Last year, Sonia was diagnosed with stage three uterine cancer which had spread to her lymph nodes. She has gone through six months of aggressive chemotherapy and twenty-five rounds of radiation. Still, her cancer is progressing rapidly. But she is still fighting, and hoping to be eligible to try a new trial drug from Henry Ford Health System in Michigan. The cost of each treatment is $10,000 – Sonia would need about five or six to have a chance at beating her cancer. This $50,000 – $60,000 figure has her worried about paying her bills and keeping open her small business, Klueless Cupcakes. However, her main priority is to do everything she can to fight her cancer. Sonia’s mother started a GoFundMe campaign with a modest goal of $10,000 – the cost of just one trial drug treatment.

There are many stories like Sonia’s: individuals who have been fighting cancer for years and are no longer able to work, but are left paying hefty bills for each doctor’s appointment, surgery and mainly, treatment. Friends and families of these cancer patients have created GoFundMe campaigns to ask for the money their loved ones need, but are likely too ashamed to ask for themselves.

The healthcare crisis in the United States is multi-faceted. It involves the question of who has access to healthcare, health insurance costs, political interests, lobbying power, mergers and more. But the overwhelming issue is that healthcare costs are so much higher in the U.S. than other countries. According to The Wall Street Journal, the United States spends more per capita on health care than any other developed nation.  Soon, the U.S. will spend almost 20 percent of its GDP on health.

While the U.S. is a rich nation, and it is logical to be spending more on healthcare than other counties, it should not be that much more.

There are obvious inefficiencies in the United States healthcare system, particularly related to insurance. The price of insurance is extremely high when it is not an employee benefit, leaving it unaffordable to many and the cause of millions of uninsured Americans. Ironically, the uninsured options for care are the most expensive – for example, emergency rooms. Often, uninsured individuals reach a point where they need extensive and expensive care because they never received preventive care.

Insurance policy prices and the high costs of care for the uninsured are two aspects of the increased medical spending in the United States, but there are many components that contribute to the overall high spending. Another contributor to increased spending is something called defense medicine – doctors are worried about malpractice lawsuits, so they run a lot of unnecessary, expensive, tests to cover themselves. Doctors and nurses in the U.S. are also paid more than in other countries. Administrative costs, like paperwork and marketing, are higher as well. But none of these reasons are as significant to spending increases as many think. What contributes most to high spending in the healthcare industry is a result of the way healthcare in America functions.

There is a mixture of private and public components of the healthcare system in the United States – from insurance carriers to healthcare providers to research and development companies. However, the majority of the U.S. healthcare system operates within the private sector. This differs significantly from single-player systems in Australia, Canada and the UK where healthcare services are mostly provided by the government.

The structure of the American healthcare system means there are many different players behind a single patient – but they are not on the same page. The insurer wants the patient to receive the least number of tests possible, in order to pay the least amount of money possible. The provider wants to run as many tests as possible to protect themselves from malpractice lawsuits and to rake in more money for their hospital or private practice and, of course, themselves. The patient hopes for the best care possible, ideally without spending too much out of pocket. However, if a patient feels they need care, they will do whatever necessary and pay whatever price is set.

One would think the increased competition in the marketplace due to lack of government involvement would keep prices low. However, little negotiation of prices for medical products and treatments takes place. Providers and manufacturers are not motivated to keep prices low because people will pay for the care they need regardless, and if they are told their insurance will not pay for something, they will go to another company.  Insurers have no leverage to negotiate because there are so many players in the marketplace that will pay for the same care. Additionally, insurance companies are able to cover the costs with increased premiums. There is inelastic demand for healthcare – if a patient is told they need to pay $100 for a treatment and then that price changes to $1,000, they will still pay. They need the treatment no matter what the cost.

This system has led people to pay high prices for insurance policies and, subsequently, the care they need.  Elisabeth Rosenthal said in a New York Times article, “Whether directly from their wallets or through insurance policies, Americans pay more for almost every interaction with the medical system.” A Commonwealth study reported by the San Diego Union Tribune found that among industrialized nations, there were significant pricing differences for many medical procedures. An MRI scan in the United States cost $1,145 on average in 2013, compared with $138 in Switzerland, $350 in Australia and $461 in the Netherlands. An appendectomy cost $6,645 in New Zealand and $13,910 in the U.S. And these prices are rising fast. According to Mayo Clinic, before 2000 a year of cancer drug therapy cost between $5,000 and $10,000 in the United States. In 2012, that average price increased to more than $100,000. Additionally, these costs in the U.S. are 50% to 100% higher than the same patented drug cost in other countries.

The pharmaceutical industry has significant power to set their prices and make high profit margins because of the inelastic demand of most of their products. Therefore, they have set life-saving treatments and drugs at high, unaffordable prices. Pharmaceutical companies justify these high prices with a few main arguments: there is a high cost of research and development, there are comparative benefits to patients, and that controlling prices limits innovation. It is true that most research spending is done in the U.S., and the innovations made are propelling science forward significantly with many individuals reaping the benefits. But these arguments do not justify the six figure numbers that Americans must pay for treatments when people using the same drugs in other countries are paying far less.

People like Sonia are being directly affected by the healthcare system in the United States. Healthy individuals pay their annual insurance fees and go to their yearly physicals without much extra cost. The sickest people in America are suffering, but because of a desire to fight for their health, they will continue to pay astronomical prices for their care if there are not systematic changes.

While the economy of Los Angeles is booming right now, finding an affordable place to live is increasingly difficult for many residents. If the mounting housing crisis is not addressed soon, the city’s future will likely be fraught with economic turbulence and crippling infrastructure.

Data from the National Low Income Housing Coalition indicates that on average, a worker in 2017 would need to earn $29.71 an hour in order to afford a 2-bedroom apartment. In the case that a worker can’t find a job at that wage, they would instead have to work 113 hours per week—almost 3 times the number of hours worked by the average American—at California’s minimum wage rate of $10.50 in order to afford a 2-bedroom. Additionally, over the past year, the average price per square foot in Los Angeles rose 8.7%, from $584 to $635. And that increase is indicative of a larger upward trend in cost over the past few years.

Source: LA Times

Rising unaffordability should be a point of major concern. The higher cost of buying or renting pushes the working poor out of the housing market all together, leading them to slip into homelessness, and also keeps those without a home at all on the streets. It also is causing more people to leave California than the number currently moving to the Golden State. Plus, unaffordability means Angelenos are living further from where they work and enduring a grueling commute, which Alan Greenlee, Executive Director of the Southern California Association of Nonprofit Housing, notes has “all kinds of bad outcomes” ranging from greenhouse gas emissions to straining infrastructure. Thus, these implications equate to growing inequality and pose a long-term threat to the stability of the city’s economy.

Los Angeles is not alone. Rather, the city is one of many major metropolitan areas that is experiencing extraordinary unaffordability. In Denver, builders cannot keep up with the pace of migration into the city, which is one factor causing the housing market to slow. In the now notoriously-expensive Bay Area, the New York Times’ Karen Zraick reported in summer 2018 that the “the federal government pegs the ‘fair market rent’ for a two-bedroom in the San Francisco area at $3,121” where the median home price “has climbed above $1 million”. On the other side of the country, the majority of homes in Boston cost between $500,000 and $1 million. In Miami, the city offers only 26 affordable housing units out of every 100 extremely low-income (ELI) renter households, compared to a still-abysmal national average of 35.

Median list prices per square foot since 2011 in five U.S. cities that have experienced an unaffordability crisis (Zillow)

What’s causing the crisis in these cities? First, rising mortgage rates have made buyers wait to purchase homes, leading to less on the market and thus an increase in prices. Plus, residential investment has been falling steadily for three consecutive quarters across the country, meaning construction and brokers fees are continually shrinking.

In Los Angeles specifically, Greenlee says the housing affordability crisis can be traced back to “a pretty simple economic issue. Supply under-paces demand, and as a result, prices go up.”

Rising mortgage rates across the United States (LA Times)

One way to curb the higher costs that come with less supply may be through higher wages. Higher wages translate to more money in people’s pockets to spend on housing, and L.A. has set a progressive schedule for raising the minimum wage until 2020. However, Los Angeles Times writer Kerry Cavanaugh concludes that, “even $15 an hour won’t help much in Los Angeles as long as the cost of housing remains so high.” In the most recent quarter of 2018, annual home price appreciation was higher than weekly wage growth in Los Angeles, as it has often been recently. Thus, although wages are rising, prices are rising faster.

Another policy option to curb the crisis would be to increase rent control across the city. Recent research indicates that moderate rent control would stabilize rents, and thus overall help quell the crisis. Although rent control could help, even proponents acknowledge its only one of many necessary steps that should be taken. Plus, like raising minimum wage, it’s another strategy that merely puts a Band-Aid on the larger problem.

According to Greenlee and other experts, the ultimate answer to the crisis—and the only one that addresses the root problem—is to build more. Doing so would not only help to decrease housing unaffordability, but it would also address a connected epidemic in Los Angeles: homelessness.

Although homelessness is a result of many contributing factors, on the most basic level, “homelessness is primarily a housing issue,” says Dr. Benjamin Henwood, a professor at the University of Southern California and an expert on homelessness and affordable housing.

In Los Angeles today, homelessness is unavoidably obvious. Between 2012 and 2018, experts believe that homelessness in L.A. increased 75% from 32,000 to around 55,000 individuals. However, recent data by the Economic Roundtable tells a different story, with analysts finding that 102,278 people in Los Angeles became homeless at some point last year. Either way, the rise in homelessness is one of the clearest signs of a broken housing system.

Source: LA Times

Henwood argues that as a whole, “housing shortages will continue to undermine best efforts to address homelessness.” Although not all affordable housing addresses the needs of homeless individuals who are out of the housing market entirely, building more affordable housing in general would still help to curb both homelessness and housing unaffordability.

Research backs up this argument. In 2017, Zillow researchers found that the “relationship between rising rents and increasing homelessness is particularly strong in four metro areas currently experiencing a crisis in homelessness,” one of which was Los Angeles.

Source: Zillow

Therefore, greater supply and lower prices for Angelenos would help not just those currently searching for a home, but would also have the trickle-down effect of reducing the number of homeless. While a combination of tactics is needed to address homelessness, to address the larger housing crisis, building more homes is a good place to start for everyone.

Through the visibility of rising homelessness, Los Angeles has already taken some first steps to improve the greater housing crisis. After voters had to live and breathe in direct contact with the sprawling homeless population for a number of years due to changed regulations, they took action, and in November 2016 passed measure JJJ, which ensured that “if developers are going to make something, it had to include housing that was available for low-income people” says Greenlee. That same year, voters also passed Proposition HHH, which funded affordable housing through a bond program. And before that, the county in 2015 decided to dedicate $100 million a year to support affordable housing development.

According to Greenlee, those policy changes were driven by the fact that “people decided our current situation related to homelessness was intolerable.” While the programs in place have admittedly run into roadblocks, they are certainly steps in the right direction by Greenlee’s standards.

Looking ahead, the next steps are for policymakers to continue to promote and propose programs to fund affordable housing, and also to ensure they are properly executed. But beyond building rapidly and intentionally, Angelenos also need to get out of the way for real change to occur. Greenlee notes that one of the biggest impediments has not been to convince people to support propositions that would build affordable housing, but rather to coax people to accept greater density in their areas.

As an example, Greenlee noted a recent housing development program put forward by the mayor of Los Angeles, in which council districts would be required to create temporary housing. In some areas – like Koreatown, Venice, and Sherman Oaks – local residents met that proposal with furry, enraged that they would have to live in close contact with the homeless. Instead of standing in opposition, Angelenos should vocalize their support for greater density in their areas rather than—as Greenlee described— “going bananas” when they hear affordable housing is coming.

Protestors in Koreatown, Los Angeles reacting to plans for homeless housing in their area (LA Weekly)

While on the one hand, people want to be as far away as possible from the poor, many Angelenos are also worried about seeing a decline in the value of their properties if low-income housing is nearby. However, if the city is serious about solving the crisis, Angelenos need to acknowledge that the homeless likely already live in their neighborhoods—just on the street rather than inside—and that building more affordable housing helps not just those without homes, but everyone who is seeing skyrocketing prices due to extreme demand.

Citizens also need to educate themselves about the issue. Experts are generally in agreement that the most comprehensive solution to the crisis is to build more homes. But, a recent USC Dornsife/ LA Times poll indicates that many constituents believe the housing unaffordability crisis is a result of a lack of rent control. While rent control is an issue, this data indicates that people still don’t actually understand the crisis. If instead, Angelenos better understood the issue, they would perhaps be more likely to support additional legislation, and to accept shifts in the make-up of their neighborhoods as necessary.

As a whole, this is not the type of crisis that is impossible to solve. Rather, the solution is relatively clear, but the largest obstacle blocking the way forward is Angelenos themselves.

It has been exactly a decade since the financial crisis swept all across the globe in the fall of 2008, but for many countries and economies, the issues brought upon remain very much alive, and the aftershocks can still be felt today. As countries and economies already were functioning in each of their own unique ways, they had put forward different monetary and fiscal policies in response to the financial crisis, and were met with varying results. Among the many distinct measures taken was Britain’s highly controversial Austerity Programme. First officially proposed by both Labour and Conservative Party during the 2010 General Election, and subsequently implemented by the Conservative-Liberal Democrat coalition government, its impacts have persevered over the past decade, and are as relevant now as ever. Though the process of leaving the European Union (Brexit) has since replaced it as the top national issue in Britain, Prime Minister Theresa May recently brought the attention back to the Austerity Programme with her central message at the 2018 Conservative Party Conference “The end of it is in sight.” It remains to be seen whether the claim turns out to be valid, but there should be little doubt the Austerity Programme has reshaped the British economy as well as millions of people’s lives, for better, and, yet, for worse.

 

 

To determine how effective the Austerity Programme has been, one has to first fully understand the context it was conceived in. When the United Kingdom was due to go into election season in April 2010, the financial crisis had been in full effect for over 18 months already, and the damage it had dealt the UK was painfully obvious. Having previously produced a strong and stable economic growth for three terms of parliament spanning a decade as the Chancellor of the Exchequer, Gordon Brown had to go through his own election campaign as the Prime Minister who was in the middle of it all when the financial crisis hit. A mere 5 years prior, he, along with the economy he produced, was widely credited as the real reason why Labour was able to win the election, in spite of Prime Minister Tony Blair’s unpopular decision to invade Iraq in 2003. Now, in 2010, the most notable thing associated with his name was a peacetime record high deficit £157 billion, highest figure in Europe second only to Ireland, as well as a 300% increase in net borrowing in proportion to GDP between 2008 and 2010. Admittedly, there was no guarantee that, had the financial crisis not happen, Gordon Brown would have won the 2010 General Election fair and square. Nevertheless, it had indubitably dealt quite a heavy blow on his premiership in its infancy. The seemingly ridiculously high borrowing numbers became an opportunity for political attack, something a strategist and tactician such as the then Leader of Opposition, David Cameron, would not, for a second, hesitate to seize. During Prime Minister’s Questions on October 29, 2008, at the height of the financial crisis, accused Brown and Alistair Darling, then Chancellor of the Exchequer, of breaking the fiscal rules that they had set up. “Rule 1 was, ‘Only borrow to invest’; now he is having to borrow to pay for unemployment benefit. That rule is dead. Rule 2 was, ‘Don’t have debt over 40 per cent of national income.’ Even on his own fiddled figures, that rule is now dead.” (Hansard) Not complacent with simply dishing out criticism, he followed it up six months later in April 2009, proposing an “age of austerity” as the potential Prime Minister.

 

He did not have to wait long before he got the chance to turn the potential into reality. The largest party coming out of the 2010 General Election but without a majority in the parliament, the Conservative Party formed a coalition government with the Liberal Democrats in May 2010. A month into the new government, Chancellor George Osborne announced in the emergency budget dramatic government spending cuts, a Value-Added Tax increase from 17.5% to 20%, welfare cuts, in addition to a personal allowances increase of £1,000. Osborne claimed such measures would be “tough, but fair”, and “unavoidable”, while calling the previous government’s massive spending in response to the financial crisis “irresponsible”. With the new budget, the coalition government had cutting the aforementioned deficit and lowering debt to GDP ratio as its top priorities. With new policies going in the opposite direction of the previous Labour government, the coalition set out to fix the financial problems as much as they could, if not at the cost of people’s living standards. Increased Value-Added Tax without increased wages meant goods were less affordable than before, and welfare cuts, most notably child benefits and pregnancy grant, meant another hit on people who needed them. The downsizing on public sectors unsurprisingly led to an increased unemployment rate during a period in the following year. Granted, while it was true that the post held tremendous power over monetary and fiscal policies, the Chancellor or the Exchequer had always been a far cry from an easy and popular job. Former Chancellor Norman Lamont, infamously known as the man responsible for Black Wednesday, called himself “the most hated man in England” after being appointed. Osborne’s public image, likewise, was practically destroyed by his direct link to the Austerity Programme, as he was perceived as the guy who simply and solely took goods and services from the British people for his own personal good. As the years went on, the coalition government did nothing to shy away from the austerity route, even adding privatizing public assets into their arsenal, with the privatization of Royal Mail causing most controversy. Despite the fact the United Kingdom’s net borrowing in proportion to GDP had been effectively cut down at the end of the parliament to half of the 2010 figures, one cannot help but wonder if it was worth the sacrifices made elsewhere in people’s welfare, purchase power, and since this was a British topic, the traditions.

 

 

Fast forward to today, over two years after the man behind the Austerity Programme had been removed from power, the effects of the programme are still pervasive and prevalent. Whilst the former Prime Minister-in-waiting has been doing his best Niccolò Machiavelli impression as editor of the Evening Standard, his predecessor has generally followed his footsteps, and steadily furthered the progress of the Austerity Programme. In his spring 2017 budget, current Chancellor Philip Hammond cut down on more benefits for working age people, and confirmed that he intended continue with the Austerity Programme during the 2017 General Election campaign. With a business background before entering parliament and “Spreadsheet Phil” for a nickname, Hammond is much less of a politician than Osborne ever was, but it was evident that his main goal was still to tackle the deficit. A year later, in August 2018, it was announced the government had turned in a surplus of £2 billion with a net borrowing of £12.8 billion, both new records since when Gordon Brown was steering the ship as Chancellor. However, it is important to look at both numbers in context. The United Kingdom GDP growth has fallen from a steady 1.7% to 1.1% at the beginning of the year, so the record numbers might not necessarily mean everything is fine and dandy. An extended period of decrease in GDP growth means the UK is at rick of bottlenecking the economy, which would defeat the very purpose of the Austerity Programme.

 

 

Just a few weeks after Prime Minister Theresa May had vowed the austerity was in its last leg in the 2018 Conservative Party Conference, and less than two weeks until Philip Hammond is due to reveal a new budget, it is quite the tricky time to comment on the future of the Austerity Programme. The United Kingdom has indeed made strides in fighting back the financial crisis with a distinct and decisive strategy, but it also introduced problems that were not present before the programme took effect. If the claim had not been purely a decoy to distract people from the mess that is the Brexit fiasco, the British people can expect real changes in the upcoming budget, given the Prime Minister’s bold claim and the most updated figures. The budget may include increased public spending, considering the newly-found liquidity in the government budget, but it would not necessarily mean a complete derail from the Austerity Programme. After all, Hammond has been merely functioning in the George Osborne-shaped mold so far. The Austerity Programme has been the dominating driving force in the British society for the better part of the past decade, and even if it were to go away in the foreseeable future, it would not do so quickly, and it is entirely likely the country would still be haunted by certain policies left over, or simply the everlasting memories of it. Moreover, mind you, the “Austerity Chancellor” himself is still young enough, relevant enough, and dare I say it, more politically charged than ever. Now that he has recovered his public image as time passed, who is to say that he is not lurking for a better time to mount a comeback for the top job?

 

 

Sources:

https://www.telegraph.co.uk/news/politics/labour/10451851/Labour-are-cowards-for-racking-up-billions-in-debt-says-Ken-Livingstone.html

https://hansard.parliament.uk/Commons/2008-10-29/debates/08102932000022/Engagements#contribution-08102932000090

https://www.theguardian.com/politics/2009/apr/26/david-cameron-conservative-economic-policy1

https://www.yorkshirepost.co.uk/news/infographic-osborne-sells-off-more-public-assets-in-12-months-than-in-past-20-years-1-7393492

https://www.bbc.com/news/business-45256075

https://drive.google.com/file/d/1DiR9XcQusHQrkY9PqPAkwN4xf1TBt-HI/view?usp=sharing

 

This is probably the most unpleasant job in the world – trash sorter. It is smelly, boring and intense. The job exists because citizens throw all types of garbage into the same bin. Trash trucks take everything in the bin and pour them onto a conveyor belt. The belt rolls with the pulley in front of the recycling workers, who spend days after days watching the belt rolling and sorting them out.

Till 2018, recycling companies still rely on manual labor to categorize materials, since the assembly lines in recycling factories neither produce identical output nor have repeatable processes. According to a study released by the University of Illinois, recycling workers are more than twice as likely to be injured at work as the average worker. Seventeen American recycling workers died on the job from 2011 to 2013.

“I was created to do this job,” said Max, a robotic sorter created by Bulk Handling System (BHS) with the artificial intelligence technology. Fundamentally, Max identifies recyclables in a similar way to a person. A process called “deep learning” runs through hundreds of thousands of images to train neural networks to “think out” the correct identification. Once built these neural networks resemble the architecture of the brain and, when paired with a camera, will correctly identify the items in our recycling stream.

Max is volunteering at just the right time. The dedicated mechanical sorter is widely welcomed, as China’s ban on plastic trash import lends urgency to upgrading the recycling industry in the exporting countries. Now that the world’s biggest trash importer only allows half percent of contamination, the recycling plants need to double or triple sort the product before the shipment. Companies are getting squeezed on a number of levels. Now they are anxiously seeking every possible way to reduce labor cost.

BHS has three sites in the U.S. and three in Europe. Two waste management companies in the U.K., Viridor and Green Recycling, have invested in Max-AI, expecting to upgrade their processing line, according to the companies’ websites.

More companies than just BHS are dedicated to developing smart machines to cater for that need. Moblieye, a vehicle manufacturer, recently designed an electronic trash truck for heavier city distribution and refuse transport operations with gross weights of up to 27 tons.

“Chinese government is allowing a window for imports, but the quality has to be there,” said Brett Johns, Director of Sales, Marketing, and Procurement at City Fibers, a family recycling company in Los Angeles. Johns said that they need robots to help improve quality. “We are looking at the elimination of probably ten to twenty percent of human jobs positions,” he said.

China’s import ban is not the only reason for Max to exist. “Automation has been a trend in the last ten to fifteen years,” Nick Morell said. He is the Recycling Coordinator from Sanitation District of Los Angeles County (LACSD).

According to Morell, the agency currently relies on both mechanical and human sorters to run its processing line. “It will be out of service in next 12 months. As we put in a new mechanical sorting line,” he said, adding that LACSD is about to sign a contract with BHS to optimize their facilities this October. This means the current employed sorters will be soon out of jobs.

Morell said they were temporary labors through contracts, so they would be either reassigned to other facilities or temporarily laid off as “they are not gonna work on the line anymore”.

While sorting trash is unpleasant, it can be worse for people to lose jobs.”This conversation should not be about jobs.”said Peter Raschio in an email. He is the marketing manager of the company. Raschio argued that automation might result in the the loss of sorting position for a future hire, but those positions were not “sustainable, long-term jobs”.

Steve Miller, CEO of BHS, believed that the impact on labors would be positive. He said in an interview that the increased efficiency in assembly line could cut recycling costs and create more jobs at paper mills, plastic recyclers, and other firms that reuse raw materials.

“I would say that green jobs are going away as automation progress,” Morell said on the contrary. He predicted that green jobs in the future would be more about quality control, engineering and processing line. “It would be almost like the mining operation — the way things are ground up and that they use magnet and optical sorters. There’s not a lot of people involved in those process until you are dealing marketing and commodities,” he said.

The newest Recycling Economic Information (REI) released by the environmental protection agency (EPA) shows that the estimated recycling jobs have declined from 2001 to 2016 national wide, including those in iron and steel mills, non-ferrous foundries and glass container manufacturing plants. The number of plastic converters dropped from 178,700 to 30,535 during the 15 years. Firms that reuse raw materials in all categories of scrap commodities, except for rubber, have seen a decreasing demand for recycling workers. Miller’s optimistic outlook might not come true in the short term.

(Professor Dowell Myers, Director of the Population Dynamics Research Group in at the University of Southern California, commenting on automation’s impact on labors)

(Labor union comments, hopefully with anecdotes)

……

 

Our global economy is connected through the energy industry. For centuries, nations and firms have fought over and sought the right to acquire “black gold” – oil [Yergin]. However, the production and use of these natural resources emits dangerous carbon into the atmosphere, endangering our planet. These carbon emissions result in a changing climate — through higher temperatures, more heat, and stronger natural disasters such as tropical storms and wildfires. In acknowledging the perilous effects of climate change, the world’s fifth-largest economy – the state of California – is embarking on a goal to transition out of a state of affairs governed by the dominant energy sources (oil, petroleum, natural gas) and towards complete utility of carbon-free clean electricity by 2045.

Signed into law in September by Governor Jerry Brown, the bill sets increasingly greater targets on California’s renewable energy capability, with 50 percent by 2026, 60 percent by 2030, and one hundred percent clean electricity by 2045. California represents the second state to set this goal [Ige, 1]. Many are skeptical of the ability of the state to fully transition to clean electricity by the time 2045 rolls around, or are perturbed by possible high costs of energy bills caused by the transition. These being legitimate causes for concern, there are myriad reasons Californians could accomplish this challenging aspiration. The development of battery storage will play a vital role and its economic viability will determine California’s success at this effort. As Fareed Zakaria writes, “We need to store the energy [produced] for when the sun isn’t shining and the wind isn’t blowing. For that we need battery power on a different scale than we have today.”

As has often been the case in its innovative history, California’s investment and pledge to transition entirely to clean electricity sets an important example for the rest of the world to follow and should help influence the private sector to act. Explains the energy expert Daniel Yergin: “High energy prices, climate change and energy security are converging as the new engine driving the development of clean energy … They are being bolstered by public policy…” [Yergin, 1].

The state has crafted policies that incentivize companies and utilities to spend on enhancing renewable energy strategies and investment in energy storage, which is seen as vital towards reaching the one hundred percent clean energy goal. Although currently natural gas power plants currently makes up a large quantity of California’s energy, the state’s leadership and many companies forecast that declining costs of energy storage will ensure that electricity is much more strongly stored. Following his signature on the one hundred percent clean energy bill, Gov. Jerry Brown recently signed another law that allows the state to allocate “an additional $800 million for energy storage to capture electricity generated by solar panels during daylight hours to help keep the lights on after the sun goes down” [Penn, 1]. This money goes into the state’s Self-Generation Incentive Program, which incentivizes providing support for “distributed energy resources” and “rebates for qualifying distributed energy systems installed on the customer’s side of the utility meter” [CPUC, 1]. Through this initiative, California is essentially creating a market for the utilities to research ways to develop new advanced energy storage systems. The state has increased the program’s funding to over $1 billion. The rebate money is available for energy storage and can be used for residential and commercial systems, including for schools, farms and businesses.

Vox’s energy and climate writer, David Roberts argues that it is imperative to get these new markets right, for they are “better at determining the proper amount and location of storage than” politicians. The state should help furnish “a market that values carbon, capacity, ramping, voltage regulation, and all the other services storage can provide, lower barriers to entry, set up transparent rules, and let profit-seeking companies battle it out” [Roberts, 1].

In many sectors, need drives innovation. California is hoping that its regulation of carbon-emitted energies drives private sector innovation vis-à-vis energy storage and new energy markets. This is especially the case for solar generation and capture, smart meters and smart grids that can store and send out energy when necessary.

“For utilities invested in the right analytics capabilities [in smart meters and the smart grid], they enable data-based analyses, planning, and diagnostics. Smart grids are more efficient and less capital intense, allowing for predictive maintenance and better asset health” [McKinsey, 3].

For example, with smarter grids and meters, the potential for energy arbitrage – storing/selling energy during higher-power times during the day and releasing/buying it during less-peak times – will grow. More powerful sensors, smart grids and energy storage provide new opportunities to develop tailored programs for consumers, which will help them control energy usage, heating, and cooling more sufficiently. This is what California is counting on. According to McKinsey & Co. research, there are a number of energy markets that – through improvements in battery storage – will grow significantly in economic value:

Source: McKinsey & Company research, June 2017

Ultimately, “the industry wants dynamic pricing and hourly rates so that solar-plus-storage owners can respond in real time to the real needs of the grid,” Brad Heavner, California Solar and Storage Association policy director, vouches. With new and more efficient batteries, solar energy can be stored by consumers and offers alternatives to carbon emitting energies.

Southern California Edison (SCE), Pacific Gas and Electric (PG&E) and San Diego Gas and Electric (SDG&E) are the three major California utilities. Despite possible rising energy bills due to these initiatives, an indicator of progress is that the economics of energy storage are becoming more cost-friendly every year. This should be a positive trend for the utilities, who could improve services by “incorporating new distributed energy alternatives”, and consumers alike [McKinsey, 2]. The International Energy Agency reported in 2017 that battery costs have declined significantly every year since 2009 and that, concurrently, battery energy storage is enlarging yearly.

Source: International Energy Agency report, 2017

Moreover, Bain & Company partners Julian Critchlow and Aaron Denman – head of and partner in the firm’s Global Utilities practice – come to the conclusion that “large-scale energy battery storage is reaching an inflection point, advancing from limited experimentation to wide adoption” [Critchlow and Denman, 1]. This inflection point is a necessary incubation for California to accomplish its goals. For utilities, grid-connected batteries and battery storage are integral for “managing peak loads, regulating voltage and frequency, ensuring reliability from renewable generation and creating a more flexible transmission and distribution system” [2]. With California-based energy storage systems working with commercial clients, utilities, and governments and using machine-learning and deep learning to “optimize power generation,” Bain determines that immediate benefits should be seen and additional value will be realized over time.

Winston Churchill once remarked regarding oil that “on no one process … or field must we be dependent” [British Parliament Speech, 1913]. Similarly, today we cannot depend on “one process” of gaining energy — society must aim to discover and utilize more efficient, environmentally-friendly energy tactics. Battery storage will be pivotal in this effort. As battery power and costs rise and fall, respectively, California’s ambitious endeavor to use completely clean electricity should be emulated, and if achieved represent a realistic, necessary path forward on energy policy for the world within a changing climate.

Sources:
Beatty, Jack. “A Capital Life: A biography of John D. Rockefeller traces his rise from threadbare country boy to Standard Oil magnate.” The New York Times, The New York Times, 17 May 1998, www.movies2.nytimes.com/books/98/05/17/reviews/980517.17beattyt.html.
Berke, Jeremy. “There’s New Evidence That Fossil Fuels Are Getting Crushed in the Ongoing Energy Battle against Renewables.” Business Insider, Business Insider, 9 Apr. 2018, www.businessinsider.com/solar-growth-outpaces-coal-oil-fossil-fuels-2018-4.
Critchlow, Julian, and Aaron Denman. “Embracing the Next Energy Revolution: Electricity Storage.” Bain Insights, Bain & Company, 31 Aug. 2018, www.bain.com/insights/embracing-the-next-energy-revolution-electricity-storage/.
Garner, Dwight. “’The Quest,’ by Daniel Yergin – Review.” The New York Times, The New York Times, 20 Sept. 2011, www.nytimes.com/2011/09/21/books/the-quest-by-daniel-yergin-review.html.

Genier, Bethany. “Yergin: Renewables Moving Toward Competitive Role in Energy Markets.” Yergin: Renewables Moving Toward Competitive Role in Energy Markets | IHS Online Newsroom, 5 Mar. 2008, https://news.ihsmarkit.com/press-release/energy/yergin-renewables-moving-toward-competitive-role-energy-markets
Gilbert, Ben. “’It’s the Dumbest Experiment in Human History’: Elon Musk Rails against Fossil Fuel Use and Climate Change.” Business Insider, Business Insider, 8 Sept. 2018, www.businessinsider.com/elon-musk-dumbest-experiment-2018-9.
Government, U.S. “U.S. Energy Information Administration – EIA – Independent Statistics and Analysis.” California – State Energy Profile Analysis – U.S. Energy Information Administration (EIA), https://www.eia.gov/state/analysis.php?sid=CA
Ige, David. “David Y. Ige.” David Y. Ige | PRESS RELEASE: Governor Ige Signs Bill Setting 100 Percent Renewable Energy Goal in Power Sector, 8 June 2015, governor.hawaii.gov/newsroom/press-release-governor-ige-signs-bill-setting-100-percent-renewable-energy-goal-in-power-sector/.
International Energy Agency. “Global EV Outlook 2017.” International Energy Agency, IEA, June 2017, https://www.iea.org/publications/freepublications/publication/GlobalEVOutlook2017.pdf
Nikolewski, Rob. “Can California Really Hit a 100% Renewable Energy Target?” Sandiegouniontribune.com, San Diego Union Tribune, 19 June 2017, www.sandiegouniontribune.com/business/energy-green/sd-fi-california-100percent-20170601-story.html.
Penn, Ivan. “California Lawmakers Set Goal for Carbon-Free Energy by 2045.” The New York Times, The New York Times, 29 Aug. 2018, www.nytimes.com/2018/08/28/business/energy-environment/california-clean-energy.html.
Roberts, David. “California Just Adopted Its Boldest Energy Target Yet: 100% Clean Electricity.” Vox, Vox Media, 10 Sept. 2018, www.vox.com/energy-and-environment/2018/8/31/17799094/california-100-percent-clean-energy-target-brown-de-leon.
Santos, Paulo. “On The Tesla Model 3 Being The Safest Car.” Seeking Alpha, 12 Oct. 2018, seekingalpha.com/article/4211218-tesla-model-3-safest-car.
The Parliamentary Debates (official Report).: House of Commons. By Great Britain. Parliament. House of Commons
Yergin, Daniel. The Prize: the Epic Quest for Oil, Money & Power: with a New Epilogue. Free Press, 2009.
Yergin, Daniel. The Quest: Energy, Security and the Remaking of the Modern World. Penguin Press, 2012.

http://faculty.haas.berkeley.edu/wolfram/papers/aea%20dynamic%20pricing.pdf

https://www.utilitydive.com/news/as-california-leads-way-with-tou-rates-some-call-for-simpler-solutions/532436/

https://www.nytimes.com/2011/09/25/books/review/the-quest-by-daniel-yergin-book-review.html

https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/battery-storage-the-next-disruptive-technology-in-the-power-sector

https://sites.hks.harvard.edu/fs/whogan/PES_paper_09_salles_final.pdf

https://www.sciencedirect.com/science/article/pii/S0301421506003545

https://www.vox.com/energy-and-environment/2018/4/27/17283830/batteries-energy-storage-carbon-emissions

When the phrase “world domination” is used in reference to a powerful entity, the first image that often comes to mind is a villain in a cartoonish suit who absorbs power as the surrounding world crumbles — sometimes even accompanied by evil-sounding thunder in the background. World domination, however, is not limited to unrealistic individuals who wear masks that shield their true identities from being associated with their heinous crimes. Instead, the modern-day world dominator takes on a more digital form, making their tactics easily accessible to the public by interacting with their followers on a daily basis. As loyal followers build trust in the entity, individuals are more willing to divulge information as the power source grows in influence, teaching the dominator to tactfully increase its followers based on previous behavioral patterns. The cycle repeats until the dominator has created such a large presence that its followers literally cannot go about their day-to-day lives without it but, even worse, don’t really question this codependency.

Yes, Amazon and Facebook are the culprits of world domination — or, at least, they’d like to be.

The digital sphere as the modern world knows it has only been in existence for about two decades but has completely revolutionized the way humanity functions. Twenty years may be an extremely short period relative to all of time, but this small sliver of time has seen unprecedented societal and economic progress that has rewired the way we consume goods, interact with others and even perceive ourselves. This progress will only continue to exponentially grow, and digital companies like Amazon and Facebook will play a vital role in evolving our economic choices alongside forming our digitally-dependent society.

On one hand, the accessibility and connectivity Amazon and Facebook provide have made experiencing life in the 21st century easier than ever before between instant communication with peers and having nearly anything imaginable delivered right to one’s doorstep with the click of a button. As mentioned earlier, however, people unquestionably are becoming increasingly co-dependent on these large digital companies to live their everyday lives and make economic decisions — emphasis on unquestionably. While individual consumers make their lives easier by passively allowing these massive digital entities to become interwoven in their lives, the dominance of Amazon and Facebook on a grander economic scale may prove more dangerous than anticipated.

Primarily, the superiority Amazon has over specific producer markets and the dominance Facebook has over advertising are reminiscent of Standard Oil’s monopoly on oil in the late 19th century. By owning or controlling 90 percent of the U.S. oil refining business, Standard Oil was able to form trusts with other oil companies and drive out competition with others in the same business. Though Standard Oil was able to provide a good quality product at a reasonable, stable price, the company, from the government’s perspective, uncomfortably wielded too much power in one of the nation’s most important industries. Ultimately, the government put antitrust laws into practice, breaking down Standard Oil’s trust and, ideally, preventing further monopolies from forming.

Now in the digital age, the large-scale presence of Amazon and Facebook isn’t as tactile as, say, oil, but that doesn’t mean their potential to monopolize isn’t as — if not more — dangerous. The way consumers interact with these companies may be limited to a screen, but their impact is both felt and seen in the real world.

Amazon, as most any digitally literate citizen knows, is an online retailer that consumers can utilize to buy nearly anything — anything — and have it shipped to their door. As discussed by Jonathan Taplin in his book “Move Fast and Break Things,” Amazon has created a monopsony over certain goods, which is essentially the inverse of a monopoly. A monopsony, according to Taplin, is when a buyer, as opposed to a seller in a monopoly, has control over who can enter a specific market to buy goods, which drives prices down.

“Amazon has a near-monopoly position in the distribution of ebooks,” Taplin writes. “Beyond books, Amazon captures fifty-one cents of every dollar Americans spend in online commerce. It wasn’t supposed to be this way.”

Ironically, in 2014, New York Times opinion writer Paul Krugman published an article titled “Amazon’s Monopsony Is Not O.K.,” where Krugman claimed that “Amazon doesn’t dominate overall online sales, let alone retailing as a whole, and probably never will.” Come 2018, research by eMarketer tells an updated story: Amazon now shares 49.1 percent of retail ecommerce sales, which is nearly 5 percent of the total U.S. retail market online and offline.

Further, Taplin points out that the main consequence of Amazon’s monopsony in the book business forces authors and publishers to work for less money. He details how Amazon is able to practice a form of “rent-seeking” by denying publishers access to its large customer base and extracting excessive “rents” from publishers because the company has driven out seller competition. Arguably, Amazon’s path to digital retail dominance came rapidly and without much question because of the convenience the company brought to consumers. As a result, however, the consequences of Amazon’s presence are only recently being felt and studied.

“Monopsony power has probably always existed in labor markets, but the forces that traditionally counterbalanced monopsony power and boosted worker bargaining power have eroded in recent decades,” writes Alan Krueger of the Princeton Economist.

VIDEO: Here’s Amazon’s impact on the economy

Beyond damaging competition with selling in the book market, Amazon has established other monopsonies that have had disastrous effects for classic physical retailers.

“Amazon has changed the market in many ways. By the end of this week, Sears will file for bankruptcy. That’s a direct result of Amazon. Kmart will file for bankruptcy probably within the next two months. There’s really no place for the old-fashioned retail to exist in a world where Amazon can undercut their prices,” said Taplin in an interview. “Amazon wants to rule the world. It’s simple.”

Facebook is a whole other beast.

As mentioned, Amazon holds a monopsony over particular retail markets, like ebooks. This makes it harder for other buyers to enter the market because Amazon’s prices are so competitive that any smaller buyer would have a hard time being successfully profitable. Facebook, on the other hand, is the largest social network in the world with over two billion monthly active users or “MUAs.” The platform also owns Instagram and WhatsApp, which each have over a billion MUAs.

Facebook’s increasing MUAs from 2008-2018, according to Statista.

With such a large reach in the social media realm, Facebook has a near monopoly on affinity-side advertising, according to Dan Faltesek’s Medium article “Social Monopsony.” Taplin discusses Facebook’s business model in the same light, noting that the platform centers around selling advertising at a higher rate than comparable internet sites.

“In short, if you are looking to make a large social buy, Facebook is your only option,” writes Faltesek. “The case that Facebook has a near monopoly on in-stream affinity network advertising is fairly clear.”

Why is Facebook’s advertising scheme so successful? It’s simple: Microtargeting.

Microtargeting is a marketing strategy by which a company collects specific information on consumers — where they live, what they like, what their friends like and so forth — and pushes advertising content their way that directly reflects their specific interests. While this can be an effective strategy for marketers, in a world where there is only one buyer of user attention, regulation is necessary, as Faltesek points out.

So where does this leave modern society? For how much longer will we be so codependent on these massive digital entities? Digital enterprise is no longer an experiment — it’s a legitimate business with large impacts on the consumer market and needs to be treated as such. On the security side, in light of data leaks like the Facebook Cambridge Analytica scandal that took place earlier this year, these digital companies have shown that while they have a massive presence, they don’t always have control over where their data goes, which is a major issue that needs to be addressed. Additionally, increasing amounts of people have shown distrust in being so digitally present or have removed themselves completely from social media platforms, so now is a crucial moment that will determine if living digitally dependent lives is sustainable in the long-term.

“Until these companies begin to take responsibility for what’s on their platform, it’s going to be complete chaos and anarchy. This is not healthy for democracy, and I don’t think it’s healthy for humans, as you can tell in terms of what I think about your addiction to your smartphone that it is probably not a good thing. It’s not making you smarter. It’s just making you more distracted,” said Taplin in an interview.

At the end of the day, the digital sphere can change intensely in only a short period of time. While one cannot be certain where certain digital platforms will be in the next two decades, one can know for sure that the digital market is here to stay. Now, it’s just up to consumers to decide how digitally codependent they want to be. The digital sphere may be prominent, but allowing it to have personal dominance is an individual choice.

On July 6^th, 2018, the United States declared war on China. This war, however, is not being fought with bombs and guns or by millions of soldiers, but is being fought with tariffs. Trump and Chinese President Xi are engaged in a full-on trade war, and neither side is showing signs of concession.

Trump has never been a big fan of the way Americans have traded with the Chinese. He says that China is profiting too much from U.S farmers without returning the favor.

At the root of Trump’s decision back in early July to tax $34 billion worth of Chinese imports lies his belief that too much manufacturing abroad is hurting domestic industrial efforts. This protectionist philosophy is highly debated by economists and is complicated as it results in both negative and positive effects throughout the economy.

Trump’s policies are not popular with other countries that rely on a stable U.S trade relationship to meet their importing schedule. Engaging in tit-for-tat trade disputes may seem like it will yield results, but in the long-term, it damages crucial relationships that could hurt America’s biggest industries. One big American industry may take a permanent hit—soybeans.

The United States’ biggest export is food, beverage, and feed according to a U.S Commerce report in 2017. Soybeans make up the largest part of that industry, and 60% of them were exported to China last year.

As demonstrated by a case study of the soybean market, the economic impact of tariffs on U.S. exports and a protectionist trade policy may damage the Chinese economy in the short term, but will eventually just push China to find alternative ways to avoid importing such high amounts of this product from America.

China does receive most of its soybeans from the United States, but it also gets them from Brazil. South America may be Xi’s best option if Trump doesn’t step down.

Though Brazil consistently runs out of soybeans at the end of each cycle, it could likely ramp up production efforts if need be. In the last 20 years, the country has increased its soybean production by 266%, whereas the United States’ production has only increased by 63%. However, production costs for Brazilian farmers may end up being too high to keep up with Chinese demand.

Another option for China is for investors to buy and develop land to produce soybeans in Brazil or another country, which would take a few years to fully implement. Then again, if this is a viable option in the long term, it could take away China’s need to rely on American soybean farmers.

President Xi’s Belt and Road Initiative (BRI) is also a key player in reducing reliance on U.S agriculture throughout this trade war. The Initiative is an effort to connect Asia, Africa, and Europe for mutually beneficial economic opportunities. China wants a “belt” of overland corridors and a “road” of shipping lanes between 71 countries. That means the BRI streamlines trade between half of the world’s population and a fourth of the global GDP.

The BRI brings an increased level of economic interaction to China, making it that much easier to locate untapped areas equipped to produce soybeans other than the United States.

If China resorts to any of these options, U.S soybean farmers are going to take a long-term hit. While America can refocus its efforts to shipping out the product to other countries, if China manages to get Brazil to ramp up production levels or invests in agricultural land in other countries, it would lower the need for U.S trade partners to exclusively import soybeans from America.

China is now taking short term measures to deal with Trump’s tariffs. The China Feed Industry Association proposed in September to ration out soybean feed to pigs.

Furthermore, the Xi administration is maintaining a positive attitude by looking to increase domestic soybean production.

“Unilateralism and trade protectionism are rising, forcing us to adopt a self-reliant approach. This is not a bad thing,” Xi said in September.

The Vice Agriculture Minister Han Jun also warned that Trump is playing with fire.

“Many countries have the willingness and they totally have the capacity to take over the market share the U.S. is enjoying in China. If other countries become reliable suppliers for China, it will be very difficult for the U.S. to regain the market,” Han Jun told the Xinhua news agency in August.

Soybean producers in China are already benefiting from the conflict. Yang Guiyin, the sales manager of an agricultural company in the Heilongjiang Province, said that soybean profits are on the rise.

“Our farmers really hope that China will import less soybeans so that domestic soybean production and soybean-related businesses will flourish,” Guiyin told NBC News in July.

The Chinese Government is pushing its domestic agenda even further as it aims to add $1.6 million acres of land to its existing soybean production. It is also subsidizing $190 to $320 per acre instead of the previous $150.

On the other side of the war, the U.S is not taking a visibly huge hit just yet. Soybean producers have been able to maximize productivity this last quarter by exporting to other countries other than China. The profit margins on the products are still diminishing, however.

 

 

 

Some experts believe this will not last.

“I view this as being a surge that will not persist, but it’s huge,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, told the Wall Street Journal in July. “If you’re doing lots [of exports] in absolute terms at a time when normally you wouldn’t be doing very many, then the seasonals will be very favorable.”

Looking ahead, the future of U.S soybean farmers will be determined by conversation between Trump and Xi. The world leaders have planned to meet on several occasions, but due to rising tensions, have not been ready to negotiate quite yet. The White House decided recently to move forward with conversation. Trump and Xi are planning to discuss the escalating situation at the Group of 20 leaders’ summit in Buenos Aires at the end of November.

For the Trump administration, the pressure is on. President Xi purposely targeted the soybean industry because the farmers primarily reside in states that elected Trump to office. China is looking to hit his weak spots. If Trump’s support system loses faith, it could have detrimental effects for republicans come November’s elections.

 

Iowa, Minnesota, Nebraska, North Dakota, and Indiana are all major soybean producing states and all voted for Trump in 2016.

In any trade war, just like in real wars, people are hurt. Trump stands by his belief that the United States will beat China, but if Xi continues to match Trump’s level of tariffs, it could get very ugly. Americans have no choice but to wait and see if Trump is correct in tweeting that “we win big.”