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The dawn of a disturbing new reality
Carola Hoyos, Financial Times
In the past month, the world has witnessed one of the largest financial and economic upheavals in a generation. The fallout may have been most immediately felt on Wall Street, but the effect on energy, and perhaps even the environment, will also be profound.
Christophe de Margerie, chief executive of Total, the French oil company, who usually argues for governments to get out of the way of those trying to bring enough energy to the market to satisfy demand, this week said recent events meant lawmakers needed to consider extending a helping hand to environmentally friendly energy sources and technologies made uneconomical by falling oil prices.
Executives say environmental initiatives such as carbon capture and storage must not be abandoned and oilfields need to be developed in an as environmentally friendly way as possible. But Chevron has already warned that Australia’s cap and trade initiative could make the development of the Gorgon gas field uneconomical.
Royal Dutch Shell has dropped its proposed investment in plans to build the world’s biggest offshore wind farm, the London Array, to concentrate on less risky US onshore wind power.
(3 November 2008)
Cassandra’s lethal paradox
Andrew Simms, The Guardian
Darling must re-engineer the economy in the face of a triple crunch of credit, oil and climate
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… however brazenly bank executives keep manoeuvring to preserve their pay packages, the bonuses will bounce like dead cats – because the old economy can’t bounce back. Its two key sources of fuel – credit and oil – are drying up, or were never really there in the first place.
For decades, the mainstream dismissed the environmental movement as a “bunch of Cassandras”, unaware that Cassandra’s lethal paradox was to be right, but to be cursed to be disbelieved. Now the gods themselves admit that peak oil is imminent. In a report entitled the Medium Term Oil Market, the International Energy Agency – an official adviser to most of the major economic powers – said there will be “a narrowing of spare capacity to minimal levels by 2013”. Next week it is expected to announce an even worse prognosis.
The real question for Darling, King and Turner is: how do they re-engineer a wealthy, advanced economy in a few short years, and in the face of an unprecedented triple crunch?
(4 November 2008)
Equity, Equity, Equity
Sharon Astyk, Casaubon’s Book
The single biggest issue facing the next president – and he’s going to have to deal with it one way or another – is going to be the question of Equity. That’s a subject that hasn’t made it to the national table in a very, very long time.
Why equity? Well, first of all, we’re entering a major Depression, not a little tiny economic downturn, but a crisis. And what happens in major economic crises is that people get very poor, often hungry, cold and scared, and they get angry. And there’s a lot to be angry about.
… The truth is that most research about hard times shows that most people are willing to do what is necessary to deal with a situation – but their primary concern is equity – justice and fairness. That is, people will make do with rationing, with great burdens and difficult times – they will even find coping mechanisms and what historian Timothy Breen calls “rituals of non-consumption” that compensate them for the consumption they used to engage in. What they won’t tolerate is injustice and unfairness. This is the conclusion of a recent book about Britain during and after WWII, reviewed here:
(3 November 2008)
Revenge of the Left across the world
Ambrose Evans-Pritchard, Telegraph
Whatever the exact result of the US elections tomorrow, we must assume that the whole governing machinery of Washington and the state capitols will soon be hostile to laissez-faire thinking.
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It is not just that the Democrats will win a crushing victory in both houses of Congress, perhaps reaching the 60-seat Senate threshold that lets them steam-roll legislation. It is also that the incoming class of 2008 is of a new creed. Many no longer believe – or actively reject – the free trade and free market catechisms.
As commentator Markos Moulitsas put it in Newsweek: “The big question is, will Democrats nationwide simply ‘win’ the night–or will they deliver an electoral drubbing so thorough that it signals the utter rejection of conservative ideology and kills the notion that America is a ‘center-right’ country?” he said.
No matter that statist policies were responsible for this global crisis in the first place. It was Western governments that set interest rates too low for too long, encouraging us all to abuse credit.
… But at this point I have given up hoping that we will draw the right conclusions from this crisis. The universal verdict is that capitalism has run amok.
In any case the damage caused as credit retrenchment squeezes real industry is likely to be so great that Barack Obama may have to pursue unthinkable policies, just as Franklin Roosevelt had to ditch campaign orthodoxies and go truly radical after his landslide victory in 1932. Indeed, Mr Obama – if he wins – may have to start by nationalizing the US car industry.
For those who missed it, I recommend Edward Stourton’s BBC interview with Eric Hobsbawm, the doyen of Marxist history.
“This is the dramatic equivalent of the collapse of the Soviet Union: we now know that an era has ended,” said Mr Hobsbawm, still lucid at 91.
“It is certainly greatest crisis of capitalism since the 1930s. As Marx and Schumpeter foresaw, globalization not only destroys heritage, but is incredibly unstable. It operates through a series of crises.
“There’ll be a much greater role for the state, one way or another. We’ve already got the state as lender of last resort, we might well return to idea of the state as employer of last resort, which is what it was under FDR. It’ll be something which orients, and even directs the private economy,” he said.
Dismiss this as the wishful thinking of an old Marxist if you want, but I suspect his views may be closer to the truth than the complacent assumptions so prevalent in the City.
(3 November 2008)
I recommend the BBC interview with Eric Hobsbawm highly. No matter where you stand on capitalism vs socialism, it’s important to understand how things are changing. -BA
