Posts

Duck Dynasty, the Green Party, and Steady Statesmanship

by Brian Czech

BrianCzechI’ve never seen an episode of Duck Dynasty, and I’m not a member of the Green Party, at least not any more. But who hasn’t seen the news, and the Duck Dynasty reminds me why I left the Green Party. I’m not sure the Green Party will give a quack, but I do think anyone concerned with political strategy should.

Back in 2000 I was actually quite involved with the Greens. The Green Party of the United States was so desperate for qualified candidates that I was approached to run for office; for President of the United States no less! At last count, I had about six votes, not including my own. (I was still undecided.) Needless to say, we failed to git ‘er done.

Yet it wasn’t a complete waste of time, as we did manage to insert a plank calling for a steady state economy — stabilized population and per capita consumption, in simplest terms — which was a first not only for the Green Party but for any political party on the national scene. In fact, it may have been the first formal act of steady statesmanship in the United States.

But my experience with this effort ultimately caused me to flee the Green Party, because it was worse than like pulling teeth. It was like pulling teeth while dodging spitballs — hastily chewed ones — spit from the left and the right.

Which leads us to the Duck Dynasty and its “patriarch” Phil Robertson. With just a few words about you-know-what, this fella opened up a spitball free-for-all. Just think, a duck caller from the Louisiana swamp opened so many cans of worms that the worm population will double before it can be stuffed back into cans. Why there’s gay rights, civil rights, and the First Amendment for starters. Sure enough, politicians from Arkansas to Alaska are jockeying for position, trying to associate themselves with the baby (Innocent Baby Phil) while bailing out the bathwater (Adult Phil and the ZZ Top Shotgunners).

I suppose it all makes for unique entertainment — God knows every other form of entertainment has been beat to death in the country of America’s Got Talent. But for those who are serious about public policy and the prerequisite politics, all the newly escaped worms and the entertainment buzz is another big distraction, sapping the focus and wasting precious time.

Which leads us back to the Green Party. Have you ever wondered how the Green Party got its name? Back in the day when I signed up, I assumed “Green” meant or at least implied that this was a political party all about environmental protection and its obvious aspects such as wildlife conservation, clean air and water, and (by now) climate stability. For me, fresh out of my Ph.D. research, protecting the environment was rapidly becoming the most important endeavor of the 21st century. This was no tree hugger’s tiddlywinks either. A long hard look will clarify for most that a healthy, stable environment is the foundation of a sustainable, prosperous economy, which in turn is the lifeblood of national security and international stability.

So when I joined the Green Party, I did so because I assumed this would be the party with an undeniable, indefatigable focus on environmental protection. Furthermore, also because of my research plus lengthy experience in environmental management and civil service, I had realized that environmental protection was all about stabilizing the human presence on the planet including the United States. I had realized that environmental protection entailed the establishment of a steady state economy.

And really that’s common sense, no?

Can you imagine my chagrin as the Green Party turned out to know quite little about environmental matters, less yet about natural resource management, and next to nothing about steady state economics? Worse, there didn’t seem to be much focus at all on the environment. The knowledge, passion, and focus was instead meted out to issues that I’m only going to describe, euphemistically, as “off center.” In other words it was a party for the disaffected of all sorts.

Most of us can empathize with the underdog. But there is a time and a place for everything, and as they say, all in moderation.

If your favorite pastime is empathizing with underdogs and you’d like to join a whole team of them, then by all means you should join the Green Party, at least if it hasn’t changed much since 2000. Just don’t expect any political success. On one issue after another, the Green Party goes way to the end of the political spectrum, usually the “left” end in American parlance. It doesn’t take a highly imaginative sense of geometry to realize that such a strategy quickly boxes you into the tiniest corner of the political world. It’s political suicide.

Now I have no interest in running for office, but if I were running with the Green Party, we’d be adopting a new slogan: “First Things First.” Everyone would know what that meant, by virtue of the Green Party’s name. The slogan would be intended to convey a new-found sense of focus on environmental protection.

Bayou

It’s about the bayou, not what’s said on the bayou (photo by Tom Haymes)

First things first — protect the environment and all the awesome potential of the United States can be achieved. Lose focus on the environment and the rug will be pulled from posterity’s future. It won’t matter if the grandkids are gay, duck hunters, or America’s Idol. They’re all gonna need clean air, clean water, a sustainable climate, healthy farms, forests and fisheries, and a bit of wild country for inspiration. They’ll all depend on what we do today for environmental protection.

First things first. Let the Huckabees and the Jindals and the Palins go picking up the worms let loose by Phil Robertson. Let the Charlie Sheens do their liberal lamenting and the A&E’s do their public relations dancing. Meanwhile, let Obamacare sap the energy of its ardent supporters and opponents alike. While you’re at it, let the NRA have at it with the police unions. None of those are dogs in your fight.

First things first. The Green Party is supposed to be about protecting the environment, and we need it. Democrats and Republicans aren’t doing it. Democrats tend to go with the “green growth” propaganda, claiming “there is no conflict between growing the economy and protecting the environment,” while Republicans just say heck with the environment and “drill baby drill.” Both parties are so tight with Wall Street and pro-growth, neoclassical economics that we can never expect sustainable economic policy, and therefore environmental protection, from them.

So at this point in history, Green Party, as you contemplate the New Year, and despite all prior shortcomings, it looks like you’re still the only game in town for providing a significant alternative to politics as usual. It remains up to you to focus on environmental protection. Regarding all those cans of worms, the default response of the Green Party ought to be adopting a central position so that environmental protection can come to the forefront as a decisive issue for the voters.

First things first! Time’s a wasting as green turns to brown, shade by shade. Forget about Ol’ Phil, metaphor for political distraction. Keep your focus on protecting the environment and saving the green space, and even the duck hunters down in Louisiana might vote for you.

Click here to receive the Daly News in your email inbox.

Do We Need a Steady State Economy? One Politician’s Surprising Answer

An interview with Andrew Weaver, distinguished climatologist and BC’s first Green MLA

by James Magnus-Johnston

As the concentration of atmospheric carbon dioxide reached the historic high of 400 parts per million, renowned climatologist Andrew Weaver became the first Green candidate ever elected to British Columbia’s legislative assembly. We chatted about politics, the perils of natural gas development, and the public appetite for a steady state economy.

Here’s a politician who thinks his constituents can handle an honest dialogue about climate change. Andrew Weaver doesn’t hide the facts or pander with the wishful thinking of infinite growth. His refreshing candidness might have something to do with his background as one of the world’s preeminent climate scientists.

Andrew Weaver Biographical SketchAs a mathematician, Dr. Weaver spent years modeling the climate and now has a long list of credits to his name. He has witnessed the climate take a turn for the worse recently, but remains an optimist who believes the problem is “entirely solvable with will and determination.”

CASSE doesn’t endorse any particular political party, but Dr. Weaver’s experience signals that sometimes a sophisticated debate about complex issues can be a winning political formula. Besides, he said, “the Green Party is not there to form government, but there to facilitate an informed dialogue.”

If B.C.’s Green Party were to one day aspire to govern, I wondered, would it adopt the mainstream agenda of “green growth?” Or would it move more seriously in the direction of a steady state economy?

On Science and Politics

The science of climate change has been “settled,” but political action remains elusive or — in the case of the fracking phenomenon — altogether misguided.

“The scientists have done their jobs,” said Weaver. “Now it’s time for politicians to do theirs.” His voice was hoarse from weeks of intense campaigning.

“I hope I can get some first-rate colleagues who are also willing to stand up and see if we can make a difference,” he stated, suggesting that it’s time for more scientists to become politicians.

“People will try to knock you down and say you’re doing it for selfish reasons, but I wanted to set an example.”

He senses a growing demand for intelligent debate and action on complex issues like climate change. “We don’t give the electorate enough credit,” he told me. “People are fed up with stock messages like ‘those Liberals did this’ and ‘the NDP did this’… you can’t just say ‘no tankers on the coast’ or ‘no’ to some other issue.”

I asked him how he would maintain a positive tone in the legislature. “I would like to see non-partisan caucuses on the environment. I think it’s possible. Progressive MLAs will want to work together — and I don’t mean progressive in terms of the left-right divide, but in terms of wanting to further their knowledge on issues.”

On Energy Policy

As with any campaign trail, Dr. Weaver was challenged by his constituents on a number of policy questions. I wondered which topics resonated with the electorate.

At doorsteps, he said folks wanted to talk about clean, locally-produced energy. They weren’t allergic to the language of economics, either. Dr. Weaver said he used phrases like “the carrot-and-stick approach,” “internalizing externalities,” and “fixing market failures.”

Amid euphoric talk of strong demand for Canada’s resources, he calls natural gas development a “pipe dream.” “Russia has twenty times more natural gas than Canada and they are already supplying gas to China. The U.S. is shifting to clean energy on the west coast, and Australia has abandoned offshore liquid natural gas extraction because they think there’s a price bubble.”

“Under [previous premier] Gordon Campbell, this whole cleantech industry grew and became leaders in the field, but they have lost their guidance”

Now B.C.’s elected officials, he explained, are essentially offering to subsidize natural gas for the Asian market, with little benefit to the provincial economy.

On the Steady State Economy

“Of course we will need something that resembles a steady state economy because it’s a finite world!”

I asked Dr. Weaver to consider the counter-argument: Gail Tverberg wrote recently that a global human population collapse is inevitable; that many animal populations throughout history have followed a pattern of exponential overpopulation and collapse.

“I don’t want to end up on that collapse trajectory and I don’t think we have to do that,” he responded.

Gail notes that human population numbers have correlated closely with energy use — just like economic growth. She argues that we’d have to go back to hunter-gatherer lifestyles to achieve a steady state economy.

She could be right. But why might she be wrong?

Dr. Weaver was quick with his response: “because we’re smarter than phytoplankton!” While phytoplankton or bacteria inevitably grow exponentially in a finite system, human beings are different for a very important reason. “We have brains! We can put men on the moon, we built the Internet! I’m sure we can keep from collapsing!”

There’s that “will and determination” he mentioned earlier.

“You absolutely have to live within your means — financially and ecologically.” He sees the steady state economy as a solution to the world’s most pressing problems. “I’ve been pushing for steady state forest policy and fish farming. Replacing the stocks at at least the rate of replenishment.” He also considers energy policies key to the steady state economy.

So, while Dr. Weaver is adopting elements of a steady state agenda, most political parties avoid the rhetoric of anything but growth when they’re seriously vying to govern. Would B.C.’s Green Party still advance the steady state economy if its chances of governing were to improve?

“Yes, that’s exactly the message that would enable us to form government down the road.”

Economics as “Unusual” in Australian Politics

by Robert Lawrence

An important event has been hardly noticed in Australian politics. But it could be the start of a trend to recognize and address causes of social and environmental problems rather than merely to struggle with the symptoms. Until recently economic growth, as measured by gross domestic product (GDP), has been the primary indicator of governmental performance, with alternatives virtually absent from the political discourse. At last one brave member of Parliament is changing that, unafraid to lead the way toward a steady state economy.

To understand the significance of this event, we need to get some perspective on the Australian political situation. There are two rival sides that differ mainly in rhetoric and in their strategies for winning support from voters. More than 90% of elected politicians belong to these two sides.

There are two houses of Parliament. One is the House of Representatives, which does the main business of government. The other is the Senate, which reviews the decisions of the House of Representatives. A group of Senators is elected to represent each of the six Australian states.

Voting is compulsory in Australia for citizens over 18 years of age. There is a preferential voting system in which every candidate must be ranked for a vote to be counted at all. Effectively this has meant that Australians ultimately had to choose between two political parties. In voting for the House of Representatives, votes for independent candidates and minor parties have rarely made an impact. The electoral system is built around the two parties. There is a review of electoral boundaries every seven years. Boundaries of electorates are redrawn so that there is a more even competition between the two major parties. The parties distribute leaflets on how to vote for their candidate, and these suggest an order of preferences for the other candidates.

The situation is different for the Senate, in which each of the six Australian states has its own set of candidates. This setup has given the minor parties and independent senators an opportunity to wrest some power away from the two main parties. This happened during the last national election when the Australian Greens and a small number of independents were able to cast deciding votes. This meant that citizens who voted for a minor party actually had a voice at last. A tax on carbon emissions commenced on July first as a consequence.

Australia has a free press. A common approach in the media has been to strive for a “balanced” view, which has generally been achieved by presenting extreme viewpoints on any given issue to contribute a public “debate.” The effect of this is to polarize the public, rather than to seek well-reasoned, informed decisions.

Another major factor in the political landscape is the opinion poll. Although polls can help politicians be more responsive to the electorate, they can produce undesirable consequences. Politicians become concerned about managing perceptions rather than governing from the best advice of their departments. Another consequence is that both the major political parties tend to become almost indistinguishable. One gives lip service to workers’ rights and the environment, while the other to business. In practice it is impossible to tell which is better in any aspect. Both major parties express disdain for each other and struggle to find ways to differentiate themselves for voters. Often “debate” deteriorates into personal attacks.

But one issue on which both major parties agree, as is the case throughout the western world, is the imperative of economic growth. Rising GDP is the unquestioned prime measure of success.

Conservationists have been dealing with the consequences of the growth-is-good dogma. They have taken the approach of running campaigns on specific, strategic issues that tend to address the symptoms of too much economic growth. One could argue that they have been afraid of being further marginalized as a lunatic fringe with no grasp of reality. At least population growth has recently made it onto the political agenda, but there has been near silence on economic growth.

Christine Milne understands the link between economic growth and environmental deterioration.

Christine Milne has been a Senator for Tasmania since the middle of 2005, and she became the leader of the Australian Green Party in April this year. There are currently nine Australian Greens in a house with 76 members.

Milne delivered a speech in late September in which she made some astute observations. She said that we can build an economic system that serves the needs of people and nature, both for today and for tomorrow. She quoted from a report of the World Economic Forum, “More with Less: Scaling Sustainable Consumption and Resource Efficiency”:

“Current trends clearly show that business as usual no longer works. Unless the present link between growth and the consumption of scarce resources is severed, our resource base, governance and policy structures are unlikely to sustain the standard of living societies have grown accustomed to or indeed aspire to. Action to decouple business and economic growth from resource intensity and environmental impact, has never been more critical to the long term success of business.”

Milne continued by suggesting that we reconsider who belongs to the lunatic fringe in our 21st-century economy:

“Surely it’s time that those who advocate economic growth derived from resource extraction and pollution as the major path be the ones labeled wacky, loopy, irresponsible, divorced from reality or connected to the CIA.”

She went on to question who actually benefits from pandering to mining companies while ordinary people are struggling to make ends meet. Her full speech is worth reading.

Where is this likely to lead? The media and politicians are completely out of their depth in considering an alternative to the perpetual growth paradigm. Such a change even seems to be beyond the scope of thinking of conservationists. Even members of the Australian Greens may have underestimated the significance of this speech. Almost everyone seems content to ignore this speech and go on as they have.

But now that a prominent politician has publicly questioned the dogma of growth, we’ve moved a little closer to a much-needed turning point in Australian politics. Thanks to Christine Milne for saying what needed to be said. How refreshing to see true leadership taking root within the barren fields of the Australian political landscape.

Robert Lawrence runs Heritage Bushcare, a small business that removes weeds to improve the condition of areas of remnant vegetation. He is also secretary of the Nature Conservation Society of South Australia and the Native Orchid Society of South Australia. He is the author of Start with the Leaves: A Simple Guide to Common Orchids and Lilies of the Adelaide Hills.

“Steady State Economy” — a Positive Vision in International Affairs

by Brian Czech

Before we think about the steady state economy, let’s think for a moment about economic growth. Economic growth still has such positive connotations in domestic politics, especially American politics, that the vast majority of citizens simply assume that whoever can do more for economic growth is the better statesman (man or woman), better Federal Reserve chair, better economic advisor, etc. That’s why the definition of economic growth bears repeating over and over again, to pull the magic cloak from a purely material process. Economic growth simply means increasing production and consumption of goods and services in the aggregate.

In other words, economic growth means increasing population, increasing per capita consumption, or both. There’s nothing magical about it. Economic growth means more and more “stuff” – green stuff, brown stuff, pink stuff — and it takes more “stuff” to make it happen. That’s pretty obvious for the agricultural, extractive, and manufacturing sectors. But service sectors, even the information sector, take more stuff to grow, too.

And stuff tends to run out. Peak Oil, Peak Water, Peak Everything as Richard Heinberg called it; Earth has only so much to go around. Earth is big, but so is 7 billion — the number of people in the global economy. More importantly, guess which one is still growing.

Economic growth is indicated by increasing GDP. In nations with big ecological footprints — the United States, Japan, Germany, China, Brazil — economic growth has long been maxed out within the borders. Huge economies have to reach across their borders for natural resources, and their pollutants go international too. Economic growth is increasingly questioned as a positive vision in international affairs.

Many if not most nations recognize that economic growth has become more of a problem than a solution from a global perspective. That’s why Herman Daly calls it “uneconomic growth.” Resource shortages, pollution, climate change, congestion, and biodiversity loss are all results and indicators of economic (or uneconomic) growth.

In other words economic growth, indicated by increasing GDP, has become a bad deal, at least at the global level. It was a good deal some decades ago when it cost us little in clean air, clean water, fish and wildlife, and peace and quiet. But now it’s a bad deal and we need to recognize it as bad.

Calling economic growth a bad thing doesn’t make the steady state economy a negative vision. Far from it. In fact, when economic growth is a bad thing, only an alternative to growth can be a good thing, right?

So what are the alternatives to economic growth? This is where sticking to the standard, textbook, policy-relevant definition of economic growth comes in handy. Again, economic growth is increasing production and consumption of goods and services in the aggregate, indicated by growing GDP. So we have only two basic alternatives: decreasing production and consumption of goods and services in the aggregate, or stabilized production and consumption of goods and services in the aggregate. The former results in declining GDP and the latter in stabilized GDP. The former is called “recession.” The latter is called a “steady state economy.”

Of these, which one sounds like the better deal? Which one evokes the more positive image? Which one should be advocated as the solution to the problem of economic growth?

I’ll go out on a limb and say it’s the steady state economy.

Fortunately, I had the opportunity to test this hypothesis at the 20th anniversary of the Earth Summit, otherwise known as “Rio+20,” from June 20-22. There in Rio de Janeiro I talked with dozens of delegates from countries ranging in GDP from the gargantuan United States to the diminutive Comoros. Here’s what I found: nearly all favored the steady state economy as the positive solution to the problem of economic growth. Nearly all saw continuous economic growth as bad and the steady state economy as good.

That’s right, nearly all!

Doubt it? Think again. These diplomats ain’t no dummies. They know full well the planet is filling up with people and stuff, and that many national economies are beyond their sustainable levels.

Of course, there are exceptions. Some diplomats have the intellectual disadvantage of a background in neoclassical economics, leading them to believe there is no limit to economic growth. They can’t defend such a fallacious hypothesis, but they still believe it.

Then again, not all diplomats who agree about limits to economic growth will formally acknowledge such agreement. A distinct tendency was clear in Rio: wealthy-nation delegates were afraid to buck the party line of economic growth except in private conversation. The reasons should be obvious. In the United States, for example, we have Wall Street, the Federal Reserve System, and the Department of Commerce pushing hard for economic growth. No one should underestimate the power of these players to influence the language of statesmen, political appointees, and bureaucrats.

In small nations with widespread poverty, on the other hand, the general public, professional diplomats, and elected politicians have one thing in common: they’ve all experienced the unfairness of global economic growth and pro-growth policies. When it comes to natural resources, smaller countries tend to be deal takers, not deal makers, and the terms of trade are harsh.

That’s why the CASSE position on economic growth has garnered signatures from numerous small-country diplomats, ministers, and other delegates in international affairs. In Rio, I found delegate after delegate supportive of steady state economics for international diplomacy. Many were from African, South American, and Asian countries far removed from Wall Street and wary of international pro-growth institutions such as the World Bank, International Monetary Fund, and World Trade Organization. I got the succinct impression that, if only we had the time and access to all diplomats of the world, and even to heads of state, we would find the vast majority of them calling for steady state economics just as the CASSE position describes. That means starting in large, wealthy countries and gradually expanding to other nations after an opportunity to catch up in per capita consumption, at least to a reasonable degree.

Yet many activists, scholars, and ‘think-tankers’ are afraid to talk openly in public about the steady state economy, much less to go on record as supporting it. They think the phrase “steady state economy” has negative connotations. They think this makes the steady state economy too difficult to promote.

The fact is that any macroeconomic goal (growth, steady state, recession) has negative connotations. It’s time to pick your negative connotations!

Some may think that negative connotations can be avoided by the use of feel-good rhetoric such as “green,” “blue,” or “new” economics. I hate to burst the bluegreen bubblegum, but these too have plenty of negative connotations. This was evident in Rio. “Green,” “blue,” and “new” are seen by diplomats for what they are: rhetorical ploys to skirt the tough issues we face in the real world.

Long-time explicit advocates of the steady state economy could, I suppose, be accused of a biased opinion. But I know what I saw in Rio: delegates almost invariably connected quickly with the phrase “steady state economy.” Although it’s a phrase that requires some thought for translation to other languages, it makes so much common sense that the translation occurs alright. For example, the CASSE position on economic growth is already posted in 19 languages. After all the followups from Rio+20, it will also be posted in Chinese, Turkish, Hindi, Bangladeshi, Japanese, and Hungarian.

In political science, a central principle is name recognition. All else equal, the name recognized is the name favored. This applies to politicians, policies, and platforms. That’s why it matters when a professor, activist, diplomat, minister, or head of state chooses a label for a particular economic goal. “Green” has name recognition, but its meaning is fuzzy. “New” has little recognition or meaning, at least as applied to economics. “Steady state economy” has modest recognition, so far, but it clearly expresses the primary principle; a stabilized economy that is neither growing nor shrinking, but fluctuating around a sustainable level.

“Steady state economy” is a positive, proactive phrase that’s productive in international affairs. It has decades of academic reputation from the work of Herman Daly and others. It speaks clearly of the need to stabilize the size of the human economy. It has plenty of backing by dignitaries in sustainability science, policy, and diplomacy, and the list of dignitaries (not yet updated from Rio) is growing fast. We should encourage the purveyors of “green,” “blue”, and “new” economics to adopt it.

Aren’t there reasons enough?

Rescuing Obama from the Slippery Slope

by Brian Czech

One year ago this week I wrote that Barack Obama had finally done it. He had taken the tantalizing trail to a notoriously slippery slope. In an op-ed for the Wall Street Journal, he promised, “federal agencies (will) ensure that regulations protect our safety, health and environment while promoting economic growth.” In other words, we would have our environmental cake and eat it too, for the sake of economic growth.

For some time after the op-ed, Obama did little to promulgate this win-win rhetoric, and those of us who prefer the truth, the whole truth, and nothing but the truth regained some hope. Economic growth is a serious topic, and so is environmental protection. We’d like Obama to come clean and tell it like it is: There is a fundamental trade-off between economic growth and environmental protection.

Maybe the truth about economic growth and environmental protection doesn’t make for an easier choice between the two, but what kind of a choice can be borne of a lie?

Now it’s fairly reasonable for Obama to say, as he did last month in a speech to EPA employees, that “Safeguarding our environment is also about strengthening the economy.” There is no doubt that safeguarding our environment protects the strength of the economy. But Obama’s exact wording is a stretch because strengthening usually connotes growing the economy. That cannot be done while truly safeguarding the environment. Economic growth — increasing production and consumption of goods and services in the aggregate — does and must have a growing environmental impact. That’s Ecological Economics 101.

Obama fell further down the slippery slope with “I do not buy the notion that we have to make a choice between having clean air and clean water and growing this economy in a robust way. I think that is a false debate.” But I don’t buy the notion that Obama is that oblivious to the truth. Surely he knows our skies, rivers and oceans gradually fill with the byproducts of production and consumption. But as with all politicians, he also knows that the average voter doesn’t detect the dulling of the skies or the graying of the waters during the course of one electoral cycle. So he hunkers down on the slippery slope, content in avoiding the attention of a really inconvenient truth.

Once in awhile, though, a spotlight shines on the slope, such as in Sunday’s Washington Post article by Juliet Eilperin, “Obama administration slows environmental rules as it weighs political cost.” Rules aimed at curbing auto emissions are on hold, as is a proposal to regulate soot, because of the toll these and other environmental protections would take from the rate of economic growth. In other words, the administration knows darn-tootin’ well that bona fide environmental “safeguarding” can’t be reconciled with economic growth. They also suspect that the political cost of prioritizing environmental protection over economic growth at this point in history is more than they are willing to pay.

Maybe it wouldn’t be so bad, this prioritizing of economic growth over environmental protection in a world of endangered species, oil spills, and climate change, if only presidents who model themselves after Ol’ Abe Lincoln were at least forthright about the trade-off between economic growth and environmental protection. Why can’t Obama just come out and say, “I realize that the #1 concern among Americans today is jobs. That’s why I’m doing all I can to help grow the economy. And I’ll continue to do this, as long as we realize that growing the economy does have a growing impact on the environment too. So while we’re growing the economy today, we must turn some of our attention to how we can transition tomorrow to a stable economy, or what they call a ‘steady state economy.’ That’s the vision of the future, and the sooner we explore it, the more prepared we’ll be.” Or something like that? At least then we could respect him for telling the truth on economic growth and environmental protection.

Would that really get him unelected? Who says? How do they know?

But the truth-telling onus is not entirely on Obama. Frankly, I think we should be far more disappointed with the many “environmental” organizations and agencies who themselves pollute the internet and airwaves with the win-win wimpsmanship. They’re the ones who could empower Obama to tell it like it is without being so worried about political consequences. As it is now, it’s hard to blame Obama for fearing the role of Lone Ranger in a wilderness of intellectual laziness.

It’s too late in this article to elaborate on these organizations and what their problems are, but count on it for another day in the Daly News.

Defusing the Debt Bomb

by James Johnston

If it didn’t have such explosive consequences, you’d have to laugh at the comedy of errors unfolding in the U.S. political arena. Politicians are proposing farcical “solutions” to the debt crisis in a competition to see who is better at pandering to the electorate. Are citizens really supposed to believe that raising taxes or cutting expenditures will provide meaningful relief on ballooning bank-inherited interest payments — payments so stratospheric that the human mind lacks a conceptual reference point for them? Each and every government service could be cut and it still wouldn’t help pay off the debt. The problem can’t be solved by reining in an overgrown government bureaucracy because much of it was created by an unregulated, overgrown banking system.

On the advice of conventional economic sages, we are to believe that the “credit crunch” is an event that took place in the past, with the words “growth” and “recovery” being used instead. But the transfer of debt from the private sector to the public sector in 2008 has merely postponed the inevitable detonation of a debt bomb that started ticking many years ago. If the government manages the bank-inherited debt in such preposterously piecemeal terms, it will never be paid off. Propping up the same broken banking system won’t solve the problem and will eventually cause history to repeat itself.

Only meaningful regulatory and monetary reform — reform that lowers the leverage ratio of lenders and discourages irresponsible gambling with the money earned by average people — can truly diffuse the debt bomb and prevent this from happening again. The result will increase the stability of the financial system and bring us closer to an economic steady state. But it means that we have to give up our collective obsession with the meaningless, self-destructive growth provided by an overgrown banking sector. First, government leaders must stop celebrating the growth of debt-inflated GDP figures like unthinking, euphoric addicts.

How we got here

No one can pinpoint the causes of the Great Depression with certainty, but prominent economist Irving Fisher argued that the predominant catalyst was over-indebtedness and speculation, which fuelled asset bubbles (Fisher, 1933). Sound familiar? After the Great Depression, the U.S. government initiated reforms based on Fischer’s explanation of the problem. The purpose was to avoid another debt-driven crisis. New regulations prevented bankers from speculating with depositors’ savings, and the U.S. economy experienced many years of prosperity without financial crisis. Investment banking was a more conservative endeavor and savings and loan funds were not used for speculation or risky business investing.

Fast-forward half a century. During the 1980s, the deregulation of banking allowed savings and loan banks to make increasingly risky bets with borrowers’ money. Some banks failed during the savings and loan crisis, yet the process of deregulation continued. Meanwhile, bankers’ wages skyrocketed. So-called new financial “products” facilitated speculation and fueled an illusion of growth and prosperity. The illusion enshrouded bankers in a mystical aura. Everything they touched turned to gold, and politicians and citizens began to regard them as sages. Only the most intelligent people, one might suppose, could create so much wealth so quickly.

The illusion of growth produced illusions of stability and prosperity; bad decisions were rewarded while lessons from history were either disregarded or forgotten. In 2008, as the American economy inched uncomfortably close to detonation, the big banks revealed that the debt bomb was much larger than initially thought. Still the regulatory bomb squad sat idle. At no point did they come up with a useful plan for truly defusing it — it was simply postponed through the transference of debt. This occurred in spite of the risks associated with a pending disruption of the monetary system: the potential disappearance of savings, the foreclosure of homes, disruptions in the flow of goods and services, and unemployment. As a bomb counting down to detonation, here is the timeline we need to bear in mind:

  • At ten seconds to detonation, advances in computing technology allow for “bankers” (many of whom were in fact physicists and computer scientists) to create investment products called “derivatives,” products that Warren Buffet called “financial weapons of mass destruction.”
  • At nine seconds, the financial sector consolidates into gigantic firms — something that was illegal following the Great Depression. Laws are changed under the guise of “modernization,” paving the path for the debt economy to balloon (and for history to repeat itself). Attempts to regulate derivatives fail and banking practices become increasingly risky.
  • At eight seconds, the euphoria reaches new heights. Loans are used as a means of generating investment funds for large banks. It becomes harder to track the risk associated with certain kinds of debt, as they are lumped together into an untraceable electronic mass (including commercial and residential mortgages, car loans, student loans, credit card debt and corporate debt). The products — “collateralized debt obligations” or “CDOs” — are given high ratings by credit rating agencies.
  • Seven seconds. Despite high ratings, many of the loans held in these portfolios are borrowed by people who cannot repay them. The banks don’t care, however, because insurance and default mechanisms allow them to avoid repaying any of the bad loans they issue. Besides, they argue, defaults like that are historically unprecedented.
  • Six seconds. As dot-com stocks crash due to over-speculation, investment money flows into sub-prime mortgages, which become all the rage. Mortgages reach their highest prices in history and home values skyrocket around the country. Indeed, many countries around the world see home values spike faster than ever. In the process, big financial firms (including JP Morgan, Credit Suisse, Citibank, Freddie Mac/Fannie Mae and UBS) defraud their borrowers to push profits ever higher.
  • Five seconds. The leverage ratio between borrowed money and reserve money reaches new heights (from 20:1 to 30:1). For every dollar a bank has, it loans out 20 to 30 times that amount. Limits on leverage are relaxed, enabling banks to bet more with the money of depositors.
  • Four seconds. U.S. home prices double over their 1986 levels. The IMF and a handful of economists warn of crisis.
  • Three seconds. Big firms declare bankruptcy and the giant debt bureaucracy (the big banks) take a tumble.
  • Two seconds. As if covering a bomb in duct-tape, the U.S. government bails out the banks and transfers debt from the private sector to the public sector, tripling U.S. debt overnight. And yet, the same system that caused the crisis is propped up.

At this point in history, with the debt reaching more than 14 trillion dollars, U.S. leadership has a choice between defusing the bomb with meaningful regulatory and monetary reform — reform that lowers the leverage ratio and punishes irresponsible institutional gambling — or further bandaging a broken system that meaninglessly consumes government expenditures and cripples the real economy to the benefit of big banks. Choosing the latter will again postpone the inevitable, maintaining an unstable economic status-quo obsessed with illusory growth derived from debt-inflated GDP.

If the U.S. government refuses to defuse the bomb now, it will explode in the foreseeable future as risky banking practices continue and interest payments (penalties for past mistakes) soar to super-stratospheric heights. The irresponsible actions of financially bloated bankers are being overlooked by a government distracted with irrelevant ideological arguments. When the debt bomb finally detonates, those responsible will likely avoid the fallout in the comfort of their unjustifiable excess. And while average people can try to shield themselves by minimizing their exposure to the debt-inflated growth economy, they will undoubtedly suffer the most. If only those elected to represent their interests would overcome petty illusions and turn their attention to more critical reforms than cutting and taxing.