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GRI Equity Review - March 2006

• Perspective
• Geopolitics * Risk and terror
• Investment, finance & VC * Interest rates and currencies * Trade & FDI
• Energy * Climate Change
• IT
• Holonics and LOHAS
• Activities, Books and Gatherings

Perspective

The Power of the Future

The Futurist published Reinventing Humanity: The Future of Machine–Human Intelligence in March, an article by Ray Kurzweil describing what he calls the Singularity - the current critical mass of technology understanding that allows quantum leaps in science so that within one generation the technology of science fiction will be reality. It is an exciting and realistic scenario in which scientific understanding will leapfrog during the next 30 years to provide the capability to create a science fantasy infrastructure for humanity and the ability to resolve today's challenges of insufficient resources, eg water, clean air, food, jobs, etc.

Unfortunately, as with scientific developments during the past century, little accommodation is made for the proclivities of human nature, the need to develop humans in parallel so that we can manage the power of technology. It is no good having a nuclear bomb if you think it behaves like a toy. To paraphrase Scott Adams who stated the situation amusingly: "We are a species of individuals living in a world created by geniuses!" The results of the misuse of technology are the problems we read about and discuss daily: pollution, poverty, famine, terror and war, global warming and more. How much worse will the consequences of the misuse of technology be when that technology has evolved at a logarithmic pace? The educated people of the world are unable to control our primitive appetites and emotions. We are still subject to the primitive reactions of a creature that was designed to survive in the wild. Without a leapfrog advancement in the understanding and ethics of the global population, and especially the rich and powerful (ie you and us), we will no doubt face cataclysmic risks. It is time for people like Kurzweil to balance their passion for science with and investment in enlightening the human spirit. It is the responsibility of leaders like him to address global ethics in the same breath that they talk about science fantasy technology.

As before, the passion for new ideas has subjugated the nurturing of ethics that match the technology. When a scientist like Kurzweil expounds on the possibilities for future technology but gives no space to human values and ethics, we can expect the dichotomy to produce problems commensurate with the gap between ethics and technology. It is dangerous to talks about the possibilities of quantum technology without discussing how our values will change and our intellect develop to manage the power of the future. 

The solar eclipse...

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Geopolitics

Informal talks began in Israel on a new coalition government after the election victory of the Kadima Party, the party founded four months ago by now coma-stricken Ariel Sharon.  A coalition is expected to emerge after the Passover holiday, in mid April.  Possible partners are second-placed Labour and other smaller parties.  The election proved disastrous for the once dominant Likud party, driven into fourth place by Labour and the rise of the far-right Yisrael Beiteinu which advocates removing Arabs from Israel.  Kadima leader and acting PM Ehud Olmert has vowed to pursue plans to define Israel's final borders. Palestinians urged him not to do so unilaterally.  Coincidentally, leaders of the militant group Hamas are taking formal control of the Palestinian government.  These developments are very encouraging signs that various communities are beginning to come together in the middle east.  While there are many pitfalls ahead, the course of events now emerging is about as good as one might expect if one was to conjecture a path to peace.

There were more protests in Thailand against Thai Prime Minister Thaksin Shinawatra.  Tens of thousands of protesters have staged large rallies in recent weeks, accusing Mr Thaksin of corruption. He has indicated he might be willing to step aside temporarily, to ease the mounting political crisis. He promoted justice minister Chidchai Vanasatidya to become his number two - which some analysts see as an indication he is looking for someone to step into his place, at least for a short time.  He has called for a snap election on 2 April to try to regain authority, but the opposition has decided to boycott the poll and now Thaksin's party Thai Rak Thai will go unchallenged in more than half Thailand's constituencies.  In any event, he is likely to get a majority of the votes because of strong support in rural areas. In a rally at the end of March about 50,000 protesters blockaded his office, demanding he step down. The demonstrators are angry at the $1.9bn sale of his family firm Shin Corp, accusing him of tax dodges and betraying the nation by selling an important national asset to Singaporean investors.  This is all a shame because, although he acts paternalistically, it is more like a benevolent dictator than a malevolent one. He is closer to Lee Kuan Yew. In the context of Thailand's collusive culture and historical feudal approach he has been softer than he might have been and has made significant initiatives in alternative fuel, sustainable agriculture and rural development. The unrest in the South has been a black spot. He must commended for the way in which he has acted over the past few months and while his acquiescence is commendable the outlook is uncertain. It is difficult to imagine who might replace him and certainly no one has the resources to match his networks in politics, business, police and military circles. We must hope that the coming months do not see regression to even more corrupt ways of the past.

More than one million people are estimated to have protested across France against the government's youth employment laws.  Fighting broke out as protesters gathered in Paris, and missiles were hurled at police as they moved into the crowds to try to remove troublemakers. Protesters were bitterly opposed to the First Employment Contract (CPE), which allows employers to end job contracts for under-26s at any time during a two-year trial period without having to offer an explanation or give prior warning. The government says it will encourage employers to hire young people but students fear it will erode job stability in a country where more than 20% of 18-to-25-year-olds are unemployed - more than twice the national average.  Unions joined French students in protesting and there was a  nationwide strike which disrupted train service and closed schools.  The protests are forcing the government to confront its own two-tier system, one that creates an elaborate system of benefits for society’s “haves” and one that imposes more restrictions and unemployment for a growing group of “have-nots.” Like many developed nations, including the US and the UK, France has achieved economic success yet the gains seem concentrated in a few pockets. For increasing numbers of middle-class workers, let alone low-income, immigrant or uneducated sectors, globalization has come to represent insecurity and declining social justice. Many fear that the phenomenon has not so much eliminated poverty in developing countries as much as eroded standards in developed nations. The "insiders" of this economy consist of a shrinking pool of older, middle-class workers who enjoy the full panoply of worker protections - most of them are in the public sector or heavily regulated private industries, with the rest in a dwindling number of competitive private firms.  And then there are the "outsiders", a growing pool including the unemployed young men of the mostly immigrant suburbs who went on a rampage last year, throwing rocks and burning cars, but also includes the children of "insiders," who tend to hang around the university until they are 24 or 25, then drift between unpaid internships, temp jobs and welfare for another five years before finally getting "inside."

As Jean Pierre Lehmann of IMD and Evian Group notes in the Financial Times: "The farmers, the huge government sector, the civil servants, who in France more often than not are highly uncivil, the transport “workers”, plumbers, pensioners, these are the people who need to be confronted. If de Villepin were to give the clarion call to dismantle these bastions of privilege, which are doing so much damage to France in general and French youth in particular, in order to open France to youth and to the future, then he would deserve indeed to be supported."

In the US, the Senate on Wednesday overwhelmingly passed the first major restrictions on lobbying in more than a decade, banning lobbyists from giving gifts and meals to lawmakers and tightening rules for pet projects known as earmarks. But critics called the bipartisan measure weak, and some lawmakers who led the effort for tighter restrictions voted against it. The bill would require lobbyists to file more public reports about their activities in a searchable Internet database, would demand that lawmakers receive advance approval for trips paid with private money and would bar former lawmakers and senior aides from lobbying Congress for two years. The vote, 90 to 8, was taken hours after Jack Abramoff, whose lobbying activities prompted a federal criminal investigation into corruption here and calls for a crackdown on influence peddling, was sentenced in Miami to nearly six years in prison for his role in the fraudulent purchase of a cruise line. The measure would not ban private travel, as some members have urged. Nor would it rein in lawmakers' ability to fly on corporate jets at heavily discounted rates, a practice that gives precious access to lobbyists, who often go along for the trip. The measure would not do away with earmarks, though it would make it more difficult for lawmakers to insert the pet projects quietly into bills at lobbyists' behest. And the Senate overwhelmingly rejected, 30 to 67, a move to create an independent ethics office to investigate accusations of abuse. The lobbying debate now moves to the House, where Republican leaders are backing a proposal that would temporarily ban privately financed trips. Their approach would also require lobbyists to disclose meals and gifts to lawmakers, and it would require members of Congress to disclose when they earmark money for the specific projects that critics deride as pork-barrel spending. House Republicans are split over the plan, and it is not clear whether the House and Senate will be able to agree on a measure this year.  It is encouraging to see some headway being made in improving transparency, but vested interests are powerful and progress is slow.

In Spain it appears that significant advances have been made in conciliation between Basque and the rest of Spain as ETA has promised a ceasefire, in exchange for political respect.  Let's hope compromise is reached and the community can find lasting peace soon.

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Risk and Terror

India and China are increasingly prominently featured in strategic decisions.  March saw the visit of G. W. Bush to India during which he offered to support India's industrialnuclear ambitions although its compliance with international nuclear treaties and standards is below par.  While bending the rules for a friend is understandable the result could be to exacerbate nuclear ambitions of others, like, worryingly, North Korea.  Pragmatism has won over precaution in a situation that it shouldn't.

The fighting in Iraq continues, exacerbated by the mosque bombing at the end of February.  It will be increasingly difficult to calm the situation and popularity for the invasion has waned as the realisation dawns that the US will be in Iraq for a decade or so.

The furore over Guantanamo Bay continued, as more than 250 medical experts, from seven countries - the UK, the US, Ireland, Germany, Australia, Italy and the Netherlands, signed a letter in the medical journal The Lancet condemning the US for force-feeding prisoners on hunger strike at the prison  where some 500 terror suspects are being held without trial. The experts, from seven nations, said physicians at the prison had to respect inmates' right to refuse treatment and doctors who used restraints and force-feeding should be punished by their professional bodies.

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Investment, Finance & V. C.

There is increasing coverage of China and India as the global economy becomes more integrated.  The Economist published a survey of China in March which offers an up to date view of current issues and possible futures. We offer a word of caution about China to temper views: do not overestimate its market profitability (the challenges and idiosyncrasies will prove costly) and do not underestimate China's ability to resolve its challenges (its capacities and resources remain huge).

One barometer of China's potential and attraction is the urban/rural inequality that was a prominent theme at the National People's Congress.  This growing imbalance, as rural communities get poorer while urban ones get rich, could be the catalyst for calls for democracy and for political change in China, and should be tackled before the problem gets blown out of control.  While rural wealth can now be improved by central policy, if that does not happen soon, the unrest will become volatile.  One solution would be to introduce land rights, which would provide the foundation of rural investment, but this would be contrary to the core of the system.  However, the introduction of community land rights would go a long way to solving the problem and be within the spirit of the current policy.  It remains for someone to table proposals in this vein.

A serious concern remains the stability of the US financial markets.  There are signs of deflation of a housing bubble, slowing consumer spending, and stock market volatility.  On the housing front, which is a key in today's dynamic, sales of new homes fell 10.5% in February, the biggest decline in nearly nine years, while prices fell and the number of homes on the market rose to a record.

In the US, retail sales dropped in February as consumers reined in spending on cars, clothes and furniture because of cold weather.  Sales fell 1.3% after jumping 2.9% in January, according to the Commerce Department.  The data may indicate that US consumers, the main driver of the world's largest economy, have become more reluctant to spend after many years of splurging, but we should wait for more evidence of this which would be an uncharacteristic cultural change.  The US current account deficit, the nation's broadest measure of trade, also was reported to have reached a record high in 2005.  According to the Commerce Department, the shortfall, which includes trade figures as well as money flows, surged 20% to $804.9 billion last year., or 6.4% of the total value of the US economy. The imbalance in the current account may prompt problems, as investors try to limit their exposure to the US and a drop in asset values. US Federal Reserve chairman Ben Bernanke warned persistent deficits need to be curbed, particularly as an ageing population will raise pressure on government spending. In a letter to Senator Robert Menendez, Bernanke said he was quite concerned about the "intermediate to long-term federal budget outlook" and US finances were expected to come under "severe pressure" as baby-boomers began to retire and collect their Social Security and Medicare benefits.

In the UK, retail sales also dropped again in March, the CBI has said, with sales down for the third month in a row.  The dip in year-on-year sales in March was greater than expected and forecasts for April were no better, according to the CBI's distributive trades survey. Thirty-five percent of retailers reported lower sales volumes in March, while only 18% noted an improvement.

In the UK, supermarkets are facing a full investigation by the Competition Commission into their dominance of Britain's grocery market. The inquiry is set to be triggered by the Office of Fair Trading (OFT) after a further one month's consultation. The OFT was ordered by a tribunal to review a decision last year, when it decided not to launch an inquiry. Critics have accused the UK's leading supermarkets of driving local convenience stores out of business, which certainly seems to be the case from anecdotal evidence and statistics - the OFT said the big four supermarkets - Tesco, Asda, Sainsbury's and Morrisons - had built up their dominance of the food retailing business over the past six years. The OFT noted some features of the grocery market which it suspected may be distorting competition and harming consumers. In particular, it pointed to:

• the planning regime, which makes it difficult for new stores to open

• the big land banks of the largest supermarkets

• restrictions that some supermarkets put in place when they sell sites to other retailers.

While these are probably issues it is also the case that, unfortunately, Tesco, the leader of the gang, is successful because it is so good at what it does!  It gives people what they want - low prices on a full  range of regular consumables focussing on a modest specification but also delivery higher quality options.  Until consumers vote with their wallets for more choice, Tesco's oligopolistic position will continue.   Personally we now try to shop locally because we have seen the local stores disappear and with them choice.

The price of gold has hit its highest level for 25 years, reaching nearly $ 600 an ounce.  Gold is often considered a secure investment, sometimes more so than land because it is portable.   Strong demand in India and China, coupled with declining gold output in South Africa - a key bullion producer - has stirred the shortage and is maintaining high prices according to Elmer Stewart, president and chief operating officer at Canadian firm Alhambra Resources. It appears that i nvestors believe that precious metals are a sound investment and could outperform stocks and bonds, however, at this level we do not expect that it can rise much further, and it certainly has room to fall in the medium term.  Gold's performance mirrors rises by other precious metals and commodities. Silver saw its highest level in 22 years, while platinum reached an all-time high. Palladium hit $355.80 an ounce, before settling at $350.30, its highest in four years. 

Responsible Investing

A new report, Translating Sustainable Development into Financial Valuation Measures - A Pilot Analytical Framework report explains how Sustainable development (SD), a business aspect traditionally viewed as “soft” by the financial community, can have a “hard”, material and calculable impact on share price and company value.  Released as an initiative to advance the integration of SD considerations in investment decision-making, the  tool seeks to isolate the effect of corporate SD practices on share price performance/company valuations, expressing this effect in financial language.  For further information, please visit: http://www.sdeffect.com/

Asria has published useful reports that present country, company, and market information as well as case studies that support the following investment themes:

• Environmental issues appear to dominate the Asian investment picture, but medium-term incentives for change are emerging on a case-by-case basis, not systematically

• Better governance standards are a key facilitator for improving ESG performance

• Rising public expectations are a growing force for regulatory change

Taken together, the sector reports raise important questions about how to shape investment strategies, reflecting the range of risks and opportunities that sustainability analysis of Asian equities can highlight. This is particularly relevant for large cap investors versus those who favor innovative, small companies. It is also relevant for investors with strong country allocation disciplines. Taking Stock is available for free download from Asria. In addition to the full report, it is possible to download an introduction to the issues, a summary document, and individual sector reports.

Wal-Mart has made a high profile push into organics. The world’s leading retailer says that it aims to be the mass-market provider of organic food in the US.  This is a welcome initiative and a sure sign that realignment of consumer values is taking place in a substantial way. Over the next few weeks the store will double its organic offer, putting in around 400 lines at its Supercenters and Neighborhood Markets.Wal-Mart has been eying up the $50 billion natural foods market for some time but has left its move until the organic food market had become established as a significant category in its own right, which it now obviously has done.

The first green investment to enter the FTSE All-Share Index in the UK is Impax Environmental Markets (IEM), an investment trust that holds small and mid-cap growth stocks active in global water, waste, and new energy markets.

Also, FTSE4Good, the UK-based SRI global index provider, just finished its semi-annual review of constituents, resulting in 19 deletions and more than twice as many (40) additions. The FTSE4Good philosophy is to set the bar for corporate social and environmental responsibility at an achievable level, then ratchet it up incrementally to promote progress toward sustainability.  The majority of the deletions (18) are due to the environmental criteria (which FTSE4Good beefed up in 2002), with only a single deletion of Canada-based nickel producer Inco (ticker: N) due to human rights criteria (which FTSE4Good strengthened in 2003). Almost all (16) of the environmental deletions are US-based companies, a conspicuous geographic correlation. The US-based environmental deletions also cluster in three sectors.  FTSE4Good removed four US travel and leisure companies--namely Cendant (CD), Darden Restaurants (DRI), Hilton Hotels (HLT), and Starwood Hotels and Resorts (HOT). FTSE4Good also removed five US retailers--Dollar General (DG), Federated Department Stores (FD), Lowe's (LOW), Nordstrom (JWN), and RadioShack (RSH). Five US finance companies have also been removed - Ambac Financial (ABK), Bear Stearns (BSC), Janus (JNS), Northern Trust (NTRS), and Washington Mutual (WM).

According to the latest report from Oekom research, a Munich-based socially responsible investment (SRI) rating firm, on the sustainability performance of global banks, most US banks fail to disclose enough information on their social and environmental performance to qualify for analysis, and only four of 21 analyzed earned above D-level grades.  Coming in first with a B grade is Australia-based Westpac (ticker: WBC.AX), followed by five banks earning a B-: UK-based Northern Rock (NRK.L) and Lloyds TSB Group (LLOY.L), Switzerland-based UBS (UBS),Germany-based HVB Group (HVMGY.PK), and National Australia Bank (NAB). Of the 17 banks earning F grades because they did not even disclose enough information to qualify for oekom's in-depth analysis, 11 are based in the US. This number includes supposed sustainability leaders such as Goldman Sachs (GS), which trumpeted its new environmental policy, Merrill Lynch (MER), which issued a report on climate change in the auto sector, and Wells Fargo (WFC), which recently reported on alternative energy.  Over half (six of 11) of the banks earning grades in the D range are US-based. Only four of the 49 banks earning C-level or higher grades are based in the US: Fannie Mae (FNM), Citigroup (C), and State Street (STT), which earned flats Cs, and JPMorgan Chase (JPM), which earned a C-.  To burnish their corporate social responsibility (CSR) images, many banks have enlisted in voluntary sustainability initiatives such as the Equator Principles (EPs), a set of standards for project finance based on International Finance Corporation (IFC) guidelines.  "However, the adoption of the Principles has not prevented several Equator Banks from financing some of the most environmentally and socially risky projects that have sought support from international project finance markets in recent years," states the report. "Prominent examples are the Baku-Tbilisi-Ceyhan (BTC) pipeline and the Nam Theun II dam in Laos. Consequently, observers have concluded that the Equator Principles are an insufficient response to the challenge of sustainable finance. Therefore, sector-specific guidelines for project finance in substantive areas such as forestry and paper, dams and hydropower, resource extraction and related infrastructure, as well as agriculture and fisheries were included in the study."  Overall the picture is not attractive - it is difficult to find a bank that serves its customers and shareholders well and to higher standards.  Perhaps it is time for new banking models, or expansion of emerging alternatives like member based and cooperative organisations.  (One of the key themes at BeTheChange in early May will be Finance and the Planet led by Sir John Whitmore.)

The Body Shop’s founder Anita Roddick sold the retail chain for the £ 652 million sale to French cosmetics firm L’Oreal. But on the same day animal welfare groups were calling for a boycott of Body Shop stores because of L’Oreal’s continued use of animal testing. The Body Shop, which opened its first store in Brighton in 1976 and is now a global brand with over 2,000 outlets, was the prototype natural bodycare retailer. From the beginning it had a strong environmental and ethical stance (using recyclable containers and avoiding ingredients that had been tested on animals).  While the sale is of concern to consumers who do not want dilution of Body Shop principles, Roddick has pledged to donate the £118 million she received from the sale to Amnesty International and other “social justice charities” and Body Shop may prove to be the catalyst of change for L'Oreal to a natural beauty business.  Nevertheless as Ruth Rosselson editor of Ethical Consumer magazine notes, “It’s ironic that a company well-known for its animal testing stance should sell out to one that tests on animals and has yet to show its commitment to any ethical issues at all.” Meanwhile, analysts have been weighing up the effects of the sale on the natural and organic products sector. Organic Monitor predicts that Neal’s Yard Remedies is the most likely to capitalise on the Body Shop buy-out. “The company was bought by a private investor (Peter Kindersley) in December 2005 and with renewed investment Neal’s Yard could emerge as the natural alternative to the Body Shop.”  The Body Shop sale could also prompt existing customers to start examining product ingredients more closely. Here, brands like Dr Hauschka and Weleda who highlight the traceability of their ingredients, could be beneficiaries adds Organic Monitor.

How companies engage in tax planning has become one of the emerging issues in corporate social responsibility and the debate has risen in recent months, among NGOs, regulators, the media, investors and businesses.   Thinktank / consultancy Sustainability has now added a substantial contribution to this debate with its new publication 'Taxing Issues: Responsible business and tax', in which they propose a number of arguments having carried out a review of the growing body of literature. First, that there is a robust business case for responsible practices in regard to tax. Second, that there are key principles around the tax agenda, namely accountability, transparency and consistency. Thirdly, they have characterised five levels of how companies report on their approach to tax, running from a scale of compliance at the low end, rising to 'integrated' at the high end.

Although not read yet, we noticed this recent release: Hard Facts, Dangerous Half-Truths and Total Nonsense which looks as though it should be useful tool for bringing discipline to the investment process, especially at the angel/VC end of the spectrum where individuals may be persuaded by a good marketing story unsupported by reality.

Wharton accounting professors Wayne Guay and John Core, and Stanford accounting professor David Larcker, have studied executive compensation and how it changes when excesses are reported in the press.  Apparently there is little change When the Press Blasts Your CEO for Excess Compensation.  What they conclude from their most recent research is that the most relevant information does not necessarily make headlines. They also find that in general, the media's focus on excessive compensation does not substantively change corporate behavior with regards to pay packages.

Venture Capital

It appears that the euphoric pursuit of deals in China by US companies has moderated slightly. The Chinese government is giving the cold shoulder to two multimillion-dollar buyouts being attempted by The Carlyle Group and Caterpillar. Regulators let it be known that they're not going to rubber stamp deals that would allow U.S. companies to take control of Chinese companies with strategic value to China. The Carlyle and Caterpillar deals are for two of China's largest construction equipment companies.  China's Ministry of Commerce (MOFCOM) is refusing to approve the The Carlyle Group's purchase of China's Xuzhou Construction Machinery Group, China's largest producer of construction equipment. The move comes almost five months after Carlyle announced the buyout of 85% of the shares in the company and majority control of the firm in a much lauded $375 million leveraged buyout.  (Xuzhou has had a joint venture with Caterpillar of the United States for over 10 years, under which Xuzhou manufactures a wide array of construction equipment in China in collaboration with Caterpillar.)   China's Xiamen Xiagong Group has reportedly cancelled the buyout of its Xiamen Engineering Machinery subsidiary by Caterpillar due to concerns over the takeover of Chinese businesses by foreign interests. Xiamen Engineering, based in Xiamen, China, makes heavy construction equipment. Its parent company reportedly cancelled the deal two days after Caterpillar Chairman and CEO Jim Owens gave a major policy speech to the National Association of Manufacturers in which he discussed “the need for constructive and positive trade relations with China.”   The blunt pronouncements by China's politicians against U.S. private equity firms comes shortly after U.S. lawmakers derailed part of the Dubai Ports acquisition of P&O Ports, which would have given Dubai control of six U.S. ports. It will be harder for U.S. senators and representatives to scream foul on behalf of Carlyle and Caterpillar after they beat their breasts about the dangers of foreign ownership of strategic U.S. assets last month.

Also, the buyout of Harbin Pharmaceutical Group, China's largest pharmaceutical maker, was stalled, ostensibly due to regulatory changes that went into effect at the beginning of the year. On the surface, everything may proceed after some fine-tuning, but it may transpire that some more regulatory challenges may lie ahead.

Research now shows 45 VC and PE funds being raised for investment in the Gulf Region. An educated guess predicts that the total amount raised by the funds will top $20 billion by the end of the year, which would be more PE fund-raising in the Middle East than in China and South East Asia combined!

Emergence Energy is an interesting project being started by Iqbal Quadir.  It will apply Grameen principles to micro-power supply in Bangladesh and would have applications in many emerging markets.  We hope to follow this business.

Clifford Chance, a UK-based corporate law firm, is considering the formation of a fund to co-invest alongside private equity clients.  This seems to be an unusual departure from normal principles of law firms. Although we often ask legal advisors to provide their services for equity in early stage businesses, they invariably say "no".

We came across a useful country briefing site, www.doingbusiness.org, sponsored by the World Bank.  It offers useful introduction to doing business in many markets around the world.

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Interest Rates and Currencies

The US Federal Reserve raised interest rates again, by a quarter of a percentage point to 4.75%. The widely expected rise came at the end of the first interest rate meeting held by new Fed chairman Bernanke.  The Fed said economic growth had "rebounded strongly", but left the door open for further rate increases as it tries to contain the risk of inflation.  Commodities across the board are making new highs as indicated above, and oil is not going to drop soon.  Rising commodity and energy prices, rising employment, rising capacity utilization, rising gold, and a growing world economy are certainly the conditions for the "potential to add to inflationary pressures." Rates have increased from 1% over the past 20 months and are now at their highest level since April 2001.  But we expect further increases and it might touch 5.75% this year, pausing on its way in July/August.  If the US economy was to suffer a set-back, such as continuing pressure on retail sales, a bursting housing bubble or uncertainty in financial markets, the outlook would change, but without signs of changing behaviour, rates are likely to continue to come back to historical levels.

In the UK, the consumer price index (CPI) inflation rose to 2.0% in February from 1.9% in January, hitting the Bank of England's target, mainly due to increased prices of items such as books, computer games and newspapers, and partly as a result of higher energy costs. The rate of headline Retail Price Index, which includes mortgage interest payments, remained unchanged at 2.4%.

Trade and FDI

The Progressive Policy Institute released a startling "Trade Fact of The Week": The U.S. collects more tariffs on Cambodian goods than on French goods.

The World Trade Organisation’s April 30 deadline to reach a framework agreement in the Doha development round has virtually expired. Such an agreement is essential if a final trade deal is to be struck by the end of the year. All parties must recognise that the time for posturing is over, that the hard decisions must be made now and that the US and the European Union must act in concert to save the talks. It is time for the transatlantic business community to come off the sidelines and engage directly with governments to help break the impasse.  But the track record is dismal.

Recent distractions like the Boeing-Airbus dispute, the Dubai Ports World controversy, the threat that the US and France will begin to close their markets to foreign investment, and the vocal opposition to globalisation, take the focus away from the fact that trade plays an essential role in our globally integrated economy and is essential to sustain growth. For the EU and the US, a strong Doha round is an imperative. They are the world’s leading exporters of services and industrial goods.  The  economies are well positioned to benefit from increased trade but high industrial tariffs, non-tariff barriers, customs bottlenecks and restrictions on services imports and investments, especially in big emerging markets such as India and Brazil, limit this potential.

Meanwhile developing nations are forging their own ties.  Brazil, India and South Africa are working to set up a free trade area they hope will eventually take in the continents they represent.   The trio - known as IBSA and part of the G20 group of developing nations - has been frustrated by the WTO's lack of progress at breaking down trade barriers. The action is on a separate track from the WTO's continuing efforts to free trade between rich and poor nations.  They agreed to strengthen their bargaining power at the WTO by boosting their trade links. Over the past two years, Brazil's trade with India has surged 170%, while its trade with South Africa has risen 86%. If a formal alliance is agreed, Brazilian foreign minister Celso Amorim expects trade to surge: "With a trilateral treaty, trade would multiply. It isn't unthinkable to dream of $14bn to $15bn in a few years' time."

Unfortunately, according to "Winners and Losers" by Sandra Polaski, a researcher with the Washington-based Carnegie Endowment for International Peace, the so-called Doha Development Round, which launched the current trade World Trade Organisation talks, will not actually generate development benefits for poor nations as initially promised. Developing nations are likely to end up being net losers under the current global trade agenda because they do not have the agricultural or industrial capability to compete with the United States, Japan, Europe or even China, the expected winners.  "There are both net winners and net losers under different scenarios, and the poorest countries are among the net losers under all likely Doha scenarios," says the study. Critics of the 149-member World Trade Organisation (WTO) have long argued the same point, and the findings of the report bolster their position even as the world's richest nations aggressively pursue new markets. The 116-page study is based on unemployment models in developing countries that separate agricultural labour markets from urban unskilled labour markets.  On the all-important question of agricultural goods, the study finds that because many poor nations are net food importers and rely on low-productivity, small-scale subsistence farming, which is generally not competitive in global markets, the benefits of agricultural trade liberalisation will flow overwhelmingly to rich countries. Developing countries will also lose relative advantages that now exist under preferential trade deals.

Joseph Stiglitz also published a summary of views in March: Social Justice and Global Trade. In it he explains some of the facts and theories behind the discontent. "The facts: Current economic arrangements disadvantage the poor. Tariff levels by the advanced industrial countries against the developing countries are four time higher than against the developed countries. The last round of trade negotiations, the Uruguay Round, actually left the poorest countries worse off. While the developing countries were forced to open up their markets and eliminate subsidies, the advanced developed countries continued to subsidize agriculture and kept trade barriers against those products which are central to the economies of the developing world."

Further, a paper, WTO, GMO and Total Spectrum Dominance  by F. William Engdahl, shows how WTO rules put free-trade of agribusiness above national health concerns (as dangerously shown by the gradual lifting of bans on GMO in Europe under WTO pressure).

In the same vein, Oxford Analytics published a paper: Revived mercantilism strikes unevenly and promotes GM.

Go here for a WTO Update from Global Trade Watch.

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Energy

Lester Brown's newly released book, Plan B 2.0: Rescuing a Planet Under Stress and a Civilization in Trouble, helps put energy issues into perspective. Petrol/gasoline costs over $ 2.50 a litre ($11 per gallon).  "In the United States, the gasoline pump price was over $2 per gallon  in mid-2005. But this reflects only the cost of pumping the oil,  refining it into gasoline, and delivering the gas to service stations.  It does not include the costs of tax subsidies to the oil industry, such as the oil depletion allowance; the subsidies for the extraction, production, and use of petroleum; the burgeoning military costs of protecting access to oil supplies; the health care costs for treating respiratory illnesses ranging from asthma to emphysema; and, most important, the costs of climate change.  If these costs, which in 1998 the International Center for Technology Assessment calculated at roughly $9 per gallon of gasoline burned in the United States, were added to the $2 cost of the gasoline itself, motorists would pay about $11 a gallon for gas at the pump. Filling a 20-gallon tank would cost $220. In reality, burning gasoline is very costly, but the market tells us it is cheap, leading to gross distortions in the structure of the economy. The challenge facing governments is to incorporate such costs into market prices by systematically calculating them and incorporating them as a tax on the product to make sure its price reflects the full costs to society."

Vinod Khosla, founder of Sun Microsystems and then a partner at Kleiner Perkins,  and Stephen Bing, a Hollywood producer, are financing a campaign to get Californians to endorse clean energy in a state-wide vote next November. "Californians for Clean Energy" will need to get more than 500,000 signatures just to make it onto the ballot. If it were then passed, its effect would be to increase taxes on Californian oil production by up to $380m a year, eventually raising billions of dollars for investments in clean energy. The plan is to help California cut its oil use by one-quarter within a decade, thereby setting a powerful example for the rest of the world.  They are particularly enthused by "cellulosic" ethanol, an efficient way of making fuel from agricultural waste. President Bush touted this new technology in his recent state-of-the-union speech, suggesting that it may come to market in six years. Khosla wants to halve that gestation period.

In the US also, the Transportation Department announced new fuel economy standards for sport utility vehicles, pickup trucks and minivans that will make some of them go farther on a gallon of gasoline than the average car does, and will apply to many of the biggest S.U.V.'s for the first time.  Unfortunately, the overall fuel savings, 8.1% when the rule is fully phased in, were characterized as too modest by many conservation advocates, who also noted that the biggest pick-up trucks will still be unregulated. Remarks by auto manufacturers were restrained. The transportation secretary, Norman Y. Mineta, said that the cost of the new rule would be justified by the fuel saved, but that more than economics ia involved. "Saving fuel is as important to our national security and economic viability as it is to preserving our environment," he said. The final rule announced is slightly tougher than the one proposed last summer. This was partly because of the president's commitment in the State of the Union address in January to reduce the nation's "addiction" to imported oil. But oil consumption will continue to rise under the new rule.

UK wholesale gas prices jumped 23% to 230p a therm after supply troubles forced National Grid to ask industrial users to limit their usage. Prices had quadrupled after a fire shut the UK's main storage facility and the recent cold snap made domestic usage soar. If the situation gets worse, industrial users could see supplies cut off. "This is as close as the UK has got to a national gas emergency," said the Energy Intensive User Group.

Experts at a World Bank conference said that developing countries can meet their need for power sources without further contributing to global warming.  Noting that those who do have power often have to deal with environmental and health effects of their reliance on heavily polluting fossil fuels, World Bank President Paul Wolfowitz said, "1.6 billion people still have no access to the electricity grid. There are 1.6 million deaths every year due to fuel pollution, of which half are children under five."

Sweden has set itself the goal of achieving total independence from oil by 2020. The country is already covering many of its energy needs with re newable resources such as bioethanol to fuel its cars and wood to fire its power plants.  If Swedish entrepreneur Per Carstedt is right, the next big energy revolution will really be a step backward. "The industrial age began with the transition from wood to fossil fuels," he says. "Now we're going in the other direction." Carstedt wants to turn wood chips into fuel for cars.  The liquid produced in the pilot project of Sweden's Bioethanol Foundation will eventually reach the tanks of so-called Flexible Fuel Vehicles (FFVs) that run on both ethanol and gasoline. Tens of thousands of Swedes are already driving such cars. They're an important part of this ambitious project become independent from oil by the year 2020.

Climate Change and Environment

according to a report presented at the annual carbon market conference, organised by analysts Point Carbon and attracting 12,000 delegates (compared with around 200 in 2004), the European emissions trading scheme (ETS) grew rapidly through its first year of operation to represent almost half of the 799 million tonnes of carbon traded on the global market in 2005, reflecting the sector's rapid growth. Point Carbon's report shows that demand for the Kyoto clean development mechanism (CDM) credits, which was initially low, has increased significantly since the introduction of the EU emissions trading scheme. In terms of volume, CDM credits are the biggest contributor of emission reductions achieved through the market, which means they are likely to survive even if there is no successor agreement to the Kyoto protocol, the report says.  (Follow-up: See Point Carbon and conference details.)

Also, an expert panel told a conference organised by Danish environmental assessment institute IMV, that jobs created by the emergence of new markets such as organic farming and renewable energy will almost entirely be offset by the decline of "sunset industries".  Presenting their conclusions to EU policy makers, experts argued that there is no empirical evidence showing green policies can generate net economic growth, however, there are synergies between environment and growth. Examples include energy efficiency, clean technologies and public procurement. Policy makers can boost eco-innovation through green taxation and subsidies for research into clean technologies. One delegate called for an EU forum to help the market adopt green products in the most cost-effective way. Interestingly, several delegates warned that the EU risks losing its leading position in global environmental goods to the USA and China, who are now investing massively in clean technologies, a market expected to top € 565 billion by 2010. "Europe is good at setting high environmental standards but it is not investing in finding solutions to problems".  Our anecdotal evidence suggests that the US market already offers a healthy demand for green products which is more attractive to start-ups than Europe.

March saw World Water Day and along with it the release of the Global International Waters Assessment (GIWA) by the United Nations Environment Programme (UNEP), which highlights the problems of water scarcity that the world now faces.  Agriculture poses the biggest threat to the world's freshwater resources, while over-fishing threatens the oceans, according to the first global assessment of fresh and salt water resources. Human pressures on water are weakening aquatic ecosystems, which is having a negative impact on human health and sustainable development. Freshwater shortages are likely to trigger increased environmental damage and social unrest over the next 15 years, concludes the review, which was compiled by 1,500 experts.  Water is commonly underpriced and undervalued, especially in agriculture, and that is at the root of much of the waste problem and lack of investment efficiency. GIWA is the final synthesis report of detailed studies of the current and future trends in the freshwater and coastal waters of some 66 transboundary water areas, mainly linked with developing countries. China's rising meat consumption is a cause for concern because it requires much more water to produce cow than a similar food value in vegetables.  And the problem is made worse by the fact that China has badly damaged its aquatic ecosystems and polluted its freshwater limiting how much food it can grow.  China is already importing large amounts of grain, pushing up world grain prices, a disturbing trend for developing countries.  The report advocates a fundamental shift to growing food, living our lives and running our economies on as little water as possible. Most importantly "we need more action and less talk about water".

A new study  “The reality of water provision in urban Africa”, written by Franklin Cudjoe and Kendra Okonski, and published in The Water Revolution: Practical Solutions to Water Scarcity has studied urban water and sanitation issues in Africa. It criticises Africa’s governments for denying the poor basic legal rights which could massively improve their access to water and sewerage services.  “The fundamental problem across urban Africa today is that Africa’s national and local governments do not recognise the legal rights of the poor,” explained Kendra Okonski, Environment Programme Director at International Policy Network.

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IT

The Economist published a special report on open-source business in March.  It offers a useful summary of some of the key open-source projects and issues.  What is clear from their synopsis is that the challenges of ensuring quality and dealing with intellectual property are being overcome quickly and more cheaply than in conventional business models, often by adopting some simple, formal management practices like structure, checks and balances and leadership.  The benefits far outweigh the costs - look at Firefox which has tripled its market share of browsers to 14% in a year and Wikipedia with 2.6 million entries, 120 languages and more visits than the New York Times.  Open business models are now successfully applied in bio-sciences (CAMBIA) and Toyota organises its teams to promote the benefits of decentralisation, flexibility and autonomy.  For those who find it difficult to get comfortable with the lack of control over results, you might consider it in light of democracy which similarly allows fringe views but, hopefully, allows the emergence of enlightened social dynamics.

Not surprisingly, Microsoft's efforts to comply with the European Commission's anti-competition ruling are "entirely inadequate" according to the Commission, which said it would impose fines of up to € 2 million euros a day if the firm continued to drag its feet.

The web-based business model applied to a new sector, real estate, seems to be taking off.  Shares in Rightmove, the UK's largest property website, have soared on its London stock market debut. Strong demand for the shares saw them priced at the top end of expectations at 335p, valuing the firm at £ 425 million. Rightmove lists more than 700,000 properties offered by estate agents around the UK and says it gets 10 million visits per month. The company reported revenues of £18.2m last year - almost double 2004's figure of £9.2m. By the end of last year, it had contracts with customers representing almost two-thirds of the total estimated number of estate agency offices in England and Wales, and a further 957 rental agents. 

America has topped the latest Networked Readiness Index from the World Economic Forum ( Global Information Technology Report), winning back its top position from this year's number two, Singapore. The survey looks at numerous factors, such as how much nations are using the internet to increase competitiveness. The full top 10 list is as follows: US, Singapore, Denmark, Iceland, Finland, Canada, Taiwan, Sweden, Switzerland and the UK. 

Microsoft is finally unbundling IE from Windows for its next release.  Unfortunately this will slow the operating system down and remove some of previous functionality.  It also appears that the next release eats up 25% more power; power management software is not yet up to scratch.  In fact, there is conjecture that the release might be delayed from this Autumn until next year.  Apparently tabbed browsing will finally be introduced.  Windoze is now trying to catch up as it is surpassed by Linux desktop functionality.

A quick note is prompted by reports of newly demonstrated properties of graphene at the American Physical Society.  It is in this section because graphene's immediate applications could well be in nano-electronics.  Graphene, a relative of graphite and carbon based, is a 2-dimensional counterpart of bucky-balls and bucky tubes and may be used to make nano-chip-boards.  It also has attractive properties like stability and it has been demonstrated that in graphene the so called Hall effect is quantum and relativistic, meaning that quantum experiments may be carried out on the desktop rather than in a particle accelerator or neutron star.  While the science is well beyond me, it appears that commercialisation of this material is approaching fast (within a year) and will have immediate applications in high-end tech applications and soon may bring down the cost and size of consumer electronics.

Further evidence of the benefits of modern technology has been enhanced by the results of trials in text-messaging.  In the UK, patients were texted reminders of doctor and hospital appointments with the results that missed appointments were reduced from 25% - 50% which would translate to national savings of £ 256 million to £ 364 million.

We finally extended the office network at Ballin Temple, with encouraging results.  On the hardware side a new NetGear FWG114P is providing a stable, wired/wireless, broadband/analogue, print server, router hub linked with a Belkin54G wired/wireless, broadband router to extend the b - g wireless/wired LAN.  The PCs are running Linux.  The setup is effective and cost efficient so these brands of router and the software get our vote.

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Holonics and LOHAS

Holonics * Health * Environment * Education * Living

Holonics

Holonics generally tries to look at the big picture, as well as micro-detail, and in this aspect scenario planning is valuable.  In the general field of projections, forecasting and futuring a number of tools were seen in March.  (See Activities, Books and Gatherings below for more.) EMCC presents a series of forward-looking features, focusing on the trends and drivers of change in selected sectors of the economy. Three separate articles are published for each sector. The first paints a broad picture of the changing dynamic of the sector, the second presents future scenarios and the third draws out key policy issues.  The reports are based on findings from existing foresight studies, scenario work, innovation studies and reliable data sources.  Please click to see them: Automotive, Biomedical healthcare,  Chemicals (excluding pharmaceuticals),  Financial services, Food and drink, Health and social services, Hotels and catering, Information and communication technologies, Knowledge-intensive business services (KIBS),  Performing arts,  Publishing and media,  Textiles and leather, and Transport.

And for another Big Picture view of the future,  Worldmapper (via Infosthetics) has produced more than 50 morphed maps of the world that reflect underlying statistical data (e.g. imports & exports, tourism, immigration, population, etc.). In this case, it's a map of projected total population density in the year 2050.

For a really big picture, courtesy of Florida State University, view the Milky Way at 10 million light years from the Earth then move through space towards the Earth in successive orders of magnitude until you reach a tall oak tree just outside the buildings of the National High Magnetic Field Laboratory in Tallahassee, Florida, after that, begin to move from the actual size of a leaf into a microscopic world that reveals leaf cell walls, the cell nucleus, chromatin, DNA and finally, into the subatomic universe of electrons and protons.

An intersting paper discussing business capital structure and Adizes lifestage model may be found here.

Health

The Soil Association called for several common food additives to be banned from all foods. The move follows the publication of a three-year study on the effects of combining four common food additives which was presented to the UK health secretary Patricia Hewitt. The research suggests that specific combinations of additives can have a neurotoxic effect. Researchers at the University of Liverpool examined the toxic effects on nerve cells by using a combination of the following four common food additives: E133 Brilliant Blue with E621 monosodium glutamate (MSG) and E104 Quinoline Yellow with E951 L-aspartyl-L-phenylalanine methyl ester. The mixtures of the additives had a much more potent effect on nerve cells than each additive on its own. The effect on cells was up to four times greater when Brilliant Blue and MSG were combined, and up to seven times greater when Quinoline Yellow and Aspartame were combined.  The study shows that when the nerve cells were exposed to MSG and Brilliant Blue or Aspartame and Quinoline Yellow the additives stopped the nerve cells from normal growth and interfered with proper signalling systems. The experiments were done in laboratory conditions and the additives were combined in concentrations that theoretically reflect the compound that enters the bloodstream after a typical children's snack and drink. This marks the start of a campaign from the Soil Association and Organix Brands who are calling for the additives in question to be removed from food. The Soil Association has identified 30 foods currently marketed to children, which include the four additives studied. 

The Ecologist reported on the link between nutrition and criminal behaviour and presents empirical evidence that better food in prisons would improve rehabilitation. This is also supported by similar findings in the area of school food and children's nutrition.

According to consultants Deloitte UK in a new report, if workers exercised more, levels of sick leave could be cut dramatically, saving the UK economy £ 487 million each year.  Only 48% of the population exercise enough to meet the government's recommended target of 150 minutes per week. But if 70% took that amount of exercise, it would cut sick leave by 2,783,808 days a year, according to the report. This would improve firms' productivity and ease the burden on the National Health Service.  The survey of 10,000 people found that those who exercised less than the recommended 150 minutes per week took an average 3.5 sick days per year, compared to three days for those who exercised for over 150 minutes each week.

Intercessory prayers offered by strangers had no effect on the recovery of people who were undergoing heart surgery, a large and long-awaited study has found. And patients who knew they were being prayed for had a higher rate of post-operative complications like abnormal heart rhythms, perhaps because of the expectations the prayers created, the research suggested. Because it is the most scientifically rigorous investigation of whether prayer can heal illness, the study, begun almost a decade ago and involving more than 1,800 patients, has for years been the subject of speculation.   At least 10 studies of the effects of prayer have been carried out in the last six years, with mixed results. The new study was intended to overcome flaws in the earlier investigations. The study's authors, led by Dr. Herbert Benson, a cardiologist and director of the Mind/Body Medical Institute near Boston, said that the findings were not the last word on the effects of so-called intercessory prayer, but the results raised questions about how and whether patients should be told that prayers were being offered for them. The study cost $2.4 million, and most of the money came from the John Templeton Foundation, which supports research into spirituality. The government has spent more than $2.3 million on prayer research since 2000.  While the results are interesting, our contention is that praying oneself improves recovery because it imitates meditation and therefore the attendant benefits on moderating heart rhythm and frontal lobe circulation.

David Davis, a biochemist at the University of Texas, US told the American Association for the Advancement of Science, that high-yield crops grown with chemical fertilisers could be hampering important public health goals. “High yield crops grow bigger or faster, but are not necessarily able to make or uptake sufficient nutrients to maintain their nutritional value.”  Davis pointed to the serious decline of vitamin and mineral levels in fruit and vegetables over the past 50 years, a phenomenon known as the ‘dilution effect’.But he said that recent research had shown that this decline can be reversed by switching to organic farming — with around 30% increases seen in antioxidant levels. “Organically grown produce offers significantly enhanced health-promoting qualities, contributing to important national public health goals,” he added.

Health awareness is certainly rising quickly. UK consumers are taking a more active interest in food and diet a new survey by the Food Standards Association (FSA) has found. The FSA’s sixth Consumer Attitudes to Food Survey, just published, shows that 67% of people are now aware that they should eat at least five portions of fruit and vegetables a day — up from 43% in 2000. The survey also reveals a growing number of food label watchers. 53% of people now check labels for salt/sodium content (22% in 2000), 48% now check for sugar content (28% in 2000), and 60% say they check labels for fat content. Another significant change identified by the survey is the rise in the number of people who claim to prepare/cook a meal from raw ingredients at least once a day, plus a rise in the proportion of consumers who claim to sit down together for a main meal at least once a day.

Environment

The appropriate management of forests is critical and now being recognised as such by economics.  Tracking of individual trunks now allows a premium for sustainably managed timber to be better satisfied and both logging companies and processors are now making the distinction.  The special report by The Economist on the logging trade illustrates the changing market conditions.

A new report by the Cornucopia Institute, which campaigns on behalf of family farmers, accuses some leading organic dairies of exploiting and misleading consumers. The report is based on a survey it carried out recently into the farming and environmental practices of 68 different US organic dairy brands. It accuses a number of large “2000-6000 cow industrial confinement dairies” of taking over the organic dairy industry using substandard practices. “Consumers who pay premium prices for organic products do so believing that they are produced with a different kind of environmental ethic, a different kind of animal husbandry ethic, and social justice for family farmers,” said Mark Kastel, the report’s author. According to Kastel, the report highlights corporate exploitation by a “handful of leading marketers” that is leading to many organic consumers being shortchanged. 

In the UK, Anthony Steen MP opened up a House of Commons debate on GM Terminator technology. The debate was the first opportunity for MPs to challenge DEFRA’s revised policy on Terminator technology (varietal – Genetic Use Restriction Technology, or v-GURTs). MPs and anti-GM campaigners have been alarmed by a statement posted on the DEFRA webstite on February 21 which reveals that the British government’s position on terminator crops has changed.  In 2000 the UK signed up to an international moratorium on developing, or even testing, the technology under the UN Convention for Biological Diversity. The revised DEFRA statement says that Britain’s position is that it will listen to new scientific evidence about terminator technology at a meeting of the United Nations Convention on Biological Diversity (CBD) group in Brazil in April and then make future judgments on a “case-by-case” base.  This is not good.  As we have reported before the evidence against the terminator technology is damning and little positive research on GM agriculture generally is available - it is predominantly negative.

Terminator plants produce sterile seeds so that farmers cannot use the seed for future planting. Campaigners argue that this forces farmers into a dependency on multinational biotech companies, whose aim, they say, is to patent the world’s main staple food crops. The companies themselves have argued that vGURT is a green solution to one of the most serious drawbacks of GM technology - the way their genes spread through pollen to create ‘superweeds’ and contaminate conventional and organic crops.  Of course it actually creates a new risk, that of making conventional plants sterile too, which would quickly destroy nature.

EU environment ministers have urged a shake-up of risk assessment and decision-making procedures used to approve new genetically-modified crops. The development marks the latest stage in the EU’s struggle to achieve a regulatory regime for GM crops that enjoys backing from all 25 member states.  In a public debate held during their council meeting in Brussels recently, ministers called almost unanimously for the European food safety authority (EFSA) to improve transparency in its scientific assessments of GM crops. Some appealed for extra assessment steps. Several ministers urged the scrapping of comitology procedures that have allowed the European commission to end the EU’s de facto moratorium on new GM crops despite opposition from many governments. In most cases the commission’s approval of new crops has been based on positive scientific opinions from EFSA.  The debate was tabled by Austria, which holds the EU presidency but is also vehemently opposed to GMOs. Vienna has defied the commission and EFSA by imposing a national ban on several EU-approved crops, citing scientific uncertainty.

We are losing the fight to tackle the world's water crisis, now one of the greatest causes of mass suffering, says the UK relief and development agency, Tearfund, in their report Pipe Dreams.  The situation which sees 1.1 billion people with no access to safe water and 2.6 billion people without basic sanitation is steadily getting worse, in spite of a major pledge by the global community to improve it. The UN's Millennium Development Goal (MDG) to "halve by 2015 the proportion of people without access to safe drinking water and basic sanitation" is in danger of becoming no more than a dream, said the agency's new report. New figures suggest five million people in Kenya are now facing food shortages as a result of failed rains. The Tearfund report's main point is that international aid, from the EU especially, is failing to keep pace with the worsening water stress hitting a growing numbers of countries. "Governments are simply failing to tackle a crisis in which a child dies from dehydration caused by diarrhoea every 14 seconds."  The report points out that the amount of extra money needed to meet the MDG - $ 15 billion - is "a small proportion of the $ 100 billion that consumers spend each year on bottled water, mainly as a fashion accessory".

As reported above in Climate Change and Environment, another major report issued, the UN-led Global International Waters Assessment, said the over-use of water for farming is the biggest environmental threat to the world's fresh water resources.

Animal copyright seems to be catching on as a way to compensate nature for its use in promotion and offering an endorsement to promoters using animals in their marketing.  Gregory Colbert, exhibitor of Ashes and Snow, is setting up the Animal Copyright foundation which hopes to "collect 1% of media buy, including print, broadcast and internet, that uses animals.  The distributions will then be made to conservation projects.  It is on one hand an appropriate way to help protect nature, but in the other a sad reflection of the culture of intellectual property and complacency about nurturing nature.

Education

In the UK, the Archbishop of Canterbury, Rowan Williams, has stepped into the controversy between religious fundamentalists and scientists by saying that he does not believe that creationism - the Bible-based account of the origins of the world - should be taught in schools.   Giving his first, wide-ranging, interview at Lambeth Palace, the archbishop was emphatic in his criticism of creationism being taught in the classroom, as is happening in two city academies founded by the evangelical Christian businessman Sir Peter Vardy and several other schools. "I think creationism is ... a kind of category mistake, as if the Bible were a theory like other theories ... if creationism is presented as a stark alternative theory alongside other theories I think there's just been a jarring of categories ... My worry is creationism can end up reducing the doctrine of creation rather than enhancing it," he said.  The debate over creationism or its slightly more sophisticated offshoot, so-called "intelligent design" (ID) which argues that creation is so complex that an intelligent - religious - force must have directed it, has provoked divisions in the UK but nothing like the vehemence or politicisation of the debate in the US. There, under pressure from the religious right, some states are considering giving ID equal prominence to Darwinism, the scientifically accepted account of the evolution of species. Most scientists believe that ID is little more than an attempt to smuggle fundamentalist Christianity into science teaching.

Public commentary on religion remains high.  We wrote about atheist christianity in the last quarter, and increasingly non-traditional views, like atheism, are being expressed in news, analysis and art.  In holonics, religion is associated with the "Impersonal" Zone or heart chakra or Truth Force/Abolutistic Saintly in spiral dynamics. Perhaps on a global level the world consciousness is moving to another level.  The acceleration of this process is important given the quickening pace of the biosphere's climate volatility and the need for us all to do things differently.

This comment from a forum of the Open World Initiative should stimulate thought in most of us ...

What is really interesting is the link between religion and politics, which as far as I know exists from the first dynasties in Egypt, more than 5.000 years ago, well before Abraham & co. Some annoying facts:-

Before Monotheism, different religions lived in peace: there were Egyptian temples in the Hitite empire, and Hittite temples in Egypt, despite the continued wars between both of them. Rome accepted Greek gods and vice-versa.

Religious war are typical from the Christian age, despite (as far as I know) that no religion says war is a good idea.

Judaism, Christianity and Islamism have the same background, all are considered to be Abraham’s followers. The actual dilemma is just who is the last prophet (Moses, Christ, Mohamed?). But their wrong fundament is the reason why these brother religions fight one with the other 

Roman church "religious empire" succeeded the roman political empire; and the first large split in church was exactly when the Roman Empire was split between western and eastern.

Christianity was a background reason for the largest genocide in the world: native people in Latin America and Australia almost disappeared and was substituted by Europeans

Henry the eight founded Anglicism just because Rome didn’t want to give him a divorce (and church’s fortune in England seemed interesting).

Cathars were considered guilty of heresy (and killed) just because they accepted other religious principles than Rome’s. (they lived just in the border of Muslim occupation in Europe).

Templairs were killed by the French King (with Rome’s blessing) just because they were becoming more rich and powerful than France and Rome...

Protestantism in Europe is associated to the idea that accumulating capital is good (in opposition, original Christianity pledged for poverty votes)

the original Francs that came to France just needed to change religion (they were of nordic origin) to obtain church’s approval for ruling..

George Bush always advocates god is alongside America in his speeches... (well, - the crusades used a religious argument (recovery of the holy land) for solving an inter-europe continuo’s conflict and consolidating pope’s Urban II power.

Jews were Christian enemies and killed during inquisition and now are allied against the “Fundamentalist Islamic danger” (which is a good allied to the defence industry, by the way).

Capitalists argued that communists were atheists to assure communism was wrong, and now use the opposite argument (i.e. the western secularized world) against  Islamic fundamentalism...and so on.

(for the very religious, sorry for this simple factoid...)

after all, religion is a way of controlling the people (Moses founded a land with that premise, the ten divine commandments)

Is there a link between monotheistic religions and intolerance and hostility? As Jean-Pierre Lehmann argues in The Dangers of Monotheism in the Age of Globalization, monotheistic religions have caused much turmoil throughout history — and continue to do so today. What is needed is a new global ethical and spiritual role model, and in his opinion, the best candidate to fill that spot is India.

Living

A female blogger has added fresh fuel to the already heated abortion debate that divides the US by posting online detailed and explicit instructions on how to perform such an operation. She said she had received half-a-dozen death threats as a result of her action. The blogger, who uses the pseudonym Molly Blythe, said she was inspired to post the DIY abortion guide after the recent signing of legislation in South Dakota that outlaws abortion, even in cases of rape and incest. The only exception to the new law would be if the woman's life was threatened if she continued with the pregnancy. "Myself and some friends have been collecting this information for the last couple of years because we believed that Roe versus Wade [the 1973 Supreme Court case that affords women the right to an abortion] was not going to be around for ever," the 21-year-old-blogger said yesterday. "We had to take steps to make sure this information was available." The guide - titled 'For the Women of South Dakota: An Abortion Manual' - makes stark reading. It lists both the equipment required and the procedure to follow to carry out a dilation and curettage, or D and C, abortion. But Ms Blythe said she believed it was essential people were aware of the facts, even if that put some people off the idea of an abortion. "My philosophy is if you don't want to have an abortion, don't have one," she added. "But people have the right to know exactly what is involved."

50 per cent of people in parts of Africa and Asia have no access to medicines due to harmful government policies, reports the Civil Society Report on Intellectual Property, Innovation and Health. The document produced by 16 civil society organizations from around the world, is being released ahead of a report on a similar theme from the World Health Organization. Examples of harmful government interventions identified in the report are:

• Taxes and tariffs of up to 55 per cent on imported medicines price people out of treatment.

• Byzantine and costly registration requirements mean many medicines already approved in the US, EU and Japan are simply not registered in most poor countries because manufacturers cannot justify the investment in registration.

• Health insurance is hampered by government regulations, so the poor are unable to obtain insurance and are only able to pay for treatments if they have sufficient savings, or must rely on charity or meagre government healthcare provision.

• Price controls - which proponents claim benefit the poor - actually reduce the availability of drugs, especially in distant rural regions, by making it uneconomic for pharmacies to stock them. Even in relatively wealthy South Africa, price controls have led to the closure of scores of rural pharmacies - leaving thousands of poor people without any access to medicines at all.

• Inadequate protection for intellectual property in poor countries undermines incentives to invest in R&D for the diseases of poverty by making it more difficult to recover costs. The report found no evidence that intellectual property protection had hampered access to medicines.

• Low pay and poor conditions at government run hospitals and clinics mean that a large number of trained medical professionals (doctors, nurses, etc.) have emigrated to wealthier countries with better healthcare systems.

The Civil Society report was motivated in part by a concern that the WHO's Commission on Intellectual Property, Innovation and Health, would not address these fundamental issues because of concerns about the response of member governments. Barun Mitra (Liberty Institute, India), one of the lead authors of the report, said "Our report shows that, when it comes to medicines for the diseases of poverty, governments are the main barriers to access and innovation. Intellectual property is an important driver of innovation but in poor countries governments currently prevent people from accessing cheap, generic medicines that could cure many of the diseases they face. In such circumstance, what is the point of producing new drugs for these diseases? Governments must remove the taxes, tariffs and regulations that prevent the sick from getting treatment."

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Activities, Books and Gatherings

March was hectic because spring is upon us in the garden, the river opened and has been busy, and we were advising on complex VC transactions.  It has been fun and now all areas are coming down to a comfortable simmer.

Here are four additional futuring/forecasting links referred to above in Holonics:

European Monitoring Centre on Change:  covers futures in a  variety of sectors, including publishing, textiles, transportation, and, most recently, the performing arts.

Future Think’s "Snap Shots" innovation index: The Future Think team, led by CEO Lisa Bodell, provides succinct summaries of innovative strategies by various organizations as they
respond to ever-shifting trends.

Worldwatch Institute's Vital Signs Facts:  Offers statistical snapshots of important trends in environment, resources, and global development.

Social Technologies: offer summaries of their forecasts and trend analyses to the public.

And just for some business fun try the McVideoGame ...

Again, in March, my extracurricular reading was restricted to Dr Pratchett.  But The Last Continent proved to be great fun.  Interestingly I noticed that the book jumps straight into quantum physics and time travel (re.: What The Bleep Do We Know!?) and was published in 1998 when I started to focus energy on understanding the Theory of Everything.  Pratchett weaves brilliantly his satire through Australian caricature - enjoy the ride!

Ethical Markets TV sponsored by Hazel Henderson is up and running with a number of series broadcast already and some clips online.

We reported on Confessions of An Economic Hitman last year.  Here is a video interview with the author.  From 1971 to 1981 John Perkins was Chief Economist and Director of Economics and Regional Planning for Chas T. Main, an international consulting firm based in Boston, Massachusetts. In 2004 he published a best-selling memoir called "Confessions of an Economic Hitman," in which he describes his work at Main and the duplicitous means by which corporate America has prospered at the expense of many of the world's poorest nations.  Covertly recruited by the US government and on the payroll of an international consulting firm, Perkins traveled to Indonesia, Panama, Ecuador, Colombia, Saudi Arabia, Iran and other nations of strategic importance to the US. His job involved implementing policies that promoted the interests of what Perkins calls America's "corporatocracy" (a coalition of government organizations, banks, multilaterals and private corporations), while at the same time professing to alleviate poverty.

We'll be at BeTheChange on 11 - 13 May and are looking forward to the opening session on Finance and the Planet.  If you might be there, let us know.

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