For those looking for answers to the crisis in liberal democracy, this may well be it.
In yesterday’s post Tensions abound in many societies I offered a viewpoint that the ‘left’ arguing with the ‘right’ in politics was utterly inappropriate. Simply for we, as in the people who live on this planet, have to start working together if we wish to have a future for mankind on Planet Earth.
Yesterday’s post also referred to Inductive and Deductive Reasoning with me proposing that the future had to be built on a universally acknowledged relationship between ’cause’ and ‘effect’. A relationship that was built on a clear axiom, or theorem; as we see all around us in both the physical and natural worlds.
This idea does take a little time to filter through and I would be the first to say that I had to spend quite a while reflecting on the idea to fully understand the difference, the power, of deductive reasoning. Plus how something that was a behaviourial ‘law’ could be seen as much as an axiom as is, for example, the calculation of the speed of light, or the relationship of gravity to mass.
His thesis is that there is a direct relationship between “… about how well dispersed economic decision-making power is and how much control and financial security people have over their lives.“
That relationship is the core message of his essay.
In other words, as I see it, there is an axiom, a theorem, that governs the relationship between the leadership process of a country and the degree to which that country’s society could be classed as a democratic society.
If 2016 brought Brexit, Donald Trump and a backlash against cosmopolitan visions of globalisation and society, the great fear for 2017 is further shocks from right-wing populists like Geert Wilders in Holland and Marine Le Pen in France. A new mood of intolerance, xenophobia and protectionist economics seems to be in the air.
In a world of zero-hour contracts, Uber, Deliveroo and the gig economy, access to decent work and a sustainable family income remains the main fault line between the winners and losers from globalisation. Drill into the voter data behind Brexit and Trump and they have much to do with economically marginalised voters in old industrial areas, from South Wales to Nord-Pas-de-Calais, from Tyneside to Ohio and Michigan.
These voters’ economic concerns about industrial closures, immigrants and businesses decamping to low-wage countries seemed ignored by a liberal elite espousing free trade, flexible labour and deregulation. They turned instead to populist “outsiders” with simplistic yet ultimately flawed political and economic narratives.
Much has been said about the crisis of liberal political democracy, but these trends look inextricably linked with what is sometimes referred to as economic democracy. This is about how well dispersed economic decision-making power is and how much control and financial security people have over their lives. I’ve been involved in a project to look at how this compares between different countries. The results say much about the point we have reached, and where we might be heading in future.
Our economic democracy index looked at 32 countries in the OECD (omitting Turkey and Mexico, which had too much missing data). While economic democracy tends to focus on levels of trade union influence and the extent of cooperative ownership in a country, we wanted to take in other relevant factors.
We added three additional indicators: “workplace and employment rights”; “distribution of economic decision-making powers”, including everything from the strength of the financial sector to the extent to which tax powers are centralised; and “transparency and democratic engagement in macroeconomic decision-making”, which takes in corruption, accountability, central bank transparency and different social partners’ involvement in shaping policy.
What is striking is the basic difference between a more “social” model of northern European capitalism and the more market-driven Anglo-American model. Hence the Scandinavian countries score among the best, with their higher levels of social protection, employment rights and democratic participation in economic decision-making. The reverse is true of the more deregulated, concentrated and less democratic economies of the English-speaking world. The US ranks particularly low, with only Slovakia below it. The UK too is only 25th out of 32.
Interestingly, France ranks relatively highly. This reflects its strong levels of job protection and employee involvement in corporate decision-making – the fact that the far right has been strong in France for a number of years indicates its popularity stems from race at least as much as economics.
Yet leading mainstream presidential candidates François Fillon and Emmanuel Macron are committed to reducing France’s protections. These are often blamed – without much real evidence – for the country’s sluggish job creation record. There is a clear danger both here and in the Netherlands that a continuing commitment to such neoliberal labour market policies might push working class voters further towards Le Pen and Wilders.
One other notable disparity in the index is between the scores of Austria and Germany, despite their relatively similar economic governance. Germany’s lower ranking reflects the growth of labour market insecurity and lower levels of job protection, particularly for part-time workers as part of the Hartz IV labour market reforms in the 1990s that followed reunification.
The index also highlights the comparatively poor levels of economic democracy in the “transition” economies of eastern Europe. The one very interesting exception is Slovenia, which merits further study. It might reflect both its relatively stable transition from communism and the civil war in the former Yugoslavia, and the continuing presence of active civil society elements in the trade union and cooperative movements. Southern European economies also tend to rank below northern European countries, as does Japan.
Poverty and inequality
The index provides strong evidence that xenophobic politics may be linked to changing levels of economic participation and empowerment – notwithstanding the French data. We found that the greater the poverty and inequality in a country, the lower the rates of economic democracy.
These findings suggest, for example, that the Anglo-American-led attack on trade unions and flexible labour policies may actually drive up poverty and inequality by cutting welfare benefits and driving up individual employment insecurity. While the OECD itself advocated these policies until recently, countries with high levels of economic democracy such as Norway, Denmark and Iceland have much lower levels of poverty than countries such as the US and UK.
Far-right populism is on the march everywhere, including the Nordic countries. But Brexit, Trump and the more serious shift to the far right in Eastern Europe have been accompanied by diminishing economic security and rights at work, disenfranchised trade unions and cooperatives, and economic decision-making concentrated among financial, political and corporate elites.
We will monitor these scores in future to see what happens over time. It will be interesting to see how the correlations between economic democracy, poverty and voting patterns develop in the coming years. For those looking for answers to the crisis in liberal democracy, this may well be it.
I shall be writing to Professor Cumbers asking if my analysis of that relationship is supported by his research.
For if it is then we do have a very clear axiom that few would disagree with. That is the political consensus this world needs now.
The power of corporations must never be permitted to override democratic choice.
The main thrust in yesterday’s post was a plea by Chip Colwell , Lecturer on Anthropology, University of Colorado, Denver for our natural lands to be given the legal status of a person. Here’s how Prof. Colwell concluded his essay (my emphasis):
In New Zealand, the Te Urewera Act offers a higher level of protection, empowering a board to be the land’s guardian. The Te Urewera Act, though, does not remove its connection to humans. With a permit, people can hunt, fish, farm and more. The public still has access to the forest. One section of the law even allows Te Urewera to be mined.
Te Urewera teaches us that acknowledging cultural views of places as living does not mean ending the relationship between humans and nature, but reordering it – recognizing nature’s intrinsic worth and respecting indigenous philosophies.
In the U.S. and elsewhere, I believe we can do better to align our legal system with the cultural expressions of the people it serves. For instance, the U.S. Congress could amend the NHPA or the American Indian Religious Freedom Act to acknowledge the deep cultural connection between tribes and natural places, and afford better protections for sacred landscapes like New Mexico’s Mount Taylor.
Until then, it says much about us when companies are considered people before nature is.
Chip Colwell was alerting us, as in humanity, that our natural resources are way, way too important for them to be considered corporate assets.
The days between a Christmas Day and a New Year’s Day are frequently a time for introspection; well they are for me! A few days to reflect on what did or did not work in the year just coming to an end and to find some clarity about the important issues for the new year.
That mood of introspection, of reflection, seems to be creeping into my blog posts this last week of 2016. For following Chip Colwell comes George Monbiot and an essay he published on the 6th December, 2016, that is republished here with Mr. Monbiot’s very kind permission.
Regarding the power of corporations there are strong echoes between Prof. Colwell and Mr. Monbiot.
The Golden Arches Theory of Decline
10th December 2016
Why is there a worldwide revolt against politics as usual? Because corporate globalisation has crushed democratic choice.
By George Monbiot, published in the Guardian, 6th December 2016
A wave of revulsion rolls around the world. Approval ratings for incumbent leaders are everywhere collapsing. Symbols, slogans and sensation trump facts and nuanced argument. One in six Americans now believes that military rule would be a good idea. From all this I draw the following, peculiar conclusion: no country with a McDonald’s can remain a democracy.
Twenty years ago, the New York Times columnist Thomas Friedman proposed his “golden arches theory of conflict prevention”. This holds that “no two countries that both have McDonald’s have ever fought a war against each other since they each got their McDonald’s”.
Friedman’s was one of several end-of-history narratives suggesting that global capitalism would lead to permanent peace. He claimed that it might create “a tip-over point at which a country, by integrating with the global economy, opening itself up to foreign investment and empowering its consumers, permanently restricts its capacity for troublemaking and promotes gradual democratization and widening peace.” He didn’t mean that McDonald’s ends war, but that its arrival in a nation symbolised the transition.
In using McDonalds as shorthand for the forces tearing democracy apart, I am, like him, writing figuratively. I do not mean that the presence of the burger chain itself is the cause of the decline of open, democratic societies (though it has played its part in Britain, using our defamation laws against its critics). Nor do I mean that countries hosting McDonald’s will necessarily mutate into dictatorships.
What I mean is that, under the onslaught of the placeless, transnational capital McDonald’s exemplifies, democracy as a living system withers and dies. The old forms and forums still exist – parliaments and congresses remain standing – but the power they once contained seeps away, re-emerging where we can no longer reach it.
The political power that should belong to us has flitted into confidential meetings with the lobbyists and donors who establish the limits of debate and action. It has slipped into the dictats of the IMF and the European Central Bank, which respond not to the people but to the financial sector. It has been transported, under armed guard, into the icy fastness of Davos, where Mr Friedman finds himself so warmly welcomed (even when he’s talking cobblers).
Above all, the power that should belong to the people is being crushed by international treaty. Contracts such as NAFTA, CETA, the proposed TransPacific Partnership and Trade in Services Agreement and the failed Transatlantic Trade and Investment Partnership are crafted behind closed doors in discussions dominated by corporate lobbyists. They are able to slip in clauses that no informed electorate would ever approve, such as the establishment of opaque offshore tribunals, through which corporations can bypass national courts, challenge national laws and demand compensation for the results of democratic decisions.
These treaties limit the scope of politics, prevent states from changing social outcomes and drive down labour rights, consumer protection, financial regulation and the quality of neighbourhoods. They make a mockery of sovereignty. Anyone who forgets that striking them down was one of Donald Trump’s main promises will fail to understand why people were prepared to risk so much in electing him.
At the national level too, the McDonalds model destroys meaningful democracy. Democracy depends on a reciprocal sense of belief, trust and belonging: the conviction that you belong to the nation and the nation belongs to you. The McDonalds model, by rooting out attachment, could not have been better designed to erase that perception.
As Tom Wolfe observes in his novel A Man in Full, “the only way you could tell you were leaving one community and entering another was when the franchise chains started repeating and you spotted another 7-Eleven, another Wendy’s, another Costco, another Home Depot.” The alienation and anomie this destruction of place promotes are enhanced by the casualisation of labour and a spirit-crushing regime of monitoring, quantification and assessment (at which McDonald’s happens to excel). Public health disasters contribute to the sense of rupture. After falling for decades, for example, death rates among middle-aged white Americans are now rising. Among the likely causes are obesity and diabetes, opioid addiction and liver failure, diseases whose vectors are corporations.
In his book The Globalisation Paradox, the Harvard economist Dani Rodrik describes a political trilemma. Democracy, national sovereignty and hyperglobalisation, he argues, are mutually incompatible. You cannot have all three at once. McDonalisation crowds out domestic politics. Incoherent and dangerous as it often is, the global backlash against mainstream politicians is, at heart, an attempt to reassert national sovereignty against the forces of undemocratic globalisation.
An article about the history of the Democratic party by Matt Stoller in The Atlantic reminds us that a similar choice was articulated by the great American jurist Louis Brandeis. “We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.” In 1936, the congressman Wright Patman managed to pass a bill against the concentration of corporate power. Among his targets was A&P, the giant chainstore of his day, that was hollowing out towns, destroying local retailers and turning “independent tradesmen into clerks”.
In 1938, President Roosevelt warned that “the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism.” The Democrats saw concentrated corporate power as a form of dictatorship. They broke up giant banks and businesses and chained the chainstores. What Roosevelt, Brandeis and Patman knew has been forgotten by those in power, including powerful journalists. But not by the victims of this system.
One of the answers to Trump, Putin, Orban, Erdogan, Salvini, Duterte, Le Pen, Farage and the politics they represent is to rescue democracy from transnational corporations. It is to defend the crucial political unit that’s under assault by banks, monopolies and chainstores: community. It is to recognise that there is no greater hazard to peace between nations than a corporate model which crushes democratic choice.
It’s very easy to pick out from Mr. Monbiot’s essay what the theme should be for 2017, and beyond. What each and every one of us who cares about the future and understands the huge changes that have to take place if our grandchildren are to have a viable future.
It was that compelling quotation by Louis Brandeis:
We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.
In the run-up to the EU referendum by the UK this Brit was tempted several times to offer an opinion on what I thought was the best decision. But I resisted. (I was qualified to vote as an overseas voter and had voted for Remain.)
My resistance was because it seemed inappropriate to pass any form of opinion before the die had been cast, so to speak. I hadn’t been living in the country for over eight years and, inevitably, was out of touch with feelings.
The Conversation blogsite yesterday had a series of articles on the aftermath of the Brexit decision but the one that seemed most useful to share with you all was an article by Gavin Barrett, a Professor of European Constitutional and Economic Law at University College in Dublin. For many readers, including me, both within and without the UK this seemed a valuable primer.
Britain votes to leave the EU, Cameron quits – here’s what happens next
June 23, 2016 11.41pm EDT
Gavin Barrett Associate Professor, Jean Monnet Professor of European Constitutional and Economic Law, University College Dublin
Legally speaking, though, the process of actually leaving will take some time. Britain will now enter a kind of phoney Brexit period. It is still a member of the EU. The referendum vote is not as such legally binding. It is advisory only – but if it is out it creates a political imperative for the UK government to arrange its exit of the EU.
The law governing Brexit is found in Article 50 of the EU Treaty. This is a provision adopted by EU member states in 2009 to govern Brexit-like scenarios. It puts a two-year time limit on withdrawal negotiations. When the two years is up (or on the date any agreement reached before this enters into force) the UK is officially out of the EU.
Article 50 requires the UK to trigger the exit process by notifying its intention to withdraw. Not one, but rather a cascade of agreements, will follow this Brexit notification:
The Article 50 exit agreement
A separate treaty governing the UK’s future relationship with the EU – which could take many years to negotiate (and which, if it goes beyond trade, will require ratification by every single EU member state)
Trade agreements between the UK and up to 134 other WTO members
A tidying-up treaty between all the remaining EU states that removes all references to the UK from the EU treaties.
The initial main focus, however, will clearly be the Article 50 Brexit agreement.
How will it work?
The UK would be the first state to leave the EU but it is most likely that the European Commission, the executive arm of the EU, will do the negotiating on behalf of the remaining 27 member states. They will no doubt cast a watchful eye on proceedings, before voting on the deal.
That vote will be by a weighted majority, with bigger states like Germany, France and Italy having a more powerful voice than smaller members (although in practice, strong efforts are made to ensure every member state can live with a deal before a matter is approved). Above and beyond this, should the Article 50 Brexit agreement venture beyond trade matters, it will then need to be ratified by every EU member state.
The European Parliament has a veto option, making it an important player too. Article 50 negotiations will thus have a lot of players with powerful voices – and many not necessarily be inclined to give the UK a very favourable deal lest “exiters” in their own countries get any ideas.
Could the UK delay giving Article 50 notification?
Legally, yes, the UK could delay giving Article 50 notification or avoid it altogether. But other EU states will probably refuse to negotiate until they get the notification.
Brexit campaigners have suggested adopting a swath of domestic laws so that the UK can short-circuit Article 50. But such measures would violate EU law and probably won’t see the light of day. Enacting them would pointlessly violate EU and international law, alienate the UK’s future negotiating partners and jeopardise the UK’s future relationship with the EU.
Can the UK withdraw notification?
This might be attempted if, for instance, the UK doesn’t like the way negotiations are going. It is unclear if it is legally permissible. The EU Treaty certainly doesn’t prohibit it in so many words. Political misgivings would abound – but might possibly be met by having a second referendum to reject any Article 50 deal ultimately reached.
Ireland, after all, had referendum second thoughts on the Lisbon and Nice Treaties, Denmark had them on the Maastricht Treaty and France and Holland agreed to a Lisbon Treaty deal very similar to the 1994 Constitutional Treaty earlier rejected by both states in referendum.
What will the UK get from negotiations?
That depends on how (and who) conducts the negotiations for the UK, and what the other states are prepared to offer it. Even assuming they prove pleasantly amenable, the UK will be left with awkward choices.
Does it want continued access to the single market with its 500m consumers? If so, it is may have
to make Norway-like concessions – including continued EU migration and cash payments for the privilege. Does it want to block out EU migrants? Then it may well have to say goodbye to single European market access.
No matter what the UK chooses, it will unavoidably find itself outside the corridors of power in the EU for the first time in over forty years.
Is there any way back in?
Article 50 does envisage the possibility of UK re-entry to the EU one day – but subject to a unanimous vote of member states. This pretty much guarantees it will only ever happen by the UK accepting the euro currency, participation in the Schengen area of free movement and no rebate.
Welcome to the brave new world of Brexitland.
All I can say is that when I wrote up my post on comfort dogs I had no idea that matters Europe would be creating an enormous need for them. Better put in the words of Per and Val:
One dissatisfied member has soundly rejected club Europe’s management. It needs to radically improve before other leave. The managers must sure be in need of comfort dogs today.
To be honest, at a personal level I just don’t know the answer to that question. It seems to depend on the mood that Jean and I are in at any particular time. All I can fall back on is that well-used saying from me: “Never underestimate the power of unintended consequences”.
In other words, we shouldn’t underestimate the strength of millions of good people when their demands start reaching out to those in power. (And whatever your reaction to this post, please don’t miss watching the inspirational Al Gore speech towards the end of this post.)
Recently over on the Grist site there was an article about the critical changes that each and every one of us should be making. I want to share it with you in full.
Want to fight climate change? Here are the 7 critical life changes you should make
A few months ago, the U.S. and 195 other countries signed this thing in Paris in which all parties involved kind of sort of agreed to stop messing with the world’s climate. It was very exciting.
So what if we, as Americans, were going to join in as individuals in order to help the U.S. meet its emissions goals? What would we do differently? Two researchers at the University of Michigan’s Transportation Research Institute, Michael Sivak and Brandon Schoettle, recently set out to answer those questions. (Here is the abstract of their report.) Their conclusion: The largest single source of greenhouse gas emissions is making things (industry, clocking in at 29 percent of greenhouse gas emissions). After that, there’s moving people and things around (transportation, 27 percent), then the energy we use at home (17 percent) followed by the energy used by non-industrial businesses (17 percent) and the energy used in agriculture (10 percent).
Most of this energy is stuff that you don’t have any control over: If you are looking at a row of lawn chairs at the store, you don’t have any way of knowing how much energy it took to produce each one. You cannot, on a personal level, decide to have your contact-lens solution delivered to your local pharmacy by cargo bicycle instead of long-haul trucker.
So, given the imperfections of this world, what is a lone wolf such as yourself to do? Here are some conclusions gleaned from this study:
1. Buy the most fuel-efficient car you can afford, then drive it as little as possible
You might notice that Sivak and Schoettle don’t even consider the option of going without a car — even though their own graph suggests that, if having an efficient car is good, having none at all is even better:
To be sure, many people live in cities and work at jobs where living without a car is virtually impossible — and these are the people who this report is written for.
Currently, the average car on the road gets about 21.4 miles per gallon. If that went up to just 31 mpg, Sivak and Schoettle claim that the amount of carbon that the U.S. emits would drop by 5 percent — as long as we didn’t go crazy and drive a lot more. If the average fuel economy rose to 56 mpg, total U.S. emissions would be reduced by 10 percent.
That said, I would like to see Sivak and Schoettle have a conversation with my (very nice) Motor City-born mom about why she should get the most fuel-efficient car she can afford when she loves her damn Jeep and gas right now is less than $2 a gallon. Since they both live in Michigan, maybe they have already.
2. Drive your fuel-efficient car until it’s so old that it turns into dust — actually, use everything you own for so long that it turns into dust
The average age of a car on the road right now is 11.5 years. The average 3,000-pound car takes the equivalent of 260 gallons of gasoline to make. It’s not like you can compare among different manufacturers to see which one is the most energy-efficient carmaker any more than you can compare lawn-chair makers or cellphone manufacturers.
But unless you’re trading it in for something that is significantly more energy efficient than what you have already, keep the old stuff around. That goes for cars, clothes, shoes, remodeling your kitchen, and so on and so forth. There is no law requiring you to buy a new cellphone every two years, and though that’s what we do in the U.S., in other countries people keep them much longer.
3. Drive your fuel-efficient car like it is a leaf on the breeze
According to Sivak and Schoettle, frequent hard stops and rapid acceleration have a dramatic effect on fuel efficiency. They assume that the average driver can reduce overall fuel consumption by 5 percent by chilling out a little while driving. Also: Since engines don’t use gasoline efficiently past a certain speed, a hypothetical driver could reduce emissions even more by never driving faster than 61 mph.
I will also say that, based on my experience growing up with a dad whose default driving speed was about 60, driving at that speed on many U.S. highways and backcountry roads is going to piss a lot of people off. They will honk, tailgate, flash their brights at you, and jokingly and not-so-jokingly pretend like they’re about to run you off the road when they do pass you. It’s a little harder to maintain zen composure under those circumstances, but that will just make those times that you do accomplish it even more impressive.
4. Fly coach
Or, well, don’t fly at all. But when taking a train from SF to NY takes four days, and flying takes about six hours, it’s not hard to see why a lot of people fly. In some cases, flying can produce less emissions than driving (if you drive alone — not if you take a train or the bus).
There’s also some information out there about which airlines are the most fuel efficient. (Spoiler: This more or less correlates precisely with which carriers pack flyers in like sardines and make them pay extra to check their bags.)
5. Fly nonstop
Planes use a disproportionate amount of fuel during takeoff, so minimizing the number of takeoffs is relatively easy (if more expensive). If you need to take a connecting flight, choose the option that gives you the least number of miles traveled.
6. Turn down the thermostat
Right. And put on a sweater. While people who use air conditioning inspire all those summer energy conservation think pieces, according to Sivak and Schoettle’s stats, it’s heating the air and water around us to a temperature that we like that is the greater problem.
7. Eat low on the food chain
Sivak and Schoettle cite stats (published in Climatic Change in 2014) suggesting that the average vegetarian diet produces 32 percent lower emissions than the average omnivore diet. Are there ways around this? Sivak and Schoettle don’t get into this, but yeah, it gets complicated. Some processed vegetarian food has a pretty hefty carbon footprint, and if you live somewhere with an abundant white-tailed deer or squirrel population, you’ve got some low-carbon meat nearby. Still, this is about averages, not your Hunger Games lifestyle.
Sivak and Schoettle also suggest that we all try reducing our collective caloric input by 1 percent, eating 25 fewer calories a day (if we’re men) or 20 fewer a day (for women) — about a tablespoon of hummus, or a single egg white, if you even think measuring things in calories makes sense (I don’t). Their excuse? “Given that 69 percent of American adults are overweight (CDC, 2015), most of us could safely lose some weight.” Dudes. Really. The low-carbon agricultural revolution will not come any faster because you fat-shamed America.
So: I have read a lot of reports like this one before. This one is particularly weird, though, because it focuses so much on personal choice, and ease of that choice. And because its definition of “ease” makes no sense.
As Sivak and Schoettle put it:
This study did not exhaustively examine all possible actions that an individual can take to reduce greenhouse gas emissions. The emphasis was on selected actions that do not require substantial effort and time, do not require much in the way of changing one’s lifestyle, and are relatively easy to quantify in terms of their effects. Examples of actions not considered are increasing home insulation (takes both substantial effort and time), eliminating the use of drive-through banks and restaurants, and thus eliminating the associated idling (requires a change, albeit small, in one’s lifestyle), and buying locally sourced products (effects are not easy to generalize because they vary from product to product).
I’m not quite sure what to make of the fact that the study’s authors have somehow decided that going vegetarian, or figuring out how to consistently eat a tablespoon less of hummus than you usually do, is less arduous than parking your car, getting out of it, and going into a building to order food.
Let’s take this study at face value. What can a hypothetical person do to cut emissions easily, when they are not trying very hard to do anything? The answer to that question is, by far and away, this one: Buy a more fuel-efficient car.
But here’s the thing. The only reason we have fuel-efficient cars to buy is because of political pressure, rather than individual choice — the first Corporate Average Fuel Economy (CAFE) standards were created by Congress in 1975. The newest CAFE standards, which are intended to get the average mpg up to 54.5 mpg by 2025, were the result of hard bargaining — and an auto industry that had been weakened by the recession. At the time that the standards were finalized in 2005, only two cars (the Chevy Volt and a thing called a Ford Focus BEV FWD) met that standard — even the much-hyped Toyota Prius didn’t qualify. Now there are a handful that get nearly double that — but the average mpg of cars sold actually fell slightly between 2014 and 2015, probably because of lower gas prices.
Meanwhile, for way too long, the low-income people with long commutes who would have the most practical incentive to drive a fuel-efficient car have been locked out of the market for one, even as the current housing status quo pushes them farther out into the suburbs. Individual choice only goes so far: Sometimes you need the whammy of regulation to change the available options before you can get to the point where you have a choice.
On paper, it’s totally possible for the U.S. to transition to lower carbon emissions and still have a strong economy. But looking at the numbers alone leaves out the huge political and social obstacles — angry oil barons, stick-in-the-mud utilities, car companies that would rather roll out old models than develop new tech — that have to be overcome to make that happen. You can’t buy fuel-efficient vehicles until companies are under pressure to actually make them — and to make them affordable. You can’t reduce the amount of time you spend driving unless your city or suburb actually has the infrastructure (sidewalks, transit, zoning that allows jobs and housing and shopping to coexist) that makes such changes possible.
Climate change is not something that we can conserve our way out of individually or easily. As Maggie Koerth-Baker put it in her excellent book Before the Lights Go Out, if we Americans were going to conserve our collective way out of climate change, we would have to reduce our emissions to less than one ton per person. While one ton seems like a big number, getting to it is much harder than it sounds:
One ton of greenhouse gas emissions buys a year’s worth of heat for one average home in the United States … That’s not including electricity, clothes, food, or transportation. Do you travel a lot for business? Maybe you could spend your one ton of emissions on airline flights instead. On that yearly budget, you can afford to fly 10 thousand miles in coach. Of course, again, that leaves you with no food to eat, no clothes to wear, and no house to come home to.
Getting to less than a ton per person — in the U.S., anyway — would involve a level of change that hasn’t been seen since WWII. Back then, tires, automobiles, typewriters, bicycles, gasoline, sugar, coffee, meat, cheese, butter, firewood, and coal were all rationed. Factories stopped making consumer products and concentrated on the war effort.
The national speed limit was set to 35 mph to conserve fuel. All forms of automobile racing were banned. Driving for “sightseeing” was banned. Special courts were set up to deal with those who broke the law — people who were found to be driving “for pleasure” had their gasoline rations taken away.
I’m not suggesting we go full WWII on climate change. (For one thing: We had more trains then. For another thing: We could get a lot done with just a Cold War approach.) What I am saying is that, yes, we can change our individual ways — and we should. But with a problem as big as climate change, we shouldn’t pretend that we can go it alone.
For example, that half of all urban water consumption is spent on landscaping seems to have sunk in, as has a greater appreciation for the hardiness of lawn grass. In Northern California at least, lawns that went brown in the summer and fall are now green — following the natural cycle of the foothills.
“It is hard to kill grass,” Marcus said. “And while I don’t think in the long run it’s realistic to think people are going to keep their lawns brown forever, I do think folks have learned they don’t need as much water as they have been dumping on them.… So that is a real ‘aha’ for people.” [Ed: Marcus refers to Felicia Marcus, chair of the state water board.]
Also demonstrated through eight months of mandatory cutbacks is that reducing consumption by nearly 25% is doable — a mark Marcus feared would be unattainable when the order went out.
Marcus grows most animated when discussing a movement underway at many local agencies up and down the state — one aimed toward integrating traditional water delivery with enhanced recycling, storm-water capture, underground storage and the like.
To conclude my proposition that only an optimistic attitude is going to sort this out for our heirs let me close with this recent TED Talk given by Al Gore. Mr. Gore supplies all the power we need to be optimistic about the future.
Al Gore has three questions about climate change and our future. First: Do we have to change? Each day, global-warming pollution traps as much heat energy as would be released by 400,000 Hiroshima-class atomic bombs. This trapped heat is leading to stronger storms and more extreme floods, he says: “Every night on the TV news now is like a nature hike through the Book of Revelation.” Second question: Can we change? We’ve already started. So then, the big question: Will we change? In this challenging, inspiring talk, Gore says yes. “When any great moral challenge is ultimately resolved into a binary choice between what is right and what is wrong, the outcome is foreordained because of who we are as human beings,” he says. “That is why we’re going to win this.”
Do drop across and consider joining. Because by so doing you will become, “… part of a growing community of millions of people worldwide who have come together in support of taking urgent steps to halt the growing climate crisis.”
Let this be the time of all of our lives where we say, “Enough is enough”, and vote and act, both individually and collectively, for positive change!
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.
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.
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!
This is not some intellectual exercise; far from it!
As often happens, a number of seemingly disconnected articles and reports seem to have provided a common theme. A theme that has previously been aired on Learning from Dogs yet a theme that always needs to be in the front of our faces: integrity.
The revelation that humanity’s dominant characteristic is, er, humanity will come as no surprise to those who have followed recent developments in behavioural and social sciences. People, these findings suggest, are basically and inherently nice.
The architecture of inequality must be carefully constructed. As the founding fathers of the United States clearly understood, democracy must be kept in check. For this purpose, they invented the Electoral College to prevent the president from being elected by popular vote.
To ensure an effective electoral system, an obsequious media must be skilled in drowning the public with a flood of misinformation to maintain a constant level of fear to make them more likely to side with the CS (corporate system).
If there is ever one example of how that lack of integrity manifests itself in our world it is through inequality. Professor Perelman’s essay is clearly written “tongue-in-cheek” but that doesn’t lessen the impact of his essay. Try his closing paragraphs: (CES = a subset of CS; WEM = The Wondrous Efficiency of Markets)
Regulators are not the only ones to see the benefits of working with the CES. Politicians who resign or are defeated are almost inevitably destined to enjoy the benefits of their dedication to the WEM with the returns from taking a rewarding position with a major corporation, lobbying, or even a lucrative contract to write a book that virtually no one would want to read.
When done correctly, this system works magnificently, although it periodically it seems to fall apart until the detested government apparatus rescues it. In the meantime, huge amounts of wealth and income fall into the hands of the top 1%, the people of greatest importance, while the rest of the public can enjoy watching the spectacular performance of the CES, a reward worthy of their place in society especially because envy of the wealthy brethren will obviously make them work harder to succeed, adding to WEM.
All power to WEM!
Does this have anything to do with dogs?
Let me steal a little from Chapter 16: Community from my forthcoming book:
When dogs lived in the wild, their natural pack size was about fifty animals and there were just three dogs that had pack status: the mentor, minder and nanny dogs, as described in Chapter 5. [Pharaoh: the Teaching Dog] As was explained in that chapter, all three dogs of status are born into their respective roles and their duties in their pack are instinctive. There was no such thing as competition for that role as all the other dogs in that natural pack grouping would be equal participants with no ambitions to be anything else.
Anyone who has had the privilege of living with a group of dogs will know beyond doubt that they develop a wonderful community strength. Let’s reflect on the lessons being offered for us in this regard by our dogs.
To reinforce the fact that this is not a new phenomena, at the time I was drafting my book last November, a new report was issued by the Center of Economic Policy Research (CEPR) on the latest (American) Survey of Consumer Finances. It painted a picture very familiar to many: the rich becoming richer while those with less wealth are falling further and further behind.
David Rosnick of the CEPR, and one of the report co-authors, made this important observation:
The decline in the position of typical households is even worse than the Consumer Finances survey indicates. In 1989, many workers had pensions. Far fewer do now. The value of pensions isn’t included in these surveys due to the difficulty of determining what they are worth on a current basis. But they clearly are significant assets that relatively few working age people have now.
Sharmini Peries, of The Real News Network, in an interview with David Rosnick, asked:
PERIES: David, just quickly explain to us what is the Consumer Finance Survey. I know it’s an important survey for economists, but why is it important to ordinary people? Why is it important to us?
ROSNICK: So, every three years, the Federal Reserve interviews a number of households to get an idea of what their finances are like, do they have a lot of wealth, how much are their house’s worth, how much they owe on their mortgages, how much they have in the bank account, how much stocks do wealthy people own. This gives us an idea of their situations, whether they’re going to be prepared for retirement. And we can see things like the effect of the housing and stock bubbles on people’s wealth, whether they’ve been preparing for eventual downfalls, how they’ve reacted to various economic circumstances, how they’re looking to the long term. So it’s a very useful survey in terms of finding out how households are prepared and what the distribution of wealth is like.
PERIES: So your report is an analysis of the report. And what are your key findings?
ROSNICK: So, largely over the last 24 years there’s been a considerable increase in wealth on average, but it’s been very maldistributed. Households in the bottom half of the distribution have actually seen their wealth fall, but the people at the very top have actually done very well. And so that means that a lot of people who are nearing retirement at this point in time are actually not well prepared at all for retirement and are going to be very dependent on Social Security in order to make it through their retirement years.
PERIES: So, David, address the gap. You said there’s a great gap between those that are very wealthy and those that are not. Has this gap widened over this period?
ROSNICK: It absolutely has. As, say, the top 5 percent in wealth, the average wealth for people in the top 5 percent is about 66 percent higher in 2013, the last survey that was completed, compared to 1989. By comparison, for the bottom 20 percent, their wealth has actually fallen 420 percent. They basically had very little to start with, and now they have less than little.
PERIES: So the poorer is getting poorer and the richer is getting extremely richer.
ROSNICK: Very much so.
To my way of thinking, if in the period 1989 through to 2013 “the average wealth for (American) people in the top 5 percent is about 66 percent higher” and “for the bottom 20 percent, their wealth has actually fallen 420 percent” it’s very difficult not to see the hands of greed at work and a consequential devastating increase in inequality.
In other words, the previous few paragraphs seemed to present, and present clearly, the widening gap between the ‘haves’ and the ‘have-nots’, comparatively speaking, and that it was now time for society to understand the trends, to reflect on where this is taking us, if left unchallenged, and to push back as hard as we can both politically and socially.
I wrote that shortly before another item appeared in my email ‘in-box’ in the middle of November (2014), a further report about inequality that, frankly, emotionally speaking, just smacked me in the face. It seemed a critical addition to the picture I was endeavouring to present.
Namely, on the 13th October, 2014, the US edition of The Guardian newspaper published a story entitled: US wealth inequality – top 0.1% worth as much as the bottom 90%. The sub-heading enlarged the headline: Not since the Great Depression has wealth inequality in the US been so acute, new in-depth study finds.
The study referred to was a paper released by the National Bureau of Economic Research, Cambridge, MA, based on research conducted by Emmanuel Saez and Gabriel Zucman. The paper’s bland title belied the reality of the research findings: Wealth Inequality in the United States since 1913.
As the Guardian reported:
Wealth inequality in the US is at near record levels according to a new study by academics. Over the past three decades, the share of household wealth owned by the top 0.1% has increased from 7% to 22%. For the bottom 90% of families, a combination of rising debt, the collapse of the value of their assets during the financial crisis, and stagnant real wages have led to the erosion of wealth. The share of wealth owned by the top 0.1% is almost the same as the bottom 90%.
The picture actually improved in the aftermath of the 1930s Great Depression, with wealth inequality falling through to the late 1970s. It then started to rise again, with the share of total household wealth owned by the top 0.1% rising to 22% in 2012 from 7% in the late 1970s. The top 0.1% includes 160,000 families with total net assets of more than $20m (£13m) in 2012.
In contrast, the share of total US wealth owned by the bottom 90% of families fell from a peak of 36% in the mid-1980s, to 23% in 2012 – just one percentage point above the top 0.1%.
The report was not exclusively about the USA. As the closing paragraphs in The Guardian’s article illustrated:
Among the nine G20 countries with sufficient data, the richest 1% of people (by income) have increased their income share significantly since 1980, according to Oxfam. In Australia, for example, the top 1% earned 4.8% of the country’s income in 1980. That had risen to more than 9% by 2010.
Oxfam says that in the time that Australia has held the G20 presidency (between 2013 and 2014) the total wealth in the G20 increased by $17tn but the richest 1% of people in the G20 captured $6.2tn of this wealth – 36% of the total increase.
I find it incredibly difficult to have any rational response to those figures. I am just aware that there is a flurry of mixed emotions inside me and, perhaps, that’s how I should leave it. Nonetheless, there’s one thing that I can’t keep to myself and that this isn’t the first time that such inequality has arisen; the period leading up the the Great Depression of the 1930s comes immediately to mind.
Sent to me by dear friend, Dan Gomez, as a light-hearted diversion for the weekend. (But it did fit rather nicely as a sequel to my Lies, Damn Lies, and … from yesterday!)
Say you are an older senior citizen and can no longer take care of yourself and the government says there is no Nursing Home care available for you. So, what do you do? You opt for Medicare Part G.
The plan gives anyone 75 or older a gun (Part G) and one bullet. You are allowed to shoot one worthless politician.
This means you will be sent to prison for the rest of your life where you will receive three meals a day, a roof over your head, central heating and air conditioning, cable TV, a library, and all the Health Care you need. Need new teeth? No problem. Need glasses? That’s great. Need a hearing aid, new hip, knees, kidney, lungs, sex change, or heart? They are all covered!
As an added bonus, your kids can come and visit you at least as often as they do now! And who will be paying for all of this? The same government that just told you they can’t afford for you to go into a nursing home. And you will get rid of a useless politician while you are at it. And now, because you are a prisoner, you don’t have to pay any more income taxes!
Is this a great country or what? Now that you have solved your senior financial plan, enjoy the rest of your week!
I’ll leave the closing words to Dan: “Crazy world but compelling plan.”