The Coming Shortage Of All The World's Most Important Industrial Metals

To read André Diederen's deeply scary presentation, 'Metal minerals scarcity and the Elements of Hope' (presented at the ‘Peak’ Summit, Alcatraz, Italy, June 27, 2009 and republished by Business Insider), click on the title of this post.

In essence: all the major metals on which western economies rely will peak within the next few decades. And then... To quote verbatim the conclusion:

1. Less affordable mass electronic products
2. Forget large-scale conversion towards alternative energy sources
3. Forget large-scale electrification of land-based transport
4. Chemical compounds will become more expensive
5. Construction and machining will become more expensive
6. Metals scarcity will aggravate energy scarcity

I think 2, 3 and 6 are quite enough. But there will be no Copenhagen for resource depletion until it is far too late, because all the key resources are owned by corporations or national governments. The USA and EU are especially exposed, and especially exposed to China - an almost equally scary idea.

As for Diederen's proposed solution:

1. Use less or “managed austerity”
2. Longer product lifetime
3. Recycling and reuse of materials
4. Substitution of materials
5. Develop adapted new products
6. Stockpiles

Hard to see how any of this can be achieved under the current economic regime:

1. Use less or 'managed austerity' - In a production/consumption-driven capitalist economy?
2. Longer product lifetime - As above.
3. Recycling and reuse of materials - Possibly, but the maths of exponential growth means this will only put of the peak by a few years. Has no one learned from the Limits to Growth?
4. Substitution of materials - With what? How often can metallic materials be replaced with non-metallic materials? Sometimes...
5. Develop adapted new products - OK if these can be made profitable - and do not themselves involve any of the key materials. Hard to imagine.
6. Stockpiles - Given the above, what will there be left to stockpile?

Finally, the effect of materials shortages and the domination all this hands to undemocratic governments and global corporations will be to undermine the possibility this very solution ever being carried out.

Very few 'elements of hope', I think.

http://www.businessinsider.com/energy-and-mineral-production-on-a-permanent-downward-spiral-2009-12#economies-are-growing-exponentially-which-is-the-root-cause-of-resource-strain-1

Undertanding stocks and flows: The bathtub metaphor

I’m currently studying for a master's degree in Business Strategy and the Environment at Birkbeck College in London University, and have been very struck by how basic concepts of environmental science are relatively poorly understood – even by our lecturers. A god example is the question of ‘stocks and flows’, which is fundamental to understanding carbon emissions. Nigel Lawson also illustrated his ignorance of this relationship in his recent sceptical tract, so here is a useful metaphor. I did not invent it (in fact it’s a basic model for all sorts of ‘stock and flow’ processes), but here goes.

Imagine that you are lying in the bath. You are up to your nose in water and more is still pouring in through the taps. But don’t worry – your nose is level with the overflow pipe, and as much water is flowing out again as the taps are letting in. But only just – the overflow can handle what is coming in right now but no more. So you are, for the moment, perfectly safe.

But what if the taps are opened just a little more? Leaving aside the very little room for manoeuvre further ‘adaptation’ of your bathtub ‘environment’ allows you, the fact is, an increase in inflow will not be met by an increase in outflow. No matter how small the increase is, you are now in great danger, to the point where you must eventually drown.

Notice that this result does not depend on how much extra water flows in – even the smallest increment will get you in the end. It does not matter how much water was in the bath already or how large or small the maximum inflow and outflow are. As soon as the former starts to exceed the latter, by no matter how little, you will drown.

Likewise for humanity’s collective carbon emissions. Regardless of how much more carbon is emitted from other sources, if the environment is adapted to reabsorb only pre-industrial levels of emissions, then adding more will quickly (in nature’s geological timescale) start to swamp the system. The sizes of both nature's emissions and our own are irrelevant: even if the rest of nature emitted a hundred times as much carbon as humanity as a whole, the natural environment would still be drowning in carbon as soon as we started to increase the flow beyond what nature's carbon 'overflow pipe' is able to remove again.

The same would happen with increased natural eruptions of carbon from natural sources, of course, and we would still have to deal with the consequences. In fact there is good evidence that massive natural changes in carbon levels have profoundly affected the survival of many species. But most such natural intrusions into the natural carbon cycle are erratic and average out over time to quite small net changes.

Industry in by no means such a slight or incidental factor. Indeed, everything we know about our actions to date point to industry being the single most important factor in the emergence of quality complete new era – what Paul Crutzen has called the Anthropocene.

This era will certainly prove to be the most fatal in a quarter of a billion years for most species on this planet. And right at the centre of its effects will be the ‘bathtub’ effect of stocks and flows.

Stop Climate Change March, London, 5 December 2009

I went on the Stop Climate Change March last Saturday. Depending on who you believe, so did somewhere between 20,000 and 60,000 other people.

Some interesting events straightaway. As we stand about in from Grosvenor Square, waiting for the off, I reminisce wistfully about the good old days of anti-Vietnam protests. Hoping he will share my nostalgia, I ask a middle-aged policeman whether we might not be allowed to sack the American Embassy. To my pleasant surprise, I am not arrested or (as far as I am aware) photographed. He replies simply, ‘Is it worth it?’ I am tempted to explain in some detail exactly what part the government and people of the United States currently play in our climate problems, but life is too short and the demonstration has started to roll down towards Piccadilly.

Almost immediately, we pass the Canadian High Commission and huge choruses of boos erupt – a mark of our enthusiasm for the Alberta tar sand projects. Yes, as George Monbiot noted the other day in The Guardian, the Canadians are finally the bad guys. Unimaginable in real life, of course, but then the Canadians no longer inhabit real life. Instead, their government has been hijacked by oil interests, while the great majority of real Canadians reject tar sands development as indignantly as they would slaughtering kittens. (I would say 'baby seals', but that would be a bit ironic with the Canadians.)

We pass by some of the most salubrious of London’s many salubrious properties, not to mention showrooms full of the fanciest of cars. I wonder what the average carbon footprint is around here. A bit more than the average American or Canadian, I suspect, and wonder exactly why popular protests do not focus on individuals and classes with environmentally obscene lifestyles as well as our cousins across the sea.

On down Piccadilly, skirting Trafalgar Square, and into Whitehall. As we pass Downing Street, I ask a policeman to ask Gordon Brown, our beloved Prime Minster, to come out, as his employers are here and want a word with him. The policeman is polite and at least a little amused, but feels unable to take my request forward. Apparently a delegation of representatives of the 100 or so organisations participating in the march got into No.10 to see Gordon, and no doubt reassuring platitudes were exchanged by all sides.

Which is a pity. Normally I have little confidence in our political class – not least because they still seem to be under the impression that climate change can be dealt with by the usual political wrangling. Nature, alas, does not negotiate, is unbeguiled by even the slickest of slogans and remains unimpressed by style and voter preferences. Yet I have the impression that climate change is just the sort of issue our beleaguered premier might be able to do something with, what with his apparently quite sincere (if recently wholly misplaced) moral enthusiasms.

Or maybe I should not be so easily fooled: for all his recent rhetoric, pretending to be a leader when you know full well no one is following you looks forthright and upstanding but risks little. It’s convenient for an unpopular politician facing the polls to be able to occupy the moral high ground (scarcely a position I expect the Tories to be able to occupy any time soon). I just hope he takes the problem seriously enough that millions will not have to move to a more literal high ground while he and his friends play games with the future of billions.

Prompted by a policeman remarking that if he weren’t on duty he’d join the march himself, I ask a couple of police officers whether they would join in if they weren’t on duty. Both reply that they’d be at home, looking after their children. I haven’t the presence of mind to suggest that that’s exactly what the march is all about, and I would like to know how they would have replied.

Do marches work? No. Or at least, no one could believe that they have much impact on their own, given how little was accomplished by at least twenty times as many people protesting about the war in Iraq. Will Blair ever be put on trial? No, of course not. But if he is, how many of the current crop would be up there with him? And what does that tell us about the likelihood that they will do anything substantial about climate change?

At 3 pm exactly we have the Great Blue Wave. Soon we are in Parliament Square. And straight past Parliament itself! Hang on, what’s the point of marching from one end of London to the other and then doing nothing? No great visible, audible protest? Why on earth not? Is it perhaps that the organisers couldn't get permission? Yes, that’s right, we need permission to express our opinion to our lords and masters about the way they are neglecting the planet. Which is, I suppose, as conclusive proof as you could want that they are indeed our lords and masters. And we go along with it, of course. Because, no doubt, we are British and middle class and jolly polite.

What do we want?
Modest and reasonable improvement!
When do we want it?
In due course!

Oh well. At least it’s quite interesting, having a ring side seat at the end of the world. I wonder what the average Roman senator felt like in about 450 AD?

Staring down the pipeline

A telltale sign of our various governments’ inability to grasp what the environmental problem actually is is the enthusiasm with which they embrace the possibility of a business-led solution. That it is specifically business-led view of the world is indicated by the specifics. For example, it is perfectly clear that a huge campaign of insulation would be a powerful, low-tech method of substantially reducing our collective carbon footprint at minimal cost and with a huge impact on key economic problem such as issues as employment.

But although this is an economic solution, it isn’t a business solution, so it won’t do. Well, not for central government anyway. Local government (such as Kirklees) is busy insulating, distributing energy-efficient light bulbs, updating boilers and otherwise making millions of one-off improvements in the countries’ carbon consumption. But that’s the problem: from business’s point of view, one-off is only one step better than ‘no step’. What business needs is a continuing stream of buyers who will need to come back over and over again.

But pandering to a growth-obsessed economy – which is to say, a capitalist economy – is precisely how we got into this mess in the first place: by creating an economic system that not only busily generated an endless pipeline of new demand (through marketing, built-in obsolescence, consumerism, and so on) but also is unable to survive if that pipeline is ever turned off. The current finance-driven crisis is only a taste of what would happen if demand for industrial products as a whole collapsed, or even stood still. That really would be a global crisis, and no amount of Asian savings would get us out of it, not least because the manufacturing-based Asian economies would be as badly affected as everyone else.

So the business necessity for an endless pipeline explains why it is that central governments (who, unlike local government, have both the power and the obligation to drive the capitalist economy as a whole) all but ignores one-off, ‘passive’ measures such as insulation. The scale of the effort that would need to be mounted is vast, but being a single shot, is not what business needs. So business programmes and journals, having finally got over their initial queasiness about green ventures, are looking at alternative energy, nuclear power, and so on – because they mean continuing streams of high-value sales that can be safely predicted to go on mounting and mounting for decades to come!

How much more ironic could it get? The solution to an environmental problem caused by uncontrolled growth is to give the people who got us here a whole new area into which to grow! Clever us. Likewise for the obsession with toys like electric cars: what purpose do they serve from an environmental point of view, given that the electricity they will run on will reduce the electricity available for genuinely social purposes such as heat and light. It isn’t very likely at the moment that we will be able to safely generate enough clean energy for those purposes in time to deflect our environmental problems, but we are talking about electric cars anyway. The odd allusion aside, we are not talking about public transport, reducing travelling for work and the many opportunities they would offer to clean up our planet ant, but rather methods for keeping an inherently unsustainable economic system in its present image. And why? Because that is what business needs. And what society needs? What the environmental needs? Who cares.

Of course, we need alternative energy and many other things for which the only solution is mass production by industrial methods. But what we don’t need is another turn of the very wheel that got us where we are today. There will be no solution to our environmental problems until we take a good clear look at the economic system we are relying on to deliver it.

The Limits to Growth

Just about the most convincing – and scary - book I ever read about the environment was The Limits to Growth. I would guess that everyone has heard of this book but my impression is that relatively few people have ever read it, or the two follow-up volumes. I read it when it first came out – almost four decades ago – and then again a few months back.

The book was written by a group of MIT researchers - Donella and Dennis Meadows, Jorgen Randers and William Behrens – and published in 1972 by the Club of Rome. The timing is interesting, as the first edition of The Limits to Growth is roughly contemporary with a number of other foundation texts in the overall environmental movement. 1971 saw the publication of Paul Ehrlich’s Population Bomb, which gave the growing concern with population growth a kick start. Then in 1972 Barbara Ward and the well-known anthropologists René Dubos published Only One Earth – a sort of semi-official UN report that attracted a lot of attention. And then in 1974, M. King Hubbard gave what was perhaps his most important summary of the position on oil and energy production, namely his testimony to Congress on the peaking of US oil production.

The reason I found The Limits to Growth so compelling – even more than Only One Earth or Silent Spring - was the simplicity and centrality of the question it posed and the directness of the method its authors used to answer it. Instead of endless facts and figures and yet another multi-faceted discussion of our environmental predicament, they simply asked what would happen if humanity at large continued with a small number of key trends:

• World population.
• Industrialization.
• Pollution.
• Food production.
• Resource depletion.

Their method was equally straightforward – so much so that, had I felt very doubtful about its validity when I first heard about it. They started with a very generalised model of these factors - the ‘World3’ model developed by Professor Jay Forrester (also from MIT). This is described in Forrester’s World Dynamics (published the previous year), which used a ‘system dynamics’ approach. This was really a very simple model - basically a suite of functional interactions (circular, interlocking, sometimes time-delayed relationships, etc.) between what the modellers regarded as the key social and natural phenomena. World3 was based on large, long-term factors, which it defined in self-consciously simple and gross terms, without much detail. It made little attempt to explain why these interactions were as they were.

When tracking what happened when the trends they were interested in unfolded, the Limits to Growth team were not looking for trouble. They made strongly optimistic assumptions when in doubt, and took into account most of the qualifications critics usually offer about predictions of environmental doom and gloom – resource substitution, the power of innovation, and so on. On the other hand, they did assume that all these factors tend towards compound growth - which is to say, that they grow by a constant percentage, and constantly accelerate, not by a constant amount, which would lead only to regular increments of the same size. They also interact with one another, which has the effect of overshoots and disruptions in one undermining the others.

A typical outcome of the model went like this:

1. Population cannot grow without food.
2. Food production can only be increased by growth of capital.
3. Creating more capital requires extracting and processing more resources.
4. Discarded waste from resource extraction, refining and usage become pollution.
5. Pollution interferes with the growth of both population and food.
6. So the system tends towards eventual collapse of both population and food production.

It’s crucial to understand that this collapse happens not only because a specific input is damaged or reduced (which might be ameliorated by resource substitution, innovation, etc.) but because the system undermines itself. That is, the initial success of the system destroys the conditions for its continuing success. This is, I think, why it makes relatively little difference to assume that we will eventually find far more resources than are currently expected, or that we can continue to have cheap energy.

The authors made multiple runs of the model based on different assumptions. Although, like most futurologists, they avoided claiming to be making strict predictions, the consistency of the outcomes is quite frightening enough.

The book analyses quite a few scenarios (though only a fraction of those actually run, apparently). The starting point was ‘business as usual’, which led to the following outcomes:

1. Massive industrial growth depletes resources.
2. Resource prices then rise and stocks are depleted.
3. So more capital used for obtaining resources, leaving less for growth.
4. Eventually investment cannot keep up with depreciation.
5. With that, the industrial base collapses, taking with it the service and agricultural systems, the tax base for government, and so on.
6. However, population keeps rising, so the death rate is driven upward by lack of food and health services.

Radical collapse comes ‘well before the year 2100’.

As I say, the authors presented other scenarios in which:

• Nuclear power is cheap and safe.
• We manage to discover vastly increased resources.
• Innovation and technology allow much reduced pollution.
• Agricultural yields are greatly improved.

And so on. By and large, these optimistic assumptions mean that the eventual collapse is delayed by a decade or two – never more.

Here’s another typical example: the Green Revolution. This has indisputably increased food production, but at a price. The specialised seeds require a great deal of fertiliser and water. The former accelerates fossil fuel use and depletion, while the latter extracts more water than natural systems can sustain. In addition, the need for extensive capital also leads to peasant farmers being evicted from the land by their landlords, and hundreds of thousands of landless peasants end up in Mumbai, Kolkata, Sao Paulo or Mexico City, where they have no resources and no relevant skills from what they might earn a living. This increases pressure on urban systems and causes fertile land to be built over by slums.

The increase in capital requirements – tractors, petrol, fertiliser, shipping etc. – needed to operate the Green Revolution hugely depletes resources, including oil and natural gas. What is worse, the intensive treatment of the soil under a monoculture régime means that it becomes less able to support any other sort of agriculture, so the system becomes even more locked into an inherently unsustainable ‘solution’, and by this remarkable ‘advance’ we have managed to convert what one would have thought was an inherently renewable resource – fertile soil – into a non-renewable resource. Aren’t we clever? Meanwhile, the planet’s carbon footprint is made that little bit bigger, global warming is given that small extra shove upwards, and the glaciers that feed the irrigation systems that feed the crops melt that little bit faster. More jam today, but not only less jam tomorrow but also a lot less ability to manage having less jam tomorrow.

More generally, the consistent result reported by The Limits to Growth was overshoot and collapse. If the present trends in world population, industrialization, pollution, food production, and resource depletion continue, the limits to growth will be reached by 2070. The alternative scenarios only delay collapse: all end by 2100. The most probable direct outcome will be sudden, uncontrollable falls in population and industry – in other words, the ‘hundreds of millions’ of deaths predicted by the Stern Report. Only The Limits to Growth predicted it all three and a half decades earlier.

The authors conclusions about the ‘business as usual’ scenario are stark:

The unspoken assumption behind all of the model runs we have presented in this chapter is that population and capital growth should be allowed to continue until they reach some ‘natural’ limit. This assumption also appears to be a basic part of the human value system currently operational in the real world. Given that first assumption, that population and capital growth should not be deliberately limited but should be left to ‘seek their own levels’, we have not been able to find a set of policies that avoids the collapse mode of behavior.

As so often, the reactions to the original publication illuminating not only for the welcome offered to this absolutely vital book but also by the disdain expressed by those who could see no further than the status quo. It was described as ‘the most fascinating and the most disturbing book’, and it was said that ‘if this doesn't blow everybody's mind who can read without moving his lips, then the earth is kaput’. But it was also described as ‘a piece of irresponsible nonsense’ and ‘an empty and misleading work’.

The authors reviewed their findings in updates published in 1992 and 2004. These books are worth reading in their own right, as they both go far beyond updating the original methods and finding. Their original conclusions, they find, were sound. They needed some qualifications, but by comparison with the critics who greeted the original publication with such scorn and the deniers by whom they are still surrounded, they seem to have been pretty much spot-on.

Nor is this merely their own opinion. In 2008 Graham Turner published a comprehensive re-evaluation of the data, and concluded that:

The analysis shows that 30 years of historical data compares favorably with key features of a business-as-usual scenario…, which results in the collapse of the global system midway through the 21^st century.

In other words, we have done nothing significant to deflect our fate.

So are there no scenarios that lead to a happy ending? Maybe - it depends on what makes you happy. If you want interminable consumerism, then no, there aren’t. If you ever wanted a ringside seat at the end of the world, consumerism represents the front row. But if you are willing to settle for mere sufficiency, to imagine that there might actually be an ‘enough’, then yes, a somewhat reduced standard of living – something like the 1940s or 1950s, it is said – is available for all. Not bad, given the alternative, and hardly desperate poverty by any standard. It’s not as though we are any happier than we were then, though it might take a bit of getting used to. Nor need it look quite like that slightly dismal era – we start from here, not there, and a great deal can be done with a 1950s carbon footprint, give the science and technology of the 21^st century.

But there is a lot to be done – population control, the end of ‘the American Way of Life’ (which surely represents the biggest threat to the planet since the last ice age), serious support for developing countries, and so on. But it’s hardly worth thinking about – we never have done anything about these things, we show no signs of doing anything about it, and we are led by politicians, media and business people with as much grasp of our situation and as much interest in dealing with it as a bucketful of molluscs.

But not to worry – it will soon be too late to deflect the worst effects of our own actions, so we won’t have to worry about it any more. Just die in our millions. If you have ever wondered what the fall of the Roman Empire looked like, stay tuned.

Read this book.

References

Ehrlich, P. (1971). The Population Bomb. Cutchogue, N.Y.: Buccaneer Books.

Forrester, J.W. (1971) World Dynamics. Cambridge, Mass.: Wright-Allen Press.

Hubbert, M.K. (1974). Testimony to Hearing on the National Energy Conservation Policy Act of 1974, hearings before the Subcommittee on the Environment of the committee on Interior and Insular Affairs House of Representatives. June 6, 1974. Published as The Nature Of Growth by Technocracy.org.

Meadows, D.H., Meadows, D.L., Randers, J. and Behrens III, W.W. (1972). The Limits to Growth. A Report for the Club of Rome’s Project on the Predicament of Mankind. New York: Universe Books.

Meadows, D.H., Meadows, D.L., Randers, and J. (1992). Beyond the Limits: Confronting Global Collapse, Envisioning a Sustainable Future. Earthscan.

Meadows, D.H., Randers, J., and Meadows, D.L. (2004). The Limits to Growth: The 30-year Update. Earthscan.

Turner, G. (2008). A comparison of the Limits of Growth with thirty years of reality. CSIRO Working Paper Series 2008-2009.

Ward, B., and Dubos, R. (1972). Only One Earth. Harmondsworth: Penguin Books.

Negotiating - a numbers game the poor must lose

John Vidal had a very good piece on the pre-Copenhagen talks in the Guardian last Friday. Reading this article reminded me of something I have often read elsewhere - that one of the real reasons why developing countries will always lose out at the climate change talks is that they haven't enough negotiators or expertise - a stupidly simple, practical reason that western governments take ruthless advantage of.

Vidal reports that the whole of Africa - 55 countries - has only 145 negotiators - to cover every area, to be present at all the meetings. 'At least 50 countries have only one or two, but the WWF… has a team of 50'. What is more, 'the G77 has no offices, no permanent staff and no budget to meet in advance of conferences'. Even the language - invariably English - is against many of them. Meanwhile, the UK, USA and Denmark have 142 participants between them, plus innumerable lawyers, interpreters and consultants on tap, all armed with huge budgets, etc. The conferences are organised and run and the agenda and processes are comprehensively dominated by white diplomats from industrial countries. It's quite impossible for developing countries, and the real decisions are made when they are not present, in closed meetings.

But this is exactly the model on which the WTO operates - effective exclusion by lack of representation and expertise, the manipulation of meetings and a constant and quite deliberate war of attrition and divide and conquer against the poor and weak.

And why are they poor and weak in the first place? Because of the last couple of centuries of colonial and post-colonial exploitation.

So well done all you clever western negotiators! Who knows how many people will die because you exercised your talent for bullying and deceit so expertly in the name of the glorious western way of life! And how soon do you plan to start blaming the poor for their plight, or congratulating yourselves on your wonderful humanity? But I forgot -you started on that one the moment you set foot in their countries and heroically took up the White Man's Burden.

Words fail me. (Well, obviously not, Richard...)

Economic myth no.1: Who are the wealth creators?

One of the necessary consequences of governments failing to measure up to the current economic crisis – and as yet there is no evidence whatsoever that they plan to do anything the change or manage the system that put us where we are today – is that the old self-congratulatory myths start to resurface. Perhaps the most important of these myths is the fantasy that it is bankers and investors who are the true wealth creators.

Why does this myth matter? Because it is this myth ensures that the rich are also the powerful, through their unchallenged control the commanding heights of the economy. Because it is the myth that they are doing something unique and almost magical that we must not importune them for taxes or justifications of their prestidigitations, lest these magicians, these golden geese, fly away, casting us into helpless penury. It is also this myth that allows them to escape the sort of scrutiny to which every other strategic area of society is rightly subject, such as the social services, manufacturing, the education and health systems, the military and so on. It is this myth that allowed them to reward themselves with a disproportionate share of society’s wealth. It is even more important than the myth of the market because, above all else, the myth of the wealth creators allows those it mythologises to disempower everyone else.

But in reality is quite preposterous to identify wealth creation with a single sector of society. It is a simple tautology that wealth is created every time anyone takes a resource and turns it into something it solves a human problem (from hunger to vanity), that makes the real world materially more efficient or effective, or otherwise makes the world a better place.

A small part of this wealth is economic. But even if one focuses exclusively on goods and services that can be bought and sold, even there it would be preposterous to claim that wealth is created at the top. Every bolt screwed onto a machine, every machine operated to make a useful product, every product used to perform a valuable service, every service performed – they all add value. Nor is simply a question of the direct production of wealth. Every manager with a discretionary budget has the opportunity to create more wealth or less, depending on how they chose to use it.

One feature of modern economies that especially militates against the idea that wealth is created at the top is the progressive professionalization of roles in the economy. An employee is someone you pay so that you can tell them what to do; but a professional is someone you pay so that they will tell you what to do. This is clear enough with doctors, lawyers and so on, but it is equally true of professional staff. And their role in the organisation is specifically to know how to create wealth in their area better than their superiors. So the more the modern economic organisation is staffed by professionals, the less claim those a the top have to be exclusively the wealth creators. On the contrary, they are increasingly only coordinators of those who create the wealth.

Hence the difficulty of maintaining a hierarchical structure in strongly professional organisations – because it is increasingly difficult to maintain the myth that those a the top know best. This leaves senior executives in the contradictory position of wielding the power to hire and fire, to invest and disinvest and generally control the organisation, yet lacking any realistic claim to unique insight, awareness or pre-eminent skill. Rather like the absolute monarchs who created to modern state in the seventeenth and eighteenth centuries, the business hierarchs of modern world have created a massively powerful system – the modern capitalist business – that has less and less time or place for those who were its progenitors.

So what is it that distinguishes the bankers and the financial sector in general? In these terms, not very much. To the extent that they are merely managing budgets, nothing at all. The leverage and reach they exercise may seem vast, but to claim that this means that they create more wealth than others makes no more sense than saying that only the top person in a human pyramid gives it height. It’s rather like a previous era when it was salespeople who were idolised rather than the analysts, the superstar executives, the ‘quants’ and other financial monsters: they too were disproportionately rewarded for selling things other people actually made. Of course, an exceptional individual can make an exceptional difference, but that is true of wealth creation at every level. And it is not as though the evidence actually support the claim that bankers, let alone the financial sector as a whole, actually do create disproportionate wealth.

So what have they been doing for the last couple of decades that explains their fabulous rewards? Haven’t our economies grown exceptionally quickly? Isn’t that to the credit of the financial sector? In the illusory terms of global figures and monetary values, yes to both. But did anyone but themselves enjoy the wealth? No. When in 2008 the banks finally realised how unsure their financial footing was and started to pull the rug from under one another, it turned out that most of the monetary increase in wealth was an illusion. The bubbles had inflated the money but not increased the material wealth society enjoyed. In fact most people are no better off now than before the financial sector was let off the leash. The geese, it turned out, produced eggs of gilded lead, not true gold.

But even that is not the bottom of the barrel. Even if they had been creating exceptional wealth, those at the top of the tree are also the ones who decided on whose behalf wealth is created. This is not after all a completely neutral activity. You can decide how to divide up the surplus. The choice is quite simple: they can allocate the wealth to the shareholders, to the workers, to society (through taxation and true corporate social responsibility) – or to themselves. As ever, those at the top favoured their shareholders. But not as much, it turned out, as they favoured themselves. Despite the longer hours, the heightened insecurity and lower happiness, the average American is no better off than in the 1970s, and much the same is probably true in Britain too. There were no more goods and services, especially not for ordinary people – which is to say, for the vast majority of the real economic wealth creators. So even if they had created great wealth, don’t hold your breath waiting for your share. What you get is a insecurity and relentless pressure.

Finally, the bankers turned out to have produced something that is now busily reducing the total wealth in society. By dislocating the structure of ownership and credit in the economy as a whole, a great deal of its material wealth, its homes and security and comforts, has been debased from wealth to debt, as people of honest working people who thought they had the money to pay for it suddenly don’t. Through no fault of their own, millions are losing their livelihood. Among the very poorest in developing countries, tens of millions have been shoved into absolute poverty. Many will simply die.

But the mythology of wealth creation has already started to revive itself. And why not? For nothing has really changed, except that we now despise the bankers we once admired, and politicians (who have been offered a truly golden opportunity to become popular heroes without a hint of crass populism) are confirming the electorate’s worst suspicions about them.

Capitalist myth no.1: Who are the wealth creators?

One of the necessary consequences of governments failing to measure up to the current economic crisis – and as yet there is no evidence whatsoever that they plan to do anything the change or manage the system that put us where we are today – is that the old self-congratulatory myths start to resurface. Perhaps the most important of these myths is the fantasy that it is bankers and investors who are the true wealth creators.

Why does this myth matter? Because it is this myth ensures that the rich are also the powerful, through their unchallenged control the commanding heights of the economy. Because it is the myth that they are doing something unique and almost magical that we must not importune them for taxes or justifications of their prestidigitations, lest these magicians, these golden geese, fly away, casting us into helpless penury. It is also this myth that allows them to carry on without the sort of scrutiny to which every other strategic area of society, such as the social services, manufacturing, the education and health systems, the military and so on, is subject. It is this myth that allowed them to reward themselves with a disproportionate share of society’s wealth. It is even more important than the myth of the market because, above all else, the myth of the wealth creators allows those it mythologises to effectively disempower everyone else.

But in reality is quite preposterous to identify wealth creation with a single sector of society. It is a simple tautology that wealth is created every time anyone takes a resource and turns it into something it solves a human problem (from hunger to vanity), that makes the real world materially more efficient or effective, or otherwise makes the world a better place.

A small part of this wealth is economic. But even if one focuses exclusively on goods and services that can be bought and sold, even there it would be preposterous to claim that wealth is created at the top. Every bolt screwed onto a machine, every machine operated to make a useful product, every product used to perform a valuable service, every service performed – they all add value. Nor is simply a question of the direct production of wealth. Every manager with a discretionary budget has the opportunity to create more wealth or less, depending on how they chose to use it.

One feature of modern economies that especially militates against the idea that wealth is created at the top is the progressive professionalization of roles in the economy. An employee is someone you pay to do as you tell them; but a professional is someone you pay to tell you what to do. This is clear enough with doctors, lawyers and so on, but it is equally true of professional staff. And their role in the organisation is specifically to know how to create wealth in their area better than their superiors. So the more the modern economic organisation is staffed by professionals, the less claim those at the top have to be exclusively the wealth creators. On the contrary, they are increasingly only coordinators of the people who really create the wealth.

Hence the difficulty of maintaining a hierarchical structure in strongly professional organisations – because it is increasingly difficult to maintain the myth that those a the top know best. This leaves senior executives in the contradictory position of wielding the power to hire and fire, to invest and disinvest and generally control the organisation, yet lacking any realistic claim to unique insight, awareness or pre-eminent skill. Rather like the absolute monarchs who created to modern state in the seventeenth and eighteenth centuries, the business hierarchs of modern world have created a massively powerful system – the modern capitalist business – that has less and less time or place for those who were its progenitors.

So what is it that distinguishes the bankers and the financial sector in general? In these terms, not very much. To the extent that they are merely managing budgets, nothing at all. The leverage and reach they exercise may seem vast, but to claim that this means that they create more wealth than others makes no more sense than saying that only the top person in a human pyramid gives it height. It’s rather like a previous era when it was salespeople who were idolised rather than the analysts, the superstar executives, the ‘quants’ and other financial monsters: they too were disproportionately rewarded for selling things other people actually made. Of course, an exceptional individual can make an exceptional difference, but that is true of wealth creation at every level. And it is not as though the evidence actually support the claim that bankers, let alone the financial sector as a whole, actually do create disproportionate wealth.

So what have they been doing for the last couple of decades that explains their fabulous rewards? Haven’t our economies grown exceptionally quickly? Isn’t that to the credit of the financial sector? In the illusory terms of global figures and monetary values, yes to both. But did anyone but themselves enjoy the wealth? No. When in 2008 the banks finally realised how unsure their financial footing was and started to pull the rug from under one another, it turned out that most of the monetary increase in wealth was an illusion. The bubbles had inflated the money but not increased the material wealth society enjoyed. In fact most people are no better off now than before the financial sector was let off the leash. The geese, it turned out, produced eggs of gilded lead, not true gold.

But even that is not the bottom of the barrel. Even if they had been creating exceptional wealth, those at the top of the tree are also the ones who decided on whose behalf wealth is created. This is not after all a completely neutral activity. You can decide how to divide up the surplus. The choice is quite simple: they can allocate the wealth to the shareholders, to the workers, to society (through taxation and true corporate social responsibility) – or to themselves. As ever, those at the top favoured their shareholders. But not as much, it turned out, as they favoured themselves. Despite the longer hours, the heightened insecurity and lower happiness, the average American is no better off than in the 1970s, and much the same is probably true in Britain too. There were no more goods and services, especially not for ordinary people – which is to say, for the vast majority of the real economic wealth creators. So even if they had created great wealth, don’t hold your breath waiting for your share. What you get is a insecurity and relentless pressure.

Finally, the bankers turned out to have produced new, fully financialised layer to the economy that is now busily reducing the total wealth in society. By dislocating the structure of ownership and credit in the economy as a whole, a great deal of its material wealth, its homes and security and comforts, has been debased from wealth to debt, as people of honest working people who thought they had the money to pay for it suddenly don’t. Through no fault of their own, millions are losing their livelihood. Among the very poorest in developing countries, tens of millions have been shoved into absolute poverty. Many will simply die.

But the mythology of wealth creation has already started to revive itself. And why not? For nothing has really changed, except that we now despise the bankers we once admired, and politicians (who have been offered a truly golden opportunity to become popular heroes without a hint of crass populism) are confirming the electorate’s worst suspicions about them.

China's non-promise

Today China promised that it will seek to reduce the 'carbon intensity' of its economy - the carbon emissions per unit of economic output - starting from 2020.

Hooray, I hear the world shout. And endless editorials have already hit the newstands, proclaiming this a great day for humanity and an important step towards a successful climate conference in Copenhagen.

But this is a complete non-promise. Any economy undergoing development will start to eventually reduce the carbon intensity of its economic activity through basic processes of technological advance and cost reduction. So China's carbon intensity would fall even if it had no environmental targets at all. All more developed countries have already done this. China has not in fact promised to anything other than what they were going to do anyway, which is pursue economic growth. Nor do they have much choice: having embraced capitalism, there is no option, especially for an industrially backward country.

Nor is it likely that this will do much towards solving the world's environmental problems. Although it obviously makes a difference, its net effect will only be positive if China's rate of economic growth (i.e., the total number of economics produced) is not so great that it completely negates the reduction in intensity per unit. But China's growth rate has hovered at the 8-10% mark for decades now, and there is no realistic chance that it will reduce its carbon intensity at anything alike this rate. Also, the reduction is only relative to 2005 - a very high baseline. So even after 2020, it is highly probable that China's carbon emissions will still be growing.

And up until 2020? Again, present growth rates - which do not seem to have been dented much by the current global recession - mean that China's economy will have more than doubled in size. Given present carbon intensity levels, that means 12 billion tons of carbon. And after 2020, it will keep on growing. Given that the estimated sustainable level for the whole planet is about 20 billion tons, what satisfaction are we to get from China's non-promise?

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The worst threat to the environment on Earth

By far the single best demonstration that business is about profit, not any sort of social or environmental responsibility, is the Alberta Tar Sands. Billed by Greenpeace and others as the largest industrial and energy project, the biggest capital investment and the worst environmental crime on earth, it really does have to be seen to be believed.

For a first-hand view, click here. Right now.

The real point? That tar sands make no environmental or social sense at all. Imagine someone replacing Florida with a slag heap - that's the new Alberta.

But for business? Lots and lots and lots of money. A no brainer, really. Say goodbye to Alberta now, children - and don't worry about the mess. No, I don't ahve any plans to clear up after me, but always remember - Daddy Business knows best.

Economic myth no.2: Trickle-down economics

One of the mainstays of market economics is the idea of trickle-down – that it does not matter that the rich corner the money, because eventually they will spend it only lesser mortals, who will then benefit from it.

This is not a very convincing idea, yet it stays on the lips of conservative politicians and economists everywhere. And it’s not true, of course – not even about the money, let alone the real economic consequences. Starting with the real economy, what happens when a rich person acquires money and spends it as a private individual? They spend it on, say, a house. Eventually everyone who works on the house is paid of course – hence the trickle-down. But what happens to the real human effort and the resources that go into that house? They are the real value in the economy, and what happens to them? They remain in the hands of the owner. They enter the economy through the paid work, but promptly leave society in the form of a private dwelling that absorbs a disproportionate amount of social activity and resources. That time, effort and resource can never be used by society again.

Contrast this to what would have happened if the same amount of money had been spent on, say, new classrooms and facilities for the local school. The same effort and resources would have been expended, but this time all those who built it would still benefit from the product of their work – the school itself. This remains in circulation in society, as it were, in complete contrast to the private home. So trickle-down economics is aptly named – only a trickle of the great flood of real social value benefits society as a whole, while much the greater part remains in the hands of the wealthy in the form of the real goods and services they enjoy.

What about the money, then? Surely that has to circulate? Some of it, such as the payment for work and materials, yes, but not all. A good deal will be set aside for investment. And what is investment for, if not to buy further property that both generates further income to be used for socially exploitative purposes and places more of the real economy into private hands? Of course, the money is eventually released, but only under conditions that not only repeat the same cycle but also reinforce the control of the propertied over the rest.

Zeno’s paradoxes

Zeno’s paradoxes are amongst the most venerable and to many impenetrable of all philosophical puzzles. There have been many attempts to explain Achilles and the tortoise, the arrow paradox and the so-called dichotomy paradox, often illustrated by 'proving' the impossibility of a frog ever managing to hop its way out of a pond. Apparently there were about 40 in all, and were originally created by Zeno of Elea to illustrate Parmenides’ conception of the world as logically changeless by showing that much of what we believed we witnessed in the world simply could not be happening.

This view has undergone a lot of humorous parody and satire, from Zeno’s contemporaries to Terry Pratchett’s occasional sketches of ‘Ephebian’ (i.e., Greek) philosophers deducing all sorts of wonderful things. All in all it tends to remind one of the wonderful line in Monty Python and the Holy Grail, ‘and that, my lord, is how we know that the earth is banana-shaped’.

There have been plenty of attempts to refute Zeno too, involving ideas like infinitesimals (roughly speaking Aristotle’s answer), which works quite well. For we have known since Archimedes that the sum of an infinite number of progressively smaller amounts will add up to a finite total. Or rather, it will tend towards a finite result, which is a problem, since it is not obvious that this is not actually simply a mathematical way of simply restating the original paradox, because this reasoning does not, in itself, conclude that the frog ever actually reaches the side of the pond.

Another use of the infinitesimals inherent in Zeno’s original paradoxes is to reject them. If it simply isn’t true that there is always a point lying between two other points, no matter how close together, to which the frog/ arrow/ Achilles/ whatever can move next, then it must make definite progress and eventually Achilles will be the winner. You can also reject the idea that things are anywhere definite or finite at any given point in time, but I think it’s a bit much to have to rely on relativity or the uncertainty principle to beat up classical philosophers!

I have never quite understood why these paradoxes seem to attract solutions like this. Perhaps I am missing something, but hasn’t Zeno actually defined the problem in such as way that it cannot be solved? He describes all these events in terms of them never being concluded. For example, if Achilles’ movements are defined in terms of reaching where the tortoise was last – a place from which it must have moved on – then plainly he can never overtake it in this framework. But that is only to day you can define a problem in terms of failure, which is what Zeno has done. If at each step Achilles' motion is defined as reaching only to where the tortoise last was, he cannot have reached where it is now. So the problem is actually stated in terms that permit only failure. In other words, failure is not a paradoxical result of this overall situation but a simple deduction from its definition.

There is no need to appeal to any fancy mathematics. All you have to do is to realise that this is not a paradox at all, but rather the description of an activity in negative terms that cannot be shaken off without seeming to disregard the original problem. Zeno’s paradoxes strike me as valid but uninteresting – except for what they tell us about how philosophers and mathematicians reason.

Quaking in their Gucci boots

... as George Monbiot described the bankers the other day[1], writing about the British government's utterly supine response to the banking crisis and those who caused it. Apparently Brown and Darling have declined to learn the lesson Nassim Nicholas Taleb suggested last April - that 'People who were driving a school bus blindfolded (and crashed it) should never be given a new bus'. In fact it's pretty hard to identify even one of Taleb's 'ten principles for a Black Swan-proof world' [2] that has found its way into public policy.

1. What is fragile should break early while it is still small. Nothing should ever become too big to fail.
2. No socialisation of losses and privatisation of gains.
3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus.
4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks.
5. Counter-balance complexity with simplicity.
6. Do not give children sticks of dynamite, even if they come with a warning.
7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”.
8. Do not give an addict more drugs if he has withdrawal pains.
9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement.
10. Make an omelette with the broken eggs.

No, as far as I can see it, not one of these lessons has been learned. Well done, chaps. Apparently, say Brown and Darling, it is 'impractical' to change the system so that we can exercise any control over it. Which can only mean that that system is out of control, but we are not worried enough about its unintended effects to do anything about it.

But is Taleb's own prescription enough?

Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.

But even if we did all this (personally I love the one about abolishing the Nobel prize for economics), would Capitalism 2.0 really be the answer? We got into the present crisis by allowing capitalism's basic rules - the structures and interests that underpin all forms of capitalism, which Taleb and other critics from within show no inclination to criticise, even in the name of Capitalism 2.0 - to play themselves out with unprecedented freedom. This particular 'black swan' was no improbable mutant but the entirely predictable (and predicted on both right and left) effect of capitalsm's most basic causes, that was only inconceivable to those of the Thatcher/Reagan generation of politicians and the idealists of economic theory for whom, no matter what the question, unbridled capitalism was the right - no, the righteous - answer.

Meanwhile, George Monbiot's own diagnosis - that no one bears more responsibility for the current mess than Gordon Brown and Alan Greenspan - essentially that this was a crisis induced by political irresponsibility and weak regulation - has some merit, but by focusing on the individuals or even on rather secondary functions of the economy rather than the structure of the economy itself - distracts attention from the real problem. The crisis was not created by poor management of our economic system; no, it was created by the very nature of that system.

So what are we looking at here? Both capitalism's intellectual critics and its would-be political masters are unable to see what got us into this, or that there is no version of capitalism that will not, eventually, pull the same trick.

Not that capitalism is an unqualified disaster. Far from it - it is after all only through capitalism that the modern world, with all its fabulous wealth and freedom, took shape at all. But it must be understood that capitalism is rather like adolescence: a huge improvement on its predecessors, but not something to be hung on to for its own sake. There is life after the teens, and there is history after capitalism.

[1] 'The Great Cop-Out,' Monbiot.com, 8 September 2009.
[2] 'Ten principles for a Black Swan-proof world', FT, April 7 2009.

Market irrationality and the environment

There are in fact at least five ways in which the rationality of markets can be challenged, and all of them have implications – not all negative - for the environment.

Firstly, sometimes people just aren’t rational by any standard. However, this is not all innocent folly or individual caprice. Not only are individuals open to irrational behaviour on their own account, but they can often be manipulated, stampeded and panicked into actions that are, from their own point of view, profoundly irrational, but that are very much in the economic interests of others.

This possibility is routinely exploited through (and often by) the mass media, of course. In the absence of a systemic account of the ways in which individuals in the economy are behaving irrationally, it is hard to say just what that means, or what it does to conventional economic theory apart from render it more or less fuzzy. But whatever the answer is, it is unlikely to figure in conventional economic theory, as it my suggest that the power to exploit and control is fundamental to our economic system, yet decidedly not the benign (or at least neutral) thing markets are supposed to be.

Secondly, if by ‘rational’ we mean, ‘pursuing economic self-interest’, it is obvious that a great deal of human behaviour can’t be forced into this particular (indeed, peculiar) mould. That does not mean that we are irrational – only that the rationality according to which we operate is not narrowly economic. I doubt that a committed church-goer tithes a significant fraction of their income out of reasons of economic self-interest, and the idea that people contribute to charities out of a very indirect calculation that they may need that charity’s services one day is surreal, to say the least. It would be doubtful to propose that a person on the streets of Manchester or San Francisco contributes to Oxfam because they expect to need Oxfam’s support any time soon. People have values, goals, interests, relationships, and any number of other motives that affect their behaviour, all of which can be pursued rationality without ever reflecting economic rationality.

This can be extremely fortunate for the environment, because it means that people are willing to pay for environmental management even when it ‘harms’ their economic self-interest. Unfortunately there are quite a few ways in which the same ability to rise above economic self-interest is likely to harm the environment – as when a certain kind of fundamentalist is persuaded that environmental problems are signs of Last Days, or that any kind of collective action is ‘communism’.

Thirdly, when we hand over the direct management of our economic interests to others (typically investment professionals, the senior management of the firms by which we are employed, our government’s treasury department, and quite a few others), this creates a dilemma for the theory of economic rationality. Either they pursue our interests on our behalf, and not their own, in which case they are not being rational from their own perspective, or they do the reverse – in which case they aren’t being rational from our perspective.

This is the problem of ‘agency’, as economists like to call it, and it had a major impact on creating the recent global economic crisis. Investment banks hotly pursuing their own interests netted themselves billions in fees for investment advice and dubious sales, not to mention outright fraud, but added little value as far as the rest of us – including their immediate customers – were concerned.

From an environmental point of view this could prove to be a serious issue, as it is crucial that environmental problems are seen as affecting all of us equally, and, conversely, that one group cannot evade the consequences by exploiting another. Unfortunately, although this may be true in the long run, especially if the problems turn out to be still more severe than most people expect, it is unlikely that such a long-term perspective will be the rule. Indeed, we can certainly expect some groups – from privileged individuals up to corporations and national governments – to do their utmost to exploit the weaknesses of others.

Fourthly, there is the more profound kind of irrationality that follows from the fact that what is rational for an individual can be counterproductive, or even outright destructive, when replicated all across a market.

From an environmental perspective this is all too common, as can be seen from the ratchet effect of many investments. To take a very parochial example, right now the London underground train system (the Tube) is being blighted with hundreds of screens that show dynamic advertisements in place of the old posters. This raises the impact of these advertisements, but they probably also represent only the thin end of the wedge, and we can certainly expect these deeply annoying devices to become the norm. But with that, all advertisements will be restored to an equal footing, so no advantage will be gained by using electronic screens. But no one will be able to go backwards either, to old fashioned paper posters. From an environmental point of view, these necessarily lead to more material resources – electronics, energy, and so on - being invested to achieve absolutely no net material benefit (as opposed to monetary) value.

Finally, there are situations – some extremely widespread – in which the economically ‘rational’ option simply isn’t available. In any market that is dominated by large-scale capital (which is to say, any area of heavy industry, any long-term commitment, and so on), rapid movements to reflect a sudden change of circumstance are simply not options.

For example, if a lower-cost operator suddenly enters the market – as often as not taking advantage of the most recent methods, processes, technologies, etc. – they can price their goods and services below more established operators, who are still committed to the old approach. The latter may have the option of moving to a lower-cost operation too – but the long-term nature of many financial commitments may mean that the old investments still have to be paid off, and the arrival of a radically new operating model may mean that the systems and resources by which they currently operate simply cannot be sold off, because no one want them.

From an environmental perspective, this is almost invariably disastrous, as it obliges the owners of that capital to carry on using it, regardless of the environmental consequences. A power station or car plant built today must be operated for decades to come if it is to be paid for, and its proprietors will lobby for the continuation of dirty energy and transport for the same period.

And all that is leaving aside the conscious exploitation of other complexities such as 'informational asymmetry' (i.e., they're lyng to you). All in all, the case for the ‘rationality’ of markets, or for the so-called ‘efficient markets hypothesis’, is not strong. As far as the environment is concerned, it is pretty disastrously flawed.

Paying India and China to do what, exactly?

Anyone with a sense of decency and proportion about humanity’s current environmental predicament understands and sympathises with the claim by developing countries that the developed countries should actively support their contribution to controlling global warming by technology transfers, improved terms of trade and direct funding. Conversely, as India and China’s own governments have pointed out, the attitude of the governments of developed countries to their position is hypocritical at best and shameless at worst.

But at the same time, is it really clear exactly what would be accomplished by such support? Just as the justice of their cause is clear to anyone with half an eye, so the doubtfulness of their chosen route to development is clear to anyone with half an ear for the brilliant but discordant disharmonies of emerging capitalism. For both India and China (and most other developing countries) have certainly set themselves on a strictly capitalist road to industrialisation, and it is exactly this that undermines their claims to the sympathy and assistance of developed countries.

Not that the latter are any less culpable – after all, we invented capitalism, we made sure that most developing countries (with the notable exception of China itself) would adopt a capitalist strategy for economic development, and we have wilfully turned a blind eye to the environmental (not to mention social, cultural, political and psychological) consequences of our own road to wealth. But to support the industrialisation of any country on the same basis would only be more of the same problem we already have. Indeed, capitalism’s incessant demand for growth and more growth, coupled with the lower ‘carbon efficiency’ of less developed countries’ industries, would actually make the problem disproportionately worse. So even if the global environment could countenance the rapid doubling and trebling of the global economy, the environmental impact is actually likely to be much worse than that.

So what is the answer? Beats me. But it isn’t capitalist development, because that can only lock us – and in this case it really is us all – into a worse problem. Nor will it solve developing countries’ developmental problems, given that they are far more likely to suffer from the resulting climate chaos, resource depletion and ecosystems damage than their more developed neighbours.

Should We Seek to Save Industrial Civilisation?

Yeasterday George Monbiot's website published a debate between George and Paul Kingsnorth on the question Should We Seek to Save Industrial Civilisation?

I commented on this rather abstract discussion, and here is what I said:

I find myself bemused by this debate. On the other hand, after reading
George’s Captive State, I would have expected a more specific focus on exactly
what it is about our economic system that drives its relentless growth, and on
the other I am sure I can’t be alone in finding any dispute that lays the blame
for environmental disaster at the door or either ‘founding myths’ or ‘humanity’
a bit abstract, to say the least.

Industry does not lead to environmental collapse. Firstly, any machine or
factory or oil well or fishing fleet can be shut down or made more
environmentally friendly any time its controllers want to do so, and secondly I
see no reason to believe that those who control these things are inherently
blind to the facts of climate chaos, peak oil and all the rest. Rather, the
issues are what it is that motivates whether or not we turn down industry and
who realistically exercises enough control to do so. These are matters of
society’s political and economic structure, not abstract speculation.

As far as motivation is concerned, our economic system is driven by profit,
and practically every sector of our global economy is committed to investments
that demand a return for decades to come. So although there is no technical
reason why the factories and power stations cannot be switched off, the economic
consequences would be disastrous. So cars keep roaring off the production lines
and the oil keeps gushing not because of Judaeo-Christian foundation myths about
control over nature or because we are too weak to give up foreign holidays, but
because if stopped buying, there would be no revenues to repay the bank loans
that fund all those hotels, aircraft, oil wells, and all the rest.

The same can be said of industry as a whole – the issue is not one of
industry as such but of the economic motivation that determines how industry is
used and developed. There the answer is simple: it is run and developed for
profit, and unless the state intervenes to impose specific environmental and
social obligations, nothing else. Nor, while those who control this whole cycle
limit their perspective to profitability, can things be otherwise. But at the
same time, they could not change this perspective to something more socially and
environmentally responsible even if they wanted too without markets and
investors simply demolishing them. That is only likely to change if there is a
truly vast realignment of our economic system, such that social and
environmental sustainability became our ultimate criterion for economic success
and profitability, if it remained at all, would become a secondary accounting
issue, not the be-all and end-all of industrial civilisation.

In short, it is capitalism that is the ‘fifth horseman’ who drives the four
horsemen of our impending environmental apocalypse – global warming, ecosystems
collapse, resource depletion and (the disastrously adverse effects of)
population growth. Conversely, it is wholly implausible that the motivation for
and control over our industrial civilisation will shift away from profitability
and radical unsustainability without equally radical political
intervention.

All in all, I don’t know how far capitalism can be adapted to social and
environmental sustainability – given its inherent drive for economic growth,
either it or civilisation itself will have to give – but I am quite certain that
capitalism is a much more realistic answer than Paul and George’s rather
speculative abstractions.

Return on investments: it doesn't add up

The fundamental problem with relying on markets to solve our environmental problems is extremely straightforward. No investment will be made unless market conditions – prices, profits and prospects – justify it. If there is no profit to be made – and a profit that beats the alternatives – then no investment will be made. The environmental consequences are obvious, and easily illustrated with a simple practical example.

T. Boone Pickens, the Texas oil billionaire, has been planning to spend $10-20 billion on a vast wind farm in the American Midwest. But like all business investments, this was really a gamble, in this case based on the assumptions that oil prices would stay high and subsidies would be on hand. Neither assumptions has proved correct, and the projected 25 percent return on investment he had predicted now looks highly implausible. So – few investors, and little prospect of his wind farms seeing the light of the Texas Panhandle for the foreseeable future. In other words, a planned four gigawatts of environmentally friendly electricity will not now come on stream by 2014.

Now it is essential that we invest in alternative energy and other solutions to our environmental problems absolutely as soon as possible. The vicissitudes of the market, however, which are driven by many factors apart from environmental impact, can never be relied on the deliver substantive solutions to serious problems.

Pickens’ dilemma is only one example of a very general problem of capitalist economics that will make it extremely hard to make a rapid transition to a low-carbon economy. A second, even bigger problem refers to the simple question all attempts to move to a different ‘installed base’ for any major sector such as energy generation, food production or manufacturing must answer. If we are going to move to a different technology, who will pay for the technology I already have installed? After all, most currently installed systems – coal-fired power stations, fossil-fuel powered cars, fertiliser and plastic plants, and all the rest – has been paid for by loans from banks and other investors who will still want their money back, regardless of what new systems we plan to install in future. In many cases, the financial commitments go on for decades into the future, and cannot be significantly changed without a massive dislocation to our economy.

Hence the problem with Robert F. Kennedy’s otherwise sensible suggestion that the United States could quickly cut its greenhouse gas emissions by a simple change in the way it manages its existing power generation systems. Apparently US generator capacity is managed to ensure that coal-powered stations are used in preference to gas-powered stations, but if this situation were reversed and gas-powered plant was given preference, then

Mothballing or throttling back these plants would mean huge savings to the
public and eliminate the need for more than 350m tons of coal, including all 30m
tons harvested through mountain-top removal. Their closure would reduce US
mercury emissions by 20-25 per cent, dramatically cut deadly particulate matter
and the pollutants that cause acid rain, and slash America’s CO2 from power
plants by 20 per cent – an amount greater than the entire reduction envisaged in
the first years of the pending climate change legislation at a fraction of the
cost. (Financial Times, 19/7/09)

It seems simple, and from both an environmental and an engineering point of view, perhaps it is. But from an economic perspective, the problem is obvious: who will pay for the existing capacity then? Largely unused but still indebted, these other, high-carbon power plants still need to be paid for. If the income from their electricity will be moved to other, more environmentally friendly gas generation plans, one can only ask, from where? And this is only one instance of a problem that pervades any capitalist economy: investments demand returns, and if returns are not forthcoming, then either economic activity stops or undesirable indirect methods, from lobbying to subversion, start.

Nor could we expect investors to simply accept the losses caused by a sudden technological change – and in this case, sudden means ‘in less than the several decades we need to recoup our investment on existing power stations’ – as their contribution to society’s battle with global warming. These are after all not a minor factories and power plants out on the edge of the economy; to a very large extent, these vast investments are the economy. To stop paying for them would be economically catastrophic in about the same proportion that it was environmentally beneficial. Conversely, we can scarcely turn to these same investors to ask them to pay for the new, environmentally friendly investments we need for a low-carbon environment: in the absence of continuing, reliable returns on their existing investments, where will they get the money from? We could of course subsidise them, but where are we going to get the money from? Money is after all the lifeblood of the capitalist economy, and if the owners of existing ‘investments’ find that what they really own is a vast collection of liabilities rather than assets, then making this environmentally essential switch will lead to a near-instant collapse in returns on investment, profits, employment, tax revenues, industrial capacity, credit (for everyone) and a viable economy.

Or at least, so it is while we carry on playing to capitalism’s rules.

One of nature's little jokes

One of the great hopes for environmentally clean energy to reduce the impact of climate change is of course wind power. One of the places where, through as combination of geography, technology and economy, you would have thought wind power had a good chance of proving itself is the American Midwest. Where, according to a paper just published in the Journal of Geophysical Research, wind speeds are have been falling for decades. Because of climate change.

Never let it be said that Mother Nature doesn't have a sense of humour.

Source: Pryor, S.C., R.J. Barthelmie, D.T. Young, E. S. Takle, R. W. Arritt, D. Flory, W. J. Gutowski, A. Nunes, and J. Roads (2009), Wind speed trends over the contiguous USA, J. Geophys. Res., doi:10.1029/2008JD011416, in press.

The train now arriving in Fantasy Gulch...

My God, it's only two days since I wondered how long it would be before market enthusiasts started trumpeting how wonderful market economies were after all, and already the Financial Times has responded with one of those I-wouldn't-believe-it-if-I-hadn't-seen-it-with-my-own-eyes pieces they are so very good at.

In today's edition, Philip Stephens has penned a piece entitled 'Crisis? What crisis? The market confounds the left'. Leaving aside the drivel he talks about 'the left' (of which, pace Mr Stephens, the Labour and Democratic parties are decidedly not members), he manages to boast that the return to profitability of various banks proves that liberal market capitalism really is the bee's knees.

Pace the doomsayers who predicted imminent Armageddon, liberal market capitalism has survived: somewhat humbled and, in the case of the financial services
industry under much tighter official supervision, but recognisably much as it was.

Indeed it is - and we will pay for it again, the next time it goes wrong. But the idea that this proves that the system is basically OK? Oh really? And that little detail of the trillion dollars we gave them? The millions of unemplyed? The wrecked businesses? The tens of millions around the world these bankers have thrust into an absolute poverty smug Mr Stephens cannot imagine? I could go on about this at enormous length (again), but if there is one thing that doesn't prove that a system is healthy, it is when it recovers from a completely self-induced disaster by being fixed by someone else.

But what can we expect from a paper that is so utterly incapable of rational thought about market economics?

Booking a trip to Fantasy Gulch

Now that we have bailed them out to the tune of a trillion-odd pounds/euros/dollars, surprise surprise, the banks are returning to profit. Meanwhile, the various government institutions who are supposed to be deciding how to avoid another train wreck are stumbling around trying to grasp what really needs to be done, but are so thoroughly tarred with the same brush as the financial sector that they cannot even conceive of what is required.

And every time governments make a move, another little patronising missive comes from entirely non-credible banking body bemoaning how any new regulation on capitalisation or bonuses will only hamstring the system – as though the last couple of years were not warning enough that what ‘the system’ needs is not just hamstringing but evolution into a completely new kind of animal.

How long can it be before the banks start issuing press releases claiming that the current crisis is just a flash in the pan and that everything is really all right? I give it until the end of June at the latest.

China shakes the road

China has certainly bought into consumerism in a big and perhaps irreversible way. General Motors has sold off now its Hummer division to a Chinese buyer, the Sichuan Tengzhong Heavy Industrial Machinery Company. Tengzhong’s CEO is quoted int eh New York Times as saying that:

‘The Hummer brand is synonymous with adventure, freedom and exhilaration,
and we plan to continue that heritage’.

Plainly he hasn't heard of peak oil.

One might take issue with this interpretation of such ‘a symbol of gas-guzzling, road-hogging American excess’ (as the FT's correspondents put it), but it is hard to avoid also seeing it as yet another symptom of China’s growing environmental impact still farther. And contrary to China’s stated defence of its unwillingness to impose carbon emission limits on itself, this is hardly the kind of development that a poor country needs to create a decent standard of living for its people.

Some market failures cannot be corrected

Currently reading Nicholas Stern’s Blueprint for a Safer Planet, and I find – as I usually do when reading authors for whom the market is some kind of shibboleth – that he really doesn’t understand how secondary the market is to strictly political decisions – or the absence of decisions – about how we want our economy to work.

Markets are rather like games: how well they work and what their consequences are depend very much on how you set up the rules and referee individual games. Without that there is no game, so to appeal to ‘the game’ as a solution to problems with the game itself makes very little sense. In the case of markets, to imagine that ‘the market’ can solve social, environmental or even economic problems on its own is irrational, to say the least.

In the present context, we know that markets will not, in their current incarnations, solve environmental problems of the size and kind we now face. Stern himself lists a very large number of market failures and rightly insists that markets need to be regulated in very deliberate ways if they are to contribute to environmental solutions. But what he does not seem to recognise three fundamental problems with the entire model.

1. Firstly, many of these problems – asymmetric information, externalities, imbalances of economic power – are direct products of the market economy.
2. Secondly, especially in markets with relatively few major producers (which is currently most markets of any global significance), these same ‘market failures’ are quite consciously wielded by all major players in the markets to ensure that markets do not in fact operate as their apologies imagine.
3. Finally, markets have failure built into them in a more important and enduring sense. Whatever ‘correction’ they may be subjected to, unless that correction is perfect the market will continue blindly on, unable to envision or anticipate the next disastrous shortcoming. The only signal markets respond to, once all the regulations are in place, is price. Since price is inherently indifferent to anything but the current rules of the market, it cannot ‘see’ that there is something else wrong. So another round of intervention becomes necessary, which disrupts the markets again, and in fact will probably only be introduced because a new crisis is upon us. Which is exactly what, in a warming, degrading and ever more crowded world, we cannot afford to wait for.

In summary, ‘market failure’ is actively created by markets, is deliberately perpetuated by participants in that market, and is in fact an inescapable fact until markets can no longer operate solely in terms of prices – which is an unlikely state of affairs without very substantial political intervention.

Duck!

My love affair with the Financial Times continues unabated, and this time I find that their scientific reporting is as spot-on as their analysis of business and capitalism. In today’s on-line edition, Clive Cookson’s report on the huge new European telescopes launched yesterday from Guyana (‘Huge telescopes aim to solve mysteries’) tells us that the telescopes ‘will operate in close proximity at a point in space called L2, 1.5km from earth’.

I hope they chose their orbit carefully. 1.5 km means that they will miss Ben Nevis pretty comfortably, but as Everest is rather over 5 times that height, it might be a bit of a white-knuckle ride elsewhere. The authoritative SatNews.com suggests that 1.5 million kilometres may be nearer the mark.

Of course, the FT is not a science paper, but you’d hope journalists and editors could manage to spot such a blindingly wrong number. It also raises the question of whether the current economy downturn is in fact a very reasonable reaction to the FT misreporting economic data by six orders of magnitude?

Global solutions: effective, efficient, equitable?

A persistent theme in much writing about the coming decades is the need for global agreements that go a good deal further than the technical questions of environment management. Nicholas Stern (the author of the authoritative Stern Review on the economics of climate change) is typical of this line of thought:

But we have to act together, to create a global deal – this is a problem that is global in both its origins and its impacts.

That global deal must be effective, in that it cuts back emissions on the scale required; it must be efficient, in keeping costs down; and it must be equitable in relation to abilities and responsibilities, taking into account both the origins and impact of climate change. (From Stern's A Blueprint for Safer Planet, p.4)

Everyone seems to say as much, and as a statement of how we should approach the coming decades, it is impossible to contradict.

I just don’t believe it will happen. In fact I suspect that the most we can realistically expect is that the actions we take will be moderately effective. Civilisation will probably not collapse. But as for efficiency and equity, what is it in our performance to date that would lead anyone to expect either? I doubt that, whatever the deals we collectively agree too, our collective response will be anything of the kind. There are far too many countervailing forces for that to happen.

The efficiency of any future global strategy is almost certainly out of the question. As everyone admits, we are faced with global problems. But we do not have global systems in place to deal with them. On the contrary, our systems are not only fragmented but also full of conflict and antipathy between individual nations. There is also a profound conflict of interest between the owners and senior management of global corporations - the other most powerful economic players on the planet - and the rest of us.

Of course, in some profound sense we are all in this together, and completely failure will be fatal for all of us. But between here and complete failure there are many decisions to be made, each of which will benefit some and burden others. Reluctant though I am to say it of my fellow human beings, those who control the decision-making at each of these branching points will, more often than not, make sure that the decision is made in their own favour. That is to say, they will be decisions which are efficient for them. In Stern’s very appropriate words, they will be ‘keeping costs down’. This may mean keeping down the costs for humanity at large, but it will almost certainly involve minimising the costs of those who control the decisions. If this means increasing the ‘costs’ – the poverty, the danger, the hunger, the misery, the disease, the fear, the agony – of everyone else, then that will be presented as the best – or at least the least bad – alternative. Those who do not control these decisions will take the consequences. Which, in many cases, will be fatal.

As for equity, we have never taken this seriously in the past and I believe it will be a lot harder to take seriously in future. In the current (relatively) stable and affluent industrial world, only a handful of the most wealthy nations ever fulfils its public commitments on aid. We announce and re-announce help for long term development and short-term disaster, and then fail to live up to either. Given that the sums involved – currently just 0.7% of GDP – are so small that we would not miss them if we paid them in full, what can we expect of decisions about disasters that are not yet even visible. And in a future world of successive environmental crises, mass migrations, resource wars and much else, there will be far less concern for, let alone commitment to, equity. On the contrary, most of humanity will not even show up on the radar screens of the key decision-makers.

Why then should we expect equity from any future arrangements to curb climate change, resource depletion, ecosystems degradation, population growth and other environmental threats? I suspect that the real fount of future ‘equity’ is likely to be what it has always been - the economic power that countries like China, India, Brazil and Russia are already starting to wield. In a world of declining fossil fuels, the European Union will not be allowed to forget that Gazprom alone controls a sixth of the world’s natural gas reserves. The United States Treasury has long since started to eye nervously China’s enormous dollar holdings - they currently hold nearly $2 trillion in US Treasury bonds, whose manipulation could easily hole the entire western economy. These are people we will treat ‘equitably’ – because they come to the negotiating table as equals, not to mention rivals. But the hundred-plus countries that are each smaller than all of the world’s hundred largest companies? If GlaxoSmithKline, Cisco Systems and Wells Fargo are unlikely to be granted a seat at the top table, what can lesser economic entities like Estonia, Ethiopia, Cameroon, Trinidad and Tobago, Ivory Coast, Panama, El Salvador, Tanzania, Bahrain, Jordan, Iceland, Bolivia, Ghana, Paraguay, Zambia, Uganda, Botswana, Honduras and the many other yet smaller countries expect?

But not even the effectiveness of any future ‘global deal’ can be taken for granted. There are after all degrees of effectiveness. I previously suggested three levels of outcome for our current position: a setback comparable to a world war; an impact on our civilisation as a whole comparable to the fall of the Roman empire; and a threat to civilisation as such, comparable to a new ice age. As I have previously said, I do not know which we are really facing, but for all the reasons that we should expect neither efficiency nor equity, we should expect the effectiveness of our actions to be limited too - perhaps to the point where the twenty-first century goes down as the worst in history.

More precisely, we should expect rich and powerful countries that are situated in relatively cool regions to do as little as possible until they have no choice but to act in their own interests. That is after all what they have always done about global problems and what they have done so far about our current environmental threats. Even if they have the foresight to recognise that disaster in developing countries now will mean disaster for them later, they will almost certainly do only what is needed to forestall the later disaster to themselves. This will almost certainly be much less than preventing or remedying the original disaster to developing countries, no doubt accompanied by a great deal of hand-wringing, protestations of good intentions and dishonest claims to be taking ‘appropriate’ action. The real focus being on deflecting the negative consequences for the rich and powerful. Again going by our experience of aid, we will even find opportunities to benefit from the suffering of developing countries. Again, we always have. And then millions and millions of people will die.

The upshot of all this is simple. Simply continually asserting that our approach must be efficient or equitable will result in neither. If we want our response to the many environmental threats we face in the twenty-first century to be efficient or equitable, we must take a very firm and explicit decision that it should be so. More than that, we must create global institutions that represent humanity at large – which is to say, people rather the most powerful corporations and nation states.

It is hard to imagine what such an institution would look like. After all, none of our existing systems operate at that level. But in any case, I can still think of no compelling reason to expect any such institutions to be created even if they could be easily described, and the chances of their coming into existence will recede faster and faster as the real problems caused by 3° and 4° temperature increases start to hit us, as the global economy starts to unravel in the face of accelerating oil and gas prices and whole populations start to move in the face of poverty, hunger, disease and war.

There's no money in saving the world

We continue to see the repercussions of relying on business to deliver our response to climate chaos, global warming and resource depletion. The last few days have thrown up these stories in the media:

• Canadian environmental groups on Wednesday accused Royal Dutch Shell, Europe’s biggest energy group, of reneging on its promise to reduce greenhouse gas emissions at its oil sands project in Alberta. (FT, 8/4/09)
• At least five big wind energy projects are in danger of being delayed or shelved owing to higher costs and a shortage of credit, the British Wind Energy Association said on Wednesday. (FT, 9/4/09)
• Japan is expected to restart the world’s biggest nuclear power plant shortly – nearly two years after it was damaged by an earthquake. The prolonged shutdown of the Kashiwazaki-Kariwa plant’s seven reactors knocked Tokyo Electric Power into the red and threatened Tokyo with electricity shortages during the hot summer months, when air-conditioner use pushes up demand. The facility accounts for 13 per cent of Tepco’s generating capacity and without it the company has been forced to rely on more expensive coal, oil and gas plants. (FT, 9/4/09)
• Several prominent energy companies have scaled back their commitment to renewables, including BP, Shell and Iberdrola. (FT, 9/4/09)

And so on. On the other hand, Mars and Cadbury have promised to move to sustainable, Fairtrade supplies of cocoa (FT, 9/4/09). So we don't need to worry about Peak Chocolate just yet. On the otehr hand, I would not be very confident that they would ahve done anything about this were it not for ethically motivated public and staff pressure - as Fiona Dawson, managing director of Mars UK, has said, consumers and employees expected Mars to “do the right thing” because “nobody has to buy confectionery”.

The fact is, a monkey will type Hamlet before profit-driven companies will create a credible and effective answer to our many, many environmental problems in the middle of a slump. (I was going to say that Hell will freeze over, but at least that is one outcome global warming protects us from.)