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Sept. 17, “Can Hunstman be a ‘game changer’ for U.S. energy policy” cont.

Politics and Science

Regardless of the outcome of the Republican primary, perhaps Huntsman’s comments can be a catalyst in motivating a shift in the discussion of energy policy at the national level. Call me a naive optimist, but at this point any sign of sanity from the “right” side of the isle is worth discussing. Consistent with a recent Washington Post article titled, “Rick Perry’s made up ‘facts’ about climate change,” Huntsman’s remarks on his fellow Republican Presidential candidates were equally damning.

In a interview with The Hill, Huntsman labeled Perry’s views as “out of the mainstream,” and essentially laid down the gauntlet for Republican candidates to challenge climate science in future debates. Whether Huntsman’s statements can have a “trickle-down” effect to the current Republican members of Congress remains to be seen – but they are a start.

As previously noted, it is long past time for debate as to whether climate change is occurring or not. Previous attempts to bridge the bipartisan gap on energy and climate by Republican Senators McCain, Collins, and Graham failed, and our country has already lost valuable years in the global race for clean energy by not incentivizing the development of alternative energy at the federal level.

Unfortunately, the recent national energy/environment debate has focused on the extent to which EPA rule-makings under the Clean Air Act, the Clean Water Act, and the Resource Conservation and Recovery Act are damaging our economic growth potential. While the forth coming rules under these acts are often being framed as “new” regulations by media outlets, they are all consistent with the bipartisan legislation passed by Congress in the 1970’s.  Many of these “new” rules – ones that protect our water and air – have already been delayed for decades.

While there are certainly inefficiencies in all of those statutes that could use Congressional amendment, the whole scale destruction of the EPA – something that several leading Republican candidates are advocating for – is simply out of touch with reality. By demonizing the EPA, the Republican party is walking a tightrope by criticizing a government agency that is designed to protect human health – something that should never be a partisan issue.

What may be a politically convenient position on energy and the environment in the primaries may also lead to political defeat in the general election – only time will tell.

Aug. 22, “The End of Macro-Economics as We Know It?” cont.

The Global Dominance of U.S. State Directed Capitalism

Throughout post-agricultural revolution human history, a common theme exists, that between any two nations in conflict, the nation with the most advanced military technology and abundant natural resources will prevail. The post WWII battle for ideological world control between the United States and the Soviet Union was no different.

In the late 80′s/early 90′s, the end of the Cold War signaled the triumph of the U.S. state directed capitalism economic model over the Soviet’s state directed communist model. This triumph was due to many factors, but to greatly oversimplify the issue, it can be primarily attributed to the superior efficiency and the resulting economic advantage of “free” markets versus a top-down state-planned economic model. The efficiency of the “free market” capitalist model, combined with America’s more abundant domestic natural resources was the right recipe for the technological innovations that powered our nation past the Soviets and into a few decades of global economic dominance.

During the Reagan Era of the 1980′s, globalization took off. The markets were allowed to run wild, and with the Soviet Union slowly internally crumbling, the U.S. was able to maintain its dominance of world markets with its newly gained unrivaled military power, achieved though the competitive arms race of the Cold War. Armed with the threat, trade, and use of that military power, the U.S. and often the World Bank and the IMF covertly (as well as overtly) continued to spread the ideals of free market efficiency throughout the developing world.  The words “Democracy,” have been attached as a moral underpinning – but an underpinning that has too often served more as a marketing ploy than a reality.

More recently, the unchallenged international power that the U.S. has enjoyed for several decades has begun to wane, triggered by years of large trade deficits, the loss of manufacturing jobs to globalized markets, and two unpaid-for wars.

Development of “Turbo-Capitalism”

Meanwhile, China, with a rapidly urbanizing population, has pursued a slightly different model of state directed capitalism – one without “democracy” attached. This model has allowed the Chinese economy to grow at unprecedented rates. Without the “burdens” of Democracy such as due process, expansive individual rights, and environmental protections; the Chinese turbo-charged economic model has quickly risen past the U.S.. In their newly created “totalitarian capitalism” model, the Chinese have a process even more readily equipped to rapidly exploit natural capital.

However, in this global race for rapid growth to fuel international economic and political dominance, a key piece of the economic puzzle has been discarded. The simple fact that the planet is a finite system; more importantly, one with a finite amount of easy to access, cheap fossil fuels. The previous centuries’ unprecedented growth had been “fueled” mostly by the technical innovation in the exploitation of these natural energy resources. This tremendous economic growth has allowed a significant portion of the 21st century humans to live with amenities that only royalty of past centuries could have dreamed of.

In the U.S., our “free market” created super-corporations have left our country’s citizens victims of our own market design success. Laissez-faire capitalism has eroded our own Democracy and left our country with wealth and income distribution as unequal as many “developing” countries. This disparity has placed the U.S. political system in the grips of the few dominant economic interests that can continue our sputtering GDP growth, in what is now a diminishing empire. Moreover, in other countries in the world, those who were either late to the “free market” game, or those who had the “free market” imposed on them – the conditions are much worse. For billions of humans, life on this planet today consists of living without access to simple Western luxuries such as clean water or electricity, two of the key ingredients for basic health and education. When the growth engine slows, these are the who are the most vulnerable. In a world whose economic fate is currently intertwined with fossil fuel use, when supply does not meet demand, our fossil fuel dependent agricultural system suffers, people start going hungry and Arab uprisings start happening.

The Imminent Collapse of Economics as We Know It?

As we stand here at the beginning of the 21st century, the cracks in the success of this economic system have begun to be more readily apparent. When the removal of 2 mb/d of crude from the world oil markets can cause prices to skyrocket; politicians begin pointing fingers about speculation, and bombs get dropped. Eventually, when the world markets cannot react to provide additional supply, strategic oil reserves are tapped, and everyone just tries to move on like everything is just fine.

Except, we have a big problem. Absent a huge leap forward in nuclear power, no amount of technical innovation can solve diminishing return on energy investment. Simply put, the remaining hard to reach energy sources are expensive to extract, both in terms of energy and dollars.

This is not a new story. Starting in 2006 global production of conventional oil peaked and leveled off, as previously discovered oil beds began to steeply decline in production, while new discoveries were unable to replace them. The energy inputs required for extraction, both in terms of physical energy and in terms of  the fiscal markers that represent the energy inputs, began to exponentially increase. However, the markets, population pressure, and therefore the government, demand continued full-steam economic growth. This remains true today, despite the fact that ever-increasing burning of fossil fuels is altering the very atmospheric  conditions on the planet that have allowed for our unprecedented expansion in the first place.

The main problem underlying everything is that the modern world has been built on a false premise of infinite economic growth in a finite system. The economy is only composed of our natural resources, used and altered to be traded amongst ourselves. Yet the powers that be in the world want, even need, to ignore this basic fact. Our debt based market economies require the political push for increased growth to continue; to create new jobs for the ever-increasing population and to simply generate more capital to service these debts. This model, the one that had allowed for  the global economic dominance by the U.S., is one that comes with no “golden parachute.” As the U.S. government debates debt ceilings, regulation, and market bubbles, the underlying reality is that the era of cheap energy is over, and with it the limits to growth are staring us in the face, whether we would like to see them or not.

As a result, the debate has become whether our decades old environmental regulations are too stringent; and thus should resource protection and human health be abandoned to continue our growth structures at any cost. This is where we are today. How we proceed from here is undetermined, but when resources  can  not meet demand and there is no market substitute (as is the case with oil), when the externalities of coal use and nuclear waste are continually passed on to future generations; when government cannot “fuel” the growth necessary for the capital markets to continue growing – what will take its place?

The answer to that question will be the start of the next chapter in the human story and it is likely that you and I will be living through it.


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