Some of you may have noticed amid all the hubub that the price of oil has dropped about $12.00 per barrel over the past couple of weeks. And though this may be good news for American motorists, the reasons for this price decline are decidedly bad news for a lot of people, whether they are motorists or not. What happens in Greece, as well as the other Club Med nations, matters very much for the U.S. It goes without saying that there is no good outcome to Greece's debt workout. The damage has already been done and the questions remaining are: who suffers more or less and, what reverberations will be felt around the world as a result of the measures taken. The scariest might be the deflation of Club Med economies that is ongoing and soon to be accelerating because of the austerity measures (cuts in government spending) that will shrink economic activity. This will likely make the debt concerns even worse by shrinking the economies ability to service that debt.
The fall in the price of oil is basically the markets opinion on the future of the global economy. Oil is falling for two reasons. The first is because the demand forecast has dropped due to worsening economic conditions. The other reason is that the dollar, which most oil contracts globally are traded in dollars, has strengthened against the Euro. But the stronger dollar, despite the benefit of cheaper oil, has a downside that American policy has been trying to avoid for the last decade. This downside is the worsening trade deficit, which should be getting more press time as the Euro drops in value against the dollar. The trade deficit is the undereported twin sister of the national debt. It is the trade deficit with China and others, notably Saudi Arabia, which helps the U.S. fund it's debt. This is likely to continue and does not bode well for anybody. The falling price of oil (copper, too) is saying that America's trading partners are going to demand much less oil in the coming months, and it also means they will be demanding fewer American-made goods as well.
The only thing governments fear more than inflation is deflation. Deflation means the economy gets smaller. Technically it means that money is destroyed. Ok, that's not technical, but that's what it means. Deflation is what American federal economic policy has been fighting against since October of 2008. It is why the inflation worry is fairly remote for the time being. This worry-free approach is being vindicated as the price of oil and copper falls sharply and overall prices fall in Greece, Spain, Portugal, and Ireland. It is the effect of a massive drop in government supports for those economies. What happens next is anybody's guess, but deflation in these countries likely means further crises are bound to happen in those economies most closely linked to them. And all countries economies are linked in one way or another.
I can't say for sure what the best response is to this crisis. It seems likely that there will be mistakes made over the coming weeks because governments are in a panic and mistakes are made in that situation. But the aim of all these machinations is to essentially keep a failed system going for a little while longer. Until something happens. Maybe they think it will eventually get to rights again if they just provide enough monetary loving care. But I think Europe should be planning for a decline in economic activity and policy should be to soften the landing and make contraction fair to all parties. This cannot happen in a vacuum. It requires an unusual burden sharing by those who are less effected for the sake of those who are more effected. Europe has the opportunity to lead the world in this. If the European governments realize that the fundamental crisis of economics as currently practiced is the growth imperative, then policies can be shaped to find a lower order of economic activity and minimize the social disharmonies that often accompany declining national fortunes.
Hard choices await the people of Greece and of Europe generally. What reducing economic activity ultimately means is asking people to give up something they already feel they deserve to have. It also means asking people who don't have to give up wanting to have certain things, a certain lifestyle that they see others have and want for themselves. So called developing countries will be countries-never-to-develop, at least along the lines of Europe and the U.S. In the meantime, the Europeans, and eventually, Americans, will be rearranging their lives to deal with their return, after many centuries, to living within the natural limits of the Earth's energy supply.
I have hope and am rooting for Europe because it probably represents the best hope for the rich countries in terms of recognizing the energy and climate predicaments we face and acting on them. Certainly it is better understood there than in the U.S. Having said that, it is perhaps a faint hope. People are people and they tend to act when crises of the kind like climate change and energy descent are upon them instead of off a few years into the future. But maybe Europe will clear a path for Americans to follow after the smug and haughty certainty of America's superiority has been wittled away by events.
Sunday, May 16, 2010
Sunday, May 9, 2010
The High Cost of Growth or, Two Tales of Diminishing Returns on Complexity
One of the weirdest and most consequential weeks in a long time has come to pass and it leaves me wondering what the heck it all means for the future. It's hard to even know which story is the most significant in terms of the immediate or long term consequences. Of course, not everything happened this week but were extensions of what happened the week before. The effects of these happenings are sure to last well into the future and cause other problems down the road.
The market, for starters, seems to have judged debt overburden a real problem. The threat of sovereign default by Greece unraveling a series of other sovereign defaults was enough to drain the entire years worth of gains in the S & P and the Dow Jones, not to mention stock markets in Asia and the rest of Europe. Now, after a weekend of scrambling, the European Central Bank has declared a TARP-like bailout fund for all the troubled PIIGS's worth a whopping $928 billion. I imagine that should cover it. The stock market futures are already eating up the news and indices look to start off the day very well. Now it is incumbent on the economies of Europe and the world to grow enough to make good on all the debt that has been transfered to the ECB. The prospect for that might look good in the coming year but further out the debt, among other looming concerns, will likely make economic growth a more difficult than it was before.
An equally grave and solemn tragedy is that of the blowout of the Deepwater Horizon oil rig in the Gulf of Mexico. Nobody can say for sure how much oil is leaking out of the ocean floor but it could easily be understated. The risk of the tube breaking off the wellhead could increase the output by as much as ten to twentyfold, thus foreclosing any chance of avoiding what can only be considered a catastrophe of the first order. The oil floating on the waves would be sure to enter the gulfstream and coat the coastlines of several states. I can only imagine what would happen to Florida if huge stretches of beachfront property is soaked in hydrocarbonic sludge. Perhaps even Rush Limbaugh will call for an end to offshore drilling once his slice of Florida beach smells so bad that he won't even visit and he can't find a buyer. Though it's early, it might not be too early to consider that there could be a whole lot of internal migrants from the Gulf coast states to other parts of the country to try their fortunes elsewhere.
The market, for starters, seems to have judged debt overburden a real problem. The threat of sovereign default by Greece unraveling a series of other sovereign defaults was enough to drain the entire years worth of gains in the S & P and the Dow Jones, not to mention stock markets in Asia and the rest of Europe. Now, after a weekend of scrambling, the European Central Bank has declared a TARP-like bailout fund for all the troubled PIIGS's worth a whopping $928 billion. I imagine that should cover it. The stock market futures are already eating up the news and indices look to start off the day very well. Now it is incumbent on the economies of Europe and the world to grow enough to make good on all the debt that has been transfered to the ECB. The prospect for that might look good in the coming year but further out the debt, among other looming concerns, will likely make economic growth a more difficult than it was before.
An equally grave and solemn tragedy is that of the blowout of the Deepwater Horizon oil rig in the Gulf of Mexico. Nobody can say for sure how much oil is leaking out of the ocean floor but it could easily be understated. The risk of the tube breaking off the wellhead could increase the output by as much as ten to twentyfold, thus foreclosing any chance of avoiding what can only be considered a catastrophe of the first order. The oil floating on the waves would be sure to enter the gulfstream and coat the coastlines of several states. I can only imagine what would happen to Florida if huge stretches of beachfront property is soaked in hydrocarbonic sludge. Perhaps even Rush Limbaugh will call for an end to offshore drilling once his slice of Florida beach smells so bad that he won't even visit and he can't find a buyer. Though it's early, it might not be too early to consider that there could be a whole lot of internal migrants from the Gulf coast states to other parts of the country to try their fortunes elsewhere.
What these ongoing stories have in common is that they are both consequences of the drive to maintain the growth machine of the global economy. Time will tell what BP was thinking when it drilled so deep underwater without taking special precautions, but saving a few million dollars on a state of the art drilling rig which now rests in peace at the bottom of the Gulf of Mexico looks really, really irresponsible. My guess is that the finance guys made the final decision and not the engineers. But it underscores a lesson that the diminishing returns on the oil based economy that we will be learning over and over again in the coming years. Dmitri Orlov makes an insightful comparison on his blog Club Orlov between Chernobyl and the Deepwater Horizon disaster. This isn't simply an accident. It is, as the Soviets called Chernobyl, a "technogenic catastrophe". The origin of the catastrophe is in the technology used for the extraction of oil from the ground. The more complex the technology, and the larger the scale, for the complexity is dependent on the scale of operations supporting it, the greater the scale of the catastrophe whenever one occurs.
The European situation exhibits the same predicament of complexity. This time it was the financial instruments used to deal with the planet-sized debt required to keep the global economy chugging along at 3% growth per year. The current European troubles are really just a new chapter of the continuing economic crisis that began in earnest with the credit meltdown of 2008 that started in U.S. banks. The cost of this to the Europeans may be too much, and the debt issued may never be paid back. Economists would say this is why we need to keep growth going because the consequences are too horrific to contemplate. But the chapter on growth just might have ended with this bailout in real terms. What the economists don't appreciate is that an energy crisis, and the ensuing resource scarcity that will follow, will make those debts unpayable because the instruments used to make the debt possible are sure to blow up again.
There's plenty that can still be done to salvage our economy but it involves much that is unpalatable to many people and especially to corporations. It will be apparent once the decline rate of oil extraction falls every year by 3-5%, causing a like fall in economic output. So imagine every year being like 2008-9, when everything hemorrhaged value and people lost their jobs by the hundreds of thousands. Our project should be to make this less painful by building the kind of society we can afford indefinitely according to the natural wealth provided by the planet, identify the simple and effective tools that can be employed, and rid ourselves of the manic need to continually acquire more and more useless crap just so we can maintain growth of the money system.
The European situation exhibits the same predicament of complexity. This time it was the financial instruments used to deal with the planet-sized debt required to keep the global economy chugging along at 3% growth per year. The current European troubles are really just a new chapter of the continuing economic crisis that began in earnest with the credit meltdown of 2008 that started in U.S. banks. The cost of this to the Europeans may be too much, and the debt issued may never be paid back. Economists would say this is why we need to keep growth going because the consequences are too horrific to contemplate. But the chapter on growth just might have ended with this bailout in real terms. What the economists don't appreciate is that an energy crisis, and the ensuing resource scarcity that will follow, will make those debts unpayable because the instruments used to make the debt possible are sure to blow up again.
There's plenty that can still be done to salvage our economy but it involves much that is unpalatable to many people and especially to corporations. It will be apparent once the decline rate of oil extraction falls every year by 3-5%, causing a like fall in economic output. So imagine every year being like 2008-9, when everything hemorrhaged value and people lost their jobs by the hundreds of thousands. Our project should be to make this less painful by building the kind of society we can afford indefinitely according to the natural wealth provided by the planet, identify the simple and effective tools that can be employed, and rid ourselves of the manic need to continually acquire more and more useless crap just so we can maintain growth of the money system.
Sunday, April 11, 2010
The Ecological Footprint and You
What the ecological perspective on the human habitation of the planet has to offer people is a box outside of which they cannot think. Nature as box may seem like an unnecessarily rigid confinement of it's apparent boundlessness and the adaptibility of it's creatures, but whenever that question of it's limits is broached, it is with the place of human life as a part of nature which we are truly concerned. Nature will continue with or without us, to be sure. The question of nature's boundlessness, however true, does not mean it is always useful to think about it in that way. There are completely natural habitats humans could never hope to survive in, let alone flourish, so the question of infinite human adaptibility has to be put to rest.
The human struggle to overcome the crueler aspects of nature and the large measure of success achieved lends a lot of historical credibility to the view that humans have been liberated from the animalistic constraints imposed by ecology. But what may be true in a relative sense is not necessarily true in an absolute sense. The hard part is knowing how to measure the limits of our achievements and to determine what is possible and what is impossible. This is where ecological concepts, principles, and laws are very useful to judge the human place in the natural world.
One broad and useful way to measure human's ultimate limit is the ecological footprint, an idea which sprang from the concept of carrying capacity used in ecology to understand an ecosystem's population limit. The ecological footprint puts the weight of human needs against the regenerative capacity of nature. It is specific to humans and is used to determine the sustainibility of a given level of economic activity. As a way to illustrate in a hopefully not simplistic way, if you use X number of trees to build a house and it takes Y number of years to regrow the trees, then Z number of houses can be built in some number of years sustainably. This can be applied to aquaculture, agriculture, energy use, and anything else that cycles through the human economy. All of this can be scaled up to the planetary level to give a grand total of how many humans can live at what economic level indefinitely within some margin of error.
Barring problems in methodology, it is a work in progress after all, the notion that it is possible to measure the impact of human civilization on the natural world, and to measure both the utmost human habitation and a desirable human habitation on the entire planet is entirely logical. There is not much that is mysterious about how people live or what people use to live and where they get it from. It really comes down to getting good data, which isn't always easy. The good news is the ecological footprint, like it's offspring the carbon footprint, can be used to guide public policy and personal behavior. The bad news is what it tells us about the human situation.
According to at least one version of the footprint (the main one), humanity surpassed the carrying capacity of the Earth sometime around 1980. As of 2006, as it says in the wikipedia article, humanity was living at 20% beyond carrying capacity. This means that humans are in overshoot of their global ecological support system. Currently human civilization needs 1.4 Earths to sustain it's current way of life. Barring an intragalactic raw materials trade opening up soon, the amount of basic natural stuff for human use will soon become scarce. And if there is any doubt about the legitimacy of the ecological footprint concept, I would point to two clear examples of resource overuse. Soil erosion is happening nearly everywhere there is agriculture. The recent flooding in Iowa showed that millions of tons of topsoil can be lost in a single thunderstorm. But soil erosion is happening at slower but still relentless rates all the time. The midwestern U.S. farm belt has lost half of it's natural topsoil since European settelment. Topsoil is still eroding faster than it is replenished in most places. Obviously, this state of affairs cannot continue for much longer. The other easily researched example of ecological overshoot is the overfishing of oceans. Several areas of the world's oceans have been overfished so much that the fish populations cannot recover by themselves. North Sea and Newfoundland fishing has seen the disappearance of makeral and Atlantic cod for commercial use and may be gone for good. Many other species are threatened with the same fate.
There are countless other indicators of human overshoot that are clear to anyone who studies the problem. Behind these examples lies a very potent and apparent fact: Humanity cannot sustain itself as it currently inhabits the Earth. The question is how far can we continue and what it means for us as we surpass the limits of natural bounty. It is possible for populations to continue to grow beyond the carrying capacity of an ecosystem for a while. What happens after that ecosystem is effectively tapped out is what should worry everyone.
The human struggle to overcome the crueler aspects of nature and the large measure of success achieved lends a lot of historical credibility to the view that humans have been liberated from the animalistic constraints imposed by ecology. But what may be true in a relative sense is not necessarily true in an absolute sense. The hard part is knowing how to measure the limits of our achievements and to determine what is possible and what is impossible. This is where ecological concepts, principles, and laws are very useful to judge the human place in the natural world.
One broad and useful way to measure human's ultimate limit is the ecological footprint, an idea which sprang from the concept of carrying capacity used in ecology to understand an ecosystem's population limit. The ecological footprint puts the weight of human needs against the regenerative capacity of nature. It is specific to humans and is used to determine the sustainibility of a given level of economic activity. As a way to illustrate in a hopefully not simplistic way, if you use X number of trees to build a house and it takes Y number of years to regrow the trees, then Z number of houses can be built in some number of years sustainably. This can be applied to aquaculture, agriculture, energy use, and anything else that cycles through the human economy. All of this can be scaled up to the planetary level to give a grand total of how many humans can live at what economic level indefinitely within some margin of error.
Barring problems in methodology, it is a work in progress after all, the notion that it is possible to measure the impact of human civilization on the natural world, and to measure both the utmost human habitation and a desirable human habitation on the entire planet is entirely logical. There is not much that is mysterious about how people live or what people use to live and where they get it from. It really comes down to getting good data, which isn't always easy. The good news is the ecological footprint, like it's offspring the carbon footprint, can be used to guide public policy and personal behavior. The bad news is what it tells us about the human situation.
According to at least one version of the footprint (the main one), humanity surpassed the carrying capacity of the Earth sometime around 1980. As of 2006, as it says in the wikipedia article, humanity was living at 20% beyond carrying capacity. This means that humans are in overshoot of their global ecological support system. Currently human civilization needs 1.4 Earths to sustain it's current way of life. Barring an intragalactic raw materials trade opening up soon, the amount of basic natural stuff for human use will soon become scarce. And if there is any doubt about the legitimacy of the ecological footprint concept, I would point to two clear examples of resource overuse. Soil erosion is happening nearly everywhere there is agriculture. The recent flooding in Iowa showed that millions of tons of topsoil can be lost in a single thunderstorm. But soil erosion is happening at slower but still relentless rates all the time. The midwestern U.S. farm belt has lost half of it's natural topsoil since European settelment. Topsoil is still eroding faster than it is replenished in most places. Obviously, this state of affairs cannot continue for much longer. The other easily researched example of ecological overshoot is the overfishing of oceans. Several areas of the world's oceans have been overfished so much that the fish populations cannot recover by themselves. North Sea and Newfoundland fishing has seen the disappearance of makeral and Atlantic cod for commercial use and may be gone for good. Many other species are threatened with the same fate.
There are countless other indicators of human overshoot that are clear to anyone who studies the problem. Behind these examples lies a very potent and apparent fact: Humanity cannot sustain itself as it currently inhabits the Earth. The question is how far can we continue and what it means for us as we surpass the limits of natural bounty. It is possible for populations to continue to grow beyond the carrying capacity of an ecosystem for a while. What happens after that ecosystem is effectively tapped out is what should worry everyone.
Sunday, April 4, 2010
Non-Negotiable Nature
Everything I post on this blog is informed primarily, maybe even exclusively, by the recognition that humans are animals and subject to the laws of nature. Call it a first principle. To be clear, I don't consider this the same as promoting a scientific understanding above, below, or equivalent to a religious experience with life and existence, but I would assert that a faith or a spirituality that is not informed by a scientific version of the Truth is inadequate for the times we live in. With that in mind, I think it is useful and valid to interpret the place of science and the various effects it has had on the history of the western world, whether good or bad, as the ultimate Faustian bargain(myth is an excellent way to understand existence as well). But is science as a means to humans to understand nature really the same as the Faustian drive for power and riches? There is certainly power to be had through the understanding of the workings of nature, but can the knowledge of something be responsible for the acts that knowledge enables? Mmm, maybe.
This may seem like a roundabout way to talk about a new economics for a resource-constrained world, but I believe that the magnitude of what needs to be considered should match the magnitude of the condition you find yourself in. In periods of dramatic change, one struggle you might find yourself in is between the way you thought the world worked and how the way you thought served to cause the changing circumstances. Examining your underlying assumptions is critical to achieving some new understanding that will be of use further down the road. To put some flesh on all of this, the changing circumstance is the steady depletion of economically extractable resources, especially the Ur-resource of crude oil. The underlying assumption is that the domination of nature by humans can continue without serious or fatal repercussions.
The domination of nature finds it's fullest expression in industrial civilization and the consumption driven economy it enables. The exploitation of the natural world for human use was given an enormous shot in the arm in the form of fossil fuels coupled with the advent of science and the technologies that the scientific method made possible. To bring back Faust for a bit, fossil fuels, playing the role of Mephistopheles, provided the power for humanity to use to dominate nature in ways it could not have otherwise done. The deal between Faust and the devil was for the devil to be the servant of Faust for a limited time in exchange for his eternal soul. During this time, the devil would give Faust everything he wished for; power, money, riches. Of course, Faust wound up in hell because he was unable to quit the bargain before the term expired.
The discovery and use of fossil fuels has produced a tricky predicament for humanity. We have come to believe during the course of the last 300 years that humans have liberated themselves from the hardships of past generations through their own cleverness. But the power we used to accomplish this is completely natural. No technology has created any fossil fuel energy but has instead just drawn it down from the Earth's natural endowment. Like the devil's bargain, the supply of hydrocarbons is limited in quantity and, therefore, in time. The cruel lesson in all of this is that, despite our cleverness, we cannot escape the natural bases of our lives. Yet we've behaved as though we had escaped the confines of the natural world and had created a world entirely seperate from it. The first principle of any economic system, or any society, of the future has to be as I stated it above because we in fact have not defeated or escaped nature by any stretch, not even in the industrial heyday.
The basis for any future society, then, has to be in accordance with ecological conditions. This essentially means it will be based on the flows of energy through the systems we rely on and human economic needs will be balanced with the needs of the natural systems that support us. All this seems obvious enough but when you consider that, sans any fossil fuels, the eventuality we all should be preparing for, the only energy source you are left with is the sun (fossil fuel is just old sunlight anyway). Of course, the sun produces wind, waves, photosynthesis, and heat. All our technology will have to be designed to make the most of these sources of energy. It will not be concentrated energy in the way fossil fuel energy is concentrated so the ability to power things we are accustomed to powering will likely not be there for us. This means industrial level production will not be possible over the long haul.
One concept used in ecology, and other fields like engineering, is the energy returned on energy invested(EROEI). Expressed as a ratio, it is one determiner of whether or not something is worth doing. A good way to think about it is through the example of a predator, like a lion, expending it's effort in catching food. It is worth it for a lion to go after bigger game like a gazelle or something, but not so much to go after rabbits. In fact, the lion would not be able to survive if it went after rabbits because, even if were able to catch one, it would have spent more energy getting the rabbit than the rabbit has to offer. At the very least, it would be barely worth it and the lion would have to either evolve to live off of rabbit meat or go extinct.
Humans ultimately face ecological limits to the economic systems they rely upon. It is like Faust choosing to give up earthly riches and return to the staid life of a normal person. It will be like the lion forced to hunt rabbits. Closer to home, it will be like a suburban mom downscaling her SUV for a moped. This could be achieved (except for the lion, perhaps), but requires something largely unprecedented. But, when the human situation is viewed from the perspective of science, and is viewed in a long enough time scale, then the stark reality becomes evident and the choices disappear. A particular future, one that believes humans will populate other planet, or one even in which we escape simple human labor, will not be occurring. Rather, it will likely be one in which we work the land, own less and travel less. In short, a future of smaller scale. Machines will be smaller and simpler and more costly to make. Things we use will be made to last a long time. Refitting the human presence on Earth to match these quite measurable physical constraints is the project for everyone.
Next week I will talk more on EROEI and other ecological concepts that will be the basis for future systems.
This may seem like a roundabout way to talk about a new economics for a resource-constrained world, but I believe that the magnitude of what needs to be considered should match the magnitude of the condition you find yourself in. In periods of dramatic change, one struggle you might find yourself in is between the way you thought the world worked and how the way you thought served to cause the changing circumstances. Examining your underlying assumptions is critical to achieving some new understanding that will be of use further down the road. To put some flesh on all of this, the changing circumstance is the steady depletion of economically extractable resources, especially the Ur-resource of crude oil. The underlying assumption is that the domination of nature by humans can continue without serious or fatal repercussions.
The domination of nature finds it's fullest expression in industrial civilization and the consumption driven economy it enables. The exploitation of the natural world for human use was given an enormous shot in the arm in the form of fossil fuels coupled with the advent of science and the technologies that the scientific method made possible. To bring back Faust for a bit, fossil fuels, playing the role of Mephistopheles, provided the power for humanity to use to dominate nature in ways it could not have otherwise done. The deal between Faust and the devil was for the devil to be the servant of Faust for a limited time in exchange for his eternal soul. During this time, the devil would give Faust everything he wished for; power, money, riches. Of course, Faust wound up in hell because he was unable to quit the bargain before the term expired.
The discovery and use of fossil fuels has produced a tricky predicament for humanity. We have come to believe during the course of the last 300 years that humans have liberated themselves from the hardships of past generations through their own cleverness. But the power we used to accomplish this is completely natural. No technology has created any fossil fuel energy but has instead just drawn it down from the Earth's natural endowment. Like the devil's bargain, the supply of hydrocarbons is limited in quantity and, therefore, in time. The cruel lesson in all of this is that, despite our cleverness, we cannot escape the natural bases of our lives. Yet we've behaved as though we had escaped the confines of the natural world and had created a world entirely seperate from it. The first principle of any economic system, or any society, of the future has to be as I stated it above because we in fact have not defeated or escaped nature by any stretch, not even in the industrial heyday.
The basis for any future society, then, has to be in accordance with ecological conditions. This essentially means it will be based on the flows of energy through the systems we rely on and human economic needs will be balanced with the needs of the natural systems that support us. All this seems obvious enough but when you consider that, sans any fossil fuels, the eventuality we all should be preparing for, the only energy source you are left with is the sun (fossil fuel is just old sunlight anyway). Of course, the sun produces wind, waves, photosynthesis, and heat. All our technology will have to be designed to make the most of these sources of energy. It will not be concentrated energy in the way fossil fuel energy is concentrated so the ability to power things we are accustomed to powering will likely not be there for us. This means industrial level production will not be possible over the long haul.
One concept used in ecology, and other fields like engineering, is the energy returned on energy invested(EROEI). Expressed as a ratio, it is one determiner of whether or not something is worth doing. A good way to think about it is through the example of a predator, like a lion, expending it's effort in catching food. It is worth it for a lion to go after bigger game like a gazelle or something, but not so much to go after rabbits. In fact, the lion would not be able to survive if it went after rabbits because, even if were able to catch one, it would have spent more energy getting the rabbit than the rabbit has to offer. At the very least, it would be barely worth it and the lion would have to either evolve to live off of rabbit meat or go extinct.
Humans ultimately face ecological limits to the economic systems they rely upon. It is like Faust choosing to give up earthly riches and return to the staid life of a normal person. It will be like the lion forced to hunt rabbits. Closer to home, it will be like a suburban mom downscaling her SUV for a moped. This could be achieved (except for the lion, perhaps), but requires something largely unprecedented. But, when the human situation is viewed from the perspective of science, and is viewed in a long enough time scale, then the stark reality becomes evident and the choices disappear. A particular future, one that believes humans will populate other planet, or one even in which we escape simple human labor, will not be occurring. Rather, it will likely be one in which we work the land, own less and travel less. In short, a future of smaller scale. Machines will be smaller and simpler and more costly to make. Things we use will be made to last a long time. Refitting the human presence on Earth to match these quite measurable physical constraints is the project for everyone.
Next week I will talk more on EROEI and other ecological concepts that will be the basis for future systems.
Sunday, March 28, 2010
When the Obvious Goes Unnoticed
What the market meltdown of October of 2008 and the subsequent resuscitation by the governments of the world have given the global citizenry is a whole lot of unease and doubt about the viability of the global economy. To be sure, the amount of unease and doubt among people varies quite a bit, but many fewer of them now see a future that could be called bright or prosperous. The numbers are well known enough and truly staggering. You don't have to look much further than the rates of unemployment and foreclosure to understand how bad things are for people. On top of this, wealth people once believed they had and now do not makes the unease, doubt, fear, anxiety and what have you thoroughly understandable. The lingering question is how deep does this go. People generally gather, or are open to the possibility, that this is a systemic crisis. But how big of a system are we talking about? What is the fluff economy and what has real value? What can be counted on to bring us our former prosperity? The questions can be iterated in many different ways.
Predictably, the people's confidence in the expertocracy is at an all time low. And it's no wonder that this is be the case given the near total failure of economists and other observers to predict the biggest meltdown since the Second World War. The question has to be asked: What are they looking at when they look at the economy? What is the value of economic models if they fail to see such an enormous crisis right before it happens?
A conclusion one might draw from all of this is that the system is even bigger than economists realize. One possible outcome from the continuation of the market difficulties is the need to scrap the way the economists understand their craft. Fortunately for us, there are plenty of different ways to look at the economy, from an academic or a practitioner's perspective, other than the reigning theoretical contraption of Neo-classical economics. The system, it turns out, is much bigger than the neo-classical economists ever dreamed, and someday soon we'll have to quickly and carefully move to some other modus operandi regarding our economic behavior.
The problems with neo-classical economics have been well-documented by critics from many different points of view but I'll just take a few of the foundational ones to illustrate what's being talked about. The neo-classical model holds that people are three things; they are rational, are utility maximizers, and have good information. This may seem absurd on the face of it but it serves as a theoretical basis for trained economists everywhere. That we are well-informed rational utility maximizers can be proven false, in my mind anyway, by one example. The great Beanie Baby Bubble (BBB) of whenever put to rest any questions about what people can become given the right circumstances. What it showed is that whimsy, fueled by too much extra money, informed by bad taste, and oblivious to quality is also an economic force. Now, this example convinces me that economics needs a serious rethink, but others may need more. This subject will be be touched on again. There's plenty more.
An even deeper problem with neo-classical economics comes from the fact that it completely ignores natural resources or natural systems except as commodities to be bought or sold. The thinking goes that resources are unlimited and that nature is a endless garbage dump. This, too, is absurd on the face of it, yet there it is. There are historical reasons for this that go back to the early days of the economic philosophies of the 19th century and it involves the scientific understanding of nature at the time and, though that understanding has certainly changed, economics has not tried to ground itself in natural science since. The thrust of the new economic thinking reconciles this and begins with energy as the lifeforce of all economies, as it is with all systems, natural or otherwise.
People losing there houses to foreclosure or their jobs to a bad economy may not find much consolation in this, or give a rip either way, but it is at least an attempt to get an idea of the magnitude of the system that is failing and point out that this failure is one whose roots can conceivably be traced back to centuries long gone. In a time when many people are compelled to think in quite short time frames, it is incumbent on others to think in longer ones. It is important also for people to appreciate how high-falutin' theories hatched in the brains of pasty academics and dead thinkers indeed have powerful impacts on the lives of anyone who lives in a civilization.
Next time I'll go into some of these new economic ideas and, for as exciting as they are, also go into why someone who sees the consumer society as the pinnacle of human achievement will likely be way less excited.
Predictably, the people's confidence in the expertocracy is at an all time low. And it's no wonder that this is be the case given the near total failure of economists and other observers to predict the biggest meltdown since the Second World War. The question has to be asked: What are they looking at when they look at the economy? What is the value of economic models if they fail to see such an enormous crisis right before it happens?
A conclusion one might draw from all of this is that the system is even bigger than economists realize. One possible outcome from the continuation of the market difficulties is the need to scrap the way the economists understand their craft. Fortunately for us, there are plenty of different ways to look at the economy, from an academic or a practitioner's perspective, other than the reigning theoretical contraption of Neo-classical economics. The system, it turns out, is much bigger than the neo-classical economists ever dreamed, and someday soon we'll have to quickly and carefully move to some other modus operandi regarding our economic behavior.
The problems with neo-classical economics have been well-documented by critics from many different points of view but I'll just take a few of the foundational ones to illustrate what's being talked about. The neo-classical model holds that people are three things; they are rational, are utility maximizers, and have good information. This may seem absurd on the face of it but it serves as a theoretical basis for trained economists everywhere. That we are well-informed rational utility maximizers can be proven false, in my mind anyway, by one example. The great Beanie Baby Bubble (BBB) of whenever put to rest any questions about what people can become given the right circumstances. What it showed is that whimsy, fueled by too much extra money, informed by bad taste, and oblivious to quality is also an economic force. Now, this example convinces me that economics needs a serious rethink, but others may need more. This subject will be be touched on again. There's plenty more.
An even deeper problem with neo-classical economics comes from the fact that it completely ignores natural resources or natural systems except as commodities to be bought or sold. The thinking goes that resources are unlimited and that nature is a endless garbage dump. This, too, is absurd on the face of it, yet there it is. There are historical reasons for this that go back to the early days of the economic philosophies of the 19th century and it involves the scientific understanding of nature at the time and, though that understanding has certainly changed, economics has not tried to ground itself in natural science since. The thrust of the new economic thinking reconciles this and begins with energy as the lifeforce of all economies, as it is with all systems, natural or otherwise.
People losing there houses to foreclosure or their jobs to a bad economy may not find much consolation in this, or give a rip either way, but it is at least an attempt to get an idea of the magnitude of the system that is failing and point out that this failure is one whose roots can conceivably be traced back to centuries long gone. In a time when many people are compelled to think in quite short time frames, it is incumbent on others to think in longer ones. It is important also for people to appreciate how high-falutin' theories hatched in the brains of pasty academics and dead thinkers indeed have powerful impacts on the lives of anyone who lives in a civilization.
Next time I'll go into some of these new economic ideas and, for as exciting as they are, also go into why someone who sees the consumer society as the pinnacle of human achievement will likely be way less excited.
Sunday, March 21, 2010
Followership-An Appeal
Not only does the US have a tremendous problem with it's leadership, it has maybe an even bigger problem with it's followership. At the present moment, the followership is disatisfied with it's leadership, and the relationship is a little bit strained. Not that I'm letting the leadership side off the hook but let's just put it aside for now and focus on the issues with the much larger group of followers and why it seems unable to make reasonable or coherent demands of it's leaders.
A follower is a citizen. It is one of the governed. In a democracy, citizenship comes with a set of responsibilties which those followers living under a different sort of arrangement, like a totalitarian single party dictatorship, are not burdened with. Democracy, you could say, is a relationship between the governors and the governed that requires a certain amount of work to be done on both sides in order for it to function properly. The relationship in a democracy is more mature than in a non-democratic system and citizens of a democracy not only have to be able to emotionally handle the relationship, but stay intellectually fit to be alert to what's going on. This demands the use of reason, a capacity and the patience to deliberate, the willingness to learn about the world, and truthfulness. That is what the country was founded on, after all.
The purpose of this blog primarily is to address the question of what is going on. That the followers largely don't know is painfully evident in the demands many of them make. It seems odd to me that voters would hold politicians accountable for rising gas prices, for example, yet tell that same government to stay out of the operations of the free market. Then they demand a lower gas tax even though that very same tax money is used to subsidize the oil industry so that it will fund exploration for new oil. In a similar vain, it is common for people to complain about how everything in America is made in China yet will line up at Walmart on the morning of Black Friday to buy all the stuff made in China. These are two tiny examples of the contradictory behavior of a lot of Americans. Hopefully they are representative enough for you to get my point.
More alarming than simple incoherence is that many people in this country are angry, for one reason or another, about the direction the country is headed. I wouldn't try to tell an angry person that it is wrong to feel angry about the situation in America, but it's important to keep in mind that people often direct their anger at the wrong things or are angry for the wrong reasons. There's a lot of that going on these days. If you couple anger and incoherence in the same person then you have someone who is ripe for exploitation by another who sees opportunity in all the anger going around. The Tea Party movement is made up exclusively of people like this.
As difficult as it is to comprehend someone who is incoherent, it is not difficult to see how that person, scaled up to a movement, can undermine useful collective measures to change course when this particular collective rejects collective action as a first priciple. The black hole of Tea Party ideology is that the very individualistic program they wish to foist onto the body politic most favors the corporate power that is ripping them off via the government they seek to tear down. Rather than regulate this corporate power, they would rather blame those among us who use, and abuse, welfare. Likewise, they would blame unions which demand living wages from the corporations for the exportation of manufacturing jobs instead of looking more systemically at the decades-long downward trend of manufacturing in America and other advanced economies.
These decades-long political disputes miss something altogether larger and more fundamental. The U.S. decades-long decline is due to things we cannot stop no matter how hard we we may wish we could. The underlying reasons we are losing ground, by many measures, can be traced to the simultaneous need for growth and the impossibility to grow. I'm not simply referring to economic growth, but growth of the whole enterprise. What I am positing is that, even if we'd done everything "right" since the 1970's, when the downturn arguably began, we would still be faced with decline, economic or otherwise, for reasons that may or may not be widely known or acknowledged. The effects of our decline are apparent enough as things are right now, but we've managed to conceal an underlying fatal flaw in the systems that have been erected and expanded since that time as a part of the drive for economic growth. The flaw is diminishing returns, a flaw we can't do much about if the system demands growth for survival. At some point the economy will start to eat itself, like a body without food will eat itself.
In one sense, I agree with the Tea Party movement and with conservatives generally. Things are getting unwieldy and too big to mange. So the Tea Party movement and conservatives are, in their own pre-conscious way, perceiving the diminishing returns of complexity. I appreciate that a movement based on decomplexification of the American system is hardly good fodder for bumper sticker manufacturers, but a general realization of this point, of complexity as the illness and economic malaise as merely a symptom, then a more thoughtful discussion on where we go from here might ensue. To extend the metaphor a bit further and apply it too another related issue, the debt is a symptom, not a cause of our decline. The conservative mania over the public debt misses the deeper roots of our predicament. Growth is the end we cannot achieve but our system depends on growth for it's very survival. That is why we borrow. If we did not borrow, we would descend wildly into a depression.
The link above has a chart that tells the story of the U.S. predicament with it's debt. But the blogger holds some of the myths about growth and economic freedom that will purportedly attain that growth. But, the chart says a lot about the longer trend and some of the commentary I am sympathetic to. But anyone who is willing to take back the power ceded to the banks has to be equally willing to accept the reduction of our financial well-being that will go along with it. The necessity of taking down and shrinking the financial industry is so that it does not take the taxpayer down with it. Eventually, the "money" will have to be written off. This means deflation. And even if the nation manages to avoid the worst of it it will mean the end of growth. Stagflation may be the best we can hope for. With food and energy prices likely to rise and stay high, high enough at least to kill growth, we could be even faced with an inflationary depression, something probably not deemed possible by economists at the moment.
The acceptance of this outcome could lead to a different set of prescriptions based on more modest expectations and a fuller sense of historical actuality. We are a superpower losing it's grip on the status quo. This is a historical process that will last several decades into the future. We should be wondering about a reasonable place for us to bottom out in a way that does not tear the fabric of society apart.
A follower is a citizen. It is one of the governed. In a democracy, citizenship comes with a set of responsibilties which those followers living under a different sort of arrangement, like a totalitarian single party dictatorship, are not burdened with. Democracy, you could say, is a relationship between the governors and the governed that requires a certain amount of work to be done on both sides in order for it to function properly. The relationship in a democracy is more mature than in a non-democratic system and citizens of a democracy not only have to be able to emotionally handle the relationship, but stay intellectually fit to be alert to what's going on. This demands the use of reason, a capacity and the patience to deliberate, the willingness to learn about the world, and truthfulness. That is what the country was founded on, after all.
The purpose of this blog primarily is to address the question of what is going on. That the followers largely don't know is painfully evident in the demands many of them make. It seems odd to me that voters would hold politicians accountable for rising gas prices, for example, yet tell that same government to stay out of the operations of the free market. Then they demand a lower gas tax even though that very same tax money is used to subsidize the oil industry so that it will fund exploration for new oil. In a similar vain, it is common for people to complain about how everything in America is made in China yet will line up at Walmart on the morning of Black Friday to buy all the stuff made in China. These are two tiny examples of the contradictory behavior of a lot of Americans. Hopefully they are representative enough for you to get my point.
More alarming than simple incoherence is that many people in this country are angry, for one reason or another, about the direction the country is headed. I wouldn't try to tell an angry person that it is wrong to feel angry about the situation in America, but it's important to keep in mind that people often direct their anger at the wrong things or are angry for the wrong reasons. There's a lot of that going on these days. If you couple anger and incoherence in the same person then you have someone who is ripe for exploitation by another who sees opportunity in all the anger going around. The Tea Party movement is made up exclusively of people like this.
As difficult as it is to comprehend someone who is incoherent, it is not difficult to see how that person, scaled up to a movement, can undermine useful collective measures to change course when this particular collective rejects collective action as a first priciple. The black hole of Tea Party ideology is that the very individualistic program they wish to foist onto the body politic most favors the corporate power that is ripping them off via the government they seek to tear down. Rather than regulate this corporate power, they would rather blame those among us who use, and abuse, welfare. Likewise, they would blame unions which demand living wages from the corporations for the exportation of manufacturing jobs instead of looking more systemically at the decades-long downward trend of manufacturing in America and other advanced economies.
These decades-long political disputes miss something altogether larger and more fundamental. The U.S. decades-long decline is due to things we cannot stop no matter how hard we we may wish we could. The underlying reasons we are losing ground, by many measures, can be traced to the simultaneous need for growth and the impossibility to grow. I'm not simply referring to economic growth, but growth of the whole enterprise. What I am positing is that, even if we'd done everything "right" since the 1970's, when the downturn arguably began, we would still be faced with decline, economic or otherwise, for reasons that may or may not be widely known or acknowledged. The effects of our decline are apparent enough as things are right now, but we've managed to conceal an underlying fatal flaw in the systems that have been erected and expanded since that time as a part of the drive for economic growth. The flaw is diminishing returns, a flaw we can't do much about if the system demands growth for survival. At some point the economy will start to eat itself, like a body without food will eat itself.
In one sense, I agree with the Tea Party movement and with conservatives generally. Things are getting unwieldy and too big to mange. So the Tea Party movement and conservatives are, in their own pre-conscious way, perceiving the diminishing returns of complexity. I appreciate that a movement based on decomplexification of the American system is hardly good fodder for bumper sticker manufacturers, but a general realization of this point, of complexity as the illness and economic malaise as merely a symptom, then a more thoughtful discussion on where we go from here might ensue. To extend the metaphor a bit further and apply it too another related issue, the debt is a symptom, not a cause of our decline. The conservative mania over the public debt misses the deeper roots of our predicament. Growth is the end we cannot achieve but our system depends on growth for it's very survival. That is why we borrow. If we did not borrow, we would descend wildly into a depression.
The link above has a chart that tells the story of the U.S. predicament with it's debt. But the blogger holds some of the myths about growth and economic freedom that will purportedly attain that growth. But, the chart says a lot about the longer trend and some of the commentary I am sympathetic to. But anyone who is willing to take back the power ceded to the banks has to be equally willing to accept the reduction of our financial well-being that will go along with it. The necessity of taking down and shrinking the financial industry is so that it does not take the taxpayer down with it. Eventually, the "money" will have to be written off. This means deflation. And even if the nation manages to avoid the worst of it it will mean the end of growth. Stagflation may be the best we can hope for. With food and energy prices likely to rise and stay high, high enough at least to kill growth, we could be even faced with an inflationary depression, something probably not deemed possible by economists at the moment.
The acceptance of this outcome could lead to a different set of prescriptions based on more modest expectations and a fuller sense of historical actuality. We are a superpower losing it's grip on the status quo. This is a historical process that will last several decades into the future. We should be wondering about a reasonable place for us to bottom out in a way that does not tear the fabric of society apart.
Sunday, February 28, 2010
My Summer Wish List
Given the widespread and stubborn refusal by most Americans to accept the eventualities of climate change disaster and the more immediate peaking of global oil production, I have found myself wishing for clear signals from nature and the market that would bolster the arguments of myself and others who appreciate the implications of such things. My wish springs from the frustration I feel as I observe the national "discussion" and my desire for it to transcend the "discussion's" most moronic elements to something more urgent. Seeing as the people who make the "discussion" especially moronic are the very same people who seem to base their opinions about these two subjects on whether or not they personally experience hot or cold weather or high gas prices I have come to hope for events that will force the issue and change the "discussion". My modest summer wish list therefore is based on what I believe is needed to jar my thicker headed compatriots enough to get them to realize that which is a clearly demonstrated reality.
The first wish I have is that this summer will be so hot that multiple high temperature records across the continental United States are smashed to pieces. It should be hot enough to make most anyone very uncomfortable but not so hot to cause anyone to die. Many Americans alive today need to feel very uncomfortable; to feel hot, sweaty, and perturbed, coupled with a sense of dread as the unpleasantness of the heat seems to have no end. All Americans should feel as northerners do in January who long for the end of winter and respite from the cold. Autumn should be embraced the way spring is embraced after winter.
My second and final wish is for gasoline prices to pole vault $3.00 a gallon and perhaps land somewhere in the $3.30-50 range in early summer then stay there. You're likely to hear many voiced and/or muttered expletives referring to the excretory functions, the sexual organs or sexual activity, or using the lords name in vain, which means you should cover your children's ears when getting gasoline this summer if this wish of mine comes to pass.
These two wishes in fact have pretty good chances of coming true. Oblivious to the heat waves that struck the southern hemisphere during it's summer, the northern hemisphere saw some cold but generally unremarkable winter temperatures, over a thirty year average, due to the Arctic Oscillation having entered it's negative phase. The Arctic Oscillation is a normal occurrence that effects weather patterns in the northern hemisphere so should not be seen as evidence of global warming. However, arctic temperatures were anywhere from 9-13 degrees F above normal this winter, which is a lot, and should be seen as evidence of global warming. The result of all of this is that the northern hemisphere really got screwed out of a globally warmed winter because of the Arctic Oscillation and were left wondering about the reality of global warming.
As for the coming summer, the main driver of temperature will be El Nino. The Pacific Ocean entered the El Nino phase last fall and will probably make this summer very hot and wet. As of last November (I haven't looked recently) surface temperature readings in the Pacific were some of the highest ever recorded. The worrisome part about this is that the bigger and more destructive storms over the continent that accompany El Nino years will probably be a constant news feature. Not to make this a farmer's almanac or anything, I'd say that folks living in the middle of the continent and in the deep South should make sure the tornado shelter is ready to roll.
The price of gas is likely to go up because of the actions of refiners. Whether the price of oil goes up or not, the refiners are in serious need of profit. The $70-80 a barrel range for the price of oil doesn't seem to support the $2.50 or so per gallon gasoline that most Americans have been paying for the past several months. Or the $2.72 I saw earlier today. Another reason is that there is a gasoline glut in the market because demand in the U.S. has fallen so much. So refiners seem to be in a strange supply-demand situation. There is too much gas on the market, forcing prices down, but the price of oil is high. It should be interesting to see how people interpret this. Will they call the speculators before congress to explain themselves? Will they clamor for new refining capacity? Or will they see it as a new normal that Americans will have to adapt to? The lesson I would like for them to get is this: If Americans want to drill for more oil they will pay more for gas, and if they want cheap gas they will have to use less. That sums up the predicament we find ourselves in.
This summer, then, whenever you hear someone swearing through his teeth about high gas prices, turn to him or her and say "Hey, if you want cheap gas, then you gotta stop usin' it". It might help if you say it in your best Jeff Spicoli imitation to add insult to injury. Likewise, when temperatures have reached unbearable levels, track down you're favorite global warming denier and ask "how's that global cooling treating you?"
The first wish I have is that this summer will be so hot that multiple high temperature records across the continental United States are smashed to pieces. It should be hot enough to make most anyone very uncomfortable but not so hot to cause anyone to die. Many Americans alive today need to feel very uncomfortable; to feel hot, sweaty, and perturbed, coupled with a sense of dread as the unpleasantness of the heat seems to have no end. All Americans should feel as northerners do in January who long for the end of winter and respite from the cold. Autumn should be embraced the way spring is embraced after winter.
My second and final wish is for gasoline prices to pole vault $3.00 a gallon and perhaps land somewhere in the $3.30-50 range in early summer then stay there. You're likely to hear many voiced and/or muttered expletives referring to the excretory functions, the sexual organs or sexual activity, or using the lords name in vain, which means you should cover your children's ears when getting gasoline this summer if this wish of mine comes to pass.
These two wishes in fact have pretty good chances of coming true. Oblivious to the heat waves that struck the southern hemisphere during it's summer, the northern hemisphere saw some cold but generally unremarkable winter temperatures, over a thirty year average, due to the Arctic Oscillation having entered it's negative phase. The Arctic Oscillation is a normal occurrence that effects weather patterns in the northern hemisphere so should not be seen as evidence of global warming. However, arctic temperatures were anywhere from 9-13 degrees F above normal this winter, which is a lot, and should be seen as evidence of global warming. The result of all of this is that the northern hemisphere really got screwed out of a globally warmed winter because of the Arctic Oscillation and were left wondering about the reality of global warming.
As for the coming summer, the main driver of temperature will be El Nino. The Pacific Ocean entered the El Nino phase last fall and will probably make this summer very hot and wet. As of last November (I haven't looked recently) surface temperature readings in the Pacific were some of the highest ever recorded. The worrisome part about this is that the bigger and more destructive storms over the continent that accompany El Nino years will probably be a constant news feature. Not to make this a farmer's almanac or anything, I'd say that folks living in the middle of the continent and in the deep South should make sure the tornado shelter is ready to roll.
The price of gas is likely to go up because of the actions of refiners. Whether the price of oil goes up or not, the refiners are in serious need of profit. The $70-80 a barrel range for the price of oil doesn't seem to support the $2.50 or so per gallon gasoline that most Americans have been paying for the past several months. Or the $2.72 I saw earlier today. Another reason is that there is a gasoline glut in the market because demand in the U.S. has fallen so much. So refiners seem to be in a strange supply-demand situation. There is too much gas on the market, forcing prices down, but the price of oil is high. It should be interesting to see how people interpret this. Will they call the speculators before congress to explain themselves? Will they clamor for new refining capacity? Or will they see it as a new normal that Americans will have to adapt to? The lesson I would like for them to get is this: If Americans want to drill for more oil they will pay more for gas, and if they want cheap gas they will have to use less. That sums up the predicament we find ourselves in.
This summer, then, whenever you hear someone swearing through his teeth about high gas prices, turn to him or her and say "Hey, if you want cheap gas, then you gotta stop usin' it". It might help if you say it in your best Jeff Spicoli imitation to add insult to injury. Likewise, when temperatures have reached unbearable levels, track down you're favorite global warming denier and ask "how's that global cooling treating you?"
Sunday, February 14, 2010
Stand Up and Get Real
American politics has become terminally warped by the influence of money infused into the system by corporate self-interest and disinformation campaigns funded by them through "think tanks" who only think about how dish up a distorted reality for popular consumption. Primarily, almost exclusively, the seizure of political power by corporations, particularily Wall Street but really by any of the major industries, has been paved by Republican ideology and actions. The drive to deregulate industry, the gutting of any measure taken to make corporations responsible for the negative impacts of their activities, through litigation or through pricing, and to strengthen corporate influence over the political sphere have all been championed by Republicans. The Republican Party represents the core obstruction to doing what is necessary for this country to avoid an epochal shitstorm.
Given this, whatever adaptations people may take over the coming years are not likely to have much assistance from the Federal government, at least in the near term. I hope I'm wrong, but I don't think so. Until there is a dramatic change in how the American people and the political leaders view our present situation as a nation, constructive action by governments is likely to come mainly from state and local governments based on whatever circumstances they find themselves facing. This is likely to be limited, too, given the severe budgetary problems of almost any government you can think of. But at least the smaller governments will be more responsive to the needs of their people and will be better able to guide a transition from the global to the local economies I see happening now and continuing for decades into the future.
Having said that, I understand the political impossibility at this juncture for my views to be aired before the political establishment. No politician that I know of has gotten elected holding the bummer views I have regarding the material impossibilty of the future most Americans regard as normal. Nonetheless, I'd like to provide two criticisms of the Democratic Party positions which I think are no longer viable or are otherwise counterproductive and may be a way to break the political logjam with conservatives. I won't hold my breath on that one.
The most immediately controversial subject on which I disagree with most Democrats is immigration. The U.S. is projected to reach somewhere around 450 million people by mid-century. We should not celebrate this. Immigrants seeking the American dream will wind up creating a whole new army of American consumers and suburban inhabitants. This cannot be allowed to happen. The population globally is already too large by a factor of at least three for reasons I've touched on in previous posts. Trying to extend our way of life to other nations will hasten an ecological disaster. Also, the United States should not attempt to relieve population pressures in other countries by taking on immgrants but instead should throw our effort exclusively into assisting these other nations attempts to reduce fertility rates through family planning programs and reduce poverty. Democrats should recognize that we as a nation will not be richer, stronger, or happier with more people.
Democrats should also recognize that some sizable proportion of the relative largesse that the U.S. currently possesses is based on the bubbled valuation of the economy and the drawing of resources and labor of other countries and cannot be counted on to fund large projects. This translates to a broad diminishment of our expectations due to what is possible financially. I don't mean to say that programs like a national health insurance program funded by taxpayers isn't the best idea. It is. What I have in mind is infrastructure. We will have to make some trade-offs regarding transportation, among other things, that will require political courage like they've hitherto been unwilling to demonstrate. A serious response to global warming and energy security requires that ultimately we give up the automotive way of life. I realize Americans love their cars, but Americans have to be realistic, and some frank and honest leadership has to be tried to lead or drag Americans into the future. The hidden cost of the GM bail-out is that we effectively chose cars over trains. It was an opportunity cost.
What these two critiques have in common is that they both pertain to growth. As time goes on, it is more apparent that the U.S. is, and has been, putting more effort into maintaining our global position than we are benefitting from it. Extending our presence around the world, growing the empire, so to speak, will only make it worse. On balance, we are spending more than we earn. That much is obvious. But to disengage from the effort to globalize the American system means that we would have to accept a reduced geopolitical and economic situation and all the dislocation, power vacuums, and loss of status that goes along with it. This is the consensus reality Americans will ultimately have to face. It'll happen one way or another and we should embark on a policy of managed decline.
There's more I'd like to say on this. One point that I didn't include is on tramsportation and how we should spend our money. Instead of building one or two high speed rail lines between amjor cities, we should electrify the entire rail system for passenger trains that top out at 80-100 mph. The cost of high speed rail is much greater than slower rail, and the energy use follows an exponential curve upwards starting at around 100 mph. Money we use for highways should be transferred to this purpose. The system of roads will have to be scaled down and made cheaper. Michigan has already begun this process by converting several paved country roads to gravel. From where i'm sitting in Minneapolis, the streets are as bad as I've ever seen them. A resurfacing of my street, Xerxes, done last summer is already wearing away. It needed to be repaved but apparently that's not in the cards. Xerxes is a quite busy two-lane through street to the freeway. My suspension is killing me.
In general, I think Democrats, and perhaps most Americans, hold the view that the U.S. shouldn't try to extend it's reach into more and more regions of the world. At the same time, I think that the benefits of our global reach feeds the expectations of liberals like they do anyone else and should be taken into account. The Democratic party has to find a way to get out from under the thumb of big money and special interests that favors whichever party is more willing to do something for them. Beyond the question of whether Democrats can compete with Republicans if the party eschews corporate money for the sake of integrity, it is the only way for us to act on what needs to be acted on. But Americans also need to appreciate that if we do so, it will not be all good. It will mean a wholesale scaling down of the entire American enterprise to something much more modest and much less complex.
Given this, whatever adaptations people may take over the coming years are not likely to have much assistance from the Federal government, at least in the near term. I hope I'm wrong, but I don't think so. Until there is a dramatic change in how the American people and the political leaders view our present situation as a nation, constructive action by governments is likely to come mainly from state and local governments based on whatever circumstances they find themselves facing. This is likely to be limited, too, given the severe budgetary problems of almost any government you can think of. But at least the smaller governments will be more responsive to the needs of their people and will be better able to guide a transition from the global to the local economies I see happening now and continuing for decades into the future.
Having said that, I understand the political impossibility at this juncture for my views to be aired before the political establishment. No politician that I know of has gotten elected holding the bummer views I have regarding the material impossibilty of the future most Americans regard as normal. Nonetheless, I'd like to provide two criticisms of the Democratic Party positions which I think are no longer viable or are otherwise counterproductive and may be a way to break the political logjam with conservatives. I won't hold my breath on that one.
The most immediately controversial subject on which I disagree with most Democrats is immigration. The U.S. is projected to reach somewhere around 450 million people by mid-century. We should not celebrate this. Immigrants seeking the American dream will wind up creating a whole new army of American consumers and suburban inhabitants. This cannot be allowed to happen. The population globally is already too large by a factor of at least three for reasons I've touched on in previous posts. Trying to extend our way of life to other nations will hasten an ecological disaster. Also, the United States should not attempt to relieve population pressures in other countries by taking on immgrants but instead should throw our effort exclusively into assisting these other nations attempts to reduce fertility rates through family planning programs and reduce poverty. Democrats should recognize that we as a nation will not be richer, stronger, or happier with more people.
Democrats should also recognize that some sizable proportion of the relative largesse that the U.S. currently possesses is based on the bubbled valuation of the economy and the drawing of resources and labor of other countries and cannot be counted on to fund large projects. This translates to a broad diminishment of our expectations due to what is possible financially. I don't mean to say that programs like a national health insurance program funded by taxpayers isn't the best idea. It is. What I have in mind is infrastructure. We will have to make some trade-offs regarding transportation, among other things, that will require political courage like they've hitherto been unwilling to demonstrate. A serious response to global warming and energy security requires that ultimately we give up the automotive way of life. I realize Americans love their cars, but Americans have to be realistic, and some frank and honest leadership has to be tried to lead or drag Americans into the future. The hidden cost of the GM bail-out is that we effectively chose cars over trains. It was an opportunity cost.
What these two critiques have in common is that they both pertain to growth. As time goes on, it is more apparent that the U.S. is, and has been, putting more effort into maintaining our global position than we are benefitting from it. Extending our presence around the world, growing the empire, so to speak, will only make it worse. On balance, we are spending more than we earn. That much is obvious. But to disengage from the effort to globalize the American system means that we would have to accept a reduced geopolitical and economic situation and all the dislocation, power vacuums, and loss of status that goes along with it. This is the consensus reality Americans will ultimately have to face. It'll happen one way or another and we should embark on a policy of managed decline.
There's more I'd like to say on this. One point that I didn't include is on tramsportation and how we should spend our money. Instead of building one or two high speed rail lines between amjor cities, we should electrify the entire rail system for passenger trains that top out at 80-100 mph. The cost of high speed rail is much greater than slower rail, and the energy use follows an exponential curve upwards starting at around 100 mph. Money we use for highways should be transferred to this purpose. The system of roads will have to be scaled down and made cheaper. Michigan has already begun this process by converting several paved country roads to gravel. From where i'm sitting in Minneapolis, the streets are as bad as I've ever seen them. A resurfacing of my street, Xerxes, done last summer is already wearing away. It needed to be repaved but apparently that's not in the cards. Xerxes is a quite busy two-lane through street to the freeway. My suspension is killing me.
In general, I think Democrats, and perhaps most Americans, hold the view that the U.S. shouldn't try to extend it's reach into more and more regions of the world. At the same time, I think that the benefits of our global reach feeds the expectations of liberals like they do anyone else and should be taken into account. The Democratic party has to find a way to get out from under the thumb of big money and special interests that favors whichever party is more willing to do something for them. Beyond the question of whether Democrats can compete with Republicans if the party eschews corporate money for the sake of integrity, it is the only way for us to act on what needs to be acted on. But Americans also need to appreciate that if we do so, it will not be all good. It will mean a wholesale scaling down of the entire American enterprise to something much more modest and much less complex.
Friday, February 5, 2010
The Politics of Decline
It's not a mystery to anyone who watches the political goings-on in Washington D.C. and elsewhere that the two parties are in terminal gridlock over not only what to do but over what is the reality we should be doing something about. Perhaps the only consensus to be found is that the position of these United States is very tenuous. I call the gridlock "terminal" because as each party is prevented from putting forth any program based on it's version of reality in a meaningful way, the efficacy of the differing programs can never be fully measured. The result is a stasis at a time when the systems that the country have operated by for decades are showing their age and in serious need of a revamp. But rather than plumb the depths of the revamping I would like instead to survey the two parties basic assumptions as I understand them currently and argue why I believe a fundamental clearinghouse of many of these assumptions is in order.
Again, in the spirit of full disclosure, I am a Democrat who has never voted for a Republican ever. And, if it matters, I supported Hillary Clinton in the Minnesota Caucus in 2008. As far as what I think is real I'll refer you to the 20-odd blog entries I've posted below. It is a Leger of what people are not talking about.
Republicans and Democrats are not, I believe, two sides of the same coin. The fights, the antagonism, the bodily loathing and disgust with one another are all real enough. The two parties represent different beliefs, understandings, values, attitudes, and whatever else that are often irreconcilable. In good times, that can be an amusing sideshow to the work that is done in Washington, as long as things are moving forward.
Now things are very different. The two parties are, and have been, polarized to the point of this terminal gridlock and it's hard to say how that could be broken. It's possible that a third candidate from a third party, probably someone claiming the center, will come in 2012. This could begin the breaking down of the two party duality and perhaps providing a voice for the disenchanted voter. If the Republican Party continues it's purification efforts, then it would be the far right party. The Democrats, on the other hand, are primarily centrist as it is, the way I see it, and it's difficult to see how it would play out if someone claiming the center challenged Obama.
Given my grim outlook generally, events are likely to be the driving factor in determining what voters will be looking for in a candidate. If the economy doesn't produce jobs, or, as is equally likely, begins a debt-deflation brought on by a massive and rapid deleveraging of assets, something that surely must happen, then people will lose confidence in the two parties. In fact, the economy could go south for so many reasons beyond the control of the government that the chance of a prolonged recession or a depression is highly likely. A property bubble in China, sovereign debt in a dozen or two countries, derivative market meltdown, or the strong probability of a multitude of asset bubbles created by all the cheap money in the system popping all at once as soon as interest rates rise or demand continues to drop could take down the tightly wound and interconnected global economy. Or, closer to home so to speak, the second wave of housing bubble craziness, this time in the form of option ARM mortgages resetting starting in earnest in the second half of 2010, will cause prices to drop and defaults on derivatives, causing a meltdown like that of 2008.
In the midst of all of this turbulence, the parties will be seen to have no explanation, at least one which has been presented in the lead-up to the land mine laden future we are entering. Trust in government could plummet in such a scenario. If no third party candidate emerges, then people might try the Republicans for another round. This is likely to be short lived. The Republicans have no positive program for government. The free market, limited government belief, emphasizing self-reliance and chastising the welfare state as having instilled moral weakness in society might not please the ears of the formerly employed without the prospect of finding a job and sound callous to those who still have one. It also precludes making reasonable investments by the government in the physical and social infrastructure based on an outsized belief in the ultimate futility of those investments by virtue of their having been made by government. We will see how this belief stands up in the face of the capital destruction that occurs in a deflation.
The popular will during the 1930's led, in effect, to the rejection of unfettered capitalism. The modus operandi for the next five decades was to share broadly the gains made through economic growth. The Republicans have, as a part of their political agenda, dismantled to the extent possible the New Deal reforms made under Roosevelt that sought to correct the economic imbalances of the time. To the extent the Republicans were successful, we have seen a corresponding increase in the amount of wealth rise up to the already rich. Rhetorically, the main claim is that individuals earn their money, not the government, and individuals should keep what they earn. The effect has been to enable the wealthy to dominate the political sphere. Up to about 2008, the decline of the middle class had been relative. Now it is absolute. The justification for megariches in the hands of experts, and the conspicuous consumption as a mode of social interaction, should become an embarrassment of riches , an uncouth display of fabulousness that won't likely be stood for by the folks dropping out of the broad middle class. It will be hard for Republicans to convince voters that they are better off by letting the rich keep their money when so many others are suffering.
There is more to say about the Republicans on the question of the ideological positions they take. In the spirit of fairness I will take on the Democrats in the next post and what I think are the unteneble positions to take in a resource constrained world.
Again, in the spirit of full disclosure, I am a Democrat who has never voted for a Republican ever. And, if it matters, I supported Hillary Clinton in the Minnesota Caucus in 2008. As far as what I think is real I'll refer you to the 20-odd blog entries I've posted below. It is a Leger of what people are not talking about.
Republicans and Democrats are not, I believe, two sides of the same coin. The fights, the antagonism, the bodily loathing and disgust with one another are all real enough. The two parties represent different beliefs, understandings, values, attitudes, and whatever else that are often irreconcilable. In good times, that can be an amusing sideshow to the work that is done in Washington, as long as things are moving forward.
Now things are very different. The two parties are, and have been, polarized to the point of this terminal gridlock and it's hard to say how that could be broken. It's possible that a third candidate from a third party, probably someone claiming the center, will come in 2012. This could begin the breaking down of the two party duality and perhaps providing a voice for the disenchanted voter. If the Republican Party continues it's purification efforts, then it would be the far right party. The Democrats, on the other hand, are primarily centrist as it is, the way I see it, and it's difficult to see how it would play out if someone claiming the center challenged Obama.
Given my grim outlook generally, events are likely to be the driving factor in determining what voters will be looking for in a candidate. If the economy doesn't produce jobs, or, as is equally likely, begins a debt-deflation brought on by a massive and rapid deleveraging of assets, something that surely must happen, then people will lose confidence in the two parties. In fact, the economy could go south for so many reasons beyond the control of the government that the chance of a prolonged recession or a depression is highly likely. A property bubble in China, sovereign debt in a dozen or two countries, derivative market meltdown, or the strong probability of a multitude of asset bubbles created by all the cheap money in the system popping all at once as soon as interest rates rise or demand continues to drop could take down the tightly wound and interconnected global economy. Or, closer to home so to speak, the second wave of housing bubble craziness, this time in the form of option ARM mortgages resetting starting in earnest in the second half of 2010, will cause prices to drop and defaults on derivatives, causing a meltdown like that of 2008.
In the midst of all of this turbulence, the parties will be seen to have no explanation, at least one which has been presented in the lead-up to the land mine laden future we are entering. Trust in government could plummet in such a scenario. If no third party candidate emerges, then people might try the Republicans for another round. This is likely to be short lived. The Republicans have no positive program for government. The free market, limited government belief, emphasizing self-reliance and chastising the welfare state as having instilled moral weakness in society might not please the ears of the formerly employed without the prospect of finding a job and sound callous to those who still have one. It also precludes making reasonable investments by the government in the physical and social infrastructure based on an outsized belief in the ultimate futility of those investments by virtue of their having been made by government. We will see how this belief stands up in the face of the capital destruction that occurs in a deflation.
The popular will during the 1930's led, in effect, to the rejection of unfettered capitalism. The modus operandi for the next five decades was to share broadly the gains made through economic growth. The Republicans have, as a part of their political agenda, dismantled to the extent possible the New Deal reforms made under Roosevelt that sought to correct the economic imbalances of the time. To the extent the Republicans were successful, we have seen a corresponding increase in the amount of wealth rise up to the already rich. Rhetorically, the main claim is that individuals earn their money, not the government, and individuals should keep what they earn. The effect has been to enable the wealthy to dominate the political sphere. Up to about 2008, the decline of the middle class had been relative. Now it is absolute. The justification for megariches in the hands of experts, and the conspicuous consumption as a mode of social interaction, should become an embarrassment of riches , an uncouth display of fabulousness that won't likely be stood for by the folks dropping out of the broad middle class. It will be hard for Republicans to convince voters that they are better off by letting the rich keep their money when so many others are suffering.
There is more to say about the Republicans on the question of the ideological positions they take. In the spirit of fairness I will take on the Democrats in the next post and what I think are the unteneble positions to take in a resource constrained world.
Sunday, January 17, 2010
An Armchair Diagnosis
It has been said that the definition of insanity is doing the same thing over and over again and expecting a different result. I would like to add another aspect to this which is that insanity is also doing and saying things for the absolute hell of it and expecting a good result. The United States of America seems to suffer from both of these forms of insanity all at once at the current moment in it's history. One doesn't have to look very far to see these two types of insanity at play since most everyone has access to a television or two. But it isn't enough to point out the obvious (that the country has gone mad), though it often helps to do so to people who manage to miss it or to cause it. The people who miss and cause it do so because they are swimming in it. It is all around them and they live it and breath it and eat it for breakfast without providing themselves the opportunity or the means to take the long view. Seeing as the long view is one of the main features of this blog I will take a swing at what I believe is going on.
It's hard for me to imagine someone taking an optimistic view on the present situation. Maybe I'm jaded but whenever someone declares him- or herself an optimist, I see a person in denial. One can be an optimist once one has taken a full accounting of the circumstances and sees bad outcomes as not only possible, but even likely, and then finding the best outcome from what is possible. It is only in this way that I can see myself as an optimist. But a survey of the political discourse in this country, the realm in which the two forms of insanity are made most public, shows me and many others that there is little reason to be optimistic.
Of recent events, the one most emblematic of the first form of insanity is the bail-out by the government of the banking system. Certainly, the banking system needed saving as we would be in the throes of the sequel to the Great Depression right at this moment. No elected official would have allowed that to happen if they could, though the right wing of the political spectrum talks as though they would indeed be willing to let that happen. But I digress. What this has become in practice thus far is to restore the same system that existed before the meltdown. Some reforms have been proposed but so far not much that will lead to the complete restructuring that would be in the offing if we had a responsive government. The attempt to modify the health care system falls into this catagory of insanity as well.
The second form of insanity manifests itself largely in the form of the popular media and right wing media in particular. For the sake of full disclosure, I am an ideological big government liberal, a disenchanted Democrat who is perhaps a former Democrat. I may even just be a democrat, one who believes that rule by the people is best and however that is realized is better than any alternative. The particulars are too many to go into here, but whenever a right wing screamer can call health care reform a Nazi scheme then this alone may suffice to say that any two words can be put together and made sensible to large numbers of people. But more seriously, it points to a true attempt by the right to undermine demonstrable reality for the purpose of destroying attempts at confronting a failing status quo.
The Grand Unified Cause (GUC) for the two forms of insanity spring from the same purpose. It is to keep the American power machine running for a little while longer. The stage we are in is retrenchment by the ones who benefit from the system, e.g. the bankers and the health insurance industry, to keep the system going. Necessarily, predictably, it will come at the expense of the citizenry as the pie grows smaller and the fraudulant practices by which our corporate elite generally operate are used to maintain the flawed growth model of our contemporary capitalist scheme.
I will return to this subject later. Next weeks post will be nonexistent, or will become the post of a week after that as I will be visiting my brother in Houston and drinking little amber beverages.
It's hard for me to imagine someone taking an optimistic view on the present situation. Maybe I'm jaded but whenever someone declares him- or herself an optimist, I see a person in denial. One can be an optimist once one has taken a full accounting of the circumstances and sees bad outcomes as not only possible, but even likely, and then finding the best outcome from what is possible. It is only in this way that I can see myself as an optimist. But a survey of the political discourse in this country, the realm in which the two forms of insanity are made most public, shows me and many others that there is little reason to be optimistic.
Of recent events, the one most emblematic of the first form of insanity is the bail-out by the government of the banking system. Certainly, the banking system needed saving as we would be in the throes of the sequel to the Great Depression right at this moment. No elected official would have allowed that to happen if they could, though the right wing of the political spectrum talks as though they would indeed be willing to let that happen. But I digress. What this has become in practice thus far is to restore the same system that existed before the meltdown. Some reforms have been proposed but so far not much that will lead to the complete restructuring that would be in the offing if we had a responsive government. The attempt to modify the health care system falls into this catagory of insanity as well.
The second form of insanity manifests itself largely in the form of the popular media and right wing media in particular. For the sake of full disclosure, I am an ideological big government liberal, a disenchanted Democrat who is perhaps a former Democrat. I may even just be a democrat, one who believes that rule by the people is best and however that is realized is better than any alternative. The particulars are too many to go into here, but whenever a right wing screamer can call health care reform a Nazi scheme then this alone may suffice to say that any two words can be put together and made sensible to large numbers of people. But more seriously, it points to a true attempt by the right to undermine demonstrable reality for the purpose of destroying attempts at confronting a failing status quo.
The Grand Unified Cause (GUC) for the two forms of insanity spring from the same purpose. It is to keep the American power machine running for a little while longer. The stage we are in is retrenchment by the ones who benefit from the system, e.g. the bankers and the health insurance industry, to keep the system going. Necessarily, predictably, it will come at the expense of the citizenry as the pie grows smaller and the fraudulant practices by which our corporate elite generally operate are used to maintain the flawed growth model of our contemporary capitalist scheme.
I will return to this subject later. Next weeks post will be nonexistent, or will become the post of a week after that as I will be visiting my brother in Houston and drinking little amber beverages.
Tuesday, January 12, 2010
Evidence for Anthropogenic Climate Change
Here is a presentation by Dr. Richard Alley, a geologist at Penn State University on the evidence for global warming caused by CO2 from the burning of fossil fuels. Gets a little technical at times but friendly to non-scientists.
http://www.agu.org/meetings/fm09/lectures/lecture_videos/A23A.shtml
He demonstrates, though it is not his purpose, how a true empirical skeptic views the evidence. In my view, in order to disprove that increased CO2 concentration is the cause of the current warming you'd have to show some other cause or show that CO2 is not a greenhouse gas. The question of higher concentrations of CO2 is not controversial, it is simply a fact. To believe otherwise is akin to denying any scientific understanding of chemistry and physics.
http://www.agu.org/meetings/fm09/lectures/lecture_videos/A23A.shtml
He demonstrates, though it is not his purpose, how a true empirical skeptic views the evidence. In my view, in order to disprove that increased CO2 concentration is the cause of the current warming you'd have to show some other cause or show that CO2 is not a greenhouse gas. The question of higher concentrations of CO2 is not controversial, it is simply a fact. To believe otherwise is akin to denying any scientific understanding of chemistry and physics.
Sunday, January 10, 2010
The Deflation Monster
Seeing that it is already pretty late, this will wind up being a short post. My thoughts want to go to the economic situation, which is the most immediate crisis we face. Several signs right now point to a new crunch and a debt deflation, which means that parties will scramble to cover debts and bets as the economic performance fails to impress. When these parties scramble to cover, they have to sell something else that has value, like stocks or property. When a party can't find a buyer, or a potential buyer smells desperation, then the seller has to settle for less. Generally speaking, the price will drop, which is one measure of deflation. Worse, many will be unable to cover their debt and will default on the loan, setting off a chain reaction of defaults on money borrowed to buy assets. When everyone does this at once, as sometimes happens, like in 2008, then the value of everything drops and most involved lose lots of money. In fact, money itself is destroyed because much of the money used in transactions never left the idea stage.
There's good reason to believe that something like this will happen again, maybe this year or next year. There are many signs pointing to this, as I said, but the reason is a pretty simple one: There is too much stuff and not enough buyers. Economists call this problem over-capacity and it isn't going away any time soon. It means that a whole lot of businesses who sell things will go out of business. It also means that a whole lot of businesses will not be taking on new credit to invest in new production because they don't see it paying off. The last crisis of over-production was called the Great Depression. It is not by accident that it has been cited so often these days because the causes are very similar. It is what happens when wealth becomes concentrated into so few hands and when there is too much money floating around the system to begin with.
The Market (I capitalize because it is like a god) is saying that money must disappear from the system. Bernanke and the Fed, in an effort to stem the tide of losses, has guaranteed somewhere around $13 trillion dollars in asset values for the banks so that they can continue lending money. The purpose of the stimulus is to create demand, indirectly, for new loans. This is largely a vain effort, though it is impressive what can be done when $13 trillion dollars is thrown at a problem. What this reveals is the magnitude of the crisis. What always happens after a burst credit bubble is a dearth of new demand. The Fed is trying to uphold the value of assets (read debt) for the banks so the banks don't have to write them off. The Fed didn't need to uphold the value of good loans, only the bad, and it is most likely the case that these assets guaranteed by the Fed are worthless because the Market has already said so. The effort to shore up these values is vain because of the sheer size of the problem and of the pre-existing debt load built in to the government's balance sheet, and ultimately because there are no good investment prospects for businesses.
So the case for another meltdown looks pretty strong. What it means for us is something only the Market knows. But some practical measures to prepare yourself would be prudent, and, in case it doesn't happen so catastrophically, then at the very least you've learned a few things. First of all, pay off debt and save money. The Market doesn't recommend you do that but the Market has failed us. When you buy things, buy them with the understanding that the thing must be useful and long-lasting. Thinking about what could be traded for something else you might need in a deflated world is a good measure for deciding what to buy. Gardening is probably the most immediately useful skill to learn, though it is a skill that takes many years to develop. And then find people who already think that the future will look something like the way I and many others have outlined and try to convince others who are inclined to believe it already to prepare for harder times ahead.
The various governments in the U.S. and around the world will respond to this in any way possible. Their assumptions about what is happening will affect the response. What is important for them is to realize that the old failed system cannot be resuscitated and it will have to form new measures for dealing with higher unemployment, disappearing wealth, and the prospect of different economic arrangements based on a new set of principles. This will require persuasion on the part of the citizenry. A better informed citizenry is badly needed to mitigate the freak out which will occur when masses of uninformed Americans decide to act. It will require a new understanding of what is fair and just based on principles other than what the free market has convinced us is the case during the past decades of bubble economics.
This discussion seems like a good direction for this blog to go to over the next couple of months so that is what I'll do.
There's good reason to believe that something like this will happen again, maybe this year or next year. There are many signs pointing to this, as I said, but the reason is a pretty simple one: There is too much stuff and not enough buyers. Economists call this problem over-capacity and it isn't going away any time soon. It means that a whole lot of businesses who sell things will go out of business. It also means that a whole lot of businesses will not be taking on new credit to invest in new production because they don't see it paying off. The last crisis of over-production was called the Great Depression. It is not by accident that it has been cited so often these days because the causes are very similar. It is what happens when wealth becomes concentrated into so few hands and when there is too much money floating around the system to begin with.
The Market (I capitalize because it is like a god) is saying that money must disappear from the system. Bernanke and the Fed, in an effort to stem the tide of losses, has guaranteed somewhere around $13 trillion dollars in asset values for the banks so that they can continue lending money. The purpose of the stimulus is to create demand, indirectly, for new loans. This is largely a vain effort, though it is impressive what can be done when $13 trillion dollars is thrown at a problem. What this reveals is the magnitude of the crisis. What always happens after a burst credit bubble is a dearth of new demand. The Fed is trying to uphold the value of assets (read debt) for the banks so the banks don't have to write them off. The Fed didn't need to uphold the value of good loans, only the bad, and it is most likely the case that these assets guaranteed by the Fed are worthless because the Market has already said so. The effort to shore up these values is vain because of the sheer size of the problem and of the pre-existing debt load built in to the government's balance sheet, and ultimately because there are no good investment prospects for businesses.
So the case for another meltdown looks pretty strong. What it means for us is something only the Market knows. But some practical measures to prepare yourself would be prudent, and, in case it doesn't happen so catastrophically, then at the very least you've learned a few things. First of all, pay off debt and save money. The Market doesn't recommend you do that but the Market has failed us. When you buy things, buy them with the understanding that the thing must be useful and long-lasting. Thinking about what could be traded for something else you might need in a deflated world is a good measure for deciding what to buy. Gardening is probably the most immediately useful skill to learn, though it is a skill that takes many years to develop. And then find people who already think that the future will look something like the way I and many others have outlined and try to convince others who are inclined to believe it already to prepare for harder times ahead.
The various governments in the U.S. and around the world will respond to this in any way possible. Their assumptions about what is happening will affect the response. What is important for them is to realize that the old failed system cannot be resuscitated and it will have to form new measures for dealing with higher unemployment, disappearing wealth, and the prospect of different economic arrangements based on a new set of principles. This will require persuasion on the part of the citizenry. A better informed citizenry is badly needed to mitigate the freak out which will occur when masses of uninformed Americans decide to act. It will require a new understanding of what is fair and just based on principles other than what the free market has convinced us is the case during the past decades of bubble economics.
This discussion seems like a good direction for this blog to go to over the next couple of months so that is what I'll do.
Sunday, January 3, 2010
Thoughts on Quality
The relocalization of the means by which people acquire stuff is an inevitable consequense of the energy descent we will soon be facing. As I've said before, it is to be a time to reassess the value of everything we currently possess and use on a daily or weekly basis in order to determine what is to be kept and what is to be chucked. People, by and large, value things differently. This is what the free market is supposed to do by allowing consumers the power to vote with their wallets. This is certain to be the case as the individual decisions are made to buy or not to buy. With this in mind, it is also necessary to point out that collective decisions are needed to guide or to even coerce some people into recognizing that there are, or can be, particular measures of quality. That is, these decisions are made within perameters determined by groups of people that, ideally, have some qualities in mind.
The impossible situation, by any measure, is the attempt to maintain the throw away consumer economy. The reigning values which define this way of life are disposability and convenience. What has brought this about, and why it has made sense for upwards of half a century, is that it's aim was financial efficiency above all else. To be sure, it was seen as an enhancement to people's quality of life but as the half century after it's implementation has passed, we can see the fatal errors in this way of thinking. These errors are visible in the costs that are now being borne and will continue to be borne by everyone as resource constraints enter the stage. This will mean that resource efficiency and conservation will trump financial efficiency and convenience.
Two qualities I would offer, as have many others, for us to embrace to guide our decisions as the old, high entropy economy falls to ruin are durability and resilience. Things that are durable last a long time. We must design the things we use with longevity in mind as it is a sure way to reduce the materials required for the manufacture of the same thing that wears out more quickly. A question we could ask is; How can I use this thing, a broom for example, for five times longer than I might have if I were to get a new one because I am sick of the color or it has worn out because the company which manufactured it used the cheapest materials avaiable. Durability is low entropy i.e., long-lasting. Fashion is the market of personal preference. This can be very easy to manipulate for the purpose of profit and drives our current throw-away system.
Resilience describes a system able to withstand shocks. Cars can have resilience but I'm talking about societal resilience. What has happened since the advent of the throw-away consumer society is that people have forgotten the basics of what people one hundred years ago generally understood. Primarily, it is the urban culture that is least resilient in this regard. The skills the inhabitants learn and that are useful in the urban environment are those most dependant on the system run on fossil fuels. Here, the complexity of channels would have value, rather than the complexity of scale that we see in a Wall Mart system. Efficiency would give way to redundancy so that folks could rely on multiple sources for goods and that surpluses in one area can relieve deficits in others.
I will explore these qualities of society further as I go to a discussion of ideas like steady state economics, no-growth societies and other like notions.
The impossible situation, by any measure, is the attempt to maintain the throw away consumer economy. The reigning values which define this way of life are disposability and convenience. What has brought this about, and why it has made sense for upwards of half a century, is that it's aim was financial efficiency above all else. To be sure, it was seen as an enhancement to people's quality of life but as the half century after it's implementation has passed, we can see the fatal errors in this way of thinking. These errors are visible in the costs that are now being borne and will continue to be borne by everyone as resource constraints enter the stage. This will mean that resource efficiency and conservation will trump financial efficiency and convenience.
Two qualities I would offer, as have many others, for us to embrace to guide our decisions as the old, high entropy economy falls to ruin are durability and resilience. Things that are durable last a long time. We must design the things we use with longevity in mind as it is a sure way to reduce the materials required for the manufacture of the same thing that wears out more quickly. A question we could ask is; How can I use this thing, a broom for example, for five times longer than I might have if I were to get a new one because I am sick of the color or it has worn out because the company which manufactured it used the cheapest materials avaiable. Durability is low entropy i.e., long-lasting. Fashion is the market of personal preference. This can be very easy to manipulate for the purpose of profit and drives our current throw-away system.
Resilience describes a system able to withstand shocks. Cars can have resilience but I'm talking about societal resilience. What has happened since the advent of the throw-away consumer society is that people have forgotten the basics of what people one hundred years ago generally understood. Primarily, it is the urban culture that is least resilient in this regard. The skills the inhabitants learn and that are useful in the urban environment are those most dependant on the system run on fossil fuels. Here, the complexity of channels would have value, rather than the complexity of scale that we see in a Wall Mart system. Efficiency would give way to redundancy so that folks could rely on multiple sources for goods and that surpluses in one area can relieve deficits in others.
I will explore these qualities of society further as I go to a discussion of ideas like steady state economics, no-growth societies and other like notions.
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