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>What I Live For

2005/06/30 7 comments

>The final chapter of Home From Nowhere
(Simon & Schuster, 1996)

by James Howard Kunstler

12 Coda

There are times I feel so fortunate that I wonder if I am making up this life as it as it traces its mysterious arc through time. Solipsism is not a very attractive philosophy – especially in others – but such good fortune as I’ve known seems improbable to one who otherwise doesn’t believe in dumb luck. Were I beset by catastrophe tomorrow, I could still say that I lived 47 pretty good years. In terms of sheer bulk chronology, I’ve outlasted George Gershwin, Jesse James, Lord Byron, Wolfgang Mozart, Martin Luther King, Jesus Christ, Huey Long, Lou Gehrig, Stonewall Jackson, Fats Waller, John F Kennedy, F Scott Fitzgerald, and one of the Beatles – and a few of these characters were far more beset by troubles in their short lives than I have been so far.

The world is full of terrible places where life is everything Hobbes said and worse. For all the shortcomings I perceive about my homeland these days, I must admit it has allowed me to function freely in my vocation, which is saying a lot. The only conditions I value more are loving relations with friends and kin and a more generalized gratitude for being born in the first place. I am not religious, but I am aware of a spiritual dimension to this mysterious world. As Wittgenstein remarked, it is astonishing that anything exists. I believe we pass this way but once, and that this is the source of man’s essentially tragic condition. Yet I believe simultaneously, perhaps incongruously, even obdurately and foolishly that each of us is an offspring of the intelligent and benevolent organism that is the universe – though this model leaves a lot unaccounted for, from war to root canal therapy – and that we remain part of it, in some fashion, everlastingly.

My ancestors were mostly Jewish – the exception being my great-grandmother, a German Christian – but my parents observed none of the Jewish rituals or holidays. They prayed to the Sunday Times crossword puzzle. In our house (or apartment following their divorce and subsequent re-marriages) there was always a Christmas tree, and up to the age of six I received chocolatey visits from the Easter Bunny, with no idea that he died in anguish on a cross for me. For all that, my parents are not the kind of Jews who pretend that they belong to the Swindon Hunt Club. They are cultural Jews, emphatically of the New York persuasion. A lot of yiddish slang is flung around, mostly for comic effect. “That forbissina face!” “What a farkokteh idea!” Anyway, Judaism is more about human conduct than eschatology. I was therefore raised in what might be described as a religion-free household. Strange to relate, as a result of my travels around the United States the past seven years, I begin to come to the disquieting conclusion that we Americans are these days a wicked people who deserve to be punished. The idea embarrasses me, but I nevertheless stand by it. I suppose this is what comes of a vocation that places one, for instance, in a New Jersey gambling casino full of overweight slobs pissing away their kids’ college tuition in pursuit of “excitement”. I therefore also believe in the existence of genuine evil, as embodied, in the Hannah Arendt sense, by the behavior of many well-known American corporations, especially those that prey on the aspirations of children.

Perhaps in consequence of my singular theology, I have rather robust notions about right and wrong. They proceed also from the issue of personal honor, which I define as meaning what one says and vice versa. To my way of thinking there are few personal virtues more important than being reliable in this sense. As for kindness and generosity, I suspect they derive as much from disposition as culture, and all it takes is a glance at the Saturday morning TV shows to see how these matters are treated at the cultural end in our time. Experience has disposed me to be kind in my personal dealings and severe in my professional ones. For instance, the culture of business, including the literature racket, has decayed in step with other things in America, and the common decencies are seldom observed nowadays. Phone calls are not returned, letters not answered, checks not sent, agreements not kept, and I get rather irked by all this. I squawk about it to the amazement of my associates and representatives. The idea that business relations might be regulated by standards of decency makes them howl with laughter. I believe that standards rise and fall in cycles and that the time will come again when personal honor means something. I hope I live to see it. Luckily, that is not all I live for.

I live in a little gray 1820s cottage with Jennifer Armstrong, an author of children’s books. By the time this book is in print, we will be married. We have two dogs, a cat, and a canoe. Our house is about a two-minute walk from the town’s main street, with all its wonderful attractions. My daily life is shapely and pleasing. I shape it by observing some self-discipline and am pleased by the results. I’m not a nut about it, but self-employment does call for a certain rigor. I believe Flaubert’s dictum that if you want to be wild in your art, you must be bourgeois in your life. I keep regular hours. I commute 27 seconds by bicycle up the street and across a square to my office, which is a ground-floor apartment in an 1850s building that was once a hotel. I usually get in before 8:30, depending on the traffic, har har.

I enjoy writing. I don’t suffer from blocks. I have enough ideas for books to keep me busy for the rest of my life. Yet writing is not easy. I struggle to produce three decent pages a day. It’s like making bratwurst under an electron microscope. Nevertheless, I amuse myself. The operations of my own mind entertain me hugely. To avoid over-indulgence in that dubious realm, therefore, I get out of here around noon, rain or shine, summer or winter, and run three miles with the dogs. I eat a miserable, abstemious lunch of an apple and a banana as a weight- control measure – since, in middle age, one develops the metabolism of a garden slug. I compose sentences and paragraphs all afternoon, sipping green tea. At five o’clock I bike over to the YMCA and swim a mile in the pool to sweep all the bratwurst scraps out of my skull. I am fortunate once again in not having to spend any portion of my day sitting in a car, commuting, as tens of millions of my countrymen do, including many of my friends.

I own a 1992 Toyota pickup truck, but it sits in its parking space on the street for days at a time because most of what I need is within a one-minute bike ride of both my home and office. I exercise a lot because I like to cook and eat. My idea of bigtime fun is to make dinner for eight of my friends and get a little looped on cheap champagne in the process. I almost never work on weekends or evenings.

I never made more than $15,000 in any one year until well after I turned forty. I arrived in this town twenty years ago on a motorcycle from San Francisco after dropping out of the journalism business to write books. I settled here because, before California, I’d worked for a year on the nearby Albany newspaper, and gotten to know Saratoga, and it seemed like a good place to be a starving writer of books nobody had asked to be written. Through the 70s and 80s, I worked a lot of odd jobs, from orderly in the psychiatric wing of the hospital, to digging holes for percolation tests in housing subdivisions. I lived on brown rice and onions for months on end. It was a stringent existence but there were many compensations. I had that motorcycle (and two successors) and a flyrod and beautiful countryside to ramble in, and I made a lot of friends in town.

Over the years I pounded out eight novels. All of them were published and all of them were commercial flops in any meaningful sense, apart from their literary merit. I picked up some Hollywood option money on most of them. My first novel was optioned thirteen times. The options amounted to a couple of thousand dollars each, spread out over two decades: chump change. None of my books were made into movies. These old novels still turn up now and again in the discontinued merchandise bin at the K-mart. It’s like finding a beloved relative in the gutter clutching a bottle in a paper bag.

In 1987, I took a badly-needed sabbatical from fiction-writing and returned to journalism with a series of stories for the Sunday New York Times Magazine about land development issues. These led to a proposal for a book that would become The Geography of Nowhere. I had no particular credentials for the job, which proved to be an advantage, since so many problems with our everyday environment are caused by the over-specialization of trained specialists unwilling to look at the bigger picture beyond the narrow purview of their specialty. It was a worthy task for a generalist.

The Geography of Nowhere was moderately successful. It seemed to help people understand their feelings about a subject that had long bewildered them. I became something of a low-grade guru. I received many invitations to speak to civic groups, professional organizations, and colleges around the country. My initial reaction was panic that people were looking to me for illumination. What could be more natural than to feel unworthy of other people’s esteem? I am aware that many successful figures secretly feel like frauds, including people far more knowledgeable and accomplished than myself. This is apparently a universal neurosis. Everybody feels inadequate. I’ve since formulated a social principle called Kunstler’s Law, which states that in any room containing 100 people, 99 of them each think that they are the only one in the room who doesn’t have his-or-her act together.

In the face of this I decided to take my role seriously and do my best to be helpful, accepting the risk of the public arena that some people will see me as an imposter, a blowhard, or a fool. I think I give a good lecture. I speak with conviction. I believe it is a sin to bore an audience. It happens that I majored in the dramatic arts in college and my training as an actor helps. I understand the nature of a performance. An audience doesn’t hunger for the truth so much as for authenticity. They know the truth can be slippery. Their hopes and dreams are something else.

I believe that rhetoric is undervalued these days. My own generation had much to do with devaluing it back in the 60s, when all public talk seemed mendacious. Part of what I do these days is an attempt to resuscitate rhetoric as an honorable and worthy feature of public life in this country. I am sensible that rhetoric sometimes changes the world. It frightens me to be in possession of it.

As a writer, though, I see myself primarily as a prose artist, not as a retailer of Big Ideas. I think the success of The Geography of Nowhere was due as much to the shapeliness of its prose as to any ideas it contained. Sooner or later, I intend to leave this subject behind. I have other fish to fry.

It is mid-September as I write, one of the last days before summer’s end, a time of year that feels analogous to the position of my little life in its orbit around a greater wheel of time. In a while, I will gather up my French easel and a newly-stretched canvas and head over to the Hudson River in my pickup truck with the canoe on the rack. The state is rebuilding the highway bridge at Schuylerville and there are several bright red work barges with cranes moored under it. I want to record the scene while all that equipment is still there. I spend most of my free time painting out in the open air. It is very important to me and I am very serious about it. When I am outside painting, I feel most in love with this world. I have a notion that writers burn out in their sixties but painters keep going to ninety or more. I love the idea of Monet pottering around the garden in his old age.

I feel an obligation to paint the landscape of my time, so I often paint highways with cars on them and even roadside monstrosities like McDonald’s and K-Mart. I especially like the contrast between the artificial light of their electric signs and the natural twilight in the background. The result on canvas is oddly beautiful, but of course what’s left out is the roaring traffic and the smell of exhaust fumes. One time a few years ago, I was painting a McDonalds with my easel set up across the highway in a bark mulch bed in the parking lot of Burger King. I was well underway when the manager bustled out and barked, “That ain’t allowed here!” I dared him to call the police. I would have loved nothing better than to be arrested for painting. I assured him that the ensuing court case would be great publicity for Burger King, too. Eventually he skulked back inside to his fry-o-laters, and that was the end of it. Today, I’ll happily forego that kind of amusement. I’m after tranquility, solitude, and fresh air. So it’s off to the river on the most beautiful day of the year. Yippie.

This is the essence of my private life. This is what I live for. I want to paint some more pictures and write some more books. I want to make my girl happy. I want to throw more Christmas parties and put on more Saturday night feeds. I want to learn how to read sheet music. I want to keep running with the dogs. I want to live in a nice town in a civilized country. I want to remain grateful for being born.

The End

Copyright 1997 James Howard Kunstler

http://www.kunstler.com/excerpt.html

Bill Totten http://www.ashisuto.co.jp/english/

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Categories: Uncategorized

>Our Very Own Enron?

>Is the private finance initiative melting down?

by George Monbiot

Published in the Guardian (June 28 2005)

For how much longer can this farce carry on? Everywhere, the chickens released by the government’s private finance initiative are not so much coming home to roost as crashing into the henhouse and sliding down the wall in a heap of blood and feathers. The prediction made in 2002 by the Banker magazine – that “eventually an Enron-style disaster will be rerun on a sovereign balance sheet” – could be starting to materialise.

The private finance initiative (PFI) is the scheme allowing private corporations to build and run our public services and lease them back to the government. The government says that this allows it to commission more schemes than it could with public funds, and offers better value for money. And it doesn’t seem to matter how often the story falls apart.

Last week, after spending GBP 14 million on lawyers, consultants, architects and miscellaneous money-wasting schemes, the National Health Service ditched its plans for a massive hospital in west London. The projected cost of the Paddington health campus had risen from GBP 360 million to GBP 1.1 billion, while the number of beds had fallen from 1000 to 800. This is pretty normal for a PFI scheme: in one case I’ve studied, beds fell by 20%, while costs rose by 1100%. What makes this instance unusual is that the project was dropped before the money was spent.

On Wednesday, the government admitted that PFI projects for council house repairs had been a costly disaster. This is hardly news to anyone who has been watching this programme’s seven-year meltdown. But despite its admission, the government has not officially scrapped the policy: councils are still being told that they will receive no new money for refurbishments unless they hand their houses over to the private or voluntary sector.

On the same day, we discovered that the PFI computer system which is meant to keep a record of MoT test results for cars in the UK has been delayed by another year. It was supposed to have been ready in May 2002.

On June 17th, Scottish ministers decided it was cheaper to spend GBP 25 million buying out the private financiers who built the Inverness airport terminal than to let them carry on. In six years, the corporations had made GBP 8.5 million on an investment of just GBP 5.5 million. This is a photocopy of the Skye bridge bail-out: it was bought back by the Scottish Executive last year for GBP 27 million. A bridge which should have cost GBP 15 million has hit the public for GBP 93.6 million.

Two days before the Inverness announcement, the Ministry of Defence quietly dropped a GBP 1 billion PFI scheme for military training. It didn’t disclose how much money it had spent developing it.

On June 14th, a leaked government report revealed that so many corners have been cut in the construction of a GBP 47 million privately financed mental health unit in Leeds that it might have to be pulled down and rebuilt.

On June 10th, the National Audit Office published a report showing how the companies which had built the Norfolk and Norwich hospital had, as well as making stupendous profits, legally walked off with an additional payment of GBP 73 million, by exploiting the gap between the financial risk the government said they had taken on and the risk they had really shouldered. It wasn’t as if the government didn’t know this was coming: in June 2001 a summary of leaked documents published in this column showed that this was going to happen. The Treasury sat back and watched.

On June 9th, the Health Service Journal published an extraordinary admission by a senior civil servant in the Department of Health. PFI deals, Bob Ricketts revealed, were locking the NHS into thirty-year contracts for services which might become useless in five. “I’ve seen some awfully grand PFI schemes”, he warned, “that are starting to give us a real problem”.

So what has the government learnt from all this? Nothing. It is ideologically committed to part-privatisation. It won’t disclose how much it is planning to spend on PFI schemes in the future – a spokesperson at the Treasury says this is “commercially confidential” – but it has already commissioned GBP 3.6 billion of new deals for this year. According to a spokesman for the Department of Health, “The government has no intention of abandoning PFI”. The heap of blood and feathers, though brain dead, keeps running.

So the government fobs us off with spin, misreporting and lies. PFI, the Treasury tells us, “is a small but important part of the Government’s strategy for delivering high quality public services”. Small? GBP 42 billion has been officially committed so far. This, according to the public-spending specialist Professor Allyson Pollock, is an underestimate, covering only the 43% of PFI contracts classified as “off balance sheet”.

Less true still is the Treasury’s assertion that there is “no bias in favour of any particular procurement route”. As people working for NHS trusts and local authorities will testify, the government has made it clear that for certain kinds of projects, public funds are not available.

But the biggest lie involves the government’s claims of value for money. “All PFI projects”, the Treasury says, “were delivered within public sector budgets … no construction cost overruns were borne by the public sector”.

Well, it’s a bit like hospital waiting lists: it depends when you start counting. The genius of PFI is that the overruns take place before the project begins. There are three ways in which this happens. The first is that the schemes are tailored to suit the private sector. Where public money might have been used to renovate a hospital, PFI demands that it is pulled down and rebuilt. But the two costs are not compared: instead we are told we have a choice between rebuilding it with public funds or rebuilding it with private funds.

Then the next fiddle kicks in. Civil servants, knowing that, as the former secretary of state for health announced, “it’s PFI or bust”, must mash the “public sector comparator” figure to show that PFI delivers best value for money. As Jeremy Colman, at the time the UK’s assistant auditor-general, said, “If the answer comes out wrong you don’t get your project. So the answer doesn’t come out wrong very often.” The third fiddle is that the concept of “risk transfer” can be used to come up with any figure you want. You simply announce that x million pounds of “financial risk” is being transferred by PFI to the private sector, and hey presto, it’s x million pounds more expensive to build the project with public money. As the Norfolk and Norwich fiasco shows, the risk costing bears no relation to any actual hazard taken on by the contractors.

Is it an exaggeration to say that we might be facing “an Enron-style disaster” in the public sector? I don’t know. But there’s something familiar about Jeremy Colman’s warning that the “pseudo-scientific mumbo jumbo” behind the private finance initiative’s financial modelling “takes over from thinking. It becomes so complicated that no-one, not even the experts, understands what is going on.” And the record of the past three weeks is hardly reassuring.

http://www.monbiot.com

References:

1. Nick Kochan, 2nd August 2002. Is the PFI about to hit the buffers? The Banker. http://www.thebanker.com/news/fullstory.php/aid/224/Is_the_PFI_about_to_hit_the_buffers_.html

2. Mark Gould and John Carvel, 21st June 2005. Plan for super-hospital scrapped after eight years and GBP 14 million. The Guardian; Mark Gould, 15th June 2005. Watery grave. The Guardian.

3. This is the Walsgrave hospital, whose story is told in George Monbiot, 2000, Captive State: the corporate takeover of Britain. Macmillan, London. The figure later rose (from an initial GBP 30 million) to GBP 330 million.

4. Matt Weaver, 22nd June 2005. Government admits problems with PFI home repairs. Guardian online. http://politics.guardian.co.uk/homeaffairs/story/0,11026,1512021,00.html

5. Eg, No author, 10th June 2005. Refurbishment PFI must stop. Inside Housing.

6. Andy McCue, 22nd June 2005. MOT computerisation PFI project delayed again. Silicon.com. http://management.silicon.com/government/0,39024677,39131366,00.htm

7. John Ross, 18th June 2005. PFI fiasco as public foots airport GBP 33 million bill. The Scotsman; BBC Online, 17th June 2005. Ministers ground airport PFI deal. http://news.bbc.co.uk/1/hi/scotland/4103178.stm

8. George Monbiot, 28th December 2004. A Scandal of Secrecy and Collusion. The Guardian. http://www.monbiot.com/archives/2004/12/29/a-scandal-of-secrecy-and-collusion/

9. Reuters, 15th June 2005. Government drops army tank training deal.

10. Grant Woodward, 14th June 2005. New mental health units ‘at risk from fire’, says report.
http://www.leedstoday.net/ViewArticle2.aspx?SectionID=39&ArticleID=1054743; David Hencke, 17th June 2005. Private-finance hospital ‘putting lives at risk’. The Guardian.

11. The Comptroller and Auditor General, 10th June 2005. The Refinancing of the Norfolk & Norwich PFI Hospital. National Audit Office.
http://www.nao.org.uk/publications/nao_reports/05-06/050678.pdf

12. George Monbiot, 5th June 2001. Bleeding Us Dry. The Guardian. http://www.monbiot.com/archives/2001/06/05/bleeding-us-dry/

13. Cited by John Carvel, 9th June 2005. Hospital building scheme ‘mistaken’. The Guardian.

14. Conversation with press officer at the Treasury, 27th June 2005.

15. See Budget 2005. Corrections to tables C17 and C18. http://www.hm-treasury.gov.uk/media/C5A/E2/bud05_correction_c17c18.pdf

16. HM Treasury, viewed 25th June 2005. The Private Finance Initiative (PFI)
http://www.hm-treasury.gov.uk/documents/public_private_partnerships/ppp_index.cfm

17. Conversation with press officer at the Treasury, 27th June 2005.

18. Allyson Pollock and David Price, July 2004. Public Risk for Private Gain? Unison, London.

19. HM Treasury, July 2003. PFI: meeting the investment challenge. HMSO, London.

20. ibid.

21. George Monbiot, 2000, Captive State: the corporate takeover of Britain. Macmillan, London.

22. Alan Milburn, quoted in the Guardian, 4th July 1997.

23. Quoted by Nicholas Timmins, 5th June 2002. Warning of ‘spurious’ figures on value of PFI infrastructure spending. Financial Times.

24. See Allyson Pollock and David Price, ibid.

25. Quoted by Nicholas Timmins, ibid.

http://www.monbiot.com/archives/2005/06/28/our-very-own-enron-/

Bill Totten http://www.ashisuto.co.jp/english/

Categories: Uncategorized

>Clusterfuck Nation

2005/06/28 3 comments

>Comment on current events

by Jim Kunstler (www.kunstler.com)

Lahar Rules (June 27 2005)

The east coast is a steambath, the Dow Jones is tanking, oil has crossed the $60 barrier, and Don Rumsfeld says the Iraq insurgency could run for twelve years.

Taking these things in reverse order – why twelve years? Why not forever? Actually, twelve years might as well be forever. What Rummy seems to be saying to the US public is: better be prepared to keep Fort Apache going indefinitely. The part he left out was … “if you want to keep making that eighty-mile round trip commute from Cherokee County to Peachtree Street“.

Even that simple equation assumes a lot. For instance, that Mr Suburban Atlanta Commuter will still have that job in the office tower on Peachtree. Or that he can continue to make a monthly payment of $3200 on a 4000-square-foot house in Hickory Flat. Or that the Fox TV News fans will maintain their enthusiasm for a war of attrition lacking in cineplex quality battles, while their property taxes are being jacked out of sight to cover the rising cost of maintaining senior parking privileges in the centralized school districts.

The public indeed may be losing its appetite for the Iraq project, but not for Nascar racing, fried chicken buckets, car trips to Six Flags, and round-the-clock air conditioning. What shock of recognition will flash across the TV screens when the connection is finally made that keeping all these things going is why we’re in Iraq? War is the answer. Sooner or later even the folks making those jitney trips to East Hampton are going to get it.

Oil’s remorseless up-ratcheting past $60 is as much a symptom of a weak dollar as a strained global energy allocation system, and the dollar is weakening because the way of life it represents is becoming more and more unreal. The harsh truth is that we’ve reached the limit of our ability to expand our suburban sprawl economy and there is no alternative US economy in the background ready to take its place. The world can’t fail to notice this weakness. The inability to generate even fake wealth, in the form of ever more WalMarts, will take its toll on the consensus that the American Dream has enduring value.

The stock market contraction ought to reflect this reality – apart from desperate attempts by US government proxies to levitate share prices – and it is hard to imagine a rally in the face of $60 oil. I’m inclined to predict a gruesome journey down for the Dow Jones into the 4000 range by the end of the year. Until now the dollars created by the Federal Reserve’s supernaturally loose credit policy have sought shelter in the “hard assets” of houses. A meltdown of the stock markets will translate into vanishing leverage in all other areas of finance, especially in real estate (as well as a swath of destruction through hedge funds, retirement accounts and, eventually, the entire creaking superstructure of the hallucinated mortgage industry). A few Americans are actually going to get the message that this is not a good time to buy an overpriced raised ranch house. A lot of real estate geniuses are going witness their own ruin with wonder and nausea.

The striking aspect in all this is that the US appears to be reaching a breaking point in the absence of any precipitating disaster. Apart from the daily meat-grinder in Iraq, the geopolitical scene is temporarily placid. The potential for disaster is huge, of course. Five pounds of Semtex in a crucial spot could crater the global economy. Sooner or later something will blow. But the US slide is commencing without a big shove. Phase change is a curious condition. Things just slip. Lahar rules.

Turning Point (June 20 2005)

Iraq is not Vietnam, all right, because there is no way the US can pull out now without severe consequences, namely the loss of our access to all the oil in the Middle East – where two-thirds of the world’s remaining oil is.

In Vietnam, there was the primal fear that if we cut-and-run all of Indochina would “go communist”, whatever that meant. What actually happened after we cut-and-ran in 1975 was Pol Pot and the killing fields of Cambodia, a military dictatorship in Burma, and Vietnam becoming the friendliest tourist country for westerners (including Americans) in all of Asia.

It is actually hard to tell whether the strategy to “democratize” Iraq is a childish pretense or a cynical cover story. There may be some grownups in the White House, Pentagon, and State Department who believe that a functioning, democratically-elected Iraq government would be such a mind-blower for the people of other nations in the region that all the jihadistas of, say, Saudi Arabia, Syria, Yemen, Iran, and Afghanistan would enter a mystical transport and wake up as Jeffersonian democrats.

The Iraq adventure so far seems to indicate that wishing can only accomplish so much. For instance, despite desperate US offensives in Karabilah and Anbar province this weekend, Iraqi hostiles managed to blow up fifty of their fellow Iraqis in Baghdad. The New York Times had an interesting way of capturing the mood: “Life along the street running past the restaurant quickly returned to normal. Older men eighty yards away resumed curbside games of checkers before men had finished sweeping away chunks of flesh.” In America these days, a wish is sometimes just another horror movie at the cineplex.

My own theory is that the war is a desperate attempt by a nation desperate over its energy supplies to retain a foothold, and therefore an economic claim, on the region where the oil is. Iraq was supposed to be our police station in a strategically vital bad neighborhood. The salient questions are: (1) assuming we can’t stay there forever, how long might we hope to stick around there? And (2) at that point somewhat short of forever, will we lose our ability to even buy Middle East oil?

The conventional belief is that oil is fungible, meaning that once it enters the universal market pool, it finds its own way to customers, determined by who will pay the most for delivery. This idea was based on the assumption that there would always be a swing producer – some entity that could always open up the valves and goose up the world supply, keeping global prices within a reasonable range. The global production peak – Peak Oil in shorthand – seems to have obviated that mechanism. It’s especially problematic that even Saudi Arabia and the Middle East generally appear to have peaked (see Twilight in the Desert by Matthew Simmons). From now on, access to oil may be determined by other things.

It was Amercia’s hope that by turning Iraqis and other Middle Eastern people into democrats, they would magically become much friendlier and that our military presence would be happily tolerated – and that eventually all the Middle East would become so democratic, friendly, and stable that our presence there would be regarded as a Godsend. Whoops, wrong God. For starters.

The world may no longer have a swing producer of oil, but this period can probably be viewed as a swing period of history. By that I mean a period when we hoped that there was a quick and easy way to keep the oil flowing westward and found out that it wasn’t so. The time is now coming when the American public won’t tolerate a dozen US casualties a week, nevermind fifty Iraqis. But Americans won’t tolerate $5 a gallon gasoline, either. We’ll now see how the public will reconcile these intolerances.

We enter this week with oil nearing $60 a barrel. Global finance, hedging, interest rates, and the continued zest of America’s last remaining industry, real estate, will all hinge on the price of oil and on America’s prospects for getting it at any price. President Bush last week shifted the responsibility for an energy policy to congress, because the ideas coming out of the White House have been so transparently lame (the hydrogen economy).

My guess is that we are about to see the first act of the Hooverization of George W Bush.

California-the-tragic (June 12 2005)

I just paid $3.25 for a twelve-ounce diet coke in the Los Angeles airport, known by the affectionate name LAX by the locals (sounds so cutting age, like rap stars who give themselves technoid names such as G-Unit). The truth is, LAX is just the airport code on the baggage label that they slap on your suitcase before it vanishes forever into the black hole of lost things. Evidently there was an earthquake here today, but the vibe of the city (if you can call this toxic hyper-mega-burb that) is so catastrophic generally that I didn’t even notice.

I’ve been on a long book publicity road trip around California, with a side trip to Seattle on Thursday, and it’s hard not to feel hopeless about this country after being here. It probably doesn’t help that my 10:30 red-eye flight has been delayed (“aircraft availability”, the sign says) and I don’t know whether I will make my morning connection in Washington for the final flight to upstate New York. My experience with United Airlines is that they (that is, the remaining skeleton crew) are a gang of lying fucks who will make up any excuse to disguise the fact that their company is a barely-functioning shell. As a matter of fact, there was not a single United employee in the entire P-7 terminal when I got here at 8:00 pm and I had to walk a half mile over to terminal P-8 to find a live gate agent. What you see in this miserable airport is simply the death of the airline industry. The airlines are the giant “canaries in the coal mine” of our imploding economy. They can’t make any money, even running fully-loaded flights, with the price of jet fuel (which is little more than kerosene) not even very high yet. But I stray from my point.

Which is that what you see in California is a society with a tragic destiny. I was all over the Bay Area earlier in the week, from San Francisco to Silicon Valley to Berkeley and even down to Santa Cruz, and that was bad enough, But then I got down to Los Angeles on Friday and have been in a state of pathological reflex nausea ever since. Despite their lame attempts to rebuild a few pieces of the 2000-mile-long streetcar system that they gleefully destroyed in the 1950s, life here is all about cars and it will never not be about cars – until the reality of our oil predicament falls on the hapless public like a hammer of God and the people of California die for their fucking cars in their fucking cars and over their fucking cars. I understand that the scene here is not qualitatively different from Dallas, Orlando, Atlanta, Northern Virginia, Miami, New Jersey and other cloacal hot-spots of the world’s highest standard of living. But I digress again, sitting, as I am, on the floor of terminal P-7 because I cannot find a single electric outlet anywhere near a chair, and being fifty-six years old, with an artificial hip, this is not the most felicitous scheme for composing one’s thoughts.

I was invited to give a talk at Google headquarters down in Mountain View last Tuesday. They sent somebody to fetch me (in a hybrid car, zowee!) from my hotel in San Francisco – as if I had any choice about catching a train down, right? Google HQ was a glass office park pod tucked into an inscrutable tangle of off-ramps, berms, manzanita clumps, and curb-cuts. But inside, it was all tricked out like a kindergarten. They had pool tables, and inflatable yoga balls, and $6000 electronic vibrating massage lounge chairs, and snack stations deployed at twenty-five step intervals, with lucite bins filled with chocolate raisins and granola. The employees dressed like children. There were two motifs: “skateboard rat” and “10th grade nerd”. I suppose quite a few of them were millionaires. Many of the work cubicles were literally modular children’s playhouses. I gave my spiel about the global oil problem and the unlikelihood that “alternative energy” would even fractionally replace it, and quite a few of the Googlers became incensed.

“Yo, Dude, you’re so, like, wrong! We’ve got, like, technology!”

Yeah, well, they weren’t interested in making a distinction between energy and technology (or, more precisely where Google is concerned, a massive web-based advertising scheme – because it is finally clear that all this talk about “connectivity” just leads to more commercial shilling, shucking, jiving, and generally fucking with your headspace in the interstices of whatever purposeful activity one may be struggling to enact on the internet).

The taxi-cab ride to Berkeley (on Google’s tab) ran over $160 on the meter. In Berkeley a radical leftist grandmotherly lady interviewed me for a radio show and once that was over she began to tell me about the chemical contrails that Dick Cheney was cross-hatching across the Berkeley skies for the purpose of controlling the masses of earnest, whole-foods-loving, undyed-wool-wearing devotees of diversity and turning them into whorish Stepford sex robots. Everybody knew it was a cover-up, she said.

Seattle was a blurr of traffic, tofu, and dark green things that must have been coniferous trees or seaweed, I wasn’t sure. The sleeplessness was catching up with me.

Flying into LA the next day, and traversing its decrepitating central core clean out to Pasadena in the airport van, was like being immersed in an updated Hieronymous Bosch landscape of hell – only substitute SUVs for spavined reptiles and tortured peasants half-stuck inside eggshells. At every turn of the odometer, one wondered: what will become of this entropic socio-economic sink, especially as the supply of its chief nutrient declines. I conclude that it may no longer maintain its stature as the breast-implant capital of the world.

I gave a talk at the closing session of the annual Congress for the New Urbanism in Pasadena on Sunday. My message was one that readers of this blog are familiar with – namely, that we are sleepwalking into desperate circumstances largely determined by our addiction to oil, our supply of which mostly comes from distant lands full of people who hate us, et cetera. I will not bore you by rehearsing this theme further today. Now, the CNU members have generally been among the most forward-looking citizen-activists on the scene for a decade. They certainly recognize the many deficiencies of our drive-in dystopia, apart from the oil issues, and have been working to remedy it. But they don’t really believe what I said to them.

The sad truth is that they are addicted to the same economic mechanisms as the sprawl-meisters: the production home-builders (so-called), the great mortgage mills of the conglomerate banks, and the real estate “industry” (also so-called). So they don’t want to hear that these “sectors” of our economy are not going to make it. They don’t want to hear about the necessity to downscale America anymore than the grifters who develop the WalMart power centers want to hear about it.

But we are going where circumstances are taking us whether we like it or not. We have to make other arrangements – and I mean really different from the way we live now, not just tweaking the municipal codes and building slightly better housing subdivisions and squeezing chain stores under the condominiums and hiding the parking lots behind the buildings. I hope the New Urbanists come around. They have a whole lot of very useful knowledge that will allow us to make our derelict towns habitable while we re-assign the remaining countryside for growing the food that we need locally.

Ah, I admit that I am in foul and turbulent spirits. I have been into the land of the American Moloch among its Moloch-worshippers and I am brainsick from it. I promise to cool my jets and come back next week with something a little less hysterical. By the way, my plane finally got out of LAX at 1:30 am Pacific time, three hours and ten minutes late. I missed my connection, so I am finishing this fugue in Dulles Airport, Washington.

Still Clueless (June 6 2005)

Cluelessness over the the world energy / economic predicament fogs the public discussion more than ever as we approach summer. The New York Times ran a big story in the Sunday news section about India’s soaring energy needs and its future plans (“Hunger For Energy Transforms How India Operates”). India is the world’s fifth leading energy user. Dig this: they import seventy percent of their oil. India’s government predicts that the country will have to import 85 percent of its oil two decades from now.

So what’s India’s plan? According to Energy Minister Mani Shankar Aiyar, the solution is “to persuade China to cooperate rather than compete”. Okay, and your bargaining chip would be …? Also consider this: The US, Japan, Europe and China will all have to import more than three quarters of their oil supplies. Does this suggest that the world is going to remain an orderly place?

Another plan to keep the lights on in Mumbai (where power outages are routine) is a 1600-mile natural gas pipeline from Iran, through Pakistan, to India. Has anyone noticed (a) that India and Pakistan have been deadly enemies for over half a century, frequently threatening to blow each other up with nuclear missiles, (b) that Pakistan is the world’s largest unstable country, and that its rugged terrain is home to many of the world’s most rabid and violent Jihadista groups, and (c) that such a proposed pipeline across Pakistan would be utterly indefensible?

The Times story about all this is so devoid of critical analysis that it appears to have been written by an eleven-year-old child.

The Times’s star columnist Thomas Friedman is making hay this season with his new book, The World is Flat, about the global economy. His book asserts that current trends will continue indefinitely – China will continue to manufacture ever more of America’s household products, Americans will continue to enjoy cash-out home equity loans to buy plastic patio chairs made in China, WalMart will keep running its warehouse-on-wheels at a thumping great profit, and all impediments to global trade will be vanquished by telemarketing, computer technology, and confident corporate can-do spirits. I am tempted to ask how Friedman manages to type on a laptop with his head so far up his ass, but this blog is dedicated, above all, to a high-minded brand of politeness so we’ll just say that he is not paying attention to a gathering global energy shitstorm that is going to change absolutely everything – including global economic relations which pundits foolishly maintain to be permanent conditions of life.

Here in the States, the price of a barrel of oil is back over $55 and we are only one week into the summer vacation driving season. President Bush is running a scam on the public by pretending to push Congress to act on an energy bill that offers nothing to realistically address the nation’s oil addiction and, especially, its car dependency. He doesn’t dare, I suppose, because he must know that the American economy is about little more than car dependency. But just watch: as the price for a barrel of oil heads north past $60, Bush’s abject leadership failure will become self-evident and the public mood will appear to shift overnight. The oval office will become a very lonely place indeed by this coming fall, and its occupant will have three long and terrible years left to suffer there.

Pipeline-istan (May 30 2005)

It’s a measure of our country’s desperation that many hopes among US government officials are pinned to the just-completed 1000-mile oil pipeline between Baku on the Caspian Sea and the Turkish port of Ceyhan on the Mediterranean. The idea is to get oil from Kazakhstan on the far eastern side of the Caspian sea through several other former Soviet states, bypassing a shorter, older route through the Black Sea, and creating an alternative to the ongoing horror show of the Persian Gulf.

The main problem is the idea that the American economy, and the easy-motoring lifestyle that holds it hostage, will now depend on a 42-inch wide oil pipe running through nations fraught with Muslim-Christian conflict on top of post-Soviet gangster politics. The good news is that the $4 billion pipe is buried underground so it will not be vulnerable to the small arms so abundant in that part of the world: shoulder-launched missiles, rocket propelled grenades, or .50 caliber bullets. The bad news is that it is only a few feet underground and can still be blown up by five pounds of Semtech strapped to a donkey. Also, the pipeline traverses some of the most rugged terrain in Asia Minor and presents many opportunities for mischief.

Another problem: Kazakhstan is right next door to China. China needs foreign oil as desperately as the US does. Nothing prevents China from commandeering Kazakhstan’s oil, by means ranging from legal contracts to Chinese soldiers on-the-ground. That logically raises the question as to whether America would entertain a land war with China over landlocked Kazakhstan, 12,000 miles away from here. What would you say our prospects would be in such a venture? The Russians might have some interests there, too, not necessarily identical to ours. World War Three anyone?

Finally, the wish back in the 1990s that Central Asian oil would bail the west out of dependence on the Persian Gulf nations has faded with exploration which now indicates the region has far less oil than the 300-billion barrels originally hoped for (more like sixteen to forty billion now), and that it mostly consists of low quality “sour” crude, heavy on sulfur and more expensive to refine.

But such is the nature of strategic thinking in Washington these days that it all comes down to a 42 two inch pipeline for us now. You have to wonder, for instance, why we couldn’t take that $4 billion and refurbish at least part of the US passenger railroad system – as compared to the roughly $290 billion slated for this year’s federal highway construction and maintenance bill.

Get ready for the interesting half of the year 2005. The summer vacation motoring season is officially underway with the Memorial Day weekend. Oil prices are back up near $52 a barrel after falling to $46 for a few weeks in May. Americans are not going to drive fewer miles this year. Just look at how we’ve arranged things on the landscape. Most have to drive all over the place whether they like it or not. By the fall, motorists (that is, American citizens – aka “consumers”) are going to be very disappointed with the way things are going, and they are going to start blaming the people responsible for our strategic thinking.

Paranoia Runs Deep (May 23 2005)

“Paranoia runs deep; into your life it will creep …”

So went the lyrics to the old Buffalo Springfield song from the tumultuous Vietnam War years and now, as Yogi Berra also said around the same time, “it’s like deja vu all over again”.

I like to claim that I am allergic to conspiracy theories and the paranoia that attends them. But these days I’m not so sure anymore. The noise in the system is getting pretty thick, and the Internet is the perfect system for paranoia because any website can appear to be dignified and therefore to speak with some kind of authority. You have to sort out the reality from the noise the best that you can on your own. (So maybe it’s not such a bad thing that this blog is so amateurish-looking, as many readers complain.)

The latest paranoid thread out there is that the US Military is waiting to commit a June assault on Iran’s nuclear facilities, and that the Bush administration has been manipulating the stock markets up and the oil markets down in an attempt to to lull the public deeper into its coma of cluelessness by making the surface of American life seem placid.

I really don’t know what the government is capable of doing to tweak the markets. It certainly has access to a lot of nominal “money”, and I suppose that it is not to difficult to put that money into “play”, by funneling it this way and that way through large institutions and agencies. The current crisis of capital derives from the fact that the American economy produces fewer and fewer things of enduring value – and more and more fluff in the form of Star Wars movies – so any financial paper or instrument that pretends to represent the nation’s longer-term prospects is in danger of not being taken seriously. The wealth accumulated in the US in the second half of the last century is actually shrinking now, since our industrial base is withering away, and whatever investment we are capable of making has been increasingly directed into the “hard assets” of houses. The catch is that the “investment” in houses is almost all credit – mortgages, promises to pay most of the money later. The catch of the catch is that the cost of obtaining credit (interest rates) remains supernaturally low and the standards for creditworthiness have ceased to exist. The catch of the catch of the catch is that a lot of the mortgages are adjustable, meaning the cost of borrowing doesn’t necessarily stay supernaturally low. It can float with rising interest rates.

Finance professionals know that these conditions are perverse and perilous. That’s why they call it a “housing bubble”. The moiling “consumer” masses only know that the dollar-value of their houses goes up ten percent or more every year, while stock and bond portfolios go sideways. So they ignore any supposed peril and keep flipping the houses. Finance professionals know that sooner or later grownups in other countries who buy our financial paper will decide that our long-term prospects are a joke, and that we will have to raise the interest rates a lot to keep them buying. When that happens, the tears begin to flow from the mortgage-holders.

Beneath all this runs the issue of our most critical resource, oil. Without it, America just stops running, and if oil gets much more expensive, major parts of our system start to break down – the easy motoring commutes, the oil-based farming, the big box retail, commercial aviation, et cetera. If oil makes a move above the $60 dollar range, all bets are off for the equity markets, the housing bubble, and the struggling “consumer” masses.

Now, it may be that the oil futures markets were simply overbought in April and the price had to go down while inventories were absorbed. The gross US inventory of oil awaiting the refineries stood at around 330 million barrels last week. Seems like a whopping great amount. We use twenty million barrels a day, so you can see that the inventory represents about 16.5 days of oil. Whoop-de-doo. But having the market price of a barrel of oil dip well below $50 was certainly a great psychological boost for the people who run America. It made President Bush seem like he can command the great forces of nature. And I suppose the oil price downturn also bestirred the equity market players to believe, if only momentarily, that there was some productive juice left in the old economy.

We now face the Memorial Day weekend, traditionally the start of the summer motoring season, when upward pressure on oil prices tends to resume. Even if the tanks are full now, it pays to remind ourselves that nearly three-quarters of that gasoline comes from other lands, including lands full of people who don’t want us to be happy. One of these, arguably, is Iran – though many in the hairsplitting game would say it’s only the leaders who hate us, not the youthful masses of the population, who don’t remember the Shah and all that. Some months ago, our leaders said they would not tolerate a nuclear Iran. In reply, Iran told the US to, well, to go piss up a rope, so to speak. All has been quiet since that exchange. They’ve made it pretty plain what they aim to do. Who knows what we aim to do? But paranoia runs deep.

Hand In Hand (May 16 2005)

I was in Tallahassee, Florida, last week talking to a large room full of planning officials. My message was pretty straightforward: every new housing subdivision, every new strip mall, every parking lagoon and big box chain-store pod that you issue approvals for from this point on will lead your country deeper into tragedy.

The response was apathetic, as though I were giving a class in Chinese algebra.

Florida is one of the multiple epicenters of a hypertrophic suburban growth machine that has taken the place of the US economy. Reforming it is unimaginable because without the business generated by a cancer-like replication of car infrastructure, the economy would consist of little besides hair cutting, fried chicken, and open heart surgery. In places like Florida (and California, and northern Virginia, and Las Vegas, and Dallas), all citizens are complicit in the drive toward tragedy because all want business-as-usual to continue. The idea that any set of circumstances might put a stop to it is laughable to them. What can you do for such a people determined to commit civilizational suicide?

Meanwhile, a glance at Sunday’s New York Times Magazine shows what the supposedly thinking class of America is preoccupied with these days: rescuing architectural Modernism, that twentieth century system of asthetic pretensions that affected to celebrate mankind’s triumph over nature by way of technology. Those boys are in for a surprise when they discover that nature gave the human race technology in order that we might choose to shoot ourselves in the head when the time came. This is what comes of humans bethinking themselves smarter than nature. Apart from it. Superior to it.

The tragic futility of the suburban growth racket and the towering hubris of Modernism go hand-in-hand. Both rest on ideologies that drive relentlessy toward death. Both depend on a condition of widespread and extreme narcissism among individual members of society to continue their operations. Both represent a kind of wickedness that does not require religious transliteration to understand. Both will be defeated by reality.

The Rapture (May 9 2005)

When exactly the American public entered the Rapture is a little hard to say – maybe as long ago as the Reagan years – but it is not the same Rapture as the Born Agains are gleefully awaiting – the absurd cosmic vacuuming up to heaven that leaves behind all the rest of us sinners. No, the Rapture I speak of is the stupendous complacency of a people convinced that the future is going to be just like the past.

Everywhere I look I see things that are not going to work in the years ahead, and see people making plans for conditions that will no longer exist. State DOT officials in Texas are planning to build a new statewide super-mega highway network just as the global oil peak forecloses a future of easy motoring. Where I live, at the rural edge of New York’s Capital District, suburban housing pods are springing up in every cow pasture in complete faith that supernaturally cheap mortgages and long commutes will continue to be the norm. Municipalities everywhere are investing in multi-million dollar parking structures in the belief that we will be using cars in 2019 exactly the way we do now. Even the enviros are enraptured. I get letters every day from bio-diesel fans who plan to run the interstate highway system and Disney World on oil derived from algae farms.

The collective consciousness is amazingly resistant to the fact that things change. Over in Syracuse, New York, a town sinking into the economic sclerosis of a former soviet-style backwater, the locals have approved perhaps the most idiotic project ever conceived by a free and sovereign people – a hyper-super-giant-mega-mall to be called DestNY USA (sic) that would include 400 stores, 4,000 hotel rooms, a saltwater aquarium, a 65-acre park under a Biosphere-like dome, and a food court based around a miniature Erie Canal {as reported in Sunday’s New York Times Metro Section}. The idea is that people will flock to Syracuse by car from places with equally sclerotic economies (Worcester, Massachusetts or Scranton, Pennsylvania) in order to go on shopping sprees for new sneakers and cargo pants, which for some reason may be in short supply where they live.

The near-imbecile governor of New York, George Pataki, showed up to grandstand at the “groundbreaking” for this dumb-ass boondoggle (which has garnered tons of tax credits and other windfalls), though not a darn thing has been built since that symbolic shovelful of dirt was turned over. The developer behind DestiNY USA, one Robert Congel, was the CEO of a predatory shopping mall company, Pyramid Inc, which raped the local retail economy of many an upstate city since the 1970s. For all of its grandiosity, DestiNY USA is still minor league stuff compared to the plans afoot for Las Vegas, where the Rapture is in its most florid and terminal stage, and aggravated by yet another collective mental disorder: the belief that it is possible to get something for nothing.

I’d go as far to say that a public as complacent and clueless as America’s is these days deserves to be played for fools. It’s not pretty, but life is tragic. History doesn’t care if we sleepwalk into a clusterfuck. Plenty of other societies have before us. The real sin in the real world is the failure to pay attention to the signals that your environment sends you. The signals aimed at us now tell us the following: the oil age is entering an unstable permanent decline; suburbia and all its usufructs is finished; the blue-light special shopping economy is about to end; easy motoring will shortly be a thing of the past; the middle class will be replaced by a new former middle class; and all bets are off as to how violently American politics will shudder when the fog finally lifts.

2041 (May 2 2005)

In his press conference last week, President Bush was fixated on the year 2041 as the point that social security will come off the rails financially if not reformed soon. He emphasized the year 2041 several times.

I wonder if the president has done the math on world oil supplies. A year ago (2004) just about any authority would tell you that, based on the current rate of use, the world oil supply would last another 37 years. Which would bring us to 2041. What a coincidence. Of the two issues, social security and oil, I have to think that running out of oil would be the more compelling, since social security will not exist unless there is an industrial society to support it. Inasmuch as industrial society runs on oil, and no combination of alternative fuels can take its place, a reasonable person would have to conclude that we face a hell of a problem.

Energy is what the president pretended to address in the first (and much briefer) part of his press conference – and he was asked hardly any questions about it during the Q and A. The president’s view is that “new technology” supplied by human ingenuity will eventually solve America’s problem with oil. This reveals a misunderstanding very common among those in the US public who think about these things at all, namely, that technology is thought to be synonymous with energy, that they are essentially the same thing.

The fact that energy and technology are not the same thing is crucial to understanding our predicament. There are really only five energy sources available to us: non-renewable oil, natural gas, coal, uranium, and renewable solar (which includes wind, hydro, photovoltaic, and bio-mass, all dependent on sunlight acting on the earth). The hope is that technology will somehow allow us to capture an equivalent amount of energy from renewables that we now get from non-renewables. This is the central fallacy of techno-hubris. And this popular delusion is one of the unfortunate unintended consequences of America’s successful landing on the moon in 1969 – the idea that we can do anything if only we wish hard enough. Talk about diminishing returns as expressed in culture!

Of course there’s a catch with the theoretical 37-year supply of world oil. The catch is that we don’t have to run out of oil, or even close, to have trouble with a depleting supply. All that’s necessary to destabilize the major industrial systems we depend on is a fractional yearly decline in production, say two or three percent, because that will mark the end of conventional industrial “growth” that global finance requires to continue operating. It also matters that the US has been depleting its oil at about that rate for thirty-five years and that we make up for our declining oil supply by importing two-thirds of the oil we use from other nations, many of them unfriendly.

President Bush has therefore wasted the first two months of his second term following a mistaken set of priorities. The system that is most in trouble is the oil-addicted American way of life and all its familiar accessories: the single family home in the suburbs, the multiple millions of cars and trucks running at any time, and the food grown and processed on fossil fuel “steroids”. If we don’t reform that system than nobody in American society will have security of any kind much sooner than 2041.

A Bitch-Slap Upside the Head (April 25 2005)

I was at the University of Wisconsin last week, doing Q and A after a lecture, when somebody asked me what it would take for the American public to start paying attention to the grave energy issues coming down at us. I answered, speaking figuratively, a bitch-slap upside the head. At once off to the side of the big room, a young woman thrust up her hand. I called on her and she said that she was offended by my remark. I was then duly upbraided for my choice of language and my attitude toward women.

This is not the first time I have encountered a reaction like this. A similar thing happened to me at Princeton last month. I remarked that Modernism had succeeded in removing all feminine qualities from architecture, in particular ornament and curves, and a wrathful female student hastened to chastise me for expressing the idea – to which, it seemed to me, any genuine feminist ought to be sympathetic.

After much pondering and prayer, I conclude that the faculties of the America’s great universities have forgotten what free speech means, namely that even if expressions make us feel uncomfortable we are obliged to tolerate them so as to assure our freedom to express ideas that might make somebody else uncomfortable.

What’s obvious is that these students have been carefully trained by their teachers to behave this way, conditioned to rise up on cue in censorious indignation to smack down ideas that “offend” them. Who are their teachers? A lot of the tenured ones are fellow members of my own Woodstock Generation (and many of them are women). It’s awfully ironic that an intellectual trend that started with the Berkeley “Free Speech” movement in 1965 has now mutated into a widespread impulse to censor free speech on the grounds that it “offends”.

This was the case earlier this year when the president of Harvard, Lawrence Summers, remarked at a conference that in light of the overwhelming representation of males on the science faculty perhaps there was something innate in the difference between men and women to account for it. Summers was pilloried for his remarks. The faculty went so far as to organize a formal no confidence vote against him. He has refused to step down, though he has issued many obsequious apologies in the aftermath.

What is most amazing about the Harvard incident is that it formally established the faculty’s position as being officially against free inquiry and free expression – and, of course, that it happened at the supposedly highest level of academia.

I would go so far to say now that this has all happened precisely because of differences between men and women and the fact that women have come to dominate some college faculties, especially the so-called humanities (where expression is supposedly taught). They’ve implanted the idea that somebody’s (anybody’s) personal feelings are more important than the substance of any expression, and that somebody’s (anybody’s) hurt feelings are grounds for shutting down the expression, and the discussion that goes with it. The implicit narcissism is also fantastic.

I regard this behavior on the campuses as pernicious fucking nonsense. It is just another thing (along with the widespread belief that it is possible to get something for nothing) that is turning America into a fourth-rate culture, a nation of cravens and cretins. And it will lead us right into the grip of the law of perverse outcomes, which states that people get what they deserve, not what they expect.

That 1914 Feel (April 18 2005)

The stock markets and the oil futures markets sank in tandem last week as the global economy responded to increasing strain by wobbling. Oil dipped below $50 a barrel. Don’t expect it to linger there long, as the summer driving season approaches. (Memorial Day weekend is the traditional start.)

Americans will travel compulsively even in a darkening economy. They may not go to Europe right now, with coffee at five bucks a cup there, but they will keep driving around the US because the suburban wastelands where most Americans live are so unendurably depressing that their denizens will pay almost any price for gas to get away for a while – if only to hyper-artificial destinations like Las Vegas and Disney World. In any case, virtually all American cities (or metroplexes, since the city part is now the least of them), are so designed that stupendous rates of daily motoring are unavoidable.

Being allergic to most conspiracy theory, I am not sure that a Plunge Protection Team actually exists. (That is, a gang of institutional investors whom government leaders can call upon to prop up faltering stock markets.) If there is such a cabal, then I would be further skeptical as to the extent of their power to act. This week will test their supposed powers against a super-tide of nervous lumpen 401-K holders who have begun to notice things such as the fact that nobody wants to buy big stupid badly-designed American cars, or that Senator Charles Schumer (D-NY) is hot to impose tariffs on Chinese textiles (that is, every article of clothing found in the GAP, Target, WalMart), or that we suddenly have a much more punative bankruptcy law that will make credit card free-spenders think twice about flirting with insolvency. My own predication is that the stock markets are entering a free-fall.

The excellent young historian Niall Ferguson has an essay in the current issue of Foreign Affairs (“Sinking Globalization”) to remind the supposedly thinking class that the global economy is not a permanent insitution but a set of transient conditions that has come and gone before – namely, the period running from about 1870 to 1914, when the First World War put an end to the Industrial Age’s first great interval of stability and free trade. That “golden age” beat a path into a gruesome intermezzo of broken political relations, depression, and more war. Globalization did not resume until the 1970s, when two things occurred: (1) the other combatants of World War Two recovered some industrial traction and (2) US oil production peaked and pricing power shifted to OPEC.

Since then, the world has enjoyed another extraordinary era of stability between the major nations. Notice, I don’t use the term major powers. Many would argue that US military power is beyond challenge. A minority view states there enough small arms in the world so that any gang of miscreants with $50,000 worth of rocket-propelled grenades, shoulder-launched missiles, and Semtech plastic explosive can make the US Army do a hurt dance. The long term trend is for America to exhaust itself engaging with these fire-ants, and to withdraw from the ant-hills back into the safety of North America.

That process is now underway, and the economic implications are rather dire. The spring of 2005 has that 1914 feel. In Iraq and the rest of the Middle East, the current hiatus has settled nothing. The various tribes and factions are still pissed off at each other and at us. America is still left with its huge oil import addiction and a suburban way-of-life that no amount of “energy conservation” can appease. The tectonic stresses of economic distortion have been building under the surface of the Wal Mart / China partnership. For those of you contemplating a vacation in Las Vegas, don’t bet on the status quo.

http://jameshowardkunstler.typepad.com/clusterfuck_nation/

James Howard Kunstler is author of The Long Emergency: Surviving the End of the Oil Age, Climate Change, and Other Converging Catastrophes of the Twenty-first Century (Atlantic Monthly Press (2005) and several other books.

Bill Totten http://www.ashisuto.co.jp/english/

Categories: Uncategorized

>What’s Left of the Union?

2005/06/27 2 comments

>by William Pfaff

New York Review of Books – Volume 52, Number 12 (July 14 2005)

1.

The French and Dutch referendum votes against the European constitutional treaty caused many Europeans to be alarmed for European unity itself. This was called the biggest reversal for Europe in fifty years, a revolt against economic reform putting the euro in jeopardy, a “lurch to the left”, a repudiation of Europe’s modernizing elites, the beginning of the end for the European Union. “We who lead Europe have lost the power to make Europeans proud of themselves”, said Jean-Claude Juncker, Luxembourg’s prime minister and current holder of the European presidency.

The rejection is something much simpler. It is a crisis provoked by the expansion of the European Union. It was foreseeable, and was sooner or later inevitable. The French and the Dutch have done the European Union a service by bringing it on now. A Europe of twenty-five members (not to speak of a potential thirty-five, or more) is too big to function as the Europe of Six, Twelve, and even Fifteen has been able to function. It represents a radical break from the EU as it has existed.

The constitutional treaty was the product of months of conscientious reconciliation of the views of the individual national members, under the presidency of Valery Giscard d’Estaing, who wrote the final version with the synthesizing panache taught only at the Ecole Nationale d’Administration. (The Constitution “is easy to read”, he told the French; a “tres joli” text. [1] ) In addition to combining all the previous EU treaties into a single three-hundred-page document, the constitution confers a number of additional powers on the union. It establishes a single EU foreign minister and a full-time president of the European Council, which consists of heads of state and government. It eliminates single-country vetoes on basic legislation (though not on big foreign policy decisions); and it increases the powers of the European Parliament. Although Spain approved it in a referendum earlier this year, France and the Netherlands rejected it with passion as soon as the public could have a go at it in their own referendums. [2]

[1] The French listened to him; they knew what they were voting on. In the final weeks before the referendum, books about the constitution were the three top French best sellers. The text was distributed by the government to everyone on the voting lists. An impassioned debate that split families and ended friendships had an intensity not experienced since a Socialist-Communist coalition successfully bid for power in France in 1981.

[2] Nine countries chose to ratify the treaty by parliamentary action: Austria, Germany, Italy, Greece, Hungary, Latvia, Lithuania, Slovakia, and Slovenia.

The rejection surely demonstrated the current gap of comprehension between European political elites and the European public, but was mainly evidence of the consistently underestimated forces of national identity and ambition in each of the twenty-five nations. The French were enthusiastically seconded by another highly nationalistic and individualistic Euro-pean society, the Netherlands – also one of the founding states of the European Union.

Not only the French and the Dutch (and obviously the British, who have now postponed a referendum that almost certainly would have rejected the constitutional treaty) are opposed to the constitution – or to be more exact, to the form of European integration, and the intention of further EU expansion, that the constitution embodied.

Sixty-five percent of the public in Sweden has demanded a referendum (instead of ratification by parliament) – a percentage that doubtless forecasts how the vote would go. The outcome of the Luxembourg referendum set for July 10 is expected to be no. Before the French and Dutch voted, polls in Denmark suggested a “yes” majority in the referendum called for September; but the prime minister, the Liberal Anders Fogh Rasmussen, has already said that unless Denmark has a guarantee that the document to be voted on will not later be renegotiated, a referendum is pointless.

The German Bundestag has also already ratified the constitution by a very large majority, but there is much reticence in Germany about where Europe seems headed. A writer in Die Zeit said recently that “the deep source of the malaise is not the constitution but Europe; one has the impression of having lost control over it”.

A German Christian Democrat deputy who was a member of the convention that wrote the constitution said recently:

“Until the start of the 1990s, we believed German and European interests were synonymous, identical. Today, opposition to that idea is visible, slowly developing over more then ten years. It began with hostility to the euro, which still exists …”

As this is written, the European Council meeting of presidents and prime ministers on June 16 is considering the next step, but while some governments cling to the idea of renegotiating the constitution, or think everyone should still have a chance to vote, it seems obvious that the constitutional project is dead, and so is Europe’s expansion beyond the current twenty-five members – plus the two who have been promised membership, Bulgaria and Romania. Turkey now appears to be out.

According to the EU agreement the ratification process can’t go on indefinitely. If, after two years, four fifths of the EU states have ratified the constitution but the rest have experienced “difficulties”, the European Council “will be seized” of the matter. With two important referendum defeats already, preparations for a British referendum suspended, and the prospect of referendum defeats in Luxembourg, the Czech Republic, and even Poland, the European Council seems unlikely to be troubled by the ratification issue two years hence. The European Union in that case will go on being governed by the ill-considered Nice Treaty of 2003, undoubtedly amended to remove some of its more unsatisfactory provisions, including its allocation of votes in the European Council, which was unfavorable to Germany and notably favorable to Spain and Poland. It will then be necessary for the EU governments to reconsider the future of Europe.

The referendum defeats and their implications have demonstrated a reality that the European political leadership has failed to acknowledge or has not wished to recognize. Expansion of the EU to the former Warsaw Pact nations was undertaken for moral as well as political reasons that, once the cold war ended, were all but impossible to ignore. But quantitative change can become qualitative change. The EU was being changed by expansion in ways that obstructed the integration and common action that were part of the EU’s original intention and previous development.

Large parts of the EU populations in the “old” countries of the union – France, Germany, and the Netherlands among them – are uncomfortable with expansion to twenty-five countries. They are apprehensive about bringing into the EU Romania and Bulgaria, not to speak of the remaining and still unreconciled former Yugoslav states of Croatia, Serbia, Montenegro, and (whatever its eventual form) Kosovo, and very doubtful indeed about Ukraine and Georgia.

All these countries have traditions, cultures, and histories more or less distant from those at the core of Western Europe, where the EU started. There is even greater reluctance to extend the EU to non-European Muslim countries in Asia Minor and the southern Mediterranean. Turkey, Morocco, Jordan, a new Iraq, and eventually Israel had all been thought by some to be logical future members. Including them would, it was hoped, soften the “clash” of Islamic and Western civilizations.

Forceful arguments were made for admitting all these countries. A “new Yalta” agreement that would cut Bulgaria, Romania, Ukraine, and Georgia out of “Europe” seems scarcely thinkable. The exclusion of these countries – their abandonment and consequent isolation from the European mainstream – could have desperate, even disastrous, consequences for them. The elaborate, sophisticated, and well-financed mechanism by which EU candidate members have until now been impelled to reform their political institutions, standards of justice, and protection of human rights, and develop their economies, has proven a marvelous force for stabilizing and modernizing societies with turbulent histories such as Spain, Portugal, Ireland, and Greece.

Over the last decade the EU has had immense influence on Turkey as Turkish leaders worked toward membership. There is obviously a great need to support political and social reform elsewhere in the Muslim world in order to develop constructive relationships between Islamic society and Europe and the larger West.

But to attempt all this by holding out the promise of EU membership threatens the integrity and survival of the European Union itself. Such is the judgment of the French and Dutch electorates. The EU is not an international aid or development agency; it is not aimed at reforming humanity or reconciling civilizations (or for supporting American foreign policy and global aims, as some Americans would like it to become).

The Dutch and French votes reflect the intuition that the first obligation of any political society, whether national or multinational, is to itself, its own security, integrity, and successful functioning. The European Union has to be a success in order to have a constructive influence on others, and this is what has seemed in jeopardy. As a success it may radiate its influence to neighboring societies through many forms of more or less intimate association, but not through membership, which would compromise its own integrity and capacity for action.

Some see cultural or religious discrimination in such a view. Some certainly see in it the comeback of nationalism, and the conventional political wisdom since World War II has identified nationalism with fascism. Fascism and Nazism both were nationalist historical moments, but nationalism is not fascism or Nazism. The US at this moment is arguably the most nationalistic country on earth.

Nationalism is an expression of the intense need for affirmation of national or communal identity as the anchor of individual identity. It is one of the fundamental forces at work in political societies, giving them meaning. It is also one of the “strong” forces in the physics of international relations, if not the strongest. It overrides short-term deviation or distraction. Although it may accompany high-minded internationalism, it does not readily yield to it; the repressed returns. For this reason nationalism has to be accommodated, not stubbornly resisted.

This is the force that has upset the European project and that resists further EU expansion as well as further concentration of executive power. The constitution asks a larger sacrifice of national sovereignty than the French, Dutch, and others are willing to accept. The Dutch plebiscite was all about identity. “We want to stay Dutch” was one of the slogans used to mobilize votes against the Constitution. The existence of a large and unassimilated immigrant population was a particular factor in the no vote in the Netherlands.

2.

Considerable confusion has been caused by comment in Europe as well as the United States and Britain that conflates the domestic problems and political conflicts of France and the Netherlands with the issues of European expansion and the constitutional treaty. France suffers a “crisis of regime” that results from unemployment of about ten percent, failures by the existing and previous governments to bring about economic and social reform, and personal rivalries over who will be the next president. This is all very interesting to the French political class and public, and to outsiders interested in France, but it is of strictly French concern.

The same is true in the Netherlands, where a weak coalition government deals with the consequences of the breakdown in recent years – for reasons having little or nothing to do with the EU – of the old political structure of Dutch society. Since the beginning of the last century political stability in Holland has rested on a more or less formal division of power and institutional influence among the Protestant and Catholic churches and other major social institutions in the Netherlands.

Today the churches are no longer strong enough to bear the weight of this arrangement. At the same time a large immigration – mainly from Turkey, Morocco, and the former Dutch colony of Suriname, among other countries – changed the complexion of the society, but the immigrants were never asked to assimilate to what is actually an old and unique society that in its own way can be highly intolerant. [3]

[3] The same mistake has been made elsewhere, where, for high-minded reasons, assimilation or cultural accommodation was not demanded of immigrants, thereby ghettoizing them, without meaning to do so. The largest components of Netherlands immigration have been Moroccan, Turkish, Somalian – all Muslim societies – and people from the former Dutch colony of Suriname, where Dutch is the official language and the population a heterogeneous one of Creoles, Indians, Javanese, blacks (“Bush Negroes”), and Amerindians. The assimilation – or nonassimilation – problem chiefly concerns the Muslim groups.

That the Netherlands arrangement has broken down was the conclusion drawn by the Dutch from the murders of the radical politician Pim Fortuyn in 2002 and last year of Theo van Gogh, maker of a film hostile to Muslim treatment of women. These were great shocks to a traditionally stable and liberal society, but again had nothing to do with the EU.

In both the Netherlands and France much opposition to the constitution was misinterpreted: the actual effect of the vote is not the one primarily intended. A great many French voted against Jacques Chirac and his government for being unable to solve the problems of high unemployment and low growth; but few of those voting in France or the Netherlands considered themselves voting against European unity as it now exists. They were voting against a different Europe, one that the constitution might have created.

In the Netherlands, people were not only voting against more immigration, they were also voting in protest against the loss they suffered from official undervaluation of the guilder when the Netherlands joined the euro. They were objecting to the indifference of EU officials and the larger countries to the Netherlands’ proposals concerning the constitution. They were voting for such irresistibly persuasive intangibles as “remaining Dutch”. They implicitly were voting against admitting Turkey and Ukraine to the EU, and against the original EU members’ loss of influence to new members. They voted against having Russia on Europe’s frontiers, as is now the case, and Europe’s on Iraq’s, as would be the case were Turkey admitted. But they were not renouncing the EU.

The French voted against the abstraction called “liberalism”, understood in Europe as globalizing American market capitalism set on destroying the European model of social welfare and government. They voted against the threat of Polish plumbers rushing to fix French sinks at prices ruinous to French plumbers, supposedly implied in Dutch former European commissioner Frits Bolkestein’s proposition for liberalizing competition in services across the EU. (Press inquiries in Poland subsequently produced little evidence of plumbers anxious to move to France.) They also voted against the threat that the constitution would allow NATO to control European defense.

But aside from larger European issues, the French were voting against the stagnation and sterility of French politics. Jacques Chirac launched his career as a presidential candidate twenty-nine years ago, against then President Valery Giscard d’Estaing, the man who drafted the European Constitution. Giscard first became a major political figure while Charles de Gaulle was still France’s president. The French would like change. They want someone to break their political stalemate, in which the same familiar faces shift from one position to another. President Chirac recently appointed Dominique de Villepin as prime minister, at least a relatively fresh face in French domestic politics, but that is not likely to be enough.

In France one can observe a very sophisticated level of political debate and passion but it does not always provide a model of political lucidity. The public demands reforms, and when it gets them often goes into the streets to block their application, as in a recent case of educational reforms. The French are a notoriously contentious people – rationalized as a heritage of revolutionary tradition – which is an important factor in both the demand for reform and the reluctance to have it applied.

In 1991 the French public, urged to do so by President Francois Mitterrand, approved the Maastricht Treaty confirming the expansion of the EU to twelve nations and proposing steps toward a common currency. Comparison of the May 29 exit polls in France with those of the referendum on the Maastricht Treaty shows no strengthening of extremist parties. Nor do the polls show new class, ideological, or regional divisions, or a rural-urban divide, or even one between the employed and unemployed. Retired people mostly voted yes both times, as did the professional and upper middle classes.

The decisive difference was a big shift in the vote of the “intermediate” trades and professions that make up the lower middle class. These include schoolteachers, nurses and hospital technicians, accountants, department heads in shops, and salesmen, among many others. The “no” vote of this group increased by seventeen points between the Maastricht referendum and 2005, producing a 53 percent majority.

In 1992 this group was the great beneficiary of the prosperity of France’s so-called glorious thirty postwar years. Its members were making more money than ever before, buying new houses in better suburbs, and had high expectations about their own future and particularly that of their children. That optimism now has disappeared, and people fear falling back. They have lost buying power and are afraid for their children. They are working harder (the thirty-five-hour work-week notwithstanding) but losing ground. These above all are the people who see “France in decline”, while their own situation seems ignored by management and unions alike; they are overlooked by the press, and treated with indifference by governing elites in Paris and Brussels. [4]

[4] Inquiry carried out for Le Figaro by Ipsos; see analysis by Vianney Aubert, Le Figaro (June 6 2005).

Undoubtedly there is an element of nihilism in French voter conduct today, provoked by political frustration, but again this has little or nothing directly to do with the EU. An economist and historian, Nicolas Baverez, wrote in Le Monde on June 4 that the constitutional referendum simply provided “the death certificate” for “Gaullist France, corrupted by Francois Mitterrand, and ruined by Jacques Chirac”. This is a convincing verdict.

Yet there are solutions. Sweden, Denmark, and other countries such as Switzerland manage to combine high standards for their social policies with low unemployment. Some of the solutions to France’s problems are readily apparent, such as the necessity to remove fiscal and administrative barriers to firing and hiring, and to the creation of new enterprises. But these require the political leaders to tell voters things they don’t want to hear (as Gerhard Schroder has begun to do in Germany).

Baverez also speaks of the problem of Europe’s “organized deflation, which has transformed ‘euroland’ into a desert of unemployment and innovation”, the result of Germany’s original insistence that the European Central Bank be given as its sole task the prevention of inflation. This automatically canceled the possibility of Keynesian policies (even the perverted Keynesianism of Bush administration deficit finance, which gives George Bush’s and Alan Greenspan’s America its much-envied growth and high employment). As Robert A Levine, former deputy director of the Congressional Budget Office, wrote recently, “The rigid monetary and fiscal constraints imposed by Maastricht are at least as responsible for economic malaise as structural sclerosis is”. [5] French voters remember that France’s postwar growth, from he early 1950s to the oil shocks of the early 1970s, took place under a dirigist government’s successful industrial policy, by which the government both supported and protected industries that showed a strong capacity for growth. At that time monetarism was but a cloud on the policy horizon, not the fading orthodoxy it is now.

[5] “[A eurozone return to prosperity] will require structural change; structural change will require voter approval; voter approval will require prosperity. The circle can be broken only by returning to the pragmatic use of monetary and budgetary stimulus as a necessary if ‘irresponsible’ first step to growth”. Op-Ed article in The International Herald Tribune (June 8 2005).

3.

The European Union is an amazing accomplishment. The original and early members have made a fifty-year effort to bring about Europe’s reconciliation; they did so with generosity, and willingness to pool sovereignty and spend money on one another and on the later members who joined the union. They aimed to create and sustain international peace, and economic and social development. The EU has transformed formerly poor countries in Europe – Greece, Ireland, Spain, and Portugal – and now is repeating this effort to benefit its new Central European, East European, Baltic, and Mediterranean members. It is a great success.

Rejection of the constitution does not damage the existing union. Relevant reforms – such as having a single president and reinforcing diplomatic and security powers – can be recovered from the wreckage. It is entirely possible for the EU countries to work cooperatively within a moderately altered version of the present EU structure of the twenty-five (or twenty-seven).

Former French foreign minister Hubert Vedrine wrote in Le Monde on June 9:

“Europe is geographic as much as political. It has to have limits … We should return to the Europe of great projects: infrastructure, educational, scientific, industrial, social, cultural, ecological, diplomatic projects. Projects that are precise, with timetables. Offered this, no one will be tempted to vote ‘no’. Existing treaties permit it. Give the eurozone a true economic policy. The challenge of the future is to reconcile growth, employment, and ecology. Let the European continent accomplish this synthesis.”

What is certainly feasible is a political arrangement in which there are several different levels of integration and nations selectively cooperate with one another when it makes sense to do so. This sometimes is described as discrimination, relegating some members to lower status, a conclusion that does not automatically follow. Such a Europe of diverse competences and ambitions is probably the only practical solution.

The European monetary zone, for example, in which the euro is the only currency, includes only twelve out of twenty-five EU members. The Schengen agreement eliminating immigration and travel barriers involves only fifteen EU countries, but includes non-EU Norway and now Switzer-land. EU peacekeeping initiatives have been carried out in Macedonia, Bosnia, Kosovo, Afghanistan, and the Congo.

In each case, the distinctions between those who take part and those who don’t are pragmatic rather than invidious. The European monetary zone, the European security organization, and European diplomacy all have different patterns of cooperation among EU members. Neutral states, non-EU NATO members, and non-NATO EU states accept different commitments and different ways of working together.

Within the existing EU a group of nations practicing “reinforced cooperation” in defense and foreign policy has been emerging, the result of an Anglo-French initiative at Saint-Malo in December 1998, strongly seconded by Germany and Belgium. The EU is preparing 7,500-man crisis groups for peacekeeping and a 60,000-man rapid reaction force that leaves out the EU’s neutral members, Austria and Ireland. The intention is to establish a serious European political and security presence in world affairs, a role that most of the group’s members, former great powers, had in the past.

Such is the Europe France wants. It is opposed and much derided in Washington and at NATO headquarters. Nicholas Burns, the US undersecretary of state and a former ambassador to NATO, bluntly told a NATO conference in Sweden on May 25, “Let’s get it straight. NATO does the big military operations” (or to be more accurate, US-led coalitions drawn from NATO and elsewhere are expected to do them). The EU, he continued, handles peacekeeping operations. “If not”, he said, “there will be friction, and you [meaning the Europeans] are not going to be happy”.

However, the commitment to making Europe a diplomatic and strategic force in the world was embodied in the constitution and undoubtedly will survive its demise, since it, too, is an affirmation of national or communitarian independence and strength. For this reason it may be doubted that it can be denied in the long run.

The official American position, reiterated several times during and after the French and Dutch votes, is that the United States wants “a strong and united Europe”. The dramatic French vote initially produced glee in some neoconservative circles, but the administration now wants good relations even with the “old” Europeans, and has its own priorities for the EU. It seeks European help in Afghanistan and Iraq, and also in dealing with Iran and in supporting whatever Washington eventually does with respect to a Palestine state.

The mainstream American foreign policy establishment has long wanted the European Union to have a close relationship with Washington, and some Americans expect it to eventually become the political counterpart to NATO in America’s transatlantic relations. This clearly implies American leadership, and is part of a larger conception of world “democratic” alliance. What Washington does not want is a Europe that aims to be a counterweight to US power or a power center in a multipolar geopolitical structure. Such could be “the road to war”, Condoleezza Rice once warned.

Hence a European crisis that temporarily weakens the French position in Europe and strengthens Tony Blair is welcome in Washington, while a Europe that will not be open to Turkey or to new members from the post-Soviet states is unwelcome. What is unacceptable to the US administration is a Europe with political and strategic ambitions of its own. Nonetheless, that seems likely to be the Europe that will survive the doomed adventure of the constitution.

(June 15 2005)

NYR Books Copyright 1963-2005 NYREV, Inc. All rights reserved.

http://www.nybooks.com/articles/18117

Bill Totten http://www.ashisuto.co.jp/english/

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>Challenges in a World of Oil Scarcity

>The Coming Saudi Oil Crisis

by Matthew R Simmons

CounterPunch (June 21 2005)

As oil becomes a scarce resource, its use will have to be rationed in one way or another. There are ways to allocate oil use and direct it to its most valuable applications. But achieving such a rational plan will require a carefully orchestrated, global, country-by-country effort. Left unattended, this process could quickly evolve into genuine chaos. The global economy can function after oil supplies peak, but not in the same manner in which we live today.

Once oil supply peaks, the world will be forced to create ways to substantially conserve our oil and other energy sources. This shift should force a rapid rethinking of the notion that transporting people and products anywhere in the world is an almost incidental cost of doing business. “Transportation” turns out to be the biggest single user of oil, and we need to begin finding ways to minimize everyone’s transportation needs and make the use of transportation fuel as efficient as possible. Today, the most wasteful use of transportation fuel is probably traffic congestion. A world beyond Peak Oil will be forced to solve this problem, too. Whether its solution is living closer to one’s work or using more mass transportation, both become viable ways to address traffic congestion and use oil more efficiently as prices rise. Simply building additional miles of wider and wider roads no longer works. Even a new fleet of more fuel-efficient vehicles will take too long to implement and may still use too much oil. If we do not alter our transportation systems as a matter of policy and public planning, the inexorable operation of pricing mechanisms will do it for us. At some price for gasoline, traffic congestion will diminish.

There is no question that a world of increasingly scarce oil will foster a growing competition among energy-consuming countries. As the reality of declining oil supply becomes better understood, this country-by-country competition could evolve either into a manageable process (like the economic competition that has existed for decades among the various OECD countries) or an aggressive free-for-all that triggers new wars. If the problem is misunderstood or left unaddressed, war could easily prevail over peaceful competition. Securing adequate oil supplies was, after all, an important element in all the major wars of the twentieth century and in the United States’ two most recent interventions in the Middle East. If the magnitude of the problem is fully understood and the risks of a laissez-faire approach are appreciated, all nations should be able to recognize the necessity of working out comprehensive ways to allocate an increasingly scarce supply of oil among the world’s many deserving countries.

The competition for oil supplies is not waiting for the day when oil production peaks and begins to decline. Scarcity is not simply a function only of production and supply; it also results from increasing demand. And that is the situation we are facing today. More people in more places want a share of the world’s petroleum resources. Rising demand over the past several years has altered the previous market balance and quickly turned oil from a relatively abundant to a far scarcer commodity. The most aggressive new entrants into the international petroleum markets are China and India, the world’s two most populous nations with two of the fastest growing economies. They will, within the lifetime of a majority of Americans and Europeans alive today, become the two largest national economies in the world by most measures, although they will not be the wealthiest.

The developing oil needs of China and India are huge, and their leaders seem now to be truly understanding the issue, perhaps far better than the leadership in many already prosperous countries. They are now using every means traditionally employed by Western nations and their oil companies, short of military force, to secure sources of supply. These means include diplomatic relations and foreign aid, direct investment, bilateral agreements, technology assistance and transfer, and the exploitation of frictions in the traditional relationships between Western nations and non-Western oil producers. China has forged agreements with three of the largest Petroleum exporters – Saudi Arabia, Iran, and Venezuela – and with several others. Not surprisingly, several of these exporting countries are currently in disputes with the United States. These countries may not be above using their increased market leverage in ways that will damage US interests.

The growth in China’s and India’s need for oil has now become very visible. Less visible is the meager oil use by many other countries that now also aspire to be like “us”. In a world where oil is limited, it is vital that a truly global International Energy Agency (IEA) begin to embrace the needs of all the world’s energy users and not simply view its role as that of the energy watchdog for the prosperous energy consumers.

I happen to think the world can make the transition into what we might call the post-Saudi oil era in some very rational ways that will limit economic disruption. As a perpetual optimist, I believe the world still works beyond Peak Oil. While oil prices in this new world will obviously rise, this rise can be a blessing, not a curse. Far higher oil prices make all other forms of energy more competitive and spur on energy research programs that might discover some real long-term fixes.

Higher oil prices will also trigger a massive influx of money to all oil-exporting nations, even as their reserves and daily outputs shrink. With proper guidance, and based on the grim reality that this great flow of fluids for these oil countries is essentially a “last call” instead of just another boom that will be followed by another bust, oil-producing countries can make the most of the revenues that higher oil prices create.

It is imperative for countries like Saudi Arabia and the Middle East producers in general to wisely invest their pending windfall profits toward creating modern societies that work beyond oil. If such plans are enacted, their unforeseen benefits could turn into a surprising global miracle. The time for using high oil prices for guns, palaces, and Swiss bank accounts is over. This money now needs to be used to create the basis for more abundant life in these countries after Peak Oil.

Do the math to understand how powerful this spending boom could be. OPEC, as a group of countries, now has about 600 million people. By 2025 or 2030, the OPEC population could easily exceed one billion people. If future oil prices were to remain as low for the next twenty years as they have been over the last ten years, it would almost ensure an ever-increasing gap between vast wealth for the ruling elites in these important countries and increasing poverty for the masses. Such a model is unsustainable. Social chaos, increasingly violent terrorism, and political or military revolutions would ultimately become “normal events” throughout all OPEC countries.

If the process is managed in a rational manner, an era of high oil prices can create the necessary revenue to begin building a genuine middle class in most OPEC nations. This process would, in turn, unleash a buying spree for OECD goods and services. The growth in demand for such goods that this new middle-class OPEC society would want might make even the economic
miracle unleashed when the Marshall Plan rebuilt Europe appear modest in comparison. It would certainly overwhelm the economic miracle of the 1980s and 1990s when the Asian tigers finally rose to prominence.

A world that learns to live with a dwindling oil supply will also be forced to control the emissions that energy use creates in an entirely different way than anyone envisioned when worries of global warming first began to surface. A continuation of urban sprawl would become an intolerable trend as the transportation that supports it becomes too costly. Fortunately, the world has already created the necessary tools to allow many highly productive people to stay and work at or closer to home. How odd it would be if the Internet became best known as a great tool to help pave the way for a world that uses less oil.

The biggest danger the world faces, if my thesis about Saudi Arabia’s oil is correct, is that no one will begin preparing Plan B. As far as I know, there is not a single contingency plan in place or currently being written by any of the think tanks of the world that sets out a model illustrating how the world can continue to function smoothly once it is clear that Saudi Arabian oil has peaked. In a nutshell, it is this total lack of any “alternative scenario thinking” that makes this unavoidable event so alarming.

Matthew R Simmons is Chairman and Chief Executive Officer of Simmons & Company International, a Houston-based investment bank that specializes in the energy industry. Mr Simmons serves on the boards of Brown-Forman Corporation and The Atlantic Council of the United States. He is also a member of the National Petroleum Council on Foreign Relations. He has an MBA from Harvard University. He is the author of Twilight in the Desert: the Coming Saudi Oil Shock and the World Economy (John Wiley & Sons, 2005), from which this essay has been excerpted.

Copyright 2005 Matthew R Simmons

http://www.counterpunch.com/simmons06212005.html

Bill Totten http://www.ashisuto.co.jp/english/

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>The $4.7 Trillion Pyramid

>Why Social Security won’t be enough to save Wall Street

by Michael Hudson

Harper’s Magazine (April 2005)

They wanted something for nothing. I gave them nothing for something.
– J R “Yellow Kid” Weil

Social Security, formerly the “third rail” of American politics, has now been trod upon, in rather dramatic fashion, by George W Bush. Given that the maneuver is both stupid and unnecessary, one must ask why. After all, the program’s alleged deficiencies, if there are any, will not manifest themselves until at least 2018. This is not quite the same as worrying about the sun’s eventual collapse into a black hole, but for most politicians a problem that lies thirteen years in the future is nearly the same thing. Clearly all is not what it seems.

Bush himself offers two reasons for the present boldness. The first – that Social Security is “in crisis” – is easily dismissed. Government actuaries, backed by economists from across the political spectrum, insist there is no funding problem. The Social Security Administration will take in more money than it pays out for the next thirteen years; it has built up a reserve of $1.8 trillion in interest-bearing Treasury bonds for the years after that; and any later shortfall can be covered easily by even a partial rollback of the recent tax cuts for the rich.

Bush’s second argument sounds more promising. If the American people will simply follow his plan, he says, they too will become rich. The way the system works now, the government withholds 12.4 percent of your paycheck, up to $90,000 in annual income. In return, it promises to provide you a monthly payment – a pension – from the time you turn sixty-two until the time you die. As of this writing, the administration’s alternative remains somewhat nebulous, but what is clear in all of the variations presented thus far is that you will be able to put some of your paycheck into the stock market. Bush calls these stock purchases “personal savings accounts”.

Bush’s opponents note a possible third reason, which is that he is hoping to roll back the New Deal in favor of smaller government. It may be true that Bush dislikes the New Deal, but it is hard to envision his proposed replacement as a small-government alternative. A federally mandated transfer of funds – whether it is from taxpayer pockets to Treasury bills, as with Social Security, or from taxpayer pockets to the stock market, as under Bush’s proposed changes – is still a federally mandated transfer of funds.

Vice President Dick Cheney described the benefits of these personal savings accounts in January. His example was a young woman who put away $1,000 every year for forty years. The Social Security Administration currently puts her money into Treasury bills, which at present return about two percent, so in forty years that investment would have returned about $61,000. Not too bad. “But if she invested the money in the stock market”, Cheney said, “earning even its lowest historical rate of return, she would earn more than double that amount – $160,000. If the individual earned the average historical stock market rate of return, she would have more than $225,000 – or nearly four times the amount to be expected from Social Security.”

Any relationship between the solvency of Social Security and the prospect of these personal accounts is purely rhetorical. Just before Bush’s State of the Union address a reporter asked a “senior administration official” at a background briefing whether it was accurate to say that personal savings accounts themselves would have “no effect whatsoever on the solvency issue”. The surprisingly candid response was , yes – “that’s a fair inference”.

That’s a lot of math. Cheney’s main point is that an upbeat assessment of the stock market – about 7.5 percent annually over forty years, by his reckoning – would easily exceed the two percent offered by Treasury bills.

There is no arguing that $225,000 is more than $61,000. On the other hand, it’s not as if you get a lump sum from the Social Security Administration when you retire. The woman Cheney cited could end up taking in much more than $61,000 if she lives long enough. (The average annual payment to retirees today is about $11,000.) Or she could die on her sixty-second birthday. Like any other investment – or any other form of insurance, for that matter – Social Security is somewhat of a gamble. But then so is the stock market. By Cheney’s estimation, however, today’s stock market is a much better bet. “Over time”, he concluded, “the securities markets are the best, safest way to build substantial personal savings”.

THE ONLY WAY THE STOCK MARKET IS GOING TO GROW IS IF
WE THE PEOPLE PUT A LOT MORE OF OUR MONEY INTO IT

That is the argument, anyway. The stock market is the main chance in America, and Bush wants to let all of us in on the action. The one sure mark of a con, though, is the promise of free money. In fact, the only way the stock market is going to grow is if we the people put a lot more of our money into it. What Bush seeks to manufacture is a boom – or, more accurately, a bubble – bankrolled by the last safe pile of cash in America today. His plan is a Ponzi scheme, and in that scheme it is Social Security that is being played for the last sucker.

Retirement savings are by far the most important source of money on Wall Street. The Federal Reserve Board reports that private and public retirement accounts, not including Social Security, had assets of $10 trillion at the end of 2003. Nearly half of that, $4.7 trillion, was held in stocks. By way of comparison, the total value of all domestic stocks listed on NASDAQ, the American Stock Exchange, and the New York Stock Exchange at the end of 2003 was about $14.2 trillion.

In the past, few retirement dollars found their way to Wall Street. IRAs and 401(k)s had yet to be invented, and few companies offered private pension plans of any kind. In 1950, General Motors – then, as now, among the largest employers on earth – began to change that with a new form of compensation. The company would withhold money from paychecks, much like the Social Security Administration was doing, and add money of its own to build up a reserve to pay retirees many decades into the future. Generally called a “defined benefit” plan, the scheme guaranteed retirees a specific (defined) monthly payment until they died.

Other giants of American industry soon followed, and the funds grew quickly. In most of them, at least half the money was put into the stock market. Workers thus would gain, at least in theory, a stake in the prosperity of their company, building loyalty to management while also providing companies with a captive source of credit – their own workforce. All of that new cash contributed to the bull market of the 1950s.

Management philosopher Peter Drucker called this process “pension-fund socialism” and hailed it as the most positive social development of the twentieth century, because it would at last merge the interests of labor and capital. Louis O Kelso and Mortimer J Adler even wrote a book called The Capitalist Manifesto announcing that a new epoch of harmony between workers and owners was at hand, because soon all workers would be owners.

It didn’t quite work out that way. Many companies used retirement reserves to buy their own stocks, bidding up their share price and allowing them to take over other firms on favorable terms, especially as mergers and acquisitions gained momentum in the 1960s. The problem was that when companies went bankrupt – especially small firms – the collapse also wiped out the pension funds invested in those companies. Employees of such companies found themselves not only out of work but stripped of the money they thought was being saved up for their retirement.

Congress moved to limit such behavior by obliging corporate pension funds to be run by arm’s-length trustees, although workers were still permitted (and often encouraged) to keep their pensions in the stock of their employers. To further protect workers, Congress created the Pension Benefit Guarantee Corporation (PBGC) in 1974. All corporate pension plans were required to buy federal insurance, through the PBGC, to protect workers in the event of a failed investment scheme or corporate bankruptcy. The plans themselves were still prone to risk, but at least the pensions would be backed by the government and workers could feel secure about their retirement.

Although as former employees of Enron and WorldCom recently learned, the price of demonstrating loyalty still can be quite steep.

Most companies now offer their employees a broad array of mutual funds instead of just their own stock. In itself this is good common-sense investing practice, and it also protects fund managers from charges of scheming. The other result of this practice is that workers’ fortunes are now tied not just to their own companies but to the market as a whole.

Which is where and how we come to both the problem and the scam. While fears regarding the solvency of Social Security are unwarranted, many corporate pension plans – the ones that have been so important in bankrolling the stock-market rise of the past few decades – are themselves threatening to go bust, taking their parent companies down with them. The financial rot already has begun to seep into the airline and steel industries, and the auto sector may be next. (General Motors reports that its current pension obligations add $675 to the cost of every vehicle it produces.)

COMPANIES SIMPLY HAVEN’T BEEN PUTTING AWAY ENOUGH
MONEY TO PAY RETIREES WHAT THEY ARE OWED

The shortfalls aren’t just a matter of bad luck. For quite a few years now, companies simply haven’t been putting away enough money to pay retirees what they are owed. The PBGC estimates that the underfunding of traditional defined-benefit plans, for instance, deepened by $100 billion last year, to a total of $450 billion. The problem was created by fund managers and CFOs who believed – or at least pretended to believe – that pension reserves could grow at fantastic rates of return forever. Milliman USA, a benefits consulting firm, reports on the assumed rates of return on pension investments at the hundred largest firms in America. How high did these companies bet? In 2000 and 2001, the median projected rate of return was 9.5 percent. In 2002 in was 9.25 percent. And in 2003 it was 8.55 percent.

These are wildly optimistic projections, even by Dick Cheney’s standards. Last summer the Financial Times noted that they conflict not only with present reality but with warnings from such mainstream investment experts as Peter Bernstein, Jeremy Siegel, and Jeremy Grantham that “we have entered a low-return environment” and that as a result many investors are expecting long-term returns closer to seven percent or five percent. Even these rates seem overly exuberant, given that the top hundred corporate pension funds earned an average annual investment return of just 1.3 percent between the end of 1999 and the end of 2003.

A three-year Treasury bill purchased at the end of 1999 would have returned 6 percent.

At the beginning of 2001, for instance, IBM proposed that it would earn $6.3 billion on pension-fund assets of $61 billion – about ten percent. This was an astonishing demonstration of confidence given that IBM had earned only $1.2 billion on those assets the previous year. In the event, IBM actually went on to lose $4 billion in 2001. Barely daunted, the company’s managers predicted a 9.5 percent return in 2002. They lost another $7 billion. In 2003 they predicted a return of $6 billion, and – as the market began to recover – they at last beat their prediction, by $4.4 billion. The result of this “recovery” is that, since George W Bush took office, IBM’s pension-fund assets have plummeted by more than $1 billion. Nonetheless, corporate fund managers across America remain optimistic.

THE CHOICE BETWEEN LIVING UP TO THEIR PENSION PROMISES OR REPORTING HIGHER NET EARNINGS WAS EASY

Such errors in judgment are seldom accidental. In pretending that their funds could generate high returns, managers sought a real – albeit short-term – advantage. The faster companies projected their funds to grow, the less they had to set aside to pay their retirees. The lower setasides in turn allowed them to report higher earnings, thereby driving up the price of the company’s own stock to “create shareholder value”. Faced with a choice between living up to their pension promises or reporting higher net earnings, companies simply decided not to live up to their employee agreements.

Plans with more realistic projected rates were deemed “overfunded” and emptied out.

The practice is not one that can be sustained across forty years. It is a kind of Ponzi scheme, in which present profits are paid for by the promise of future stock-market gains. At some point retirees are going to want the money they are owed. The last few years have seen the results of these broken promises in the form of lawsuits, bankruptcy, and, ultimately, retirees being forced to live on far less than they were promised.

In the end, it is the PBGC that pays when the plans go bust. Here, however, the problem deepens considerably, because picking up the total bill for the corporate sector’s underfunding would bankrupt the PBGC itself.

Last November the PBGC reported that although it had “operated for several years with virtually no claims”, the end of the stock-market boom has given way to “a period of record-breaking claims”. As recently as 2001 the PBGC had a surplus of $8 billion, but a series of bankruptcy cases pushed it $23 billion into deficit last year, a year in which it took in only $1.5 billion in premiums. The PBGC would need more than fifteen years just to make up its current deficit, with new claims arriving all the while. The PBOC has proposed that companies follow more realistic accounting rules and pay premiums that reflect the true risks of their underfunding. It also is asking for stricter limits on the ability of companies to escape their pension debts by declaring bankruptcy.

Reasonable as these requests seem, they are being opposed by the same corporate managers who created the mess in the first place. Last year the American Benefits Council, the lobbying organization of pension-fund managers, persuaded regulators to even further loosen me requirement that companies estimate realistic rates of return.

Without such changes the PBGC will be forced into bankruptcy and the government will have to bail it out. That could cost as much as $95 billion, according to the Congressional Research Service. At that point only today’s profits would remain private. The losses will have been fully socialized.

That estimate is probably low. The precedent is the bailout of the Federal Savings and Loan Insurance Corporation, which ended up costing taxpayers $200 billion.

SOMETHING HAS TO GIVE – EITHER THE HOPES OF RETIREES
OR THE HOPES OF THE STOCK MARKET

Barring some sudden influx of capital, something has to give – either the hopes of retirees or the hopes of the stock market. Unfortunately, this is a zero-sum game in which many Americans are on both sides at once. Higher pension set-asides will diminish corporate earnings. Lowered earnings in turn will lead to dividend cuts and job losses. Low dividends and high employment will decrease the demand for stocks – leading to further declines in the ability of pension funds to pay retirees, with more defaults all around. Workers, retirees, investors, and taxpayers thus find themselves yoked to the fortunes of the financial managers who created this situation.

This is hardly the kind of happy pension-fund socialism that Peter Drucker had in mind, in which worker-owners share risks and rewards alike as they create the goods and services demanded by a thriving marketplace. In fact, what has happened is that companies have made a great effort not merely to share the risk but to off-load it entirely onto the backs of their employees, the government, and taxpayers in general.

This phenomenon of risk rolling downward can be seen most clearly in the move by many companies from defined-benefit programs – in which employees are guaranteed a specific retirement payment, based on their salary history – to “defined-contribution plans”, in which workers know nothing else except how much is being deducted from their paychecks. The payout rate is decided by how well the stock market performs, which shifts the risk onto employees even as it frees up more revenue for their employers and generates rich commissions for money managers. The risk flows down the economic scale even as the cash flows up.

Given the widespread problems confronting pensions outside the embrace of the federal government, now would seem an odd time for the administration to campaign for Social Security privatization. Why would anyone want to invest America’s last line of pension defense in so perilous a market? Are Bush and his advisers unaware of the odds?

Probably not. Therefore, they must have a particular idea in mind. Presumably they believe that some kind of market recovery is needed not only to rescue the PBGC but to rescue the pension funds, to rescue the stock market, and, for that matter, to rescue the political fortunes of the ruling party – that what is needed, in fact, is a Bush boom. After all, such a boom would allow us to “grow our way out of trouble”, as we have done so many times before.

But where will the funds come from to bid up stock prices? The national savings rate is nearly zero, because most personal discretionary income – like that of most companies – is absorbed in repaying debts. Previously, the Fed could have flooded the capital markets with credit to lower interest rates and thereby spur a bond and stock-market bubble. But interest rates are at their lowest since the 1950s. They can go no lower.

After World War II interest rates rose to a peak, in 1980, of more than 21 percent. The result was nearly four decades of capital losses on bonds – whose interest rates are fixed at the time you buy them – and a steady rise in stocks. Since 1980, however, interest rates have fallen back, creating the greatest bond-market boom in history.

There is only one other place to turn. The new flow of funds into the stock market will have to come from labor itself, just as it did back in the 1950s. Social Security is the greatest plum of all, so large as to virtually guarantee a boom.

MANY OF HISTORY’S MOST FAMOUS BUBBLES HAVE BEEN
SPONSORED BY GOVERNMENTS IN ORDER TO GET OUT OF DEBT

Talk of bubbles has become popular in recent years, but most discussions miss the key point. Although optimism is inherent in the human spirit, it rarely effloresces into the kind of frenzy necessary to float a bubble without help from the government. In fact, many of history’s most famous bubbles have been sponsored by governments in order to get out of debt. Britain, in 1711, persuaded bondholders to swap their bonds for stocks in the South Sea Company, which was expected to get rich off the growth industry of its day, the African slave trade. By the time the South Sea bubble collapsed, the government had indeed paid off its war debt – and speculators were left holding worthless “growth sector” stocks. In 1716, John Law organized France’s Mississippi bubble along the same lines, retiring France’s public debt by selling shares to create slave-stocked plantations in the Louisiana territories. It worked, for a while.

The US government is now attempting to run the same kind of scam. Bush would like to persuade Social Security claimants to exchange the security of US Treasury bonds for a chance to buy growth stocks on which a much higher return is hoped for. No modern blue-sky venture comparable to the South Sea or Mississippi companies is needed. The stock market itself has become a bubble, borne aloft from the burden of generating actual goods and services by a constant flow of new retirement dollars.

There is no denying that channeling trillions of Social Security dollars into the stock market would produce short-term gains. But once this money is spent, the markets are likely to retreat. That is what happens after a financial bubble. Then we will be right back where we are today, only much the poorer and with no guaranteed pension system for elderly Americans – who will, of course, need guaranteed pensions more than ever as they watch their stock holdings continue to shed value. Indeed, many other countries are just now recovering from their own dismal experiences with what Augusto Pinochet and Margaret Thatcher called “labor capitalism” and Bush calls, with no apparent irony, an “ownership society”.

In Chile conglomerates invested employee paycheck withholding in their own stocks or in loans to affiliates whose value then was wiped out in financially engineered bankruptcies. The problem got so bad by 1980 that the government turned over management to American and other international firms. Most discussions of Chile’s “success story” choose to start at the trough right after these fraudulent bankruptcies, which of course gives a steep trough-to-peak tilt for the rate of return that is claimed to be normal. The equivalent for America would be to start a new trend right after a 1929-type stock-market crash. When one starts from a peak, such as today, it is much harder to give the statistical impression that a fantastic takeoff is in store.

In the 1930s, John Maynard Keynes urged governments to run budget deficits in order to increase the economy’s spending power on goods and services. His point of reference was the “real economy” – the economy of production and consumption, of investment in capital and in the labor to operate that capital. Whereas Keynes spoke of governments priming the pump with public spending programs to get domestic investment and employment going, Bush now seeks to prime the stock-market pump with Social Security contributions. It is the next natural step from our real economy to the economy of dreams.

The genius of recent administrations, Democratic and Republican, has been to transfer inflation to the stock market – that is, to the prices of stocks and bonds instead of to the prices of labor and production. Real wages today are lower than they were in 1964.

Michael Hudson is Distinguished Professor of Economics at the University of Missouri, Kansas City, and the author of many books on international and domestic finance, including Super Imperialism: The Origin and Fundamentals of US World Dominance.

http://www.michael-hudson.com/

Bill Totten http://www.ashisuto.co.jp/english/

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>Capitalism’s future on trial

>The European Union’s crisis has obscured the fact that it has
come closest to balancing market dynamism and social protection

by Jeremy Rifkin

The Guardian (June 22 2005)

Europe has plunged into a crisis of meaning in the wake of the repudiation of the EU constitution by voters in France and the Netherlands – and the Brussels summit breakdown. At the root of the crisis is a deep angst over the dire state of domestic and European economic affairs.

The neoconservatives argue that the only way out of the economic malaise facing Europe is to deconstruct decades of social benefits that have come to define the European notion of quality of life in a socially responsible society, and unfetter the marketplace so that competition can run free. If Europe does this, they say, the economy will grow and the people will prosper.

The socialists argue, on the other hand, that the unrestrained Anglo-American liberal market model rewards the rich by beggaring the working class and results in a meaner and more bereft social order.

In a curious way, what is really on trial is not the EU constitution but the future of capitalism itself. An increasing number of Europeans are asking themselves whether the liberal market model or the social market model is the best approach to charting the economic future.

Today, while corporate profits are soaring around the world, 89 countries find themselves worse off economically than they were in the early 1990s. Capitalism promised that globalisation would narrow the gap between rich and poor. Instead the divide has widened. The 356 richest families on the planet enjoy a combined wealth that now exceeds the annual income of forty percent of the human race. Two-thirds of the world’s population have never made a phone call and one-third have no access to electricity.

The champions of capitalism pledged to promote sustainable economic development; yet we continue to squander our remaining fossil-fuel reserves, spewing increasing amounts of carbon dioxide into the atmosphere, destroying the world’s ecosystems and habitats, with the prospect of catastrophic climate change.

Our business leaders decried the corruption that permeated the old centralised communist regimes, while many engaged in equally egregious corporate corruption, bringing down some of the world’s “most trusted” companies.

Why have the two dominant ideologies of the industrial age so utterly failed? Because the central tenet of each was not sufficiently tempered by the antidote of the other. The central tenet of communism is best expressed in the oft-heard aphorism “from each according to his ability, to each according to his need”. In practice, however, communism created a form of paternalistic governance that robbed the individual of any semblance of autonomy. In the end, everyone was subject to the dictates of impersonal state-run bureaucracies.

The central tenet of capitalism is found in the words of the Scottish Enlightenment economist Adam Smith. He believed that an invisible hand ruled over the market place, guaranteeing that everyone would eventually benefit, if only the market mechanism were left unencumbered. Neoconservative economists and politicians still believe this.

In reality, the invisible hand has turned out to be nonexistent. Left to its own internal logic, the unfettered market leads not to a bigger share of the economic pie for all but a “winner takes all” endgame.

Is capitalism salvageable? Yes, but only if we are willing to have a frank discussion. The strength of capitalism is, paradoxically, also its weakness. The market caters to the pursuit of individual self-interest, and is therefore almost pathologically innovative. The entrepreneurial spirit, technological innovation and productivity advances exceed any other economic system ever devised.

But capitalism does not fairly distribute the fruits of economic progress. That’s because the logic in the boardroom is always to cut production costs in order to maximise profits and shareholder value. This means reducing, whenever possible, the share of the gains that goes to workers, as well as cutting the expense of preserving the natural environment upon which all future economic activity depends.

In a globally connected world, the hope for humanity rests on creating a balance that encourages and stimulates the entrepreneurial spirit of the market while tempering its inherent propensity to run wild and concentrate more and more power at the top. Countervailing forces, in the form of a strong trade-union movement, a diverse and healthy civil society and vigilant political parties, need to rein in the potential abuses and exploitation of capitalist practices by ensuring a just redistribution of the benefits of the market with the appropriate social programmes – without, however, stifling market incentives. This is a tricky balancing act.

We ought to consider capitalism and socialism as complementary “visible hands” that continually balance individual self-interest in the market with a collective sense of responsibility for each other’s welfare.

The social market-economy model practised across the member states of the European Union comes closest to this mechanism. Unfortunately, the current economic debate in Europe threatens to polarise public opinion – pitting unrestrained market forces against the bureaucratic dictates of a welfare state. The difficult task at hand is pursuing an intelligent and sophisticated course that maintains a balanced tension between the entrepreneurial spirit of capitalism and the social solidarity of socialism without either vision vanquishing the spirit of the other. We are, after all, each and every one of us, an embodiment of both spirits. We desire to pursue our own self-interests while mindful of our responsibilities to our fellow human beings. A reformed European social economy that allows both aspects of human behaviour to flourish is a model for the rest of the world to follow.

Jeremy Rifkin is the author of The European Dream: How Europe’s Vision of the Future is Quietly Eclipsing the American Dream.

Guardian Unlimited – Copyright Guardian Newspapers Limited 2005

http://www.guardian.co.uk/comment/story/0,3604,1511718,00.html

Bill Totten http://www.ashisuto.co.jp/english/

Categories: Uncategorized