A Toast to the Family

By STANTON PEELE
August 31, 2007 - WSJ

Florida, Michigan and New Hampshire are some of a growing number of states to enact laws holding parents accountable for underage drinking at their homes. These laws typically involve hosting parties where alcohol is served to minors.

The target is parents who blithely allow keg parties in their basements and then let the teenagers who attend them drive home drunk. One such couple in Deerfield, Ill., was recently convicted when two 18-year-olds died in a car accident after such a party. Earlier this month, Karen Dittmer was arrested for allowing her 18-year-old son and his friends to drink beer at her birthday barbecue in New York's Suffolk County.

What kind of parents would ever allow their children to drink at home? Doesn't this put youngsters at risk?

The answer to the first question is simple. Most of the state laws include a specific exemption for children drinking at home during family and religious ceremonies. Observant Jews, for example, traditionally serve children small glasses of wine during Friday night Sabbath ceremonies. Other cultures also begin socializing children into drinking at an early age -- including Mediterranean societies such as Italy, Greece and Turkey (and non-Mediterranean societies such as China).

As for the second, two international surveys -- one conducted by the World Health Organization -- revealed that these Mediterranean countries and Israel had the lowest binge drinking rates among European adolescents.

In societies where children drink with their parents, this typically means giving a kid a small amount of wine or other alcohol, often watered down on special occasions or a family dinner. Many European countries also lower the drinking age for children when they are accompanied by parents. In the United Kingdom, for example, the legal age is 18, but for a family at a restaurant it is 16. In France and Italy, where the legal age is 16, there is no age limit for children drinking with parents.

But what might all of this mean for teen drinking problems in America?

Several studies have shown that the younger kids are when they start to drink, the more likely they are to develop severe drinking problems. But the kind of drinking these studies mean -- drinking in the woods to get bombed or at unattended homes -- is particularly high risk.

Research published in the Journal of Adolescent Health in 2004 found that adolescents whose parents permitted them to attend unchaperoned parties where drinking occurred had twice the average binge-drinking rate. But the study also had another, more arresting conclusion: Children whose parents introduced drinking to the children at home were one-third as likely to binge.

"It appears that parents who model responsible drinking behaviors have the potential to teach their children the same," noted Kristie Foley, the principal author of the study. While the phrasing was cautious, the implication of the study's finding needs to be highlighted: Parents who do not introduce children to alcohol in a home setting might be setting them up to become binge drinkers later on. You will not likely hear this at your school's parent drug- and alcohol-awareness nights.

Obviously, if a parent isn't comfortable consuming alcohol -- for whatever reason -- he or she is going to find it difficult to teach a child moderate social drinking. Fair enough. But neither should parents feel guilty or intimidated about responsibly introducing their children to alcohol in a home setting. The research suggests that this is more likely, not less, to protect the kids against the excessive drinking that permeates American high schools and colleges.

The youngest of my three children attends New York University, in a metropolis that is no stranger to alcohol. But alcohol is not forbidden fruit, since Anna drank wine at home. She says binge drinking holds no allure. I believe her.

Mr. Peele, a psychologist, therapist and attorney, is the author of several books on addiction, including the just-published "Addiction-Proof Your Child" (Three Rivers Press).

The Larry Craig Mess

August 31, 2007 - WSJ

So now comes Idaho's Senator Larry Craig to verify one more time Mr. Dooley's truth that "politics ain't beanbag." Were it gentle beanbag, a long parade of troubled politicos caught in cars, tidal basins, on boat decks and inside cookie jars would have been left to God's mercy and their own demons. Even in the days of smoke-filled rooms, the boys knew there were some malefactors who had strayed to that place beyond their protective reach, which is to say, into the hands of the party faithful. Senator Larry Craig is in that place.

Senator Craig's incident inside the men's room of the Minneapolis-St. Paul airport is, at the least, bad timing on his part. His party, it might have occurred to him, had just lost control of Congress for reasons that Republican voters chose to call "corruption." The various corruptions included Representatives Mark Foley and Duke Cunningham, Tom DeLay and the K Street mob, the disgrace of earmarks and bridges to nowhere and whatever else GOP voters concluded had fallen outside the norms of established party principle.

Politicians like to buck obviously poor odds, but Senator Craig hasn't helped his with his decision-making. The incident at the airport occurred on June 11. Nearly two months later, on August 8, he pleaded guilty to misdemeanor disorderly conduct for which he received one-year probation from the court. He told no one. When all this became public days ago, Mr. Craig announced that the guilty plea was a mistake and that he should have called a lawyer.

It can be no surprise that the Senate GOP leadership referred the matter to the Ethics Committee, nor that they pushed him from senior committee posts. Senators John McCain and Norm Coleman, citing the guilty-plea standard for staying in office, have urged Mr. Craig to resign, as have Republican House Members.

Senator Craig was elected by the people of Idaho, and it is properly a matter between them and him whether he should finish his term. We agree, however, with those in his party who want the Senator to forgo re-election next year. The Republican Party needs to get its house in order. It is a mess. And that cleanup should include the living room, the library, the front porch and, we daresay, the restroom.

INDEC: ¿dibujarán ahora crecimiento económico?

INDEC: ¿dibujarán ahora crecimiento económico?

Por: Carlos Arbía
Ámbito Financiero

Luego que se conociera a principios de febrero que el IPC del mes anterior había sido modificado por la intervención de la Secretaría de Comercio Interior, que dirige Guillermo Moreno, el mayor temor de los empresarios e inversores era que el efecto se propagara hacia otras áreas del organismo. Y los temores no eran infundados, el contagio de la adulteración de los índices a través de lo que el gobierno llama un cambio metodológico llegó primero a la Encuesta Permanente de Hogares (EPH) y por último al cálculo del EMI (Estimador Mensual Industrial) la semana pasada.

El crecimiento económico medido a través de las cuentas nacionales es uno de los principales insumos para determinar cuánto dinero debe pagar el Estado a los ahorristas por los cupones PBI que fueron emitidos en el canje de la deuda.

# Bonos

Otro de los insumos es el CER o la inflación para indexar el precio de los bonos que se calcula con el cuestionado IPC y por el cual los bonistas cobran menos intereses de los que el Estado debería pagarles. La modificación de este índice también distorsionará los valores de la canasta de pobreza e indigencia que deberán darse a conocer el 20 de setiembre.

Como se puede observar, la enfermedad que empezó con el cambio metodológico del IPC en el INDEC y que ahora se extiende al cálculo del EMI repercute negativamente en la economía. Más allá de la crisis financiera internacional, lo cierto es que los bonos indexados por el CER se han perdido más de 40% de su valor desde los máximos de diciembre pasado en parte por la falta de transparencia y credibilidad en los índices del INDEC. Por ese motivo uno de los grandes interrogantes que devela al mercado financiero y a las empresas es saber cómo repercutirá la manipulación de los datos de producción industrial de julio en el cálculo del crecimiento económico (EMAE) que se debe publicar el 21 de setiembre ¿se utilizará el aumento anual de 5,4% que no incluye la producción de acero o 2,7% que la incluye?

Es probable que las autoridades del INDEC decidan realizar el cálculo incorporando el mayor incremento para mostrar un crecimiento económico superior al observado. En este caso deberían aclarar que se trata del cálculo de un nuevo tipo de EMAE (Estimador Mensual de Actividad Económica) que no incluye el acero, algo inexplicable desde el punto de vista del análisis económico. Lo grave es que se trata de la tercera vez en lo que va del año que el gobierno interviene en la estructura del INDEC para modificar cifras e influir en las estadísticas públicas.

# Diseño

En lo que respecta al cálculo del nuevo IPC, el Ministerio de Economía ya adelantó que está trabajando en el diseño de la nueva canasta del IPC, que se elaborará a partir de la encuesta de gastos de 2004. En este caso, es factible que los cambios en el índice favorecerían al gobierno. La nueva canasta que se utilizará para el cálculo es probable que dé una inflación más baja, ya que perderán peso los servicios públicos que en el futuro podrían aumentar. En cambio el rubro alimentos podrían tener una participación más alta. Lo que se sabe es que no se modificará las variaciones anteriores y allí reside uno de los problemas más difíciles de solucionar. Hoy se observa un INDEC donde el cambio metodológico o la manipulación del IPC una especie de metástasis en otros índices que invade de incertidumbre a los agentes económicos.

Slim Pickings

By BURTON W. FOLSOM
August 29, 2007 - WSJ

In the world of wealth, the big news this summer is that Carlos Slim, 67, of Mexico may have surpassed Bill Gates as the world's richest person. Inevitably, writers compare Mr. Slim, who built his wealth on a telecommunications monopoly, to America's so-called "robber barons" -- including men such as John D. Rockefeller, James J. Hill and Henry Ford.

This is bad history. America's most famous rugged entrepreneurs, especially men such as Rockefeller and Ford, the wealthiest men of their eras, reached mass markets by producing quality products -- kerosene and cars -- at low prices. More recently, Sam Walton did the same thing in retailing. Mr. Slim, by contrast, is better characterized as a "political entrepreneur," who relied more on manipulating Mexico's bureaucracy than on satisfying consumers in a competitive arena.

In the great heyday of late-19th century American capitalism, successful businessmen had to innovate and compete as they helped create mass markets. Government was limited, property rights and contracts were protected, and, except for tariffs and occasional subsidies, government could not play favorites.

Whoever satisfied the most customers would have the largest businesses. Only when Rockefeller sold cheap kerosene to tens of millions of Americans did he become the nation's first billionaire. "We must ever remember," Rockefeller told his partner, "we are refining oil for the poor man and he must have it cheap and good." Ironically, the price of Rockefeller's kerosene dropped to eight cents a gallon in 1885 from 26 cents in 1870 -- all the while he was viciously pilloried as a monopolist by the press, Congress and his competitors.

Ford, Walton and Mr. Gates also had to sell widely to masses of Americans at competitive rates before they rose to the top. Putting a car in every garage, not just the garages of the rich, was Ford's working motto. In serving the most customers, he reaped the largest reward. So did Bill Gates with computers. When America did deviate from free markets -- for example, by granting government subsidies to the Union Pacific and Central Pacific Railroads -- the economy suffered instabilities. But it recovered from the experience and learned a lesson. James J. Hill built the Great Northern Railroad with no federal subsidy -- and outperformed all other transcontinentals.

Mexico, unfortunately, has had a long tradition of weak property rights and a strong, intrusive government. The Constitution of 1917 almost guarantees economic chaos. According to Article 27, property is not a right but a social function. Government officials, therefore, may confiscate land or industry which, in their opinion, is not serving a "public use" or the "public interest."

Inevitably, different groups lobbied the Mexican government to confiscate property "in the national interest." Beginning in the 1930s, railroads were nationalized and turned over to union leaders; banks, the oil industry and some utilities were also expropriated. The dreaded oil gringos from the U. S. were paid off later at about 10 cents on the dollar.

The new nationalized industries, of course, performed erratically and incompetently. The unions and government officials running these industries had little experience managing large firms and no knowledge of how much their workers were worth, how much to invest in new technology, which engineers to hire, and, in the case of oil, where to do exploratory drilling. PEMEX, the nationalized oil company, floundered for decades losing money and trying to recapture lost markets.

Enter Carlos Slim. His father, Julian Slim Haddad, a Lebanese immigrant, made his money as a merchant during the chaos leading up to the Constitution of 1917. Carlos Slim greatly expanded the family fortune by working closely and cleverly with government officials. (In fairness to Mr. Slim, there may not be another avenue to great wealth in a massively interventionist economy.)

His major opportunity came when President Carlos Salinas de Gortari decided to privatize some inefficient industries. Mr. Slim bought Telmex, the nation's phone company, in 1990 in a controversial auction which was decidedly less than transparent. With that purchase came a six-year monopoly guaranteed by the government. Although Mr. Slim was supposed to relinquish the monopoly in 1997, he used a variety of legal and political tools to maintain it, for example filing injunctions in court to block orders from the regulator to provide competitors fair access to his network. According to OECD figures, Mexican consumers and businesses still pay above market telephone rates. Fewer than one-fourth of Mexican homes have telephones.

With a near monopoly of fixed-line telephones and data access (the Internet), Mr. Slim has reaped windfall profits which, wisely invested, have propelled him to immense wealth. Meanwhile, Mr. Slim's newer ventures -- his construction company and his oil services company -- rely on government contracts for their major business. Recently President Felipe Calderón met with Mr. Slim and urged him to accept greater competition.

Not surprisingly, when striving Mexicans want to better themselves, they look to where competition is the rule and property rights are more secure -- and head for the land of the robber barons.

Mr. Folsom is professor of history at Hillsdale College and author of "The Myth of the Robber Barons: A New Look at the Rise of Big Business in America" (Young America's Foundation, 5th edition, 2007).

1934

Not So Hot

August 29, 2007- WSJ

The latest twist in the global warming saga is the revision in data at NASA's Goddard Institute for Space Studies, indicating that the warmest year on record for the U.S. was not 1998, but rather 1934 (by 0.02 of a degree Celsius).

Canadian and amateur climate researcher Stephen McIntyre discovered that NASA made a technical error in standardizing the weather air temperature data post-2000. These temperature mistakes were only for the U.S.; their net effect was to lower the average temperature reading from 2000-2006 by 0.15C.

The new data undermine another frightful talking point from environmentalists, which is that six of the 10 hottest years on record have occurred since 1990. Wrong. NASA now says six of the 10 warmest years were in the 1930s and 1940s, and that was before the bulk of industrial CO2 emissions were released into the atmosphere.

Those are the new facts. What's hard to know is how much, if any, significance to read into them. NASA officials say the revisions are insignificant and should not be "used by [global warming] critics to muddy the debate." NASA scientist Gavin Schmidt notes that, despite the revisions, the period 2002-2006 is still warmer for the U.S. than 1930-1934, and both periods are slightly cooler than 1998-2002.

Still, environmentalists have been making great hay by claiming that recent years, such as 1998, then 2006, were the "warmest" on record. It's also not clear that the 0.15 degree temperature revision is as trivial as NASA insists. Total U.S. warming since 1920 has been about 0.21 degrees Celsius. This means that a 0.15 error for recent years is more than two-thirds the observed temperature increase for the period of warming. NASA counters that most of the measured planetary warming in recent decades has occurred outside the U.S. and that the agency's recent error would have a tiny impact (1/1000th of a degree) on global warming.

If nothing else, the snafu calls into question how much faith to put in climate change models. In the 1990s, virtually all climate models predicted warming from 2000-2010, but the new data confirm that so far there has been no warming trend in this decade for the U.S. Whoops. These simulation models are the basis for many of the forecasts of catastrophic warming by the end of the century that Al Gore and the media repeat time and again. We may soon be basing multi-trillion dollar policy decisions on computer models whose accuracy we already know to be less than stellar.

What's more disturbing is what this incident tells us about the scientific double standard in the global warming debate. If this kind of error were made by climatologists who dare to challenge climate-change orthodoxy, the media and environmentalists would accuse them of manipulating data to distort scientific truth. NASA's blunder only became a news story after Internet bloggers played whistleblower by circulating the new data across the Web.

So far this year NASA has issued at least five press releases that could be described as alarming on the pace of climate change. But the correction of its overestimate of global warming was merely posted on the agency's Web site. James Hansen, NASA's ubiquitous climate scientist and a man who has charged that the Bush Administration is censoring him on global warming, has been unapologetic about NASA's screw up. He claims that global warming skeptics -- "court jesters," he calls them -- are exploiting this incident to "confuse the public about the status of knowledge of global climate change, thus delaying effective action to mitigate climate change."

So let's get this straight: Mr. Hansen's agency makes a mistake in a way that exaggerates the extent of warming, and this is all part of a conspiracy by "skeptics"? It's a wonder there aren't more of them.

''Brasil se ubica en el mundo; la Argentina pelea por pasteras''

Entrevista al ex vicecanciller Andres Cisneros
''Brasil se ubica en el mundo; la Argentina pelea por pasteras''

Andrés Cisneros
Ámbito Financiero

Mientras la Argentina continúa concentrando su política exterior en pelear por las pasteras con los uruguayos, Brasil consolida su posición en el mundo y, con ello, obtiene grandes ventajas para su desarrollo económico, dijo ayer en diálogo con Ambito Financiero Andrés Cisneros, vicecanciller en el gobierno de Carlos Menem. A continuación, sus principales definiciones sobre la propuesta lanzada el lunes por el presidente francés, Nicolas Sarkozy, de sumar a Brasil, México, China, la India y Sudáfrica al actual Grupo de los Ocho (G-8), convirtiéndolo en un G-13.

Periodista: ¿Qué ventajas implicaría para Brasil entrar a un G-13?

Andrés Cisneros: En el mundo moderno, la política ya no pasa ni por lo estratégico ni por lo ideológico, sino por lo comercial y económico. Cuanto mejor se posiciona un país, más ventajas obtiene. Brasil tiene el interés de ubicarse en el mundo como un jugador económico con mayores beneficios. Así, busca conseguir el «investment grade», que implica que para las calificadoras internacionales el país no representa ningún riesgo, por lo que los bancos internacionales pueden prestar cobrando el mismo interés que pagan países como Estados Unidos, por ejemplo.

P.: Situación que no ocurre en la Argentina...

A.C.: Acá, como hay un riesgo-país enorme, la tasa de interés con los bancos internacionales es también enorme y, por lo tanto, se desalienta la inversión extranjera.

# Inserción

P.: ¿Qué otras estrategias de inserción internacional tiene Brasil?

A.C.: También está tratando de entrar a la OCDE. Esto tendría un resultado parecido al de lo anterior. Es análogo a obtener un ISO 9000 para una empresa. Y la estrategia se completa ahora con la posibilidad de entrar al G-13. Un país que lo integra tiene voz y voto en las discusiones sobre cómo se manda el mundo. Lo que se decide en las reuniones del G-8 repercute en los otros 200 Estados.

P.: Pero hasta ahora sólo fue una propuesta de Nicolas Sarkozy. ¿Se concretará?

A.C.: El presidente francés se caracteriza por el oportunismo. Es como cuando un grupo de gente reunida decide algo y uno sale antes a la puerta a contar de qué se habló; es lo que hizo Sarkozy. Es muy importante este anuncio.

P.: ¿Qué lugar queda para la Argentina?

A.C.: Mientras Brasil lleva a cabo esta estrategia internacional, nuestra política exterior se dedica a pelearnos con los uruguayos por las pasteras.

P.: ¿Existe alguna posibilidad de que la Argentina tenga un lugar en el G-13?

A.C.: No, eso no sería posible. Un país que ha defaulteado y que debe plata al Club de París no califica.

Entrevista de María Iglesia

A Denier's Confession

August 28, 2007 - WSJ

The recent discovery by a retired businessman and climate kibitzer named Stephen McIntyre that 1934 -- and not 1998 or 2006 -- was the hottest year on record in the U.S. could not have been better timed. August is the month when temperatures are high and the news cycle is slow, leading, inevitably, to profound meditations on global warming. Newsweek performed its journalistic duty two weeks ago with an exposé on what it calls the global warming "denial machine." I hereby perform mine with a denier's confession.

I confess: I am prepared to acknowledge that Mr. McIntyre's discovery amounts to what a New York Times reporter calls a "statistically meaningless" rearrangement of data.

But just how "meaningless" would this have seemed had it yielded the opposite result? Had Mr. McIntyre found that a collation error understated recent temperatures by 0.15 degrees Celsius (instead of overstating it by that amount, as he discovered), would the news coverage have differed in tone and approach? When it was reported in January that 2006 was one of the hottest years on record, NASA's James Hansen used the occasion to warn grimly that "2007 is likely to be warmer than 2006." Yet now he says, in connection to the data revision, that "in general I think we want to avoid going into more and more detail about ranking of individual years."

I confess: I am prepared to acknowledge that the world has been and will be getting warmer thanks in some part to an increase in man-made atmospheric concentrations of greenhouse gases. I acknowledge this in the same way I'm confident that the equatorial radius of Saturn is about 60,000 kilometers: not because I've measured it myself, but out of a deep reserve of faith in the methods of the scientific community, above all its reputation for transparency and open-mindedness.

But that faith is tested when leading climate scientists won't share the data they use to estimate temperatures past and present and thus construct all-important trend lines. This was true of climatologist Michael Mann, who refused to disclose the algorithm behind his massively influential "hockey stick" graph, which purported to demonstrate a sharp uptick in global temperatures over the past century. (The accuracy of the graph was seriously discredited by Mr. McIntyre and his colleague Ross McKitrick.) This was true also of Phil Jones of the Climatic Research Unit at the University of East Anglia, who reportedly turned down one request for information with the remark, "Why should I make the data available to you, when your aim is to try and find something wrong with it?"

I confess: I understand that global warming may have negative consequences. Heat waves, droughts and coastal flooding may become more intense. Temperature-sensitive parasites such as malaria could become more widespread. Lakes may be depleted by evaporation. Animal life will suffer.

But as Bjorn Lomborg points out in his sharp, persuasive and aptly titled book "Cool It," a warming climate has advantages, too, and not just trivial ones. Though global warming will cause more heat deaths, it will also mean many fewer cold deaths. Drought may increase in some areas, but warming also means both more rain and longer growing seasons. Temperature changes will harm some wildlife in some places. But many species will benefit from a bit more warmth. Does anyone know for certain that the net human and environmental losses from global warming will exceed overall gains?

I confess: Denial never solves anything. But neither does sensational and deceptive journalism.

Newsweek illustrates this point by its choice of cover art -- a picture of the sun, where the surface temperature hovers around 6,000 degrees Celsius. Given that the consensus scientific estimate for average temperature increases over the next century is a comparatively modest 2.6 degrees, this would seem a rather Murdochian way of convincing readers about the gravity of the climate threat. On the inside pages is a photograph of a polar bear stranded on melting ice. But the caption that the bears are "at risk" belies clear evidence that the bear population has risen five-fold since the 1960s. Another series of photographs, of a huge Antarctic ice shelf that quickly disintegrated in 2002, suggests the imminence of doom. But why not also mention that temperatures at the South Pole have been going down for 50 years?

I confess: It's easy to be indifferent to far-off and diffuse threats. It's hard to work toward solutions the benefits of which will not be felt in our lifetime.

Then again, if Americans are not fully persuaded of the dangers of global warming, as Newsweek laments, don't chalk it up to the pernicious influence of the so-called deniers and their enablers at ExxonMobil and Fox News. Today, global warming is variously suggested as the root cause of terrorism, the conflict in Darfur and the rising incidence of suicides in Italy. Yet the 20th century offers excellent reasons to be suspicious of monocausal explanations for the world's ills, monomaniacs intent on saving us from ourselves, and the long train of experts predicting death by overpopulation, resource depletion, global cooling, nuclear winter and prions. Also, hypocrites. When we are called on to bike to work, permanently abjure air travel, "eat locally" and so on, we expect to be led by example, not by a new nomenklatura.

I confess: Though it may surprise those who use the term "denier" so as to put me on a moral plane with Holocaust deniers, I have children for whom I would not wish an environmental apocalypse.

Yet neither do I wish the civilizational bounties built up over two centuries by an industrial, inventive, adaptive, globalized and energy-hungry society to be squandered chasing comparatively small environmental benefits at gigantic economic costs. One needn't deny global warming as a problem to deny it as the only or greatest problem. The great virtue of Mr. Lomborg's book is its insistence on trying to measure the good done per dollar spent. Do we save a few lives, at huge cost, as a byproduct of curbing global warming? Or do we save many, for less, by acting on problems directly?

Some might argue it is immoral to think this way. Maybe they are the ones living in denial.

Affirmative Action Backfires

Have racial preferences reduced the number of black lawyers?
BY GAIL HERIOT
Sunday, August 26, 2007 - WSJ

Three years ago, UCLA law professor Richard Sander published an explosive, fact-based study of the consequences of affirmative action in American law schools in the Stanford Law Review. Most of his findings were grim, and they caused dismay among many of the champions of affirmative action--and indeed, among those who were not.

Easily the most startling conclusion of his research: Mr. Sander calculated that there are fewer black attorneys today than there would have been if law schools had practiced color-blind admissions--about 7.9% fewer by his reckoning. He identified the culprit as the practice of admitting minority students to schools for which they are inadequately prepared. In essence, they have been "matched" to the wrong school.

No one claims the findings in Mr. Sander's study, "A Systemic Analysis of Affirmative Action in American Law Schools," are the last word on the subject. Although so far his work has held up to scrutiny at least as well as that of his critics, all fair-minded scholars agree that more research is necessary before the "mismatch thesis" can be definitively accepted or rejected.

Unfortunately, fair-minded scholars are hard to come by when the issue is affirmative action. Some of the same people who argue Mr. Sander's data are inconclusive are now actively trying to prevent him from conducting follow-up research that might yield definitive answers. If racial preferences really are causing more harm than good, they apparently don't want you--or anyone else--to know.
Take William Kidder, a University of California staff advisor and co-author of a frequently cited attack of Sander's study. When Mr. Sander and his co-investigators sought bar passage data from the State Bar of California that would allow analysis by race, Mr. Kidder passionately argued that access should be denied, because disclosure "risks stigmatizing African American attorneys." At the same time, the Society of American Law Teachers, which leans so heavily to the left it risks falling over sideways, gleefully warned that the state bar would be sued if it cooperated with Mr. Sander.

Sadly, the State Bar's Committee of Bar Examiners caved under the pressure. The committee members didn't formally explain their decision to deny Mr. Sander's request for these data (in which no names would be disclosed), but the root cause is clear: Over the last 40 years, many distinguished citizens--university presidents, judges, philanthropists and other leaders--have built their reputations on their support for race-based admissions. Ordinary citizens have found secure jobs as part of the resulting diversity bureaucracy.

If the policy is not working, they, too, don't want anyone to know.

The U.S. Commission on Civil Rights hopes that it can persuade the State Bar to reconsider. Its soon-to-be released report on affirmative action in law schools specifically calls for state bar authorities to cooperate with qualified scholars studying the mismatch issue. The recommendation is modest. The commission doesn't claim that Mr. Sander is right or his critics wrong. It simply seeks to encourage and facilitate important research.

The Commission's deeper purpose is to remind those who support and administer affirmative action polices that good intentions are not enough. Consequences also matter. And conscious, deliberately chosen ignorance is not a good-faith option.

Mr. Sander's original article noted that when elite law schools lower their academic standards in order to admit a more racially diverse class, schools one or two tiers down feel they must do the same. As a result, there is now a serious gap in academic credentials between minority and non-minority law students across the pecking order, with the average black student's academic index more than two standard deviations below that of his average white classmate.

Not surprisingly, such a gap leads to problems. Students who attend schools where their academic credentials are substantially below those of their fellow students tend to perform poorly.

The reason is simple: While some students will outperform their entering academic credentials, just as some students will underperform theirs, most students will perform in the range that their academic credentials predict. As a result, in elite law schools, 51.6% of black students had first-year grade point averages in the bottom 10% of their class as opposed to only 5.6% of white students. Nearly identical performance gaps existed at law schools at all levels. This much is uncontroversial.

Supporters of race-based admissions argue that, despite the likelihood of poor grades, minority students are still better off accepting the benefit of a preference and graduating from a more prestigious school. But Mr. Sander's research suggests that just the opposite may be true--that law students, no matter what their race, may learn less, not more, when they enroll in schools for which they are not academically prepared. Students who could have performed well at less competitive schools may end up lost and demoralized. As a result, they may fail the bar.

Specifically, Mr. Sander found that when black and white students with similar academic credentials compete against each other at the same school, they earn about the same grades. Similarly, when black and white students with similar grades from the same tier law school take the bar examination, they pass at about the same rate.

Yet, paradoxically, black students as a whole have dramatically lower bar passage rates than white students with similar credentials. Something is wrong.

The Sander study argued that the most plausible explanation is that, as a result of affirmative action, black and white students with similar credentials are not attending the same schools. The white students are more likely to be attending a school that takes things a little more slowly and spends more time on matters that are covered on the bar exam. They are learning, while their minority peers are struggling at more elite schools.
Mr. Sander calculated that if law schools were to use color-blind admissions policies, fewer black law students would be admitted to law schools (3,182 students instead of 3,706), but since those who were admitted would be attending schools where they have a substantial likelihood of doing well, fewer would fail or drop out (403 vs. 670). In the end, more would pass the bar on their first try (1,859 vs. 1,567) and more would eventually pass the bar (2,150 vs. 1,981) than under the current system of race preferences. Obviously, these figures are just approximations, but they are troubling nonetheless.

Mr. Sander has his critics--some thoughtful, some just strident--but so far none has offered a plausible alternative explanation for the data. Of course, Mr. Sander doesn't need to be proven 100% correct for his research to be devastating news for affirmative-action supporters.

Suppose the consequences of race-based admissions turn out to be a wash--neither increasing nor decreasing the number of minority attorneys. In that case, few people would think it worth the costs, not least among them the human costs that result from the failure of the supposed beneficiaries to graduate and pass the bar.

Under current practices, only 45% of blacks who enter law school pass the bar on their first attempt as opposed to over 78% of whites. Even after multiple tries, only 57% of blacks succeed. The rest are often saddled with student debt, routinely running as high as $160,000, not counting undergraduate debt. How great an increase in the number of black attorneys is needed to justify these costs?

The most important other recommendation of the Civil Rights Commission is a call for transparency. As a matter of consumer fairness, law school applicants--regardless of race--need to know the statistical likelihood that someone with their academic credentials will successfully graduate and pass the bar. Once informed, they can better decide whether to undertake the risk of attending that particular school, or any law school at all. If law schools are unwilling to undertake this simple reform, it should be mandated by law.

Under current practices, law school applicants are at the mercy of admissions officers for that information; it is almost never provided except on a class-wide basis where success rates are positively misleading. Minority students whose academic credentials are substantially below their average classmates are lulled into believing that they are just as likely to graduate and pass the bar. When they don't, they may be stuck with the bills, not to mention the loss of several years of their lives.
The problem is that the admissions officer's job is to enroll students, not to draw the risks of failure to their attention. Indeed, in some cases, the officer may be frantic to enroll minority students in order to comply with the stringent new diversity standards of the American Bar Association Council on Legal Education and Admissions to the Bar. As the federal government's accrediting agency for law schools, the ABA Council determines whether a law school will be eligible for the federal student-loan program. The law school that fails to satisfy its diversity requirements does so at its peril--as a number of law school deans can amply attest.

Decades of law students have relied upon the good faith of law school officials to tell them what they needed to know. For the 43% of black law students who never became lawyers, maybe that reliance was misplaced.

Ms. Heriot is professor of law at the University of San Diego and a member of the U.S. Commission on Civil Rights.

Canada's Shooting Gallery

Canada's Shooting Gallery
By MARY ANASTASIA O'GRADY
WSJ

Vancouver, British Columbia

Early on a cool, rainy morning here last week, I decided to walk from my hotel in the most fashionable quarter of this fashionable West Coast metropolis to the "Downtown East Side." I was going to see an old friend, who in his retirement years has joined a Catholic ministry dedicated to outreach among the prostitutes in this notoriously seedy area. I wanted to visit the neighborhood where he works, in part, because it also happens to be where provincial authorities have set up a "safe injection site" for drug addicts. Many of the young women on the streets are hooked on opiates.

When I asked for directions from the hotel concierge, her eyebrows went up and she asked me what time of day I would be going. "As long as it's early and you stick to Pender Street, you should be OK," she said, tracing a path for me on a map.

Her advice, I later realized, was another way of saying, "stay off East Hastings Street," the epicenter of life for drug users here and the location of "InSite," North America's only legal, government-sponsored, injection clinic. Later that morning, as my friend showed me around the neighborhood in his car, I saw why. The sidewalks in front of the clinic were lined with addicts, and for blocks in both directions, all humanity looked sick, drawn, impoverished and defeated. In the gloom of a drizzly, cloud-covered Sunday morning, I felt I had entered one of Dante's inner circles of suffering.

Like most wealthy societies, Canada struggles with the problem of drug addiction. Prohibition was supposed to limit the supply of evil weeds, and thus the temptation to experiment with addictive chemicals. Yet decades of drug laws have had little effect, if any, on the availability of mind-altering substances and their corrosive effects on some part of the population.

While the benefits of prohibition are hard to discern, the cost of the war on drugs is quite clear. Inside the borders of rich countries, the large profits make vigorously pushing illegal substances worth the risk. Children, even in rural areas, are an especially attractive target under the black-market pricing structure. Addicts have to pay dearly; yet, like all intelligent vendors, dealers offer "introductory prices" for beginners. For criminals, prohibition profits make weapons, information technology and bribery of law-enforcement officials easily affordable.

These days Canadians are all too familiar with the price of the drug war outside their borders. Their military is now engaged in some of the heaviest fighting in Afghanistan, where reports from the field suggest that what is making the mission so difficult, at least in part, is the fact that the bad guys have enlisted support from the poppy growers who serve the heroin trade.

Organized crime is also flourishing in the Western Hemisphere. Colombian society has been shredded by drug cartels and, more recently, by narcotrafficking left-wing guerrillas and right-wing paramilitaries. The U.S. effort to block Caribbean transit routes sent the traffickers into Central America and Mexico. Since taking office in July 2006, Mexican President Felipe Calderón has made defeating the drug lords a priority. The Calderón crackdown has produced a spike in violence in the past year, claimed the lives of numerous Mexican law-enforcement officials and, if reports from the border are true, is now having a spillover effect in the Southwestern U.S. Yet the drugs keep coming, answering the demand.

This record suggests that attacking supply as a way to reduce demand is fighting a losing battle. Sophisticated economists -- most notably the late Milton Friedman -- have argued that the power of the market is just too great and that the unintended consequences are bound to cause both more bloodshed and more corruption.

Yet even though the war on drugs has been an obvious failure, Canada's experimental approach is hardly a promising alternative. Vancouver's InSite is simply horrifying in different ways. I didn't venture inside the clinic itself, but someone who has describes "bright white lights and a cold clinical setting," with the obligatory "absolutely no smoking" sign hanging at the entry. The idea is that junkies are going to use anyway so the state should help lower the risk, being careful, of course, not to pass judgment. The drugs are illegal, but in the interest of "harm reduction," the state will provide sanitary injection services. "Come right in, get your fix. There, you feel better, don't you?"

This is like something out of Aldous Huxley's novel, "Brave New World." Utilitarian big government discovers a low-cost, efficient method of getting the dregs of society out of everybody's hair. All it takes are sterile needles and mind-numbing drugs supplied by the addicts themselves. Leaving aside the quaint notion that putting oneself in a perpetually medicated state may not be the best way to reach one's human potential, the clinic's approach is hugely problematic. Even the most pro-legalization libertarians would have to agree that a government that engages in drugging the citizenry is pretty far removed from the classic definition of the modern liberal state.

Canada is now debating this issue. A group of 130 Canadian scientists and doctors recently published a statement arguing that InSite has been successful because there has been "reduced needle sharing, decreased public drug use, fewer publicly discarded syringes, and more rapid entry into detoxification services by persons using the facility." But last week Health Minister Tony Clement suggested that other studies have drawn far less happy conclusions. Critics of "harm reduction" programs say that despite free needles, junkies tend to share anyway and that addicts continue to sell sex and spread disease. They also note that signing up for "detoxification" is a far cry from rehab and it's not the least bit clear that needle clinics are paths to treatment.

There is another problem as well with the nanny province getting into the drug injection business: It adds to what one British Columbian described to me as "the growth of the poverty industry" in Vancouver. The bureaucracy that exists to "serve" the drug-dependent community has little interest in seeing the problem go away and, with it, their jobs. Here, as in many other arenas, there is a normal bureaucratic impulse to expand, broadening the state's subsidization of dependency. Viewed in this light, a state-sponsored shooting gallery is good for business.

Something is also very wrong when society officially winks at its own prohibition laws. Indeed, InSite demonstrates that encouraging drug use through the welfare state while at the same time attempting prohibition is not just illogical. It also produces the worst of all worlds.

• Write to O'Grady@wsj.com

Clientelismo: pobreza favorece oficialismos

Clientelismo: pobreza favorece oficialismos
Por: Rosendo Fraga
Ámbito Financiero

La preocupación del Episcopado por el llamado «clientelismo político» se encuentra justificada en la realidad social de la Argentina.

Ya en el Imperio Romano, el cliente era aquella persona de los estratos populares que, a cambio de favores, asistencia o manutención, respondía políticamente a un noble o caudillo político. Desde esta perspectiva, el llamado «clientelismo político» ha existido a lo largo de la historia en diversas formas.

En la Argentina del siglo XIX, los caudillos políticos nutrían sus filas de hombres provenientes de los sectores populares. Tanto conservadores, como radicales y peronistas, utilizaron formas políticas clientelistas de diverso tipo. El acceso al empleo público, facilitar trámites, otorgar favores y ayudas, han sido sistemas de creación de adhesiones y fidelidades políticas no sólo argentinos sino universales.

Sin embargo, en los últimos tiempos se evidencia en nuestro país una agudización de estas formas, que se hacen cada vez más notorias en los procesos electorales.

El aumento de la pobreza y la indigencia, generado por la crisis 2001-2002, incrementó las políticas clientelistas en los sectores populares.

Un ejemplo de ello es que en 2005 se conoció el hecho de que 52% de los beneficiarios de los subsidios para jefas y jefas de hogar desempleados estaba afiliado a partidos políticos, mientras sólo lo estaba 14% de la población total. A ello se agrega que aproximadamente 15% de estos planes eran adjudicados por organizaciones piqueteras, con lo cual dos de cada tres subsidios se distribuyen sobre la base de clientelismo político.

El análisis de los datos electorales muestra claramente que aumenta el voto por el oficialismo -del partido que sea- a medida que aumenta la pobreza.

De esta forma, tomando las elecciones de 2005, en las ocho provincias con mayor porcentaje de población (25,4%) con Necesidades Básicas Insatisfechas (NBI), el promedio obtenido por el oficialismo local fue de 55,7% de los votos. De estos ocho gobiernos provinciales, cinco han sido electos por el PJ y tres por la UCR. Por otro lado, en los ocho distritos que tienen un promedio de 15,7% de la población con NBI, el promedio de votos obtenidos por el oficialismo fue de 44,1%. En cambio, en los ocho distritos que tienen un promedio de sólo 11,1% de la población en esta situación -en los hechos, con menor pobreza- el voto por el oficialismo desciende a 40,7%. La tendencia es clara: a más pobreza más voto por el oficialismo.

El mismo análisis realizado sobre los resultadosde los municipios del Gran Buenos Aires lo corrobora. En las nueve comunas con menos población con NBI -que promedian 9,81% de la población en esta situación-, el voto por el oficialismo fue de 41,6%. En los municipios que promedian 17,97% de la población con NBI, el voto por el oficialismo se elevó a 44,1%; y en los municipios más pobres, que promedian 24,02% de los habitantes con NBI, el voto por el oficialismo llega a un promedio de 54,6%.

La segunda vuelta de la elección porteña del 24 de junio del corriente, confirma la tendencia.

El voto por el oficialismo nacional es de sólo 22,6% en las circunscripciones de sectores altos, se eleva a 41,6% en las de sectores medios y llega a 45% en las de sectores bajos.

Las elecciones provinciales que se vienen realizando este año reiteran lo mencionado. Hoy, la mitad de los votantes vive o sobrevive en base a un ingreso del sector público, ya sea salario estatal, jubilación estatal, pensión o subsidio.

La provincia de Catamarca representa un claro ejemplo ya que 76% de los votantes depende del sector público, y en este distrito el gobernador fue reelecto con 57% de los votos. La «territorialización» de la política, en función de la cual los gobernadores e intendentes han pasado a ser protagonistas centrales frente al debilitamiento de los partidos nacionales -como sucedía en las últimas décadas del siglo XIX- es causa y consecuencia del aumento del clientelismo. Cuanto más personas dependen del Estado para subsistir, más aumenta la base electoral «cautiva» de quien está en el gobierno.

Tanto en 2003 como en 2005, en 20 de los 24 distritos ganó quien gobernaba y lo mismo sucederá en 2007. Los fenómenos de cambio, como el de Capital y Tierra del Fuego, se dan en distritos con predominio de clase media y alto ingreso.

Si a ello se suma que la concurrencia a votar sigue descendiendo, al igual que el voto positivo por partidos y candidatos, el porcentaje relativo del voto cautivo aumenta, al descender el del voto independiente.

Por esta razón, quien hoy está en el gobierno -nacional, provincial o municipal- tiene más ventaja que antes para ganar una elección, porque el electorado cautivo o clientelista actualmente es mayor que en el pasado.

Sin embargo, también hay que asumir que para los sectores populares, el clientelismo termina siendo un mecanismo para resolver no sólo la subsistencia, sino también los problemas cotidianos, y que para ellos votar por la oposición implica crear una situación de incertidumbre sobre su futuro. En realidad es el mismo Estado quien, al no cumplir sus funciones primarias, lo termina haciendo por un canal indirecto que le permite capitalizarlo políticamente.

Se equivocan con la receta inflacionaria

Se equivocan con la receta inflacionaria
Por: Enrique Szewach
Ámbito Financiero

Primero, un repaso a la situación internacional. Da toda la impresión que la rápida reacción de los bancos centrales inyectando liquidez y la reacción de la Fed reduciendo los costos de esa liquidez está dando resultado. Los mercados están reaccionando favorablemente y parecen más cercanos a una corrección, dentro de perspectivas positivas, que a una ratificación del desplome. Sin embargo, todavía no es tiempo de cantar victoria. Como expresaba la semana pasada, los problemas de liquidez se superan con «prestamistas de última instancia», los de solvencia no. Falta ahora la depuración del mercado de aquéllos que, efectivamente, se «merecieron» la corrida, por la pérdida de calidad de sus activos. Habrá que ver, de aquí en más, quiénes de los portadores del «virus» de las hipotecas de baja calidad quedan sanos y quiénes no tendrán cura. Dependiendo de la magnitud de la enfermedad sabremos, en los próximos meses, el grado de la desaceleración de la economía mundial. Por ahora, insisto, el escenario de aterrizaje suave, menor crecimiento, mayores spreads hacia lo más riesgoso, pero sin recesión y sin desplome de los precios de los commodities agrícolas sigue siendo el más probable. ¿Altera en algo este panorama la agenda de política económica local? En realidad no. Quizá le reste algo de margen de maniobra a la política económica. Quizá torne más urgente algunas medidas previstas para más largo plazo. Quizá, también aquí, veamos algunas consecuencias en el sector inmobiliario y en el ingreso de capitales amantes del riesgo argentino. Pero lo cierto es que más allá de estas cuestiones del entorno, que no son menores por cierto, lo que teníamos por delante en materia de política económica un mes atrás, también lo tenemos por delante ahora. Desde el punto de vista macro, la tarea más importante del próximo gobierno será la de recuperar solvencia fiscal y adaptar la política monetaria y cambiaria al nuevo escenario internacional. Sin embargo, la forma en que se intenta recuperar dicha solvencia fiscal resulta peligrosa. La idea de convivir con 15-20% anual de inflación en los ingresos y retomar un escenario de licuación del gasto, es una idea con mucho «sex appeal» en el gobierno y en quienes están cerca del futuro gobierno de Cristina. Me explico: con la maxidevaluación de 2002, el Estado, a través de las retenciones a la exportación, por un lado, y de un «impuesto extraordinario a los ingresos de empleados públicos y jubilados», y un «impuesto extraordinario a las ganancias de las empresas» (al no ajustar ninguno de estos rubros por inflación) por el otro, logró un espectacular superávit fiscal de caja. (Dicho sea de paso, resulta gracioso que todavía le echen en cara a mi amigo López Murphy su modesto pedido de reducción de 10% de los salarios públicos, teniendo en cuenta todo lo que les quitaron, con la inflación, en los años posteriores). Este superávit extraordinario se mantuvo mientras el desempleo y la capacidad ociosa del sector productivo, ponían, de alguna manera, un freno al reclamo de ajuste de los asalariados.

# Compensación

Luego, en la medida que la reducción del desempleo mejoraba los ingresos familiares (al aumentar el número de trabajadores en cada hogar), los asalariados compensaron la caída real de sus ingresos individuales, con los nuevos recursos que ingresaban en la casa, por los nuevos trabajadores. Esta etapa, de alguna manera, terminó, o se desaceleró fuertemente durante el año pasado y parte de éste. A partir de allí, el gobierno del presidente Kirchner en el nivel federal, y los gobernadores, en las provincias, empezaron a «devolver» parte de lo que la inflación les había quitado a los salarios públicos y jubilaciones. Mientras en el sector privado, también por pleno empleo, y fin de la etapa, en promedio, de la capacidad ociosa, los salarios blancos y aún los informales comenzaban a achicar, e inclusive superar, la brecha respecto de lo que la inflación se había llevado desde el estallido de la convertibilidad. Este proceso se aceleró dramáticamente, como no podía ser de otra manera, en este año electoral. Las provincias, en donde el gasto salarial es, en promedio, más de 50% del gasto total, perdieron prácticamente todo su superávit fiscal y algunas pasaron fuertemente al déficit. Mien-tras la Nación redujo su excedente, también rápidamente, aunque en menor medida, dado que el peso de los salarios públicos es relativamente menor y que el rubro de gasto más importante, jubilaciones, no tiene el mismo «reclamo» gremial que los salarios. A esta presión de salarios y jubilaciones -presión a la que cedió rápidamente el gobierno por razones electorales e inclusive ideológicas, en busca de una mejor distribución del ingreso-se le sumaron la maraña de subsidios e inversión pública tendiente a compensar problemas de oferta energética y déficit de inversión privada en infraestructura, por las razones que conocemos, más problemas en precios de alimentos, transporte, etc. Es decir, se trató de devolver parte del impuesto inflacionario, subsidiando algunos precios a ciertos sectores de la población. Sin embargo, sin esta tasa de inflación de 20% en los ingresos -más allá del «dibujo» de Morenolos ingresos fiscales hubieran sido sustancialmente menores. Obviamente que, con una tasa de inflación menor, también hubiera sido menor el ajuste necesitado por los salarios y jubilaciones. Pero, políticamente, no es lo mismo recaudar 20% más, echarle la culpa de la inflación a los «mercados oligopólicos» y luego otorgar «generosamente» un aumento a los empleados públicos y jubilados y subsidiar, además, con fondos discrecionales y control político, consumos y gastos; que, en cambio, tener un aumento de los ingresos de 7 u 8% (recaudar menos impuesto inflacionario), y anunciar menos aumentos en los gastos o subsidiar menos y, por lo tanto, controlar menos a productores, prestadores de servicios o gobernadores. La inflación, en este esquema de gobierno, ha sido parte de la «solución política» y no un problema. La idea entonces, como mencionaba más arriba, es que, pasadas las elecciones y en un escenario de mayor «normalidad», se puede recuperar solvencia fiscal, simplemente, manteniendo relativamente constante la tasa del impuesto inflacionario «verdadera» en torno a 15-20% anual y expandiendo el gasto, levemente por debajo de dicha tasa. En otras palabras, para el Presidente y su sucesora, no sólo se puede convivir con una tasa de inflación de 15% anual, sino que ésta es una manera «política» de administrar mayores recur-sos fiscales y de licuar gasto disimuladamente.

# Problema mayor

¿Por qué esta idea resulta peligrosa? No es la primera vez, en la historia de la política económica argentina, que se intenta utilizar un «poco de inflación» como mecanismo facilitador de la política fiscal. Y allí, precisamente, está el mayor de los problemas. Ningún experimento social puede repetirse, dado que «los ratones» aprendemos. Dicho de otra manera, es difícil hoy en día engañar por mucho tiempo en el verdadero valor del Indice de Precios al Consumidor. También resulta difícil engañar a los inversores sobre la verdadera solvencia fiscal, incorporando recursos de una sola vez, como los provenientes de la reforma previsional, como si fueran recursos corrientes. Es difícil, en una economía en cuasi pleno empleo, licuar salarios privados e inclusive, públicos. Y hasta la Justicia le pone límites a la licuación de jubilaciones y pensiones. En ese contexto, se corre el riesgo, similar al observado en el período 2006-2007, de ir acelerando, sin prisa pero sin pausa, la tasa de inflación, con el objetivo de postergar soluciones de largo plazo en la política fiscal. (Pero ahora partiendo de un «piso» más elevado.) Paradójicamente, juega a favor la probable desaceleración de la economía, tanto por las razones internacionales ya analizadas, como por las limitaciones locales. Pero también, y para evitar un problema mayor de mediano y largo plazo, hará falta ir normalizando precios clave de la economía, como los vinculados a la energía, lo que impactará en los precios en general, aunque reducirá los gastos en subsidios varios. Por otro lado, todavía no se han percibido mecanismos de «evasión» del impuesto inflacionario generalizados. Pero no sería de extrañar que, en la medida que se persista en tasas elevadas, dichos mecanismos comiencen a surgir, obligando al Banco Central a una política monetaria menos expansiva, con lo que ello implica en términos de tasa de interés y la «sintonía fina» del nivel de actividad y el tipo de cambio. En síntesis, el escenario internacional ha cambiado, pero por ahora, se ratifica el aterrizaje, algo menos suave, pero no violento. Esto reduce el margen de maniobra de la política económica local, pero no al extremo de generar una crisis. La idea que prima en el gobierno, respecto a que, pasadas las elecciones, tanto el Presidente como la futura presidenta, podrán volver al escenario de 2005-2006, cobrando impuesto inflacionario en los ingresos y licuando el gasto en los egresos, es una idea peligrosa. No será fácil seguir postergando políticas de fondo en materia fiscal. No será fácil apostar al «acuerdo social» como mecanismo de freno a las demandas sindicales por seguir aumentando el salario real, y a las demandas empresarias por recuperar tasas de rentabilidad extraordinarias que compensen el creciente riesgo argentino. Seguir engañándonos entre nosotros, para evitar enfrentar nuestros dilemas, nunca ha sido una buena solución.

Recipe: Gazpacho With Watermelon and Avocado

2 fat ripe tomatoes (about 1 pound), cored and cut into chunks
1 cup seedless watermelon, diced small
Two-inch-thick slice of day-old baguette (about 1 1/2 ounces), cut into pieces
1 Kirby cucumber, trimmed and cut into chunks
2 tablespoons chopped red onion
1 garlic clove
1/2 teaspoon kosher salt
Freshly ground black pepper
1 ice cube
1/4 cup extra virgin olive oil
1/4 avocado, peeled and diced small.

1. In a blender combine tomatoes, 1/2 cup watermelon, bread, cucumber, onion, garlic, salt, pepper and ice cube. Purée until smooth. Slowly drizzle in the olive oil. Chill in refrigerator until very cold, at least 30 minutes.

2. Serve, garnished with remaining chopped watermelon and avocado.
Yield: 2 servings.

A Farewell to Alms

By ARVIND SUBRAMANIAN
August 22, 2007 - WSJ

When celebrities such as Angelina Jolie or Bono highlight human tragedy to show that something can be done to alleviate it, the heart melts and the purse strings loosen. But the stars, alas, aren't up on the economic literature. Research is increasingly questioning the benefits of foreign aid.

For a long time, persistent underdevelopment in aid-receiving countries fostered doubts about whether the do-good impulse was doing permanent good. Validation seemed to arrive with two World Bank researchers, Craig Burnside and David Dollar, who purportedly showed in the late 1990s that aid helped boost long run economic growth. It did so not everywhere and all the time, but only where recipient countries followed good policies and had reasonable institutional environments for these policies to be effective.

Governments, nongovernmental organizations, donors, the press and civil society embraced this work with the hungry enthusiasm of the long-deprived. The research had the great virtues of plausibility and expediency -- a finding that aid is unconditionally good would have strained credulity. And by linking aid effectiveness to policies, the research gave intellectual justification to donors' practice of imposing "conditionality" on recipient governments. Tough love had found its intellectual savior.

Unfortunately, the Burnside-Dollar findings did not hold up to further scrutiny. Aid, after all, simply expands resources available to countries to build schools, hospitals and roads, and to pay teachers. These investments in human capital and infrastructure surely boost growth and improve living standards, the thinking went, even if there is some wastage of resources along the way through corruption or mismanagement. But as researchers pored over the data, it became increasingly difficult to maintain that there was any systematic relationship between aid and long-run economic growth.

The problem is that development and long-run growth are less about resources than about the environment for generating and sustaining private sector investment. Two key aspects of this environment are decent public institutions or governance -- the essential "software" for running a market economy, for creating rule of law and protecting property rights -- and incentives that encourage the private sector to export, especially manufactured products.

Aid, especially in large amounts, can damage governance and make an economy uncompetitive. Like revenues from natural resources, it is manna from heaven for governments. When governments receive large oil revenues or aid, they have less incentive to be accountable to their citizens, and governance suffers. In theory, donors impose an alternate form of accountability. In practice, donors' motivations are sometimes a mixture of the murky (think of the U.S. and Pakistan post 9/11 or the West and Zaire's Mobutu several decades ago) and the mindless (in 2000-02, the Tanzanian government reportedly had to write a few thousand reports to donors every quarter). Even where motivations are honorable, recipients have infinite ways of circumventing donor conditions.

Aid can also have adverse effects on an economy's competitiveness. When foreign resources come pouring in and are spent domestically, wages tend to rise, especially for those in scarce supply such as managers, supervisors and entrepreneurs. Factories that export will find themselves becoming uncompetitive and go out of business.

In research with Raghuram Rajan, we find that in countries that received more aid, exportable industries systematically underperformed. And exporting manufactured goods has been the mode of escape from underdevelopment in many of the East Asian successes. Is it a coincidence that, with rare exceptions (Mauritius), there are no booming clothing industries -- the launching pad for some of the East Asian miracles -- in aid-addled Africa? This despite the fact that clothing is only minimally demanding of infrastructure and entrepreneurship, and despite the very favorable access that Africa has always had in Western markets for exports of clothing products.

The new research findings have provoked genuine soul-searching among aid practitioners on the need to do things differently. But a new line, expressed most recently by the New York Times' Nicholas Kristof, goes something like this: So what if aid cannot do permanent good? The question is, can it do some good? Or, even if aid cannot promote livelihoods, can it save lives?

If it can, aid for a set of well-defined objectives, such as improving health and education, should continue to flow, and even increase substantially. There is ample evidence that foreign assistance helps fight disease in poor countries, documented most vividly in the Center for Global Development's "Millions Saved: Proven Successes in Global Health." So, why not do more of the same?

Because the fact that aid can save lives does not mean that aid might not have some of the adverse long-run effects relating to damaging governance and making the economy uncompetitive. Better health could be accompanied by slower growth, and hence reduced prospects for long-run prosperity. Even if the trade-off is worth making, it needs to be acknowledged. Aid advocates evade this by thinking and acting as if the long-run problems caused by aid can be fixed independently. That rarely happens.

Aid advocacy leads to perhaps an even more serious problem. There is a limited stock of good will and good intentions in the rich world and the question becomes whether this stock is best harnessed by mobilizing more aid, or by pursuing alternative actions that could have a bigger impact.

Consider a few: mobilizing more money to provide incentives for greater research and development devoted to addressing poor country health and agriculture problems (the green revolution in Asia was made possible by research on high-yielding varieties of wheat, and Africa hasn't had a similar revolution of its own); making regulatory changes in industrial countries that can reduce corruption (for example, more rigorous enforcement of bribery and corruption by rich country officials and corporations) in poor countries, which could have a huge impact on economic performance; or allowing more immigration from the poorest countries, which would directly benefit the poor.

These solutions are seldom pursued with the zeal that they deserve, in part because they are more difficult to support politically, and in part because that zeal which is essential to overcome the difficulties gets diverted toward, well, to calling for more aid.

Giving aid is like looking for the lost key under the lamppost because that is the easiest thing to do. But it is not obviously the most effective way that outsiders can help. When Ms. Jolie appears on the screen calling for more aid, she not only distracts our attention toward her obviously good looks, she may also be distracting our attention away from the search for more effective solutions to helping the poorest around the world.

Mr. Subramanian is a senior fellow at the Center for Global Development and at the Peterson Institute for International Economics.

Government Failure in Peru

By IAN VASQUEZ
August 20, 2007 - WSJ

The water towers on the outskirts of Lima, Peru say "Water is health, care for it." For many residents of Villa El Salvador, one of the Peruvian capital's famous sprawling shanty towns, that admonishment is a cruel joke. Many have petitioned the government for water for decades, to no avail. One million of Lima's eight million citizens have no access to clean water.

The water monopoly -- which loses some 40% of its water through leaky pipes or in ways otherwise unaccounted for -- is only one of Peru's monuments to government incompetence. Peruvians were reminded of another last month when the communist-led teacher's union went on strike, paralyzing schools and triggering violence across the country. The union was protesting a law requiring that teachers be tested and held accountable for competency. An evaluation earlier this year found that one-third of teachers are deficient in reading comprehension and that nearly half cannot do basic math.

The union's grip on schools is the main reason for the failure of public education, according to the Peruvian Institute of Economics, which reports that half of 15-year-olds lack minimum reading skills. In the end, the union agreed to temporarily suspend its strike while it negotiates with the government.

Those hit hardest by the crises in education and water -- poor Peruvians -- are not reacting with complacency, however. They are demanding private solutions. Indeed, during my visits to one of the poorest parts of Villa El Salvador in the past two years, I learned why residents began marching on government offices to demand the privatization of Sedapal, Lima's state-run water company. Community leaders and residents explained that they'd grown tired of being neglected by Sedapal. They have been joined by residents of other shanty towns surrounding Lima.

In one such protest by hundreds of people from the shanty town of Carabayllo at the Ministry of Finance last year, Adolfo Peña Olivos told the daily Diario Correo that "We represent 116,000 families from 120 squatter settlements that have not had water or sewage for more than 10 years, and many children and elderly have died because Sedapal does not have the resources to alleviate our needs."

Lima's marginalized poor are correct about the potential of the private sector to meet their water needs -- they can see for themselves how private companies have made electricity, telephones and cable widely available in their neighborhoods. As José Manuel Saavedra, head of CITPeru, a local NGO, wryly notes, poor communities have Internet access, but no water.

The poor know, too, that the price they're used to paying would fall dramatically with privatization. Water they now buy from unsanitary tanker trucks costs 10 to 15 times more than piped water. In Guayaquil, Ecuador, a privatization carried out in 2001 has lowered the price of water by 90% for 275,000 poor people because their homes became connected to the formal network. Privately run water can also save thousands of lives, as has been the case around the developing world including in Argentina, where child mortality dropped by 26% in the poorest areas that privatized water.

By chance, during my visits I learned that the rejection of state services has extended to education as well. One day, a woman in Villa El Salvador confirmed to me that the large building in the distance was a public school, and volunteered that she did not send her son there. Instead, he goes to a private school that charges a fee. "It hurts, but it's well worth it," she explained.

Somewhat surprised, I then asked if many other parents there send their children to private schools. She estimated that at least half do so. Standing on the dusty hillside overlooking the town, with the putrid smell of human waste wafting through the air, the mother pointed to building after building where private, informal-sector schools educate the poor.

As it turns out, Peru's shanty towns are full of such private, for-profit schools. Yet to my knowledge, the phenomenon has not been carefully studied. The anecdotal evidence is, however, consistent with the pathbreaking work of University of Newcastle Professor James Tooley, who documented how private schools in the African and Indian slums he studied have arisen to educate the majority of the children there. Mr. Tooley found that students in private schools performed notably better than those in public schools, and private schools rated better on most indicators, including teacher attendance.

The same seems to be the case in Peru. The one grade school I visited, San Vicente de Paúl, offered classes to 30 children at a cost of about $12 per month. Its several classrooms were clean and orderly, and looked well supplied. The school even had 10 computers connected to the Internet and a small play area. Director Ariela Roque's main complaint, however, was that her school lacked a property title, thus inhibiting its expansion.

So it is that people in Lima's squatter settlements rely on their wits to overcome any number of obstacles thrown up by government. Their thinking is still, as anthropologist William Mangin, one of the first to document the vast informal economies of Lima's shanty towns, described it some 40 years ago: "Similar to the beliefs of the operator of a small business in 19th century England or the United States . . . Work hard, save your money, trust only family members . . . outwit the state, vote conservatively if possible . . . educate your children for their future and as old-age insurance for yourself."

Even in a country where the government is dysfunctional and vastly larger than that of 19th century England, those values can serve as a good development guide. New spending of the kind President Alan García has begun on water projects in Villa El Salvador will not do the trick. As CITPeru points out, Peru cannot come close to spending the $2 billion necessary to meet Lima's water needs unless there is private investment.

The government's new water pipes will mostly be running dry. It is high time the government recognize the dignity of Lima's poor by trusting their solutions.

Mr. Vásquez is the director of the Center for Global Liberty and Prosperity at the Cato Institute.

Is Housing Undervalued?
By DAVID RANSON
August 17, 2007-WSJ

The housing market isn't nearly as mysterious as it seems. Much public confusion stems from our failure to clearly define our terms. Take the popular, long-standing belief that housing is overpriced and unaffordable relative to income. It was said 30 years ago and it is still being said today. The key to solving this puzzle is to widen the definition of income so that it includes the increase in existing wealth. Milton Friedman, in the course of the work on consumer spending that won him a Nobel Prize, introduced a much broader, long-term measure of income called "permanent income" -- including capital gains, physical assets and factors like education that would affect a consumer's earning potential.


Permanent income grows at the same rate as wealth, and generally faster than conventional forms of income. Friedman demonstrated that households base their spending decisions on permanent income rather than on narrowly defined income, such as short-term wages. Fifty years later this idea has yet to sink into our national consciousness. Yet, in a highly developed and wealthy country such as the U.S., annual gains in the value of pre-existing assets are getting larger and larger relative to annual cash income from wages, rents and dividends.

Home prices behave the way they do because housing is not a typical consumer good. Rather, it is a capital asset for which the price is set by the markets for capital assets. These markets continually clear in a way that typical consumption markets do not, and housing is therefore being constantly re-priced. In this limited sense, real-estate prices behave like the prices of other tangible assets such as commodities. Of course, in other ways housing is quite unlike a commodity -- it is immobile, provides services such as shelter to its owners, and its price is geographically very specific. Still, the general level of housing prices, when measured as an index, is as acutely and promptly sensitive to an uptick in inflationary pressures as are other forms of financial or tangible capital.

Inflation tends to boost housing prices in the same way that it boosts the price of any tangible asset. And inflation is surely a major part of the housing-price story. Over the past three decades, the price of housing at the national level has risen at a rate similar to the growth of nominal GDP, and the correlation between housing prices and GDP is statistically significant. But the relationship between housing prices and the prices of highly inflation-sensitive assets such as commodities is much more impressive than the relationship with the economy. There is a particularly strong correlation between percentage changes in housing prices and percentage changes in the price of gold -- especially when a short time lag is taken into account.

When paper money is depreciating rapidly, as in the last five years, it is normal for tangible assets such as housing to appreciate more rapidly than usual, while financial assets such as stocks and bonds tend to perform relatively poorly. This can be understood in terms of the flow of financial capital from one economic haven to another. Capital is mobile. It flows out of assets that are vulnerable to the dollar's depreciation, and into assets that are invulnerable. Capital promotes growth and price appreciation in the sectors into which it migrates, at the expense of the sectors from which it escapes.

Instead of viewing the price performance of housing during the first half of the current decade as a "bubble," I see it as having appreciated for the same reason that the prices of commodities and other tangible assets have appreciated. In nominal dollar terms these prices have to rise in order to maintain the status quo in real terms. The rise in housing prices is one more symptom or early warning of the inflation of which the Fed (rightly) is so fearful.

To better understand housing-market trends, we need to clearly distinguish between real and nominal terms. I define the "real price of housing" as the ratio of the national home-price index to an index of precious-metals prices, while the nominal value refers to the price in dollars. Failure to draw this distinction can cause great confusion. For example, the annual gain in the nominal price of housing averaged 4.8% in all the years in which the Fed lowered interest rates, and averaged 7.3% in all the years in which the Fed pushed interest rates up. This calculation, at least in nominal terms, directly contradicts the popular belief that higher interest rates bring real-estate prices down. When the above calculation is repeated using the real price of housing instead of the nominal price, however, the inverse relationship appears. Higher interest rates do tend to depress real housing prices, and this can happen without any significant fall in nominal housing prices.

Expressing the price of housing in real terms not only clarifies the interest-rate confusion, it also changes the overall housing picture. The accompanying graph shows the history of the real national home-price index over the past 30 years. Notice how, during the current decade, instead of the continuing rise in nominal housing prices that made everyone so fearful, in real terms there has been a significant decline. Far from a bull-market bubble that has begun to collapse, housing when viewed in real terms has been in a bear market since the beginning of the decade.

Moreover, like the real price of oil, the real price of housing consistently reverts to the norm. In particular, housing prices have a strong tendency to rise when they have underperformed precious-metals prices. The graph illustrates how the real price of housing sticks to a steadily rising trend over the long haul, occasionally diverging from this trend but afterwards reverting to it. According to the same data, the real price of housing was 30% above its norm as recently as 2001.

Since that time commodity-price inflation has escalated, and nominal housing prices have lagged far behind. The graph suggests that housing prices are now 30% below their equilibrium in terms of the precious-metals benchmark. Any further decline in the ratio plotted in the chart would transcend the bounds of historical experience. The last time that housing prices underperformed the precious-metals market as dramatically as this was in the 1978-80 period, after which they bounced back dramatically.

We can also calculate from these data the average speed at which the real price of housing has historically converged toward its norm. It shows that norm reversion is virtually complete after three years.

All of these various empirical reasons challenge the popular view that housing prices will remain weak because they are in the throes of a "correction" from "bubble" levels. On the contrary, housing prices are weak only in the sense that, after outperforming commodity prices in the late 1990s, they have fallen behind since 2001. History suggests that housing is significantly undervalued, and nominal housing prices have a lot of catching up to do over the next few years.

Housing prices are thus much less enigmatic than they seem. The nation's wealth and its permanent income are growing consistently, and housing is the largest of all the capital asset vehicles in which wealth can be lodged. At the national level, housing prices are not bounded by the growth of wages or other forms of conventional income. Nor are they subject to "irrational" booms or busts. Instead, they respond perfectly rationally to inflationary forces that drive other capital assets and commodities. The real value of housing is much more stable than the currency unit in which housing prices are expressed.

Mr. Ranson is president of H.C. Wainwright & Co. Economics Inc.

El próximo gobierno está a tiempo de superar la crisis

El economista del mes: Adolfo Sturzenegger

El próximo gobierno está a tiempo de superar la crisis

Adolfo Sturzenegger fue el encargado en agosto de exponer su visión del actual momento de la economía argentina en la ya tradicional entrega de este diario «El economista del mes». Quien se desempeña como profesor de la Universidad Nacional de La Plata y director de la consultora IBC&P advierte sobre la peligrosa dinámica fiscal que torna a hacerse insostenible. Habla de la necesidad de un reacomodamiento de la política económica que, hecha a tiempo, le dará margen de maniobra al próximo gobierno. De lo contrario habrá serios problemas económicos y sociales. Para leer detenidamente.

1 Teniendo en cuenta el nuevo contexto de los mercados internacionales, ¿cuál es su visión de la situación argentina?

Vamos a recordar 2007 como un año en el que hubo dos transiciones, una constitucionalmente programada, esperada y visible, que es la transición política. Otra no programada y menos visible que es una transición económica, más específicamente una transición en la política económica. Esta consiste en que, por varias razones, esa política efectuó un pasaje desde una zona bien fácil por la cual transitó los cuatro años anteriores, hacia una bien difícil hoy. Tal pasaje le exige un importante reacomodamiento en el sentido de que varios de sus principales componentes, dado que la situación es muy distinta, deberían ser diferentes de los utilizados en los cuatro años pasados. En este momento, voy a reflejar mi opinión optimista acerca de la posibilidad de que tal reacomodamiento efectivamente se concrete. Y esto por dos razones. La primera es política. El nuevo gobierno va a tener un horizonte político básico de cuatro años, o sea mucho más extenso que el que ha tenido el actual presidente en los últimos meses, preocupado casi exclusivamente por la próxima elección de octubre. No parece políticamente racional que el nuevo gobierno haga lo mismo que hoy con un horizonte tan distinto. La segunda es económica. Al transitar ahora la política económica por una zona bien difícil, los riesgos de no intentar un reacomodamiento de ella serían muy altos, y por eso creo que lo más probable es que se tenga clara conciencia de ello, y que consecuentemente tal reacomodamiento se concrete.

2 ¿Cuáles fueron las bases de la economía hasta hoy?

Para explicar mejor el pasaje de la política económica de una zona a otra, debemos comenzar a explicar por qué existió una zona bien fácil en los cuatro años pasados. En este período actuaron cinco factores «facilitadores». En primer lugar, los altos precios internacionales de nuestros principales commodities de exportación, como trigo, soja, maíz, petróleo, cobre, carne, leche. En segundo término, de importancia decisiva para la facilidad, esos cuatro años se inician con un altísimo nivel de recursos ociosos. Esto permitió que no existieran tensiones importantes entre el objetivo de un alto crecimiento con el objetivo de la estabilidad de precios. Así, en 2002, teniendo en cuenta el desempleo y el subempleo demandante, se llegó a tener 40% de nuestra población trabajadora con problemas de empleo. Por otro lado, la utilización de la capacidad instalada industrial apenas superaba 50%. Algo similar ocurría en otros sectores de actividad. Un tercer factor, también decisivo, fue que el país logró entrar en una fuerte reversión fiscal completamente diferente a la situación de los 50 años previos. Los importantes superávit fiscales que se generaron en esos cuatro años fueron importantes facilitadores, ya que otorgaron al gobierno amplios márgenes fiscales que permitieron sostener una política de ingresos que pudo contar con la posibilidad de introducir importantes subsidios al transporte, a la energía y a los alimentos, con lo cual se pudo reforzar aún más la compatibilidad entre fuerte crecimiento y razonable estabilidad de precios. El cuarto fueron los altos niveles de inversión en los servicios públicos privatizados concretados en los 90. Por esto, el gobierno pudo congelar o atrasar las tarifas de esos servicios públicos sin riesgos importantes de restricciones infraestructurales que pegaran duro sobre el crecimiento. El último punto es que el dólar experimentó una fuerte depreciación internacional en los dos últimos años del período. Así, el gobierno se dio el lujo de que manteniendo un peso nominalmente constante con relación a la divisa norteamericana, el tipo de cambio real multilateral no descendió, lo que se tradujo en el mantenimiento de un alto nivel de competitividad internacional.


3 ¿Cómo es la situación hoy?

En la economía de hoy existen claras señales de que se han debilitado los cuatro últimos factores que permitieron transitar la etapa «bien fácil». Es así que, salvo los precios internacionales de nuestros commodities de exportación, las condiciones del resto de los facilitadores cambiaron significativamente. Por el propio desenvolvimiento económico exitoso, prácticamente desapareció la existencia de recursos ociosos. El desempleo estaría llegando a ser de sólo 8%, y los márgenes de capacidad de producción sin utilizar ya prácticamente no existen. A su vez, la dinámica fiscal instalada en 2007 ha sido tan desalentadora, que los márgenes que permitían apoyar una activa política de ingresos estabilizadora de los precios también han desaparecido. Por el contrario, uno comienza a preguntarse de dónde va a sacar el gobierno los fondos para poder seguir aumentando la inversión pública, lo cual es necesario para poder mantener los subsidios actuales para evitar ajustes traumáticos de tarifas y precios, o para poder afirmar la política de gasto social. En tercer lugar, por la evolución natural de las cosas, han desaparecido completamente los márgenes que brindaban las inversiones hechas en el pasado en los servicios públicos privatizados. Por último, qué va a ocurrir con el dólar en el mercado internacional es impredecible. Sabemos que en los últimos cuatro años se devaluó y eso fue un facilitador, pero ¿qué pasará hacia delante?

4 ¿Cuál es la principal consecuencia del debilitamiento de estos factores facilitadores?

Creo que ha sido la aparición de una fuerte tensión entre el objetivo de alto crecimiento y el de la estabilidad de precios. Las señales de esta tensión son visibles. Por un lado, el gobierno comienza a manipular la información que mide los precios al consumidor. Difícilmente esto hubiera sucedido si la inflación hubiese dado señales de desaceleración. Por otro lado, el índice de precios de la construcción se mueve interanualmente en 20%, el de precios en el interior en 13%, y el de precios mayoristas, aún con un dólar sin mayores aumentos, en 10%.
Pero además de la tensión entre estabilidad de precios y crecimiento, existen otras. En lo fiscal, por ejemplo, después de lo que está sucediendo en este año, aparece claramente la tensión entre el objetivo de mantener o aumentar gastos públicos necesarios, y el objetivo de aumentar los superávit fiscales. Otra tensión entre objetivos deseables es la que se manifiesta en la infraestructura económica. Hoy se requieren fuertes inversiones en el sector de servicios públicos privatizados y para ello se hace necesario ajustar significativamente las tarifas de esos servicios, pero simultáneamente se hace necesario evitar shocks tarifarios que resultarían recesivos y desestabilizadores. Por último, dado que no sabemos qué va a ocurrir internacionalmente con el dólar, se puede plantear la tensión entre el objetivo de mantener un tipo de cambio real elevado, con el objetivo de no devaluar nominalmente el peso para evitar mayores presiones inflacionarias.


5 ¿Qué habría que modificar?

Mientras que en los últimos años se trató de movilizar grandes cantidades de recursos ociosos existentes, hoy se trata de crear recursos adicionales y de aumentar la eficiencia en el uso de los factores de producción. Ya no se trata más de aumentar la demanda global al mayor ritmo posible, lo cual fue correcto en los cuatro años pasados, sino de ampliar la capacidad de oferta global lo máximo que se pueda, lo cual es algo muy diferente.

El reacomodamiento debería abarcar una visión amplia y otra más específica. De acuerdo con la primera, se deberían hacer dos cosas. Primero, priorizar, al menos para los próximos dos años la desaceleración inflacionaria, aún cuando esto tenga el costo de tener que resignar algunos puntos de crecimiento. Para el nuevo gobierno, será un riesgo (político y económico) muchísimo menor crecer a 5% en vez de a 8%, que el correspondiente a una situación en que no se detiene el proceso de aceleración inflacionaria. Lo segundo es que hay que priorizar objetivos de mediano plazo por sobre cualquiera de corto plazo, o sea hacer lo contrario que en los últimos meses.

6 ¿Qué cambios recomendaría?

Dentro de la visión específica, en primer lugar habría que hacer cambios en la política fiscal. En esencia, sería necesario quebrar la equivocada dinámica de este año, para volver a la de los cuatro años anteriores (ver nota aparte). En cuanto a la política monetaria, debería dejar de ser lo permisiva que fue en los cuatro años pasados. Si bien tal permisividad fue básicamente correcta dado el contexto de ese momento donde lo esencial era ocupar a factores productivos ociosos, ahora ya no lo es. Resulta necesario hoy hacerla más activa de tal forma que la tasa de interés real pasiva resulte positiva. Creo que al menos temporariamente, para el período donde la desaceleración en el crecimiento de los precios sea el objetivo prioritario, el esquema monetario debe acercarse a la idea de fijar metas de inflación, decidiendo sobre la base de ese esquema cuán restrictiva debe ser la política. En relación con la cambiaria, también aquí el Banco Central debe aceptar que la prioridad inicial del reacomodamiento que se requiere sería la de priorizar la estabilidad de precios, y por ello no debe temer de aceptar alguna gradual apreciación real del peso. A título de ejemplo, si el dólar se mantuviera internacionalmente estable, las devaluaciones nominales del peso que se produjeran, en cualquier caso, deberían ser menores que la tasa de interés pasiva y que la inflación. Esto significaría reducir el tipo de cambio real multilateral y algún debilitamiento en la competitividad internacional, pero sería importante aceptarlo. Por un tiempo va a ser necesario no atender los reclamos ansiosos de los sectores productores de bienes transables. En cuanto a la política de servicios públicos privatizados, sería necesario presentar un plan creíble de ajustes tarifarios para cambiar las expectativas del sector privado que debe invertir en él. Tal vez un horizonte de tres años para ir efectuando ajustes graduales resulte lo más conveniente. Por último, las cuatro políticas anteriores deberían enmarcarse dentro de un ambiente organizacional que denote credibilidad, respeto, y falta de arbitrariedad del gobierno en sus relaciones con el sistema de información económica y con el sistema de mercados y precios.

7 ¿Qué opinión le merece el anuncio de Cristina Kirchner, como candidata, de crear un Consejo Económico Social?

Lo esencial para el éxito del futuro gobierno es encontrar la forma de concretar un reacomodamiento sustantivo de la política económica hoy prevaleciente. Si se pensara que la creación de ese Consejo puede ser una forma de sustituir, o de poder soslayar, la ejecución de ese reacomodamiento, ello sería un gran error. Bajo esta circunstancia, los acuerdos que eventualmente pudiera lograr ese Consejo resultarían inconsistentes con el proceso de aceleración inflacionaria en que está inmersa la economía, y en el que seguirá estando sin cambiosen las políticas económicas,con lo cual tales acuerdos nunca se concretarían en la realidad económica. Por el contrario, si hubiera consistencia entre los resultados esperables de un reacomodamiento de la política económica y los acuerdos corporativos que se obtuvieran en el Consejo, la creación de este ente puede no ser negativa. Mientras el caso de inconsistencia sería similar al de Gelbard de 1974, el de consistencia sería más parecido al de Gómez Morales de 1951. Sin embargo, aún aceptando la hipótesis de consistencia, mi preferencia sería por la no creación de tal consejo.

8 ¿Cuáles son sus expectativas durante el nuevo gobierno?

Hoy estamos experimentando una visible crisis financiera internacional. Además, como sabemos, el impacto financiero que ha tenido sobre nuestra economía ha resultadoamplificado, ya que transitamos una performance relativa al grueso del resto de los países emergentes, muy preocupante.

Sin embargo, a pesar de tal situación, tengo un visión bien optimista para los próximos años para el caso en que se concrete un importante reacomodamiento de la política económica. Para ello me baso en siete aspectos de la realidad actual que creo llevarían a buen puerto a la economía si tal intento de reacomodamiento efectivamente se concreta. El primero es que disponemos de un muy buen nivel de reservas internacionales. El segundo es que, pese a un importante debilitamiento en lo fiscal, seguimos teniendo la buena situación de los dos superávit gemelos. En tercer lugar, todavía se está cobrando cada año un importante nivel de impuesto inflacionario de más de 2.500 millones de dólares. Cuarto, los resultados cuasifiscales del Banco Central todavía son positivos. Como consecuencia de los últimos tres factores, el quinto es que tenemos una dinámica de nuestra deuda pública muy sostenible. En los últimos tres años las relaciones entre esa deuda y nuestro PBI han estado bajando en forma significativa. El sexto es que continuamos teniendo buenos precios internacionales para nuestras principales exportaciones. Por ejemplo, trigo, maíz y soja, tienen hoy precios internacionales que están alrededor de 50% más altos que hace un año. Por último, nuestro tipo de cambio real multilateral actual brinda fuertes márgenes para nuestra competitividad internacional. Basta recordar que con base diciembre 2001 igual a 1, nuestro tipo de cambio real multilateral actual supera los 2,20, siendo a su vez bastante más altos los cambios reales bilaterales con el euro y el real.

HOME SECURITY
One Family's Journey
Into a Subprime Trap

By JAMES R. HAGERTY and KEN GEPFERT
August 16, 2007 - Wall Street Journal

FULLERTON, Calif. -- Nearly two years ago, Mario and Leticia Montes found a home they loved, a gray stucco bungalow with a hot tub in the backyard in a middle-class neighborhood of Orange County.

The price was a major stretch at $567,000. But the couple, who had sold a home a few years earlier to move to a better area, was tired of renting. Mr. and Mrs. Montes convened a meeting with their two teenage daughters around the kitchen table to hash out the implications. "We agreed we wanted to be homeowners again," says Mr. Montes, "even if it meant the end of vacations and not eating out as often."

With a December "reset" on their loan looming, however, the refinancing option now looks impossible. A friend who works as a loan officer called with some bad news this week: Similar homes in their area have been selling for $535,000 to $565,000 recently. That means the Monteses' loan balance may exceed the value of their home.

The Monteses are caught in a trap -- one that hundreds of thousands of people could face as the housing market totters and the easy credit of recent years dries up. They in effect bet that the boom in housing prices would continue. It was more important to hop onto the escalator than to wait until they could afford to make the leap according to traditional measures.

And with thousands of mortgage banks and brokers threatened with extinction, lenders that embraced all kinds of risky loans two years ago are enforcing increasingly strict standards. They are refusing even to consider extending new credit to people like the Monteses who lack any equity in their homes.

Until recently, the Montes family didn't seem like the type that would find itself faced with foreclosure. They live in a solid neighborhood and are both employed and in good health. "My wife and I make pretty good money," says Mr. Montes. Mrs. Montes works as a school secretary. Together, they earned nearly $90,000 last year.

But they already pay about $38,400 a year on their home loans, even before taxes and insurance. In December, when their primary loan "resets" to a higher rate, that cost will rise to about $50,000 a year, Mr. Montes says.

Tightening Standards

Lenders have been tightening their standards for the past year in the face of rising defaults and growing jitters among the investors who provide funding for loans. That tightening has accelerated in the past two weeks as many lenders -- uncertain at what price they might be able to sell loans -- have stopped making all but the safest ones.

"It's getting worse and worse," says Jeff Lazerson, chief executive of Mortgage Grader, a mortgage broker in Laguna Niguel, who tried to help the Montes family last spring but concluded even then that they couldn't qualify for a new loan. Many people who have been counting on a refinancing to ease their debt burdens will find that's now impossible, he says: "It's either work 24 hours a day to make ends meet [with the existing loan] or mail the keys back to the bank."

Being stuck with little or no home equity is no longer a rare situation. Christopher Cagan, director of research at First American CoreLogic, a housing and mortgage data supplier in Santa Ana, recently found that nearly 7% of 32 million U.S. households studied as of December owed more than their homes were worth, based on computer estimates of the property values. An additional 4% had home equity of 5% or less. Since then, house prices have edged down in much of the country, erasing more home equity.

Partly as a result, foreclosures are surging. Moody's Economy.com, a research firm in West Chester, Pa., projects that lenders will acquire about 760,000 homes through foreclosure this year and 935,000 in 2008, up from an average of about 440,000 a year from 2000 through 2006.

When the Monteses decided to buy the bungalow in 2005, they had only a so-so credit record and little savings. So they settled for a "subprime" loan, with costlier terms than those available in the prime market.

The Monteses' primary loan is the type that became the dominant subprime mortgage during the housing boom of the first half of this decade -- and now has become a symbol of misguided lending, swept away by regulatory fiat and investors' flight from mortgages deemed too risky. These loans are known in the trade as 2/28 mortgages. The interest rate is fixed at a relatively low rate for the first two years (5.45% in the Monteses' case), then floats at a predetermined margin above an interest-rate index for the next 28 years. In many cases, that "reset" of the interest rate after two years leads to a monthly payment increase of 30% or more.

U.S. lenders originated about $600 billion of subprime home loans in 2006, or 20% of all home mortgages, according to Inside Mortgage Finance, a trade publication. About 56% of those subprime loans were 2/28 mortgages, says Keith Ernst, senior policy counsel at the Center for Responsible Lending, a nonprofit research and lobbying group in Durham, N.C.

Mario and Leticia Montes and daughter, Christina, in front of their house in Fullerton, Calif.
The lending industry touted the 2/28 loans as "affordability" mortgages, because they helped people buy houses that wouldn't have been affordable with the higher immediate payments on 30-year fixed-rate mortgages. To make the loans even more affordable in the early years, they were often structured as "interest-only," meaning that principal payments were deferred until later.

Lenders sometimes described these loans as "credit-repair tools." The idea was that people with blemished credit records could take out a 2/28 subprime loan and keep up with the payments long enough to improve their credit records and qualify for a less-costly prime loan.

Earlier this year, regulators ordered subprime lenders to make such loans based on the borrower's ability to afford the loan after the reset, not just for the initial two years, as was the common practice. That change, along with tighter guidelines from rating agencies and risk-aversion among investors, has recently prompted major subprime lenders to stop making 2/28 loans. Instead, they are making more subprime loans that carry a fixed rate for at least five years, as well as ones that hold down payments by stretching the payments over 40 years instead of 30.

The Montes family got their loan through a mortgage broker in Rancho Cucamonga. Using what was then a common formula, the broker offered to arrange for two loans, one to cover about 80% of the home price and the other, a so-called piggyback loan, for the rest. For the first two years, their total monthly mortgage payments are about $3,200. The loans are initially interest-only.

Mr. Montes recalls feeling edgy about whether he would be able to afford the higher costs -- about $900 more per month -- due to take effect after two years. But he says the broker assured him he could refinance before those costs kicked in.

Mr. Montes preferred not to name the broker publicly because the broker has a business connection with a relative of the Monteses. The broker declined to comment.

Mrs. Montes says she was apprehensive about the broker's assurances. "But I blame that on that I don't understand the lingo they were talking," she says. "It's a scary experience.... All I could see was all these numbers flash before me.... I said, 'Mario, I hope you don't get into something that is going to hurt us.'"

They moved into their home and hung a sign on the front door reading, "Life is a daily celebration of love." Within months, things started going wrong. The Monteses received a letter informing them their property taxes had been reassessed based on the $567,000 sale price instead of its previous $389,000 value. That raised their taxes to $6,000 from $2,900 a year and would have increased their monthly payments (including the mortgages and taxes) to $3,931. "Whoa!" Mr. Montes recalls saying. "I can't afford this. I went into emergency mode."

He was able to successfully challenge part of the tax increase, but another shock came in late February of this year when he began looking at refinancing possibilities. Mr. Montes says four brokers -- including the one who arranged the original loan -- turned him away, saying it wouldn't be possible to refinance because, with home prices flat at best, the family had little or no equity in the home. Worse for the Monteses, they learned that they faced a $12,000 prepayment penalty if they refinanced within three years of the original mortgages -- something that Mr. Montes says wasn't made clear to him when he took out those loans.

Then another broker told him in March that his home had gained enough in value for him to qualify for a more affordable loan. They paid for an appraisal and were told their home was worth $620,000, or about $53,000 more than they paid in 2005. The Monteses were jubilant, thinking their home was saved. But more than three months later, the broker outlined a package that would have involved payments far higher than indicated in earlier meetings.

Next, Mr. Montes sought the help of Laurie Arnold, a former neighbor who is a loan officer at IndyMac Bancorp, a large lender based in Pasadena. In another blow, Mr. Montes learned that the appraisal he had done in March -- at a cost of $375 -- is no longer valid. Ms. Arnold sounded out appraisers and concluded that there was no hope the house could appraise for enough to allow the family to qualify for a refinancing. Based on recent sale prices and other data, Zillow.com, an online service that provides home-value information, estimates that the price of a typical home in Fullerton is down 6.7% from a year ago.

The Monteses now hope for help from the company that services their loan, America's Servicing Co., a unit of Wells Fargo & Co. Mr. Montes telephoned America's Servicing Tuesday to ask whether it might consider a modification in the terms of the loans to help him keep the payments affordable beyond the reset date. An employee of the servicing company said that wouldn't be possible if the family has no home equity, Mr. Montes says.

A Wells spokesman declined to comment on the Monteses' loan but said the bank reviews requests for loan modifications "on a case-by-case basis and works with customers on solutions that address their individual financial needs."

Mr. Montes says the family may try to sell the house, but that would be tricky in today's weak market. Or they could try to trim other expenses and keep meeting the higher monthly home payments that are due to take effect in December.

Borrowing for College

There is very little wiggle room. Mr. and Mrs. Montes also have two car loans, with payments totaling about $700 a month, and are borrowing more money to help put their elder daughter through college. They recently had to tell their younger daughter they couldn't afford $70 a month for her to take piano lessons.

The couple now eat out once or twice a month, instead of once or twice a week before they bought the house. They have yet to visit a nearby jazz club they had hoped to frequent. The trips they used to take to Lake Tahoe now are out of the question.

To bring in a bit more income, Mr. Montes two weeks ago found a weekend job as a bartender for a catering company. He says he might be able to take on a third job.

"Bottom line, it's our little home," Mrs. Montes told a visitor one evening in April as tears welled in her eyes. "We're going to keep it. Hopefully, we won't go down and if we do, we're going to go down with a fight."

Write to James R. Hagerty at bob.hagerty@wsj.com5 and Ken Gepfert at Ken.Gepfert@wsj.com6