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[06.04.2010] Somalia's maritime economy


The industrialized global ransacking of the oceans has left populations of small fishers without income, 'high and dry', also those on the coast of Somalia. The liberal climate in Somalia afforded by the absence of government regulation of the economy has provided a boost to private enterprise and innovation (see also Milton Friedman). And this nurtured the growth of a new sector of the economy. To be precise, it is one of the oldest sectors known to mankind, variously referred to as road toll, highway robbery, or piracy, depending on whether it was practised on land or at sea. Queen Elizabeth I of England found it eminently useful for redistributing wealth more equitably between the nations of Spain and England.
Somalis have not been conferred any knightly title, nevertheless they have adopted a business model quite as effective as Elizabeth's fund manager of long ago.

A modern business model [1]

According to a report presented to the UN Security Council on 10.03.2010, the Somali coastal adventure capitalists (pirates) are organized as well as any of the hunters of Wall Street. Those having fire-arms at their disposal participate in boarding tankers and container ships that transit the Horn of Africa: every owner of a kalashnikov or pistol is entitled to a class A (action) share of the earnings (ransom). A rocket launcher or a machine gun entitles to a second class A share. A further class A share is accorded those who board the captured vessel, cf. the compensation of the higher risk of subprime mortgages by higher interest rates.
The boarding team typically comprises 8-12 shareholders. The outlays incurred by the boarding team with their two or more speedboats having to ply around the ocean in search of prey are financed by on-shore investors.
The boarding team is complemented by a second team on the ground comprising at least 12 members, which (among other duties) ensures the safety of the ship at anchor against being hijacked by other groups. The investors also advance the costs incurred by the ground team, e.g. food, drink (also for the hostages), laundry. The trust between the two teams is often cemented by family ties.

Salaries and boni:
The ground team, being exposed to much less risk, is paid according to class B shares, which represent fixed fees, not a percentage of the ransom, as is the case with class A shares.
Upon arrival of the ransom,
- the investors (e.g. pirates that have become multi-millionaires through previous actions) receive 30% plus reimbursement of expenses,
- the elder? members of the ground team are paid a flat rate, typically 5-10% in toto,
- the holders of class B shares receive typically $15000,
- the rest of the ransom is distributed amongst the class A shareholders.

[1] Le Monde "Le 'business model' des pirates somaliens", 01.04.2010

[04.04.2010] Whaling:  New Zealand sails with the wind,  Australia throws the anchor

Background: [1]

The International Whaling Commission (IWC) was created 1946 with economic and environmental goals for the whaling industry.
- Currently 84 member countries, most of whom do not conduct whaling.
- Decisions by 3/4 majority.
- A voluntary as opposed to treaty-bound organization.

Especially since the 1980s the IWC is dominated by two militant fractions: anti- and pro-whaling.

1986 marked the adoption of a moratorium calling for a pause in commercial whaling in response to findings that a number of whale species were in danger of extinction. But killing for scientific purposes was allowed. This moratorium is still 'in force'.
- Japan was forced to accede to the moratorium by pressure from the USA, but continued (obviously) commercial whaling under the formal guise of a scientific motivation. The USA itself had by then already moved from pro to anti.
- Norway and Iceland lodged formal protests and declared themselves exempt and continued commercial whaling since 1994 and 2006 respectively.
- Canada withdrew from the IWC.

1994 the IWC created a 'Southern Ocean Whale Sanctuary' around Antarctica, containing the largest Mink whale population.


Australia wants a total ban on whaling. Until recently, New Zealand had also been an adament opponent to whaling in any form. See, for example, the plan for a joint scientific effort aimed at demonstrating that (even) killing for scientific research purposes is unnecessary. [2]

Japan has made a proposal to replace the ban on commercial whaling by a reduced quota on scientific-motivated whaling compensated by a commercial-motivated allotment (how limited?).

NZ has now decided to support this proposal with the argument that
- it is better to accept a compromise than risk Japan leaving the IWC moratorium and conducting whaling without restraint, and
- effective control/monitoring of whaling is impossible anyway.
The Australian Environment Minister Peter Garrett said he will oppose the compromise proposal. [3]

The next IWC annual meeting is in June 2010.

See (of course) also: Greenpeace.

The weak point for the anti-whaling fraction is the voluntary character of the IWC.

[update 28.05.2010] Source [4]
Australia has said it will begin legal action against Japan arguing that Japan's annual whaling hunt in the Southern Ocean violates the international ban on commercial whaling. The government says it will lodge formal proceedings at the International Court of Justice in The Hague next week. The move comes ahead of the June IWC meeting.

[update 23.06.2010] Source [5]

IWC annual meeting in Agadir (Morocco): June 2010

The debate over the plan allowing a limited resumption of commercial whaling will be postponed for one year after attempts to bridge the divide between pro- and anti-whaling nations looked to have failed.
The US and New Zealand were prepared to accept a compromise, but Australia refused.
On the other side, Japan is willing to accept the proposed quotas butd Iceland and Norway were not willing to reduce their catch.
This means Japan that would continue its "scientific" whaling program in the Southern Ocean.


[1] wiki "International Whaling Commission"

[2] softpedia "Whaling: New Zealand and Australia Against Japan", 05.01.2010

[3] BBC "New Zealand calls for whaling compromise", 01.04.2010

[4] BBC "Australia to mount legal bid against Japan whaling", 28.05.2010

[5] BBC "Hopes fade of compromise over whaling", 26.06.2010

[27.03.2010] Bulgaria withstands Gene Manipulation Lobby. An example for others?

An EU regulation does not allow member countries to generally prohibit genetically modified organisms (GMOs). Despite this, in response to massive demonstrations of environmentalists, the bulgarian government found a way to change the national GMO law such that Bulgaria effectively becomes a GMO-free zone.
From now on, no GMOs are permitted within a 10 km radius around a beehive, a 7 km protection radius exists around a bio-farm, and a 30 km radius around a nature reserve. Bulgaria is fortunate in having many beekeepers.

The multinational biotechnology corporation Monsanto has been infiltrating key government authorities in the USA for quite a while now. By means of diplomatic channels (arguing against protectionism), as well as through direct lobbyism, pressure is being exercised on the EU to permit genetically modified agrarian products on a widespread basis. The EU officials and commissioners in Brussels are susceptable to this constant barrage. Hopefully in future the EU Parliament will offer better resistance against these efforts. See also (for example) [3, 4]

[1] MyBulgaria Portal "Bulgaria MPs Agree GMO Amendments to Protect Bees", 17.02.2010

[2] AFP "Bulgaria boosts GM crop restrictions", 18.03.2010

[3] Wiki "Portrait of Monsanto"

[4] ZMAG "The World According to Monsanto", November 2008

[14.02.2010] The statue of liberty of the republic is a donkey

In Germany, "Hartz 4" is the common term used for the combination of longterm unemployment benefit financed from taxes. Hartz 4 exists since 2005. See for example Hartz4 wiki (german).

On February 9, 2010, the Federal Constitution Court ruled that parts of the Hartz 4 law are unconstitutional, making corrections necessary. The chair of the Free Democrat Party (FDP), Guido Westerwelle (since the last federal election September 2009 also the vice chancellor and foreign minister) misused the Court decision to catapult himself into the center of media attention, in an attempt to boost the faltering popularity of his party:

Westerwelle (excerpts of a speech): "The discussion on the Hartz 4 ruling shows distinct socialist traits . . . It looks as if in Germany there are only recipients of taxpayers' money, and nobody working to generate such taxes . . . People who promise the population effortless prosperity, are inviting late Roman decadence . . . Especially the youth has to learn that performance is not the same as bodily injury".

A response from Heiner Geißler (Christian Democrats, the other coalition partner): "The late Roman decadence was characterized by the rich bathing in donkey milk after their feasts, and that emperor Caligula appointed a donkey as senator. In this respect Westerwelle's comparison is appropriate: 100 days ago a donkey was appointed foreign minister".

Overdrawn polemic is nothing new to Westerwelle:
On the FDP party congress in July 2006 he described himself as a statue of liberty, and fighter against the resuscitation of the mouldy corpse of socialism.
His party colleague Wolfgang Kubicki called across the floor: "In the first place, the statue of liberty is standing fairly alone in the Atlantic before New York. And secondly the statue's head is empty".

On the one hand, donkeys do not deserve a comparison with Westerwelle. On the other hand, Westerwelle's behaviour is consequently thought out, and reveals his view of the psychology of society, in particular, how a domino effect can be initiated. And the results seem to confirm his view.
Sources (german):

[1] Westerwelles Dekadenzrede, Feb 2010

[2] Die Welt "Finanzminister Schäuble lehnt Anhebung von Hartz-IV-Sätzen ab", 13.02.2010

[3] Der Spiegel "FDP-Parteitag: Hier steht die Freiheitsstatue der Republik", 15.06.2007

[4] Stern "Kommentar: Freiheitsstatue in Panik", 16.08.2007

[30.01.2010] Car producers: worldwide recall actions (Toyota then Peugeot-Citroën then Honda then GM)

Possibly 19 people have died because in a certain Toyota car model gas pedals became stuck. This has now led worldwide to mass recall actions.

As with any human activity, the commercial production of cars involves the use of limited resources. All resources have their price. In a mass market, the pressure of competition usually translates to price pressure. The need to maintain or improve competitiveness leads all enterprises to repeatedly inaugurate cost reduction (or efficiency boosting) programs. Variously these aim at reduction in R & D costs, testing costs, material and procurement costs, operational and organizational costs, etc. Sooner or later these reductions invariably result in a reduced product quality. Reduced quality in turn leads to statistically occuring malfunctions. Malfunctions may be trivial in nature. They can, of course, have dangerous consequences. They are not foreseeable. Malfunctions have specific causes, e.g. inadequate testing, or human failure*. And they have a general, system-inherent cause, namely the competition pressure.
Today, Toyota has been hit (not to mention those killed). In the past, others were affected, and in future it will be yet others.

*) some would say, failure is by definition human failure.

[update 01.02.2010] Source [2]
Meantime, also Peugeot-Citroën is recalling around 100.000 cars. These were all produced in a common Toyota & Peugeot factory in the Czech Republic. The construction parts of affected Peugeot cars are "practically identical" with the Toyota Aygo models. The problematical gas pedal came from the US supplier CTS.

Only when things go wrong does the 'man on the street' gain insight behind the facade of the globalized economy.

[update 10.02.2010] Sources [3, 4]
The series of quality related problems continues unabated:
- Toyota cars are being recalled because of mechanical and software problems with the brakes. In the USA 52 deaths have been associated with the brake problems.
- The total number of Toyota vehicles recalled is around 8 million.
- In January Honda had to order 650.000 cars back because of a fire hazard originating from the power window regulators.
- Now Honda is extending a recall action already existing since November 2008. The problem: An airbag could burst during expansion and injure passengers.

[update 02.03.2010] Source [5]
- Toyota: Leaky oil hoses can lead to engine noise and illuminate the oil pressure light on vehicle dashboards. Repair shops to replace the defect hoses. Worldwide possibly 1.6 million vehicles affected.
- GM recalls 1.3 millionen vehicles because of a power steering problem that has been linked with 14 accidents.

[update 25.03.2010] Source [6]
After the defects with airbags and window automatic, Honda has now recalled 400,000 cars to fix a brake problem. Air can penetrate into the bake system, and this impairs the braking function, so that drivers have to press down more forcefully to achieve the desired effect.

[update 08.04.2010] Source [7]
The US National Highway Traffic Safety Administration (NHTSA) found that Toyota already knew about the brake defect in September 2009, but for the following four months failed to inform anyone about it, and undertook nothing towards the protection of drivers and their families. Car manufacturers are bound to inform the the NHTSA within five days after a security-related problem is discovered. Therefore the NHTSA has imposed a charge of $16.4 million.
Aside from this, car owners have brought several group action lawsuits against Toyota.

Worldwide more than 8 million cars had to be recalled because of all three technical defects.

Toyota has now indicated taking quality improvement measures including the appointment of a new Chief Quality Officer for North America and a greater role for the region in making safety-related decisions.

The heaviest (or only?) reaction came from US authorities, and the improvements in quality control are also foreseen for North America.

[update 25.04.2010] Source [8]
Toyota recalls worldwide 34000 off-road vehicles with the kinetic dynamic undercarriage system KDSS (Lexus GS460 and Landcruiser) to modify the stabilization program VSC. In fast swerve manoeuvres the cars may skid sidewards.

[update 26.06.2010] Source [9]
Because of possible leaks in the fuel pipe, Toyota recalls 17000 luxury cars of type Lexus designed for the US market. Sales have been temporarily suspended.


[1] Chicago Tribune "Toyota stays mostly quiet about massive recall, frustrating drivers: 'I'm stuck with this car'", 29.01.2010

[2] Focus "Rückruf - Auch Peugeot Citroën meldet Pannen", 30.01.2010 [german]

[3] BBC News "Honda extends airbag recall by 437,000 cars", 10.02.2010

[4] JapanToday "Honda recalls 646,000 vehicles worldwide over power window switch", 30.01.2010

[5a] RAC "Toyota hit by new oil leak problem", 02.03.2010
[5b] BBC News "GM recalls 1.3m cars over power steering fault", 02.03.2010

[6] ZDF Heute "Honda ruft Hunderttausende Autos zurück", 17.03.2010 [german]

[7] BBC News "Toyota faces record $16m fine from US over pedal recall", 05.04.2010

[8] ARD Rundschau "Toyota-Rückruf für 420 Land Cruiser in Deutschland", 20.04.2010 [german]

[9] ARD Tagesschau "Verdacht auf Leck in Kraftstoffleitung: Erneute Rückrufaktion bei Toyota", 26.06.2010 [german]

[21.01.10] Banker boni and the helplessness of governments

In Dec 2009 the government imposed a one-off (2010 only) 50% tax on all bank boni above £25000. However most banks will let their shareholders and not their managers pay most of this levy. As the aide to the treasurer put it, "The banks don't seem to realise this tax is about changing their behaviour not raising revenue".
But the government does not appear to be too bothered. After all, the income will arrive, whatever the source. Surprisingly, there is a huge difference amongst estimates on what the tax will raise. The government estimates £550m, the banks estimate £5bn.
The bankers bring forth the universal argument* for the tax evasion: the global salary competition. I.e. if paid less than elsewhere, the "good people" will drift out of the country.
*) In reverse, this argument is applied regularly to the employee salaries at the base of the hierarchy: if employee salaries are too high, the company will be forced to migrate abroad (Eulenspargel).
FT Weekend (print), "Bankers escape bonus blow", 09.01.2010

Nothing concrete on the curtailing of banker boni.
Barack Obama has voiced the general intention of retrieving the taxpayers' money that was spent to help the banks out of their misery, but details on this are not (yet) available.

A levy has been imposed identical to the one in the UK (for boni above €27500). The government expects to raise €360m. However, the banks will get most of this (€270m) back, in the form of a payment into their common deposit protection fund, which is planned to be nationalized at the end of 2010.
Süddeutsche "Steuer auf Bankerboni: Frankreich päppelt Haushalt auf", 12.01.2010 [german]

The possibility of a levy on banker boni is currently the subject of a parliamentary discussion. The finance minister is against such a levy.
So, in the face of a -planned- record new deficit (i.e. a delta) in 2010 of €86bn, a finance minister freely foregoes the opportunity of higher tax income (Eulenspargel).

[21.01.2010] The WHO, the swine flu, and the pharmaceutical industry

Since the swine flu showed up in Mexico, the World Health Organization has been working overtime to continuously proclaim a pandemic is underway.

Lately, TV investigative teams have documented the industry affiliations and sponsorship of a number of high-level advisors to the WHO. There is also a further indication demonstrating that the WHO is not independent of commerce:
Until May 2009, the WHO definition of a pandemic influenza (the swine flu is seen as such a disease) included the requirement of the occurence of "simultaneous epidemics worldwide with enormous numbers of deaths and illnesses". In May 2009 the WHO decided to replace this part of the definition with "Pandemics can be either mild or severe in the illness and death they cause". This was done without public notice.
From then on, any mild influenza could be declared as a pandemic. The point is, declaring a disease to be pandemic requires governments around the world to undertake agreed protection measures. These include the procurement of large volumes of vaccines.

The two main effects of this industry influence are clearly
- more money flowing from the taxpayer to the pharmaceutical industry
- an undermining of trust in the WHO and other health-related organizations

[update 26.01.2010] Source [2]
The WHO's links to drug companies were questioned at a hearing by the Council of Europe's health committee. The WHO flu expert Keiji Fukuda denied there had been improper influence from drug firms. He said that part of the WHO review would examine if there was a better way to define outbreaks and severity.

Such as reversing the definition change of May 2009?

[1] WorldNetDaily "OUTBREAK! How U.N. redefined 'pandemic' to heighten alarm over H1N1", 12.11.2009

Links to the official WHO site in article (1):

  WHO definition of pandemic BEFORE May 2009 only available via the WayBackMachine archive:
  [1a] WayBackMachine-Archiv
    NB: This archive is gigantic, so download times can be in the order of 30 min.

  WHO definition of pandemic AFTER May 2009:
  [1b] WHO "WHO pandemic phase descriptions and main actions by phase (pdf 341kb)"

[2] BBC News "WHO defends its swine flu warning ", 26.01.2010


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