Is the Transatlantic Trade and Investment Partnership in trouble too?

The Transatlantic Trade and Investment Partnership (TTIP), the NAFTA-like arrangement being negotiated between USA and the EU, has more going for it than its sister agreement with Asia.  Most importantly, 28 countries have already bought into the EU which is an umbrella trade organization not terribly unlike what is being proposed with TTIP.  The visceral hatred for neoliberalism that exists in Asia does not exist in Europe where all "respectable" citizens seem to be good little neoliberals.

This does NOT mean that TTIP faces no organized opposition.  Europe has had protests against neoliberal globalization plans for decades.  Some of the best critiques of these schemes have come from French organizations such as ATTAC (Association pour la Taxation des Transactions financière et l'Aide aux Citoyen) which started out as a movement to support transaction taxes on financial instruments and soon became an umbrella organization against the criminal excesses of neoliberalism.

The opposition to TTIP will most likely center around the provisions that allow corporations to sue governments over such things as environmental laws.  Once such a trade agreement is signed, it doesn't require much imagination to see Monsanto suing everyone in sight over the laws and regulations prohibiting the introduction of Genetically Modified Organisms into Europe.

So even though many Europeans have already ceded a great deal of political power to multinational bodies like EU, allowing the USA into the environmental discussion is a step many will probably oppose.  USA has spent too much time and effort sabotaging environmental action over the last three decades to be trusted on anything important.  So even the good little neoliberals are probably wary about TTIP.

Is TPP in trouble?

As someone who spent quite a bit of time and energy trying to keep NAFTA from being passed, I must admit to great pleasure watching the problems facing the Trans-Pacific Partnership (TPP).  During the NAFTA fight, we were just overwhelmed.  Not only were up against the whole economic establishment, the groves of academe, and all the major organs of the press, we were up against that name.  Spent a lot of time just getting by the question, "Why are you against Free Trade?"  In 1993, even (or especially) the lowest classes had been exposed to enough petty and arbitrary regulation to believe a healthy dose of freedom was probably just what the doctor ordered to cure a sick economy.  And having an enlightened political debate on a subject that way less than 10% had heard of and only a tiny fraction of them remotely understood was damn near impossible.

But this time around, a trade agreement with Asia is in real trouble.  A lot has changed since NAFTA—mostly in Asia.  They have many reasons to suspect the 'great' ideas of neoliberalism.  The catastrophe that was the financial crises of 1997 pretty much disabused Asia of pirate economics as a development model. Asia is obsessed with development and any economic strategy doesn't get this result is automatically suspect.  And as any late-developing industrializing economy has proven over the years, nothing works better than import substitution and technology transfer—subjects that the neoliberals barely acknowledge exist.  These are two very different worldviews.

My guess is that TPP is doomed in the important countries of Asia.  Obama has been selling it on his latest trip and while he isn't getting a hard no, he is getting the sort of polite no that means TPP will be in the same limbo 15 years from now.  There's a video over at real news that explains what happens when a President is sent to sell something no one wants anymore entitled:

TPP Unraveling? President Obama returns from East Asia empty-handed after Japan rejects bilateral agreement - but if the TPP moves forward, will it be in the interest of most Americans?

It would be nice to win this one.  Neoliberalism needs some big losses before it will be discredited.  Losing TPP would demonstrate that at least the debate has been lost in the part of the world where most of the people live.

Saudi America? oh please

Folks, it is time for a reality check.  The very idea that USA could become a net exporter of oil again is literally beyond insane.  But it's a very popular idea and even what passes for a USA intelligentsia believes it to be true.  Of course, when the subject is a scientific / technological one like energy, utter bullshit is given equal standing with scientific and mathematical fact in the organs of the mainstream press.  Whole Sunday talk shows can be wasted on subjects based on assumptions that are quite easily proven wrong.  And how can that be?

The defining characteristics of the USA intelligentsia is that they must be:

• Historically illiterate. One of the reasons why the citizens of this land can so easily be convinced to hate Vladimir Putin, is that he keeps bringing history into his arguments.  People in USA can't be bothered to know their own history—being asked to know someone else's history is for them just plain rude and very annoying.
• Scientifically illiterate.  I have a friend who went to Harvard who took a class called "Physics for Poets."  I am NOT making this up.  Science is a whole new way of thinking.  It is certainly not just a distribution requirement at a fancy liberal arts college.  It's no wonder that many people think that science is just another opinion.
• Technologically illiterate.  A had a person who told me at a Drinking Liberally session that he had assembled a kitchen from IKEA but that it was an ORDEAL! If you cannot understand how the man-made world you live in actually works, you are going to have a LOT of trouble describing how difficult and time-consuming it will be to build better mechanisms to cope with climate change / end of the Petroleum Age.
• Economically illiterate.  The overwhelming majority of people know absolutely nothing about economics.  And they're the lucky ones.  The folks who are reasonably well versed in the conventional wisdom only know the neoliberal madness that will lead to feudalism with mathematical certainty.  I am still coming to grips with the idea that neighbors who think of themselves as liberal are reading the Economist.  And not surprisingly, they are about as enlightened as Mr. Bumble in Oliver Twist.

All of these baleful forces combine when the subject is energy and climate change.  People do not understand how we came to rely of liquid fuels (HI), they don't understand why burning fuels can change the chemistry of the atmosphere and the oceans (SI), they don't even begin to understand how invested we are in the current infrastructure and how difficult it will be to upgrade it all (TI), and they sure cannot understand how their neo-feudal economics will allow any solution to be properly funded (EI).

Japan ordered to abandon their QE program

Democrats beholden to the interests of Wall Street are not new.  The most notorious was Grover Cleveland whose "accomplishments" included crushing the Pullman Strike of 1894 and a commitment to "sound money" that ruined the lives of thousands of farmers.  His reactionary politics ruined the Democratic Party for at least a generation.  In fact, the first Democratic President in my lifetime to think there was anything admirable about Cleveland was another Wall Street toady—Bill Clinton.

Mike Whitney is the house "economist" over at Counterpunch—a site that is usually pretty good on many issues.  But Whitney is the sort of "sound money" Democrat who would make Cleveland smile.  He frets about inflation LONG after inflation has ceased to be a meaningful concern.  And he can mount his high horse over the subject of Quantitative Easing—which is the program that permits central banks to conjure up money from thin air to cover the losses the banking business incurred from the crash of the real estate bubble.  And while using the the bank's monetary creation function to bail out the slime that crashed the global economy is hardly the best use of QE, the idea that central banks should have the power to relieve the pressures caused by excessive debt is a very good one indeed.  And so while I am opposed to QE aimed at bad banks and crooked bankers, I could see considerable virtue in a QE program targeting struggling homeowners.

The really interesting story here concerns Japan.  Prime minister Abe ran for election in 2012 on the promise to do something about the over-valued Yen and the underperforming economy.  To hear the screams of the orthodox money boys, you would have thought Abe was advocating goat-raping.  But Abe was elected and his pro-development economist was appointed to head the Bank of Japan.  Not surprisingly, Abe's program has not been much of a success—even though in theory it should have worked.  The reasons are clear—Japan is really not the sort of society to fight the global conventional wisdom so Abe's new economics were only partially tried.  And now the word is out—the USA and the G-20 countries are demanding that even Abe's partial experiment should be ended.

And Whitney thinks this is a good idea.  In Cleveland's day, Whitney would have been called a "Bourbon Democrat."  Since no one seems to know what that means any longer, we will have to call him something more appropriate—"NPR totebagger," perhaps.

Saturday toons 26 APR 14

Central banking 'wisdom'—German style

Unlike the USA where conservatives are these oddballs who want to build museums to the Noah's Ark story or bring back the days when blacks still "knew their place," Germans conservatives are a hangover from the days when only the ruling classes got complex and expensive educations.  As a result, German schools are notoriously authoritarian and an 'educated' person is someone who knows more details of the convention wisdom.  The problem is so bad that Max Planck once remarked that the only way for a new idea to take hold is for everyone who believes the old idea dies.  Planck was such a towering genius the Germans built an Institute named for him.  Plank's insight can be seen in action as the Institute today is a fine example of traditional German conservatism in action.

Keep in mind that this sort of conservatism has considerable virtue.  Much can be accomplished by people who venerate best practices and force new practices to undergo a serious vetting process.  Unfortunately, the same impulse that produces Porsches also produces the most backwards bankers on earth.  German bankers are, charitably, a joke.  They start from a default position of beady-eyed Heinrich Brüning, Weimar-level ignorance and then update it with the best of Chicago, Stanford, or Harvard neoliberalism.  It's little wonder that whenever the Wall Street houses had some really nasty shit to peddle during the real estate bubble, the suckers that got stuck were usually the Germans.  Call Düsseldorf!

So here we have a probably excellent account of the conventional wisdom of Germany's top central bankers.  Europe is losing a whole generation of their young to an existential hopelessness, thousands of businesses have gone bankrupt, progress towards a green future has essentially stopped, yet these fools think they have done a fine job because inflation has been contained, the banks have been 'saved', and the markets are up.  They obviously have ZERO concern for the destruction of the real economy.  It is almost impossible to imagine an uglier example of arrogant German conservatism.  Unfortunately, so long as these guys define banking's best practices, the economies of Europe are in for a long period of decline.  We know this because we have tried this sort of backward economic thinking before—many times.

Fracking by slobs—methane as a bridge fuel

Methane, CH4, is theoretically a very clean-burning fuel.  The carbon atom unites with a couple of oxygen atoms to form CO2 while the hydrogen atoms combine with oxygen to form water vapor.  The benign nature of these combustion products is the reason why natural gas can be safely burned indoors.  Yes, burning methane produces carbon dioxide but compared to burning coal which is almost all carbon, it produces FAR less CO2.

Unfortunately, methane is itself a greenhouse gas.  In fact, it is at 20 times more effective at trapping atmospheric energy than CO2.  So the plan to replace coal with natgas will only work to reduce overall greenhouse gasses IF methane doesn't escape during production. So guess what?  Lots of CH4 is lost in the production process—especially if that process involves fracking.  Why?

1. Fracking involves forces great enough to fracture underground rock formations.  This is NOT a precision operation.
2. Fracking is hideously expensive so the incentives to cut corners is almost overwhelming.  Doing anything on the cheap results in sloppy procedures.  In fact, almost all accidents and spills in the oil business can be traced to corner cutting.

If methane will not work as a 'bridge' fuel, the only serious alternative is to speed up the conversion to renewables.  My guess is that should have been the strategy all along.

Canada loses its diplomatic mind

In 1969, I knew guys who were seriously considering moving to Canada to escape the madness of the Vietnam War.  This was a difficult decision because changing countries is always a lot harder than it might first appear.  Canada might have looked a lot like northern USA but it really was different in substantial and meaningful ways.  Of course some of those differences were quite exciting and at the top of that list was the political leadership.  Their prime minister was this handsome, educated, articulate man named Pierre Trudeau.  Our president was this surly, backward, frighteningly evil guy named Richard Nixon.  For a couple of guys I knew, this was the deal-maker.

A lot has changed up north.  The current PM is a reactionary named Stephen Harper who seems cut from the same cloth as Sarah Palin or Rush Limbaugh.  How Canada has slipped so far is probably an ugly tale best told by her citizens but for someone who remembers the glory days of Trudeau, it is almost unbelievable.  So I leave it to Murray Dobbin, one of Canada's more insightful observers over the years, to attempt an explanation now that Harper has decided to fully support the USA-engineered coup in Ukraine.

At least Dobbin hasn't lost his touch.

Peak soil?

Here in Minnesota, we have a county named Blue Earth.  Now the soil in that county isn't blue like the sky or a lake, but it is so black that under certain lighting conditions, it actually takes on an iridescent bluish hue.  It is quite remarkable.  I spent a significant fraction of my childhood not far from there so I grew up believing that all topsoil was a deep rich black.  I would eventually grow to learn just how incredibly rare such soil actually is but I still have trouble believing that any soil that isn't blue-black is really agricultural land.

Sadly, people treat this amazing resource like, well, dirt.  Careless farming practices see some of this topsoil washed into the rivers with every rainfall.  This dirt gets used to grow corn that is used to make ethanol—a product that requires more energy to produce than it yields when burned.  And of course, the petty real estate speculators think absolutely nothing about covering such ground with tacky housing developments and parking lots.

In the meantime, while crop yields per acre have increased by about six times since my childhood through a combination of better plant genetics and massive applications of fertilizers, there are only so many rabbits that can be pulled out of that hat.  So now there are looming shortages of fertilizers while at the same time, we wash so much nitrogen down the Mississippi that there is now a huge dead zone off the coast of Louisiana.  Throw in the problem of an exploding population and it seems unlikely that these trends will have a happy ending.  What's even worse, the people paid to think about the problems of agriculture are so invested in high-input, energy-intensive production methods there is barely no one to invent alternatives to systems almost certain to crash.

And you wonder why bacon now costs an average of $5.57 / pound.  These will soon be considered the good old days.

Moral equivalent of war

Back when I was a college freshman, much time was spent in the dorm's break room passionately discussing the events of the day.  While these bull sessions were often hopelessly uninformed, they served a useful function by making us defend our intellectual positions and making us engage the world we hoped to soon be a part of.  One idea that I still remember quite vividly was the notion that if the planet were confronted by an alien invasion or some similar threat, the USA and USSR would stop the expensive and pointless Cold War and join forces to attack that external threat.

So now we as a species find ourselves facing a threat that completely dwarfs any possible threat posed by a few alien invaders.  Climate change will affect every human on the planet irregardless of race, class, or nationality.  So the common threat already exists.  And yet there are folks who are actively agitating to restart the Cold War 25 years after most of us thought it was over.

Today's essay is about some reasonably enlightened Ukrainians who think that an investment in renewables would free them from their vassal status to Russia.  Well, it would.  Not only that, but eventually Ukraine will have to join in the effort to reduce global carbon emissions so now is as good a time as any to get started and the current dust-up with Russia is as good a reason as any.

Except.  If people were actually serious about this they would have started the process back in 1991 when the USSR broke up and Ukraine was stuck being a permanent importer of energy.  Changing the energy mix powering the society requires time, resources, organization, and superb planning—not exactly the sort of conditions one finds when the government isn't legitimate and the economy is being strangled by the IMF.  Given Ukraine's location on planet earth, any conversion to renewables is going to be extremely difficult under the best of circumstances.  A country teetering on the verge of a civil war is not going to produce sophisticated and nuanced solutions to existential problems.

Back in the 1970s when Jimmy Carter tried to arouse the citizens of USA to confront the problems caused when we became a net importer of energy, he said that solving the energy problem was the "moral equivalent of war."  Then he threw a few dimes at the problem, pulled on a cardigan sweater, and told us to get used to being colder—proving he didn't actually believe his own speechwriters.  For if he had been serious, we would have seen billions applied to the problem, an organized system of industrial planning, a cooperating Federal Reserve, and the other measures used to fight World War II.  Because Carter's suggested measures were so pathetic, his phrase "moral equivalent of war" was soon shortened to MEOW.  And then came Reagan who made Carter's fecklessness look positively enlightened by comparison.

Ludlow Colorado—100 years ago today

On this day 100 years ago, company goons in the employ Colorado Fuel and Iron, a kindly operation of the Rockefeller family, decided to attack some strikers in Ludlow.  The strikers were living in tents because they had been evicted from their company-owned homes.  It was a one-sided affair—the goons were heavily armed with weapons that included machine guns.  When the smoke cleared, at least 19 people had died including two women and 11 children who were huddling in a tent that caught fire.

The Rockefeller reputation never recovered but it wasn't for lack of trying.  A professional liar named Edward Bernays—who many consider the father of the "Public Relations" profession—was hired to shift the blame for the massacre to the striking workers.  Bernays was successful is muddying the issue but he never succeeded in clearing the Rockefeller name.  John D. would go down in USA history as arguably the most hated man in the country—ever.  Of course, there were dozens of other reasons why he was despised, but the Ludlow Massacre would tower above the rest.

One of the reasons Rockefeller's reputation would never recover is that on Jan 5, 1914, Henry Ford announced his plan to pay his workers $5 for an eight-hour day.  The biggest name in American manufacturing had broken ranks with the robber barons of his day.  And while the rest of them hated Ford for this heresy, he would go down as one of the heroic figures of USA industrial capitalism in the eyes of the general public.  The difference was astounding.  When old man Rockefeller died, a tiny handful of people showed up at his funeral and they expected to be named in his will.  When Ford died, an estimated 30,000 people stood in the rain waiting for the privilege to walk past his casket.  Folks understood that not all the rich are created equal.

1914 would mark another significant moment in economic history—the publication of Thorstein Veblen's magnum opus The Instinct of Workmanship. This work of towering insight would argue that labor needs not be terrorized by violent goons nor bribed by a large paychecks in order to accomplish anything.  Instead, Veblen would argue that people are internally motivated to do a good job and that this motivation was similar to the desire for parents to provide a good life for their children.  In his telling, good management would not only remove obstacles to a worker's instinct of workmanship, but would provide an environment where the instinct could thrive.

A century later, not much has changed.  We still have companies like Wal-Mart that severely underpay its workers and rely of professional union-busters to swoop down on anyone who would protest this arrangement.  We still have professional liars who attempt to "change the narrative" to favor economic reactionaries.  And on occasion, we still find companies who spend good money to enrich their workplace environments—although I am not certain foosball tables in the company break rooms are exactly what Veblen had in mind.  Folks who want to change the economic thinking of this age of economic stagnation and austerity will soon discover that they don't have to re-invent the wheel.

It's Good Friday

My traditional celebration is to listen to Bach's St. Matthew Passion BWV 244.  I first tried this ritual in 1967 and wouldn't do without it.  This year I am especially enjoying a recording by Paul McCreesh and his one voice per part experiment.

Anyone up for the nearly 3-hour experience may find this Youtube clip worth considering.  The Dutch do Bach especially well and this version was done by Ton Koopman and the Amsterdam Baroque Orchestra.  It includes a simple English subtitle track.

The following (much shorter) clip is from a performance at the Thomaskirche in Leipzig.  This is the church where Bach wrote most of his sacred music from 1723 until his death in 1750 and was the conductor of the choir—so it is ground zero for all things Bach.  It is the opening called Kommt, ihr Töchter written for two choirs, two orchestras, and a boy's choir (yes, Lutherans actually believe Bach's masterpiece is something you should teach children to sing.)  It is one of the more complex pieces of music ever written.

Major study links catastrophic weather events to manmade climate change

Many of us who have watched the weather get crazier and crazier over the past 25-30 years may find it quite surprising that most mainstream scientists have been highly reluctant to draw links between ferocious weather and climate change.  After all, for most of us, crazy weather is the evidence we have for climate change because we don't have access to the extensive records and expensive equipment necessary to do big science.

For me, my memory and experience has been more than enough to convince me that something serious has gone wrong with the atmosphere.  This winter has been miserable but it was what we used to consider quite normal.  As we bitched and moaned about the snow and cold it was also a reminder of how warm it has been for at least a decade.

But for me, the event that cemented climate change in my world-view happened on Lake Pepin about 10 years ago.  I have sailed that lake since 1970 so have a pretty good idea what sort of weather happens there.  So on a spring day we were sailing up the lake when we rounded a point and discovered the howling wind was being amplified by a chute created by the bluffs that line both sides of the lake.  In seconds, a boat that is North Atlantic seaworthy was knocked flat.  As we scrambled to right the boat, it became impossible to talk to each other because the wind was just screaming.  This was a nice day.  The sun was shining and until that moment, the sail had been pleasant if a bit rigorous.  But now we were coping with conditions I had only read about in books about storms in the Southern Roaring Forties.  I was truly frightened—something that had never happened to me before on that lake—ever!

But now the climate scientists are throwing unnecessary professional caution and providing us with big science backing for phenomenon we have been witnessing for years.  I say, its about time.

What happened to John Kerry?

By November of 1969, I had spent a year and a half busying myself on the fringes of the antiwar movement.  I was still mostly a scared kid from small-town USA so I spent most of that time trying to get my intellectual act together.  I wanted to have good answers in case anyone asked why I was opposing a democratically-elected government during a time of war.  Of course, the bigger problem was what David Harris called the "John Wayne Syndrome"—the desire for young men to play hero in the defense of the tribe. Not only did I have a serious case of the JWS, but because I had spent so much of my youth in the world of airplanes, I had been romanced by the branches of the armed forces that had aircraft (all of them.)  So I really wanted to convince myself that bombing the shit out of a third-world country that could mount no defense was really as evil as it looked.  By Nov. 1969, I was thoroughly convinced about the need to end the war against the Vietnamese and was pretty convinced that I could change minds if given half a chance.

The Moratorium March on Washington was held Nov 15th.  I was there as were an estimated 500,000 other mostly lost souls.  I had ridden a bus for 22 hours from St. Paul and slept in an all-night movie house in downtown DC so I was almost asleep on my feet when the March actually started.  It was cold.  So marching from one point on the mall to another seemed especially futile under the circumstances.  I still wonder why I did it.  Over the years, I have come up with two reasons:

1. I had reached the stage where I just had to do SOMETHING or I would explode.  This seemed like a can't-miss event which looked like it might have a small chance of changing the course of human events.
2. It looked like the cavalry had arrived.  There were now a critical mass of returning Vietnam Vets thoroughly disgusted with what they had seen.  Most were working class or poorer but there were a few rich kids like Yalie John Kerry who was quickly establishing himself as one of the better antiwar critics.  The warmongers may have been able to ignore someone like me but an establishment scion with military training was another matter entirely.

Yup, that's the same John Kerry who is now supervising a foreign policy that most of the world considers criminal.  So what happened to John Kerry?  One of the easier answers is that Kerry is Skull and Bones and at some time he would revert to form.  And since his fortune has now merged with the ketchup heiress, he is disgustingly rich.  Why wouldn't he be arrogant and utterly disdainful of the damage his actions cause?

But even IF Kerry was the man he was in 1969, I think the institutional arrangements in place at the State Department would just eat him up.  Diplomacy is one of the acceptable jobs of the Leisure Classes and so State is populated in all the important positions by people highly skilled in the Leisure Class arts. (Something I first discovered in 1982)  Of course, this is true of diplomats around the world so Kerry is quite at home with his Yale / Skull and Bones background.  Kerry probably could have turned the ship of the State department in another direction if he was convinced it was a good idea but he seems to lack either the conviction OR energy.  And so State sails along on the neocon course it set in the post 1989 period.

Here Robert Parry tries to understand how John Kerry devolved into an imperialist war-mongering hack.

A new Cold War—a new political alignment?

I rarely drink and can count the times I have been drunk on my fingers, but one of those few times was the night the Berlin Wall came down.  On champagne, no less.  I had such high hopes that night.  We could stop terrorizing each other with nukes and we could put our industrial muscle into solving real problems instead of building ever more insane weapons with our genius.  But mostly, I hoped we could finally stop hating on the Russians.  I was a crazy Cold Warrior in my youth, but by 1989, I had come to admire Russian culture very much.  After all, we were winter people and trust me on this, there are places like Minnesota where winter so powerfully influences the culture, almost nothing else really matters.  Russia is such a place.  I had also come to loathe people who wanted me to hate them and want them destroyed.  So on that November night in 1989, I mostly wanted an end to the corrosive lies of the war-and-fear-mongers directed at USSR.

A someone who claims to understand Institutional Analysis, I should have known better.  All those people who had literally invested their lives and careers  in the Russia-hating business weren't going to disappear simply because some Berliners rearranged some concrete in a fit of drunken joy.  Prime example would be that old war-monger Zbigniew Brzezinski whose hatred of USSR / Russia is in keeping with his roots in the Polish nobility—arrogant and deep.  This is the guy who convinced Jimmy Carter that a good response to the USSR invasion of Afghanistan would be to arm an earnest group of patriots who called themselves the Taliban.  He considers himself a genius—an opinion shared by his very rich patrons but few else.  The Cold War never ended for Brzezinski—not for one day.  And this crazy idea that we should still encircle Russia so as to contain them from doing (what?) has his fingerprints all over it.

Anyway, so long as a Cold War is starting again it is interesting how the sides are being chosen.  What the establishment press calls the "far right" in Europe is in fact the designated enemy of "respectable" Europe mostly because almost all their members detest the EU.  So now that the EU is in open warfare against the Russians who have slowed their plans for a takeover of Ukraine, the Euroskeptics (which by now includes most folks with a pulse) have discovered they might have a new nuclear-armed pal.

It all seems to be a bit far-fetched.  Putin's main supporters in Russia are at least as neoliberal as anyone in Brussels.  The economics of grab and plunder has served many of them very well.  Besides, the Russians LIKE being invited into clubs like the WTO so there is no shortage of social-climbing suck-ups who want the respectability the rich believe they are owed.  Even so the Russians are well schooled in the tale of how they threw back the mighty German army on the outskirts of Moscow in Dec 1941.  My guess is that the events in Ukraine have stiffened Russian resolve and the days of them backing down are over for a long while.  As for the EU, their days are probably numbered as well—at least as an organization for the enforcement of neoliberalism.  So we will see.

Thinking on the cheap

The IPCC, bless their precious little hearts, has come up with an economic report that tries to reassure us that the actions necessary to avert a climate catastrophe will "shave only a tiny fraction off economic growth."

Oh goody!  A few problems with that sort of "thinking."

1. The alternative to solving the climate crises is going out of business as a species. And pretty soon, too.  Given that reality, anyone who questions spending the money necessary to fix the problem is, at best, hopelessly uncouth.
2. As Edison pointed out in 1921, infrastructure projects, organized properly, pay for themselves.  As Edison was one of the few people in history to have ever really improved the overall economy, it think it behooves the rest of us to pay attention.
3. Converting solar energy into electricity is a known way of generating wealth.  Solar power may not be as convenient as oil, but it's still energy.  And as I have been arguing for a long time now, we have been on a de facto "oil standard" since 1973.  It shouldn't require a great leap of faith to take the final step and just always value money in energy units.  Using that thinking, a solar cell is another way of "printing" money—a known form of economic stimulus.
4. Converting from a fire-based infrastructure to solar is a HUGE project.  It seems difficult to believe that so much stimulus wouldn't lead to massive growth—not the tiny decline postulated here.

In fact, what we see here in this IPCC report is the result of using neoliberal / neofeudal economic assumptions that have been with us since before the industrial revolution to try to predict the outcome of the solar-powered megaproject.

On responding to Pitkettyism

It was sort of like arriving in high school one day to discover that some fashion had gripped the student body and I hadn't gotten the memo.  Suddenly, I was being besieged by friends and readers to say something wonderful about Thomas Pitketty's latest tome Capital in the 21st Century.  Actually, this was about the last thing I wanted to do. But never underestimate the power of not wanting to feel hopelessly uncool (for the 10,000th time.)  Someone mailed me an epub file and no less than James Galbraith had given C21C a positive review.  So what did I have to lose—except some more of my dwindling lifespan?

I was not impressed by the new Capital.  This was not because it wasn't a serious attempt to deal with a serious problem—income equality.  But as someone who has been following this subject for most of my life, I am not exactly impressed by someone who weighs in with another study / opinion on a subject so well-discussed.  Sort of like another Ph.D. thesis on Chaucer.  There were much better thoughts than Pitketty's on the economic value of a well-paid Producing Class by the 1910s—with Henry Ford putting the ideas into practice in 1914.  Besides, no one really gives a damn about income inequality—so long as folks at the bottom get paid well enough to have a decent life.

The main reason I wish I hadn't wasted my time on C21C is that the subject of income inequality is about dividing the economic pie.  This blog is dedicated to the much more interesting problem—How do we create the economic pie in the first place.  This is an important distinction.  If we are to survive, we MUST build a very different infrastructure that what we have now.  And we don't have much time.  Given that reality, those who aspire to being historically significant economists should be devoting their intellectual horsepower to development strategies.  It's pretty simple, actually. If we want a green sustainable society, we must build it.  Anything that diverts time and resources from those who can build the better world is a criminal act against the future.

Unfortunately, as dreary as it is, C21C is obviously an improvement over the crackpot neoliberalism that so dominates the economic profession.  Of course, that is jumping over a very low bar.  Yes, I was raised to believe we are supposed to be grateful for the smallest blessings but considering we are up against extinction, I can't waste my time on something so minor.  Considering everyone's time to absorb ideas is finite, I would suggest that C21C is only worth your time when you have first read The Instinct of Workmanship (the other significant economic event of 1914.)

The post–climate crisis economy (part two)

There are a lot of good reasons why not much has been accomplished in the struggle to alter our headlong rush to climate catastrophe.  But two are especially significant.

1. Virtually all the members of the advanced industrial societies have NO idea how big the problem is and what their part in it might be.  For example, I have used the argument "Climate Change is a problem of too many fires" for some time now.  It's my attempt to keep things simple.  Yet in many cases, it only confuses folks.  Why? because they have NO idea how many fires they are responsible for.  They don't understand that their electricity mostly comes from burning coal.  They are clueless about the amount of energy used to feed them (I once told a woman that for every gallon of milk she buys, something like a gallon of energy has been spent getting it to her refrigerator.  She called me a liar.)  Most folks are surprised to learn that they start about 3000 fires for every mile they drive—and most of these folks pump their own gas!  They only understand the fires they can see—and then only rarely!
2. Most folks have never even attempted to change something in their lives that would reduce the amount of energy they consume.  Even the most basic of the possible changes—swapping out light bulbs—is often considered too hard and in some circles, politically controversial.  I have met exactly no one who has ever modified an automobile so it got better gas mileage and I have known a lot of gearheads in my life.  I know exactly one person, my brother, who has successfully constructed a net-zero home and he fiddled with it for 20 years before he got it right.  So no matter how much one wants to do the right thing by the atmosphere, actually doing it is damn hard—and usually pretty expensive.  And this is true at all sizes of enterprise.

There are many reasons why climate conferences and other lame attempts to foster human cooperation are notorious failures.  But mostly, it's because these are the actions of people who refuse to address the two issues listed above.

In any case, the folks who DO understand the scope and difficulty of the problems caused by too many fires really cannot wait for the great multitudes to get a clue.  The essay below suggests waiting for "international cooperation" is useless and that we can get started right now if we choose.

The post–climate crisis economy

Last Sunday I created a post entitled Climate change—we just want to see your plan wherein I quoted a reader over at Firedoglake who like me is discovering that there seem to be no plans anywhere that can remotely address the serious nature of climate change.

Because I’ve never read a credible proposed plan, to get us off the current trajectory. Arm-waving in aplenty, a plan, which would require much Government control of the economy, not visible. If there is an explicit plan, please link to it.

Currently, I am working on my version of "The Plan" which will draw from the insane amount of research I have managed to do in the course of creating this blog.  Much will have been seen here before but the idea is to reduce a bunch of details into a solid list of talking points and political action plans.  In the meantime, I saw this piece over at Smirking Chimp.  In many ways, it is brilliant and is certainly a good first answer to the above complaint.  Gaius Publius reduces his primary demand to zero-carbon emissions society—which is ultimately what must happen so why not start now?  His analysis is excellent—starting with the idea that neoliberalism is a primary cause of the climate-change problem.

On the other hand, he accords far too much effective power to rationing. "Voluntary rationing means that we’ll have it very hard, World War I and II hard, for five-to-ten years, and then we’ll be carbon-free forever."  Really?  I don't think so.  We will get to zero carbon emissions by replacing the fire-based infrastructure.  If that isn't done, rationing will only provoke social chaos.

Exporting natgas?

As regular readers know, I am NOT a big fan of fracking.  I understand that since Peak Oil has passed, these secondary recovery techniques will become increasingly necessary / popular / expedient.  But even so, anything that contaminates groundwater to get at a little natgas is a seriously stupid trade-off.

Of course, what is going to do in fracking is that it is so expensive—especially in terms of the amount of energy it takes to get at those micro deposits of oil.  Fracking is really hard to do—which is the main reason it is so environmentally hazardous.  Lots of things to go wrong.

So when I hear folks claim that USA can replace Europe's gas imports from Russia with the natgas we are finding through fracking, I can only shudder at the relentless ignorance of it all.  Realizing that "important" people in your culture actually never learned to count is not comforting.  Anyway, here is Gail Tverberg who actually did learn to count setting the record straight on the state of the natgas industry.  If you want to see her charts and graphs, be sure to follow the more link.

Hungary’s elections: Don’t be fooled by the labels

Below is a truly wonderful essay about the Hungarian elections.  It is quite unlike a mainstream "liberal" publication like the Guardian where the newly re-elected Prime Minister Viktor Orban is considered a dangerous right-winger with totalitarian instincts.  Yet he is the most popular politician in the EU—as measured by approval ratings of their voters of the 28 heads of state.  The reason for this seeming contradiction is that Orban is actually using the Populist / Progressive economic playbook—including (gasp, horror) laws that state that the Central Bank must be subservient to the elected government!  As someone who has brought something that resembles prosperity to his country, he is considered dangerous in "elite" circles because he is proving that neoliberalism—the official policy of the EU—doesn't work.  He embarrasses them—and all the sniveling pols that defend the agenda of rip-off and destruction.

Clark also points out that the BIG water-carriers for neoliberalism are the Socialist and Social Democratic parties.  And of course, there is no surprise with that observation either.  In USA, the neoliberal / neofeudalist agenda has been enthusiastically embraced by the Democratic Party starting with Jimmy Carter deregulating the trucking industry.

When Clinton repealed Glass-Steagall, the party was over.  To destroy something so politically important so casually was little like watching a toddler playing with a Faberge egg.  Of course, Clinton could not comprehend the thousands of man-years of political organizing and life-and-death struggle that had resulted in a political climate where Glass Steagall could pass, because like all good modern USA pols, he is historically illiterate.  And so without a good historical grounding, neoliberalism made as much sense to him as anything else.

As someone who has devoted a significant fraction of my adult energy trying to keep straight the record of the Populist / Progressive economic playbook, I am cheered by the fact that it's being tried somewhere with pretty good results.  Orban commands so much political support that his super-majority can change the Hungarian constitution.  So yes, I understand why the folks who stole everything under neoliberalism's cover are worried.  They always fear when the peasants get restless.  My only advice to them is, "Shut up and watch—you might actually learn something!"

The Ukraine is SO screwed

The situation in the Ukraine is so messed up, it is enough to reduce a grown man to tears of rage and frustration.  Anyone who merely imagines a normal life with a job, family, and a decent roof over his head is already in the category of a hopeless dreamer.  Anyone who can is probably plotting to get out.  The only problem is, the same forces that destroyed Ukraine have already worked their savage destruction in many other places.  So going somewhere else isn't really a viable option.

Some of this damage the Ukrainians inflicted on themselves.  I saw someone from Ukraine commenting that IMF reforms were welcome because the country really needed reform.  Such delusions are usually self-inflicted.  But MOST of the damage came from without.  Victoria Nuland was caught bragging that USA spent $5 billions to destroy her fledgeling democracy.  The neoliberals who have looted Russia since 1991 have also been stealing full-time in Ukraine.  And this corruption has resulted in massive and unpayable debts.  So in the midst of a putsch, Ukraine has been throw to the tender mercies of the IMF.

It is almost too ghastly to watch.  But Andre Vltchek put up a photo essay on the aftermath of the USA / EU - sponsored coup.  I could have included the pictures but they can be viewed at the link at the end.  And Robert Parry's description of the economic torture the IMF intends to inflict is both graphic and accurate.

The good people on earth wish the Ukrainians a better future than they have in store for them.  Unfortunately, the bad guys really are in control these days.

The end to petrodollars?

Whether petroleum is priced in dollars or not is a subject that some big players take very seriously.  Both Saddam Hussein and Muammar al-Gaddafi sought to change the rules on how they would be paid and look what happened to them.  More than a few people think their violent deaths were linked to their anti-dollar desires.  Of course, I personally have no way of knowing what caused the USA to use up some of its most expensive ordinance to kill those two, but that is as good a reason any you might hear on CNN.  Let me explain.

Hubbert's 1956 chart

Around 1970, give or take a few months, USA oil production peaked just as King Hubbert had predicted in 1956.  Suddenly this country entered a world where we were going to be ever more reliant on imported oil.  And by 1970, we had invented a host of ways to burn said oil from the interstate highway system to bombing the Ho Chi Minh trail with B-52s flown from Guam. So along with a bunch of other trade problems, the USA had started to hemorrhage cash.  Now technically, these dollars were redeemable in gold but when the French actually tried to covert their dollar holdings, Nixon slammed shut the gold window.  The official world gold standard had ended.

The value of money is based on two essential things—the ability to convert the paper (or electronic impulse) into something of value like gold, or, the ability of a society to convert common elements into something of greater value through their clever actions.  If you cannot mine gold or drill for oil on your territory, you better be able to make something like a Lexus if you want a valuable currency.

In the absence of a gold standard, the world quickly replaced it with an "oil standard."  And because oil was priced in dollars, this meant anyone who got his hands on a dollar could convert it into something far more valuable than gold—oil!  But what this really meant was USA could produce dollars that were instantly valuable world-wide.  Our "irresponsible" trade deficits became the engine for international economic development.

Needless to say, the idea that one country could create an almost unlimited supply of "free" money caused no small amount of envy in the rest of the world.  And the folks with the greatest ability to do something about the dollar's dominance are the oil-producing states.  After all, they have goodies that make the dollar valuable in the first place.

But dumping the dollar, even IF you have a vast arsenal of nuclear weapons, will be very difficult and dangerous.  Even so, the Russians are talking about it although the reader might note that in the second article, some oil guys who are familiar in how oil deals are structured seem to think that dumping the dollar would take 10-15 years.  My guess is that if anyone can dump the dollar, it would be Russia.  It's not going to be Ecuador or Venezuela, after all, no matter how much they may wish it would happen.  The main reason is because the USA has endless desires that the dollar stays on top and is willing commit infinite atrocities to ensure that happens.

Climate change—we just want to see your plan

Not long ago over at Firedoglake, I saw this comment attached to a post about climate change.  It pretty much sums up the frustrations most of us feel watching the planet die while no one seems to do anything meaningful about it.  It also expresses the idea that if only the government would get its act together to regulate the economy, we could solve the problems.

Synoia March 22nd, 2014 at 12:54 pm

Because I’ve never read a credible proposed plan, to get us off the current trajectory. Arm-waving in aplenty, a plan, which would require much Government control of the economy, not visible. If there is an explicit plan, please link to it.

As for wanting to see a plan, well that sentiment has been around since at least when Lennon wrote "Revolution."  As for thinking that government regulation of the economy is that better plan—well yes and no.  Of course, there will never be ANY progress on climate change so long as banksters and corruption are the primary actors in economic management.  On the other hand, more effective government regulation of the the economy is merely a start towards meaningful change.  Even if we as a society decided to reduce carbon emissions by 95% and even better, provided a way to fund this change, we still would have only moved to the starting line of a real solution.

Recently, we had a little dust-up here at real economics.  A reader and pretty good friend recommended that I read a book that was supposed to outline the new economic thinking necessary get us off the global slide towards catastrophe.  This exercise was supposed to lead to a post that would help build momentum towards the big changes we need.  Unfortunately for my blood pressure, the book in question was written by someone clearly influenced by Marx.  I have despised Marxism and its real-life consequences since the 1970s when I first saw just how trashy Marxist societies were.  Trashy is not good for the environment.  It is impossible to build an energy-efficient society—the primary requirement of fighting climate change—without an intense devotion to quality and attention to detail.  When it comes to building a sustainable society, "good enough" is never good enough.

So I have spent the last few days thinking, "If the choices have come down to letting the banksters set the economic agenda OR turning the society over to folks who actually believe that Marx ever had any answers to the dilemmas of industrialization, well then, just shoot me now.  Because if those are the only choices, then in fact the planet is doomed.  Of course, there ARE better choices but they involve giving significant control of the economy to the people and agenda of the master builders and the folks who show major manifestations of the Instinct of Workmanship.

Forget the cost—time to go to work

There are two approaches a builder / contractor can take when presented with a set of plans that is unique, unprecedented, and difficult.  They can come up with some bid so high that every possible disaster can be covered—plus a few no one has considered.  But sometimes the scheme is so far out, the builder will just say—we only do projects like that on a cost-plus basis because we cannot possibly predict enough to risk some fixed-cost arrangement.

For many years, I have taken the route of the "big bid" when someone asks me how much I think it will cost to seriously address the problems of climate change.  My figure since the late 1980s has always been $100 Trillion—or $2 Trillion per year for 50 years.  I have an assortment of ways of explaining why I think it will cost that much but in truth, I don't know.  I DO think it important to come up with a serious price tag—if only to differentiate between my thinking at the "50 Easy Ways to Save the World" crowd.

So I am quite pleased to read that a couple of serious researchers have said, "No, we don't want to play that game.  We don't know what it will cost—and no one else does either."  Truth-tellers, those two.

More importantly, what possible difference does it make what it costs.  It must be done and there a millions of people who need a good job.  If we can create all this economic activity without becoming slaves to the debt ghouls, why ever would we not do it?

Business and industry—Veblen validated by 60 Minutes

Thorstein Veblen is best known for coining the expression “conspicuous consumption.” But a very good argument could be made that his biggest contribution towards understanding modern societies is his lesser-known distinction between business and industry. (See a graphic representation of this class analysis.)

According to Veblen, business is a manifestation of the Leisure Classes who employ the strategies of force and fraud to obtain wealth from their targets. Industry is the strategy of becoming prosperous by trying to market something extremely difficult to make and doing it very well.

Not surprisingly, this formulation has horrified a wide assortment of social observers. The Marxists hate it because it suggests that there is a whole stratum of useful and highly productive “capitalists.” The right wing hates it because it points out that many who call themselves capitalists are nothing more than a bunch of thieves. Because it has become so controversial over the years, Veblen’s distinction between business and industry has disappeared even in academic courses devoted to his writings.

And yet, the idea does not die because every so often it is displayed in all its magnificent glory. Last Sunday night was such an occasion. The first segment of 60 Minutes was devoted to Michael Lewis discussing his new book on the practice of ultra high-speed flash trading. This is a perfect example of business as fraud because while it enriches a few people who have figured out how to front-run trades in the markets, it adds absolutely nothing to the functioning of the real economy but rather harms it by diverting capital into piles of utter uselessness.

After this segment on capitalism as sociopathic behavior, 60 Minutes sought to balance that gruesome business tale with something more uplifting.  And so we were treated to a profile of the brilliant young industrialist named Elon Musk. His credentials are amply demonstrated because he started a car company that builds a stunningly beautiful, insanely fast, remarkably quiet, and fastidiously crafted all-electric model called the Tesla S. In doing so, Musk has accomplished the seemingly impossible—he has made at least one electric car that is very cool.

Because USA has spent the last 35 years de-industrializing, a mainstream media company like CBS has lost its ability to tell an industrial story correctly. And so because their segment makers believe that all cars go vroom, vroom, they inserted an audio track from an internal combustion engine into a story about an all-electric car.

But even when CBS gets the story wrong and social scholars dismiss the idea that there really is a difference between business and industry, the public gets it. You could see how well when Steve Jobs died. Jobs was known to be very difficult to work for, was pretty ruthless, and was richer than God, yet his death was greeted with an outpouring of grief that included spontaneous shrines surrounded with piles of flowers. This at a time when the criminals on Wall Street were being subjected to angry protests.

Business and Industry. There are few ideas that explain more.

Limiting speech by the rich

In classical republican theory, two major threats to self-government were recognized.

The first was a standing military. The second was concentrations of wealth.

Free speech is not absolute. The speech rights of military officers in USA are to a rather large degree limited by both custom and tradition, as well as law.

No such restrictions have been developed to limit free speech by the rich. With the rulings by the Roberts Court, it is time we start thinking along these lines. (The most notorious ruling was Citizens United v. FEC, which held that corporations have the same speech rights as human beings. This morning, the Court struck down any limits on the total amount of money any single individual corporation can give to any number of political campaigns.)

I don't know what the exact percentage is, but I think a good guess is that at least two thirds of political campaign spending goes for TV ads.

How informative are political ads on TV? And how truthful?

The United States was designed to be a democratic republic - a system of government that is designed to be responsive to the people of the United States as a whole, and not to the wealthiest 1 percent. The key to a functioning democratic republic is an informed citizenry. Yet, the key feature of modern political ads are thirty or sixty second TV ads that more often than not are deliberately designed to misinform, misrepresent, mislead, and inflame.

The founding fathers and mothers concluded, from their intense historical study of previous republics, most especially Rome, that the most important safeguard of a republic was a sense of public virtue, which is cultivated by general education of the population. John Adams was most proud of his writing of the Massachusetts Constitution, which includes this remarkable admonishment:

Wisdom and knowledge, as well as virtue, diffused generally among the body of the people being necessary for the preservation of their rights and liberties; and as these depend on spreading the opportunities and advantages of education in various parts of the country, and among the different orders of the people, it shall be the duty of legislators and magistrates in all future periods of this commonwealth to cherish the interests of literature and the sciences, and all seminaries of them, especially the university at Cambridge, public schools, and grammar schools in the towns; to encourage private societies and public institutions, rewards and immunities, for the promotion of agriculture, arts, sciences, commerce, trades, manufactures, and a natural history of the country; to countenance and inculcate the principles of humanity and general benevolence, public and private charity, industry and frugality, honesty and punctuality in their dealings, sincerity, good humor, and all social affections, and generous sentiments among the people.

Only an educated public could spot those political leaders who had been corrupted and lost their sense of public virtue, and subject them to the censure and punishment requisite for preserving the republic. As Jefferson states, "An informed citizenry is the bulwark of a democracy."

Did the USA sabotage the Copenhagen Climate Conference?

One of the themes around here is that climate conferences are considered an exercise in conspicuous time-wasting.  Certainly, it would be helpful if the nations of the world had a efficient way of internationally coordinating the struggle to dramatically lower carbon emissions.  But that sort of effort can easily be organized on the Internet so the conferences will probably always be some sort of manifestation of Leisure Class wretched excess.

But interestingly, according to some recently-released Snowden documents, the USA spooks thought the 2009 Climate Summit in Copenhagen was far more than an exercise in useless diplomacy and decided to manage an ugly outcome.  Seriously!  You just cannot make this shit up!

What's the old saying—any jackass can kick down a barn?  Here we have a perfect example of competing jackasses determined to combine the forces of uselessness and destruction.  And still almost magically, the Producer Classes have figured out a way in those past five years to make solar cells price-competitive with our cheapest fires.  So it turns out the NSA didn't wreck much!

Prominant Germans on Putin and Russia

When I fired up my computer yesterday morning, staring out at me from the front page of Der Spiegel was the frighteningly ugly face of German Finance Minister Wolfgang Schäuble.  His picture was attached to an even uglier claim that he saw parallels between Vladimir Putin's annexation of Crimea and Adolf Hitler's land grab of Sudetenland.  As the man most responsible for the policies of austerity that have ruined the lives of millions of Europeans, Schäuble is probably the most hated German since the death of Hitler himself.  His economic thinking most resembles that of Heinrich Brüning, the economist turned chancellor (30 March 1930 – 30 May 1932) whose mismanagement of the German economy was so inept, she turned to Adolph Hitler out of pure desperation.  So the headline was that Schäuble is not only a dangerous economic crackpot, he is dangerously historically illiterate as well.

Scary headlines of Ms. Merkel's goto guy hurling dangerously provocative insults at Russia's President made for a depressing start to the day.  I clicked away as quickly as I could fearing that Germany's head crackpot was signaling an escalation of tensions in German-Russian relations.  Fortunately for my blood pressure, I came back to the Der Spiegel site a few hours later and was greeted by the article reprinted below.  It turns out Herr Schäuble is the exception—that in fact Germany is awash in important and sensible folks who highly value good relations with her big neighbor to the east.  Der Spiegel presented these good people in a mildly negative light as would be expected in a story about important critics of the government.  But the message was clear—Germany is not at all likely to get into economic warfare with Russia.  Too many important citizens think that this would be a terrible idea (which it most certainly would be.)