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.