4 April 2025

Uranium

Recommendation

This is a great story about a very special rock which was formed millions of years ago, and continues to breed a deadly form of energy. Tom Zoellner’s factual book about uranium reads like a gripping novel. He breathes vigorous life into a saga that could have been a dry political and geological tale. His beautifully crafted story puts uranium into its complex context as a key protagonist on the world stage. Zoellner’s reporting ranges from the Congo to Nazi Germany to the war in Iraq, with vivid information at every turn. BooksInShort found this meticulously researched book exceptionally interesting, and recommends it to anyone interested in discovering how society entered the atomic age and how it is muddling through.

Take-Aways

  • Uranium holds huge danger as a source of the apocalypse and great promise as a source of clean energy. One ton can produce as much power as 20,000 tons of coal.
  • Uranium breaks down into radium, radon and plutonium. It is common and lethal.
  • The U.S. spent $2 billion on the Manhattan Project, which built the WWII atomic bomb. President Harry Truman called it the “greatest scientific gamble in history.”
  • The core element in the Hiroshima atomic bomb was uranium’s most powerful, heavily concentrated form: enriched U-235.
  • Making U-235 is an immense job, but a small piece in a bomb can vaporize a city.
  • The amount of plutonium that flashed into energy in the Nagasaki bomb was about one-third the weight of a penny and killed more than 40,000 people, ending WWII.
  • By the mid-1960s, during the Cold War, the U.S. had 30,000 nuclear warheads.
  • Much of the former U.S.S.R.’s nuclear material is not catalogued, and the material that is identified and stored is badly secured.
  • Today, about 40% of the world’s known uranium is in Australia. The largest single uranium mine is in Niger.
  • Inhaled in a closed space, like a mine, uranium enters the lungs, causing cancer.

Summary

Natural Danger

Uranium, the core element in the atomic bomb, is most powerful in the form of enriched U-235 – heavily concentrated uranium ore. At a 20% concentration, U-235 can create a spontaneous explosion due to its unstable molecular composition and its atomic inclination to divide with so much force that, in specific circumstances, a concentrated baseball of U-235 could vaporize a city. Uranium is the heaviest element. Its nucleus has 92 protons and the atomic threads that hold it together are more fragile than anything else in nature. Uranium is so unstable that it constantly whirls off two protons and two neutrons – the act that registers as radioactivity. It is always “disintegrating,” always losing atoms, but its fissile energy remains potent for about 700 million years. Yet, like the other elements, uranium is a natural substance, “more common than tin, and nearly 500 times more abundant than gold.” The Romans used it to tint stained glass and southwest American Indians employed it for art and body paint. Yet, uranium is extremely dangerous. People must heavily protect themselves from breathing uranium or being exposed to it. The fast-moving particles penetrate the skin and kill healthy cells, causing cancer and reorganizing genetic material. As it disintegrates, uranium decays into: radium, radon-222 (the heaviest known gas), polonium-218 and, finally, lead 214. The “radon daughter” elements are radioactive particles with half-lives ranging from a few minutes to less than a second. These odorless, tasteless gases embed in porous surfaces and readily seep into the atmosphere. In the open, these gases are hardly dangerous, but if inhaled inside a closed space, like a mine, they leave radioactive particles in the lungs, bombarding adjoining tissues, mutating cells and, in 15 years or so, causing cancer.

Uranium Mining

The U.S. acquired the uranium for the two bombs dropped on Japan ending World War II from the Belgium-owned Shinkolobwe mine in the Congo. In the 1870s, Belgium’s King Leopold II, represented by explorer Henry Morton Stanley, claimed the territory that later included the mine. Stanley named it the Congo Free State and, under Leopold’s rule, it became a giant forced-labor camp where native people collected ivory and lumber, and harvested rubber sap under brutal conditions. In 1909, Leopold died a billionaire. He never visited the Congo, where Belgium’s giant mining company, Union Miniére du Hant Katanga, discovered copper, bismuth, cobalt, tin, zinc and radium. At the time, uranium was a “trash rock,” a worthless byproduct of radium. The Shinkolobwe mine opened in 1915, exploiting radium when it was “the most valuable substance on earth.” A gram could sell for $175,000, some 30,000 times the price of gold, but the frequently injured, heavily abused miners were “paid the equivalent of 20 cents a day to break rocks and push carts...a version of debt slavery.”

The Manhattan Project: “The Greatest Scientific Gamble in History”

On October 11, 1939, an intermediary handed President Franklin D. Roosevelt a letter authorized by Albert Einstein. It cited recent work on nuclear chain reactions, outlined the possibility of a powerful bomb and drew the president’s attention to the U.S.’s inadequate uranium supplies. FDR set up the first Uranium Committee, but funded it scantly. The effort languished until data from England – where research was outpacing U.S. efforts – put “the uranium question” into the hands of Vannevar Bush, head of the U.S. Office of Scientific Research and Development. Given now urgent authorization, he set up the top-secret Manhattan Project, which – under the administration of a logistical and organizational genius, Col. Leslie Groves – resulted in the invention of the atomic bomb.

“In this rock, we can see the best and the worst of mankind: the capacity for scientific progress and political genius; the capacity for nihilism, exploitation and terror.”

In 1940, Union Miniére official Edgar Sengier – anticipating the Nazi invasion of Belgium – moved to New York and reopened the company as the African Metals Corporation. He shipped Shinkolobwe’s 1,250-ton uranium ore stockpile to the U.S. in barrels, and stored it in a vegetable oil warehouse in Staten Island. He tried to sell it to the U.S. government, which proved more interested in cobalt at the time. Then, in September 1942, Sengier received a guest: U.S. Army Lt. Colonel Kenneth D. Nichols, an administrator at the new Manhattan Project. Nichols asked the mine official about Shinkolobwe’s uranium. “I have been waiting for your visit,” Sengier said.

“Man’s most carnal tendencies are inflamed by the most modern of elements, uranium.”

Nichols purchased the uranium ore stored on Staten Island, plus all Shinkolobwe still had and, later, all it could produce after hard negotiations and onsite help from the Army Corps of Engineers. Two-thirds of the uranium in the bomb dropped on Hiroshima and “much of the plutonium” in the Nagasaki bomb came from Shinkolobwe. The U.S. then tried and failed to tie up the world’s uranium ore supply. (Nearly tapped out, Shinkolobwe was closed in 1960 when unrest persuaded Belgium to grant the Congo’s independence. Fearing that the “lethal substance would fall into the wrong hands,” the mine’s managers sealed it with concrete on their way out of the country.)

“A fearsome animal was caged in this exotic metal, hot as the sun."

Extensive testing throughout the early 1940s proved the physics of the proposed atomic bomb’s nuclear reaction, so manufacturing began on the actual “gadget,” as the Army called it in code. The mechanics were straightforward. Construction was based on sliding an enriched, measured uranium pellet through a chute at a precise speed and then through a block of uranium. This triggered a shower of neutrons, setting off a chain reaction. This basic principle was used in the first atomic bomb, “Little Boy,” dropped on Hiroshima. A radar unit triggered a cordite explosive device, shooting an enriched uranium plug through a steel tube at 684 miles per hour. It passed a series of uranium rings and unleashed the neutrons that would trigger the reaction, which took 141 pounds of enriched uranium. The bomb was not tested before it was dropped; scientists were confident it would work and the U.S. did not have uranium to spare for a test. In a radio address announcing the first atomic bomb, President Harry Truman said, “We have spent two billion dollars on the greatest scientific gamble in history. We won.”

“Physicist Leo Szilard realized that...in certain circumstances it might be possible to set up a nuclear chain reaction, liberate energy on an industrial scale and construct atomic bombs.”

Less than three days after the Hiroshima explosion, the U.S. dropped a plutonium bomb on Nagasaki. The amount “of material inside the bomb that actually flashed into energy was but one gram,” about one-third the weight of a Lincoln penny. It killed more than 40,000 people in seconds. The two bombings ended World War II. They also stunned the world, created a new awareness of the apocalypse, and unleashed a continuing scientific and political debate with enormous ramifications for world events.

The Cold War

The end of WWII ushered in the arms race and the atomic age. The U.S. and U.S.S.R. raced to find and extract new sources of uranium. The U.S. focused on its southwest region, and opened one of its largest mines near Moab, Utah. To encourage prospecting, the new Atomic Energy Commission offered cash, maps and gear to would-be explorers. To keep the U.S. from being the sole owner of the atomic bomb, the Soviets used forced labor in Siberia, the Urals and East Germany to work in uranium mines at Wismut, St. Joachimsthal and Schlema. Wismut miners worked 12-hour shifts in knee-deep water, without ventilation or real protection from radiation. Reports estimated that one in seven of the 150,000 miners there “end up dead, sick or hurt.”

“There was that year-long wait after Einstein’s letter – but now a $2 billion assembly line...was humming at warp speed.”

By 1955, the U.S. was in the midst of uranium mania. Board games, movies and penny-stock schemes made the hunt for the mineral into both a patriotic duty and a business. Yet, the authorities, for the most part, did not tell people about the cancer dangers of uranium and its by-products because it would interfere with private mining. One of the groups hardest hit by radiation’s effects were the Native American Navajos, who lived and mined in the uranium-rich areas. By the mid-’60s, the U.S. had stockpiled upward of 30,000 strategic nuclear warheads and U.S. uranium exploration came to a close.

Modern Marvels

Today, about 40% of the world’s known uranium is buried in Australia, which has no working nuclear reactors. Uranium was first discovered at Mount Brockman in northern Australia in 1969. Today, the mine produces 8% of the world’s uranium. This discovery triggered an emotional response as Aboriginal tribes, conservationists, mine operators, the government and environmentalists all argued about whether to mine the pitchblende ore and how to protect Aboriginal ancestral claims to the mountain as a spiritual site. By 1977, Australia forged a delicate political solution and designated a vast area surrounding the working uranium mine as Kakadu National Park. Australia exported uranium only to existing nuclear nations: the then-U.S.S.R., France, England, the U.S. and China. The largest single piece of pitchblende ever found, one ton, came from northern Australia.

“Apprehension and confusion were widespread – a remarkable mood for a nation on the verge of winning a major war.”

However, the world’s largest uranium mine, Akouta, is in Saharan Niger. It has been producing uranium for almost 30 years. The mine’s yellowcake powder is Niger’s largest export; the second is onions. France, the main buyer of Niger’s uranium, processes it into pellets for nuclear plants. Niger has not benefited from uranium mining. The U.N. ranks it as “the most deprived country on earth,” with a near 75% illiteracy rate and a 45-year average life span. French mining companies pay only 5.5% of their revenues in taxes to Niger’s government, and much of that goes to the political elite. This income disparity is part of the “resource curse,” as economists term the way nations fail to benefit financially from selling their resources. Often, the exploitation of natural resources may breed corruption and actually make a poor nation poorer. Blustering, Niger’s President Seyni Kountché once said, “We will sell uranium even to the devil if we have to.”

“For the religious and secular alike, uranium had become the mineral of apocalypse.”

Niger’s uranium played a crucial role in the U.S. decision to invade Iraq. In 2002, an Italian who claimed to have intelligence sources sold a communiqué allegedly signed by Niger’s president offering to sell Iraq 500 tons of pure uranium annually. The claim eventually reached U.S. intelligence just as President George W. Bush was building a case for invading Iraq. Despite skeptics in the State Department and the CIA who said that Iraq could not process ore into a weapon, Bush noted Iraq’s alleged effort to buy uranium from Niger in his 2003 State of the Union speech.

“Every time you turn on the lights in America, there is a one in ten chance that the power is coming from an old Soviet warhead.”

The amount of uranium Bush claimed Iraq wanted was one-quarter of Niger’s annual output. The director of Niger’s mining company said any large diversion of the ore to Iraq was impossible. It would have alarmed mining officials in Paris, and would have required a conspiracy involving hundreds of people. Retired U.S. diplomat, Joseph Wilson, went to Niger and agreed. After the war started, he publicly discredited the Niger uranium hoax. The White House tried to undermine him, even revealing that his wife, Valerie Plame, was an undercover CIA agent.

“A common joke among nuclear policy analysts is that the best way to move an atomic bomb across a national border is to hide it inside a truckload of marijuana. In other words, smuggling routes used by average criminals provide good cover for the occasional piece of nuclear merchandise.”

The International Atomic Energy Agency (IAEA) in Vienna traces stolen uranium in any form. With a small budget, it must maintain a database on traffic in illicit uranium and its by-products. Since 1993, thieves have taken 16 cases of plutonium and uranium, including the processed material for making a bomb. The IAEA, lacking any investigative staff, relies on voluntary reports from member nations, which often come years after incidents occur. The IAEA estimates that 80 to 85% of uranium smuggling remains undetected. During Boris Yeltsin’s presidency, the U.S.S.R. had 735 to 1,365 tons of enriched uranium. When his political situation deteriorated, the U.S. bought a disposal site in Siberia to control some nuclear material. Today, Russian facilities are known for shoddy security.

Rediscovering Uranium

Since nuclear plants do not pollute, nuclear power has seen a popular resurgence. A single ton of uranium produces as much power as 20,000 tons of coal. This helps explain why countries across the globe are now planning to build a total of 200 new nuclear power plants. The nuclear energy industry received about $13 billion in aid and tax relief from the Bush administration. Some environmentalists endorse it as a source of clean, green energy, while others deeply oppose it. Even hedge funds have bought yellowcake. Prospectors have returned to the hills and deserts in Arizona, New Mexico and Mongolia though few claims ever become working mines. Despite uranium’s value and potency, neither the U.S. nor Russia have an exact count on how much they have enriched since WWII. The U.S. lacks an accurate audit since it did not have centralized recordkeeping among its various processing plants and military branches. The Russians suffered poor bookkeeping and production irregularities. One estimate said Russia cannot account for some 600 tons of enriched uranium, enough for 8,000 Hiroshima-sized warheads.

About the Author

Tom Zoellner wrote The Heartless Stone: A Journey Through the World of Diamonds, Deceit, and Desire, an American Library Association “Notable Book,” and he co-authored An Ordinary Man. He is a former Men’s Health contributing editor and San Francisco Chronicle reporter.


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Uranium

Book Uranium

War, Energy and the Rock That Shaped the World

Viking,


 



4 April 2025

In Defense of Globalization

Recommendation

Jagdish Bhagwati is a true believer in the righteousness of international trade, and in this pro-globalization work, he takes a tone of nearly evangelical fervor. This tactic is likely to please those who agree with him, but it’s unlikely to win over sceptics. Bhagwati makes no attempt to hide his disdain for the patchouli-scented protesters who disagree with him, and he spends much of this book serving up their flimsiest arguments and then knocking them down. Of course, he also offers plenty of persuasive points, such as a review of research showing that multinationals that set up shop in poor nations pay more than their workers would receive from other employers. At his worst, Bhagwati makes the reptilian argument that mothers who leave behind their children for jobs in rich countries are simply making a logical choice, never mind the wrenching emotions that accompany such a move. At his best, he advocates for a safety net in poor nations and for a kinder, gentler form of globalization. BooksInShort recommends this book to readers seeking an in-depth study of the pro-globalization mind-set.

Take-Aways

  • Critics paint globalization as “unfair trade” and “a race to the bottom” that hurts workers.
  • However, no objective evidence indicates that globalization kills jobs in rich nations.
  • Antiglobalization advocates spread inaccurate information about trade. For instance, reports of 15,000 child slaves on African cocoa plantations proved false.
  • Critics say globalization exploits workers who work for cents per hour on luxury items that retail for hundreds of dollars.
  • In fact, multinationals raise wages in the nations where they set up factories.
  • Multinationals don’t pollute as much as host countries would allow or treat workers as harshly as local laws would allow.
  • Improving on the generally positive aspects of globalization would add to its benefits.
  • International institutions should offer compensation to those whom globalization harms.
  • Trade liberalization should unfold at a measured pace to prevent economic shocks.
  • US wages have stagnated not because of globalization but because technology and increased productivity keep pay levels down.

Summary

Globalization and Its Discontents

Economic globalization – the increased interconnectedness of the world’s economies – is a topic that’s guaranteed to inflame passions. Proponents see globalization as a force for positive change throughout the world. Skeptics invariably use phrases such as “unfair trade” and blame profit-hungry corporations for spreading poverty and pollution. When antiglobalization activists mobilize to rail against globalization, they invariably win significant media attention. Any time there’s an international free trade meeting, you can count on seeing a throng of youthful protesters who perform for the cameras. Intriguingly, rich nations, not poor countries, are the most likely to engage in hand-wringing over the spread of economic globalization.

“Globalization...has become by now a phenomenon that is doomed to unending controversy, the focal point of always hostile passions and sometimes violent protests.”

That’s not to say globalization is perfect. International trade’s economic shifts often create unintended fallout. Consider the example of the shrimp farms that sprang up in India, Southeast Asia and Latin America to create livelihoods for the poor. These farms released chemicals that harmed surrounding mangroves and damaged the ability of traditional fishermen to catch fish in nearby waters. Imposing a “polluter tax” on shrimp farmers would compensate those who lost money due to the farming.

“Globalization promotes democracy both directly and indirectly.”

Governments should manage the downsides, but not end globalization altogether, as its opponents want. Driven by fear, critics think that globalization causes unemployment, yet no evidence exists to show that jobs have disappeared in the US and UK because of globalization. In truth, unpleasant side effects like those caused by the shrimp farms are rare and manageable. The “fundamentally benign” effects of globalization don’t create economic insecurity. Critics who point to wage stagnation in the US in recent decades are wrong to blame globalization for that trend. The real culprit is technology – the technical advances that have allowed machines to replace human workers. Productivity gains, not globalization, create downward pressure on wages.

Critics Exaggerate Globalization’s Dark Side

Opponents of globalization continue to play up the dark side of international trade. For instance, they spread rumors that 15,000 child slaves in Mali and the Ivory Coast produced chocolate consumed in the rich world. But The New York Times found no evidence that large numbers of child slaves worked on cocoa plantations. In fact, most of the children working on cocoa plantations were the offspring of the plantation owners or knew the owners, and many were 15 to 17 years old. This episode showed how eager opponents of globalization are to believe far-fetched tales about the underbelly of international trade.

“The truth is that globalization...only accelerates the reduction of child labor and enhances primary school enrollment and hence literacy.”

It is true that children are being exploited in poor nations. The International Labor Organization estimates that some 100 million to 200 million children younger than 15 are working. But don’t fault globalization for their plight; in fact, globalization reduces child labor. Parents whose earnings improve as a result of international trade are more likely to enroll their children in school and keep them out of the labor force. Simply legislating against child labor doesn’t work. The mere threat of a US law banning imports made with child labor led Bangladeshi garment factory owners to fire 50,000 children, some of whom became prostitutes to replace their lost income.

“The idea of the global care chain as a chain that binds rather than liberates is almost certainly a wrongheaded one.”

The fragility of families is a common theme for critics of globalization. For example, sociologist Arlie Russell Hochschild argues that “global care chains” harm families in the developing world. Leaving their own children to become maids or nannies for well-to-do families in the US and Europe, Hochschild and others fear, forces women from poor countries to displace their maternal love to strangers. This theory ignores the importance of extended families in the developing world, where female relatives often take active roles in child rearing. And it downplays the power gained by the absent mothers, who earn money and in some cases escape abusive husbands.

“The fearful notion that the world’s many cultures are doomed to be buried under an American avalanche also ignores the fact that other cultures are doing very well indeed, and even exporting their own artifacts and products to others around the world.”

Economic globalization unquestionably is a force that spreads democracy and prosperity. Yet its opponents don’t see it this way, and they tap into a deep vein of suspicion. Consider the 1999 razing of a McDonald’s under construction in southwestern France. A group of farmers tore the building down, drawing cheers in the media. The symbolism appealed to two strains of modern thought: “anti-Americanism and antiglobalization.” But McDonald’s marches on: France is the chain’s “third-largest market in Europe.” Yet one sociologist noted that French consumers are so sheepish about patronizing McDonald’s that they insist, when questioned in the act, that this visit is their first and last. Ironically, even as many fear American cultural domination, America itself is becoming increasingly bilingual, thanks to a wave of Spanish-speaking immigrants. While anthropologists consider the spread of the dominant culture as a threat to smaller, more fragile societies, economists take a different view: They think the true threat is that indigenous cultures will miss out on the benefits of globalization.

In Truth, Globalization Is “a Race to the Top”

Labor unions and other opponents of globalization typically point to “a race to the bottom” as jobs move from America to Mexico, China, India, and other nations with lower wages and looser regulations. Supporters of free trade have a different view. They see “a race to the top,” in which workers in poor countries attain new levels of prosperity. Even liberal economist Paul Krugman acknowledges that trade with poor countries has little effect on American workers’ wages. And scant evidence exists to support another objection to international trade: that Western employers move to nations with fewer labor protection rules. Large corporations steer clear of the reputational damage they would incur if they were caught mistreating workers or casually polluting developing nations. With ever-watchful NGOs and media scrutiny, multinationals take pains to behave responsibly.

“The case that globalization, and in particular trade integration, contributes to devastation of the indigenous cultures...is unproven.”

Critics lament that multinationals exploit workers in poor nations, contrasting, for example, the $190 price tag on a Liz Claiborne jacket with the 90 cents an hour paid to the worker who sewed it. Or they point to basketball star Michael Jordan’s huge remuneration from Nike and compare it to the pittance earned by Nike’s workers overseas. Neither of these oft-cited comparisons holds water: The wage paid by Liz Claiborne reflects only a small part of the cost of the $190 garment. Costs for materials, distribution, tariffs, marketing and unsold inventory add to the final price. And Nike’s advertising budget bears no relation to the wages paid to the makers of their shoes. Both companies face cutthroat competition, and while they are profitable, neither is raking in huge profits on the backs of exploited workers.

“The multinationals...cannot afford to be seen to dump dangerous effluents into the waters or into the air or treat their workers badly.”

More relevant is how much employees of multinationals receive compared to what local jobs pay. Several studies show that multinationals pay about 10 percent more than local employers in poor nations. In the late 1990s, Vietnamese workers earned about twice as much working at foreign-owned companies as at Vietnamese-owned enterprises. While critics paint multinationals as exploitative, the rules of supply and demand dictate that multinationals’ jobs can only favor workers in poor nations. By boosting demand for workers, multinationals raise wage levels in the countries where they do business. The critics wrongly assume that every foreign-owned factory is a sweatshop. And sweatshops exist even in developed nations due to absent regulation; note the presence of more than a few sweatshops in New York City’s garment district.

“By adding to the demand for labor in the host countries, multinationals are also overwhelmingly likely to improve wages all around, thus improving the incomes of the workers in these countries.”

Environmental regulation is another hot button for globalization’s detractors. Surely, they argue, multinationals move overseas largely to escape pollution rules in the developed world. Yet critics often seek to impose their own vague norms on multinationals. Unlike laws, which tend to be specific, these norms often depend on selective interpretation and therefore are nearly impossible to follow. And weak regulations in poor countries aren’t always what they seem. For example, the developed world has banned the use of the chemical DDT. But in India, where malaria remains a threat, the health benefits of DDT are thought to outweigh the chemical’s ecological harm. So an antiglobalization activist who chides a multinational for working in a nation that allows the use of DDT might not paint a complete picture.

Managing the Ill Effects of Globalization

If badly managed, international trade can exert a deadly economic force, as evident from the Asian crisis of the late 1990s. After a spate of international investment, nations such as Indonesia, Malaysia and the Philippines saw their currencies crater, their stock markets collapse and their economies shrink. Safeguards to slow the transition to globalization and to strengthen banking structures might have averted the meltdown.

“It is not sufficient to say that, by and large, globalization advances both economic and social agendas.”

Managing globalization can be complicated for governments. For instance, regulating short-term capital flows is more complex than regulating trade. And immigration also presents two sides of a coin: Compare the desperate workers sneaking into the US to perform low-paying tasks with the significant immigration of highly educated scientists and engineers who attend graduate schools in America and then choose to stay.

“The obvious candidate for [financing adjustment assistance] is the World Bank, which should put its money where its pro-globalization mouth is.”

Globalization’s tide generally lifts all boats, but some boats are swamped. Inevitably, some workers in poor countries will lose their jobs as a result of trade liberalization, and for them, globalization carries high stakes. Laborers in developing nations should receive “adjustment assistance” of the type that workers in the developed world demand. For instance, when Pennsylvania steel workers lose their jobs to lower-cost producers in Korea or Brazil, the government customarily provides extra unemployment benefits and money for job training. The governments of poor countries are ill-equipped to provide this help, so the pro-globalization World Bank and other international institutions should fund such adjustment assistance.

“If what I have written so far has been read with care, it should be clear that, in many ways, globalization will yield better results if it is managed.”

Farmers in less-developed countries, especially in Africa, are particularly susceptible to the vagaries of international trade and therefore should benefit from organized adjustment assistance. Agriculture is prone to spikes in supply and demand: Underproduction of a crop causes its price to rise, leading farmers to grow more of the crop. But that creates a glut, pushing prices down and bankrupting those who had borrowed and invested to ramp up production. Fewer harvests spur prices to rise and the cycle to begin again. Peasant farmers in developing nations don’t have the means to hedge their risks against price collapses, and their often dysfunctional governments can’t meet their needs, so it’s up to the international community to create some form of financial aid that keeps these farmers and their families from starvation. Other strategies for helping formerly isolated nations make the transition to globalization include:

  • Slow transitions – Free-market purists argue for speedy transitions from state-run systems to capitalistic, internationally integrated economies. Sometimes, as in the case of Poland, this “shock therapy” works well, but in Russia, chaos ensued. While globalization is the best solution in the long run, rapid moves to free trade often create layoffs and other economic turmoil, which in turn lead to political unrest and a pushback against trade liberalization. Developing economies that seek to integrate can’t choose a one-size-fits-all solution, so policy makers should take their time.
  • Job security for workers, not for positions – Unions are infamous for demanding security for specific jobs. But in an era of rapid technological change, it makes little sense to protect a soon-to-be-obsolete task. Guarantee security to individuals if they are willing to learn new skills that prepare them for new jobs. Unions should require their members to attend classes outside of work for a few hours a week.
  • Less-specific education – Universities, community colleges and vocational schools place too much emphasis on specialized training, and not enough on “general technical education.” In a rapidly evolving labor market, workers no longer can afford skills that might not be useful in a few years.
  • A “Gray Peace Corps” – Nations of the developed world should establish a Peace Corps of retired doctors, teachers, nurses and engineers who each spend a few years imparting their knowledge in places like Africa, which faces a huge skills deficit.

About the Author

Jagdish Bhagwati is a professor at Columbia University and a senior fellow in international economics at the Council on Foreign Relations.


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In Defense of Globalization

Book In Defense of Globalization

Oxford UP,


 



4 April 2025

The Little Book of Bull Moves in Bear Markets

Recommendation

Author Peter D. Schiff explains how he positioned his clients when he saw the current bear market coming, and warns you about what he sees as the imminent collapse of the U.S. dollar and the U.S. economy. He recommends that readers get their money out of the U.S. market, invest abroad, and even consider emigrating altogether and opening a business in a BRIC country (Brazil, Russia, India and China). Schiff elaborates on the risk of living in an American city “with an inner-city population.” This short book full of breathlessly long sentences explains Schiff’s end-of-life-as-we-know-it investment philosophy, including why he thinks that playing the commodities markets by investing in futures is safer and sounder than trusting the U.S. government and financial structure. BooksInShort recommends his book to readers who want to hear every point of view about the U.S. economy, including the very worst-case scenario. And even if the worst is occurring, says Schiff, you still have some investment options.

Take-Aways

  • The U.S. economy is in terrible shape and the dollar is going to collapse.
  • The government is deceiving the people, inflating the currency and weakening the country.
  • America’s current economic plight is comparable to the Great Depression.
  • Commodity futures trading may be the best hope for individual investors.
  • Gold and silver both have promise for investors.
  • Another strategy is to buy foreign stocks, but only from a trusted broker.
  • The greatest returns go to those who take the greatest risks, so take a chance on investing directly in emerging markets.
  • Certain industries will still prosper.
  • Get trained to work in those sectors; for example, learn a foreign language.
  • The U.S. economy is a dangerous place right now, but in the very long term, you’ll see a light at the end of the tunnel.

Summary

Bad News

The U.S. economy is falling apart. This is no mere cyclical downturn. This is the big one! Americans have loaded up on debt, spent beyond their means and lolled about in a fantasy world of imaginary wealth. Their government has betrayed them, especially the Federal Reserve. Now they must face the music. It won’t be pretty.

“Skyrocketing gasoline and food prices, and plummeting home sales are...early symptoms of fundamental economic problems.”

In the 1950s, the U.S. was an exporting nation with a positive trade balance. The manufacturing sector was healthy. Consumers were buying and the U.S. had real economic growth. The dollar was as good as gold. Alas, look at it now! The trade deficit is a sea of red ink. America imports far more than it exports and is the world’s biggest debtor. What happened? America stopped working hard, saving and facing facts. America became an unemployed playboy living on the tab. Well, one difference separates America and a playboy. America can print its own money. But the money it prints is worth less and less. The subprime crisis, the consumer credit meltdown, the airline industry’s trials – all are symptoms of America’s economic woes.

“[These problems] are too advanced to be reversible and grave enough to profoundly impact the living standards of most Americans for years.”

The government is fighting recession with economic stimulus packages, which means printing more money. In fact, it is just creating inflation. Until Americans get back to the economic basics of working, saving and creating real wealth, the nation will be a bad place to invest. Desperate times call for desperate measures. Only the bold can hope to make money. You can’t trust the government or the Federal Reserve. The dollar is doomed, and if you leave your assets in dollar-denominated investments – you’ll be doomed, too. Get your money out of the U.S., and invest in a money market fund denominated in a nondollar currency or invest in foreign stocks. Sell your American bonds. Interest rates are low, so bond prices are unreasonably high.

“The outlook for the American stock market has never looked grimmer, as deepening recession accompanied by higher interest rates and rising raw material costs depresses corporate earnings.”

The American equity market has the worst prospects ever. As the recession worsens, interest rates and raw material prices are going up, and corporate earnings are going down. Inflation is destroying the value of the dollar. Even people with paychecks are able to buy less with them. The recession could very easily topple into a full-fledged depression, like the Great Depression of the 1930s. During the Great Depression, all but three Dow Jones industrial stocks fell. The exceptions were food and tobacco firms, which might now pose prudent investments.

“The concept of demand destruction domestically and demand creation elsewhere, while causing domestic consumer prices to rise to levels that will force malls and big-box retailers to shut down, will actually bring prices down in other cases.”

Will customers benefit from falling prices? Not likely. The government is doing its best to keep prices up by printing currency. Americans have been borrowing to close the gap between what they earned and what they spent. Now that the credit providers are not supplying as much credit anymore, many companies will have to reduce capacity or slash prices. However, growth in the money supply is feeding inflation, keeping prices up. This period has much in common with the stagflation of the 1970s, an era that united runaway inflation and economic stagnation.

How Bad Is Inflation?

Inflation is an enormous threat to U.S. investors. Although the government is pumping up the money supply, it won’t tell you how bad inflation really is because it doesn’t want you to get too upset. To get a better idea of the real course of inflation, look at the changes in gold pricing instead of reading the newspapers and following government statistics.

“I’d reinvest any cash you don’t need for walking-around money in a nondollar money market fund or foreign equity portfolio.”

In addition to the inflationary pressure created by expansion of the money supply by American authorities, non-U.S. interests who hold dollars could also provoke inflation. A number of foreign countries have accumulated large dollar reserves. What will they do with those dollars? Some will buy American companies and, thus, inject more dollars into the U.S. economy. However, when the money supply increases, so do prices. When foreigners buy American companies, they not only increase inflation in America, they also capture the wealth of those companies, and the power that wealth brings.

“Unload bonds (and TIPS) right now, while rates are still artificially low and prices artificially high.”

The Federal Reserve is in a tough spot. On one hand, it can stimulate the economy by expanding the money supply and risk inflation. Or, it can address inflation by raising interest rates to protect the value of the dollar, which would worsen the downturn.

Productivity statistics don’t seem to reflect the fact that America is producing less and unemployment is rising. Economists exaggerate gains in productivity by using “hedonics.” If a computer is 10 times as powerful as the previous model, economists consider the manufacturer 10 times more productive. Unemployment statistics are similarly misleading – they exclude the long-term unemployed who have stopped looking.

Wall Street Hustlers

The term “Wall Street” includes all traditional fiduciary institutions, such as brokerages, mutual fund companies and investment banks, as well as hedge funds. Investment banks have a serious conflict of interest. They underwrite stocks for corporate customers, which means buying stock for the corporation and selling it in the market. But, they also offer an advisory service to investors. In fact, they have an incentive to defraud investors by selling stocks that don’t deserve to be bought. Mutual funds aren’t much better. Active fund managers reap rewards for outperforming other active managers, quarter to quarter. Thus, they take risks that are inappropriate for a long-term investor.

“If foreign holders use their dollars to buy American companies...earning streams vital to the American economy are diverted to foreign owners, as is the political influence they represent.”

Hedge funds are so secretive that no one really knows how much they have and what they are doing with it. Hedge fund managers get paid well even when investors lose money. Like mutual fund managers, hedge fund managers have an incentive to take big risks.

Investors in search of good information about industries often rely on statistics compiled by – guess who? – companies in that industry! Assuming that industry statistics are objective and unbiased is probably naïve. Yet, a reporter doing a piece on real estate still will ask people in the industry for expert opinions. Is it any surprise they say, “Now is the time to buy”? Be skeptical.

Go for Gold, Commodity Futures and Foreign Stocks

Commodities, which are now a bull market, are a great way to protect your portfolio against runaway inflation. Usually, commodities move inversely to the stock and bond markets. So a fall in the stock market means a rise in the commodities market. Creating commodities is not as easy as printing money. When commodity prices fall, producers cut back on capacity. Building capacity again takes a long time, so when the economy begins to move up, commodities will be in short supply and the prices will rise. With India and China on the rise, demand for commodities will see unprecedented growth. Six strategies can make money in commodities: three for skilled investors and three for regular investors. Skilled investors might consider:

  • “Nondiscretionary individual account” – You make all the decisions.
  • “Discretionary individual account” – Also called a “managed account,” this approach puts all the decisions in the hands of a professional manager.
  • “Commodity pool” – A manager combines several investors’ accounts. This approach provides greater diversity and limits your potential losses to the amount you invested. (In the previous two approaches, investors can lose more than they invested.)
“Low commodity prices cause overutilization of resources and underinvestment in capacity, resulting in low supply relative to demand – and...in opportunity for investors.”

The approaches for less skilled investors are:

  • “Commodity Index Funds” – These low-risk, economical funds, which are easily available as exchange-traded funds (ETF) or exchange-traded notes, try to mimic the returns of a commodities index.
  • Buying stock in commodity firms – Investors can play the commodity market by buying stock in commodity producers and other companies with exposure to the commodities industry, such as oil service companies.
  • Buying stocks in countries rich in commodities – You shop offshore for stock and buy on other nation’s stock exchanges.

Precious Metals

Gold and silver are particularly interesting commodities. When former Federal Reserve Chairman Paul Volcker restored soundness to the dollar, the world presumed that inflation was dead. Alan Greenspan, the next Fed chairman, opened the money spigot. Inflation returned and, in 2000, people noticed. Gold jumped to $1000 an ounce. A bull market in gold is coming.

“The secret is buying a combination of value and high dividends in developed foreign economies enjoying strong growth.”

Silver also looks very attractive. It has many industrial uses, and consumption exceeds production; the supply is falling while the demand is not. Silver could do even better than gold – but the downside also is potentially greater. To invest in these metals, among other tactics, you could buy bullion, use the Perth Mint (a bullion storage entity backed by the Western Australian government), buy ETFs or exchange-traded notes, trade futures contracts, or buy stock in production companies, such as mining firms.

“I strongly prefer conservative, dividend-paying foreign stocks to foreign bonds, because inflation prevails in all countries using fiat money and stocks offer inflation protection.”

Investing in foreign stocks also can protect your assets from the collapse of the American markets and currency. Some people think that if the U.S. economy collapses, it will take the whole world with it. This ignores the fact that America depends on Asia, which has provided the debt financing that has supported U.S. consumption.

“The United States will have no choice but to rebuild its manufacturing base, shore up its crumbling infrastructure, and support those few industries where it remains a world leader.”

You can invest in foreign stocks by purchasing American Depository Receipts or by investing in mutual funds, though you may pay for the convenience of so doing. ETFs offer diversification, liquidity, relatively low expenses, tax efficiency and flexibility. However, with ETFs, dollar-cost average indexing is difficult, transaction costs may be high and a risk exists that the fund may not really represent the index.

“Reducing or eliminating credit card debt should be one of your top priorities as you prepare for the coming economic downturn."

The best way to invest in foreign stocks is to buy them directly on foreign exchanges. However, beware of using Pink Sheets brokerage firms. Pink Sheets LLC publishes market makers’ bids and offers for foreign stocks. These market makers trade for their own accounts and make enormous profits at your expense, so seek a reputable broker instead. Consider Australia, Canada, Norway, Hong Kong, Switzerland and the Netherlands as investment destinations. Promising sectors include agriculture, energy, forestry, mining, water, infrastructure, property, transportation, manufacturing and utilities. Investing in emerging markets also makes sense. The risk is high, but so are potential rewards. If you are not a professional investor, consider working through a managed account.

Emigrate as an Entrepreneur

Conditions in America are going to get so bad that you should seriously consider leaving the country. Almost every industry is or soon will be on the rocks. If you live in an urban area with a large inner-city population, you may have serious trouble. Before moving, research the immigration laws and banking practices. You may need to learn a new language. The fastest-growing economies are in the BRIC countries: Brazil, Russia, India and China. The best way to take advantage of their growth is to start a business there.

“Stay out of the dollar until the coast is clear...if we wait long enough, our patience will be rewarded.”

If you decide to stay in the U.S., start saving now – preferably in nondollar currencies. Get out of debt. Pay off your credit cards. To beat inflation, hoard products with long shelf lives. A carton of cigarettes or the box of cereal you buy today may be worth double or triple its present price in the very near future. You can barter these goods. Learn to fix things instead of throwing them out.

Eventually, America will figure out what it needs to do. Rebuilding its manufacturing center will be part of the recovery. Investors will find opportunities in engineering, construction, agriculture, merchant marine, commercial fishing, energy, computers, entertainment, tailoring, textiles, and auto and appliance repair. The service economy will probably shrink. Trade school may be a prudent option. College students should focus on learning skills, including foreign languages, which can suit them for employment in these fields. The U.S. economy is hazardous right now but given time and the right efforts, a light will emerge at the end of the tunnel.

About the Author

Peter D. Schiff is the author of Crash Proof and president of Euro Pacific Capital, Inc.


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The Little Book of Bull Moves in Bear Markets

Book The Little Book of Bull Moves in Bear Markets

How to Keep Your Portfolio Up When the Market is Down

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