Harm de Blij is the John A. Hannah Professor of Geography at Michigan State University. The author of more than 30 books he is an honorary life member of the National Geographic Society and was for seven years the Geography Editor on ABC’s Good Morning America. His most recent book, The Power of Place: Geography, Destiny, and Globalization’s Rough Landscape, he reveals the rugged contours of our world that keep all but 3% of “mobals” stationary in the country where they were born. He argues that where we start our journey has much to do with our destiny, and thus with our chances of overcoming obstacles in our way.  In the post below he examines the recent events in Belgium.

Once again, Belgium – that is, Belgium’s future as a country – is in the news. It is in a way the ultimate irony that the European Union (EU) member whose capital serves as the headquarters of the world’s foremost experiment in supranationalism teeters on the brink of disintegration. Sophisticated, bureaucratic Brussels, Francophone island in Belgium’s Flemish-speaking north, represents multicultural cooperation to EU enthusiasts across Europe, but foreign intrusion to Flemish nationalists in its immediate hinterland. The collapse of one of the EU’s founding members, a key participant in the Benelux union that preceded the EU itself, would signify a failure that could have serious ramifications for the entire project.

The rise of Flemish nationalism and the default of Belgian federalism are not, however, unique to this small, prosperous country whose very survival is linked to the EU experiment. Europe’s growing integration is animating nationalist sentiments among locals in many of the EU’s 27 member states, and central governments try in various ways to defuse the associated political pressures. The European map is replete with cultural minorities that see themselves threatened with a loss of identity in Europe’s economic and political homogenization, and some of these minorities have national aspirations, viewing the EU’s still-formative period as an opportunity to strengthen their autonomy. The partition of

Czechoslovakia created two states for such cultural majorities and is often cited by others (in Catalonia, Scotland, Corsica, the Basque country as well as in both Belgian Flanders and Wallonia) as the prototype for their own aspirations. Separatists may be aware of the ultimate futility of their campaigns, but some of them nevertheless punctuate their activities with violence. The European political scene is anything but placid.

Thus the fate of Belgium will be of particular significance for the EU. Overcoming devolutionary forces by demonstrating the economic and social advantages of representative membership is the whole idea, and in general it has worked. The list of states aspiring to join the EU, including not only Turkey but also Croatia, Bosnia, Albania, Macedonia, Ukraine and even Georgia, is longer than that rejecting the option (Norway, Iceland and Switzerland), and only one entity has left the EU when the opportunity arose, namely Kalaallit Nunaat (Greenland). But if a state at the very heart of the EU, and one of its greatest beneficiaries, fails to accommodate its centrifugal forces, it will constitute a setback that will raise doubts among members and would-be members alike.

Flemish-Walloon negotiations having failed, should the EU seek to intervene? Might an EU transitional administration give the parties time and space to renew their efforts? The prospects appear dim: Flemish nationalism is again on the rise, with visions of independence and, ironically, eventual full membership in the EU. Resentment of French-speaking Belgians runs deep; xenophobia is rife. The Flemish flag waves over public buildings and town squares in the northern provinces; advertisements promoting the economic advantages of Wallonia in commercial publications barely mention Belgium at all. That two cultural communities with so much in common could find themselves at this impasse casts doubt on the whole EU enterprise.

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Last week two announcements were made that support the claims made by yours truly regarding sales of Kindles and Sony Readers, and the corresponding rise in ebook sales that will occur in 2008.

TIME Magazine reported that sales of the 130,000 titles available in the Kindle Store represented 12% of the sales of the exact same 130,000 titles in other formats. This is a significant increase as Jeff Bezos reported at the end of May this figure was 6% of 125,000 titles.

The doubling of the percentage on a bigger base points to two very interesting trends – the first is the clearly growing number of Kindle owners – I cannot imagine that kind of ebook sales growth is possible on a similar number of devices. The device sales must be skyrocketing.

The other trend that may be exposed here is the sheer number of ebooks being purchased. Last month some of the bigger trade publishers announced they were increasing the number of titles available for the Kindle. This was done not because of any arm-twisting by Amazon – but clearly as a response to the demand. And just as lack of product has helped to keep ebooks unsuccessful to date, the opposite is helping drive consumer enthusiasm and buying.

More evidence that the e-ink based devices such as Kindle and Sony’s Reader have been selling well comes from further up the supply chain, from the screen manufacturer, PVI. As I reported in the last article, PVI manufactures the 6 inch EPD for Sony and Amazon (the iRex Iliad does not use a 6 inch screen) and in a report files in DIGITIMES last week, PVI reported “Small- to medium-size panel supplier Prime View International (PVI) saw its June sales rebound 23% sequentially to NT$663 million (US$21.79 million) as demand for niche products, including electrophoretic displays (EPDs), picked up, according to the company.” While this is hardly definitive, it should be enough to support the theory that e-ink reader sales are increasing.

This is good news for ebooks – and more good news happened with the opening of Apple’s App Store for the iPhone and iPod Touch. Even though I am not a big believer in LCD screen ebook readers (I find them very difficult on the eyes for immersive reading), I am thrilled that the iPhone/iPod juggernaut will now contain a variety of choices for reading ebooks. I look forward to seeing how ebook retailers, wholesalers, and publishers tap into this wonderful market and what inventive business models Mr. Jobs creates for ebooks. Oh, wait, Steve Jobs doesn’t think Americans read – maybe that dream of an iBooks store is a just pipe dream…

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One of the many upsides to being a publicist is getting to attend launch parties for our books. Of course, organizing them is hard work, but the night itself can be a lot of fun. We OUP-UK publicists were last week at what is shaping up to be our party of the season for the launch of Winston Fletcher’s Powers of Persuasion: The Inside Story of British Advertising, which publishes here later this week. Below are some photos from the event.

Yesterday we posted a piece written by Winston Fletcher for OUPblog on when the British led the world in advertising.

Held at London’s incredibly beautiful Somerset House, we had a wonderful turn out including many of the great and the good from Britain’s ad-land, past and present. Winston gave an excellent speech where he confessed that though he had reached the top of his profession - he is the only person to have been both the Chairman of the Advertising Association and the President of the Institute of Practitioners in Advertising - he didn’t work for long in the creative side of the business. ‘Why?’, you ask. Well, when he did work in the creative side, he was the one who came up with the strapline “Have no fear, your piles will disappear!” for a campaign. He then decided he was better suited to the business side of advertising.

Also in attendance was former government Culture Secretary Chris Smith who is the current Chairman of the Advertising Standards Authority. He is pictured below with Winston Fletcher.

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We recently launched Powers of Persuasion: The Inside Story of British Advertising by Winston Fletcher. Today, I am pleased to be able to bring you an original essay by Winston on the period where the British led the way in the advertising world. Check back tomorrow for photos from the party at London’s Somerset House.

Conventional wisdom has it that America is the home of advertising, where it all began. That is not quite right. Unquestionably America is the world’s largest advertising market, and American advertising agencies now dominate the world. But advertising began in ancient Athens (if not earlier), and advertising agencies started in Britain more than a century before they appeared in the USA. During 1970s and early 1980s British advertising led the world. It did so creatively – but it did so in other ways too, which underpinned the creativity, making it more effective and successful.

The emergence of Britain started slowly. At the Cannes Festival, which was then – and still is – the arbiter of global advertising creativity, Britain was outpaced by the USA throughout the 1960s, and in 1970 and 1971. Then the British climb began. In 1972 British and American advertising agencies took home an equal number of Gold Lions (4 apiece), and Britain won the cinema Grand Prix. The next year Britain won more awards than any other country, though most of these were Silvers.

In 1974 the British Gold rush really got going. That year Britain collected 18 Gold and Silver Lions and the Palme D’Or. In 1975 the festival moved to Venice for a year, and the British trade press headline simply read ‘Venice Goes British’. Come 1976 the festival returned to Cannes and the headline ran: ‘Britain Sweeps The Board’. The Brits had again pocketed the Palme D’Or, plus 10 of the 19 Gold Lions. In 1977 it was ‘Britain Comes Out Best Again’, with the Grand Prix for television and another 6 Gold Lions. Then, in 1978, Britain reached its zenith. The Brits won the Grand Prix for both television and cinema – a rare occurrence – and garnered a massive 80 Gold, Silver and Bronze Lions.

After 5 years at the top, there followed a couple of relatively fallow, but not wholly unsuccessful, years (1979 & 1980). But in 1981 the British made a come back (‘Britain Comes out Best Again’) with more Gold and Silver Lions than any other country. And Britain’s creative leadership continued throughout the first half of the new decade, when it collected 45 Gold Lions against America’s 23.

What caused this burgeoning of British advertising creativity? A combination of factors. Commercial television had begun in Britain in 1955, and for the first two decades British television advertising was dominated by American advertisers – particularly household cleanser and other packaged goods advertisers, whose approach to creativity was strictly formulaic. Every commercial had to abide by the ‘proven rules’. During the 1970s British advertisers started to become much more important in their home markets, and more confident, and allowed British creativity much more freedom. Creativity flowers in freedom. Moreover this occurred against the background of a recovery in Britain’s economic performance, after a long period of economic tribulation. But probably most important of all, there happened to be in London during those years a raft of quite exceptionally talented advertising people, who worked both as colleagues and as rivals to outperform each other creatively, in a highly charged competitive atmosphere.

Additionally, their creativity was underpinned by other developments which also helped British advertising leap ahead. More or less simultaneously, two London agencies (Boase Massimi Pollitt and J Walter Thompson London) invented a new system of campaign development called ‘account planning’. Account planning integrated research into the creative process in a way that had not been done before, and in a way that creative people found far more sympathetic than they had found earlier systems. Account planning spread slowly at first, but it is now generally accepted around the globe as the best way to develop new campaigns.

At the same time, in the mid-1970s. Britain developed the world’s best system of advertising self-regulation – a system that maximises creative freedoms within responsible constraints. And advertising began to be used more and more by British Governments to promote worthwhile social causes, from blood-giving to drink-less driving. Simultaneously Britain began to build what has become the world’s largest advertising archive, ‘The History of Advertising Trust.’ Out of this ferment of activity two commercial giants emerged: Saatchi & Saatchi and the WPP Group. Both joined the world’s advertising leaders, though Saatchi & Saatchi later stumbled and fell.

For the British advertising industry the second half of the 20th century was a heady era – when it reached peaks that it will probably never quite achieve again.

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Ammon Shea recently spent a year of his life reading the OED from start to finish. Over the next few months he will be posting weekly blogs about the insights, gems, and thoughts on language that came from this experience. His book, Reading the OED, will be published by Perigee in July. In the post below Ammon, an expert dictionary reader, takes a close look at the word “bailout”.

In the past few months there has been a good amount of talk about the Federal Reserve’s plan to loan a rather large sum of money to J P Morgan, in order that they might buy the fiscally challenged Bear Stearns. There seems also to be some disagreement about whether this is the right or wrong thing to do, and furthermore whether or not it constitutes a bailout. Critics of the plan are saying rather accusingly that this is a bailout - unfairly giving a hand to a large corporation. The government has been saying rather defensively that it is not a bailout - it’s merely trying to save the overall economy from further damage.

The word bailout is a fairly recent addition to our language, with its first usage dating to some time around 1940. As a noun it derives from the verbal phrase ‘to bail out’, although it is not quite clear which of the several meanings of this phrase is the parent.

Another thing about bailout that is not terribly clear is what exactly it means. Different dictionaries provide definitions that are somewhat at odds, making it difficult to pin down a completely specific meaning. So rather than quibble endlessly over whether this is or is not a bailout, I am proposing a compromise: both sides agree that it is in fact a bailout, but they each get to consult the dictionary of their choice to establish what a bailout is.

Those who oppose the Federal Reserve’s plan can point out that the Cambridge Dictionary of American English defines bailout as ‘the process of saving a company, plan, or other thing from failing by providing lots of money.’ This would bolster their claim that the Fed is courting moral hazard on a grand scale by subsidizing poor business practices, and potentially throwing away some thirty billion dollars that could help struggling homeowners.

The Federal Reserve could counter with the definition found in the New Oxford American dictionary, which states that a bailout can also be an instance of giving assistance to a failing economy, which would bolster their claim that they are acting to save the larger economy, and are not simply trying to help a privileged few.

Their opposition could then come back with the American Heritage Dictionary definition, which swears that a bailout is nothing more than ‘a rescue from financial difficulties’.

“Aha!” the Federal Reserve will cry, “we were referring to the bailout that is defined in the Random House Dictionary of the English Language, Second Edition – ‘Of, pertaining to, or consisting of the means for relieving an emergency situation’”.

Their opponents will then throw down their trump card, and cite the unshakable authority of the Merriam-Webster and Garfield Dictionary (whose cover reads ‘the 1st dictionary with attitude!’ and ‘with comics!’), which avows that a bailout is simply ‘a rescue from financial distress’.

Given that none of the dictionaries that the Federal Reserve has in its arsenal come equipped with comics it is doubtful that they will have a suitable rejoinder to this. But it doesn’t really matter – giving a name to something won’t change what that thing is, and it won’t change whether you are for it or against it. And it can be risky to give too much authority to what a dictionary says - I have a sneaking suspicion that the current President Bush has fashioned his own personal definition of what torture is based on sense 2b in Merriam-Webster’s Third New International Dictionary – ‘an extreme annoyance or severe irritation.’

Both the Fed and its naysayers should give up on quibbling about what is and what is not a bailout, and go back to quibbling about more substantial matters, like how many thesauri you could buy with thirty billion dollars.

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Marhsall Goldman is a Professor of Economics Emeritus at Wellesley College and Senior Scholar at the Davis Center for Russian Studies at Harvard University. In his book, Petrostate: Putin, Power, and the New Russia , Goldman chronicles Russia’s dramatic reemergence on the world stage, illuminating the key reason for its rebirth: the use of its ever-expanding energy wealth to reassert its traditional great power ambitions. In the article below Goldman reflects Russia’s role in increasing energy prices.

As energy prices rise to record heights, most consumers are unaware that it’s not only OPEC members who are the beneficiaries, but Russia which today actually produces more petroleum that Saudi Arabia. Russia has been the world’s largest producer of petroleum several times in the past including at the beginning of the twentieth century and again in the 1950s. But its role today when energy prices are at record levels has made Russia an especially important economic and political power, more so than ever before in the country’s history.

In more recent times, the bounty brought in by Russian petroleum exports has transformed Russia from near bankruptcy in August 1998 to levels of prosperity unmatched not only in Soviet but Czarist history. The Russian government today has built up nearly $500 billion in foreign currencies—not bad considering that less than a decade ago, in 1998, Russia’s treasury was effectively empty. Moreover the Russian company, Gazprom, the world’s largest producer of natural gas has just recently become the world’s second largest corporation as measured by the combined value of its corporate stock, a distinction that until just recently was held by General Electric. Today only Exxon-Mobil is larger than Gazprom, but Prime Minister Putin has promised that he will do all he can to help Gazprom reach first place. More than that Putin has begun to question why it is that the dollar is the world’s currency standard. As the US dollar loses value, the ruble has strengthened, gaining 20 per cent in recent weeks.

Not surprisingly both Putin and his protégé, Dmitri Medvedev his successor as President, have begun to demand that the ruble be included as a world currency (not bad considering that only a few years ago the ruble was not even convertible into other currencies) and that Russia have a say in selecting the leaders of international financial groups such as the International Monetary Fund and the World Bank.

Given the likelihood that energy prices will remain at high levels for some time to come, it is likely that Russia will seek to use its new wealth to reassert itself as both an energy and a political superpower.

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[A Full Disclosure Note From Evan] Let’s be clear from the start: Neither Amazon nor Sony have told me anything. I get nada, zilch, bupkis when I ask even the most circumspect questions about their respective device sales. If it has to do with Kindle or Reader, I get the standard “go away” line. I have not manipulated sales data, be it OUP’s or any other publisher. I have not analyzed Amazon or Sony ebook sales statistics or rankings. I have not found any secret documents. I have not broken into the vault, I have not cracked the code, I have not had prophetic dreams - well, not about any e-ink devices anyway…

What I do have is a subscription to DIGITIMES that has led me to some pretty outlandish and, I think, substantiated conclusions about Kindle and Sony Reader sales figures. Before you dismiss me as loopy check out the evidence…

When the Kindle first launched there were plenty of predictions about how it and its predecessor the Sony Reader would sell. Over time the chatter died down, halted partly by the Kindle going out of stock. At the end of April, the chatter returned and hit full volume after last week’s Book Expo America in Los Angeles. The catalyst was Jeff Bezos’ speech, which let out some tantalizing, yet cryptic information on ebook sales volume at the Kindle store. The chatter, as reported in the NY Times, has publishers and others speculating that Amazon has sold somewhere between 10,000 - 50,000 Kindles.

I think all the speculations are completely wrong. By my calculations, combined sales of the Amazon Kindle and the Sony Reader will be 1,000,000 units in 2008. This estimate is based on solid data.

The Evidence
Amazon and Sony both use the 6-inch electrophoretic display (EPD), also known as an e-ink screen. Both companies buy their EPD’s from Prime View International (PVI) of Taiwan. DIGITIMES, a daily news service covering the Taiwanese IT market, reported on April 18th, in a story entitled PVI EDP shipments to grow sharply in 2008, that PVI expects EPD module shipments to reach 120,000 units PER MONTH in the second half of 2008. It further explains that the unit price of the screens are $60-$70 per unit and that the current volume has been 60-80,000 units PER MONTH.

Also intriguing is the article’s claim that 60% of the EPDs go to Amazon and 40% go to Sony. This is an important factor as it implies that there is a market beyond Kindle – a very, very strong market. Taking the figures at face value, Sony was selling (or at least manufacturing) an average of 28,000 readers per month (I took 70,000 units as the average sold per month and then 40% of that). Using this monthly rate, the annual sales of the Sony Reader are at nearly 350,000 units. Using the same formula, Amazon is ordering an average of 42,000 units per month, which will add up to over 500,000 units sold this year.

With production ramping up to 120,000 units a month these numbers will look much better - to the tune of a combined 1.4 million units over 12 months! Even with the Kindle out of stock for a big chunk of the first and second quarter, combined sales of these two e-ink devices in 2008 will most likely top 1 million. If a million devices are out on the street looking to feed, and we know they primarily eat one kind of food, ebooks, then what must this mean for the ebook sales?

Jeff Bezos said last week that ebook sales in the Kindle store had hit 6% of book unit sales. What this means is that of the 125,000 titles available in the Kindle store, the sales of ebooks represented 6% of the sales of those same 125,000 titles in print formats. Another interesting thing that Bezos said was that Kindle buyers purchase at a rate of 2.5 times more than print book buyers… food for thought when thinking through your ebook strategy.

One can draw some ebook sales conclusions from this information. For example, the number 2 seller at the Kindle store is The Last Lecture by Randy Pausch. According to Bookscan, in 4 weeks this book has sold 784,158 units. For the sake of argument, lets ascribe 75,000 units (10% of total sales, a reasonable guess) to Amazon. If Kindle sales were 6%, then Amazon would have already sold 4,500 ebooks. That’s 4,500 people with Kindles buying a single title in 4 weeks!

While it’s clearly amazing that in one month an ebook can sell 4,500 units it is not the best way to calculate the ebook sales impact of Kindle and Reader. A better way to approach this is through good old-fashioned guess-timation. Taking stock of my own experience and the experiences of others I know, I found that ebook buying on either the Sony Reader or the Amazon Kindle ranges from 5 ebooks to over 100 ebooks. Assuming that anyone who buys an e-ink ebook reader is doing so to read ebooks, lets assume that 10 ebooks a year is a reasonable purchase estimate. Using this logic, we should see 10 million ebooks purchased for these two devices in 2008.

The IDPF estimates that in 2007 ebook sales income was $31,800,000 with the caveat that the actual retail income could be as much as double due to retailer discounts, so let’s assume that the sales actually totaled $60,000,000. If we use an average retail price of $12 per ebook sold, and if consumers will buy 10 ebooks a year, then they will spend $120 on average, per device. That would lead us to $120,000,000 in ebook sales for the Kindle and the Reader in 2008, double all ebook sales in 2007. (For those of you who cannot swallow the idea of 10 books purchased per device – cut it in half. The result is $60,000,000 in ebook sales – as much as last year!)

Success in technology, like everything else, leads to more success. It’s not uncommon to see five-fold growth the year following a successful technology product launch. Think iPod, think Wii, think Blackberry. Whole micro-economies emerge around products that range from accelerated content creation, and all sorts of aftermarket products and services. Versions 2.0 and beyond create better and better devices. The better the devices, the more accessories, the more content there is, and soon a whole world of business opportunity is rolling downhill picking up speed.

With this in mind, I can easily imagine the success of Kindle and Reader dramatically expanding next year and growing by a factor of five. If that happens, then the excitement of ebooks will also grow and average 20 per year and the formula leads to a completely new ebook economy. Five million devices  and 20 ebooks per device would mean ebook sales of $1,200,000,000, which, by my estimation, is 1.3% of the current global book market of $90,000,000,000.

This reminds me of a comment I heard from a music industry executive at a conference a couple of years ago. “One day there was the iPod and iTunes. The next day 20% of our business was digital. The day after that more than 50% of our revenues came from digital music. Yeah, we believe in digital music now.”

I personally don’t see publishing becoming a 50% digital business as books and cd’s are completely different animals. But I sure can see that the 3% - 4% I once predicted isn’t such a crazy notion any more. And yes, I believe in ebooks.

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Today we bring you Teresa Ghilarducci (who just published When I’m Sixty-Four) in conversation with Jacob Hacker (author of The Great Risk Shift). These two experts have been debating how to ensure retirement for future generations. This is the final part the exchange. Read part one and part two.

Teresa Ghilarducci taught economics for twenty-five years at the University of Notre Dame and now holds the Irene and Bernard L. Schwartz Chair of Economic Policy Analysis at the New School for Social Research. She is also the 2006-2008 Wurf Fellow at Harvard Law School. Her most recent book is When I’m Sixty-Four: The Plot against Pensions and the Plan to Save Them.

Jacob Hacker is a Professor of Political Science at Yale University and a Fellow at the New American Foundation. His most recent book is The Great Risk Shift: The Assault on American Jobs, Families, Health Care, and Retirement And How You Can Fight Back.

Dear Teresa,

I would never throw you out of the reality-based policy community. But I would encourage you to be flexible in the debates over retirement security our nation is surely going to have. 401(k)s are more embedded, I think, than you acknowledge. And while they are indeed a practical failure and thus must be overhauled, “clever psychological jujitsu with automatic this and thats” might be the best we can do.

Moreover, this jujitsu approach wouldn’t be as bad as you suggest. I would universalize 401(k)s — everyone has them automatically, with a standard government contribution that is inversely scaled to income. If employers want to set up their own plans and match their workers contributions, bully for them. And yes, I would have all those “automatic this and thats” — default investment options with annual balances into the federally sponsored plan when you lose or change jobs, and so on.

In any case, you and I mostly agree on what needs to be done; we mainly differ on political strategy. The big controversy is not going to be between folks like us; it’s going to between folks like us and those who don’t actually live in the reality-based policy community and continue to insist that 401(k)s (perhaps with small tweaks at the margins) work splendidly — and, indeed, should be the model for reforming Social Security, and just about everything else. There are proposals for private accounts in Medicare, unemployment insurance, employment-based health insurance, and on and on. Heck, my guess is that somewhere at the Cato Institute they are formulating a plan for 401(k)-style reform of the post office. (”With individual mail accounts, all Americans can build their own personal postal service, not rely on a top-down, one-size fits-all, big-government system built for the 19th century!”)

You ask, “Who did this? Who brought old age income security under attack?” Well, employers and 401(k) providers are good places to start, and leading members of Congress, like the late William Roth of Delaware (of “Roth IRA” fame), have been making things worse for some time. But I think there’s something else going on. We are living in an increasingly unequal society in which those who make and comment on policy are, for the most part, insulated from the dominant economic trend faced by the middle and working classes: rising economic insecurity. You know the numbers, so I won’t inundate you with them. But I will quote one recent analysis by the Congressional Budget Office. Average income more than doubled among the top 1% between 1979 and 2005, after accounting for inflation, taxes, and public benefits. What about the middle fifth of Americans? Their average income rose by just over 20 percent during this quarter century, and most of that rise was because of increased family work hours. Meanwhile, private health insurance coverage, guaranteed pension protection, and personal savings have all headed sharply South.

So I have my own question: Who’s going to push back against these trends? I am reminded of the importuning question of a working mom I interviewed for The Great Risk Shift:
Where is the AARP for families? I feel like we need the equivalent of the Million Mom March to let candidates know that parent with young children are hurting. How can busy, overwhelmed parents be educated and motivated? How can we have our voice heard above those of huge PACs and corporations? I know this is nearly a rant, but I am angry and frustrated and don’t know where to turn to be effective in getting the leadership this country needs.

It’s a good question. What’s your answer? And where doesm the struggle for retirement security fit into this larger challenge?

I’ve enjoyed our exchanges; thanks for writing When I’m Sixty-Four and letting me talk with you about it.

Best,

Jacob

Jacob, I share your frustration and near shock that, since 1979, incomes for middle class families grew at a fraction the rate enjoyed by the top one percent and wages for middle class men actually fell. I am also appalled that tax breaks for pensions and health care have skyrocketed, while pension and health insurance coverage erodes. Tax breaks are going to people who need help the least. That we are both angry is a good sign; we are not alone, political change is possible.

In this conversation (and in our books) we have crafted, for the next President, a practical, affordable way to solve health and retirement insecurity. Such confidence - unusual for academics– comes from both of our work in the history of social policy and the knowledge about modern labor markets and policy failures.

About retirement security: my GRAs are your universal 401(k)s. Every worker would have a 401(k)-type account in which 5% of their income is contributed each year. The government would deposit $600 into everyone’s account (up to the Social Security cap) that would count towards that 5% contribution. The best thing about GRAs is that the government would guarantee the return and fees would be very low.

This means for people earning $12,000 per year the government would pay all of the workers’ contribution.

For people earning $40,000 per year the government would pay 40% of the required contribution and for people earning near the Social Security cap, at about $100,000 per year the government would pay 20% of the required contribution.

You aren’t alone urging me to be flexible, we costed out keeping some of the current 401(k) contributions up to $5000 (instead of the $46,000 maximum now) That would cost $25 billion.

The only difference is that you would make universal 401(k)s voluntary and I would make them mandatory. A reasonable reality-based path would be to phase in mandatory GRAs. Yet, Jacob, I am convinced, the $600 contribution might be so fetching and attractive that a mandatory plan may never be required.

About health insurance security: you have a plan that gives everyone more security. You would pay for it through a transparent, straightforward payroll tax. Maybe people will balk but you can make the argument we all pay anyway for the uninsured but the cost is hidden, passed through in the form of higher prices. And, we all pay more than we have to because of the inefficiency and high insurance and pharmaceutical profits.

Thank you for writing The Great Risk Shift and entering in this coversation about When I’m Sixty Four. We should not be shy insisting our books promote income security for American workers, which when implemented, will dampen anxiety and bitterness, enhance productivity and help the new president and Congress move away from a foreign policy based on fear and toward economic policy based on a healthy working class.

Teresa

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Today we are proud to bring you Teresa Ghilarducci (who just published When I’m Sixty-Four) in conversation with Jacob Hacker (author of The Great Risk Shift). These two experts will be debating how to ensure retirement for future generations. This is part two of the which will we be publishing all week, so be sure to come back and check our exchange.

Teresa Ghilarducci taught economics for twenty-five years at the University of Notre Dame and now holds the Irene and Bernard L. Schwartz Chair of Economic Policy Analysis at the New School for Social Research. She is also the 2006-2008 Wurf Fellow at Harvard Law School. Her most recent book is When I’m Sixty-Four: The Plot against Pensions and the Plan to Save Them.

Jacob Hacker is a Professor of Political Science at Yale University and a Fellow at the New American Foundation. His most recent book is The Great Risk Shift: The Assault on American Jobs, Families, Health Care, and Retirement And How You Can Fight Back.

Dear Teresa,

I see these multiple perspectives on retirement every day, in my research and my own life. I visit my dear colleague Bob Dahl, who in his mid-90s continues to publish path breaking books on democracy and political equality. How can I talk with someone so intellectually vibrant and not want to be contributing in that way in my own old age?

And then I remember Elinor Sheridan, whom I wrote about in my book. In her seventies, she was trying to find a job because her 401(k), crushed by the stock-market decline of 2000, had already been depleted. Even with Social Security, the pension she receives from 17 years at a hospital provided a meager standard of living. Elinor had worked her whole life — as a mom and wife (divorced) and then, ironically, as a “risk manager” at the hospital — and now she was not because she wanted to but because she had to. So much for the golden years.

It is good to have someone celebrating retirement as a benefit to our society, rather than a burden on us and future generations. The labor movement may be the “folks who brought you the weekend,” but it was FDR and countless fellow campaigners for a guaranteed retirement income who who brought us retirement as we now know it. And the campaign is not over.

Retirement security is under attack. Corporations are jettisoning traditional guaranteed pensions, Congress is pouring money into tax breaks for individual benefit plans that exclude millions and mostly benefit the affluent, virtue in proposals for partial privatization of Social Security that will put the promise of secure retirement= further at risk.

But this exchange would be pretty uninteresting if all I said was “Amen,” and so let me continue in the vein of disagreement for at least a little while. I have two concerns about the Guaranteed Retirement Account (GRA) vision — the first more philosophical, the second more practical. (And I should note, as a fellow policy wonk, that GRA is a nice acronym, especially when compared with John McCain’s chosen shorthand for his health plan of last resort, GAP, or “Guaranteed Access Plan.” Note to the McCain candidacy: A plan that’s billed as filling gaps should probably have another moniker, though perhaps the McCain folks believe in truth in advertising.)

First, the more or less philosophical concern: Are GRAs the best immediate use of federal resources and the scarcely unlimited running room for new federal taxes — excuse me, “mandatory contributions”? I am not one to go in for the clash-of-generations view so common in official Washington and the news media. (After all, we all get old, and young and old alike support Social Security and say they want a secure retirement.) But I am not sure I am ready to man the barricades for a major new commitment to provide enhanced retirement income when so many needs go unmet for working age Americans and kids. For one, and I say this only half in jest, I would rather have the 5 percent of payroll proposed to fund GARs for my universal health plan
= (http://www.sharedprosperity.org/topics-health care.html). For another, Social Security provides a tattered but still crucial safety net that is sorely lacking in other areas of American economic life—most notably, health care (again, I really want that 5 percent!). My point is not that we don’t need a new campaign for retirement security — we do. It’s just that I”m not sure it should be the first priority of those seeking economic security. The aged look out for themselves pretty well in American politics. Not so the young, the disadvantaged, the cash-strapped working family — though, yes, they will all be old some day and, yes, our pension system fails them above all.

Now, the practical worry. We have a huge 401(k) complex on which millions of Americans rely. In my 2002 book, The Divided Welfare State, I described the slapdash way in which this system came into being (trust me; almost no one knew what they were getting into, though once the floodgates were opened, corporations figured it out pretty quick). But I also made the point that existing systems of social protection, however haphazardly created or inadequate in practice, are fiendishly difficult to supplant with new, more rational arrangements. I called this “path dependence.” But we could just as well call it “political reality.” And it seems to me that the political reality today is that it will be very, very hard to completely redirect existing tax breaks for 401(k) plans and create an entirely new supplementary pension system managed by the federal government.

If that judgment is correct (dispute away), then where does it leave those of us living in the reality-based policy community who recognize that the 401(k) defined contribution model is incapable of providing retirement security for all but those at the top? I argued in The Great Risk Shift thSocial Security, and (2) transform 401(k)s into something that looks like a guaranteed retirement benefit. Without going into the details, I called for making 401(k)-type accounts available to everyone, even if their employer failed to provide them; requiring automatic enrollment through the workplace; and offering progressive “matches” to supplement lower-income workers’ contributions, even if employers do not offer a standard match. And I said that all account balances should be automatically converted into annuities (a guaranteed income for the remainder of one’s life) at retirement unless someone could show they had sufficient wealth to protect themselves against outliving their assets. (providing such annuities through the post office back in the 1930s).

By the way, this would surely cost serious money – which puts it somewhat in tension with my first point about priorities. But it has the virtue that it could be done in stages, with the lowest-cost aspects (automatic enrollment; annuitization, which should be self-financing) coming \ first. Its more important virtue is that it might be possible to do at all.

Fire Away,

Jacob

Thanks for reminding me of Robert Dahl and what was unspoken, our hope we are as incisive in our nineties and in control of our time.

Please know it was both — FDR’s Social Security and union pensions (e.g. those for the Ladies Garment Workers, bricklayers, coal miners, steel, auto workers etc.) that created the middle class and middle class retirement. But, as you point out, the campaign for “decent retirement for all” is not over. Except for the wealthiest men and women, people, now in their 40s and 50s, will likely be the first U.S. history to be more at risk than their parents of experiencing a sharp drop in living standards in old age.

I bristle a bit when accused of not being a reality-based policy wonk. There is not a pension economist on the planet that will defend our system of tax breaks for savings that only help the affluent move money from taxed accounts to tax-favored accounts, costing the Treasury over $80 billion per year. Thus, it is no surprise that the tax breaks - called tax expenditures - have soared while overall savings rates keep on going down. A full 50% of the tax expenditures for 401(k)-type accounts go to only 6% of workers; those at the top earning over $100,000 per year.
70% of the tax breaks go to the top 20%. The most head banging reality of it all is that these people would have saved without the help. The current system has no basis in logic.

Who did this? Who brought old age income security under attack? I used to think it was mostly corporations spending less on pensions because they could get away with it. The shift in market power to employers and away from workers is partly the reason, but a big part of the attack comes from Congress indulging the 401(k) industry. And a dedicated, ideologically-based campaign to transform Social Security into individual accounts (my Chapter 5 covers that intricate history and, as you rightly point out, continuing saga) is the other source of the plot against pensions.

My proposal for guaranteed supplements to Social Security is based in this reality. GRAs obtains pensions for all with no additional risk or federal spending. And, they restore savings rates to the higher rates before the “debt boom” that started in the 1980s.

Philosophically we are on the same page. You didn’t say it right out, but I guess you are just as terrified as I am that high payroll taxes would cause terrible things like widespread tax evasion and an underground economy. I’ve come to appreciate how lucky we are in America that we have almost 100% employer compliance (the stray restaurant and construction sites notwithstanding) in paying social security tax.

Keeping payroll taxes low is philosophical and practical. Nonetheless, I support your plan for an additional payroll tax to pay for health care and for a mandatory 5% contribution to a GRA. First, the government will offset the 5% GRA contribution with an indexed $600 annual contribution.

Second, the “mandatory contribution” is unlike a tax, it will go into an individual’s account under that individual’s name. Third, money for the old doesn’t take away money from the young. One of my best articles has the best title - Do the Old eat the Young? (I also teach a class on social policy with the same name). The ugly fear that supporters of Social Security and pensions compete with government support for working-age Americans and kids is not well founded. You know what? Nations that pay for the old also pay for kids. It is also a pattern in American history. When American families funded their pensions and paid ever increasing Social Security taxes, they voted for increases in property taxes to pay for schools.

Thus, we can plausibly argue for a bread and roses social policy. Your great book, The Great Risk Shift, put working class families’ insecurity front and center. The kids! The kids! Only African American kids have higher poverty rates than older single women. And, you are right, over the last 4 decades, we have drastically cut old age poverty rates while more kids face poverty risks. But did bread leave the mouths of babes to feed the grandmas? No. Tax expenditures - taxes not collected for special reasons, like for oil depletion and for profits of banks operating abroad — between 1974 - 2004 tripled. And the growth in tax breaks, mostly for businesses and the wealthy, far exceeds the growth in social spending. That is where much of the money for cash-strapped working families have gone.

I agree, thought the practical reality of checking the runaway 401(k) industrial complex might be difficult, it is not impossible don’t annihilate Wall Street firms, the government will contract with for-profit professional money managers just as we do for for investing pensions for Federal Reserve employees, Texas teachers, etc. Even Chuck (in the “Talk to Chuck” campaign for Charles Schwab brokerage accounts) and other broker dealers will have something to do. Employers can still keep their 401(k) plans, but their merits have to be r al, not based on the tax breaks going to the bosses. So, though it is difficult to implement policy as if we are “starting from scratch” because of “path dependence” this 401(k) path is fairly new - the tax breaks have soared only recently. And, if we can keep tax breaks for 401(k) contributions up to $5,000 per year - not up to, in some cases, $46,000 — we only spend $25 billion per year for GRAs for all, funded with $600 federal contributions for everyone.

So, don’t throw me out of the reality-based policy community. Guaranteed Retirement Accounts, with all due respect, is a more effective, straightforward plan than your plan that relies on clever psychological jujitsu with automatic this and thats. You aim to raise pension coverage rates by taking advantage of human laziness through auto enrolling, auto annuitizing and - you should add — auto investing. Fundamentally, relying on voluntary, commercial accounts does not address huge leakages from high retail fees, leakages from churning and scams, and leakages from early withdrawals and, the biggest leak of all, the fact most employers do not bother to sponsor a pension plan at all.

The best part about the GRAs is that it addresses the two Americas. The GRAs gives every American worker with a Social Security number what only some lucky workers have. Workers with government, corporate and union defined benefit plans, and college professors in TIAA -CREF have low cost, not-for-profit financial institutions handling our pensions. The other Americans have nothing, or pay retail fees for leaky 401(k) accounts. The GRAs close that access gap - everyone has access to a low fee, professional, quasi-governmental, financial institution that guarantees an inflation-protected competitive market return.

Jacob, we can get health and pension security. No?

Teresa

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Today we are proud to bring you Teresa Ghilarducci (who just published When I’m Sixty-Four) in conversation with Jacob Hacker (author of The Great Risk Shift). These two experts will be debating how to ensure retirement for future generations. This is the first part of the series which will we be publishing all week, so be sure to come back and check our exchange.

Teresa Ghilarducci taught economics for twenty-five years at the University of Notre Dame and now holds the Irene and Bernard L. Schwartz Chair of Economic Policy Analysis at the New School for Social Research. She is also the 2006-2008 Wurf Fellow at Harvard Law School. Her most recent book is When I’m Sixty-Four: The Plot against Pensions and the Plan to Save Them.

Jacob Hacker is a Professor of Political Science at Yale University and a Fellow at the New American Foundation. His most recent book is The Great Risk Shift: The Assault on American Jobs, Families, Health Care, and Retirement And How You Can Fight Back.

Dear Teresa,

You have written a powerful indictment of our rickety framework of retirement security, one that resonates very much with my own thinking on the topic. And you have done a masterful job puncturing the view that further encouragement of 401(k)s or partial privatization of Social Security is our salvation. As you show, these poison pills will actually increase the risk of inadequate income in retirement for most Americans while showering even more government largesse on well-off folks who do not have all that much to worry about.

And yet, I find myself coming up short -no pun intended- on those who would advocate a later retirement age. I am with you for most of the trip. Telling people that they need to tough it up and stay in the workforce for much longer than their parents did illustrates precisely the excessive emphasis on personal responsibility in economic policy debates that I criticized in The Great Risk Shift.

Many people don’t retire voluntarily; many have labored more than long enough, in jobs that are demanding and tiring; and many, sadly, won’t actually live that long after they leave work. You also make the important point that one reason we may be living longer -and, as you know, there are stark differences both in life expectancy and how much it has grown across income classes– is precisely because we have more time in retirement.

Still, we are living longer. And many of us are staying in school longer. And many of us are doing jobs, such as mine, where most of our time is spent sitting at desks, rather than lifting girders. I agree that working longer cannot be a national policy solution, but I wonder if we should be so resistant to the idea that a good share of Americans — and, perhaps even more so, Europeans — should be working later in life than they do now. I like the general idea, for example, of basing retirement age on the number of years in the workforce, so that those who get advanced degrees end up retiring later than those whose formal education ends much earlier. I see no reason either why we should encourage early retirement — by which I mean retirement before age 65 — except in cases where it is truly necessary or unavoidable. And I think we should be improving the opportunities for older workers to take fair part-time jobs, in part because I think that all Americans should have the opportunity to take part-time jobs that pay well and offer benefits when they need to do so to balance work and family.

It seems to me that the message you want to convey is that people need security as well as choice. They need guaranteed retirement benefits that are there when they need them, even if they need them at 62. But they should also have the choice to work longer, with benefits that do not penalize them if they stay in the workforce until 69, or 79. What do you think? And what should those benefits — and other supportive policies — look like?

Best,

Jacob

Thanks for your comments, we both challenge the growing insecurity of workers’ financial futures.

In writing the book I decided to first think what American retirement policy did right, to see where we went wrong. Through a patchwork of private/public programs – employer pensions, Social Security, disability provisions - we successfully extended to all workers what was once only available to the rich - a chance to retire at the end of our working lives. In one of my favorite chapters, I show that we have a very flexible retirement system so that everyone gets a crack at free time before they die. The coal miner dies sooner but he can retire earlier; the coal mine owner lives much longer, but she can work into her seventies. We, Americans have laws against age discrimination; we proudly stand apart from Europe and Japan, who make people leave their jobs JUST because of their age.

I want to preserve that equity and flexibility, Jacob, the ability of all older people - regardless of social economic class — to have free time at their end of their lives, to construct a meaningful narrative of themselves and their human relationships, whether it be by working or not.

I wrote this book to describe the attack on retirement, the creation of an ethic of work to supposedly stave off a fear of aging, and who wins and loses under the new pro-work, anti-pension ethic.

You are right, many come up short when they hear I am against policies to extend the retirement age and policies that push a pro-work agenda. Indeed, reporters, congressional members, educated professionals like us, really hate it when I say I am defending retirement or, worse, retirement leisure. I see them shuddering and shaking their heads no.

They think I am talking to them, telling them I want to declare them retired and thrown away. Though, when I talk to working people and people who fear from their pensions they hear something else. They hear me defend age discrimination laws. They hear me defend the unappreciated abilities and great desire of older people to be trained on the job.

They hear me defend the real choice to work in old age.

I propose that all workers save 5% of their income in guaranteed retirement accounts (GRAs) to supplement their Social Security benefits with a $600 contribution from the federal government. The worker takes responsibility to ensure they have basic income — 70% of pre-retirement earnings — after age 65. Under my plan, only a full 40 years of work or more gets you the basic pension. People should work as long as they want to. The thrust of my proposal is that only when we secure basic income in old age, will employers have to entice older people into the labor pool. Without basic pensions older people are pushed and never have time to rest and reflect. That is simply not an option in a civilized society.

Thanks for your comments Jacob!

Teresa

P.S. Your early work on the history of the welfare state in the United States was helpful in my approach to the looming retirement crises. I never had your article with Beland far from my desk.

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