Climate Change and British Politics

The Economist | Britain decides that climate change is too important to leave to the politicians. “GIVE me chastity and continence, but not yet,” Saint Augustine besought God more than a millennium ago. Those worried by global warming but unwilling to change their behaviour take a similar approach. Evidence of the damage that economic activity does to the planet is mounting, but given the cheapness and convenience of fossil fuels, the temptation to avoid tackling climate change for just another year (and another and another) is hard to resist. This is even truer as economic woes mount.

Britain’s government thinks it has a solution, and it is one that so far no other country has adopted. The approach is rather like that of a desperate dieter padlocking his pantry. If all goes according to plan, a climate-change bill will be passed next week that takes the power to set carbon-reduction goals away from politicians and enshrines them in law. A climate-change committee will recommend five-year carbon budgets for different parts of the economy, such as power generation, transport and manufacturing, with the ultimate goal of cutting emissions by 80% from their 1990 levels by the time 2050 rolls around.

Modelled partly on the Bank of England’s Monetary-Policy Committee, which was set up in 1997 to take interest-rate decisions out of the hands of ministers, the new Committee on Climate Change (now headed by Lord Turner, the head of Britain’s financial regulator and before that the author of important pension reforms) will publish on December 1st the first three carbon budgets, covering the period until 2022. Other countries may have more eye-catching ambitions than Britain (Sweden, for instance, aspires to phase out fossil-fuel use entirely), but nowhere else will the pledges have the force of law. Foreign governments and green groups are watching the British experiment with interest.

Is Natural Gas Drilling Endangering US Water Supplies?

Propublica | In July, a hydrologist dropped a plastic sampling pipe 300 feet down a water well in rural Sublette County, Wyo., and pulled up a load of brown oily water with a foul smell. Tests showed it contained benzene, a chemical believed to cause aplastic anemia and leukemia, in a concentration 1,500 times the level safe for people.

The results sent shockwaves through the energy industry and state and federal regulatory agencies.

Sublette County is the home of one of the nation's largest natural gas fields, and many of its 6,000 wells have undergone a process pioneered by Halliburton called hydraulic fracturing, which shoots vast amounts of water, sand and chemicals several miles underground to break apart rock and release the gas. The process has been considered safe since a 2004 study (PDF) by the Environmental Protection Agency found that it posed no risk to drinking water. After that study, Congress even exempted hydraulic fracturing from the Safe Drinking Water Act. Today fracturing is used in nine out of 10 natural gas wells in the United States.

Over the last few years, however, a series of contamination incidents have raised questions about that EPA study and ignited a debate over whether the chemicals used in hydraulic fracturing may threaten the nation's increasingly precious drinking water supply.

If Only Life Would Imitate Art.....,

What would happen if companies stopped hiding problems from customers and government stopped hiding problems from citizens? What if customers and citizens were tapped to become resources for problem solving?

"EVE Online tries the World of Democracycraft experiment

"A recent insider-meddling scandal inside the space-merchant game EVE Online prompted the creation of a democratically elected player council called the Council of Stellar Management (CSM). This newly constituted democratic institution is charged with helping the game developers balance out fun with fairness. I've often wondered whether democratic player-groups can vote for more fun, even when "fun" includes making the game harder and more frustrating at times. .. "

Sadly, open source design is still regarded by power-holders with fear and contempt, but these goings-on in virtual nerd world compel one to wonder How much decision making can be democratized? The comment thread spawned by this post on American illiteracy got me thinking about this topic.

U.S. car companies lobbied the government to give large vehicles tax advantages for business use. The car companies "engineered" (or would that be gerrymandered?) the demand for SUVs that has proven to be their undoing. Would car buying consumers have voted for such lobbying?

Competitive advantage would depend on transparency, accountability, and accurate information rather than propaganda. If these virtual world methods were adopted by one successful business, how long before the public would move to have them applied to functions of government?

Decision Neuroscience

This will not be the first time you've heard this from me, I've variously addressed it hereabouts under the rubrics neuroeconomics or dopamine hegemony - but this morning my very good friend Arnach hit me up back channel with a morsel supportive of the theory that global human governance boils down to the science of stimulating and controlling dopaminergy in the individual brain.

From the Stanford Storybank we have This is Your Brain on Bargains.

Scientific inspiration can derive from the most mundane experience. Archimedes was said to have figured out how to compute volume in his bathtub. When Uzma Khan had her eureka moment, she was sprawled on her couch, just back from a shopping mall where she had gone to avoid working on her dissertation.

Khan—then at Yale, now an assistant professor of marketing at the Graduate School of Business—knew all about the supposed levers of consumer behavior: supply, demand, advertising, discounting. Traditionally, business theorists described consumer behavior as being based on rational decisions about value and price. But as Khan looked at the shopping bags strewn around her apartment she realized that the conventional wisdom was, well, bankrupt. She was sure that her buying decisions had much less to do with price than they did her frayed nerves. She had gone shopping to feel better. Once home, the thrill was gone. “I looked at all that stuff, all those bags, and I thought, 'I don't need this stuff. I'm going to take most of it back. What was I thinking?'”

Khan's professional focus today is answering that question—what are we thinking when we go shopping? She is one of a growing number of researchers at Stanford and elsewhere working on consumer mysteries: Why are our needs and wants so disconnected? Why do people dig themselves into debt from foolish spending? Why do our brains perceive expensive products as superior? And what are the biological bases for the pleasures that shopping or even the anticipation of shopping can unleash?

So simple, elegant, and obvious. Selective governance via the natural tendency of the brain's neuronal circuits to Do What They Do..., what could be easier, more powerful, and more durable than that? The basic fact is that humans are routinely exploited by those with the wherewithal to "engineer" values in the outside world and a little knowledge of the workings of the "inside" world.

Pakistanis Fear the U.S., Too

NYTimes | A redrawn map of South Asia has been making the rounds among Pakistani elites. It shows their country truncated, reduced to an elongated sliver of land with the big bulk of India to the east, and an enlarged Afghanistan to the west.

That the map was first circulated as a theoretical exercise in some American neoconservative circles matters little here. It has fueled a belief among Pakistanis, including members of the armed forces, that what the United States really wants is the breakup of Pakistan, the only Muslim country with nuclear arms.

“One of the biggest fears of the Pakistani military planners is the collaboration between India and Afghanistan to destroy Pakistan,” said a senior Pakistani government official involved in strategic planning, who insisted on anonymity as per diplomatic custom. “Some people feel the United States is colluding in this.”

That notion may strike Americans as strange coming from an ally of 50 years. But as the incoming Obama administration tries to coax greater cooperation from Pakistan in the fight against militancy, it can hardly be ignored.

This is a country where years of weak governance have left ample room for conspiracy theories of every kind. But like much such thinking anywhere, what is said frequently reveals the tender spots of a nation’s psyche. Educated Pakistanis sometimes say that they are paranoid, but add that they believe they have good reason.

Pakistan, a 61-year-old country marbled by ethnic fault lines, is a collection of just four provinces, which often seem to have little in common. Virtually every one of its borders, drawn almost arbitrarily in the last gasps of the British Empire, is disputed with its neighbors, not least Pakistan’s bitter and much larger rival, India.

These facts and the insecurities that flow from them inform many of Pakistan’s disagreements with the United States, including differences over the need to rein in militancy in the form of Al Qaeda and the Taliban.

Flux in the BRIC

NYTimes | “Russia’s elites, including President Medvedev, look on China’s rising diplomatic and economic successes in Latin America and in Africa with envy,” said Stephen Kotkin, the director of Russia studies at Princeton University. “They also perceive an opportunity, much exaggerated, to send the U.S. a message in its supposed backyard.”

But Mr. Medvedev faces a hard sell in the region. In Cuba there are lingering suspicions over Russian intentions, as the Cuban economy collapsed when the Soviets withdrew in the 1990s, as well as a reluctance to alienate an incoming Obama administration that might push to end the trade embargo.

Brazil, Latin America’s largest country, which also places a high priority on relations with an Obama administration, wants to engage Russia not as a source of weapons or military assistance, but as an equal partner.

“We are not interested in buying defense products off the shelf,” said Roberto Mangabeira Unger, Brazil’s minister of strategic affairs and the architect of a new military strategy set to be officially unveiled in December.

“Unlike other South American countries we don’t go around buying things, and we are not interested in some kind of balance-of-power politics to contain the United States,” said Mr. Mangabeira Unger, a former Harvard law professor who taught Mr. Obama when he was at Harvard Law School. “We have friendly relations with the United States, and with the incoming administration intend to make them even more friendly.”

By contrast in Venezuela, itself battered by falling oil prices, Mr. Medvedev can expect a warm welcome. President Hugo Chávez has long sought closer ties, traveling to Russia seven times and forging deals to buy more than $4 billion in arms. Until recently, however, Russia showed little interest in expanding ties with Venezuela beyond weapons sales and a handful of energy deals.

The Pakistan Test

NYTimes | While there are no easy solutions for the interlinked catastrophes unfolding in Pakistan and Afghanistan, there are several useful steps that we in the West can take to reduce the risk of the region turning into the next Somalia.

First, we should slow the financial flow to Pakistan’s government and military. If the government wants to stop the Talibanization of Pakistan, its greatest need isn’t money but the political will to stop sheltering Taliban leaders in the city of Quetta.

Second, we should cut tariffs on Pakistani agricultural and manufactured products to boost the economy and provide jobs. We should also support China on its planned export-processing zone to create manufacturing jobs in Pakistan.

Third, we should push much harder for a peace deal in Kashmir — including far more pressure on India — because Kashmir grievances empower Pakistani militants.

Fourth, let’s focus on education. One reason the country is such a mess today is that half of all Pakistanis are illiterate.

Pennyland - Echoes of the Great Depression

Up from the comments, a poignant movie by Frank Thomas inspired by "Pennyland" a song written by his brother, Eddie Thomas featuring Depression Era photographs from the Library of Congress and audio excerpts from Franklin D. Roosevelt's 1933 inaugural address. Thanks for stopping by Frank.

World's Biggest Loser.....,

Shape of Things to Come?

John Maynard Keynes had the answer to the crisis we’re now facing; but it was blocked and then forgotten. Poor old Lord Keynes. The world’s press has spent the past week blackening his name. Not intentionally: most of the dunderheads reporting the G20 summit which took place over the weekend really do believe that he proposed and founded the International Monetary Fund. It’s one of those stories that passes unchecked from one journalist to another.

The truth is more interesting. At the Bretton Woods conference in 1944, John Maynard Keynes put forward a much better idea. After it was thrown out, Geoffrey Crowther - then the editor of the Economist magazine - warned that “Lord Keynes was right … the world will bitterly regret the fact that his arguments were rejected.”(1) But the world does not regret it, for almost everyone - the Economist included - has forgotten what he proposed.

He proposed a global bank, which he called the International Clearing Union. The bank would issue its own currency - the bancor - which was exchangeable with national currencies at fixed rates of exchange. The bancor would become the unit of account between nations, which means it would be used to measure a country’s trade deficit or trade surplus.

By George Monbiot. Published in the Guardian 18th November 2008

The Real Great Depression

Comes now my man RC spitting lost historical knowledge from the Chronicle of Higher Education. You should read the article in full. The depression of 1929 is the wrong model for the current economic crisis;

the current economic woes look a lot like what my 96-year-old grandmother still calls "the real Great Depression." She pinched pennies in the 1930s, but she says that times were not nearly so bad as the depression her grandparents went through. That crash came in 1873 and lasted more than four years. It looks much more like our current crisis.

The problems had emerged around 1870, starting in Europe. In the Austro-Hungarian Empire, formed in 1867, in the states unified by Prussia into the German empire, and in France, the emperors supported a flowering of new lending institutions that issued mortgages for municipal and residential construction, especially in the capitals of Vienna, Berlin, and Paris. Mortgages were easier to obtain than before, and a building boom commenced. Land values seemed to climb and climb; borrowers ravenously assumed more and more credit, using unbuilt or half-built houses as collateral. The most marvelous spots for sightseers in the three cities today are the magisterial buildings erected in the so-called founder period.

If there are lessons from 1873, they are different from those of 1929. Most important, when banks fall on Wall Street, they stop all the traffic on Main Street — for a very long time. The protracted reconstruction of banks in the United States and Europe created widespread unemployment. Unions (previously illegal in much of the world) flourished but were then destroyed by corporate institutions that learned to operate on the edge of the law. In Europe, politicians found their scapegoats in Jews, on the fringes of the economy. (Americans, on the other hand, mostly blamed themselves; many began to embrace what would later be called fundamentalist religion.)

The post-panic winners, even after the bailout, might be those firms — financial and otherwise — that have substantial cash reserves. A widespread consolidation of industries may be on the horizon, along with a nationalistic response of high tariff barriers, a decline in international trade, and scapegoating of immigrant competitors for scarce jobs. The failure in July of the World Trade Organization talks begun in Doha seven years ago suggests a new wave of protectionism may be on the way.

Every day you learn something new is a good day indeed.

Tom Terrific

Culture Change | Tom Friedman has convinced a vast swath of otherwise intelligent and well-educated Americans that he's a visionary. I propose this is so because he channels the thought patterns and emotional currents at the core of American conventional wisdom: economic growth and unrestrained technological progress are the natural state of the world -- with the stipulation that America must, naturally, lead the way. Friedman's greatest skill is catchy -- and often oddly phrased -- simplifications promoting our collective identity as the Exceptional Nation. Recently he, as we say in another context about petroleum, reached peak Friedman.

Before getting to that I note that Friedman's modus operandi is to tirelessly see “opportunity” in crisis. He ridicules those who see threats as lacking insight, entrepreneurial spirit, and innovative thinking. To do this, Friedman operates much like the fifties cartoon character Tom Terrific, who possesses a magical thinking cap that transports him out of any jam in which he finds himself. For example, Friedman is waiting for an entrepreneur in a garage to invent the next energy platform -- who cares about finite fossil fuels when the next Steve Jobs is all we really need? In fact, he recently suggested that Jobs -- because he’s invented the iPod -- could rescue the Big-Three automakers. It's that simple; take it from Tom Terrific.

Much to Friedman's displeasure, however, financial, economic, and ecological realities (the latter of which he appears to be totally unaware) are undermining his belief that nature can be dominated by human ingenuity. These intertwined crises will, I suspect, elicit all manner of Tom Terrific articles from Friedman in the coming months; this will indicate, for an undetermined time, the undulating plateau of peak Friedman.

America the Illiterate

TruthDig | In our post-literate world, because ideas are inaccessible, there is a need for constant stimulus. News, political debate, theater, art and books are judged not on the power of their ideas but on their ability to entertain. Cultural products that force us to examine ourselves and our society are condemned as elitist and impenetrable. Hannah Arendt warned that the marketization of culture leads to its degradation, that this marketization creates a new celebrity class of intellectuals who, although well read and informed themselves, see their role in society as persuading the masses that “Hamlet” can be as entertaining as “The Lion King” and perhaps as educational. “Culture,” she wrote, “is being destroyed in order to yield entertainment.”

“There are many great authors of the past who have survived centuries of oblivion and neglect,” Arendt wrote, “but it is still an open question whether they will be able to survive an entertaining version of what they have to say.”

The change from a print-based to an image-based society has transformed our nation. Huge segments of our population, especially those who live in the embrace of the Christian right and the consumer culture, are completely unmoored from reality. They lack the capacity to search for truth and cope rationally with our mounting social and economic ills. They seek clarity, entertainment and order. They are willing to use force to impose this clarity on others, especially those who do not speak as they speak and think as they think. All the traditional tools of democracies, including dispassionate scientific and historical truth, facts, news and rational debate, are useless instruments in a world that lacks the capacity to use them.

As we descend into a devastating economic crisis, one that Barack Obama cannot halt, there will be tens of millions of Americans who will be ruthlessly thrust aside. As their houses are foreclosed, as their jobs are lost, as they are forced to declare bankruptcy and watch their communities collapse, they will retreat even further into irrational fantasy. They will be led toward glittering and self-destructive illusions by our modern Pied Pipers—our corporate advertisers, our charlatan preachers, our television news celebrities, our self-help gurus, our entertainment industry and our political demagogues—who will offer increasingly absurd forms of escapism.

Question of the Week - No. 1

Who do you know and what do you know (institutions, systems, companies, things) that will thrive during the pending period of national and global Greatest Economic Depression?

everything after that is really just conversation, but in the interest of engaging repartee,

please state who or what you know of that you believe will not only survive, but thrive during the pending Greatest Economic Depression?

Hat tip to Mahndisa for making me think about water efficiency, free markets, fremen warriors , and alternative currency systems.

Hat tip to Ed Dunn for writing at length about what's around that signpost up ahead, what you need to be thinking about and doing to get ready for it, and keeping it all extra trill, practical, and very humorous.

Moore’s Curse and the Great Energy Delusion

The American | Our transition away from fossil fuels will take decades—if it happens at all. During the early 1970s we were told by the promoters of nuclear energy that by the year 2000 America’s coal-based electricity generation plants would be relics of the past and that all electricity would come from nuclear fission. What’s more, we were told that the first generation fission reactors would by then be on their way out, replaced by super-efficient breeder reactors that would produce more fuel than they were initially charged with.

During the early 1980s some aficionados of small-scale, distributed, “soft” (today’s “green”) energies saw America of the first decade of the 21st century drawing 30 percent to 50 percent of its energy use from renewables (solar,wind, biofuels). For the past three decades we have been told how natural gas will become the most important source of modern energy: widely cited forecasts of the early 1980s had the world deriving half of its energy from natural gas by 2000. And a decade ago the promoters of fuel cell cars were telling us that such vehicles would by now be on the road in large numbers, well on their way to displacing ancient and inefficient internal combustion engines.

These are the realities of 2008: coal-fired power plants produce half of all U.S. electricity, nuclear stations 20 percent, and there is not a single commercial breeder reactor operating anywhere in the world; in 2007 the United States derives about 1.7 percent of its energy from new renewable conversions (corn-based ethanol, wind, photovoltaic solar, geothermal); natural gas supplies about 24 percent of the world’s commercial energy—less than half the share predicted in the early 1980s and still less than coal with nearly 29 percent; and there are no fuel-cell cars.

This list of contrasts could be greatly extended, but the point is made: all of these forecasts and anticipations failed miserably because their authors and promoters ignored one of the most important realities ruling the behavior of complex energy systems—the inherently slow pace of energy transitions.

Chinese Automakers May Buy GM and Chrysler

Truth About Cars | Chinese carmakers SAIC and Dongfeng have plans to acquire GM and Chrysler, China’s 21st Century Business Herald reports today. [A National Enquirer the paper is not. It is one of China's leading business newspapers, with a daily readership over three million.] The paper cites a senior official of China’s Ministry of Industry and Information Technology– the state regulator of China’s auto industry– who dropped the hint that “the auto manufacturing giants in China, such as Shanghai Automotive Industry Corporation (SAIC) and Dongfeng Motor Corporation, have the capability and intention to buy some assets of the two crisis-plagued American automakers.” These hints are very often followed with quick action in the Middle Kingdom. The hints were dropped just a few days after the same Chinese government gave its auto makers the go-ahead to invest abroad. And why would they do that?

A take-over of a large overseas auto maker would fit perfectly into China’s plans. As reported before, China has realized that its export chances are slim without unfettered access to foreign technology. The brand cachet of Chinese cars abroad is, shall we say, challenged. The Chinese could easily export Made-in-China VWs, Toyotas, Buicks. If their joint venture partner would let them. The solution: Buy the joint venture partner. Especially, when he’s in deep trouble.

At current market valuations (GM is worth less than Mattel) the Chinese government can afford to buy GM with petty cash. Even a hundred billion $ would barely dent China’s more than $2t in currency reserves. For nobody in the world would buying GM and (while they are at it) Chrysler make more sense than for the Chinese. Overlap? What overlap? They would gain instant access to the world’s markets with accepted brands, and proven technology.

21st Century Business Herald, obviously with input from higher-up, writes that Chinese industry must change and upgrade. China wants their factories to change from low-value-added manufacturing to technically innovative and financially-sound high-value-add industries. Says the paper: “It would be much easier now for strong Chinese automakers to go global by acquiring some assets of their U.S. counterparts in times of crisis.”

Let Detroit Go Bankrupt

NYTimes | IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

A Sea of Unwanted Imports

NYTimes | LONG BEACH, Calif. — Gleaming new Mercedes cars roll one by one out of a huge container ship here and onto a pier. Ordinarily the cars would be loaded on trucks within hours, destined for dealerships around the country. But these are not ordinary times.

For now, the port itself is the destination. Unwelcome by dealers and buyers, thousands of cars worth tens of millions of dollars are being warehoused on increasingly crowded port property.

And for the first time, Mercedes-Benz, Toyota, and Nissan have each asked to lease space from the port for these orphan vehicles. They are turning dozens of acres of the nation’s second-largest container port into a parking lot, creating a vivid picture of a paralyzed auto business and an economy in peril.

“This is one way to look at the economy,” Art Wong, a spokesman for the port, said of the cars. “And it scares you to death.”

Indian Warship Shells Pirates

MOGADISHU (AFP) - An Indian warship opened fire at a Somali pirate "mother ship", the navy said Wednesday, as bandits demanded a ransom for a Saudi super-tanker seized in the most daring sea raid yet.

The Indian frigate INS Tabar, one of dozens of warships from several countries protecting shipping lanes in the Gulf of Aden, attacked the pirate ship late Tuesday after coming under fire, navy spokesman Nirad Sinha said.

The incident came as shipping groups reported a new surge in hijackings off Somalia and the International Maritime Bureau said pirates based in the lawless African nation were now "out of control".

"The INS Tabar closed in on the mother vessel and asked her to stop for investigation," the New Delhi navy spokesman said.

"But on repeated calls, the vessel's threatening response was that she would blow up the naval warship" if it approached," he added.

"The vessel... subsequently fired on the INS Tabar, and the warship retaliated in self defence," he said. "Explosions were heard, possibly due to exploding ammunition that was stored on the vessel."

Pirates had been on the upper deck of the vessel with automatic weapons and rocket-propelled grenade launchers, he said.

The piracy crisis has grown since the capture of Saudi super-tanker the Sirius Star on Saturday. The huge vessel was carrying a full load of two million barrels of oil worth an estimated 100 million dollars.

Prophesy of economic collapse 'coming true'

NewScientist | In 1972, the seminal book Limits to Growth by a group called the Club of Rome claimed that exponential growth would eventually lead to economic and environmental collapse.

The group used computer models that assessed the interaction of rising populations, pollution, industrial production, resource consumption and food production.

Most economists rubbished the book and its recommendations have been ignored by governments, although a growing band of experts today continues to argue that we need to reshape our economy to become more sustainable.

Now Graham Turner at theCommonwealth Scientific and Industrial Research Organisation (CSIRO) in Australia has compared the book's predictions with data from the intervening years.

Changes in industrial production, food production and pollution are all in line with the book's predictions of collapse in the 21st century, says Turner. According to the book, the path we have taken will cause decreasing resource availability and an escalating cost of extraction that triggers a slowdown of industry, which eventually results in economic collapse some time after 2020.

"For the first 30 years of the model, the world has been tracking along an unsustainable trajectory," he says.

According to Herman Daly of the University of Maryland, Turner's results show that we "must get off the growth path of business as usual, and move to a steady state economy," stopping population growth, resource depletion, and pollution.

Yet Turner reckons his report [pdf format] shows that a sustainable economy is attainable. "We wouldn't have to go back to the caves," he says.