15 July, 2011
Post Carbon Institute

World energy policy is gripped by a fallacy — the idea that coal is destined to stay cheap for decades to come. This assumption supports investment in ‘clean-coal’ technology and trumps serious efforts to increase energy conservation and develop alternative energy sources. It is an important enough assumption about our energy future that it demands closer examination.

There are two reasons to believe that coal prices are likely to soar in the years ahead.

First, a spate of recent studies [1–5] suggests that available, useful coal may be less abundant than has been assumed — indeed that the peak of world coal production may be only years away. One pessimistic study [1] published in 2010 concluded that global energy derived from coal could peak as early as 2011.

Second, global demand is growing rapidly, largely driven by China. Demand rose modestly in the 1990s (0.45% per year), but since 2000 it has been surging at 3.8% per year. China is both the world’s biggest producer of coal (40% of global production) and its biggest consumer. Its influence on future coal prices should not be underestimated.

Economic shocks from rising coal prices will be felt by every sector of society. Better data on global coal supplies is long overdue and energy policies that assume a bottomless coal pit need rethinking urgently.

Forecasting future supplies of coal is a murky business, largely because of the unreliability of national estimates. China claims that it has enough coal to fuel its growing economy at current rates. According to data collected in the 2000–10 national resource survey by the China’s Ministry of Land and Resources, the country’s proven reserves of coal total 187 billion tonnes, the second-largest reserves after the United States. For China, that is about 62 years’ worth of coal — at 2009 rates of consumption (roughly 3 billion tonnes a year). This simple ‘lifetime’ calculation is popular with industry and politicians but it can generate a false sense of security over the actual state of reserves.

‘Proven recoverable reserves’ are estimates of the national coal resources that geologists believe are technically and economically feasible to mine. New mining technology and higher coal prices could, in principle, increase the size of those reserves. But the overwhelming global trend, as revealed by national coal surveys over the past few decades, is for the size of countries’ estimated reserves to shrink as geologists uncover restrictions — such as location, depth, seam thickness and quality — on the coal that can be practically extracted.

For example, both German and South African reserves have fallen by more than one-third between 2003 and 2008. The first British coal survey, in the nineteenth century, suggested that the nation had enough coal to last 900 years. The current reserves lifetime is only 12 years [6], and the British coal industry is a tiny fraction of its former size. Similarly, the first official US coal survey, in the early twentieth century, suggested that the country had enough coal for 5,000 years. That estimate shrank to about 400 years in 1974 and stands at 240 years today. There are exceptions to this trend: estimates of reserves in Indonesia and India have grown. However, in aggregate, estimates of global coal reserves have dropped at a faster rate in recent years than can be accounted for by mining alone.

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OPTIMISTIC FORECASTS

China’s reserves were last surveyed in the early 2000s, and the US reserves in the 1970s. China does not possess, as the United States does, vast deposits of surface-minable coal. More than 90% of China’s coal comes from underground mines that can be as much as 1,000 metres deep, presenting increasing engineering challenges. We strongly suspect that the current reserves figures are too optimistic. The coal is certainly there, but — like the majority of coal elsewhere in the world — most of it is probably destined to stay put. One way to estimate future production is to look at past production trends. This method was pioneered by geophysicist King Hubbert, who used 1950s data from the US oil industry to predict that US oil production would peak in the early 1970s. It did. Hubbert production profiles plotted over time assume the shape of a distorted bell curve, with a short peak and gradual decline (see graphic). Applying Hubbert analysis to coal, Chinese academics Tao and Li [7] forecast in 2007 that China’s production will peak and begin to decline long before the simple 62-years estimate, perhaps as early as 2025. During and after the period when production peaks, resource quality will dwindle and mining costs will rise, pushing up coal prices, as is already beginning to happen with Asia-Pacific coal.

Tao and Li used the Chinese government’s latest official reserves figure of 187 billion tonnes to arrive at their peaking date between 2025 and 2032. Other forecasts are more pessimistic. A 2007 forecast3 by the Energy Watch Group, based in Berlin, used a reserves figure of 114.5 billion tonnes (reported by China to World Energy Council in 1992) to forecast a peak of production in 2015, with a rapid production decline commencing in 2020. Analogous concerns raised in 1998 about the end of cheap oil [8] proved prescient. The price of oil has grown substantially since then, as have the costs of finding and extracting new supplies. The current price of more than US$80 per barrel is about three times higher than the upper range in official forecasts for 2010 that were being issued in the late 1990s [9]. New technologies have made marginal oil reserves accessible, but deepwater drilling and oil-sands production entail high costs and risks.

Similarly, new technology — underground coal gasification — may eventually make marginal coal reserves accessible, but it will take time and substantial investment to commercialize on a large scale. Meanwhile, the world’s highest-quality and most-accessible coal reserves are disappearing as demand for the fuel grows.

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Coal consumption is accelerating fast, notably in China (see graphic). This renders meaningless reserves-lifetime figures calculated on the basis of flat demand. A 2009 report from China’s Energy Research Institute forecast that coal demand would rise by 700 million to 1 billion tonnes by 2020, reducing the reserves lifetime to about 33 years. If coal demand grows in step with projected Chinese economic growth, the reserves lifetime would drop to just 19 years [10].

COAL RELIANT

China has few options for reducing its reliance on coal. It uses coal in many more industries than the United States, where coal mostly fuels power generation. About half of China’s coal provides 80% of the country’s electricity supply; another 16% supplies the coke for its iron and steel industry, the largest in the world. Hundreds of millions of people in northern China consume another 6% for their winter heat supply. The remaining 28% is primarily used in industries such as cement, non-ferrous metals, and chemicals. Although China is rapidly expanding its supply of natural gas, to replace just the coal used for heating would double its total gas consumption.

Urbanization is also driving demand for coal. Less than half of China’s population now lives in cities (compared with 80% for the United States and the European Union). To improve living conditions and opportunities for its citizens, the government wants the urban population to grow by 350 million people over the next 15 years, all of whom will require infrastructure such as housing, energy, transport, water supply and waste treatment. This will necessitate a steady supply of building materials such as cement, steel, aluminium and copper, all of which depend on coal for their production. Over the next decade, economic growth and urbanization are expected to use at the very least 700 million tonnes of coal — assuming that aggressive energy-efficiency and alternative-energy targets are also met [7].

Can China go elsewhere for its coal? The United States has the world’s biggest reported reserves, but almost all its current production — 1 billion tonnes — is used domestically. The biggest exporters of coal, Australia, Indonesia and South Africa, have much smaller reserves and production rates — some 250 million to 400 million tonnes a year. In 2008 the entire seaborne trade in steam coal (mainly used by power plants) amounted to about 630 million tonnes. Although this could grow (Australia, Russia and Indonesia are expanding capacity), growth will be limited, and prices pushed up, by the need to construct mines, railways and ports.

Russia has large but mostly undeveloped coal resources in Siberia. They are not located near demand centres, and rail transport of coal is expensive (which is why the largest exporters are coastal and trade is waterborne). Nevertheless, Russia could export Siberian coal to China more easily than to Europe, especially if China helped to build the railways.

China alone could absorb all current Asia-Pacific exports with just three years of import growth at current rates. Because other countries in the region also depend on coal imports, China clearly cannot take all, but competition for imports drives up prices. And then there’s India, where imports are expected to nearly double to 100 million tonnes by 2012. India is one of the few countries to revise its reserves estimates upwards in recent years, but its higher-quality reserves are limited and it is importing increasing quantities.

The inevitable result of soaring demand and dwindling supply will be rising coal prices globally, even in nations that are currently self-sufficient in the resource.

The poor quality of coal data globally means that uncertainty clouds every forecast. Even in the technologically advanced United States — the ‘Saudi Arabia of coal’ — most experts rely on decades-old coal surveys. These are commonly interpreted as indicating that the nation has a coal supply with a 250-year lifetime. This figure is not reliable enough for strategic energy planning.

In terms of energy output, US coal production peaked in the late 1990s (volume continued to increase, but the coal was of lower energy content). In 1995 the US Geological Survey (USGS) promised a new national coal survey, but it has not been seen as a high priority by that organization or by Congress. The most recent surveys [11],[12] of two key mining regions show rapid depletion of high quality reserves. There is still an enormous amount of US coal, but whether future energy production can be increased is doubtful, even taking into account new mining areas in Montana, Alaska and the Illinois basin.

LIMIT CONSUMPTION

At the very least, the USGS should urgently complete a new national coal survey. And it is essential for the security of energy supplies globally that Chinese domestic coal production and the timing of its likely decline is better understood.

We believe that it is unlikely that world energy supplies can continue to meet projected demand beyond 2020. Therefore, new limits on energy consumption will be essential in all sectors of society — including agriculture, transportation and manufacturing — and will be imposed by energy prices and shortages if they are not achieved through planning and policy.

Supply limits also have implications for the development of clean-coal technology. Also known as carbon capture and storage (CCS), clean coal is one proposal for reducing greenhouse-gas emissions while growing energy supplies. Because maintaining economic growth while cutting coal out of the energy equation globally will be difficult, and because nearly everyone assumes that coal will remain cheap far into the foreseeable future, the idea is to keep the carbon dioxide produced by burning coal from going into the atmosphere.

There are two hitches: the difficulty of scaling up such an enterprise, and its effect on electricity prices. As many analysts have noted, the scale and cost of clean-coal infrastructure will be vast [13]. Energy analysts agree that this will boost the price of electricity, but the scheme could work if coal prices remain low. If they don’t, building new coal plants — conventional or clean — makes little economic sense, except to replace ageing inefficient infrastructure.

Nations should immediately begin to plan for higher fossil-fuel prices and to make maximum possible investments in energy efficiency and renewable-energy infrastructure. Even then the world will have to accept a slowdown in economic growth.

Richard Heinberg and David Fridley are at the Post-Carbon Institute in Santa Rosa, California 95404, USA. \

Heinberg is the author of nine books, including Blackout: Coal, Climate, and the Last Energy Crisis, The Party’s Over, Peak Everything, and the soon-to-be-released The End of Growth. He is widely regarded as one of the world’s most effective communicators of the urgent need to transition away from fossil fuels.

David Fridley: Since 1995, David Fridley has been a staff scientist at the Energy Analysis Program at the Lawrence Berkeley National Laboratory in California. He is also deputy group leader of Lawrence Berkeley’s China Energy Group, which collaborates with China on end-user energy efficiency, government energy management programs, and energy policy research. Mr. Fridley has nearly 30 years of experience working and living in China in the energy sector, and is a fluent Mandarin speaker. He spent 12 years working in the petroleum industry both as a consultant on downstream oil markets in the Asia-Pacific region and as business development manager for Caltex China. He has written and spoken extensively on the energy and ecological limits of biofuels.

This article was Originally published November 18, 2010 in Nature Vol 468. Republished with permission.

1. Patzek, T. W. & Croft, G. D. Energy 35, 3109–3122(2010).

2. Mohr, S. H. & Evans, G. M. Fuel 88, 2059–2067(2009).

3. Zittel, W. & Schindler, J. Energy Watch Group, Paper No. 1/07 (2007); available at http://go.nature.com/jngfsa

4. Rutledge, D. Hubbert’s Peak, The Coal Question, and Climate Change (2007): available at http://rutledge.caltech.edu

5. Höök, M., Zittel, W., Schindler, J. & Aleklett, K. Fuel 89, 3546–3558 (2010).

6. 2010 Survey of Energy Resources (World Energy Council, 2010); available at http://go.nature.com/hde5r7

7. Tao, Z. & Li, M. Energy Pol. 35, 3145–3154 (2007).

8. Campbell, C. J. & Laherrère, J. H. The End of Cheap Oil. Sci. Am. (March 1998).

9. Energy Information Administration. Annual Energy Outlook 1998 (DOE/EIA, 1997).

10. 2050 China Energy and CO2 Emissions Report (in Chinese) Science Press, 2009).

11. Luppens, J. A. et al. Assessment of Coal Geology, Resources, and Reserves in the Gillette Coalfield, Powder River Basin, Wyoming. Open-File Report 2008-1202 (USGS, 2008).

12. Coal Reserves of the Matewan Quadrangle, Kentucky — A Coal Recoverability Study. US Bureau of Mines Circular 9355 (USGS, 2003).

13. Strategic Analysis of the Global Status of Carbon Capture and Storage. (Global CCS institute, 2009).

America is not broke.

Contrary to what those in power would like you to believe so that you’ll give up your pension, cut your wages, and settle for the life your great-grandparents had, America is not broke. Not by a long shot. The country is awash in wealth and cash. It’s just that it’s not in your hands. It has been transferred, in the greatest heist in history, from the workers and consumers to the banks and the portfolios of the uber-rich.

Today just 400 Americans have the same wealth as half of all Americans combined.

Let me say that again. 400 obscenely rich people, most of whom benefited in some way from the multi-trillion dollar taxpayer “bailout” of 2008, now have as much loot, stock and property as the assets of 155 million Americans combined. If you can’t bring yourself to call that a financial coup d’état, then you are simply not being honest about what you know in your heart to be true.

Watch Video: Michael Moore Speaks in Wisconsin

And I can see why. For us to admit that we have let a small group of men abscond with and hoard the bulk of the wealth that runs our economy, would mean that we’d have to accept the humiliating acknowledgment that we have indeed surrendered our precious Democracy to the moneyed elite. Wall Street, the banks and the Fortune 500 now run this Republic — and, until this past month, the rest of us have felt completely helpless, unable to find a way to do anything about it.

I have nothing more than a high school degree. But back when I was in school, every student had to take one semester of economics in order to graduate. And here’s what I learned: Money doesn’t grow on trees. It grows when we make things. It grows when we have good jobs with good wages that we use to buy the things we need and thus create more jobs. It grows when we provide an outstanding educational system that then grows a new generation of inventers, entrepreneurs, artists, scientists and thinkers who come up with the next great idea for the planet. And that new idea creates new jobs and that creates revenue for the state. But if those who have the most money don’t pay their fair share of taxes, the state can’t function. The schools can’t produce the best and the brightest who will go on to create those jobs. If the wealthy get to keep most of their money, we have seen what they will do with it: recklessly gamble it on crazy Wall Street schemes and crash our economy. The crash they created cost us millions of jobs. That too caused a reduction in revenue. And the population ended up suffering because they reduced their taxes, reduced our jobs and took wealth out of the system, removing it from circulation.

The nation is not broke, my friends. Wisconsin is not broke. It’s part of the Big Lie. It’s one of the three biggest lies of the decade: America/Wisconsin is broke, Iraq has WMD, the Packers can’t win the Super Bowl without Brett Favre.

The truth is, there’s lots of money to go around. LOTS. It’s just that those in charge have diverted that wealth into a deep well that sits on their well-guarded estates. They know they have committed crimes to make this happen and they know that someday you may want to see some of that money that used to be yours. So they have bought and paid for hundreds of politicians across the country to do their bidding for them. But just in case that doesn’t work, they’ve got their gated communities, and the luxury jet is always fully fueled, the engines running, waiting for that day they hope never comes. To help prevent that day when the people demand their country back, the wealthy have done two very smart things:

1. They control the message. By owning most of the media they have expertly convinced many Americans of few means to buy their version of the American Dream and to vote for their politicians. Their version of the Dream says that you, too, might be rich some day – this is America, where anything can happen if you just apply yourself! They have conveniently provided you with believable examples to show you how a poor boy can become a rich man, how the child of a single mother in Hawaii can become president, how a guy with a high school education can become a successful filmmaker. They will play these stories for you over and over again all day long so that the last thing you will want to do is upset the apple cart — because you — yes, you, too! — might be rich/president/an Oscar-winner some day! The message is clear: keep you head down, your nose to the grindstone, don’t rock the boat and be sure to vote for the party that protects the rich man that you might be some day.

2. They have created a poison pill that they know you will never want to take. It is their version of mutually assured destruction. And when they threatened to release this weapon of mass economic annihilation in September of 2008, we blinked. As the economy and the stock market went into a tailspin, and the banks were caught conducting a worldwide Ponzi scheme, Wall Street issued this threat: Either hand over trillions of dollars from the American taxpayers or we will crash this economy straight into the ground. Fork it over or it’s Goodbye savings accounts. Goodbye pensions. Goodbye United States Treasury. Goodbye jobs and homes and future. It was friggin’ awesome and it scared the shit out of everyone. “Here! Take our money! We don’t care. We’ll even print more for you! Just take it! But, please, leave our lives alone, PLEASE!”

The executives in the board rooms and hedge funds could not contain their laughter, their glee, and within three months they were writing each other huge bonus checks and marveling at how perfectly they had played a nation full of suckers. Millions lost their jobs anyway, and millions lost their homes. But there was no revolt (see #1).

Until now. On Wisconsin! Never has a Michigander been more happy to share a big, great lake with you! You have aroused the sleeping giant know as the working people of the United States of America. Right now the earth is shaking and the ground is shifting under the feet of those who are in charge. Your message has inspired people in all 50 states and that message is: WE HAVE HAD IT! We reject anyone tells us America is broke and broken. It’s just the opposite! We are rich with talent and ideas and hard work and, yes, love. Love and compassion toward those who have, through no fault of their own, ended up as the least among us. But they still crave what we all crave: Our country back! Our democracy back! Our good name back! The United States of America. NOT the Corporate States of America. The United States of America!

So how do we get this? Well, we do it with a little bit of Egypt here, a little bit of Madison there. And let us pause for a moment and remember that it was a poor man with a fruit stand in Tunisia who gave his life so that the world might focus its attention on how a government run by billionaires for billionaires is an affront to freedom and morality and humanity.

Thank you, Wisconsin. You have made people realize this was our last best chance to grab the final thread of what was left of who we are as Americans. For three weeks you have stood in the cold, slept on the floor, skipped out of town to Illinois — whatever it took, you have done it, and one thing is for certain: Madison is only the beginning. The smug rich have overplayed their hand. They couldn’t have just been content with the money they raided from the treasury. They couldn’t be satiated by simply removing millions of jobs and shipping them overseas to exploit the poor elsewhere. No, they had to have more – something more than all the riches in the world. They had to have our soul. They had to strip us of our dignity. They had to shut us up and shut us down so that we could not even sit at a table with them and bargain about simple things like classroom size or bulletproof vests for everyone on the police force or letting a pilot just get a few extra hours sleep so he or she can do their job — their $19,000 a year job. That’s how much some rookie pilots on commuter airlines make, maybe even the rookie pilots flying people here to Madison. But he’s stopped trying to get better pay. All he asks is that he doesn’t have to sleep in his car between shifts at O’Hare airport. That’s how despicably low we have sunk. The wealthy couldn’t be content with just paying this man $19,000 a year. They wanted to take away his sleep. They wanted to demean and dehumanize him. After all, he’s just another slob.

And that, my friends, is Corporate America’s fatal mistake. But trying to destroy us they have given birth to a movement — a movement that is becoming a massive, nonviolent revolt across the country. We all knew there had to be a breaking point some day, and that point is upon us. Many people in the media don’t understand this. They say they were caught off guard about Egypt, never saw it coming. Now they act surprised and flummoxed about why so many hundreds of thousands have come to Madison over the last three weeks during brutal winter weather. “Why are they all standing out there in the cold? I mean there was that election in November and that was supposed to be that!

“There’s something happening here, and you don’t know what it is, do you …?”

America ain’t broke! The only thing that’s broke is the moral compass of the rulers. And we aim to fix that compass and steer the ship ourselves from now on. Never forget, as long as that Constitution of ours still stands, it’s one person, one vote, and it’s the thing the rich hate most about America — because even though they seem to hold all the money and all the cards, they begrudgingly know this one unshakeable basic fact: There are more of us than there are of them!

Madison, do not retreat. We are with you. We will win together.

Source URL: http://www.truth-out.org/michael-moore-america-is-not-broke68265

http://www.alternet.org/story/149226/

The severe economic crisis, now in its fourth year, is being used to batter the remnants of the social welfare state. Having decimated aid to the poor over the last 30 years, especially in the United States, the economic and political elite are now intent on strangling middle-class benefits, namely state-provided pensions, health care and education.

The initial neoliberal assault under Ronald Reagan and Margaret Thatcher reorganized the capitalist economy and hammered private-sector unions into submission. This was accomplished by putting labor back into competition with itself by off-shoring industrial production, through deregulation and with frontal assaults on labor rights, organizing and solidarity.

Similarly, the current attack is a two-pronged effort to reorganize state social services, either by eliminating or privatizing them, and decimate public-sector unions whose workers provide those services. While the safety net is being withered by attrition, police and spying agencies are getting more powers and funding, and the wealth of the super-rich and record corporate profits are deemed off-limits to taxation to close any government budget gap.

Simply put, the elderly are superfluous to capitalism. With high rates of joblessness the “new norm,” more and more people are being made disposable. This leads to an efficient if brutal logic: cutting old-age income and health care will make it easier to scrap old, useless workers. In fact, this reality is already coming to pass. One study published in 2008 found that over a 16-year period life expectancy had declined for many poor American women — precisely those who are disproportionately represented among the elderly heavily dependent on Social Security and Medicare.

Slashing social services affects everyone by increasing the pool of workers desperate for any sort of paying job, pushing down wages and benefits. This will all be pushed under the rubric of “personal responsibility,” and it will probably be successful as long as opposition is weak and divided. The main beneficiaries will be the super-wealthy who gain both from tax cuts as the social sector is chopped up and higher corporate profits as wages and benefits are slashed more deeply.

The attack on pensions is mainly occurring in the West and those countries close to its orbit. So while the United States, Greece, Ireland, Japan, France, Turkey, Spain, Poland and Latvia have been cutting or trying to squeeze state-run pensions, others such as Bolivia, China and Venezuela have been increasing funding of old-age pensions in recent years (though within these countries the picture is more complicated because social spending may be declining overall and inflation increasing).

The Right has stridently opposed Social Security since it was enacted in 1935, but the modern attack on pensions originated during the Reagan-Thatcher era. While he proposed making Social Security voluntary during the 1964 Goldwater campaign, when he reached office Reagan temporarily froze cost-of-living adjustments, raised the future retirement age to 67, taxed benefits of higher-income earners, made it more difficult for the disabled to claim benefits and forced the self-employed to pay 100 percent of payroll taxes. Then under Clinton, according to some economists, inflation was understated to suppress cost-of-living adjustments, resulting in benefits that should be 50 percent higher than the current average of $1,072 a month. Thatcher and Tony Blair formed the same one-two punch as Reagan and Clinton, but they went further by partially privatizing much of the state-run pension system.

The second historical component is the current crisis, which is severely widening the economic chasm. According to the New York Times, corporate profits “have grown for seven consecutive quarters, at some of the fastest rates in history,” hitting a record of $1.66 trillion on an annual basis. Taking advantage of Federal Reserve and U.S. Treasury monies, Wall Street has notched record profits over the last two years. And the top one percent actually increased their share of the wealth through the end of 2009.

As for the overall economic picture, industrial production is back to where it was in 2000 and the all-important capacity utilization rate – which measures how much of existing manufacturing plants are actually operating – is below 75 percent, compared to a level above 80 percent before the crash. This is like saying more than one-fourth of factories are idle. The trade deficit is at 3.7 percent of the gross domestic product. Only 874,000 jobs were created during the first 10 months of 2010, well short of the 1.2 million needed to keep up with population growth, and some 260,000 state workers lost their jobs during this period, leaving 7.5 million fewer jobs than when the recession began.

The household picture is even grimmer: family income shrank more than 4 percent in 2008 and 2009; the official poverty rate of 14.3 is the highest since 1994; 13.5 percent of home mortgages are in delinquency or foreclosure; the percentage of people receiving health insurance through their employer has dropped by 13 percent over the last decade and the real unemployment rate — the “U6 rate” which includes those who have given up looking for work — is at 17 percent. Household debt stands at 118 percent of after-tax income.

Most economists say there are really only four sources of potential growth in our economy: consumer spending, business investment, trade and government. As the data above indicates, the first three are on life support, while the Obama White House bungled the stimulus plan, helping the right in discrediting government intervention, which is still the only remaining option. These economic conditions prevail throughout the West, which is the backdrop for the global assault on pension plans. Thus the conclusion is stark: there is no functioning engine to drive economic growth.  

With so much idle productive capacity, the bromide of giving tax breaks to spur business investment is little more than throwing away money. With American families drowning in debt, getting smacked with rising healthcare costs, having lost $15.8 trillion in wealth and fearing joining the armies of unemployed, they are incapable of pulling the economy out of its funk with increased consumption. Increased trade is one possibility, which would require a weaker dollar to make U.S. exports more competitive. But, as Paul Krugman points out, this is opposed by Republicans who believe continued economic decline will enhance their electoral chances in 2012. Despite investment money pouring into the BRIC countries – Brazil, Russia, India and China – agricultural commodities and precious metals, these markets are too narrow and shallow to form a new asset bubble, such as the ones in tech and housing that fueled economic growth for nearly two decades. And in any case, we know how well those bubbles worked out.

When business investment, consumption, trade, debt and speculation all falter, that leaves government as the only sector that can revive a capitalist economy. But, as I first pointed out in December 2008, the Obama administration knew the stimulus was almost certain to fail because the downturn was sapping a staggering $1 trillion a year from the economy at that point, while the plan offered a relatively meager $787 billion. Of that, only $600 billion of stimulus money was spent in the last two years and, according to Paul Krugman, more than 40 percent of that was in tax breaks that tend to offer the least bang for the buck. So in early 2009, faced with an economy leaking 7 percent of the GDP a year, Obama offers a plan that plugs 1 to 2 percent a year.

In the final equation, the Obama stimulus only covered some of the shortfall in state and local budgets. But that money is drying up, and that, to a large degree, is the reason state services and workers are now under attack.

But now we are in for more bloodletting of social services and government workers because the failed stimulus has legitimized the establishment hysteria over the federal debt. Debt matters but the simplest way to reduce it is by a combination of economic growth and inflation. This is what happened to U.S. debt after WW2, which peaked at about 120 percent of GDP, far more than today even with the economic depression and bailouts. Instead, the right is pushing policies that may result in a worst-case scenario. Cutting spending and taxes –which Obama has endorsed – could lead to further economic contraction and deflation. This will make federal debt payments doubly onerous because tax revenues will shrink as the dollar strengthens.

There is another solution to reviving the economy without piling on debt: tax the wealth of the elite. According to economist Rick Wolff, “high-net-worth” Americans have around $12 trillion in investable assets, which excludes the value of their homes. A 13 percent wealth tax would wipe out the entire 2010 federal budget deficit of $1.56 trillion while doing little to crimp the economy because this money is literally lying around.

Yet Obama never seriously considered even the Keynesian policy of debt-driven financing for national re-industrialization because he was the darling of Wall Street – and number one recipient of its dollars – for his unwavering support of the Bush bailout in September 2008 and by taking counsel from Larry Summers and Tim Geithner during the campaign. Once in the White House Obama shunned jobs programs on a massive enough scale to revive the economy because the indirect method of debt-driven financing would shore up benefits, wages and labor bargaining power, thus cutting into corporate profits, while the direct financing method, taxing the rich, would mean they would have to pay for programs that would eventually cut into their profits.

The Obama administration has consistently fought for policies that involve weakening labor — such as its attacks on auto workers and teachers and the cynical gesture of calling for a freeze on the pay of federal workers– driving down wages, letting unemployment rise, and squeezing social services and benefits, all to transfer more wealth upward.

The wealthy have profited three times off the crisis: from the bubble itself, during the bailouts and from government bonds sold to them to pay for the bailouts. Putting pensions on the chopping block would give them a fourth opportunity to profit off the same crisis.

If debt is a problem, then bondholders should take a haircut because they took the risk. Of course, that’s not how capitalism works. So, in the case of Social Security, which has nearly $2.6 trillion in its trust fund and can meet ALL obligations through 2037 even assuming no changes are made, the plan is to raid it to pay off bondholders.

That’s why a crisis is being manufactured. Obama’s deal to reduce payroll tax by two percentage points will pilfer an estimated $120 billion from the trust fund that will supposedly be paid back by revenues from the general treasury. This means the deficit will increase, feeding into the fabricated panic over Social Security and debt.

For any country, cutting pensions is disastrous to long-term economic health. In the United States, Social Security accounts for 40 percent of the income of the population over 65 and nearly 50 percent for women in this group. It would also leave more people in the workforce as older workers delay retirement. Because the elderly tend to spend their benefits right away, on housing, food, transportation and medical services this means less demand and lower economic activity. And combining all this with trying to crush public workers also means more unemployed, less tax revenue and a shrinking economy.

It all adds up to a recipe for a depression. Two conclusions are inescapable: Obama is far more Herbert Hoover than FDR, and change will only come from creative independent movements instead of marching into the tomb of the Democratic Party.

Arun Gupta is a founding editor and the publisher of The Indypendent newspaper. He is writing a book on the politics of food for Haymarket Books.

23 May, 2010
Culturechange.org

As the U.S. continues the incredibly wasteful misallocation of resources known as car production and everything that goes with it, the externalized costs in terms of global warming, oil spills, and human isolation as consumers, only mount.

Who is in charge of this mad policy of ecocide? We all are, but we did elect a president named Barack Obama. He was supposed to be the answer to the blatantly destructive and incompetent George W. Bush. But Lo and Behold, Obama’s allegiance proved to be the status quo. Got recession? More cars! Oil spill a la Chernobyl in the U.S. Gulf? Keep on producing cars and using oil!

So, having fooled ourselves again with an election, ignoring the warning by The Who in their landmark song Won’t Get Fooled Again (1970), we look to the driver of our vehicle to see that he is a nut case with his accelerator pedal pushed to the floor. Global peak in oil supply? Pedal to the metal! What’s that above him? A helicopter gunship mowing down people on the other side of the world, in the name of democracy and freedom.

Obama’s calm, intelligent face, our multiracial darling Obama, is on the whole a maniacal puppet. And he’s wearing a mask, whether he knows it or not. Who or what is underneath?

Some who look beyond elections say the problem is essentially one of corporatism: that Obama is just another representative of the corporate elite, as were the Bushes, McCain and the Clintons. True, but is U.S. culture salvageable by targeting corporate rule?

The lateness of the hour tells us the answer is No. Although the modern large corporation is the most virulent form of exploitation of people and the Earth, and needs to be abolished, U.S. culture has gone way too far in its alienation, oppression and general distortion of human values to be cured or transformed by even a major reform.

What, then, are the implications for a nation and people who don’t even have a hope today of getting out from under the car (that’s pinning them down on the bloody, oily pavement)? Ideally, even Tea Party activists realize that significant change or relief from economic and social pressures does not come from another election or series of elections.

What, then — revolution? Is that the real goal of anyone wishing for fundamental change? What would this revolution entail? Would it be political, cultural, or both?

A series of goals or wishes by enough people amounts to a social movement or a coup. It has happened before, and the threat of this feels real to those who find the U.S. to still be somewhat benign. To them, the possibility of a worse form of government and loss of our already diminished freedoms looms large enough that one’s priority becomes that of somehow maintaining the status quo, while hoping for positive developments such as clean energy, an end to oil wars, and a roll-back of the Patriot Act.

However, the time for political change to re-chart the course of a nation is past. Collapse and disintegration have been assured, due in large part to dependence on cheap oil. When the dust settles there will be a proliferation of local cultures. Meanwhile, the extreme state of a society hard wired to consume its way to eco-hell is unchangeable.

This is a blind culture that cannot see its own true roots. Who came to North America to conquer and set up a foreign culture, and what was the prime objective? Sky-god fearing, private-property obsessed, master-slave opportunists: the antithesis of the indigenous nature-revering, communal, more egalitarian, diverse cultures that had found the key to surviving and thriving for a thousand generations.

This does not imply there was nothing good in the newcomers or in their exploits (Jefferson, Tom Paine, or their successors in great thought such as Thoreau and Muir). Indeed, the courageous new Americans loved their small farms, the amazing scenery, and the soul of the land that spawned perhaps the greatest new forms of music the world has ever seen.

How can the goodness of U.S. Americans and the land they inhabit (and have changed irrevocably) be safeguarded and turned into a force for positive change at a time of runaway destruction at the hands of ecocidal, greedy corporations and their tools in political power?

There is no political answer, but there is a cultural-change answer.

By abandoning a way of living that denies our true needs for healthy nature and human closeness, taking steps to conserve the land, air and water, we cannot help but find ourselves cutting the umbilical cord to the terminally ill host. What would we be losing? For one thing, car dependency: we can’t afford it anyway, financially or ecologically. We would then be looking to our neighbors and family for solutions to daily living, losing the isolation of total reliance on shopping and technology.

Organizing household and neighborhood composting, gardening and home repairs are more first steps toward restoring real community and socioeconomic resilience.

Human potential is unlimited. Those who believe deep change is not possible in the foreseeable future, while it is our only choice if we are to turn back the worst of petrocollapse that has clearly been unleashed, will be shocked by the upheaval to come in their own lives and throughout the modern world.

Such a revolution, with eventual political outcomes of a more local-based and nature-respecting basis than the conventional top-down growth-maximizing sort, is within us now, waiting to spread and flower.

24 May, 2010
TruthDig.com

Here’s to the Greeks. They know what to do when corporations pillage and loot their country. They know what to do when Goldman Sachs and international bankers collude with their power elite to falsify economic data and then make billions betting that the Greek economy will collapse. They know what to do when they are told their pensions, benefits and jobs have to be cut to pay corporate banks, which screwed them in the first place. Call a general strike. Riot. Shut down the city centers. Toss the bastards out. Do not be afraid of the language of class warfare-the rich versus the poor, the oligarchs versus the citizens, the capitalists versus the proletariat. The Greeks, unlike most of us, get it.

The former right-wing government of Greece lied about the size of the country’s budget deficit. It was not 3.7 percent of gross domestic product but 13.6 percent. And it now looks like the economies of Spain, Ireland, Italy and Portugal are as bad as Greece’s, which is why the euro has lost 20 percent of its value in the last few months. The few hundred billion in bailouts for other faltering European states, like our own bailouts, have only forestalled disaster. This is why the U.S. stock exchange is in free fall and gold is rocketing upward. American banks do not have heavy exposure in Greece, but Greece, as most economists concede, is only the start. Wall Street is deeply invested in other European states, and when the unraveling begins the foundations of our own economy will rumble and crack as loudly as the collapse in Athens. The corporate overlords will demand that we too impose draconian controls and cuts or see credit evaporate. They have the money and the power to hurt us. There will be more unemployment, more personal and commercial bankruptcies, more foreclosures and more human misery. And the corporate state, despite this suffering, will continue to plunge us deeper into debt to make war. It will use fear to keep us passive. We are being consumed from the inside out. Our economy is as rotten as the economy in Greece. We too borrow billions a day to stay afloat. We too have staggering deficits, which can never be repaid. Heed the dire rhetoric of European leaders.

“The euro is in danger,” German Chancellor Angela Merkel told lawmakers last week as she called on them to approve Germany’s portion of the bailout plan. “If we do not avert this danger, then the consequences for Europe are incalculable, and then the consequences beyond Europe are incalculable.”

Beyond Europe means us. The right-wing government of Kostas Karamanlis, which preceded the current government of George Papandreou, did what the Republicans did under George W. Bush. They looted taxpayer funds to enrich their corporate masters and bankrupt the country. They stole hundreds of millions of dollars from individual retirement and pension accounts slowly built up over years by citizens who had been honest and industrious. They used mass propaganda to make the population afraid of terrorists and surrender civil liberties, including habeas corpus. And while Bush and Karamanlis, along with the corporate criminal class they abetted, live in unparalleled luxury, ordinary working men and women are told they must endure even more pain and suffering to make amends. It is feudal rape. And there has to be a point when even the American public-which still believes the fairy tale that personal will power and positive thinking will lead to success-will realize it has been had.

We have seen these austerity measures before. Latin Americans, like the Russians, were forced by the International Monetary Fund and the World Bank to gut social services, end subsidies on basic goods and food, and decimate the income levels of the middle class-the foundation of democracy-in the name of fiscal responsibility. Small entrepreneurs, especially farmers, were wiped out. State industries were sold off by corrupt government officials to capitalists for a fraction of their value. Utilities and state services were privatized.

What is happening in Greece, what will happen in Spain and Portugal, what is starting to happen here in states such as California, is the work of a global, white-collar criminal class. No government, including our own, will defy them. It is up to us. Barack Obama is simply the latest face that masks the corporate state. His administration serves corporate interests, not ours. Obama, like Goldman Sachs or Citibank, does not want the public to see how the Federal Reserve Bank acts as a private account and ATM machine for Wall Street at our expense. He, too, has helped orchestrate the largest transference of wealth upward in American history. He serves our imperial wars, refuses to restore civil liberties, and has not tamed our crippling deficits. His administration gutted regulatory agencies that permitted BP to turn the Gulf of Mexico into a toxic swamp. The refusal of Obama to intervene in a meaningful way to save the gulf’s ecosystem and curtail the abuses of the natural gas and oil corporations is not an accident. He knows where power lies. BP and its employees handed more than $3.5 million to federal candidates over the past 20 years, with the largest chunk of their money going to Obama, according to the Center for Responsive Politics.

We are facing the collapse of the world’s financial system. It is the end of globalization. And in these final moments the rich are trying to get all they can while there is still time. The fusion of corporatism, militarism and internal and external intelligence agencies-much of their work done by private contractors-has given these corporations terrifying mechanisms of control. Think of it, as the Greeks do, as a species of foreign occupation. Think of the Greek riots as a struggle for liberation.

Dwight Macdonald laid out the consequences of a culture such as ours, where the waging of war was “the normal mode of existence.” The concept of perpetual war, which eluded the theorists behind the 19th and early 20th century reform and social movements, including Karl Marx, has left social reformers unable to deal with this effective mechanism of mass control. The old reformists had limited their focus to internal class struggle and, as Macdonald noted, never worked out “an adequate theory of the political significance of war.” Until that gap is filled, Macdonald warned, “modern socialism will continue to have a somewhat academic flavor.”

Macdonald detailed in his 1946 essay “The Root Is Man” the marriage between capitalism and permanent war. He despaired of an effective resistance until the permanent war economy, and the mentality that went with it, was defeated. Macdonald, who was an anarchist, saw that the Marxists and the liberal class in Western democracies had both mistakenly placed their faith for human progress in the goodness of the state. This faith, he noted, was a huge error. The state, whether in the capitalist United States or the communist Soviet Union, eventually devoured its children. And it did this by using the organs of mass propaganda to keep its populations afraid and in a state of endless war. It did this by insisting that human beings be sacrificed before the sacred idol of the market or the utopian worker’s paradise. The war state provides a constant stream of enemies, whether the German Hun, the Bolshevik, the Nazi, the Soviet agent or the Islamic terrorist. Fear and war, Macdonald understood, was the mechanism that let oligarchs pillage in the name of national security.

“Modern totalitarianism can integrate the masses so completely into the political structure, through terror and propaganda, that they become the architects of their own enslavement,” he wrote. “This does not make the slavery less, but on the contrary more- a paradox there is no space to unravel here. Bureaucratic collectivism, not capitalism, is the most dangerous future enemy of socialism.”

Macdonald argued that democratic states had to dismantle the permanent war economy and the propaganda that came with it. They had to act and govern according to the non-historical and more esoteric values of truth, justice, equality and empathy. Our liberal class, from the church and the university to the press and the Democratic Party, by paying homage to the practical dictates required by hollow statecraft and legislation, has lost its moral voice. Liberals serve false gods. The belief in progress through war, science, technology and consumption has been used to justify the trampling of these non-historical values. And the blind acceptance of the dictates of globalization, the tragic and false belief that globalization is a form of inevitable progress, is perhaps the quintessential illustration of Macdonald’s point. The choice is not between the needs of the market and human beings. There should be no choice. And until we break free from serving the fiction of human progress, whether that comes in the form of corporate capitalism or any other utopian vision, we will continue to emasculate ourselves and perpetuate needless human misery. As the crowds of strikers in Athens understand, it is not the banks that are important but the people who raise children, build communities and sustain life. And when a government forgets whom it serves and why it exists, it must be replaced.

“The Progressive makes History the center of his ideology,” Macdonald wrote in “The Root Is Man.” “The Radical puts Man there. The Progressive’s attitude is optimistic both about human nature (which he thinks is good, hence all that is needed is to change institutions so as to give this goodness a chance to work) and about the possibility of understanding history through scientific method. The Radical is, if not exactly pessimistic, at least more sensitive to the dual nature; he is skeptical about the ability of science to explain things beyond a certain point; he is aware of the tragic element in man’s fate not only today but in any collective terms (the interests of Society or the Working Class); the Radical stresses the individual conscience and sensibility. The Progressive starts off from what is actually happening; the Radical starts off from what he wants to happen. The former must have the feeling that History is ‘on his side.’ The latter goes along the road pointed out by his own individual conscience; if History is going his way, too, he is pleased; but he is quite stubborn about following ‘what ought to be’ rather than ‘what is.’ ”

Chris Hedges writes a regular column for Truthdig.com. Hedges graduated from Harvard Divinity School and was for nearly two decades a foreign correspondent for The New York Times. He is the author of many books, including: War Is A Force That Gives Us Meaning, What Every Person Should Know About War, and American Fascists: The Christian Right and the War on America. His most recent book is Empire of Illusion: The End of Literacy and the Triumph of Spectacle.

Silly me. Here I had thought that world leaders would want to keep their nations from collapsing. They must be working hard to prevent currency collapse, financial system collapse, food system collapse, social collapse, environmental collapse, and the onset of general, overwhelming misery—right? But no, that’s not what the evidence suggests. Increasingly I am forced to conclude that the object of the game that world leaders are actually playing is not to avoid collapse; it’s simply to postpone it a while so as to be the last nation to go down, so yours can have the chance to pick the others’ carcasses before it meets the same fate.

I know, that sounds unbearably cynical. And in fact it may not accurately describe the conscious attitudes of leaders of some smaller nations. But for the U.S. and China, arguably the countries most likely to lead the way for the rest of the world, actions speak louder than words. (Mental health advisory: readers with a low tolerance for bad news should turn back now; there are lots of cheerier articles on the Internet and this might be a good time to find and enjoy one.)

For these two nations, avoiding collapse would require solving a range of enormous problems, of which at least four are non-negotiable: climate change; peak fossil fuels (in effect, stagnating and, soon, declining energy supplies); the inherent instability of growth-based financial systems; and the vulnerability of food systems to factors like fresh water scarcity and soil erosion (in addition to global warming and fuel scarcity). If they fail to address any one of these, societal collapse is inevitable—in a few decades certainly, but perhaps in just the next few years.

So how are our contestants doing? There’s not much to report on the climate score—just vague promises for future action. So their apparent strategy in this case is to delay (not to delay the impacts, mind you, but to delay efforts to address the problem).

Likewise, there is little positive action occurring regarding food systems: the assumption appears to be that conventional industrial agriculture—which is responsible for most of the global food system’s enormous and growing vulnerabilities—will somehow shoulder the task of feeding seven to nine billion humans. We just need to continue with what we are already doing, but on a larger scale and using more gene-engineered crop varieties.

Officially, peak energy is not even a concern, so evidently the strategy being adopted here is denial. We’ll see how that works out.

How about the financial mess? Here the U.S. and China are in situations so different that a more extended discussion seems justified.

China Surges to the Lead!

The U.S. is in debt up to its eyeballs and has mortgaged the paychecks of every generation approximately until hell freezes over in order to bail out its “too-big-to-fail” banks. In contrast, China has piles of cash (resulting from its enormous trade surpluses) and has bought a mountain of U.S. debt in order to keep its main customer’s currency from losing value. It would seem that, in this department, one nation is set to flag while the other is poised to leap into first place as world economic superpower.

And that happens to be the conventional wisdom on the subject. It’s not hard to find commentators who say the United States is a has-been for a variety of reasons. In addition to its huge debt burden, the U.S. also suffers from a shrinking manufacturing base, a big trade deficit, eroding quality of education, and a foreign policy that serves the interests of arms manufacturers while undermining the long-term interests of the nation. Regarding the last of these items, a 2006 World Public Opinion poll showed large majorities in four leading ally nations (Egypt, Morocco, Pakistan, and Indonesia), together accounting for a third of the Muslim world’s population, believe the U.S. is determined to destroy or undermine Islam. Within those countries, most people surveyed support attacks on American targets. And it just so happens that most of the world’s future oil supplies will be coming from Muslim nations. Brilliant.

By contrast, China is enjoying springtime on amphetamines. It now has the biggest car market in the world. And, according to Stuart Staniford in a recent fact-filled article, “if present trends continue, the Chinese expressway system will likely grow larger than the U.S. interstate highway system within the next couple of years, and Chinese car ownership will exceed U.S. car ownership by somewhere in the neighborhood of 2017.” As of 2010 China is the leading producer of hydroelectric and solar power and by 2011 will be the top producer of wind power. China’s smart grid investments dwarf those of the U.S. by 200 to one. The Chinese are also investing heavily in nuclear energy. Staniford goes on: “Oversimplifying greatly, it’s as though the U.S. borrowed a pile of money from China in order to fight a war to free up oil supply in Iraq in order that China could become the greatest industrial power the world has ever seen.”

China’s foreign policy consists largely of buying friends by purchasing rights to oil, gas, coal, and other resources (in Canada, Australia, Venezuela, Iraq, Kazakhstan, and throughout Africa), while the U.S. spends money it doesn’t have rooting out bad guys and making more enemies in the process.

In an October, 2009 lecture, George Soros showed refreshing candor about the seriousness of the continuing global financial crisis: “What differentiated [the recent economic crisis] from the Great Depression is that this time the financial system was not allowed to collapse, but was put on artificial life support. In fact [however], the magnitude of the credit and leverage problem we have today is even greater than the 1930s.” Soros then went on to discuss the relative positions of the U.S. and China:

In the short term, all countries were negatively affected. But in the long term, there will be winners and losers. . . . To put it bluntly, the U.S. stands to lose the most, and China is poised to emerge as the greatest winner. . . . China has been the primary beneficiary of globalization, and it has been largely insulated from the financial crisis. For the West, and the U.S. in particular, the crisis was an internally-generated event [that] led to the collapse of the financial system. For China, it was an external shock [that] has hurt exports, but left the financial, political, and economic system unscathed.

China Stumbles!

But remember: without solutions to climate change, peak energy, and the looming food crisis, winning the financial contest is only temporary solace. Consider just the energy conundrum: China may be building nukes and windmills, but there’s no way it can maintain 8 percent annual growth for long with flat or declining energy from coal. China and India, between them, are currently planning to build 800 new coal-fired power plants by 2020. Where will the coal come from? Both countries are already experiencing domestic production shortfalls and are starting to import the fuel. But coal-exporting countries will be unable to keep up with their growing combined demand.

Moreover, there is a school of thought that says China’s apparently unstoppable economic miracle is a bubble waiting to burst. Beijing’s housing market is overheated, like that of Las Vegas circa 2006. Last year, the Chinese economy enjoyed 9 percent GDP growth—on paper. But in order to achieve that goal, the government and banks had to loan out 30 percent of China’s GDP (the rate of growth in loans accelerated during the latter part of the year; at year-end rates, banks were on track to loan out an amount equal to the nation’s entire GDP in 2010). In any case, much of that growth probably occurred through speculation on real estate and questionable stocks.

Generally, China is at a Wild West stage of economic development: it is a collection of powerful local capitalist power bases unaccountable to anyone, all jockeying to create and inflate assets and credit. While the central government has recently exerted control over the banks, its ability to halt regional Ponzi schemes is still limited.

In January the Chinese banking regulatory commission attempted to rein in lending in order to slow the rapid increase in real estate and stock market values. (On the other hand, during the same month, China’s cabinet agreed to permit margin trading and short selling of stocks and to launch a stock futures index.) Significantly, there is evidence that China’s central bank’s attempts to harmlessly deflate the housing and stock market bubbles may be going badly. The sudden suspension in lending has, according to Joe Weisenthal in Business Insider, “caught importers, along with many other companies, by surprise and could cause turbulence in China’s import orders. Letters of credit (LoC) suddenly became unavailable, despite previous agreements. We believe that this will inevitably lead to delays or cancellations in China’s imports. Import orders for commodities and machineries could be affected most.” Translation: the government was faced with the options of letting a rapidly growing bubble burst, taking the economy down; or deliberately deflating the bubble, risking taking the economy down by another route. The central bank chose the latter, and the risked takedown may be unfolding.

Meanwhile Google and the Obama Administration have been exerting external pressure on China to relax its censorship of electronic communications—moves that some see as reducing the central government’s options for controlling both information flow and the economy.

In a recent op-ed, New York Times columnist Tom Friedman countered worries about a bursting of the China bubble with a robust display of confidence in Beijing’s unstoppable expansionary momentum. Given Friedman’s record (remember his columns in 2003 extolling the benefits that would flow to America from an invasion of Iraq?), this alone should be cause to doubt whether the Chinese locomotive can stay on its tracks much longer.

What Does It Mean to “Win”?

In his book Reinventing Collapse: The Soviet Example and American Prospects, Dmitry Orlov discusses the “collapse gap” between the United States and the old Soviet Union: the latter, he argues, was in effect much better prepared for economic crisis and the fall of its central government; when the U.S. eventually goes the way of the U.S.S.R., the pain and suffering of its citizens will be much greater. (I can’t adequately summarize Orlov’s evidence and reasoning here, but they are persuasive; if you haven’t read the book, do yourself a favor.)

So: How is the U.S. doing today in terms of collapse preparedness as compared to China?

After six decades of nearly uninterrupted economic growth, Americans have developed unrealistic expectations about the future. They are urbanized consumers whose manufacturing capability has shriveled and whose practical survival skills are in most cases vestigial. The Chinese, in contrast, have less of a steep fall ahead of them. Most still dwell in the countryside, and many who live in the cities are only one generation removed from subsistence agriculture and can still draw on their own, or their parents’, practical skills learned during decades of poverty and immersion in a traditional farming culture.

Both nations face fierce political challenges. In the U.S., the central government has reached nearly complete paralysis: it is evidently incapable of solving even relatively minor problems, and confidence in it among the citizenry has largely evaporated. Political leaders have succeeded in polarizing the people geographically with “hot-button” issues, few of which have anything to do with the factors currently undermining the nation’s ability to survive. The Chinese central government appears far more capable of acting decisively and strategically, but it is confronted with nasty facts of geography and history: there is an extreme and growing economic and social division between the wealthy coastal cities and the poor, rural interior; and a demographic schism between those 40 years old or younger who have high economic expectations, and the older generation who grew up under Mao, with an ethic of collectivism and self-sacrifice. The young, especially, have accepted a trade-off between civil freedoms and economic prosperity. If the latter is not delivered, there will be shrill demands for the former. These divisions are so deep and profound that they could tear society apart if expectations are dashed—and the leaders know this.

Thus, in the event of collapse, both nations face the possibility of a breakdown in their political systems, entailing widespread violence (uprisings and crackdowns).

China still maintains a crucial advantage in one key area: its food system. Far more of its citizens still grow food, even taking into account recent trends toward rapid urbanization (in the U.S., full-time farmers make up only about two percent of the population and the average farmer is approaching retirement age). This is not to say that China will have the capacity to feed all its people; it is already moving in the direction of being a major net food importer. Meanwhile, the U.S. remains a significant food exporter. The key difference has to do with the resiliency of the two nations’ respective food systems: that of the United States is more centralized, more highly fuel dependent, and therefore probably more vulnerable.

The Geopolitics of Collapse

It’s easy to see the advantage of collapse preparedness for the citizenry—with better preparation, more will survive. But does a higher survival rate during and after collapse translate to some sort of geopolitical advantage?

The process of collapse will be determined by many factors, some hard to predict, and so it is difficult to know the size or scope of the political power structure that might re-emerge in either country. It’s possible that one nation, or both, could devolve into smaller political units squabbling among themselves and unable to engage much in global jockeying for resources. All new political units emerging within the present territories of China or the U.S. would be immediately beset with enormous practical problems, including poverty, hunger, environmental disasters, and mass migrations.

Presumably some potent weaponry from the age of global warfare would remain intact and usable, so it is possible in principle that one or another of these smaller political entities could assert itself on the world stage as a short-lived, bargain-basement empire of limited geographic scope. But even in that case “winning” the collapse race would be small comfort.

The possibility of armed conflict between the two powers prior to mutual collapse is not to be entirely excluded if, for example, U.S. efforts to contain Iran’s nuclear ambitions were to set off a deadly chain reaction of attacks and counter-attacks possibly involving Israel, with world powers being forced to choose sides; or if the U.S. were to persist in arming Taiwan. But neither the U.S. nor China wants a direct mutual military confrontation, and both nations are highly motivated to avoid one. Thus all-out nuclear war—still the worst-case imaginable scenario for homo sapiens and planet Earth—seems thankfully unlikely, though in the few decades ahead the use of some of these weapons, on some occasions, by one nation or another, is probable.

Trade wars are another matter, and we might even see one this year, according to Michael Pettis at Financial Times, who notes that

. . . trade imbalances are more necessary than ever to justify increased investment in surplus countries [i.e., China], but rising unemployment makes them politically and economically unacceptable in deficit countries [i.e., the U.S.]. Rising savings in the U.S. will collide with stubbornly high savings in China. Unless a long-term solution is jointly worked out immediately, trade conflict will worsen and it will become increasingly hard to reverse offensive policies. Most importantly, if deficit countries demand structural change faster than surplus countries can manage, we will almost certainly finish with a nasty trade dispute that will . . . poison relationships for years.

How likely is the prospect for the last nation standing to be able to, as I put it in the first paragraph above, “pick the carcasses” of its competitors? Such a scenario presupposes that one nation will be able to stay on its feet for at least a few years after others fall. But this may not be possible. Recall the prophetic words of Joseph Tainter in The Collapse of Complex Societies (1988):

“A nation today can no longer unilaterally collapse, for if any national government disintegrates, its population and territory will be absorbed by some other [or bailed out by international agencies]. . . . Collapse, if and when it comes again, will this time be global. No longer can any individual nation collapse.”

When the U.S.S.R. crashed, the U.S. and various multinational corporations were able to sweep in and gobble up some of the treasure left lying around. One example: U.S. nuclear power plants have for many years been using uranium fuel cannibalized from old Soviet missile warheads. Soon, international institutions such as the World Bank and IMF helped organize new financial structures for Russia, Ukraine, Belarus, Lithuania, Estonia, and the other nations born from Soviet political and economic disintegration, so as to limit and reverse the process of social disintegration that had already passed beyond its early stages.

But now the game has changed. A collapse of the U.S. would leave China devastated. Not only would Beijing lose its main customer, but the hundreds of billions of dollars’ worth of treasury notes it has accumulated would be rendered worthless. If China were internally stable, such impacts could be absorbed with difficulty. But in light of China’s own simmering social and financial predicaments, a U.S. collapse would almost certainly be enough to tip Beijing’s economy into a tailspin, resulting in both social and political crises.

A collapse of China would similarly devastate the U.S. Obviously, the loss of a source of cheap consumer products would discomfit WalMart shoppers, but the shock soon would go much deeper. The Treasury would lose its main foreign buyer of government debt, which means that the Fed would be forced to step in and monetize that debt (in common parlance, “turn on the printing presses”), undermining the dollar’s value. The result: a hyperinflationary economic crash. Such a crash is probably inevitable at some point anyway, but a collapse of the Chinese system would hasten and worsen it.

In neither instance would international institutions be capable of preventing substantial social and political fall-out. The last nation standing would not stand for long. We have reached the stage where, as Tainter says, “World civilization will disintegrate as a whole.”

The Transition Marathon

Okay, so there is no serious effort on the part of U.S. or Chinese leaders to avoid collapse in the long run (say, over the next 10 to 20 years). Perhaps this is because they have concluded that it is impossible to do so—there are just too many trends leading in the same direction, and actually dealing with any of those trends head-on would entail huge, immediate political risks. In reality, however, it is much more likely that they simply refuse seriously to think about these trends and their implications, because they do have another option—to postpone collapse through deficit spending, bailouts, and more financial bubbles, while enacting their parts in a climate-policy kabuki play and engaging in resource geopolitics. This way blame will at least fall on the next set of leaders. Postponing collapse is itself a big job, enough so as to take all of one’s attention away from having to contemplate the awfulness and inevitability of what is being postponed.

Do these short-term efforts in any way reduce the risk of dissolution? Hardly. In fact, the longer the reckoning is delayed, the worse it will be.

What would make more sense than just trying to put off the inevitable is quite simply to build resilience throughout society, re-localizing basic social systems involving food, manufacture, and finance. There is no need to rehearse the existing discourse about this strategy: readers who are not familiar with it can find plenty of useful pointers at www.transitiontowns.org, or in the books and articles of authors such as Rob Hopkins, Albert Bates, David Holmgren, Pat Murphy, and Sharon Astyk (and in some of my own writings, including Museletter #192).

It is understandably hard for national politicians to think along those lines. Building societal resilience means disregarding the dictates of economic efficiency; it means systematically reducing the power of the central government and national/global commercial institutions (banks and corporations). It also means questioning the central dogma of our modern world: the efficacy and possibility of unending economic growth.

So if the best outcome lies in a strategy of resilience and re-localization, and our national leaders can’t even contemplate such a strategy, that means those leaders are, in one sense at least, irrelevant to our future.

Some blog readers are so in tune with this line of thinking that they no longer see any point in paying attention to the global scene. They may even think this article is a waste of time (and I expect to get an email or two to that effect). But following world events is more than a matter of infotainment: when and how China and the U.S. come apart at the seams is a question of far greater consequence than that of whether the New Orleans Saints or the Indianapolis Colts will win the Superbowl. The reality is that no nation, and no community will be able to completely protect itself from the sudden, harsh winds that will rush to fill the vacuum left by an implosion of either superpower.

By the way, my apologies to the other 190 or so nations of the world, large and small: my singling out of the U.S. and China for discussion does not signify that other countries are unimportant, or that their destinies will not be as unique as their cultures and geographies; merely that those destinies will probably unfold in the context of a global collapse spreading from the two nations we have been discussing. For any nation—India, Bolivia, Russia, Brazil, South Africa—and for any community or family, survival will require some comprehension of the direction of large events, so as to get out of the way when debris is flying and to anticipate opportunities to regroup.

So: Pay attention to the weather reports from Washington and Beijing, but meanwhile build local resilience wherever you are. If the roof needs mending, don’t dawdle.

Meanwhile, after a long day of organizing neighborhood Transition gardens, you may want to get a foretaste of post-collapse America by reading James Howard Kunstler’s A World Made by Hand; or savor an entertainingly erudite discussion of collapse as an extended process (which it will likely be), rather than as a sudden, all-out event, by reading John Michael Greer’s books The Long Descent and The Ecotechnic Future.

Just because the sky is falling, that doesn’t mean it’s time to stop thinking.

Huffington Post

Globalization is killing Europe, just as it’s already wiped out much of the American middle class.

Spain and Greece are facing immediate crises that many other European nations see on the near horizon: aging boomer workers are retiring with healthy benefit packages, but the younger workers who are paying for those benefits aren’t making anything close to the income (or, therefore, paying the taxes) that their parents did.

Globalists/corporatists/conservative “free market” and “flat earth” advocates say this is a great opportunity to cut benefits for the old folks (and for the young folks in the future), thus bringing the countries budgets back into balance, and this story is the main corporate media storyline.

But it overlooks the real issue (and the real solution): how globalization is killing these nations’ economies and what can be done about it.

From the days of Adam Smith, classical economics pointed out that manufacturing and extraction are the only two ways to “create wealth.”

“Wealth” is different from “income.” Wealth is value, which endures at least for some time. Income is simply compensation for work. If you wash my car for $10 and I mow your lawn for $10, we have a GDP of $20 and it looks like we both have income and economic activity. But no wealth has been created, just income.

On the other hand, if I build your car, I’m creating something of value. And if you turn my lawn into a small farm that produces food we can all eat, you’re creating something of value. Not only do we have an “economy” with a “GDP,” we also have created wealth.

A stick on the ground has no commercial value, but if you add labor to it by carving it into an axe handle — a thing of commercial value — you have “created wealth.” Similarly, metals in the ground have no commercial value, but when you add labor to them by extracting, refining, and forming them into products, you “create wealth.” Even turning seeds and dirt and cows into hamburgers is a form of manufacturing and creates wealth.

This is the “Wealth of Nations” that titled Adam Smith’s famous 1776 book.

On the other hand, when a trader at Goldman Sachs makes a “profit” trading stocks, bonds, or currencies, no wealth whatsoever is created. In fact, to the extent that that trader takes millions in commissions, pay, and bonuses, he’s actually depleting the wealth of the nation (particularly to the extent that he moves his money offshore to save or invest, as many do).

To use the United States as an example, in the late 1940s and early 1950s manufacturing accounted for a high of 28 percent of our total gross domestic product (and much of the rest of the economy like agriculture that, in a classical sense is “manufacturing” wasn’t even included in those numbers), and when Reagan came into office it was at a strong 20 percent. Today it’s about ten percent of our GDP.

What this means is that we’re creating less wealth here, because we’re not making much anymore. (And the biggest growth in American manufacturing has been in the military sector, where goods are made that are then destroyed when they explode over foreign cities, causing even more of our wealth to vanish.)

The main effect of the globalism fad of the past 30 yearrs — lowering the protective barriers to trade that countries for centuries have used to make sure their own local economies are self-sufficient — has been to ship manufacturing (the creation of wealth) from developed nations to developing nations. Transnational corporations love this, because in countries with lower labor costs and few environmental and safety regulations, it’s more profitable to manufacture products. They then sell those products in the “mature” countries — the places that used to manufacture — and people burn through the wealth they’d accumulated in the earlier manufacturing days (home equity, principally, along with savings and lines of credit) to buy these foreign-manufactured goods.

At first, it looks like a good deal to consumers in developed nations. Goods are cheaper! But over a decade or two or three, as the creation of real wealth is reduced and the residue of the old wealth is spent, the developed nations become progressively poorer and poorer. At the same time, the “developing” nations become wealthier — because those are the places that are producing real wealth.

Which brings us to Spain and Greece — and the problem of all developed nations including the USA. So long as globalism continues apace, the transnational corporations and their CEOs will continue to become fabulously wealthy. But, more importantly, they also acquire the political power that comes with that control of economies.

So they tell us that instead of putting back into place tariffs, domestic content laws, and other “protectionist” policies that built America from the time the were first proposed by Alexander Hamilton in 1791 (and largely adopted by Congress in 1793) until they were dismantled by Reagan/Bush/Clinton/Bush, we should instead simple “accept the reality” that we’re “living beyond our means” and we have to “cut back our wages and social programs.”

In other words, they get richer, our nations become poorer, and national sovereignty is reduced.

Nations — and in large countries like the USA, even states — must again rebuild their manufacturing base and become locally self-sufficient, so their own consumers are buying products manufactured by their own workers.

“But won’t that make Wal-Mart’s stuff more expensive?” whine the flat-earthers.

Yes, it will. But most Americans (and Greeks and Spaniards) would gladly pay 10 percent more for the goods in their stores if their paychecks were 20 percent higher. And manufacturing paychecks have always been higher, because manufacturing is where “true wealth” is generated (thus the basis for most union movements, which further guarantee healthy worker income and benefits).

The transnational corporations benefiting from globalization are also, in most cases, the transnational corporations that own our media, so even the word globalization is rarely heard in reports on economic crises around the world.

But globalization is the villain here, and one that needs to be taken in hand and brought under control quickly if we don’t want to see virtually the nations of the world end up subservient to corporate control, a new form of an ancient economic system known as feudalism.

Domains of Life

I am about to make you feel uncomfortable. Sorry, but there’s no way of avoiding it if I’m going to tell this story as it should be told.

You are a human being; a member of the species Homo sapiens sapiens, although the second “sapiens” was only put there because we like to feel we are important. Remember that. There used to be other species within the genus “Homo” but they died out, or were possibly killed off, most recently a few thousand years ago when Homo neanderthalensis finally succumbed to the insurgent sapiens somewhere on the Iberian Peninsula.

On a smaller scale, you are a collection of major and minor organs, bony structures, muscles, ligaments, tubular networks, soft tissues and various other organic materials; all structured in such a way that you are capable of living in a vast range of habitats and climatic zones, under tremendous pressure from all sorts of predators and invaders, from large animals to minute single-celled organisms. Through an extraordinary evolutionary process, your constituent parts have developed to fill an optimally agile and self-regulating body such that they are able to function in tune with each other, symbiotically and independently as required, while you get on with the business of being a conscious and self-aware individual.

Each of these constituent parts are constructed from billions of cellular structures of various types which, if not part of your body, would be considered organisms in their own right: fragile, yes, but only because they have evolved to become at least partially dependent upon the whole of which they are a tiny part. Within each of your cells are components called mitochondria, which convert the raw materials of proteins – amino acids –into energy, which the cell uses to fulfil whatever function it is required to as part of the multi-cellular thing that is your body. This may involve fighting off viral invaders, absorbing nutrients from food, expelling waste from blood, moving in time with muscular activity or firing off a message to a neighbouring cell to recall an image of something that happened in your past.

Each of these mitochondria are specially adapted bacteria, that once independently existed, but at some point were “hijacked” by or may have taken up residence in, an animal cell that would, from then on, benefit from the energy produced by the mitochondria – the same cells that constitute an infinitesimally small part of a component of an individual human being, among something like 6.8 billion other human beings on Earth. 6.8 billion human beings that are utterly dependent upon the rest of the massive food web of which they (we) are just a tiny part.

You eat fish? The chances are that if you live in the Industrial West, your fish was a carnivore that ate other fish. If you live in China or Indonesia, it is more likely that your dinner was vegetarian, missing out a few links in the chain, and retaining a lot more of the food energy that came from the algae, or phytoplankton, that ultimately derived its energy from sun by virtue of the photosynthetic process that uses solar energy to split carbon molecules off from oxygen molecules, and create carbon structures that constitute the building blocks of life.

But, of course, it’s not only the animals or plants you eat (and that they may eat or utilise in the form of soil and “waste” products) that you are dependent upon, but the crucial role each of these organisms plays in the various natural processes that take place on Earth: regulation of the climatic-oceanic system; soil formation; water purification and enrichment; nutrient distribution…in the world we live in today we would not survive without all of these processes operating at a high level of efficiency. Interfere with these processes at a local level, and ecosystems can collapse; damage these processes at a global scale, and the entire biosphere is forced to readjust. With humans at the very top of the food chain, and so dependent upon everything else, we will be some of the first casualties of any global extinction.

Try and balance a pencil on its tip.

The Psychosis Of Civilization

This beautiful continuum, of which we are such a physically insignificant part, takes some imagining. The numbers are mind-numbing – individual nematodes alone stretch into the quintillions, and bacteria are many orders more numerous – as is the complexity of the ecological nets that link together different animals, plants, fungi and the countless other organisms that actually constitute the great majority of all life on Earth. We sit as a delicate flower waiting to be blown away in the next breeze of extinction; yet what do we see as the most important factor in our role as human beings?

Money.

As I have discussed on The Earth Blog previously, our values have become outrageously skewed in favour of whatever benefits the onward march of the global economy. We do not see the rise and fall of habitat viability on the television news, instead we see the rise and fall of the markets in the capital economy; we do not count specie extinctions in newspaper bar charts, but we urgently count companies going bust; we do not map the catastrophic breaks in the energy flows between different parts of an ecosystem, but we do acknowledge every time a budget airline discontinues a route, or whenever a main road has “severe” delays. As if it matters.

The psychosis of Industrial Civilization is endemic: every person that places his or her trust in the system of hierarchies, politics, markets and mass consumption, undergoes a fundamental readjustment in priorities. No longer does the fate of our species rest upon our increasingly precipitous position within the global ecology; we can all hold hands, actually or virtually, and celebrate the majesty of the global economic miracle, safe in the knowledge that it will take us forward into a glittering future of jobs, money and all the other civilised things we have been taught to desire.

How we have become so determined to destroy the continuum of life in search of something so utterly trivial, has its roots in the history of civilization. Every civilization has had its own goals, but ultimately they have all come down to one thing: the insatiable desire to progress in whatever way is dictated by the elite members at the very top. Such “progress” takes many forms, but whether it be exploration, scientific discovery, technological prowess, imperial power or simply the idea of being “the best”, civilizations have to feel they are progressing in some way; and so its subjects – the civilians – become part of that collective desire. For what are we if we don’t keep progressing? Failures. From our fear of failure, others above us draw their strength – just at the moment we seem to be reaching the end, and as we stretch out our fingertips, another line is drawn even further away. So we note the new goals and conform to the wishes of the system; continuing to do as we are told.

Through this psychotic behaviour, civilizations thrive…until they fail.

What Is Really Important

When I wrote the chapter called “Why Does It Matter?” in my book, Time’s Up! I felt rather uneasy; as though I hadn’t managed to explain myself properly. The problem was that, beyond the physical argument for the continuation of our DNA that I offered, there was also a complex and deeply-philosophical explanation that I also had which didn’t translate well into words. It was like a version of the argument that Descartes gave for the existence of God; to paraphrase: “I have within me a perfect and unequivocal representation of God; how could that be so if there were no God.” It’s a terrible argument, but it demonstrates well how a very good idea – which Descartes no doubt thought was perfect at the time – completely fails to work when written down.

I’m going to have another go.

So, how do you feel about your place in the world? Do you feel small, insignificant, worthless, just a tiny part of something far greater than yourself? This natural feeling of inferiority when you realise you are just a tiny part of a greater whole is the reason why medieval religious leaders were so resolute about our exulted position in the Great Chain of Being, just below the angels, but above all other forms of life – so long as you accepted that monarchs, priests and landowners were considerably more perfect than the rest of us.

It’s the same in the industrial economy: there is this global system that has enormous, if transient, power over the whole of existence; that governs every aspect of the lives of the civilised, but you don’t have to feel small, so long as you are told how important it is to go to school, get a job, go to the shopping mall or buy something online, follow the latest fashions, and cast your vote. You are empowered by your participation in these activities. It’s just that some people are more empowered than others.

But why on Earth do you need to be told how important you are? It speaks volumes about our state of mind when in order to feel worthwhile we have to, for instance, achieve good grades at school. We are all human beings, for goodness sake! Even more than that, we are what we are: our consciousness is bound up in our physical being, and everything we know and feel – everything we will ever be – is determined by our personal interaction with what is around us. We are at the centre of our personal universe; not in any selfish way, but simply because we can never truly perceive anything outside of our point of view.

Thomas Nagel, the American philosopher, summed this up beautifully in his essay, “What Is It Like To Be A Bat?”:

After all, what would be left of what it was like to be a bat if one removed the viewpoint of the bat?
Substitute “human” for “bat” and it is obvious that human experience has to be a unique thing for humans and, by extension, for each individual human. That is why we are important; not because humans are essential to the global ecology or even because we are essential to the absurd construct we call Civilization, but because what matters, is what matters to us.

How could it be any other way?

Think about this for a short while and it becomes clear that the civilised world’s destruction of the natural environment cannot under any circumstances be acceptable, for it will endanger the one thing which matters above all else: ourselves.

Decision Time

You have to make a choice. Are you going to continue supporting and extending the global reign of Industrial Civilization; or are you going to once again learn to value yourself as the centre of your universe, and the thing that matters above all else?

To me that choice is remarkably easy, but you might take some persuading, not only because of the insidious hold that the civilised world has upon everything we do, but because you are possibly thinking that I have left something out – the other things that also matter dearly to you. Fear not; this is what I wrote in Time’s Up!

More than just our natural tendency to survive, though, is the manifestation of that survival instinct in the way we think. Consider the question: What would you risk your life to save? My initial instinct is to say ‘my family’, then ‘me’, then, with a little more thought, ‘the Earth in general’ and ‘my friends’. Remove the Earth from the equation and you have the kind of answer that most people give.

I have said that I was not entirely happy with the strength of reasoning I gave in the book, but with the addition of the philosophical argument to the obvious need to replicate our DNA – the survival imperative – then we can all be justified in wanting not only to protect ourselves, but also our families and those other people we really care about and need: the community.

In fact, all three typical responses are directly related to the natural instinct for survival. We instinctively want to protect our families in order to secure the continuation of our DNA through blood relatives and the people they depend upon to survive. We want to protect ourselves in order to protect our own DNA, and the opportunity for that to be further replicated. We want to protect our friends because they too are human beings, but not only that, we have consciously chosen our closest friends because of what they have in common with us – they are almost like family.

Community is the antithesis of civilization for civilization thrives on the division of humanity into tiny, atomised, competing parts; but community is the form in which humans have always survived best. The choice is simple now: Civilization or Community; Progress or Humanity; Death or Life.

This article is licensed under a Creative Commons Attribution-Noncommercial 3.0 Unported License.

It was the pivotal international conference of the new century. Tens of thousands showed up, including heads of state, officials at all levels of government, representatives of environmental organizations, and ordinary citizens from nearly 200 countries. Scientists had warned that, without a strong agreement to reduce carbon emissions, the consequences for civilization and the world’s ecosystems would be cataclysmic.

On the sidelines sat powerful forces (including pro-growth business interests and fossil fuel companies) that preferred a weak agreement or none at all. Their strategic public relations efforts (“by far and away the biggest public relations campaign that I’ve ever seen,” according to PR veteran James Hoggan, cofounder of DeSmogBlog.com and author of Climate Cover-Up: The Crusade to Deny Global Warming) paid off when, only days before the meeting, thousands of private emails between climate scientists were hacked and released to the public; during the next few days, prominent right-wing commentators assured one and all that “climategate” completely undercut any scientific basis for thinking that human actions cause global warming. While nothing in the emails did in fact call established climate science into question, the desired and actual effect of the exercise was to destabilize public support for a strong agreement in Copenhagen.

On the streets were tens of thousands of mostly young activists and NGO campaigners, and even a few scientists, who were prepared to raise hell if world leaders didn’t act boldly to reduce carbon emissions.

So, on the whole, heads of state still felt obliged to come up with some results—but nothing too radical.

U.S. President Barack Obama’s role in the proceedings seems to have been pivotal. He jetted in on the final day of negotiations and gave a tepid speech stating his country’s modest bargaining position. This was greeted coolly (some accounts mention choruses of boos). Then, later in the day, he apparently burst in on a meeting including heads of state or high-level negotiators from China, India, Brazil, and South Africa, insisting that an agreement be reached (up to this point, according to most accounts, the Chinese had been obstructing any deal). Obama managed to persuade the other leaders to sign onto a three-page, non-binding Accord, which, at a midnight press conference, he presented to the other 189 nations attending the conference for their acceptance (no changes to the text were to be permitted). The full text of the document can be found at [UNFCC Framework Convention on Climate Change].

Environmental activists and representatives of poor nations most vulnerable to rising sea levels or desertification were unhappy with these results. Bill McKibben of the organization 350.org called it “an end far worse than most [climate activists] had imagined.” Ian Fry of the drowning island nation of Tuvalu likened it to “being offered 30 pieces of silver to betray our people and our future.” Kumi Naidoo, the head of Greenpeace International, called Copenhagen simply “a crime scene.”

On the other hand, U.N. secretary-general Ban Ki-moon told a press conference that he welcomed the Accord as “an important beginning,” and Sierra Club executive director Carl Pope released a statement calling it “an historic, if incomplete, agreement.”

What was agreed—and what wasn’t

The main points of the Copenhagen Accord are easy to summarize:

• Industrial countries must list their individual emissions reductions targets, and less-industrialized countries must list the actions they will take to cut emissions by specific amounts.
• All countries must accept a transparent system for monitoring their emissions.
• Poor countries will be paid to prevent deforestation.
• Wealthy nations will establish a fund (growing from 30 billion dollars per year to $100 billion per year by 2020) to help poor and vulnerable nations adapt to climate change.
• Signatory nations accept a goal of limiting global warming to 2 degrees Celsius by 2050.
• The Accord creates a Technology Mechanism to accelerate development of low-carbon technology, but supplies no details.

It is important to emphasize that this is not a binding legal or political agreement. The Accord is not a U.N.-sanctioned document, though the U.N. has officially moved to “take note” of it, which essentially means it may be considered in future climate gatherings as the framework for a legally binding agreement. The U.S. delegation made it clear that the U.N. cannot modify the Accord. While it was negotiated effectively in secret by five countries, many other nations have now signed on to it, and the signing countries together account for over 80 percent of total global emissions. Some countries, including the island nation of Tuvalu, have strongly repudiated the document.

Criticisms of the Accord’s substance (leaving aside complaints about the exclusion of most nations from negotiations, its abandonment of the U.N. framework, and so on) include the following:

• The limit of 2 degrees C is too high. A limit of 1.5 degrees was already supported by over 100 countries and is necessary to avert catastrophic climate impacts.
• The Accord offers no cap for CO2 concentrations. The scientific consensus a few years ago was that an atmospheric CO2 level of 450 parts per million would translate to a temperature increase of 2 degrees over pre-industrial levels. But that conclusion has been called into question due to the likelihood of feedbacks (e.g., as arctic ice melts, it reflects less sunlight back into space, causing even more global warming). This is one of the reasons most scientists now support a 350 ppm cap on atmospheric CO2. By setting a limit of 2 degrees temperature increase without specifying a CO2 cap, the Accord may implicitly be adhering to the older scientific consensus, which would mean a 45o ppm cap and 3 degrees or more of real temperature increase. Any scientific assessment of temperature and CO2 targets is delayed until 2015.
• There is no target date for peaking of emissions mentioned in the Accord, just a vague suggestion that emissions should “peak as soon as possible.”
• There are no global emissions targets for 2020 or 2050. Instead, the Accord merely proposes listing the voluntary targets of developed and developing countries. Based on current assessments of country promises, these 2020 targets will put the world on a track toward 3.5 to 4 degrees of warming.
• The Accord makes general statements about need for adaptation and an end to deforestation, but there is no concrete deal on reducing emissions from deforestation and forest degradation (although this may be a relatively good thing, as the negotiations were veering toward offset loopholes).
• The promised finances for poor nations are too small. For example, African countries had sought $400 billion in short-term financing for climate change adaptation, with an immediate amount of $150 billion needed. In the longer term they say 5 percent of the industrial world’s GDP is needed (about $2 trillion). Not only were much smaller amounts offered, but U.S. negotiators including Hillary Clinton implied that poor nations needed to “associate” themselves with the Accord in order to be eligible for funds.

On the bright side: the Clean Development Mechanism negotiated in Copenhagen seems to have excluded carbon capture and storage, thus reducing the incentive for wasting money on this dead-end technology. Expect pushback from the coal industry on that.

Why agreeing was hard (and will continue to be)

The battle to rescue the planet from climate calamity has been waged uphill from the start. That’s essentially because we humans tend to discount future events, whether they’re perceived favorably or unfavorably: immediate profits are worth more to companies than similar profits ten years hence; similarly, the immediate cost of averting climate change looms large compared to the estimated cost of dealing with its consequences decades from now. This attitude was exemplified, for example, in the comment of U.S. House of Representatives member Joe Barton, who told Reuters on the sidelines of the Copenhagen conference, “We’re not going to let jobs be destroyed in America for some esoteric environmental benefit 100 years from now.”

But there’s more to it than that. Over the past couple of centuries economic growth has been closely tied to increased burning of fossil fuels. And economic growth has become the universal measure of national well-being. Thus when talking to politicians, climate scientists often try to gain traction by describing the impact of future CO2 emissions in terms of the cost to future economic growth. Their hope is that this future cost will be high enough to justify the immediate economic sacrifice that would result from phasing out the use of fossil fuels. This is a tough argument to win, though it plays differently according to the audience: relative receptivity depends on who will be impacted most by climate change and who will bear the highest immediate costs during the energy transition. (Sometimes environmentalists go so far as to suggest that the transition from fossil fuels to “green” energy sources will result in enormous economic growth; however, this ignores the very real economic benefits of cheap fossil fuels and the problems with most of the renewable alternatives, as outlined for example in the report  “Searching for a Miracle”.

And so, at the climate talks in Copenhagen, bargaining positions closely reflected countries’ relative vulnerability to long-range environmental impacts versus short-range economic costs for adaptation.

As mentioned, China evidently obstructed any agreement from the start. No doubt this was largely due to the fact that this nation is the world’s top greenhouse gas emitter, uses over twice as much coal as the next country in line (the U.S.), and requires at least 8 percent economic growth per annum to stave off domestic political unrest. While China is quickly becoming the world leader in renewable energy technologies, it has no realistic prospect of phasing out coal without giving up its high GDP growth rates. China produces half the world’s cement and 40 percent of its iron and steel; over the next 15 years, it plans to urbanize a number of its people about equal to the total population of North America—a continent that took more than a century to accomplish a similar-sized task. That means more cement, steel, appliances, power plants, and all the other energy-guzzling accouterments of urban existence. Mark Lynas, an environmental writer who was present at the final Friday night negotiations at Copenhagen, summarized the situation this way: “China knows it is becoming an uncontested superpower; indeed its newfound muscular confidence was on striking display in Copenhagen. Its coal-based economy doubles every decade, and its power increases commensurately. Its leadership will not alter this magic formula unless they absolutely have to.” [How do I know China wrecked the Copenhagen deal? I was in the room]. In effect, by subverting a strong, binding climate agreement while directing blame for failure toward western nations, China is playing brilliant climate politics—with deadly consequences for all.

India’s economy is also highly coal dependent, also growing rapidly, also on a trajectory of rapid urbanization. And so it should come as no surprise that this country largely echoed China’s position.

There are many who correctly point out that wealthy western industrial nations are responsible for the vast bulk of historic greenhouse gas emissions, and who then go on to conclude that future climate policy must therefore center on achieving economic justice by requiring rich nations to reduce fossil fuel consumption much faster than poor ones while financing climate change mitigation and adaptation in those less-industrialized countries. If China and India have now grown big enough to bully their way around international negotiations, we should applaud them, say climate justice activists, because this means the already-rich countries are no longer in the driver’s seat. Those who hold this view tend to blame western nations (especially the U.S.) for lack of progress in the Copenhagen talks. The problem with this framing is that it doesn’t take account of the reality that China and India have little real interest in forging a strong, binding climate accord, and without them there can be no global agreement.

There’s plenty of blame to go around for slow progress on climate policy, but the bottom line is this: once we’re done fairly apportioning that blame, is there still a viable path toward an agreement?

Not if Russia gets a veto. This nation played a less visible role in wrecking the Copenhagen process, but that may be because it allowed China to play the spoiler on its behalf. Russia is the world’s top oil producer, the world’s biggest gas exporter, has the world’s second-largest coal reserves, and can claim hardly even a token renewable energy sector.

Some fossil fuel exporting nations are rich (think Australia or Kuwait) but most are poor (think Nigeria or Angola). Prior to Copenhagen, OPEC floated the proposal that fossil fuel importers should pay exporters for the oil, coal, or gas that the latter keep in the ground to avoid greenhouse gas emissions. It’s a nice idea, in the same way that that it’s nice to imagine money trees or horns of plenty. But in the real world nations grow their economies by using energy to produce goods and services, not by paying for energy they’ll never use.

Among the fossil fuel exporters, Venezuela was most vocal in promoting strong climate policy in Denmark: the politics and personality of that nation’s president, Hugo Chavez, in this instance evidently led to a bargaining position contrary to what would be expected based on his country’s economic interests. Or maybe Chavez was the originator of that OPEC policy proposal—which, by ensuring that his county’s oil was paid for even if it isn’t burned, would obviate almost all the economic sacrifice implied by strong climate policy.

Anyway, Venezuela’s oil production is generally declining, a situation this nation holds in common with Britain—which also favored a strong global climate agreement. The European countries (with the exception of Norway) are fossil fuel importers, which means they are more or less forced to plan for a future of ever more expensive fossil fuels. For them, a climate agreement that would phase out fossil fuels globally is not as scary as it is for those that make money from fuel exports.

Small island nations and very poor countries with few indigenous fossil fuel resources were of course the countries most in favor of a strong climate agreement. They have the least to lose from increased prices for fuels they hardly use anyway, the most to lose from climate change, and the most to gain when wealthy nations establish a climate adaptation fund.

That leaves the U.S., the biggest per capita carbon emitter (well, almost—Australia and a couple of OPEC members actually rank higher), but also the world’s top fossil fuel importer. With its domestic oil production long in decline but its oil and coal companies still powerfully wielding domestic political influence, the U.S. is deeply conflicted. This ambivalence is reflected in domestic climate politics and was also on display in President Obama’s efforts at Copenhagen.

The nations that negotiated the Accord included the world’s first and second foremost coal burners (China and the U.S.); the country home to the world’s largest coal company (India); a prominent coal exporter (South Africa); and what will probably prove to be the last nation to have luck finding large amounts of oil (Brazil). It should be noted that Brazil, which is also a major biofuels producer, has just (as of December 28) announced that it has unilaterally made its ambitious 2020 emissions reduction targets legally binding. Nevertheless, with the rest of this cast of characters at the table, it should have surprised no one when the Accord turned out to be non-binding and weak.

Further, the Accord’s implementation could turn out to be a joke. The document says nothing about how voluntary targets are to be achieved—whether through carbon taxes, cap-and-trade, or other mechanisms. And, as climate scientist James Hansen has pointed out tirelessly during the past few months, cap-and-trade programs, unless set up and managed flawlessly, can easily be “gamed” by fossil fuel producers by buying phony offsets while continuing to increase total emissions.

If all of this sounds shamefully self-interested and corrupt, just put yourself in the shoes of a high-level politician. No would-be leader who fails to promise economic growth is taken seriously to begin with, so the only politicians we have are ones committed to producing growth. Those who succeed at this are rewarded; those who fail are sidelined and forgotten.

Should we ever seriously have expected a much different outcome from Copenhagen?

What nobody talked about

Normally we humans like to focus on one problem at a time. It’s how our brains are wired, and it’s how the political process is set up to function. But reality is not always so simple and clear-cut.

Climate change is just one of several enormous interrelated dilemmas that will sink civilization unless all are somehow addressed. These include at least five long-range problems:

• topsoil loss (25 billion tons per year),
• worsening fresh water scarcity,
• the death of the oceans (currently forecast for around 2050 based on current trends),
• overpopulation and continued population growth, and
• the accelerating, catastrophic loss of biodiversity.

As events are unfolding now, these problems, together with climate change, will combine over the next few years or decades to trigger a food crisis of a scale and intensity that will dwarf to insignificance any famine in human history.

To make matters even more grim, there are two near-term dilemmas that may make climate change and these other problems much harder to address: peak oil and economic collapse.

Some of my friends who were on the streets of Copenhagen in early December assure me that most activists and concerned citizens they talked to there knew about peak oil. But the media offered no clue that the officials negotiating in the Bella Center ever mentioned fossil fuel supply limits. For many years the default assumption in all climate negotiations has been that the world has enough conventional fossil fuels to enable it to continue increasing oil, coal, and gas consumption (and hence carbon emissions) up until at least the end of this century. In fact, global oil production has probably already entered its terminal decline and coal and gas extraction will likewise do so in about 15 years—which means that the world may have seen its all-time peak of total energy production from fossil fuels during the years 2005 to 2008. Earth probably has enough economically extractable conventional fossil fuels to raise atmospheric CO2 levels to about 470 ppm—high enough to trigger human and environmental catastrophe (remember, the “safe” level is 350 ppm), but not nearly as high as the projections commonly mentioned in U.N. climate literature. (The potential amount of carbon emissions from unconventional fossil fuels, such as tar sands and oil shale, is immense, but actual production of those fuels is likely to be constrained by a variety of economic factors, as discussed in  “Searching for a Miracle”.)

Because petroleum has been the driver of most economic expansion during the past few decades and there is no ready substitute for it, peak oil basically means the end of economic growth as we have known it. And without economic growth, our entire financial system comes apart. Indeed, that’s exactly what we’ve been seeing over the past 18 months in the failure of trillions of dollars’ worth of bets on future economic expansion. (For a discussion of the role of peak oil in the financial crisis, see  “Temporary Recession or the End of Growth?”.

No politician can ignore the worldwide economic crisis, yet its significance for the climate talks is rarely discussed. Now that people can’t afford to drive as much, or even heat their homes in many cases, global carbon emissions have declined during the past year. That means that if the economy is in only a temporary state of “recovery” and resumes its swoon (as many financial analysts anticipate), and if global oil production has indeed peaked, then global carbon emissions have probably already peaked too. In which case, the world has achieved its first major goal in mitigating climate catastrophe.

Economic crisis makes climate change much harder to solve in the way everyone wants to see—i.e., with lots of green-tech growth. But it makes almost inevitable a “solution” that nobody wants: dramatic economic contraction leading to sharply declining energy demand. This is similar to famine “solving” overpopulation.

Responsible officials can discuss none of this in public lest investors lose their nerve and head for the exits. But a conversation that excludes such essential realities is delusional.

How might that pivotal Friday night negotiation in the Bella Center have gone if it had been grounded in reality?

President Obama might have said something like this: “Colleagues, global oil production has peaked and we have witnessed the resulting carnage in the global economy. We have likely seen the last of economic growth, in an overall sense. We are in an entirely new era. Adopting strict carbon emissions caps will help us end our dependence on fossil fuels—which we must do both to mitigate climate change and also to reduce the economic impacts of fuel scarcity. While giving up fossil fuels means reducing opportunities for growth, continuing to use them is no longer an option. We must adapt to this new reality.”

The Chinese delegate would have objected: “But our nation needs to continue using coal in ever-increasing amounts. If we don’t continue to grow our economy at 8 percent annually, the people will revolt. We’re doing all we can to develop renewable energy, but only coal can give us the growth we need.” To which Obama might have replied: “Your coal production will be peaking during the next few years anyway, and you won’t be able to import enough from Australia and Indonesia to maintain growth in total energy production. Your economy is about to stall in any case—it is heavily dependent on exports, and Americans just aren’t going to be buying a lot more Chinese goods. Your only hope, as ours, is to build renewable energy infrastructure at top speed, provide as much of a basic safety net for citizens as we can, try to enlist them in the overall energy transition, and hope for the best. Meanwhile, a strong climate agreement can at least help us change direction toward reducing our reliance on fossil fuels, and we are obligated to produce such an agreement anyway for the sake of the planet and future generations. Let’s get this done.”

But that’s evidently not what transpired. Instead, all accounts suggest the negotiations amounted to a theatrical set piece in which each player stayed rigidly on script.

If governments are having a difficult time addressing climate change in any serious fashion, they’re not doing much better with regard to any of the other problems mentioned. Key nations are going about “solving” their financial crises by shoveling money by the billions and trillions at bankers who were largely responsible for creating the mess to begin with. Peak oil is regarded by heads of state as a subject unworthy of mention. The crisis of fresh water scarcity is being dealt with by pumping ancient aquifers until they’re dry. Topsoil erosion has slowed in a few places, but overall continues at a staggering pace.

These problems, which will shape our destiny over the next few years and decades, are for the most part discussed only by experts in relevant fields. Meanwhile citizens are subjected to a steady stream of “infotainment” and political rhetoric utterly divorced from crumbling physical reality. This is easy to illustrate with ludicrously disinforming statements from industry-backed climate-change deniers. But responsible advocates of a strong climate policy are often nearly as soaked in delusion.

Here’s just one example. Professor Mark Maslin, Director of the Environment Institute at University College London, was recently quoted as saying: “The science tells us that we must drastically cut the amount of carbon going into the atmosphere to avoid catastrophic climate change. But we must also protect the moral and ethical right of countries to develop and achieve the same standard of living as we have in the west.” This is a completely unremarkable statement with which nearly everyone at the climate talks in Copenhagen would probably have agreed—at least publicly. But think about it: what does this “development” consist of? The assumption is that poor countries can and should use more fossil fuels while rich ones wean themselves. But there just aren’t enough fossil fuels available to enable that to happen. Poor countries will never achieve “the same standard of living as we have in the west.” Rather, in the decades ahead, as nonrenewable resources deplete, people in the west will involuntarily give up their material standard of living until their way of life is supported only by renewable resources and the recycling of non-renewables. That means economic contraction, big time. We have a very long downward ramp to negotiate until that sustainable baseline is achieved.

Economic justice or leveling is to some extent inevitable during the energy transition. But it won’t consist of poor families in Senegal adopting the living standards of folks in Seattle or Stuttgart. It will be a matter of industrialized countries seeing a huge increase in rates of absolute poverty.

In the meantime, countries of the global north could do a lot of good just by canceling the southern nations’ debts and by ceasing to enforce trade rules that continue to transfer wealth mostly from poor countries to rich. Moreover, if our goal is to achieve global equity, there is one other thing that actually might make a significant difference: that is the shifting of wealth and income away from truly rich individuals—from bankers, CEOs, and hedge fund managers—and from the global weapons industry. The money could be used to fund public programs for food, shelter, and medical care in the industrialized nations as these careen into economic depression, and to bankroll Asia, Central and South America, and Africa, not in “development” as conventionally conceived (meaning urbanization), but in adopting simple, cheap technologies to avoid burning wood, charcoal, and dung for cooking and home heating; in helping them replace slash-and-burn agriculture with small-scale ecological farming; and in supporting them in scrapping and (where possible) replacing inefficient, polluting, hand-me-down diesel vehicles and factories. None of these things would be easy to achieve, but they are all at least within the realm of the possible.

In summary, the discussions in Denmark took place in a conceptual fantasy world in which climate change is the only global crisis that matters much; in which rapid economic growth is still an option; in which fossil fuels are practically limitless; in which a western middle class staring at the prospect of penury can be persuaded voluntarily to transfer a significant portion of its rapidly evaporating wealth to other nations; in which subsistence farmers in poor nations should all aspire to become middle-class urbanites; and in which the subject of human overpopulation can barely be mentioned.

Once again: it’s no wonder more wasn’t achieved in Copenhagen.

Where does that leave us?

Copenhagen was a watershed event. Climate change has become, in many people’s minds, the central survival issue for our species, and the Copenhagen talks provided a pivotal moment for addressing that issue. The fact that the talks failed to produce a binding agreement is therefore of some significance.

The next opportunity to forge a binding global climate treaty will be the 2010 U.N. climate conference in Mexico City. Many see this as a chance to achieve what proved elusive in Copenhagen. But the same challenges will face leaders there. And if the global economy relapses in the meantime, national politicians may be even more reluctant to take bold action to limit fossil fuel consumption, as they’ll want to keep all their economic options open. Indeed, it seems likely that for the foreseeable future economic implosion will be sucking the air from any room in which heads of state are gathered.

So, international policies are needed if we are to deal with a potentially game-ending global issue like climate change, yet there is now convincing evidence that national and supra-national institutions are incapable of producing effective climate policies.

The same could be said for other crises mentioned above. It’s not enough that national governments can’t get together to solve climate change. They can’t solve economic meltdown, peak oil, water scarcity, soil erosion, or overpopulation either. Yes, there are individual nations like Tuvalu that can muster a decent policy on one issue or another. Denmark is probably the shining example among industrial nations: it has reduced its greenhouse gas emissions by 14 percent since 1990 while maintaining constant energy consumption and growing its GDP by more than 40 percent. But these are the rare exceptions, and apparently destined to stay that way. We have no global means of dealing with the toxic debt that is strangling the world economy. We have no agreements in place to prevent the death of the oceans. There is no global policy to avert economic impacts from fossil fuel depletion. There is no worldwide protocol to protect the precious layer of living topsoil that is all that separates us from famine. There is no effective global convention on fresh water conservation.

This is not to say there is nothing that can be done about these problems. In fact, there are organizations and communities in many nations doing path-breaking work to address each and every one of them. Some examples:

• Agronomists at the Land Institute in Salina, Kansas, led by Wes Jackson, have for years been patiently developing perennial grain crops capable of feeding billions without destroying topsoil.
• The city of Zurich has decided through popular vote to become a 2000-Watt society. This means cutting energy consumption from the current 6000 Watts per person to one-third that amount over the next three or four decades. This was evidently a response both to climate change and the problem of energy security.
• Here in Sonoma County, California, a Go Local Co-op has formed; it’s an extension of the national organization, Business Alliance for a Living Local Economy (BALLE). One of its projects is “Sustaining Capital”—a community cooperative capital formation model that, if successful and replicated widely, could end local economies’ dependence on Wall Street banks.
• At Sunga in Madhyapur Thimi, Nepal, a community-supported project has built a water treatment plant based on reed-bed constructed wetlands that also serves as the main source of irrigation for farmers in the region.

These are just a few items out of hundreds, maybe thousands that could be cited. But, in aggregate, are they enough? Obviously not—even in the estimation of the folks who are doing this admirable work. Some problems are more easily tackled at the local level than others (local efforts can help maintain biodiversity, but without international agreements it’s not obvious how the oceans could be rescued). And many local success stories actually depend on global systems of finance and provisioning (for example, the Nepalese water treatment plant mentioned above was built with financial support from the United Nations Human Settlements Program, U.N.-Habitat’s Water for Asian Cities Program, the Asian Development Bank, and Water Aid, and received technical support from the Environment and Public Health Organization).

Discouraging? Of course. But absent global agreements, local efforts are what we’ve got, and we will simply have to make the most of them that we can.

Meanwhile, given the amount of carbon emissions already in the atmosphere, climate impacts are in store no matter what happens at the U.N. negotiations in Mexico City. Something similar could be said with regard to all the other problems mentioned: even if strong policies could somehow be forged tomorrow, serious challenges will arise in the years ahead with regard to water, food, energy, and the economy.

If such impacts are unquestionably coming, then we should be doing something to prepare. Since we don’t know exactly what the impacts will be, or when or where they will land, the most sensible strategy is simply to build resilience throughout the system. Resilience implies dispersed control points and dispersed inventories, and hence regional self-sufficiency—the opposite of economic efficiency, the central rationale for globalization—and so it needs to be organized primarily at the local level.

To summarize: three factors—the need for resilience, the lack of effective policy at national and global levels, and the tendency of the best responses to emerge regionally and at a small scale—argue for dealing with the crushing crises of the new century locally, even though there is still undeniable need for larger-scale, global solutions.

Does this mean we should give up even trying to work at the national and global levels? Each person will have to make up her or his own mind on that one. To my thinking, Copenhagen is something of a last straw. I have no interest in trying to discourage anyone from undertaking national or global activism. Indeed, there is a danger in taking attention away from national and international affairs: policy could get hijacked not just by parties even less competent than those currently in command, but by ones that are just plain evil. Nevertheless, this writer is finally convinced that, with whatever energies for positive change may be available to us, we are likely to accomplish the most by working locally and on a small scale, while sharing information about successes and failures as widely as possible.

A final note: As 2010 begins we are about to enter the second decade of the 21st century. Historians often remark that the character of a new century doesn’t make itself apparent until its second decade (think World War I). Perhaps peak oil, the global financial crash, and the failure of Copenhagen are the signal events that will propel us into the Century of Decline. If these events are indeed indicative, it will be a century of economic contraction rather than growth; a century less about warnings of environmental constraints and consequences than about the fulfillment of past warnings; and a century of local action rather than grand global schemes.

I suspect that things are going to be noticeably different from now on.

Republished from Postcarbon.org.

Everyone agrees: our economy is sick. The inescapable symptoms include declines in consumer spending and consumer confidence, together with a contraction of international trade and available credit. Add a collapse in real estate values and carnage in the automotive and airline industries and the picture looks grim indeed.

But why are both the U.S. economy and the larger global economy ailing? Among the mainstream media, world leaders, and America’s economists-in-chief (Treasury Secretary Geithner and Federal Reserve Chairman Bernanke) there is near-unanimity of opinion: these recent troubles are primarily due to a combination of bad real estate loans and poor regulation of financial derivatives.

This is the Conventional Diagnosis. If it is correct, then the treatment for our economic malady might logically include heavy doses of bailout money for beleaguered financial institutions, mortgage lenders, and car companies; better regulation of derivatives and futures markets; and stimulus programs to jumpstart consumer spending.

But what if this diagnosis is fundamentally flawed? The metaphor needs no belaboring: we all know that tragedy can result from a doctor’s misreading of symptoms, mistaking one disease for another.

Something similar holds for our national and global economic infirmity. If we don’t understand why the world’s industrial and financial metabolism is seizing up, we are unlikely to apply the right medicine and could end up making matters much worse than they would otherwise be.

To be sure: the Conventional Diagnosis is clearly at least partly right. The causal connections between subprime mortgage loans and the crises at Fannie Mae, Freddie Mac, and Lehman Brothers have been thoroughly explored and are well known. Clearly, over the past few years, speculative bubbles in real estate and the financial industry were blown up to colossal dimensions, and their bursting was inevitable. It is hard to disagree with the words of Australian Prime Minister Kevin Rudd, in his July 25 essay in the Sydney Morning Herald: “The roots of the crisis lie in the preceding decade of excess. In it the world enjoyed an extraordinary boom…However, as we later learnt, the global boom was built in large part…on a house of cards. First, in many Western countries the boom was created on a pile of debt held by consumers, corporations and some governments. As the global financier George Soros put it: ‘For 25 years [the West] has been consuming more than we have been producing…living beyond our means.’” (1)

But is this as far as we need look to get to the root of the continuing global economic meltdown?

A case can be made that dire events having to do with real estate, the derivatives markets, and the auto and airline industries were themselves merely symptoms of an even deeper, systemic dysfunction that spells the end of economic growth as we have known it.

In short, I am suggesting an Alternative Diagnosis. This explanation for the economic crisis is not for the faint of heart because, if correct, it implies that the patient is far sicker than even the most pessimistic economists are telling us. But if it is correct, then by ignoring it we risk even greater peril.

Economic Growth, The Financial Crisis, and Peak Oil

For several years, a swelling subculture of commentators (which includes the present author) has been forecasting a financial crash, basing this prognosis on the assessment that global oil production was about to peak. (2) Our reasoning went like this:

Continual increases in population and consumption cannot continue forever on a finite planet. This is an axiomatic observation with which everyone familiar with the mathematics of compounded arithmetic growth must agree, even if they hedge their agreement with vague references to “substitutability” and “demographic transitions.” (3)

This axiomatic limit to growth means that the rapid expansion in both population and per-capita consumption of resources that has occurred over the past century or two must cease at some particular time. But when is this likely to occur?

The unfairly maligned Limits to Growth studies, published first in 1972 with periodic updates since, have attempted to answer the question with analysis of resource availability and depletion, and multiple scenarios for future population growth and consumption rates. The most pessimistic scenario in 1972 suggested an end of world economic growth around 2015. (4)

But there may be a simpler way of forecasting growth’s demise.

Energy is the ultimate enabler of growth (again, this is axiomatic: physics and biology both tell us that without energy nothing happens). Industrial expansion throughout the past two centuries has in every instance been based on increased energy consumption.(5) More specifically, industrialism has been inextricably tied to the availability and consumption of cheap energy from coal and oil (and more recently, natural gas). However, fossil fuels are by their very nature depleting, non-renewable resources. Therefore (according to the Peak Oil thesis), the eventual inability to continue increasing supplies of cheap fossil energy will likely lead to a cessation of economic growth in general, unless alternative energy sources and efficiency of energy use can be deployed rapidly and to a sufficient degree. (6)

Of the three conventional fossil fuels, oil is arguably the most economically vital, since it supplies 95 percent of all transport energy. Further, petroleum is the fuel with which we are likely to encounter supply problems soonest, because global petroleum discoveries have been declining for decades, and most oil producing countries are already seeing production declines. (7)

So, by this logic, the end of economic growth (as conventionally defined) is inevitable, and Peak Oil is the likely trigger.

Why would Peak Oil lead not just to problems for the transport industry, but a more general economic and financial crisis? During the past century growth has become institutionalized in the very sinews of our economic system. Every city and business wants to grow. This is understandable merely in terms of human nature: nearly everyone wants a competitive advantage over someone else, and growth provides the opportunity to achieve it. But there is also a financial survival motive at work: without growth, businesses and governments are unable to service their debt. And debt has become endemic to the industrial system. During the past couple of decades, the financial services industry has grown faster than any other sector of the American economy, even outpacing the rise in health care expenditures, accounting for a third of all growth in the U.S. economy. From 1990 to the present, the ratio of debt-to-GDP expanded from 165 percent to over 350 percent. In essence, the present welfare of the economy rests on debt, and the collateral for that debt consists of a wager that next year’s levels of production and consumption will be higher than this year’s.

Given that growth cannot continue on a finite planet, this wager, and its embodiment in the institutions of finance, can be said to constitute history’s greatest Ponzi scheme. We have justified present borrowing with the irrational belief that perpetual growth is possible, necessary, and inevitable. In effect we have borrowed from future generations so that we could gamble away their capital today.

Until recently, the Peak Oil argument has been framed as a forecast: the inevitable decline in world petroleum production, whenever it occurs, will kill growth. But here is where forecast becomes diagnosis: during the period from 2005 to 2008, energy stopped growing and oil prices rose to record levels. By July of 2008, the price of a barrel of oil was nudging close to $150—half again higher than any previous petroleum price in inflation-adjusted terms—and the global economy was beginning to topple. The auto and airline industries shuddered; ordinary consumers had trouble buying gasoline for their commute to work while still paying their mortgages. Consumer spending began to decline. By September the economic crisis was also a financial crisis, as banks trembled and imploded. (8)

Given how much is at stake, it is important to evaluate the two diagnoses on the basis of facts, not preconceptions.

It is unnecessary to examine evidence supporting or refuting the Conventional Diagnosis, because its validity is not in doubt—as a partial explanation for what is occurring. The question is whether it is a sufficient explanation, and hence an adequate basis for designing a successful response.

What’s the evidence favoring the Alternative? A good place to begin is with a recent paper by economist James Hamilton of the University of California, San Diego, titled “Causes and Consequences of the Oil Shock of 2007-08,” which discusses oil prices and economic impacts with clarity, logic, and numbers, explaining how and why the economic crash is related to the oil price shock of 2008. (9)

Hamilton starts by citing previous studies showing a tight correlation between oil price spikes and recessions. On the basis of this correlation, every attentive economist should have forecast a steep recession for 2008. “Indeed,” writes Hamilton, “the relation could account for the entire downturn of 2007-08…If one could have known in advance what happened to oil prices during 2007-08, and if one had used the historically estimated relation [between price rise and economic impact]…one would have been able to predict the level of real GDP for both of 2008:Q3 and 2008:Q4 quite accurately.”

Again, this is not to ignore the role of the financial and real estate sectors in the ongoing global economic meltdown. But in the Alternative Diagnosis the collapse of the housing and derivatives markets is seen as amplifying a signal ultimately emanating from a failure to increase the rate of supply of depleting resources. Hamilton again: “At a minimum it is clear that something other than housing deteriorated to turn slow growth into a recession. That something, in my mind, includes the collapse in automobile purchases, slowdown in overall consumption spending, and deteriorating consumer sentiment, in which the oil shock was indisputably a contributing factor.”

Moreover, Hamilton notes that there was “an interaction effect between the oil shock and the problems in housing.” That is, in many metropolitan areas, house prices in 2007 were still rising in the zip codes closest to urban centers but already falling fast in zip codes where commutes were long. (10)

Why Did the Oil Price Spike?

Those who espouse the Conventional Diagnosis for our ongoing economic collapse might agree that there was some element of causal correlation between the oil price spike and the recession, but they would deny that the price spike itself had anything to do with resource limits, because (they say) it was caused mostly by speculation in the oil futures market, and had little to do with fundamentals of supply and demand.

In this, the Conventional Diagnosis once again has some basis in reality. Speculation in oil futures during the period in question almost certainly helped drive oil prices higher than was justified by fundamentals. But why were investors buying oil futures? Was the mania for oil contracts just another bubble, like the dot.com stock frenzy of the late ’90s or the real estate boom of 2003 to 2006?

During the period from 2005 to mid-2008, demand for oil was growing, especially in China (which went from being self-sufficient in oil in 1995 to being the world’s second-foremost importer, after the U.S., by 2006). But the global supply of oil was essentially stagnant: monthly production figures for crude oil bounced around within a fairly narrow band between 72 and 75 million barrels per day. As prices rose, production figures barely budged in response. There was every indication that all oil producers were pumping flat-out: even the Saudis appeared to be rushing to capitalize on the price bonanza.

Thus a good argument can be made that speculation in oil futures was merely magnifying price moves that were inevitable on the basis of the fundamentals of supply and demand. James Hamilton (in his publication previously cited) puts it this way: “With hindsight, it is hard to deny that the price rose too high in July 2008, and that this miscalculation was influenced in part by the flow of investment dollars into commodity futures contracts. It is worth emphasizing, however, that the two key ingredients needed to make such a story coherent—a low price elasticity of demand, and the failure of physical production to increase—are the same key elements of a fundamentals-based explanation of the same phenomenon. I therefore conclude that these two factors, rather than speculation per se, should be construed as the primary cause of the oil shock of 2007-08.”

Aftermath of the Peak

There is also controversy over to what degree troubles in the automobile, trucking, and airline industries should be attributed to the oil price spike or the economic crash. Of course, if the Alternative Diagnosis is correct, the latter two events are causally related in any case. However, it may be helpful to review the situation.

Everyone knows that GM and Chrysler went bankrupt this year because U.S. car sales cratered. The current forecast is for sales of about 10.3 million vehicles in the U.S. for 2009, down from last year’s 13.2 million and 16.1 million in 2007. U.S. car sales have not been this low since the 1970s. Sales of light trucks, the most profitable vehicles, took the biggest hit during 2008, as fuel prices soared and car buyers avoided gas-guzzlers. It was at this point that the auto companies really began feeling the pain.

The airline industry’s ills are summarized in a recent GAO document: “After 2 years of profits, the U.S. passenger airline industry lost $4.3 billion in the first 3 quarters of 2008 [as jet fuel prices climbed]. Collectively, U.S. airlines reduced domestic capacity, as measured by the number of seats flown, by about 9 percent from the fourth quarter of 2007 to the fourth quarter of 2008…To reduce capacity, airlines reduced the overall number of active aircraft in their fleets by 18 percent…Airlines also collectively reduced their workforces by about 28,000, or nearly 7 percent, from the end of 2007 to the end of 2008…The contraction of the U.S. airline industry in 2008 reduced airport revenues, passengers’ access to the national aviation system, and revenues for the Trust Fund.”(11)

For the trucking industry, fuel accounts for nearly 40 percent of total operational costs. In 2007, as diesel prices rose, carriers began losing money and added fuel price surcharges; meanwhile the volume of freight began falling. After July 2008, as oil prices crashed, tonnage continued to decline. Overall, the cumulative decrease in loads for flatbed, tanker, and dry vans ranged between 15 percent and 20 percent just in the period from June to December 2008. (12)

This last set of statistics raises a couple of questions crucial to understanding the Alternative Diagnosis: Why, if global oil production had just peaked, did petroleum prices fall in the last five months of 2008? And, if oil prices were a major factor in the economic crisis, why didn’t the economy begin to turn around after the prices softened?

Why Did Oil Prices Fall?

And Why Didn’t Lower Oil Prices Lead to a Quick Recovery?

The Peak Oil thesis predicts that, as world oil production reaches its maximum level and begins to decline, the price of oil will rise dramatically. But it also forecasts a dramatic increase in the volatility of prices.

The argument goes as follows. As oil becomes scarce, its price will rise until it begins to undermine economic activity in general. Economic contraction will then result in substantially reduced demand for oil, which will in turn cause its price to fall temporarily. Then one of two things will happen: either (a) the economy will begin to recover, stoking renewed oil demand, leading again to high prices which will again undermine economic activity; or (b), if the economy does not quickly recover, petroleum production will gradually fall due to depletion until spare production capacity (created by lower demand) is wiped out, leading again to higher prices and even more economic contraction. In both cases, oil prices remain volatile and the economy contracts.

This scenario corresponds very closely with the reality that is unfolding, though it remains to be seen whether situation (a) or (b) will ensue.

Over the past three years, oil prices rose and fell more dramatically than would have been the case if it had not been for widespread speculation in oil futures. Nevertheless, the general direction of prices—way up, then way down, then part-way back up—is entirely consistent with the Peak Oil thesis and the Alternative Diagnosis.

Why has the economy not quickly recovered, given that oil prices are now only half what they were in July 2008? Again, Peak Oil is not the only cause of the current economic crisis. Enormous bubbles in the real estate and finance sectors constituted accidents waiting to happen, and the implosion of those bubbles has created a serious credit crisis (as well as solvency and looming currency crises) that will likely take several years to resolve even if energy supplies don’t pose a problem.

But now the potential for renewed high oil prices acts as a ceiling for economic recovery. Whenever the economy does appear to show renewed signs of life (as has happened in May-July this year, with stock values rebounding and the general pace of economic contraction slowing somewhat), oil prices will take off again as oil speculators anticipate a recovery of demand. Indeed, oil prices have rebounded from $30 in January to nearly $70 currently, provoking widespread concern that high energy prices could nip recovery in the bud.(14)

A barrel of oil from newly developed sources costs in the neighborhood of $60 to produce, now that all of the cheaper prospects have been exploited: finding new oilfields today usually means drilling under miles of ocean water, or in politically unstable nations where equipment and personnel are at high risk. (15) So as soon as consumers demand more oil, the price will have to stay noticeably above that figure in order to provide the incentive for producers to drill.

Volatile oil prices hurt on the upside, but they also hurt on the downside. The oil price collapse of August-December 2008, plus the worsening credit crisis, caused a dramatic contraction in oil industry investment, leading to the cancellation of about $150 billion worth of new oil production projects—whose potential productive capacity will be required to offset declines in existing oilfields if world oil production is to remain stable. (16) This means that even if demand remains low, production capacity will almost certainly decline to meet those demand levels, causing oil prices to rise again in real terms at some point, perhaps two or three years from now. Volatile petroleum prices also hurt the development of alternative energy, as was shown during the past few months when falling oil prices led to financial troubles for ethanol manufacturers. (17)

One way or another, growth will be highly problematic if not unachievable.

Big Picture Diagnosis: Continuing the Trail of Logic

At this point in the discussion many readers will be wondering why alternative energy sources and efficiency measures cannot be deployed to solve the Peak Oil crisis. After all, as petroleum becomes more expensive, ethanol, biodiesel, and electric cars all start to look more attractive both to producers and consumers. Won’t the magic of the market intervene to render oil shortages irrelevant to future growth?

It is impossible in the context of this discussion to provide a detailed explanation of why the market probably cannot solve the Peak Oil problem. Such an explanation requires a discussion of energy evaluation criteria, and an analysis of many individual energy alternatives on the basis of those criteria. I have offered brief overviews of this subject previously and a much longer one is in press. (18)

My summary conclusions in this regard are as follows.

About 85 percent of our current energy is derived from three primary sources—oil, natural gas, and coal—that are non-renewable, whose price is likely to trend sharply higher over the next years and decades leading to severe shortages, and whose environmental impacts are unacceptable. While these sources historically have had very high economic value, we cannot rely on them in the future; indeed, the longer the transition to alternative energy sources is delayed, the more difficult that transition will be unless some practical mix of alternative energy systems can be identified that will have superior economic and environmental characteristics.

But identifying such a mix is harder than one might initially think. Each energy source has highly specific characteristics. In fact, it has been the characteristics of our present energy sources (principally oil, coal, and natural gas) that have enabled the building of an urbanized society with high mobility, large population, and high economic growth rates. Surveying the available alternative energy sources for criteria such as energy density, environmental impacts, reliance on depleting raw materials, intermittency versus constancy of supply, and the percentage of energy returned on the energy invested in energy production, none currently appears capable of perpetuating this kind of society.

Moreover, national energy systems are expensive and slow to develop. Energy efficiency likewise requires investment, and further incremental investments in efficiency tend to yield diminishing returns over time, since it is impossible to perform work with zero energy input. Where is there the will or ability to muster sufficient investment capital for deployment of alternative energy sources and efficiency measures on the scale needed?

While there are many successful alternative energy production installations around the world (ranging from small home-scale photovoltaic systems to large “farms” of three-megawatt wind turbines), there are very few modern industrial nations that now get the bulk of their energy from sources other than oil, coal, and natural gas. One example is Sweden, which obtains most of its energy from nuclear and hydropower. Another is Iceland, which benefits from unusually large domestic geothermal resources not found in most other countries. Even for these two nations, the situation is complex: the construction of the infrastructure for their power plants mostly relied on fossil fuels for the mining of the ores and raw materials, for materials processing, for transportation, for the manufacturing of components, for the mining of uranium, for construction energy, and so on. Thus a meaningful energy transition away from fossil fuels is still a matter of theory and wishful thinking, not reality.

My conclusion from a careful survey of energy alternatives, then, is that there is little likelihood that either conventional fossil fuels or alternative energy sources can be counted on to provide the amount and quality of energy that will be needed to sustain economic growth—or even current levels of economic activity—during the remainder of this century. (19)

But the problem extends beyond oil and other fossil fuels: the world’s fresh water resources are strained to the point that billions of people may soon find themselves with only precarious access to water for drinking and irrigation. Biodiversity is declining rapidly. We are losing 24 billion tons of topsoil each year to erosion. And many economically significant minerals—from antimony to zinc—are depleting quickly, requiring the mining of ever lower-grade ores in ever more remote locations. Thus the Peak Oil crisis is really just the leading edge of a broader Peak Everything dilemma.

In essence, humanity faces an entirely predictable peril: our population has been growing dramatically for the past 200 years (expanding from under one billion to nearly seven billion), while our per-capita consumption of resources has also grown. For any species, this is virtually the definition of biological success. And yet all of this has taken place in the context of a finite planet with fixed stores of non-renewable resources (fossil fuels and minerals), a limited ability to regenerate renewable resources (forests, fish, fresh water, and topsoil), and a limited ability to absorb industrial wastes (including carbon dioxide). If we step back and look at the industrial period from a broad historical perspective that is informed by an appreciation of ecological limits, it is hard to avoid the conclusion that we are today living at the end of a relatively brief pulse—a 200-year rapid expansionary phase enabled by a temporary energy subsidy (in the form of cheap fossil fuels) that will inevitably be followed by an even more rapid and dramatic contraction as those fuels deplete.

The winding down of this historic growth-contraction pulse doesn’t necessarily mean the end of the world, but it does mean the end of a certain kind of economy. One way or another, humanity must return to a more normal pattern of existence characterized by reliance on immediate solar income (via crops, wind, or the direct conversion of sunlight to electricity) rather than stored ancient sunlight.

This is not to say that the remainder of the 21st century must consist of a collapse of industrialism, a die-off of most of the human population, and a return by the survivors to a way of life essentially identical to that of 16th century peasants or indigenous hunter-gatherers. It is possible instead to imagine acceptable and even inviting ways in which humanity could adapt to ecological limits while further developing cultural richness, scientific understanding, and quality of life (more of this below).

But however it is negotiated, the transition will spell an end to economic growth in the conventional sense. And that transition appears to have begun.

How Do We Know Which Diagnosis Is Correct?

If the patient is an individual human and the cause of distress is uncertain, more diagnostic tests can be prescribed. But to what sorts of blood tests, x-rays, and CAT scans can we subject the national or global economy?

In a sense, the tests have already been done. During the past few decades thousands of scientific surveys of natural resources, biodiversity, and ecosystems have showed increasing rates of depletion and decline. (20) The continuing increase in human population, pollution, and consumption are likewise well documented. This information formed the basis for the Limits to Growth studies, previously mentioned, which use computer modeling to show how current trends are likely play out—and most resulting scenarios show them leading to an end of economic growth and a collapse of industrial output some time in the early 21st century.

Why are the results of such diagnostic tests not universally accepted as a challenge to expectations of continued growth? Primarily because their conclusion runs counter to the beliefs and proclamations of most economists, who maintain that there are no practical limits to growth. They deny that resource constraints provide an eventual cap on production and consumption. And so their diagnostic efforts tend to ignore environmental factors in favor of easily measured internal features of the human economy such as money supply, consumer confidence, interest rates, and price indices.

Ecologist Charles Hall, among many others, has argued that the discipline of economics, as currently practiced, does not constitute a science, since it proceeds primarily on the basis of correlative logic rather than through the building of knowledge by a continuous, rigorous process of proposing and testing hypotheses. (21) While economics uses complex terminology and mathematics, as science does, its basic assertions about the world—such as the principle of infinite substitutability, which holds that for any resource that becomes scarce, the market will find a substitute—are not subjected to careful experimental examination. (It is worth noting that Hall and others have made the effort to lay the conceptual foundations for a new economics based on scientific principles and methods, which they call “biophysical economics.” (22)

Moreover, mainstream economists failed on the whole to foresee the current crash. There was no consistent or concerted effort on the part of Secretaries of the Treasury, Federal Reserve Chairmen, or “Nobel” prize-winning economists to warn policy makers or the general public that, sometime in the early 21st century, the global economy would begin to come apart at the seams. (23) One might think that this predictive failure—the inability to foresee so historically significant an event as the rapid contraction of nearly the entire global economy, entailing the failure of some of the world’s largest banks and manufacturing companies—would cause mainstream economists to stop and re-examine their fundamental premises. But there is little evidence to suggest that this is occurring.

At the risk of repetition: physical scientists from several disciplines have indeed foreseen an end to economic growth in the early 21st century, and have warned policy makers and the general public on many occasions.

Whom should we believe?

The specifics of the Alternative Diagnosis are falsifiable. If economic activity were to rebound above 2007 levels, or if oil production were to rise above the July 2008 high-water mark, then the attribution of the current economic crisis to resource-tied limits to growth may be considered at least partly disproven. However, even if these things were to occur, the underlying reasoning behind the Alternative Diagnosis might still be correct. If the world oil production peak is delayed until, let us say, 2015 or 2020, and if another—this time bottomless—global economic crash results then, the ultimate outcome will be essentially the same. But if, meanwhile, the Alternative Diagnosis were to be taken seriously and acted upon, the consequences of doing so would be beneficial: a decade would have been spent preparing for the event.

Could the Alternative Diagnosis be altogether wrong? That is, might conventional economists be right in thinking that growth can continue forever? It is often said that anything is possible, but some things are clearly much more possible than others. The perpetual growth of human population and consumption within the confines of a finite planet seems like a very long shot indeed, especially since warning signs are everywhere apparent that ecological limits are already being reached and surpassed. (24)

What Not to Do: Prescribe Punishingly Expensive Placebos

If the physical scientists who warn about limits to growth are right, confronting the global economic meltdown implies far more than merely getting the banks and mortgage lenders back on their feet. Indeed, in that case we face a fundamental change in our economy as significant as the advent of the industrial revolution. We are at a historic inflection point—the ending of decades of expansion and the beginning of an inevitable period of contraction that will continue until humanity is once again living within the limits of Earth’s regenerative systems.

But there are few signs that policy makers understand any of this. Their thinking appears to be shaped primarily by mainstream economists’ assurances that growth can and must continue into the indefinite future, and that the economic contraction the world is currently experiencing is only temporary–a problem that can and must be solved.

Still, the problem is not a minor one in the eyes of economists and policy makers. Consider the gargantuan size of the Treasury and Federal Reserve bailouts and stimulus packages that have been deployed in the possibly futile attempt to end contraction and restart growth. According to the special inspector general of the U.S. government’s Troubled Asset Relief Program (TARP), in remarks submitted to the House Committee on Oversight and Government Reform on July 21, $23.7 trillion have been committed in “total potential federal government support.” This is expensive medicine indeed. It takes a moment to even begin to comprehend the enormity of the figure. It represents about half of annual world GDP, and is over three times the total amount spent by the U.S. government, in inflation-adjusted dollars, on all wars combined, from 1776 to the present. It is nearly fifty times the cost of the New Deal.

Other nations, including Britain, China, and Germany have committed to paying for stimulus packages and bailouts that, while much smaller in absolute terms, represent an impressive (or should we say frightful?) share of national GDP.

If the Alternative Diagnosis is valid, none of this will work in the end, because existing financial institutions—with their basis in debt and interest and their requirements for constant expansion—cannot be made to function in a context where energy and resource constraints impose effective caps on manufacturing and transport.

Are the bailouts and stimulus packages working? Much evidence suggests that they are not, except in limited ways. In the U.S., unemployment continues to increase, while real estate values continue to fall. And most of the reputed “green shoots” in the economy so far sighted amount merely to an arguably temporary decline in the rate of contraction. For example, the home price index released July 28 of this year showed that in May, seasonally adjusted prices fell just 0.16 percent from the previous month. That represents an annual rate of decline of a little under 2 percent, which is a substantial improvement over the annualized rate of more than 20 percent that prevailed from September 2008 through March of 2009. Many commentators seized upon this news as a sign of an imminent turnaround. Nevertheless, new home sales are down from 1.4 million per year in 2005 to 350,000 per year today, and house prices are down 50 percent from the bubble peak and still declining in most places. Moreover, manufacturing is still shrinking, small businesses are in trouble, there are still significant danger signs on the horizon, including a new round of mortgage resets, a likely dive in commercial real estate values, and the looming reality that toxic assets at the center of the banking crisis have yet to be dealt with. (25)

President Obama has made the argument that bailouts are justified to stabilize the system long enough so that leaders can make fundamental changes to institutions and regulations, enabling the economy to then go forward healthier and more immune to similar crises in the future. But there is little to suggest that the kinds of systemic changes that are actually needed (ones that would enable the economy to function during a prolonged period of contraction) are under way or even contemplated. Meanwhile, as growth-based institutions are temporarily propped up, the ultimate scale of the damage is likely only to increase: when the inevitable collapse of those institutions does come, the consequences will likely be even worse because so much capital will have been squandered in attempting to salvage them.

In using up non-renewable resources like metals, minerals, and fossil fuels, we have stolen from future generations. Now in effect we are stealing from those generations the financial wherewithal that could have been used to build a bridge to a sustainable economy. The construction of a renewable energy infrastructure (including not only generating capacity, but distribution and storage infrastructure, as well as post-petroleum transport and agriculture systems) will require enormous investments and decades of work. Where will the investment capital come from if governments are already buried in debt? If we have committed nearly $24 trillion to propping up an old economy with no real survival prospects, what’s left with which to finance the new one?

If the current prescription for our economic malady is wrong-headed, the same is true of many proposed cures for our energy problems. According to the Conventional Diagnosis, today’s high oil prices are due to speculation; the cure must therefore lie in the tighter regulation of oil futures trading (which may be a good idea, though it doesn’t get to the heart of the problem), while providing more opportunities to oil companies to explore for domestic oil (even though the likely production rates from currently off-limits reserves would be relatively paltry, and would have a negligible effect on oil prices). In fact, though, investing further in fossil fuel energy systems (including “clean coal” technology) will yield declining returns, given that the highest quality resources have already been used up; meanwhile, doing so takes investment capital away from the development of renewable energy, which we will have to rely on increasingly as fossil fuels deplete. (26)

What is required but is still utterly lacking is a fundamental recognition that circumstances have changed: what worked decades ago will not work now.

What To Do: Adapt to the New Reality

If the Alternative Diagnosis is correct, there will be no easy fix for the current economic breakdown. Some illnesses are not curable; they require that we simply adapt and make the best of our new situation.

If humanity has indeed embarked upon the contraction phase of the industrial pulse, we should assume that ahead of us lie much lower average income levels (for nearly everyone in the wealthy nations, and for high wage earners in poorer nations); different employment opportunities (fewer jobs in sales, marketing, and finance; more in basic production); and more costly energy, transport, and food. Further, we should assume that key aspects of our economic system that are inextricably tied to the need for future growth will cease to work in this new context.

Rather than attempting to prop up banks and insurance companies with trillions in bailouts, it would probably be better simply to let them fail, however nasty the short-term consequences, since they will fail anyway sooner or later. The sooner they are replaced with institutions that serve essential functions within a contracting economy, the better off we will all be.

Meanwhile the thought-leaders in society, especially the President, must begin breaking the news—in understandable and measured ways—that growth isn’t returning and that the world has entered a new and unprecedented economic phase, but that we can all survive and thrive in this challenging transitional period if we apply ourselves and work together. At the heart of this general re-education must be a public and institutional acknowledgment of three basic rules of sustainability: growth in population cannot be sustained; the ongoing extraction of non-renewable resources cannot be sustained; and the use of renewable resources is sustainable only if it proceeds at rates below those of natural replenishment.

Without cheap energy, global trade cannot increase. This doesn’t mean that trade will disappear, only that economic incentives will inexorably shift as transport costs rise, favoring local production for local consumption. But this may be a nice way of putting it: if and when fuel shortages arise, fragile globe-spanning systems of provisioning could be disrupted, with dire effects for consumers cut off from sources of necessary products. Thus a high priority must be placed on the building of community resilience through the preferential local sourcing of necessities and the maintenance of larger regional inventories—especially of food and fuel. (28)

It currently takes an average of 8.5 calories of energy from oil and natural gas to produce each calorie of food energy. Without cheap fuel for agriculture, farm production will plummet and farmers will go bankrupt—unless proactive efforts are undertaken to reform agriculture to reduce its reliance on fossil fuels. (29)

Obviously, alternative energy sources and energy efficiency strategies must be high priorities, and must be subjects of intensive research using a carefully chosen spectrum of criteria. The best candidates will have to be funded robustly even while fossil fuels are still relatively cheap: the build-out time for the renewable energy infrastructure will inevitably be measured in decades and so we must begin the process now rather than waiting for market forces to lead the way.

In the face of credit and (potential) currency crises, new ways of financing such projects will be needed. Given that our current monetary and financial systems are founded on the need for growth, we will require new ways of creating money and new ways of issuing credit. Considerable thought has gone into finding solutions to this problem, and some communities are already experimenting with local capital co-ops, alternative currencies, and no-interest banks. (30)

With oil becoming increasingly expensive in real terms, we will need more efficient ways of getting people and goods around. Our first priority in this regard must be to reduce the need for transport with better urban planning and re-localized production systems. But where transport is needed, rail and light rail will probably be preferable to cars and trucks. (31)

We will also need a revolution in the built environment to minimize the need for heating, cooling, and artificial lighting in all our homes and public buildings. This revolution is already under way, but is currently moving far too slowly due to the inertia of established interests in the construction industry. (32)

These projects will need more than local credit and money; they will also require skilled workers. There will be a call not just for installers of solar panels and home insulation: millions of new food producers and builders of low-energy infrastructure will be needed as well. A broad range of new opportunities could open up to replace vanishing jobs in marketing and finance—if there is cheap training available at local community colleges.

It is worth noting that the $23.7 trillion recently committed for U.S. bailouts and loan guarantees represents about $80,000 for each man, woman, and child in America. A level of investment even a substantial fraction that size could pay for all needed job training while ensuring universal provision of basic necessities during the transition. What would we be getting for our money? A collective sense that, in a time of crisis, no one is being left behind. Without the feeling of cooperative buy-in that such a safety net would help engender, similar to what was achieved with the New Deal but on an even larger scale, economic contraction could devolve into a horrific fight over the scraps of the waning industrial period.

However contentious, the population question must be addressed. All problems that have to do with resources are harder to solve when there are more people needing those resources. The U.S. must encourage smaller families and must establish an immigration policy consistent with a no-growth population target. This has foreign policy implications: we must help other nations succeed with their own economic transitions so that their citizens do not need to emigrate to survive. (33)

If economic growth ceases to be an achievable goal, society will have to find better ways of measuring success. Economists must shift from assessing well-being with the blunt instrument of GDP, and begin paying more attention to indices of human and social capital in areas such as education, health, and cultural achievements. This redefinition of growth and progress has already begun in some quarters, but for the most part has yet to be taken up by governments. (34)

A case can be made that after all this is done the end result will be a more satisfying way of life for the vast majority of citizens—offering more of a sense of community, more of a connection with the natural world, more satisfying work, and a healthier environment. Studies have repeatedly shown that higher levels of consumption do not translate to elevated levels of satisfaction with life. (35) This means that if “progress” can be thought of in terms of happiness, rather than a constantly accelerating process of extracting raw materials and turning them into products that themselves quickly become waste, then progress can certainly continue. In any case, “selling” this enormous and unprecedented project to the general public will require emphasizing its benefits. Several organizations are already exploring the messaging and public relations aspects of the transition. (36) But those in charge need to understand that looking on the bright side doesn’t mean promising what can’t be delivered—such as a return to the days of growth and thoughtless consumption.

Can We? Will We?

It is important to state the implications of all this as plainly as possible. If the Alternative Diagnosis is correct, there will be no full economic “recovery”—not this year, or the next, or five or ten years from now. There may be temporary rebounds that take us back to some fraction of peak economic activity, but these will be only brief respites.

We have entered a new economic era in which the former rules no longer apply. Low interest rates and government spending no longer translate to incentives for borrowing and job production. Cheap energy won’t appear just because there is demand for it. Substitutes for essential resources will in most cases not be found. Over all, the economy will continue to shrink in fits and starts until it can be maintained by the energy and material resources that Earth can supply on ongoing basis.

This is of course very difficult news. It is analogous to being told by your physician that you have contracted a systemic, potentially fatal disease that cannot be cured, but only managed; and managing it means you must make profound lifestyle changes.

Some readers may note that climate change has not figured prominently in this discussion. It is clearly, after all, the worst environmental catastrophe in human history. Indeed, its consequences could be far worse than the mere destruction of national economies: hundreds of millions of people and millions of other species could be imperiled. The reason for the relatively limited discussion of climate here is that (assuming the Alternative Diagnosis is correct) it is not climate change that has proven to be the most immediate limit to economic growth, but resource depletion. However, while there is not as yet general agreement on the point, climate change itself and the needed steps to minimize it both constitute limits to growth, just as resource depletion does. Moreover, if we fail to successfully manage the inevitable process of economic contraction that will characterize the coming decades, there will be no hope of mounting an organized and coherent response to climate change—a response consisting of efforts both to reduce climate impacts and to adapt to them. It is important to note, though, that the measures advocated here (including the development of renewable energy sources and energy efficiency, a rapid reduction of reliance on fossil fuels in transport and agriculture, and the stabilization of population levels) are among the steps that will help most to reduce carbon emissions.

Is this essay likely to change the thinking and actions of policy makers? Unfortunately, that is unlikely. Their belief in the possibility and necessity of continued growth is pervasive, and the notion that growth may no longer be possible is unthinkable. But the Alternative Diagnosis must be a matter of record. This essay, composed by a mere journalist, in many ways represents the thinking of thousands of physical scientists working over the past several decades on issues having to do with population, resources, pollution, and biodiversity. Ignoring the diagnosis itself—whether as articulated here or as implied in tens of thousands of scientific papers—may waste our last chance to avert a complete collapse, not just of the economy, but of civility and organized human existence. It may risk a historic discontinuity with qualitative antecedents in the fall of the Roman and Mayan civilizations. (37) But there is no true precedent for what may be in store, because those earlier examples of collapse affected geographically bounded societies whose influence on their environments was also bounded. Today’s civilization is global, and its fate, Earth’s fate, and humanity’s fate are inextricably tied.

But even if policy makers continue to ignore warnings such as this, individuals and communities can take heed and begin the process of building resilience, and of detaching themselves from reliance on fossil fuels and institutions that are inextricably tied to the perpetual growth machine. We cannot sit passively by as world leaders squander opportunites to awaken and adapt to growth limits. We can make changes in our own lives, and we can join with our neighbors. And we can let policy makers know we disapprove of their allegiance to the status quo, but that there are other options.

Is it too late to begin a managed transition to a post-fossil fuel society? Perhaps. But we will not know unless we try. And if we are to make that effort, we must begin by acknowledging one simple, stark reality: growth as we have known it can no longer be our goal.

Notes

1. “Pain on the Road to Recovery”. (http://www.smh.com.au/national/pain-on-the-road-to-recovery-20090724-dw6q.html?page=-1).

2. Here, for example, are a few relevant excerpts from the present author’s book The Party’s Over: Oil, War and the Fate of Industrial Societies (Gabriola Island, BC: New Society, 2003): “Our current financial system was designed during a period of consistent growth in available energy, with its designers operating under the assumption that continued economic growth was both inevitable and desirable. This ideology of growth has become embodied in systemic financial structures requiring growth…Until now, this loose linkage between a financial system predicated upon the perpetual growth of the money supply, and an economy growing year by year because of an increasing availability of energy and other resources, has worked reasonably well—with a few notable exceptions, such as the Great Depression… However, [when global oil production peaks] the financial system may not respond so rationally…This might predictably trigger a financial crisis…”

3. See Albert Bartlett, “Arithmetic, Population and Energy” (lecture transcript). (http//www.globalpublicmedia.com/transcripts/645).

4. Donella H. Meadows, Dennis L. Meadows, Jorgen Randers, and William W. Behrens III, Limits to Growth (New York: Universe Books, 1972); Donella H. Meadows, Dennis L. Meadows, and Jorgen Randers, Beyond the Limits (Post Mills, VT: Chelsea Green, 1992); Donella H. Meadows, Dennis L. Meadows, and Jorgen Randers, Limits to Growth: The 30 Year Update (White River Junction, VT: Chelsea Green, 2003). See also the recent CSIRO study, “A Comparison of the Limits to Growth with Thirty Years of Reality” (2009) (http://www.csiro.au/files/files/plje.pdf).

5. See, for example, Robert U. Ayers and Benjamin Warr, The Economic Growth Engine: How Energy and Work Drive Material Prosperity (Cambridge, UK: Edward Elgar Publishing, 2005); and Robert Barro and Xavier Sala-i-Martin, Economic Growth (Cambridge, MA: MIT Press, 2003) (http://www.bookrags.com/research/economic-growth-and-energy-consumpt-mee-01/).

6. See Richard Heinberg, The Party’s Over: Oil, War and the Fate of Industrial Societies (2003, 2005); Powerdown: Options and Actions for a PostCarbon World (2004); and The Oil Depletion Protocol: A Plan to Avert Oil Wars, Terrorism, and Economic Collapse (2006); as well as books by Kenneth Deffeyes, Colin Campbell, and Matthew Simmons; and websites www.theoildrum.com and www.energybulletin.net. The Association for the Study of Peak Oil organizes international conferences to study issues related to oil and gas depletion (www.peakoil.net and www.aspo-usa.com), and the U.S. chapter of ASPO publishes a weekly survey of relevant news, “Peak Oil Review,” compiled by former CIA analyst Tom Whipple. At the annual Association for the Study of Peak Oil conference in Cork, Ireland, in September 2007, former U.S. Energy Secretary, James Schlesinger, said: “Conceptually the battle is over. The peakists have won. We’re all peakists now.” See also Steve Connor, “Warning: Oil supplies are running out fast,” The Independent, August 3, 2009 (http://www.independent.co.uk/news/science/warning-oil-supplies-are-running-out-fast-1766585.html).

7. The declining rate of discovery of new oilfields, and the list of past-peak oil producing countries, are widely documented; e.g.: Roger D. Blanchard, The Future of Global Oil Production: Facts, Figures, Trends and Projections by Region (Jefferson, NC: McFarlane and Co., 2005).

8. A May 4, 2009 report from Raymond James Associates (“Stat of the Week”) argued that world oil production peaked in July 2008 (http://blogs.wsj.com/environmentalcapital/2009/05/04/peak-oil-global-oil-productions-peaked-analyst-says/). In a subsequent interview, Marshall Adkins, author of the report, suggested that most knowledgeable players within the petroleum industry now accept the Peak Oil thesis in some form, whether or not they acknowledge it publicly (http://www.aspousa.org/index.php/2009/07/interview-with-marshall-adkins/).

9. Brookings Papers on Economic Activity, March 2009 http://eepurl.com/cSPu.

10. See Joe Cortright, “Driven to the Brink: How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs,” Discussion paper, CEOs for Cities, 2008 (http://www.ceosforcities.org/).

11. U.S. Government Accountability Office, “Commercial Aviation: Airline Industry Contraction Due to Volatile Fuel Prices and Falling Demand Affects Airports, Passengers, and Federal Government Revenues,” April 21, 2009 (http://www.gao.gov/products/GAO-09-393). For a detailed discussion of the likely future impacts of high oil prices and oil shortages on the airline industry, see Charles Schlumberger, “The Oil Price Spike of 2008: The Result of Speculation or an Early Indicator of a Major and Growing Future Challenge to the Airline Industry?” Annals of Air and Space Law, Vol. XXXIV, [2009], McGill University (http://www.globalpublicmedia.com/the_oil_price_spike_of_2008).

12. American Trucking Association (http://www.truckline.com/Pages/Home.aspx).

13. This scenario is implied in Robert L. Hirsch, Roger Bezdek, and Robert Wendling, “Peaking of World Oil Production: Impacts, Mitigation and Risk Management” (U.S. Department of Energy: 2005): “As peaking is approached, liquid fuel prices and price volatility will increase dramatically…” (http://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf).

14. See, for example, “Troubling Signs That Oil Prices Could Hamper Recovery,” Wall Street 24/7, May 8, 2009 (http://247wallst.com/2009/05/08/troubling-signs-that-oil-prices-could-hamper-recovery/)

15. See, for example, James Herron, “Low Oil Prices, Credit Woes Could Spell Trouble for UK North Sea,” Rigzone, November 14, 2008 (http://www.rigzone.com/news/article.asp?a_id=69507).

16. Jad Mouawad, “Big Oil Projects Put in Jeopardy by Fall in Prices,” New York Times, December 15, 2008 (http://www.nytimes.com/2008/12/16/business/16oil.html).

17. See David R. Baker, “Low oil prices take wind out of renewable fuels,” San Francisco Chronicle, October 27, 2008 (http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/10/26/MNSK13NNK4.DTL).

18. See The Party’s Over, Chapter 4; Powerdown, Chapter 4; The Oil Depletion Protocol, pages 23-31. A longer treatment of the subject, tentatively titled Energy Limits to Growth, will be published by International Forum on Globalization and Post Carbon Institute in September.

19. This conclusion is echoed in, for example, Ted Trainer, Renewable Energy Cannot Sustain a Consumer Society (Dordrecht, The Netherlands: Springer, 2007); and (with some reservations), David J. C. McKay, Sustainable Energy Without the Hot Air (Cambridge, UK: UIK Cambridge, 2008), (www.withouthotair.com).

20. Just one example, from a press release April 20, 1998 describing the results of a poll commissioned by the American Museum of Natural History: “The American Museum of Natural History announced today results of a nationwide survey titled Biodiversity in the Next Millennium, developed by the Museum in conjunction with Louis Harris and Associates, Inc. The survey reveals that seven out of ten biologists believe that we are in the midst of a mass extinction of living things, and that this loss of species will pose a major threat to human existence in the next century.”

21. Charles A. S. Hall and Kent A. Klitgaard, International Journal of Transdisciplinary Research, Vol. 1, No. 1 (2006) (http://www.peakoil.net/files/the%20need%20for%20a%20new%20biophysical-based%20paradigm%20in%20economics%20….pdf) “The Need for a New, Biophysical-Based Paradigm in Economics for the Second Half of the Age of Oil,”, Charles A. S. Hall, D. Lindenberger, R. Kummell, T. Kroeger and W. Eichorn, “The Need to Reintegrate the Natural Sciences with Economics.” Bioscience 51:663-673, 2001 (http://web.mac.com/biophysicalecon/iWeb/Site/Downloads_files/Hall_2001_NeedtoReintegrate.pdf).

22. Cutler J. Cleveland, “Biophysical Economics,” The Encyclopedia of Earth (http://www.eoearth.org/article/Biophysical_economics). See also the related field of Ecological Economics, especially the books of Herman Daly, including Toward a Steady State Economy (New York: Freeman, 1973); and, with Joshua Farley, Ecological Economics: Principles and Applications (Washington: Island Press, 2004).

23. The quotation marks around the Nobel name are justified because the Nobel family has never acknowledged economics as a science: the so-called “Nobel prize in economics” is awarded by a Swedish Bank.

24. See The Millennium Ecosystem Assessment (http://www.millenniumassessment.org/en/index.aspx).

25. See, for example, J. S. Kim, “Irrational Exuberance of the Green Shoots,” July 24, 2009 (http://seekingalpha.com/article/151101-irrational-exuberance-of-the-green-shoots).

26. See Richard Heinberg, Blackout: Coal, Climate and the Last Energy Crisis (Gabriola Island, BC: New Society, 2009), pages 137-143, 145-168.

27. The opinion that banks and insurance companies should be allowed to fail rather than being bailed out was voiced by many knowledgeable observers throughout late 2008 and early 2009. See for example Ambrose Evans-Pritchard, “Let banks fail, says Nobel economist Joseph Stiglitz,” London Daily Telegraph, Feb. 2, 2009 (http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4424418/Let-banks-fail-says-Nobel-economist-Joseph-Stiglitz.html).

28. See Jeff Rubin, Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization. (New York: Random
House, 2009).

29. See Richard Heinberg and Michael Bomford, “The Food and Farming Transition” (Sebastopol, CA: Post Carbon Institute, 2009) (http://postcarbon.org/food).

30. See Bernard Lietaer, “White Paper on All the Options for Managing a Systemic Bank Crisis” (http://www.lietaer.com/images/White_Paper_on_Systemic_Banking_Crises_final.pdf). JAK in Sweden is a cooperative, member-owned bank that operates without interest (http://en.wikipedia.org/wiki/JAK_members_bank).

31. See Richard Gilbert and Anthony Perl, Transport Revolutions: Moving People and Freight Without Oil (Gabriola Island, BC: New Society, 2009).

32. The Passivhaus Institute pioneers construction methods that reduce energy input to buildings in many cases to zero. Roughly 20,000 Passivhauses have been built in Europe, only about 12 in the U.S. (http://www.passivehouse.us/)

33. See websites of Population Media Center (http://www.populationmedia.org/issues/), and SUSPS (http://www.susps.org/overview/immigration.html).

34. The organization Redefining Progress has developed a Genuine Progress Indicator (GPI) that incorporates many such indices ( http://www.rprogress.org/sustainability_indicators/genuine_progress_indicator.htm).

35. See, for example, “Understanding Human Happiness and Well-Being,” The Sustainable Scale Project (http://www.sustainablescale.org/AttractiveSolutions/UnderstandingHumanHappinessandWellBeing.aspx).

36. The burgeoning Transition Town movement (www.transitiontowns.org/) proceeds from the premise that “life can be better without fossil fuels.” YES! Magazine (www.yesmagazine.org) is a publication of the Positive Futures Network and highlights examples of low-impact ways of living that bring personal and social benefits. And the Simple Living Network (www.simpleliving.net/) provides “resources, tools, examples and contacts for conscious, simple, healthy and restorative living.”

37. See Jared Diamond, Collapse How Societies Choose to Fail or Succeed (New York: Viking, 2005); Joseph Tainter, The Collapse of Complex Societies (Cambridge, UK: Cambridge University Press, 1988); and John Michael Greer, The Long Descent (Gabriola Island, BC: New Society, 2008).

Richard Heinberg is a Senior Fellow of the Post Carbon Institute and author of five books on resource depletion and societal responses to the energy problem. www.richardheinberg.com, www.postcarbon.org.

This piece was also published as Richard Heinberg’s Museletter #208. To subscribe to the Museletter visit http://richardheinberg.com/Museletter.html. Interestingly it was also picked up by Business Week.

It’s too bad so many people are falling into poverty at a time when it’s almost illegal to be poor. You won’t be arrested for shopping in a Dollar Store, but if you are truly, deeply, in-the-streets poor, you’re well advised not to engage in any of the biological necessities of life – like sitting, sleeping, lying down or loitering. City officials boast that there is nothing discriminatory about the ordinances that afflict the destitute, most of which go back to the dawn of gentrification in the ’80s and ’90s. “If you’re lying on a sidewalk, whether you’re homeless or a millionaire, you’re in violation of the ordinance,” a city attorney in St. Petersburg, Fla., said in June, echoing Anatole France’s immortal observation that “the law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges.”

In defiance of all reason and compassion, the criminalization of poverty has actually been intensifying as the recession generates ever more poverty. So concludes a new study from the National Law Center on Homelessness and Poverty, which found that the number of ordinances against the publicly poor has been rising since 2006, along with ticketing and arrests for more “neutral” infractions like jaywalking, littering or carrying an open container of alcohol.

The report lists America’s 10 “meanest” cities – the largest of which are Honolulu, Los Angeles and San Francisco – but new contestants are springing up every day. The City Council in Grand Junction, Colo., has been considering a ban on begging, and at the end of June, Tempe, Ariz., carried out a four-day crackdown on the indigent. How do you know when someone is indigent? As a Las Vegas statute puts it, “An indigent person is a person whom a reasonable ordinary person would believe to be entitled to apply for or receive” public assistance.

That could be me before the blow-drying and eyeliner, and it’s definitely Al Szekely at any time of day. A grizzled 62-year-old, he inhabits a wheelchair and is often found on G Street in Washington – the city that is ultimately responsible for the bullet he took in the spine in Fu Bai, Vietnam, in 1972. He had been enjoying the luxury of an indoor bed until last December, when the police swept through the shelter in the middle of the night looking for men with outstanding warrants.

It turned out that Mr. Szekely, who is an ordained minister and does not drink, do drugs or curse in front of ladies, did indeed have a warrant – for not appearing in court to face a charge of “criminal trespassing” (for sleeping on a sidewalk in a Washington suburb). So he was dragged out of the shelter and put in jail. “Can you imagine?” asked Eric Sheptock, the homeless advocate (himself a shelter resident) who introduced me to Mr. Szekely. “They arrested a homeless man in a shelter for being homeless.”

The viciousness of the official animus toward the indigent can be breathtaking. A few years ago, a group called Food Not Bombs started handing out free vegan food to hungry people in public parks around the nation. A number of cities, led by Las Vegas, passed ordinances forbidding the sharing of food with the indigent in public places, and several members of the group were arrested. A federal judge just overturned the anti-sharing law in Orlando, Fla., but the city is appealing. And now Middletown, Conn., is cracking down on food sharing.

If poverty tends to criminalize people, it is also true that criminalization inexorably impoverishes them. Scott Lovell, another homeless man I interviewed in Washington, earned his record by committing a significant crime – by participating in the armed robbery of a steakhouse when he was 15. Although Mr. Lovell dresses and speaks more like a summer tourist from Ohio than a felon, his criminal record has made it extremely difficult for him to find a job.

For Al Szekely, the arrest for trespassing meant a further descent down the circles of hell. While in jail, he lost his slot in the shelter and now sleeps outside the Verizon Center sports arena, where the big problem, in addition to the security guards, is mosquitoes. His stick-thin arms are covered with pink crusty sores, which he treats with a regimen of frantic scratching.

For the not-yet-homeless, there are two main paths to criminalization – one involving debt, and the other skin color. Anyone of any color or pre-recession financial status can fall into debt, and although we pride ourselves on the abolition of debtors’ prison, in at least one state, Texas, people who can’t afford to pay their traffic fines may be made to “sit out their tickets” in jail.

Often the path to legal trouble begins when one of your creditors has a court issue a summons for you, which you fail to honor for one reason or another. (Maybe your address has changed or you never received it.) Now you’re in contempt of court. Or suppose you miss a payment and, before you realize it, your car insurance lapses; then you’re stopped for something like a broken headlight. Depending on the state, you may have your car impounded or face a steep fine – again, exposing you to a possible summons. “There’s just no end to it once the cycle starts,” said Robert Solomon of Yale Law School. “It just keeps accelerating.”

By far the most reliable way to be criminalized by poverty is to have the wrong-color skin. Indignation runs high when a celebrity professor encounters racial profiling, but for decades whole communities have been effectively “profiled” for the suspicious combination of being both dark-skinned and poor, thanks to the “broken windows” or “zero tolerance” theory of policing popularized by Rudy Giuliani, when he was mayor of New York City, and his police chief William Bratton.

Flick a cigarette in a heavily patrolled community of color and you’re littering; wear the wrong color T-shirt and you’re displaying gang allegiance. Just strolling around in a dodgy neighborhood can mark you as a potential suspect, according to “Let’s Get Free: A Hip-Hop Theory of Justice,” an eye-opening new book by Paul Butler, a former federal prosecutor in Washington. If you seem at all evasive, which I suppose is like looking “overly anxious” in an airport, Mr. Butler writes, the police “can force you to stop just to investigate why you don’t want to talk to them.” And don’t get grumpy about it or you could be “resisting arrest.”

There’s no minimum age for being sucked into what the Children’s Defense Fund calls “the cradle-to-prison pipeline.” In New York City, a teenager caught in public housing without an ID – say, while visiting a friend or relative – can be charged with criminal trespassing and wind up in juvenile detention, Mishi Faruqee, the director of youth justice programs for the Children’s Defense Fund of New York, told me. In just the past few months, a growing number of cities have taken to ticketing and sometimes handcuffing teenagers found on the streets during school hours.

In Los Angeles, the fine for truancy is $250; in Dallas, it can be as much as $500 – crushing amounts for people living near the poverty level. According to the Los Angeles Bus Riders Union, an advocacy group, 12,000 students were ticketed for truancy in 2008.

Why does the Bus Riders Union care? Because it estimates that 80 percent of the “truants,” especially those who are black or Latino, are merely late for school, thanks to the way that over-filled buses whiz by them without stopping. I met people in Los Angeles who told me they keep their children home if there’s the slightest chance of their being late. It’s an ingenious anti-truancy policy that discourages parents from sending their youngsters to school.

The pattern is to curtail financing for services that might help the poor while ramping up law enforcement: starve school and public transportation budgets, then make truancy illegal. Shut down public housing, then make it a crime to be homeless. Be sure to harass street vendors when there are few other opportunities for employment. The experience of the poor, and especially poor minorities, comes to resemble that of a rat in a cage scrambling to avoid erratically administered electric shocks.

And if you should make the mistake of trying to escape via a brief marijuana-induced high, it’s “gotcha” all over again, because that of course is illegal too. One result is our staggering level of incarceration, the highest in the world. Today the same number of Americans – 2.3 million – reside in prison as in public housing.

Meanwhile, the public housing that remains has become ever more prisonlike, with residents subjected to drug testing and random police sweeps. The safety net, or what’s left of it, has been transformed into a dragnet.

Some of the community organizers I’ve talked to around the country think they know why “zero tolerance” policing has ratcheted up since the recession began. Leonardo Vilchis of the Union de Vecinos, a community organization in Los Angeles, suspects that “poor people have become a source of revenue” for recession-starved cities, and that the police can always find a violation leading to a fine. If so, this is a singularly demented fund-raising strategy. At a Congressional hearing in June, the president of the National Association of Criminal Defense Lawyers testified about the pervasive “overcriminalization of crimes that are not a risk to public safety,” like sleeping in a cardboard box or jumping turnstiles, which leads to expensively clogged courts and prisons.

A Pew Center study released in March found states spending a record $51.7 billion on corrections, an amount that the center judged, with an excess of moderation, to be “too much.”

But will it be enough – the collision of rising prison populations that we can’t afford and the criminalization of poverty – to force us to break the mad cycle of poverty and punishment? With the number of people in poverty increasing (some estimates suggest it’s up to 45 million to 50 million, from 37 million in 2007) several states are beginning to ease up on the criminalization of poverty – for example, by sending drug offenders to treatment rather than jail, shortening probation and reducing the number of people locked up for technical violations like missed court appointments. But others are tightening the screws: not only increasing the number of “crimes” but also charging prisoners for their room and board – assuring that they’ll be released with potentially criminalizing levels of debt.

Maybe we can’t afford the measures that would begin to alleviate America’s growing poverty – affordable housing, good schools, reliable public transportation and so forth. I would argue otherwise, but for now I’d be content with a consensus that, if we can’t afford to truly help the poor, neither can we afford to go on tormenting them.

Barbara Ehrenreich is the author of thirteen books, including the New York Times bestseller Nickel and Dimed. A frequent contributor to the New York Times, Harpers, and the Progressive, she is a contributing writer to Time magazine. She lives in Florida.

Reposted from AlterNet.

By Michael ShumanThe Obama Administration believes that the best way to repair our financial system after the Great Crash of 2008 is to improve the performance and oversight of global banks and investment firms. A growing number of Americans, however, would prefer to pull their retirement savings out of these high financial fliers altogether. They would rather invest in their communities. The problem is, they can’t. Outdated federal securities laws have left Main Street dangerously dependent on Wall Street, and overhauling these regulations turns out to be a hidden key to economic revitalization.

There are two reasons Americans increasingly wish to invest in locally owned businesses. First, they understand that these businesses are the real pillars of a prosperous, sustainable economy. A growing body of evidence suggests that every dollar spent at a locally owned business generates two to four times more economic benefit-measured in income, wealth, jobs, and tax revenue-than a dollar spent at a globally owned business. That’s because locally owned businesses spend more of their money locally and thereby pump up the so-called economic multiplier. Other studies suggest that local businesses are critical for tourism, walkable communities, entrepreneurship, social equality, civil society, charitable giving, revitalized downtowns, and even political participation.

Second, many Americans no longer believe Wall Street’s assertions that a global, publicly traded corporation is the safest place to invest their savings. According to data in Statistical Abstract, sole proprietorships (the legal structures chosen by most first-stage small businesses) are nearly three times more profitable than C-corporations (the structures of choice for global businesses). Moreover, a bunch of global trends, like rising energy prices and the falling dollar, are making local businesses increasingly competitive. Meanwhile, Americans are shifting their spending from goods to services, a trend that promises to expand the local business sector, since most services depend on direct, personal, and, ultimately, local relationships.

Locally owned businesses currently generate half of the private economy, in terms of output and jobs. Add in other place-based institutions-nonprofits, co-ops, and the public secto-and we’re talking about 58 percent of all economic activity. So in a well-functioning financial system, weï’d invest roughly 58 percent of our retirement funds in place-based enterprises.

Yet local businesses receive none of our pension savings. Nor do they receive any investment capital from mutual, venture, or hedge funds. The result is that all of us, even stalwart advocates of community development, overinvest in the Fortune 500 companies we distrust and underinvest in the local businesses we know are essential for local vitality. This situation represents a colossal market failure.

The good news is that much of the problem could be solved by modernizing securities laws. Today these laws place huge restrictions on the investment choices of small, “unaccredited”investors-a category in Securities and Exchange Commission vernacular that includes all but the richest 2 percent of Americans. The regulations prohibit the average American from investing in any small business, unless the business is willing to spend $50,000 to $100,000 on lawyers to prepare private placement memoranda or public offerings-thick documents with microscopic, all-caps print that no human being has ever actually been observed reading.

Were these reforms enacted nationally, literally trillions of investment dollars could begin to move into the local business economy.

One easy reform would be for the SEC to allow low-risk public ownership of locally owned microbusinesses. By low-risk, I mean that no person can hold more than $100 worth of any one stock-which means that we’re freeing up people to engage in the risk equivalent of a nice dinner for two. By local ownership, I mean that stock shares can only be bought, held, and sold by residents within a state. And by microbusinesses, I mean any business with a total stock valuation on issuance of under $250,000.

This legal reform would be even more effective if supported by a few others:

• Micro-investment funds.
  Let’s allow small investors to pool their money in backyard investment funds (again, up to $100 per person) that in turn create diverse portfolios of local stocks. (Only the rich can invest in such funds now.)
• Co-op investment funds.
  Let’s allow cooperatives, most of which are owned by workers or consumers in a single community, to set up investment funds empowered to make local investments on behalf of their members. (Currently, they can only invest members’ capital in businesses owned and run by the co-op itself.)
• Local stock exchanges.
  Letï’s allow private companies to facilitate local trading of microbusiness stock electronically, like Prosper.com and Kiva.org do for microloans. (The SEC now bans small, electronic exchanges like these from trading equities.)
• Pension fund participation.
  Let’s allow any pension fund that places as much as 5 percent in local securities, either directly or through microbusiness investment funds, to meet legal standards of “fiduciary responsibility.” (Current regulations define the term in a way that directs virtually all such investments to global companies.)

These new community-based funds and investments, of course, need to be overseen to prevent fraud and ensure accountability. But since all these activities are intrastate, these new rules can be left to the existing securities departments in the 50 states. Once state-level laws are put into practice, many of the absurd requirements of the SEC-like expensive audits and lengthy legal filings; may finally disappear.

Were these reforms enacted nationally, literally trillions of investment dollars could begin to move into the local business economy.

Entrepreneurs, hungry for new capital in the post-meltdown credit crunch, will begin to restructure their businesses to receive microcapital. Investors terrified of betting all their money in the global casino will start shifting their investments to local businesses they know, trust, and can visit and “ground-truth” with tough questions.

The result will be a nation of stronger local economies, with American investors placing more and more of their money into backyard businesses rather than into the untrustworthy hands of distant speculators.

Finally, there are two other compelling features about these ideas. First, they cost nothing. And second, the experimentation opened up at the state level will invite all kinds of grassroots engagement and inventions. Instead of spending billions more in federal taxpayer dollars to prop up dubious big financial institutions, why not create a system that’s more stable, safe, lucrative, and democratic-for free?

Michael Shuman wrote this article as part of The New Economy, the Summer 2009 issue of YES! Magazine. Michael is director of research and public policy for the Business Alliance for Local Living Economies (livingeconomies.org.) and author of The Small-Mart Revolution: How Local Businesses Are Beating the Global Competition (Berrett-Koehler, 2007).

Originally posted in Yes! Magazine. Reproduced under Creative Commons licence.

 More than six decades of human rights failures by governments have been exacerbated by the world economic crisis, which brought the problems of poverty and inequality to the fore, according to Amnesty International’s Secretary General.“It’s not just the economy, it’s a human rights crisis: the world is sitting on a social, political and economic time bomb,” said Irene Kahn as she launched Amnesty International’s annual report on the state of the world’s human rights.Billions of people are suffering from insecurity, injustice and indignity around the world. In many cases, the economic crisis made matters worse, with millions more sliding into poverty.

Increased poverty and deprivation have led to denial of economic and social rights – including food shortages and the use of food as a political weapon; forced evictions; abuse of rights of indigenous peoples. Yet human rights problems have been relegated to the backseat as political and business leaders grapple with the economic crisis.

2008 saw massive rises in the price of the most basic of necessities – food – which had the effect of making the poorest people in the world even poorer. People took to the streets across the world and, in many countries, were faced with violent repression.

In Zimbabwe, more than five million people were in need of food aid by the end of 2008, according to the UN. The government has used food as a weapon against its political opponents. Across the country, political opponents, human rights activists and trade union representatives were attacked, abducted, arrested and killed with impunity.

Hundreds of activists protesting against economic decline and social conditions were arrested and detained without charge.

Across Africa, people demonstrated against desperate social and economic situations and sharp rises in living costs. In a taste of what could lie ahead, some demonstrations turned violent; the authorities often repressed protests with excessive force.

Social tensions and economic disparities led to thousands of protests throughout China. In the Americas, social protest at economic conditions increased in Peru; in Chile there were demonstrations throughout 2008 on Indigenous People’s rights and rising living costs.

In the Middle East and North Africa, the economic and social insecurity was highlighted by strikes and protests in several countries, including Egypt. In Tunisia, strikes and protests were put down with force, causing two deaths, many injuries and more than 2,000 prosecutions of alleged organizers, some culminating in long prison sentences.

“The events we’ve seen in 2008, with the world economic crisis at the top, demand a new kind of leadership from world leaders,” said Irene Khan. “They must take real action, centred on human rights, to tackle growing poverty around the world, and they must invest in human rights as purposefully as they invest in economic growth.”  

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Amnesty International Report 2009

Going green doesn’t have to mean using less power or slower economic growth

Author and democracy activist Frances Moore Lappé says we already know how to solve the pressing issues of our time, such as climate change and world hunger.

But she says our own pre-conceived ideas about how things should work – our mental map of the world – is actually preventing us from taking action.

In a speech at Ottawa’s Carleton University as part of the 78th Congress of the Humanities and Social Sciences, Lappé called for a wholesale revamping of the way we view government, the economy and democracy. If we manage to do it, she says, we can save ourselves from our own demise.

Lappé, made famous in the 1970s by her bestselling vegetarian cookbook Diet for a Small Planet, is an activist, author and co-founder with her daughter Anna Lappé of The Small Planet Institute. She says many people today are frightened by the potential for disaster, ecological and otherwise, and fearful that nothing can be done to prevent it. Lappé says we can do something – if we challenge five assumptions about the way the world works.

The first is that going green means “powering down,” or reducing our consumption of energy. Lappé says all we have to do is stop getting energy from fossil fuels and start getting it from renewable sources like the sun.

“Every day the sun supplies us with 15,000 times the amount of energy we’re now using in fossil fuels,” she says. If everyone had a solar panel or windmill on their roof, we wouldn’t be dependent on oil companies – and as individuals we’d feel more in control of our own destiny.

The second idea to dispense with, she says, is that going green means an end to economic growth. What we have to do, she says, is change our idea of what growth is. Right now, she says, the Walton family – owners of Wal-Mart – controls as much wealth as the bottom 40 per cent of the U.S. population. Is it growth if the wealthy families just get wealthier?

There’s plenty of room for growth, she says, if we learn to do things more efficiently. For example, she says various estimates show that between 25 and 50 per cent of all food produced in the United States is wasted. And that every year, Americans throw out some 300 pounds of packaging material.

The third idea she wants to challenge is the notion that humans are by nature greedy, self-centred and materialistic. Under certain conditions, she said, we can be monsters. But there wouldn’t be 6.8 billion of us on the planet today if we didn’t also have positive qualities such as empathy, cooperation and fairness. As a society, she said we should simply try to make sure our rules try to bring out the best, not the worst in us.

The fourth idea she disputes is that we dislike rules. She says humans crave structure, particularly rules that make sense to us as individuals and which foster a sense of inclusion. We will accept the right rules, she says, citing as an example a German law that enables individual citizens to sell power they produce at home, through renewable sources such windmills or solar panels for example, to utilities at a guaranteed price. People there have embraced the idea, she says.

The final concept she wants to challenge is the idea that our problems are so pressing there’s no time for democracy, and only an authoritarian regime can save us. She believes the only hope for the planet is to trust in people and set rules that bring out the best in us.

“The mother of all issues is who makes the decisions,” she says, adding that if decisions are taken by people with the most money, we all suffer.

Lappé says she’s not against a market economy – just the idea that there’s only one way to run the economy.

She also wants to challenge the idea, she says, that change is impossible. Recent history has shown that seemingly insoluble problems have in fact been solved.

“It’s not possible to know what’s possible.”