Monday, 3 June 2019
In economics the majority is always wrong
It is time for US business and government to embrace Galbraith’s pragmatic approach writes Rana Foroohar in The FT
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Economists’ reputations, like skirt lengths, go in and out of fashion. In the past 10 years, John Maynard Keynes has received fresh appreciation, and Hyman Minsky has been having a moment.
I think it’s time for John Kenneth Galbraith to have his. The late liberal economist’s “concept of countervailing power”, put forth in his 1952 book American Capitalism, is a critique of the “market knows best” view that has dominated the US political economy since the era of Ronald Reagan. There could not be a better time to re-read it.
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Markets don't supply according to demand
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Despite the much discussed rise of millennial “socialists” (to my mind they are not, really), Americans still fundamentally accept the idea that the private sector always allocates resources more efficiently than the public sector. It is a truism that dies hard, even amid what feels like a drumbeat of boardroom scandal, an explosion in unproductive corporate debt, and an inverted yield curve for Treasuries that suggests investors fear a recession is coming.
Policymakers across the political spectrum agree on what we need to create real and lasting growth — decent infrastructure, a 21st-century education system, healthcare reform.
Yet these are things that the private market has little incentive to address. Building roads and running schools and hospitals (at least the non-profit kind) simply isn’t as lucrative as throwing up luxury condos or engaging in financial speculation.
As Galbraith would have agreed, private markets also are not well set up to address the broad economic and social externalities of climate change or the effects of income inequality.
One obvious example is that burgeoning student debt has become a headwind to overall economic growth. Market prices cannot capture the full costs of these problems.
Galbraith also would have argued that corporations can be just as bureaucratic and dysfunctional — if not more so — than government. His 1967 book The New Industrial State explored how large companies are driven more by their need to survive as organisational entities than by supply and demand signals.
He predicted that innovation and entrepreneurial zeal would decline as such organisations rose. That is exactly what happened as our economy became dominated by superstar companies.
Look at any number of troubled behemoths — from GE to Kraft Heinz to Boeing — and it is hard not see exactly what Galbraith predicted. In an endless search for profits, many companies simply move money around on their balance sheets, creating a short-term financial sugar high without real innovation.
We live in a world in which markets cannot handle even a tiny rise in interest rates without plunging, and when the savings from tax cuts went not into new capital investment but share buybacks, which were also fuelled by debt issued at those very same low rates. Can anyone really argue that the private markets are allocating resources efficiently?
I am not saying that we need centralised planning. Galbraith once put it well: “I react pragmatically. Where the market works, I’m for that. Where the government is necessary, I’m for that. I’m deeply suspicious of somebody who says, ‘I’m in favour of privatisation,’ or ‘I’m deeply in favour of public ownership’. I’m in favour of whatever works in the particular case.”
Politicians and policymakers on both sides of the aisle should sear these words on their brains. Americans don’t really do nuance. We like strong, simple statements, such as Reagan’s observation that: “The government is not the solution to our problem; government is the problem.”
But the “private good, public bad” argument simply isn’t true. How else can we explain the rise of China? It has not only shown that government planning and economic competitiveness cannot only go hand in hand, but that in the current era of tech-based disruption and inequality, public sector support may be necessary for the private sector to thrive.
It is time for political conservatives, economic neoliberals, and chief executives to embrace this. I find it endlessly frustrating to hear so many American corporate leaders complain that government cannot get anything done, even as they pay expensive accountants to keep as much wealth as possible out of state tax coffers.
It is time to admit that endless tax cuts have not put more money into the real economy, despite frequent, incorrect claims from businesses that they would create lasting above-trend growth. Rather, they have led to pitted highways and hazardous bridges that rival those one might find in any number of far poorer countries. The US ranks 31st out of 70 countries on the OECD’s Pisa test for mathematics, science and reading.
Let us try something new. Let us stop assuming that markets always know best. Let us pay our taxes, modernise our social safety nets, regulate markets properly, enforce antitrust to protect the overall economic ecosystem and not just the largest businesses, and reinvent our social compact.
This is not socialism. It is smarter capitalism. The majority may not yet believe that. But as Galbraith is often quoted as saying: “In economics, the majority is always wrong.”
Saturday, 1 June 2019
The winner’s wisdom of Silicon Valley Stoics
Letting go of comfort and control makes sense — if you already have those things writes Janan Ganesh in The FT.
The late George Michael used to hail marijuana as the optimal drug — for those who have already achieved their ambitions. For the rest of us, he warned, its mellowing properties would sap our drive. “You’ve got to be in the right position in life,” said a man who kept houses in both Hampstead and Highgate, which, if you know Manhattan better, is like keeping homes on East 75th Street and West 75th Street.
An idea that works for an established winner can be utterly ruinous for a mere aspirant.
For some reason, this insight comes to mind whenever I encounter the modern fad for Stoicism. Which, given that I have access to the internet, and to the state of California, is rather a lot.
In common parlance, Stoicism used to mean nothing more specific than a kind of grin-and-bear-it fortitude. But in recent years, the actual philosophy of Seneca and Marcus Aurelius has rallied too, if in glib and half-understood form.
The new Stoicism calls for — and here I paraphrase — a virtuous rather than joy-centred life. It often takes the guise of self-denial: the modern Stoic volunteers for ice baths and sparse diets. It also manifests as a certain detachment from the vicissitudes of life. The modern Stoic does not rail against external variables. Enemies, disasters and random surprises are all part of the natural order.
You can recognise the parallels with the Zen vogue of yesteryear. And you can guess who has fallen hardest for this creed. It has made deep inroads into the educated rich, and into the tech cognoscenti in particular. Through their cultural reach — the podcasts, the Ted talks — it is fanning out from Silicon Valley to other pockets of well-fed ennui.
There is a something to be said for this elevated version of self-help. Certain habits I keep, such as a minimal intake of media, are unconsciously neo-Stoic. And while some of its followers would fall for any passing -ism or -ology (Tim Ferriss, Arianna Huffington), others have brains like industrial lasers.
All the more reason, then, for the smarter among them to insert a qualifier: letting go of comfort and control makes perfect sense (and I really must resort to italics here) once you already have these things. The new Stoicism is a kind of victor’s wisdom. It simplifies the lives of people who are beset with extreme surplus. This is not a universal problem. Modern Stoics should not pretend to universal (or even broad) relevance. “Very little is needed to make a happy life”, wrote Marcus Aurelius, the ultimate owner of everything in the known world at the time. At least he did not try this line on the masses. His Meditations were never meant for publication. Would that his 21st-century heirs were so coy.
As a way of de-stressing powerful millionaires, neo-Stoic thought is hard to fault. For those striving for some power and millions to be stressed about, it rather speaks over their heads. Most of us aspire to material comforts or (another Stoic no-no) popularity. It is fine to achieve these things and then decide to keep them in check, lest they drive one mad. But to warn others off them, or pretend they can get them by not craving them, is life advice at its most de haut en bas.
You will notice that the smarmy de-emphasis on earthly pleasures stops well short of total renunciation. Like some credulous Sloane on an equatorial gap year, the modern Stoic idealises hardship precisely because they can pick and choose their exposure to it. “Practising poverty,” they call it, with Marie Antoinette’s self-awareness.
Perhaps the worst of it is the deception of those who are just starting out in life. Unless “22 Stoic Truth-Bombs From Marcus Aurelius That Will Make You Unf***withable” is pitched at retirees, the internet crawls with bad Stoic advice for the young. The premise is that what answers to the needs of those in the 99th percentile of wealth and power is at all relevant to those trying to break out of, say, the 50th. The new Stoicism is not useless. It promises a measure of serenity in a world that militates against it. You’ve just got to be in the right position in life.
The late George Michael used to hail marijuana as the optimal drug — for those who have already achieved their ambitions. For the rest of us, he warned, its mellowing properties would sap our drive. “You’ve got to be in the right position in life,” said a man who kept houses in both Hampstead and Highgate, which, if you know Manhattan better, is like keeping homes on East 75th Street and West 75th Street.
An idea that works for an established winner can be utterly ruinous for a mere aspirant.
For some reason, this insight comes to mind whenever I encounter the modern fad for Stoicism. Which, given that I have access to the internet, and to the state of California, is rather a lot.
In common parlance, Stoicism used to mean nothing more specific than a kind of grin-and-bear-it fortitude. But in recent years, the actual philosophy of Seneca and Marcus Aurelius has rallied too, if in glib and half-understood form.
The new Stoicism calls for — and here I paraphrase — a virtuous rather than joy-centred life. It often takes the guise of self-denial: the modern Stoic volunteers for ice baths and sparse diets. It also manifests as a certain detachment from the vicissitudes of life. The modern Stoic does not rail against external variables. Enemies, disasters and random surprises are all part of the natural order.
You can recognise the parallels with the Zen vogue of yesteryear. And you can guess who has fallen hardest for this creed. It has made deep inroads into the educated rich, and into the tech cognoscenti in particular. Through their cultural reach — the podcasts, the Ted talks — it is fanning out from Silicon Valley to other pockets of well-fed ennui.
There is a something to be said for this elevated version of self-help. Certain habits I keep, such as a minimal intake of media, are unconsciously neo-Stoic. And while some of its followers would fall for any passing -ism or -ology (Tim Ferriss, Arianna Huffington), others have brains like industrial lasers.
All the more reason, then, for the smarter among them to insert a qualifier: letting go of comfort and control makes perfect sense (and I really must resort to italics here) once you already have these things. The new Stoicism is a kind of victor’s wisdom. It simplifies the lives of people who are beset with extreme surplus. This is not a universal problem. Modern Stoics should not pretend to universal (or even broad) relevance. “Very little is needed to make a happy life”, wrote Marcus Aurelius, the ultimate owner of everything in the known world at the time. At least he did not try this line on the masses. His Meditations were never meant for publication. Would that his 21st-century heirs were so coy.
As a way of de-stressing powerful millionaires, neo-Stoic thought is hard to fault. For those striving for some power and millions to be stressed about, it rather speaks over their heads. Most of us aspire to material comforts or (another Stoic no-no) popularity. It is fine to achieve these things and then decide to keep them in check, lest they drive one mad. But to warn others off them, or pretend they can get them by not craving them, is life advice at its most de haut en bas.
You will notice that the smarmy de-emphasis on earthly pleasures stops well short of total renunciation. Like some credulous Sloane on an equatorial gap year, the modern Stoic idealises hardship precisely because they can pick and choose their exposure to it. “Practising poverty,” they call it, with Marie Antoinette’s self-awareness.
Perhaps the worst of it is the deception of those who are just starting out in life. Unless “22 Stoic Truth-Bombs From Marcus Aurelius That Will Make You Unf***withable” is pitched at retirees, the internet crawls with bad Stoic advice for the young. The premise is that what answers to the needs of those in the 99th percentile of wealth and power is at all relevant to those trying to break out of, say, the 50th. The new Stoicism is not useless. It promises a measure of serenity in a world that militates against it. You’ve just got to be in the right position in life.
Friday, 31 May 2019
Pakistan, Waziristan.- the descent continues
Hope Vs Reason
Najam Sethi in The Friday Times
The economy is in tatters, inflation and joblessness are stalking the landscape. Both western and eastern borders are insecure – a civil war is threatening to spill over one border while an invigorated predator is sizing up its prey on the other. Terrorism/insurgency in Balochistan is barely manageable even as another threatens to shatter the newfound peace of FATA. Hounded to the wall, the mainstream opposition is inching towards mass agitation. Yet the PTI government of the day – hanging by an arrogant and unaccountable puppeteer’s thread — is bent upon imprisoning popularly elected leaders of Sindh, Punjab and FATA, blackmailing the NAB Chairman to do its bidding, prosecuting an honourable judge who dares question the writ of the puppeteer, extinguishing a rising star from lighting the path of the opposition and gagging the media from speaking the truth. Under the circumstances, can we shut our minds to reason and hope that all will be well? Or will defiance trump logic and set things right?
The Afghan Taliban are not likely to concede core American demands. In time, the Americans will blame Pakistan for not doing more to bail them out. President Trump has already teamed up with PM Modi to contain, if not confront, Pakistan’s lifeline ally China. Before long, both will turn the screws on Pakistan, the former via the US Treasury’s manipulation of the IMF and FATF and the latter by priming its “offensive-defense” proxy war doctrine. This will transpire when the ruling Puppeteer–PTI clique stands totally alienated and isolated from most sections of state and society.
The confrontation in FATA between the “patriotic” army and “treasonous” populace may get worse. Both sides have wantonly crossed red lines. In the heat of the moment, the protestors tried to overrun a security check post. The army shot and killed several of them. Next time, the protesting crowds will be bigger. If a new insurgency is born, it will doubtless be aided and abetted on a bigger scale by hostile neighbours.
The NAB chairman was spoiling to be hoist on his own petard. But the PTI exploited his weakness to advance its anti-opposition agenda. Now, if he throws in the towel and the government is successful in empowering its hand-picked Deputy Chairman, then there will be more confrontation, more repression, more political instability, more economic chaos. It is remarkable, isn’t it, that the media managers of the government, in cahoots with a civilian intel agency, should have successfully staged such a coup? No wonder, the government is adamant in denying a proper investigation into L’Affaire Chairman!
The decision to target a Supreme Court judge and teach a suitable lesson to other wayward judges was expected. The good judge had dared to tick off the Intel Agencies and seemed inclined to read out the “democracy” sections of the constitution to them. Horror of horrors, he was also lined up in due course to rule as the chief justice of Pakistan for many years. Confronted by leaked reports of a Presidential Reference to the Supreme Judicial Council to defame him, he has demanded to know the veracity of the reports. The Additional Attorney General in Karachi has resigned in protest. If other judges don’t resist such machinations, the peoples’ struggle for an independent judiciary will be lost. Certainly, there is at least one other judge who may be on the hit-list for ruffling the untouchable feathers of certain VIP housing societies across the country.
Next in line is the Election Commission of Pakistan. Having advisedly taken a soft look at the shenanigans of the Prime Minister, it is now being pressured to take a hard stance against Mariam Nawaz Sharif. If it does the government’s bidding, it will join the queue of discredited state institutions that are paving the way for societal anarchy and states of siege.
The worrying future is already upon Pakistan. The US is gearing up India and others to confront and contain China in the Asia-Pacific and Asia-West region. China’s Road and Belt project, in general, and CPEC, in particular, will be targeted. It is also engaged, along with Saudi Arabia, UAE and others in trying to force regime change in Iran as a prelude to redrawing the map of the Middle-East. This makes Pakistan’s third southern border vulnerable. It also threatens to open deep sectarian divisions within the country.
Wiser counsel would surely advise a contrary path. A national all-parties government headed by a stolid prime minister who can disarm domestic critics, build trust with prickly neighbours, manage the economy dispassionately and herald certainty and stability would do Pakistan much good. Such a dispensation would heal the wounds between provinces, between state institutions, between political parties, between classes and ethnicities, between Pakistan and its neighbours while pulling the economy out of its current trough. A nation united and at peace with itself is bound to be a nation united and at peace with the rest of the world. More than anything else that is the need of the hour.
Will hope be rekindled at the altar of realism? Or will despair be our lot when reason is sacrificed?
Compromise dies in the age of outrage
Hardening political positions are the sclerosis that may lead to a heart attack for democracies writes Tim Harford in THE FT
I don’t often find myself agreeing with Esther McVey, but I wondered this week whether the candidate for leader of the UK Conservative party might accidentally have spoken the truth: “People saying we need a Brexit policy to bring people together are misreading the situation. That is clearly not possible.”
The British do indeed seem in no mood to compromise. The results of elections to the European Parliament produced a thunderous endorsement of parties that proudly reject an attempt to find common ground on Brexit. The Conservatives and Labour, each caught in an awkward straddle, were slaughtered. Labour offered the slogan “let’s bring our country together”. Ha! Voters preferred the Liberal Democrats (“Bollocks to Brexit”) and the Brexit party (“they’re absolutely terrified of us”).
Sometimes an extreme position is the correct one. When King Solomon proposed cutting the baby in half, it wasn’t because he was looking for the middle ground. Yet a capacity to find compromises is a good thing to have. Positions may differ, but whether we live in the same home or on the opposite side of the planet, we benefit when we can find a way to get along.
If this new distaste for compromise is a problem, it is not the UK’s alone. Positions seem to be hardening everywhere, the sclerotic arteries that may lead to a heart attack for western democracies. Perhaps this is driven by personalities. For a man whose name adorns a book titled The Art of The Deal, Donald Trump is curiously uninterested in negotiating lasting agreements with anyone. Or maybe it is a function of an information ecosystem in which outrage sells.
Perhaps the problems themselves are more intractable. Some issues do not lend themselves to compromise. Brexit is one. Splitting the difference between Remainers and hard Brexiters is less like cutting a cake and more like splattering its ingredients everywhere. Egg on my face, flour on yours, and nobody even partially satisfied.
Abortion is another. There is a principled case to be made for a woman’s absolute right to control her body. There is also a principled case to be made for the absolute right to life of a foetus. But like the unstoppable cannonball and the immovable post, both rights cannot be absolute simultaneously.
In contrast, other complex and emotive problems may still allow for compromise. On climate change, we can shrug and do nothing, or we can turn our economic system upside down, but there is plenty of middle ground between those options. In a trade negotiation, a mutually advantageous outcome is almost always there to be discovered.
Roger Fisher and William Ury’s classic negotiation handbook Getting to Yes advises: focus on the problem rather than the personalities; explore underlying interests rather than explicit positions; and consider options that may open up scope for mutual benefit.
We may find a much better way to split the cake if we discover that you scrape the icing into the bin, while I would happily eat it with a spoon. It is sometimes astonishing how far a principled negotiation can go towards giving both sides what they want.
It is clear that we British have failed to follow this advice. Our debate is driven by a bitter focus on personalities, from Theresa May to Nigel Farage to Jeremy Corbyn to the generic “Remoaner elite”. Each side knows what the other wants but has shown very little interest in why they want it. Without sincerely exploring the underlying aims and values of warring tribes there is no chance of finding an outcome everyone can accept.
The US debate also seems the antithesis of Fisher and Ury’s advice. Too many politically active people seek the humiliation of the other tribe. Dismissing compromise as craven appeasement seems to be a winning tactic, particularly in the primary elections that set the tone of US politics.
Compromise, however, is often possible even in unpromising situations. On abortion, for example, it emerges with a focus not on absolute rights but on practicalities. Many people can get behind policies to minimise unwanted pregnancies, and to make abortions safe and regulated rather than dangerous and illicit. It is a middle ground that many countries manage to find.
One can see politics as a competitive sport or a search for solutions. There’s truth in both views. However, a democratic election is far closer to a competition than to a principled negotiation. Do we not wish to see the opposite team soundly thrashed? Do we not boo their villainous antics and laugh at their mishaps? Who wants to play out a nil-nil draw?
I would not want to venerate compromise as the supreme good in politics. Sometimes it really is true that you and I, dear reader, are absolutely right and they are absolutely wrong. (It may even be true that we are absolutely wrong and they are absolutely right.) Either way, the merits of the case must be weighed against the merits of trying to respect everyone. It feels good to win, but this isn’t a fairytale: the losers won’t stamp their feet and vanish through the floor. They — or we — aren’t going anywhere.
I don’t often find myself agreeing with Esther McVey, but I wondered this week whether the candidate for leader of the UK Conservative party might accidentally have spoken the truth: “People saying we need a Brexit policy to bring people together are misreading the situation. That is clearly not possible.”
The British do indeed seem in no mood to compromise. The results of elections to the European Parliament produced a thunderous endorsement of parties that proudly reject an attempt to find common ground on Brexit. The Conservatives and Labour, each caught in an awkward straddle, were slaughtered. Labour offered the slogan “let’s bring our country together”. Ha! Voters preferred the Liberal Democrats (“Bollocks to Brexit”) and the Brexit party (“they’re absolutely terrified of us”).
Sometimes an extreme position is the correct one. When King Solomon proposed cutting the baby in half, it wasn’t because he was looking for the middle ground. Yet a capacity to find compromises is a good thing to have. Positions may differ, but whether we live in the same home or on the opposite side of the planet, we benefit when we can find a way to get along.
If this new distaste for compromise is a problem, it is not the UK’s alone. Positions seem to be hardening everywhere, the sclerotic arteries that may lead to a heart attack for western democracies. Perhaps this is driven by personalities. For a man whose name adorns a book titled The Art of The Deal, Donald Trump is curiously uninterested in negotiating lasting agreements with anyone. Or maybe it is a function of an information ecosystem in which outrage sells.
Perhaps the problems themselves are more intractable. Some issues do not lend themselves to compromise. Brexit is one. Splitting the difference between Remainers and hard Brexiters is less like cutting a cake and more like splattering its ingredients everywhere. Egg on my face, flour on yours, and nobody even partially satisfied.
Abortion is another. There is a principled case to be made for a woman’s absolute right to control her body. There is also a principled case to be made for the absolute right to life of a foetus. But like the unstoppable cannonball and the immovable post, both rights cannot be absolute simultaneously.
In contrast, other complex and emotive problems may still allow for compromise. On climate change, we can shrug and do nothing, or we can turn our economic system upside down, but there is plenty of middle ground between those options. In a trade negotiation, a mutually advantageous outcome is almost always there to be discovered.
Roger Fisher and William Ury’s classic negotiation handbook Getting to Yes advises: focus on the problem rather than the personalities; explore underlying interests rather than explicit positions; and consider options that may open up scope for mutual benefit.
We may find a much better way to split the cake if we discover that you scrape the icing into the bin, while I would happily eat it with a spoon. It is sometimes astonishing how far a principled negotiation can go towards giving both sides what they want.
It is clear that we British have failed to follow this advice. Our debate is driven by a bitter focus on personalities, from Theresa May to Nigel Farage to Jeremy Corbyn to the generic “Remoaner elite”. Each side knows what the other wants but has shown very little interest in why they want it. Without sincerely exploring the underlying aims and values of warring tribes there is no chance of finding an outcome everyone can accept.
The US debate also seems the antithesis of Fisher and Ury’s advice. Too many politically active people seek the humiliation of the other tribe. Dismissing compromise as craven appeasement seems to be a winning tactic, particularly in the primary elections that set the tone of US politics.
Compromise, however, is often possible even in unpromising situations. On abortion, for example, it emerges with a focus not on absolute rights but on practicalities. Many people can get behind policies to minimise unwanted pregnancies, and to make abortions safe and regulated rather than dangerous and illicit. It is a middle ground that many countries manage to find.
One can see politics as a competitive sport or a search for solutions. There’s truth in both views. However, a democratic election is far closer to a competition than to a principled negotiation. Do we not wish to see the opposite team soundly thrashed? Do we not boo their villainous antics and laugh at their mishaps? Who wants to play out a nil-nil draw?
I would not want to venerate compromise as the supreme good in politics. Sometimes it really is true that you and I, dear reader, are absolutely right and they are absolutely wrong. (It may even be true that we are absolutely wrong and they are absolutely right.) Either way, the merits of the case must be weighed against the merits of trying to respect everyone. It feels good to win, but this isn’t a fairytale: the losers won’t stamp their feet and vanish through the floor. They — or we — aren’t going anywhere.
Wednesday, 29 May 2019
Tuesday, 28 May 2019
A sweet tale: the son who reinvented sugar to help diabetic dad
The natural substitute helps diabetics, combats obesity and tackles climate change writes Senay Boztas in The Guardian
Javier Larragoiti (centre) and his Xilinat team in the lab in Mexico City. Photograph: Courtesy Xilinat
Javier Larragoiti was 18 when his father was diagnosed with diabetes. The teenager had just started a degree in chemical engineering in Mexico City. So he dedicated his studies to a side project: creating an acceptable alternative to help his father and millions of Mexicans like him avoid sugar.
“It’s only when you know someone with this sickness that you realise how common it is and how sugar intake plays a huge role,” he says. “My dad tried to use stevia and sucralose, just hated the taste, and kept cheating on his diet.”
The young chemist started dabbling with xylitol, a sweet-tasting alcohol commonly extracted from birch wood and used in products such as chewing gum.
“It has so many good properties for human health, and the same flavour as sugar, but the problem was that producing it was so expensive,” he says. “So I decided to start working on a cheaper process to make it accessible to everyone.”Quick guide
What is the Upside?ShowSign up here for a weekly roundup from this series emailed to your inbox every Friday
Ten years later, Larragoiti has patented a fermentation-based process to turn wasted corn cobs from Mexico’s 27.5m-tonne annual crop into xylitol. It is thereby solving a second problem: what to do with all that agricultural waste that otherwise might be burned, adding greenhouse gases to the overladen atmosphere.
His business, Xilinat (pronounced Hill-Ee-Natt), buys waste from 13 local farmers, producing 1 tonne of the product a year. This month his invention was awarded a prestigious $310,000 Chivas Venture prize award, which will enable him to industrialise production and scale up production tenfold.
Obesity is one of the fastest-growing global health problems. One in seven people are obese and about 10% have type 2 diabetes. Since 1980 the rate of obesity has doubled in more than 70 countries.
Larragoiti says that sugary diets are a real problem in Coca-Cola-lovingMexico, which has the world’s second-highest rate of obesity and has successfully taxed sugary drinks to try to combat a main source of the issue.
Paradoxically, another corn byproduct – fructose – is part of the problem, used to make corn syrup that has been linked to increasing obesity in the US.
“It’s kind of ironic,” Larragoiti says. “High fructose corn syrup is just a bomb of carbs and concentrated sugar that makes a high peak of insulin. It’s many times sweeter than regular glucose. Companies use and pay less and that’s the issue.”
Reusing agricultural waste is rapidly emerging as a promising sector for social entrepreneurs keen to tackle global heating and make useful things at the same time.
“One corn stalk has 70% to 80% waste by weight when you get down to it,” says Stefan Mühlbauer, the chief executive of the Sustainable Projects Group Inc. His company has a pilot plant in Alsace, France, and is building another in Indiana, US, to turn corn waste into a peat moss substitute and a super-absorbent foam for filters or soil. “Farmers are excited as it gives them something that extends their harvest season and they see another source of revenue,” he adds.
In Mexico, agricultural waste is often burned, releasing greenhouse gasesand creating one of the country’s highest sources of dioxin emissions. “Burning the residue is cheap and quick and may suppress pests and diseases,” says Dr Wolter Elbersen, a crop production expert at Wageningen University & Research. “The disadvantages such as air pollution, loss of organic matter and nutrients are less appreciated apparently. Removing the material for feed or compost, or added value products such as paper pulp or fuels is often not cost-effective, or no labour is available to do all the work in a short window of time.”
But thinking in a different way about “waste products” is essential if we are going to conserve scarce resources and feed a growing population, according to the Ellen MacArthur Foundation. “We need to think about the principles in the past, where we had to do much with little, and at the same time apply the technology we have at hand nowadays to succeed in the challenge of feeding the world,” says Clementine Schouteden, who leads the global initiative on the circular economy for food at the campaigning organisation.
“There’s definitely a sense of urgency in making sure that we farm in a way that is regenerative, preventing waste but also [creating value from] the waste that is currently not edible, with a food industry making the right options for consumers and for the planet.”
Xilinat’s idea has huge potential, according to Sonal Shah, the founding executive director of the Beeck Center for Social Impact + Innovation at Georgetown University, and a Chivas Venture judge. “It’s not just that he’s building a sugar substitute that tastes like sugar but that it’s going to become scalable so every company that uses sugar in its food has the opportunity to rethink what kind of substitute they use,” she said.
Ebersen added, though, that “you do, however, need a solution for using the leftovers after the xylose has been extracted and the demand for xylitol is small [currently] compared with the amount of residue”.
Meanwhile, what about Javier’s father? “My dad is super-happy,” Larragoiti says. “He uses my product every day and he’s willing not to cheat on his diet any more!”
Javier Larragoiti was 18 when his father was diagnosed with diabetes. The teenager had just started a degree in chemical engineering in Mexico City. So he dedicated his studies to a side project: creating an acceptable alternative to help his father and millions of Mexicans like him avoid sugar.
“It’s only when you know someone with this sickness that you realise how common it is and how sugar intake plays a huge role,” he says. “My dad tried to use stevia and sucralose, just hated the taste, and kept cheating on his diet.”
The young chemist started dabbling with xylitol, a sweet-tasting alcohol commonly extracted from birch wood and used in products such as chewing gum.
“It has so many good properties for human health, and the same flavour as sugar, but the problem was that producing it was so expensive,” he says. “So I decided to start working on a cheaper process to make it accessible to everyone.”Quick guide
What is the Upside?ShowSign up here for a weekly roundup from this series emailed to your inbox every Friday
Ten years later, Larragoiti has patented a fermentation-based process to turn wasted corn cobs from Mexico’s 27.5m-tonne annual crop into xylitol. It is thereby solving a second problem: what to do with all that agricultural waste that otherwise might be burned, adding greenhouse gases to the overladen atmosphere.
His business, Xilinat (pronounced Hill-Ee-Natt), buys waste from 13 local farmers, producing 1 tonne of the product a year. This month his invention was awarded a prestigious $310,000 Chivas Venture prize award, which will enable him to industrialise production and scale up production tenfold.
Obesity is one of the fastest-growing global health problems. One in seven people are obese and about 10% have type 2 diabetes. Since 1980 the rate of obesity has doubled in more than 70 countries.
Larragoiti says that sugary diets are a real problem in Coca-Cola-lovingMexico, which has the world’s second-highest rate of obesity and has successfully taxed sugary drinks to try to combat a main source of the issue.
Paradoxically, another corn byproduct – fructose – is part of the problem, used to make corn syrup that has been linked to increasing obesity in the US.
“It’s kind of ironic,” Larragoiti says. “High fructose corn syrup is just a bomb of carbs and concentrated sugar that makes a high peak of insulin. It’s many times sweeter than regular glucose. Companies use and pay less and that’s the issue.”
Reusing agricultural waste is rapidly emerging as a promising sector for social entrepreneurs keen to tackle global heating and make useful things at the same time.
“One corn stalk has 70% to 80% waste by weight when you get down to it,” says Stefan Mühlbauer, the chief executive of the Sustainable Projects Group Inc. His company has a pilot plant in Alsace, France, and is building another in Indiana, US, to turn corn waste into a peat moss substitute and a super-absorbent foam for filters or soil. “Farmers are excited as it gives them something that extends their harvest season and they see another source of revenue,” he adds.
In Mexico, agricultural waste is often burned, releasing greenhouse gasesand creating one of the country’s highest sources of dioxin emissions. “Burning the residue is cheap and quick and may suppress pests and diseases,” says Dr Wolter Elbersen, a crop production expert at Wageningen University & Research. “The disadvantages such as air pollution, loss of organic matter and nutrients are less appreciated apparently. Removing the material for feed or compost, or added value products such as paper pulp or fuels is often not cost-effective, or no labour is available to do all the work in a short window of time.”
But thinking in a different way about “waste products” is essential if we are going to conserve scarce resources and feed a growing population, according to the Ellen MacArthur Foundation. “We need to think about the principles in the past, where we had to do much with little, and at the same time apply the technology we have at hand nowadays to succeed in the challenge of feeding the world,” says Clementine Schouteden, who leads the global initiative on the circular economy for food at the campaigning organisation.
“There’s definitely a sense of urgency in making sure that we farm in a way that is regenerative, preventing waste but also [creating value from] the waste that is currently not edible, with a food industry making the right options for consumers and for the planet.”
Xilinat’s idea has huge potential, according to Sonal Shah, the founding executive director of the Beeck Center for Social Impact + Innovation at Georgetown University, and a Chivas Venture judge. “It’s not just that he’s building a sugar substitute that tastes like sugar but that it’s going to become scalable so every company that uses sugar in its food has the opportunity to rethink what kind of substitute they use,” she said.
Ebersen added, though, that “you do, however, need a solution for using the leftovers after the xylose has been extracted and the demand for xylitol is small [currently] compared with the amount of residue”.
Meanwhile, what about Javier’s father? “My dad is super-happy,” Larragoiti says. “He uses my product every day and he’s willing not to cheat on his diet any more!”
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