In the ultimate analysis, economic prosperity depends not on how brilliant a few
people are, but on how large a scale you are able to produce competent people
in all walks of life.
- John Maynard Keynes
Over the past six months, Keynes has been raised from the dead and looks none
the better for it. "Keynesian" has become an ubiquitous adjective inflicted
into all matters concerning the economy, attempting to provide legitimacy for
actions that make very little sense. If Keynes' recently resurrected corpse
could speak on what's being proposed in his name, he would once again say, "I
agree with everything in this if 'not' is put in front of every statement."
Keynes' greatest legacy will be that of a free thinker who debunked the notion
of economics as science and understood the
great uncertainty underlying all human endeavors. Keynes would be horrified to
look at the global economy today and think his thought from seven decades ago
could just be plucked and willy-nilly transferred to the present. Nonetheless,
it is done with alarming frequency; even newly minted Nobel Prize winners use
his name to give authority to bad ideas.
So, before US Democrats try being good Democrats and destroy the reputation of
Keynes, let's think about a couple things. In the past year, the money wasted
to Wall Street and the global banking system trying to pump up the deflating
financial bubble now reaches over several trillion dollars. We're in for a much
bigger tab if we continue down the same path.
Now, the rest of the United States' mega-corporations are lining up for their
share. American Express has fraudulently become a bank, and of course, the auto
industry now rushes to the front of the line. While the current financial
problem (let's call it a problem and not a crisis, so we might slow the looting
of the US Treasury), is indeed creating great economic problems, the price of
oil has also been a important culprit. Much more importantly, oil will remain a
very burdensome yoke on any recovery.
A recent report by the Canadian Imperial Bank of Commerce states the obvious:
"Over the past expansion, real oil prices rose over 500%, twice the climb in
real oil prices that produced the two biggest recessions in the post-war era:
the 1974 recession and the double-dip recession in 1980 and 1982."
Why did oil spike so high? Certainly the giant casino Ponzi scheme that global
finance had become played a role, but more importantly we are at the end of the
era of cheap oil. A recent Barclays Capital report on the global oil industry
documents extreme decline in oil production in the past few years from the
North Sea, Mexico and Russia. In the past decade, Russia alone provided almost
all global growth in the oil production of non-Organization of Petroleum
Exporting Countries (OPEC).
Barclays concludes, "In our view, extreme non-OPEC supply weakness is not set
to remain an isolated episode of 2008. The repeated difficulties faced by
non-OPEC producers in responding to price signals, and the increasing scale of
that failure indicates the existence of structural hurdles to growth." Or in
English, there will be less oil and it will be more expensive.
OPEC, and more specifically Saudi Arabia, are at present the only nations able
to increase supply, and how much longer they will be able to do this is
questionable. How many Americans know Iraq is now the sixth-largest source of
imported US oil, providing over 6% of our imported supply. That's very
expensive oil! Yet, oil is only one of our limited resource problems in a
no-longer sustainable 20th century economic model.
As the World Wildlife Fund states in its Living Planet Report 2008, "Over the
past 35 years alone, the Earth’s wildlife populations have declined by a third.
Our global footprint now exceeds the world’s capacity to regenerate by about
30%. If our demands on the planet continue at the same rate, by the mid-2030s
we will need the equivalent of two planets to maintain our lifestyles."
So, let us stop our mad rush to destruction in the name of saving the economy
while invoking in vain the name of poor old long dead Keynes. Let us understand
the world of 2008 is not the world of 1938, and it is the depths of immorality
to spend money entombing the future in a unsustainable past.
Fewer than 1 million people are now employed directly in the US automobile and
parts industry, or about 0.8% of the American workforce. The present automobile
is a millstone around the future's collective neck. If Detroit wants more
government money, let them begin building more buses, trolleys and trains.
Secondly, the majority of so-called Keynesian pump-priming should be spent not
on the parts of America's present infrastructure that are unsustainable, but in
transforming it to be much less energy- and resource-wasteful.
America should make a goal of cutting its oil use by 50% in five years,
spending money to evolve more walkable, bikeable and transit-oriented
communities. This change cannot be run through Washington, but officials there
certainly must help facilitate it, indeed it is imperative they do.
The greater weight for change will fall on local governments and, most
importantly, the citizen. If we wish to borrow something from the 1930s, let's
transform Labor's old hymn, "Which Side are You On?" Let's ask, "What are You
Doing?" How have you cut your energy consumption today?
If we really wish to honor Keynes, one of the great minds of the 20th century,
let's intern his body back to the soil, and instill in each of us his spirit, a
spirit which joyously overthrew the orthodoxies of his day, challenged archaic
institutions and had little patience for foolish thinking, no matter the
pedigree.
Joe Costello is a communication and energy consultant. He served as
communications director for Jerry Brown's 1992 presidential campaign and senior
advisor on Howard Dean's 2004 campaign. joecostello@gmail.com
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