Confessions of an Economic Hitman

I finally just got through reading Confessions of an Economic Hitman and was quite impressed with how John Perkins ended it. The bulk of the book is an interesting look on what is a well documented – but unfortunately still misunderstood, often concealed or misrepresented, and usually ignored – phenomenon of the modern American empire building, and how we have transformed from a respected Republic to a feared and increasingly disreputable Empire.

If like me, you find both the current administration's explanations for anti-Americanism baffling (some people in the world "hate freedom") and that often heard from the left inadequately vague (it's because of our foregn policy) - then this book should prove to be very valuable.

It’s a good read because it’s a narrative and offers an inside look at the thrilling (if highly disturbing) true stories of economic manipulation, CIA-orchestrated coups and assassinations, revolutions and invasions in Afghanistan, Panama, Ecuador, Iraq, Iran, Saudi Arabia, etc. Overall he does a good job of presenting these complex stories and phenomenon in an understandable way with out being simplistic, accusatory, or bombastic.

It is also refreshing to hear the accounts from someone ‘on the inside’ whereas these types of books usually come from those on the losing side of the system, through academics or journalists, and are therefore somehow more easily discredited. So it’s fascinating to hear how things really work from someone who knowingly orchestrated and benefited tremendously from the system.

The problems with the system are many and obvious – starvation, wars, terrorism, climate change, environmental destruction, loss of culture – and I’ve talked a lot about them in different contexts. Taken as a whole the interconnections between these issues are clear, regardless of what we call the resulting in a phenomenon: the ills of globalization, overshooting the limits to growth, hitting ‘the funnel walls.’

One telling statistic in particular, on the global wealth gap, highlights the failure of our current system in a relatively simple way – “The income ratio of the one-fifth of the world’s population in the wealthiest countries to the one-fifth in the poorest countries went from 30 to 1 in 1960 to 74 to 1 in 1995. And the World Bank, the U.S. Agency for International Development, the IMF, and the rest of the banks, corporations, and governments involved in international “aid” continue to tell us that they are doing their jobs, that progress has been made.” [p.206]

The reason I was impressed with the ending was because I think he came to the only reasonable conclusion about how to address these serious consequences of this system:

“It would be great if we could just blame it all on a conspiracy, but we cannot. The empire depends on the efficacy of big banks, corporations, and governments – the corporatocracy – but it is not a conspiracy. This corporatocracy is ourselves – we make it happen – which, of course, is why most of us find it difficult to stand up and oppose it. We would rather glimpse conspirators lurking in the shadows, because most of us work for one of those banks, corporations, or governments, or in some way are dependent on them for the goods and services they produce and market. We cannot bring ourselves to bite the hand of the master who feeds us.” [p.217]

“…We need a revolution in our approach to education, to empower ourselves and our children to think, to question, and to dare to act.” [p.222]

As I’ve said before in regards to the neo-classic macro-economic system, it is hard for us to let go of because its positive benefits in terms of human progress have been so many, however to continue blindly cling to it as the end-all-be-all, even as it has become clear that it devastatingly inappropriate, will lead to our demise.

Internalizing these issues is at the heart of Sustainable Development. He addresses the role that existing institutions and organizations can lead the way towards Sustainability, which is a central to this program, as the name suggests –Strategic Leadership Towards Sustainability. He states:

“There is nothing inherently wrong with banks, corporations, and governments – or with the people who manage them – and that they certainly do not have to compose a corporatocracy. I could go into detail about how the problems confronting us today are not the result of malicious institutions; rather, they stem from fallacious concepts about economic development. The fault lies not in the institutions themselves, but in our perceptions of the manner in which they function and interact with one another, and of the role their managers play in that process. In fact, those highly effective worldwide communications and distribution networks could be used to bring about positive and compassionate changes.”[p.222]

The change must start within each one of us, conscious of our place in the greater context of the System (Level 1) – individual within an organization within society within the biosphere; it must involve a shared (science-based) vision of Success (Level 2) – not violating the 4 sustainability principles; and have an effective Strategy (Level 3) for achieving success – backcasting from principles. To expect this from every single individual may seem unrealistic, but it is also unnecessary, because at a certain point, a tipping point will be reached, and society, with all of its economic and social institutions will shift.

Another very interesting concept Perkins raises is “The Prophecy of the Condor and the Eagle.” I’ve talked a lot about a bifurcation point for society in the near future – the Limits to Growth team’s computer models mostly show things changing somewhere in the middle of this century, and nearly every lecturer we’ve had, whether they’ve been working on these issues for 10 or 30 years, have similar comments about a feeling that things are beginning to change in terms of sustainable development.

The Prophecy of the Condor and the Eagle – which is popular in Latin American cultures, but apparently very similar to many prophecies from around the world – predicts a period of great change starting in the late 1990s. He describes it as follows:

“…back in the mists of history, human societies divided and took two different paths: that of the condor (representing the heart, intuitive and mystical) and that of the eagle (representing the brain, rational and material). In the 1490s, the prophecy said, the two paths would converge and the eagle would drive the condor to the verge of extinction. Then, five hundred years later, in the 1990s, a new epoch would begin, one in which the condor and eagle will have the opportunity to reunite and fly together in the same sky, along the same path. If the condor and eagle accept this opportunity, they will create a most remarkable offspring, unlike any ever seen before.” [p.210]

Something to look forward to – it will require us to wake up to the current reality and the role we each play individually and collectively in creating that reality every day.

Stay going…

Pay at the Pump

While running the risk of turning this blog into little more than a news-feed of current articles, I can’t help but throw this one from the NY Times on here because it breaks down a poignant issue – one that could have a hugely positive ripple effect in the US and the world, and push us one small step closer towards an Ecological Economic system.

It talks about the benefits of a tax shift in the US, imposing a gas-tax at the pump, off-set by a break in income taxes. Two key points –

1) the fact that while self-proclaimed “free-market” advocates typically try to over-simplify the situation and argue that such a move is an artificial regulatory burden, it actually brings us closer to a true free-market system when the true costs of fossil fuels are accounted for (e.g. military spending to secure cheap oil as the article mentions, and the monstrous, and sometimes unquantifiable costs of health problems (estimated $24-450 billion per year from vehicle pollution in the US), destruction of ecosystem services (monetarily unquantifiable) and climate change ($200 billion for Katrina alone) that stem from burning gas). Including these “external” costs of fossil fuel use is called internalizing externalities and a core concept of environmental economics, as well as an important part of ecological economics. It becomes a matter of obvious common sense when a whole-systems perspective is taken, but can be easy to overlook when we have a fractured, reductionist perspective.

2) When it talks about how people would just take the income tax savings and buy the same amount of gas, the article hints at something called the “rebound effect.” It’s a typical problem in the environmental economic model, because in general environmental economics doesn’t explicitly acknowledge and deal with limits to growth in the same way ecological economics does by setting “caps” or quotas – limits – to how much of a resource can be used (at a sustainable rate equal to or below the rate of replenishment) or how much waste can be returned into the biosphere (at a rate equal to or below the rate of assimilation of the waste by the natural systems). As the article points out, in this case the accounting for the true costs of gas will result in less use, as there are so many behavioral and technological alternatives to our current transportation patterns.

This type of move is long overdue and has been politically misrepresented for too long. Its important to do whatever you can (voting, writing your congressmen, etc) to support these kinds of developments. Anyway – here’s the article:

http://www.nytimes.com/2006/02/16/business/16scene.html?_r=1&oref=login

A Way to Cut Fuel Consumption That Everyone Likes, Except the Politicians

By ROBERT H. FRANK
Published: February 16, 2006

SUPPOSE a politician promised to reveal the details of a simple proposal that would, if adopted, produce hundreds of billions of dollars in savings for American consumers, significant reductions in traffic congestion, major improvements in urban air quality, large reductions in greenhouse gas emissions, and substantially reduced dependence on Middle East oil. The politician also promised that the plan would require no net cash outlays from American families, no additional regulations and no expansion of the bureaucracy.

As economists often remind their students, if something sounds too good to be true, it probably is. So this politician's announcement would almost surely be greeted skeptically. Yet a policy that would deliver precisely the outcomes described could be enacted by Congress tomorrow — namely, a $2-a-gallon tax on gasoline whose proceeds were refunded to American families in reduced payroll taxes.

Proposals of this sort have been advanced frequently in recent years by both liberal and conservative economists. Invariably, however, pundits are quick to dismiss these proposals as "politically unthinkable."

But if higher gasoline taxes would make everyone better off, why are they unthinkable? Part of the answer is suggested by the fate of the first serious proposal to employ gasoline taxes to reduce America's dependence on Middle East oil. The year was 1979 and the country was still reeling from the second of two oil embargoes. To encourage conservation, President Jimmy Carter proposed a steep tax on gasoline, with the proceeds to be refunded in the form of lower payroll taxes.

Mr. Carter's opponents mounted a rhetorically brilliant attack on his proposal, arguing that because consumers would get back every cent they paid in gasoline taxes, they could, and would, buy just as much gasoline as before. Many found this argument compelling, and in the end, President Carter's proposal won just 35 votes in the House of Representatives.
The experience appears to have left an indelible imprint on political decision makers.

To this day, many seem persuaded that tax-cum-rebate proposals do not make economic sense. But it is the argument advanced by Mr. Carter's critics that makes no sense. It betrays a fundamental misunderstanding of how such a program would alter people's opportunities and incentives.

Some examples help to illustrate how the program would work. On average, a family of four currently consumes almost 2,000 gallons of gasoline annually. If all families continued to consume gasoline at the same rate after the imposition of a $2-a-gallon gasoline tax, the average family would pay $4,000 in additional gasoline taxes annually. A representative family with two earners would then receive an annual payroll tax refund of $4,000. So, if all other families continued to buy as much gasoline as before, then, this family's tax rebate would enable it to do so as well, just as Mr. Carter's critics claimed.

But that is not how things would play out. Suppose, for example, that the family was about to replace its aging Ford Explorer, which gets 15 miles per gallon. It could buy another Explorer. Or it could buy Ford's new Focus wagon, which has almost as much cargo capacity and gets more than 30 miles per gallon. The latter choice would save a whopping $2,000 annually at the pump. Not all families would switch, of course, but many would.

From the experience of the 1970's, we know that consumers respond to higher gasoline prices not just by buying more efficient cars, but also by taking fewer trips, forming carpools and moving closer to work. If families overall bought half as much gasoline as before, the rebate would be not $2,000 per earner, but only $1,000. In that case, our representative two-earner family could not buy just as much gasoline as before unless it spent $2,000 less on everything else. So, contrary to Mr. Carter's critics, the tax-cum-rebate program would profoundly alter not only our incentives but also our opportunities.

A second barrier to the adoption of higher gasoline taxes has been the endless insistence by proponents of smaller government that all taxes are bad. Vice President Dick Cheney, for example, has opposed higher gasoline taxes as inconsistent with the administration's belief that prices should be set by market forces. But as even the most enthusiastic free-market economists concede, current gasoline prices are far too low, because they fail to reflect the environmental and foreign policy costs associated with gasoline consumption. Government would actually be smaller, and we would all be more prosperous, if not for the problems caused by what President Bush has called our addiction to oil.

At today's price of about $2.50 a gallon, a $2-a-gallon tax would raise prices by about 80 percent (leaving them still more than $1 a gallon below price levels in Europe). Evidence suggests that an increase of that magnitude would reduce consumption by more than 15 percent in the short run and almost 60 percent in the long run. These savings would be just the beginning, because higher prices would also intensify the race to bring new fuel-efficient technologies to market.

The gasoline tax-cum-rebate proposal enjoys extremely broad support. Liberals favor it. Environmentalists favor it. The conservative Nobel laureate Gary S. Becker has endorsed it, as has the antitax crusader Grover Norquist. President Bush's former chief economist, N. Gregory Mankiw, has advanced it repeatedly.

In the warmer weather they will have inherited from us a century from now, perspiring historians will struggle to explain why this proposal was once considered politically unthinkable.

Robert H. Frank, an economist at the Johnson School of Management at Cornell University, is the co-author, with Ben S. Bernanke, of "Principles of Economics." E-mail: rhf3@cornell.edu


Stay going...

Fossil Free Sweden & Clean Development Mechanisms

Strapped for time and will write more on my thesis project soon – but for now, this article from the Financial Times gives a pretty nice, basic introduction to the concept of the Clean Development Mechanism (CDM) under Kyoto:

http://news.ft.com/cms/s/fc4d2d90-9e91-11da-b641-0000779e2340.html

Also, I’m long overdue for a post on sustainability initiatives in Sweden, but this write up is again, a nice overview of the some of their initiatives, at least in the energy sector. The ambitious goal of getting off fossil fuels all together by 2020 was announced by the PM in the fall, and the country is coming together to get it done.

http://www.guardian.co.uk/print/0,,5394081-103681,00.html

Stay going…

Hållbarhet Huset…

I’ve moved into a new apartment, deemed the Hållbarhet Huset (Sustainability House) in the booming metropolis of downtown Karlskrona. Michelle just posted some pics on her blog if anyone’s interested (scroll down to the bottom when you go to this link):

http://michellemckay.typepad.com/photos/life_in_karlskrona/

… it’s a great living situation with plenty of opportunity for good conversations and reflections with the roommates (Andrew, Geneva, Ingrid, Michelle and Richard) as we get into our thesis projects. Hope you’re all well ~ Stay going.

Money where your mouth is...

I think in general people are pretty interested in doing the right thing. After a few months of this program – dealing with strategic sustainable development day-in and day-out – it’s difficult to put my finger in the wind and get a sense of awareness around the urgency of these issues. It seems that climate change is getting a lot of headlines. Some in the mainstream press are starting to connect the dots between things like fossil fuel dependence, international trade, social injustice, climate change, soil erosion, terrorism, water purity, break down in social fabric, hurricanes, deforestation, etc.

Still, I remember how easy these things are to forget. When I was living in New York just a few months ago I would forget. Even as someone who has been passionate about sustainability for years, trying to plot a long-term strategy as to how I could have the most positive impact, I would allow myself to become subdued, to put the problems outside of myself, outside of my control. I would sometimes remember, feel helpless, and then forget again. I would justify my lifestyle to myself because I knew the experience I was getting and the knowledge about business and financial markets would be invaluable to me down the road in sustainability work.

But as for the day-to-day – how could I really do anything about the state of the NYC waste streams? If I raised the issue, is the girl at Go Sushi going to stop and think about how much packaging is really necessary for my dinner? She could barely understand me when I asked for chopsticks. Was I supposed to jump out of bed at 3:30 on Tuesday mornings to ask the guys on the garbage truck if they could send word back to their boss that some kids on 51^st want more recycling options?

I could legitimately see those kinds of approaches working if each one of us did them in our communities – but in New York it just seems ridiculous. I guess it speaks to the importance of strength in the social fabric – strong relationships, resilient communities – for sustainability. Businesses and organizations, the people in them, are far less likely to take actions that might harm people they know and care about. Clearly, this is too drastic a simplification – because we’re dealing with complex systems it’s difficult to identify the full impact of our actions (including indirect side-effects, especially when time-delays are involved) – still there’s a lot to be said for having a personal stake in people.

Anyway, back to my point, which stems from a recent conversation I had with a friend in the city who was frustrated by what he could do there. If there’s one thing that city has it’s a lot of options, especially when it comes to food. I’ve always been very conscious about the value of eating local and organic food – but when it came down to it I rarely did. If the option was convenient and not too much more expensive I would go for it, but I wouldn’t go too far out of my way.

Looking back it seems absurd. I would shy away from spending an extra buck on a $3 carton of organic milk – and then go drop $250 for a bottle of vodka. Here it’s been a lot easier – the “ecological” labeling is much more prevalent and the costs usually aren’t much more than the standard option. Plus when you spend all day contemplating the true costs of industrial agriculture and long-haul food transport, it makes you want to throw up, which makes throwing down a few extra kronor easier to stomach.

The impacts of industrial agriculture are huge. The fossil energy that goes into fertiliers, pesticides and production, the run-off of these chemicals and the soil degredation all threaten our civilization. The GMO debate is a whole other can of worms, I won't get into here.

So, I guess the point of this post is a bit of a reminder, a bit of a call to action, however modest. Buy locally produced food whenever possible. Every vote with your wallet for organic food takes it a small step closer to being the norm, which brings us a small step closer to sustainable agriculture system, which would bring us a pretty huge step closer to a sustainable society. Plus it’s way better for you. Stay going…

Orders of Magnitude

Just a quick bit of perspective on Bush's State of the Union speech talking about reducing the US's dependence on foreign oil by 75% by 2025. While it's great to see the administration starting to at least talk in the right direction, what they're laying out seems to be far too little too late.

Also, the resources allotted are far too small.

Bush said that while the US has spent nearly $10-bil to develop clean

alternative energy sources, he would boost funding for clean-energy research

by 22%. 

Meanwhile....

Bush Request Would Push War Total to $440B

By ANDREW TAYLOR

The Associated Press
Friday, February 3, 2006; 8:32 AM

WASHINGTON -- The Bush administration said Thursday it will ask Congress for $120 billion more for the wars in Iraq and Afghanistan and $18 billion more for hurricane relief this year.

The White House acknowledges the upcoming requests would cause total spending on the wars in Iraq and Afghanistan since Sept. 11, 2001, to soar well past the $400 billion mark, while spending for hurricane relief would top $100 billion.

Think of how quickly we could get off fossil fuels all together (not just oil, and not just 'dependence on foriegn oil') with that kind of funding, a shared vision, a meaningful purpose. The technology is all there, and with those resources and inspired purpose, I can guarantee better technology would come quickly. It’s the Apollo mentality that we need to pull together – not just in the US, but globally – and make the shift to sustainability!! Check out the Apollo Alliance website again for more. Stay going...