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From Environmentalism to Ecologism, Part One.

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A guest essay for today and the next two days.

A few days ago, I remarked that for the time being posts on Learning from Dogs were frequently going to be based on the material of others.  It was the only way that I could keep this blog going yet at the same time edit (code for re-write!) a 60,000-word novel that was completed, as a first pass, last November.

Martin Lack is one major step ahead of yours truly.  Not because he, too, writes a blog but because, unlike yours truly, he is a published author!  His book is called The Denial of Sciencehe blogs under the name of Lack of Environment.

DenialofScience

Thus I was extremely grateful when a short while ago, Martin offered a major essay of his as a guest post for Learning from Dogs.  Better than that, Martin happily accepted my recommendation to send me his essay in three parts.

It may not be the easiest read out in the ‘blogosphere’ but, trust me, Martin’s essay is profoundly important.

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Can ecologism be regarded as an ideology in its own right? (Part 1)

Introduction

Although it might well be assumed that one does not have to define what is meant by ‘socialists’ or – in UK terms at least – ‘conservatives’, it is certainly necessary to define ‘ecologism’: For the purposes of answering the above question, therefore, the latter should be understood as including thinking, behaviour, and the pursuit of policies that are concerned with the environment; but which are not merely or predominantly anthropocentric (i.e. those concerned with human needs and interests).

In a way, the question is nonsensical because use of the term ‘ecologism’, as coined by Andrew Dobson, appears to pre-suppose that ecological politics is indeed a “new political ideology” (2000: 163). If so, to respond to the above question by saying, in effect, ‘just because both socialists and conservatives (can) lay claim to ecological politics does not change the fact that ecologism is a distinctive political ideology in its own right’, would clearly be tautological. Therefore, to provide a defensible answer “Yes” to the above question – as is the intent herein – it is necessary to explain how and why:

  1. both socialists and conservatives can lay claim to ecological politics;
  2. the majority of both socialists and conservatives do not do so; and
  3. the ‘ecologism’ that both find so challenging must therefore be considered as a distinctive political ideology in its own right.

The Socialist claim

One does not have to be an eco-socialist in order to believe or appreciate that there is a great deal of common ground shared by socialist and environmental politics. Socialism is a broad left-of-centre church that, it could be argued, includes everything from social democrats to communists. However, if socialism can be summed-up in the tripartite “Liberté, égalité, fraternité” motto of France (with its origins in the French Revolution of 1789-99), whose English translation would be “Freedom, equality, and brotherhood”, then it is not hard to see why socialists would find common cause with those whose goal is, in effect, to seek equal rights for the environment.

The “four pillars” of ecological politics are – as cited by Neil Carter – those devised by the German Green Party in 1983: ecological responsibility, grassroots democracy, social justice, and non-violence (Carter 2007: 48). Clearly, grassroots democracy and social justice are part of the socialist agenda. Therefore, despite the global dominance of free-market economics, Mary Mellor has asserted that far from being a challenge to socialism, “ecology greatly enhances the case for a redefined and refocused socialism” (Mellor 2006: 35).

The Conservative claim

Although by no means a monolithic entity, environmental politics is usually seen as being a predominantly left-of-centre entity (e.g. Carter 2007: 78); and it is often seen as being easier to define what it opposes than to define what it seeks. If so, ecological politics is essentially a reaction against anthropocentric thinking and the selfish pursuit of individual gain without regard for others or the environment. However, some philosophers such as Roger Scruton have therefore tried to distinguish between such selfish, libertarian, goals and those of traditional conservatives who, as their name suggests, seek the preservation of the status quo for the benefit of both the current generation and those that will follow (Scruton 2006: 7-8). Indeed, as early as 1993, in the wake of the Rio Earth Summit, Scruton was advocating the need for a radical re-think of right-wing politics:

Conservatives need to explore, with greens and others, as yet unthought-of dilemmas of life in societies which are no longer buoyed up by the prospect of incessant economic growth or by modernist pseudo-religions of endless world improvement” (Scruton 1993: 173).

However, in 1993, the idea that there might be limits to growth was hardly new; being based on Garrett Hardin’s Tragedy of the Commons article (1968); the Massachusetts Institute of Technology (MIT) Limits to Growth report for the Club of Rome (Meadows et al., 1972); E. F. Schumacher’s highly influential book Small is Beautiful (1973). For example:

The illusion of [mankind’s] unlimited powers, nourished by astonishing scientific and technological achievements, has produced the concurrent illusion of having solved the problem of production… based on the failure to distinguish between income and capital where this distinction matters most… A businessman would not consider a firm to have solved its problems of production and to have achieved viability if he saw that it was rapidly consuming its capital… (Schumacher 1974: 11).

Therefore, although the dilemmas were not “as yet unthought-of”, Scruton had, nevertheless, identified the source of the challenge that does indeed, it is here argued, begin to transform ecological politics into the distinctive political ideology that is ecologism.

Limits to Growth – a political and economic challenge

Although much disputed (by those that point to the fact that commodity prices have generally fallen over time, or that dire predictions have not yet come true), the Limits to Growth argument is based on the reality of the physical constraints of the planet on which we live.

For example: “Infinite growth is impossible in a closed system. With continued growth in production, the economic subsystem must eventually overwhelm the capacity of the global ecosystem to sustain it” (Daly & Farley 2004: 64). However, this is merely a comparatively recent re-statement of (former World Bank economist) Herman E Daly’s longstanding belief in the need for steady-state growth.

Furthermore, Daly and Farley cite Rudolf Clausius has having “coined the term ‘entropy’ for the Second Law [of Thermodynamics], derived from the Greek word for transformation, in recognition of the fact that entropy was a one-way street of irreversible change; a continual increase in the disorder of the universe” (Daly & Farley 2004: 65).

This is a fundamental tenet of modern physics; one that Daly has been repeating (like a “voice in the wilderness” proclaiming a message that nobody wants to hear) for a long time: It was over 35 years ago that he began an article entitled ‘The Economics of the Steady State’ with a quote from the famous scientist Sir Arthur Eddington, who once said, “But if your theory is found to be against the Second Law of Thermodynamics, I can give you no hope; there is nothing for it but to collapse in deepest humiliation” (as cited in Daly 1974: 15).

With this in mind, perhaps, the Union of Concerned Scientists (UCS) issued the “World Scientists’ Warning to Humanity” on 18 November 1992, from which the following excerpt is taken:

The earth is finite. Its ability to absorb wastes and destructive effluent is finite. Its ability to provide food and energy is finite. Its ability to provide for growing numbers of people is finite. And we are fast approaching many of the earth’s limits. Current economic practices which damage the environment, in both developed and underdeveloped nations, cannot be continued without the risk that vital global systems will be damaged beyond repair (UCS 1992).

Today, we are now well beyond these limits. According to the Global Footprint Network (GFN), humanity is now using the resources of at least 1.5 Earth’s (GFN, 2010). The most recent update to the Limits to Growth report was produced in 2005 and, in a section entitled “why technology and markets alone can’t avoid overshoot”, the authors suggested that:

…the more successfully society puts off its limits through economic and technical adaptations, the more likely it is in the future to run into several of them at the same time… the [model] does not run out of land or food or resources or pollution absorption capacity, it runs out of the “ability to cope” [i.e. too much industrial output has to be diverted to solving problems]… Given enough time, we believe humanity possesses nearly limitless problem solving abilities. [However] exponential growth… shortens the time for effective action. It loads stress on a system faster and faster, until coping mechanisms that have been adequate with slower rates of change finally begin to fail (Meadows et al 2005: 223).

Arguably, it could be said that the evidence for this is already becoming clear in the form of widespread social unrest around the globe, as a result of the increasing cost of – or difficulty in gaining access to – food, water, and energy.

For Robyn Eckersley, the reality of limits to growth and the magnitude of the ecological challenge is something from which we need to be emancipated; and it is also the raison d’être for environmentalism:

The environmental crisis and popular environmental concern have prompted a transformation of Western politics… Whatever the outcome of this realignment… the intractable nature of the environmental problems will ensure that environmental politics… is here to stay (Eckersley 1992: 7).

The latest UN projections for global population (published on 3 May 2011) suggests that stabilisation at about 10 billion by 2100AD is still most likely; but use probabilistic methods to account for the uncertainty in future fertility trends. Therefore, depending on changes in fertility rates in differing countries, the press release also indicates that global population could also peak at 8 billion in 2050 and then fall to 6 billion in 2100, or reach 10 billion by 2050 and continue to rise to 15 billion by 2100 (UN 2011: 1).

The key question the UN press release does not address is, “How many humans is too many?” Furthermore, although it depends on average rates of resource consumption, it is quite probable that there are already too many. However, this raises philosophical and/or ethical issues that form the other main aspect of ecological politics, which ensures that ecologism is a distinct political ideology in its own right.

From Environmentalism to Ecologism – the philosophical and ethical challenge

What’s in a name?

In the introduction above, ‘ecological politics’ was, in effect, defined as being environmentally-friendly and ecocentric (i.e. ecologism). For the avoidance of any doubt, therefore, it should be noted that this implies that it is possible to be concerned for the environment but be anthropocentric (i.e. environmentalism). It is precisely because the two things are not the same that Dobson has asserted that “…environmentalism and liberalism are compatible, but ecologism and liberalism are not” (2000: 165). The reason for this is examined below. (Ed. As in tomorrow!)

References

Carter, N. (2007), The Politics of the Environment (2nd edition). Cambridge: Cambridge University Press.

Daly, H. & Farley, J. (2004), Ecological Economics: Principles and Applications. Washington DC: Island Press.

Daly, H. (1974), ‘The Economics of the Steady State’, The American Economic Review, 64(2), pp.15-21.

Dobson, A. (2000), Green Political Thought, (3rd edition). London, Routledge.

Eckersley, R. (1992), Environmentalism and Political Theory. London: UCL Press.

GFN (2010), Living Planet Report 2010: Biodiversity, Biocapacity, and Development. [Online] GFN. Available at http://www.footprintnetwork.org/en/index.php/GFN/page/2010_living_planet_report/> [accessed 18 April 201].

Hardin, G. (1968), ‘The tragedy of the commons’, Science, 168, pp.1243-8.

Meadows D, et al (1972), The Limits to Growth. New York: Universe Books.

Meadows D, et al (2005), Limits to Growth: the 30-Year Update, London: Earthscan.

Mellor, M. (2006), ‘Socialism’, in Dobson, A. and Eckersley, R., Political Theory and the Ecological Challenge. Cambridge: Cambridge University Press, pp.35-50.

Schumacher, E.F. (1974), Small is Beautiful: A study of Economics as if Small People Mattered, London: Abacus.

Scruton, R. (1993), Beyond the New Right. London: Routledge.

Scruton, R. (2006), ‘Conservatism’, in Dobson, A. and Eckersley, R., Political Theory and the Ecological Challenge. Cambridge: Cambridge University Press, pp.7-19.

UCS, (1992), World Scientists’ Warning to Humanity. [Online] UCS. Available at <http://www.ucsusa.org/about/1992-world-scientists.html> [accessed 14/04/2011].

UN (2011), World Population Prospects: The 2010 Revision – Press Release. [Online] UN. Available at <http://esa.un.org/wpp/index.htm> [accessed 11/05/2011].

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The fate of Europe!

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A less than reverent view of the Euro.

This was sent to me by Richard Maugham from England.  Richard and I go back the thick end of 40 years or more.  He and I met when I was a salesman for IBM UK (Office Products Division) and Richard was a salesman for Olivetti UK.  Thus we were selling competitive products!

But that didn’t stop us from becoming great friends and remaining so ever since.  Indeed, Richard and Julie are out to see us in Oregon in just over 3 weeks time.

One of the bonds between Richard and me is a love for silliness and quirky humour.  Hence Richard sending me the following that, in turn, had been sent to him.

For those that are not familiar with the Blackadder comedy series on the BBC, more background provided later on.  Anyway, this is what I received from Richard.

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The Euro according to Blackadder

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Baldrick: “What I want to know, Sir, is before there was a Euro there were lots of different types of money that different people used. And now there’s only one type of money that the foreign people use. And what I want to know is, how did we get from one state of affairs to the other state of affairs?”

Blackadder: “Baldrick. Do you mean, how did the Euro start?”

Baldrick: “Yes Sir”.

Blackadder: “Well, you see Baldrick, back in the 1980s there were many different countries all running their own finances and using different types of money. On one side you had the major economies of France, Belgium, Holland and Germany, and on the other, the weaker nations of Spain, Greece, Ireland, Italy and Portugal. They got together and decided that it would be much easier for everyone if they could all use the same money, have one Central Bank, and belong to one large club where everyone would be happy. This meant that there could never be a situation whereby financial meltdown would lead to social unrest, wars and crises”.

Baldrick: “But, Sir, isn’t this a sort of a crisis?”

Blackadder: “That’s right Baldrick. You see, there was only one slight flaw with the plan”.

Baldrick: “What was that then, Sir?”

Blackadder: “It was bollocks”.

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blackadder
More about the Blackadder series can be read here, from which I republish:

Blackadder is the name that encompassed four series of a BBC 1 period British sitcom, along with several one-off instalments. All television programme episodes starred Rowan Atkinson as anti-hero Edmund Blackadder and Tony Robinson as Blackadder’s dogsbody, Baldrick. Each series was set in a different historical period with the two protagonists accompanied by different characters, though several reappear in one series or another, for example Melchett and Lord Flashheart.

The first series titled The Black Adder was written by Richard Curtis and Rowan Atkinson, while subsequent episodes were written by Curtis and Ben Elton. The shows were produced by John Lloyd. In 2000 the fourth series, Blackadder Goes Forth, ranked at 16 in the “100 Greatest British Television Programmes”, a list created by the British Film Institute. Also in the 2004 TV poll to find “Britain’s Best Sitcom”, Blackadder was voted the second-best British sitcom of all time, topped by Only Fools and Horses. It was also ranked as the 20th-best TV show of all time by Empire magazine.

Although each series is set in a different era, all follow the “misfortunes” of Edmund Blackadder (played by Atkinson), who in each is a member of a British family dynasty present at many significant periods and places in British history. It is implied in each series that the Blackadder character is a descendant of the previous one, although it is never mentioned how any of the Blackadders manage to father children.

There are many videos on YouTube of Blackadder sketches and it was a hard choosing what to include in today’s post.

See what you make of this:

Captain Blackadder is court-martialled for killing a pigeon and George provides counsel for the defence.

What goes up?

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Civilizations die from suicide, not by murder. Arnold J Toynbee

I’m not sure where to start but as a result of finishing a particular book, plus a recent essay on Tom Dispatch, then another recent essay from Simon Johnson of Baseline Scenario fame, there were so many thoughts bumping around this aged brain that I had no alternative than to offer them to you, dear reader.  You should also be warned that this is going to be two posts, covering today and tomorrow.

So let’s start with the book: The United States of Fear by Tom Engelhardt.  To be brutally honest, I purchased the book more as a gesture of support to Tom who has been very supportive of Learning from Dogs, in particular allowing me permission to reproduce any essays that were published on TomDispatch, as a number have so been.  What an error of judgment!  Tom’s book provided another one of those rare but inspirational occasions where you know the world will never look quite the same again!

The back cover page of the book sets out the theme, thus,

Published 2011

In 2008, when the US National Intelligence Council issued its latest report meant for the administration of newly elected President Barack Obama, it predicted that the planet’s “sole superpower” would suffer a modest decline and a soft landing fifteen years hence. In his new book The United States of Fear, Tom Engelhardt makes clear that Americans should don their crash helmets and buckle their seat belts, because the United States is on the path to a major decline at a startling speed. Engelhardt offers a savage anatomy of how successive administrations in Washington took the “Soviet path”—pouring American treasure into the military, war, and national security—and so helped drive their country off the nearest cliff.This is the startling tale of how fear was profitably shot into the national bloodstream, how the country—gripped by terror fantasies—was locked down, and how a brain-dead Washington elite fiddled (and profited) while America quietly burned.

Think of it as the story of how the Cold War really ended, with the triumphalist “sole superpower” of 1991 heading slowly for the same exit through which the Soviet Union left the stage twenty years earlier.

One of the fascinating aspects of the book is that it was put together from 32 essays previously published online by Tom; the complete list with titles and dates is on pps. 205 & 206.  So giving you a real feel for the book is easy!  I’m going to do that by linking to one of those essays available in the archives of TomDispatch here.  That essay was called Washington’s Echo Chamber and appears in the book starting on page 170 under the sub-heading of Five Ways to Be Tone Deaf in Washington. Let me quote you a little,

So much of what Washington did imagine in these last years proved laughable, even before this moment swept it away.  Just take any old phrase from the Bush years.  How about “You’re either with us or against us”?  What’s striking is how little it means today.  Looking back on Washington’s desperately mistaken assumptions about how our globe works, this might seem like the perfect moment to show some humility in the face of what nobody could have predicted.

It would seem like a good moment for Washington — which, since September 12, 2001, has been remarkably clueless about real developments on this planet and repeatedly miscalculated the nature of global power — to step back and recalibrate.

As it happens, there’s no evidence it’s doing so.  In fact, that may be beyond Washington’s present capabilities, no matter how many billions of dollars it pours into “intelligence.”  And by “Washington,” I mean not just the Obama administration, or the Pentagon, or our military commanders, or the vast intelligence bureaucracy, but all those pundits and think-tankers who swarm the capital, and the media that reports on them all.  It’s as if the cast of characters that makes up “Washington” now lives in some kind of echo chamber in which it can only hear itself talking.

As a result, Washington still seems remarkably determined to play out the string on an era that is all too swiftly passing into the history books.  While many have noticed the Obama administration’s hapless struggle to catch up to events in the Middle East, even as it clings to a familiar coterie of grim autocrats and oil sheiks, let me illustrate this point in another area entirely — the largely forgotten war in Afghanistan.  After all, hardly noticed, buried beneath 24/7 news from Egypt, Bahrain, Libya, and elsewhere in the Middle East, that war continues on its destructive, costly course with nary a blink.

That was published by Tom a little over 18 months ago!  Seems as relevant today as then!  Let me stay with perspectives from 2011.

Chomsky, visiting Vancouver, Canada in March 2004

On the 24th August 2011 Noam Chomsky wrote an essay entitled American Decline: Causes and Consequences.  Chomsky, as Wikipedia relates, is Professor (Emeritus) in the Department of Linguistics & Philosophy at MIT, where he has worked for over 50 years.  Here is how that essay opens,

In the 2011 summer issue of the journal of the American Academy of Political Science, we read that it is “a common theme” that the United States, which “only a few years ago was hailed to stride the world as a colossus with unparalleled power and unmatched appeal — is in decline, ominously facing the prospect of its final decay.” It is indeed a common theme, widely believed, and with some reason. But an appraisal of US foreign policy and influence abroad and the strength of its domestic economy and political institutions at home suggests that a number of qualifications are in order. To begin with, the decline has in fact been proceeding since the high point of US power shortly after World War II, and the remarkable rhetoric of the several years of triumphalism in the 1990s was mostly self-delusion. Furthermore, the commonly drawn corollary — that power will shift to China and India — is highly dubious. They are poor countries with severe internal problems. The world is surely becoming more diverse, but despite America’s decline, in the foreseeable future there is no competitor for global hegemonic power.

So, according to Chomsky, it’s not as ‘black and white’ as Engelhardt sets out.  But do read the full essay.

Nevertheless, the idea that the USA is ‘fiddling while Rome burns’ is supported in an essay published by Mattea Kramer on TomDispatch on the last day of September.  I’m going to end Part One by republishing the essay in full.  (Note that this is being published here after the first ‘debate’ had taken place.)

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Tough Talk for America

A Guide to the Presidential Debates You Won’t Hear 
By Mattea Kramer

Five big things will decide what this country looks like next year and in the 20 years to follow, but here’s a guarantee for you: you’re not going to hear about them in the upcoming presidential debates. Yes, there will be questions and answers focused on deficits, taxes, Medicare, the Pentagon, and education, to which you already more or less know the responses each candidate will offer. What you won’t get from either Mitt Romney or Barack Obama is a little genuine tough talk about the actual state of reality in these United States of ours. And yet, on those five subjects, a little reality would go a long way, while too little reality (as in the debates to come) is a surefire recipe for American decline.

So here’s a brief guide to what you won’t hear this Wednesday or in the other presidential and vice-presidential debates later in the month. Think of these as five hard truths that will determine the future of this country.

1. Immediate deficit reduction will wipe out any hope of economic recovery: These days, it’s fashionable for any candidate to talk about how quickly he’ll reduce the federal budget deficit, which will total around $1.2 trillion in fiscal 2012. And you’re going to hear talk about the Simpson-Bowles deficit reduction plan and more like it on Wednesday. But the hard truth of the matter is that deep deficit reduction anytime soon will be a genuine disaster. Think of it this way: If you woke up tomorrow and learned that Washington had solved the deficit crisis and you’d lost your job, would you celebrate? Of course not. And yet, any move to immediately reduce the deficit does increase the likelihood that you will lose your job.

When the government cuts spending, it lays off workers and cancels orders for all sorts of goods and services that would generate income for companies in the private sector. Those companies, in turn, lay off workers, and the negative effects ripple through the economy. This isn’t atomic science. It’s pretty basic stuff, even if it’s evidently not suitable material for a presidential debate. The nonpartisan Congressional Research Service predicted in a September report, for example, that any significant spending cuts in the near-term would contribute to an economic contraction. In other words, slashing deficits right now will send us ever deeper into the Great Recession from which, at best, we’ve scarcely emerged.

Champions of immediate deficit reduction are likely to point out that unsustainable deficits aren’t good for the economy. And that’s true — in the long run. Washington must indeed plan for smaller deficits in the future. That will, however, be a lot easier to accomplish when the economy is healthier, since government spending declines when fewer people qualify for assistance, and tax revenues expand when the jobless go back to work. So it makes sense to fix the economy first. The necessity for near-term recovery spending paired with long-term deficit reduction gets drowned out when candidates pack punchy slogans into flashes of primetime TV.

2. Taxes are at their lowest point in more than half a century, preventing investment in and the maintenance of America’s most basic resources: Hard to believe? It’s nonetheless a fact. By now, it’s a tradition for candidates to compete on just how much further they’d lower taxes and whether they’ll lower them for everyone or just everyone but the richest of the rich. That’s a super debate to listen to, if you’re into fairy tales. It’s not as thrilling if you consider that Americans now enjoy the lightest tax burden in more than five decades, and it happens to come with a hefty price tag on an item labeled “the future.” There is no way the U.S. can maintain a world-class infrastructure — we’re talking levees, highways, bridges, you name it — and a public education system that used to be the envy of the world, plus many other key domestic priorities, on the taxes we’re now paying.

Anti-tax advocates insist that we should cut taxes even more to boost a flagging economy — an argument that hits the news cycle nearly every hour and that will shape the coming TV “debate.” As the New York Times recently noted, however, tax cuts might have been effective in giving the economy a lift decades ago when tax rates were above 70%. (And no, that’s not a typo, that’s what your parents and grandparents paid without much grumbling.) With effective tax rates around 14% for Mitt Romney and many others, further cuts won’t hasten job creation, just the hollowing out of public investment in everything from infrastructure to education. Right now, the negative effects of tax increases on the most well-off would be small — read: not a disaster for “job creators” — and those higher rates would bring in desperately-needed revenue. Tax increases for middle-class Americans should arrive when the economy is stronger.

Right now, the situation is clear: we’re simply not paying enough to fund the basic ingredients of prosperity from highways and higher education to medical research and food safety. Without those funds, this country’s future won’t be pretty.

3. Neither the status quo nor a voucher system will protect Medicare (or any other kind of health care) in the long run: When it comes to Medicare, Mitt Romney has proposed a premium-support program that would allow seniors the option of buying private insurance. President Obama wants to keep Medicare more or less as it is for retirees. Meanwhile, the ceaseless rise in health-care costs is eating up the wages of regular Americans and the federal budget. Health care now accounts for a staggering 24% of all federal spending, up from 7% less than 40 years ago. Governor Romney’s plan would shift more of those costs onto retirees, according to David Cutler, a health economist at Harvard, while President Obama says the federal government will continue to pick up the tab. Neither of them addresses the underlying problem.

Here’s reality: Medicare could be significantly protected by cutting out waste. Our health system is riddled with unnecessary tests and procedures, as well as poorly coordinated care for complex health problems. This country spent $2.6 trillion on health care in 2010, and some estimates suggest that a staggering 30% of that is wasted. Right now, our health system rewards quantity, not quality, but it doesn’t have to be that way. Instead of paying for each test and procedure, Medicare could pay for performance and give medical professionals a strong incentive to provide more efficient and coordinated care. President Obama’s health law actually pilot tests such an initiative. But that’s another taboo topic this election season, so he scarcely mentions it. Introducing such change into Medicare and the rest of our health system would save the federal government tens of billions of dollars annually. It would truly preserve Medicare for future generations, and it would improve the affordability of health coverage for everyone under 65 as well. Too bad it’s not even up for discussion.

4. The U.S. military is outrageously expensive and yet poorly tailored to the actual threats to U.S. national security: Candidates from both parties pledge to protect the Pentagon from cuts, or even, in the case of the Romney team, to increase the already staggering military budget. But in a country desperate for infrastructure, education, and other funding, funneling endless resources to the Pentagon actually weakens “national security.” Defense spending is already mind-numbingly large: if all U.S. military and security spending were its own country, it would have the 19th largest economy in the world, ahead of Saudi Arabia, Taiwan, and Switzerland. Whether you’re counting aircraft carriers, weapons systems, or total destructive power, it’s absurdly overmatched against the armed forces of the rest of the world, individually or in combination. A couple of years ago, then-Secretary of Defense Robert M. Gates gave a speech in which he detailed that overmatch. A highlight: “The U.S. operates 11 large carriers, all nuclear powered. In terms of size and striking power, no other country has even one comparable ship.” China recently acquired one carrier that won’t be fully functional for some time, if ever — while many elected officials in this country would gladly build a twelfth.

But you’ll hear none of this in the presidential debates. Perhaps the candidates will mention that obsolete, ineffective, and wildly expensive weapons systems could be cut, but that’s a no-brainer. The problem is: it wouldn’t put a real dent in national defense spending. Currently almost one-fifth of every dollar spent by the federal government goes to the military. On average, Americans, when polled, say that they would like to see military funding cut by 18%.

Instead, most elected officials vow to pour limitless resources into more weapons systems of questionable efficacy, and of which the U.S. already owns more than the rest of the world combined. Count on one thing: military spending will not go down as long as the U.S. is building up a massive force in the Persian Gulf, sending Marines to Darwin, Australia, and special ops units to Africa and the Middle East, running drones out of the Seychelles Islands, and “pivoting” to Asia. If the U.S. global mission doesn’t downsize, neither will the Pentagon budget — and that’s a hit on America’s future that no debate will take up this month.

5. The U.S. education system is what made this country prosperous in the twentieth century — but no longer: Perhaps no issue is more urgent than this, yet for all the talk of teacher’s unions and testing, real education programs, ideas that will matter, are nonexistent this election season. During the last century, the best education system in the world allowed this country to grow briskly and lift standards of living. Now, from kindergarten to college, public education is chronically underfunded. Scarcely 2% of the federal budget goes to education, and dwindling public investment means students pay higher tuitions and fall ever deeper into debt. Total student debt surpassed $1 trillion this year and it’s growing by the month, with the average debt burden for a college graduate over $24,000. That will leave many of those graduates on a treadmill of loan repayment for most or all of their adult lives.

Renewed public investment in education — from pre-kindergarten to university — would pay handsome dividends for generations. But you aren’t going to hear either candidate or their vice-presidential running mates proposing the equivalent of a GI Bill for the rest of us or even significant new investment in education. And yet that’s a recipe for and a guarantee of American decline.

Ironically, those in Washington arguing for urgent deficit reduction claim that we’ve got to do it “for the kids,” that we must stop saddling our grandchildren with mountains of federal debt. But if your child turns 18 and finds her government running a balanced budget in an America that’s hollowed out, an America where she has no chance of paying for a college education, will she celebrate? You don’t need an economist to answer that one.

Mattea Kramer is senior research analyst at National Priorities Project and a TomDispatch regular. She is lead author of the new book A People’s Guide to the Federal Budget.

Copyright 2012 Mattea Kramer

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Let me close with another quote from Arnold J. Toynbee:

Of the twenty-two civilizations that have appeared in history, nineteen of them collapsed

when they reached the moral state the United States is in now.

Part Two continues tomorrow.

A view from the Radical Middle

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Promoting the thoughts of Per Kurowski.

A few days ago, I published a delightful story sent to me by Richard Maugham about Helga’s Bar.  It was a tongue-in-cheek look at the crazy world of finance and banking that we seem to be living in at present.

One of the regular readers of Learning from Dogs is Per Kurowski and he left a couple of comments.  The first being,

As a former ED at the World Bank, 2002-2004, living close to Washington, writing articles and being an assiduous blogger, I’ve been in the middle of many discussions about those many of the challenges our world faces. And my friend, I am sorry to say, our prospects to solve these problems, do not seem good.

One of the main reasons for that negative outlook, is that I have been able to witness how the discussion of many of these problems, no matter how urgent these are, so often get hijacked by a political agenda, or by a group that decides making a business, or a living, out of it.

If we cannot break out of this mold, unfortunately, the world is toast, and this, not only from a global warming perspective.

which was then followed up by,

By the way, I managed to sit down a prominent and important bank regulator in my chair yesterday, though he was invisible and quite silent!

I then replied,

Per, just love that. Any chance of you penning a guest post that could set the background to that video in terms that make it easy for the punter to understand?

So here is Per’s interview (sound volume is a little low) and his views.

oooOOOooo

Paul… well here is “a brief summary of my thoughts on banks and risks”

Capital requirements for banks which are lower when the perceived risk of default of the borrower is low, and higher when the perceived risk is high, distort the economic resource allocation process. This is so because those perceptions of risk have already been cleared for, by bankers and markets, by means of interest rates and amounts of exposures.

All the current dangerous and obese bank exposures are to be found in areas recently considered as safe and which therefore required these banks to hold little capital. What was considered as “risky” is not, as usual, causing any problems. This is not a crisis caused by excessive risk taking by the banks, but by excessive regulatory interference by naïve and nanny type regulators.

And, if that distortion is not urgently eliminated, all our banks are doomed to end up gasping for oxygen and capital on the last officially perceived safe beach… like the US Treasury or the Bundesbank.

Bank regulators have no business regulating based on risk perceptions being right, their role is to prepare for when these perceptions turn out to be wrong.

A nation that cares more for history, what it has got, the haves, the “not-risky”, the AAA rated or the “infallible” sovereigns, than for the future, what it can get, the not-haves, the risky, the small businesses or the entrepreneurs, is a nation on its way down.

Per.

oooOOOooo

You may read more from Per on his blog here, and also read Per’s Tea with FT blog!  So let me close by saying that Per’s summary seems like a blast of sanity in an otherwise crazy world!

The Long Emergency, part one

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A reflection on the huge changes facing our global society.

I am reading James Howard Kunstler’s book The Long Emergency.  On the front cover there is a quote from a review in The Independent newspaper, “If you give a damn, you should read this book.”  On the back cover, the quote, “Stark and frightening.  Read it soon.” – Daily Camera.  The quotes are spot on!

Rather than give my own opinion at this stage (I should finish the book first!), let me quote from the opening of Chapter Five, Nature Bites Back.

I was a at a four-day conference called Pop Tech in the seaside village of Camden, Maine, at the peak of the fall foliage season in October 2003, having a pretty good time at the talks, and enjoyiong a series of extravagant dinners – one featuring a free oyster raw bar and gratis Grey Goose vodka – not to mention all the lobsters, steaks, and other products of our bountiful cheap-oil economy.  Then, on Saturday afternoon, a scientist from the University of Washington, Peter D. Ward, got up in the old-time opera house where the conference was held and did a presentation about the life and death of the planet Earth,  Using a series of vivid artist’s renderings delivered on PowerPoint, Ward showed us how, hundreds of millions of years hence, all land animals would become extinct, the green forests and grasslands would broil away, the oceans would evaporate, and eventually our beloved planet would be reduced to a pathetic ball of inert lifeless lint – prefatory to being subsumed in the expanded red giant heat cloud of our baking sun.  Few members of the audience had any appetite for the spread of cookies and munchables laid out for the break that followed.  Personally, I was so depressed that I felt like gargling with razor blades.

The human spirit is remarkably resilient, though.  A few hours later, the horror of it all was forgotten and the conference-goers reported to the next supper buffet with the appetites recharged, happy to scarf more lobster and beef medallions and guzzle more liquor, while chatting up new friends about their various hopes and dreams for the continuing story of civilized life here on good old planet Earth, which, it was assumed, had quite a ways to go before any of us needed to worry about its fate, if ever.

Wasn’t it John Maynard Keynes who famously remarked to a group of fellow economists dithering about the long-term this and the long-term that: “Gentlemen, in the long term we’re all dead.”  Our brains are really not equipped to process events on a geological scale – at least in reference to how we choose to live, or what we choose to do in the here-and-now.  Five hundred millions years is a long time, but how about the mad rush of events in just the past 2,000 years starring the human race?  Rather action-packed, wouldn’t you say?  Everything from the Roman Empire to the Twin Towers, with a cast of billions – emperors, slaves, saviors, popes, kings, queens, navies, rabbles, conquest , murder, famine, art, science, revolution, comedy, tragedy, genocide, and Michael Jackson.  Enough going on in a mere 2,000 years to divert anyone’s attention from the ultimate fate of the earth, you would think.  Just reflecting on the events of the twentieth century alone could take your breath away, so why get bent out of shape about the ultimate fate of the earth?  Yet, I was not soothed by these thoughts, nor by the free eats, and even the liquor failed to lift me up because I couldn’t shake the recognition that in the short term we are in pretty serious trouble, too.

OK, that’s enough for today – I’ll continue this important extract on Monday.  Let me close by inviting you to watch James Kunstler in interview.

The Greatest Crash – footnote

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The story that could run for an awfully long time!

I rather revealed my newness as a US resident by posting my review of David Kauders’ book The Greatest Crash over 2 days last week,  one of them being Thanksgiving Day.  Despite that 1,895 people viewed my review which was entitled The end of an era.

A week has now passed since that review.  I was curious to see what sorts of headlines had been making the news in the last 7 days.  It’s just a random trawl through those items that have captured my attention.

Let’s start with the Financial Times, November 27th,

The eurozone really has only days to avoid collapse

By Wolfgang Münchau

In virtually all the debates about the eurozone I have been engaged in, someone usually makes the point that it is only when things get bad enough, the politicians finally act – eurobond, debt monetisation, quantitative easing, whatever. I am not so sure. The argument ignores the problem of acute collective action.

Last week, the crisis reached a new qualitative stage. With the spectacular flop of the German bond auction and the alarming rise in short-term rates in Spain and Italy, the government bond market across the eurozone has ceased to function.

Wolfgang concludes his article thus,

Italy’s disastrous bond auction on Friday tells us time is running out. The eurozone has 10 days at most.

Then my print copy of The Economist that arrived on the 26th had this lurid cover page,

Unless Germany and the ECB move quickly, the single currency’s collapse is looming

The leader article contains this paragraph,

Past financial crises show that this downward spiral can be arrested only by bold policies to regain market confidence. But Europe’s policymakers seem unable or unwilling to be bold enough. The much-ballyhooed leveraging of the euro-zone rescue fund agreed on in October is going nowhere. Euro-zone leaders have become adept at talking up grand long-term plans to safeguard their currency—more intrusive fiscal supervision, new treaties to advance political integration. But they offer almost no ideas for containing today’s conflagration.

and a few paragraphs later, this,

This cannot go on for much longer. Without a dramatic change of heart by the ECB and by European leaders, the single currency could break up within weeks. Any number of events, from the failure of a big bank to the collapse of a government to more dud bond auctions, could cause its demise. In the last week of January, Italy must refinance more than €30 billion ($40 billion) of bonds. If the markets balk, and the ECB refuses to blink, the world’s third-biggest sovereign borrower could be pushed into default.

Then on Sunday, 27th, MISH’s Trend Analysis blogsite reveals,

ICAP Plc, the world’s largest inter-dealer broker (one that carries out transactions for financial institutions rather than private individuals), is now Testing Trades In Greek Drachma Against Dollar, Euro

ICAP Plc is preparing its electronic trading platforms for Greece’s potential exit from the euro and a return to the drachma, senior executives at the inter-dealer broker said Sunday.

ICAP is the latest firm to disclose such preparations, joining the growing ranks of banks, governments and other key players in the global financial system whose officials are worried enough about the stability of the common currency to be making contingency plans for a possible break-up.

Then Bloomberg published an article by Peter Boone and Simon Johnson, the latter of Baseline Scenario fame, that opened as follows,

Investors sent Europe’s politicians a painful message last week whenGermany had a seriously disappointing government bond auction. It was unable to sell more than a third of the benchmark 10-year bonds it had sought to auction off on Nov. 23, and interest rates on 30-year German debt rose from 2.61 percent to 2.83 percent. The message? Germany is no longer a safe haven.

and concluded,

Ultimately, an integrated currency area may remain in Europe, albeit with fewer countries and more fiscal centralization. The Germans will force the weaker countries out of the euro area or, more likely, Germany and some others will leave the euro to form their own currency. The euro zone could be expanded again later, but only after much deeper political, economic and fiscal integration.

Tragedy awaits. European politicians are likely to stall until markets force a chaotic end upon them. Let’s hope they are planning quietly to keep disorder from turning into chaos.

Finally, on the 29th the BBC News website carried details of the Autumn Statement made by British Chancellor, George Osborne, to Parliament.

Osborne confirms pay and jobs pain as growth slows

Chancellor George Osborne has said public sector pay rises will be capped at 1% for two years, as he lowered growth forecasts for the UK economy.

The number of public sector jobs set to be lost by 2017 has also been revised up from 400,000 to 710,000.

Borrowing and unemployment are set to be higher than forecast and spending cuts to carry on to 2017, he admitted.

Just look at that figure of public sector job losses – 710,000!

Well that’s more than enough from me but it does surely endorse the opening views that David Kauders expounded in his book, as carried in my review, and reproduced here,

Starting with the first sentence, David sets out the core problem;

This book argues that it is impossible to expand the financial system much further.

expanding this a few paragraphs later,

This is the financial system limit: lack of new borrowing plus excessive weight of debt obligations from past borrowing combine to slow economies down. This is the barrier whichever way policy makers turn. It is like the lid on a boiling kettle. Enough steam can lift it for a while but it always snaps back into place. The financial system limit is a roadblock preventing growth.

A few pages later in this opening chapter ‘The roadblock preventing growth‘ this limit is explained thus,

Policy contradictions also show us that the financial system has reached a roadblock. The glaring conflict between bailout and austerity is at the core. Each bailout or stimulus requires creation of more credit, leading to false financial speculation, and for a short while markets recover their poise. The threat of inflation returns. Later, bad debts rise, the markets tumble again and a new crisis emerges. Austerity, the alternative policy, cuts spending thereby cutting the immediate level of economic activity and bringing economic decline more quickly than the stimulus alternative. Whichever way they turn, the authorities are damned.

You can understand why I called this Post a ‘footnote’ not an endnote.

The end of an era, part two.

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A review of David Kauder’s recently published book, The Greatest Crash.

Details of the availability of the book are included at the end of the review.

Extracts from the book included are with grateful thanks to Sparkling Books.

Part One of this review was published yesterday which needs to be read before Part Two.

——————-

Chapter 5 continues by examining the over-bearing consequences of excessive public spending, excessive Government regulations, substitute taxation, weakness of Treasury forecasts, and so on. While these are UK issues, there is no doubt that similar restraints of free enterprise exist in many other western nations.

In Chapter 6, ‘Group Think‘, David looks at the strange ways in which we form opinions.  It’s a topic that has been discussed and written about widely but the point behind this chapter is that people have in great part lost the ability to discern truth from fiction, with terrible implications when it comes to understanding how individuals are affected by government and bureaucratic institutions.

The chapter closes;

One of the remarkable points that I have found in writing this book is that many of the detailed errors, incorrect policies et al, have already been amply documented by others. But we never learn. The delegated society, the strength of lobby groups and vulnerability of our political system to pressure, the sheer volume of noise in the media and on the Internet, the immediacy of the demands of daily life, all combine to make our collective memory rather short.

Amen to that!

Chapter 7, ‘Academic differences of opinion‘, was surprisingly short at just 6 1/2 pages. One would have thought the subject worthy of a much longer review especially as David was exploring the fundamental differences between Keynesian and Ricardian economic theories and opportunities for alternative theories. Must say that that I laughed out loud (David’s book is a little short on humour!) at the sentence on p.127 that ran, “One correspondent writing to the Financial Times proposed that economics should be declared a failing discipline, economists as not fit for purpose, and a physicist put in charge of sorting their theories out.

Chapter 8, ‘The dark side of capital markets‘, is the penultimate chapter and quite a technical one at that. But David manages to trip through esoteric aspects, well esoteric to the lay reader, in a manner that keeps one involved.   Here’s an example from early on in the chapter.

Capital markets follow a long cycle beyond the experience of most practitioners, detectable only by understanding history and then applying this understanding to contemporary conditions.

It didn’t mean much to me. Then the next sentence;

The principles are identical for any market where prices depend on the supply of credit: equities, bonds, property and commodities are all markets where the prices must relate to the availability of credit.

That, at least, was understood but still the penny hadn’t dropped. Then came;

Bond prices prosper when credit is lacking while the other three prosper when credit is abundant.

That then made sense to me but still only at some academic level. David then followed those sentences with these two paragraphs;

The whole market cycle consists of bull market followed by bear market, as surely as night follows day. The bull market in assets is driven by an increasing supply of credit and economic expansion, since more credit leads to higher prices. The bear market in assets is driven by less credit and economic contraction; there is no purchasing power to keep asset prices high. Only fixed interest bonds are contra-cyclical, declining in price as credit expands and rising in price as credit sinks.

There are two useful theories for analysing the whole market cycle: conversion flow and Dow theory.

So in half-a-page of text, the book effectively educated me and then showed the relevance of that learning to the world I was living in. Cleverly done!

Chapter 9, ‘The attitude change‘, is, without doubt, a clincher of a close to this fascinating book. The sentiments conveyed in this chapter are so unexpected that, forgive me, it would be wrong to explicitly refer to them.  Buy the book!

Let me just say that the last chapter fully endorsed me calling this review The End of an Era.

Overall conclusions

This is an important book from a writer who has both the academic and professional experience to enable him to form the views that he expresses. Only time will tell if the whole scenario that is envisaged by Mr. Kauders will play out as he expects. My personal view is that it will.

For individuals and business alike, reading The Greatest Crash will inform you in a manner that I would argue is critical when one notes the precarious and potentially unstable period we are living through. The decisions readers make after reading the book are beyond the remit of this review and, of course, David Kauders, but, at least, read the book!

Prof. Myddelton in the book’s introduction wrote, “But one of the things we need now is new thinking on the fundamentals.” Perhaps not new thinking on fundamentals, as the Prof. puts it, but a reinstatement of core fundamental values.

I am not alone from sensing that the world, especially the western world, is transitioning from an era of greed and materialism, seeing a world of unlimited resources, to a different societal relationship with planet Earth, the only planet we have. A transition across all layers of society towards the values of truth, integrity and compassion; values whose day has come.

The Greatest Crash reinforces immensely my notion that this truly is the end of an era.

——————

Want to buy The Greatest Crash?  The ebook was published in October worldwide, the  paperback published in the UK on the 1st November UK, the hardcover being released any day now in the UK.  For North America both the paperback and hardcover versions are being published on 1st February, 2012.

Full details from the Sparkling Books webpage here.

Copyright © 2011 Paul Handover

The end of an era, part one.

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A review of David Kauder’s recently published book, The Greatest Crash.

Details of the availability of the book are included at the end of both parts of my review, part two is published tomorrow.

Extracts from the book included are with grateful thanks to Sparkling Books.

Personal introduction.

Back in the late 90s, when I was living in England, I attempted to bolster my self-employed income by investing and trading in equities. It was a frustrating game, game being the right word! One day I was lamenting this to a close friend and he gave me the name of David Kauders at Kauders Portfolio Management and suggested I might like to contact him.

I followed my friend’s recommendation and met with David. What he outlined at that meeting all those years ago was mind-blowing, no other way of putting it. Essentially, David predicted a financial and economic crisis of huge proportions. He convinced me of the likelihood of that crisis and in November 2001 I became a fee-paying client. As the world now knows that prediction came to fruition. My anticipated residency in the USA meant continuing to be a client was not possible, and I ceased being a client of Kauders Portfolio Management in June 2010.

Thus not only am I deeply indebted to my friend for referring me to David but also unable to write this review from an unprejudiced point of view.

The Greatest Crash

The book, released in paperback in England in October 2011, published by Sparkling Books, is subtitled ‘How contradictory policies are sinking the global economy‘. Frankly, that subtitle doesn’t do much for me. A clearer message that comes from the book is this: the economic world has reached a ‘systems limit’. Indeed, the term systems limit is used widely throughout the book.

In his introduction to the book, Professor D. R. Myddelton, Chairman of the Institute of Economic Affairs, writes,

Adam Smith said ‘There’s a deal of ruin in a nation’, and it would be a mistake to despair. But one of the things we need now is new thinking on the fundamentals. That is what David Kauders provides in his book ‘The Greatest Crash’.

Without doubt, David achieves that.

Starting with the first sentence, David sets out the core problem;

This book argues that it is impossible to expand the financial system much further.

expanding this a few paragraphs later,

This is the financial system limit: lack of new borrowing plus excessive weight of debt obligations from past borrowing combine to slow economies down. This is the barrier whichever way policy makers turn. It is like the lid on a boiling kettle. Enough steam can lift it for a while but it always snaps back into place. The financial system limit is a roadblock preventing growth.

A few pages later in this opening chapter ‘The roadblock preventing growth‘ this limit is explained thus,

Policy contradictions also show us that the financial system has reached a roadblock. The glaring conflict between bailout and austerity is at the core. Each bailout or stimulus requires creation of more credit, leading to false financial speculation, and for a short while markets recover their poise. The threat of inflation returns. Later, bad debts rise, the markets tumble again and a new crisis emerges. Austerity, the alternative policy, cuts spending thereby cutting the immediate level of economic activity and bringing economic decline more quickly than the stimulus alternative. Whichever way they turn, the authorities are damned.

In the next chapter, ‘Evolution by trial and error‘, David writes about economic cycles and reminds his readers that the long economic cycle is often “beyond the practical experiences of our working lifetimes“.  Then later suggesting that because we have seen the greatest period of inflation ever since the end of World War Two, ergo “the unwelcome lesson from history is that the greatest deflation should follow.

In Chapter 4, ‘An Era of Wishful Thinking‘, the spotlight is put on the horrific policy errors that have been made for decades, try these three examples (there is a longer list in the book),

  • Policy makers believed that debt could expand indefinitely, at no cost.
  • Nobody realised that interest rate rises would make existing borrowing unaffordable and cause a wave of defaults.
  • The world was swamped with so many detailed requirements and standards that nobody could understand how they all fitted together. It was assumed that ‘transparency’, i.e. extensive detail, would solve the inability to comprehend how the parts made the whole.

Part Two of the review, continuing with Chapter 5 is tomorrow.

Want to buy The Greatest Crash?  The ebook was published in October worldwide, the  paperback published in the UK on the 1st November UK, the hardcover being released any day now in the UK.  For North America both the paperback and hardcover versions are being published on 1st February, 2012.

Full details from the Sparkling Books webpage here.

Copyright © 2011 Paul Handover

A Presidential speech.

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A President with more speech writers than one could imagine.

Got a vested interest or a strong view?  Then draft a speech for the President of the United States of America.  Many do.  Some are clearly very tongue-in-cheek, some are pertinent.  The following from CASSE fits into the latter category. Enjoy.

President Obama’s (Hoped for) “Amaze Speech”

Speechwriter: Brian Czech

President Obama’s hoped-for speech first appeared in the Daly News on August 7. We reprint it this week in anticipation of the President’s September 8th speech.

Pres. Obama

Fellow Americans, this evening I have a special message for you. It’s an unprecedented and surprising message, but ultimately it will resonate with your common sense, good will, and patriotic spirit. It turns out that the recessionary cloud we’re under does have an extremely valuable silver lining. I know; it sounds like something only a politician would say, but wait. I think you’ll be surprised to hear my explanation.

Now before I elaborate on the silver lining, I want to make it clear that the cloud has some rain, too. As a nation, we are struggling with debt, credit ratings, and worst of all, the painful experience of unemployment. The last thing I want is to mislead you into thinking these are problems I take lightly, or problems that will be automatically solved by the markets or policy makers. These problems were many years in the making — decades in fact — and it’s going to take years of diligence and readjustment to solve them.

Yet none of these problems can deny us the silver lining, which is this: the economic turmoil we experience today will change the course of history in such a way as to secure the future for American posterity, starting with our children and grandchildren. Let me reiterate, our own kids and grandkids — the most precious American treasure — will have a secure future as a result of the problems we face today. Here’s why…

Far from the trading floors of Wall Street and the policy meetings of the Federal Reserve, crucial discoveries have been made by scientists, economists, anthropologists, historians, and others collaborating under a broad umbrella called “sustainability science.” No, they haven’t discovered an unlimited energy source, a pollution-free car, or a method to stabilize our climate at optimum conditions. They’ve discovered something far more important and exciting: the key to permanent economic security.

For the past few years, as time has allowed, I and my economic advisors, with the assistance of numerous scholars, have studied this key to economic security. The theory and evidence for it is absolutely irrefutable. The only reason this key to security hasn’t broken into public dialog is because it serves no short-term vested interests; no wealthy corporations, think tanks, or political parties that would stand to profit before the next shareholders meeting or election cycle. But that’s also the beauty of it: the key to security is a non-partisan, scientifically sound approach to the long-run interests of all, especially our kids and grandkids. Fortunately for us, it’s surprisingly simple as well.

What is this key to a secure future? We could coin a new phrase to get credit for the idea or to improve its political flavor, but I believe the clearest term is what the scientists already call it: the “steady state economy.” Political advisors think it’s a bit on the dry side, but after what we’ve been through – stock market crashes, insurance crises, banker bailouts, panic over the debt ceiling, having our credit downgraded — doesn’t a “steady state economy” sound like just what the doctor ordered?

In the coming weeks and months, I and my Cabinet will be helping to introduce fellow Americans to the basics of steady state economics, especially what it means for producers, consumers, and public policy. We’ll do this through a series of public announcements, publications, and townhall meetings. Meanwhile, this evening, I’ll provide a brief summary, first by noting what a steady state economy is not.

A steady state economy is not communism, Marxism, or anything at odds with the Constitution of the United States. A steady state economy is not a stagnant, flat-lined economy but is rather continuously dynamic and creative. A steady state economy is not established overnight with draconian policies; instead it evolves as a matter of consumer preference and prudent policy. Most importantly, a steady state economy is in no way opposed to jobs and full employment. To the contrary, a steady state economy is the only economy that can ensure full employment, for your kids and theirs.

The most fundamental feature of the steady state economy is stability. The idea is to stabilize good conditions; stable agriculture, stable manufacturing, stable services, stable production and consumption, stable currency, stable markets, stable international trade, stable impact on the environment, stable air and water, stable climate… You get the picture, and remember, all this stability is at a good level — a level that ensures life, liberty and happiness for us and future generations. At this point in history, the steady state economy is the right goal, and the first step in getting there is recognizing it.

Perhaps you find this amazing. I think you should be amazed. After all, I haven’t said a word about economic growth; in fact I’ve called growth into question. The closest thing to this in presidential history is when President Carter encouraged Americans to consume a little less after the OPEC oil embargo. But President Carter was before his time, and his speech was maligned as the “malaise speech.”

Well, at this point in history, we can no longer afford — literally or figuratively — to pull out all the stops for economic growth. Therefore, tonight you’re hearing the “amaze speech,” the speech that introduces our nation to steady state economics, the alternative to growth.

I understand the adjustment in thinking that this will entail. I’ve gone through it myself. With the exception of President Carter in 1979, my predecessors for over 50 years have prioritized economic growth in their speeches, campaigns, and policies. None even mentioned steady state economics in a speech. Yet with every new president, the pursuit of economic growth has become less realistic, less sustainable, and even less desirable.

Earlier I mentioned the profound developments in sustainability science. Among the sustainability scholars are behavioral scientists and psychologists who have found compelling evidence that economic growth stopped contributing to a happier United States somewhere from the 1950′s to the 1970′s. After that, our gross domestic product continued to rise, but our happiness did not. If you’re like me — meaning old enough to remember — this probably resonates with you. Somewhere along the line the brighter lights, bigger houses and fancier cars stopped making us better off. In fact, all the new “stuff” started working against us. Now we struggle to find enough oil, water, “green space,” solitude, free time, and the peace of mind that comes with a stable climate. It’s all the sign of an economy grown too big.

They say the definition of insanity is doing the same thing over and over again and expecting a different result. I think we’ve all done some crazy things in life, but I don’t want to go down in history as the insane president who kept trying every trick in the book to “stimulate the economy,” when stimulating the economy was neither bound to work nor even desirable by that point in history. I don’t want to oversee more banker bailouts, more stimulus spending, more loosening of environmental protections in a vain attempt to increase GDP growth. That would be insane. Instead, I’m going to tell it like it is: the pursuit of economic growth has become a dangerous obsession that we must overcome. I say this with the backing of sound science, the lessons I’ve learned, and the concern I have for the future of America.

I’m going to test your common sense now. Do you think there is a limit to economic growth? Remember, economic growth is increasing production and consumption of goods and services. It means more and more people, more and more stuff. It takes more energy, water, space to operate in, and places to put out the trash.

Now as a politician, I can assure you that, in the coming days, well-paid pundits will conjure up magical concepts of perpetual growth based on “dematerializing” the economy. Well when they’re ready to dematerialize it, maybe they can beam us up. Meanwhile, the rest of us in the real economy know what perpetual GDP growth would take: evermore people, evermore stuff. And we know we’re running out of evermore room, resources, and patience for unreal notions of evermore growth.

I know that for some, and perhaps for many, this is hard to swallow. For decades we Americans have been encouraged to believe in the notion of continual economic growth. But look at it this way: to think there is no limit to economic growth on Earth is like thinking we could fit a stabilized economy into a perpetually shrinking area. For example, with computers, robots, nanotechnology and the like, we could squish the $70 trillion global economy into North America, then the United States, then Iowa, then into the foyer of the Des Moines Chamber of Commerce, leaving the rest of the world as a designated wilderness area! It’s a ludicrous notion, and it’s precisely as ludicrous as thinking there’s no limit to economic growth in Des Moines, the United States, or Earth.

Now, let’s consider some of the problems we will face if we continue pulling out all the stops for economic growth. The first is inflation. Typically we use monetary policy — such as increasing the money supply — to stimulate growth. But when the real economy isn’t meant to grow as easily as increasing the money supply, the result is inflation. Nothing could be more harmful to our economy at this point than inflation, which is like a devastating tax on the nation.

Another problem is debt. As you know, my Administration injected a major fiscal stimulus into the economy. It helped somewhat and spun off some jobs, but it did not produce the wave of jobs we’d get in an economy with plenty of room to grow. Meanwhile, it added to our deficit and ultimately our debt. Now our credit is coming into question, as with so many nations in a global economy bumping up against the limits to growth.

Of course, there is no shortage of special interests to pounce on the news of faltering fiscal policy. The answer, they say, is to turn over as much as possible to Wall Street. “Take care of national security,” they say, “and let the markets take care of the economy.” The problem with that approach is that national security is about more than having the biggest military. National security starts with a sustainable economy, which requires a stable environment to support the agricultural, fishing, logging, mining, and ranching activities that have always been and always will be the foundation of the American and global economy. Our manufacturing and service sectors — the best in the world — are the best because we have the biggest and best agricultural and extractive sectors. And we have those because we have protected the environment from overuse, pollution, and displacement.

Consider what will happen if we take an unbalanced approach and prioritize economic growth even more over environmental protection. Does anyone really question whether we will have more environmental problems, including devastating problems? More oil spills in the Gulf of Mexico and Gulf of Alaska, more mountaintop mining in the Appalachians, more scraping for shale oil in the Rockies, more nuclear waste, more endangered species, more greenhouse gas emissions, and all the while less water, less fish and wildlife, less wilderness, less nature, less beauty. Does anyone question whether such trends diminish the quality of life for future generations? No, the problems caused by economic growth are unquestionable. It’s just that, for much of American history, the benefits of increasing GDP outweighed the costs. That’s no longer the case, and I’m confident that most of us can sense it.

In fact, the more I thought about this speech, the more amazed I became. Why did it take us so long, in America, to have an open discussion of limits to growth and alternatives to growth? The principles are irrefutable. Neither growth nor recession is sustainable in the long run; a steady state economy is the obvious policy for long-run security. Yet based on the politics of the past 50 years, you’d think economic growth had supplanted apple pie as the companion to motherhood.

Well, now we’re entering a new era of dealing squarely with sustainability. It turns out that economic growth was not a good companion to motherhood, not in the long run. We want apple pie back. We want loving homes for our children, quality time with family and friends, the occasional escape to the great outdoors, and peace. That’s the American dream in a nutshell, and it’s too valuable to sacrifice for economic growth.

So let’s roll up our sleeves and wash our hands of the dirty business of growth at all costs. We know what the right goal is, and malaise won’t get us there. We have work to do to stabilize the economy for our children and grandchildren. Our decisions — what we eat, what we drive, what we build, and frankly how many kids we have — all these will determine the quality of life for the kids that we do have. Meanwhile, those of us privileged to hold public office are responsible for developing the policies to help you thrive in a steady state economy, and for avoiding the policies that force us onto an unsustainable pathway of evermore growth. You could say we are tasked now with “steady statesmanship.”

To conclude, my fellow Americans, do stay tuned. In the coming days and weeks we’ll be discussing the details of transitioning from growth to a steady state. We’ll be talking with you about employment, population growth, stock markets, the banking system, and more. Don’t fear any shocks to the system; you’ve seen most of the shocks already as the policies of economic growth have failed. One by one, we’re going to turn these “failures” into steady state successes.

Meanwhile, good night, and God bless America.

 

What is it you don’t understand?

with 3 comments

Stating the obvious.

I am about a third into Paul Gilding’s book The Great Disruption.  It’s proving to be a very-thought provoking read that I will review in more detail over the coming weeks.

However, I just wanted to quote from the start of Chapter 5, Addicted to Growth,

Indeed, as argued by economist Kenneth Boulding: “Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.”

Very little that can be argued about that statement.  It rather puts into context a couple of items read recently. Both from the blogsite New Economic Perspectives.  The first on June 10th by Stephanie Kelton,

Earlier this week, President Obama talked about the weakening state of the economy, telling us that he’s not worried about a double-dip recession and that the nation should “not panic.” It’s hard to imagine a more alarming assessment at this juncture.

The recovery is faltering. Our economy is growing at annual rate of just 1.8 percent. Manufacturing just grew at its slowest pace in 20 months. More than 44 million Americans – one in seven – rely on food stamps. Employers hired only 54,000 new workers in May, the lowest number in eight months. Jobless claims increased to 427,000 in the week ended June 4. The unemployment rate rose to 9.1 percent. Nearly half of all unemployed Americans have been without work for more than 6 months. About 25% of all teenagers who are looking for work are unemployed. Eight-and-a-half million Americans are underemployed – i.e. working part-time because their hours have been cut or because they can’t find full-time work. There are, on average, 4.6 unemployed people for every 1 job opening. And even if all the open positions were filled, there would still be 10.7 million people looking for work.

The second on July 8th by Marshall Auerback,

Today’s unemployment data suggests that we are experiencing something far worse than a mere “bump in the road”, as our President described it last month.  In fact, if last month was the time to panic, as Stephanie Kelton argued here, then today’s data should create real palpitations in the White House.  This isn’t just a “bump,” but a fully-fledged New York City style pot hole.

First the headline number everyone looks at: non-farm payrolls. Up 18,000 in June, the increase was 100,000 less than expectations.  In addition the prior two month payroll increases were revised down by -44,000 overall.  That’s weak – but not terrible.

Dig a bit deeper into the data and it looks absolutely awful:  The household measure of employment fell by -445,000.  Okay, it’s a noisy number. But, as Frank Veneroso has pointed out to me in an email correspondence, this measure of employment which is never revised now shows no employment growth over the last five months and very negative employment growth over the last three.

But it gets worse:  The work week was down one tenth.  Overtime was down one tenth.  The labor participation rate at 64.1% was the lowest since 1984.  The broad U6 unemployment rate rose from 15.8% to 16.2%.  In other words, as Frank suggested to me this morning, “many other employment indicators in this report confirm the deep disappointment in the payroll series and the much more negative message of the household series.”

Now here’s the latest item published by Paul Gilding in his Blog, The Cockatoo Chronicles. (I have republished it in full, hopefully without upsetting Mr. Gilding – couldn’t see advice on reproduction – but copyright remains, of course, fully with Paul Gilding.)

Like a Grenade in a Glasshouse

June 29, 2011

It’s going to hit hard and it’s going to hurt – made worse because most aren’t expecting it. They think the world is slowly returning to our modern “normal” – steadily increasing growth, with occasional annoying but manageable interruptions. After all, the global recession wasn’t so bad was it? Sure there was pain and things got shaky but Governments responded, bailed out companies, stimulated economies, got things back on track.  While it’s still a bit bumpy, Greek wobbles, US debt, extreme weather, high oil and food prices etc, it’ll work out. It always does….

If only it were so. In fact we are blindly walking towards the next in a series of inevitable system shaking and confidence sapping crises, deluded in the belief that the worst is behind us.

Each crisis will be a little worse than the last. Each one will shake our denial a little more. This is what happens when systems hit their limits. They don’t do so smoothly, but bump up against the wall, hitting hard, then bouncing off equally hard. It is the behaviour of a system trying to break through. But if the limits are solid, as is the case with our economic system hitting the limits of the planet – defined by unchangeable physical capacity and the laws of physics, chemistry and biology – then it can’t find its way through. So eventually, when the pain of hitting the wall gets too much, it stops.

Then it will hit. Like a grenade in a glasshouse, shattering denial and delusion and leaving it like a pile of broken glass on the floor of the old economic model. Then we’ll be ready for change.

I’ve been arguing the inevitability of this moment since 2005, mostly inside the business community. Before the 2008 financial crisis hit, the idea was almost universally rejected, with a belief in the indomitable power of globalised markets to overcome all challenges and keep growth on track. Most audiences believed that while markets always wobbled, they also always recovered. My suggestion, that this level of arrogance was the hallmark of empires before they fell, landed on deaf ears. They were the masters of the universe and markets and growth would always reign supreme.

Now the response is different. The financial crisis saw many break off from the pack and start to ask the difficult questions. I now find as I tour the world speaking about The Great Disruption to community gatherings, corporate executives and policy makers that minds are increasingly open. While not the dominant view, the previous confidence in the inevitably of growth has become shaky and the group asking the challenging questions is rapidly expanding.

As I argue in the book, the fundamental cause of what’s coming is resource constraint and environmental breakdown, which when combined with an overstretched financial system and high levels of debt puts unbearable tension into the global economy. While no one can know what event will pull the pin out of the grenade, the underlying pressures make that moment inevitable. Yes, the dominant commentary still blames each individual problem on unique circumstances, but the underlying systemic causes are clear for those who wish to look.

The continued level of denial still surprises me, especially given the pressures driving this are not esoteric and can be measured in clear economic indicators. A good example was recently published by one of the more interesting voices to join the growing chorus that we have a system-wide problem. The legendary contrarian and fund manager Jeremy Grantham is co-founder of the Boston based firm GMO, with over $100 billion of assets under management. So this guy is a solid capitalist and market advocate, pursuing wealth for the wealthy. But he sees the data and is raising the alarm, calling this moment “one of the giant inflection points in economic history” – referring to the end of a 100-year steady decline in commodity prices. His views were echoed by Stephen King, group chief economist at HSBC, who wrote in the FT: “After the biggest meltdown since the Great Depression, economic theory tells us that world commodity prices should not be this high. But they are and the West quickly needs to wake up to this new economic reality. Commodity prices are now permanently higher.”

Grantham provides the detail, pointing out that the 100 year trend of falling prices in the 33 most important commodities, except for oil, were wiped out with a price surge from 2002 to 2010 – a surge even greater than experienced in WW2. We have now reached what Grantham calls the Great Paradigm shift; not a price spike but a new reality. Within this new reality, Grantham says: “if we maintain our desperate focus on growth, we will run out of everything and crash.”

This is why hitting the wall is inevitable – because limits are not philosophies, they are limits. We can understand what to expect – and why the grenade will shatter the glasshouse of economic growth – by going back to how systems behave when they hit their limits. Our economic system first hit the wall in 2008 – that was when The Great Disruption began with food and oil prices hitting record highs and a credit crisis driven by reckless monetary policy pursuing growth at all costs. The resulting recession meant we backed away from those limits (bouncing off the wall), and then borrowed massive amounts of money from our children (think Greece) to try to get the economy moving again.

Now that the global economy is slowly entering a so-called “recovery”, the prices of commodities (representing our use of earth’s resources for food and materials) are on the way up, accelerated, in the case of food, by climate change. Of course if significant growth kicks in, the prices of oil, food and other commodities will surge, this timestarting from near record highs.  Then we will bounce back into recession and prices will back off again. Hit the wall, bounce off. Hit the wall, bounce off. Ouch.

By itself this would pose enough of a challenge to growth. But now we also have the debt we used to get the economy moving again. This debt can only be paid off with significant economic growth – but such significant growth is impossible as outlined above. So the debt itself becomes an enormous additional tension in the system, as argued by Richard Heinberg in his important forthcoming book The End of Growth. With the global economy and ecosystem now both burdened by unmanageable debt, effective global default is only a matter of time.

So we’re living in a glass house with the grenade sitting there for all to see. Who knows what will pull the pin. It could be Greece, a Chinese food crisis, peak oil or any number of other triggers. But it’s coming.

The question to ask yourself is simple. Are you ready?

Back to Kenneth Boulding: “Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.

Precisely!

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