Tuesday, April 25, 2006


Socialism, Capitalism - economic truth, ecologic truth

From an article from Wired.com

There's a quote by Oystein Dahle close to a decade ago now, after the collapse of the Soviet Union. He was for many years Exxon's vice president for Norway and the North Sea. He said, "Socialism collapsed because it did not allow the market to tell the economic truth. Capitalism may collapse because it does not allow the market to tell the ecological truth." That's a lot of wisdom distilled into those two sentences.

Equating the blind spots of socialism and capitalism is something I found to be quite interesting.

In the presence of a shared ethical framework which values the environment we depend on, then capitalism can potentially work well in the long term.  There is of course the other unsolved issue of what "enough" wealth is in terms of creating it. This is a conundrum that has existed from the beginning of capitalism ( as defined in Adam Smith's Wealth of Nations).

This shared ethical framework with respect to the environment does not currently exist in the United States capitalist community for any number of reasons. American capitalism has been allowed to simply pillage the environment instead of preserving it, with some regulations having some effect from time to time.

This unrestricted wealth creation at high cost to both workers and the environment has been going on for a long time. It's gone on so long that being a good consumer is now the equivalent of being a good citizen, with predictable results to culture, the environment, and - oddly enough - the economy itself.

A professor at UALR told me that the Roman Empire collapsed for several interrelated reasons. One of which was the habit of farmers to grow cash crops instead of sustainable mixes. The cash crops were exported for, of course, cash. Cash allowed the Romans to buy whatever they wanted. The economic system was advanced and worked pretty well.

When unrest due to some sustained external raiding made it impossible for the cash crops to be exported, then the internal economy of the Roman Empire started to experience hyperinflation and moved from healthy to crumbling in a relatively short time.

The economy can indeed be killed by that which makes it strong, if enough positive feedback is applied. But enough of ancient history. We're seeing history in the making at the present time.

The destabilization of the world oil economy (or, as I would rather see it put, the recognition that it is inherently unstable to begin with) may have some parallels with the Roman experience. Inflation is kept low here due to the fact that we've shifted labor costs to places where labor is shockingly cheap, while at the same time selling debt.

By giving up the ability to manufacture consumer goods, while continuing to borrow money from the same economies that sell us those manufactured goods, we either have a mutually-assured-destruction Economic Death Embrace (and the US and, say, China continue on as we have been continuing on), or we'll have a situation where the dollar will devalue greatly, and we will suffer widespread economic damage as the dollar slowly (or quickly) becomes incapable of buying what we, or our parents, used to buy.

Since mutually-assured-destruction didn't prevent the collapse of the Soviet Union. I'm not inclined to think of it as a stable or preferable economic partnership. Destabilization of the trade routes made the Roman experience of the third century quite challenging. Continued destabilization of our trade routes could make our own third century, of existence as a country, quite challenging.

So, if someone like me can maintain an understanding of the basics, you'd figure that our government, with all sorts of smart people as resources, would come up with solid solutions for the precarious position that we find ourselves uncomfortably sliding towards. After all, with a republican president and a republican congress, I'd expect to see some smart economic action - some wicked-mean sharp-shooting monetary policy acumen. After all, these are the guys that are supposed to be the experts of the financial side of the house.

It's unfortunately revealing, then, that it took only a modest rise in gasoline prices for President Bush to do nothing more than simply waive environmental rules for gasoline.

This is supposedly to help lower prices. I'm not exactly sure how this will help lower prices. Why are we trying to manipulate prices (thinking as a Republican), instead of solving the underlying problems anyway?

A free market means a free market. Prices are high for specific reasons, none of which can be solved by rolling back environmental laws. A real republican answer would be to allow the market to shape society, not use the machinery of government to shape the market, while allowing society to do whatever it is that it's doing. This primarily means driving a lot more than necessary and buying record amounts of fuel.

It sounds, from the brief article, that refineries are generally already done with their summer blending plans anyway. The connection between not complying with regulations and a reduction in price to the consumer is therefore negligible at best. I of course fully expect to see someone at some point claim that the Bush Administration "saved summer vacations for patriotic Americans" by rolling back environmental laws.

Any cost decreases will be largely taken as profits by the refineries. A cynic would see this (profits for oil companies) as the real reason for waiving of a regulatory law that has far less impact on the value (as opposed to price) of gasoline than drivers actually driving intelligently or maintaining correct air pressure in their car tires. If you want to tinker with regulations, then require higher gas mileages for new cars. It's not like the technology isn't there, and would actually increase fuel value to the consumer.

There is a long list of other things that could actually help consumer costs. Some of which have been repeatedly and publicly suggested by people a lot smarter than me. I can't recall anyone outside of maybe a few refinery industry lobbyists that has ever called for the removal of clean air related environmental regulations. There has never been any sort of suggestion that it would actually lower prices at the pump.

The reason for this is simple. Dirty air and climate change cost society much much more than any small break at the pump from refining regulations going away.

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