And, despite some recent good news on the economic front, the CBO is still predicting that (U3) unemployment will remain above 8 percent until 2014. The report also notes that, including those who haven’t sought work in the past four weeks and those who are working part-time but seeking full-time employment, the (U6) unemployment rate would be 15 percent.
The CBO made its comments in a report examining the long-term effects of joblessness, and possible policy options to boost employment, including unemployment insurance reforms and job training programs. The report came at the request of
Michigan Democratic Rep. Sander Levin, but Republicans quickly jumped on the chance to bash President Obama’s stimulus program, which is also reaching its three-year anniversary today.
(As anti-corporate as I am, I have to say this is the most sensible pro-corporate piece I've read in over a decade. I don't like a lot of it, but it takes a sensible approach to some of the crucial issues that divide corporations and the US citizenry. What I would add, though, is give up your corporate personhood, or it will be taken away, anyway. And get the hell out of government. Your corruption will take decades to undo!--jef)
The near meltdown of the financial system and the ensuing Great Recession have been, and will remain, the defining issue for the current generation of executives. Now that the worst seems to be behind us, it’s tempting to feel deep relief—and a strong desire to return to the comfort of business as usual. But that is simply not an option. In the past three years we’ve already seen a dramatic acceleration in the shifting balance of power between the developed West and the emerging East, a rise in populist politics and social stresses in a number of countries, and significant strains on global governance systems. As the fallout from the crisis continues, we’re likely to see increased geopolitical rivalries, new international security challenges, and rising tensions from trade, migration, and resource competition. For business leaders, however, the most consequential outcome of the crisis is the challenge to capitalism itself.
That challenge did not just arise in the wake of the Great Recession. Recall that trust in business hit historically low levels more than a decade ago. But the crisis and the surge in public antagonism it unleashed have exacerbated the friction between business and society. On top of anxiety about persistent problems such as rising income inequality, we now confront understandable anger over high unemployment, spiraling budget deficits, and a host of other issues. Governments feel pressure to reach ever deeper inside businesses to exert control and prevent another system-shattering event.
My goal here is not to offer yet another assessment of the actions policymakers have taken or will take as they try to help restart global growth. The audience I want to engage is my fellow business leaders. After all, much of what went awry before and after the crisis stemmed from failures of governance, decision making, and leadership within companies. These are failures we can and should address ourselves.
In an ongoing effort that started 18 months ago, I’ve met with more than 400 business and government leaders across the globe. Those conversations have reinforced my strong sense that, despite a certain amount of frustration on each side, the two groups share the belief that capitalism has been and can continue to be the greatest engine of prosperity ever devised—and that we will need it to be at the top of its job-creating, wealth-generating game in the years to come. At the same time, there is growing concern that if the fundamental issues revealed in the crisis remain unaddressed and the system fails again, the social contract between the capitalist system and the citizenry may truly rupture, with unpredictable but severely damaging results.
Most important, the dialogue has clarified for me the nature of the deep reform that I believe business must lead—nothing less than a shift from what I call quarterly capitalism to what might be referred to as long-term capitalism. (For a rough definition of “long term,” think of the time required to invest in and build a profitable new business, which McKinsey research suggests is at least five to seven years.) This shift is not just about persistently thinking and acting with a next-generation view—although that’s a key part of it. It’s about rewiring the fundamental ways we govern, manage, and lead corporations. It’s also about changing how we view business’s value and its role in society.
There are three essential elements of the shift:
First, business and finance must jettison their short-term orientation and revamp incentives and structures in order to focus their organizations on the long term.
Second, executives must infuse their organizations with the perspective that serving the interests of all major stakeholders—employees, suppliers, customers, creditors, communities, the environment—is not at odds with the goal of maximizing corporate value; on the contrary, it’s essential to achieving that goal.
Third, public companies must cure the ills stemming from dispersed and disengaged ownership by bolstering boards’ ability to govern like owners.
None of these ideas, or the specific proposals that follow, are new. What is new is the urgency of the challenge. Business leaders today face a choice: We can reform capitalism, or we can let capitalism be reformed for us, through political measures and the pressures of an angry public. The good news is that the reforms will not only increase trust in the system; they will also strengthen the system itself. They will unleash the innovation needed to tackle the world’s grand challenges, pave the way for a new era of shared prosperity, and restore public faith in business.
1. Fight the Tyranny of Short-TermismAs a Canadian who for 25 years has counseled business, public sector, and nonprofit leaders across the globe (I’ve lived in Toronto, Sydney, Seoul, Shanghai, and now London), I’ve had a privileged glimpse into different societies’ values and how leaders in various cultures think. In my view, the most striking difference between East and West is the time frame leaders consider when making major decisions. Asians typically think in terms of at least 10 to 15 years. For example, in my discussions with the South Korean president Lee Myung-bak shortly after his election in 2008, he asked us to help come up with a 60-year view of his country’s future (though we settled for producing a study called National Vision 2020.) In the U.S. and Europe, nearsightedness is the norm. I believe that having a long-term perspective is the competitive advantage of many Asian economies and businesses today.
Myopia plagues Western institutions in every sector. In business, the mania over quarterly earnings consumes extraordinary amounts of senior time and attention. Average CEO tenure has dropped from 10 to six years since 1995, even as the complexity and scale of firms have grown. In politics, democracies lurch from election to election, with candidates proffering dubious short-term panaceas while letting long-term woes in areas such as economic competitiveness, health, and education fester. Even philanthropy often exhibits a fetish for the short term and the new, with grantees expected to become self-sustaining in just a few years.
Lost in the frenzy is the notion that long-term thinking is essential for long-term success. Consider Toyota, whose journey to world-class manufacturing excellence was years in the making. Throughout the 1950s and 1960s it endured low to nonexistent sales in the U.S.—and it even stopped exporting altogether for one bleak four-year period—before finally emerging in the following decades as a global leader. Think of Hyundai, which experienced quality problems in the late 1990s but made a comeback by reengineering its cars for long-term value—a strategy exemplified by its unprecedented introduction, in 1999, of a 10-year car warranty. That radical move, viewed by some observers as a formula for disaster, helped Hyundai quadruple U.S. sales in three years and paved the way for its surprising entry into the luxury market.
To be sure, long-term perspectives can be found in the West as well. For example, in 1985, in the face of fierce Japanese competition, Intel famously decided to abandon its core business, memory chips, and focus on the then-emerging business of microprocessors. This “wrenching” decision was “nearly inconceivable” at the time, says Andy Grove, who was then the company’s president. Yet by making it, Intel emerged in a few years on top of a new multi-billion-dollar industry. Apple represents another case in point. The iPod, released in 2001, sold just 400,000 units in its first year, during which Apple’s share price fell by roughly 25%. But the board took the long view. By late 2009 the company had sold 220 million iPods—and revolutionized the music business.
It’s fair to say, however, that such stories are countercultural. In the 1970s the average holding period for U.S. equities was about seven years; now it’s more like seven months. According to a recent paper by Andrew Haldane, of the Bank of England, such churning has made markets far more volatile and produced yawning gaps between corporations’ market price and their actual value. Then there are the “hyperspeed” traders (some of whom hold stocks for only a few seconds), who now account for 70% of all U.S. equities trading, by one estimate. In response to these trends, executives must do a better job of filtering input, and should give more weight to the views of investors with a longer-term, buy-and-hold orientation.
If they don’t, short-term capital will beget short-term management through a natural chain of incentives and influence. If CEOs miss their quarterly earnings targets, some big investors agitate for their removal. As a result, CEOs and their top teams work overtime to meet those targets. The unintended upshot is that they manage for only a small portion of their firm’s value. When McKinsey’s finance experts deconstruct the value expectations embedded in share prices, we typically find that 70% to 90% of a company’s value is related to cash flows expected three or more years out. If the vast majority of most firms’ value depends on results more than three years from now, but management is preoccupied with what’s reportable three months from now, then capitalism has a problem.
Some rightly resist playing this game. Unilever, Coca-Cola, and Ford, to name just a few, have stopped issuing earnings guidance altogether. Google never did. IBM has created five-year road maps to encourage investors to focus more on whether it will reach its long-term earnings targets than on whether it exceeds or misses this quarter’s target by a few pennies. “I can easily make my numbers by cutting SG&A or R&D, but then we wouldn’t get the innovations we need,” IBM’s CEO, Sam Palmisano, told us recently. Mark Wiseman, executive vice president at the Canada Pension Plan Investment Board, advocates investing “for the next quarter century,” not the next quarter. And Warren Buffett has quipped that his ideal holding period is “forever.” Still, these remain admirable exceptions.
To break free of the tyranny of short-termism, we must start with those who provide capital. Taken together, pension funds, insurance companies, mutual funds, and sovereign wealth funds hold $65 trillion, or roughly 35% of the world’s financial assets. If these players focus too much attention on the short term, capitalism as a whole will, too.
In theory they shouldn’t, because the beneficiaries of these funds have an obvious interest in long-term value creation. But although today’s standard practices arose from the desire to have a defensible, measurable approach to portfolio management, they have ended up encouraging shortsightedness. Fund trustees, often advised by investment consultants, assess their money managers’ performance relative to benchmark indices and offer only short-term contracts. Those managers’ compensation is linked to the amount of assets they manage, which typically rises when short-term performance is strong. Not surprisingly, then, money managers focus on such performance—and pass this emphasis along to the companies in which they invest. And so it goes, on down the line.
As the stewardship advocate Simon Wong points out, under the current system pension funds deem an asset manager who returns 10% to have underperformed if the relevant benchmark index rises by 12%. Would it be unthinkable for institutional investors instead to live with absolute gains on the (perfectly healthy) order of 10%—especially if they like the approach that delivered those gains—and review performance every three or five years, instead of dropping the 10-percenter? Might these big funds set targets for the number of holdings and rates of turnover, at least within the “fundamental investing” portion of their portfolios, and more aggressively monitor those targets? More radically, might they end the practice of holding thousands of stocks and achieve the benefits of diversification with fewer than a hundred—thereby increasing their capacity to effectively engage with the businesses they own and improve long-term performance? Finally, could institutional investors beef up their internal skills and staff to better execute such an agenda? These are the kinds of questions we need to address if we want to align capital’s interests more closely with capitalism’s.
2. Serve Stakeholders, Enrich ShareholdersThe second imperative for renewing capitalism is disseminating the idea that serving stakeholders is essential to maximizing corporate value. Too often these aims are presented as being in tension: You’re either a champion of shareholder value or you’re a fan of the stakeholders. This is a false choice.
The inspiration for shareholder-value maximization, an idea that took hold in the 1970s and 1980s, was reasonable: Without some overarching financial goal with which to guide and gauge a firm’s performance, critics feared, managers could divert corporate resources to serve their own interests rather than the owners’. In fact, in the absence of concrete targets, management might become an exercise in politics and stakeholder engagement an excuse for inefficiency. Although this thinking was quickly caricatured in popular culture as the doctrine of “greed is good,” and was further tarnished by some companies’ destructive practices in its name, in truth there was never any inherent tension between creating value and serving the interests of employees, suppliers, customers, creditors, communities, and the environment. Indeed, thoughtful advocates of value maximization have always insisted that it is long-term value that has to be maximized.
Capitalism’s founding philosopher voiced an even bolder aspiration. “All the members of human society stand in need of each others assistance, and are likewise exposed to mutual injuries,” Adam Smith wrote in his 1759 work, The Theory of Moral Sentiments. “The wise and virtuous man,” he added, “is at all times willing that his own private interest should be sacrificed to the public interest,” should circumstances so demand.
Smith’s insight into the profound interdependence between business and society, and how that interdependence relates to long-term value creation, still reverberates. In 2008 and again in 2010, McKinsey surveyed nearly 2,000 executives and investors; more than 75% said that environmental, social, and governance (ESG) initiatives create corporate value in the long term. Companies that bring a real stakeholder perspective into corporate strategy can generate tangible value even sooner. (See the sidebar “Who’s Getting It Right?”)
Creating direct business value, however, is not the only or even the strongest argument for taking a societal perspective. Capitalism depends on public trust for its legitimacy and its very survival. According to the Edelman public relations agency’s just-released 2011 Trust Barometer, trust in business in the U.S. and the UK (although up from mid-crisis record lows) is only in the vicinity of 45%. This stands in stark contrast to developing countries: For example, the figure is 61% in China, 70% in India, and 81% in Brazil. The picture is equally bleak for individual corporations in the Anglo-American world, “which saw their trust rankings drop again last year to near-crisis lows,” says Richard Edelman.
How can business leaders restore the public’s trust? Many Western executives find that nothing in their careers has prepared them for this new challenge. Lee Scott, Walmart’s former CEO, has been refreshingly candid about arriving in the top job with a serious blind spot. He was plenty busy minding the store, he says, and had little feel for the need to engage as a statesman with groups that expected something more from the world’s largest company. Fortunately, Scott was a fast learner, and Walmart has become a leader in environmental and health care issues.
Tomorrow’s CEOs will have to be, in Joseph Nye’s apt phrase, “tri-sector athletes”: able and experienced in business, government, and the social sector. But the pervading mind-set gets in the way of building those leadership and management muscles. “Analysts and investors are focused on the short term,” one executive told me recently. “They believe social initiatives don’t create value in the near term.” In other words, although a large majority of executives believe that social initiatives create value in the long term, they don’t act on this belief, out of fear that financial markets might frown. Getting capital more aligned with capitalism should help businesses enrich shareholders by better serving stakeholders.
3. Act Like You Own the PlaceAs the financial sector’s troubles vividly exposed, when ownership is broadly fragmented, no one acts like he’s in charge. Boards, as they currently operate, don’t begin to serve as a sufficient proxy. All the Devils Are Here, by Bethany McLean and Joe Nocera, describes how little awareness Merrill Lynch’s board had of the firm’s soaring exposure to subprime mortgage instruments until it was too late. “I actually don’t think risk management failed,” Larry Fink, the CEO of the investment firm BlackRock, said during a 2009 debate about the future of capitalism, sponsored by the Financial Times. “I think corporate governance failed, because...the boards didn’t ask the right questions.”
What McKinsey has learned from studying successful family-owned companies suggests a way forward: The most effective ownership structure tends to combine some exposure in the public markets (for the discipline and capital access that exposure helps provide) with a significant, committed, long-term owner. Most large public companies, however, have extremely dispersed ownership, and boards rarely perform the single-owner-proxy role. As a result, CEOs too often listen to the investors (and members of the media) who make the most noise. Unfortunately, those parties tend to be the most nearsighted ones. And so the tyranny of the short term is reinforced.
The answer is to renew corporate governance by rooting it in committed owners and by giving those owners effective mechanisms with which to influence management. We call this ownership-based governance, and it requires three things:
More-effective boards.In the absence of a dominant shareholder (and many times when there is one), the board must represent a firm’s owners and serve as the agent of long-term value creation. Even among family firms, the executives of the top-performing companies wield their influence through the board. But only 43% of the nonexecutive directors of public companies believe they significantly influence strategy. For this to change, board members must devote much more time to their roles. A government-commissioned review of the governance of British banks last year recommended an enormous increase in the time required of nonexecutive directors of banks—from the current average, between 12 and 20 days annually, to between 30 and 36 days annually. What’s especially needed is an increase in the informal time board members spend with investors and executives. The nonexecutive board directors of companies owned by private equity firms spend 54 days a year, on average, attending to the company’s business, and 70% of that time consists of informal meetings and conversations. Four to five days a month obviously give a board member much greater understanding and impact than the three days a quarter (of which two may be spent in transit) devoted by the typical board member of a public company.
Boards also need much more relevant experience. Industry knowledge—which four of five nonexecutive directors of big companies lack—helps boards identify immediate opportunities and reduce risk. Contextual knowledge about the development path of an industry—for example, whether the industry is facing consolidation, disruption from new technologies, or increased regulation—is highly valuable, too. Such insight is often obtained from experience with other industries that have undergone a similar evolution.
In addition, boards need more-effective committee structures—obtainable through, for example, the establishment of a strategy committee or of dedicated committees for large business units. Directors also need the resources to allow them to form independent views on strategy, risk, and performance (perhaps by having a small analytical staff that reports only to them). This agenda implies a certain professionalization of nonexecutive directorships and a more meaningful strategic partnership between boards and top management. It may not please some executive teams accustomed to boards they can easily “manage.” But given the failures of governance to date, it is a necessary change.
More-sensible CEO pay.An important task of governance is setting executive compensation. Although 70% of board directors say that pay should be tied more closely to performance, CEO pay is too often structured to reward a leader simply for having made it to the top, not for what he or she does once there. Meanwhile, polls show that the disconnect between pay and performance is contributing to the decline in public esteem for business.
CEOs and other executives should be paid to act like owners. Once upon a time we thought that stock options would achieve this result, but stock-option- based compensation schemes have largely incentivized the wrong behavior. When short-dated, options lead to a focus on meeting quarterly earnings estimates; even when long-dated (those that vest after three years or more), they can reward managers for simply surfing industry- or economy-wide trends (although reviewing performance against an appropriate peer index can help minimize free rides).
Moreover, few compensation schemes carry consequences for failure—something that became clear during the financial crisis, when many of the leaders of failed institutions retired as wealthy people.
There will never be a one-size-fits-all solution to this complex issue, but companies should push for change in three key areas:
They should link compensation to the fundamental drivers of long-term value, such as innovation and efficiency, not just to share price.
They should extend the time frame for executive evaluations—for example, using rolling three-year performance evaluations, or requiring five-year plans and tracking performance relative to plan. This would, of course, require an effective board that is engaged in strategy formation.
They should create real downside risk for executives, perhaps by requiring them to put some skin in the game. Some experts we’ve surveyed have privately suggested mandating that new executives invest a year’s salary in the company.
Redefined shareholder “democracy.”The huge increase in equity churn in recent decades has spawned an anomaly of governance: At any annual meeting, a large number of those voting may soon no longer be shareholders. The advent of high-frequency trading will only worsen this trend. High churn rates, short holding periods, and vote-buying practices may mean the demise of the “one share, one vote” principle of governance, at least in some circumstances. Indeed, many large, top-performing companies, such as Google, have never adhered to it. Maybe it’s time for new rules that would give greater weight to long-term owners, like the rule in some French companies that gives two votes to shares held longer than a year. Or maybe it would make sense to assign voting rights based on the average turnover of an investor’s portfolio. If we want capitalism to focus on the long term, updating our notions of shareholder democracy in such ways will soon seem less like heresy and more like common sense.
While I remain convinced that capitalism is the economic system best suited to advancing the human condition, I’m equally persuaded that it must be renewed, both to deal with the stresses and volatility ahead and to restore business’s standing as a force for good, worthy of the public’s trust. The deficiencies of the quarterly capitalism of the past few decades were not deficiencies in capitalism itself—just in that particular variant. By rebuilding capitalism for the long term, we can make it stronger, more resilient, more equitable, and better able to deliver the sustainable growth the world needs. The three imperatives outlined above can be a start along this path and, I hope, a way to launch the conversation; others will have their own ideas to add.
The kind of deep-seated, systemic changes I’m calling for can be achieved only if boards, business executives, and investors around the world take responsibility for bettering the system they lead. Such changes will not be easy; they are bound to encounter resistance, and business leaders today have more than enough to do just to keep their companies running well. We must make the effort regardless. If capitalism emerges from the crisis vibrant and renewed, future generations will thank us. But if we merely paper over the cracks and return to our precrisis views, we will not want to read what the historians of the future will write. The time to reflect—and to act—is now.
Environmental, social, and governance initiatives can serve a wide range of stakeholders and benefit shareholders. Companies can:
Create new products and marketsThree years ago Verizon developed a phone and a calling plan to address the needs of seniors and the disabled. It sold 400,000 of the new phones and doubled senior customers’ wireless spending.
Drive operational efficiencyDuring the past several years Walmart has been working to establish tough new targets for reducing suppliers’ packaging waste. Its goal—to trim packaging by 5% between 2008 and 2013—should generate $12 billion in savings across its global supply chain.
Motivate and retain employeesNovo Nordisk’s mission to end diabetes would, if accomplished, put the company out of business. Yet the firm has an enormously committed workforce, not least in developing countries and especially in China, where its initiatives (such as the first Chinese-language website for people with diabetes) have helped it gain a 70% market share.
Spur innovationGE’s “bottom of the pyramid” development of low-cost medical imaging for the Indian and Chinese markets led to efficiency breakthroughs in design and engineering and to new products that now account for growing sales in advanced nations as well. (See “How GE Is Disrupting Itself,” HBR October 2009.)
Retain access to inputsCoca-Cola has devised a sophisticated global water strategy that ensures that local concerns as well as local supply and demand issues are integrated into the long-range plans for each plant. This approach helps avoid both public backlashes over water use and operational problems due to water shortages.
Despite repeated assurances from federal officials and President Obama, independent scientists and public health experts have serious concerns about the long-term safety of Gulf seafood consumption.
In particular, experts tell Raw Story, contaminants from the massive oil spill and unprecedented use of the dispersants employed to dissolve the spill have the potential to cause cancer and neurological disorders.
In interviews with Raw Story last week, scientists and public health experts expressed concerns over possible long-term risks from eating contaminated Gulf seafood.
Polycyclic aromatic hydrocarbons (PAHs) are cancer-causing chemicals found in crude oil that can accumulate in the food chain, absorbed by fish and shellfish. During the ongoing testing of seafood in the Gulf of Mexico by federal and state authorities, PAHs are of primary concern.
But crude oil also contains heavy metals such as lead, mercury and cadmium that can accumulate in the food chain as well, though at a slower pace than PAHs, and are toxic to the brain and nervous system.
Another potential long-term health concern left in the wake of BP’s catastrophic oil spill is the nearly two million gallons of dispersant unleashed into the Gulf, much of it subsurface, which made both the amount used and its use unprecedented.
In interviews with Raw Story last week, FDA and National Oceanic and Atmospheric Administration officials said that all fish and shellfish in reopened federal and state waters have tested well beneath the level of concern for PAHs.
But what worries some scientists and public health experts is what these tests don’t -- and can’t -- reveal. They feel it’s “premature” for government officials to claim Gulf seafood poses no future health risks.
“Those are the short-term effects,” said Edward Trapido, the Wendell Gauthier Chair of Cancer Epidemiology at the Louisiana State University School of Public Health.
“We don’t know the long-term effects,” he explained. “And we don’t know, particularly related to cancer and particularly related to age and exposure, what the long-term effects will be.”
Trapido testified in June at a House Subcommittee on Energy and Environment hearing on the spill and is heading a research group at LSU that will look at a range of health effects, including psychiatric and behavioral effects, chronic diseases and cancers.
The issue we don’t know at this point, he said, is the extent to which these compounds may bioacccumulate in shellfish or fish and what the half-lives are.
“So you could imagine if a large fish feasted on several hundred small fish and each of those small fish have eaten a certain number of microorganisms which had a little of contaminant, there’s a possibility, certainly, that you could go over the current measurements.”
In interviews with Raw Story last week, NOAA and FDA officials, in general, tended to downplay bioaccumulation of PAHs in Gulf seafood. But in some cases they denied it’s occurring at all, or even that it could occur.
“We have not found it,” FDA spokeswoman Meghan Scott claimed. “Every sample that we have tested for PAHs has come back clean. It has the potential to [bioaccumulate]. But we have not found it, even from samples taken from inside of closure areas.”
Christine Patrick, NOAA spokeswoman for seafood safety, went so far as to tell Raw Story, “The concept that the oil bioaccumulates [in seafood] – that’s not correct. It’s metabolized and excreted.”
Raw Story confirmed, in consultation with independent scientists, that these two statements were, respectively, impossible and inaccurate.
Miriam Rotkin-Ellman, a staff scientist at the Natural Resources Defense Council (NRDC), a leading national environmental group, underscored two things that NOAA, FDA and Gulf state officials have been playing down.
“The monitoring that’s currently being conducted by both NOAA and various different state agencies, and compiled by FDA, show that there is PAH contamination of fish in the Gulf,” she said. “They are detecting various different levels of the various different PAH constituents.”
Ellman, who contributed to last month’s peer-reviewed Journal of the American Medical Association (JAMA) study, which identified a number of issues about the health of Gulf seafood, also noted, “There is a good body of literature showing that seafood can be impacted by these contaminants.”
The JAMA report cites a 2002 study in the peer-reviewed journal Marine Environmental Research on the lasting effects of the Exxon Valdez oil spill, which concluded: "Our data show that 10 years after the spill, nearshore fishes within the original spill zone were still exposed to residual hydrocarbons. All biomarkers [for contaminants] were elevated in fish collected from sites originally oiled, in comparison to fish from unoiled sites.''
Ellman added, “We understand that the different types of seafood – fish vs. crustaceans and bivalves – all have different capacities to retain the contaminants, and that’s important to note. But it’s not the basis on which to make a blanket statement that there’s no risk.”
“So it’s premature,” Trapido cautioned, “to say that it’s safe in the long-term.”
“We can say that it’s safe at this point based on what we know,” he continued. “But as a cancer epidemiologist, which is what I am, I have to maintain an air of skepticism and say, well, we don’t have any data to make a judgment on the long-term cases.”
The startling lack of data on the future health effects from oil spills on humans was a common lament among experts who spoke with Raw Story.
Trapido confirmed that the longest follow-up study that’s ever been done on people exposed to oil spills was just four years, and that was to track mental health only.
Two new areas of scientific research not being accounted for in the current risk assessments could also adversely impact future health, Ellman noted.
She said that studies have shown that early life exposure to the chemical benzo(a)pyrene, one of the most carcinogenic PAHs, increases the risk of cancer later in life. It wouldn’t have the same effect, she clarified, if the exposure came later in life.
“So because children’s bodies are different and they’re developing, exposures that happen early in life can have a more detrimental effect than if they were exposed later on,” said Ellman.
In addition to the cancer risks, Ellman told Raw Story that there’s also a new body of literature that has shown adverse developmental impacts from in utero exposure to PAHs, such as delayed growth, low birth weight and other indicators of impact during fetal development.
NOAA toxicologist John Stein said that he and other scientists within the agency have proposed to continue monitoring the Gulf waters to ensure seafood safety for the next three to five years. But Patrick confirmed that the agency has not made an official commitment to this.
Independent scientists and public health officials who spoke with Raw Story agreed that even if federal and state officials committed to such a time frame, it would still fall short of what's necessary.
They pointed out that due to bioaccumulation in the food chain, it's quite possible contamination levels in Gulf fish and seafood may actually be higher in three to five years.
"If they were to completely suspend any monitoring prematurely," Ellman warned, "we wouldn't necessarily know whether levels of contaminants in seafood that we're most worried about have gone back down or remain elevated."
“Those countries with serious fiscal challenges need to accelerate the pace of consolidation,” it added. “We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions”.
It’s basically incredible that this is happening with unemployment in the euro area still rising, and only slight labor market progress in the US.
But don’t we need to worry about government debt? Yes — but slashing spending while the economy is still deeply depressed is both an extremely costly and quite ineffective way to reduce future debt. Costly, because it depresses the economy further; ineffective, because by depressing the economy, fiscal contraction now reduces tax receipts. A rough estimate right now is that cutting spending by 1 percent of GDP raises the unemployment rate by .75 percent compared with what it would otherwise be, yet reduces future debt by less than 0.5 percent of GDP.
The right thing, overwhelmingly, is to do things that will reduce spending and/or raise revenue after the economy has recovered — specifically, wait until after the economy is strong enough that monetary policy can offset the contractionary effects of fiscal austerity. But no: the deficit hawks want their cuts while unemployment rates are still at near-record highs and monetary policy is still hard up against the zero bound.
But what about Greece and all that? Look, right now sovereign debt problems are taking place in countries with a very specific problem: they’re part of the euro zone, AND they’re badly overvalued thanks to huge capital inflows in the good years; as a result they’re facing years of grinding deflation. Counties not in that situation are not facing any pressure from the markets for immediate cuts; as of this morning, 10-year bonds were yielding 3.51 in Britain, 3.21 in the US, 1.27 in Japan.
Yet the conventional wisdom now is that these countries must nonetheless cut — not because the markets are currently demanding it, not because it will make any noticeable difference to their long-run fiscal prospects, but because we think that the markets might demand it (even though they shouldn’t) sometime in the future.
In this interview, Jeffrey Smith, author of the bestseller Seeds of Deception, and Genetic Roulette, discusses the latest GMO research findings coming out of Russia, which adds fuel to previous concerns about long-term sterility and other highly bizarre physiological side effects.
I strongly believe that one of the most obvious clues about the danger of GMO foods are that just about EVERY species of animal that is offered a GMO food versus a non-GMO food will avoid the GMO one. Many times they will do this to the point of starvation, as they have an intuitive sense of the danger of this food.
Please listen to the interview as Jeffery expands on this point in great detail. It’s one you can use to effectively share with your friends and family who are not yet convinced of the dangers of GMO foods.
If you have more time with them you can bring up the sterility argument that is expanded upon with these new research findings. You might have read this before that genetically modified foods may cause sterility in future generations but now the latest research from Russia provides shocking confirmation of this potential.
This study, which was conducted by the Russian equivalent of the US National Association for Gene Security, has not yet been published, but its findings were recently announced. It’s anticipated that the details will be published later this summer.
Russian Scientists Find Third Generation of Hamsters Sterilized by GM Soy
The release of this new information provides yet another health risk, and confirmation on earlier problems related to fertility, birth weight of offspring, and infant mortality.
In this feeding study they used hamsters, an animal which has not been previously featured in GM safety studies.
One group of hamsters was fed a normal diet without any soy whatsoever, a second group was fed non-GMO soy, a third ate GM soy, and a fourth group ate an even higher amount of GM soy than the third.
Using the same genetically modified (GM) soy that is produced on over 90 percent of the soy acreage in the US, the hamsters and their offspring were fed their respective diets over a period of two years, during which time the researchers evaluated three generations of hamsters.
First they took five pairs of hamsters from each group, each of which produced about seven to eight litters each, totaling about 140 animals.
At first all went well, but serious problems became apparent when they selected new pairs from the offspring.
The first problem was that this second generation had a slower growth rate and reached their sexual maturity later than normal.
However, this second generation eventually generated another 39 litters:
The no-soy control group had 52 pups The non-GM soy had 78 The GM soy had only 40, of which 25 percent died
So these second-generation GM soy-fed hamsters had a five-fold higher infant mortality rate, compared to the 5 percent normal death rate that was happening in the controls.
Nearly All of the Third-Generation GMO Babies Were Sterile!
But then an even bigger problem became apparent, because nearly all of the third generation hamsters lost the ability to have babies altogether.
Only a single third-generation female hamster gave birth to 16 pups, and of those, one fifth died.
In short, nearly the entire third generation of GM soy eaters were sterile. But it doesn’t end there.
In the GM soy-fed groups they also found an unusually high prevalence of an otherwise extremely rare phenomenon – hair growing inside the animals’ mouths. (You can see the images here.)
Says Smith:
“… it’s a very rare phenomenon but he [study author, Dr. Surov] had never in his life seen more hair in mouths of hamsters than with these GM soy-fed, third generation hamsters.”
As you may know, genetically modified crops weren’t released until 1996, starting with GM soy, corn and cotton. Modified canola came about a year later.
Please remember humans have MUCH longer life spans than rats and that GMO foods were only introduced in 1996. This is LESS than one generation.
So we’re still nowhere near seeing the full effects of these potential ramifications in humans, as we’re only about 15 years into it. But if the effects are anything like the effects on numerous types of animals, we could be looking at sterility on a grand scale as our great-grandchildren grow up and begin to try to procreate...
The fact that the US is completely unwilling to implement the precautionary principle with regards to GM foods is incomprehensible in light of the findings we already have from animal studies.
Additionally, some 800 genetically engineered food applications have been submitted to the USDA, but not one single environmental impact statement has been prepared. So not only are human health ramifications ignored, but the entire eco system is being jeopardized.
Rampant Conflicts of Interest Put You and Your Family at Great Risk
Unfortunately, it’s clear that the US government is not in a position to make reasonable and responsible decisions related to GMOs at this point, when you consider the fact that the Obama administration has placed former Monsanto attorney and Vice President, Michael Taylor, in charge of US food safety, and serious conflicts of interest even reign supreme within the US Supreme Court!
That’s right. Supreme Court Justice Clarence Thomas is also a former Monsanto attorney, but refuses to acknowledge any conflict of interest as he’s hearing Monsanto’s third appeal for deregulation of genetically modified alfalfa seeds.
After corn, soy and wheat, alfalfa is the most widely grown crop in the US, so allowing GM alfalfa to be deregulated could spell disaster in several ways. It’s easily cross-pollinated by bees and wind, and it’s a perennial, meaning GM alfalfa could live on for years, spreading their genetically modified traits far and wide for a long period of time.
It remains to be seen how Justice Thomas rules in this case.
But in addition to conflicts of interest, we’re also dealing with government agencies that refuse to acknowledge the science produced by their own scientists.
Closely tied to the production of GM crops is the use of the herbicide Roundup, which contains glyphosate. Monsanto’s Roundup is the most widely used herbicide in the world, and contrary to the popular belief propagated by industry, pesticide use has significantly increased – DOUBLED since 2005 -- rather than decreased with the use of GM crops.
As it turns out, this is a serious problem for more reasons than one. Not only are GM food crops saturated with more pesticides than ever before, which naturally ends up in your body when you eat them, but glyphosate may also be killing the soil itself.
This startling conclusion comes straight from one of the USDA’s own scientists, Dr. Kremer.
However, his employer has opted to more or less ignore his findings, which, according to this article in Grist, include evidence that glyphosate causes:
-damage to beneficial microbes in the soil increasing the likelihood of infection of a crop
by soil pathogens
-interference with nutrient uptake by the plant
-reduced efficiency of symbiotic nitrogen fixation
-overall lower-than-expected plant productivity
More Evidence of Reproductive Problems from Eating GM Foods
But let’s get back to the infertility caused in animals.
The evidence of third-generation sterility in hamsters is just one link in a chain of studies that show evidence of this tragic side effect.
For example, back in 2005, Dr. Irina Ermakova, one of the senior scientists with the Russian National Academy of Sciences, reported that more than 50 percent of the babies from mother rats that were fed GM soy died within three weeks, compared to a 10 percent death rate among the controls.
Again, that’s a death rate five times higher than normal – identical to the findings in the hamster study above.
Similarly, the rats were also growing more slowly, just like the hamsters, and their offspring also had lower birth weights. And again, when the rats’ offspring tried to reproduce, they too were found to be mostly sterile, but it happened sooner, with infertility striking the second generation of rats, as opposed to the third generation of hamsters.
Ermakova wanted to perform further studies to analyze the organs she’d collected from the study, but she never got the chance. Says Smith:
“She told me as we were sitting at the EU Parliament after giving a presentation there, that her boss had been pressured by his boss.
So, she was told to do no more GM food study on animals, her documents were burned on her desk, samples were stolen from her laboratory, and one of her colleagues tried to comfort her by saying, “Well maybe the GM soy will solve the overpopulation problem on earth.”
She wasn’t impressed.”
Neither am I.
However, she inadvertently stumbled upon further proof that GM soy wreaks havoc with reproductive health. She discovered that the rat chow being fed to all rats in the facility had been switched, so that all of it contained GM soy… Two months later she asked her colleagues whether or not they’d discovered any surprising changes in the infant mortality of their various studies, and yes indeed, they had!
Inexplicably, infant mortality in the animal studies performed at the National Academy of Scientific Laboratory in Moscow had skyrocketed to over 55 percent, sometimes higher.
There’s more evidence of reproductive health being harmed in various ways. Smith explains:
“[Ermakova] gave me a slide of a completely new study in which she fed male rats genetically modified soy, and it’s absolutely stunning.
On the left side of the slide is a pink testicle. On the right side of the slide, is a blue testicle.
She said that when the GM soy was fed to the male rats, it changed the color of their testicles from pink to blue, and you could see the cells on another slide, left to right, the structure of the cells in the testicle was different; a completely different blood flow.
And this reminded me of what they had studied in Italy, where they fed mice genetically modified soy and they also had changes in their testicles, including damage to the young sperm cells.
Now, if you’re damaging the young sperm cells, it could result in one of two things. They can result in infertility, or problems with the offspring.
Well, it appears that they may have had both.
In fact, with the mice, they looked at the offspring and they took the embryos out of the pregnant mothers and looked at how the DNA was functioning. And they compared the DNA of those who were born to GM soy-fed parents versus those who were fed non-GM soy and the DNA functioned differently.
So we’re seeing a fundamental change in the offspring of mice that were fed genetically modified soy, whose parents were also fed genetically modified soy.”
Other feeding studies using GM corn have also produced similar results. For example, mice fed GM corn had increasingly fewer and smaller babies the longer they stayed on the GM diet.
There are also plenty of reports about pigs, cows and other livestock having reproductive problems when fed genetically modified feed.
It’s Time to Save Yourself and Your Famiy Because White Knights Don’t Exist in Government
It’s important to realize that the key to ending the ongoing atrocity of GM foods lies not with government, but with you and me.
Consumers are going to have to drive GM foods out, and we CAN do it.
Through educating yourself, your family, friends and community about GMOs, and most importantly of all, through the food purchases you make, you can stop this unregulated science experiment.
Once we reach the tipping point, which is probably as little as five percent of the US population, the market WILL respond. They can’t afford not to!
Once enough people refuse to buy GM food products, it won’t be long before food manufacturers start switching their ingredients.
How to Sniff Out GMOs and Vote with Your Pocketbook
You CAN avoid GMOs, if you know what to look for.
First of all, remember there are eight genetically modified food crops:
Soy Corn Cottonseed (used in vegetable cooking oils) Canola (canola oil) Sugar from sugar beets Hawaiian papaya Some varieties of zucchini Crookneck squash
Based on this list, anything containing soy or soy derivatives should be avoided, as well as anything containing corn, the most obvious ingredient being high fructose corn syrup.
The easiest way to avoid ending up with GM foods in your shopping cart is to do some pre-planning using the free non-GMO shopping guide, available at www.NonGMOshoppingGuide.com.
TheInstitute for Responsible Technology has also created a free iPhone application that is available in the iTunes store. You can find it by searching for ShopNoGMO in the applications.
The shopping guide lists the various derivatives of each crop to be avoided, and even better, it lists hundreds of brand products in 22 food categories that are non-GMO, so if you’re still buying processed foods, at least you can easily select a brand that does not use genetically modified ingredients.
