Monthly Archives: March 2009

The Quiet Coup

My new friend Michael Barrow recommended an eye opening article in The Atlantic: “The Quiet Coup” by Simon Johnson, a professor at MIT’s Sloan School of Management and chief economist at the International Monetary Fund during 2007 and 2008.

From his perspective on both sides of IMF bailouts over the decades, Johnson describes the current US financial crisis in very familiar terms. It is a crisis brought on by a corrupt oligarchy, the same story at the heart of all IMF interventions. Unfortunately, it is doubtful the IMF is adequately capitalized or politically powerful enough to address this one, even if our government were to become wise, humbled or desperate enough to request their help.

The introduction to the article reads:

“The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.”

The recommended solutions are once again the same ones that almost all informed economists outside government and Wall Street have been recommending for months now. They are those strong solutions that are completely abhorrent to the members of the elite oligarchy who sit in the seats of power at the Treasury Department, Federal Reserve and other regulatory agencies:

“The challenges the United States faces are familiar territory to the people at the IMF. If you hid the name of the country and just showed them the numbers, there is no doubt what old IMF hands would say: nationalize troubled banks and break them up as necessary.”

But he adds a critical component:

“This may seem like strong medicine. But in fact, while necessary, it is insufficient. The second problem the U.S. faces—the power of the oligarchy—is just as important as the immediate crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy.”

And Johnson offers specific advice that will be familiar to readers here:

“Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business. ………….  Banks that remain in private hands should also be subject to size limitations.

This may seem like a crude and arbitrary step, but it is the best way to limit the power of individual institutions in a sector that is essential to the economy as a whole. Of course, some people will complain about the “efficiency costs” of a more fragmented banking system, and these costs are real. But so are the costs when a bank that is too big to fail—a financial weapon of mass self-destruction—explodes. Anything that is too big to fail is too big to exist.

To ensure systematic bank breakup, and to prevent the eventual reemergence of dangerous behemoths, we also need to overhaul our antitrust legislation.”

Johnson closes on a plea to federal financial regulators, those intimately intertwined members of of our own US financial oligarchy, to wake up to reality. The game is over.

“The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great Depression.” This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.”

It is ironic that Barak Obama, a leader many feared would be too left leaning, is in fact such a strong defender of the financial elite and our own corrupted system of crony capitalism. Hopefully, before his political capital is all squandered, he will wake up to reality  and do the job he was elected to do – restore some sanity, balance and fairness to the system and end the rein of the Wall Street oligarchy.

Advertisements

1 Comment

Filed under Economic Policy, Fundamental Perspectives

The Problems With Cap and Trade

Willem Buiter offers a great summary of the challenges  to the Cap and Trade solution to climate change favored by politicians everywhere in Carbon Offsets: Open House for Waste, Fraud and Corruption

Key takeways:

“Politicians, including Gordon Brown, prefer cap and trade, because it hides/obscures the fact that for it to work, it must be equivalent to a tax; however, it does not look like a tax and will not show up in conventional tax burden calculations. Also, you can hand out the credits free of charge to your friends (including the heavy historical polluters).”

and

“Offsets, the creation of credits that can be added to the (national, regional or global) CO2E quota under cap and trade schemes, require not only the (difficult) verification of how much CO2E is actually emitted in the real world, but also the impossible verification of how much CO2E would have been emitted in some counterfactual alternative universe. The quantity of offset credits earned by some activity is the net quantity of CO2E that has been saved as a result of this activity.

Just stating it makes one shout out: impossible! Fraud! Bribery! Corruption! Wasteful diversion of resources into pointless attempts at verification! And indeed this is what is happening before our eyes. Enterprises get paid for not cutting down trees and for installing filters and scrubbers they would have installed in any case. The new Verification of the Carbon Counterfactual industry is growing in leaps and bounds. The amounts of money involved are vast and the opportunities for graft, bribery and corruption limitless. The offset proposal has birthed a monster.”

and

“What was chosen was the most real resource-wasting and corruption- and rent-seeking inducing scheme anyone could think of. Masses of jobs for engineering consultants, environmental auditors, lawyers etc. All verifying the unverifiable and getting paid handsomely for it.”

He ends with:

“And God forbid that reducing CO2E emissions would have a visible price tag. Truth, courage and politics: three concepts almost never encountered in the same place.”

Buiter is a professor of European Political Economy at the London School of Economics and Political Science and former chief economist of the European Bank for Reconstruction and Development. Of course, like the vast majority of economists and anyone thinking rationally about this subject, Buiter comes down on the side of a straight forward tax on carbon, such as suggested here.

But expecting politicians to do something rational rather than politically expedient is probably idealism at its most unrealistic.

7 Comments

Filed under Climate Policy, Economic Policy, Energy Policy

Rethinking Finance

Over at BloggingStocks, Peter Cohan offers a radically rational way to begin thinking about how to trim Wall Street’s power and restore some rationality to our financial system. In it he references one of the few things I have ever agreed with Paul Krugman on, in Krugman’s argument that the current economic crisis “represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good”.

It is going to take a long time for good solutions to emerge. And I suspect there will be little that I will agree with Krugman on regarding actual solutions to the core problem in the financial system that he correctly identifies.

The deeper question is not just one of recrafting the rules of the finance game, but rethinking the whole question of scale throughout our society. Giant government facing giant problems naturally looks for giant players to offer giant solutions within the framework of giant regulatory systems.

The fundamental problem is all those giants. Until both the questions and solutions get reframed at the level which local communities can impact them more directly, so called “solutions ” will likely exacerbate the core problems.

The question of scale goes well beyond the finance industry. The concentration of wealth and power in all sectors of our society is fundamentally undermining our democracy and our economy.  “Efficiencies of scale” in the private and public sectors are an outdated legacy of the industrial revolution.  In the information and communication age, the huge scale with which we currently address all questions creates gross distortion, corruption and inefficiencies throughout our entire society .

The questions of scale and its consequences are at the core of most problems in our society.  Answers to those questions won’t come easily.

Leave a comment

Filed under Economic Policy, Fundamental Perspectives

Defining A Sustainable Financial System

Over at the NESEA Blog, my friend Joel Gordes defines The First Tenet of Sustainablity.

Joel’s definition of Sustainability is precisely right: “meet[ing] the needs of the present without compromising the ability of future generations to meet their own needs”.  He goes on to refine the definition to include: Social & Intergenerational Equity, Environmental Quality, Quality of Life and Economic Vitality.

One may also think of sustainability fundamentally as just making responsible decisions, acting as if we are accountable for the long term impacts of those decisions and being good citizens of the planet.

Many seem to think about this term Sustainability on environmental terms only. But it is no coincidence that the words ecology and economy share the same greek root, oikos, or home.

The current economic crisis is highlighting more than ever before the serious threats created by a lack of understanding of sustainability, responsibility and accountability.  Specifically, the lack of sustainability and accountability embedded in the structure of the financial securities system is a major threat to all the other systems that a modern society depends on.

Our financial system has not been operating in a remotely sustainable manner for several decades. And our government is now borrowing and spending at completely irresponsible levels to prop up a financial system built on securitization and avoided accountability. The federal government’s recent economic endeavors are themselves completely unsustainable.

The global financial institutions that our government is most trying to sustain are neither sustainable, healthy or competitive. In fact they seriously distort and disrupt the functioning of healthy markets. They should not be considered too big to fail, but rather too big to exist.

Like the natural selection of ecology, a critical part of a healthy economy is truly competitive markets. We don’t need to restore the markets for complex incomprehensible and unaccountable financial securities. Indeed we need the opposite –  rules that restore the health and diversity of the financial system that has been disrupted by a cancerous invasion of securitization.

As a small business owner, I have found local community banks to be the most responsive to my needs. In those seemingly old fashoned institutions,  lending decisions are made by bank officers that know the borrowers personally and business loans are still often held in house.

Perhaps all the financial system needs to return to health and sustainability is a return to the older banking regulations that enabled a financial system comprised of thousands of small local banks that were accountable to the local communities they served and whose businesses were intimately dependent on the health of those local communities.

Sustainability advocates should be out in front of the effort to restore a truly sustainable financial system in which feedback mechanisms are clear and effective, enforcing real accountability, like in any healthy natural system.

1 Comment

Filed under Economic Policy, Environmentalism, Fundamental Perspectives

Legislating Greenness Updated

Over at the NESEA Blog, where I also write, I posted a significantly revised version of “Legislating Green”, informed by a pretty amazing public discussion at the NESEA Conference between Henry Gifford; Brendan Owens, the vice president of US Green Building Council (USGBC); and few other folks closely involved in the debate over the proper role for the USGBC LEED program.

Perhaps of most significance in the discussion is this quote that Brendan asked me to attribute to him:  “LEED is a leadership standard and it’s not built to be building code. That’s why USGBC has been cosponsoring the development of an ANSI green building code, Standard 189.1, with ASHRAE and IESNA, for over two years.  We’ve been doing this because building codes serve a different purpose than rating systems like LEED and we are committed to providing policy makers with the appropriate tools to accomplish the objectives we all share.”

As suggested earlier, with USGBC clearly acknowledging that LEED should not be used as a building code standard, it’s time for them to responsibly take the lead in actively curtailing the efforts of their members to get such standards promulgated as defacto code standards by governors, legislatures, mayors, city councils and planning agencies around the country.

Whole thing here:

LEGISLATING GREENNESS

The public forum at this year’s NESEA conference “What’s Right and What’s Wrong with LEED” was in many ways NESEA at its best. It helped separate truth from hype. It addressed the unfortunate reality that real solutions aren’t always easy and don’t always fit into nice simple answers that marketers and politicians can latch onto in their idealized efforts to solve complex problems. It helped highlight the need to focus on real experience, real science and real measurements.

In the recent Wall Street Journal ECO:nomics conference,  Google CEO Eric Schmidt nailed the essence of the debate on all things green when he said “the way you solve the environment problem is you solve the energy problem.”

Henry Gifford has provided statistical proof, from US Green Building Council’s (USGBC) own data, showing that at least to date, Leadership in Energy and Environmental Design (LEED) buildings have on average proven to actually use more energy in their operation than comparable buildings. The relevant study, USGBC’s initial response and Henry’s rebuttal to that response are available at Henry’s web site. An excellent summary of the issues along with his recommendation for using utility bills for rating buildings appears in Henry’s article in the latest issue of the Northeast Sun Magazine.

I have the utmost respect for all USGBC has done as a marketing effort to promote green building. USGBC’s success has really helped transform the market.

Thanks at least in part to USGBC’s efforts, the markets for all the solutions NESEA has been promoting for thirty-five years have been growing at a blistering pace. In the case of solar photovoltaics, annual worldwide growth has averaged something close to 40% for a decade.

Lately, with increased interest in government as a solution to all problems, there is accelerating pressure to push growth in these spheres even harder through policy mandates. But we have to be careful to not let good intentions get too far ahead of reality.

Pushing growth of these industries further may be possible with relatively straight forward challenges like installing more PV panels or wind generators. The most significant market obstacles in the wind arena are regulatory obstacles, which the government is well suited to address. In the solar PV arena, prices are coming down, production capacity is going up and the majority of the skills needed to get systems built are very straight forward roofing and electrical work. So appropriately designed government incentives can probably help to continue the remarkable growth path for these and other renewable energy solutions.

Unfortunately, in the case of complex issues like improving the performance of buildings, we really don’t have nearly adequate levels of skilled experienced practitioners necessary to implement the idealized goals of well intended people who seem to think that simply mandating simplistic solutions like counting points actually solves problems.

The question of how to best use public policy to encourage environmentally responsible building practice has been going on for a very long time in the professional community and is still very much unresolved. My own sense is that the market demand for these solutions over the last several years has been very successful in spurring remarkable growth.

I am not at all convinced that mandating greenness will actually improve buildings. And like most hastily implemented good intentions, such measures can, and in at least a few cases have had significant unintended consequences on performance, economics and durability of buildings and the health of their occupants.

The concerns Henry Gifford raises are based on deep experience. Henry is the mechanical system designer who has designed the HVAC systems on architect Chris Benedict’s remarkable buildings and who Chris credits with much of the success her firm has had in repeatedly building apartment buildings in New York City which use only fifteen percent of the energy of comparable buildings, at no extra cost and with no subsidies. Along with his practical experience, Henry is one of the most sought after teachers at serious professional building conferences around the country including NESEA conferences and the invitation only Westford Symposium on Building Science.

While some are shocked by Henry’s finding, they are really not at all surprising considering the questionable methodology involved in LEED. Proof like Henry presents confirms what many of the best building experts in the country have been saying for years about LEED. Taking an eight hour course and counting greenness points is really no substitute for real experience with building science; or good design, detailing and construction management; or measuring factors that actually matter.

USGBCs questionable statistical methodology in analyzing that data themselves highlights real questions about whether what is fundamentally a marketing endeavor should really be enshrined as the standards setting agency for the building industry.

Marc Rosenbaum is considered by many of us to be the leading green building consulting engineer in the country. In answering the question on the NESEA web site Member Voices:  “What’s the most irritating example of ‘greenwashing’ you can think of?” Marc answered “That you get your LEED rating without proving the energy performance in real life.”

Joe Lsiburek is the best known building scientist in the nation. You can find his opinion on this subject in his article “Mis-LEED-ing” or his article “Prioritizing Green – It’s the Energy Stupid” which was first published in the ASHREA Journal, the publication of the nation’s professional organization for heating, ventilation, air-conditioning and refrigeration engineers.

You may want to check out the article in Grist Magazine: “LEED is Broken; Let’s Fix It”.

The most thoughtful conversation I have seen on this subject is over at the BuildingGreen Blog entitled “Lies, Damn Lies, and… (Another Look at LEED Energy Efficiency)”. The central point of this whole discussion is highlighted in Henry’s own comment on that Blog. “LEED is based on a compelling idea: that anyone can take an 8 hour class, pass a test to become an accredited professional, and use a checklist or points system to profoundly improve the way buildings are designed, built, and operated. Sorry, life isn’t that simple, and neither are buildings.”

Like many long time NESEA members, I am far more aware today of how much I still have to learn than I was when I started in this work 33 years ago.  Part of really starting to understand any issue is confronting the complexities that novices are completely oblivious to.

In the public forum Tuesday, Maureen Mahle acknowledged that the folks monitoring the results of USGBC’s efforts were surprised to find that the vast majority of LEED buildings have been built by people doing green building and integrated design for the first time. With no meaningful training and so little focus on either building science or energy in the LEED rating system, it’s really not hard to understand why people with no experience with this stuff would deliver the results that they have.

Having watched the evolution of USGBC and LEED along with Energy Star Homes, Energy Crafted Homes, R-2000 and numerous other green rating brands that have come and gone over the decades, I have developed a degree of skepticism toward the whole idea of rating buildings. For those who insist we must attempt to put legislated mandates and certification around this stuff, lets at least make it meaningful.  Rather than counting things like LEED “greenness” points, lets measure the actual performance of buildings with hard scientific metrics like BTU/sq ft/HDD.  Any such ratings should include verified energy use measurements and real scientific and economic metrics. Counting arbitrarily determined points on designs is not remotely appropriate for legislative mandate.

The best solution is the one Henry suggests in his article. “Building energy use is perhaps the largest field of human endeavor in which almost nobody measures anything. But, the situation is actually a bit worse than that: measurements are taken by utility companies every month, and are largely ignored. Utility company records should start to be used to rate our country’s buildings immediately.”

Here in Rhode Island, as elsewhere, legislators are pushing to mandate LEED. I have very serious reservations about mandating that a private out of state organization like USGBC be enshrined with essentially carte blanche authority to design, price and enjoy an exclusive unregulated monopoly on verifying compliance with a significant aspect of state law. Such efforts that cross the appropriate line between public and private spheres in such critical areas of regulation are just bad public policy.

At the national level, USGBC is very clear that LEED should not be enshrined as the equivalent of a code standard and that it was never intended to be used the way some advocates have been inappropriately suggesting in legislation. Brendan Owens, the Vice President of USGBC  indicated that  “LEED is a leadership standard and it’s not built to be building code. That’s why USGBC has been cosponsoring the development of an ANSI green building code, Standard 189.1, with ASHRAE and IESNA, for over two years.  We’ve been doing this because building codes serve a different purpose than rating systems like LEED and we are committed to providing policy makers with the appropriate tools to accomplish the objectives we all share.”

If it is deemed appropriate and necessary for governments to mandate green practices in designing and building, then legislation should require specific professional and scientific standards and perhaps requirements for building commissioning, requirements for building waste reduction and recycling, requirements for low VOC materials, requirements for ventilation standards, requirements for life cycle costing analysis, and other specific pragmatic details. It is a bit harder and requires real professional expertise to craft good legislation in this realm, but the extra effort is worth it. I am eager to see what the coalition working on the ANSI standards comes up with. I hope it is focused on real measurements and real science.

In setting policy, there are a variety of professional stakeholders that should be at the table sorting through the appropriate compromises rather than precluding their participation by enshrining a single private organization  with arbitrary unregulated monopoly power to set public building standards. Overly eager advocates and legislators should slow down a little and allow time for the ANSI process Brendan references to develop. They should also take the time to engage local professional stakeholders in developing and appropriate state version of the code.

We have to be very careful to craft legislation that separates good public intentions from the private interests and benefits of any one private organization. USGBC is a private organization that sets and changes the definitions of the LEED standards at will, sets the pricing for getting LEED certification and has an exclusive national monopoly on granting LEED certification. It would be totally inappropriate to have any standards set and enforced in that manner be enshrined in public policy. I question whether it would even be constitutional if challenged.

My three decades working professionally in the field have convinced me that doing things right in buildings unfortunately is not as easy as many advocates might idealistically wish for. This is very much true in the legislative and regulatory arena as well. Good legislation, like good buildings, takes real care in crafting.

The government should perhaps insist that real measured performance information be provided for buyers and leasers of buildings and then let the market sort out good designers and builders from the others. Perhaps labeling like that done by the Building America program and like Energy Star provides for appliances should be used for selling buildings. Ideally records of actual utility bills for all buildings would be publicly available and realtors would start paying attention to them.

The best thing the government could do is stop subsidizing fossil and nuclear energy and responsibly address the “economic externalities” of incumbent energy sources so that green solutions are fairly priced in the market. (please see Actually Mr. President, There Is A Solution). With realistic energy pricing and good information, the market would sort out winners and losers based on appropriate criteria.

If society insists we must regulate this stuff, there are lots of good ways to encourage environmentally responsible building that don’t require enshrining a single private organization with completely unregulated monopoly powers over vast swaths of the public sphere.

The key issue is not about how or even whether to regulate “greenness” in buildings, but the problem of governments at various levels enshrining a completely unregulated private entity with essentially monopoly powers in defining and charging for “greenness” certification.

While we all share the goal of improving the way buildings are built, there are far more fundamental concerns regarding defending the rule of law in our country from such totally inappropriate encroachments.

USGBC should very publicly lead the way in assuring that LEED retains its real value as a set of voluntary guidelines and is never again suggested or used in any legislation or government mandate.

Leave a comment

Filed under Energy Policy, Fundamental Perspectives, Politics

Nuclear Waste, A Shameful Legacy

Last week, Secretary of Energy Steven Chu ended the decades long federal plan to dispose of nuclear waste at Yucca Mountain in Nevada saying that that long planned waste repository is “no longer an option.” The Obama administration will instead allow spent fuel rods to remain in storage pools at the nations more than 100 nuclear reactor sites “while the administration devises a new strategy toward nuclear waste disposal.”

Some environmentalists are happy to see further derailment of a plan to permanently dispose of nuclear waste, since in any rational world the lack of any viable waste disposal plan for these incredibly dangerous materials should preclude the development of more nuclear plants. But it should be noted that neither rationality or regulatory responsibility has ever impeded the development of nuclear power in the past. The industry has existed since the 1950’s and reactors well past their intended design lives are being relicensed for decades more operation, despite the lack of any viable plan to dispose of their incredibly dangerous byproducts, which the federal government has been promising since the industry’s inception.

Nuclear apologists, are taking a new spin on it, like the recent Wall Street Journal guest editorial “There Is No Such Thing as Nuclear Waste” by William Tucker, who continues his outrageously irrational argument that an technology that produces the most dangerous byproducts known to man is a “green solution”.

In his argument for reprocessing spent nuclear fuel, Mr. Tucker acknowledges “when they emerge, the fuel rods are intensely radioactive — about twice the exposure you would get standing at ground zero at Hiroshima after the bomb went off.” And he acknowledges that beyond the highly radioactive Uranium 238 and all the other irradiated materials that encase and surround the fuel rods, “of the remaining 5% of a rod, one-fifth is fissionable U-235 — which can be recycled as fuel. Another one-fifth is plutonium”.

Plutonium 239 is an intense carcinogen, which causes cancer from exposure to dust size particle. It is also the core material for creating nuclear weapons. This element isn’t naturally occurring, yet it has a half-life, the time it takes for only half the atoms to decay, of over 24,000 years. Recognizing that human civilization itself has existed far less than half that long, how green and environmentally responsible could it possibly be to plague future generations with dispersing this incredibly nasty stuff around the world?

Along with his suggestion that it is wise to leave nuclear waste lying in storage pools at the more than 100 nuclear plants around the nation where they provide ideal terrorist targets, Tucker argues that it is wise to start shipping these materials over our roads and through our cities to reprocessing facilities. Through reprocessing they can be made more pure and even more dangerous as nuclear fuels. They then become even more ideal terrorist targets, either for hijacking to create rogue nuclear weapons or just blown up in transport using conventional explosives to create aerosol dispersal “dirty bombs”.

Unlike the legacies of two thousand or so years ago, which have dramatically shaped history around people, ideas and myths of that period, our generation is leaving a shameful legacy that could shape history for at least 100,000 years with very real and hugely dangerous materials which don’t occur naturally, all in our short term selfish greed for cheap energy. The craziest part is that the myth our legacy to the future is based on has already proven to be blatantly false and absurd. Nuclear power doesn’t provide cheap energy. In fact the industry has proven economically to be a completely unjustifiable boondoggle.

Nuclear power development has stalled for over three decades because it is ridiculously expensive.  Even in our crazy boom years when anything could be financed, private finance was not available for nuclear power, despite over half a century of massive federal subsidies and taxpayers being saddled assuming the industry’s liability, along with its growing and unsolvable waste disposal costs. Developers and backers of existing nuclear plants lost massive amounts of money and many were bankrupted while the industry propagandists were promising use energy “too cheap to meter”.  Plants are being operated by companies who bought them for pennies on the dollar of their initial development costs, while the rate payers of the utilities who initially made those imprudent investments have been saddled with paying off those debts for decades.

The Bush administration had been pushing for expedited permitting for new generation of nuclear  technology, while ramping up yet more federal subsidy for this ridiculously expensive and economically irrational solution.

And the nuclear propaganda machine has been aggressively jumping on the climate change bandwagon suggesting that Plutonium and other nasty ingredients of their fissionable, highly radioactive, carcinogenic and toxic material stream are more environmentally friendly than carbon dioxide, one of the essential molecules of all life.

Hopefully Dr. Chu’s closure of the Yucca Mountain project is what real environmentalists are hoping for – the beginning of the end of our nations insane and shameful experiment with nuclear power. But it would be completely irresponsible for the federal government to have enabled and created this horrid environmental legacy for the millennium without proposing any viable solution to address it.  Along with ending the subsidies, liability exclusions and licensing for nuclear power operators and properly decommissioning existing plants, we need a real solution like that Yucca Mountain was intended to provide to permanently dispose of this horrible legacy of technological arrogance gone wild.

Today, our nations nuclear plants are nearing or past the end of their intended design lives. Hopefully the Obama administration will be the government that finally acts responsibly, shutting down the nuclear industry and solving the huge, daunting and shameful nuclear waste problem permanently.

Leave a comment

Filed under Climate Policy, Economic Policy, Energy Policy, Environmentalism, Fundamental Perspectives

The Great Disruption

Thomas Friedman suggested in his editorial “The Inflection Is Near?” that we “step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: ‘No more’.”  He goes on to suggest that “Often in the middle of something momentous, we can’t see its significance. But for me there is no doubt: 2008 will be the marker — the year when ‘The Great Disruption’ began.”

The good news is that a whole lot of people read and pay attention to Friedman.  I believe he is right.  I am also pretty certain that as a society, we aren’t nearly prepared to come to terms with the real implications of the Great Disruption that Friedman barely begins to describe.

To get a better handle on the real implications of what Friedman is alluding to, I’ll again suggest dedicating the two hours necessary to watch Chris Martenson’s Crash Course. It’s a great summary of where things stand regarding economics, energy and the environment, the three interrelated primary factors driving the change that is upon us.

We face a time of truly incredible opportunity to fundamentally transform society for the better and to transform our economy to a far more sustainable form. We really have no other choice.

But the challenges and dangers ahead are enormous. As an amateur student of history, it is hard to be entirely hopeful in the face of the Great Disruption we are facing.

My father in law, Keith Ketner, is a much more serious student of history than I am. He lived through the Great Depression and was a bomber pilot in World War II. He wrote to me this morning: “It’s quite calming to realize that we survived the 20th century”.  A wise perspective for these interesting times.

1 Comment

Filed under Economic Policy, Fundamental Perspectives