28 March 2008

ECONOMIC SECURITY

ENERGY RESOURCES AND OUR FUTURE (Energy Bulletin, December 2, 2006)

On May 14, 1957, Navy Rear Admiral Hyman Rickover, considered the Father of the Nuclear Submarine, gave a speech to the Minnesota State Medical Association which he acknowledged “had no medical connotations” -– the rapidly growing consumption of fossil fuels in modern society. He noted that our technological base depends on enormous amounts of energy: “What assurance do we then have that our energy needs will continue to be supplied by fossil fuels? The answer is - in the long run – none ... Fossil fuels are not renewable. In this respect our energy base differs from that of all earlier civilizations. They could have maintained their energy supply by careful cultivation. We cannot.” Rickover warned that fossil fuel reserves would start to shrink in the early twenty-first century, and biofuels would not be the answer, as land would be needed to grow food rather than fuel. He urged his audience to “think soberly about our responsibilities to our descendents -- those who will ring out the Fossil Fuel Age.” While dated in a few minor respects, Rickover’s speech, given at the beginning of America’s modern consumption boom, is eerily prescient of our current energy predicament, and sheds important light on a debate that is only just starting to take place in the U.S. today. A copy of the speech came to light not long ago, and is available online at http://www.energybulletin.net/23151.html 

WHAT WENT WRONG (Economist, vol. 386, no. 8572, March 22, 2008, pp. 79-88)

In this special report, the Economist examines how close Wall Street came to a systemic collapse, and how the financial system will change as a result. They note that the origins of this crisis are in the 1980s, when the financial services industry began a pattern of growth that may only now have come to an end. Financial services’ share of total corporate profits grew from ten percent in the early 1980s to forty percent last year -– but account for only fifteen percent of corporate America’s gross value and only five percent of private-sector jobs. After the “dotcom” crash in 2001, America’s GDP growth has been the lowest in half a century; yet, even as the ground beneath it fell away, the financial services industry has “defied gravity” by using debt, securitization and proprietary trading to boost fees and profits, made possible by cheap money and low consumer-price inflation.

Stoll, Steven FEAR OF FALLOWING: THE SPECTER OF A NO-GROWTH WORLD (Harper’s, vol. 316, no. 1894, March 2008, pp. 88-94)

Using the giant warehouse store Costco as a backdrop, Stoll, senior fellow at the Rutgers Center for Historical Analysis, expresses astonishment at the scale of the modern global economy and its ability to marshal natural resources and energy to sustain economic growth. In this discussion of several recently-released books on the subject, Stoll notes that in the last 250 years, growth of the industrial economy has created what amounts to an exponential-growth culture, particularly in the U.S., where talk of an end to economic growth is tantamount to the end of progress. He notes that economists forget that “growth and ecology operate by different rules ... whereas economies might expand, ecosystems do not.” There is growing realization that humanity is approaching a variety of natural limits simultaneously –- fossil fuel resources, fresh water, forests, minerals and fisheries, to name a few -– that may preclude non-stop future economic growth. Stoll cites the example of the government of Newfoundland, which has placed intermittent bans on its fishing industry to allow fish populations to recover. Such “fallowing”, temporary investment in non-production in order to maintain long-term yields, runs counter to our current mindset. But Stoll argues that progress needs to be redefined as “something other than accumulation”, and our challenge will be to “maintain social tolerance without continued physical expansion.”