IMF chief Christine Lagarde

(This is the second of three posts about the new female head of the IMF, which the business press is promoting as a “rock star of the economic world,” and how we are being deceived about the real cause of the debt crisis in Europe)

LaGarde isn’t without her critics. Former IMF chief economist Simon Johnson refers to her appointment as “the fox guarding the henhouse.” Johnson, like former World Bank economist Joseph Stiglitz, has been highly critical of the extreme concentration of financial power and it threat it poses to the global economy. This is the subject of Johnson’s recent book, Thirteen Bankers.

His criticism of Lagarde centers mainly around her proposal to solve the Eurozone crisis by issuing additional loans to the debt-ridden “peripheral” countries (Greece, Spain, Italy, Portugal and Belgium). He maintains all these countries are looking at a default scenario, no matter how much money she throws at them. He accuses her of allowing EU leaders to use the IMF to conceal from their voters major flaws in the Eurozone structure. As senior fellow at a Washington DC think tank (Peterson Institute for International Economics), he also complains about the unfairness of expecting US taxpayers to bail out the IMF for the sake of European politicians (and Greeks “who don’t like to pay taxes”). In Johnson’s view instead of spending other peoples’ money on struggling Eurozone economies, the EU leadership needs to make some a hard choice – either to integrate their fiscal systems in a way that allows fiscal transfers to poorer, less competitive countries or to create two tiers of Eurozone participation, in which only tier 1 members can borrow from the European Central Bank (see Fox in the Hen House and The Problem with Christine Lagarde).

Lagarde Gets the Cold Shoulder

Thus far Johnson’s arguments have resonated with most non-European IMF member countries. Despite Lagarde’s aggressive lobbying to add $500 billion to the IMF rescue fund at the recent G20 meeting in Mexico City, she came away empty handed. Most finance ministers agreed with the response U.S. Treasury Secretary Timothy Geithner gave her: the European Central Bank must make a much larger financial commitment before asking other G20 countries for money.

Fairy Tale Economics

The problem with mainstream media coverage, which continues to center around Lagarde and her “rock star” persona is that it’s a fairy tale – complete with a fairy princess – that never addresses the fundamental structural problems that caused the world economic collapse. The corporate media never tells the back story – that fossil fuel scarcity has effectively ended global economic growth, rendering our debt-based monetary system totally inoperable. Richard Heinberg convincingly makes the case that Peak Oil is responsible for the global economic collapse in his 2011 The End of Growth, as do Richard Douthwaite David Korowicz, Chris Vernon and Tom Konrad in Fleeing Vesuvius (see Will Peak Oil Spell the End of Capitalism?).

Instead the mainstream media promotes cruel myths about lazy Greek workers and a Greek middle class that refuses to pay taxes, obscuring the reality that much of the Greek debt is likely “odious; and fraudulently incurred.

To be continued.

Community garden in New York City

Book Review-Part VI

Fleeing Vesuvius, New Zealand Edition

(2011, Feasta and Living Economies)

Fleeing Vesuvius finishes with an Epilogue (Part 7), in which different authors give practical suggestions about preparing for the eventual collapse of our present energy intensive economic system. The items reflect a wide range of perspectives and priorities. However there are a number of common themes:

Individual

1. Try to be less “busy,” even if you have to cut back your work hours. Give yourself time to focus on surviving in uncertain economic times. Surveys show one of the main reasons Americans give for non-involvement in political and community activity is being too “busy.”
2. Begin investing in land, fruit trees and non-perishable foodstuffs, rather than banks and stocks.
3. Get out of debt and reduce your consumption by practicing frugality.
4. Build a survival support network by shifting from cash transactions to bartering and (where available) to local currency transactions.
5. Avoid the bunker mentality that characterizes the Survivalist Movement. Once another major disaster like Katrina hits, the denial practiced by most of the population will evaporate. Even if you have a shotgun, defending the food and water you have hoarded against an anxious and destitute mob is a risky proposition. This is why it’s essential to network with neighbors and other community members in preparing for a weather-related, public health or other crisis that disrupts the distribution of food and basic services.
6. Replace virtual relationships with face-to-face ones (i.e. spend less time on the Internet). Build stronger connections with friends, family and neighbors. Join something.
7. Re-skill in preparation for a new era in which energy guzzling technology is no longer an option – for example, learning how to grow veggies; make clothes, simple repairs and homemade cleaning products; and cook meals from scratch (a biggie for many young people).

Community

1. Work with local government to develop food security and other strategies to help your city or town become economically independent and energy self sufficient.
2. Support site or land value taxes (LVT), similar to those enacted in Pittsburgh (see http://stuartbramhall.aegauthorblogs.com/2012/01/15/money-and-energy-scarcity/)

National

1. Organize and speak out against the refusal of elected officials to tell the truth.
2. Organize and speak out against the failure by national governments to enact a feasible and effective emergency preparedness plan (addressing food and water security in the case of major infrastructure collapse).
3. Organize and speak out against government policies that dig a deeper hole, by increasing dependence on dwindling and costly fossil fuels. Building more highways and coal fired power plants is just plain stupid.
4. Lobby against government subsidies for “greener” technology – people who walk to work shouldn’t have to pay more taxes to pay for biofuels for people who insist on driving.
5. Lobby for cap and share laws to reduce carbon emissions (see http://stuartbramhall.aegauthorblogs.com/2012/01/17/surviving-the-collapse-possible-strategies/)
6. Lobby for your national economy to become energy self sufficient.

International

Lobby for an international treaty that puts a price on carbon (i.e. that requires countries to pay for their carbon emissions) and allows a rapid rise in that price until countries and companies have no choice but to curb emissions and promote carbon sinks.

Transition Towns New Zealand

The final section in the New Zealand edition contains very brief essays by activist in New Zealand’s Transition movement in various parts of the country. Four of them are available on-line:

http://fleeingvesuvius.org/2011/11/25/preface-to-the-new-zealand-edition/

http://fleeingvesuvius.org/2011/12/09/how-i-survived-the-end-of-the-world-in-aotearoa/

http://fleeingvesuvius.org/2012/01/02/how-resilient-are-we-a-new-zealand-immigrants-perspective/

http://fleeingvesuvius.org/2012/01/11/will-new-zealand-be-the-first-developed-country-to-evolve-a-steady-state-economy/

North American Edition

The North American edition of Fleeing Vesuvius has a preface by Richard Heinberg, author of the End of Growth (see http://stuartbramhall.aegauthorblogs.com/2011/10/30/documenting-the-collapse-of-capitalism/) and fellow at the Post Carbon Institute. Heinberg seems to have the same reaction if did: (“What a goldmine!”). You can read Heinberg’s preface here: http://fleeingvesuvius.org/2011/04/17/preface-by-richard-heinberg-north-american-edition/

The US edition also has an appendix “Should the US try to avoid a financial meltdown?” – a dialogue between two of the economists who contributed essays (Richard Doutwaite and Tom Konrad): http://fleeingvesuvius.org/2011/04/17/should-the-united-states-try-to-avoid-a-financial-meltdown/

http://transitionculture.org/

Book Review-Part V (of VI)

Fleeing Vesuvius, New Zealand Edition

(2011, Feasta and Living Economies)

Parts 5 and 6 of Fleeing Vesuvius are entitled “Changing the Way We Live” and “Changing the Way We Think.” Both are about solutions. They propose broad strategies for supporting large numbers of people in downsizing their energy guzzling way of life.

The main lessons I draw from these chapters are

1. Politicians don’t lead – people do. The notion that elected officials will lead us in finding solutions to the economic crisis, climate change, Peak Oil or the impending food and water crisis is a myth created and perpetuated by the mainstream media. The only solution politicians and the media can think of is to push the poor and disadvantaged off the cliff through massive austerity cuts. One of the important points Gar Aperovitz makes in America Beyond Capitalism is that Franklyn Roosevelt didn’t create the New Deal jobs and social programs (like Social Security). With the New Deal, he merely enacted on a federal level (in response to popular pressure) programs that had been operating for years on a state and local level.

2. There is an awful lot happening on the state and local level to take back our economy and lives from corporate rule. Just because people don’t hear about it on the six o’clock news doesn’t make it any less real. In addition to the Citizens Rights movement and similar movements in other countries, hundreds of US cities (representing nearly one-third of the population) have signed up to the Kyoto Accords and are massively reducing their carbon emissions. Likewise, as Aperovitz points out, hundreds of millions of Americans have opted out of the corporate economy by joining cooperatives and credit unions and creating worker owned businesses, alternatives currencies, farmers markets, etc.

Part 5 Changing the Way We Live

This section starts with economist Brain Davey’s article entitled “Danger ahead: prioritizing risk avoidance in political and economic decision making.” It looks at the difficult proposition of getting national and international leaders to enact meaningful energy and transportation policy. He suggests that we need to stress the dire risk – focusing on an impending food and public health crisis – of not doing so. I find it intriguing that the elitist World Economic forum, which meets every January in Davos Switzerland, makes the same argument in Global Risks 2012 (see http://dissidentvoice.org/2012/01/occupy-wall-street-the-view-from-davos/)

The second essay, “Transition thinking: The Good Life 2.0,” describes the philosophy and success of the Transition movement in helping thousands of local communities to make the local infrastructure changes that will facilitate a transition to carbon neutrality and energy self-sufficiency. As a member of Transition Town New Plymouth, I have been extremely surprised at the receptiveness of our local council to the initiatives we put forward (for example reconfiguring streets to make them safer for cycling and walking, rewarding council employees for leaving their cars at home, and enacting incentives to help residents insulate their homes and install solar water heaters).

“Sailing Craft for a post-collapse world” talks about strategies for replacing expensive, fossil fuel based land transport with boats powered by free wind energy.

Part 6 Changing the Way We Think

This section is a little disappointing, as some of the essays buy into reductionistic drug company hype attributing human behavior to brain molecules. The notion presented here that resource overconsumption is based on the dopaminergic reward system overlooks important work by Robert Putnum, Ralph Nader and others on the link between depression and alienation and breakdown of community and civic organizations. Kalle Lasn (founder of Adbusters) and others have written at length about systematic efforts by the public relations and advertising industry to persuade people to compensate for chronic loneliness and emptiness by consuming. This section also overlooks extensive neurophysiological research showing that human beings are hard wired to crave social interaction. These studies also show that hormones, such as ocytocin and endorphins, and mirror neurons are far more important than dopamine in this programming (see http://www.opednews.com/articles/Marketing-Serotonin-Defici-by-Dr-Stuart-Jeanne-B-100713-513.html).

I found the later essays in Part 6 more helpful, especially those that address the apathy and inertia that prevent most of the developing world from taking serious measures to address impending economic, ecological and resource crises. In “Cultivating hope and managing despair,” psychotherapist John Sharry compares this widespread apathy and inertia to Kubler Ross’s stages of grief in bereavement or impending loss (denial, anger, depression, acceptance). The impending collapse of the global economy, industrial capitalism and possibly civilization itself is the worst loss any of us can imagine. It should be no surprise that human beings’ initial response to such news is denial.

Sharry suggests that Kubler Ross has left out an essential step between depression and acceptance – namely hopeful and constructive action. Based on personal experience, this makes perfect sense. Transition Town New Plymouth draws in many people who still aren’t totally convinced we are heading off the cliff. As they become involved in constructive activities to move our community away from blind corporate consumption, they seem to find it easier to accept that mankind faces a rocky future.

People can follow the progress of the global Transition movement at the Transition Culture website http://transitionculture.org/

To be continued.

***

Check out my free ebook 21st Century Revolution. Start the free download by clicking the Transact Socially link at the bottom of the right sidebar and either posting to your Facebook wall or sending a Tweet.

Book Review-Part III

Fleeing Vesuvius, New Zealand Edition

(2011, Feasta and Living Economies)

The second part of Fleeing Vesuvius is entitled “Innovation in business, money and finance.” It draws on the main theme of Part I, describing how the current economic crisis is a direct result of fossil fuel scarcity and spiking energy costs. The second section focuses on the link between energy availability and money.

The late Richard Douthwaite is the author of the first and (I feel) best essay in Part II, entitled “The supply of money in an energy scarce world.” He traces the history of money, with special emphasis on the de-linking of money, production and wealth which occurred starting in the 1970s. This disconnect results from the “financialization” of the economies of the so called “industrialized” north. He points out the irony of calling Europe and North America “industrialized,” when currently most manufacturing takes place in developing countries, to take advantage of sweatshop wages. At present so called “industrialized” countries earn most of their profits through banking and other financial services. They also carry most of the global debt burden. Douthwaite finds it even more ironic that they owe most of this debt to so-called “developing” countries.

Getting Rid of Debt-Based Money

Douthwaite goes on to offer specific alternatives to our current debt based money system (under our current system, the one and only way money is created is by going to the bank to take out a loan – it’s called fractional reserve banking. A debt-based monetary system can only function in the presence of indefinite economic growth (see (http://stuartbramhall.aegauthorblogs.com/2011/10/30/documenting-the-collapse-of-capitalism/). Moreover the end of cheap energy also means the end of continuous economic growth. He also explores a number of strategies to facilitate the transition to a new steady state economy (one that doesn’t grow).

Douthwaite proposes to create inflation to eliminate the massive external debt that is suffocating the economies of Europe, North America and Japan. However he wouldn’t hand the money over to bankers, as the Federal Reserve does when they engage in quantitative easing. Instead Douthwaite would have governments create new money that they would spend directly into the economy to fix decaying infrastructure and provide essential public services. This would ensure that the new money would circulate in the economy to stimulate buying and increase jobs – instead of paying astronomical bonuses to CEOs.

Creating Regional and Local Currencies

He also strongly supports the creation of regional and local currencies. This gives poor people access to money when the national currency is in short supply due to recession and deflation. People only have access to the official currency when their products and skills increase corporate profits. Regional and local currencies, on the other hand, provide access to money to anyone with skills and/or products other community members need or want. In addition to boosting support for local business, by requiring that local currencies be spent locally, a pricing scheduled is created that more accurately reflects the work invested and true value to the community. Food production is an excellent example. Small farmers can easily work 16 or more hours a day. Yet owing to competition from large scale factory farms, the “market” price they receive for their crops is rarely enough to support a family.

Douthwaite also explores the possibility of creating a currency based on future energy production, just as early national currencies were based on gold (which will have far less intrinsic value than energy).

Rethinking Financing, Corporate Structure and Property Taxes

Other essays in part II look at alternative methods (other than borrowing and incurring debt) of financing the new energy efficient businesses, farms, and homes. One model favored by several authors is a “limited liability equity partnership.” In an equity partnership, the landowner, builder, and future occupation finance a home or new business by assuming an equity interest in its construction. “Rethinking Business Structures” looks at new corporate structures that place social and environmental considerations ahead of external shareholders.

“Why Pittsburgh’s real estate never crashes” is an interesting essay on Pittsburgh’s land value tax (LVT). It shows how property taxes that differentially tax land at a higher rate than buildings discourage property speculation. It credits LVT for protecting Pittsburgh from the massive foreclosure crisis other US cities faced in 2008.  Dan Sullivan, the author of the essay, is the education director of Saving Communities, a Pittsburgh- based non-profit.

To be continued.

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Check out my free ebook 21st Century Revolution. Start the free download by clicking the Transact Socially link at the bottom of the right sidebar and either posting to your Facebook wall or sending a Tweet.

Fleeing Vesuvius, New Zealand Edition

(2011, Feasta and Living Economies)

Book Review-Part II

Obviously getting by without fossil fuels (owing to impending shortages of oil, natural gas and coal) will be an incredibly rude shock for all of us. Our current telecommunication, transportation and retail infrastructure, as well as our current system of industrial agriculture, are based on the abundant availability of cheap fossil fuels. On the plus side, Fleeing Vesuvius is full of a number of specific strategies, currently being tried in Ireland and elsewhere, for building resilient communities to withstand this transition to a non-fossil energy  society. In his introduction, the late Richard Douthwaite lays out a kind of road map by identifying nine ways in which fossil energy use has perverted our economies and lives:

1. It has transformed manufacturing methods by displacing human labor.
2. It has transformed agricultural methods, replacing human labor, animal power and sunlight.
3. It has enabled the world population to grow to a level that may well be unsupportable without its use.
4. It has devalued human labour and led to widespread unemployment.
5. It has made the economy reliant on economic growth to avoid collapse.
6. It has enabled extremes of wealth and poverty to develop.
7. It has led to the development of industrial capitalism.
8. It has produced profits that had to be recycles. This led to the growth of the banking system and debt-based money.
9. By fueling powered transport, it has destroyed self-reliant local economies and the nature of local relationships.

I find this approach extremely valuable. It moves away from blaming capitalism, rich people and banksters for the problems of contemporary society. By treating them as a natural outgrowth of fossil fuel dependence, Douthwaite inspires optimism that these “perversions” will be easy to undo once we cease to rely on oil, gas and coal to provide for our basic needs.

Layout of Fleeing Vesuvius

Fleeing Vesuvius is divided into seven parts:

Part 1 – looks at energy and water availability in a post-carbon world, with a detailed discussion of our diminished capacity to produce food.

Part 2 – looks at models for new non-debt based monetary systems that will greatly facilitate our transition to a fossil energy-free economy, as well as alternative, non-corporate methods for financing land and business development.

Part 3 – looks at alternative land management strategies that will improve energy efficiency by promoting the “proximity” of complementary enterprises (for example, building factories near each other that use each other’s waste products), and specific techniques that increase and maintain soil carbon and mineral content.

Part 4 – looks at a novel “Cap and Share” regulatory scheme to rapidly reduce corporate carbon emissions. It would cap the emissions each company (and country) are allowed, while sharing the cost of running the scheme among the entire population.

Part 5 – looks at the immense lifestyle changes we all need to make to survive in a post-carbon world and how the Transition and similar movements are helping communities prepare themselves to make these changes.

Part 6 – looks at specific approaches for breaking through widespread apathy and denial about the imminence of economic and ecological collapse.

Part 7 – is a collection of specific suggestions of what people can do on the individual, community, national and international level.

The final section of the New Zealand edition contains a number a brief essays of the Transition and other sustainability initiatives currently being undertaken in this country.

Part I – “Energy Availability”

I have already discussed the connections made in Part I (i.e. capitalism ends when the oil runs out) in my last blog. However I want to share graphs that summarize the points made about EROI (Energy Return on Investment, aka EROEI Energy Returned on Energy Investment). Although there’s still a lot of oil, gas and coal in the ground, we have most likely passed the point where the “sweet” stuff, the reserves that are easy and cheap to extract, has been used up. Even more importantly, owing to low EROI, renewable energy sources will never replace fossil fuels. Thus we have no choice but to downsize our energy intensive lifestyles.

Illustration 2: An energy source can rarely be used directly. An energy extraction process is required to discover, extract and process the resource before its energy is available to society. This process consumes energy itself, a deduction from the energy otherwise available. The energy return on invested is the ratio of surplus energy to energy required to drive the process.

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Offshore wind and tidal barrages give good energy returns

llustration 1: The world does not need just energy – it needs energy that is delivered with very low levels of carbon dioxide emissions (that is, a low-carbon intensity) while still giving a lot more energy back than it took to produce it. This chart, by Evan Robinson, shows the most promising technologies and those to ignore. The half dots indicate where a technology is beyond the limits of the chart. Source: http://evanrobinson.typepad.com/ramblings/science_nature/

It took me awhile to figure this one out – there’s a lot going on here. You read EROI (or EROEI) from left to right. Energy sources with an EROI of zero (at the far left) use up as much energy in extraction/production as they release. Solar thermal and geothermal have a very low EROI, while tidal energy has an EROI even higher than 1970s oil reserves. The EROI of Middle East oil isn’t listed (Saudia Arabia, Iran, etc aren’t very transparent about their production costs). Different Peak Oil websites estimate that Middle East oil has an EROI of between 20 and 30. This gives it an EROI somewhere between 1970s and 2000s US oil (it costs a lot more to extract US oil now than 30 years ago because it’s harder to get at). This doesn’t include the cost of transporting oil to the US, cleaning up oil spills, the wars in Iraq, Afghanistan, Libya (Iran?), etc – costs that keep going up and up. The vertical axis is the carbon emissions produced by each energy source.

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The area of each bubble represents the energy return on energy invested — EROI. The most valuable energy resources are those with large bubbles – a high EROI – at the top of the chart because this shows that they also have a high Energy Internal Rate of Return – EIRR. In other words, they pay back the energy invested in developing them rather quickly. Photovoltaic, nuclear and hydropower have low rates of energy return. Graph compiled and redrawn specially for Feasta by Jamie Bull, oco-carbon.com

To be continued, with a discussion of Parts II-VII. No more graphs, I promise.

***

Check out my free ebook 21st Century Revolution. Start the free download by clicking the Transact Socially link at the bottom of the right sidebar and either posting to your Facebook wall or sending a Tweet.

Fleeing Vesuvius, New Zealand Edition

(2011, Feasta and Living Economies)

Book Review

In my experience, there are two main forms anti-corporate resistance can take. The first involves direct confrontation of government and corporate official over their criminal and unethical activities. The hundreds of Occupy Wall Street encampments launched in late 2011 to protest banking greed and corruption represent the epitome of this direct, confrontational approach. In the second type of resistance, local activists collectively op out of corporate-dominated lifestyles by creating their own alternative systems of food and energy production and distribution and, in some cases, alternative banking and money systems. This second type of resistance movement is facilitated by a number of loosely linked national and international sustainability networks. These include groups such as Transition Towns, Feasta and Cultivate. The Transition movement, which started in 2004-2005 in Ireland and Britain, is the best known. Transition Towns New Zealand has been active since 2007.

Fleeing Vesuvius, published by Feasta in Ireland in 2010, is best described as a handbook or encyclopedia for individuals, groups and communities seeking to opt out of a corporate-dominated lifestyle and transition to a more sustainable one. Feasta (Foundation for the Economics of Sustainability) was launched in Dublin in 1998. The New Zealand edition was published by Living Economies in July 2011. The book is a collection of essays by Feasta members and others from a wide range of technical backgrounds. This first post is intended as a general overview of the book and the premises it’s based on. Successive posts will look a specific chapters in more detail.

Preparing for Collapse

The title, Fleeing Vesuvius, refers to the volcano that destroyed Pompeii in 79 AD – to the majority of residents who failed to save themselves, despite weeks of earthquakes, gaseous clouds and other obvious signs that the volcano was about to erupt. For at least a decade, most citizens of the world have been confronting growing evidence that the planet is on the verge of economic and ecological collapse. Yet the vast majority do absolutely nothing to prepare for the stark conditions ahead.

All the essays in Fleeing Vesuvius are written from the perspective that the age of cheap energy is over. In fact the beginning section asserts that oil depletion, not reckless subprime derivatives trading, was responsible for the 2008 economic crash. As the authors explain, the readily accessible surface oil is used up. What remains is much more difficult and costly to extract. Once oil reached $147 per barrel in 2008, energy and food costs (directly linked to the price of fuel under industrial agriculture), people had no money to repay their mortgages and the defaults started.

All the essays in the book are written from the perspective that humankind needs to drastically downsize their energy use. This includes returning to an era where people produced food and other basic needs with human labor and draft animals (horses, oxen, mules, etc), instead of engines that run on fossil fuels. One author makes the point that one barrel of oil produces the equivalent of an adult laborer working 40 hours a week for 12 years.

Fossil Fuels and Capitalism

The Introduction and Part I (“Energy Availability”) are the most mind blowing sections of the book because of the historical links they make between the fossil fuel revolution, industrialization and the birth of the capitalist economic system. I don’t pretend to understand all the math, but it’s clear from the references that the first five essays represent a consensus position of many prominent economists and energy engineers. Before fossil fuels, capitalism was impossible because an economy relying on human labor and animal power can’t support it.

By definition capitalism depends on capital accumulation, the production of an economic surplus that can be reinvested in new capital (property and machines) to expand production even further. In the beginning of Fleeing Vesuvius, the authors demonstrate how producing this surplus was only possible because of the vast amount of cheap (practically free) work performed by fossil fuel energy. Obviously there were rich people (landowners and merchants) prior to industrialization. However there weren’t any capitalists – production was far too limited to accumulate capital.

If capitalism is only possible with an abundance of cheap energy, clearly it will end when cheap fossil fuels run out. From the graph, it looks like this happens at $200 a barrel – which is predicted some time in the next six to thirty six months. None of the renewable energies (e.g. solar, wind, tidal, hydro) can match fossil fuels in terms of low cost and efficiency. Seven billion global residents will really struggle to produce enough food to feed themselves, much less accumulate capital to invest in new production.

To be continued.

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Check out my free ebook 21st Century Revolution. Start the free download by clicking the Transact Socially link at the bottom of the right sidebar and either posting to your Facebook wall or sending a Tweet.