No post this week. I expect to post again on Sunday, January 2.
Sunday, December 19, 2010
If you externalize the costs of a business activity, it means other people pay the costs--environmental, social and otherwise--and you get the profits. It goes on all the time in extractive industries such as oil and natural gas and mining. And, it is also a natural strategy for manufacturers who dump their pollution into the air and the water. It's even practiced in finance where the executives of Wall Street banks have managed to collect the bonuses made off a phony boom in the last decade and saddle taxpayers with the losses of the inevitable bust caused by bad and often fraudulent loans, misleading derivative contracts, and leveraged speculation in stocks and commodities.
If the loopholes are there, you can be assured that people in business will take advantages of them. That's exactly what is happening in the business of shale gas drilling. Drillers are exempt from federal clean air and water regulations under a bill shepherded through Congress in 2005 by none other former Halliburton CEO Dick Cheney in his capacity as the then vice president of the United States. (Halliburton is one of the world's largest providers of drilling fluids for shale gas drilling and other oil and gas drilling operations.) That means the drillers can externalize the environmental costs of these hazardous fluids and other materials needed to fracture the shale and thereby free the natural gas. They can foist those costs on nearby residents in the form of ruined water supplies, toxic air pollution, poisoned land, and health problems for humans and animals.
The environmental and health horrors associated with shale gas drilling are now in the news on a daily basis. But I have begun to think about the issue in another way. All of these externalized costs have an energy cost. And, the toxic fracturing fluid--millions of gallons of which are pumped into each and every shale gas well--will stretch out the time frame during which such costs are borne. No one knows what will happen to the half of that fluid which never returns to the surface during operations. There is concern that it could migrate to drinking water aquifers and destroy the drinking water not just for the few who happen to live near a drilling site, but for people living in huge swaths of the United States by polluting water sources for large cities such as New York.
Now, of course, that water could be cleaned up if it becomes toxic. Already shale gas drillers are having to provide filtering systems for people whose well water has become contaminated. In some cases, even this isn't enough, and water must now be trucked in to families whose water is no longer fit to drink even with filtering.
In order to judge whether shale gas will provide any net energy to society, we must first decide where to set its system boundaries. It is hard to know exactly where to stop spatially: Should we, for example, include the energy needs of a family dependent on a worker at a subcontractor that provides software services to the driller? But, it is even harder to know what time frame to use.
One thing is certain. The legacy energy costs of doing shale gas drilling will not disappear anytime soon. The country and its people could be paying the externalized costs of such drilling decades after it ceases to provide any material benefit to society.
If New York city is forced to expend considerable energy to purify its water to clean out toxic chemicals leaching from wells in its watershed 50 years from now, how shall we then judge the presumed bounty of energy that shale gas supposedly represents?
The same kinds of questions have been raised about nuclear energy. If one takes into account the entire energy cost over time of building, operating, decommissioning, and then protecting decommissioned plants and their wastes--wastes that will remain dangerous for conceivably tens of thousands of years--it is possible to understand why some people claim that nuclear energy provides no net energy to society. Rather, it burdens future generations with huge legacy energy costs. We who are alive today get to externalize the energy costs of nuclear power by foisting them on future generations. This is probably the only way that one can consider nuclear power--as it is currently configured--an energy source rather than an energy sink.
I believe we may ultimately find that shale gas is nothing but an energy sink. It will provide net energy for a while to those who are living now while burdening future generations with huge cleanup costs that, in terms of energy, may equal or exceed the energy gain we are currently receiving from this supposedly "clean" energy source.
Sunday, December 12, 2010
First, you should know that I have an allergy to anything that smacks of geoengineering. And the use of biochar--charred organic matter that can improve soil fertility--to address climate change by interring carbon in farmland on a mass scale strikes me as one of the largest geoengineering projects ever conceived. I always ask, "What will the unintended consequences be? Can we be sure that those consequences won't simply present a new set of problems, possibly catastrophic ones?"
Fortunately, Albert Bates, author of The Biochar Solution, takes these questions seriously and offers a measured endorsement of biochar as one of an array of strategies for responding to climate change. Even in the forward Vandana Shiva warns that "[b]y shifting our concern from growing the green mantle of the earth to making charcoal, biochar solutions risk repeating the mistakes of industrial agriculture."
With this kind of qualified endorsement, why should we read further? The answer is straightforward: Because intelligently and broadly applied and ethically managed, the production of biochar and its incorporation in the soil has the potential to lower carbon dioxide levels in the atmosphere, not on a millennial time line, but within a few decades. We have the possibility of reversing climate change. It's worth exploring this possibility because some of the most prominent climate scientists in the world believe we have already passed beyond the level of greenhouse gases in the atmosphere that will, if not reduced, move the world into new and much warmer climate.
So, what might one of those unintended and possibly catastrophic consequences be? Bates summarizes an unexpected answer from a prominent soil scientist as follows:
Biochar is too powerful, she told me. Once the industrial complex with its credit markets, government incentives, and subsidies to farmers gets up and running, biochar could become a juggernaut, pushing the soil-atmosphere carbon balance into an overcorrection and ushering in a rapid-onset ice age.
When was the last time you heard someone who is firmly convinced that climate change is a critical issue say that a proposed solution would not simply fail, but could push us into an ice age? If biochar was that potent, I wanted to know more.
And, this leads to a second reason why you should read The Biochar Solution. The book begins with the engaging story of how biochar was discovered but not really understood (by Europeans, that is), forgotten, rediscovered, and finally understood by scientists. The story reads like a combined action/adventure tale and detective novel and shows Bates to be an accomplished storyteller. We are treated to a trip down the Amazon at the time of the conquistadors; to visits to plantations run by expatriate Confederate plantation owners who emigrated to Brazil after The Civil War; and finally to the findings of modern archeologists who uncover the truth about seemingly fantastical historical descriptions of great cities on the Amazon at the dawn of Spanish settlement in the New World.
The remainder of book is something of a handbook on biochar and carbon farming, showing how it might be done and who might do it. Bates introduces us to innovators who think broadly and creatively about how the soil might again become the rich, dense, living provider of fertility it once was. Readers will learn that the side effects may actually turn out to be side benefits: revitalized soils, verdant cities, higher long-term agricultural productivity, increased biodiversity and the reclaiming of desert landscapes. The author also discusses the prospects for agroforestry, an approach to forests that could make them both sustainable and productive for human purposes.
Along the way Bates relates several astounding claims that will keep you reading. Two such claims are as follows: 1) The Amazon rainforest is actually the product of human actions, and 2) the world's cooking stoves--the kind that burn wood and other biomass in most poor countries and currently add to global climate change woes--could be transformed into tools for climate recovery.
Could little pieces of charred organic matter really do all that Bates suggests? He recommends that we give biochar a widespread trial, but in conjunction with deep cuts in greenhouse gas emissions. These cuts, he says, are absolutely essential.
While such cuts seem by far the more difficult task, biochar will involve its own difficulties. First, as Bates admits, the production of biochar will have to be regulated to ensure that it is done ethically and sustainably. He gives an example in the book of unregulated production and its potential to do much harm. But, in a world now gripped by the laissez-faire model of economics, it's hard to see how broad-reaching international regulation of biochar production could be achieved.
And yet, if the unfolding climate catastrophe produces a vivid and pivotal moment--say, a sudden collapse of the West Antarctic Ice Sheet--the will to do something as dramatic as seeding a large portion of the Earth's soils with biochar and doing it in an ethical way may actually become politically feasible.
Sunday, December 05, 2010
The following piece appeared previously in the Peak Oil Review.
Peak oil activists and the mass media have had a rocky relationship. Activists often don't understand how the media works and can't fathom why reporters and editors are not better informed about energy issues. Those working in the media are constrained by the interests of their advertisers, their corporate owners and the necessity of focusing on ratings and circulation.
There is a pervading sense in the peak oil community that those in the mass media "just don't get it." And, there is an inclination to criticize them for either their lack of curiosity or their blatant indifference. And, that brings me to my four principles of public relations, the first of which is:
1. Never, ever publicly criticize the media. There's no upside.
My father used to say that it was unwise to pick a fight with people who buy ink by the barrel. In the age of the Internet we now tend to think in terms of the number of eyeballs attracted to web content. But it comes to the same thing. If the media has the equivalent of a loudspeaker system designed for a heavy metal band concert and you have the equivalent of laryngitis, who do you think is going to win any dispute you have with them in the eyes of the public?
If someone in the media irks you, you can complain all you want to your spouse or spouse-equivalent. But you're a fool to take on the reporter and media outlet publicly. If you do, they may not take out their irritation directly on you. But you will find them far less sympathetic to your point of view in the future and more likely to lean to the opposing side in the way they cover energy-related stories.
If you think a story contains errors or frames energy issues in the wrong way, it is pointless to ask for a correction. Corrections end up in obscure places in newspapers, magazines, and websites, if they end up anyplace at all. And, they almost never get on broadcast media. It is more effective to make yourself into a credible, reasonable, even-tempered source who will be glad to provide information for the NEXT story. That story, if you are lucky, will end up prominently positioned and do far more to overcome misconceptions from a previous story than any correction ever will.
2. Fear triumphs over hope.
The human nervous system is designed to build hope slowly and react to fear quickly. Why is this so? Because those are the characteristics which have enabled humans to survive. It's not that fear always and everywhere triumphs over hope. But our evolutionary heritage makes us prone to react to danger much more quickly and completely than we do to the prospects of gain or pleasure.
Peak oil activists are pretty good at wielding fear, maybe too good. If you emphasize the possible catastrophic outcomes of declining oil, you will frequently get two reactions from an audience. One group will say, "If peak oil is coming so soon and going to be so bad, what's the point of doing anything?" A second group will just go into denial. They'll judge your assessment of the future to be so bleak that it can't possibly be true because lots of other people would be talking about it and they aren't.
Fear has to find its resolution in action. What can I do? How will what you suggest help me weather the storm? When politicians demonize their opponents or scapegoat the helpless and marginalized in society, they are offering voters an avenue for action: "Vote for me and I'll take care of these rascals who are causing our problems." Peak oil activists can certainly do better than that, and many now give detailed practical advice to help people prepare for a post-peak oil world. Perhaps the best way to start with audiences new to the peak oil issue is to give them "no regrets" strategies, ones that will make their lives better whether peak oil hits soon or not. Some ideas include insulating their homes, riding a bicycle whenever practical, sourcing more of their food from local producers, and getting to know their neighbors. All of these things can enhance people's lives no matter what happens, and it puts them on a road that allows successful adaptations which will inculcate a willingness to do more.
3. If you're explaining, you're losing.
Perhaps the most difficult thing for a peak oil activist to do is to keep it short. Now, if you are having a conversation with a group of friends where the object is to hash things out, it's fine to ignore this dictum. If you are performing public education, you are probably talking before an attentive, curious and self-selected audience. They will often put up with lot of explaining. After all, that's what they've come for. But if you are in a public dogfight in the media, you definitely don't want to be the one who is explaining things.
Here's why: When communicating with large audiences, anyone saddled with the task of explaining complex scientific and technical information is likely to turn off the audience. First, the audience will find it hard to follow such explanations. Second, they'll wonder why the person providing the explanation feels compelled to provide such detail. He or she will appear to be on the defensive. This is the key point. The public perceives that those who are prone to excessively long explanations are actually trying to confuse them or hide something. This perception may be wholly without foundation, but it is a hard one to fight.
The best strategy is to force your opponents (who may be physically present or simply quoted alongside you in a newspaper article) to do the explaining. Some possible grenades to lob include the following:
- Explain why many OPEC members mysteriously claimed increases in their reserves by 50 to 100 percent in the mid-1980s without any large discoveries.
- Explain why with the very high historical oil prices of the last decade, we have not seen the predicted glut in oil supply.
- Why does the promised bounty of oil from oil shale never seem to appear even when oil prices scale $100 a barrel?
- Some 80 percent of the world's oil reserves are controlled directly by countries and their government-run oil companies. Many of these countries are run by secretive, authoritarian regimes and do not allow any outside audit of their claims. Why should we be confident about the reserve numbers they report? Is it wise policy to simply take their word for it?
An alert activist can probably think of many more, but you get the idea. Let the other side explain all these things. You're job for now is to plant doubt concerning the official story. Without that doubt most people will never consider the peak oil point of view.
If you have some creative talent, an alternative way of pressing your case is to do it in verse or in song or in the form of a play, a novel, a painting, or a stand-up comedy routine. This is not the same as explaining. It’s storytelling in the classic sense. It’s very hard to argue with a piece of art. People can comment on it. But an antagonistic viewer is forced to choose between aesthetic criticism (which doesn’t really strike at your message) and attacks on your message. Attacks on your message will seem off base to most people since, after all, it’s just a piece of fiction or a song or a work of art, so lighten up! The critic will come off as a killjoy which is perfect for you. This will be especially true if what you are doing is funny.
4. The cover-up is always far more damaging than the screw-up.
This one is simple. If you make a mistake, admit it, apologize for it, if necessary, and then move on. In the context of peak oil activism, this principle is less applicable than the others. Peak oil activists strive to shed light on energy issues, not cover them up. Still, it is possible to screw up, and one of the best ways to do that is to make predictions.
When it comes to making predictions for reporters, I have one word of advice: DON'T! The currently well-established facts are scary enough. If you must talk about the future, talk about it in terms of risks, not forecasts. If you make predictions, you are setting yourself up for a fall, and then the cycle of anger with the media is likely to get hold of you all over again. And, as I've said, there's absolutely no upside to expressing it publicly.
The notion, however, that governments and oil companies are not squaring with the public is a useful idea. But it is reckless to accuse them of some sort of conspiracy of silence. A better way to talk about this is that it is not in the interests of public officials to announce the peak oil predicament since they have no plan to address it. And, it is not in the interests of large international oil companies to talk about peak oil since it would imply that their businesses would soon start winding down, something that can hardly be salutary for oil company stock prices.
While it may seem unfair in some ways that the world of mass communications requires the understanding and application of these principles, it is more effective to deal with the realities of mass communications than to try to change them. Sticking with these principles doesn't always assure you of success, but it does keep you out of a lot of unnecessary trouble.
Sunday, November 28, 2010
Aristotle wrote that the desires of humans are unlimited. This is completely consistent with the modern notion proposed by Howard Odum of the Maximum Power Principle which states that biological systems seek to maximize their power intake. In the context of evolution it makes sense that those human beings who gathered the most energy to themselves in the form of food, heat, and even tools for self-defense, hunting and later farming were most likely to survive and produce offspring.
Before the fossil fuel age nature provided limits on power intake. And, wisdom was in part an understanding of where those limits lay so as to avoid overstepping them and suffering the inevitable punishment for doing so.
In the industrial age fossil fuels have given us the illusion of no limits, and the Enlightenment provided the philosophical basis for such thinking by imagining the perfectibility of humankind in all ways intellectual and material. The application of reason was the liberating force that would make progress eternal.
Rising material wealth in the 19th and 20th centuries moved questions of material progress to the background in literature and philosophy since such progress seemed assured despite its uneven trajectory and the injustice which accompanied the distribution of its fruits. The seemingly intractable problem of scarcity had been overcome.
And so, the focus of literature moved to the themes of social justice and the psychic drama of the family and the individual. It's not that such themes weren't already in use. But a society believing that its material progress is assured will no longer find the themes of limits and scarcity helpful.
What is missing, therefore, from most modern stories is the notion of physical resource limits. Such limits imply a tragic trajectory, the possibility of failure and punishment for overuse of the physical world. In the last half century the scientific literature has been infused with increasingly ominous warnings about such limits. But popular stories accessible to the mass of humanity, at least in rich countries, still most often champion explicitly or implicitly the ideas of a limitless material future.
There are plenty of tales of technology gone wrong. One the earliest at the dawn of the fossil fuel age was Frankenstein. But this story does not embody the theme of technology failing for lack of available resources. For such a theme we must look to stories of castaways cut off from the logistical supply lines of society.
But now we must look toward a literature in which we all become castaways, severed from the wells of plenty not by a freakish storm, but by the dictates of geology and the limits it is about to place on our primary sources of energy: fossil fuels. For that we must come again to understand that nature can provide a backdrop for what William Catton Jr. calls the “tragic story of human success”--that hubris and nemesis are not merely psychosocial terms implying humiliation, but terms that carry the sting of hunger and want embedded within them.
Sunday, November 21, 2010
At the recent 2010 International Conference on Sustainability I made a brief presentation focused on using concrete illustrations that explain peak oil and climate change in ways that relate to people's everyday experiences. I have been searching for methods to bring the basics of peak oil and climate change out of the realm of the abstract, and this is my first public attempt to do just that.
What I am most interested in are your ideas for how we all might do a better job of making these important issues more vivid for audiences, especially those who are just starting to learn about them. While my presentation is not the classic "elevator speech" (unless the elevator ride is 13 minutes long and you have room for props), I do think it was a good first step.
Here is the presentation:
Monday, November 15, 2010
Every culture lives by its narratives. And, these narratives come to us not just in the form of novels, plays, movies and television shows. They also come in the form of news stories, ideology, religious doctrine, theories that are social, political and scientific, and myriad other works which fall under the category of nonfiction. Over time these narratives become outmoded, and new ones emerge, or at least, the old ones are reworked in light of new circumstances.
Prelude, my peak oil novel, is part of a broader, ongoing process that is developing a counternarrative to the dominant one which is driving our global society toward the brink of social, economic and environmental collapse. At first, counternarratives are voiced by the few who perceive changed realities and try to articulate those new realities in ways that will allow a broader group of people to see them. There is an action plan implied by these counternarratives, but their effect on the actual functioning of society is small at this point. Widespread organized and concerted action for change still lies in the future.
In many ways that's where we are in the peak oil story. As concern about peak oil spreads through more and more communities and to the highest circles in industry and government, we are approaching a critical threshold. But will we as a global society choose to pass through it?
As of now the story of peak oil has yet to reach the broad public, most of whom have never even heard the term, let alone contemplated its significance. Without broad public awareness it will be difficult for politicians and policymakers at all levels to find support for initiatives aimed at addressing peak oil.
When I conceived of Prelude three years ago, it was based on the notion that ideas only become widely dispersed in the public mind when they are infused in the arts. Since then several peak oil-themed novels have found their way to the bookstore shelves. Most of these, it turns out, are based either on an apocalyptic vision of a post-peak oil world or on the device of a sudden, catastrophic loss of oil, often through means that have little to do with peak oil production as it is commonly conceived.
I decided to create a narrative set firmly in contemporary society. I wanted a story that would reframe the way people read the daily news and the way they interpret their everyday experience. My premise was that readers would more readily identify with a world familiar to them than one set in the distant future or transfigured by an imaginary crisis.
During the three years it took to write the book, there has been a small, but steady proliferation of peak oil-related art, cartoons, stand-up comedy, theater, songs (here, here, and here), and even some peak oil poetry (here and here). The infusion of peak oil themes into the arts has now begun and appears to be spreading. This development is both a reflection of growing public awareness and a tool to create more awareness. Many more literary, performance, and graphic works of art will have to be married with the peak oil theme before they produce a self-reinforcing spiral that will blanket the public with the peak oil message.
My goal in writing Prelude was to help to create that self-reinforcing spiral of awareness, to break out beyond the peak oil community, beyond even the broader sustainability community, and to reach people who know little or nothing about such issues, but have chosen to read Prelude because they find it a compelling story in its own right. This implies a very broad audience, and my goal is an ambitious one. But success could mean nothing less than a large new group of people open to participating in national, regional and local initiatives related to peak oil and other sustainability issues.
Naturally, I will be gratified if this book finds broad acceptance among those in the peak oil community. Even if it does, it will fall far short of my goal. That's why I'm hoping that those who read it and like it will recommend it especially to those who previously have had little association with peak oil or sustainability. The book was written with such people in mind.
No single work of art can express all the needs of an era. But through the efforts of activists and the continued creative work of artists, performers and writers, I believe we can achieve a much broader awareness of peak oil and other sustainability issues, an awareness that will lay the groundwork for a much more effective response to the daunting challenges that lay before us.
Sunday, November 07, 2010
Sunday, October 31, 2010
In the 1948 Frank Capra film State of the Union aircraft tycoon Grant Matthews is drafted as a candidate for president of the United States. Matthews has never sought office and his popularity stems solely from his business successes and his charismatic and plain-talking speeches. As it becomes clear to Matthews that his self-funded campaign might win him the nomination, he gives in to the corrupting influence of the politicians and party fixers who have recruited him and who now manage his campaign.
Today, the notion that tycoons are corrupted by politicians and not the other way around seems quaint. The last pretense that American political institutions are not merely an extension of global financial and industrial interests was stripped away earlier this year when the U. S. Supreme Court ruled that corporations may spend unlimited amounts of money influencing political campaigns. To be fair, corporations have long influenced American politics through a variety of means including political action committees, donations to major parties (which is no longer allowed), lobbying, issue advertising, threats to move operations out of the country (or the community), and, in some cases, actual bribery (still technically illegal).
Despite their obvious power, corporations up to this point had to accept that, however dominate their position in American politics, they still had to contend with other interests seeking the ear and votes of elected representatives. If corporations had had absolute power over federal policy, neither financial reform nor health care reform would have passed the Congress since, even in their admittedly watered-down state, they contained provisions which both industries vehemently opposed. Thus, their sway over elections and policy has been considerable, but not absolute.
That may now change. Without any limitations on what corporations can spend or even say (since no front group is obliged to disclose its donors), they are free to destroy the reputations of candidates they don't like anonymously and therefore with impunity. To be fair, an incurious group of voters called swing voters--these are the ones who switch their party allegiance from election to election--are complicit in this process. They do little vetting of candidates and issues and rely heavily on information provided by campaigns and by independent groups that sponsor political ads of questionable veracity.
The campaign of 2010 may produce members of Congress and of the Senate who are nothing but conduits for corporate agendas and whose loyalties can be traced directly to those corporate-funded campaign groups--groups made up of anonymous donors who seek nothing less than direct control of the government of the United States for their personal gain. What this means is that corporations will now for the first time since the Gilded Age be forced to govern rather than simply influence those who govern.
It is a common conceit that American businessmen (and now businesswomen) know how to run the government better than career politicians. Frank Capra's film is merely one product of this type of thinking. The claim often made by such people when they run for office is that they've met a payroll and created jobs. But what is most relevant is how they have gone about doing these things. Typically, businesspeople who seek office have run corporations as chief executives and often owners. That means their style of governance has always been buttressed by the fact that they are autocrats who can get their way by command. Getting things done in a large, modern corporation is, of course, more difficult than simply commanding it. But corporate structures remain highly undemocratic and hierarchical. The employees can't fire the boss.
But whether they run for office themselves or simply hire people to do it for them, there is no getting around the fact that these corporate managers and owners constitute a class of autocrats who wish to rule the country. They are not used to the give and take of the political process, and they do not suffer people they believe are fools easily. (In this context "fools" are merely people who oppose their views and aims.)
While the corporate paymasters of the new crop of corporate politicians profess their love for free markets, limited government, and respect for individual freedom, they believe in nothing of the sort. This is just what they and their minions say to voters in order to get their votes. What they really mean to do and have done, to the extent their powers have enabled them, is to use the government as a slush fund for their own benefit--both as a source of revenues through tax breaks and contracts and as an insurance pool for their corporate interests when they make disastrous financial decisions.
With regard to the insurance function the government has played, particularly for large financial institutions, former Wall Street trader and now author Nassim Nicholas Taleb explained before a Congressional committee last year that he was instructed again and again in his career not to worry about extreme losses, only smaller losses in the 5 to 10 percent range, since the government would bail out his firm in the event of a financial crisis. Here's what he said:
I was a trader for 21 years. And every time I said, "What if we blow up?", they [management] said, "Who cares? The government bails us out." And, I heard that so many times throughout my career.
To judge how the country's new corporate government might perform, one needs only to recall how events unfolded in a couple of areas in which corporate lobbyists got their way. First, the ongoing financial deregulation which had been occurring in the United States for many years was a product of heavy lobbying by financial firms. They got their deregulation and even lax enforcement of the remaining regulations based on the idea that markets are self-correcting and that the interests of the individual trader, his or her firm and the shareholders were identical. When the financial system melted down because of the excessive risks, fraud and mismanagement by Wall Street managers and traders, these employees of the firm already had their huge bonuses in pocket. The bad trades and positions which led collectively to the financial meltdown were backstopped by the U. S. Treasury and the Federal Reserve, not the the firms or their employees. Nobody has been forced to give back their bonuses.
Second, for years under administrations from both parties, the oil industry essentially got whatever it wanted from what was formerly called the Minerals Management Service which oversaw offshore drilling. Inadequate regulations and poor enforcement were the policy of this agency under successive administrations. The BP well blowout and oil spill was one result of that lax regime. Of course, in this case BP was actually made to pay for some of the damage. But it will never be able to restore the Gulf of Mexico to its state prior to the spill, even if it expended all of the funds it will ever generate. Some things can't be fixed. And, the federal government and communities across the Gulf coast will be paying for the collateral damage for decades to come.
In both cases profits were privatized and risks were socialized, and we can expect to see more and more of that in every area of economic life in America under a new corporate-run government. The incentives for corporations are mostly short-term because the incentives for the managers are short-term. And, the incentives for shareholders to allow and encourage corporate misbehavior is huge, since shareholders demand maximum returns, usually in the short term. The average holding period for stocks listed on the New York Stock Exchange is nine months. The average holding period for all stocks including exchange-traded funds is four months.
The history of corporate governance also shows that when corporations might have naturally aligned themselves with changes that would have been good for their bottom lines as well as the public, these corporations have failed to do so. The American automakers would have benefited greatly from a universal health care system in the United States. Health care costs for autoworkers were one of the main financial drains on the industry and a competitive disadvantage in a world where Japanese and European automakers had the benefit of government-sponsored universal systems that picked up most of the costs. Yet, the automakers never supported such a plan and instead focused on defeating increases in fuel economy standards. Such shortsightedness in part led to the bankruptcy of two of the Big Three automakers. Their foreign competitors relentlessly chipped away at the market share of the Big Three with fuel-sipping cars and lower overall cost structures. It is proof that oftentimes corporate managers either do not know or do not care what will be good for their own companies in the long run.
Some people have dubbed the gradual and perhaps all-but-complete melding of corporate and government power as fascist. None other than Mussolini dubbed such a combination one facet of fascism. But even the fascist regimes of Mussolini and Hitler engaged in large public works projects meant to boost employment and income during the Great Depression. And, it is, of course, of no small import that they incorporated their respective industrial establishments into their ambitions for military conquest.
Under fascism, the government colludes with corporate interests to achieve its goals. But what does one call a government in which the corporations, not the government, call all the shots? What does one call a government in which there is no political class to mediate the needs of many factions? The closest we might come is plutocracy. But this doesn't quite get it either because plutocracy refers to undue influence by the wealthy in the affairs of government. What shall we call it when the wealthy through their corporations achieve absolute control of government policy?
Naturally, not all corporations share the same interests. Those who make wind turbines do not have interests identical to those who mine coal. But in the fight over government policy, it is fervency that matters, for where corporations rule, money follows fervency. The fossil fuel lobby will continue to work to prevent any kind of climate change legislation even though the insurance industry knows only too well what risks its faces as climate changes and causes insured property damage to crops, homes and businesses. Yet, the insurance industry has many other areas which it must be concerned with. It will never be as focused as the fossil fuel industry is on this issue.
Will the alternative energy industry suffer the same fate? A tiny fraction of the world's energy comes from renewable energy today. While growing quickly, the alternative energy industry simply doesn't have the money to buy as many candidates as the new political funding regime allows to the fossil fuel industry.
Look for little or no progress on important environmental and natural resource issues in the years ahead in the United States as corporations battle it out for narrow advantages for themselves obtained through government policy. The trouble with this type of governance, however, is that it will miss the big picture and thus the big dangers and challenges and never prepare us for them.
Whether a politically moribund voting public will be able to associate an increasingly dysfunctional government with the corporate takeover now in progress is an open question. Whether that public will be able to affect change if and when it does understand this is a troubling one. But, given the history of corporate intervention in American political life, we can summarize in one word how corporations will govern the American nation as they move toward complete political control: badly.
Sunday, October 24, 2010
At the recent conference of the Association for the Study of Peak Oil & Gas-USA in Washington, D.C., an unknown person hired two people to dress as Chicken Little and walk around outside the conference venue.
The trouble with Chicken Little is that he neither had a practical plan to address the problem of the falling sky nor the sense to discern the intentions of Foxy Loxy who ultimately devoured Chicken Little and his friends before they could reach the king to tell him that the sky is falling. As such, Chicken Little gives us poor guidance about the effect that the efforts of those involved in the peak oil movement will likely have. A better analogy would be the so-called Y2K problem.
Y2K refers to the problem of two-digit year notation previously used in computers, notation which could only accommodate years up to 1999. Many experts believed that computer failures related to this problem had the potential to be highly disruptive of global society if not corrected before the year 2000. As a result of this concern, firms and governments spent large sums to update or replace outdated software and hardware.
Critics of extensive Y2K preparations said that the problem was overblown and that any necessary corrections could me made after January 1, 2000 on an as-needed basis. Those who supported extensive Y2K preparation cited the almost completely smooth rollover to January 1, 2000 as a vindication for their strategy. Oddly, their opponents cited the same smooth rollover as proof that such preparation, which was by no means complete in all sectors of the economy, was largely unnecessary.
The peak oil movement is facing a similar scenario. If those concerned about peak oil were miraculously able to get governments, communities and households to begin rapid and extensive preparations for oil decline, the effects of such a decline, when it arrived, would, of course, be mitigated to a considerable extent. No doubt, at that point those who claimed that peak oil would not be a problem would say that the less than catastrophic result proves that peak oil was never a serious threat to civilization. In other words, don't expect to be thanked if preparations urged on your community prevent problems. Heroic measures after a crisis always get more attention and attract more awards.
Of course, many of those in the peak oil movement would say that it is far too late in the game to prevent the catastrophic consequences of an oil decline because that decline is imminent. But it is a common mistake to underestimate the adaptive power of human communities when faced with a crisis. The real difficulty remains in convincing the public that such a crisis may actually be nearby and that an ounce of prevention will be far preferable to the pound of cure which will surely have to be applied.
Sunday, October 17, 2010
"Don't waste your breath" needs to become a mantra in the peak oil and sustainability communities. The season for arguing with peak oil and climate change deniers has long since passed. Our time is too precious and the need to act too urgent. The time has come for talkin' triage.
Triage, of course, refers to medical decisions made on a battlefield. Those for whom treatment would be useless are given what comfort is possible. Those for whom treatment can wait are set aside while those who will only survive with treatment are treated first.
But, I'm thinking about a triage for our discussions with others by identifying those who will never be convinced, those who are already convinced, and those who are open to persuasion. It still makes my blood boil occasionally when I must listen to completely discredited arguments repeated by climate change deniers who care nothing for evidence or logic. But there is no point in arguing with such people. Most of them engage me not to further their understanding of climate change, but to offload their anger about myriad other things in their lives. I become a temporary enemy against whom they can concentrate their fire. For me it is a completely useless enterprise.
The only time it is worthwhile to engage such people is if you have an audience uncommitted to the issue and you have sufficient rhetorical skills to put your opponent back on his or her heels. Remember: Such public arguments are not about logic so much as impressions. A skilled climate change denier can argue that there is uncertainty about climate change and convince an audience that this uncertainty means we needn't be alarmed. But, of course, it is precisely the uncertainty that should lead us to act to prevent potentially catastrophic consequences.
Still, a population brought up on courtroom dramas tends to believe that the criminal standard of "beyond a reasonable doubt" should apply to public policy questions. Of course, this is patent nonsense. Public policy is always made under conditions that are uncertain. But try convincing most people of that in a five-minute exchange. My advice is to announce that the denier's conclusions are contrary to the overwhelming evidence on climate change and that you are not going to discuss the issue with someone so ill informed.
There are fewer self-styled deniers of peak oil because the issue remains more obscure and in some ways more difficult to master. There is also less denier material on the Internet and elsewhere for those inclined to vent their spleens using peak oil as a target. Still, I think the same approach applies unless you feel extremely confident about your ability to successfully embarrass your opponent.
So, where does that leave us? Well, the deniers are like those poor wounded soldiers in triage who are considered hopeless. We must let them go. They merely slow down the work of reaching those who can be convinced and recruited into action. Recruitment can be done all the more quickly if it is done in friendly non-confrontational venues where the intent is to share information. Naturally, these venues might attract some deniers. But they are easy to detect and easy to shut down. They try to hog the floor by pretending that they might be convinced. Don't let them. Get up and tell them that the group now understands their views and that others should be allowed to speak.
Legitimate points of discussion based on genuine uncertainties which are followed by good-faith exchanges are important to advancing the understanding of all of us involved in the peak oil and sustainability communities. The emphasis needs to be on good faith. When that good faith is absent, it's time to start talkin' triage.
Monday, October 11, 2010
Many of my readers already know that I have completed a peak oil-themed novel entitled Prelude. I am now engaged in the final preparations before publication. I expect the book to be available within weeks. If you'd like to follow the progress of Prelude, you can check out the website periodically or you can subscribe to the email updates. Two excerpts from the book have already been posted.
I wrote Prelude in hopes of reaching a much wider audience than is typically possible through blogs, articles and nonfiction books. I believe I've produced not only an engaging tale, but also a tool for activists to use to spread the word about the challenges of peak oil.
Naturally, I'll be posting here and on the book website as developments proceed.
Sunday, October 10, 2010
Wednesday, October 06, 2010
I'll be attending the Association for the Study of Peak Oil and Gas--USA annual conference in Washington, D.C. this week October 7 through 9. If you are attending, I hope you'll approach me and introduce yourself.
Monday, October 04, 2010
In a world desperate for new oil supplies, Venezuela beckons. But will its fumbling management of oil production lead to foreign intervention, covert or otherwise, in a effort to raise Venezuelan output?....Read more.
Sunday, October 03, 2010
As I watched snippets of President Obama's town hall-style meetings around the country recently, I was struck by how often questioners demonstrated the mindset that solutions to their problems will come from some central authority, in this case, the federal government. It's not surprising to see this in the modern industrial state. The other central authority would be large, globe-spanning corporations that provide the essentials of modern life including food, fuel, transportation, and a wide array of industrial and consumer goods. They even supply much of the entertainment.
I see no easy way for a modern person, especially someone living in an urban setting--as the vast majority of people in the United States do--to avoid such dependencies altogether for now. To disengage from them completely would mean certain death for many if not most. For nearly everyone alive in wealthy countries there has never been a time when we were not faced with extreme dependence on the two most centralizing forces of the modern era, central government and behemoth corporations.
So, given the current economic mess it seems natural for people to turn to the twin citadels of central power and demand that they alleviate our suffering. This demand assumes that those running our governments and corporations have the ability and the desire to respond to such suffering.
In a world where various occupational niches are disappearing never to return, the extreme specialization which has become the norm in modern labor has doomed many to long-term unemployment. The market no longer needs them because they have the wrong skills or because demand for what they do is very low.
And, the promise that the economic downturn will be temporary further enslaves the minds of those already out of work and out of luck. It deals them a second blow of suffering, the second being the false hope that things can return to what passed for normal in, say, 2006.
This terrible dependency of mind results in paralysis for some and rage for others. It leads people to believe that someone else can fix what ails them. They assume that they have little power to solve their own problems in ways that don't involve central authorities.
And now, like children throwing tantrums to punish their parents, America's voters appear ready to throw out the current governing party because of its inability to resolve their suffering. They do not recognize that neither party can now steer a corrupt and bankrupt central government toward solutions to our difficulties. In part that's because the government has become the lapdog of self-serving corporate managers who take no responsibility for our current predicament and therefore see little role for themselves in addressing it.
Those who have labored now for years in the relocalization movement generally recognize this dependence of mind and attempt to fight it. They fight it not merely with mental exercises, but, more importantly, with action that leads to a degree of self-sufficiency and a healthy mutuality among neighbors, friends and other community members. In America there has always been the necessary cultural framework for this. And, we have not forgotten how to do it. But we have forgotten that we know how to do it.
It is one of the main tasks of the peak oil and sustainability movements to reawaken that knowledge. Once reawakened a person faced with such scenes as we saw on television in these town hall meetings will understand the pain. But that person will seek to alleviate it by turning off the TV set and getting down to work alongside fellow community members.
Sunday, September 26, 2010
Nobody likes to hear a bleak diagnosis. But without a proper diagnosis, if you have a serious illness, your chances of survival become vanishingly small.
Enter Guy McPherson, conservation biologist, climate scientist and blogger, who despite his gloomy outlook about the prospects for industrial civilization--he thinks it could disappear within his lifetime--regards himself as an optimist. Why? Because back in 2002 after he finished editing a book on global climate change, he concluded that "we had set events in motion that would cause our own extinction, probably by 2030."
But, then he discovered the concept of peak oil and realized that "its consequences might bring the industrial economy to an overdue close, just in time." That development would make it possible for humans to persist on the planet for a considerably longer time by saving the life support systems of the Earth essential to both humans and the other species which humans rely on. Peak oil became a cause for optimism rather than pessimism.
I asked McPherson, who gave a talk this weekend near where I live, what would change his mind about the trajectory of industrial civilization. He answered that the discovery of a miraculous, cheap, easily scalable new energy source would probably allow our current arrangements to persist for a while longer. But such a development would be a death sentence for the human race since it would lead to the total destruction of the life support systems we rely on, systems which are only seriously crippled now. It would result in further population overshoot, resource depletion including that of soil and water, and further destruction of species we rely on for our well-being.
He likened what we are doing now to constructing an extra floor on the top of a 30-story brick structure using bricks pulled from the lower floors. We are engaging in the "world's largest game of Jenga" with the building blocks of our existence.
He says the emerging collapse of our modern living arrangements is not a recent phenomenon, but actually an ongoing process. He traces it back to the oil crises of the 1970s which were the beginning of the end. The key metric in his view is a peak in per capita oil consumption in 1979. McPherson says he would not be surprised if the endgame for industrial civilization plays out very quickly given the long period of stress both human society and the biosphere have been under for the last generation.
As a response he suggests focusing on four things: water, food, maintaining proper body temperature, and community. Water and food are obvious needs, but many of us don't think about whether the climate we live in will allow us to maintain proper body temperature. We have central heating and air conditioning to help us with that. But when such amenities are not available, the climate where we live will become crucial to our well-being and comfort.
By community he means building ties of mutual support with one's neighbors. "There ain't no lone rangers in collapse," McPherson explained. "If you look for ways to serve your community, you've got a good life ahead." His model is Monticello (minus the slaves) where "agriculture was the center of commerce and therefore the center of life."
As part of his own preparations he lives on land at moderate elevation with deep soils and easily accessible water. He grows food and raises goats for milk. The area is already populated by what he calls "life-loving economic doomers" who do not need to be convinced that industrial civilization is coming to an end. Mutual assistance is a way of life. Practical concerns trump philosophical and religious differences.
To do all this McPherson left his position as a tenured professor. He says at the beginning he knew practically nothing about how to provide the necessities for himself. "I could barely distinguish between a zucchini and a screwdriver," he explained. Now, he's milking goats, making cheese, growing vegetables and performing myriad our tasks necessary to a more localized existence, one that does not rely so heavily on the far-flung logistical networks of the globalized economy.
He doesn't call what he's doing "sustainable," a term which, he said, has even been co-opted by Wal-Mart. Instead, he refers to it as "durable," meaning he is trying to build a way of life that will outlive industrial civilization. He said his cosseted existence as an academic did little to prepare him for what he is doing now. But precisely because of this he is convinced that "if I can do this, anyone can do this."
And, in the manner of a principled prophet on a lonely mission, he soldiers on each day trying to help others build a durable way of life before it's too late.
Wednesday, September 22, 2010
A detailed schedule is now available for the ASPO-USA World Oil Conference in Washington, D.C., October 7 through 9. I am now told starting today that for the next 50 individual attendees or persons representing nonprofits or educational institutions, using the discount code "peakoi12010" will allow registration for as little as $175.
I will be attending the entire conference. Please look me up if you are there.
Sunday, September 19, 2010
Nicole Foss looks like she might be your grandmother coming to reassure you about something. But instead of milk and cookies you are served a cold dose of reality. According to Foss, one of the writers on the popular finance-oriented blog The Automatic Earth, the global economy is locked into an inexorable deflationary decline that cannot be stopped by governments or central banks. And, the world is headed for a depression worse than that of the 1930s.
Believe it or not, that's the good news. The bad news is that the problems we face in the emerging depression will be aggravated by fossil fuel depletion, in particular, the onset of world peak oil production. When one questioner asked Foss when she thought we might return to even the tepid economic activity we see today, she had a one-word answer: "Never."
Her explanation is that the interaction between the ongoing collapse of contemporary finance and the development of new oil and gas fields will leave us desperately short of these critical fuels over time. The weakness in the economy will lead to low investment in exploration for new oil and gas reservoirs which will, in turn, lead ultimately to a supply collapse. The supply collapse will lead to high prices which will depress economic activity and lead to recurrent economic contractions. When the new Great Depression is done, Foss claims that the world will be a completely different place with our current institutions swept into the dustbin of history.
Foss is remarkably good at delivering her message. She delivered it in person recently in a high school auditorium near where I live. Steady and clear, she methodically lays out her case for the scenario above with such logical precision and compelling analogies that you wonder just how one would go about making even the slightest dent in it. Of course, no one knows the future. Some people make lucky guesses--sometimes called "informed" predictions. But in the end it's never clear how to tell ahead of time whom to believe during the next round of predictions.
Nicole Foss does, however, seem remarkably informed. She is at ease talking about the necessity of acquiring your own tools and growing own your food. In the next breathe she's just as much at ease explaining with stunning clarity and brevity why the current chairman of the U. S. Federal Reserve Board is an even bigger fool that you thought he was. But she does this without any sign of personal animus. Ben Bernanke isn't a bad person. He's just confused and misinformed.
And, that leads us directly to Foss's mission: To inform people so that they will have the understanding and tools to weather the coming storm and to build a community that can survive and thrive through it. She also demystifies the world of finance with unusual pithiness. The most recent financial bubble was not the result of some impenetrable, new-fangled financial instruments. Rather its roots were the same as all financial bubbles: the rediscovery of leverage. Translation: If you borrow money from someone else and speculate with it, you can make a lot more money than if you just use your own. It's a tactic that works until it doesn't. And, when it stops working, the economy goes crash.
The post-Depression generation had learned that too much borrowing leads to tears, and so they were very careful not to take on too much debt. Eventually, the people who experienced these tears died, and others took their place in the economy. The success of those who took on debt for speculative purposes attracted more people who took on debt to do the same in every field of investment. Eventually, too many people borrowed too much, and many of them were unable even to meet their interest payments. That is where we are today. According to Foss, it will be years until that excess debt is either paid or defaulted on. And, that means deflation for several years to come at least.
Is she right? No one can know until we travel some years hence. But so far, I'm having a hard time cracking her logic.
Sunday, September 12, 2010
It is a frequent conceit among hard money advocates that central banks and especially the U. S. Federal Reserve Bank are out to debase their currencies in order to save debtors. Below I will show why this statement--although seemingly borne out by observation--can result in misleading conclusions about the motives of central banks. But first, let me lay out more thoroughly the hard money advocates' explanation of how the world works.
Central banks debase currency by printing excess currency or by enabling the rapid expansion of credit, both of which put more money in circulation. When the amount of money in circulation rises with no corresponding rise in the production of actual goods and services, then more money is chasing after the same amount of goods and services. That creates an inflation, that is, a general rise in prices, which usually leads to a rise in wages and in asset values in such areas as housing and the stock market. If you are in debt and your wages are rising, this naturally makes it easier to pay back your loans which are, of course, for a fixed number of dollars or euros or other currency. In other words, the loan amounts are not adjusted for inflation even as wages and the price of assets rise.
Naturally, those who've been prudent and saved and therefore have money to lend are penalized since when their loans are repaid, the money they receive back, even with interest, often buys less than it did when they lent it. This is the standard explanation of how savers get gypped and profligates get rewarded under what is called a fiat money system, that is, a system of currency which is merely decreed by a national government. In the United States the U. S. dollar is legal tender because the government says it is. There is no formal backing with precious metals or anything else.
Why do central banks supposedly cater to debtors? It's because they make up the majority of the electorate who have any combination of home mortgages, car loans, credit card debt, and installment credit. The political pressure on the banks is thought to be so great to bailout the masses who are in debt that these banks cannot carry out their primary mandate to maintain the purchasing power of the currency.
Maintaining the value of currency would, however, favor savers, and the majority of savings are held by the very wealthy. In the United States the wealthiest 10 percent of the population hold a whopping 70 percent of all wealth. In Switzerland the numbers are almost the same. In Denmark the wealthiest 10 percent hold 65 percent of the total wealth. In Germany the amount is 44 percent.
But is it true that inflation is never good for the wealthy who are the world's chief lenders? It depends on what the wealthy own and what type of inflation one is talking about. If they own real estate, and the wealthy own a substantial amount of it, inflation can make these prices rise. If they own stocks, and the wealthiest 10 percent in the United States own more than 80 percent of all equities, inflation can make them rise either by stimulating economic activity or by encouraging people to enter the stock market to preserve their wealth thus bidding up stock prices.
Naturally, the wealthy have bank deposits which are lent out. And, they own bonds, government, municipal and corporate. In fact, they buy lots of them. Now, inflation hurts the value of these investments, but bank deposits and bonds are by no means the principal investments of the wealthy.
Now, let's return to the role and purpose of central banks. The purpose of any central bank is to ensure the stability of a country's banking system. And, the banking system in most democratic countries is in private hands, and that means in the hands of the wealthiest, either through stock and bond ownership or through direct investment in banks. So, indirectly, at least, the purpose of central banks is to insure a major repository of wealth for the world's very richest people. So far, in this task, the central banks have performed miracles. Many of the world's largest banks are, in fact, insolvent, and yet they have continued to function after the 2008 financial meltdown through a combination of regulatory forbearance, massive liquidity injections from central banks, and government guarantees and direct investment.
The hard money advocates warned that this bailout of the banking system would make so much money available for loans that the world would experience a bout of high inflation if not hyperinflation. Credit would once again flow so freely that money would flood the economy without a corresponding increase in goods and service. As people realized the inflationary effects of this new credit bubble, they would rapidly flee paper claims on wealth such as bonds and bank accounts and move their money into real goods such as commodities, particularly precious metals, and claims on real productive assets such as stocks.
But this has not happened. Instead, the banks, at least in the United States, have chosen to park their massive liquidity injections at the Federal Reserve or in government bonds where they earn essentially risk-free returns. This has turned out to be a backdoor method for transferring public funds to ailing banks through government expenditures on bond interest. And so, by any reasonable measure, private credit continues to shrink worldwide as public credit (i.e. government borrowing) expands. So far this has enabled a more orderly deleveraging on the part of companies and households than would otherwise have been the case. This is because you can deleverage in two ways; either you can pay back your loans or you can simply default on them. So far defaults have been kept in check. But government support of the economy has resulted in neither a substantial economic recovery nor an inflationary spiral. In fact, the biggest fear among central bankers is that the world could once again fall into the maw of deflation as it did in 2008.
The new and as yet untested prediction made by those who say we are heading for a bout of intense inflation is that as the economy once again weakens, the Federal Reserve will take the extraordinary step of creating fresh money to buy stocks and to buy real estate directly from homeowners. This would supposedly put money into the hands of "the public." But is this actually what would happen?
By "public" we can assume that the commentator cited above is talking about people who make considerably less money than he does. And yet, we already know that more than 80 percent of all equities in the United States are owned by people in the top 10 percent measured by assets. These people are unlikely to spend on consumer goods a substantial portion of the proceeds from any stock sale since their basic needs have already been met. They are much more likely to reinvest the money they receive in something else. As for the other 20 percent of equities which are held by "the public," many of those are held in pension funds, 401K plans, and IRAs, hardly sources of ready spending money. There's not much fodder for an unstoppable inflationary spiral here.
But what about direct real estate investments? Here the Federal Reserve would have to distinguish between rich homeowners trying to dump mansions or second homes and middle or working class homeowners who might spend more freely the money which they'd receive from any sales of their homes. But typically people of average means who must sell their homes are selling them because they can no longer pay the mortgage. This means that much of the money the Federal Reserve might pay for such homes would simply go to the bank holding the mortgage where, if current conditions continue to prevail, the bank will simply invest the money in low-risk government bonds.
So, even in the very unlikely circumstance that the Federal Reserve embarks on such a program, I am doubtful it would do much good. Instead, I regard the most likely course for the world economy as continued deleveraging by businesses and households for some time. And, I expect governments and central banks to continue to attempt to stimulate the economy. But all they will accomplish is to partially offset the contraction of credit which must proceed to its conclusion, that is, down to a point where debt service is manageable and prices for assets such as homes and stocks are compelling based on long-term historical trends, not compared to recent bubble-induced pricing.
Where does this leave us? While central banks seem incapable of preserving the absolute wealth of the rich, they are supremely accomplished at working in concert with central governments to preserve and even enhance the relative position of the wealthy. That is, wealth is now even more concentrated in fewer hands than it was before the 2008 crash despite the large percentage losses that the wealthy suffered along with everyone else. This is, of course, the result of failures of banks and other businesses outside the world's main financial centers, failures which have have reduced competition for the businesses and banks controlled by the superwealthy. These people may not be quite as wealthy as they were before the crash. But relatively speaking they have gained against the rest of the population in their wealth and power.
However, the wealth of the rich depends on other people, usually middle class people and the governments they fund, paying back their loans. Much of the government bailout effort has been focused on shoring up the value of the bonds of government and government-sponsored entities such as Fannie Mae and Freddie Mac, the home mortgage giants. Far from being concerned about the needs of feckless American homeowners or the Greek government, the bailouts of Fannie Mae, Freddie Mac, and Greece, to name three examples, are really about securing the investments of the banks and wealthy individuals who hold the bonds of these entities.
Of course, central bankers are right to worry about systemic financial collapse. But they always seem to think that the response to such a threat should be to guarantee the investments of the rich using the public's money. Central bankers and financial regulators often come from investment houses and banks which are, of course, controlled by the rich, and so are infected with an idea that infects so many of those who are rich or who cavort with the rich, namely, that what is good for the wealthy is more or less identical with the public interest.
The threat of inflation then comes not from any conscious policy on the part of central bankers or even most central governments who have already made their iron-clad allegiance to the wealthy classes abundantly clear. Rather the threat of inflation comes from the eventual exhaustion of government credit in the face of an intractable and unstoppable deflation brought on by continuous deleveraging of companies and households. When the governments of the world can no longer entice lenders to give them money, they will be forced to print their own. (This is usually done through the sale of bonds to central banks which then create deposits out of thin air for governments to spend.) At that point the inflation worriers may turn out to be right, in spades. Private deleveraging will have halted, but, of necessity, government credit will continue to grow at a frightening pace, probably just in order to pay the interest on and roll over the debt previously shouldered to fight deflation through government spending.
If inflation does arrive in this way, it won't be because the central banks and the government meant for it to happen. They have shown themselves to be faithful guardians of the rich. No, such a result will be pure and simple--if anything related to central banks and governments can be said to be pure and simple--a gargantuan policy mistake borne of a misunderstanding of the financial predicament we face.
When households and/or companies as a group take on more debt than they can service, then they are obliged to shed it, either by paying it down or defaulting. When this happens on a grand scale, it takes the entire economy into a deflationary depression which in turn makes it even more difficult for households and companies to pay their debts as incomes and profits tend to fall relentlessly with each new round of deflationary pressures. Every player in the economy is acting rationally by saving and by holding back on investments because they cannot be justified by consumer spending or on purchases because prices are likely to be cheaper in the months ahead. This rational behavior leads to worsening results for everyone until the deflationary spiral comes to its natural end.
No doubt there are many unforeseen events which might halt the world's slide into the deflationary mire--perhaps a large-scale war or central bank policies that essentially print paper money and hand it out to the populace. But barring such extraordinary events, inflation is likely to show up only as a latecomer to the global economy's wake. What course inflation will take and whether governments and central banks will once again be capable of stemming the losses of the wealthy is impossible to know. That they will try to stem the losses of the wealthy is beyond question.
Sunday, September 05, 2010
I am taking a holiday break and expect to post again on Sunday, September 12. In the meantime, I hope you'll take a look at my latest column on Scitizen entitled "Fossil Fuels vs. The Public Interest." You may also find of interest the many comments on the The Oil Drum under a recent piece of mine, "Personality Profile: Do you 'go with the flow' or 'stock up' just in case?" that was reposted in the campfire section of the site.
Thursday, September 02, 2010
The fossil fuel industry often pretends to have the public's best interests in mind. The operative word is "pretends"....Read more.
Sunday, August 29, 2010
A frequent critique of those who claim we still have enormous stocks of resources left to exploit is that the flow or rate of extraction is far more important to the health of the world economy than the size of the stocks. If we can't get it out of the ground at the rate we'd like to, then that is the key restraint. Hence the concern about peak production of resources such as oil, natural gas, coal, phosphorus, and even gold.
It occurred to me that this argument might be due in part to differences in personality, but also to flaws in one's understanding of how the world actually works. Let's think for a moment about how the world actually works. All life on Earth (except that of certain deep-sea creatures living off the heat of the Earth's core) ultimately depends on the daily flow of sunlight. The sunlight enables plants to create food for themselves and for animals. There are storage mechanisms for when the light is gone at night or when it's seasonally weak and short-lived in winter. But, generally nothing could survive long without the Sun.
So too, our entire civilization lives on flows of energy, food, water and other resources. While it has the capacity to store resources, the end of the needed flows would mean the end of our civilization in short order.
Given all this, why is it that some people believe they can really store up much of anything? Yes, it is wise to have emergency supplies in case of a power outage or other disruption that might make it difficult to get food, heat and even water. But can one really stock up for a lifetime?
The illusion that we can is given to us by money. We are told that if we save enough, we can have a comfortable old age. But what is money other than a claim on the current flow of goods and services? It's not really a stockpile of anything. So, its value depends entirely on the smooth flow of energy and resources through the economy.
And yet, there are people who believe that money will somehow make them immune to the breakdown of this flow. Yes, enough money might make it easier for someone to get scarce goods during such a breakdown. But, ultimately a community that fails to function won't be able to provide you with anything no matter how much money you have.
This is the fear behind the thinking of the lone survivalist. And yet, even stockpiles of food and other goods will eventually run out. Without a functioning community capable of defending itself and with continuing access to a flow of energy and goods, no one can survive in the long run.
Today, however, it is far too easy to just "go with the flow," rather than prepare for possible disruptions. This is the philosophy behind the just-in-time inventory religion which is still so dominant. Prudent stockpiles of essential materials including food have been the hallmark of civilization. Without such surpluses and the ability to store them, what we call civilization could never have arisen. Civilization depends on the ability to store surpluses.
Today's cornucopians provide a useful cheering section for the just-in-time religion since they are the ultimate "go with the flow" crowd. They like to cite the principle of substitution as their defense against running low on critical resources. No need to worry about using up nonrenewable resources, they say. But, what they always seem to leave out is that substitution takes time. What if we don't have enough time for a smooth transition from one resource to another? Won't happen, the cornucopians say. You see, the marketplace is just like magic. Things show up the instant they are needed! (This is true until it isn't.)
What I'm getting at is that the balanced personality would recognize that all of us live on flows of energy and resources and that our cooperation to keep those flows moving is critical. But that same balanced personality would also recognize the potential for serious problems should those flows be curtailed. Therefore, the balanced personality would want three things: 1) That we have a reasonably large stockpile of critical goods in case of a temporary disruption of flows, 2) that what we rely on for our survival be by and large renewable, and 3) that our demand for renewable resources would come into balance with the supply we can reasonably expect--considerably less than fossil fuels have provided us.
It's hard to find such balanced thinking in the world we now live in. But that balance is precisely what we will need most in the years to come.
Sunday, August 22, 2010
Every society attempts to determine which risks will be borne by the individual and which will be borne by the community. It is certainly not an exact science, and there are many situations in which risk is presumably blended, some being shouldered by the individual and some by the group, either the community in general or a specified group such as a pool of policyholders. An example would be deductibles or co-pays for various kinds of insurance. The policyholder is at risk up to a certain amount. After that, the insurance company, which really means the policyholders in the group, bear the risk.
But my task is to convince you that the idea of individual risk is flawed, and that to the extent we organize our society around it we are being hoodwinked by a false libertarian ideology, one that tells us there are choices available to the individual the consequences of which will fall only to that individual. I am going to discuss this in the context of energy and resources later, but first let me offer another kind of illustration.
Controversy continues to rage over mandatory helmet laws for motorcycles, scooters, and bicycles. Two states require no helmet for any of the three. (They are Illinois and Iowa.) Many states require helmets only for those under a certain age--ranging from 17 to 20 for motorcycles and 14 to 17 for bicycles. No state requires adult bicycle riders to wear helmets.
I am not trying to argue here for or against specific helmet requirements. You can certainly find many sites on the Internet that will argue that wearing a helmet ought to be an individual choice. But do the consequences of not wearing one fall merely on the individual?
Long ago during two separate time periods, I did marketing work for two rehabilitation hospitals, the kind that treat head injuries from motorcycle and other accidents. Yes, these hospitals compete for the very lucrative task of treating traumatic head injuries as well as other types of injuries requiring extensive rehabilitative stays in a hospital. So, now you have at least one clue about how the consequences of such injuries are actually distributed.
If you are insured, your insurance picks up much of the tab which means other policyholders are picking up your bill; that's how insurance is designed. But, if traumatic head injuries are more numerous than the insurance company anticipates, look for a rate increase to pay for the very costly treatment.
Okay, so what happens if you aren't insured? Well, in my state the state government picks up your bill, and that, of course, means all taxpayers do. What is the logic behind this? The state figures that without rehabilitation a trauma victim with severe injuries will become a long-term burden on the state and the local community through other programs that serve low-income citizens in the areas of housing, employment, home health care and transportation. It's much cheaper to bring the injured person back to his or her fullest capabilities than to treat ongoing disabilities resulting from an accident. It's also the right thing to do for that person.
But there are all sorts of other consequences of a traumatic head injury that can affect the individual and his or her family and community for years afterwards. For those who never fully recovery there can be a lifetime of follow-up services, not all of them covered by insurance and many paid for with tax dollars. Some patients who appear to have a full recovery develop subtle deficits in higher reasoning functions and find that the speed with which they formerly thought through problems, say, simple calculations, is not there. These ongoing deficits take a toll on those around the injured person even though he or she appears healed.
I've used this illustration because I am so familiar with it. But I want to apply the same logic to the way in which we use resources, particularly energy. Most Americans feel that they have a right to use as much energy as they choose so long as they can pay for it. The perceived risk is that you may not be able to pay for it, not that its supply could become scarce, something that would affect myriad systems in society, not just the individual.
In an era of rising supplies of just about everything including energy, the marketplace solution to allocating resources functioned reasonably well with occasional shortages and disruptions and, of course, with the attendant steep inequality of distribution. But, running low permanently was not considered a risk. The marketplace would always magically bring on new supply or at least substitutes.
As we face a future of constrained resources, the risks are increasingly shifting from the individual person or company to society as a whole. My resource use no longer simply drives up prices which will then cause mining companies and oil and gas companies to produce whatever society might need at ever higher rates. Instead, my profligate use of resources threatens to destabilize the very social, economic and governmental systems I depend on. Should I merely be entitled to all that I can pay for?
So much of the freedom of action we take for granted today is, in fact, a product of the availability of huge amounts of energy. Of course, not to allow the individual some range of action to take risks would indeed make our lives exceedingly frustrating and dull and our societies stagnant. But as we head down the slope of energy and resource constraints, we as a society are going to have to rethink the idea that the risks associated with access to resources are an individual risk. They are increasingly going to become a societal risk to which we will need to apply some restraints regardless of the ability to pay in order to insure the stability and integrity of society as a whole.
Thursday, August 19, 2010
My latest column on Scitizen entitled "Global Coal Supplies: It Might Be Worse Than Anyone Thinks" has now been posted. Here is the teaser:
A new study on global coal supplies suggests a worldwide peak in production from existing fields in 2011.....Read more
Sunday, August 15, 2010
Henry David Thoreau commented at length on the frequent interruptions of his day caused by the whistle, rumble, and hiss of steam-powered trains on the Fitchburg Railroad which passed not far from his house on Walden Pond. The railroad symbolized that commercial "getting and spending" world maligned by Wordsworth in his poem The World Is Too Much With Us.
How different the railroad seems to most of us 150 years hence! As I read James McCommons' compelling account of his year riding Amtrak, Waiting on a Train: The Embattled Future of Passenger Rail Service, the memories came streaming in. In the little burg where I grew up just two blocks from my house trains passed every evening around bedtime. The low roar of the diesel locomotives and the syncopated clatter of the railway cars on the track, far from disturbing me, lulled me to sleep.
As a young boy there were overnight trips in sleeper cars on the Denver Zephyr, one leg in the family's annual journey to Colorado for a skiing vacation in places like Vail and Aspen, long before they became exclusive celebrity playgrounds. The observation car provided a geography lesson as the Great Plains gradually gave way to the Rocky Mountains in the dusky twilight. The dining car seemed as exotic as a circus act: A formal dinner in a moving vehicle, who thought of something as neat as that? At night the gentle rocking of the train made me sleep, well, like a baby.
Passenger trains still seemed glamorous and contemporary then. Yet with only 5 percent of the passenger market, they were already lurching toward oblivion.
But McCommons' book is not about the past, but about the future of passenger rail, right? In fact, it is about both. He seamlessly weaves the history of passenger rail in with his artful travelogues as he describes the scenery he sees, the people he meets, and the problems and joys he encounters during a year of train travel that covers nearly every major Amtrak route. These travelogues are an absolute pleasure to read. And, they provide an excellent window on the current state of passenger rail in America today. Frequently, McCommons takes train trips to meet people who are actively shaping passenger rail in the United States. That's the part of the book about the future.
In reading this book it helps to have fond memories of train travel for this predisposes you to look carefully for clues about what might be done to improve and expand service. It helps even more if you have occasion to ride Amtrak today as I do to reach Chicago or visit friends in Minnesota via the Empire Builder. But herein lies part of the problem. McCommons tells us that an astoundingly low proportion of Americans have ever been on an intercity train, less than 2 percent! Only 3 percent use light rail or commuter lines. It's hard to build sympathy for a mode of travel that most Americans have never experienced and may know only from movies or television.
Still, it is indicative of the hold trains have on the popular imagination that many routes have Wikipedia entries. How many airline routes have that! It is this appeal which provides some hope. After all, many of the Amtrak routes which remain today exist only because people in the localities served by those routes fought hard to keep them. Some of the stories are detailed in the book. And, when the Bush administration tried to destroy Amtrak by zeroing out its budget, Congress simply passed Amtrak funding by veto-proof majorities. People want passenger rail.
Now, comes the sticky part. An economist acquaintance of mine has tried to drill into me that we as a society should tax the things we don't want, and let the market sort out what should take their place. If we do that, then the government doesn't need to pick winners by subsidizing anything. In fact, he insists, if the U. S. government would stop subsidizing highway travel, that is, if people were forced to pay the true cost of driving on highways, they would soon flock to rail and that rail would be privately financed because it would be profitable.
He may be right, but I am a realist. I don't think we will ever get a chance to find out if his system would work. Societies have always considered transportation as simply too important to be left to the marketplace--from the roads of the Roman Empire all the way to today's newest airports. And, so perhaps the critical point that McCommons' book makes is that if we want passenger rail to thrive in America, we as a society will have to pay for it. Passenger rail will never be profitable in the narrow sense that businesses are. But it will be vastly profitable to society by other measures: energy efficiency; national cohesion; private development associated with transit; and the comfort, aesthetic pleasure, and sociability that trains offer over other types of transport.
That means we need to focus on making passenger rail so attractive that people will abandon their cars because they think that taking the train is a better idea. And, to do that we will have to invest far more in passenger rail than we do today.
Sunday, August 08, 2010
It is a frequent conceit among humans that they are at the beginning of some new important era or at the end of a previous grand or decadent era. It is quite boring to imagine oneself simply in the ongoing stream of an already well-established pattern of life that will neither reach a climax nor inaugurate a new epoch.
What if, a friend of mine proposed, we are not approaching a point that will tip us into a grand ecological catastrophe which we are called upon to prevent? What if we are in the middle of that catastrophe and it began some time ago?
So much of the environmental community is focused on preventing this catastrophe. So much of the scientific community is warning us about what we must change in order to avert disaster. Of course, disaster is already arriving for many species who are being wiped out daily by the encroachments and ill effects of industrial society. But apparently the marker for much of the public will be widespread human casualties from lack of heat, lack of food, disease and myriad other causes.
William Catton Jr., author of Overshoot and Bottleneck, has already stepped forward and said that the public will have to wait no longer than sometime in this century for their preferred signal that the great ecological catastrophe is upon us. He believes we are now on a trajectory for a mass dieoff of humans. It probably won't mean the extinction of homo sapiens, he believes. But it will mean the end of industrial civilization as we've known it.
The idea that we can prevent the great ecological catastrophe has certain psychological effects that I have noticed even in myself. For some it creates a great sense of urgency and a desire to leaflet the neighborhood. There is a deadline looming, and we must as a society act in time. If we succeed at prevention, then life will return to normal. For others the idea that we still have time for preventive measures simply means that we can leave the task of prevention to future generations. It'll be their problem. But if, as my friend and the venerable William Catton suggest, the catastrophe is upon us, then neither of these outlooks will do.
Now some who believe that the catastrophe is here have chosen resignation as their stance. Since we have not prevented the catastrophe from happening and it is too late to prevent it, then there is nothing that can be done. But we do not typically take this attitude with an illness, for example. Having failed to prevent it, we set about treating it. We try to alleviate the symptoms if they are severe. We attempt to get at the underlying cause to shorten the time of recovery. And, if the problem proves chronic, we look for ways to cope with the condition long term.
All three of these approaches seem appropriate for those who accept that we are now beyond the possibility of preventing a collapse of some type in our ecosystems and ultimately our society. The cure, if there is one, is not something that will take us back to the coveted perpetual economic growth of industrialism, but forward to a sustainable society based on other principles.
For those alive today, we may be faced with something akin to dealing with a chronic disease. Fortunately, unlike actions aimed at prevention, there is no expiration date on our task. If we are at the end of prevention, then we might be fated simply to cope with the intractable problems of climate change and declining energy and resources. But "cope" seems too small a word for the task ahead. When people think of coping with a situation, they think of others around them happily proceeding with business-as-usual while they cope. What is actually available to us is a lifetime of creative response in collaboration with others to an unprecedented challenge. That view I believe takes us into a new dimension and along the path of action.