Do Medications Really Expire?

Does the expiration date on a bottle of a medication mean anything? If a bottle of Tylenol, for example, says something like "Do not use after June 1998," and it is August 2002, should you take the Tylenol? Should you discard it? Can you get hurt if you take it? Will it simply have lost its potency and do you no good?

In other words, are drug manufacturers being honest with us when they put an expiration date on their medications, or is the practice of dating just another drug industry scam, to get us to buy new medications when the old ones that purportedly have "expired" are still perfectly good?

These are the pressing questions I investigated after my mother-in-law recently said to me, "It doesn't mean anything," when I pointed out that the Tylenol she was about to take had "expired" 4 years and a few months ago. I was a bit mocking in my pronouncement -- feeling superior that I had noticed the chemical corpse in her cabinet -- but she was equally adamant in her reply, and is generally very sage about medical issues.

So I gave her a glass of water with the purportedly "dead" drug, of which she took 2 capsules for a pain in the upper back. About a half hour later she reported the pain seemed to have eased up a bit. I said "You could be having a placebo effect," not wanting to simply concede she was right about the drug, and also not actually knowing what I was talking about. I was just happy to hear that her pain had eased, even before we had our evening cocktails and hot tub dip (we were in "Leisure World," near Laguna Beach, California, where the hot tub is bigger than most Manhattan apartments, and "Heaven," as generally portrayed, would be raucous by comparison).


Peoples Drug Store, Richmond, Virginia, 1960, by Adolph B. Rice Studio.

Upon my return to NYC and high-speed connection, I immediately scoured the medical databases and general literature for the answer to my question about drug expiration labeling. And voila, no sooner than I could say "Screwed again by the pharmaceutical industry," I had my answer. Here are the simple facts:

First, the expiration date, required by law in the United States, beginning in 1979, specifies only the date the manufacturer guarantees the full potency and safety of the drug -- it does not mean how long the drug is actually "good" or safe to use.

Second, medical authorities uniformly say it is safe to take drugs past their expiration date -- no matter how "expired" the drugs purportedly are. Except for possibly the rarest of exceptions, you won't get hurt and you certainly won't get killed. A contested example of a rare exception is a case of renal tubular damage purportedly caused by expired tetracycline (reported by G. W. Frimpter and colleagues in JAMA, 1963;184:111). This outcome (disputed by other scientists) was supposedly caused by a chemical transformation of the active ingredient.

Third, studies show that expired drugs may lose some of their potency over time, from as little as 5% or less to 50% or more (though usually much less than the latter). Even 10 years after the "expiration date," most drugs have a good deal of their original potency. So wisdom dictates that if your life does depend on an expired drug, and you must have 100% or so of its original strength, you should probably toss it and get a refill, in accordance with the cliché, "better safe than sorry." If your life does not depend on an expired drug -- such as that for headache, hay fever, or menstrual cramps -- take it and see what happens.

One of the largest studies ever conducted that supports the above points about "expired drug" labeling was done by the US military 15 years ago, according to a feature story in the Wall Street Journal (March 29, 2000), reported by Laurie P. Cohen. The military was sitting on a $1 billion stockpile of drugs and facing the daunting process of destroying and replacing its supply every 2 to 3 years, so it began a testing program to see if it could extend the life of its inventory. The testing, conducted by the US Food and Drug Administration (FDA), ultimately covered more than 100 drugs, prescription and over-the-counter. The results showed that about 90% of them were safe and effective as far as 15 years past their original expiration date.

In light of these results, a former director of the testing program, Francis Flaherty, said he concluded that expiration dates put on by manufacturers typically have no bearing on whether a drug is usable for longer. Mr. Flaherty noted that a drug maker is required to prove only that a drug is still good on whatever expiration date the company chooses to set. The expiration date doesn't mean, or even suggest, that the drug will stop being effective after that, nor that it will become harmful. "Manufacturers put expiration dates on for marketing, rather than scientific, reasons," said Mr. Flaherty, a pharmacist at the FDA until his retirement in 1999. "It's not profitable for them to have products on a shelf for 10 years. They want turnover."

The FDA cautioned there isn't enough evidence from the program, which is weighted toward drugs used during combat, to conclude most drugs in consumers' medicine cabinets are potent beyond the expiration date. Joel Davis, however, a former FDA expiration-date compliance chief, said that with a handful of exceptions -- notably nitroglycerin, insulin, and some liquid antibiotics -- most drugs are probably as durable as those the agency has tested for the military. "Most drugs degrade very slowly," he said. "In all likelihood, you can take a product you have at home and keep it for many years, especially if it's in the refrigerator."

Consider aspirin. Bayer AG puts 2-year or 3-year dates on aspirin and says that it should be discarded after that. However, Chris Allen, a vice president at the Bayer unit that makes aspirin, said the dating is "pretty conservative"; when Bayer has tested 4-year-old aspirin, it remained 100% effective, he said. So why doesn't Bayer set a 4-year expiration date? Because the company often changes packaging, and it undertakes "continuous improvement programs," Mr. Allen said. Each change triggers a need for more expiration-date testing, and testing each time for a 4-year life would be impractical. Bayer has never tested aspirin beyond 4 years, Mr. Allen said. But Jens Carstensen has. Dr. Carstensen, professor emeritus at the University of Wisconsin's pharmacy school, who wrote what is considered the main text on drug stability, said, "I did a study of different aspirins, and after 5 years, Bayer was still excellent. Aspirin, if made correctly, is very stable.

Okay, I concede. My mother-in-law was right, once again. And I was wrong, once again, and with a wiseacre attitude to boot. Sorry mom. Now I think I'll take a swig of the 10-year dead package of Alka Seltzer in my medicine chest -- to ease the nausea I'm feeling from calculating how many billions of dollars the pharmaceutical industry bilks out of unknowing consumers every year who discard perfectly good drugs and buy new ones because they trust the industry's "expiration date labeling."

- Richard Altschuler

The Health-Insurance Market Is Not Free

With the government's healthcare plan looming above us, there has perhaps never been a better time for Americans to understand the excessive costs of health care, and the origins of these vast increases.

While many commentators have been quick to blame the free market for these costs, health insurance in America is not completely "free." For instance, in Idaho, Maine, Massachusetts, New York, New Jersey, Ohio, Rhode Island, and Vermont, there are regulations called "guaranteed issues." These force insurance companies to accept all comers, regardless of preexisting conditions.

Likewise, more than 30 other states have lesser (but very similar) regulations forcing companies to accept all comers. Such regulations allow individuals to buy insurance as soon as they need a given type of high-cost care. This is like letting a driver who causes a major accident purchase the insurance after the accident and expect all his car repair bills to be paid.


Dr. Schreiber of San Augustine giving a typhoid innoculation at a rural school, San Augustine County, Texas, by John Vachon, April 1943.

In an effort to protect themselves, insurance companies would prefer to then charge more to the person who waited until he became sick to buy insurance. However, some people cannot afford these higher payments, so the government has imposed price controls.

There are also "community ratings," which require insurance companies to charge the same amount to all members of a pool. Maine, Massachusetts, New York, New Jersey, North Dakota, Oregon, Vermont, and Washington are the most severe. These "community rating" laws effectively force insurance companies to finance people with preexisting conditions, and as a result they vastly increase the premiums for healthy people.

With community ratings in effect, an 18-year-old's premium is the same as 60-year-old's. Often, when a young and healthy person sees their premiums rise, he or she drops out of the insurance pool, which then leaves it more full of sick people, again increasing premiums for the remaining members. These community ratings contribute a great deal to the large number of uninsured, and are among the reasons why healthcare in New York and New Jersey is the most expensive in the country.

Another aspect that keeps insurance prices high is government-mandated coverage. The policies vary, but in some states, people who don't drink alcohol must purchase coverage for alcoholism, nonsmokers must purchase coverage for antismoking programs, non–drug users must purchase coverage for drug-abuse treatment, etc. Some states require consumers to purchase 50 or more types of mandated coverage. Special-interest groups are mainly behind these acts of legislation, which come from people in certain fields who want to expand the market for their services.

Government regulations also prohibit people from buying insurance from companies that are headquartered out of states that have a different set of regulations. This is an obvious barrier to entry, which decreases the supply of competing insurance companies and thus raises the price. As I noted before, each state determines the provisions that insurance companies must abide by. This means that the regulators essentially grant monopolies in each state, since insurance licenses must go through them. The barriers to entry in the health-insurance market are thus appalling.

So long as a market is highly competitive and has little or no barriers to entry, a particular firm acquiring significant market share will not always translate into greater market power. Were it easy for new health-insurance companies to enter into the market, surely we would be seeing a vast increase in them as a response to the record profits of the past few years. On the contrary, the number of health insurance companies has been on a consistent decline because of regulations and barriers to entry.


Transfusion donor bottles at Baxter Laboratories, Glenview, Illinois, by Howard R. Hollem, October 1942.

The current system of employer-provided health insurance traces back to domestic policy during the World War II era. Due to government policy, inflation grew both before and during WWII. As a "remedy," caps on wage increases were imposed by the government. In response, employers began to offer their employees health insurance to soften the blow and attract quality workers.

The federal government did not consider an increase in health benefits a violation of these wage controls, and in 1943 the IRS ruled that health benefits were tax exempt for workers. After the wage caps were abolished, health insurance benefits became seen as the norm and were not eliminated. For instance, by the early 1960s, General Motors was paying 100% of the healthcare bills for their employees (retirees included).

So, anyone who claims that the high costs of health insurance originated in the "free market" is either severely mistaken or lying.

There are certain groups that profit from these governmental policies: lobbyists, who obviously carry a significant amount of political clout, and the bureaucrats themselves. However, there are many more losers than winners under the current state of affairs; and adding more government provisions would only increase the costs for taxpayers and insurance consumers.

- Anton Batey


Anton Batey is an economics and history major at Wayne State University in Detroit, Michigan. Send him mail. See Anton Batey's article archives. You can subscribe to future articles by Anton Batey via this RSS feed.

Poll: Just Six Percent of Scientists are Republican

A full 87 percent of American scientists see their political alignment as Democrat or Independent, according to a new Pew Research poll.

Surprisingly or not, just six percent declared themselves Republican, and only nine percent overall expressed support of conservative ideology.

From the data summary:

Most Americans do not see scientists as a group as particularly liberal or conservative. Nearly two-thirds of Americans (64%) say they think of scientists as “neither in particular”; 20% see them as politically liberal and 9% say they are politically conservative.

In contrast, most scientists (56%) perceive the scientific community as politically liberal; just 2% think scientists are politically conservative. About four-in-ten scientists (42%) concur with the majority public view that scientists, as a group, are neither in particular.

The scientists’ belief that the scientific community is politically liberal is largely accurate. Slightly more than half of scientists (52%) describe their own political views as liberal, including 14% who describe themselves as very liberal. Among the general public, 20% describe themselves as liberal, with just 5% calling themselves very liberal.


California delegates cheering on stagecoach, Republican National Convention at the Chicago Coliseum, June 1912 (Bain News Service).

These figures should only be surprising to someone who neglected current events during the Bush administration, which was accused of censoring and intimidating scientists on matters from global warming to medical research and nuclear weapons.

It's safe to say that being treated like an unwanted step-child, along with continued, eye-widening nonsense like this, has not engendered much love of Republicanism in the scientific community.

- Stephen C. Webster, Raw Story

Can a Central Bank Go Broke?

Centralized monetary authorities enjoy a privileged position in the current monetary system. People tend to view the economists and politicians at these institutions as demigods, individuals who if given enough resources will ensure that the economy continues an ever-advancing and smooth trajectory. However, unlike the Greek demigods of yore, today's central bankers are mere mortals who must work within the confines and constraints of the institution that they head.

While they present an aura of invincibility, the truth is that the effectiveness of their policies faces severe limits.

Conventionally, a central bank pursues its goal of price stability by adjusting the money supply to alter the discount rate indirectly, thus making lending more or less attractive. The recent crisis draws attention to a secondary function of these banks — namely, as a lender of last resort.


Federal Reserve Bank of Richmond by Adolph B. Rice Studio, 1956

After the Lehman Brothers collapse of September 2008, central banks of the world intervened in a united effort to swap bad, illiquid assets from the private banking sector for higher-quality government debt. While this process proceeded unhindered in its early stages, central banks soon found themselves with declining balances of higher-quality debt to swap. The lone tool remaining to combat the liquidity crisis was a quantitative expansion — increasing the money supply, and thus making fresh liquidity available to the banking system for retiring its liabilities.

Through this qualitative expansion, central banks were able to bailout domestic banking systems that were heavily indebted in domestic currencies, such as the American system. However, other economies that relied on foreign funding were not quite as fortunate. The insolvency of the Central Bank of Iceland late last year brought this issue to light; several additional central banks are still at risk.

Central banks that are only able to inflate the money supply in their own domestic currency face significant challenges when faced with banking systems heavily indebted in foreign-denominated liabilities. As the recent Icelandic example has demonstrated, the possibility of central bank insolvency creates the opportunity for real banking reform.


When Central Banks Go Broke

Murray Rothbard, in his book The Case Against the Fed, argues that a private, free-banking industry is disciplined by the threat of a bank run, which keeps it from overissuing its liabilities in excess of its assets. A central-bank-led fractional-reserve system is, however, under no such constraint. Fiat money grants the central monetary authority an advantage: its own liabilities — primarily the monetary base — will never be forced into redemption for anything other than the same nominal units they are denominated in.

Guido Hülsmann explains this peculiarity, using the British pound as an example:

Until 1914, and then between 1925 and 1931, the Bank of England redeemed its £20 notes into a quantity of gold that was called "the sum of £20." Today it redeems these notes into other notes of the same kind. The point is that in the old days the expression "the sum of £20" had a different legal meaning than it has today. At the time it designated some five ounces of gold. Today it means something different. The suspension of payments has turned the expression "the sum of £20" into a self-referential tautology — it now designates £20 paper notes. The notes that promise payment of "the sum of £20" do no more than promise payment in like notes."

The result is that liabilities may be retired by inflating the money supply and not through sacrificing any real savings, whether they be a commodity (such as gold) or a foreign currency. This central bank's ability to effortlessly inflate away domestic liabilities has given rise to its oft-cited function as a lender of last resort. Hence, as banks find themselves facing illiquidity, entrepreneurs assume that the central bank is capable of moving in swiftly to expand the money supply and head off a crisis.



New York Federal Reserve Building by Berenice Abbott, 1936

Today, as the global money markets have taken on a more reserved tone, economic turbulence has caused many financial institutions to experience a binding liquidity constraint. Many central banks have thus taken on the role of market makers to ensure that liquidity remains high enough to keep the companies facing this constraint from becoming insolvent.

Ignore for the moment whether artificially propping up companies that have made an entrepreneurial error in the past and are now facing insolvency should be rescued. The really interesting question becomes: is this possible in all cases, as entrepreneurs commonly assume?

Recently, the Fed was nearing insolvency as it used its own assets to bail-out a faltering financial system. As the Fed swapped high-quality government debt for subprime debt that was burdening the banking sector, the central bank exhausted a large amount of its assets and approached its own funding constraint.

At this point, the Fed adopted a simple solution: it expanded the supply of money available to the banking sector, thus allowing it to retire its dollar-denominated liabilities. Since the liabilities that the central bank wanted to retire were denominated in that same domestic currency, it had the ability to retire them simply by expanding the money supply. In this way, the Fed averted a liquidity crisis with no significant difficulty (leaving aside the hidden damages associated with all money expansions).


A Global Problem

What if a banking system is not saddled with debt that is denominated in its domestic currency, but rather debt denominated in a foreign currency?

In this case, the central monetary authority is limited in its role as a lender of last resort. It can enact regulatory changes that affect reserve requirements, capital adequacy ratios, etc. It can pursue open-market operations using its balance sheet assets to offset transactions. Or, it can inflate its own money supply. Its assets held in foreign liabilities become the lynchpin in maintaining the solvency of this type of banking system.

When global liquidity is seriously restrained, economies heavily denominated in foreign currencies quickly feel the strain. The Icelandic banking system is the most recent example of this problem. The Central Bank of Iceland lacked the ability to inflate in any currency other than the domestic króna; as a result, Iceland's banking sector — which was heavily indebted in foreign liabilities (primarily Japanese yen and Swiss francs) — succumbed to insolvency.

As liquidity evaporated in the fall of 2008, global institutions accustomed to continually rolling over debts faced the challenge of having to pay off their liabilities. However, they had to do so without simultaneously taking out offsetting debt positions (that is, extending the maturity by rolling over existing debt). These liabilities were due in foreign currencies, so Iceland's domestic banking system was unable to fulfill its debt obligations.

The central bank tried to be the lender of last resort, but it was left with few options. It lacked foreign-denominated assets with which to fund the struggling financial sector. In the end, the system required currency swaps and lines of credit by friendly nations to stave off a devastating financial collapse. As a result, the Central Bank of Iceland became the first central bank of a developed country in the twenty-first century to become insolvent.

Iceland had a foreign-denominated debt-to-GDP ratio of between 60 and 70 percent during the height of its boom. Several countries today are marked by no less extreme levels, including many eastern European countries — chiefly, Estonia, Hungary, Latvia, Lithuania, and Serbia — which all face foreign-denominated debt-to-GDP ratios that are higher than 66 percent.

Most of these countries have already received IMF loans to ease the pressures caused by this imbalance. A renewed bout of financial turmoil may aggravate the liquidity constraint caused by this foreign-denominated debt. These countries may end up insolvent once again if these banking systems prove to be too over-leveraged in foreign-denominated debt to be sustainable.


Conclusion

Central banks enjoy a revered position in discussions on monetary matters. At their disposal are a seemingly endless array of tools and weapons ready to correct any market "imbalance" that threatens economic stability. However, these institutions are only as useful as the assets they represent. Expansionary monetary policies cannot fix all problems that a central bank faces. Countries faced with banking sectors heavily indebted in foreign-denominated liabilities will eventually find the central bank (which lured them to these positions) to be impotent.

Jésus Huerta de Soto demonstrates in his magisterial work Money, Bank Credit, and Economic Cycles that the current banking system enjoys the privileged legal provision of being able to treat deposit accounts as though they were loans. A central bank sustains this fractional-reserve system by ensuring that an illiquid banking industry will have adequate liquidity in times of banking crises.

The possibility of an insolvent central bank, however, bypasses the question of whether the central bank should be abolished and concludes that it will, in certain instances, abolish itself as insolvency renders it helpless. Banking systems heavily indebted in foreign-denominated currencies are especially vulnerable to this possibility, simply because central banks are only able to bailout domestically denominated debt obligations.

A well-known adage states that "if it ain't broke, don't fix it." Economists have long claimed that central planners are necessary to ensure economic stability. Their looming bankruptcies could end up exposing the sterility of this very function.

Let's hope that once these monetary authorities are exposed as broken, they will be fixed in light of the true needs and demands of a prosperous economic order. Free Banking, operating under established legal principles coupled with the private production of money, will ensure that an oversized banking industry does not develop. Neither will it rely on the fallacy that an omnipotent centralized monetary authority is always on guard, ready to save capitalism from its own excesses.



- David Howden is a PhD candidate at the Universidad Rey Juan Carlos, in Madrid, and winner of the Mises Institute's Douglas E. French Prize. Contact him at this link or see archives of his other articles.

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Apology Central

Earlier this month a new section debuted on News N Shit. Apology Central is a live chronicle of the pervasive and ever-growing Culture of Apology.

The section now appears every day in the right hand column of the site's front page, just below What's Happening Now and above the News N Shit Picks section.

Now each time you visit News N Shit, you can check this section for an instant roundup of all the latest public apologies that are making news in America and around the world.

We created Apology Central after finding that so many of the stories we selected each day for our Picks dealt with people being forced to apologize for saying the wrong thing, doing something someone didn't like, or generally being caught with their pants down - sometimes figuratively, sometimes literally. Football players, politicians, newspapers, celebrities - they just never seem to be able to do anything interesting anymore without having to apologize for it later.

We hope you'll enjoy this new section. If it is not to your liking, please accept our sincerest apologies.

News N Shit is always looking for new material from writers. If you have anything you'd like to contribute, please drop it in an email to us. Be sure to include your name the way you'd like it to appear with the article, a link to your website (if you'd like us to do that), and indicate that you're giving us permission to publish the work.

Click here to send us your submissions. Thanks.

Wall Street bonuses are back with a vengeance

According to Kevin Rudd's unFair Work Australia, the economy is doing so badly that low-paid workers need to do without a pay rise this year, despite rising costs of living.

It seems, however, that Wall Street didn't get the same message.


Tearing down the JP Morgan Building, corner of Wall Street and Nassau Street, New York, Bain News Service, 1912.

After slightly decreasing in 2008, corporate fat-cat pay cheques have recently started to rise again, showing exactly what the priorities of the rich and powerful are in an economic crisis.

A recent report written for the Wall Street Journal forecasts that Goldman Sachs will pay out almost twice as much to its high fliers as it did last year - an estimated $700,000 per employee, with even more for the top execs. This would have been sickening even back in 2007 when the economy was going better, although workers' living standards were not. It's even more outrageous today, with millions more losing their jobs and facing foreclosures.

Steven Eckhaus, executive-employment lawyer at Katten Muchin Rosenman LLP in New York, told the Wall Street Journal that he is "seeing deals like it's 2007 again," and spoke of $10 million guaranteed pay deals for corporate parasites. With payouts like that, there'll be plenty of money for the filthy rich to put down a deposit on their second corporate jet, buy their children Ferraris, or to hire a chef to cook for the family pet.

In the same country, but for another class, things aren't looking so rosy. At the very same time that the rich are getting their snouts right back in the trough, working class living standards are in freefall.

Unemployment in the US is now 9.5 per cent of the workforce - and a massive 24 per cent amongst teenagers. Investment author and analyst Bill Gross is one of many prominent capitalist economists who now predict that unemployment in the US will exceed 10 per cent for a protracted period. Those with jobs are now working an average of 33 hours per week, which underlies a massive shift toward insecure part-time work that doesn't pay the bills.

And while for the rich losing a job means the opportunity to spend even more time yachting or snorting cocaine, for workers it is a catastrophe. Losing a job - or sometimes even losing hours at work - quickly means losing health cover, being unable to pay rent or a mortgage, and often homelessness.

And it's not just American workers. Ireland has 12 per cent unemployment, Spain has over 18.5 per cent.

The economic crisis really exposes the class divide at the heart of capitalism. In a society based on exploitation, a crisis isn't something that affects all layers of society equally. Those who control the key decisions in society - the capitalist class - will make every effort to use the crisis to cut wages, slash job security, and do anything they can to pass the burden of the crisis onto workers rather than themselves - so they can raise profits and walk away with the enormous payouts they are again starting to give themselves.

Alan Kohler of Business Spectator projected that consumption (by workers) could be "suppressed for a generation, as it was in the 1930s". One thing is certain - if workers' wages are further pushed down, our employers will be laughing all the way to the bank.

- Andrew Cheeseman

The Oil Intensity of Food

Today we are an oil-based civilization, one that is totally dependent on a resource whose production will soon be falling. Since 1981, the quantity of oil extracted has exceeded new discoveries by an ever-widening margin. In 2008, the world pumped 31 billion barrels of oil but discovered fewer than 9 billion barrels of new oil. World reserves of conventional oil are in a free fall, dropping every year.


Bean field and canning factory, Seabrook Farm, Bridgeton, New Jersey by John Collier, 1942

Discoveries of conventional oil total roughly 2 trillion barrels, of which 1 trillion have been extracted so far, with another trillion barrels to go. By themselves, however, these numbers miss a central point. As security analyst Michael Klare notes, the first trillion barrels was easy oil, “oil that’s found on shore or near to shore; oil close to the surface and concentrated in large reservoirs; oil produced in friendly, safe, and welcoming places.” The other half, Klare notes, is tough oil, “oil that’s buried far offshore or deep underground; oil scattered in small, hard-to-find reservoirs; oil that must be obtained from unfriendly, politically dangerous, or hazardous places.”

This prospect of peaking oil production has direct consequences for world food security, as modern agriculture depends heavily on the use of fossil fuels. Most tractors use gasoline or diesel fuel. Irrigation pumps use diesel fuel, natural gas, or coal-fired electricity. Fertilizer production is also energy-intensive. Natural gas is used to synthesize the basic ammonia building block in nitrogen fertilizers. The mining, manufacture, and international transport of phosphates and potash all depend on oil.

Efficiency gains can help reduce agriculture’s dependence on oil. In the United States, the combined direct use of gasoline and diesel fuel in farming fell from its historical high of 7.7 billion gallons (29.1 billion liters) in 1973 to 4.2 billion in 2005–a decline of 45 percent. Broadly calculated, the gallons of fuel used per ton of grain produced dropped from 33 in 1973 to 12 in 2005, an impressive decrease of 64 percent.

One reason for this achievement was a shift to minimum- and no-till cultural practices on roughly two fifths of U.S. cropland. But while U.S. agricultural fuel use has been declining, in many developing countries it is rising as the shift from draft animals to tractors continues. A generation ago, for example, cropland in China was tilled largely by draft animals. Today much of the plowing is done with tractors.

Fertilizer accounts for 20 percent of U.S. farm energy use. Worldwide, the figure may be slightly higher. As the world urbanizes, the demand for fertilizer climbs. As people migrate from rural areas to cities, it becomes more difficult to recycle the nutrients in human waste back into the soil, requiring the use of more fertilizer. Beyond this, the growing international food trade can separate producer and consumer by thousands of miles, further disrupting the nutrient cycle. The United States, for example, exports some 80 million tons of grain per year–grain that contains large quantities of basic plant nutrients: nitrogen, phosphorus, and potassium. The ongoing export of these nutrients would slowly drain the inherent fertility from U.S. cropland if the nutrients were not replaced.

Irrigation, another major energy claimant, is requiring more energy worldwide as water tables fall. In the United States, close to 19 percent of farm energy use is for pumping water. And in some states in India where water tables are falling, over half of all electricity is used to pump water from wells. Some trends, such as the shift to no-tillage, are making agriculture less oil-intensive, but rising fertilizer use, the spread of farm mechanization, and falling water tables are having the opposite effect.


Washing oranges at an orange packing co-op, Redlands, California, by Jack Delano, 1943

Although attention commonly focuses on energy use on the farm, agriculture accounts for only one fifth of the energy used in the U.S. food system. Transport, processing, packaging, marketing, and kitchen preparation of food are responsible for the rest. The U.S. food economy uses as much energy as the entire economy of the United Kingdom.

The 14 percent of energy used in the food system to move goods from farmer to consumer is equal to two thirds of the energy used to produce the food. And an estimated 16 percent of food system energy use is devoted to canning, freezing, and drying food–everything from frozen orange juice concentrate to canned peas.

Food staples such as wheat have traditionally moved over long distances by ship, traveling from the United States to Europe, for example. What is new is the shipment of fresh fruits and vegetables over vast distances by air. Few economic activities are more energy-intensive.


The Caudill family eating dinner in their dugout, Pie Town, New Mexico, by Lee Russell, 1940

Food miles – the distance that food travels from producer to consumer – have risen with cheap oil. At my local supermarket in downtown Washington, D.C., the fresh grapes in winter typically come by plane from Chile, traveling almost 5,000 miles. One of the most routine long-distance movements of fresh produce is from California to the heavily populated U.S. East Coast. Most of this produce moves by refrigerated trucks. In assessing the future of long-distance produce transport, one writer observed that the days of the 3,000-mile Caesar salad may be numbered.

Packaging is also surprisingly energy-intensive, accounting for 7 percent of food system energy use. It is not uncommon for the energy invested in packaging to exceed that in the food it contains. Packaging and marketing also can account for much of the cost of processed foods. The U.S. farmer gets about 20 percent of the consumer food dollar, and for some products, the figure is much lower. As one analyst has observed, “An empty cereal box delivered to the grocery store would cost about the same as a full one.”

The most energy-intensive segment of the food chain is the kitchen. Much more energy is used to refrigerate and prepare food in the home than is used to produce it in the first place. The big energy user in the food system is the kitchen refrigerator, not the farm tractor. While oil dominates the production end of the food system, electricity dominates the consumption end.

In short, with higher energy prices and a limited supply of fossil fuels, the modern food system that evolved when oil was cheap will not survive as it is now structured.

- Lester R. Brown, founder and president of the Earth Policy Institute. Adapted from his book "Plan B 3.0: Mobilizing to Save Civilization." Download the book free or purchase a hard copy at this link.

Images courtesy of the Library of Congress from the Office of War Information Collection.

Checks and Taxes

Ever since I was a kid, I have been baffled by the concept of check writing. Essentially, when you write a check, you're saying to someone, "I have the money I owe you, but it's not with me right now. I'll write you this note that says how much money I'm giving you and if you take it to my bank they'll give you the money."

This primitive system is totally based on trust. If the person writing you a check has made a mistake in their checkbook or if they are simply lying to you about the document's validity, you may not ever get paid.

A bad check will cost you money in fees from your bank and will likely cause you to unknowingly issue a few bad checks of your own. Maybe the person writing a check to you has received a bad check and will be surprised that they never paid you.

One bad check can start a chain reaction through the accounts of any number of people, bringing headaches for people who don't deserve them and a money train of fees collected by their banks.

When everything goes right - if someone writes you a check that actually is good - it can take as long as a week before you are able to spend the money. That's because when you deposit a check into your account, your bank has to then send it to the issuer's bank to actually collect the money for you before the funds are available to spend. This delay of typically 3 to 5 days is a hassle as well.

There's a reason "the check is in the mail" is a funny line. It takes forever to move money this way. Convenient, because usually the person saying it hasn't mailed it yet.

This isn't the first time I've written of the absurdity of this system and the ways American banks exploit it to collection hundreds of millions of dollars each year by generating a laundry list of stealth fees on their customers' accounts.

One of the most popular things I've written over the years was an article titled In Banker's Clothing. By "popular" I mean that I hear about it from people more than most other things I've written. Maybe it's not so much popular as it is something that invites them to share their feelings of mutual disgust and infuriation. Like health care, every American has a banking horror story.

In 2001, I bounced a check when registering my car in Louisville. This was right before I moved to Rhode Island. The news of a bounced check is communicated by mail, which takes a long time, especially when there is an out-of-state change-of-address involved. I really can't express what a series of pains in the ass the chain reaction of this bounced check became.

Even though I repaid the check to the office as soon as I found out about it, unbeknownst to me, the County Clerk's office issues arrest warrants for these infractions. Furthermore, such a warrant is not automatically canceled upon payment.

Years later during a visit to Louisville, I was arrested and spent the night in jail - not for jumping the fence of an apartment building with a bunch of friends to go swimming in the middle of a hot night, but for a bad check that I had repaid years ago and forgotten about.

I'm no fan of banks, suffice it to say. For years, my life has been conducted as much as possible in a cash-only manner. I do have a bank account and debit card, but I have not had a credit card or any loans or real debts in more than ten years.

Funny thing, if you jump out of the system like I did, it's almost impossible to get back in. A few years ago I tried to buy a house in Louisville. I have been a lifelong renter and this was at the time when "everyone can buy a house" in America. Well, not me. I had more than one mortgage specialist tell me, "You don't have a credit score. I've never seen anything like it." In the '90s, I had bad credit, now I have none. Possibly it was a blessing in disguise that I was unable to buy a house when "everyone" could. We all know how that turned out for "everyone."

When I started writing this article today, I had a line in it that described checking as "a preposterous, archaic, 18th Century way to do business." Upon further research, I found I was being way too generous with that burn. In reality, checking dates back to the 3rd Century. Yes, the Third Century. You know, about 1,800 years ago? The fucking Romans came up with it! One empire's innovation is another empire's... I don't know, something.

In the same way that personal checks rely on everyday people to be both honest and skilled in math, so do income taxes. It is truly mind-boggling that individual Americans are responsible for calculating their own taxes each year.

In the United States, the country that is the undisputed world capital of inventing new ways to scam people, expecting everyone to honestly calculate their own share of taxes is simply an insane way to collect funds for public services.

Not too long ago, The Pittsburgh Post-Gazette reported that "an estimated 30 percent to 40 percent of taxpayers cheat on their returns, defrauding the government of some $290 billion a year, according to an Internal Revenue Service analysis of 2001 returns. Some believe the real percentage of tax cheats is much higher."

How much money is $290 billion a year? Quite simply, it is more than almost any previous year's Federal Budget Deficit. (Read that again!)

The Federal Deficit is an annual number that is the difference between what the government collects and what it spends. Each year, this difference is added to the national debt.

Before this year's stimulus-reinvestment-bailout budget, the annual deficit had only tickled $290 billion a few times. The amount of money that individual Americans are defrauding their own government is a main reason why the nation is in debt. It averages out to about $2,000 per taxpayer per year.



Theoretically, if Americans were not cheating on their taxes, the government would never have needed to borrow money from banks or foreign nations, and consequently would not be in debt.

You could, of course, go further and say if the US was not fighting two simultaneously monstrous wars that are draining the coffers, the resulting surplus and ability to provide better services would be even more spectacular. And if you wanted to, you could argue that if Americans weren't already paying one of the lowest tax rates in the industrialized world, and if everyone over a certain income level (including corporations and religious groups) paid taxes at a fair, across-the-board rate... well, I was dreaming when I started this line of thought in the first place.

Only about 1% of tax returns are ever audited. Those are pretty good odds and Americans know it. Joe Antenucci, professor of accounting and finance at Youngstown State University said, "Any gambler will tell you, when you have a high payoff and low risks, that is when you want to be involved."

Just like with check writing, when everything goes right, taxes are also a headache. Each year, Americans labor through confusing tax forms, calculate their taxes, and live in fear of the IRS. A national poll conducted by the Discovery Channel in 2000 showed that 57% of Americans feared the IRS more than God.

Nothing's scarier than getting an envelope in the mail with their logo on it, even if that logo looks like a chicken with big tits.

How does this have anything to do with my ongoing discovery of Swedish culture?

Rightfully so, both check writing and self-calculation of your own taxes seem totally insane to Swedes. As you might have guessed, the back-asswards process of individuals calculating their own taxes and being responsible for the errors is uniquely American. It's almost as insane as trusting someone who writes down an amount of money on a piece of paper, thereby magically transforming that piece of paper into a bank note worth that amount.

In Sweden writing a check to make a purchase or pay a debt is something that happens only at very high levels of corporate trade and finance. Ordinary people never come in contact with checks.

Instead of personal checks, in Sweden (and in essentially every European country), they use a system called giro (or girot, depending on the country, all pronounced JEE-roh). The nearest thing Americans could equate it with is direct deposit. However, the difference between giro and direct deposit is that giro goes in both directions. It is not just for deposits and the system is accessible to individuals, not just large companies.

For example, if you get a bill in the mail for your rent, telephone service, cable TV, school tuition, or anything else, it comes with a tear-off stub that has a unique giro number on it. You take the stub to your bank and give it to the teller. The money is instantly transferred from your account to the requester's account. No waiting. Because of the unique number assigned to each stub, the company instantly knows you have paid them. Of course, this can all be done online as well, and some of these debits happen on regularly scheduled dates, requiring you to do nothing.

Wow, this giro system that processes instant payments from account to account sounds pretty modern, right? It must be on the cutting edge and reliant on fairly new technology. Guess again. Sweden implemented the giro system in 1925. By the 1950's, practically all of Europe was using some variant of it. For decades, it has been the standard way money moves in Europe.

Sveriges Riksbank, which is Sweden's central bank, says that in 2007, "giro transfers accounted for a good 94 percent of the total value of transactions and for 29 percent of the number of transactions" in the country. Most small transactions are completed with debit and credit cards, and by "most" I mean practically all of them. Riksbank says it was 62% of all transactions in 2007. Paper money was barely a blip on the radar (which is a shame since Sweden's currency is downright gorgeous) and checks were basically non-existent.

In fact, several of my Swedish friends have told me they have never seen a check in real life. They know what checks are only from American films and television. You'd think it would be funny, like when you see an 8-track tape in an old movie. To the contrary, even in Sweden, a country intimately familiar with American culture, someone writing a check is one thing that seems truly foreign.

Swedes use debit cards for everything. Even the tiniest, little amounts, like one cup of coffee or a candy bar at a convenience store are paid for with cards. Almost nobody will run a tab at a bar - each individual drink is paid for with an individual debit card purchase each time - and most of these transactions require a PIN code entry at the point of purchase.

A few months ago, while I was in Sweden, someone made a duplicate of my debit card and went on a shopping spree in Florida. Sophisticated thieves are apparently now able to manufacture fake cards with real numbers and use them in stores. Someone's card number can be intercepted virtually anywhere and a new card can be produced from it. This was the second time it has happened to me.

Every Swedish person I talked with about the situation asked the same question, which was not "How did they get your card number?" but rather, "How did they get your PIN code?" Swedes are blown away by the fact that you don't need a PIN code to make a purchase with a card in America, all you need is the card. And if you're making a fake card, you can just put a name on it that matches an ID you have, on the off chance that a merchant asks for your ID.

Checks, giros, debits and taxes all cross paths at this point in our discussion. In Sweden people are paid from their jobs in essentially the same automatic way as they pay their bills. On the 25th day of every month, money appears in their accounts automatically. (Good luck going out to eat or to the state-run liquor store Systembolaget on the Friday after the 25th.)

Money appearing in your bank account is like direct deposit in America, and this happens with the taxes already deducted, but that's where the similarity ends as far as taxes are concerned. For Americans, the amount removed from their paycheck is just one piece of a nerve-wracking puzzle that must be assembled in paperwork at the end of the year.

For the majority of Swedes, everything about tax collection is also automatic. Taxes are taken out of your wages before they are deposited into your bank account. At the end of the year when your tax forms come in the mail, all the numbers are already filled in. That is, when you open the envelope, all the numbers are already on the page. All you have to do is confirm that the numbers are correct, which you can do by telephone, text message, or computer. If everything looks right, that's all you have to do. You're finished. (There's more to it if you're self-employed or a business owner, of course.)

You're not faced with a stack of confusing forms or the burden of fear if you make a mistake.

I should mention something else as well, that Swedish tax forms are comparatively beautiful. They're borderline cute even (this year's forms had a flower and a cartoon kitty cat on the front), colorful, reminiscent of Ikea order forms and easy on the eyes. The tax collection agency, Skatteverket, even has a logo that's not so bad either.

Aside from automatic income taxes and the 25% sales tax, as I discussed a few months ago, there is one tax in Sweden that people are expected to pay voluntarily. That is the television and radio tax. This tax of about $250 a year helps regulate the airwaves and backs the operation of five publicly-funded television networks and more than forty streams of radio programming.

Whereas 40% of Americans are cheating on their income taxes, even though many Swedes hate the TV and radio tax and feel it is unfairly levied, 9 out of every 10 Swedes are sending in these additional payments voluntarily. Only about 10% are not.

Long story short, for every American who has cried "there's got to be a better way" when balancing their checkbook or preparing their income taxes, well, there are better ways. Again, just like health care, these better ways haven't been made available to Americans, probably because there are people somewhere making tons of money off of keeping the systems broken and confusing.

It's only common sense that there should be no delays, doubts or leaps of faith necessary in financial transactions or tax collection.

Both of these complex, antiquated systems invite inaccuracies and unnecessarily allow the processes to become corrupted. Americans can't be relied on to do the right thing if the opportunity to make an extra buck exists.

Further, in a country whose schools are so lacking, I'm not sure who ever thought it would be a good idea to trust the general public with math. We need not mention the complexity or comprehension involved in addition to the calculations required for paper-based banking and tax preparation.

Even though I had the advantage of being able to go to private schools in my youth, I was never in a course that covered balancing a checkbook, preparing tax forms, calculating annual percentage rates, or any of the basic, real-world financial knowledge every last dumb ass is expected to have.

No wonder 57% of Americans are more afraid of the tax man than the wrath of God. A simple mistake can put you in jail, and if you don't understand how it's supposed to be done in the first place, well, that starts you off with a pretty wide margin for error.

I know Obama's got a lot on his plate and neither of these topics will likely ever be addressed, given the larger, pressing issues of the moment, but like those problems, I think these are indicative of a pervasive "if it ain't broke don't fix it" mentality. Such thinking can only ultimately result in nothing ever being improved, until it reaches the point of being unwieldy.

It is possible to fix things that "ain't broke." In fact, it's advisable. If people made something, there's always room for improvement. You can't just keep adding rooms on to the outhouse until there's a ramshackle mansion attached to it.

-Scott Ritcher

High Speed Rail? Not So Fast

High speed rail is like soccer – Americans want to like it, but it’s still much more popular in Europe.

President Obama included an ambitious HSR plan as part of his Stimulus Package, and plans are now moving forward. But now a recent report (PDF), out of Europe no less, questions one of the basic assumptions of HSR: that it is any cleaner than flying.

As reported in the Freakonomics blog of the New York Times, a recent study by Booz Allen Hamilton, commissioned by the UK Department for Transport, suggests that the net CO2 emissions of a proposed HSR line from London to Manchester would be greater, over 60 years, than if it was never built at all – even if every air passenger switched to rail. Currently, rail holds a 54% share of the air/rail market between the cities.

For a proposed line from London to Edinburgh, Scotland, CO2 emissions would drop below “doing nothing” only if 62% of passengers took the train, up from 15% now.

Taking the train is still cleaner than flying, but the study takes into account not only emissions during operations, but also CO2 emitted in the building of a new HSR line, the pollution from cranes and bulldozers, building new stations, and everything else required in laying down new tracks.

For the United States, the same analysis could be even further weighted towards planes over trains, because this country is not as densely populated as the UK, and thus rail is less likely to capture the market share necessary to reach the same levels of emissions (“emissions parity”) as doing nothing.

Reached for comment, the Department of Transportation said “We believe high speed rail travel will reduce our carbon footprint significantly and that travelers deserve another option beyond cars and planes.” The California High-Speed Rail Authority, which is in the design stage of a line connecting the Bay Area with LA and San Diego, said their line will save 12.7 million barrels of oil a year, and have less impact on the environment than expanding highways or airports.

Of course, the perceived environmental friendliness of rail is just one of its selling points. Increasing safety and efficiency, reducing traffic congestion and promoting “livable communities,” are just a few of the reasons cited by the Department of Transportation in a recent report, “Vision for High-Speed Rail in America.”

The UK report is also a “simplistic analysis,” in its authors own words. A multitude of factors could change the equation, including taxing airplane CO2 emissions, changes in technology and in passengers tastes, and a million “unknown unknowns.”

And there is the fact that a national high-speed rail service would be very cool. Like a National Soccer League – oh wait, we already have that.

- BC Upham