Transcript: 406 Carbon as the Core of Recovery

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Last week we did part one, this week it's

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Wait, wait, wait. It's part two of carbon as the core of an economic reconstruction of the U.S.

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Okay, okay, Here we have Joe Mason, professor of banking at Lousiana State University

MASON

Coming out waving as many red flags as he can at the pollitically naive, we might expect Professor Mason has some weak arguments. We would be correct.

The oil and gas industry as a generator of jobs is wrong in so many ways, and Mason's pat explanation is transparently false. If it were true that all fiscal policy were equal, you could create as many jobs by giving AIG $180 billion to pass through to its banking counterparties as you could by hiring people for the CCC with the same $180 billion. We know, in fact, that $180 for AIG passed through to the banks did save a few jobs, but the bonuses were tremendous. We might imagine that six million jobs at $8.50 per hour complete with benefits could be created with the same money.

It is wrong to view oil and gas as a jobs industry, when it is a resource extraction industry. Value added is not the core of the big profits available to resource extraction. Empirically derived estimates show the number of jobs per dollar of activity in oil production and distribution to be lower than for any other industry. To have an economist make the claim that it is only makes economists look foolish. Even defense spending, another low-jobs, high cost industry that gets credit for more than it delivers, is much more effective.

The jobs in energy are efficiency, green construction, carbon-minimizing infrastructure, retrofitting. Characterizing tax loopholes for the oil and gas industry as economic stimulus is not intellectually coherent, and is probably disingenuous. Joe Mason, water carrier for oil and gas, Idiot of the Week.


But there was more. Arnold Schwarzenegger, the governator, of all people, went off on Big Oil last week as they dump their massive money into the political climate of the state of California in the form of Proposition 23.

Again with the claim that oil and gas is somehow going to produce jobs. It is just not so. We'll see what money and modern mind manipulation can do. If it can convince Californians that the road to prosperity is through more carbon pollution, it can do anything.

SCHWARZENEGGER.

Arnold Scwharzenegger. Noting again, as with everything on Demand Side, remarks may be heavily edited.

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These are skirmishes on the fringes of the issue of oil and gas and the future of the American economy. The critical battle is on the issue of a higher oil price and a move to a low-carbon economy. As Joseph Stiglitz pointed out last week on Demand Side, a higher oil price can position economies for the future by creating the context for new investment and comparative advantage. If an enlightened policy such as the Cantwell-Collins CLEAR Act were the law of the land, gradually higher prices and mandated reductions in emissions could go hand in hand with certainty. The same law would generate a funding base for new investment directly by the government or a quasi-government body in infrastructure and clean energy. At the same time, because the majority of revenues would be rebated directly to individuals on a per-capita basis, it would be a progressive tax and a way for households to capture directly in cash money the fruits of conservation.

We're going to let that be our discussion of the matter. But even a higher oil price and reorganization and reconstruction of the economy on the basis of carbon reduction is not the core of the matter from an economic perspective. We want to end today with an extended excerpt from Manfred Max-Neef, a Chilean economist, without further comment.

MANFRED MAX-NEEF:


We are simply, dramatically stupid. We act systematically against the evidences we have. We know everything that should not be done. There’s nobody that doesn’t know that. Particularly the big politicians know exactly what should not be done. Yet they do it. After what happened since October 2008, I mean, elementally, you would think what? That now they’re going to change. I mean, they see that the model is not working. The model is even poisonous, you know? Dramatically poisonous. And what is the result, and what happened in the last meeting of the European Union? They are more fundamentalist now than before. So, the only thing you know that you can be sure of, that the next crisis is coming, and it will be twice as much as this one. And for that one, there won’t be enough money anymore. So that will be it. And that is the consequence of systematical human stupidity.

First of all, we need cultured economists again, who know the history, where they come from, how the ideas originated, who did what, and so on and so on; second, an economics now that understands itself very clearly as a subsystem of a larger system that is finite, the biosphere, hence economic growth as an impossibility; and third, a system that understands that it cannot function without the seriousness of ecosystems. And economists know nothing about ecosystems. They don’t know nothing about thermodynamics, you know, nothing about biodiversity or anything. I mean, they are totally ignorant in that respect. And I don’t see what harm it would do, you know, to an economist to know that if the beasts would disappear, he would disappear as well, because there wouldn’t be food anymore. But he doesn’t know that, you know, that we depend absolutely from nature. But for these economists we have, nature is a subsystem of the economy. I mean, it’s absolutely crazy.

And then, in addition, you know, bring consumption closer to production. I live in the south of Chile, in the deep south. And that area is a fantastic area, you know, in milk products and what have you. Top. Technologically, like the maximum, you know? I was, a few months ago, in a hotel, and there in the south, for breakfast, and there are these little butter things, you know? I get one, and it’s butter from New Zealand. I mean, if that isn’t crazy, you know? And why? Because economists don’t know how to calculate really costs, you know? To bring butter from 20,000 kilometers to a place where you make the best butter, under the argument that it was cheaper, is a colossal stupidity, because they don’t take into consideration what is the impact of 20,000 kilometers of transfer? What is the impact on the environment of that transportation, you know, and all those things? And in addition, I mean, it’s cheaper because it’s subsidized. So it’s clearly a case in which the prices never tell the truth. It’s all tricks, you know? And those tricks do colossal harms. And if you bring consumption closer to production, you will eat better, you will have better food, you know, and everything. You will know where it comes from. You may even know the person who produces it. You humanize this thing, you know? But the way the economists practice today is totally dehumanized.

There are some important scientists that already are saying, I believe. I have not reached that point yet. But some believe, you know, and state that it’s definite: we are finished. We are finished. In a few more decades, I mean, there will be no humanity anymore. I don’t think we have reached that point of it, but I believe that we are pretty close to it. I’ll say that we already crossed one of the three rivers. And if you look at it and what is happening everywhere, I mean, it’s quite frightening how the amount of catastrophes are increasing all over the place, you know, in all manifestations—storms, earthquakes, you know, volcanoes erupting. I mean, the amount of events is growing dramatically. I mean, it’s really frightening. And we continue with the same.

The principles, you know, of an economics which should be are based in five postulates and one fundamental value principle. One, the economy is to serve the people and not the people to serve the economy. Two, development is about people and not about objects. Three, growth is not the same as development, and development does not necessarily require growth. Four, no economy is possible in the absence of ecosystem services. Five, the economy is a subsystem of a larger finite system, the biosphere, hence permanent growth is impossible. And the fundamental value to sustain a new economy should be that no economic interest, under no circumstance, can be above the reverence of life.

Nothing can be more important than life. And I say life, not human beings, because, for me, the center is the miracle of life in all its manifestations. But if there is an economic interest, I mean, you forget about life, not only of other living beings, but even of human beings. If you go through that list, one after the other, what we have today is exactly the opposite.

Growth is a quantitative accumulation. Development is the liberation of creative possibilities. Every living system in nature grows up to a certain point and stops growing. You are not growing anymore, nor he nor me. But we continue developing ourselves. Otherwise we wouldn’t be dialoguing here now. So development has no limits. Growth has limits. And that is a very big thing, you know, that economists and politicians don’t understand. They are obsessed with the fetish of economic growth.

Many studies have been done. I’m the author of a famous hypothesis, the threshold hypothesis, which says that in every society there is a period in which economic growth, conventionally understood or no, brings about an improvement of the quality of life. But only up to a point, the threshold point, beyond which, if there is more growth, quality of life begins to decline. And that is the situation in which we are now.

I mean, your country is the most dramatic example that you can find. I have gone as far as saying—and this is a chapter of a book of mine that is published next month in England, the title of which is Economics Unmasked. There is a chapter called "The United States, an Underdeveloping Nation," which is a new category. We have developed, underdeveloped and developing. Now you have underdeveloping. And your country is an example, in which the one percent of the Americans, you know, are doing better and better and better, and the 99 percent is going down, in all sorts of manifestations. People living in their cars now and sleeping in their cars, you know, parked in front of the house that used to be their house—thousands of people. Millions of people, you know, have lost everything. But the speculators that brought about the whole mess, oh, they are fantastically well off. No problem. No problem.

I don’t know how to turn it around. I mean, it will turn around itself, you know, in catastrophic manners. I mean, I don’t understand how there isn’t—millions of people can all of a sudden go out in the streets in the United States and begin destroying things, I don’t know. That may perfectly happen. You know, the situation is absolutely dramatic. Absolutely dramatic. And it is supposed to be the most powerful country in the world, you know, and so on. And even in those conditions, they continue with those stupid wars, you know, and spend more, more, more millions and trillions. Thirteen trillion dollars for the speculators; not one cent for the people who lost their homes! I mean, what kind of logic is that?