Green Capitalism The God that Failed

Richard Smith, an economic historian, has written an amazing article which I have only just discovered, (thanks to the wonderful people on our Facebook group).

He comprehensively dismisses green capitalism, as recommended by people like Paul Hawken and Amory Lovins. He says green growth is a completely blind alley, a God that failed. You can't shop your way to sustainability.

He describes scary scenarios for a four degrees global warming, notes the lack of progress on reducing emissions over two decades and concludes that there is something wrong with capitalism itself. "From Kyoto to Cancun, governments have all made it abundantly clear that they will not sacrifice growth today to save the planet tomorrow."

Cap and trade usually gets watered down. This is because there is such a huge range of occupations that negatively affected by it that the lobby opposing it is too broad and too powerful. The theory was nice. The cap was supposed to come down over time, but industry lobbyists in Germany badgered the government for higher caps and special exemptions of all sorts. "They warned of unemployment, threatened to pack up and leave Germany and so on.  In the end governments caved." So in the market solution – cap and trade – profits ended up with the polluters and traders.  He says even carbon taxes when implemented can never be set at high enough levels to make a difference. And it makes no difference if it is revenue neutral or not.

Smith writes,"But the problem is not just special interests, lobbyists and corruption. And courageous political leaders could not turn the situation around. Because that's not the problem. The problem is capitalism.....There is no way to cut CO2 emissions by anything like 90 percent without imposing drastic cuts across the board in industrial production. Because we live under capitalism, not socialism, no one is promising new jobs to all those coal miners, oil drillers, gas frackers, power plant operators, farmers and fertilizer manufacturers, loggers and builders, auto builders, truck drivers, airplane builders, airline pilots and crews and countless other occupations whose jobs would be at risk if fossil fuel use were really seriously curtailed."

This book reminded me of Naomi Klein's This Changes Everything in that it clearly states the problem is capitalism.

The article was written two years ago. During the last eighteen months the price of oil has declined 70% and now hundreds of thousands of oil workers have lost their jobs. Soup kitchens in Aberdeen are feeding former oil workers and tens of thousands of jobs continue to be lost in Alberta and North Dakota and Texas alone. In Nigeria 120,000 jobs have been lost. This month the New York Times put the global figure at 250,000 jobs lost. Meanwhile, and connected with this, the global economy is under severe threat of a complete meltdown, and central banks clamber to find yet another way to calm the markets, always by injecting more debt into the system.

So what answers does Smith come up with? He offers eco-socialism. A quick look at their website indicates they would nationalise the fossil fuel industry and the industries that are heavily based on them which means the auto industry, aircraft and airlines, petrochemicals, and so on.

So while it is wonderful to see Richard Smith facing the political realities of climate change, overconsumption, waste and pollution, there is another step or two he could take. He could ask, "And is there something structurally in the system that has demanded this incessant growth? Is growth written into the system? Which system? And if so can that be reformed?" Now Richard Smith may know this. I wonder if he also knows you have to transform the land tenure system if you change the money system, since the first reform demands the second. When you know about the money system you often wish you didn't – that you could put the genie back in the bottle, so to speak. The corporates, as TPP has shown us, are more powerful than ever before in history and that changes the political landscape and our strategies. Few centralised solutions are now politically possible.

In our movement we have been struggling for over four years to work out some politically viable solution to our massive global problems. Maybe nationalising all these industries doesn't get to the bottom of the problem. We need elegant, more lasting solutions.

Anyway his article is superb as far as it goes. He also has a book of that name.
http://www.worldeconomicsassociation.org/downloads/green-capitalism-the-god-that-failed/ is the e-book

And here’s a review of the book: http://www.truth-out.org/opinion/item/31959-book-review-green-capitalism-the-god-that-failed

At last a good explanation for the rise of ISIS

Thank you, thank you Jim Tankersley of the Washington Post. You have finally answered the question about why people from the Middle East feel so bad about the west that they need to commit dastardly acts of terrorism. I don't have friends who are experts on the Middle East's inequality and Piketty has spelt it out for us so well. Finally! Your article should be read by everyone. You say the inequality is due to the concentration of oil wealth into a few countries with relatively little population. You draw attention to the oil monarchies controlling 60-70% of the wealth. It seems he is talking about Qatar, the United Arab Emirates, Kuwait, Saudi Arabia, Bahrain and Oman. They had 16% of the region's population in 2012 and almost 60% of its Gross Domestic Product. Within those monarchies, Piketty says, a small slice or people controls most of the wealth while a large proportion, including women and refugees, are kept in a state of 'semi-slavery'.  Piketty's list starts with the first Gulf War, which resulted in allied forces returning oil 'to the emirs.' The wars that benefited only a select few have become what Piketty calls a 'powder keg for terrorism across the region'. Tankersley writes 'Terrorism that is rooted in inequality is best fought economically.' Piketty says the region is the most unequal on the planet. And Piketty says the Western nations largely have themselves to blame for terrorism as the west perpetuated the wars that worsened inequality. 'The countries in question are the regimes that are militarily and politically supported by the Western powers, all too happy to get some crumbs to fund their (soccer) clubs or sell them some weapons.' It looks like this is what Piketty will be remembered for. The discussion is only just beginning. Of course this brings us to searching for the real political solution, otherwise terrorism will persist for ever. I am reminded of the first part of Silvio Gesell's wonderful 1906 book The Natural Economic Order. The part is called Free Land and he writes,' Free Land means that the earth is to be conceived as a globe on which there is no import or export of goods. Hence Free land also implies universal free trade and complete elimination of all tariff boundaries. National boundaries must become simply administrative boundaries, such as, for instance, the boundaries between separate cantons of Switzerland. From this description of Free Land it follows that such expressions as 'English coal, 'German potash', 'American oil and so forth can be understood only in a geographic sense. For everyone, no matter to what race he may belong, has the same right to English coal, German potash and American oil.' Work this out, using the principle of sharing the rents from the earth's resources. Quite a challenge.  

The Simplicity Option

“Simplicity is the ultimate sophistication.” – Leonardo da Vinci

Since the industrialization of society over the last two hundred years, humans have physically and mentally remained unchanged. We have, however, surrounded ourselves with accessories, added layers of complexity, and confusion in our lives. This urbanization has reduced humanity’s connection with nature.

Connection to the land and natural environment has been replaced by freeways, cities, concrete landscapes, and technological gadgetry that bring little solace and opportunity for reflection for individuals. Inner peace and happiness can be hard to find in a world of constant diversion and distraction. The ability to witness nature and live in harmony with the natural cycles provides unquantifiable experiences for those living a resilient life.

The 2010 Living Planet Report, based on the scientific research of the Global Footprint Network, reports humanity’s ecological footprint now exceeds the planet’s sustainable carrying capacity by 50 percent. In other words, human beings are now consuming ‘natural capital,’ which is diminishing the capacity of the planet to support life into the future. The propaganda and ideology that many economists, governments, and business people have been espousing in an effort to continue exploitation of resources is that developing countries can have similar standards of living to those in the West. The reality is that the West has been exploiting developing countries’ resources to fund our resource intensive lifestyles for many decades.

Think about this for a second. If the expected 9 billion people were to enjoy the “living standards” forecast for Western countries such as Australia, Canada, U.S., U.K, or Europe by 2050 (assuming 3% yearly economic growth), the world’s total consumption would be about 30 times as much as it is now. That would mean 30 times greater use of land, soils, trees, forests, minerals, fishing, energy, etc… With already stretched and depleted natural resources and ecosystems, this scenario would most likely end in ecological catastrophe.

Dr. Ted Trainer, senior Lecturer in the School of Social Sciences at the University of New South Wales in Australia, has been teaching about sustainability for many decades. He suggests:
It is difficult to see how anyone aware of these basic numbers could avoid accepting that people in developed countries should be trying to move to far simpler and less resource-intensive lifestyles and economies. The decreases might have to be around 90% – something that can only be achieved through dramatic reductions in production, consumption, and economic activity. To transition to a low energy society which resembles our current high energy model will be a significant challenge and highly unlikely. The enormity of the transition to alternative fuels and/or technologies will require a coordinated approach on an unprecedented scale. It would require vast amounts of resources and capital investment. (1)

Enter Voluntary Simplicity

As reported in the Melbourne Age, a growing number of people in the “voluntary simplicity” movement are choosing to reduce and restrain their consumption – not out of sacrifice or deprivation, but in order to be free, happy, and fulfilled in a way that consumer culture rarely permits. By limiting their working hours, spending their money frugally and conscientiously, growing their own vegetables, sharing skills and assets, riding bikes, rejecting high-fashion, and generally celebrating life outside the shopping mall, these people are new pioneers transitioning to a form of life beyond consumer culture. (2)

An Institute For Simplicity

There is even an Institute for Simplicity. The Simplicity Institute is an education and research centre seeking to:
  • seed a revolution in consciousness that highlights the urgent need to move beyond growth-orientated, consumerist forms of life.
  • envision and defend a ‘simpler way’ of life at a time when the old myths of progress, techno-optimism, and affluence are failing us.
  • transform the overlapping crises of civilisation into opportunities for ‘prosperous descent’

Goals of the Simplicity Institute

“To change something, build a new model that makes the existing model obsolete.” – Buckminster Fuller
SAMSUNG CAMERA PICTURESThe global economy is undermining the ecological foundations of life, producing perverse inequalities of wealth and spreading a cultural malaise as ever-more people discover that consumerism cannot satisfy the human craving for meaning. While industrial civilization continues this inevitable descent, humankind is being challenged to reimagine the good life, tell new stories of prosperity, and get to work envisioning and building a new world within the shell of the old. Genuine progress towards a just and sustainable world requires those who are over-consuming to move to far more materially ‘simple’ and less energy-intensive ways of living. This does not mean deprivation or hardship. It means focusing on what issufficient to live well, and creating new cultures of consumption, new systems of production, and new governance structures that promote a simpler way of life. Our basic needs can be met in highly localized and low-impact ways, while maintaining a high quality of life. The Simplicity Institute seeks to provoke a broader social conversation about the need to transition away from growth-based, consumer societies toward more resilient, egalitarian, and rewarding societies based on material sufficiency and renewable energy. Rethinking growth, capitalism, and consumerism in an age of environmental limits and economic instability cannot be avoided. The only question is whether it will be by design or disaster. (3)

To find out more about the Simplicity Institute CLICK HERE

  Article by Andrew Martin, author of  Rethink…Your world, Your future. and One ~ A Survival Guide for the Future…  RethinkcoverCE2Sources: excerpts from Rethink…Your world, Your future.  facebook (1) http://theconversation.com/the-simple-life-manifesto-and-how-it-could-save-us-33081 (2) http://www.theage.com.au/it-pro/the-simple-life-has-benefits-for-us-all-20120315-1v6f7.html#ixzz3jmqytmtA (3) http://simplicityinstitute.org/

Bubble finance, junk energy bonds, oil derivatives being neglected by mainstream media

Those who still think the plummeting price of oil is a good thing for the economy are taken in by PR spin or the simple lack of coverage in the mainstream media. It is not about consumers having lower petrol prices and more in their pocket. It’s not even about the energy. It’s about the money, the financial structure of the oil industry, particularly for the wildly speculative ventures like shale oil extraction. Environmentalists will see low oil prices as bad news for climate change but they need also to look at the way these energy shale firms are financed and learn about things they don’t want to know about, like junk bonds, leveraged loans and derivatives. It causes more immediate pain and must be survived first. WTI to 12 Dec 2014The relentless slide continues. As of Monday 15 December in New Zealand the price of WTI oil was $56.73, down over 47% since June this year. Unfortunately in New Zealand we are being shielded from all this bad news. Bubble finance is not a sexy topic for a front page. During the last week the Dominion Post, national radio, Sunday Star Times had nothing, and a business programme on Radio Live on Sunday touched on everything but the junk energy bond issue or the derivative issue. The programme gave the impression the only place to invest was in shares, bonds or fixed interest. When the derivatives market is so enormous, this is a major omission. It’s not as though the media believe the public won’t be able to understand junk energy bonds or derivatives. The corporate owned media only gives us bad news when it is about crime. OK let’s try and explain it. There are four major risks of plummeting oil prices. The first is the risk to junk energy bonds held by pension funds, mutual funds and governments. Second is the secondary oil market, including the risk associated with a variety of oil derivatives contracts held by big banks. The third is the social unrest in oil exporting countries like Venezuela, Russia. And a fourth is the ongoing and contagious decline in prices of a range of other commodities – iron ore, copper, milk powder. Let’s just deal with the first two, though the fourth one is dealt with in passing. 1. Junk energy bonds. What on earth are these, you might ask. They are the risky bonds that energy companies sell to help finance their operations. The bonds give you high returns but they are also high risk as they are unsecured loans. That risk-taking now comes home to roost. For a new venture now the bank will lend you less because the oil in the ground as their security is now worth less. In December 2014 the oil is worth only about half what it was six months ago. So you have to get more of your funding from junk bonds. You end up shelling out more in interest and what’s more you get less in revenue from the sale of your oil. Michael Snyder says “The impact of lower oil prices has been felt directly by high yield energy bonds and since September they have posted a return of -11.2%. J P Morgan has warned that if oil prices stay at $60 a barrel for three years 40% of the junk bonds could be facing a default.” Of course other companies finance themselves using junk bonds (as well as bank loans at a low interest rate and their own revenue stream). The energy sector accounts for over 17% of the high yield bond market (junk bonds) and when these are hammered apparently a stock market decline always follows. It’s not a small sector either. Analyst Wolf Richter says there are $210 billion of them. So they have to sell more bonds. Unfortunately now fewer investors want to buy the risky bonds so that means the yields go up to make it more tempting for investors. As the debt markets dry up and profits fall due to cheaper oil, the funding gap widens. It was all beautifully explained in October 2014 when oil prices were $85/barrel here Who loses from this? The investors. And those employed in the oil industry as smaller or more indebted firms are less viable than others. And that is just the start. But it isn’t only junk energy bonds being affected now. As the Financial Times told us on December 12, “Investors are fleeing the US junk debt market as a selloff that started in low-rated energy bonds last month has now spread to the broad corporate debt market amid fears of a spike in default rates.” Woops, that wasn’t meant to happen. 2 Oil derivatives. Like other industries over the last few decades of financial wizardry, the oil industry has been financialised. Remember when housing debt was bundled up by the banks, securitised, divided into tranches according to risk, and sold off? It was to increase the profits of the banks. You just pass the risk on. The bonds are sold to unwary buyers who don’t realise the risk for massive losses. The whole process was enabled by rating agencies who rated junk bonds (the risky ones have high returns) as A++. A great movie explaining all this was The Inside Job. Now we have version 2 of the same script. Instead of CDOs (Consolidated Debt Obligations) we have got CLOs (Consolidated Loan Obligations) – just a different name this time. It’s what is called ‘leveraged loans.’ The 6 largest ‘too big to fail’ banks control $3.9 trillion in commodity derivatives contracts. A large portion of this is in energy. And the big banks of the world are on the other end of derivative contracts. One of the headlines of a tweet going round is “Plummeting Oil Prices Could Destroy The Banks That Are Holding Trillions In Commodity Derivatives” There is nowhere to hide. As the entire global economy is dependent on the six biggest banks, we will all be affected, even in New Zealand. The Oil Industry is not just any old industry Writing on Zero Hedge in October when oil was $75/barrel, Michael Snyder explains the huge investment of the energy industry in both capital expenditure and R&D. He quotes the Perryman group on the economic effects of the oil industry in US alone: If you think about the role of oil in your life, it is not only the primary source of many of our fuels, but is also critical to our lubricants, chemicals, synthetic fibers, pharmaceuticals, plastics, and many other items we come into contact with every day. The industry supports almost 1.3 million jobs in manufacturing alone and is responsible for almost $1.2 trillion in annual gross domestic product. If you think about the law, accounting, and engineering firms that serve the industry, the pipe, drilling equipment, and other manufactured goods that it requires, and the large payrolls and their effects on consumer spending, you will begin to get a picture of the enormity of the industry. The combination of junk bonds and financialisation Putting these two first effects together, former Reagan budget chief David Stockman, in an analysis on his "ContraCorner" website Dec. 9, wrote: “The now-shaking high-yield debt bubble in energy is $500 billion — $300 billion in leveraged loans and $200 billion in junk bonds. This is the same estimate EIR has made in recent briefings, of one-quarter of the $2 trillion high-yield market being junk energy debt. In that junk energy debt market, interest rates have suddenly leaped, in the past 45 days, from about 4% higher than "investment grade" bonds, to 10% higher; that is, credit in that sector has disappeared, triggering the start of defaults of the highly leveraged shale companies and their big-oil sponsors.” “In the larger, $2 trillion high-yield debt market as a whole, interest rates have also risen sharply, so far by 2-2.5%: i.e., contagion. Whether the debt collapse will be "mini", or maximum, may be determined in the markets for $20 trillion in commodity derivatives exposure. “So now we come to the current screaming evidence of bubble finance—–the fact that upwards of $500 billion of junk bonds ($200B) and leveraged loans ($300 B) have surged into the US energy sector over the past decades—–and much of it into the shale oil and gas patch. “An honest free market would have never delivered up even $50 billion wildly speculative ventures like shale oil extraction million of leveraged capital—let alone $500 billion— at less than 400bps over risk-free treasuries to.” The simple fact is low oil prices kill millions of jobs. Falling oil prices are dangerous. While readers of mainstream media, listeners to radio and watchers of television remain in blissful ignorance of the nightmares that fund managers are living through, they will celebrate Christmas as though nothing had happened – and then ask later why nobody warned them. The first Global Financial Crisis came on us with little apparent warning. The Queen was famously known to ask “ Why did nobody see this coming?” For the last five years since QE, energy companies have received super cheap financing. Quantitative easing, where the Fed created trillions of dollars for banks, was a gift to the capital-intensive energy industry. Moreover job creation has been huge. Bloomberg reports Employment in support services for oil and gas operations has surged 70 percent since the U.S. expansion began in June 2009, while oil and gas extraction payrolls have climbed 34 percent. It doesn’t matter whether the trigger for this fall was OPEC punishing the shale industry, falling demand in China, the end of QE or what it was. It was going to happen anyway and the trigger might have been anything. The whole pack of cards simply has to tumble. It’s a cauldron of death brought to the boil. But many have seen it coming – Nicole Foss and Raul Ilargi Meijer of The Automatic Earth, Michael Snyder, Gail Tverberg, Jesse Colombo, Wolf Richter, Yves Smith are a few names that spring to mind. It’s just that haven’t been listened to yet. Whether is it the Tulip Bubble, the South Sea Bubble or the housing bubble of 2007, bubbles have a nasty habit of bursting.

Financial analyst and former oildrum editor joins New Economics Party as spokesperson

Top Financial Analyst to join New Economics Party

Friday, 1 August 14

The New Economics Party has just added top financial analyst Nicole Foss to its group as spokesperson on the global economy.

“We are delighted to welcome Nicole, Senior Editor of The Automatic Earth website to our team” said party co-leader Deirdre Kent. “Nicole, a Canadian has recently arrived to live in Motueka and is in demand as an international speaker on finance, energy and resilience,” she said.

Nicole is former Editor of The Oil Drum Canada (canada.theoildrum.com). She used to be a Research Fellow at the Oxford Institute for energy Studies in the UK and used to run the Agri-Energy Producers' Association of Ontario in Canada. Her formal background is in science and law.

Nicole says she aligns with the New Economics Party idea that the global financial crisis is far from over. “The recent credit bubble was the biggest ponzi scheme the world has ever experienced and it’s not yet unwound.” The bailouts now add up to at least $4.6 trillion or $4,600,000,000,000. Foss says the bubble is leading us into a very long and painful depression.

The New Economics Party http://neweconomics.net.nz is not contesting this election.

For further comment phone Deirdre Kent 06 364 7779 or 021 728 852 or Nicole Foss 022 312 5120

A thriving, vibrant economy is possible after fossil fuels – tax reform, currency reform and welfare reform

http://www.slideshare.net/deirdrekent/sustainable-economics-without-fossil-fuels-21 This slideshare show is now updated and made clearer. It is the first time it has been published on this site and represents a lot of feedback from our members. If others have a method of reforming the tax and money system in a way that is politically possible and in a way that doesn't shock the economy, we would love to know. Meanwhile this is a serious proposal. Feedback is welcomed.

The energy return cliff and the end of growth

When we first started talking about peak oil (I heard about in 2004) we were worried about the price of oil going over $100 a barrel. Many people say “They will find something”  They hear a radio item about shale gas being plentiful and are happy. Or others might dismiss it as a plot by the left. As oil gets discovered in so many new corners of the globe, people now say the concern about peak oil was unnecessary. But actually, because of climate change, almost all those resources have to be left in the ground!
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Once a barrel of oil would be enough energy to extract 100 barrels of oil. But nowadays we need much more energy to get energy.

Then we had the Global Financial Crisis in 2008 and all got busy worrying about housing bubbles, derivatives, debt bubbles, too big to fail banks and bailouts. This is all important stuff. The price of oil declined as the global economy declined and now keeps repeating these waves. Affordability oil became the issue. In 2012 that same brother in law commented that my worry about oil was unfounded as the oil price hadn’t gone up as much as forecast and “they were always finding something”. Now I realise what is happening and there is no better little book to explain it than the one former Green Party leader Jeanette Fitzsimons recommended in a recent talk run by the local Quakers. The book that blew her mind was The Perfect Storm – Energy, Finance and the End of Growth by Tim Morgan, Global Head of Research at finance broker Tullett Prebon. It is freely downloadable at http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf. I have printed it off and had it bound.
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The Net Energy Cliff according to Tim Morgan

Morgan says: There are four factors bringing down the curtain on growth. The economy as we know it is facing a lethal confluence of four critical factors – the fall-out from the biggest debt bubble in history; a disastrous experiment with globalisation; the massaging of data to the point where economic trends are obscured; and, most important of all, the approach of an energy returns cliff-edge. When oil bubbled from the ground in Saudi Arabia a century ago, only one barrel of oil was required to extract 100 barrels of oil. The energy return on energy invested (EROEI) was 100:1. But for tar sands it is 20:1, North Sea oil today 5:1, shale oil 5:1 or less and biofuels 3:1. He says below an EROEI of 15 the profitability falls off a cliff. For decades EROEIs are declining. Few discoveries today offer much more than 10:1. So as time passes economies are spending a larger percentage on energy. At the household level when petrol and power costs rise we have less and less for other essentials. A nasty little graph  of oil’s dying EROEI is shown at http://deepresource.wordpress.com/2012/11/22/eroei-estimates-for-shale-oil/ The economy is a surplus energy equation not a monetary one. Too much energy has to be reinvested into energy extraction and too little energy is left for the essentials of food, government services, housing and investment. The interesting thing is that Tim Morgan works for Tullett Prebon. It is the messenger which is unusual saying all these things. It isn’t Richard Heinberg or some sandal wearing, folk dancing greenie. In a way Tullett Prebon seems to be taking over where Matt Simmonds left off. I think the most scary thing in his whole book is the graph of the energy returns cliff. While we blithely go into debt to build motorways and while we waive civil rights to protest at sea about deep sea oil drilling, it must be worthwhile paying attention to what this energy firm is saying.