access to decent water.

Environment

As noted in the section on Trade, the spread of GMO continues to threaten. The World Trade Organisation (WTO) released a draft ruling on the trade dispute over GM food imports. This US-led dispute claims the EU's policy on GM food imports is a barrier to free trade and that it's illegal under WTO rules. George Monbiot discusses these Enemies of Science.

One of the greatest fears is the transgenic mutation of Monsanto's Terminator gene technology - plants that are genetically engineered to produce sterile seeds - which would potentially wipe out nature (because plants can't reproduce)!  in 1999 the world's largest seed and agbiotech company made a landmark public promise not to commercialize "Terminator Technology".  It turns out you can't trust Monsanto. Now, seven years later, Monsanto seems to have changed its mind. It says it may develop or use the so-called "suicide seeds" after all. A newly revised pledge from Monsanto now suggests that it would use Terminator seeds in non-food crops and does not rule out other uses of Terminator in the future.

In February, a coalition of farmers, consumers and environmentalists filed a lawsuit against the US Department of Agriculture (USDA) over its decision to grant approval of genetically modified alfalfa. The suit contends that the USDA improperly allowed the commercial release of GM alfalfa, the world’s first release of a GM perennial crop, and failed to analyse the public health, environmental and economic consequences of the release.  The suit asserts that the GM alfalfa is likely to contaminate natural alfalfa and ultimately prevent farmers from producing natural, non-GM alfalfa for markets that demand it. Buyers in Japan and South Korea, America’s major alfalfa customers, have already made it clear that they will avoid US alfalfa if a GM variety is given the go ahead.  South Dakota alfalfa seed farmer, Pat Trask, said: “I’m outraged that genetically engineered alfalfa will contaminate the South Dakota seed that has been developed over generations.”  In addition to the commercial threat posed by the USDA’s decision, the lawsuit also highlights unique risks to the environment. The GM alfalfa is designed to tolerate high doses of glyphosphate, the active ingredient in Monsanto’s Roundup herbicide. But 83% of US alfalfa (according to family farm campaign group the Cornucopia Institute) is grown without herbicide. Some experts believe that GM alfalfa could lead to massive increases in herbicide use on alfalfa.

Bayer and BASF are among the first companies worldwide to sign the Responsible Care Global Charter, aimed at minimizing the environmental impact of chemicals developed by the health care industry.  This is rather ironic as BASF is applying to grow GM potatoes in Ireland despite public protest.  This application was described as "evil" and "the biggest rip-off in the history of the State".  GM Free Ireland is covering this closely and the EPA has presented documents online.

In a similar vein, rushed EU organic regulations revision risks a "corporate takeover". The European Commission was warned that its proposed revision of the EU Organic Regulation could end up "dumbing down" organic standards and damaging local markets.

Forest Trends has raised the concern that illegal logging and corruption in Papua New Guinea are destroying the largest remaining tract of primary tropical forest in the Asia-Pacific region.  Malaysian interests dominate the multi-million dollar logging industry while much of the timber is processed in China for consumption in Europe and North America. Working conditions are described as "modern-day slavery," while forests were effectively being "logged out," the international non-profit organisation said in its report "Logging, Legality and Livelihoods in Papua New Guinea". The report summarises findings from five independent reviews of the timber harvesting industry conducted since 2000 for the PNG government and the World Bank.

Bottled water consumption, which has more than doubled globally in the last six years, is a natural resource that is heavily taxing the world's ecosystem, according to a study by the Earth Policy Institute.  "Even in areas where tap water is safe to drink, demand for bottled water is increasing, producing unnecessary garbage and consuming vast quantities of energy," according to Emily Arnold, author of the study. Arnold said although in the industrial world bottled water is often no healthier than tap water, it can end up costing 10,000 times more. "At as much as 2.50 dollars per liter (10 dollars per gallon), bottled water costs more than gasoline," the study says. It added that the United States was the largest consumer of bottled water, with Americans drinking 26 billion liters in 2004, or about one eight-ounce (25 cl) glass per person every day. Mexico was the second largest consumer at 18 billion liters followed by China and Brazil at 12 billion liters each. In terms of consumption per person, Italians came first at nearly 184 liters, or more than two glasses a day, followed by Mexico and the United Arab Emirates with 169 and 164 liters per person respectively. Belgium and France follow close behind and Spain ranks sixth.   The study said that demand for bottled water soared in developing countries between 1999 and 2004 with consumption tripling in India and more than doubling in China during that period.

One bottled water company, Ethos Water, has drawn attention to the issue by making a donation of 5c per bottle to poverty alleviation.

Education

A study presented to the American Association for the Advancement of Science focussed on the developmental benefits of a nurturing environment at a young age. Denying children love and affection in the earliest months of life can have a lasting impact on their intellectual, emotional and physical development. The first systematic comparison of abandoned children raised in orphanages and foster homes in Romania reveals how severe deprivation at a critical young age continues to affect progress years later.  Early neglect appears to affect behaviour most. When children are taken into foster care after spending their first months in an institution, they remain highly prone to such problems of conduct as aggression and hyperactivity. Measurements of brain activity show that it remains much lower than normal in children who have been institutionalised early in life, even at the ages of three and four. Children placed in orphanages for any length of time show stunted growth, low IQs and poor emotional development compared with those in normal families. The findings offer evidence that the brain requires special nurture and attention at a very young age if it is to develop normally.

Science continues to rewrite history.  A 'Jurassic beaver' that was paddling around before the hey-day of the dinosaurs is changing scientists' view of early mammals. Well-preserved fossil remains of the creature, which lived 164 million years ago, were discovered in China. Like modern beavers, it had fur, a broad scaly tail, and swimmer's webbed feet. It also had forelimbs adapted both for burrowing and swimming, and seal-like teeth designed for eating fish. The advanced features are leading scientists to rethink the early evolution of mammals. They indicate that mammals had already begun to specialise and move into new environments long before the dinosaurs' reign ended 65m years ago. Previously it was thought that mammals only really began to develop and diversify once dinosaurs became extinct.

The International Facility Management Association (IFMA) has announced a collaborative agreement with the Alliance for Sustainable Built Environments to develop and deliver sustainability educational programmes, as well as provide research and planning tools.  The Alliance for Sustainable Built Environments is a group of industry leaders who practice and are recognized for leadership in economic, social, and environmental responsibility. Since 2003 the Alliance, which includes the international companies Johnson Controls, Milliken & Company, Forbo Flooring, Philips Lighting, JohnsonDiversey, and Owens Corning, has been working to educate the marketplace and top management on the benefits of reducing the overall impact facilities have on the natural environment and on building occupants. IFMA/Alliance programming and activities will include a number of environmental metrics, including the U.S. Green Building Council's LEED (Leadership in Energy and Environmental Design) programs, Energy Star, Climate Leaders, and others.

Consider surfing to Professor Hans Roling's www.gapminder.org and browse through the animations. Gapminder is a non-profit venture for development and provision of free software that visualise human development. This is done in collaboration with universities, UN organisations, public agencies and non-governmental organisations.

Living

Last month, the US Supreme Court halted the execution of a man in Florida to consider whether chemicals used in lethal injections violated a constitutional ban on cruel and unusual punishment and in February California has postponed indefinitely the execution of a convicted killer over ethical issues surrounding the method of death by lethal injection.  Prison authorities failed twice within 24 hours to find qualified medics to administer the drugs to Michael Morales in a jail near San Francisco. He is now back on Death Row while the state reviews its policy on how to carry out lethal injections.  Lethal injection is the most widely used method in the US, although some offer inmates the choice of alternatives like electrocution or the gas chamber. Thirty-eight of the 50 US states and the federal government permit capital punishment.  Morales' lawyers had successfully called for anaesthesiologists to be present, arguing that he would suffer extreme pain because of the mix of drugs in the three-part injection. But the two court-appointed doctors withdrew, causing it to be delayed. They had objected to a court ruling which ordered them to intervene in the event that Morales woke up or appeared to be in pain, calling it "ethically unacceptable".  "We are really relieved to see we will now have a careful review of the issues," said Natasha Minsker, a lawyer for the American Civil Liberties Union.

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Activities, Books and Gatherings

February was exciting though hectic with more travelling than expected and new ventures growing in VC and business support.  The growing season is also starting up in the garden with early seeds being planted like broad beans and tomatoes.

I picked up Spiral Dynamics by Beck and Cowan again and read the second half.  It is a great piece of work providing a practical tool kit for personal and organisation development.  If you are interested in management, HR, psychology or business development you should read it.

I also finally picked up Fueling The Future edited by Heintzman and Solomon.  This gift from my brother-in-law has been sitting on my desk for a couple of months but once I cracked it I found it to be a valuable addition to understanding the energy challenges facing earth today.  With articles by a wide range of experts in various aspects of the energy industry a balanced view can be gleaned.  This should be read by anyone involved in energy industries, especially investment in alternatives, or carbon trading.

II enjoyed Pratchett's Hogfather which cleverly explores the fantasies we create to help us stay sane in a world we don't understand. I've also worked half-way through Pratchett's Jingo which brilliantly builds the tension of politics over nothing!

Black Eyed Peas recently released the album "Monkey Business", which I enjoyed. In particular the lyrics to one song "Union" (a translation of yoga) which Neil Crofts has diligently transcribed:

[Chorus]
(One for all, one for all)
(It's all it's all for one)
Let's start a union, calling every human
It's one for all and all for one
Let's live in unison, calling every citizen
It's one for all and all for one

We don't want war- can't take no more
It's drastic time for sure
We need a antidote and a cure
Coz do you really think Mohammed got a problem with Jehovah
We don't want war – imagine if any prophet was alive
In current days amongst you and I
You think they would view life like you and I do
Or would they sit and contemplate on why
Do we live this way, act and behave this way
We still livin' primitive today
'Cause the peace in the destination of war can't be the way
There's no way, so people just be a woman, be a man
Realise that you can change the world by changing yourself
And understand that we're all just the same
So when I count to three let's change

[Chorus]

Got no time for grand philosophy
I barely keep my head above the tide
I got this mortgage, got three kids at school
What you're saying is the truth that really troubles me inside
I'd change the world if I could change my mind
If I could live beyond my fears
Exchanging unity for all my insecurity
Exchanging laughter for my tears

[Chorus]

I don't know, y'all, we in a real deposition
In the midst of all this negative condition
Divided by beliefs, differences and religion
Why do we keep missing the point on our mission?
Why do we keep killing each other, what's the reason?
God made us all equal in his vision
I wish that I could make music as a religion
Then we could harmonise together in this mission
Listen, I know it's really hard to make changes
But two of us could help rearrange this curse
Utilising all the power in our voices
Together we will unite and make the right choice
And fight for education, save the next generation
Come together as one
I don't understand why it's never been done
So let's change on the count of one

It takes one, just one
And then one follows the other one
And then another follows another one
Next thing you know you got a billion
People doing some wonderful things
People doing some powerful things
Let's change and do some powerful things
Unity could be a wonderful thing

[Chorus]

As before, I recommend BeTheChange to anyone who can spare three days in London (May 11-13).  It has proved to be a broad based enlightening gathering.

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