The Challenges Not Mentioned in the Election

John Michael Greer describes some issues that are so controversial that candidates don't touch them. But they won't go away quietly and denial is not a viable option. Excerpts below.

Link: The Archdruid Report: History and Hope.

…the major issues of this moment in history were barely mentioned by any party, major or minor, in the presidential campaign. Over the next decade or so, the United States will have to work out a way to stand down from a global military-economic empire it can no longer afford to maintain; it will have to find the money and the means to replace a mostly fictive economy based on the manipulation of baroque financial instruments with a real economy based on the production of goods and services for people; it will have to make good on decades of malign neglect inflicted on the national infrastructure on nearly every level, even as it struggles to convert a suburban landcape viable only in an age of cheap abundant fossil fuels to something that makes sense in the world of scarce and expensive energy ahead of us.

Few of the changes that will be imposed by these necessities will be popular. Many, in fact, will be bitterly resented, and none of them will come cheaply. We have wasted so many opportunities and poured so many of our once-abundant resources into a decades-long joyride that the next few years will almost certainly impose one wrenching challenge after another on a society that the recent past has left very poorly equipped to face them. Our history is among the heaviest burdens we face, because the habits we learned during America’s imperial zenith are among the things that are most necessary to unlearn in the new and far more multipolar world dawning around us.

Still, I find myself feeling a bit more hopeful than before, for the burden of racial hatred was also profoundly rooted in American history and identity, and the verdict of last night’s election suggests that it has turned out to be subject to change. I think of the difference forty years has made, from 1968, when an assassin’s bullet cut down Martin Luther King and inner cities across America exploded in violence, to 2008, when a nation’s ballot sent Barack Obama to the presidency and many of those same inner cities celebrated straight through the night. We live in a different country now, and the possibility that Americans might be able to rise to the massive challenge of the deindustrial transition has become just slightly harder for me to dismiss out of hand. Still, that turn of history’s wheel is still ahead of us, and we will have to wait and see.

Political Greed in Congress

U.S. Senator Tom Coburn, M.D. (R-OK) released the following statement on October 2, 2008.

As much as members of Congress want to find scapegoats, the root of this problem is political greed in Congress. Members of Congress from both parties wanted short-term political credit for promoting home ownership even though they were putting our entire economy at risk by encouraging people to buy homes they couldn’t afford. Then, instead of conducting thorough oversight and correcting obvious problems with unstable entities like Fannie Mae and Freddie Mac, members of Congress chose to ignore the problem and distract themselves with unprecedented amounts of pork-barrel spending.

Taxpayers who want to ensure that this doesn’t happen again should send a very clear message to Washington that it’s time for Congress to live within its means and restore the principles of limited government and free markets that made this country great. I will do everything in my power to ensure that this bill does not lead us down a slippery slope of European style socialism and slow economic growth. I will also promise taxpayers that I will do everything in my power to block what I expect will be hundreds of attempts by politicians in Washington to continue business-as-usual borrowing and spending in the next Congress. In a time of crisis, American families have to make hard choices between budget priorities. So should Congress. If politicians want to create new programs they should eliminate duplicative programs or reduce funding for less important programs. The only way we can put this crisis behind us is for Congress to rejoin the real world of budget choices and consequences which, as we have seen in recent days, can be ignored for only so long.

Leadership in the U.S.

Thomas L. Friedman at the NYTimes.com offers some suggestions for McCain and Obama. Excerpts below.

Link: Op-Ed Columnist – No Laughing Matter – Op-Ed – NYTimes.com. Thomas L. Friedman

We have been living on borrowed time and borrowed dimes. President Bush has nothing to offer anymore. So that leaves us with Barack Obama and John McCain. Neither has wowed me with his reaction to the market turmoil. In fairness, though, neither man has any levers of power to pull. But what could they say that would give you confidence that they could lead us out of this rut? My test is simple: Which guy can tell people what they don’t want to hear — especially his own base.

Think how much better off McCain would be today had he nominated Michael Bloomberg as his vice president rather than Sarah Palin. McCain could have said, “I’m not an expert on markets, but I’ve got one of the best on my team.” Instead of a V.P. to re-energize America, McCain went for a V.P. to re-energize the Republican base.

So what would get my attention from McCain? If he said the following: “My fellow Americans, I’ve decided for now not to continue the Bush tax cuts, because the most important thing for our country today is to get the government’s balance sheet in order. We can’t go on cutting taxes and not cutting spending. For too long my party has indulged that nonsense. Second, I intend to have most U.S. troops out of Iraq in 24 months. We have done all we can to midwife democracy there. Iraqis need to take it from here. We need every dollar now for nation-building in America. We will do everything we can to wind down our presence and facilitate the Iraqi elections, but we’re not going to baby-sit Iraqi politicians who don’t have the will or the courage to reconcile their differences — unless they want to pay us for that. In America, baby sitters get paid.”

What would impress me from Obama? How about this: “The Big Three automakers and the United Auto Workers union want a Washington bailout. The only way they will get a dime out of my administration is if the automakers and unions come up with a joint plan to retool their fleets to get an average of 40 miles per gallon by 2015 — instead of the 35 m.p.g. by 2020 that they’ve reluctantly accepted. I am not going to bail out Detroit with taxpayer money, but I will invest in Detroit’s transformation with taxpayer money, provided the management and unions agree to radical change. At the same time, while I will go along with the bailout of the banking system, it will only be on the condition that the institutions that got us into this mess accept sweeping reforms — in terms of transparency and limits on the leverage they can amass — so we don’t go through something like this again. To help me figure this out, I’m going to keep Treasury Secretary Hank Paulson on the job for a while. I am impressed with his handling of this crisis.”

Who Caused the Financial Crisis?

In a Washington Post article, Eric D. Hovde describes how the greed of Wall Street and their political action committee contributions to elected officials in Washington created the financial crisis.

Link: Calling Out the Culprits Who Caused the Crisis – washingtonpost.com.

…because of the actions of the investment banks, the mortgage industry and the rating agencies, the investment community has now incurred an estimated $1 trillion and more in losses. Even more troubling, housing prices have dropped 20 percent from their July 2006 highs, with the very real likelihood that housing could contract another 15 to 20 percent — essentially wiping out more than $4 trillion in housing values. This would be the biggest hit since the Depression to Americans’ most important asset.

What is even more remarkable is that at the same time, firms such as Goldman Sachs and Lehman not only made billions of dollars packaging and selling these toxic loans, they also wagered with their own capital that the values of these investments would decline, further raising their profits. If any other industries engaged in such knowingly unscrupulous activities, there would be an immediate federal investigation.

Why is Washington so complicit in this intricate and lucrative affair? First, the Fed laid the groundwork for both these asset bubbles by lowering interest rates to historic lows. In an attempt to protect his legacy after the Internet-bubble collapse, Greenspan provided unprecedented stimulus to re-inflate the economy and maintain his popularity with Wall Street. (Remember the "Greenspan put"?) But in doing so, he spawned the largest debt and asset bubble in U.S. history.

At the same time, federal regulatory agencies such as the SEC stood idly by as Wall Street took advantage of the investment public during both the Internet and the housing bubbles. The SEC took almost no action against Wall Street after the dot-com implosion. And in the midst of the housing bubble, in 2006, only the Office of the Comptroller of the Currency pushed for any level of regulation to address subprime lending.

One has to wonder why Treasury secretaries under Presidents Clinton and Bush — Robert Rubin and Hank Paulson, respectively — took no action to curb these abuses. It certainly was not because they did not understand Wall Street’s practices — both are former chief executives of Goldman Sachs. And why has Congress been so silent? The Wall Street investment banking firms, their executives, their families and their political action committees contribute more to U.S. Senate and House campaigns than any other industry in America. By sprinkling some of its massive gains into the pockets of our elected officials, Wall Street bought itself protection from any tough government enforcement.

This is no doubt the same reason why so many members of Congress were consistently blocking attempts to reform and downsize Fannie Mae and Freddie Mac, which are essentially giant, undercapitalized hedge funds. These two entities have been huge money machines for Democrats in both the House and the Senate, many of whom recently had the gall to ask why these companies hadn’t been reformed in the past. Nor should several Republican congressmen and Senators who likewise contributed to watering down legislation aimed at reforming these institutions be let off the hook.

Wall Street’s actions are now profoundly hurting American families, communities and the entire U.S. financial system. People are being thrown out of their homes. Once seemingly indestructible financial entities are succumbing to the crisis they have created and have jeopardized the stability of the global financial system. Isn’t it ironic that the same firms that preached free-market capitalism are now the ones begging for a taxpayer bailout? Many investment professionals operating in my world believe, as do I, that we are facing the greatest financial crisis since 1929.

Fortunately, today we have safety nets, such as federal deposit insurance, that were non-existent during the Great Depression. Yet there has not been a time since the 1920s when Wall Street has enjoyed as much influence over Washington as it has for the last 12 years. Let’s hope that this influence fades rapidly — and that this financial crisis doesn’t end the same way as the one of nearly 80 years ago.

via Chris Kliemt

Nuclear Power is NOT Energy Independence

Steve Christ describes why nuclear energy increases U.S. energy dependence. Do we prefer to be dependent on OPEC or Russia? He says that we currently import 92% of the uranium (43% of that is from Russia) for nuclear power.

Link: Investing in Uranium.

…one of the biggest misconceptions about nuclear power at the moment is this: It will end our energy dependence foreigners. The truth is it will not. That’s the dirty little secret most people don’t know about nuclear power in the United States these days.

You see, while everyone knows we have become virtual slaves to foreign crude, only a few know we also import 92% of the enriched uranium necessary to run our nuclear plants. That is even worse than our predicament with oil where 70% of our supply is now imported.

That’s why I call enriched uranium America’s "other" energy crisis. Because if nothing else changes we could conceivably exchange one set of shackles for another if we are aren’t careful.

And it will likely only get worse when a 20 year program with the Russians called Megatons to Megawatts runs its course in 2013 since almost 43% of what we use comes from dismantled Soviet warheads. After that supply runs dry, it is not inconceivable we could be completely on our own, unable to meet our own needs.

onThat’s a current danger that we can ill-afford and Washington knows it. Over time, those potential shortages will only be exacerbated as more and more nuclear plants here and abroad begin to come online and demand skyrockets.

According to the World Nuclear Association, there are 439 reactors operating globally, with 36 under construction. Moreover, there are also 93 new reactors on the drawing board, with another 219 proposed. 

And should all of the planned and proposed reactors be built, the world total will be more than 787, or almost a 79% increase over the current level—-the vast majority of which will be fueled with—you guessed it— enriched uranium.

So at some point in the future, enriched uranium could be no different than oil—sold off in a tight market to the highest bidder. Sound familiar?

Peak Oil is a Predicament without a Political Solution

John Michael Greer describes why peak oil won’t be "solved" with popular solutions. It does create an opportunity for extreme political change that often ends badly. Excerpts below.

Link: The Archdruid Report: Post-Peak Politics.

…peak oil is not a problem that can be solved. It’s a predicament – a phenomenon hardwired into our species’ most fundamental relationships with physical and ecological reality – and like any other predicament, it cannot be solved; it can only be accepted. It differs in detail, but not in kind, from the collisions with ecological limits that punctuate the historical record as far back as you care to look.

Like every other species, humanity now and then overshoots the limits of its ecological support system. It’s our misfortune to live at a time when this has happened on a much larger scale than usual, due to our species’ recent discovery and reckless exploitation of the Earth’s once-abundant fossil fuel reserves. Expecting a change of leaders, or even of systems, to make that reality go away is a little like trying to pass a bill in Congress to repeal the law of supply and demand.

Still, leaders and governmental systems make great scapegoats, and just now scapegoats are very much in fashion.

Missing from nearly all these lists, however, is the simple geological reality that there’s only so much oil in the Earth’s rocks, we’ve pumped out most of the really large and easily accessible deposits, and it’s becoming increasingly difficult to maintain current production levels – much less increase them – by drawing down the smaller and less accessible deposits that remain. It’s not hard to show that this is a major factor in the current energy crisis; when a commodity’s price doubles in a year, but the production of the same commodity fails to budge outside of a narrow range, it’s a reliable bet that physical limits on the supply of the commodity are to blame.

The difficulties with this otherwise sensible observation, of course, are twofold. It offers no easy answers; if we’ve reached the physical limits of petroleum production, that’s a fact we have to learn to live with, no matter how inconvenient or uncomfortable it may be. At the same time, it offends against a common assumption of modern thought, the belief that human beings – and only human beings – play an active role in history. Older civilizations understood that nonhuman forces shared in the making of history, and there’s a fine irony in the way that our civilization, having rejected the nonhuman world as a historical agent, now finds its own history being shaped by a nonhuman reality with which it steadfastly refuses to come to terms.

Bring historical irony into the political sphere, though, and as often as not it turns explosive. The example of Germany in the aftermath of the First World War is instructive. Faced with the collision between an imperial ideology of world domination and the hard fact of military defeat, a great many Germans after 1918 searched feverishly for an explanation for that defeat that did not require them to recognize the geopolitical limits to German power in the dawning age of oil.

As the economic troubles of the postwar period mounted, so did the quest for scapegoats, until finally a fringe politician named Adolf Hitler came up with an answer that most Germans found acceptable.

We are in a similar situation in America today. If anything, contemporary political thought is far more impoverished than it was in 1908, when the radical fringes of society swarmed with alternative theories of political economy. Since the collapse of classical conservatism in the 1960s, and the implosion of the New Left in the 1970s, political debate in the American mainstream has focused on finding the best means to achieve a set of ends that few voices question at all, while a great deal of debate outside the mainstream has abandoned political theory for a secular demonology in which everything wrong with the world – including the effects of the Earth’s ecological limits, of course – is the fault of some malevolent elite or other.

The current presidential race in America is a case in point. Neither candidate has addressed what, to my mind at least, are the crucial issues of our time: for example, whether America’s interests are best served by maintaining a sprawling military-economic empire with military bases in more than a hundred nations around the world; what is to be done about the collapse of America’s economic infrastructure and the hollowing out of its once-prosperous heartland; and, of course, how America’s economy and society can best deal with the end of the age of cheap abundant energy and the transition to an age of scarcity for which we are woefully unprepared.

Instead, the candidates argue about whether American troops should be fighting in Iraq or in Afghanistan, and whether or not we ought to produce more energy by drilling for oil in the nation’s wildlife refuges. Meanwhile, the partisans of each of these career politicians strive to portray the other as Satan’s own body double, while a growing number of those who are disillusioned with the entire political process hold that both men are pawns of whatever reptilian conspiracy happens to be fashionable on the fringes these days.

Maybe it’s just me, but this sort of evasion of the obvious seems utterly counterproductive. If Weimar America is to have a less disastrous future than its 20th century counterpart, we need to move toward serious debate over the shape that future is going to have, and our economically ruinous empire, our disintegrating national economy, and our extravagant lifestyles need to be among the things up for discussion. The radical right have already begun to scent a major opportunity; Nick Griffin, head of the neofascist British National Party, has already commented that his party is precisely one major crisis away from power, and he may well be right.

More generally, the first political movement to come up with a plausible response to peak oil will likely define the political discourse around energy and society for decades to come. Griffin and his peers are eager to take on that role; their response may not look plausible to most people now, but then neither did Hitler’s, before the Great Depression lowered the bar on plausibility to the point that he could goose-step over it. Unless some other movement comes up with a meaningful politics for the post-peak world, Griffin’s ideas may yet win out by default.

That would be a tragedy, and for more than the obvious reasons. One advantage of crisis is that it becomes possible to make constructive changes that are much harder in less troubled times. While I am no fan of utopian fantasies, and the possibility always exists that well-intentioned changes could make things worse, it’s hard to argue against the idea that the dysfunctional mess that is modern American politics could stand some improvement. That might involve learning a few things from other democracies; it might also involve returning to something a little more like the constitutional system on which this country was founded, which after all worked well in a pre-fossil fuel age. One way or another, though, it’s time to take a hard look at some of our most basic assumptions, and replace scapegoat logic with a reasoned discussion about where we are headed and what other options our society might want to consider.

Toxic Oil and Power Politics in the Amazon

Newsweek.com describes how an oil company uses political connections to hide the mess left behind. Very sad but not surprising.

Link: Chevron Lobbyists Fight Ecuador Toxic-Dumping Case | Newsweek International | Newsweek.com.

Few legal battles have been more exotic than the lawsuit tried over the past five years in a steamy jungle courtroom in Ecuador‘s Amazon rain forest. Brought by a group of U.S. trial lawyers on behalf of thousands of indigenous Indian peasants, the suit accuses Chevron of responsibility for the dumping (allegedly conducted by Texaco, which Chevron bought in 2001) of billions of gallons of toxic oil wastes into the region’s rivers and streams. Activists describe the disaster as an Amazon Chernobyl. The plaintiffs—some suffering from cancer and physical deformities—have showed up in court in native garb, with painted faces and half naked. Chevron vigorously contests the charges and has denounced the entire proceeding as a "shakedown."

But this spring, events for Chevron took an ominous turn when a court-appointed expert recommended Chevron be required to pay between $8 billion and $16 billion to clean up the rain forest. Although it was not the final verdict, the figures sent shock waves through Chevron’s corporate boardroom in San Ramon, Calif., and forced the company for the first time to disclose the issue to its shareholders. It has also now spawned an unusually high-powered battle in Washington between an army of Chevron lobbyists and a group of savvy plaintiff lawyers, one of whom has tapped a potent old schoolmate—Barack Obama.

Chevron is pushing the Bush administration to take the extraordinary step of yanking special trade preferences for Ecuador if the country’s leftist government doesn’t quash the case. A spokesman for U.S. Trade Representative Susan Schwab confirmed that her office is considering the request. Attorney Steven Donziger, who is coordinating the D.C. opposition to Chevron, says the firm is "trying to get the country to cry uncle." He adds: "It’s the crudest form of power politics."

via The Oil Drum

Who’s Going to Fix America?

Thomas L. Friedman gets on his soapbox about the need for a better-functioning democracy in the U.S.

Are we getting the leaders we deserve?

Link: Op-Ed Columnist – Anxious in America – Op-Ed – NYTimes.com.

My fellow Americans: We are a country in debt and in decline — not terminal, not irreversible, but in decline. Our political system seems incapable of producing long-range answers to big problems or big opportunities. We are the ones who need a better-functioning democracy — more than the Iraqis and Afghans. We are the ones in need of nation-building. It is our political system that is not working.

I continue to be appalled at the gap between what is clearly going to be the next great global industry — renewable energy and clean power — and the inability of Congress and the administration to put in place the bold policies we need to ensure that America leads that industry.

“America and its political leaders, after two decades of failing to come together to solve big problems, seem to have lost faith in their ability to do so,” Wall Street Journal columnist Gerald Seib noted last week. “A political system that expects failure doesn’t try very hard to produce anything else.”

We used to try harder and do better. After Sputnik, we came together as a nation and responded with a technology, infrastructure and education surge, notes Robert Hormats, vice chairman of Goldman Sachs International. After the 1973 oil crisis, we came together and made dramatic improvements in energy efficiency. After Social Security became imperiled in the early 1980s, we came together and fixed it for that moment. “But today,” added Hormats, “the political system seems incapable of producing a critical mass to support any kind of serious long-term reform.”

If the old saying — that “as General Motors goes, so goes America” — is true, then folks, we’re in a lot of trouble. General Motors’s stock-market value now stands at just $6.47 billion, compared with Toyota’s $162.6 billion. On top of it, G.M. shares sank to a 34-year low last week.

That’s us. We’re at a 34-year low. And digging out of this hole is what
the next election has to be about and is going to be about — even if it
is interrupted by a terrorist attack or an outbreak of war or peace in
Iraq. We need nation-building at home, and we cannot wait another year
to get started. Vote for the candidate who you think will do that best.
Nothing else matters.

Democracy, Politicians, and War

Another wake up call from Atanu Dey, who continues to aim economic intelligence at the leaders of the world’s largest democracies. He wants us to see the light before it is too late. I fear we’re on the razors edge now.

Atanu (India) and I (US) both live in countries where we can criticize the leaders without persecution. We both want free societies to survive and prosper. Acknowledging a problem is the first step to a solution.

Link: Your Vote for My Money

A democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largess out of the public treasury.
– Alexander Tytler

Some numbers are well beyond human comprehension. We can talk glibly about millions and billions of this or that but we cannot intuitive grasp what they actually mean. Evolution has equipped us with fine brains but those brains never needed to deal with thousands — leave alone millions — of anything. So we have to do some mental gymnastics to get a fleeting glimpse of what very large numbers represent.

Here’s a way of realizing how large millions, billions, and trillions are relative to a thousand. One thousand seconds passes in less than 17 minutes. A million seconds takes around 13 days. A billion seconds takes a bit over 31 years. We humans live for something between 2 and 3 billion seconds. A trillion seconds is over 31,688 years. We don’t really know what thousands of years mean, of course. Human civilization is not a trillion seconds old.

The US war in Iraq has been estimated to cost around $3 trillion. That is, $3,000,000,000,000. Details are in Joseph Stiglitz and Linda J. Bilmes’ new book, “The Three Trillion Dollar War: The True Cost of the Iraq Conflict.” See The Cold Price of Hot Blood in Salon for more on that. The total cost globally could well be over $6 trillion.

…It is the very nature of democracy that creates the perverse incentives for the politicians to implement policies that help themselves at the cost of immense harm to the country. Those who make the policies enjoy the indirect benefits of the policies — votes from specific groups — without paying any of the costs.

There is another asymmetry. The direct beneficiaries of the policies naturally have a concentrated interest in voting for the politicians. The costs are diffuse and poorly understood by the rest of the population. So while they bear the costs, they do not connect it with the policies and the politicians.

In the final analysis, a country is only as rich or as poor as its collective wisdom allows it to be. The politicians can be expected to make those decisions that are good for them, just like you and I make self-interestedly rational decision in our daily lives. However, we get to play with whatever little money we have; the politicians can play with billions and trillions that do not belong to them. So they are understandably less careful with billions than we would be with our few thousands.