Holiday break

The post below is my last one of this year. I'm taking a brief holiday break and expect to post a regular piece again on Sunday, January 4th. In the meantime, my latest column on Scitizen will be appearing shortly, and I'll provide a link to it when it is posted.

Uncertainty

To live in an uncertain world is one thing. To know it is altogether something else. In the last 30 years policymakers and then investors came to believe that the ups and downs in the economy and the financial markets were simply bumps along the road to long-term prosperity. In fact, declines were increasingly thought to be simply opportunities to double down and ultimately make more money.

The certainty that we were living in stable times led some people to commit more and more of their wealth to investments rather than savings accounts. It led others to rack up huge amounts of debt believing that the good times could never end. The risk was not being in the market or not getting that house you really wanted. Likewise businesses found themselves in an environment of cheap finance. Why not lever up the company balance sheet and make even more money? Both consumers and businesses were abetted by banks and other lenders who used complex models to justify their wild expansion of lending. The models were said to be backtested and the risk properly hedged or offloaded onto investors. Investment ratings agencies seconded this thoughtless optimism with high ratings of questionable securities, ratings that in hindsight look like rampant grade inflation at a second-rate school trying to attract students. Numbers crunched on computers gave everyone a belief that profits were certain and that risk was negligible.

But, beware of those offering certainty. They probably have something to sell you, perhaps something you don't need and that may be dangerous to your health and prosperity. Former hedge fund manager and self-styled philosopher of uncertainty Nassim Nicholas Taleb has a rule of thumb: Don't trust any predictions from people who wear ties. He notes that bankers and financial economists almost universally wear ties to work. Those in the hard sciences such as physicists and chemists almost never do. Such scientists have a much better record of predicting the course of planets and the outcomes of chemical reactions than the bankers and economists do of predicting the trajectory of the economy or the markets.

But certainty sells, especially regarding those things about which we are most uncertain. The purveyors of research on the future would like to tell us (often but not always for a fee) that everything will be all right, especially if we let that purveyor (or his or her clients) make all the important personal and public policy decisions for us. (I probably should have put the word "research" in the previous sentence in ironic quotes since it is impossible to do research on the future.) Other purveyors might also tell us of dark days ahead for which they can sell us the certain and perfect defense. And, there is yet a third very small class of soothsayers who offer a message of gloom (without extracting a fee or at least a very large one) and without offering hope (at least that life will ever again be what passes for normal these days). I sometimes give this third class my attention since they tend to speak with less certitude, and they often pray that they are wrong.

A succession of developments has lifted the reputation of the few in this third class. The highest prices ever seen for oil were recorded in July this year. This was followed by the swiftest decline in the economy since the Great Depression. Nearly every market crashed making mincemeat of practically all investment advice even from those who ostensibly foresaw the crash and recommended investments that were supposed to go up in such a crash. Suddenly, those things which seemed so certain just 12 months ago are now quite shaky. What most people want to know is whether someone or something, perhaps the government, can restore certainty to our lives. But is that what we really need?

More than 50 years ago author and interpreter of Zen to the English-speaking world Alan Watts wrote a book entitled "The Wisdom of Insecurity." He made the case that feelings of certainty and security were just that, feelings. Our true and perpetual state as humans is that of uncertainty and insecurity. The world never stops changing and never stops unsettling our settled notions, at least if we pay careful attention to it.

And so, what's really necessary to feel certainty in one's life is to be oblivious to what is actually happening. For Watts a good life and a happy life, taken with all its sufferings, is one lived while paying attention. Recent events are forcing more of us to pay careful attention. But to pay attention is to feel more insecure and more uncertain. Still, instead of something to be avoided, insecurity is something to be embraced. It forces us to become more resourceful, to encounter the world as it is and to gain a measure of prudence that can serve us well when we are tempted to believe the optimistic hype of investment advisors, economists, politicians, or experts of any kind.

I find myself writing an odd sort of holiday message in this piece. When so many others are sending out words of comfort and joy and wishes for a happy new year, I am focused on getting in touch with life's inherent uncertainty and insecurity which in my view is the true cauldron of creativity in our lives. If you want to have a better year next year than you had this year, I offer no certain way to achieve it--only the insecurity and uncertainty that engender prudent and practical effort, which when we do it in concert with others can bring us the joy of working together on something worthwhile.

Energy and Ponzi schemes

The recent collapse of what is believed to be the largest Ponzi scheme ever says as much about what the public believes regarding wealth and the possibilities of infinite growth as it does about the scruples of investment managers. (In a Ponzi scheme, old investors are paid off using money from new investors. Exorbitantly high but fraudulent returns for the initial investors quickly attract new investors seeking the same high returns.)

In the absence of independent contrary information, unsuspecting investors will believe in Ponzi schemes as long as their returns are high. In the same way the public will put its faith in neoclassical economic theories which claim that perpetual economic growth is possible. What most investors and many Americans want is to get rich. Most recently they were led to believe that the stock market was a one-way ticket to wealth. While the stock market as a whole is not a Ponzi scheme, the companies on the exchanges are run on the basis of neoclassical economic assumptions about growth. When those assumptions are undermined, as is happening currently, investors and corporate leaders look for villains and bailouts rather than questioning the assumptions themselves.

In an effort to challenge those assumptions, systems ecologist and energy researcher Charlie Hall has long championed a biophysical approach to economics as an alternative to neoclassical economics which he likens to a Ponzi scheme. Why a Ponzi scheme? Each new wave of lending is made based on the faith that future flows of energy will increase sufficiently to create enough economic growth to pay off the new loans.

Theoretically, given no other resource constraints, this might work for a very long time if the energy were to come entirely from renewable resources. But such is not the case. The vast majority of current energy flows come from finite fossil fuels. That means that without drastic shifts in the sources of energy for society, there will be a day of reckoning, just as there is for every Ponzi scheme when not enough new investors are brought in to pay off the old ones.

(Some people think that day may have already arrived. They posit that oil supply constraints sent prices so high last summer that those high prices brought on a depression, one that will now cause massive debt defaults. They also believe that we may have no prospect of ever returning to sustained economic growth based on increasing supplies of fossil fuels.)

The lure of wealth is so great, however, that the dream will die hard. Even now middle-class investors are being told to hang on until growth returns. And, perhaps it will. But the dream of becoming wealthy remains problematic if unquestioned. First, not everyone can get rich. The idea that anybody can become wealthy is not the same as everybody becoming wealthy. Second, although fossil fuels have made possible enormous comforts for the middle-class and even many poor people, few of them would consider themselves wealthy. Wealth is a relative concept. To be wealthy is essentially to be able to pay other people to do many things for you that most people do for themselves. If everyone were to become wealthy, it would be meaningless since wealth always implies privilege, that is, inequality. If you still have to wash your own shirts, take out the garbage and drive yourself to work, you may be comfortable, but you won't necessarily consider yourself privileged.

The unreflective view of wealth--the confusion of wealth with money, the failure to see that feeling wealthy requires an underclass--masks attempts to explain the limits of wealth. Now that the expectations of perpetual financial gain are being dashed, there may be an opening to explain those limits. If the Ponzi-like scheme that animates our economic thinking can be exposed, it could help many to see, perhaps for the first time, that the source of wealth is not the financial markets or the banks, but rather the very earth, air and sea around us.

The singularity: The fantasy and its effect

(I am posting early this week since I will be on vacation and away from home until late next week.)

This Thanksgiving I was discussing the idea of technological progress with my father. I asked him if he had ever heard the term "singularity." He recognized the word had something to do with physics, but did not know any meaning that related to our discussion of technology. Then, he went on to describe a view of technology that seemed strikingly similar to that espoused by believers in the so-called "technological singularity," a speed-up in the rate of technological change so immense that it would constitute a third revolution in human history alongside the agricultural and industrial revolutions.

But his explanation had a twist. He thought it very likely that this technological progress would result in the destruction of human civilization and perhaps all life on the planet within a century. Alas, he didn't see any way to stop it.

The idea that the advance of technology is speeding up is not a new one. And, the idea that technological progress may actually be putting us on a path to destruction precisely because we don't know when enough is enough has a long history as well. But perhaps the most pernicious idea of the three my father mentioned is that nothing can be done to stop it.

I was struck by how deeply the idea of inevitable, unstoppable, rapid technological progress had become ingrained in the culture. If my father--who reads a lot, but is not particularly versed in things scientific or technological--could describe this idea and its possible consequences in such great detail, then it must indeed have made its way into the minds of nearly every thinking and perhaps many nonthinking persons.

The effect of this idea has been threefold. First, the vast majority of people regard technological progress as an unalloyed blessing. Of course, they are, in part, confusing the availability of cheap energy to run the technology with the technology itself. Without cheap energy much of that technology would not be available to the masses. And, we would not have been able to build the necessary infrastructure nor been able to put the necessary number of people to work to develop so many new technologies.

Second, many people are also discounting the ill effects. If someone had told you at the beginning of the 20th century that the automobile would become ubiquitous in American life, that it would lead to tens of thousands of fatalities and countless injuries each year, that it would be a major cause of urban decline, that it would make our country dangerously dependent on foreign oil imported from the most politically unstable parts of the world, and that it would be a large contributor to climate change, would you not have joined a campaign to ban it? Yet, even today most people are largely blind to or at least have little concern about these clearly deleterious effects.

Third, faith in technology turns most people into citizen-couch potatoes. Since technology will fix everything, we'll put the technologists in charge and then sit back and wait for the miracles to arrive.

The persistence and depth of this conviction results not from the available evidence, but rather from a pseudo-religious belief in the innate goodness of technological progress. Ray Kurzweil, the high priest of the singularity idea, tells us in his tome, "The Singularity is Near," that humans have become joined to machines in their cultural evolution. So far, this is not news. Human ecologist William Catton Jr. made the same point in his 1980 book, "Overshoot," where he refers to human beings as homo colossus, a man-tool hybrid of extraordinary destructive power.

But Kurzweil goes on to say that evolution creates better solutions to the problems of survival, and that technological evolution as part of overall evolution inevitably makes humans more fit for survival. This, he says, is the necessary progression of the universe. That's not exactly what the original evolutionist, Charles Darwin, thought. Changes in living organisms are due to random mutations that are just that, changes. They do not have a purpose per se. The natural world simply sorts through these experiments (including presumably any human technological inventions), keeping the ones which make animals and plants more fit and discarding the ones that don't. Since this sorting takes place over many generations and sometimes many millennia, there is no good way to tell ahead of time what will work and what won't.

So, Kurzweil's faith that our technology will make us more fit for survival in the universe is, in reality, a religious view, not a scientific one. To be fair, Kurzweil does acknowledge many potential dangers from new technologies such as genetic research, nanotechnology and robotics. But he believes we can mitigate or eliminate those dangers with proper regulation.

The main problem with this worldview is that nature is almost entirely absent from it. In this view nature is something which we seek to understand in order to manipulate it for our benefit and for the benefit of other creatures when we deem it necessary. And, nature is something we can fix when we have to. Witness the many ideas for geoengineering the climate including giant mirrors in space to reflect a portion of the sunlight that would otherwise fall on the Earth and a proposal to seed the ocean with iron to increase algae growth, algae that will ultimately die and fall to the ocean floor thereby sequestering carbon.

First, the natural world is so complex that environmental education giant David Orr believes we will never solve the knowledge problem. For everything we learn about the natural world and how to manipulate it, we create an equal and consequential void of ignorance concerning the effects of our actions. When it came to chlorofluorocarbons--a set of chemicals used in refrigerators and spray cans--we almost found out too late that they were eating a hole in the ozone. Given our countless industrial and technological processes, we simply cannot know all their effects on our biosphere.

Second, those effects might be so severe that they could wipe out human civilization. Bill Joy, formerly the chief scientist for Sun Microsystems, wrote a widely read article for Wired back in 2000 about just such possibilities. The article entitled "Why the Future Doesn't Need Us" details the possibilities for the dissemination of designer viruses with the power to kill selectively, self-replicating nanobots that devour the world, and robotic intelligence too great for us to understand or control. The problems may seem like something out of science fiction, but at least the designer viruses and the self-replicating nanobots are in principle possible. Robotic intelligence that mimics and outpaces human intelligence is still just a dream. And, many debate whether such a thing is even possible. But if it were to come to pass, it would have enormous consequences, not all of them salutary for the human race or the biosphere.

Finally, there is the perception that technological progress is speeding up. But is it? After one hundred years, we are still dependent on the internal combustion engine for almost all of our land and much of our sea transportation. We were promised miracle cures for genetic diseases a decade ago, but they haven't arrived. After a half a century of research, we expected fusion reactors to be in place. But the latest international project promises to bring us commercial fusion power only by the mid-21st century. In truth, it is not altogether clear that we will ever be able to master fusion energy. Our main fuels by far remain fossil fuels, 86 percent by energy content. And, these fuels are heading toward depletion faster than anyone anticipated as the world economy and population grow, and as more and more people want access to high-energy lifestyles.

In reality, technology sometimes progresses in fits and starts, and sometimes not at all. Joseph Tainter, author of "The Collapse of Complex Societies," suggests that we may have reached an era of diminishing returns for technology and for the complexity it fosters. Complexity, Tainter explains, can increase the power and reach of a civilization. But increasing complexity will also eventually have diminishing and even negative returns to a society thereby endangering its very cohesiveness. He cites Roman and Mayan civilizations as examples.

An aura of inevitability surrounds the idea of technological progress. And, that aura implies meaningful progress for human society as well. But is that aura in reality merely a paralyzing agent that prevents careful examination of technology and its claims for the future? Humans have, in fact, stopped, slowed or restricted technology on a few occasions. Whether wisely or not, the nuclear power industry was essentially stopped in its tracks after the accident at the Three Mile Island reactor in Pennsylvania in 1979. The public wanted other solutions.

We should want other solutions now, too. Technology enthusiasts claim that new as yet created technologies will keep human society overflowing with the cheap energy it needs for the energy-hungry technological wonderworld of the future. And, yet despite all our new technology, oil discoveries continue to fall. Geology is remorseless and doesn't yield to mere faith in technology. The development of alternatives is lagging far behind our need for quick replacements. The effects of climate change are visiting us sooner than even the most pessimistic estimates had presumed.

The singularitarians tell us, "Just wait! The great breathtaking exponential acceleration of technological progress is about to begin and will play out over the next few decades." The new technologies that will emerge will solve the problems of energy supply, clean water, hunger, and even climate change. And, they will also lead to much greater longevity and far better human health.

But as the world hurtles toward peak oil, catastrophic climate change, widespread water shortages and further vast destruction of the biosphere, can we afford to wait for the singularity to arrive? Or do we need to be pragmatic and start addressing these issues now as well as we can, not just with our technology, but with a plan to change the very way in which we live to make our presence more consonant with the limits of the Earth?

The overoptimized society

For former Wall Street hedge fund manager and self-styled student of uncertainty Nassim Nicholas Taleb an important cause of the current financial meltdown is best described by ecological science. The system has become overoptimized. The consolidation of finance into the hands of fewer and fewer large players--banks, insurance companies, investment banks, and giant hedge funds--has made it less vulnerable to frequent crises, but more likely to produce a severe crisis when there is a breakdown in the system.

What used to be country-specific or regional crises, now become worldwide crises. In the past we've had the Mexican crisis, the Asian crisis, the Argentinian meltdown and most recently the utterly devastating hyperinflation in Zimbabwe. But none of these became global crises.

"It's vastly more optimal to have one large bank than 10 small banks. It's more efficient," Taleb told The News Hour with Jim Lehrer recently. "[But,] when one bank, [a] large bank makes a mistake, OK, it's 10 times worse than a small bank making a mistake." The moral of the story: A world with a lot of small banks is far more resilient than one with a few large banks. That's the kind of result one would expect in biological communities, and it turns out to be true, not surprisingly, in human communities as well.

But overoptimization isn't just limited to the banking industry. In fact, it is everywhere, and it makes for vulnerabilities across multiple fronts that quite often interact with one another. We've built a system too complex for any human to understand. Therefore, when something major goes wrong, no one can be sure how to correct it.

Witness the floundering attempts to revive the comatose credit markets. The seemingly incoherent policy shifts exhibited by U. S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke are not so much a result of incompetence as a reaction to the opacity of the global economy and the inability of anyone to grasp its workings or interpret its supposed signals.

As for the vulnerabilities across multiple fronts, one need look no further than the world's ports. The financial crisis has slowed many to a crawl as exporters worry that importers on the other side of the ocean may not be able to pay them. Banks are reluctant to issue letters of credit guaranteeing payments when they can't be sure the bank on the other side of the transaction is sound. This has driven dry cargo rates down 90 percent from their highs this year forcing some shipping companies to simply idle freighters. In addition, several shipping companies are on the verge of bankruptcy. And, that means orders for new ships are plummeting as well driving shipbuilders toward bankruptcy or at least consolidation.

The tight coupling and vast size of the globe's major economic actors, once hailed a triumph for economic efficiency, has now become an Achilles' heel. Only a few months ago the globe's just-in-time delivery system was strained beyond the limit. Now, as demand has fallen off a cliff, it's spewing out so much stuff that the Port of Long Beach doesn't know where to put all the imported cars coming ashore. Feast or famine, the system wasn't designed for surges or sudden drops in demand.

Overoptimization has taken place in agriculture as well. We are now hostage to such potential crises as the so far unstoppable wheat rust which threatens to knock down wheat yields worldwide. Farms that grow and rotate multiple crops with multiple varieties would be less efficient, but far more resilient in the face of such plant diseases.

And, with the huge, but clunky U. S.-Canadian electrical grid, we are subject to large consequences from small disturbances. Overgrown tree limbs in Ohio were said to blame for the 2003 power outage that deprived 50 million people of electricity from Detroit to New York and from the Ohio River to northern Ontario. A distributed power system made up of a large number of individual home and business generators might be less efficient; but it would be much more resilient. A failure of even many parts of such a power system would leave most of the rest functioning.

The effects of the overoptimized society have been seen in price swings as well. Small changes in the supply and demand for oil can send the price soaring or plunging, and we have seen both this year. The same has been true in the grain and base metals markets.

What all this tells us is that the pablum we've been fed about the merits of globalization has masked its dreadful vulnerabilities. We have created a system that nobody understands and nobody can fix when it falters. We were told that the global marketplace could heal itself and correct imbalances. Well, obviously it can't, not without mowing down an awful lot of people who did nothing to cause the current financial meltdown.

That's the problem with a complex, tightly interconnected network. When it spirals out of control, it tends to create a cascade of problems everywhere. Nassim Taleb says he used to get up in the morning and worry about what will happen to our out-of-control financial system. Now, he wakes up in the middle of the night and wonders how bad it could get.

Maybe, just maybe, it's time to redesign our society with resilience in mind. If things keep going in the current direction, we will surely be forced to.

The energy optimist's lexicon

My latest column on Scitizen entitled "The Energy Optimist's Lexicon" has now been posted. Here is the teaser:

The world's energy optimists often employ a particular lexicon to make their case for abundance far into the future. Whether the lexicon is used cynically or out of ignorance, the result is the same: false impressions.
.....Read more

Timing is everything

As I watched a panel of speakers take questions about Michigan's and, by extension, the world's energy future at a recent conference, I was struck by how different their unspoken timetables for change were.

The panel included peak oil lecturer and author Richard Heinberg who other than James Howard Kunstler is probably the most widely recognized name in peak oil circles. It also included Albert Bates, a polymath of sorts, who has authored several books on sustainability, argued environmental and civil rights cases before the U. S. Supreme Court, helped to organize the Global Ecovillage Network, and works assiduously to teach others about permaculture and natural design. Also included were two Michigan state representatives, a utility representative, an independent wind power expert, and an academic transportation expert.

For those who acknowledged the possibility of an upper limit on and perhaps an ongoing drop in the supply of oil starting in, say, the next few years, the time for drastic action seemed to be more or less "yesterday." Not surprisingly this group included Heinberg, Bates, the transportation expert and the wind power expert. One of the state representatives also fell into this group.

The other state representative and the utility representative cautioned against a headlong rush into renewable energy. Yes, an energy transition is necessary to address global warming and fossil fuel depletion. But 2050 is a better time frame for completing the transition. We were told by the state representative that putting all of our eggs in one basket, namely, renewable energy, risked economic damage and risked betting on technologies that might not survive, work as planned or might be improved upon considerably over time.

Rushing to build an entirely new energy infrastructure may indeed not result in an optimal system and may saddle us with technology that will likely be superseded. Witness the efficiency gains in wind generators and the far greater knowledge we have today about where to deploy them compared to, say, 20 years ago. A gradual energy transition would clearly be much better in many ways.

The key question is whether we have the time for said gradual energy transition. Should the analogy be the computer revolution that took from the end of World War II to the middle of this decade to make ownership of a home computer all but universal in the United States? Or should the analogy be the American entry into World War II which led to a command economy directed by the federal government with the aim of winning the war?

One could certainly argue that the United States did not make optimal use of its resources during World War II. But, it did win. And, private industry directed by the War Production Board managed feats which no one believed possible at the beginning. The effort required the sacrifice of the consumer economy, something which is unthinkable today in the United States even now in time of war. In fact, the primary concern in the current economic downturn is to get consumer spending going again even as two wars grind on.

As long as even those who agree that an energy transition is necessary have wildly differing timetables, the needed changes will limp along at a snail's pace. It seems that only a catalyzing event, something as compelling and clear as America's entry into World War II, can now bring about a rapid energy transformation. It's hard to imagine what would be more compelling than a disastrous and failed war in the Middle East, $150 a barrel oil last summer, and now economic freefall. But the public and the vast majority of policymakers have not made the connection.

If they finally do, the now unfolding economic hardship could become the basis a vast public works program aimed at a rapid and successful energy transition, something at least an order of magnitude larger and far more comprehensive than is currently being contemplated by the incoming Obama administration. But that would mean that America could no longer be about mere consumption, a change that would require a true leap of faith.

Higher lows

(I am posting early this week since I am leaving today for the Conference on Michigan's Future where I will be presenting.)

Back in February in a piece entitled "Do High Commodity Prices Speak for Themselves?" I wrote that the emerging spike in commodity prices would tell us less about resource depletion than prices during the inevitable bust. I observed:

The real price of commodities has been going down for more than a century. This is because the race between technology and resource exhaustion has been been won decisively by technology. Whether that will continue is now in question.

One indicator will be to see not what new highs are achieved in various commodities in the coming years, but whether a new floor is established that is significantly above previous historical real prices. In other words, higher lows will be more indicative of our situation than higher highs which are usually a very temporary phenomenon.

Well, the bust has arrived much sooner than I anticipated. So, now seems like a good time to evaluate. To be sure, commodities--which have already taken one of the worst drubbings ever--may have further to fall. But the glee with which their fall has been greeted may be obscuring what current prices are telling us.

Let's look at crude oil. At its peak this summer oil sold for $147.27 a barrel. As I write, crude for December delivery sits at $56.16. That's a decline of 62 percent. But it's a different story if we compare the current crude price with its previous bear market low. On December 10, 1998 crude oil on the New York Mercantile Exchange closed at $10.72 a barrel. Today, even after a precipitous fall in prices, oil remains 424 percent above the previous bear market low.

How about copper? It reached an all-time high on May 5 of $4.26 per pound. As I write, copper for December delivery sells for $1.65. That's a drop of 61 percent. In late 2001, however, copper prices were hovering around 60 cents per pound. That means that even the latest power dive in the price leaves copper 175 percent above its previous bear market lows.

Foodstuffs don't look all that much different. Sugar, for example, was hovering around 4 cents a pound in early 1999, but vaulted to 19.73 cents by February 2006. As I write, sugar for March delivery sits at 11.61 cents. That's a fall of 41 percent leaving sugar still 190 percent higher than its previous bear market low.

Of course, we may just be seeing a pause in the commodity bull market that began way back in late 1998. The average span for such bull markets in the past century has been about 17 years. On the other hand, if we go into a long economic slump, but commodity prices never return to their lows, we may chalk that up as another indication that depletion may be stealing the march on technology.

Of course, we can grow more sugar if we decide to expand our acreage or increase our inputs. (That's assuming that the fossil-fuel inputs will be readily available and that we have adequate water and fertile soil, both of which are being depleted by modern farm practices.) We cannot, however, grow more copper or more oil. We may figure out how to get leaner and leaner ores to yield copper. And, we may be able to get more difficult-to-extract deposits of petroleum to yield their oil. The key question is whether this will take a rising portion of society's total effort to do so. If it does, that may mean depletion has begun to overwhelm our technological prowess. And that could mean that we need to find other ways to meet our needs for minerals and energy.

Of course, we can deploy renewable sources of energy. And, we could fully recycle all key metals. But these steps would require practices and an infrastructure much different from what we currently have. And, the changes would have to be put in place long before we reached critical shortages in order to avoid large disruptions in our economic life.

The (Not So) Invincible Society

My latest column on Scitizen entitled "The (Not So) Invincible Society" has now been posted. Here is the teaser:

Policymakers and the public think of modern industrial society as being resilient and durable. Are they right?
.....Read more

Governing the ungovernable

Some of my acquaintances have been saying for a long time that President George Bush has been leading the United States toward fascism. I have responded that they should be more concerned about anarchy than authoritarianism. For starters, the anti-authority gene runs deep in American culture. But I'm also in the same camp as peak oil Jeremiah James Howard Kunstler who believes that the "federal government will be lucky if they can answer the phones five years from now, let alone regulate anybody's life." Just recall how effective the federal government was in responding to Hurricane Katrina!

I have been dwelling on this in the celebratory aftermath of Barack Obama's election victory. (Full disclosure: I voted for him.) I think that those who supported Obama have reason to celebrate, especially for the way in which he was able to spread blue all over the electoral map of the country. Of course, there will be the difficulty of getting legislation through Congress even with increased Democratic majorities. But there is the much more serious problem of trying to govern the country in a time not only of financial collapse, but also of resource stringency.

It may not seem as if resource stringency is a problem. After all, oil prices are less than half what they were a few months ago. But the price decline has little to do with increasing supply. It is primarily due to swiftly falling demand, and that has been the result of slowing economic activity due to the financial crisis. So, even as the economy tries to lift off again, it will all too quickly face the headwinds of limited supply, not only of oil, but also of other critical resources including agricultural products and some base and rare earth metals.

In his first news conference, Obama tried to reassure the public about his focus on and understanding of economic issues by having an army of financial heavyweights stand with him on stage. Now, I don't easily discount expertise. We've had too little of it in government in the last eight years. So-called "common sense" isn't enough when it comes to understanding highly complex systems. But, the global economy may now be far too complex for anyone to understand. Nassim Nicholas Taleb, author of "The Black Swan," says he lies awake at night sometimes wondering how bad things could get. (Much of the current turmoil was foreshadowed in his book.)

That policymakers don't really understand the current economic system has been most clearly demonstrated in the many iterations of the plan for using the $700 billion in bailout funds appropriated by the U. S. Congress. Treasury officials went from proposing that it be used to buy toxic assets from banks, to proposing and then using it to inject capital into banks by buying preferred shares, to working on a plan to inject money into insurance companies and now even a plan to inject money into a wide array of nonfinancial companies. The truth is they don't really know where the levers of the economy are anymore, and neither does anyone else. Add to this that most economic policymakers recognize no environmental limits to economic growth, and you have a recipe for perpetually wrongheaded and perhaps disastrous economic thinking.

Environmental education giant David Orr is fond of saying that as our knowledge grows, so does our ignorance. He is merely speaking the truth about any complex system. His response is to suggest that we employ wide margins of safety to take into account those dangers which we cannot see or understand at present.

Of course, such advice was never taken seriously in the trading rooms of Wall Street which used the risk formulas of what Taleb calls pseudo-scientists, namely, the financial economists and physicists turned financial risk modelers. They assumed they could calculate risks precisely and created charts and graphs and equations to make people feel comfortable.

I am reminded of a talk I gave at Michigan State University, a captive hub for industrial agriculture and now biofuels research. I downplayed the likelihood that biofuels will be able to substitute in any substantial way for petroleum-derived fuels for reasons of scale, resource scarcity (i.e. scarcity of petroleum- and natural gas-based products now critical to modern agricultural productivity and scarcity of water) and soil degradation. One student came up after the talk and wanted to reassure me that my concern over removing crop waste (for cellulosic ethanol) was being addressed. He was working on research to determine exactly how much crop waste could be removed for biofuel feedstock without affecting soil fertility. Anyone who understands how complex soil is and how comparatively little we know about its interactions in the environment will be forgiven for wondering whether we can calculate such things to the fourth decimal place.

But it is possible to calculate or at least characterize some of the damage done to the ability of the next president to govern the United States. During this year's presidential campaign I was reminded of the perhaps apocryphal saying attributed to members of the Ba'athist party in Iraq, the party through which Saddam Hussein controlled the country: "If we don't govern Iraq, nobody will." Years of insurgency in the country illustrate the sentiment.

Here in the United States, the McCain campaign along with its surrogates did their best to suggest to the American public that Barack Obama was a Manchurian candidate, as if he had been held captive in the Rev. Jeremiah Wright's church and brainwashed to act on instructions to destroy the country upon becoming president. Or perhaps Obama better fit the description of a fifth columnist. His almost laughably tenuous connection with one William Ayers was somehow supposed to prove that Obama was loyal to a terrorist creed born out of the 1960s, a decade during which Obama reached the ripe old age of eight. Maybe it was Obama's middle name Hussein which was the giveaway, a fact almost endlessly repeated on the FOX News Channel. The McCain campaign and its surrogates could never make up their minds about which paranoid vision would work, so they tried all of them. It is the kind of appeal so aptly described by Richard Hofstadter in his famous essay, "The Paranoid Style in American Politics."

Of course, none of these approaches yielded victory, but they can only help to make the country more ungovernable. If you voted for McCain believing that Obama is a traitor--rather than merely an American politician with whom you strongly disagree--shouldn't you resist his treason and those who supported it with every fiber of your being? It is wildly irresponsible to make claims of disloyalty against a candidate. Kathleen Hall Jamieson, an ardent student of campaign advertising, had this to say about such claims during a recent interview on Bill Moyers' Journal:

The notion that we would impugn the integrity of a person running for president on the other side, question their patriotism, is something that we all ought to step back from and say that is unacceptable. The evidence that one should have to mount to make that kind of case should be so clear and so overwhelming that it would persuade that person's mother. And for practical purposes, those are charges that are out of bounds.

Now some will say that the Obama campaign ran many negative ads against McCain. And, I must agree that it was questionable that a McCain administration would just be a continuation of the Bush administration, a message that was the main thrust of the Obama ads. But I defy anyone to point to an ad put out by the Obama campaign--and not by some crazy on the Internet--which branded John McCain as disloyal to his country.

The paranoid style which we saw exhibited in the McCain campaign comes to the fore in times of extreme social stress such as we are witnessing now. (By the way, I don't actually think McCain believed his own attacks, but merely saw them as a useful tactic. And, we saw that in an exchange he had with a questioner at one of his rallies. But that doesn't excuse him in my view.) The paranoid style makes it exceedingly difficult to have serious discussions about issues since the motives of those discussing the issues are always suspect.

Even though a serious dialogue about our interlocking financial and resource crises has been somewhat undermined by the paranoid style exhibited in the presidential campaign, I still believe that the nation can have such a dialogue. But I believe it will end up being much more fruitful on the local level. If energy stringency means a turn away from expansion of the global economy and toward more regional and local economies, then it's hard to see how the federal government could play a dominant role in such a transition. The federal government by its very nature is designed to centralize activities rather than disperse them.

While there are certainly actions the federal government could undertake to aid in the move to a decentralized economy, it seems unlikely those actions would take the right form. For example, if the Congress were to move to expand support of wind and solar power, would it do so in a manner that would make communities more self-sufficient in energy? Or would it emphasize renewable electricity generation by large utilities rather than individual households? I am fairly certain that federal policy would favor the second approach over the first.

And, this brings me to my final point. The reason I call this piece "Governing the ungovernable" is that I believe the problems we now face will not be solved at the central government level. They might be mitigated or exacerbated, but not truly solved. In essence, the world as currently constructed has become ungovernable. So, along with new ways of living, we must find new ways of governing, and I believe those new ways will emphasize the local and the regional over the national or the international.

This tempers my enthusiasm for the new administration about to take power in Washington, one with whom I already have many disagreements especially in the area of energy policy. To the extent that Barack Obama and the team he assembles inspire and empower people to act in their own communities to address energy stringency, climate change, food self-sufficiency and the repercussions of the financial meltdown, the next administration will succeed. But the real successes will have to be imagined and implemented closer to home.