Archive

Archive for May, 2015

Dead Nation Walking

by William Howard Kunstler

Clusterfuck Nation – Blog (May 18 2015)

Many people seem to think that America has lost its sense of purpose. They overlook the obvious: that we are striving to become the Bulgaria of the western hemisphere. At least we already have enough vampires to qualify.

You don’t have to seek further than the USA’s sub-soviet-quality passenger railroad system, which produced the spectacular Philadelphia derailment last week that killed eight people and injured dozens more. Six days later, we’re still waiting for some explanation as to why the train was going 100 miles-per-hour on a historically dangerous curve within the city limits.

The otherwise excellent David Stockman posted a misguided blog last week that contained all the boilerplate arguments denouncing passenger rail: that it’s addicted to government subsidies and that a “free market” would put it out of its misery because Americans prefer to drive and fly from one place to another.

One reason Americans prefer to drive  –  say, from Albany, New York, to Boston  –  is that there is only one train a day, it never leaves on time nor arrives on time, and it takes twice as long as a car trip for no reason that makes any sense. Of course, this is exactly the kind of journey (slightly less than 200 miles) that doesn’t make sense to fly, either, given all the dreary business of getting to and from the airports, not to mention the expense of a short-hop plane ticket.

I take the popular (and gorgeous!) Hudson River Amtrak train between Albany and New York several times a year because bringing a car into Manhattan is an enormous pain in the ass. This train may have the highest ridership in the country, but it’s still a Third World experience. The heat or the air-conditioning is often out of whack, you can’t buy so much as a bottle of water on the train, the windows are gunked-over, and the seats are often broken. They put wifi on trains a couple of years ago but it cuts out every ten minutes.

Anyway, even if Americans seem to prefer for the present moment to drive or fly, it may not always be the case that they will be able to. Several surprising forces are gathering to take down the Happy Motoring matrix. Peak oil is actually not playing out in the form of too-high gasoline prices, but rather a race between a bankrupt middle class unable to pay the total costs of motoring and an oil industry that can’t make a profit drilling for hard-to-get oil. That scenario is plain to see in the rapid rise and now fall of shale oil.

Nowhere on earth is there passenger rail that pays for itself. But, of course, you don’t hear anyone complain about the public subsidies for driving or air travel. Who do you think pays for the interstate highway system? What major airport is privately owned and operated?

Some of the decisions made over our rail system are so dumb you wonder how the executives on board ever got their jobs. For instance the train between New York City and Chicago never runs on time for the simple reason that Amtrak sold the right-of-way to the CSX freight line. CSX then tore up the second track because there was an antiquated state real estate tax on railroad tracks. As a result, freight trains have priority on the single track and the passenger trains have to pull over on sidings every time a freight needs to go by. Earth calling the New York state legislature. Rescind the stupid tax.

America is going to need trains more than it thinks right now, despite what the “free market” says. The condition of our trains is symptomatic of the shape of the nation. The really sad part is we missed the window of opportunity to build a high-speed system. Capital will soon be too scarce for that. But we still have a conventional network that not so many decades ago was the envy of the world, and we know exactly how to fix it. We just don’t want to. No will left. Apparently we’d rather just turn into the walking dead.

http://kunstler.com/clusterfuck-nation/dead-nation-walking/

Categories: Uncategorized

The Era of Response

by John Michael Greer

The Archdruid Report (May 27 2015)

The third stage of the process of collapse, following what I’ve called the eras of pretense and impact, is the era of response. It’s easy to misunderstand what this involves, because both of the previous eras have their own kinds of response to whatever is driving the collapse; it’s just that those kinds of response are more precisely nonresponses, attempts to make the crisis go away without addressing any of the things that are making it happen.

If you want a first-rate example of the standard nonresponse of the era of pretense, you’ll find one in the sunny streets of Miami, Florida right now. As a result of global climate change, sea level has gone up and the Gulf Stream has slowed down. One consequence is that these days, whenever Miami gets a high tide combined with a stiff onshore wind, salt water comes boiling up through the storm sewers of the city all over the low-lying parts of town. The response of the Florida state government has been to issue an order to all state employees that they’re not allowed to utter the phrase “climate change”.

That sort of thing is standard practice in an astonishing range of subjects in America these days. Consider the roles that the essentially nonexistent recovery from the housing-bubble crash of 2008 & 2009 has played in political rhetoric since that time. The current inmate of the White House has been insisting through most of two turns that happy days are here again, and the usual reams of doctored statistics have been churned out in an effort to convince people who know better that they’re just imagining that something is wrong with the economy. We can expect to hear that same claim made in increasingly loud and confident tones right up until the day the bottom finally drops out.

With the end of the era of pretense and the arrival of the era of impact comes a distinct shift in the standard mode of nonresponse, which can be used quite neatly to time the transition from one era to another. Where the nonresponses of the era of pretense insist that there’s nothing wrong and nobody has to do anything outside the realm of business as usual, the nonresponses of the era of impact claim just as forcefully that whatever’s gone wrong is a temporary difficulty and everything will be fine if we all unite to do even more of whatever activity defines business as usual. That this normally amounts to doing more of whatever made the crisis happen in the first place, and thus reliably makes things worse is just one of the little ironies history has to offer.

What unites the era of pretense with the era of impact is the unshaken belief that in the final analysis, there’s nothing essentially wrong with the existing order of things. Whatever little difficulties may show up from time to time may be ignored as irrelevant or talked out of existence, or they may have to be shoved aside by some concerted effort, but it’s inconceivable to most people in these two eras that the existing order of things is itself the source of society’s problems, and has to be changed in some way that goes beyond the cosmetic dimension. When the inconceivable becomes inescapable, in turn, the second phase gives way to the third, and the era of response has arrived.

This doesn’t mean that everyone comes to grips with the real issues, and buckles down to the hard work that will be needed to rebuild society on a sounder footing. Winston Churchill once noted with his customary wry humor that the American people can be counted on to do the right thing, once they have exhausted every other possibility. He was of course quite correct, but the same rule can be applied with equal validity to every other nation this side of Utopia, too. The era of response, in practice, generally consists of a desperate attempt to find something that will solve the crisis du jour, other than the one thing that everyone knows will solve the crisis du jour but nobody wants to do.

Let’s return to the two examples we’ve been following so far, the outbreak of the Great Depression and the coming of the French Revolution. In the aftermath of the 1929 stock market crash, once the initial impact was over and the “sucker’s rally” of early 1930 had come and gone, the federal government and the various power centers and pressure groups that struggled for influence within its capacious frame were united in pursuit of a single goal: finding a way to restore prosperity without doing either of the things that had to be done in order to restore prosperity.  That task occupied the best minds in the US elite from the summer of 1930 straight through until April of 1933, and the mere fact that their attempts to accomplish this impossibility proved to be a wretched failure shouldn’t blind anyone to the Herculean efforts that were involved in the attempt.

The first of the two things that had to be tackled in order to restore prosperity was to do something about the drastic imbalance in the distribution of income in the United States. As noted in previous posts, an economy dependent on consumer expenditures can’t thrive unless consumers have plenty of money to spend, and in the United States in the late 1920s, they didn’t – well, except for the very modest number of those who belonged to the narrow circles of the well-to-do. It’s not often recalled these days just how ghastly the slums of urban America were in 1929, or how many rural Americans lived in squalid one-room shacks of the sort you pretty much have to travel to the Third World to see these days. Labor unions and strikes were illegal in 1920s America; concepts such as a minimum wage, sick pay, and health benefits didn’t exist, and the legal system was slanted savagely against the poor.

You can’t build prosperity in a consumer society when a good half of your citizenry can’t afford more than the basic necessities of life. That’s the predicament that America found clamped to the tender parts of its economic anatomy at the end of the 1920s. In that decade, as in our time, the temporary solution was to inflate a vast speculative bubble, under the endearing delusion that this would flood the economy with enough unearned cash to make the lack of earned income moot. That worked over the short term and then blew up spectacularly, since a speculative bubble is simply a Ponzi scheme that the legal authorities refuse to prosecute as such, and inevitably ends the same way.

There were, of course, effective solutions to the problem of inadequate consumer income. They were exactly those measures that were taken once the era of response gave way to the era of breakdown; everyone knew what they were, and nobody with access to political or economic power was willing to see them put into effect, because those measures would require a modest decline in the relative wealth and political dominance of the rich as compared to everyone else. Thus, as usually happens, they were postponed until the arrival of the era of breakdown made it impossible to avoid them any longer.

The second thing that had to be changed in order to restore prosperity was even more explosive, and I’m quite certain that some of my readers will screech like banshees the moment I mention it. The United States in 1929 had a precious metal-backed currency in the most literal sense of the term. Paper bills in those days were quite literally receipts for a certain quantity of gold – 1.5 grams, for much of the time the US spent on the gold standard. That sort of arrangement was standard in most of the world’s industrial nations; it was backed by a dogmatic orthodoxy all but universal among respectable economists; and it was strangling the US economy.

It’s fashionable among certain sects on the economic fringes these days to look back on the era of the gold standard as a kind of economic Utopia in which there were no booms and busts, just a warm sunny landscape of stability and prosperity until the wicked witches of the Federal Reserve came along and spoiled it all. That claim flies in the face of economic history. During the entire period that the United States was on the gold standard, from 1873 to 1933, the US economy was a moonscape cratered by more than a dozen significant depressions. There’s a reason for that, and it’s relevant to our current situation – in a backhanded manner, admittedly.

Money, let us please remember, is not wealth. It’s a system of arbitrary tokens that represent real wealth – that is, actual, nonfinancial goods and services. Every society produces a certain amount of real wealth each year, and those societies that use money thus need to have enough money in circulation to more or less correspond to the annual supply of real wealth. That sounds simple; in practice, though, it’s anything but. Nowadays, for example, the amount of real wealth being produced in the United States each year is contracting steadily as more and more of the nation’s economic output has to be diverted into the task of keeping it supplied with fossil fuels. That’s happening, in turn, because of the limits to growth – the awkward but inescapable reality that you can’t extract infinite resources, or dump limitless wastes, on a finite planet.

The gimmick currently being used to keep fossil fuel extraction funded and cover the costs of the rising impact of environmental disruptions, without cutting into a culture of extravagance that only cheap abundant fossil fuel and a mostly intact biosphere can support, is to increase the money supply ad infinitum. That’s become the bedrock of US economic policy since the 2008 to 2009 crash. It’s not a gimmick with a long shelf life; as the mismatch between real wealth and the money supply balloons, distortions and discontinuities are surging out through the crawlspaces of our economic life, and crisis is the most likely outcome.

In the United States in the first half or so of the twentieth century, by contrast, the amount of real wealth being produced each year soared, largely because of the steady increases in fossil fuel energy being applied to every sphere of life. While the nation was on the gold standard, though, the total supply of money could only grow as fast as gold could be mined out of the ground, which wasn’t even close to fast enough. So you had more goods and services being produced than there was money to pay for them; people who wanted goods and services couldn’t buy them because there wasn’t enough money to go around; business that wanted to expand and hire workers were unable to do so for the same reason. The result was that moonscape of economic disasters I mentioned a moment ago.

The necessary response at that time was to go off the gold standard. Nobody in power wanted to do this, partly because of the dogmatic economic orthodoxy noted earlier, and partly because a money shortage paid substantial benefits to those who had guaranteed access to money. The rentier class – those people who lived off income from their investments – could count on stable or falling prices as long as the gold standard stayed in place, and the mere fact that the same stable or falling prices meant low wages, massive unemployment, and widespread destitution troubled them not at all. Since the rentier class included the vast majority of the US economic and political elite, in turn, going off the gold standard was unthinkable until it became unavoidable.

The period of the French revolution from the fall of the Bastille in 1789 to the election of the National Convention in 1792 was a period of the same kind, though driven by different forces. Here the great problem was how to replace the Old Regime – not just the French monarchy, but the entire lumbering mass of political, economic, and social laws, customs, forms, and institutions that France had inherited from the Middle Ages and never quite gotten around to adapting to drastically changed conditions – with something that would actually work. It’s among the more interesting features of the resulting era of response that nearly every detail differed from the American example just outlined, and yet the results were remarkably similar.

Thus the leaders of the National Assembly who suddenly became the new rulers of France in the summer of 1789 had no desire whatsoever to retain the traditional economic arrangements that gave France’s former elites their stranglehold on an oversized share of the nation’s wealth. The abolition of manorial rights that summer, together with the explosive rural uprisings against feudal landlords and their chateaux in the wake of the Bastille’s fall, gutted the feudal system and left most of its former beneficiaries the choice between fleeing into exile and trying to find some way to make ends meet in a society that had no particular market for used aristocrats. The problem faced by the National Assembly wasn’t that of prying the dead fingers of a failed system off the nation’s throat; it was that of trying to find some other basis for national unity and effective government.

It’s a surprisingly difficult challenge. Those of my readers who know their way around current events will already have guessed that an attempt was made to establish a copy of whatever system was most fashionable among liberals at the time, and that this attempt turned out to be an abject failure. What’s more, they’ll have been quite correct. The National Assembly moved to establish a constitutional monarchy along British lines, bring in British economic institutions, and the like; it was all very popular among liberal circles in France and, naturally, in Britain as well, and it flopped. Those who recall the outcome of the attempt to turn Iraq into a nice pseudo-American democracy in the wake of the US invasion will have a tolerably good sense of how the project unraveled.

One of the unwelcome but reliable facts of history is that democracy doesn’t transplant well. It thrives only where it grows up naturally, out of the civil institutions and social habits of a people; when liberal intellectuals try to impose it on a nation that hasn’t evolved the necessary foundations for it, the results are pretty much always a disaster. That latter was the situation in France at the time of the Revolution. What happened thereafter is what almost always happens to a failed democratic experiment: a period of chaos, followed by the rise of a talented despot who’s smart and ruthless enough to impose order on a chaotic situation and allow new, pragmatic institutions to emerge to replace those destroyed by clueless democratic idealists. In many cases, though by no means all, those pragmatic institutions have ended up providing a bridge to a future democracy, but that’s another matter.

Here again, those of my readers who have been paying attention to current events already know this; the collapse of the Soviet Union was followed in classic form by a failed democracy, a period of chaos, and the rise of a talented despot. It’s a curious detail of history that the despots in question are often rather short. Russia has had the great good fortune to find, as its despot du jour, a canny realist who has successfully brought it back from the brink of collapse and reestablished it as a major power with a body count considerably smaller than usual.. France was rather less fortunate; the despot it found, Napoleon Bonaparte, turned out to be a megalomaniac with an Alexander the Great complex who proceeded to plunge Europe into a quarter century of cataclysmic war. Mind you, things could have been even worse; when Germany ended up in a similar situation, what it got was Adolf Hitler.

Charismatic strongmen are a standard endpoint for the era of response, but they properly belong to the era that follows, the era of breakdown, which will be discussed next week. What I want to explore here is how an era of response might work out in the future immediately before us, as the United States topples from its increasingly unsteady imperial perch and industrial civilization as a whole slams facefirst into the limits to growth. The examples just cited outline the two most common patterns by which the era of response works itself out. In the first pattern, the old elite retains its grip on power, and fumbles around with increasing desperation for a response to the crisis. In the second, the old elite is shoved aside, and the new holders of power are left floundering in a political vacuum.

We could see either pattern in the United States. For what it’s worth, I suspect the latter is the more likely option; the spreading crisis of legitimacy that grips the country these days is exactly the sort of thing you saw in France before the Revolution, and in any number of other countries in the few decades just prior to revolutionary political and social change. Every time a government tries to cope with a crisis by claiming that it doesn’t exist, every time some member of the well-to-do tries to dismiss the collective burdens its culture of executive kleptocracy imposes on the country by flinging abuse at critics, every time institutions that claim to uphold the rule of law defend the rule of entrenched privilege instead, the United States takes another step closer to the revolutionary abyss.

I use that last word advisedly. It’s a common superstition in every troubled age that any change must be for the better – that the overthrow of a bad system must by definition lead to the establishment of a better one. This simply isn’t true. The vast majority of revolutions have established governments that were far more abusive than the ones they replaced. The exceptions have generally been those that brought about a social upheaval without wrecking the political system: where, for example, an election rather than a coup d’etat or a mass rising put the revolutionaries in power, and the political institutions of an earlier time remained in place with only such reshaping as new necessities required.

We could still see that sort of transformation as the United States sees the end of its age of empire and has to find its way back to a less arrogant and extravagant way of functioning in the world. I don’t think it’s likely, but I think it’s possible, and it would probably be a good deal less destructive than the other alternative. It’s worth remembering, though, that history is under no obligation to give us the future we think we want.

_____

John Michael Greer is the Grand Archdruid of the Ancient Order of Druids in America {1} and the author of more than thirty books on a wide range of subjects, including peak oil and the future of industrial society. He lives in Cumberland, Maryland, an old red brick mill town in the north central Appalachians, with his wife Sara.

Link {1}: http://www.aoda.org

http://thearchdruidreport.blogspot.jp/

Categories: Uncategorized

Pro-TPP Arguments Show Desperation

If trade agreement supporters are going with their best sell, there’s clearly little to be said in its favor

by Dean Baker

Al Jazeera America (May 27 2015)

The push for the Trans-Pacific Partnership (TPP) is reaching its final stages, with the House of Representatives soon voting on granting the president fast-track trade authority, which will almost certainly determine the pact’s outcome. The proponents of the TPP are clearly feeling the pressure as they make every conceivable argument for the deal, no matter how specious.

In the last few weeks, TPP advocates have repeatedly tripped up, getting their facts wrong and their logic twisted. This hit parade of failed arguments should be sufficient to convince any fence sitters that this deal is not worth doing. After all, if you have a good product, you don’t have to make up nonsense to sell it.

Leading the list of failed arguments was a condescending editorial from USA Today directed at unions that oppose the TPP because they worry it would cost manufacturing jobs. The editorial summarily dismissed this idea. It cited Commerce Department data showing that manufacturing output has nearly doubled since 1997 and argued that the job loss was due to productivity growth, not imports.

It turned out that the table used in the editorial did not actually measure manufacturing output. The correct table showed a gain of only forty percent over seventeen years. By comparison, in the prior ten years, when our trade deficit was not expanding, manufacturing output increased by roughly fifty percent.

USA Today eventually acknowledged the error but left the text and the criticisms in the editorial unchanged. Remarkably, the headline of the editorial referred to the opposition to the TPP as a “fact-free uproar”.

Another big swing and miss came from Bill Daley, a former commerce secretary under President Bill Clinton and a former executive at JPMorgan Chase who briefly served as chief of staff in Barack Obama’s administration. Daley published a New York Times column pushing the TPP by arguing for the virtues of trade. The piece was chock-full of errors and misleading comments, with the best line being the claim that the United States ranks near the bottom in the ratio of exports to GDP because of the barriers put up to our exports.

As fans of trade economics everywhere know, the main reason the United States has a low ratio of exports to GDP is that the United States is a big country. This means that Illinois and Ohio provide a large market for items produced in Indiana. On the other hand, if the Netherlands or Luxembourg wants to have a large market for its products, it must export. (Paul Krugman added a chart to illustrate this point.)

Then there was the issue over whether the TPP is secret. Obama and other TPP supporters ridiculed this notion, pointing out that members of Congress can see the draft text anytime they like. But the critics’ point is that it is impossible to have a public debate on the TPP because the members are not allowed to take staffers with them or discuss the text with others.

The TPP has little to do with trade. It is a deal crafted by business for business.

As Senaror Sherrod Brown pointed out in this context, President George W Bush made the draft text for the Free Trade Area of the Americas (FTAA) public before asking Congress to vote for fast-track authority. Apparently Obama is not willing to have the same degree of openness as Bush and is attacking TPP critics for suggesting that he should.

Washington Post columnist Ruth Marcus tried to save the day for Obama by arguing that our partners in the FTAA gave permission to make the deal public but our TPP partners have not done so. We’re really supposed to believe that Obama could not get similar consent from the TPP partners if he wanted it?

Then there was the issue of whether the TPP and other trade agreements that could be passed under fast-track authority (this power will extend well into the term of the next president) could jeopardize the ability of the United States to regulate the financial sector. When Senator Elizabeth Warren raised this issue, Obama on May 9 dismissed her views as the hypothetical musings of a former law professor.

Then on May 13, Canada’s finance minister gave a speech in which he argued the Volcker rule, which limits the extent to which government-insured banks may hold risky assets, violates the North American Free Trade Agreement (NAFTA). It turned out that the Canadian financial industry raised these concerns with the Treasury Department as far back as 2011. In other words, Warren’s concerns were far from hypothetical; they reflected issues that came up with prior trade deals.

With the economic arguments for the TPP falling flat, some commentators have turned to the geopolitical argument. Fareed Zakaria went this route in a column last week. After implying that opponents of the TPP favored a return to autarky, he argued that we should be less concerned about what the TPP would do for the United States and think more about what it would do for our trading partners. He held up NAFTA and what it did for Mexico as a model.

This should leave readers more than a bit baffled. On the economic side, Mexico has lagged badly in the years since NAFTA went into effect. According to International Monetary Fund data, the country went from having a per capita GDP that was 34.9 percent of the United States’ in 1993 to 32.7 percent last year. Developing countries are supposed to catch up to rich countries economically, not fall further behind.

In reality, the TPP has little to do with trade. It is a deal crafted by business for business. The goal is to put in place a business-friendly structure of regulation in the United States and elsewhere. No amount of lipstick is going to make this pig pretty, and the folks who keep trying are making themselves look very foolish in the process.

Links: The original version of this article, at the URL below, contains links to further information not included here.
_____

Dean Baker is co-director of the Center for Economic and Policy Research and author, most recently, of The End of Loser Liberalism: Making Markets Progressive (2011).

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera America‘s editorial policy.

http://america.aljazeera.com/opinions/2015/5/pro-tpp-arguments-show-desperation.html

Categories: Uncategorized

China’s New Roads to Russia

by F William Engdahl

New Eastern Outlook (May 28 2015)

I know of no comparable global Great Project to equal what is now unfolding, bit-by-bit, as China reveals more about her Silk Road Economic Belt high-speed railway infrastructure network. And it’s now clear that the road will be filled with entire new cities, industrial zones, construction, improving standards of living for hundreds of millions of people previously abandoned. The implications for founding a new global alternative to the bankrupt dollar system are immense.

The Chinese don’t dither around when they’ve reached a consensus. The project of President Xi Jinping to develop a new economic space across Eurasia from Beijing to the borders of the European Union, which he unveiled during one of his first foreign visits as President in 2013 in Kazakhstan, is now known as the New Silk Road Economic Belt.

The project is emerging as the centerpiece of a renaissance in infrastructure construction that will transform and lift the entire world economy for decades. For the economic space encompassing China and Asia, a recent study estimated that over the next years some $8 trillion of infrastructure investment will be needed to bring those economies into modern standards of commerce and development.

A Rail Renaissance

China began several years ago drawing up plans for a colossal Eurasian and Asian rail infrastructure series of high-speed railroads to provide a future alternative to transport trade to the world. In 2010 Wang Mengshu of the Chinese Academy of Engineering revealed in an interview that China was examining plans to construct a high-speed railway system that will weave together high-speed rail links across Asia and Europe by 2025.

That same year China began what then was the first leg of three planned rail legs. The domestic Chinese part of one route starts in Kunming in Yunnan Province and runs south to Singapore. A second route starts in Urumqi, capital of the Xinjiang Uyghur Autonomous Region, and connect Central Asian countries such as Kazakhstan, Uzbekistan and Turkmenistan with Germany. A third line will connect the city of Heilongjiang in northern China with Eastern and Southern European countries via Russia. At that time China’s aim was to create a pan-Asian rail network to connect 28 countries with 81,000 kilometers of railways.

With Chinese diligence, the country began buying the state-of-the-art high-speed rail equipment from Germany, France, Japan and Canada. By 2010 China had developed its own high-speed rail systems, with advanced trains which run at over 350 kilometers per hour. By 2012 China had built 42 high-speed lines inside China, conceived in their national planning as preparation to launch the greater Eurasia and Asia expanded rail links. China understands the economic value of infrastructure as few nations today. Given the extent of deployment internally since then, today China stands to become the world’s leading exporter of advanced high-speed railway technology to the nations of Asia and Eurasia including Russia, Kazakhstan and Belarus.

On September 7 2013 in a speech before Kazakhstan President Nursultan Nazarbayev, China’s newly-installed President Xi proposed, for the first time officially, his global New Silk Road strategy, suggesting that China and Central Asia join to build a “Silk Road Economic Belt” to boost cooperation.

Xi proposed that Kazakhstan and other relevant Central Asian countries, including Russia, increase communication and promote regional economic integration in terms of both policy and law. He proposed concretely that China and Central Asian countries compare notes on their respective economic development strategy and work together to formulate plans and measures for regional cooperation. Xi also said that they should work to improve traffic connectivity to open the strategic regional thoroughfare from the Pacific Ocean to the Baltic Sea, and set-up a network of transportation that connects Eastern, Western and Southern Asia. Xi also proposed trade be done with local-currency settlement and not via the US dollar to improve their immunity to financial risks from US future financial warfare, the kind of financial warfare the US Treasury initiated around that time against Iran oil payments and in March 2014 against Russia.

At that time Russia was focused on the war in Syria, on hosting the showcase Sochi Winter Olympics and had not yet clearly formulated its own Eurasian Economic Union in detail. The US coup d’etat in Ukraine that began with Maidan Square protests in November 2014 and escalated into a de facto war situation on the part of Nato against Russia since then, dramatically concentrated Russian energies on developing alternative strategies and firm partners and allies to withstand what were clear threats to Russia’s very existence as a sovereign nation. At the same time China was being confronted by US encirclement in the East China Sea and across Asia known as Washington’s military “Asia Pivot”, aka China Pivot strategy, of containing China’s future economic and political emergence. Ironically, those very US escalations of military pressure brought the two giants of Eurasia – China and Russia – closer together than ever in history.

New Silk Road Begins

Those events, which no one could have clearly foreseen in 2010, catalyzed the most dramatic series of changes in world geopolitics since May 1945. Only this time, as the American Century is sinking in debt and economic depression, Eurasia is rapidly emerging as the most dynamic and far the largest and richest region in the world in terms of resources and especially human resources.

This fact was underscored by the recent visit of China president Xi to three key member countries of the Eurasian Economic Union. A day before Xi was to be one of the honor guests at the May 9 Victory Day celebrations, he had closed door talks with Vladimir Putin. After those talks Putin announced that the two countries had signed a decree on cooperation in connecting the development of the Eurasian Economic Union with the Silk Road Economic Belt project. “The integration of the Eurasian Economic Union and Silk Road projects means reaching a new level of partnership and actually implies a common economic space on the continent”, Putin said.

China agreed to also invest $5.8 billion in the construction of the Moscow-Kazan High Speed Railway, a major boost at a critical time for a project that will be extended to China through Kazakhstan, a part of the route of the new Silk Road project. The total cost of the Moscow-Kazan high speed railroad project is $21.4 billion.

Wasting no time, on May 13, China Railway Group announced it had won a $390 million contract from Russia to build the Moscow-Kazan high-speed railway which is to be further extended to China as part of the new Silk Road project. A consortium led by China Railway with two Russian companies will jointly survey and conduct regional development planning and design for the Moscow–Kazan segment of the Moscow–Kazan–Yekaterinburg high-speed railway line in 2015 & 2016 according to a report from RT in Moscow.

Chinese participation in the planned Moscow-Kazan. Ekaterinburg High-Speed Rail segment will integrate Russia into the New Silk Road Economic Belt

The day before, on May 7, China’s Xi was in Astana meeting with Kazakhstan President Nazarbayev to concretize Kazak participation in the New Silk Road. China, Kazakhstan and Russia are all founding members of the Shanghai Cooperation Organization as well. Construction on the China-Kazakh part of the New Silk Road high-speed rail line is already underway from China’s side.

The visits of Xi to Kazakhstan and Russia were followed with a three day visit of Xi to Belarus on May 10. Belarus is geographically a critical potential link in a more peaceful world, between the countries of the European Union and the Eurasian countries within the developing New Silk Road project. After their meetings Belarus President Alexander Lukashenko announced he too had agreed to make Belarus a platform for the development of the New Silk Road Economic Belt. Lukashenko revealed that twenty years before as a member of the Parliament of the new independent Belarus as the Soviet Union dissolved he made a visit to China: “I adopted China’s step-by-step economic reform style in Belarus …” That puts the three key countries of the new Eurasian Economic Union – Russia, Kazakhstan, Belarus – fully in the New Silk Road Economic Belt project.

Opening Eurasia to Real Development

One intriguing and potentially very strategic side benefit of the vast Silk Road Eurasian Economic Union integration that has just been decided will be the dramatic change in the development possibilities of some of the world’s richest undeveloped raw materials, including of gold. Russia and Central Asian states hold perhaps the world’s largest reserves of every imaginable metal and mineral.

Both China and Russia have been building their central bank gold reserves as rapidly as possible. Economic exploitation of gold reserves in Central Asia could become a significant support for that effort.

During Soviet times gold was part of Soviet National Bank reserves but considered a “capitalist relic”. After 1991, in the chaotic collapse of the Soviet Union, Western intelligence agencies in cooperation with Italian organized crime and criminal former Soviet senior bureaucrats organized the theft of the entire gold reserves, more than 2,000 tons of bullion, from the Soviet Gosbank vaults, a crime announced by bank chairman Geraschenko, himself reportedly a secret participant in the theft, to an astonished Russian parliament.

Since Putin became president in 1999, the Russian central bank has been steadily restocking its central bank gold. Today according to official IMF statistics, Russia’s Central Bank has managed to accumulate 1238 tons of gold reserves. In April alone Russia bought fhirty tons.

The existence of central bank gold reserves has been shrouded in mystery for the country allegedly the world’s largest gold reserve holder, the US Federal Reserve Bank. In 2011 IMF Director General Dominique Strauss-Kahn demanded an independent physical audit of Federal Reserve gold. The Federal Reserve gold has never been audited. Strauss-Kahn reportedly had information that the 8000 tons of gold reported to be held by the US was gone.

The IMF head became concerned reportedly after the United States began “stalling” its pledged delivery to the IMF of 191.3 tons of gold agreed to under the Second Amendment of the Articles of Agreement to fund what are called Special Drawing Rights (SDRs). Some days later a bizarre hotel sex scandal forced the abrupt resignation of Strauss-Kahn and an end to IMF calls for a gold audit.

Whatever the true state of US Federal Reserve gold reserves, it’s clear that both Russia and China are stocking gold bullion to back their currencies as they carefully create a new architecture to replace the US dollar system.

Despite US financial warfare efforts, Russia state finances are also remarkably healthy in comparison with those in the West. In the USA government debt officially is well over $17 trillion or 105% of GDP. Greek debt is 177% of GDP. The Eurozone countries average debt to GDP is 91% and Germany 74%.

In Russia state debt is about eighteen percent of GDP. China’s debt is around 43% according to latest IMF data.

Belarus, Kazakhstan, Russia and China have all substantially increased their official gold reserves since the first quarter of 2000. Now it emerges that gold is intended to be a vital element in the OBOR – One Bridge, One Road – Silk Road project.

At a Dubai commodities conference in April this year, Albert Cheng, Managing Director of the World Gold Council, revealed that China is consciously looking to integrate its search for gold with the Silk Road economic project over the next ten years. He cited a statement from Xu Luode, President of Shanghai Gold Exchange and a National People’s Congress (NPC) delegate who proposed to integrate gold market development into the strategic development plan of Silk Road Economic Belt at the March 2015 meeting of the Chinese Central Committee. He suggested a mechanism to involve major gold producers and users along the new rail routes through Kazakhstan and Russia. He also proposed that the Chinese government’s development of those resources make the Shanghai Gold Exchange the trading hub, and be integrated into the Silk Road Economic Belt plan.

The opening of the new network of Eurasian high-speed rail infrastructure will open entire new areas of mineral riches to development. On May 11 2015, China’s largest gold mining company, China National Gold Group Corporation (CNGGC), signed an agreement with Russian gold miner Polyus Gold to deepen ties in gold exploration. Announcing the deal, Song Xin, general manager of CNGGC and President of the China Gold association, said, “China’s Belt and Road Initiative brings unprecedented opportunities for the gold industry”. Song Yuqin, Deputy General Manager of the Shanghai Gold Exchange stated, “The gold trade is expected to become a significant component of transactions by ‘Belt and Road’ countries”.

The Eurasian region in fact holds every conceivable mineral and rare earth metal known in vast quantities. That will now become economically feasible to develop with presence of high-speed freight rail infrastructure.

The Great Silk Road Economic Belt is clearly going to happen and fast. The emerging reality of the network of New Silk high-speed rail infrastructure, a wide-spanning network of road and rail links between all Asian and Central Asian nations, will be the heart of a new economic world. It is a well-known phenomenon of economics that as transportation infrastructure is developed there is a stronger GDP growth in each connected nation, a multiplier effect as entire new markets grow up. Clearly Eurasia is the place to be as Vladimir Putin and Xi Jinping have demonstrated.

_____

F William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine New Eastern Outlook.

http://journal-neo.org/2015/05/28/china-s-new-roads-to-russia/

Categories: Uncategorized

Challenging Operation Vulture in Ukraine

Shortchanging Labor in a Broken Economy

by Michael Hudson

CounterPunch (May 28 2015)

Ukraine’s collapse since the February 2014 coup has become an umbrella for grabitization. Collateral damage in this free-for-all has been labor. Many workers are simply not getting paid, and what actually is being paid is often illegally low. Employers are taking whatever money is in their business accounts and squireling it away –  preferably abroad, or at least in foreign currency.

Wage arrears are getting worse, because as Ukraine approaches the eve of defaulting on its more than ten billion euros London debt, kleptocrats and business owners are jumping ship. They see that foreign lending has dried up and the exchange rate will plunge further. The Rada’s announcement last week that it shifted eight billion euros from debt service to spend on a new military attack on the country’s eastern export region was the last straw for foreign creditors and even for the IMF. Its loans helped support the hryvnia’s exchange rate long enough for bankers, businessmen and others to take whatever money they have and as many euros or dollars as they can before the imminent collapse in June or July.

In this pre-bankruptcy situation, emptying out the store means not paying workers or other bills. Wage arrears are reported to have reached two billion hryvnia, owed to over half a million workers. This has led the Federation of Trade Unions of Ukraine to picket against the Cabinet of Ministers on Wednesday (May 27). More demonstrations are scheduled for the next two Wednesdays, June 3 and 10. According to union federation Deputy Head Serhiy Kondratiuk,

… the current subsistence wage of UAH 1,218 is sixty percent less than the level set in Ukrainian law, which is confirmed by the calculations if the Social Policy Ministry … the subsistence wage in the country should exceed UAH 3,500 a month, but the government refuses to hold social dialog to revise standards”.
http://en.interfax.com.ua/news/general/267940.html

The Scenario that is Threatened

Emptying out Ukrainian business bank accounts will leave empty shells. With Ukraine’s economy broken, the only buyers with serious money are European and American. Selling to foreigners is thus the only way for managers and owners to get a meaningful return – paid in foreign currency safely in offshore accounts, outside of future Ukrainian clawback fines. Privatization and capital flight go together.

So does short-changing labor. The new buyers will reorganize the assets they buy, declare the old firms bankrupt and erase their wage arrears, along with any other bills that are owed. The restructured companies will claim that bankruptcy has wiped out whatever the former firms (or public enterprises) owed to workers. It is much like what corporate raiders do in the United States to wipe out pension obligations and other debts. They will claim to have to “saved” Ukrainian economy and “made it competitive”.

Operation Vulture

The Pinochet coup in Chile was a dress rehearsal for all this. The US-backed military junta targeted labor leaders, journalists, and potential political leaders, as well as university professors (closing every economics department in Chile except for the Chicago “free market”-based Catholic University). You cannot have a “free market” Chicago-style, after all, without taking such totalitarian steps.

US strategists like to name such ploys after predatory birds: Operation Phoenix in Vietnam, and Operation Condor in Latin America that targeted “lefties”, intellectuals and others. A similar program is underway against Ukraine’s Russian speakers. I don’t know the code word being used, so let’s call it Operation Vulture.

For labor leaders, the problem is not only to collect back wages, but to survive with a future living wage. If they refrain from protesting, they simply won’t get paid. This is why they are organizing a growing neo-Maidan protest explicitly on behalf of wage earners –  so that the junta’s Right Sector snipers cannot accuse the demonstrators of being pro-Russian. The unions have protected themselves by seeking support from the UN’s International Labour Organization (ILO), and from the International Trade Union Confederation in Brussels.

The most effective tactic to tackle the corruption that is permitting the non-payment of wages and pensions is to focus on the present regime’s foreign support, especially from the IMF and EU. Using labor’s grievances as an umbrella to demand related reforms could include warnings that any sale of Ukrainian land, raw materials, public utilities or other assets to foreign buyers can be reversed by future, less corrupt governments.

In labor’s favor is the fact that the IMF is violating its Articles of Agreement by lending for military purposes. As soon as its last loan was disbursed, Poroshenko announced that he was stepping up his war against the East. This brings the IMF loan close to being what legal theorists call an Odious Debt: debts to a junta taking power and looting the government’s Treasury and other assets in the public domain, leaving future governments to pay off what has been stolen.

Labor’s fight for a living wage is not only for retroactive shortfalls, but to put in place a recovery plan to protect against the economy being treated like Greece or Latvia, neoliberal style. US strategists have been discussing whether they could dismiss the $3 billion that Ukraine owes Russia this December as an “odious debt”; or, perhaps, classify it as “foreign aid” and hence not collectible in practice. Ironic as it may seem, the Peterson Institute of International Economics, George Soros and other Cold Warriors have provided future Ukrainian governments with a repertory of legal reasons to reconstitute their economy foreign-debt free –  leaving the government able to pay wage and pension arrears.

The alternative is for international creditors to win the case for putting foreign bondholders, the IMF and European Union first, and sovereign rights to prevent self-destruction second.

_____

Michael Hudson’s book summarizing his economic theories, The Bubble and Beyond (2012), is now available in a new edition with two bonus chapters on Amazon. His latest book is Finance Capitalism and Its Discontents (2012).  He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (2012), published by AK Press. Hudson’s new book, Killing the Host, will be published this summer by CounterPunch Books. He can be reached via his website, mh@michael-hudson.com

http://www.counterpunch.org/2015/05/28/challenging-operation-vulture-in-ukraine/

Categories: Uncategorized

This is How Much of Your Life …

… The US Has Spent at War

by Tyler Durden
 
Zero Hedge (May 26 2015)

With the US spiraling quickly {1} towards a maritime conflict with China over the latter’s “construction projects” in the disputed South China Sea and with NATO doing its best to match Moscow’s Eastern European sabre-rattling on the way to facilitating the most serious confrontation between Russia and the West in decades, we thought it as good a time as any to bring you the following graphic which shows the percentage of your life that the US has been at war.

Note from Totten: I found the fine print in this chart difficult to read, so I reproduced the two most important columns here:

YEAR
OF
BIRTH
PERCENT
OF LIFE
AT WAR
1915 35.6
1916 36.0
1917 36.4
1918 35.7
1919 35.1
1920 35.4
1921 35.8
1922 36.2
1923 36.6
1924 37.0
1925 37.4
1926 37.8
1927 38.2
1928 38.6
1929 39.1
1930 39.5
1931 40.0
1932 40.5
1933 41.0
1934 41.5
1935 42.0
1936 42.5
1937 43.0
1938 43.6
1939 44.2
1940 44.7
1941 45.3
1942 44.6
1943 43.8
1944 43.1
1945 42.3
1946 41.4
1947 42.0
1948 42.6
1949 43.3
1950 43.9
1951 43.1
1952 42.2
1953 41.3
1954 40.3
1955 41.0
1956 41.7
1957 42.4
1958 43.1
1959 43.9
1960 44.6
1961 45.5
1962 46.3
1963 47.2
1964 48.1
1965 49.0
1966 48.0
1967 46.9
1968 45.8
1969 44.7
1970 43.5
1971 42.2
1972 40.9
1973 39.5
1974 38.1
1975 39.0
1976 40.0
1977 41.0
1978 42.1
1979 43.2
1980 44.4
1981 45.7
1982 47.1
1983 48.5
1984 50.0
1985 51.6
1986 53.3
1987 55.2
1988 57.1
1989 59.3
1990 61.5
1991 64.0
1992 62.5
1993 65.2
1994 68.2
1995 71.4
1996 75.0
1997 78.9
1998 83.3
1999 88.2
2000 93.8
2001 100.0
2002 100.0
2003 100.0
2004 100.0
2005 100.0
2006 100.0
2007 100.0
2008 100.0
2009 100.0
2010 100.0
2011 100.0
2012 100.0
2013 100.0
2014 100.0

Simply put, if you were born in 1992 or later, America has been at war for at least two-thirds of your life and if you were born after 2001, well … you have never known life in the US without war.

More from The Washington Post:

Using somewhat subjective definitions of “at war” – Korea counts but Kosovo doesn’t in our analysis, for example – we endeavored to figure out how much of each person’s life has been spent with America at war. We used whole years for both the age and the war, so the brief Gulf War is given a full year, and World War Two includes 1941. These are estimates.

But the beginning of the conflict in Afghanistan in (late) 2001 means that anyone born in the past thirteen years has never known an America that isn’t at war. Anyone born after 1984 has likely seen America at war for at least half of his or her life. And that’s a lot of Americans.

Given recent events {2} in Iraq and Syria, this isn’t likely to change anytime soon.

Links:

{1} http://www.zerohedge.com/news/2015-05-26/china-outlines-new-offensive-military-strategy-builds-lighthouses-disputed-waters

{2} http://www.zerohedge.com/news/2015-05-23/it-begins-us-may-send-target-spotters-iraq-counter-isis-offensive

http://www.zerohedge.com/news/2015-05-26/how-much-your-life-us-has-spent-war

Categories: Uncategorized

Fossil Fuel Subsidies …

… Total Trillions of Dollars Per Year

by Systemic Disorder (May 21 2015)

Most of the cost of fossil fuels is hidden because environmental harms such as pollution and global warming are kept outside ordinary economic calculation. Energy companies externalize these costs (among others) –  that is, they don’t pay them. The public does.

And we do, to a remarkable extent. When we think of corporate subsidies, we naturally think of taxes not paid, real estate giveaways and other ways of taking money from the public and shoveling it into corporate coffers. Then there are the environmental costs, something prominent if we are talking about fossil fuels. These, too, should be thought of as subsidies since these constitute costs paid by the public. A first attempt at seriously quantifying the magnitude of the totality of subsidies given to fossil fuels leads to a conclusion that the total for 2014 was US$5.6 trillion, a total expected to be matched in 2015.

Yes, you read that correctly: 5.6 trillion dollars. As in 5.6 million million. Or, to put it another way, more than seven percent of gross world product.

A lot of money.

These calculations are, interestingly, the product of an International Monetary Fund working paper, “How Large Are Global Energy Subsidies?” {1}. The paper, prepared by economists David Coady, Ian Parry, Louis Sears and Baoping Shang, sought to provide a fuller accounting of the costs of the environmental damages caused by fossil fuels, and found that those costs greatly exceed direct corporate subsidies and below-cost consumer pricing. The authors foresee huge benefits should all fossil-fuel subsidies be eliminated. They write:

Eliminating post-tax subsidies in 2015 could raise government revenue by $2.9 trillion (3.6 percent of global GDP), cut global carbon dioxide emissions by more than twenty percent, and cut pre-mature air pollution deaths by more than half. After allowing for the higher energy costs faced by consumers, this action would raise global economic welfare by $1.8 trillion (2.2 percent of global GDP). [page 7]

As dramatic as the preceding paragraph is, the International Monetary Fund is not suddenly questioning capitalism. The paper carries the caveat that it is “research in progress” and does not represent the views of the IMF. Nor does the paper devote so much as a single word questioning the economic system that has produced such astounding distortions, not to mention the hideous social effects of massive inequality and power imbalances. Nonetheless, it does present an implicit challenge to business as usual and helps conceptualize the massive costs of profligate energy usage. The paper lays out in plain language the environmental, fiscal, economic and social consequences of energy subsidies, stating that energy subsidies [page 5]:

* Damage the environment, causing more premature deaths through local air pollution, exacerbating congestion and other adverse side effects of vehicle use, and increasing atmospheric greenhouse-gas concentrations.

* Impose large fiscal costs, which need to be financed by some combination of higher public debt, higher tax burdens and crowding out potentially productive public spending (for example, on health, education and infrastructure).

* Discourage needed investments in energy efficiency, renewables and energy infrastructure, and increase the vulnerability of countries to volatile international energy prices.

* Are a highly inefficient way to provide support to low-income households since most of the benefits from energy subsidies are typically captured by rich households.

Paying for Air Pollution and Global Warming

The biggest subsidized cost is air pollution, which the paper’s authors estimate accounts for 46 percent of fossil fuel subsidies. Global warming is the next biggest subsidy, at 22 percent, with corporate and consumer subsidies, foregone taxes and other items accounting for smaller amounts. From this calculation, the authors argue that local benefits from ending subsidies are high enough that doing so should be done in the absence of action in other countries. They write:

An important point, therefore, is that most (over three-fourths) of the underpricing of energy is due to domestic distortions –  pre-tax subsidies and domestic externalities –  rather than to global distortions (climate change). The crucial implication of this is that energy pricing reform is largely in countries’ own domestic interest and therefore is beneficial even in the absence of globally coordinated action. [page 21]

When the costs are broken down by forms of energy, it is no surprise that coal is the most subsidized form. Coal subsidies alone total almost four percent of global GDP, according to the paper, with “no country …  impos[ing] meaningful taxes on coal use from an environmental perspective”. Petroleum is also heavily subsidized.

If we could at a stroke eliminate all forms of fossil fuel subsidies, the gains would be significant. The authors believe that global revenue gains would be $2.9 trillion for 2015, a total less than the current cost of subsidies because it accounts for a reduction in energy usage from higher prices and an assumption that some tax money would be used for emission-control technologies. The authors also calculate a $1.8 trillion net gain in social welfare, a gain that could be increased were this gain used to invest in education, health and other public benefits.

So if so much good can come from rationalizing the fossil fuel industry, why does this sound like an impossible dream? Unfortunately, in real world of capitalism, there is very little to prevent corporations from externalizing their costs.

With increased corporate globalization, capital can pick up and move at will, inducing political office holders to hand out subsidies, waive taxes and refuse to enforce safety and environmental laws. They do this because the alternative is for corporations to move elsewhere in a never-ending search for the lowest wages and weakest regulations with an accompanying disappearance of jobs. And this globalization, fueled by “free trade” agreements that arise from relentless competition, aggravates global warming as components are shipped around the world for assembly into finished products that are shipped back, greatly adding to the environmental damage imposed by transportation.

Environment Doesn’t Count in Orthodox Economics

Not only is the environment an externality that corporations do not have to account for, thereby dumping the costs on to the public, but orthodox economics doesn’t account for the environment, other than as a source of resources to exploit. The same capitalist market that is nothing more than the aggregate interests of the largest and most powerful industrialists and financiers is supposed to “solve” environmental problems. A Monthly Review article by sociologists Richard York, Brett Clark and John Bellamy Foster, “Capitalism in Wonderland” {2}, puts this contradiction in stark perspective:

Mainstream economists are trained in the promotion of private profits as the singular “bottom line” of society, even at the expense of larger issues of human welfare and the environment. The market rules over all, even nature. For Milton Friedman the environment was not a problem since the answer was simple and straightforward. As he put it: “ecological values can find their natural space in the market, like any other consumer demand”. [May 2009, page 4]

From that perspective, it follows that present-day environmental damage is of minimal concern to capital and future damage of no concern. The industrialists and financiers who reap billions today won’t necessarily be around when the environmental price becomes too high to avoid. The “Capitalism in Wonderland” authors write:

The ideology embedded in orthodox neoclassical economics [is] a field which regularly presents itself as using objective, even naturalistic, methods for modeling the economy. However, past all of the equations and technical jargon, the dominant economic paradigm is built on a value system that prizes capital accumulation in the short-term, while de-valuing everything else in the present and everything altogether in the future …

Human life in effect is worth only what each person contributes to the economy as measured in monetary terms. So, if global warming increases mortality in Bangladesh, which it appears likely that it will, this is only reflected in economic models to the extent that the deaths of Bengalis hurt the economy. Since Bangladesh is very poor, [orthodox] economic models …  would not estimate it to be worthwhile to prevent deaths there since these losses would show up as minuscule in the measurements … Ethical concerns about the intrinsic value of human life and of the lives of other creatures are completely invisible in standard economic models. Increasing human mortality and accelerating the rate of extinctions are to most economists only problems if they undermine the “bottom line”. In other respects they are invisible: as is the natural world as a whole. [pages 9-10]

Tinkering Versus Analyzing the Structure

The International Monetary Fund paper does offer a brief discussion of social disruptions should fossil-fuel subsidies be removed, suggesting a need for “transitory” programs such as worker retraining and protection of vulnerable groups [page 31]. But their proposed program centers on environmental taxes as a way to align fossil fuels with their costs to make energy prices “efficient”. Certainly, polluters and causers of global warming should be required to absorb those costs. But given that market forces tilt overwhelmingly in favor of large polluters, the fact of massive imbalances in power, and that governments have handcuffed themselves in terms of confronting capital (a trend itself a product of market forces), it is unrealistic to believe such a program is currently politically feasible.

The disruptions to a capitalist economy with a forced large reduction in energy usage are also significant. It is not only that a capitalist economy can’t function without growing (and a growing economy uses more, not less, energy, especially because of ever more complex machinery and lengthening supply chains), but that a capitalist economy doesn’t offer millions of workers who lose their jobs new work in new industries. Every incentive under capitalism is for more energy usage; thus “the market” will object to dramatically higher energy prices, no matter how rational those higher prices.

Ultimately, the authors of the IMF paper are trapped in the same inability to imagine anything outside the present capitalist system, similar to those who claim that stopping global warming will be virtually cost-free {3}. Their paper has done a necessary service by providing the first real quantification of the gigantic costs of fossil fuels and the massive subsidies they receive. Subsidies for renewable energy, in comparison, are minuscule. The massive subsidies for nuclear energy {4}, which is a complete failure on any rational economic basis before we even get to the physical dangers, demonstrate that nuclear is no solution, either. These should also be eliminated.

The size of the social movement that would be necessary to eliminate all these subsidies would be enormous. Why should such a movement ask for mere reforms that fall well short of what is necessary, worthy as they would be. Energy is too important not to be put in public hands. The trillions of dollars of fossil fuel subsidies are the logical product of allowing private interests to control critical resources for private profit and leaving “the market” to dictate outcomes.

We can’t make what is unsustainable sustainable through a better tax policy. That the enormous scale of reform proposed by the IMF paper still falls far short of what is actually necessary to create a sustainable economy demonstrates the severity of the crises we are only beginning to face.

Links:

{1} http://www.imf.org/external/pubs/ft/wp/2015/wp15105.pdf

{2} http://monthlyreview.org/2009/05/01/capitalism-in-wonderland/

{3} https://systemicdisorder.wordpress.com/2014/05/28/environmental-frying-pan/

{4} https://systemicdisorder.wordpress.com/2013/10/31/nuclear-dangerous-to-wallet/

https://systemicdisorder.wordpress.com/2015/05/21/fossil-fuel-subsidies-trillions

Categories: Uncategorized