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GP11Dec: Third World Economy; First-Rate Common Sense
London Lurching. A couple of years back, some
banking acquaintances moved from Singapore to London. They had been
spoiled, because Singapore is an engine that purrs, greased by an ironfisted
autocracy that has its eye on the future and its hand on the levers of the
present. Except for the occasional python that may crawl out of the
Botanical Garden into your house, nothing untoward is ever allowed to happen
there. This island nation is proud of keeping gum off its sidewalks and
pursuing those who "outrage the modesty of ladies."
London is shock itself. The City, London's financial district, suffers
occasional bomb scares. The traffic does not flow, unless you are on the
Thames. Indeed, the gridlock by some accounts rivals that of Bangkok, the
capital of going nowhere and enforced lassitude in Asia. When our friends'
car was savaged and broken into while they were staying at a fancy country
inn, the wittiest fellow exclaimed, "Oh Britannia. You have become a Third
World country."
Storm of the Century. December 4 brought an ice storm to the
Carolinas, and minds and hearts came to a standstill. The local paper
called it "The Storm of the Century," which means, we imagine, that the
headline writer is stuck in the 20th century and thought that this tempest
took the cake for years past. But maybe the newspaper is prophetic (perhaps
you have seen the TV serial in which the headlines spell out tomorrow's
tragedies); just maybe it is looking 98 years into the future and sees an
all clear out there.
In any event, the storm did put swathes of the Carolinas out of commission
as trees crashed down onto power lines and dimmed the prospects for the
week. As of Monday, lots of lights still were not on, revealing a fragile
infrastructure more than symbolic of the last quarter of the 20th century
when we built things patchwork and underinvested in all the humdrum systems
that keep life going. The very stuff that leads to a Third World Economy.
Duke Redux. Duke Energy of Charlotte is a principal electricity
provider in North Carolina, suffering vast outages during this icing. If
you prowl along some of its lines, you will see why they can be knocked down
with ease. Trees tower over the toothpicks that hold up the electric
lines. The sclerotic state government provides weak regulation of utilities
and several other quasi-public industries, so it has been rather easy to
underbuild as housing and the population swells. And yet the power is fully
priced. All this shows up in truly bad weather, but consumers can also
expect halting repairs during an average lightening storm (8 to 12 hours is
not uncommon). Free-wheeling Duke, meanwhile, has had an opportunity to
take its eye off the ball, purchasing ventures well outside its service
area, and making a horrible muck of speculative activity in energy trading
just like several others. Several trading executives have recently gone
their own way. It has put its foot on the third rail. As an investment, we
have been forced to change our evaluation from "investment grade" to
"trading vehicle." This has not been an inconsequential matter since the
whole U.S. economy has traditionally run on cheap, reliable power.
Duke is, of course, just one visible example of the state's slide into the
Third World Economy. Some food items at grocery chains may cost as much as
60 or 70% more than the same items at discounters. Price, service, and
quality disparities plague a number of industries. One lady is known to
send her cleaning to New York, having found no local outlet that can
reliably get the job done on finer articles of clothing. In another five
years, some of its growth districts threaten to choke on traffic, because
its planners and politicians have not paid enough attention to its Blue
highways. For the state, this has led to an economy that has peaked for
now. Variations on this theme have led to low growth in industry after
industry throughout the nation. Growth is dependent on honest government and
a well-wrought infrastructure.
Self Reliance. If the 21st century offers a Third World dimension to
many in the developed world, it's heartening that citizens are slowly
finding their own ways to deal with inadequate systems, which, as we have
said in previous letters, are melting down. Out-of-the-box thinking is not
enough: the brave and the survivors find ways to entirely detach themselves
from complex, poorly designed, poorly built systems. During the power
outage in the Carolinas, a host of people installed little generators in
their houses. Alternative systems, such as solar power, are gaining
traction: San Francisco is implementing more solar power as a matter of
public policy. More and more innovation is now taking place in the arena of
small generators, which will partially uncouple us from central sources of
supply.
There are other examples where people are giving up on the system and
relying more on their own ingenuity. We have talked previously about the
huge growth of obesity in the United States. Our national healthcare system
has not been able to come to grips with it. Of their own accord, many are
flocking to physical exercise, better diets not recommended by the USDA, and
restraint toward fast food. Some indignant consumers are suing the fast
food companies, having grown irate at the unhealthiness of the offerings.
Yet again, this is an area where adversity is bringing out an independent
thinking that will eventually lead to real innovation.
Best of the Week. We recently visited with a fine sports doctor who
even finds his own weight and cholesterol creeping up. Ironically this
stems from long hours taking care of professional athletes. He is treating
himself with two organic supplements that show promise in relation to
cholesterol. That is, he is a doctor of an independent frame of mind, fully
cognizant of all the received scientific opinion, who nonetheless knows it
is worthwhile to find natural substances to deal with medical conditions,
since, again and again, we discover that standard drugs may have side
effects that have not yet made it into the medical journals and are, in any
event, hard on the pocketbook. It is remarkable when a physician can pull
himself free of the handouts from the pharmaceutical companies.
Adversity--Third World Economy, ice storms, broken utilities, high
cholesterol, uncertain health systems--inspire self-reliant people to find
new ways to deal with things that are not in any of the standard how-to
books. Though Paradise appears to be lost, we can rejoice in resilient
souls who are ready to assert their own commonsense.
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