Albeit, a slightly tongue-in-cheek fix from this ex-Brit.
I thought after yesterday’s pretty grim and turgid post that today’s offering should be connected but not in nearly such a dark manner.
The following came to me having done quite a few rounds so it’s not clear whom I should thank. But it’s an interesting proposition; nonetheless.
A MESSAGE FROM THE QUEEN
To the citizens of the United States of America from Her Sovereign Majesty Queen Elizabeth II:
In light of your failure to nominate competent candidates for President of the USA and thus to govern yourselves, we hereby give notice of the revocation of your independence, effective immediately. (You should look up ‘revocation’ in the Oxford English Dictionary.)
Her Sovereign Majesty Queen Elizabeth II will resume monarchical duties over all states, commonwealths, and territories (except North Dakota, which she does not fancy).
Your new Prime Minister, David Cameron, will appoint a Governor for America without the need for further elections.
Congress and the Senate will be disbanded. A questionnaire may be circulated next year to determine whether any of you noticed.
To aid in the transition to a British Crown dependency, the following rules are introduced with immediate effect:
The letter ‘U’ will be reinstated in words such as ‘colour,’ ‘favour,’ ‘labour’ and ‘neighbour.’ Likewise, you will learn to spell ‘doughnut’ without skipping half the letters, and the suffix ‘-ize’ will be replaced by the suffix ‘-ise.’ Generally, you will be expected to raise your vocabulary to acceptable levels. (look up ‘vocabulary’).
Using the same twenty-seven words interspersed with filler noises such as ”like’ and ‘you know’ is an unacceptable and inefficient form of communication. There is no such thing as U.S. English. We will let Microsoft know on your behalf. The Microsoft spell-checker will be adjusted to take into account the reinstated letter ‘u” and the elimination of ‘-ize.’
July 4th will no longer be celebrated as a holiday.
You will learn to resolve personal issues without using guns, lawyers, or therapists. The fact that you need so many lawyers and therapists shows that you’re not quite ready to be independent. Guns should only be used for shooting grouse. If you can’t sort things out without suing someone or speaking to a therapist, then you’re not ready to shoot grouse.
Therefore, you will no longer be allowed to own or carry anything more dangerous than a vegetable peeler. Although a permit will be required if you wish to carry a vegetable peeler in public.
All intersections will be replaced with roundabouts, and you will start driving on the left side with immediate effect. At the same time, you will go metric with immediate effect and without the benefit of conversion tables. Both roundabouts and metrication will help you understand the British sense of humour.
The former USA will adopt UK prices on petrol (which you have been calling gasoline) of roughly $10/US gallon. Get used to it.
You will learn to make real chips. Those things you call French fries are not real chips, and those things you insist on calling potato chips are properly called crisps. Real chips are thick cut, fried in animal fat, and dressed not with catsup but with vinegar.
The cold, tasteless stuff you insist on calling beer is not actually beer at all. Henceforth, only proper British Bitter will be referred to as beer, and European brews of known and accepted provenance will be referred to as Lager. South African beer is also acceptable, as they are pound for pound the greatest sporting nation on earth and it can only be due to the beer. They are also part of the British Commonwealth – see what it did for them. American brands will be referred to as Near-Frozen Gnat’s Urine, so that all can be sold without risk of further confusion.
Hollywood will be required occasionally to cast English actors as good guys. Hollywood will also be required to cast English actors to play English characters. Watching Andie Macdowell attempt English dialect in Four Weddings and a Funeral was an experience akin to having one’s ears removed with a cheese grater.
You will cease playing American football. There is only one kind of proper football; you call it soccer. Those of you brave enough will, in time, be allowed to play rugby (which has some similarities to American football, but does not involve stopping for a rest every twenty seconds or wearing full kevlar body armour like a bunch of nancies).
Further, you will stop playing baseball. It is not reasonable to host an event called the World Series for a game which is not played outside of America. Since only 2.1% of you are aware there is a world beyond your borders, your error is understandable. You will learn cricket, and we will let you face the South Africans first to take the sting out of their deliveries.
13.. You must tell us who killed JFK. It’s been driving us mad.
An internal revenue agent (i.e. tax collector) from Her Majesty’s Government will be with you shortly to ensure the acquisition of all monies due (backdated to 1776).
Daily Tea Time begins promptly at 4 p.m. with proper cups, with saucers, and never mugs, with high quality biscuits (cookies) and cakes; plus strawberries (with cream) when in season.
Note: This is a long and pretty depressing post yet one that contains a critically vital message. Just wanted to flag that up.
This is not the first time I have used this expression as a header to a blogpost. The first time was back in August 2013 when I introduced the TomDispatch essay: Rebecca Solnit, The Age of Inhuman Scale.
I am using it again to introduce another TomDispatch essay. Like the Solnit essay a further reflection on the incredible madness of these present global times.
Tempo depended upon the CO2 concentration, pitch upon the Earth global temperature, distortion upon the energy balance on land in watts per square meter. The numbers used were past and anticipated. After 2015, the graphs became two: one was red, the bad case scenario, the other was blue, and represented the good scenario.
As I looked at the blue graphs, the optimistic graphs, I got displeased: the blue CO2 emissions, the blue temperature, and the blue power imbalance, had a very sharp angle, just in 2016. First a sharp angle is mathematically impossible: as it is now, the curves of CO2, and temperature are smooth curves going up (on the appropriate time scale). It would require infinite acceleration, infinite force. Even if one stopped magically any human generated greenhouse gases emissions next week, the CO2 concentration would still be above 400 ppm (it is 404 ppm now). And it would stay this way for centuries. So temperature would still rise.
The composer, who was on stage, had been advised by a senior climate scientist, a respectable gentleman with white hair, surrounded by a court, who got really shocked when I came boldly to him, and told him his blue graph was mathematically impossible.
I told him that one cannot fit a rising, smooth exponential with a sharp angle bending down and a line. Just fitting the curves in the most natural, smooth and optimistic way gives a minimum temperature rise of four degrees Celsius. (There is a standard mathematical way to do this, dating back to Newton.)
However, I find the malaise gripping us in these times to be infinitely more difficult to understand than what is or is not mathematically possible. I just can’t get my mind around the possibility that we are in an era where greed, inequality and the pursuit of power and money will take the whole of humanity over the edge.
Lobbying for the bill has been heavy. As DeSmog’s Steve Horn reported: “The list of lobbyists for S.2012 is a who’s who of major fossil fuel corporations and their trade associations: BP, ExxonMobil, America’s Natural Gas Alliance, American Petroleum Institute, Peabody Energy, Arch Coal, Southern Company, Duke Energy and many other prominent LNG export companies.”
I highlighted the name ExxonMobil in that extract because that company is the subject of Tom Engelhardt’s essay from Bill McKibben. Republished here with Tom’s kind permission.
Tomgram: Bill McKibben, It’s Not Just What Exxon Did, It’s What It’s Doing
The time scale should stagger you. Just imagine for a moment that what we humans do on this planet will last at least 10,000 more years, and no, I’m not talking about those statues on Easter Island or the pyramids or the Great Wall of China or the Empire State Building. I’m not talking about any of our monumental architectural-cum-artistic achievements. Ten thousand years from now all the monuments to our history may be forgotten ruins or simply obliterated, while what we’re doing at this very moment that’s truly ruinous may outlast us all. I’m thinking, of course, about the burning of fossil fuels and the sending of carbon dioxide (and other greenhouse gases) into the atmosphere. It’s becoming clearer by the month that, if not brought under control relatively quickly, this process will alter the global environment in ways that will affect humanity and everything else living on this planet for what, from a human point of view, is eternity.
In essence, there’s no backsies when it comes to climate change. Once you’ve begun the full-scale destabilization and melting of the Greenland ice sheet and of the vast ice sheets in the Antarctic, for instance, the future inundation of coastal areas, including many of humanity’s major cities, is a foregone conclusion somewhere down the line. In fact, a recent study, published in the journal Nature Climate Change by 22 climate scientists, suggests that when it comes to the melting of ice sheets and the rise of seas and oceans, we’re not just talking about how life will be changed on Planet Earth in 2100 or even 2200. We’re potentially talking about what it will be like in 12,200, an expanse of time twice as long as human history to date. So many thousands of years are hard even to fathom, but as the study points out, “A considerable fraction of the carbon emitted to date and in the next 100 years will remain in the atmosphere for tens to hundreds of thousands of years.” The essence of the report, as Chris Mooney wrote in the Washington Post, is this: “In 10,000 years, if we totally let it rip, the planet could ultimately be an astonishing 7 degrees Celsius warmer on average and feature seas 52 meters (170 feet) higher than they are now.”
Even far more modest temperature changes like the two degree Celsius rise discussed at the recent Paris meeting, where 196 nations signed onto a climate change agreement, would transform the face of the planet for thousands of years and result in the drowning of a range of iconic global cities “including New York, London, Rio de Janeiro, Cairo, Calcutta, Jakarta, and Shanghai.”
This, in other words, is what the hunt for yet more fossil fuels and more profits by the planet’s giant energy companies actually means — not tomorrow, but on a scale we don’t usually consider. This is why those who continue to insist on pursuing such a treasure hunt (for a few companies and their shareholders), despite knowing its grim future results, will truly be in the running with some of the monsters of our past to become the ultimate criminals of history. In this light, consider what Bill McKibben, TomDispatch regular, founder of 350.org, and author most recently of Oil and Honey: The Education of an Unlikely Activist, has to say about one of those companies, ExxonMobil, and its pivotal role in our warming world. Tom Exxon’s Never-Ending Big Dig Flooding the Earth With Fossil Fuels
By Bill McKibben
Here’s the story so far. We have the chief legal representatives of the eighth and 16th largest economies on Earth (California and New York) probing the biggest fossil fuel company on Earth (ExxonMobil), while both Democratic presidential candidates are demanding that the federal Department of Justice join the investigation of what may prove to be one of the biggest corporate scandals in American history. And that’s just the beginning. As bad as Exxon has been in the past, what it’s doing now — entirely legally — is helping push the planet over the edge and into the biggest crisis in the entire span of the human story.
Back in the fall, you might have heard something about how Exxon had covered up what it knew early on about climate change. Maybe you even thought to yourself: that doesn’t surprise me. But it should have. Even as someone who has spent his life engaged in the bottomless pit of greed that is global warming, the news and its meaning came as a shock: we could have avoided, it turns out, the last quarter century of pointless climate debate.
The results of all that work were unequivocal. By 1982, in an internal “corporate primer,” Exxon’s leaders were told that, despite lingering unknowns, dealing with climate change “would require major reductions in fossil fuel combustion.” Unless that happened, the primer said, citing independent experts, “there are some potentially catastrophic events that must be considered… Once the effects are measurable, they might not be reversible.” But that document, “given wide circulation” within Exxon, was also stamped “Not to be distributed externally.”
So here’s what happened. Exxon used its knowledge of climate change to plan its own future. The company, for instance, leased large tracts of the Arctic for oil exploration, territory where, as a company scientist pointed out in 1990, “potential global warming can only help lower exploration and development costs.” Not only that but, “from the North Sea to the Canadian Arctic,” Exxon and its affiliates set about “raising the decks of offshore platforms, protecting pipelines from increasing coastal erosion, and designing helipads, pipelines, and roads in a warming and buckling Arctic.” In other words, the company started climate-proofing its facilities to head off a future its own scientists knew was inevitable.
But in public? There, Exxon didn’t own up to any of this. In fact, it did precisely the opposite. In the 1990s, it started to put money and muscle into obscuring the science around climate change. It funded think tanks that spread climate denial and even recruited lobbying talent from the tobacco industry. It also followed the tobacco playbook when it came to the defense of cigarettes by highlighting “uncertainty” about the science of global warming. And it spent lavishly to back political candidates who were ready to downplay global warming.
Its CEO, Lee Raymond, even traveled to China in 1997 and urged government leaders there to go full steam ahead in developing a fossil fuel economy. The globe was cooling, not warming, he insisted, while his engineers were raising drilling platforms to compensate for rising seas. “It is highly unlikely,” he said, “that the temperature in the middle of the next century will be significantly affected whether policies are enacted now or 20 years from now.” Which wasn’t just wrong, but completely and overwhelmingly wrong — as wrong as a man could be.
Sins of Omission
In fact, Exxon’s deceit — its ability to discourage regulations for 20 years — may turn out to be absolutely crucial in the planet’s geological history. It’s in those two decades that greenhouse gas emissions soared, as did global temperatures until, in the twenty-first century, “hottest year ever recorded” has become a tired cliché. And here’s the bottom line: had Exxon told the truth about what it knew back in 1990, we might not have wasted a quarter of a century in a phony debate about the science of climate change, nor would anyone have accused Exxon of being “alarmist.” We would simply have gotten to work.
But Exxon didn’t tell the truth. A Yale study published last fall in the Proceedings of the National Academy of Sciences showed that money from Exxon and the Koch Brothers played a key role in polarizing the climate debate in this country.
The company’s sins — of omission and commission — may even turn out to be criminal. Whether the company “lied to the public” is the question that New York Attorney General Eric Schneiderman decided to investigate last fall in a case that could make him the great lawman of our era if his investigation doesn’t languish. There are various consumer fraud statutes that Exxon might have violated and it might have failed to disclose relevant information to investors, which is the main kind of lying that’s illegal in this country of ours. Now, Schneiderman’s got backup from California Attorney General Kamala Harris, and maybe — if activists continue to apply pressure — from the Department of Justice as well, though its highly publicized unwillingness to go after the big banks does not inspire confidence.
Here’s the thing: all that was bad back then, but Exxon and many of its Big Energy peers are behaving at least as badly now when the pace of warming is accelerating. And it’s all legal — dangerous, stupid, and immoral, but legal.
On the face of things, Exxon has, in fact, changed a little in recent years.
For one thing, it’s stopped denying climate change, at least in a modest way. Rex Tillerson, Raymond’s successor as CEO, stopped telling world leaders that the planet was cooling. Speaking in 2012 at the Council on Foreign Relations, he said, “I’m not disputing that increasing CO2 emissions in the atmosphere is going to have an impact. It’ll have a warming impact.”
As a start, investigations by the Pulitzer-Prize winning Inside Climate News, the Los Angeles Times, and Columbia Journalism School revealed in extraordinary detail that Exxon’s top officials had known everything there was to know about climate change back in the 1980s. Even earlier, actually. Here’s what senior company scientist James Black told Exxon’s management committee in 1977: “In the first place, there is general scientific agreement that the most likely manner in which mankind is influencing the global climate is through carbon dioxide release from the burning of fossil fuels.” To determine if this was so, the company outfitted an oil tanker with carbon dioxide sensors to measure concentrations of the gas over the ocean, and then funded elaborate computer models to help predict what temperatures would do in the future.
Of course, he immediately went on to say that its impact was uncertain indeed, hard to estimate, and in any event entirely manageable. His language was striking. “We will adapt to this. Changes to weather patterns that move crop production areas around — we’ll adapt to that. It’s an engineering problem, and it has engineering solutions.”
Add to that gem of a comment this one: the real problem, he insisted, was that “we have a society that by and large is illiterate in these areas, science, math, and engineering, what we do is a mystery to them and they find it scary. And because of that, it creates easy opportunities for opponents of development, activist organizations, to manufacture fear.”
Right. This was in 2012, within months of floods across Asia that displaced tens of millions and during the hottest summer ever recorded in the United States, when much of our grain crop failed. Oh yeah, and just before Hurricane Sandy.
He’s continued the same kind of belligerent rhetoric throughout his tenure. At last year’s ExxonMobil shareholder meeting, for instance, he said that if the world had to deal with “inclement weather,” which “may or may not be induced by climate change,” we should employ unspecified “new technologies.” Mankind, he explained, “has this enormous capacity to deal with adversity.”
In other words, we’re no longer talking about outright denial, just a denial that much really needs to be done. And even when the company has proposed doing something, its proposals have been strikingly ethereal. Exxon’s PR team, for instance, has discussed supporting a price on carbon, which is only what economists left, right, and center have been recommending since the 1980s. But the minimal price they recommend — somewhere in the range of $40 to $60 a ton — wouldn’t do much to slow down their business. After all, they insist that all their reserves are still recoverable in the context of such a price increase, which would serve mainly to make life harder for the already terminal coal industry.
But say you think it’s a great idea to put a price on carbon — which, in fact, it is, since every signal helps sway investment decisions. In that case, Exxon’s done its best to make sure that what they pretend to support in theory will never happen in practice.
Consider, for instance, their political contributions. The website Dirty Energy Money, organized by Oil Change International, makes it easy to track who gave what to whom. If you look at all of Exxon’s political contributions from 1999 to the present, a huge majority of their political harem of politicians have signed the famous Taxpayer Protection Pledge from Grover Norquist’s Americans for Tax Reform that binds them to vote against any new taxes. Norquist himself wrote Congress in late January that “a carbon tax is a VAT or Value Added Tax on training wheels. Any carbon tax would inevitably be spread out over wider and wider parts of the economy until we had a European Value Added Tax.” As he told a reporter last year, “I don’t see the path to getting a lot of Republican votes” for a carbon tax, and since he’s been called “the most powerful man in American politics,” that seems like a good bet.
The only Democratic senator in Exxon’s top 60 list was former Louisiana solon Mary Landrieu, who made a great virtue in her last race of the fact that she was “the key vote” in blocking carbon pricing in Congress. Bill Cassidy, the man who defeated her, is also an Exxon favorite, and lost no time in co-sponsoring a bill opposing any carbon taxes. In other words, you could really call Exxon’s supposed concessions on climate change a Shell game. Except it’s Exxon.
The Never-Ending Big Dig
Even that’s not the deepest problem.
The deepest problem is Exxon’s business plan. The company spends huge amounts of money searching for new hydrocarbons. Given the recent plunge in oil prices, its capital spending and exploration budget was indeed cut by 12% in 2015 to $34 billion, and another 25% in 2016 to $23.2 billion. In 2015, that meant Exxon was spending $63 million a day “as it continues to bring new projects on line.” They are still spending a cool $1.57 billion a year looking for new sources of hydrocarbons — $4 million a day, every day.
As Exxon looks ahead, despite the current bargain basement price of oil, it still boasts of expansion plans in the Gulf of Mexico, eastern Canada, Indonesia, Australia, the Russian far east, Angola, and Nigeria. “The strength of our global organization allows us to explore across all geological and geographical environments, using industry-leading technology and capabilities.” And its willingness to get in bed with just about any regime out there makes it even easier. Somewhere in his trophy case, for instance, Rex Tillerson has an Order of Friendship medal from one Vladimir Putin. All it took was a joint energy venture estimated to be worth $500 billion.
But, you say, that’s what oil companies do, go find new oil, right? Unfortunately, that’s precisely what we can’t have them doing any more. About a decade ago, scientists first began figuring out a “carbon budget” for the planet — an estimate for how much more carbon we could burn before we completely overheated the Earth. There are potentially many thousands of gigatons of carbon that could be extracted from the planet if we keep exploring. The fossil fuel industry has already identified at least 5,000 gigatons of carbon that it has told regulators, shareholders, and banks it plans to extract. However, we can only burn about another 900 gigatons of carbon before we disastrously overheat the planet. On our current trajectory, we’d burn through that “budget” in about a couple of decades. The carbon we’ve burned has already raised the planet’s temperature a degree Celsius, and on our present course we’ll burn enough to take us past two degrees in less than 20 years.
At this point, in fact, no climate scientist thinks that even a two-degree rise in temperature is a safe target, since one degree is already melting the ice caps. (Indeed, new data released this month shows that, if we hit the two-degree mark, we’ll be living with drastically raised sea levels for, oh, twice as long as human civilization has existed to date.) That’s why in November world leaders in Paris agreed to try to limit the planet’s temperature rise to 1.5 degrees Celsius, or just under three degrees Fahrenheit. If you wanted to meet that target, however, you would need to be done burning fossil fuels by perhaps 2020, which is in technical terms just about now.
That’s why it’s wildly irresponsible for a company to be leading the world in oil exploration when, as scientists have carefully explained, we already have access to four or five times as much carbon in the Earth as we can safely burn. We have it, as it were, on the shelf. So why would we go looking for more? Scientists have even done us the useful service of identifying precisely the kinds of fossil fuels we should never dig up, and — what do you know — an awful lot of them are on Exxon’s future wish list, including the tar sands of Canada, a particularly carbon-filthy, environmentally destructive fuel to produce and burn.
Even Exxon’s one attempt to profit from stanching global warming has started to come apart. Several years ago, the company began a calculated pivot in the direction of natural gas, which produces less carbon than oil when burned. In 2009, Exxon acquired XTO Energy, a company that had mastered the art of extracting gas from shale via hydraulic fracturing. By now, Exxon has become America’s leading fracker and a pioneer in natural gas markets around the world. The trouble with fracked natural gas — other than what Tillerson once called “farmer Joe’s lit his faucet on fire” — is this: in recent years, it’s become clear that the process of fracking for gas releases large amounts of methane into the atmosphere, and methane is a far more potent greenhouse gas than carbon dioxide. As Cornell University scientist Robert Howarth has recently established, burning natural gas to produce electricity probably warms the planet faster than burning coal or crude oil.
Exxon’s insistence on finding and producing ever more fossil fuels certainly benefited its shareholders for a time, even if it cost the Earth dearly. Five of the 10 largest annual profits ever reported by any company belonged to Exxon in these years. Even the financial argument is now, however, weakening. Over the last five years, Exxon has lagged behind many of its competitors as well as the broader market, and a big reason, according to the Carbon Tracker Initiative (CTI), is its heavy investment in particularly expensive, hard-to-recover oil and gas.
In 2007, as CTI reported, Canadian tar sands and similar “heavy oil” deposits accounted for 7.5% of Exxon’s proven reserves. By 2013, that number had risen to 17%. A smart business strategy for the company, according to CTI, would involve shrinking its exploration budget, concentrating on the oil fields it has access to that can still be pumped profitably at low prices, and using the cash flow to buy back shares or otherwise reward investors.
That would, however, mean exchanging Exxon’s Texan-style big-is-good approach for something far more modest. And since we’re speaking about what was the biggest company on the planet for a significant part of the twentieth century, Exxon seems to be set on continuing down that bigger-is-better path. They’re betting that the price of oil will rise in the reasonably near future, that alternative energy won’t develop fast enough, and that the world won’t aggressively tackle climate change. And the company will keep trying to cover those bets by aggressively backing politicians capable of ensuring that nothing happens.
Can Exxon Be Pressured?
Next to that fierce stance on the planet’s future, the mild requests of activists for the last 25 years seem… well, next to pointless. At the 2015 ExxonMobil shareholder meeting, for instance, religious shareholder activists asked for the umpteenth time that the company at least make public its plans for managing climate risks. Even BP, Shell, and Statoil had agreed to that much. Instead, Exxon’s management campaigned against the resolution and it got only 9.6% of shareholder votes, a tally so low it can’t even be brought up again for another three years. By which time we’ll have burned through… oh, never mind.
What we need from Exxon is what they’ll never give: a pledge to keep most of their reserves underground, an end to new exploration, and a promise to stay away from the political system. Don’t hold your breath.
But if Exxon seems hopelessly set in its ways, revulsion is growing. The investigations by the New York and California attorneys general mean that the company will have to turn over lots of documents. If journalists could find out as much as they did about Exxon’s deceit in public archives, think what someone with subpoena power might accomplish. Many other jurisdictions could jump in, too.
At the Paris climate talks in December, a panel of law professors led a well-attended session on the different legal theories that courts around the world might apply to the company’s deceptive behavior. When that begins to happen, count on one thing: the spotlight won’t shine exclusively on Exxon. As with the tobacco companies in the decades when they were covering up the dangers of cigarettes, there’s a good chance that the Big Energy companies were in this together through their trade associations and other front groups. In fact, just before Christmas, Inside Climate Newspublished some revealing new documents about the role that Texaco, Shell, and other majors played in an American Petroleum Institute study of climate change back in the early 1980s. A trial would be a transformative event — a reckoning for the crime of the millennium.
But while we’re waiting for the various investigations to play out, there’s lots of organizing going at the state and local level when it comes to Exxon, climate change, and fossil fuels — everything from politely asking more states to join the legal process to politely shutting down gas stations for a few hours to pointing out to New York and California that they might not want to hold millions of dollars of stock in a company they’re investigating. It may even be starting to work.
Vermont Governor Peter Shumlin, for instance, singled Exxon out in his state of the state address last month. He called on the legislature to divest the state of its holdings in the company because of its deceptions. “This is a page right out of Big Tobacco,” he said, “which for decades denied the health risks of their product as they were killing people. Owning ExxonMobil stock is not a business Vermont should be in.”
The question is: Why on God’s-not-so-green-Earth-anymore would anyone want to be Exxon’s partner?
Let me close this tale of modern madness with the closing words from Patrice’s essay:
American plutocrats are always one step ahead of the propaganda game. After spending decades claiming the Earth was not warming, now they are pretending, thanks to this impossible blue graph, that we stop the deleterious effects on the biosphere on a dime, should the USA want it.
And the scientists are playing along… because they want the money. And the influence. And the plutocrats in the audience. And the American population confusedly feel that the USA is better off with cheap gas.
As I explained, the Moral Imperative is to think correctly, and the first imperative of scientists should be to teach what is impossible. It’s impossible to stop the nefarious effects on the biosphere on a dime. There is huge inertia in the world climate and geophysics. Right now, climate change is happening at a rate 100,000 times the rate of the preceding great extinctions (they probably had to do with huge, sustained volcanism, direct from the core).
In the best scenario of business as usual, most of energy from fossil fuels, we are on 4 degree Centigrade global warming scenario. And that means the poles will melt entirely. That will make the present Middle East disarray feel as if it had been a walk in a pleasant park.
Pure unadulterated madness! And I feel utterly powerless to stop it!
That sub-heading is a very old proverb supporting the idea “that even when the outcome of an event seems certain, things can still go wrong.”
That proverb came to me when I was reading a TomDispatch essay that was published last Tuesday. I couldn’t make up my mind about whether or not to continue with yesterday’s mood of “Living in interesting times” but in the end decided to so do. Because Peter Van Buren’s essay, published as a Tomgram, needs to be widely read so that as many as possible appreciate the need to reach out to those that should be supported.
I am very grateful to Tom Engelhardt for his continuing permission for me to republish his TomDispatch essays.
Tomgram: Peter Van Buren, Minimum Wage, Minimum Chance
To say that we live on a 1% planet isn’t just a turn of phrase. In fact, it would undoubtedly be more accurate to speak of a .1% or a .01% planet. In recent years, wealth and income inequalities have grown in a notorious fashion in the United States — and, as it turns out, globally as well. In January, Oxfam released a report on the widening gap between global wealth and poverty. It found that, between 2010 and today, the wealth of the poorest half of the planet’s population fell by a trillion dollars, a drop of 41%, while that of the richest 62 people (53 men and 9 women) increased by half a trillion dollars. Put another way, those 62 billionaires were wealthier than the bottom 50% of the world’s people, while the richest 1% owned more than the other 99% combined. The direction in which we’re heading is obvious. Just consider that, in 2010, it took 388 of the super-rich to equal the holdings of the bottom 50%; now, that number is 326 people smaller.
Keep that trend line in mind as you read about TomDispatch regular Peter Van Buren’s latest adventures in the minimum-wage economy. Back in 2014, he described for this site how, having lost his State Department job for being a whistleblower on the Iraq War, he fell for a time into the low-wage world. As he wrote, “And soon enough, I did indeed find myself working in exactly that economy and, worse yet, trying to live on the money I made. But it wasn’t just the money. There’s this American thing in which jobs define us, and those definitions tell us what our individual futures and the future of our society is likely to be. And believe me, rock bottom is a miserable base for any future.” His experiences in a big-box retail store inspired him to write his novel, Ghosts of Tom Joad: A Story of the #99Percent. As last year ended, he returned to the minimum-wage world, now — thanks in particular to Bernie Sanders — part of the national conversation. And here’s what he found. Tom
Nickel and Dimed in 2016 You Can’t Earn a Living on the Minimum Wage
By Peter Van Buren
When presidential candidate Bernie Sanders talks about income inequality, and when other candidates speak about the minimum wage and food stamps, what are they really talking about?
Whether they know it or not, it’s something like this.
My Working Life Then
A few years ago, I wrote about my experience enmeshed in the minimum-wage economy, chronicling the collapse of good people who could not earn enough money, often working 60-plus hours a week at multiple jobs, to feed their families. I saw that, in this country, people trying to make ends meet in such a fashion still had to resort to food benefit programs and charity. I saw an employee fired for stealing lunches from the break room refrigerator to feed himself. I watched as a co-worker secretly brought her two kids into the store and left them to wander alone for hours because she couldn’t afford childcare. (As it happens, 29% of low-wage employees are single parents.)
At that point, having worked at the State Department for 24 years, I had been booted out for being a whistleblower. I wasn’t sure what would happen to me next and so took a series of minimum wage jobs. Finding myself plunged into the low-wage economy was a sobering, even frightening, experience that made me realize just how ignorant I had been about the lives of the people who rang me up at stores or served me food in restaurants. Though millions of adults work for minimum wage, until I did it myself I knew nothing about what that involved, which meant I knew next to nothing about twenty-first-century America.
I was lucky. I didn’t become one of those millions of people trapped as the “working poor.” I made it out. But with all the election talk about the economy, I decided it was time to go back and take another look at where I had been, and where too many others still are.
My Working Life Now
I found things were pretty much the same in 2016 as they were in 2012, which meant — because there was no real improvement — that things were actually worse.
This time around, I worked for a month and a half at a national retail chain in New York City. While mine was hardly a scientific experiment, I’d be willing to bet an hour of my minimum-wage salary ($9 before taxes) that what follows is pretty typical of the New Economy.
Just getting hired wasn’t easy for this 56-year-old guy. To become a sales clerk, peddling items that were generally well under $50 a pop, I needed two previous employment references and I had to pass a credit check. Unlike some low-wage jobs, a mandatory drug test wasn’t part of the process, but there was a criminal background check and I was told drug offenses would disqualify me. I was given an exam twice, by two different managers, designed to see how I’d respond to various customer situations. In other words, anyone without some education, good English, a decent work history, and a clean record wouldn’t even qualify for minimum-wage money at this chain.
And believe me, I earned that money. Any shift under six hours involved only a 15-minute break (which cost the company just $2.25). Trust me, at my age, after hours standing, I needed that break and I wasn’t even the oldest or least fit employee. After six hours, you did get a 45-minute break, but were only paid for 15 minutes of it.
The hardest part of the job remained dealing with… well, some of you. Customers felt entitled to raise their voices, use profanity, and commit Trumpian acts of rudeness toward my fellow employees and me. Most of our “valued guests” would never act that way in other public situations or with their own coworkers, no less friends. But inside that store, shoppers seemed to interpret “the customer is always right” to mean that they could do any damn thing they wished. It often felt as if we were penned animals who could be poked with a stick for sport, and without penalty. No matter what was said or done, store management tolerated no response from us other than a smile and a “Yes, sir” (or ma’am).
The store showed no more mercy in its treatment of workers than did the customers. My schedule, for instance, changed constantly. There was simply no way to plan things more than a week in advance. (Forget accepting a party invitation. I’m talking about childcare and medical appointments.) If you were on the closing shift, you stayed until the manager agreed that the store was clean enough for you to go home. You never quite knew when work was going to be over and no cell phone calls were allowed to alert babysitters of any delay.
And keep in mind that I was lucky. I was holding down only one job in one store. Most of my fellow workers were trying to juggle two or three jobs, each with constantly changing schedules, in order to stitch together something like a half-decent paycheck.
In New York City, that store was required to give us sick leave only after we’d worked there for a full year — and that was generous compared to practices in many other locales. Until then, you either went to work sick or stayed home unpaid. Unlike New York, most states do not require such a store to offer any sick leave, ever, to employees who work less than 40 hours a week. Think about that the next time your waitress coughs.
Minimum Wages and Minimum Hours
Much is said these days about raising the minimum wage (and it should be raised), and indeed, on January 1, 2016, 13 states did raise theirs. But what sounds like good news is unlikely to have much effect on the working poor.
In New York, for instance, the minimum went from $8.75 an hour to the $9.00 I was making. New York is relatively generous. The current federal minimum wage is $7.25 and 21 states require only that federal standard. Presumably to prove some grim point or other, Georgia and Wyoming officially mandate an even lower minimum wage and then unofficially require the payment of $7.25 to avoid Department of Labor penalties. Some Southern states set no basement figure, presumably for similar reasons.
Don’t forget: any minimum wage figure mentioned is before taxes. Brackets vary, but let’s knock an even 10% off that hourly wage just as a reasonable guess about what is taken out of a minimum-wage worker’s salary. And there are expenses to consider, too. My round-trip bus fare every day, for instance, was $5.50. That meant I worked most of my first hour for bus fare and taxes. Keep in mind that some workers have to pay for childcare as well, which means that it’s not impossible to imagine a scenario in which someone could actually come close to losing money by going to work for short shifts at minimum wage.
In addition to the fundamental problem of simply not paying people enough, there’s the additional problem of not giving them enough hours to work. The two unfortunately go together, which means that raising the minimum rate is only part of any solution to improving life in the low-wage world.
At the store where I worked for minimum wage a few years ago, for instance, hours were capped at 39 a week. The company did that as a way to avoid providing the benefits that would kick in once one became a “full time” employee. Things have changed since 2012 — and not for the better.
Four years later, the hours of most minimum-wage workers are capped at 29. That’s the threshold after which most companies with 50 or more employees are required to pay into the Affordable Care Act (Obamacare) fund on behalf of their workers. Of course, some minimum wage workers get fewer than 29 hours for reasons specific to the businesses they work for.
It’s Math Time
While a lot of numbers follow, remember that they all add up to a picture of how people around us are living every day.
In New York, under the old minimum wage system, $8.75 multiplied by 39 hours equaled $341.25 a week before taxes. Under the new minimum wage, $9.00 times 29 hours equals $261 a week. At a cap of 29 hours, the minimum wage would have to be raised to $11.77 just to get many workers back to the same level of take-home pay that I got in 2012, given the drop in hours due to the Affordable Care Act. Health insurance is important, but so is food.
In other words, a rise in the minimum wage is only half the battle; employees need enough hours of work to make a living.
About food: if a minimum wage worker in New York manages to work two jobs (to reach 40 hours a week) without missing any days due to illness, his or her yearly salary would be $18,720. In other words, it would fall well below the Federal Poverty Line of $21,775. That’s food stamp territory. To get above the poverty line with a 40-hour week, the minimum wage would need to go above $10. At 29 hours a week, it would need to make it to $15 an hour. Right now, the highest minimum wage at a state level is in the District of Columbia at $11.50. As of now, no state is slated to go higher than that before 2018. (Some cities do set their own higher minimum wages.)
So add it up: The idea of raising the minimum wage (“the fight for $15”) is great, but even with that $15 in such hours-restrictive circumstances, you can’t make a loaf of bread out of a small handful of crumbs. In short, no matter how you do the math, it’s nearly impossible to feed yourself, never mind a family, on the minimum wage. It’s like being trapped on an M.C. Escher staircase.
The federal minimum wage hit its high point in 1968 at $8.54 in today’s dollars and while this country has been a paradise in the ensuing decades for what we now call the “One Percent,” it’s been downhill for low-wage workers ever since. In fact, since it was last raised in 2009 at the federal level to $7.25 per hour, the minimum has lost about 8.1% of its purchasing power to inflation. In other words, minimum-wage workers actually make less now than they did in 1968, when most of them were probably kids earning pocket money and not adults feeding their own children.
In adjusted dollars, the minimum wage peaked when the Beatles were still together and the Vietnam War raged.
Many of the arguments against raising the minimum wage focus on the possibility that doing so would put small businesses in the red. This is disingenuous indeed, since 20 mega-companies dominate the minimum-wage world. Walmart alone employs 1.4 million minimum-wage workers; Yum Brands (Taco Bell, Pizza Hut, KFC) is in second place; and McDonald’s takes third. Overall, 60% of minimum-wage workers are employed by businesses not officially considered “small” by government standards, and of course carve-outs for really small businesses are possible, as was done with Obamacare.
Keep in mind that not raising wages costs you money.
Those minimum wage workers who can’t make enough and need to go on food assistance? Well, Walmart isn’t paying for those food stamps (now called SNAP), you are. The annual bill that states and the federal government foot for working families making poverty-level wages is $153 billion. A single Walmart Supercenter costs taxpayers between $904,542 and $1.75 million per year in public assistance money, and Walmart employees account for 18% of all food stamps issued. In other words, those everyday low prices at the chain are, in part, subsidized by your tax money.
If the minimum wage goes up, will spending on food benefits programs go down? Almost certainly. But won’t stores raise prices to compensate for the extra money they will be shelling out for wages? Possibly. But don’t worry — raising the minimum wage to $15 an hour would mean a Big Mac would cost all of 17 cents more.
My retail job ended a little earlier than I had planned, because I committed time theft.
You probably don’t even know what time theft is. It may sound like something from a sci-fi novel, but minimum-wage employers take time theft seriously. The basic idea is simple enough: if they’re paying you, you’d better be working. While the concept is not invalid per se, the way it’s used by the mega-companies reveals much about how the lowest wage workers are seen by their employers in 2016.
The problem at my chain store was that its in-store cafe was a lot closer to my work area than the time clock where I had to punch out whenever I was going on a scheduled break. One day, when break time on my shift came around, I only had 15 minutes. So I decided to walk over to that cafe, order a cup of coffee, and then head for the place where I could punch out and sit down (on a different floor at the other end of the store).
We’re talking an extra minute or two, no more, but in such operations every minute is tabulated and accounted for. As it happened, a manager saw me and stepped in to tell the cafe clerk to cancel my order. Then, in front of whoever happened to be around, she accused me of committing time theft — that is, of ordering on the clock. We’re talking about the time it takes to say, “Grande, milk, no sugar, please.” But no matter, and getting chastised on company time was considered part of the job, so the five minutes we stood there counted as paid work.
At $9 an hour, my per-minute pay rate was 15 cents, which meant that I had time-stolen perhaps 30 cents. I was, that is, being nickel and dimed to death.
Economics Is About People
It seems wrong in a society as wealthy as ours that a person working full-time can’t get above the poverty line. It seems no less wrong that someone who is willing to work for the lowest wage legally payable must also give up so much of his or her self-respect and dignity as a kind of tariff. Holding a job should not be a test of how to manage life as one of the working poor.
I didn’t actually get fired for my time theft. Instead, I quit on the spot. Whatever the price is for my sense of self-worth, it isn’t 30 cents. Unlike most of this country’s working poor, I could afford to make such a decision. My life didn’t depend on it. When the manager told a handful of my coworkers watching the scene to get back to work, they did. They couldn’t afford not to.
By the way, when I copied across that image of Peter Van Buren’s book the Buy The Book link didn’t work. If you are interested in buying the book then Amazon have it listed here.
My closing thought is directed as much to me and Jean as it is to you, my dear reader. It is this. Don’t read this post and think it’s too big a social problem for you. Find some way of making a difference. If you have recommendations as to how we lucky ones can make a difference please share them today! Thank you!
Dogs ‘teaching’ man to be so successful a hunter enabled evolution, some 20,000 years later, to farming, thence the long journey to modern man. But in the last, say 100 years, that farming spirit has become corrupted to the point where we see the planet’s plant and mineral resources as infinite. Mankind is close to the edge of extinction, literally and spiritually.
I continue that theme in Part Two of my book (Chapter 7: This Twenty-First Century)
Bad news sells! Bad news also causes stress and worry. In my previous explanation, I explained that the last thing you want is a catalogue of all the things that have that power to cause you stress and worry. However, I do see three fundamental aspects of this new century that have their roots in that loss of principles that I referred to in the previous chapter. They are
1. the global financial system,
2. the potential for social disorder, and
3. the process of government.
Because they are at the heart of how the coming years will pan out.
The first aspect, our global financial system, was selected because it underpins all our lives in so many ways. When I was living in southwest England I was a client of Kauders Portfolio Services. The founder of the company, David Kauders, published a book, The Greatest Crash, in 2011. It was an obvious read for me at that time and I still have the book on my shelves here in Oregon.
David explained that whether we like it or not, our lives are inextricably caught up in the twin dependencies of the global financial system: credit and debt. As he wrote in his opening chapter:
Households can barely afford their existing debts, let alone take on more. Since households now prefer not to borrow, indeed some even choose to pay back debt, it follows that those who have already borrowed, as a group, can no longer contribute to economic expansion.
People can be divided into borrowers and savers. With existing borrowers unable to afford or unwilling to take on extra debt, can new borrowers be found instead? Those who do not need to borrow are unlikely to volunteer. Except for the young wishing to buy houses, facing the reality that house prices are beyond their pockets, where are the new borrowers?
Businesses are also under pressure. There has been an inadequate recovery from recession, business prospects are poor as households cut back their spending. Lack of bank lending is a symptom rather than a cause, for if existing businesses were to be given more credit, they would probably be unlikely to find profitable growth opportunities in a world of austerity.
Later on in the book David describes this as “the financial system limit”. In other words, the period of growth and expansion, especially of financial and economic expansion, has come to an end in a structural sense. This was his perspective from 2011.
Recently, I chose to reread The Greatest Crash. What struck me forcibly, reading the book again some four years later on, was how visible this “system limit” appeared in the world today. Everywhere there are signs that the era of growth has come to an end. Many countries are now indebted to a point that reinforces the proposition of there being a financial system limit. The United States is greatly in debt but the only thing mitigating that situation, for the time being anyway, is that the American dollar is the quasi dominant global currency.
The changing nature of the global population is also reinforcing the fact that this is the end of a long period of growth. Even without embracing the question of how much longer we can increase the number of people living on a finite planet, the demographics spell out a greater-than-even chance of a decline in consumption and economic activity. Simply because in all regions of the planet, except for India where there is still a growing youth element in the country, people are ageing. To state the obvious, ageing persons do not consume as much as middle-aged and younger persons.
Thus, the world’s economy that is just around the corner is certainly going to be very different to what it has been in the past. It is not being widely discussed. Worse than that, there is a widespread assumption adopted by many governments that a return to the “normal” economic growth of previous times is a given. Many do not share that assumption.
The second aspect that isn’t being spoken about is the potential for massive, widespread social disorder. All summed up in just three words: greed, inequality, and poverty. Just three words that metaphorically appear to me like a round, wooden lid hiding a very deep, dark well. That lifting this particular lid, the metaphorical one, exposes an almost endless drop into the depths of where our society appears to have fallen.
Even the slightest raising of awareness of where this modern global world is heading is scary. I have in mind the author Thomas Piketty who warned that, “the inequality gap is toxic, dangerous.” Then there was the news in 2015 that, “Billionaires control the vast majority of the world’s wealth, 67 billionaires already own half the world’s assets; by 2100 we’ll have 11 trillionaires, while American worker income has stagnated for a generation.”
The third and final aspect that isn’t being widely discussed is the process of government. Not from the viewpoint of “left” or “right”, Labour or Conservative, Democratic or Republican (insert the labels appropriate to your own country), that is being discussed ad nauseum, but from the viewpoint of good government. It might be a terrible generalisation but it is still a fair criticism to say that many peoples of many countries have lost faith in their governments.
There appears to be a chronic absence of open debate about the need for good government, what that good government would look like, and how do societies bring it about.
If we were a dog pack, then our leader, our female mentor dog, would have moved us all to a new, pristine territory!
So, dear reader, you can understand why a recent article over on Naked Capitalism spoke to me. It was penned by Satyajit Das, a former banker and the author of a number of books. Both Satyajit and Yves, of Naked Capitalism, were delighted to offer me permission to republish the full post.
Yves here. If you’ve read Das regularly, one of the characteristics of his writing is wry detachment. The shift to a sense of foreboding is a big departure.
By Satyajit Das, a former banker and author whose latest book, The Age of Stagnation, is now available. The following is an edited excerpt from Age of Stagnation (published with the permission of Prometheus Books)
If you look for truth, you may find comfort in the end; if you look for comfort you will not get either comfort or truth, only . . . wishful thinking to begin, and in the end, despair. C.S. Lewis
The world is entering a period of stagnation, the new mediocre. The end of growth and fragile, volatile economic conditions are now the sometimes silent background to all social and political debates. For individuals, this is about the destruction of human hopes and dreams.
For most of human history, as Thomas Hobbes recognised, life has been ‘solitary, poor, nasty, brutish, and short’. The fortunate coincidence of factors that drove the unprecedented improvement in living standards following the Industrial Revolution, and especially in the period after World War II, may have been unique, an historical aberration. Now, different influences threaten to halt further increases, and even reverse the gains.
Since the early 1980s, economic activity and growth have been increasingly driven by financialisation – the replacement of industrial activity with financial trading and increased levels of borrowing to finance consumption and investment. By 2007, US$5 of new debt was necessary to create an additional US$1 of American economic activity, a fivefold increase from the 1950s. Debt levels had risen beyond the repayment capacity of borrowers, triggering the 2008 crisis and the Great Recession that followed. But the world shows little sign of shaking off its addiction to borrowing. Ever-increasing amounts of debt now act as a brake on growth.
Growth in international trade and capital flows is slowing. Emerging markets that have benefited from and, in recent times, supported growth are slowing.
Rising inequality and economic exclusion also impacts negatively upon activity.
Financial problems are compounded by lower population growth and ageing populations; slower increases in productivity and innovation; looming shortages of critical resources, such as water, food and energy; and manmade climate change and extreme weather conditions.
The world requires an additional 64 billion cubic metres of water a year, equivalent to the annual water flow through Germany’s Rhine River. Agronomists estimate that production will need to increase by 60–100 percent by 2050 to feed the population of the world. While the world’s supply of energy will not be exhausted any time soon, the human race is on track to exhaust the energy content of hundreds of millions years’ worth of sunlight stored in the form of coal, oil and natural gas in a few hundred years. 10 tons of pre-historic buried plant and organic matter converted by pressure and heat over millennia was needed to create a single gallon (4.5 litres) of gasoline.
Europe is currently struggling to deal with a few million refugees fleeing conflicts in the Middle East. How will the world deal with hundreds of millions of people at risk of displacement as a resulting of rising sea levels?
Extend and Pretend
The official response to the 2008 crisis was a policy of ‘extend and pretend’, whereby authorities chose to ignore the underlying problem, cover it up, or devise deferral strategies to ‘kick the can down the road’. The assumption was that government spending, lower interest rates, and the supply of liquidity or cash to money markets would create growth. It would also increase inflation to help reduce the level of debt, by decreasing its value.
It was the grifter’s long con, a confidence trick with a potentially large payoff but difficult to pull off. Houses prices and stock markets have risen, but growth, employment, income and investment have barely recovered to pre-crisis levels in most advanced economies. Inflation for the most part remains stubbornly low.
In countries that have ‘recovered’, financial markets are, in many cases, at or above pre-crisis prices. But conditions in the real economy have not returned to normal. Must-have latest electronic gadgets cannot obscure the fact that living standards for most people are stagnant. Job insecurity has risen. Wages are static, where they are not falling. Accepted perquisites of life in developed countries, such as education, houses, health services, aged care, savings and retirement, are increasingly unattainable.
In more severely affected countries, conditions are worse. Despite talk of a return to growth, the Greek economy has shrunk by a quarter. Spending by Greeks has fallen by 40 percent, reflecting reduced wages and pensions. Reported unemployment is 26 percent of the labour force. Youth unemployment is over 50 percent. One commentator observed that the government could save money on education, as it was unnecessary to prepare people for jobs that did not exist.
Future generations may have fewer opportunities and lower living standards than their parents. A 2013 Pew Research Centre survey conducted in thirty-nine countries asked whether people believed that their children would enjoy better living standards: 33 percent of Americans believed so, as did 28 percent of Germans, 17 percent of British and 14 percent of Italians. Just 9 percent of French people thought their children would be better off than previous generations.
The Deadly Cure
Authorities have been increasingly forced to resort to untested policies including QE forever and negative interest rates. It was an attempt to buy time, to let economies achieve a self-sustaining recovery, as they had done before. Unfortunately the policies have not succeeded. The expensively purchased time has been wasted. The necessary changes have not been made.
There are toxic side effects. Global debt has increased, not decreased, in response to low rates and government spending. Banks, considered dangerously large after the events of 2008, have increased in size and market power since then. In the US the six largest banks now control nearly 70 percent of all the assets in the US financial system, having increased their share by around 40 percent.
Individual countries have sought to export their troubles, abandoning international cooperation for beggar-thy-neighbour strategies. Destructive retaliation, in the form of tit-for-tat interest rate cuts, currency wars, and restrictions on trade, limits the ability of any nation to gain a decisive advantage.
The policies have also set the stage for a new financial crisis. Easy money has artificially boosted prices of financial assets beyond their real value. A significant amount of this capital has flowed into and destabilised emerging markets. Addicted to government and central bank support, the world economy may not be able to survive without low rates and excessive liquidity.
Authorities increasingly find themselves trapped, with little room for manoeuvre and unable to discontinue support for the economy. Central bankers know, even if they are unwilling to publicly acknowledge it, that their tools are inadequate or exhausted, now possessing the potency of shamanic rain dances. More than two decades of trying similar measures in Japan highlight their ineffectiveness in avoiding stagnation.
Heart of the Matter
Conscious that the social compact requires growth and prosperity, politicians, irrespective of ideology, are unwilling to openly discuss the real issues. They claim crisis fatigue, arguing that the problems are too far into the future to require immediate action. Fearing electoral oblivion, they have succumbed to populist demands for faux certainty and placebo policies. But in so doing they are merely piling up the problems.
Policymakers interrogate their models and torture data, failing to grasp that ‘many of the things you can count don’t count [while] many of the things you can’t count really count’. The possibility of a historical shift does not inform current thinking.
It is not in the interest of bankers and financial advisers to tell their clients about the real outlook. Bad news is bad for business. The media and commentariat, for the most part, accentuate the positive. Facts, they argue, are too depressing. The priority is to maintain the appearance of normality, to engender confidence.
Ordinary people refuse to acknowledge that maybe you cannot have it all. But there is increasingly a visceral unease about the present and a fear of the future. Everyone senses that the ultimate cost of the inevitable adjustments will be large. It is not simply the threat of economic hardship; it is fear of a loss of dignity and pride. It is a pervasive sense of powerlessness.
For the moment, the world hopes for the best of times but is afraid of the worst. People everywhere resemble Dory, the Royal Blue Tang fish in the animated film Finding Nemo. Suffering from short-term memory loss, she just tells herself to keep on swimming. Her direction is entirely random and without purpose.
The world has postponed, indefinitely, dealing decisively with the challenges, choosing instead to risk stagnation or collapse. But reality cannot be deferred forever. Kicking the can down the road only shifts the responsibility for dealing with it onto others, especially future generations.
A slow, controlled correction of the financial, economic, resource and environmental excesses now would be serious but manageable. If changes are not made, then the forced correction will be dramatic and violent, with unknown consequences.
During the last half-century each successive economic crisis has increased in severity, requiring progressively larger measures to ameliorate its effects. Over time, the policies have distorted the economy. The effectiveness of instruments has diminished. With public finances weakened and interest rates at historic lows, there is now little room for manoeuvre. Geo-political risks have risen. Trust and faith in institutions and policy makers has weakened.
Economic problems are feeding social and political discontent, opening the way for extremism. In the Great Depression the fear and disaffection of ordinary people who had lost their jobs and savings gave rise to fascism. Writing of the period, historian A.J.P. Taylor noted: ‘[the] middle class, everywhere the pillar of stability and respectability . . . was now utterly destroyed . . . they became resentful . . . violent and irresponsible . . . ready to follow the first demagogic saviour . . .’
The new crisis that is now approaching or may already be with us will be like a virulent infection attacking a body whose immune system is already compromised.
As Robert Louis Stevenson knew, sooner or later we all have to sit down to a banquet of consequences.
Loving our wilderness is another vital loving relationship
I quite deliberately named today’s post so that it would extend the theme of loving relationships posted yesterday.
So the recent announcement from the White House, “White House announced President Obama signed proclamations Friday to protect almost 2 million acres of pristine lands.” is to be welcomed with open arms. The article published in The Press Enterprise explained that those millions of acres were in California.
President Barack Obama established three national monuments today, Feb. 12, that cover almost 2 million acres in the Mojave Desert, the White House announced.
Obama used his power under the Antiquities Act to sign a proclamation designating the Mojave Trails, Sand to Snow and Castle Mountains national monuments. The move bypasses similar legislation, introduced by Sen. Dianne Feinstein, D-Calif., that has languished for years in Congress.
Feinstein asked the president in August to use his executive power to create the monuments. She praised the action in a statement: “I’m full of pride and joy knowing that future generations will be able to explore these national monuments and that the land will remain as pristine and as it is today. To a city girl like me, this expanse of desert, with its ruggedness and unique beauty, is nothing short of awe-inspiring.”
While on the subject of California, there is more good news from the Canis lupus 101 blog.
Wolves get a grudging welcome from Northern California ranchers
By Tim Holt February 11, 2016
Wolves such as OR 25, a 3-year-old male, have crossed the Oregon border, and Northern California ranchers are preparing to accommodate them.
We are going to have a viable population of wolves in the far northern reaches of California, and it will be with the grudging cooperation of our ranchers.
That was the takeaway from a public hearing held last month in Yreka (Siskiyou County), where the state’s Department of Fish and Wildlife invited public comment on its draft plan for accommodating our new four-footed residents, and where there were as many Stetsons in the audience as you’d see at a cowboy poetry convention.
Where are the wolves?
Yes, there was some foaming at the mouth, some evidence of the government-hating libertarianism this region is known for. “We don’t want people in Sacramento telling us how to live our lives,” grumbled one rancher.
But on the whole, there was a lot of thoughtful comment by those in attendance, and the beginnings of a dialogue between those who are charged with facilitating the wolves’ re-entry, and those who will be most affected by it. There was a focus on practical, down-to-earth matters — the threat to one’s livelihood when livestock are killed by predators, and the impracticality of maintaining 24-hour surveillance on sprawling ranch lands.
There was not much discussion of the nonlethal methods that can be used to ward off wolf depredations, although a number of speakers strongly urged that radio collars be put on wolves so ranchers can be warned if they’re getting near their cattle or sheep. That idea is already in the draft wolf management plan, as well as hazing techniques that include spotlights and air horns, as well as guard dogs and mobile electric fences.
Suzanne Asha Stone was on hand as the Rocky Mountain field representative for Defenders of Wildlife. After listening to some of the ranchers’ comments, she said, “This is verbatim what we heard in Idaho 20 years ago,” when wolves were introduced in Yellowstone National Park. Ranchers in that state were naturally concerned about the impact those wolves would have on their livelihoods. Two decades later, through programs Stone and her organization have helped implement, nonlethal strategies have reduced wolf kills of livestock in Idaho to “near zero,” she said. And that’s with a wolf population than now totals 770.
According to Stone, “It takes a while living with wolves before people realize that their worst fears won’t come true.”
I think most ranchers in California’s far north respect the wildlife around them, but their relationship with it is complicated by the need to make a living. Looking closely at the strategies used in Idaho would be a good first step in helping convince them that there are ways to reconcile ranching with the presence of this new predator.
John Wayne has long been a conservative icon, the personification of rugged individualism in the Wild West. In the 1963 movie “McLintock,” made late in his career, Wayne plays a cattle rancher and land baron. At one point he tells his daughter what he plans to do with his holdings after he dies: “I’m gonna leave most of it to the nation, really, for a park, where no lumber mill (can) cut down all the trees for houses with leaky roofs, nobody’ll kill all the beavers for hats for dudes, nor murder the buffalo for robes.”
John Wayne was no tree hugger. But neither, like the ranchers up here, should he be reduced to a simple stereotype.
Back to Governments or is this case the U.S. Government and a little-known unit known as Wildlife Services. Another arm reaching out to love our wilderness? H’mmm. Not according to Wolves of Douglas County blog:
PUBLISHED FEBRUARY 12, 2016
Wildlife Services—ever heard of it? No, not the U.S. Fish and Wildlife Service. That’s something different. The Fish and Wildlife Service is part of the Department of the Interior, charged with enforcing wildlife laws, restoring habitat, and protecting fish, plants, and animals. Wildlife Services isn’t your state fish and game commission, either, which issues hunting and fishing licenses and manages local wildlife.
Wildlife Services is a federal agency under the U.S. Department of Agriculture, and it specializes in killing wild animals that threaten livestock—especially predators such as coyotes, wolves, and cougars. Outside the ranching community, Few have heard of Wildlife Services.
Since 2000, the agency has killed at least two million mammals and 15 million birds. Although it’s main focus is predator control in the West, Wildlife Services also does things like bird control nationwide at airports to prevent crashes and feral pig control in the South.
The challenges facing the European Union ripple out across the whole of the free world.
I note that this is the second Friday where there is an abrupt change from the run of posts during the previous few days. For last Friday I republished a George Monbiot article on Rigging the Market and today there is another Monbiot article that I want to share with you; shared with you with the kind permission of Mr. Monbiot.
Unlike last Friday’s Monbiot article that clearly had global implications, at first sight this article about the European Union has no relevance to those of us not living with EU boundaries. But that would be wrong. For the importance of protecting a country’s sovereignty and the democratic processes within that country is supreme across all democratically elected governments.
The Lesser Evil
10th February 2016
I am starting to hate the European Union. But I will vote to stay in.
By George Monbiot, published in the Guardian, 10th February 2016
By instinct, like many on the left, I am a European. I recognise that many issues – perhaps most – can no longer be resolved only within our borders. Among them are grave threats to our welfare and our lives: climate change and the collapse of the living world; the spread of epidemics whose vectors are corporations (obesity, diabetes and diseases associated with smoking, alcohol and air pollution); the global wealth-grab by the very rich; antibiotic resistance; terrorism and conflict.
I recognise that the only legitimate corrective to transnational power is transnational democracy. So I want to believe; I want to belong. But it seems to me that all that is good about the European Union is being torn down, and all that is bad enhanced and amplified.
Nowhere is this clearer than in the draft agreement secured by David Cameron. For me, the most disturbing elements are those which have been widely described in the media as “uncontroversial”: the declarations on regulations and competitiveness. The draft decisions on these topics are a long series of euphemisms, but they amount to a further dismantling of the safeguards defending people, places and the living world.
What David Cameron described in parliament as “pettifogging bureaucracy” are the rules that prevent children from being poisoned by exhaust fumes, rivers from being turned into farm sewers and workers from being exploited by their bosses. What the European Commission calls reducing the “regulatory burden for EU business operators” often means increasing the costs the rest of us must carry: costs imposed on our pockets, our health and our quality of life. “Cutting red tape” is everywhere portrayed as a good thing. In reality, it often means releasing business from democracy.
There is nothing rational or proportionate about the deregulation the European Commission contemplates. When Edmund Stoiber, the conservative former president of Bavaria, reviewed European legislation, he discovered that the combined impact of all seven environmental directives incurred less than 1% of the cost to business caused by European law. But, prodded by governments like ours, the Commission threatens them anyway. It is still considering a merger and downgrading of the habitats and birds directives, which are all that impede the destruction of many of our precious places and rare species.
Alongside such specific threats, the European Union is engineering treaties that challenge the very principle of parliamentary control of corporations. As well as the transatlantic trade and investment partnership (TTIP), it has been quietly negotiating something even worse: a trade in services agreement (TISA). These claim to be trade treaties, but they are nothing of the kind. Their purpose is to place issues in which we have a valid and urgent interest beyond the reach of democratic politics. And the European Commission defends them against all comers.
Are such tendencies accidental, emergent properties of a highly complex system, or are they hardwired into the structure of the European Union? The more I see, the more it seems to me that the EU’s problems are intrinsic and systemic. The organisation that began as an industrial cartel still works at the behest of the forces best equipped to operate across borders: transnational corporations. The European Commission remains a lobbyists’ paradise: opaque, sometimes corruptible, almost unnavigable by those without vast resources.
So should those who seek a decent, protective politics vote to stay or vote to leave? If you wish to remain within the European Union because you imagine it is a progressive force, I believe you are mistaken. That time, if it ever existed, has passed. The EU is like democracy, diplomacy and old age. There is only one thing to be said for it: it is not as bad as the alternative.
If you are concerned about arbitrary power, and the ability of special interests to capture and co-opt the apparatus of the state, the UK is in an even worse position outside the European Union than it is within. Though the EU’s directives are compromised and under threat, they are a lot better than nothing. Without them we can kiss goodbye to the protection of our wildlife, our health, our conditions of employment and, one day perhaps, our fundamental rights. Without a formal constitution, with our antiquated voting arrangements and a corrupt and corrupting party funding system, nothing here is safe.
The government champs and rears against the European rules that constrain it. It was supposed to have ensured that all our rivers were in good ecological condition by the end of last year: instead, lobbied by Big Farmer and other polluting businesses, it has achieved a grand total of 17%. On behalf of the motor industry, it has sought to undermine new European limits on air pollution, after losing a case in the Supreme Court over its failure to implement existing laws. Ours is the least regulated labour market in Europe, and workers here would be in an even worse fix without the EU.
On behalf of party donors, old school chums, media proprietors and financial lobbyists, the government is stripping away any protections that European law has not nailed down. The EU’s enthusiasm for treaties like TTIP is exceeded only by David Cameron’s. His defence of national sovereignty, subsidiarity and democracy mysteriously evaporates as soon as they intrude upon corporate power.
I believe that we should remain within the union. But we should do so in the spirit of true scepticism: a refusal to believe anything until we have read the small print; a refusal to suspend our disbelief. Is it possible to be a pro-European Eurosceptic? I hope so, because that is what I am.
Nothing at all to do with dogs, or with integrity if it comes to that!
Regular followers of this place know that I am a tremendous fan of George Monbiot, the Englishman who so regularly exposes stuff that needs to be aired and discussed. As his About page explains:
Here are some of the things I love: my family and friends, salt marshes, arguments, chalk streams, Russian literature, kayaking among dolphins, diversity of all kinds, rockpools, heritage apples, woods, fishing, swimming in the sea, gazpacho, ponds and ditches, growing vegetables, insects, pruning, forgotten corners, fossils, goldfinches, etymology, Bill Hicks, ruins, Shakespeare, landscape history, palaeoecology, Gavin and Stacey and Father Ted.
Here are some of the things I try to fight: undemocratic power, corruption, deception of the public, environmental destruction, injustice, inequality and the misallocation of resources, waste, denial, the libertarianism which grants freedom to the powerful at the expense of the powerless, undisclosed interests, complacency.
Here is what I fear: other people’s cowardice.
I still see my life as a slightly unhinged adventure whose perpetuation is something of a mystery. I have no idea where it will take me, and no ambitions other than to keep doing what I do. So far it’s been gripping.
Way back in the early days of Learning from Dogs, the blog that is, not the book, George was very gracious in giving me blanket permission to republish his posts, and many of them have appeared in this place.
So now read George Monbiot’s latest Rigging the Market. It is yet another example of what is going wrong in these times.
Rigging the Market
3rd February 2016
Oil, the industry that threatens us with destruction, is being bailed out with public money
By George Monbiot, published in the Guardian 3rd February 2016
Those of us who predicted, during the first years of this century, an imminent peak in global oil supplies could not have been more wrong. People like the energy consultant Daniel Yergin, with whom I disputed the topic, appear to have been right: growth, he said, would continue for many years, unless governments intervened.
Oil appeared to peak in the United States in 1970, after which production fell for 40 years. That, we assumed, was the end of the story. But through fracking and horizontal drilling, production last year returned to the level it reached in 1969. Twelve years ago, the Texas oil tycoon T. Boone Pickens announced that “never again will we pump more than 82 million barrels”. By the end of 2015, daily world production reached 97 million.
Instead of a collapse in the supply of oil, we confront the opposite crisis: we’re drowning in the stuff. The reasons for the price crash – an astonishing slide from $115 a barrel to $30 over the past 20 months – are complex: among them are weaker demand in China and a strong dollar. But an analysis by the World Bank finds that changes in supply have been a much greater factor than changes in demand. Oil production has almost doubled in Iraq, as well as in the US. Saudi Arabia has opened its taps, to try to destroy the competition and sustain its market share: a strategy that some peak oil advocates once argued was impossible.
The outcomes are mixed. Cheaper oil means that more will be burnt, accelerating climate breakdown. But it also means less investment in future production. Already, $380 billion that was to have been ploughed into oil and gas fields has been held back. The first places to be spared are those in which extraction is most difficult or hazardous. Fragile ecosystems in the Arctic, in rainforests, in remote and stormy seas, have been granted a stay of execution.
BP reported a massive loss on Tuesday, partly because of low prices. A falling oil price drags down the price of gas, exposing coal mining companies to the risk of bankruptcy: good riddance to them. But some renewables firms are being tanked by the same forces: just as natural gas prices plunge, governments like the UK’s are stripping them of their subsidies. One day they will compete unaided, but not yet.
To cheer or lament these vicissitudes is pointless. They are chance events that counteract each other, and will at some point be reversed. The oil age, that threatens the conditions sustaining life on Earth, will come to an end through political, not economic, change. But the politics, for now, are against us.
Last week, David Cameron flew to Aberdeen, where he announced another £250 million of funding for, er, free enterprise, much (though not all) of which will be used to prop up oil and gas. A further £20 million of public money will be spent on seismic testing. Expect more whale strandings, and ask yourself why the industry that threatens our prosperity shouldn’t cover its own bloody costs.
The energy secretary, Amber Rudd, says she stands “100% behind” this “fantastic industry”. She will “build a bridge to the future for UK oil and gas”. Had she been born 300 years ago, I expect she would have said the same about the slave trade. In a few years’ time, her observations will look about as pertinent and about as ethical.
Oil companies have already been granted “ministerial buddies” to “improve access to government” – as if they didn’t have enough already. Now they get an “oil and gas ambassador”, and a new ministerial group, to “reiterate the UK Government’s commitment to supporting the oil and gas industry”. A leaked letter shows that Amber Rudd and other ministers want to silence local people, by transferring the power to decide whether fracking happens from elected councils to an unelected commission. Let’s sack the electorate and appoint a new one.
Compare all this to the government’s treatment of renewables. Local people have been given special new powers to stop onshore windfarms from being built. To the renewables companies Amber Rudd says this, “We need to work towards a market where success is driven by your ability to compete in a market, not by your ability to lobby government”. Strangely, the same rules do not apply to the oil companies. Your friends get protection. The free market is reserved for enemies.
Yes, I do mean enemies. An energy transition threatens the kind of people who attend the Conservative party’s fundraising balls. It corrodes the income of old school friends and weekend guests. For all the talk of enterprise, old money still nurtures its lively hatred of new money, and those who control the public purse use it to protect the incumbents from the parvenus. As they did for the bankers, our political leaders ensure that everyone must pay the costs imposed by the fossil fuel companies – except the fossil fuel companies.
So they lock us into the 20th Century, into industrial decline and air pollution, stranded assets and – through climate change – systemic collapse. Governments of this country cannot resist the future forever. Eventually they will succumb to the inexorable logic, and recognise that most of the vast accretions of fossil plant life in the Earth’s crust must be left where they are. And those massive expenditures of public money will prove to be worthless.
Crises expose corruption: that is one of the basic lessons of politics. The oil price crisis finds politicians with their free-market trousers round their ankles. When your friends are in trouble, the rigours imposed religiously upon the poor and public services suddenly turn out to be negotiable. Throw money at them, trash their competitors, rig the outcome: those who deserve the least receive the most.
I don’t know about you but I take the view that this essay from Monbiot is to be embraced. Simply because the more that stuff like this is aired, discussed and shared then the more likely that we ordinary folk can make a social and a political difference.
My sub-title comes from personal knowledge of what it feels like to set out on an ocean voyage into waters that one has not sailed before. In my case, leaving Gibraltar bound for The Azores on my yacht Songbird of Kent in the Autumn of 1969.
Despite me being very familiar with my boat, and with sailing in general, there was nonetheless a sense of trepidation as I headed out into a vast unfamiliar ocean.
Coming to matters closer to hand, there is a sense of trepidation felt by me and countless others as to what world we are heading into if we don’t take seriously the risks that are ‘tapping on our door’.
So hold that in your mind as you read a recent essay published by Patrice Ayme’; an essay that highlights very uncertain times ahead if we, as a global society, don’t get our act together pretty damn quick. Republished here on Learning from Dogs with Patrice’s kind permission.
Record Heat 2015, Obama Cool
2014 was the warmest year ever recorded. 2015 was even warmer, and by far, by .16 degrees centigrade. The UK (Great Britain) meteorological office announced that the temperature rise is now a full degree C above the pre-industrial average. At this annual rate of increase, we will get to two degrees within six years (as I have predicted was a strong possibility).
What’s going on? Exponentiation. Just as wealth grows faster, the greater the wealth, mechanisms causing more heat are released, the greater the heat. Yes, it could go all the way to tsunamis caused by methane hydrates explosions. This happened in the North Atlantic during the Neolithic, leaving debris of enormous tsunamis all over Scotland.
The Neolithic settlements over what is now the bottom of the North Sea and the Franco-English Channel (then a kind of garden of Eden), probably perished the hard way, under giant waves.
Explosions of methane hydrates have started on the land, in Siberia. No tsunami, so far. But it can, and will happen, any time. The recent North Easter on the East Coast of the USA was an example of the sort of events we will see ever more of: a huge warm, moist Atlantic born air mass, lifted up by a cold front.
Notice that, at the COP 21 in Paris all parties, 195 nations, agreed to try their best to limit warming to 1.5 degree Centigrade. At the present instantaneous rate, that’s less than 4 years away. Even with maximum switching out of fossil fuels, we are, at the minimum, on a three degrees centigrade target, pretty soon.
By the way, if all nations agree, how come the “climate deniers” are still heard of so loudly? Well, plutocrats control Main Stream Media. It’s not just that they want to burn more fossil fuels (as it brings them profit, they are the most established wealth). It’s also that they want to create debates about nothing significant, thus avoiding debates about significant things, such as how much the world is controlled by Dark Pools of money.
Meanwhile, dear Paul Krugman insists in “Bernie, Hillary, Barack, and Change“, that it would be pure evil to see him as a “corrupt crook“, because he believes everything Obama says about change and all that. Says Krugman: “President Obama, in his interview with Glenn Thrush of Politico, essentially supports the Hillary Clinton theory of change over the Bernie Sanders theory:
[Says Obama]: ‘I think that what Hillary presents is a recognition that translating values into governance and delivering the goods is ultimately the job of politics, making a real-life difference to people in their day-to-day lives.’”
This is all hogwash. We are not just in a civilization crisis. We are in a biosphere crisis, unequalled in 65 million years. “Real-life differences“, under Obama, have been going down in roughly all ways. His much vaunted “Obamacare” is a big nothing. All people in the know appraise that next year, it will turn to a much worse disaster than it already is (in spite of a few improvements, “co-pays” and other enormous “deductibles” make the ironically named, Affordable Care Act, ACA, unaffordable).
The climate crisis show that there is no more day-to-day routine. At Paris, the only administration which caused problem, at the last-minute, was Obama’s. How is that, for “change”? The USA is not just “leading from behind”, but pulling in the wrong direction. Really, sit down, and think about it: under France’s admirable guidance (!), 194 countries had agreed on a legally enforceable document. Saudi Arabia agreed. The Emirates agreed. Venezuela agreed. Nigeria agreed. Russia agreed. Byelorussia agreed. China, having just made a treaty with France about climate change, actually helped France pass the treaty. Brazil agreed. Zimbabwe agreed. Mongolia agreed. And so on. But, lo and behold, on the last day, Obama did not.
I know Obama’s excuses well; they are just that, excuses. Bill Clinton used exactly the exact same excuses, 20 years ago. Obama is all for Clinton, because, thanks to Clinton, he can just repeat like a parrot what Clinton said, twenty years ago. Who need thinkers, when we have parrots, and they screech?
I sent this (and, admirably, Krugman published it!):
“No doubt Obama wants to follow the Clintons in making a great fortune, 12 months from now. What is there, not to like?
Obama’s rather insignificant activities will just be viewed, in the future, as G. W. Bush third and fourth terms. A janitor cleaning the master’s mess. Complete with colored (“bronze”) apartheid health plan.
What Sanders’ supporters are asking is to break that spiral into ever greater plutocracy (as plutocrat Bloomberg just recognized).”
Several readers approved my sobering message, yet some troll made a comment, accusing me of “racist “slander”. Racist? Yes the “bronze” plan phraseology is racist. I did not make it up. And it is also racist to make a healthcare system which is explicitly dependent upon how much one can afford. Krugman is all for it, but he is not on a “bronze” plan. Introducing apartheid in healthcare? Obama’s signature achievement. So why should we consider Obama as the greatest authority on “progressive change”? Because we are gullible? Because we cannot learn, and we cannot see? Is not that similar to accepting that Hitler was a socialist, simply because he claimed to be one, it had got to be true, and that was proven because a few million deluded characters voted for him?
We are in extreme circumstances, unheard of in 65 million years, they require extreme solutions. They do not require, nor could they stand, Bill Clinton’s Third Term (or would that be G. W. Bush’s fifth term? The mind reels through the possibilities).
“Change we can believe in”: the new boss, same as the old boss, the same exponentiation towards inequality, global warming and catastrophe, the same warm rhetoric of feel-good lies.
As it is, there is a vicious circle of disinformation between the Main Stream Media, and no change in the trajectory towards Armageddon. Yes, Obama was no change. Yes, Obama was the mountain of rhetoric, who gave birth to a mouse. Yes, we need real change, and it requires to start somewhere. And that means, not by revisiting the past.
Yes, we do need real change, and every day that we think that this change is the responsibility of someone else then that is another day lost forever. Or in the more proasic words of Mahatma Gandi, “You must be the change you wish to see in the world.”
There is no question that we are living in interesting times!
Back in the old country there was a popular saying: “There are liars, damn liars, and politicians.” I am insufficiently aware of politics in both my new home country, the US of A, and my new home state, Oregon, to know if that saying is equally pertinent to life in America as it was in Great Britain – I suspect that it is.
So what’s getting ‘my knickers in a twist’ today? Namely the state of the world economy.
There seems to be so much spin and counter-spin that getting to the truth of what is going on, economically speaking, is not straightforward.
Which is why a recent article posted by Raúl Ilargi Meijerover on The Automatic Earth jumped out at me. To my eyes, it really did cover the truth of what’s going on. And to double-check my analysis I shared it with Dan Gomez, no stranger to global finances, and he found it useful. Indeed, this was Dan’s reply: “That’s pretty much it. This should be the top of the world news every week until governments become accountable. All the other big issues of the day pale compare to the backlash from this sclerotic thinking. Good luck to all of us.”
Raúl has very kindly given me his permission to republish this. It’s not an easy read but that doesn’t detract from the value of the essay.
Why This Slump Has Legs
January 18, 2016Posted by Raúl Ilargi Meijer
We’ve only really been in two weeks of trading in the new year, things are looking pretty bad to say the least, so predictably the press are asking -and often answering- questions about when the slump will be over. Rebound, recovery, the usual terminology. When will we get back to growth?
For me personally, but that’s just me, that last question sounds a bit more stupid every single time I hear and read it. Just a bit, but there’s been a lot of those bits, more than I care to remember. Luckily, the answer is easy. The slump will not be over for a very long time, there will be no rebound or recovery, and please stop talking about a return to growth unless you can explain what you want to grow into.
I’m sorry, I know that’s not what you want to hear, but life’s a bitch and so’s the economy. You’ve lived on pink fumes for a long time, most of you for their whole lives, but reality dictates that real ‘growth’ stopped decades ago, and you never figured that out because, and I quote here (see below), you and the world you’re part of became “addicted to borrowing money, spending it, and passing this off as ‘growth’”.
That you believed this was actual growth, however, is on you. You fell for a scam and you’re going to have to pay the price. If there’s one single thing people are good at, it’s lying. It’s as old as human history, and it happens every day, so you’re no exception to any rule. You’re perhaps just not particularly clever.
How do we know a ‘recovery’ is so far off it’s really no use to even talk about it? As I said, it’s easy. Let me lead this in with a graph I saw just today, which deals with a topic the Automatic Earth has covered a lot: marginal debt, or more precisely, the productivity/growth gained from each additional dollar of debt.
Please note, this particular graph deals with private non-financial debt only, we’ll get to other kinds of added debt, but that restriction is actually quite illuminating.
Now of course, you have to wonder about the parameters the St. Louis Fed uses for its data and graphs, and whether ‘growth’ was all that solid in the run up to 2008. There’s plenty of very valid arguments that would say growth in the 1960’s was a whole lot more solid than that in the naughties, after the Glass-Steagall repeal, and after the dot.com blubber.
However, that’s not what I want to take away from this, I use this to show what has happened since 2008, more than before, when it comes to “passing debt off as ‘growth’”.
But it’s another thing that has happened since 2008, or rather not happened, that points out to us why this slump will have legs. That is, in 2008 a behemoth bubble started bursting, and it was by no means just US housing market. That bubble should have been allowed to fully deflate, because that is the only way to allow an economy to do a viable restart.
Instead, all that has been done since 2008, QE, ZIRP, the works, has been aimed at keeping a facade ‘alive’, and aimed at protecting the interests of the bankers and other rich parties. That facade, expressed most of all in rising stock markets, has allowed for societies to be gutted while people were busy watching the S&P rise to 2,100 and the Kardashians bare 2,100 body parts.
It was all paid for, apart from western QE, with $28 trillion and change of newfangled Chinese debt. The problem with this is that if you find yourself in a bubble and you don’t go through the inevitable deleveraging process that follows said bubble in a proper fashion, you’re not only going to kill economies, you’ll destroy entire societies.
And that is not just morally repugnant, it also works as much against the rich as it does against the poor. It’s just that that is a step too far for most people to understand. That even the rich need a functioning society, and that inequality as we see it today is a real threat to everyone.
Recognizing this simple fact, and the consequences that follow from it, is nothing new. It’s why in days of old, there were debt jubilees. It’s also why we still quote the following from Marriner Eccles, chairman of the Federal Reserve under FDR and Truman from 1934-1948, in his testimony to the Senate Committee on the Investigation of Economic Problems in 1933, which prompted FDR to make him chairman in the first place.
It is utterly impossible, as this country has demonstrated again and again, for the rich to save as much as they have been trying to save, and save anything that is worth saving. They can save idle factories and useless railroad coaches; they can save empty office buildings and closed banks; they can save paper evidences of foreign loans; but as a class they cannot save anything that is worth saving, above and beyond the amount that is made profitable by the increase of consumer buying.
It is for the interests of the well to do – to protect them from the results of their own folly – that we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit. This is not “soaking the rich”; it is saving the rich. Incidentally, it is the only way to assure them the serenity and security which they do not have at the present moment.
Everything would all be so much simpler if only more people understood this, that you need a – fleeting, ever-changing equilibrium- to prosper.
Instead, we’re falling into that same trap again. Or, more precisely, we already have. We have been fighting debt with more debt and built the facade put up by the Fed, the BoJ and the ECB, central banks that all face the same problems and all take the same approach: save the rich at the cost of the poor. Something Eccles said way back when could not possibly work.
Anyway, so here are the graphs that prove to us why the slump has legs. There’s been no deleveraging, the no. 1 requirement after a bubble bursts. There’s only been more leveraging, more debt has been issued, and while households have perhaps deleveraged a little bit, though that is likely strongly influenced by losses on homes etc. plus the fact that people were simply maxed out.
First, global debt and the opposite of deleveraging:
And global debt from a longer, 65 year, more historical perspective:
It’s a global debt graph, but it’s perhaps striking to note that big ‘growth’ spurts happened in the days when Reagan, Clinton and Obama were the respective US presidents. Not so much in the Bush era.
Next, China. What we’re looking at is what allowed the post 2008 global economic facade to have -fake- credibility, an insane rise in debt, largely spent on non-productive overinvestment, overcapacity highways to nowhere and many millions of empty apartments, in what could have been a cool story had not Beijing gone all-out on performance enhancing financial narcotics.
Today, the China Ponzi is on its last legs, and so is the global one, because China was the last ‘not-yet-conquered’ market large enough to provide the facade with -fleeting- credibility. Unless Elon Musk gets us to Mars very soon, there are no more such markets.
So US debt will have to come down too, belatedly, with China, and it will have to do that now. because there are no continents to conquer and hide the debt behind. We’re all going to regret engaging in the debt game, and not letting the bubble deflate in an orderly fashion when we still could, but all those thoughts are too late now.
What the facade has wrought is not just the idea that deleveraging was not needed (though it always is, after every single bubble), but that net US household worth rose by 55% in the 6-7 years since the bottom of the crisis, an artificial bottom fabricated with…more debt, with QE, and ZIRP.
Meanwhile, in today’s world, as stock markets go down at a rapid clip, China, having lost control of a market system it never had the control over that Politburos are ever willing to acknowledge they don’t have, plays a game of Ponzi whack-a-mole, with erratic ‘policies’ such as circuit breakers and CIA-style renditions of fund managers and the like.
And all the west can do is watch them fumble the ball, and another one, and another. And this whole thing is nowhere near the end.
China bad loans have now become a theme, but the theme doesn’t mean a thing without including the shadow banking system, which in China has been given the opportunity to grow like a tumor, on which Beijing’s grip is limited, and which has huge claims on local party officials forced by the Politburo to show overblown growth numbers. If you want to address bad loans, that’s where they are.
Chinese credit/debt graphs paint only a part of the picture if and when they don’t include shadow banks, but keeping their role hidden is one of Xi’s main goals, lest the people find out how bad things really are and start revolting. But they will anyway. That makes China a very unpredictable entity. And unpredictable means volatile, and that means even more money flowing out of, and being lost in, markets.
The ‘least worst’ place to be for what money will be left is US dollars, US treasuries and perhaps metals. But there’ll be a whole lot less left than just about anyone thinks. That’s the price of deleveraging.
The price of not deleveraging, on the other hand, is what we see in the markets today. And there is no cure. It must be done. The price for keeping up the facade rises sharply with each passing day, and the effort will in the end be futile. All bubbles have limited lifespans.
I’ll close this with a few recent words from Tim Morgan, who puts it so well I don’t feel the need to try and do it better.
In order to set the Ponzi economy into some context, let’s put some figures on it. In the United States, total “real economy” debt (which excludes inter-bank borrowing) increased by $19.4 trillion – in real, inflation-adjusted terms – between 2000 and 2014, whilst real GDP expanded by only $3.7 trillion. Britain, meanwhile, added £1.9 trillion of new debt for less than £400bn on “growth” over the same period. I spent part of the holiday period unearthing quite how much debt countries added for each dollar of “growth” over a period starting at the end of 2000 and ending in mid-2015.
Unsurprisingly, the league is topped by Portugal ($5.65 for each $1 of growth), Ireland ($5.42) and Greece ($5.39). Britain’s ratio ($3.46) is somewhat flattering, in that the UK has used asset sales as well as borrowing to sustain its consumption. The average for the Eurozone ($3.54) covers ratios as diverse as Germany (just $1.87) and France ($4.22).
China’s $2.56 looks unexceptional until you note that the more recent (post-2007) number is much worse. Economies which seem to have been growing without too much borrowing (such as Brazil and Russia) are now experiencing dramatic worsening in their ratios, generally in the wake of tumbling commodity prices.
In the proverbial nutshell, then, the world has become addicted to borrowing money, spending it, and passing this off as “growth”. This is a copybook example of a pyramid scheme, which in turn means that the world’s most influential economic mentor is neither Keynes nor Hayek, but Charles Ponzi.
[..] How, in the absence of growth, can inflated capital values be sustained? The answer, of course, is that they can’t. Like all Ponzi schemes, this ends with a bang, not a whimper. This is why I find forecasts of a ‘big fall’ or ‘sharp correction’ in markets hard to swallow. Ponzi schemes don’t end gradually, any more than someone can fall off a cliff gradually, or be “slightly pregnant”.
The Ponzi economy simply continues for as long as irrationality prevails, and then implodes. Capital markets, though, are the symptom, not the cause. The fundamental problem is an inability to escape from an addictive practice of manufacturing supposed “growth” on the basis of borrowed money.
There may be shallow lulls in the asset markets, nothing ever only falls down in a straight line in the real world, but that debt I’ve described here will and must come down and be deleveraged.
The process will in all likelihood lead to warfare, and to refugee movements the likes of which the world has never seen just because of the sheer numbers of people added in the past 50 years.
When your children reach your age, they will not live in a world that you ever thought was possible. But they will still have to live in it, and deal with it. They will no longer have the facade you’ve been staring at for so long now, to lull them into a complacent sleep. And the Kardashians will no longer be looking so attractive either.
If you found your mind wandering somewhat as you tried to stay focussed on the essay, just go back and read the closing two paragraphs.
The process will in all likelihood lead to warfare, and to refugee movements the likes of which the world has never seen just because of the sheer numbers of people added in the past 50 years.
When your children reach your age, they will not live in a world that you ever thought was possible. But they will still have to live in it, and deal with it. They will no longer have the facade you’ve been staring at for so long now, to lull them into a complacent sleep. And the Kardashians will no longer be looking so attractive either.
As I said at the start: we are living in interesting times!
Some time ago, I republished, with Tom’s permission, essays that were being published on the TomDispatch blogsite. While those essays had nothing at all to do with dogs, they had much to do with integrity; the underlying theme of Learning from Dogs. Then Tom Engelhardt very generously gave me blanket permission to republish further TomDispatch essays whenever I felt so inclined. Thus back in 2011, I republished The Great American Carbon Bomb because it seemed so important to readers of this place. Subsequently, from time to time, other essays have been republished again because they seemed worthy of a broader distribution.
Which brings me to today’s post; another republication of a TomDispatch essay. Why? Because what is presently going on in the world, about the price of oil, about the chaos in the Middle-East, about the prospects of global deflation and the frightening consequences that could flow from that, are of concern to 99.9% of the ordinary folk living on this planet, including the vast majority of owners of dogs.
When it comes to news about Saudi Arabia, the execution of an oppositional Shiite cleric, Nimr al-Nimr, has topped the headlines recently — and small wonder. Aging King Salman bin Abdulaziz al-Saud and his 30-year-old son, Deputy Crown Prince Mohammed bin Salman, the new defense minister who has already involved his country in a classic quagmire war in Yemen, clearly intended that death as a regional provocation. The new Saudi leadership even refused to return the cleric’s body to his family for burial, but interred it with the many al-Qaeda terror suspects killed at the same time, some beheaded. After death, in other words, al-Nimr was left in uncomfortable company. Think of it as the ultimate beyond-the-grave insult. The provocative message embedded in the announcement of his execution was so obvious that, in Shia Iran, crowds supporting that country’s religious hardliners (with their own hideous execution policies) promptly torched the Saudi embassy in Tehran. In the following days, as the Saudis broke diplomatic relations with Iran, ended a failing truce in Yemen (promptly bombing a home for the blind and also hitting the Iranian embassy in Sana’a), and rallied Sunni neighboring states to similarly break ties or at least downgrade relations, the whole, roiling region hit the news as war fears rose.
On September 10, 2001, had someone predicted that the oil heartlands of the planet would, within a decade and a half, become a roiling mix of failed states, fierce sectarian religious and ethnic struggles, spreading terror groups, and the first terror “caliphate” in history, if you had suggested that Saudi Arabia, one of the more stable countries on the planet, might someday begin to come unglued, that Libya would essentially collapse, Syria be no more, and Iraq be transformed into a riven tripartite land, you would surely have been laughed out of any room of pundits and experts. So the recent intensification of such a state of affairs, involving two countries in those heartlands with gigantic energy reserves, is big news indeed — but not perhaps the biggest news in the region.
My own pick might be a story that passed largely unnoticed in our American world. Sitting atop some of the planet’s great oil reserves and getting 73% of their revenues from oil sales (income that dropped by 23% last year), the Saudi royals just hiked the domestic price of gas at the pump by 40%. Though it still remains dirt cheap by global standards, that act — which is like charging for salt water in the middle of the ocean — is an indication that something startling is going on. And note that, in the years to come, that kingdom’s rulers are planning to cut back on similar subsidies for “electricity, water, diesel, and kerosene.” In other words, the world’s largest oil producer and a country of striking wealth (and foreign reserves) no longer feels comfortable giving away gas to its own population, even though this is part of a bargain it struck long ago for peace in the kingdom.
And the reason for this has little to do with Iran or Syria or Yemen or Iraq or the Islamic State. The problem is far more basic, as TomDispatch’s resident energy expert Michael Klare points out today. It’s the price of oil, which in the last 18 months has dropped through the floor. In a sense, the oil business — with its constellation of giant energy firms, until recently among the most profitable companies in history, and its energy-producing states, until recently riding high — may prove to be the natural-resource equivalent of a failed state, and, as Klare makes clear, the changing economics of oil will transform the political face of the planet. So keep your eye on Saudi Arabia. Things there could get ugly indeed. Tom
The Oil Pricequake Political Turmoil in a Time of Low Energy Prices
By Michael T. Klare
As 2015 drew to a close, many in the global energy industry were praying that the price of oil would bounce back from the abyss, restoring the petroleum-centric world of the past half-century. All evidence, however, points to a continuing depression in oil prices in 2016 — one that may, in fact, stretch into the 2020s and beyond. Given the centrality of oil (and oil revenues) in the global power equation, this is bound to translate into a profound shakeup in the political order, with petroleum-producing states from Saudi Arabia to Russia losing both prominence and geopolitical clout.
To put things in perspective, it was not so long ago — in June 2014, to be exact — that Brent crude, the global benchmark for oil, was selling at $115 per barrel. Energy analysts then generally assumed that the price of oil would remain well over $100 deep into the future, and might gradually rise to even more stratospheric levels. Such predictions inspired the giant energy companies to invest hundreds of billions of dollars in what were then termed “unconventional” reserves: Arctic oil, Canadian tar sands, deep offshore reserves, and dense shale formations. It seemed obvious then that whatever the problems with, and the cost of extracting, such energy reserves, sooner or later handsome profits would be made. It mattered little that the cost of exploiting such reserves might reach $50 or more a barrel.
As of this moment, however, Brent crude is selling at $33 per barrel, one-third of its price 18 months ago and way below the break-even price for most unconventional “tough oil” endeavors. Worse yet, in one scenario recently offered by the International Energy Agency (IEA), prices might not again reach the $50 to $60 range until the 2020s, or make it back to $85 until 2040. Think of this as the energy equivalent of a monster earthquake — a pricequake — that will doom not just many “tough oil” projects now underway but some of the over-extended companies (and governments) that own them.
The current rout in oil prices has obvious implications for the giant oil firms and all the ancillary businesses — equipment suppliers, drill-rig operators, shipping companies, caterers, and so on — that depend on them for their existence. It also threatens a profound shift in the geopolitical fortunes of the major energy-producing countries. Many of them, including Nigeria, Saudi Arabia, Russia, and Venezuela, are already experiencing economic and political turmoil as a result. (Think of this, for instance, as a boon for the terrorist group Boko Haram as Nigeria shudders under the weight of those falling prices.) The longer such price levels persist, the more devastating the consequences are likely to be.
A Perfect Storm
Generally speaking, oil prices go up when the global economy is robust, world demand is rising, suppliers are pumping at maximum levels, and little stored or surplus capacity is on hand. They tend to fall when, as now, the global economy is stagnant or slipping, energy demand is tepid, key suppliers fail to rein in production in consonance with falling demand, surplus oil builds up, and future supplies appear assured.
During the go-go years of the housing boom, in the early part of this century, the world economy was thriving, demand was indeed soaring, and many analysts were predicting an imminent “peak” in world production followed by significant scarcities. Not surprisingly, Brent prices rose to stratospheric levels, reaching a record $143 per barrel in July 2008. With the failure of Lehman Brothers on September 15th of that year and the ensuing global economic meltdown, demand for oil evaporated, driving prices down to $34 that December.
With factories idle and millions unemployed, most analysts assumed that prices would remain low for some time to come. So imagine the surprise in the oil business when, in October 2009, Brent crude rose to $77 per barrel. Barely more than two years later, in February 2011, it again crossed the $100 threshold, where it generally remained until June 2014.
Several factors account for this price recovery, none more important than what was happening in China, where the authorities decided to stimulate the economy by investing heavily in infrastructure, especially roads, bridges, and highways. Add in soaring automobile ownership among that country’s urban middle class and the result was a sharp increase in energy demand. According to oil giant BP, between 2008 and 2013, petroleum consumption in China leaped 35%, from 8.0 million to 10.8 million barrels per day. And China was just leading the way. Rapidly developing countries like Brazil and India followed suit in a period when output at many existing, conventional oil fields had begun to decline; hence, that rush into those “unconventional” reserves.
This is more or less where things stood in early 2014, when the price pendulum suddenly began swinging in the other direction, as production from unconventional fields in the U.S. and Canada began to make its presence felt in a big way. Domestic U.S. crude production, which had dropped from 7.5 million barrels per day in January 1990 to a mere 5.5 million barrels in January 2010, suddenly headed upwards, reaching a stunning 9.6 million barrels in July 2015. Virtually all the added oil came from newly exploited shale formations in North Dakota and Texas. Canada experienced a similar sharp uptick in production, as heavy investment in tar sands began to pay off. According to BP, Canadian output jumped from 3.2 million barrels per day in 2008 to 4.3 million barrels in 2014. And don’t forget that production was also ramping up in, among other places, deep-offshore fields in the Atlantic Ocean off both Brazil and West Africa, which were just then coming on line. At that very moment, to the surprise of many, war-torn Iraq succeeded in lifting its output by nearly one million barrels per day.
Add it all up and the numbers were staggering, but demand was no longer keeping pace. The Chinese stimulus package had largely petered out and international demand for that country’s manufactured goods was slowing, thanks to tepid or nonexistent economic growth in the U.S., Europe, and Japan. From an eye-popping annual rate of 10% over the previous 30 years, China’s growth rate fell into the single digits. Though China’s oil demand is expected to keep rising, it is not projected to grow at anything like the pace of recent years.
At the same time, increased fuel efficiency in the United States, the world’s leading oil consumer, began to have an effect on the global energy picture. At the height of the country’s financial crisis, when the Obama administration bailed out both General Motors and Chrysler, the president forced the major car manufacturers to agree to a tough set of fuel-efficiency standards now noticeably reducing America’s demand for petroleum. Under a plan announced by the White House in 2012, the average fuel efficiency of U.S.-manufactured cars and light vehicles will rise to 54.5 miles per gallon by 2025, reducing expected U.S. oil consumption by 12 billion barrels between now and then.
In mid-2014, these and other factors came together to produce a perfect storm of price suppression. At that time, many analysts believed that the Saudis and their allies in the Organization of the Petroleum Exporting Countries (OPEC) would, as in the past, respond by reining in production to bolster prices. However, on November 27, 2014 — Thanksgiving Day — OPEC confounded those expectations, voting to maintain the output quotas of its member states. The next day, the price of crude plunged by $4 and the rest is history.
A Dismal Prospect
In early 2015, many oil company executives were expressing the hope that these fundamentals would soon change, pushing prices back up again. But recent developments have demolished such expectations.
Aside from the continuing economic slowdown in China and the surge of output in North America, the most significant factor in the unpromising oil outlook, which now extends bleakly into 2016 and beyond, is the steadfast Saudi resistance to any proposals to curtail their production or OPEC’s. On December 4th, for instance, OPEC members voted yet again to keep quotas at their current levels and, in the process, drove prices down another 5%. If anything, the Saudis have actually increased their output.
Many reasons have been given for the Saudis’ resistance to production cutbacks, including a desire to punish Iran and Russia for their support of the Assad regime in Syria. In the view of many industry analysts, the Saudis see themselves as better positioned than their rivals for weathering a long-term price decline because of their lower costs of production and their large cushion of foreign reserves. The most likely explanation, though, and the one advanced by the Saudis themselves is that they are seeking to maintain a price environment in which U.S. shale producers and other tough-oil operators will be driven out of the market. “There is no doubt about it, the price fall of the last several months has deterred investors away from expensive oil including U.S. shale, deep offshore, and heavy oils,” a top Saudi official told the Financial Times last spring.
Despite the Saudis’ best efforts, the larger U.S. producers have, for the most part, adjusted to the low-price environment, cutting costs and shedding unprofitable operations, even as many smaller firms have filed for bankruptcy. As a result, U.S. crude production, at about 9.2 million barrels per day, is actually slightly higher than it was a year ago.
In other words, even at $33 a barrel, production continues to outpace global demand and there seems little likelihood of prices rising soon, especially since, among other things, both Iraq and Iran continue to increase their output. With the Islamic State slowly losing ground in Iraq and most major oil fields still in government hands, that country’s production is expected to continue its stellar growth. In fact, some analysts project that its output could triple during the coming decade from the present three million barrels per day level to as much as nine million barrels.
For years, Iranian production has been hobbled by sanctions imposed by Washington and the European Union (E.U.), impeding both export transactions and the acquisition of advanced Western drilling technology. Now, thanks to its nuclear deal with Washington, those sanctions are being lifted, allowing it both to reenter the oil market and import needed technology. According to the U.S. Energy Information Administration, Iranian output could rise by as much as 600,000 barrels per day in 2016 and by more in the years to follow.
Only three developments could conceivably alter the present low-price environment for oil: a Middle Eastern war that took out one or more of the major energy suppliers; a Saudi decision to constrain production in order to boost prices; or an unexpected global surge in demand.
The prospect of a new war between, say, Iran and Saudi Arabia — two powers at each other’s throats at this very moment — can never be ruled out, though neither side is believed to have the capacity or inclination to undertake such a risky move. A Saudi decision to constrain production is somewhat more likely sooner or later, given the precipitous decline in government revenues. However, the Saudis have repeatedly affirmed their determination to avoid such a move, as it would largely benefit the very producers — namely shale operators in the U.S. — they seek to eliminate.
The likelihood of a sudden spike in demand appears unlikely indeed. Not only is economic activity still slowing in China and many other parts of the world, but there’s an extra wrinkle that should worry the Saudis at least as much as all that shale oil coming out of North America: oil itself is beginning to lose some of its appeal.
While newly affluent consumers in China and India continue to buy oil-powered automobiles — albeit not at the breakneck pace once predicted — a growing number of consumers in the older industrial nations are exhibiting a preference for hybrid and all-electric cars, or for alternative means of transportation. Moreover, with concern over climate change growing globally, increasing numbers of young urban dwellers are choosing to subsist without cars altogether, relying instead on bikes and public transit. In addition, the use of renewable energy sources — sun, wind, and water power — is on the rise and will only grow more rapidly in this century.
These trends have prompted some analysts to predict that global oil demand will soon peak and then be followed by a period of declining consumption. Amy Myers Jaffe, director of the energy and sustainability program at the University of California, Davis, suggests that growing urbanization combined with technological breakthroughs in renewables will dramatically reduce future demand for oil. “Increasingly, cities around the world are seeking smarter designs for transport systems as well as penalties and restrictions on car ownership. Already in the West, trendsetting millennials are urbanizing, eliminating the need for commuting and interest in individual car ownership,” she wrote in the Wall Street Journal last year.
The Changing World Power Equation
Many countries that get a significant share of their funds from oil and natural gas exports and that gained enormous influence as petroleum exporters are already experiencing a significant erosion in prominence. Their leaders, once bolstered by high oil revenues, which meant money to spread around and buy popularity domestically, are falling into disfavor.
Nigeria’s government, for example, traditionally obtains 75% of its revenues from such sales; Russia’s, 50%; and Venezuela’s, 40%. With oil now at a third of the price of 18 months ago, state revenues in all three have plummeted, putting a crimp in their ability to undertake ambitious domestic and foreign initiatives.
In Nigeria, diminished government spending combined with rampant corruption discredited the government of President Goodluck Jonathan and helped fuel a vicious insurgency by Boko Haram, prompting Nigerian voters to abandon him in the most recent election and install a former military ruler, Muhammadu Buhari, in his place. Since taking office, Buhari has pledged to crack down on corruption, crush Boko Haram, and — in a telling sign of the times — diversify the economy, lessening its reliance on oil.
Venezuela has experienced a similar political shock thanks to depressed oil prices. When prices were high, President Hugo Chávez took revenues from the state-owned oil company, Petróleos de Venezuela S.A., and used them to build housing and provide other benefits for the country’s poor and working classes, winning vast popular support for his United Socialist Party. He also sought regional support by offering oil subsidies to friendly countries like Cuba, Nicaragua, and Bolivia. After he died in March 2013, his chosen successor, Nicolas Maduro, sought to perpetuate this strategy, but oil didn’t cooperate and, not surprisingly, public support for him and for Chávez’s party began to collapse. On December 6th, the center-right opposition swept to electoral victory, taking a majority of the seats in the National Assembly. It now seeks to dismantle Chávez’s “Bolivarian Revolution,” though Maduro’s supporters have pledged firm resistance to any such moves.
The situation in Russia remains somewhat more fluid. President Vladimir Putin continues to enjoy widespread popular support and, from Ukraine to Syria, he has indeed been moving ambitiously on the international front. Still, falling oil prices combined with economic sanctions imposed by the E.U. and the U.S. have begun to cause some expressions of dissatisfaction, including a recent protest by long-distance truckers over increased highway tolls. Russia’s economy is expected to contract in a significant way in 2016, undermining the living standards of ordinary Russians and possibly sparking further anti-government protests. In fact, some analysts believe that Putin took the risky step of intervening in the Syrian conflict partly to deflect public attention from deteriorating economic conditions at home. He may also have done so to create a situation in which Russian help in achieving a negotiated resolution to the bitter, increasingly internationalized Syrian civil war could be traded for the lifting of sanctions over Ukraine. If so, this is a very dangerous game, and no one — least of all Putin — can be certain of the outcome.
Saudi Arabia, the world’s leading oil exporter, has been similarly buffeted, but appears — for the time being, anyway — to be in a somewhat better position to weather the shock. When oil prices were high, the Saudis socked away a massive trove of foreign reserves, estimated at three-quarters of a trillion dollars. Now that prices have fallen, they are drawing on those reserves to sustain generous social spending meant to stave off unrest in the kingdom and to finance their ambitious intervention in Yemen’s civil war, which is already beginning to look like a Saudi Vietnam. Still, those reserves have fallen by some $90 billion since last year and the government is already announcing cutbacks in public spending, leading some observers to question how long the royal family can continue to buy off the discontent of the country’s growing populace. Even if the Saudis were to reverse course and limit the kingdom’s oil production to drive the price of oil back up, it’s unlikely that their oil income would rise high enough to sustain all of their present lavish spending priorities.
Other major oil-producing countries also face the prospect of political turmoil, including Algeria and Angola. The leaders of both countries had achieved the usual deceptive degree of stability in energy producing countries through the usual oil-financed government largesse. That is now coming to an end, which means that both countries could face internal challenges.
And keep in mind that the tremors from the oil pricequake have undoubtedly yet to reach their full magnitude. Prices will, of course, rise someday. That’s inevitable, given the way investors are pulling the plug on energy projects globally. Still, on a planet heading for a green energy revolution, there’s no assurance that they will ever reach the $100-plus levels that were once taken for granted. Whatever happens to oil and the countries that produce it, the global political order that once rested on oil’s soaring price is doomed. While this may mean hardship for some, especially the citizens of export-dependent states like Russia and Venezuela, it could help smooth the transition to a world powered by renewable forms of energy.
Michael T. Klare, a TomDispatch regular, is a professor of peace and world security studies at Hampshire College and the author, most recently, of The Race for What’s Left. A documentary movie version of his book Blood and Oil is available from the Media Education Foundation. Follow him on Twitter at @mklare1.