Sunday, October 31, 2010

Can corporations govern?

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

Chicken Little, peak oil and Y2K

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

Talkin' triage

"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

Prelude, my peak oil novel, coming soon

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

Off to ASPO Conference

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

Is Venezuela the next flashpoint for oil?

My latest column on Scitizen entitled "Is Venezuela the Next Flashpoint for Oil?" has now been posted. Here is the teaser:
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

A terrible dependency of mind

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.