Money Talks
Posted by Glenn on December 9, 2007 - 11:00am in The Oil Drum: Local
Topic: Economics/Finance
Tags: carbon emissions, money [list all tags]
Another guest post from Hans Noeldner.
Somewhere along the way, we-the-people seem to have reached a consensus that when it comes to allocating natural resources, money should do the talking. In fact many true believers contend money is the only legitimate communicator.
“How much oil should I be able to burn? Every barrel I can afford.”
“How big a house – how many houses – should I be able to buy? Just as many as I can afford.”
“How much CO2 should I be able to emit? Not one damned molecule less than I can afford.”
“And if I want to burn and buy and emit more, then acquiring more money naturally gives me the right to do so.”
If our economy fails to charge us the “true cost” of denying future generations the fossil energy they might need to feed themselves 50 years hence; if our economy suffocates vast swathes of bio-productive land beneath highways and parking lots for our Happy Motoring convenience, if our economy fails to extract “flood money” from us to recompense millions of coastal dwellers for the loss of their ancestral homelands beneath rising oceans; well…perhaps the solution is to internalize those costs somehow.
Tellingly, the specific methods politicians might use to sneak such price-boosting tariffs past hyper-vigilant business interests and an unsupportive consuming public are seldom explained. But in any case it is deemed essential that we remember the distribution of natural resources is not – and cannot be – a “moral” issue.
We do not challenge Billy Fourwheeler to find ways to amuse himself that require no fossil fuel. We do not warn Mr. Manor that monuments to covetousness make us worse rather than better human beings. We do not broach carbon footprints when family members or friends return from their flight to Park City to play on world-class ski slopes.
If the unenlightened masses are to wake up, then prices must serve as alarm clocks. As despite the fact that major gasoline price increases (from less than $2 a few years ago to more than $3 today) have failed to put any appreciable dent in our consumption, again and again we are reassured that, “When gas prices go up, (other) people will conserve.”
It would be an understatement to say that our plutocratic caste is particularly fond of the fiscally-based resource entitlements program. Millionaires and billionaires overwhelmingly prefer a system of governance which represents dollars rather than souls, and quite naturally $10 gas and $4000 airline tickets won’t crimp the style of any self-respecting Washington insider or Fortune 500 CEO (in fact chauffeured motoring and flying might become pleasant again without the rabble clogging highways, airports, and flight paths).
When confronted by the abject failures of the market system to distribute Earth’s finite bounties to the most needy, or to restrain present consumption so some essential resources are left for future generations, the “money talks” faithful often counter with the bizarre contention that burning up Nature’s one-time gifts as fast as possible may be the best way to deal with them – a kind of wild-west “bring it on” bravado. True believers do not trouble themselves with niggling trifles like entropy; they harbor unshakeable faith that a scarcity of resource “x” will inevitably spur The Market to develop an even better substitute in the form of “y”.
If pressed on the central matter of usable energy, the economic cornucopians will usually point to the transitions from wood to coal and thence oil and natural gas as incontrovertible proof that the process can continue ad infinitum. But despite billions spent on research into petroleum alternatives over many decades, we have uncovered no evidence that any practical “new” form of energy will ever approach the abundance and convenience of petroleum.
Oil once offered a rate of energy-return-on-energy-invested exceeding 100-to-1. Now we lavish billions on subsidies for corn ethanol which yields at best 1.7 units of alcohol energy for every unit of invested natural gas, diesel, and coal. Now we rip off whole mountaintops to expose seams of low-quality coal, and claw even more savage scars into Earth’s living skin to extract the dilute tar sands of Alberta, in the process burning about one unit of high quality natural gas to produce two or three units of low-quality crude.
The combination of our economic paradigm with our willful ignorance of finite realities is a curse upon future generations. Treacherous slopes lie beyond the extraction peaks for all of our major energy resources, but we-the-people have not begun to assemble the ropes and belays we will need to descend them securely rather than tumbling into catastrophe. And so long as we remain silent and allow money to do the talking, we never will.
Proposed remedies like cap and trade, taxation, etc. are based upon the idea that the market will optimally distribute resources while simultaneously cut oil consumption or some other fossil fuel resource. It is a model drilled into us by our society and especially by our economics courses and professors. But as you are suggesting, these proposals will also perpetuate and perhaps even extend the advantages that the rich have over the less rich and the poor.
But, really, what is the goal? These remedies are proposed because politicians are afraid to do what they really need to do, simply ban certain activities. Instead of banning certain size homes, for example, we see proposals to charge extra carbon taxes for houses over a certain size. We just try to discourage behavior, but are afraid to come out and just say certain behavior is wrong. We talk about gas taxes to discourage consumption; but wouldn't it more efficient to simply ration that gas? Our demand for gas is so inelastic, no one really knows what it is going to take to make a dent in consumption.
But really. Our situation is much worse. We simply wait for the market to do its "magic". Waiting, waiting, waiting, until the resources run out and the planet burns.
But yeh, money rules and creating scarcity will make the rich feel even more privileged and the poor even less privileged. And that is the way of the world. As in the film network, we are not permitted to mess with the primal forces of nature.
Btw, I saw Network last night, the first time in thirty years. Highly recommended.
A simple question I often consider is who is a better true environmentalist:
A. A poor person who doesn't think about environmentalism in their actions
B. A wealthy person who is a strong environmentalist and tries very hard to be environmentally friendly.
I've done a little research on this and through a few questions about what people eat, where they live, how far they commute to work, where they go on vacations, etc. I have to say that Person A almost always has lower carbon emissions than Person B. And it's not even close.
The other major driver is where people live - people who live in small towns or large cities do a lot better than folks that live in the suburbs or even rural areas.
Glenn -- I strongly agree that most "poor" people have a smaller ecological footprint, whether they know it or not, whether they care or not.
We relatively wealthy ones not only breathe and consume food and water like the poor, but our power plants and cars and the huge infrastructure we require inhales an enormous amount of oxygen and exhales a huge amount of waste.
The infrastucture that we relatively wealthy folks require for our "normal" lives soaks up resources and spews out toxins so that each one of us is a large behemoth roaming the earth with consequences we have not been much aware of until lately.
It would be interesting to show the relative environmental impact of those we consider to be "poor" with the "top" 20%, "top" 5% and then the "top" 1%.
One person living sustainably could be seen as 1 standard unit of measure. A poor person might consume/slough off more or less than this, depending. But then what about the people who are "middle class" or "upper class" or "very rich"?
It is a worthwhile point to ponder.
There's more to environmental protection than carbon emissions, though. Wholesale destruction of habitats, slaughter of various species (sometimes just for sport or boredom, like destruction of the passenger pigeon), overuse of soil - that is also a consequence of poverty).
You are still probably right, but there's more to consider. What I hope for is not a return to the past, but a future with a declining human population, but one living in better situations with more space and resources for the rest of life on this planet.
Our population needs to decline. That's the bottom line.
What a lot of rubbish. Non market solutions to inequality and perceived misuse of resources have been tried many times with little success. Check out all the the socialist failures of the 20th century. Those who think they know better than the market are delusional, especially if they think imposing their ideas on the unwilling will improve the situation.
Just cheap opinion here, with no citations. Cuba seems to be doing quite well, thanks primarily to its isolation from global corporatism, and will probably pass the peak oil test with high marks ... if it can survive climate change impacts. The USSR and its satellite states were never socialist prototypes.
Cuba isn't isolated, far from it. Tourism is one, but they also get a lot of their technology from the West. The only truly isolated country is North Korea. And we can see what socialism does there.
If the USSR was never a socialist prototype, then that begs the question what was it? They certainly thought they were the epitome of socialism.
Richard Wakefield
A socialist or communist state requires the power to reside with the people (ie., democracy, or some similar form), and wealth to be distributed according to need.
The USSR horribly failed the democracy test.
I think that using "socialism" as a catch-all for authoritarianism is intellectually dishonest. Saying North Korea is pure socialism has just as much ground as saying Zimbabwe is pure capitalism. It's not because a dictator claims to be serving the greater good, the will of the nation, democracy, socialism, captilism or whatever that that is also true.
If the USSR was never a socialist prototype, then that begs the question what was it? They certainly thought they were the epitome of socialism.
Personally I do not like the world ‘socialism’ because it is so heavily freighted with propaganda that people cannot think about the underlying phenomena objectively. I prefer the phrase ‘democratic, cooperative economic production’. Clearly the USSR was not an example of such a system. Soviet communism was an economic and political system created by sadistic, autocratic ideologues and imposed by force of terror on a culture with no tradition of democratic institutions. Furthermore, the USSR was fully committed to economic growth and to short term exploitation resources in the pursuit of power and wealth, though admittedly they were much less efficient at this process than we were.
One could have argued that the failure of the democratic Greek city states and the failure of the Roman republic constituted definitive proof that democratic institutions are inconsistent with human nature and should be relegated to the scrap heap of history with greater force of reason than arguing that the failure of the Soviet Union constitutes proof that democratic, cooperative economic production is a practical impossibility. If your intuition tells you than such a form of social organization is inconsistent with human nature I certainly cannot disprove your intuition, but you really need to come up with better supporting reasons for it than the fall of the USSR.
Personally, I find the communism vs. capitalism debate to be somewhat beside the point. We are all heavily dependent on the community in which we live. If Bill Gates along with a mountain of gold bars were transported to an uninhabited world then Bill would be rich no longer. The only true source of wealth is a healthy functioning community. All so called ‘stores of value’ are merely claims against the output of the community. If explicitly recognizing this fact is ‘communism’ the communism is merely common sense.
On the other hand if we are to have any production enterprises above the scale of cottage industries then some method must found of capitalizing such production enterprises. The craft guilds of the middle ages were capitalized industries. The question is whether the current system for investing in production infrastructure, which I call private finance capitalism to distinguish it from capitalism in a more general sense, can function effectively in a world in which production is being limited by the availability of resources. I believe that the clear answer to this question is “no”. The only effective way to deal with resource depletion is to voluntarily limit consumption. In the current economic system limiting consumption would lead to a huge economic depression and massive unemployment. This reality is a fundamental structural defect of private finance capitalism which must be fixed if we have any hope of creating a humane, democratic society in the long term. If it is really true that our only choices are Wall Street or the Politburo, then I fear that the Politburo is our future.
And who gets to be those elitist people who control the lives of everyone else? What right do they have to dictate to everyone else how to live? How do you stop them from becoming corrupt? And is their authority enforced through force? Death camps, slave camps? Anyone who disagrees with the system must be "punished"?
Absolute power corrupts absolutely.
Richard Wakefield
Why do you think those elites would be any different people than the ones we are dealing with in the U.S. today?
You have completely misunderstood the intention of my post. It is you who are insisting on the absolute dichotomy between autocratic control freaks and the supposed absolute freedom of private finance capitalism. My statement about making a choice between Wall Street and the Politburo was intended as irony. I believe other possibilities exist. If they do not then let civilization burn. I would rather return to village style tribalism rather than live under a system of serfdom as either a slave or a master.
I see no reason why a choice to limit consumption cannot be made in a democratic manner. You and I both know that a single person commuting to work in a 3 ton pickup truck is an incredibly bad idea. That reason we do not ban such behavior is not because the hearts of U.S. lawmakers bleed for the potential psychological suffering of people who have to give up their beloved 400hp monsters; It's because banning such sales would hurt American car manufacturers and eliminate jobs in the automobile industry. Such concerns are very real within the context of the economy as it now exists, but there is no reason for this context to be continued forever. In a world of declining fossil fuel supplies banning the production and sales of such vehicles will collectively enrich us, and the people who voluntarily give up such destructive activities should be supported by the community until they can find new jobs. Instead of clinging to an economic system whose raison d'etre is to increase the total volume of economic transactions as rapidly as possible, we need to create an economic system which seeks to carry out only those economic transactions which support a decent quality of life. We need an economic system which emphasizes the creation of stable community wealth and mutual support rather than the competitive accumulation of private wealth. I do not see why we need autocratic elites to impose such a system by force. All we need is the intelligence to understand that we are members of a mutually dependent community and to act in accordance with this understanding.
Roger,
Good posts. I agree with everything you say. The million dollar question is how do we get there from here? And thinking about that brings to mind a point which I think may be relevant.
To what extent are our problems the result of the decoupling of capital from social responsibility? Or perhaps they have never been together but need merging. But I have money in a mutual fund with no knowledge of how that money is being used. This can't be good. If I had it invested in a local business I would be more likely to know whether that business and my money were a good thing or bad thing for the community. Obviously the argument against this is rate of return but it seems this would provide at least some check on greed.
The question of how to get from here to there is key question, but is almost unanswerable at the present time. I see very little chance of a rational turning back from the path we are on in the near term. Only when it becomes clear to a majority of the population that middleclass security is disappearing from the face of the earth will a political space open up for genuine institutional change. Even then the path of change will be difficult and tumultuous. I suspect our future will be decided in the streets (a la Argentina or Bolivia) rather than at the ballot box.
As for socially responsible investing, my view is that in the future the only way to earn money should be by working for it. The phenomenon of money earning money needs to disappear from the face of the earth. Of course we will still need to invest in manufacturing infrastructure, but this investing should be done by the community. The return on that investment will be the goods and services produced. Your salary is the return on your investment of labor. Money can increase in value only if the overall productivity of the economy is increasing. Although in some instances the productivity of a particular community may increase, there is no reason to allow large private accumulations of wealth to result from that increase. And, in general, in a post growth world increasing productivity will not be a rule governing all communities at all times. Financial investment will become a relic of the past although saving will still exist.
Ah, sorry. Now I see. Difficult at times to get such subtleness in a forum.
As is my position.
And that is the Big Unknown. It all depends if governments can have control over the collapse. I don't think it will be possible, but they will try (and fail). Chaos is going to rule, and rationings will be imposed. It will be a whole new era.
Richard Wakefield
It all depends if governments can have control over the collapse. I don't think it will be possible, but they will try (and fail).
It’s not really a question of what governments are going to try to do; It’s a question of what you and I are going to do. Governments will try to preserve the status quo for as long as possible even though doing so will destroy the middle class. When a majority of the population realizes that middle class security is disappearing from the world then the real fun will begin. The transformation that follows will indeed be chaotic, but a new order will come into being only as a result of people rolling up their sleeves and doing the hard work of creating it. The era of being passive consumers is coming to an end. You had better decides what it is that you really believe in and be prepared to go to the streets to promote and defend it.
Richard Wakefield,
Nicaragua has been peachy under capitalism?
As far as what the USSR was,Richard Wakefield, from the beginning it was a beleaguered political state, beleagured mainly at instigation of The US and England, two lovely just so socially conscious states.
It was also, Richard Wakefield, the state that saved your ass from German world domination so that bare bum of yours could be chewed to shreds by Capitalist bankers and an elite-run Greenspan with a prime loan to sell you. And that is just a bit of icing on the cake called America, the beautiful capitalist state. Fauugh!
Take a look at what capitalism has done for you and your country Richard Wakefield. A country that lives on burgers and styles its life after such models as Paris Hilton, has 1 in 31 citizens in the slammer, doesn't keep treaties, treats other nations and their people like disposable ass wipe. Cuba Nicaragua Vietnam Irag Afghanistan and even little weensey Granada a withering trail of capitalist bloodletting. Don't talk to me about the mote in a failed Socialisms eye, tell me about how well your country and the world fare with that beam capitalism in yours.
I would rather have the failings, and ultimate demise, of capitalism than to have lived under the thumb of dictatorial thugs who out right killed millions in the name of the state.
Richard Wakefield
So you are emigrating to Russia Richard Wakefield?
Why would I do that? Seems to me those who should move are the ones who live in a system of society that they absolutely hate.
Richard Wakefield
Instead the states that kill more clandestinely are the choice?
It's not much of a good choice either way, really.
You forgot to mention how well the capitalist system in the wonderful US of A provides THE BEST HEALTH CARE SYSTEM IN THE WORLD to ALL of its citizens. "US Citizens without Health Insurance Climbed to 46 Million in 2005"
And it was that great and wonderful capitalist system that has created the great advances in healthcare in the world. It's so easy to attack a system you don't like, but at the same time ignore the great things it has done for society. How many people in the world have had their lives saved because of our healthcare knowledge and equipment?
Richard Wakefield
Are you sure that the advances you praise were brought about by the system we have now which often works to limit access to knowledge; which patents and licenses protocols? The people, not a system, who brought about those advances worked to promote the development and expansion of public health services. Our current system of for profit medicine has been working to reduce the available services.
Well, we can't turn back the clock and see can we. One has to look at the countries around the world and ask: "which ones have the best medical system, and who invented it?" Was it the Chinese? No. Was it the Russians during the USSR? No. So who? Gee, seems it was the free capitalist systems that have had the greatest advances in medicine (and science). Just because your country does not dish out that medical advancement equaly does not mean the system to invent it is wrong. We have "universal" health care here in Canada, "free" to all. Except the cost to governments swamps everything else. In Ontario the cost of our free healthcare system is 45% of all government expences put together and growing at 11% per year.
Nothing is free.
Richard Wakefield
Sorry Richard, this system is seriously broken in so many ways. I will not deny that many have benefited from science and technology that was developed under capitalistic systems.
However what we have now is a perversion. Let me be very clear, I believe that framing this debate in terms of Capitalism vs Socialism or even worse Communism serves no useful purpose whatsoever. Non of these systems are capable of providing the basis for solving any of our global social (no pun intended)crisis. We need a major paradigm shift. Not that I'm expecting to see one happen anytime soon, at least not in the USA. What exactly is so great about all that technology if 40 million plus of our own citizens not only do not have access to the best of it but don't even have access to the most primitive and basic health care. You are right, I do not like the system and I don't understand the arguments in favor of it.
Richard,
Both the soviet system and our US system suck. The Soviet Empire is gone but coming back in another form, and the other, the US Empire, is in decline, politically, economically, democratically, and almost by any other way you can measure. The dollar has even recently been devalued 5% here against the local currency, and I fear the fall is only beginning.
I live in a quasi socialist system. We have good cheap health care. We have good schools and inexpensive universities. Cheap clean electricity. Price controls on some items. Wage controls (enforced minimums mostly for every profession). Unions. I look at it as capitalism with a human face. There are some things I don't like, but my family and I are much happier here than we were in the US. This last stupid war was the straw that broke the camel's back for us. I want no more of my money going to the military industrial complex, feeding the US addiction to war.
If you saw Sicko, you would have noticed that that Costa Rican health care quality came in rated 35th, the US 36th, in the world. (You are number one in health care cost though.) We have doctors here that have been trained in Cuba as do Nicaragua and other Central American republics. The first country in the hemisphere to provide assistance after any natural disaster or major hurricane (they offered it to us after Katrina) is Cuba. In much of the Third World, they are the heroes, and they do it largely for free, whereas our disaster capitalism, like our aid to Nica after Hurricane Mitch, comes with major strings attached, mostly leading back to large multi-nationals and Wall Street.
Peace,
What does Cuba import ? Most of its Calories
The grain imports never stopped.
http://www.fas.usda.gov/grain/highlights/2005/07-05/CubaRiceITR05.pdf
Right on! How dare this pip squeak slander our god.
Agreed. And the reason is simple. The very thing that makes the market system not work, in this regard, -- fear, greed and power -- is more expressed in socialist systems where the very few control the vast majority of masses by fear. They lavish themselves on the very things that is denied to the masses. Besides, the great socialist governments have had the worst environmental record.
The problem with the scenario in this article is that we live in a free society. As long as we have a free society you can't just enact by decree laws that curb that freedom. Those who do get voted out. Our system is self reenforcing towards the "gluttonous" society we have become.
The only way to change the system is to change the belief system of the masses. Just like we now have a different belief system for smoking, for example, we need a new belief system on the use of our planet for our own survival. Not laws, but a mind set change on mass. That can only happen with education of our children.
If we really wanted to change that mindset, we should have done it after WWII. Then we would have had the ability to manager our natural resources more. But now it's too late. There are just far too many people who will not wish to give up any of their lifestyle unless forced to by circumstances.
Maybe in the Post Carbon Era, once humanity has had a huge awakening due to it's collapse, will there be a chance that such mind sets emerge. But I'm not counting on that either. I see a major stumbling block to this -- religion, which you can almost guarantee will become more radical once things start to fall apart.
Richard Wakefield
Gotta run, but -- this is not an arguement about capitalism vs communism vs socialism.
At root, it is a discussion about economics rooted in superstition and the old divine right of kings versus economics rooted in an understanding of our place withijn our larger environment.
Well, my family calls -- so I must run!
That's my place today!
I beg to differ. Economic policies of any kind, including how the economy interacts with the environment and the Earth's resources, is completely political, and determined from political policies (our laws). You can't separate the two.
The only way you can make the article's system work is to have a completely new political paradigm. Nothing that has existed before. A form of capitalism, democracy, socialism and control all wrapped up in a new system that is stable. And that's the key. It has to be politically stable. And the only way that can happen is if the masses have a fundamental shift in worldview. This would mean rejecting a lot of sacred cows, in particular all religions, but also the emotions that run the market place. Fear and greed. It would also have to eliminate the quest for power of political office. Political office should be a “someone has to do it” view, not one that must be attained at all cost.
Since these are all so well established in the mindset of the masses, the only way I can see it changing is if civilization gets one hellova kick in the ass from this planet. But since that has happened before, and we never learned from history, I'm not holding my breath we will ever succeed. Humanity will always go from crisis to crisis as it always has.
Richard Wakefield
Good point. I wouldn't go to extremes and call it "completely" political.
As with most good lies, there are some sprinklings of truth within the theories of economics.
We will always have "money" of some sort as a means of assigning "value" to the goods, services and people around us. The question is, what value?
It is there that our political systems have failed us. We end up valuing the wrong things. We end up not "accounting" for the damage we do to ourselves and our surroundings.
The main thing that is free in US-style "free markets" is the cost of externalities to those that generate them. Until that changes, the system is utterly indefensible from a moral, political, or even economic perspective.
And yes, communism was just as bad about externalities, per my post above. Instead of arguing about how much better it is to eat arsenic than cyanide, how about finding a more life-sustaining dish?
Read Odland's dissertation and CV:
http://www.ldeo.columbia.edu/~odland/
We need nonmarket intervention if there is to be any hope.
I agree with the post of practical.
If you remember that when the USSR collapsed economically, Gorbachev was at his seaside villa, enjoying his privileged position. Instead of gaining the power to consume more than average by economic success, he had gained it from the barrel of a gun.
What Glenn is advocating is using force on people to allocate resources, instead of using a system of voluntarily trading value for value; slavery instead of freedom.
Underlying his thesis is not an assumed right to life, but a nonexistent right to be taken care of. The right to life does not guarantee successful in living that life nor does it mean that you have a right to force others to see to it that you get your perceived equal share of what others have discovered or produced.
If you read the Discovery of Freedom by Rose Wilder Lane (the real life daughter is Little House on the Prairie) you will see a history of the world where periods of freedom produced the most human advance and the most natural distribution of wealth (bell curved) while periods of slavery produced considerable human suffering and a skewed distribution of wealth in favor of those in power (and poverty for the majority).
I suspect that as the terrible future arrives we will hear more and more calls like Glenn's for government to further intervene in our lives with force. Should these calls be headed the level of human suffering will only increase, and the dieoff will be even larger. For example, already we have been impoverished to some degree by government involvement in the energy markets (ethanol subsidies) which has made it marginally more difficult for individuals to afford their own solution.
The "freedom" meme has so completely supplanted critical thinking that discussion about any issue that requires restraint on the part of the people is shut-off.
This bumper-sticker mentality that screams, "We need freedom over planetary health, over our health, over every other creature's health," will inevitably cause the enslavement of the population