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In their World Economic Forum treatise Covid-19: The Great Reset, economists Klaus Schwab and Thierry Malleret bring us the voice of would-be Global Governance.

Viewing the virtual-reality film “Collisions” at a session of the World Economic Forum in Davos, Switzerland, January 2016. (World Economic Forum, Flickr, CC BY-NC-SA 2.0)

By Diana Johnstone
**in Paris**Special to Consortium News

By titling their recently published World Economic Forum treatise Covid-19: The Great Reset, the authors link the pandemic to their futuristic proposals in ways bound to be met with a chorus of “Aha!”s. In the current atmosphere of confusion and distrust, the glee with which economists Klaus Schwab and Thierry Malleret greet the pandemic as harbinger of their proposed socioeconomic upheaval suggests that if Covid-19 hadn’t come along by accident, they would have created it (had they been able).

In fact, World Economic Forum founder Schwab was already energetically hyping the Great Reset, using climate change as the triggering crisis, before the latest coronavirus outbreak provided him with an even more immediate pretext for touting his plans to remake the world.

The authors start right in by proclaiming that “the world as we knew it in the early months of 2020 is no more,” that radical changes will shape a “new normal.” We ourselves will be transformed. “Many of our beliefs and assumptions about what the world could or should look like will be shattered in the process.”

Throughout the book, the authors seem to gloat over the presumed effects of widespread “fear” of the virus, which is supposed to condition people to desire the radical changes they envisage. They employ technocratic psychobabble to announce that the pandemic is already transforming the human mentality to conform to the new reality they consider inevitable.

“Our lingering and possibly lasting fear of being infected with a virus … will thus speed the relentless march of automation…” Really?

“The pandemic may increase our anxiety about sitting in an enclosed space with complete strangers, and many people may decide that staying home to watch the latest movie or opera is the wisest option.”

“There are other first round effects that are much easier to anticipate. Cleanliness is one of them. The pandemic will certainly heighten our focus on hygiene. A new obsession with cleanliness will particularly entail the creation of new forms of packaging. We will be encouraged not to touch the products we buy. Simple pleasures like smelling a melon or squeezing a fruit will be frowned upon and may even become a thing of the past.”

This is the voice of would-be Global Governance. From on high, experts decide what the masses ought to want, and twist the alleged popular wishes to fit the profit-making schemes they are peddling. Their schemes center on digital innovation, massive automation using “artificial intelligence,” finally even “improving” human beings by endowing them artificially with some of the attributes of robots: such as problem-solving devoid of ethical distractions.

Engineer-economist Klaus Schwab, born in Ravensburg, Germany, in 1938, founded his World Economic Forum in 1971, attracting massive sponsorship from international corporations. It meets once a year in Davos, Switzerland – last time in January 2020 and next year in May, delayed because of Covid-19.

Klaus Schwab, founder and executive chairman, World Economic Forum, on Jan. 21, 2015. (World Economic Forum, Flickr, CC BY-NC-SA 2.0)

A Powerful Lobby

What is it, exactly? I would describe the WEF as a combination capitalist consulting firm and gigantic lobby. The futuristic predictions are designed to guide investors into profitable areas in what Schwab calls “the Fourth Industrial Revolution (4IR)” and then, as the areas are defined, to put pressure on governments to support such investments by way of subsidies, tax breaks, procurements, regulations and legislation. In short, the WEF is the lobby for new technologies, digital everything, artificial intelligence, transhumanism.

It is powerful today because it is operating in an environment of State Capitalism, where the role of the State (especially in the United States, less so in Europe) has been largely reduced to responding positively to the demands of such lobbies, especially the financial sector. Immunized by campaign donations from the obscure wishes of ordinary people, most of today’s politicians practically need the guidance of lobbies such as the WEF to tell them what to do.

In the 20th century, notably in the New Deal, the government was under pressure from conflicting interests. The economic success of the armaments industry during World War II gave birth to a Military-Industrial Complex, which has become a permanent structural factor in the U.S. economy.

It is the dominant role of the MIC and its resulting lobbies that have definitively transformed the nation into State Capitalism rather than a Republic.

The proof of this transformation is the unanimity with which Congress never balks at approving grotesquely inflated military budgets. The MIC has spawned media and Think Tanks which ceaselessly indoctrinate the public in the existential need to keep pouring the nation’s wealth into weapons of war. Insofar as voters do not agree, they can find no means of political expression with elections monopolized by two pro-MIC parties.

The WEF can be seen as analogous to the MIC. It intends to engage governments and opinion manufacturers in the promotion of a “4IR” which will dominate the civilian economy and civilian life itself.

The pandemic is a temporary pretext; the need to “protect the environment” will be the more sustainable pretext. Just as the MIC is presented as absolutely necessary to “protect our freedoms,” the 4IR will be hailed as absolutely necessary to “save the environment” – and in both cases, many of the measures advocated will have the opposite effect.

Public street art on 6th Street in Austin, Texas, depicting the impact of Covid-19 closings. (Leah Rodgers, CC BY 4.0, Wikimedia Commons)

So far, the techno-tyranny of Schwab’s 4IR has not quite won its place in U.S. State Capitalism. But its prospects are looking good. Silicon Valley contributed heavily to the Joe Biden campaign, and Biden hastened to appoint its moguls to his transition team.

But the real danger of all power going to the Reset lies not with what is there, but with what is not there: any serious political opposition.

Can Democracy Be Restored?

The Great Reset has a boulevard open to it for the simple reason that there is nothing in its way. No widespread awareness of the issues, no effective popular political organization, nothing. Schwab’s dystopia is frightening simply for that reason.

The 2020 presidential election has just illustrated the almost total depoliticization of the American people. That may sound odd considering the violent partisan emotions displayed. But it was all much ado about nothing.

There were no real issues debated, no serious political questions raised either about war or about the directions of future economic development. The vicious quarrels were about persons, not policy. Bumbling Trump was accused of being “Hitler,” and Wall Street-beholden Democrat warhawks were described by Trumpists as “socialists.” Lies, insults and confusion prevailed.

A revival of democracy could stem from organized, concentrated study of the issues raised by the Davos planners, in order to arouse an informed public opinion to evaluate which technical innovations are socially acceptable and which are not.

Cries of alarm from the margins will not influence the intellectual relationship of forces. What is needed is for people to get together everywhere to study the issues and develop well-reasoned opinions on goals and methods of future development.

Unless faced with informed and precise critiques, Silicon Valley and its corporate and financial allies will simply proceed in doing whatever they imagine they can do, whatever the social effects.

Serious evaluation should draw distinctions between potentially beneficial and unwelcome innovations, to prevent popular notions from being used to gain acceptance of every “technological advance,” however ominous.

Redefining Issues

The political distinctions between left and right, between Republican and Democrat, have grown more impassioned just as they reveal themselves to be incoherent, distorted and irrelevant, based more on ideological bias than on facts. New and more fruitful political alignments could be built through confrontation with specific concrete issues.

We could take the proposals of the Great Reset one by one and examine them in both pragmatic and ethical terms.

(Bob Mical, Flickr, CC BY-NC-SA 2.0)

No. 1 – Thanks to the pandemic, there has been a great increase in the use of teleconferences, using Skype, Zoom or other new platforms. The WEF welcomes this as a trend. Is it bad for that reason? To be fair, this innovation is positive in enabling many people to attend conferences without the expense, trouble and environmental cost of air travel. It has the negative side of preventing direct human contact. This is a simple issue, where positive points seem to prevail.

No. 2 – Should higher education go online, with professors giving courses to students via internet? This is a vastly more complicated question, which should be thoroughly discussed by educational institutions themselves and the communities they serve, weighing the pros and cons, remembering that those who provide the technology want to sell it, and care little about the value of human contact in education – not only human contact between student and professor, but often life-determining contacts between students themselves. Online courses may benefit geographically isolated students, but breaking up the educational community would be a major step toward the destruction of human community altogether.

No. 3 – Health and “well-being”. Here is where the discussion should heat up considerably. According to Schwab and Malleret: “Three industries in particular will flourish (in the aggregate) in the post-pandemic era: big tech, health and wellness.” For the Davos planners, the three merge.

Those who think that well-being is largely self-generated, dependent on attitudes, activity and lifestyle choices, miss the point. “The combination of AI [artificial intelligence], the IoT [internet of things] and sensors and wearable technology will produce new insights into personal well-being. They will model how we are and feel […] precise information on our carbon footprints, our impact on biodiversity, on the toxicity of all the ingredients we consume and the environments or spatial contexts in which we evolve will generate significant progress in terms of our awareness of collective and individual well-being.”

Question: do we really want or need all this cybernetic narcissism? Can’t we just enjoy life by helping a friend, stroking a cat, reading a book, listening to Bach or watching a sunset? We better make up our minds before they make over our minds.

User being monitored in a biometrics lab. (Grish068, CC BY-SA 4.0, Wikimedia Commons)

No. 4 – Food. In order not to spoil my healthy appetite, I’ll skip over this. The tech wizards would like to phase out farmers, with all their dirty soil and animals, and industrially manufacture enhanced artificial foods created in nice clean labs – out of what exactly?

The Central Issue: Homo Faber

No. 5 – What about human work?

“In all likelihood, the recession induced by the pandemic will trigger a sharp increase in labor-substitution, meaning that physical labor will be replaced by robots and ‘intelligent’ machines, which will in turn provoke lasting and structural changes in the labor market.”

This replacement has already been underway for decades. Along with outsourcing and immigration, it has already weakened the collective power of labor. But clearly, the tech industries are poised to go much, much further and faster in throwing humans out of work.

The Covid-19 crisis and social distancing have “suddenly accelerated this process of innovation and technological change. Chatbots, which often use the same voice recognition technology behind Amazon’s Alexa, and other software that can replace tasks normally performed by human employees, are being rapidly introduced. These innovations provoked by necessity (i.e. sanitary measures) will soon result in hundreds of thousands, and potentially millions, of job losses.”

Cutting labor costs has long been the guiding motive of these innovations, along with the internal dynamic of technology industry to “do whatever it can do.” Then socially beneficial pretexts are devised in justification. Like this:

“As consumers may prefer automated services to face-to-face interactions for some time to come, what is currently happening with call centers will inevitably occur in other sectors as well.”

“Consumers may prefer…”! Everyone I know complains of the exasperation of trying to reach the bank or insurance company to explain an emergency, and instead to be confronted with a dead voice and a choice of irrelevant numbers to click. Perhaps I am underestimating the degree of hostility toward our fellow humans that now pervades society, but my impression is that there is a vast unexpressed public demand for LESS automated services and MORE contact with real persons who can think outside the algorithm and can actually UNDERSTAND the problem, not simply cough up preprogrammed fixes.

“Corporate agility in the Fourth Industrial Revolution” session held in Tianjin,China, September 2018. (World Economic Forum, Faruk Pinjo, CC BY-NC-SA 2.0)

There is a potential movement out there. But we hear nothing of it, being persuaded by our media that the greatest problem facing people in their daily lives is to hear someone exhibit confusion over someone else’s confused gender.

In this, I maintain, consumer demand would merge with the desperate need of able-minded human beings to earn a living. The technocrats earn theirs handsomely by eliminating the means to earn a living of other people.

Here is one of their great ideas. “In cities as varied as Hangzhou, Washington DC and Tel Aviv, efforts are under way to move from pilot programs to large-scale operations capable of putting an army of delivery robots on the road and in the air.” What a great alternative to paying human deliverers a living wage!

And incidentally, a guy riding a delivery bicycle is using renewable energy. But all those robots and drones? Batteries, batteries and more batteries, made of what materials, coming from where and manufactured how? By more robots? Where is the energy coming from to replace not only fossil fuels, but also human physical effort?

At the last Davos meeting, Israeli intellectual Yuval Harari issued a dire warning that:

“Whereas in the past, humans had to struggle against exploitation, in the twenty-first century the really big struggle will be against irrelevance… Those who fail in the struggle against irrelevance would constitute a new ‘useless class’ – not from the viewpoint of their friends and family, but useless from the viewpoint of the economic and political system. And this useless class will be separated by an ever-growing gap from the ever more powerful elite.”

No. 5 – And the military. Our capitalist prophets of doom foresee the semi-collapse of civil aviation and the aeronautical industry as people all decide to stay home glued to their screens. But not to worry!

“This makes the defense aerospace sector an exception and a relatively safe haven.” For capital investment, that is. Instead of vacations on sunny beaches, we can look forward to space wars. It may happen sooner rather than later, because, as the Brookings Institution concludes in a 2018 report on “How artificial intelligence is transforming the world,” everything is going faster, including war:

“The big data analytics associated with AI will profoundly affect intelligence analysis, as massive amounts of data are sifted in near real time … thereby providing commanders and their staffs a level of intelligence analysis and productivity heretofore unseen. Command and control will similarly be affected as human commanders delegate certain routine, and in special circumstances, key decisions to AI platforms, reducing dramatically the time associated with the decision and subsequent action.”

So, no danger that some soft-hearted officer will hesitate to start World War III because of a sentimental attachment to humanity. When the AI platform sees an opportunity, go for it!

“In the end, warfare is a time competitive process, where the side able to decide the fastest and move most quickly to execution will generally prevail. Indeed, artificially intelligent intelligence systems, tied to AI-assisted command and control systems, can move decision support and decision-making to a speed vastly superior to the speeds of the traditional means of waging war. So fast will be this process especially if coupled to automatic decisions to launch artificially intelligent autonomous weapons systems capable of lethal outcomes, that a new term has been coined specifically to embrace the speed at which war will be waged: hyperwar.”

Americans have a choice. Either continue to quarrel over trivialities or wake up, really wake up, to the reality being planned and do something about it.

The future is shaped by investment choices. Not by naughty speech, not even by elections, but by investment choices. For the people to regain power, they must reassert their command over how and for what purposes capital is invested.

And if private capital balks, it must be socialized. This is the only revolution – and it is also the only conservatism, the only way to conserve decent human life. It is what real politics is about.

Diana Johnstone lives in Paris. Her latest book is Circle in the Darkness: Memoirs of a World Watcher and is also the author of Fools’ Crusade: Yugoslavia, NATO, and Western Delusions. Her lates book is Queen of Chaos: the Misadventures of Hillary Clinton. The memoirs of Diana Johnstone’s father Paul H. Johnstone, From MAD to Madness, was published by Clarity Press, with her commentary. She can be reached at diana.johnstone@wanadoo.fr .

When oil drillers descended on North Dakota en masse a decade ago, state officials and residents generally welcomed them with open arms. A new form of hydraulic fracturing, or "fracking" for short, would allow an estimated 3 to 4 billion barrels of so-called shale oil to be extracted from the Bakken Formation, some 2 miles below the surface.

The boom that ensued has now turned to bust as oil prices sagged in 2019 and then went into free fall with the spread of the coronavirus pandemic. The financial fragility of the industry had long been hidden by the willingness of investors to hand over money to drillers in hopes of getting in on the next big energy play. Months before the coronavirus appeared, one former oil CEO calculated that the shale oil and gas industry has destroyed 80 percent of the capital entrusted to it since 2008. Not long after that the capital markets were almost entirely closed to the industry as investor sentiment finally shifted in the wake of financial realities.

The collapse of oil demand in 2020 due to a huge contraction in the world economy associated with the pandemic has increased the pace of bankruptcies. Oil output has also collapsed as the number of new wells needed to keep total production from these short-lived wells from shrinking has declined dramatically as well. Operating rotary rigs in North Dakota plummeted from an average of 48 in August 2019 to just 11 this month.

Oil production in the state has dropped from an all-time high of 1.46 million barrels per day in October 2019 to 850,000 as of June, the latest month for which figures are available. Even one of the most ardent oil industry promoters of shale oil and gas development said earlier this year that North Dakota's most productive days are over. CEO John Hess of the eponymous Hess Corporation is taking cash flow from his wells in North Dakota and investing it elsewhere.

So, what has this meant for the state? Not only is the oil industry in North Dakota suffering, but all those contractors who service the oil industry. Beyond that are the housing and public services which had to be expanded dramatically during the boom. Will there be enough people to live in that housing years from now? Will the cities be able to maintain the greatly expanded infrastructure their dwindling tax revenues must pay for?

The state government relies on oil and gas revenues for 53 percent of its budget. So far those revenues are running 83 percent lower than projected for this year. In addition, the pandemic reduced other revenue sources, but those are returning to normal as the overall economy bounces back (at least for now). North Dakota's historically low unemployment rate popped from 2 percent in March to 9.1 percent in April, but has recently come down.

Perhaps the most enduring legacy of the boom will be the damage to the landscape and the water in North Dakota from years of sloppy environmental practices. While companies are legally responsible for cleaning up their sites and capping old wells, in practice the state's failure to force companies to post bonds to pay for these things means much of the work will have to be done by the state or not done at all. This is because bankrupt companies are just abandoning their wells and other infrastructure. There will be no one left with money to sue to pay for the cleanup in many cases.

What North Dakota may have traded for a temporary boom is a long-lived legacy of tainted land and especially water. Back in 2012 I warned about this danger from the fracking industry in a piece called "Pincushion America: The irretrievable legacy of drilling everywhere on drinking water."

In that piece, I cited a former EPA engineer who said that within 100 years most of the country's underground drinking water will be contaminated. What has happened in North Dakota (and is still happening at a somewhat reduced rate) has likely sped up that timetable considerably for the state. Even with the waning oil industry, the state still has considerable oil to produce and so the damage will only continue to mount.

North Dakota may now experience a long, slow withdrawal from what is called the resource curse. This is the paradoxical notion that natural resource-rich jurisdictions often fail to prosper partly due to the huge swings in prices of their principal products, swings which destabilize their societies. This is because disproportionate amounts of wealth (including labor) are devoted to the natural resource sector and therefore unavailable for other more stable forms of commerce and industry.

In addition, the enormous wealth and influence of those in the natural resource sector are used to thwart environmental protections necessary for the long-term well-being of the population. This influence also keeps taxes on the industry low, depriving the people in the state of the full fruits of the resource boom (and of investments necessary for the day when the resource will be depleted).

Beyond this, governments tend to rely on resource sectors too much for their revenue. This causes them to overspend during booms and face austerity during downturns.

All of the negative effects of the resource curse are now on display in North Dakota and may well get worse. Of course, what North Dakota is experiencing, many resource-rich places around the world are also experiencing in one form or another. The worst thing the state can do now is live by the hope that the oil industry will revive and save North Dakota from its woes. Now is the time to plan a new path to a more stable and sustainable economy.

Kurt Cobb is a freelance writer and communications consultant who writes frequently about energy and environment. His work has appeared in The Christian Science Monitor, Resilience, Common Dreams, Naked Capitalism, Le Monde Diplomatique, Oilprice.com, OilVoice, TalkMarkets, Investing.com, Business Insider and many other places. He is the author of an oil-themed novel entitled Prelude and has a widely followed blog called Resource Insights. He is currently a fellow of the Arthur Morgan Institute for Community Solutions. He can be contacted at kurtcobb2001@yahoo.com.

Remarks given at the 1st ASECU Teleconference ‘Systematic Crises Triggered the Current Pandemic & Progressive Way-Outs, May 8, 2020.

Well, I think you’re quite right in organizing the conference to point out that today’s pandemic crisis hastens and intensifies the internal contradictions that have been building up. Many of these contradictions are going to be blamed simply on the virus. But there is an underlying problem that the virus is exposing and turning into a crisis. That underlying problem is the debts that have been building up for the last few decades.

We are in a situation much like a war. There are winners and there are losers in a war. In this case the winner is the aggressor – the financial sector. Its demands for payment have set the stage for today’s economic breakdown. This has been the case throughout history. Finance always has been the great destabilizing factor. Right now, you’re having businesses – retail stores, restaurants, hotels, airlines and other businesses that are being closed down or operating at only a small capacity far below break-even levels. These businesses are not able to pay their stipulated rents or mortgage debt service. Their landlords are not able to pay their banks.

Workers have been laid off, and they’re unable to pay their landlords or creditors. So they are falling more deeply into debt. Entire states and the cities, like New York State and New York City, are being squeezed. In addition to having to pay local unemployment insurance, they have to maintain basic infrastructure and social services. But their d tax revenues ae plunging as a result of fewer sales taxes and income taxes. So the pandemic is creating a fiscal crisis as part of the overall debt and real-estate crisis.
The question is, how do we get out of it? What is happening is what legal contracts call an Act of God. What do you do when economic activity is disrupted and the flow of payments that people have every month – their debt service, their rents or their mortgage, or their credit cards and other basic ongoing expenses. What do you do when they can’t be paid? I think that this crisis is laying the problem bare. It is a problem that’s occurred in Western civilization for the last 2,000 years. But what is so striking is how much more adroitly ancient civilizations handled this problem. They did so in a completely different way from how other civilizations have handled things.

I have written quite a bit about Bronze Age archaeology in the ancient Near East. That is where the Act of God stipulation originated. It appears in the Laws of Hammurabi c. 1750 BC. The problem that the Babylonians had to deal with was what to do when there is a flood, a drought, warfare or a pandemic. What should be the rules when, suddenly out of nowhere, cultivators and the citizenry on the land are rendered unable to grow and harvest crops, out of which to pay the debts that they have run up during the year and are falling due. They owe the taxes, sharecropping or other rent that could not be paid.

Hammurabi was quite specific about how to handle this situation. Paragraph 48 of his Laws said that there would be a debt and a tax amnesty when the weather god, Adad, created a flood or otherwise prevented debts and other obligations from being paid. If the storm god floods the lands, the debts and rents don’t have to be paid. A fresh start was made under conditions of balance for the next crop season.

The basic problem was similar to that today: How does a society restore continuity and save itself from disruption creating a permanent loss and distortion of existing wealth and income relationships? What Hammurabi and every other Babylonian, Sumerian ruler and other Near Eastern rulers did between about 2,500 BC and the 1st century BC was to proclaim amnesties in such circumstances. If they hadn’t done that, cultivators would not have been able to pay their creditors and they would have fallen into bondage. They would have owed their labour and crops to their creditors.

This would have caused a serious fiscal problem for rulers. If victims of a crop failure or other economic interruption had to pay their creditors with their labour and crop surplus, this labor and crop tax wouldn’t be available to pay the palace its normal claims for taxes and corvée labour duties to build infrastructure or even serve in the army. Social balance and continuity would have been destroyed – from within. So when Hammurabi and every ruler of his dynasty proclaimed a clean slate cancelling the debts and rent arrears that had mounted up unpaid, proclaiming a return to the normal situation prevented a creditor oligarchy from emerging and seeking its own interest as distinct from that of the palace.

All this changed in Roman times. Classical antiquity protected the financial and rentier elites. Cicero and the other Roman leaders said that all the debts had to be paid, even (or indeed, precisely because!) this led to the enslavement of poorer Romans and Greeks. Rome’s creditor oligarchy used every crisis as an opportunity to grab the land of the smallholders, to force the population into bondage and to get control of their land.

We’re seeing the same basic dynamic occur throughout the post-Roman Western world. Creditors are now already planning to buy up distressed real estate from landlords that default as their rents are not paid. There is going to be a huge bankruptcy sale. Large private capital funds have already announced their intention to begin buying out the retail stores that have gone bankrupt, along with their real estate.

Individuals who are unable to pay their debts, workers who’ve been laid off, are told to borrow from their pension funds or social security accounts. That means that they won’t be receiving the retirement income they need to live. Likewise, the states and the cities that Jeffrey Sachs mentioned also are facing a debt crisis with their bondholders. Mitch McConnell, the Republican Senate head, said that Democratic states like New York, New Jersey and California should cover their shortfall by taking the pension funds that they’ve set up for public employees. The financial sector’s intention is to use this crisis to wipe out the pension funds and transfer the savings of the wage-earners to pay bondholders and other creditors. The promises that state and local governments made for pension in exchange for not asking for higher wages are to be wiped out.

The debts that have been built up are being used as a financial warfare tactic. It is more efficient than military warfare. Debt has been used to strip away the assets of middle-class people, of home owners, of employee pension funds, to suck their savings and property up to the top of the economic pyramid. The pandemic crisis has created a battlefield. Its rules have been written by the financial sector and their lobbyists as an opportunity for the largest property and financial grab since the Great Depression.

The result will be that much of the American and European economies are going to end up looking like the Greek economy five years ago, when it was unable to pay its euro-debts. You can look at Greece as the future of the United States, catalysed by the coronavirus pandemic.

Thank you, thanks a lot. Michael, it’s your turn and allow me, before you start, because there was an extra question addressed to you, but also to the rest, included perhaps in the previous questions: who are the big winners, in economic terms, after current developments?

I’ll talk about the questions in reverse order, beginning with the idea that there may be an inflation to help pay off the debts.

Just the opposite: What we are facing now is an era of debt deflation. It’s the worst debt deflation since the Great Depression. I’ve already described how there are going to be major defaults in real estate, especially for commercial real estate, for stores and all the other businesses that are going without income while their rents have accrued. If we are going to have a close-down for at least three more months, with no income for stores, entertainment, motion-picture houses and museums, paying three months’ back rent is not viable. There’s no way in which stores, or many wage-earners, can earn enough to pay the rent out of normal work and business. So, they’re going to go out of business.

There is going to be a wave of bankruptcy, and that will be followed by fire sales of real estate. Unemployment is going to lead to lower wage levels, and there also will be cutbacks in public spending for social services, transportation and other normal programs. Privatisation sell-offs will occur, much like Margaret Thatcher’s in England. this is now going to be imposed upon Europe. It’s possible that the Eurozone will break up if it does not change its rules and create the euro-money to enable Italy and Spain to get by. But at present the Eurozone rules are that all the money, all of the credit that is needed to grow in Europe, should be borrowed from banks at interest.

Banks can create this money on their keyboards electronically. The government could do the same, but relinquishes this privilege to the privatized banking sector. As Modern Monetary Theory explains, a central bank can simply print the money that is needed to fuel economic growth. But the financial sector has captured the hearts and minds of central bankers, from Europe to the United States.
The problem is these banks don’t lend money to create means of production or livelihood. They don’t lend money to build factories. Banks lend money against assets already in existence, mainly real estate, houses, buildings, and also companies – and to corporate raiders to buy other companies on credit. So, the effect of this bank lending has been to inflate the price of real estate, because a house or a building is worth whatever a bank will lend against it.

The financial sector has become less and less productive, and more predatory. It has prevented European governments from having a central bank that directs deficit spending into the real economy. Only the banks and financial sector, the elite One Percent, are supported, as in the United States. Ten trillion dollars ’s put into the economy, mainly into the stock and financial markets, the bond market and the real estate market, but not into production.

The Eurozone does not do that. This means that the governments of Europe are not really democratic. Europe is governed by the European Central Bank. It works for its customers, the commercial banks. And the commercial bankers say: “We want to starve the economy of credit, so that we, the commercial bankers, can create the money to lend to our customers, and charge interest and financial fees. Our own financial speculation that all the growth, the surplus that Europe produces, should be turned over to the financial sector.” That’s what the Europeans have voted for. In effect they vote for lower wages, cutbacks in public services and shorter pensions. These living standards are threatened by the way in which the financial dimension of the coronavirus crisis is being managed.

You’re seeing a disparity between Italy and the Mediterranean countries and northern Europe. Countries need credit in order to recover. But the Eurozone refuses to provide the credit that is needed to get through the coronavirus suspension of economic activity and its aftermath of unpaid debts, rents and other obligations. The Eurozone is treating Italy, Greece, Portugal and Spain just like President Trump here in America is treating the Democratic states like New York, New Jersey and California. The effect is to create a deflationary crisis. That makes it impossible to pay the backlog of debts and rents.

We may see a power grab creating something much like feudalism. In the United States it’s suggested that for student loans, or for loans to wage-earners collateralized by the debtor promising to pay 10%, 20%, 25% of everything they earn for the rest of their life. This is like a tax, but it’s really a form of debt peonage. It’s a payment much like medieval serfs had to turn over their economic surplus to their landlords. Well, now the wage-earners, small business and even big business in America and in Europe are going to have to turn over even more of their earnings to the financial sector in order to survive.

This may seem a crazy way to organize society, but it is how Western civilization has been structured on the basis of protecting creditor rights, not debtor solvency and overall social balance and continuity. Unlike non-Western societies, unlike even China today, credit in Europe and America is privatized. The supply of credit, like money, should be a public utility. Just like public health should be a public utility. Just like roads and communication should be a public utility. Europe has let it be privatized in an aggressive, predatory way.

As long as governments subordinate the will of democratic voters to whatever the central banks tell you, you are not a democracy. Jeffrey earlier mentioned what Aristotle thought. Aristotle explained a kind of eternal political triangle. He said that many constitutions appeared to be democratic, but they’re, actually, oligarchic. That’s because democracies tend to evolve into an oligarchy. The oligarchy makes itself hereditary into an aristocratic ruling class. Finally, thank heavens, some of the wealthy aristocrats fight among themselves and they try – like Cleisthenes did in Athens as early as 406 BC – to take the masses into their camp, and become democratic and order to mobilize support in the citizens against the other aristocrats. Then you have a democratic revolution, but democracy once again develops into oligarchy. That’s the eternal political triangle that Aristotle described.

And that’s what you have in Europe. It’s not a democracy anymore; it’s an oligarchy making itself into the same kind of hereditary aristocracy that occurred in classical antiquity. Many of you hoped that Europe had overthrown the aristocracy after World War I when you did indeed get rid of the kings and royalty. But you opened the way for a new kind of oligarchy turning itself into a hereditary aristocracy, that of finance. That’s the task before you to solve. The only thing I can say is that, perhaps, this crisis has indeed catalysed this basic internal contradiction and will create a response that deals with the pandemic by cancelling debts and de-privatizing the banking sector.

Photo by Laura Seaman on Unsplash

As time goes on in close confinement, even people bound by love may start to find each other unbearable. On a larger scale, in this crazy mass confinement, people brought together by a common rejection of the lies of our criminal rulers may find themselves at each other’s throats because of conflicting interpretations of why who is doing what.

This is happening on alternative media – especially in Germany. It seems that many anti-conformist political analysts believe that the Coronavirus crisis is a fake, perpetrated by media and governments for sinister reasons. They are actually calling for protest demonstrations against confinement.

I can’t help seeing this as an obsession of certain dissidents to prove to themselves that they are good “anti-authoritarian” Germans who would never have bowed to Nazism. But is this assertion of individual freedom appropriate in the midst of a public health crisis?

The Limits of Power

Very clever people naturally want to find motives behind whatever happens. At one time such people might have been theologians, who explained the extremely mysterious ways in which God carries out His cosmic plan. A flood, a plague, an earthquake? There had to be a reason for it, a motivation in human terms. The All-Powerful was punishing his sinful flock and reminding them of who was boss.

Mammon. (Wikipedia)

Today, quite a number of alternative media commentators are ready to believe in the absolute power not of God but of Mammon, of the powers of Wall Street and its partners in politics, the media and the military. In this view, nothing major happens that hasn’t been planned by earthly powers for their own selfish interest.

Mammon is wrecking the economy so a few oligarchs will own everything. Or else Mammon created the hoax Coronavirus 19 in order to lock us all up and deprive us of what little is left of our freedom. Or finally Mammon is using a virus in order to have a pretext to vaccinate us all with secret substances and turn us all into zombies.

Is this credible? In one sense, it is. We know that Mammon is unscrupulous, morally capable of all crimes. But things do happen that Mammon did not plan, such as earthquakes, floods and plagues. Dislike of our ruling class combined with dislike of being locked up leads to the equation: They are simply using this (fake) crisis in order to lock us up!

But what for? To whom is there any advantage in locking down the population? For the pleasure of telling themselves, “Aha, we’ve got them where we want them, all stuck at home!” Is this intended to suppress popular revolt? What popular revolt? Why repress people who aren’t doing anything that needs to be repressed?

What is the use of locking up a population – and I think especially of the United States – that is disunited, disorganized, profoundly confused by generations of ideological indoctrination telling them that their country is “the best” in every way, and thus unable to formulate coherent demands on a system that exploits them ruthlessly? Do you need to lock up your faithful Labrador so he won’t bite you?

If anything, the trauma of this situation might actually awaken a somnolent population to the vital need for basic transformation of society. The notion that this lockdown threatens to be permanent is totally unrealistic, against all evidence from previous lockdowns. On the contrary, prolonged confinement is most likely to lead to explosions. The question is, can these explosions be constructive.

On a wall in Paris: “You will not confine our anger.”

Blinded by Hubris

Rather than deploring the all-powerful nature of Mammon, it would be more constructive to look for the flaws in his armor, for his weaknesses, for the ways he can be massively discredited, denounced and defeated.

Mammon is blinded by its own hubris, often stupid, incompetent, dumbed down by getting away with so much so easily. Take a look at Mike Pompeo or Mike Pence – are these all-powerful geniuses? No, they are semi-morons who have been able to crawl up a corrupt system contemptuous of truth, virtue or intelligence – like the rest of the gangsters in power in a system devoid of any ethical or intellectual standards.

The power of creatures like that is merely the reflection of the abdication of social responsibility by whole populations whose disinterest in politics has allowed the scum to rise to the top.

The lockdown decreed by our Western governments reveals helplessness rather than power. They did not rush to lock us down. The lockdown is disastrous for the economy which is their prime concern. They hesitated and did so only when they had to do something and were ill-equipped to do anything else. They saw that China had done so with good results. But smart Asian governments did even more, deploying masks, tests and treatments Western governments did not possess.

Western governments called for confinement when experts explained the exponential curves to them. They didn’t know what else to do. There is at least enough sense of social responsibility left in our societies to oblige governments to take the basic, classic quarantine methods usual during pandemics.

Of course, in every crisis some are well placed to take advantage of disaster. The vultures didn’t cause the cattle to die so they could eat the carrion. But they will gobble it up when it’s there. Wall Street financial powers could quickly get Congresspeople to vote laws to bail them out while small businesses sink and working people are plunged into despair.

But in the long run, without the small businesses, without the workers now being deprived of income to spend, without normal economic activity, Wall Street itself will have no one to bleed, nothing to exploit. It makes absolutely no sense to believe that dominant economic powers sought this ruinous crisis for some mysterious benefit to themselves.

In the European Union, creditor countries like Germany and the Netherlands refuse to let the European Central Bank issue “Coronabonds” to finance economic recovery of hard-hit countries like Italy and Spain. That means those countries will have to borrow from the private financial system, at high interest rates leading to bankruptcy.

That sounds like a boon to international finance, which, however, will find itself holding an infinite amount of unpayable debt. And the European Union may split apart as a result – not in the interests of any of these powerful masters of Mammon.

Public Health Is Not an Individual Choice

In the West, “human rights”, are conceived in terms of the “rights” of the individual, or of a minority, to go against what we call “the regime” when speaking of countries other than our own. The United States uses the absolute value of “human rights” as a pretext to impose its will through sanctions and bombing on nations that reject its global domination. The defiance of authority is celebrated as resistance, without necessarily examining the details.

However, virtually all key aspects of any civilized society go contrary to the absolutism of individual rights. Every civilized society has some sort of legal system, some basic rules that everyone is expected to follow. Most civilized societies have a public education and (except for the United States) a public health insurance system designed to benefit the whole population. These elements of civilization include constraints on individual freedom.

The benefits to each individual of living in a civilized society make these constraints acceptable to just about everybody. The health of the individual depends on the health of the community, which is why everyone in most Western countries accepts a single payer health insurance system. The only exception is the United States, where the egocentricities of Ayn Rand are widely read as serious thought.

Mammon and His Slave. (Wikimedia Commons)

The arrival of a plague or an epidemic suddenly calls for totally abnormal, extremely unpleasant constraints, such as quarantines. This is a case where the freedom of the individual is sacrificed for the general good: the individual is confined not merely for his own good but for the good of his community and indeed of all humanity.

The paradox of our highly technological societies is that the greater the impossibility of the general public (all of us) to understand crucial functions and issues, the more we depend on experts and authorities, and the more we distrust those experts and authorities and suspect them of using their position to advance secret agendas. There is thus a sort of built-in paranoia in our societies where the power of invisible forces becomes constantly more inscrutable.

This paradox operates forcefully on issues of medicine and public health, all the more in that the authorities themselves are frequently divided in their opinions. In Germany especially, where the crisis has been relatively mild, one can hear a doctor claiming that fear of Covid-19 is artificially created and that nature should be allowed to take its course, since healthy people will be spared and the few who die would have died anyway.

Stay Home and Take a Pill

This opinion is readily accepted by those who suspect every government measure of being an arbitrary assault on personal liberties. But it is hardly a majority opinion in the world medical profession.

Personally, I’ve been there. I’ve seen this virus in action. This is not simply a bad cold, or a seasonal flu. Yes, there are light cases, but there are fatal ones as well. It does not just kill off superfluous elderly people that some commentators seem satisfied to get rid of.

Still, it is quite reasonable to question the usefulness of confinement alone. Here in France, authorities turned to confinement with some delay, only because the illness was spreading and they had nothing else to do about it.

There were no masks; a factory in Brittany that provided the domestic market with masks and other medical equipment had been bought up a while back by Honeywell and closed down. This is an aspect of the deindustrialization of France, based on the assumption that we in the West can live from our brains, our ideas, our startups, while actual things are made for low wages in poor countries.

So there were no masks and no immediate capacity to make them. There was also a shortage of ventilators, even of hospital beds – in fact there was no ability to deal with the epidemic other than to tell people to stay at home and prescribe paracetamol.

Surely there are better ways to deal with it, and one inevitable explosion after confinement will be an outpouring of criticism of the way the government has handled the crisis and demands for drastic improvements in the public health system.

The argument that “oh well, even more people die of ordinary flu, or cancer, or something else” is not valid because this illness comes in addition to all the others that are anticipated: it pushes already largely saturated health facilities over the top, into collapse.

In Italy, Covid-19 has killed off a hundred medical doctors in just over a month. They would not have “died anyway, of something else” without the epidemic.

In France, in normal times, dial the emergency service SAMU 15 and usually a team is there within minutes. During the Covid-19 crisis, you could dial 15 and wait an hour or more for an answer, whatever your health crisis might be, and help might never come.

The main purpose of the quarantine is to reduce the pression on overburdened systems. Without the confinement, the overload would have been even worse. This crisis is exposing the inadequacy of existing facilities and the crucial need for major programs to strengthen public health systems.

Irrational Fear of Vaccination

Jonas Salk’s vaccine wiped out polio in the United States, and he didn’t patent it. (Wikimedia Commons)

Mass vaccination has always been the surest way to wipe out deadly diseases. It is also an instance where individual freedoms need be sacrificed to the general good. It is deeply disturbing that many intelligent people are more afraid of the vaccine that may be developed to combat this virus than they are of the virus itself.

One objection is that profit-oriented Big Pharma takes advantage of every illness to make money. But the answer is not to reject pharmaceuticals. The main problem with Big Pharma is unleashed neoliberal capitalism in the United States, combined with the absence of a government-run single payer health insurance, which allows pharmaceutical companies to charge outrageous prices for their products, as well as to focus on production of the most profitable rather than the most generally useful medication.

The answer to this is not to give up medication but to demand greater public supervision and price control.

Finally, the pharmaceutical industry should be considered a public utility rather than a business and nationalized so that revenue can be used to finance research rather than to pay dividends to Big Finance.

The prospects are different from one country to another. Achieving social control in the United States looks practically impossible because of the overwhelming belief that “free enterprise” is the only way to do things. In France, which has positive experience of a mixed economy, it could be politically possible to nationalize pharmaceutical companies – if France were not under the domination of the European Union and, less directly, the United States, which is always prepared to do what it can to block socialist measures anywhere in the world.

No Longer the Center

But the West is no longer the center of the world. The Covid-19 crisis has demonstrated the rising capabilities and more human attitudes of East Asia. There will be vaccines developed in China, in Russia, in other countries outside the NATO sphere. Their achievements will break the monopoly of Western “Big Pharma.”

In Europe, and notably in France, Italy and Spain, the total disillusion with the European Union is strengthening the trend toward return of national sovereignty. And sovereign nations, able to respond to their people’s demands can be able to break away from the dictates of Big Finance in order to renew democracy in more appropriate forms.

In France, labor unions and progressives are demanding better protection of the population, starting with all those essential service workers, in hospitals and grocery stores, bus drivers, deliverymen, all those who are increasingly appreciated by their confined compatriots and who need to reap the benefits of their public service.

Yellow Vests protest, March 7, 2020 in Paris before lockdown. (Joe Lauria)

Perhaps because of the long tradition of social struggle in France, including the Yellow Vest movement which is not dead but only on hold, one can be sure that after confinement there will be an explosion of demands to abandon the fantasies of neoliberal globalism and build a system where the welfare of the people comes first.

In contrast, in the context of the corona virus crisis in Germany, someone supposedly “on the left” has initiated a petition calling on persons over 75 to declare that if they are sick, they renounce medical treatment, in order to give preference to younger people. This is a new twist of identity politics, of classifying people by groups, and a step toward revival of the worst eugenics of Nazism.

Which is civilized and which is barbaric: insisting on a system that gives equal care to all, or deciding that the elderly be sacrificed for the others? What is this but a suggestion to resort to human sacrifice to please Mammon?

For Civilization

Sounding the alarm about how horrible our ruling class is gets us nowhere unless we have an idea of a real alternative – not just “resisting” but proposing and fighting for something different and better.

Let’s start with a most concrete practical issue and work from there: vaccination. Like other aspects of public health, this is an issue of collective welfare rather than individual rights. It is an element not of “resistance to oppression” but of the construction of civilization.

The coronavirus has not illustrated the need to get rid of vaccines – on grounds that “they” want to use them against us – but on the contrary, of the need to make sure that vaccines are developed under proper supervision for the public welfare and not as a means for Big Pharma to make bigger dividends for BlackRock.

So the problem with vaccines is not vaccination but American capitalism that has gotten completely out of hand. Once upon time, the Food and Drug Administration was a reliable monitor of pharmaceutical innovations. In recent decades, such control agencies have increasingly been taken over by the companies they are supposed to control and transformed into rubber stamps.

Alarms are also raised about the alleged role of billionaires like Bill Gates whose philanthropic institutions are suspected of manipulating vaccines for hidden nefarious purposes.

The remedy is not to flee medication and vaccination, but to dismantle these overgrown dictatorial powers and build a society that can properly be called civilized because it is balanced between collective and individual welfare. Of course, to say what should be done is very far from knowing how to do it. But without an idea of what should be done, there will not even be any effort to figure out how.

A Mixed Economy

In the United States, it would be necessary to accept the fact that certain essential activities must be considered public services. This requires a wave of reforms equivalent to a revolution, not as prescribed by Marxist revolutionaries to situations that no longer exist. Pharmaceuticals and hospitals are public services and must be socially controlled. Internet has become a public service.

How should that be treated? Innovators who used free market mechanisms to gain virtual monopoly control of their sector should be invited to choose which of their mansions to retain as residence as they are retired to the role of advisor, while their disproportionate accumulated earnings should become part of the public treasury.

What I am advocating is not a “communist revolution,” certainly not for the United States. I am advocating a mixed economy, which can take various forms, from France in the 1960s to China today. The commanding heights of the economy should be under social control, to ensure that major investment has social purpose.

The forms of this control can vary. In the United States, the first task of the commanding heights should be to shift investment away from insanely wasteful military production to domestic infrastructure and measures to integrate all citizens into a genuinely civilized society. Such a mixed economy creates a favorable environment for the proliferation of small independent enterprises free to innovate.

Free from fear of illness and homelessness allows more real freedom than the polarized lottery that passes for capitalism in the United States today. Such a project of civilization should win support from decent and lucid people in all classes of society.

I am perfectly aware that the United States today is ideologically light years away from such a sensible project. But developments are underway in other countries to meet the threat of Big Pharma and meddling American billionaires. The word that sums up these developments is “multipolarization.”

This is the slogan launched by Vladimir Putin in 2007. It drove Western champions of unipolar globalization into a frenzy from which they are far from having recovered – witness the insanely provocative “Defender Europe 20” military games practicing nuclear war right up to the Russian border, stalled temporarily by Covid-19.

The United States and its European satellites are in effect waging war against the Free World – that is, countries free of U.S. domination, in order to perpetuate an imaginary global regime along the lines of neoliberalism: rule of finance approved by manipulated elections.

Nevertheless, unipolar globalization is in the process of disintegration. All the slander against China cannot change the facts. While U.S. propagandists blast their rising rival, most of the world sees that China handled the epidemic with more professional know-how than the West. The United States control of international agencies is being threatened by growing Chinese influence – in particular, the World Health Organization.

This is the greatest threat to Big Pharma: a multipolar world. Bill Gates and U.S. pharmaceutical companies will have no monopoly of vaccine development to combat Covid-19. A dramatic shift from neoliberal globalization to multipolar national sovereignty will restore genuine competition – not only in production of vaccines but in social organization.

Let Western countries look to their own problems and find solutions. Let other countries develop according to models that suit their history, philosophy and popular demands. It is obvious that the vaunted U.S. “free market democracy” is not a model that should be imposed on every country on earth, nor even on the United States itself.

Mixed economies can take various forms. Some could evolve toward something that could be called socialism, others not. Let every small country be as independent as Iceland. Let the world explore different paths. Let a hundred flowers bloom!

The following essay originally appeared in Valeurs actuelles on April 2, 2020, and is published here in English translation by permission of the author. Translated by Russell A. Berman.

History is always open, as everyone knows, and this makes it unpredictable. Yet in certain circumstances, it is easier to see the middle and long term than the near term, as the coronavirus pandemic shows well. For the short term, one surely imagines the worst: saturated health systems, hundreds of thousands, even millions of dead, ruptures of supply chains, riots, chaos, and all that might follow. In reality, we are being carried by a wave and no one knows where it will lead or when it will end. But if one looks further, certain matters become evident.

It has already been said but it is worth repeating: the health crisis is ringing (provisionally?) the death knell of globalization and the hegemonic ideology of progress. To be sure, the major epidemics of antiquity and the Middle Ages did not need globalization in order to produce tens of millions of dead, but it is clear that the generalization of transportation, exchanges, and communications in the contemporary world could only aggravate matters. In the “open society,” the virus is very conformist: it acts like everyone else, it circulates—and now we are no longer circulating. In other words, we are breaking with the principle of the free movement of people, goods, and capital that was summed up in the slogan “laissez faire,” i.e., let it go, let it pass. This is not the end of the world, but it is the end of a world.

Let us remember: after the implosion of the Soviet system, every Alain Minc of the planet announced a “happy globalization.” Francis Fukuyama even prophesied the end of history, convinced that liberal democracy and the market system had definitively won the day. One was going to transform the earth into an enormous shopping center, suppress all obstacles to free exchange, dissolve borders, replace countries with “territories,” and establish the “universal peace” that Kant had predicted. “Archaic” collective identities would be progressively eradicated, and sovereignty would become obsolete.

Globalization rested on the imperative to produce, to sell and to buy, to move, to circulate, to advance, and to mix in an “inclusive” manner. It depended on the ideology of progress and the idea that the economy would definitively replace politics. The essence of the system was the end of limits: always more exchanges, always more goods, always more profits to permit money to feed on itself to transform into capital.

Following the former industrial capitalism that still had some national anchorings, a new capitalism, more and more disconnected from the real economy, entirely deterritorialized and functioning in zero time, has taken off by demanding that states, now prisoners of financial markets, adopt “good governance,” susceptible to serving its interests. Privatizations spread, as well as delocalizations and international contracts, leading to deindustrialization, declines in revenue, and rising unemployment. The old Ricardian principle of the international division of labor was used and abused, which led to a competition, under dumping conditions, between the workers of Western countries and those in the rest of the world. The Western middle class began to decline, while the lower classes expanded, becoming increasingly vulnerable and precarious. Public services have been sacrificed on the altar of grand principles of liberal budgetary orthodoxy. Free exchange became more of a dogma than ever before, and protectionism its foil. If it didn’t work, one never backed off but instead pushed the accelerator.

But now, on top of that, collapse! While one once boasted of movement and deracination, everything now has stopped. While the imminent disappearance of borders was expected, one instead sees everywhere: the European Union is closing its borders (which turns out to be possible!)—borders are being placed between cities and regions, between buildings and individuals. One after another, all the countries are reestablishing control of their frontiers—and everyone is applauding.

The order of the day yesterday was to live together in a society with no borders; today it is “stay at home” and do not mix with others. The yuppies of the metropoles are fleeing like lemmings to find safety in the France of the periphery that they used to disdain. The time is long gone when one only spoke of a “sanitary cordon” to maintain a distance from nonconformist thinking! In the “maritime” world of fluctuation, one suddenly faces the return of the telluric—of the place that binds.

Thoroughly deflated, the European Commission looks like a frightened rabbit: bewildered, stunned, paralyzed. Incapable of understanding the state of emergency, it embarrassingly suspended what it previously held most important: the “principles of Maastricht,” that is, “the stability pact,” which limited state budgets to 3 percent of the GDP and the public debt to 60 percent. Following that, the European Central Bank unblocked 750 billion euros, allegedly in order to respond to the situation but in reality in order to save the euro. However, the truth is that in an emergency, each country decides and acts for itself.

In a globalized world, norms are supposed to allow for addressing every eventuality. Yet that forgets that in a state of exception, as Carl Schmitt showed, norms can no longer be applied. To listen to the good apostles, the state was the problem, but now it becomes the solution, just as in 2008, when the banks and pension funds appealed to the public powers, which they had previously denounced, to protect them from going under. Macron himself previously said that the social programs cost an insane sum, but now he declares ready to spend whatever it costs to get through the health crisis, without limits. The more the pandemic spreads, the more the public costs will have to grow. In order to cover the costs of unemployment and fill the breaches in the companies, the states are going to tap hundreds of billions, even though they are already deep in debt.

Labor law is being softened, the reform of pensions is being delayed, new plans for unemployment compensation are postponed indefinitely. Even the taboo of nationalization is gone. Apparently, one will find the money that used to be unfindable, but suddenly everything is possible that used to be impossible.

They are also now pretending to discover that China, which had become the factory of the world (in 2018, China represented 28 percent of the value added of global manufacturing production), produces all sorts of things that we have decided not to make ourselves, beginning with our medicine (since 2008, Europe does not produce a single gram of paracetamol!), and this turns us into the historical object of others. The head of state—what a surprise!—has stated that “it is a folly to delegate to our others our food, our protection, our capacity to care for ourselves, our way of life.” “The coming weeks and months will require decisions of rupture,” he added. Will it therefore be possible to relocalize entire aspects of our economy and to diversify our supply chains?

Nor should we ignore the anthropological shock. The understanding of man promoted by the dominant paradigm was one of the individual severed from his peers, thoroughly in ownership of himself (“my body belongs to me!”), intended to contribute to the general equilibrium by permanently seeking to maximize his own interest in the midst of a society thoroughly ruled by legal contracts and commercial relations. It is this vision of homo oeconomicus that is in the process of collapsing. While Macron calls on everyone’s responsibility, the solidarity of proximity, and even “national union,” the health crisis has recreated sentiments of belonging. Our relationships to time and space have been transformed: our relationship to our way of life, the reason for our existence, and to values that are not exhausted by those of “the Republic.” Instead of complaining, people admire the heroism of the health care workers. The importance is being rediscovered of what we have in common, the tragic, war, and death—in short, everything we wanted to forget: it is a fundamental return of reality.

And now, what is before us? First of all, surely an economic crisis, which will have the severest social consequences. Everyone anticipates a very strong recession, which will affect Europe as well as the United States. Thousands of businesses will fail, millions of jobs are threatened, and a drop of GDP up to 20 percent is expected. States are going to have to go into debt again, which will make the social tissue ever more fragile.

This economic and social crisis might lead to a new financial crisis even greater than 2008. The coronavirus will not be the key factor, because the crisis has been awaited for years, but it will surely be the catalyst. The stock markets have begun to collapse, and the price of oil has tumbled. A stock market crash does not only affect stockholders, but instead impacts the banks whose value depends on their active holdings: the hypertrophic growth of the financial holdings has resulted from speculative activity on the market that they pursued to the detriment of the traditional banking activity of savings and loans. If the stock market crash is accompanied by a crisis of the debt markets, as was the case with the subprime crisis, the spread of payment defaults in the center of the banking system points to a general collapse.

The risk then is having to respond simultaneously to a health crisis, an economic crisis, a social crisis, a financial crisis, and, not to be forgotten, an ecological and migrant crisis. A perfect storm: this is the coming tsunami.

There will also be political consequences, in all countries. What is the future of the Chinese president after the collapse of the “dragon”? What will happen in the Arab Muslim countries? What about the impact on the American presidential election, in a country where tens of millions lack medical coverage?

As for France, right now people are closing ranks, but they are not blind. They see that the epidemic was first met with skepticism, even indifference, and the government hesitated to adopt a strategy: systematic testing, herd immunity, or confinement. Procrastination and contradictory statements lasted for two months: this illness is not serious, but it causes many deaths; masks do nothing, but health care workers need them; screening tests are useless, but we will try to carry them out on a massive scale; stay at home, but go out to vote. At the end of January, Agnès Buzyn, French Minister of Health, assured us that the virus would not leave China. On February 26, Jerome Salomon, Director General of Health, testified at the Committee on Social Affairs of the Senate that there was no problem with masks. On March 11, Jean-Michel Blanquer, Minister of Education, saw no reason to close schools and colleges. On that same day, Macron bragged that “We will renounce nothing and certain not liberty!” after having demonstrably gone to the theater a few days before because “life must continue as normal.” Eight days later, a change in tone: universal seclusion. Who can take people like this seriously? In the language of the Yellow Vests, one might translate this by the slogan: the confined are being ruled by the cons.

We are at war, the head of state tells us. Wars require leaders and means. Yet we only have “experts” who do not agree with each other and our weapons are cap guns. As a result, three months after the start of the epidemic, we still lack masks, screening tests, disinfectant gel, hospital beds, and respirators. We are missing everything because nothing was anticipated, and no one hurried to catch up once the storm hit. According to many doctors, the responsible parties should be called to account.

The case of the hospital system is symptomatic because it is at the center of the crisis. In accordance with liberal principles, the public sector hospitals were to be transformed into cost centers, so as to encourage them to earn more money in the name of the sacrosanct principle of profitability, as if their work could be treated simply as a matter of supply and demand. In other words, a non-market sector was to be subordinated to market principles by introducing a managerial rationality resting on the sole criterion of just in time, which pushed the public hospitals to the edge of paralysis and collapse. Is it known that the regional health guidelines, for example, set a limit to the number of resuscitations as a function of the “health map”? Or that France eliminated 100,000 hospital beds during the past 20 years? That in Mayotte there are currently 16 ICU beds for 400,000 inhabitants? Health professionals have been talking about this for years, but no one listened. We are paying the price now.

When all this is over, will we return to the normal disorder, or will we find, thanks to this health crisis, an opportunity to start with better foundations, far from the demonism of the commercialization of the world, productivism, and consumerism at all costs?

One would hope so, except that the same people have shown themselves to be incorrigible. The 2008 crisis might have served as a lesson, but it was ignored. Old habits prevailed: priority of financial profits and the accumulation of capital to the detriment of public services and employment. When things seemed to be going better, one rushed again into the infernal logic of debt, and the “bulls” began again to gain, toxic financial products circulate, stockholders insisted on the full returns on their investments, while under the pretext of reestablishing an equilibrium, a politics of austerity was put in place that ravaged the people. The “open society” followed its natural inclination: one more time!

For the moment, one could make use of the confinement to reread or rediscover the formidable work of the sociologist Jean Baudrillard. In a “hyperreal” world, where virtuality has surpassed reality, he was the first to speak of the “invisible, diabolical, and elusive alterity that is the virus.” The informatic virus, the epidemic virus, the stock market virus, the virus of terrorism, the viral circulation of digitalized information: all that, he argued, obeyed “the same protocol of virulence and irradiation with a viral power over the imagination.” Virality, in other words, is the contemporary grand principle of the contagion of deregulation.

As I write these lines, the residents of Wuhan and Shanghai are rediscovering that in its natural state, the sky is blue.

Alain de Benoist is a writer, philosopher, and specialist in political philosophy and the history of ideas. He is the editor-in-chief of the journals Nouvelle Ecole and Krisis, as well as editorialist of the magazine Éléments. A collection of his writings, Democracy and Populism: The Telos Essays, was recently published by Telos Press and is available in our store.

Edvard Munch Ashes 1894

I have a lot of sympathy for young(er) people who are upset about what has happened, and still is happening, to the planet they were born on, during their lifetime and that of the generations before them. I have less sympathy for the “climate movement” even if those same young people thinnk it represents them, because it has grown too big and too diverse, and has come to rely (for no reason) too much on hype and exaggeration. Don’t feed your opponent or enemy.

The movement also has too little attention for what younger people themselves contribute to the descent into chaos. If you don’t start with yourself, how are you ever going to tell others what to do? How many phones and gadgets and cars do you have? Do your clothes also say Made in China? Personal question.

Naming one’s movement “Extinction Rebellion” strikes me as odd, because the movement appears to be, from what I can see, based almost exclusively on the deleterious effects of carbon emissions, though these have -at least so far- played just a small part in the actual extinction of -far too many- species, much less than the use of chemicals, the loss of forest, and land use in general, just to name some examples.

I have a lot of sympathy for Greta Thunberg, and I’m sure she means very well. But I have no sympathy for the PR people that she allows to surround her, and who make millions of dollars off of her name and appearances. Nor do I think Greta had grasped at age 16 the full complexity of the systems that have led to what she protests against. Very few adults have either, so that’s hardly her fault.

I still think, just like I said a year ago when she was first unloaded upon the Davos conference by those same PR people, that not only is there nothing for her there, but her time would be better spent trying to educate herself about that “full complexity”. Because today, it all appears to me to be too much about what she does not want, rather than about what she does, and to a large extent that’s because she simply doesn’t know. Protesting for something is harder than protesting against it.

Because of all these things, the climate movement is actively though unwittingly helping the rich, who got rich through their use of fossil fuels, to get richer still off of society’s adaptation to a world in which fossil fuels play a smaller role.

Yes, there are enormous amounts of irony involved in this. People like the idea of a green economy. They like the sound of it. But if you would ask them what it means in practice, they would picture something very close to the present economic system, just green, i.e. powered by electricity instead of fossil fuels.

And that is nonsense. In the same way that “fossil free” living is utter nonsense, but nevertheless it’s terms like that which are most prominent in headlines. Carbon neutral, carbon free, fossil free, those terms all describe fantasies; they are terms straight out of a PR campaign book. There’s even carbon negative. But who among the activists understand what this means? You got to be careful guys, because the way this is going, you will all end up being accomplices of the very people you should be protesting.

Here’s what going to happen (and already has), Greta and all of you Greta fans.

You’re getting to Davos and meet with all these rich people, and they all already have their plans ready. They’re going to tell you that they agree with just about everything you have to say. But they do and they don’t at the same time.

The fossil fuel industry, along with carmakers, governments et al, have solved the riddle: what appeared at first to be a huge threat to them, now turns out to be their next golden goose: they’re going to get paid more to move away from fossil fuels and emissions than they previously did to produce them. Pretty smart, right?

Only you will find out not even that is true. Do you know what an electric car produces in pollution, in CO2 emissions? I read the other day that an electric car has to drive 30,000-50,000 km a year over its “lifetime” to pollute less than a petrol one. Details are not terribly important there, it sounds kind of right. Unless you’re in Poland or certain parts of Germany or Eastern Europe, than it’s much higher still. Brown coal.

How did the rich and the worst polluters do it? How did they solve the riddle? By promoting Greta and the entire climate movement, with the help of the media they own, and then steering their priorities to be in line with their own. Piece of cake for them. They have been among the most powerful forces in western society forever, and it wasn’t too hard for them to figure this one out.

And that’s why these days, and increasingly as Davos has started (timing is everything), climate is a well advertized topic, and why the likes of BlackRock and Microsoft -and many others- just days ago announced that they will “go green”, divest out of fossil fuels etc.

They do this because they see a profit to be made. So don’t flatter yourselves, it has nothing to do with you. Or rather, it does, but not the way you thought and wanted. Your worst adversaries are using you for their promotion and advertizing platforms. The more banners you fly, the more words Greta utters, the more governments will make trillion dollar promises, ane the more Big Oil will make profits. Like this one today (just one example in fat growing long row):

UN Decarbonisation Target For Shipping To Cost Over $1 Trillion

At least $1 trillion of investment in new fuel technology is needed to enable the shipping industry to meet U.N. targets for cuts in carbon emissions by 2050, a study published on Monday showed. The global shipping fleet, which accounts for 2.2% of the world’s CO2 emissions, is under pressure to reduce those emissions and other pollution. About 90% of world trade is transported by sea.

A trillion euros for 2.2% of CO2 emissions. We can all do the math here, right?! And yes, Greta and her fellow schoolkids contributed a lot to that amount by seeking publicity, but also by being promoted by other interests. Only to become part of a giant publicity machine.

You see, Greta, the message the rich get is not that they must listen to you, it’s that others do listen who control a lot of money, individuals, governments, and so there will be money to be made if they just promote your ideas enough. You’ve been co-opted and pre-empted, so to speak. And what are you going to do now? You’re in cahoots, whether you like it or not, with the likes of Exxon, Shell, and Mercedes.

The oil companies have long rebranded themselves as energy companies (this started when BP’s logo turned green years ago) and invested billions in solar and wind turbines. The carmakers are betting big on electric vehicles. And this is supposed to achieve your goal of carbon neutrality? Let’s get real, shall we?

You’re way out of your league. You’re up against people who represent decades if not centuries-old interests, as well as -aspiring- politicians in every Parliament and even city counsel who know full well their careers will be nipped in the bud if they don’t go along with those interests. And then there’s 10,000 Middle East sheiks.

Davos is not your stage, Greta, and it’s not the stage for the people who believe in you. You’re betraying them by going there, because you have no control over the stage. Still, the other side really want you to think it is, the oil companies do, US and EU governments do, Mercedes and Toyota and Ford, do. Because you are their meal ticket.

They want you to believe that the problem that keeps you up at night can be solved with electric cars and solar panels and wind turbines. Because they have invested heavily in companies that produce all of those.

And now there’s a trillion here and a trillion there, because people listen to you. No government, no chosen official or appointed civil servant at any level, can anymore be forgiven for not budgeting heavily for climate change effects, even if they are ignorant about what those are.

The entire climate change issue is about energy, not about a duscussion of sources of energy. And as I argued late last year in Energy vs DNA and Energy vs Waste, mankind, like any other organism, is driven to use all surplus energy at its disposal as fast as it can. If only so other organisms can’t benefit from it, or even other humans.

And all energy use produces waste, not just fossil fuels. I suggest you read those. In the meantime, Greta, go home, enjoy the snow and the northern lights on your skin, have the youth you’re supposed to have, share your views with your friends, study study study and keep things in perspective. Your fans are not in Davos, but you are; that’s an ego-trip that will backfire on you because you’re being played for a fool.

Also, dump the PR teams; you’re bigger than that.

Much of the U.S. pressure exerted on Iraq’s government with respect to China has reportedly taken place covertly and behind closed doors, keeping the Trump administration’s concerns over China’s growing ties to Iraq largely out of public view, perhaps over concerns that a public scuffle could exacerbate the U.S.-China “trade war” and endanger efforts to resolve it. Yet, whatever the reasons may be, evidence strongly suggests that the U.S. is equally concerned about China’s presence in Iraq as it is with Iran’s. This is because China has the means and the ability to dramatically undermine not only the U.S.’ control over Iraq’s oil sector but the entire petrodollar system on which the U.S.’ status as both a financial and military superpower directly depends.

Behind the curtain, a different narrative for Iraq-US Tensions

Iraq’s caretaker Prime Minister Adel Abdul-Mahdi gave a series of remarks on January 5, during a parliamentary session that received surprisingly little media attention. During the session, which also saw Iraq’s Parliament approve the removal of all foreign (including American) troops from the country, Abdul-Mahdi made a series of claims about the lead-up to the recent situation that placed Iraq at the heart of spiking U.S.-Iran tensions.

During that session, only part of Abdul-Mahdi’s statements were broadcast on television, after the Iraqi Speaker of the House — Mohammed Al-Halbousi, who has a close relationship with Washington — requested the video feed be cut. Al-Halbousi oddly attended the parliamentary session even though it was boycotted by his allied Sunni and Kurdish representatives.

Secretary of State Pompeo, left, walks alongside Al-Halbousi in Baghdad, Iraq on Jan. 9, 2019. Andrew Caballero-Reynolds | Reuters

After the feed was cut, MPs who were present wrote down Abdul-Mahdi’s remarks, which were then given to the Arabic news outlet Ida’at. Per that transcript, Abdul-Mahdi stated that:

The Americans are the ones who destroyed the country and wreaked havoc on it. They have refused to finish building the electrical system and infrastructure projects. They have bargained for the reconstruction of Iraq in exchange for Iraq giving up 50% of oil imports. So, I refused and decided to go to China and concluded an important and strategic agreement with it. Today, Trump is trying to cancel this important agreement.”

Abdul-Mahdi continued his remarks, noting that pressure from the Trump administration over his negotiations and subsequent dealings with China grew substantially over time, even resulting in death threats to himself and his defense minister:

After my return from China, Trump called me and asked me to cancel the agreement, so I also refused, and he threatened [that there would be] massive demonstrations to topple me. Indeed, the demonstrations started and then Trump called, threatening to escalate in the event of non-cooperation and responding to his wishes, whereby a third party [presumed to be mercenaries or U.S. soldiers] would target both the demonstrators and security forces and kill them from atop the highest buildings and the US embassy in an attempt to pressure me and submit to his wishes and cancel the China agreement.”

“I did not respond and submitted my resignation and the Americans still insist to this day on canceling the China agreement. When the defense minister said that those killing the demonstrators was a third party, Trump called me immediately and physically threatened myself and the defense minister in the event that there was more talk about this third party.”

Very few English language outlets reported on Abdul-Mahdi’s comments. Tom Luongo, a Florida-based Independent Analyst and publisher of The Gold Goats ‘n Guns Newsletter, told MintPress that the likely reasons for the “surprising” media silence over Abdul-Mahdi’s claims were because “It never really made it out into official channels…” due to the cutting of the video feed during Iraq’s Parliamentary session and due to the fact that “it’s very inconvenient and the media — since Trump is doing what they want him to do, be belligerent with Iran, protected Israel’s interests there.”

“They aren’t going to contradict him on that if he’s playing ball,” Luongo added, before continuing that the media would nonetheless “hold onto it for future reference….If this comes out for real, they’ll use it against him later if he tries to leave Iraq.” “Everything in Washington is used as leverage,” he added.

Given the lack of media coverage and the cutting of the video feed of Abdul-Mahdi’s full remarks, it is worth pointing out that the narrative he laid out in his censored speech not only fits with the timeline of recent events he discusses but also the tactics known to have been employed behind closed doors by the Trump administration, particularly after Mike Pompeo left the CIA to become Secretary of State.

For instance, Abdul-Mahdi’s delegation to China ended on September 24, with the protests against his government that Trump reportedly threatened to start on October 1. Reports of a “third side” firing on Iraqi protesters were picked up by major media outlets at the time, such as in this BBC report which stated:

Reports say the security forces opened fire, but another account says unknown gunmen were responsible….a source in Karbala told the BBC that one of the dead was a guard at a nearby Shia shrine who happened to be passing by. The source also said the origin of the gunfire was unknown and it had targeted both the protesters and security forces. (emphasis added)”

U.S.-backed protests in other countries, such as in Ukraine in 2014, also saw evidence of a “third side” shooting both protesters and security forces alike.

After six weeks of intense protests, Abdul-Mahdi submitted his resignation on November 29, just a few days after Iraq’s Foreign Minister praised the new deals, including the “oil for reconstruction” deal, that had been signed with China. Abdul-Mahdi has since stayed on as Prime Minister in a caretaker role until Parliament decides on his replacement.

Abdul-Mahdi’s claims of the covert pressure by the Trump administration are buttressed by the use of similar tactics against Ecuador, where, in July 2018, a U.S. delegation at the United Nations threatened the nation with punitive trade measures and the withdrawal of military aid if Ecuador moved forward with the introduction of a UN resolution to “protect, promote and support breastfeeding.”

The New York Times reported at the time that the U.S. delegation was seeking to promote the interests of infant formula manufacturers. If the U.S. delegation is willing to use such pressure on nations for promoting breastfeeding over infant formula, it goes without saying that such behind-closed-doors pressure would be significantly more intense if a much more lucrative resource, e.g. oil, were involved.

Regarding Abdul-Mahdi’s claims, Luongo told MintPress that it is also worth considering that it could have been anyone in the Trump administration making threats to Abdul-Mahdi, not necessarily Trump himself. “What I won’t say directly is that I don’t know it was Trump at the other end of the phone calls. Mahdi, it is to his best advantage politically to blame everything on Trump. It could have been Mike Pompeo or Gina Haspel talking to Abdul-Mahdi… It could have been anyone, it most likely would be someone with plausible deniability….This [Mahdi’s claims] sounds credible… I firmly believe Trump is capable of making these threats but I don’t think Trump would make those threats directly like that, but it would absolutely be consistent with U.S. policy.”

Luongo also argued that the current tensions between U.S. and Iraqi leadership preceded the oil deal between Iraq and China by several weeks, “All of this starts with Prime Minister Mahdi starting the process of opening up the Iraq-Syria border crossing and that was announced in August. Then, the Israeli air attacks happened in September to try and stop that from happening, attacks on PMU forces on the border crossing along with the ammo dump attacks near Baghdad… This drew the Iraqis’ ire… Mahdi then tried to close the air space over Iraq, but how much of that he can enforce is a big question.”

As to why it would be to Mahdi’s advantage to blame Trump, Luongo stated that Mahdi “can make edicts all day long, but, in reality, how much can he actually restrain the U.S. or the Israelis from doing anything? Except for shame, diplomatic shame… To me, it [Mahdi’s claims] seems perfectly credible because, during all of this, Trump is probably or someone else is shaking him [Mahdi] down for the reconstruction of the oil fields [in Iraq]…Trump has explicitly stated “we want the oil.”’

As Luongo noted, Trump’s interest in the U.S. obtaining a significant share of Iraqi oil revenue is hardly a secret. Just last March, Trump asked Abdul-Mahdi “How about the oil?” at the end of a meeting at the White House, prompting Abdul-Mahdi to ask “What do you mean?” To which Trump responded “Well, we did a lot, we did a lot over there, we spent trillions over there, and a lot of people have been talking about the oil,” which was widely interpreted as Trump asking for part of Iraq’s oil revenue in exchange for the steep costs of the U.S.’ continuing its now unwelcome military presence in Iraq.

With Abdul-Mahdi having rejected Trump’s “oil for reconstruction” proposal in favor of China’s, it seems likely that the Trump administration would default to so-called “gangster diplomacy” tactics to pressure Iraq’s government into accepting Trump’s deal, especially given the fact that China’s deal was a much better offer. While Trump demanded half of Iraq’s oil revenue in exchange for completing reconstruction projects (according to Abdul-Mahdi), the deal that was signed between Iraq and China would see around 20 percent of Iraq’s oil revenue go to China in exchange for reconstruction. Aside from the potential loss in Iraq’s oil revenue, there are many reasons for the Trump administration to feel threatened by China’s recent dealings in Iraq.

The Iraq-China oil deal – a prelude to something more?

When Abdul-Mahdi’s delegation traveled to Beijing last September, the “oil for reconstruction” deal was only one of eight total agreements that were established. These agreements cover a range of areas, including financial, commercial, security, reconstruction, communication, culture, education and foreign affairs in addition to oil. Yet, the oil deal is by far the most significant.

Per the agreement, Chinese firms will work on various reconstruction projects in exchange for roughly 20 percent of Iraq’s oil exports, approximately 100,00 barrels per day, for a period of 20 years. According to Al-Monitor, Abdul-Mahdi had the following to say about the deal: “We agreed [with Beijing] to set up a joint investment fund, which the oil money will finance,” adding that the agreement prohibits China from monopolizing projects inside Iraq, forcing Bejing to work in cooperation with international firms.

The agreement is similar to one negotiated between Iraq and China in 2015 when Abdul-Mahdi was serving as Iraq’s oil minister. That year, Iraq joined China’s Belt and Road Initiative in a deal that also involved exchanging oil for investment, development and construction projects and saw China awarded several projects as a result. In a notable similarity to recent events, that deal was put on hold due to “political and security tensions” caused by unrest and the surge of ISIS in Iraq, that is until Abdul-Mahdi saw Iraq rejoin the initiative again late last year through the agreements his government signed with China last September.

Chinese President Xi Jinping, center left, meet with Iraqi Prime Minister Adil Abdul-Mahdi, center right, in Beijing, Sept. 23, 2019. Lintao Zhang | AP

Notably, after recent tensions between the U.S. and Iraq over the assassination of Soleimani and the U.S.’ subsequent refusal to remove its troops from Iraq despite parliament’s demands, Iraq quietly announced that it would dramatically increase its oil exports to China to triple the amount established in the deal signed in September. Given Abdul-Mahdi’s recent claims about the true forces behind Iraq’s recent protests and Trump’s threats against him being directly related to his dealings with China, the move appears to be a not-so-veiled signal from Abdul-Mahdi to Washington that he plans to deepen Iraq’s partnership with China, at least for as long as he remains in his caretaker role.

Iraq’s decision to dramatically increase its oil exports to China came just one day after the U.S. government threatened to cut off Iraq’s access to its central bank account, currently held at the Federal Reserve Bank of New York, an account that currently holds $35 billion in Iraqi oil revenue. The account was set up after the U.S. invaded and began occupying Iraq in 2003 and Iraq currently removes between $1-2 billion per month to cover essential government expenses. Losing access to its oil revenue stored in that account would lead to the “collapse” of Iraq’s government, according to Iraqi government officials who spoke to AFP.

Though Trump publicly promised to rebuke Iraq for the expulsion of U.S. troops via sanctions, the threat to cut off Iraq’s access to its account at the NY Federal Reserve Bank was delivered privately and directly to the Prime Minister, adding further credibility to Abdul-Mahdi’s claims that Trump’s most aggressive attempts at pressuring Iraq’s government are made in private and directed towards the country’s Prime Minister.

Though Trump’s push this time was about preventing the expulsion of U.S. troops from Iraq, his reasons for doing so may also be related to concerns about China’s growing foothold in the region. Indeed, while Trump has now lost his desired share of Iraqi oil revenue (50 percent) to China’s counteroffer of 20 percent, the removal of U.S. troops from Iraq may see American troops replaced with their Chinese counterparts as well, according to Tom Luongo.

“All of this is about the U.S. maintaining the fiction that it needs to stay in Iraq…So, China moving in there is the moment where they get their toe hold for the Belt and Road [Initiative],” Luongo argued. “That helps to strengthen the economic relationship between Iraq, Iran and China and obviating the need for the Americans to stay there. At some point, China will have assets on the ground that they are going to want to defend militarily in the event of any major crisis. This brings us to the next thing we know, that Mahdi and the Chinese ambassador discussed that very thing in the wake of the Soleimani killing.”

Indeed, according to news reports, Zhang Yao — China’s ambassador to Iraq — “conveyed Beijing’s readiness to provide military assistance” should Iraq’s government request it soon after Soleimani’s assassination. Yao made the offer a day after Iraq’s parliament voted to expel American troops from the country. Though it is currently unknown how Abdul-Mahdi responded to the offer, the timing likely caused no shortage of concern among the Trump administration about its rapidly waning influence in Iraq. “You can see what’s coming here,” Luongo told MintPress of the recent Chinese offer to Iraq, “China, Russia and Iran are trying to cleave Iraq away from the United States and the U.S. is feeling very threatened by this.”

Russia is also playing a role in the current scenario as Iraq initiated talks with Moscow regarding the possible purchase of one of its air defense systems last September, the same month that Iraq signed eight deals, including the oil deal with China. Then, in the wake of Soleimani’s death, Russia again offered the air defense systems to Iraq to allow them to better defend their air space. In the past, the U.S. has threatened allied countries with sanctions and other measures if they purchase Russian air defense systems as opposed to those manufactured by U.S. companies.

The U.S.’ efforts to curb China’s growing influence and presence in Iraq amid these new strategic partnerships and agreements are limited, however, as the U.S. is increasingly relying on China as part of its Iran policy, specifically in its goal of reducing Iranian oil export to zero. China remains Iran’s main crude oil and condensate importer, even after it reduced its imports of Iranian oil significantly following U.S. pressure last year. Yet, the U.S. is now attempting to pressure China to stop buying Iranian oil completely or face sanctions while also attempting to privately sabotage the China-Iraq oil deal. It is highly unlikely China will concede to the U.S. on both, if any, of those fronts, meaning the U.S. may be forced to choose which policy front (Iran “containment” vs. Iraq’s oil dealings with China) it values more in the coming weeks and months.

Furthermore, the recent signing of the “phase one” trade deal with China revealed another potential facet of the U.S.’ increasingly complicated relationship with Iraq’s oil sector given that the trade deal involves selling U.S. oil and gas to China at very low cost, suggesting that the Trump administration may also see the Iraq-China oil deal result in Iraq emerging as a potential competitor for the U.S. in selling cheap oil to China, the world’s top oil importer.

The Petrodollar and the Phantom of the Petroyuan

In his televised statements last week following Iran’s military response to the U.S. assassination of General Soleimani, Trump insisted that the U.S.’ Middle East policy is no longer being directed by America’s vast oil requirements. He stated specifically that:

Over the last three years, under my leadership, our economy is stronger than ever before and America has achieved energy independence. These historic accomplishments changed our strategic priorities. These are accomplishments that nobody thought were possible. And options in the Middle East became available. We are now the number-one producer of oil and natural gas anywhere in the world. We are independent, and we do not need Middle East oil. (emphasis added)”

Yet, given the centrality of the recent Iraq-China oil deal in guiding some of the Trump administration’s recent Middle East policy moves, this appears not to be the case. The distinction may lie in the fact that, while the U.S. may now be less dependent on oil imports from the Middle East, it still very much needs to continue to dominate how oil is traded and sold on international markets in order to maintain its status as both a global military and financial superpower.

Indeed, even if the U.S. is importing less Middle Eastern oil, the petrodollar system — first forged in the 1970s — requires that the U.S. maintains enough control over the global oil trade so that the world’s largest oil exporters, Iraq among them, continue to sell their oil in dollars. Were Iraq to sell oil in another currency, or trade oil for services, as it plans to do with China per the recently inked deal, a significant portion of Iraqi oil would cease to generate a demand for dollars, violating the key tenet of the petrodollar system.

Chinese representatives speak to defense personnel during a weapons expo organized by the Iraqi defense ministry in Baghdad, March, 2017. Karim Kadim | AP

As Kei Pritsker and Cale Holmes noted in an article last year for MintPress:

The takeaway from the petrodollar phenomenon is that as long as countries need oil, they will need the dollar. As long as countries demand dollars, the U.S. can continue to go into massive amounts of debt to fund its network of global military bases, Wall Street bailouts, nuclear missiles, and tax cuts for the rich.”

Thus, the use of the petrodollar has created a system whereby U.S. control of oil sales of the largest oil exporters is necessary, not just to buttress the dollar, but also to support its global military presence. Therefore, it is unsurprising that the issue of the U.S. troop presence in Iraq and the issue of Iraq’s push for oil independence against U.S. wishes have become intertwined. Notably, one of the architects of the petrodollar system and the man who infamously described U.S. soldiers as “dumb, stupid animals to be used as pawns in foreign policy”, former Secretary of State Henry Kissinger, has been advising Trump and informing his China policy since 2016.

This take was also expressed by economist Michael Hudson, who recently noted that U.S. access to oil, dollarization and U.S. military strategy are intricately interwoven and that Trump’s recent Iraq policy is intended “to escalate America’s presence in Iraq to keep control of the region’s oil reserves,” and, as Hudson says, “to back Saudi Arabia’s Wahabi troops (ISIS, Al Qaeda in Iraq, Al Nusra and other divisions of what are actually America’s foreign legion) to support U.S. control of Near Eastern oil as a buttress of the U.S. dollar.”

Hudson further asserts that it was Qassem Soleimani’s efforts to promote Iraq’s oil independence at the expense of U.S. imperial ambitions that served one of the key motives behind his assassination.

America opposed General Suleimani above all because he was fighting against ISIS and other U.S.-backed terrorists in their attempt to break up Syria and replace Assad’s regime with a set of U.S.-compliant local leaders – the old British “divide and conquer” ploy. On occasion, Suleimani had cooperated with U.S. troops in fighting ISIS groups that got “out of line” meaning the U.S. party line. But every indication is that he was in Iraq to work with that government seeking to regain control of the oil fields that President Trump has bragged so loudly about grabbing. (emphasis added)”

Hudson adds that “…U.S. neocons feared Suleimani’s plan to help Iraq assert control of its oil and withstand the terrorist attacks supported by U.S. and Saudi’s on Iraq. That is what made his assassination an immediate drive.”

While other factors — such as pressure from U.S. allies such as Israel — also played a factor in the decision to kill Soleimani, the decision to assassinate him on Iraqi soil just hours before he was set to meet with Abdul-Mahdi in a diplomatic role suggests that the underlying tensions caused by Iraq’s push for oil independence and its oil deal with China did play a factor in the timing of his assassination. It also served as a threat to Abdul-Mahdi, who has claimed that the U.S. threatened to kill both him and his defense minister just weeks prior over tensions directly related to the push for independence of Iraq’s oil sector from the U.S.

It appears that the ever-present role of the petrodollar in guiding U.S. policy in the Middle East remains unchanged. The petrodollar has long been a driving factor behind the U.S.’ policy towards Iraq specifically, as one of the key triggers for the 2003 invasion of Iraq was Saddam Hussein’s decision to sell Iraqi oil in Euros opposed to dollars beginning in the year 2000. Just weeks before the invasion began, Hussein boasted that Iraq’s Euro-based oil revenue account was earning a higher interest rate than it would have been if it had continued to sell its oil in dollars, an apparent signal to other oil exporters that the petrodollar system was only really benefiting the United States at their own expense.

Beyond current efforts to stave off Iraq’s oil independence and keep its oil trade aligned with the U.S., the fact that the U.S. is now seeking to limit China’s ever-growing role in Iraq’s oil sector is also directly related to China’s publicly known efforts to create its own direct competitor to the petrodollar, the petroyuan.

Since 2017, China has made its plans for the petroyuan — a direct competitor to the petrodollar — no secret, particularly after China eclipsed the U.S. as the world’s largest importer of oil. As CNBC noted at the time:

The new strategy is to enlist the energy markets’ help: Beijing may introduce a new way to price oil in coming months — but unlike the contracts based on the U.S. dollar that currently dominate global markets, this benchmark would use China’s own currency. If there’s widespread adoption, as the Chinese hope, then that will mark a step toward challenging the greenback’s status as the world’s most powerful currency….The plan is to price oil in yuan using a gold-backed futures contract in Shanghai, but the road will be long and arduous.”

If the U.S. continues on its current path and pushes Iraq further into the arms of China and other U.S. rival states, it goes without saying that Iraq — now a part of China’s Belt and Road Initiative — may soon favor a petroyuan system over a petrodollar system, particularly as the current U.S. administration threatens to hold Iraq’s central bank account hostage for pursuing policies Washington finds unfavorable.

It could also explain why President Trump is so concerned about China’s growing foothold in Iraq, since it risks causing not only the end of the U.S. military hegemony in the country but could also lead to major trouble for the petrodollar system and the U.S.’ position as a global financial power. Trump’s policy aimed at stopping China and Iraq’s growing ties is clearly having the opposite effect, showing that this administration’s “gangster diplomacy” only serves to make the alternatives offered by countries like China and Russia all the more attractive.

Feature photo | Graphic by Claudio Cabrera for MintPress News

Whitney Webb is a MintPress News journalist based in Chile. She has contributed to several independent media outlets including Global Research, EcoWatch, the Ron Paul Institute and 21st Century Wire, among others. She has made several radio and television appearances and is the 2019 winner of the Serena Shim Award for Uncompromised Integrity in Journalism.

CYCLES OF CAPITALIST ACCUMULATION

A recession is defined in economics as two or more quarters of negative growth. A depression, on the other hand, comprises a sharp and deep downturn, usually as a result of bursting asset-price bubbles, a weak recovery, and a subsequent prolonged period of sub-optimal growth. This is about where we are at the present time.

Mr Mullan’s book – which I would recommend although my own views don’t always coincide with the author’s – is well-argued, researched and well worth reading.

The title itself is an obvious allusion to the theories put forward by the great Austrian economist, Joseph Alois Schumpeter (1883-1950) although Schumpeter was never part of the Austrian school of Von Mises and Von Hayek.

Capitalism is nothing if not cyclical, but the cycles themselves vary greatly from mild recessions to full-blown semi-collapses and Kondratiev waves. These episodes are necessary to the system; they are the cleansing method whereby all the bad investment decisions, false values and misallocation of productive resources which had grown up in the boom phase of the cycle reach their inflexion point where boom turns to bust.

The crisis was the moment of truth when suddenly all the plans, hopes and inane euphoria which were formed during the upswing were put to the test. Many of them were found wanting and those responsible would have to face the consequences of their actions.

The cycle took no prisoners. If your business failed, well, tough shit. No namby-pamby bailouts for the losers in the great game of rags to riches and back again. All very reminiscent of the film starring Eddy Murphy – Trading Places – a down and out street hustler who was groomed by two eccentric millionaires and became a stock-market player with considerable success.

Moreover:

This process was not just necessary to keep capitalism efficient; it was also necessary to keep capitalism moral. Only if market agents bore responsibility for their actions of prudence, reliability, sound judgement and trust, upon which capitalism was based, would the system be upheld. The crisis of capitalism was in a double sense – both practical and moral.” [1]

This process has undergone a fundamental change as will be discussed later.

THE RISE AND FALL OF BRETTON WOODS

Mr Mullan situated the latest phase of the Kondratiev Wave, or as he determines it, The Long Depression, during the initial upswing which started in about 1944. The period lasted from its early formulations which were implemented by 1945 lasting until approximately 1975. This era became known as Les Trente Glorieuses.

Thus was born the Bretton Woods system.[2] Key to this system was the anchoring of currencies of all of the major western economies to the US$-Gold nexus. The US dollar was linked to gold which held at US$35 per oz and was convertible into gold upon request.

But trouble was brewing. Owing to the costs of America’s wars in Indo-China together with the profligate spending of President Johnson’s ‘Great Society’ programme, surplus dollars began to flow abroad, particularly to Europe.

The Europeans – particularly De Gaulle – saw this as an opportunity to trade in these surplus dollars for payment in gold. This led to an outflow of gold from the US to Europe at which point the then President (Nixon) suspended US$ gold convertibility as of 15 August 1971. Speaking to his fellow Americans on a nationwide TV appearance he stated that this policy involved a ‘temporary’ expedient, but this soon morphed into a permanent arrangement.

This signalled what was in fact the end of the Bretton Woods system, and the beginning of the second phase of the Kondratiev downturn or as Mr Mullan puts it the beginning of the Long Depression. The new world order now rested on the rather dubious moorings of a fiat system – a system in which currencies float in a rather unstable relationship with each other in an increasingly volatile global environment.

THE NEW ORDER & ITS DESIGN FAULTS

This new economic disorder becomes increasingly chaotic as fundamental and seemingly intractable problems became increasingly apparent. Mr Mullan notes:

To maintain a semblance of vitality, western capitalism has become increasingly dependent on expanding debt levels and on the expansion of fictitious capital.[3] This layer of financial assets that are only symbols of value, not real values. For example, company shares are traded like goods and services do not, in the same way, embody value.

They are tokens which represent part ownership of a company and the potential distribution of future profits in the form of dividends. The paper or electronic certificate itself is not a genuine value that can create more value. Rising share/stock prices are often presented as a healthy economy, but the amount of money a share/stock changes hand for says nothing definitive about the value of a company’s assets or about its productive capacity. On the contrary, it is when real capital stagnates that the amount of fictitious capital tends to expand.[4]

Thus, during a property boom prices may reach astronomical levels where those who own their houses feel they are getting richer but come the down phase they wonder what happened to their new-found wealth which seems to have disappeared during the market correction.

The fact of the matter is that it was never there in the first place. It was fictitious.

The chief characteristics of the 1980/90s was the growing reliance on debt, and, in addition, the growth of financialization; this in order to stimulate growth. Debt in all its forms: corporate, household, financial, student loans, car loans and sovereign debt were a function of easy money – QE and ultra-low interest rates – and bore witness to increasing levels of leverage which kept the system going.

Debt was cheap. Its costs had fallen since the 1980s. Interest rates had been declining for over three decades.

The United States shows this clearly – and its rates remain the dominant influence across the mature economies because of the dollar’s role as a world money. Real commercial bank interest rates averaged 7% during the 1980s, 5.5% during the 1990s 4% during the 2000s for the period leading up to the financial crash of 2008 and have been below 2% ever since.[5]

Financialization [6] was the other leg of a system which in, Mr Mullen’s words artificially propped up – a ‘decaying system.’ Free monies from the Central banks was used by banks and other financial institutions to buy up and speculate on various markets including in particular stock and bond markets.

It was financialization and debt which acted as an increasingly counter-balancing force to the long-run tendency of decline in the productive industries.

Unfortunately, the productive sector was the creator of real value whereas the rent-seeking nature of debt-driven finance capital was essentially a parasitic outgrowth on the productive sector.

DIMINISHING RETURNS TO ZERO AND MINUS RETURNS

During the same period debt was and still is rising faster than national income, and indeed growth seemed to be in a long downward trajectory. At the present time growth has come to a stop in Europe. (In alphabetical order).

France GDP Growth
Quarterly: 0.3%
Annual: 1.4%

Germany GDP Growth
Quarterly: 0.1%
Annual: 0.5%

Italy GDP Growth
Quarterly: 0.1%
Annual: 0.3%

UK GDP Growth
Quarterly: 0.3%
Annual: 1.0%

EU area GDP Growth
Quarterly: 0.2%
Annual: 1.2%

(Source: Trading Economics)

10-Year Bond Yields Yearly
France: –0.73%
Germany: -0.54%
Italy: –1.69%
UK: 0.67%
EU Area: 0.3%

(Source: countryeconomy.com)

No ifs or buts, these really are depression figures. European industry is not merely slowing to a crawl but is actually becoming negative. Mr Mullan attributes this decline in value production as systemic under-investment due to the Tendency of the Rate of Profit to Fall (TPRF). No guesses from what source that came.

THE TENDENCY OF THE RATE OF PROFIT TO FALL AND DECLINING INVESTMENT

The Labour theory of value began life with Adam Smith (1723-1790) was subject to further elaboration with David Ricardo (1772-1823) and additional further final touches by Karl Marx (1818-1883).

Briefly stated the theory rests on the thesis that capital or value represents the objectified process of past human labour. Actually, existing value/capital is nothing more than labour which has already been expended.

Thus, a potter will start with a piece of clay on his wheel, and through several stages of moulding, painting, and baking, the piece of clay has become a vase, a commodity, with a value and price. As labour becomes more productive and innovative, output (growth) expands in both a quantitative and qualitative sense.

This process did not simply represent the output of the individual labourer, it involved the aggregated social labour of the economy as a whole which produced goods and services.

In modern parlance – growth qua capital stock. It should be said that the value of a commodity doesn’t always coincide with its price (which is the phenomenal form of value) due to supply and demand pressures. In contemporary economic parlance this process would be described as productivity growth and value-added growth. Goods become cheaper and markets expand to purchase these new goods. We have seen this in the production of among other items, cars, I-Phones and shoes.

Of course, the whole process is underpinned by businesses quest for profit and this is central to the theory of capitalist crisis.
One cycle of accumulation will (I hope!) serve to clarify this.

Let M stand for money capital, C stand for Capital consisting of both living labour, workers, and dead labour, machinery and raw materials, and P for the production process.

Here we go: M – C … P … C’- M’

Let us suppose this is car manufacture.

Money capital is transformed into dead and living capital. M to C. These factor inputs are brought together during the process of production P. Thus, emerges new capital as a Car C’. But what is the significance of the ‘ or C’?

Well the ‘ is the surplus labour time (or value) which is part of total value of ’ which also includes necessary labour time which represents costs to the capitalist i.e., wages. Surplus labour time is the source of surplus value and ultimately money profit. The workers worked for 10 hours but were paid for 8.

The 2 hours were a surplus over and above what was paid to the workers. And this would be the case at any level of production. It is the source of surplus value and profit. Finally: M’ or the transition to C’- M’ This is sometimes referred to as the realisation problem, but simply means how does C’ become M’. This takes place in the final phase of the process where the cars are on sale in the dealership courtyard waiting to be sold.

Having appropriated the M’ surplus value, the business can restart the whole cycle once again, – ceteris paribus. However there maybe problems of transforming the surplus value into prices of production (that is to say converting C’ into M’) due to the level of aggregate demand. (For further discussion refer to Michael Roberts and David Harvey*).

It is essential that profit maximization is the driving force of capital and the accumulation process. If profit starts to undergo a secular decline, this will have serious implications to the system as a whole. This is exactly what Mr Mullan picks up.

Investment is in decline due to the falling rate of profit. And the rate of profit is declining due to the fact that labour input into each successive unit of output has declined. It may sound strange to say but declining profitability is due precisely to the increased efficiency and productivity of the system.

Marx argued that:

(i) each individual capitalist can increase their own competitiveness through increasing the productivity of his workers.
(ii) The way to do this is by using a greater quantity of dead capital —tools, machinery and so on—for each worker. There is a growth in the ratio of the physical extent of the capital to the amount of labour power employed, a ratio that Marx called the “technical composition of capital”.
(iii) But a growth in the physical extent of the means of production will also be a growth in the investment needed to buy them. So, this too will grow faster than the investment in the workforce.
(iv)The growth of this ratio, which he calls the “organic composition of capital”, is a logical corollary of capital accumulation.
(v)Yet the only source of value for the system as a whole is labour. If investment grows more rapidly than the labour force, it must also grow more rapidly than the value created by the workers, which is where profit comes from.
(vi) In short, capital investment grows more rapidly than the source of profit. As a consequence, there will be a downward pressure on the ratio of profit to investment—the rate of profit must therefore decline.

Each capitalist has to push for greater productivity in order to stay ahead of competitors. But what seems beneficial to the individual capitalist is disastrous for the capitalist class as a whole.

Each time productivity rises there is a fall in the average amount of labour in the economy as a whole needed to produce a commodity (what Marx called “socially necessary labour”), and it is this which determines what other people will eventually be prepared to pay for that commodity.

So today we can see a continual fall in the price of goods such as computers or DVD players produced in industries where new technologies are causing productivity to rise fastest.

Thus, according to Mr Mullan, falling profitability is the root cause of curtailed business investment.[7] Moreover, this observation has been observed in a number of authoritative sources.[8]

COUNTERACTING FORCES TO THE TRPF

Although the declining rate of profit is a necessary feature of the capitalist accumulation process there are counter-acting forces.

These include the increase in the mass of profit which offsets the decline in the rate of profit, and the rate of surplus value which also slows down the decline in the rate of profit. The two deep economic slumps of 1974-5 and 1980-2 had sufficiently reduced the value of constant capital. At the same time, the slumps had driven up unemployment and weakened the ability of the labour movement to protect wages (the cost of variable capital).

The productivity of labour rose as new techniques (and hi-tech ones at that) were introduced to many sectors of the economy, while wages were not allowed to rise as much. The wage share in the US economy plunged. The rate of surplus value rose. Additionally, subsidies to business and low interest rates helped to mitigate declining profits but could not stop it in the longer run. (Again, see Roberts and/or Harvey for a more detailed explanation.)

THE LEFT BOTTLES IT

In football parlance a player bottles it when he/she pulls out of a 50-50 tackle. A referee bottles it when he gives a dubious decision to the home team. The political left ‘bottled it’ when they gave up on socialism or communism circa 1989/90. There was a turbulent period of class struggle – the Miners’ Strike in the UK – and the air traffic controllers’ strike in the US, launched and overseen by Thatcher and Reagan circa 1984. This was also a period which bore witness to the collapse of communism in Eastern Europe.

Neoliberalism was to carry the day to such an overwhelming extent that even ‘left’ political parties were seemingly entranced by the new order. Strange they couldn’t tell the difference between revolution and counter-revolution.

One of the first things the incoming Labour government – in the shape of Gordon Brown – did after the 1997 election was to grant independence to the Bank of England! No more fiscal policy! Carry on entrenching Mrs T’s pet projects.

We know the rest. The new order was established from Washington to Moscow being imposed by the IMF, World Bank and WTO. The left had been neutered and was officially declared dead.

Mr Mullan explains:

It was ironic that it was not the strength of the alternatives to capitalism, but their demise that eventually crystallised the elites intellectual crisis. The return to depressed economic conditions had already put the establishment on the defensive. But capitalism’s self-confidence to its next blow came not from the vehemence of its former adversaries attacks but by the reverse. Opposition withered away not just in the Soviet Union as its international enemy, but from the domestic challenges from the left and from organized labour.” [9]

A similar view was put forward at an earlier date by Peter Gowan, who wrote,

We had thought that the interwar capitalist society was a thing of the past, a deviation overcome by post-war social progress. But it turns out that the post-war social gains were a deviation and the inter-war state and society is again the norm. Post-war social progress, was, it seems, a tactical aberrant form of European capitalism made necessary by the challenge of communism.

We now know the second part of the sentence whose first half, so strongly believed in 1989, stated: ‘Western-style welfare capitalism is better than Eastern Communism … ‘ The second half went unnoticed 10 years ago: It reads: ‘But western style welfare capitalism only existed because of communism.’ Europe seems to be drifting towards a divided, turbulent and ugly future.”[10]

THE ZOMBIE ECONOMY

What has seemed to have emerged in the neoliberal era was a wholly unexpected form of capitalist decline. This has been termed a zombie economy.

Low interest rates create zombie companies. Weak businesses survive (when they ought to have gone out of business) directing cash flow to cover interest on loans – but not the principal – that cannot be repaid but that banks will not write off. With capital tied up, banks reduce lending to productive enterprises, especially small and medium sized ones, which account for a large proportion of economic activity and employment.

Firms do not dispose of or restructure unproductive investments. The creative destruction of the slump when businesses of this type go out of existence and debts are wiped out and the reallocation of resources necessary to restore the economy does not take place.

Thus, a zombie economy, where failed businesses are kept artificially afloat is one where the necessary adjustments including liquidation of unproductive enterprises and assets are allowed to continue and the necessary restructuring fails to take place. This thus results in a semi-permanent depressed condition, until the next downturn comes along.

As opposed to Mr Mullan’s enthusiasm for a Schumpeterian policy of creative destruction we have been served up with an ever-deepening economic and social stasis by a brain-dead political and business class.

This has been eerily reminiscent of the British Prime Minster, Stanley Baldwin, who fought the 1929 general election on a “Safety First” ticket. Stabilisation and ‘muddling through’ has become the policy of successive western governments, particularly in the EU still labouring under the Stability and Growth Pact.

Schumpeter writing in Capitalism, Socialism and Democracy (1941) described a bourgeoisie which was losing not just its wealth in the economic crisis but also its sense of purpose. This loss of belief in their own functions, capability and sense of moral leadership is becoming increasingly evident. They are a corrupt and decadent force in society and more and more of them and society at large are beginning to realise it.

This purpose was reinstalled as a result of WW2. National economies of the belligerent nations were cranked up to full capacity and to all intents and purposes ceased to be capitalism and began to be command economies.

In the United States for example Roosevelt’s New Deal actually began to move away from the economic orthodoxies of the 1930s toward a more organized economic system, this process carried on until the US entered WW2 where it was taken even further.

…the war economy did not stimulate the US private sector it replaced the free market and capitalist investment for profit. Consumption did not restore economic growth as Keynesians argued … instead it was weapons of destruction.

In many industries, corporate executives resisted converting to military production because consumer market share would go to competitors who did not. Conversion thus became a goal of public officials and labour leaders.

Auto companies only fully converted to war production in 1942 and only began substantially contributing to aircraft production by 1943 … From the beginning of preparedness to the peak of war production in 1944, the war economy could not be left to the capitalist sector to deliver.

To organize a war economy and ensure that it produced the goods needed for war, the Federal Government created an array of mobilization agencies, which often purchased goods, closely directed those goods manufacture, and heavily influenced the operation of private companies and whole industries.

The US Treasury introduced the first income tax in US history and war bonds were sold to the public. Income tax payees rose from 4 million in 1939 to 43 million by 1945.[11]

Moreover, all types of technological discoveries were part of this process. Radar, aircraft design, chemicals, pharmaceuticals, the jet engine, plastic surgery for treating aircraft crew who suffered burns. And this in the most capitalist of all countries!

So, what couldn’t possibly be done, was done. A revolution had occurred because it was needed. And where there’s a will…

So Mullan’s arguments for a desperately needed change seem all too plausible and necessary even from a common-sense point of view. He argues:

Escaping from the grip of the Long Depression will not be easy, but it is necessary, and it is possible … there are many barriers to economic health, yet none is insuperable. The biggest challenges are not economic constraints. They lie in the realms of, ideas and imagination, culture and politics.” [12]

Agreed, but the ideological hegemony of the ‘Washington Consensus’ permeates all levels of social being smothering any attempt to break out of the template. From globalization and what are called ‘free-markets’, to hyper-individualism and identity politics, the orthodoxy of the power-elites seems escape proof.

It is what Max Weber called the escape proof ‘Iron Cage’ of bureaucracy, or in our own time the iron cage of the deep-state/media/security/corporate matrix. It seems a lost cause. But I wonder? The late-capitalist monolith may not be as powerful and impregnable as it would have us believe and as it really is. We shall see.

La Lotta Continua

[1] The Spectre at the Feast – Andrew Gamble – p.46

[2] The 1944 Bretton Woods agreement was negotiated in the small town of Bretton Woods in New Hampshire. It was to establish a new global monetary system. It replaced the gold standard with the U.S. dollar as the global currency. By so doing, it established America as the dominant power in the world economy. After the agreement was signed, America was the only country with the ability to print dollars. The agreement created the World Bank and the International Monetary Fund. These U.S.-backed organizations would monitor the new global system.

[3] Fictitious capital: Karl Marx made a simple yet profound discovery in the course of his critique of the contemporary political economy. He pointed out that money is not capital; it is only capital’s representation. It is a real representation only when and till there is continuous creation of capital during the production process. Money unrelated to the production process is fictitious as it is valueless

[4] Creative Destruction – Mullan – p.22

[5] Mullen, Ibid., p112.

[6] The term financialization is generally used as a reference to that part of the economy indicated by the acronym FIRE (Finance, Insurance and Real Estate) and its growing importance in the economy in both qualitative and quantitative terms.

Financialization is a process whereby financial markets, financial institutions, and financial elites gain greater influence over economic policy and economic outcomes. Financialization transforms the functioning of economic systems at both the macro and micro levels. Its principal impacts are to…

(A) elevate the significance of the financial sector relative to the real value -producing sector,
(B) transfer income from the real value-producing sector to the financial sector, and
(C) increase income inequality and contribute to wage stagnation

Since 1970 this part of the economy has grown from almost nothing to 8% of US Gross Domestic Product (GDP). This means that one dollar in every ten is associated with finance. In terms of corporate profits finance’s contribution now represents 40% of all corporate profits in the US. This is a significant figure and, moreover it does not include those overseas earnings of companies whose profits are repatriated to their countries of origin.

Thus, the increasing presence and role of finance in overall economic activity and the increase of profits channelled to the financial sector represent the salient indicators as to what has been termed financialization. It is argued by some that financialization may put the economy at risk of debt deflation and prolonged recession.

Financialization operates through three different conduits: changes in the structure and operation of financial markets, changes in the behaviour of nonfinancial corporations, and changes in economic policy. Countering financialization calls for a multifaceted agenda that

(D) restores policy control over financial markets,
(E) challenges the neoliberal economic policy paradigm encouraged by financialization,
(F) makes corporations responsive to interests of stakeholders other than just financial markets, and
(G) reforms the political process so as to diminish the influence of corporations and wealthy elites.

This ongoing transformative process represents a structural change in the nature of the late capitalist economy. Principally the relationship between the value-creating manufacturing sector and the FIRE sector – that is to say, the creative part of the economy and the distributive part.

In the earlier phase of capitalism, the financial sector was much smaller and served to grease the wheels of industry by providing investment capital and credit obtained from depositors. That symbiotic relationship has now ended, and finance has increasingly taken on a life form of its own relegating manufacturing industry to the second tier.

Financialization is a pattern of accumulation that relies increasingly on profit making through financial channels even for firms which are not financial. General Motors in the US, for example, had a trading and finance sector which was to grow larger than the original auto-vehicle operations.

[7] Mullan op.cit., p.116

[8] Mullan op.cit p.116 footnotes -35, 36, 37.

[9] Mullen, Ibid., p.200

[10] The Global Gamble – Peter Gowan, p.319

[11] The Long Depression – Michael Roberts – pp.56/57

[12] Ibid., Mullan – p.265.

One of the things that used to puzzle me, as a very small boy, was why the day after Christmas was called “Boxing Day”.

Did people in the classic “Dickensian Christmas” – in the era evoked by traditional festive icons like snow, holly and robins – really set aside a day for pugilism? It seemed even less likely that a day of fist-fighting contests formed any part of the first Christmas.

All became clear, of course, when it was explained to the very young me that this was the day on which Christmas “boxes” (gifts) were exchanged. In those times, people drew a distinction between the Christian celebration, on 25th December, and the giving and receiving of presents, on the following day.

This distinction is even more pronounced here in Spain, where the exchange of gifts is deferred to the “Night of the Kings”, two weeks after Christmas itself. The festive season is thus more protracted here than in, say, Britain or America, but it’s also markedly less frenetic, and culminates, in most towns and cities, with a thoroughly enjoyable Night of the Kings carnival.

Depending on where you are and how you look at it, the Christmas holidays end, and something like “normality” resumes, at some point between the 2nd and the 7th of January. My view is that the word “normal”, whose definition has, in economic and broader terms, already been stretched a very long way indeed, might soon lose any realistic meaning. A situation in which the Fed is in the process of injecting at least $1 trillion of newly-created money into the system typifies the extent to which abnormality has already become the norm.

In these circumstances, my immediate aim is to produce a guide, comprehensive but succinct, to the surplus energy interpretation of the economy.

This will cover the energy basis of all economic activity, the critical role played by ECoE (the Energy Cost of Energy), and the true nature of money and credit as an aggregate claim on the output of the ‘real’ (energy) economy.

It will move on to discuss how SEEDS models, interprets and anticipates economic trends, and to set out an overview of where we are in energy-interpreted terms. It might also – if space permits – touch on what this tells us about the false dichotomy between environmental challenges and the customarily-misstated concept of “growth”.

What I aim to do here is to close out the year with some observations about where we are as we head into the 2020s.

The best place to start is with the deterioration in prosperity, and the simultaneous increase in debt, that have already destroyed the credibility of any ‘business as usual’ narrative in the Advanced Economies (AEs).

Starting with Japan back in 1997, and finally reaching Germany in 2018, the prosperity of the average Western person has hit a peak and turned downwards, not in a temporary way, but as part of a secular process which conventional economics cannot recognise, much less explain.

This process is now spreading to the emerging market (EM) economies, most of which can expect to see prior growth in prosperity per person go into reverse within the next three years. The signs of deceleration are already becoming apparent in big EM countries such as China and India.

Thus far, global average prosperity has been on a long plateau, with continuing progress in the EM economies largely offsetting deterioration in the West. Once decline starts in the EM group, though, the pace at which the average person Worldwide becomes poorer can be expected to accelerate.

If deteriorating prosperity is the first point worthy of emphasis, the second is that a relentlessly increasing Energy Cost of Energy (ECoE) is the fundamental cause of this impoverishment process. ECoE reflects that fact that, within any given quantity of energy accessed for use, a proportion is always consumed in the access process.

ECoE is a direct deduction from the aggregate quantity of energy available, which means that surplus (ex-ECoE) energy is the source of all economic activity other than the supply of energy itself.

In other words, prosperity is a function of surplus energy.

In the past, widening geographic reach, economies of scale and technological advance drove ECoEs downwards, to a low-point (of between 1% and 2%) in the immediate post-1945 decades. The subsequent rise in trend ECoEs has been driven by the fact that, with the benefits of reach and scale exhausted, depletion has now become the primary driver of ECoEs in the mature fossil fuels industries which continue to provide four-fifths of global energy supply. The role of technology has been re-cast as a process which can do no more than blunt the rate at which ECoEs are rising.

By 2000, when World trend ECoE had reached 4.5%, Advanced Economies were already starting to face an insurmountable obstacle to further growth. Prosperity turned down in Japan from 1997 (when ECoE there was 4.4%), and has been declining in America since 2000 (4.5%).

SEEDS studies demonstrate that prosperity in advanced Western countries turns down once ECoE enters a band between 3.5% and 5%. EM economies, by virtue of their lesser complexity, are less ECoE-sensitive, with prosperity going into reverse once ECoEs enter a range between 8% and 10%. Ominously, ECoE has now reached 8.2% in China, 10.0% in India and 8.1% in the EM countries as a group.

The key point about rising ECoEs is that there is nothing we can do about it. This in turn means that global prosperity has entered de-growth. The idea that we can somehow “decouple” economic activity from the use of energy is utter wishful thinking – not surprisingly, because the economy, after all, is an energy system.

This presents us with a clear choice between obfuscation and denial, on the one hand, and acceptance and accommodation, on the other. Our present position is one of ‘denial by default’, in that the decision-making process continues to be based on the false paradigm that ‘the economy is money’, and that energy is “just another input”.

This leads us to the third salient point, which is financial unsustainability.

Properly understood, money functions as a claim on the output of the ‘real’, energy-driven economy. Creating more monetary claims, without a corresponding increase in the goods and services against which these claims can be exercised, creates a gap which, in SEEDS terminology, is called “excess claims”.

Since these “excess” claims cannot, by definition, be honoured, then they must be destroyed. There are various ways in which this “claims destruction” can happen, but these mechanisms can loosely be divided into “hard” default (the repudiation of claims) or “soft” default (where claims are met, but in greatly devalued money).

These processes mean that “value destruction” has become an inevitability. This may involve waves of asset market crashes and defaults, or the creation (through reckless monetary behaviour) of hyperinflation.

The likelihood is that it’s going to involve a combination of both.

These issues take us to the fourth critical point, which is the threat to the environment. Let’s be clear that this threat extends far beyond the issue of climate change, into many other areas, which range from pollution and ecological damage to the dwindling availability of essentials such as water and food.

Conversion to renewable energy (RE) isn’t the solution to these problems, if by “solution” we mean “an alternative which can sustain our current level of prosperity”. RE, despite its many merits, isn’t going to replace the surplus energy that we’ve derived hitherto from fossil fuels. RE might well be part of the solution, but only if we take on board the inevitability of degrowth.

This brings me to my final point, which is choice. For well over two centuries we’ve been accustomed to an energy context which has been so favourable that it has given us the ability both to improve personal prosperity and to extend those benefits across a rapidly increasing population.

With this favourable context fading into the past, we have to find answers to questions that we’ve never had to ask ourselves until now.

The faculty of choice requires knowledge of the options, and this we cannot have whilst we persist in the delusion that “the economy is a financial system”. It isn’t, it never has been, and it never can be – but our ignorance about this fundamental point has been one of the many luxuries afforded to us by the largesse of fossil fuels.

This seems pretty depressing fare to put before readers at the start of the festive season. The compensating thought has to be that the connection between prosperity and happiness has always been a falsehood.

A lack of sufficiency can, and does, cause misery – but an excess of it has never been a guarantee of contentment.

In the coming days, Christians will recall with renewed force that Jesus was born in a humble stable. He went on to throw the money-changers out of the Temple, and to instruct people to lay up their treasure, not on Earth, but in Heaven. I hope it will be taken in the right spirit if I add that He never earned an MBA, or ran a hedge fund.

The single most important challenge that we face isn’t deteriorating prosperity, or the looming probability of a financial catastrophe. Rather, the great challenge is that of how to jettison the false notion that material wealth and happiness are coterminous.

‘Value’ may indeed be heading for mass destruction.

But values are indestructible.

In all the press coverage of the “the SNC-Lavalin affair,” not enough attention has been paid to the company’s involvement in Site C – the contentious $11 billion dam being constructed in B.C.’s Peace River valley.

The Liberals say that any pressure they put on Jody Wilson-Raybould to rubber-stamp a “deferred prosecution agreement” for SNC-Lavalin was to protect jobs at the company. But the pressure may have been to protect something much bigger: the Liberals’ vision for Canada’s future. Site C epitomises that vision.

The “Many Lives” of Site C

Birthed in 1959 on the drawing boards of the U.S. Army Corps of Engineers and BC Electric (then owned by Montreal-based Power Corp), the Site C dam has been declared dead, then alive, then dead again several times over the next five decades until 2010, when BC Premier Gordon Campbell announced that Site C would proceed. [1]

Tracking SNC-Lavalin’s involvement in Site C during recent years has been difficult, but Charlie Smith, editor of The Georgia Straight, has filled in some of the missing information.

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Nuclear power costs too much

U.S. nuclear power plants are old and in decline. By 2030, U.S. nuclear power generation might be the source of just 10% of electricity, half of production now, because 38 reactors producing a third of nuclear power are past their 40-year life span, and another 33 reactors producing a third of nuclear power are over 30 years old. Although some will have their licenses extended, 37 reactors that produce half of nuclear power are at risk of closing because of economics, breakdowns, unreliability, long outages, safety, and expensive post-Fukushima retrofits (Cooper 2013. Nuclear power is too expensive, 37 costly reactors predicted to shut down and A third of Nuclear Reactors are going to die of old age in the next 10-20 years.

New reactors are not being built because it takes years to get permits and $8.5–$20 billion in capital must be raised for a new 3400 MW nuclear power plant (O’Grady, E. 2008. Luminant seeks new reactor. London: Reuters.). This is almost impossible since a safer 3400 MW gas plant can be built for $2.5 billion in half the time. What utility wants to spend billions of dollars and wait a decade before a penny of revenue and a watt of electricity is generated?

In the USA there are 104 nuclear plants (largely constructed in the 1970s and 1980s) contributing 19% of our electricity. Even if all operating plants over 40 years receive renewals to operate for 60 years, starting in 2028 it’s unlikely they can be extended another 20 years, so by 2050 nearly all nuclear plants will be out of business.

Joe Romm “The Nukes of Hazard: One Year After Fukushima, Nuclear Power Remains Too Costly To Be A Major Climate Solution” explains in detail why nuclear power is too expensive, such as:

• New nuclear reactors are expensive. Recent cost estimates for individual new plants have exceeded $5 billion (for example, see Scroggs, 2008; Moody’s Investor’s Service, 2008).
• New reactors are intrinsically expensive because they must be able to withstand virtually any risk that we can imagine, including human error and major disasters
• Based on a 2007 Keystone report, we’d need to add an average of 17 plants each year, while building an average of 9 plants a year to replace those that will be retired, for a total of one nuclear plant every two weeks for four decades — plus 10 Yucca Mountains to store the waste
• Before 2007, price estimates of $4000/kw for new U.S. nukes were common, but by October 2007 Moody’s Investors Service report, “New Nuclear Generation in the United States,” concluded, “Moody’s believes the all-in cost of a nuclear generating facility could come in at between $5,000 – $6,000/kw.”
• That same month, Florida Power and Light, “a leader in nuclear power generation,” presented its detailed cost estimate for new nukes to the Florida Public Service Commission. It concluded that two units totaling 2,200 megawatts would cost from $5,500 to $8,100 per kilowatt – $12 billion to $18 billion total!
• In 2008, Progress Energy informed state regulators that the twin 1,100-megawatt plants it intended to build in Florida would cost $14 billion, which “triples estimates the utility offered little more than a year ago.” That would be more than $6,400 a kilowatt. (And that didn’t even count the 200-mile $3 billion transmission system utility needs, which would bring the price up to a staggering $7,700 a kilowatt).

Extract from Is Nuclear Power Our Energy Future, Or in a Death Spiral? March 6th, 2016, By Dave Levitan, Ensia:

In general, the more experience accumulated with a given technology, the less it costs to build. This has been dramatically illustrated with the falling costs of wind and solar power. Nuclear, however has bucked the trend, instead demonstrating a sort of “negative learning curve” over time.

According to the Union of Concerned Scientists, the actual costs of 75 of the first nuclear reactors built in the U.S. ran over initial estimates by more than 200 percent. More recently, costs have continued to balloon. Again according to UCS, the price tag for a new nuclear power plant jumped from between US$2 billion and US$4 billion in 2002 all the way US$9 billion in 2008. Put another way, the price shot from below US$2,000 per kilowatt in the early 2000s up to as high as US$8,000 per kilowatt by 2008.

Steve Clemmer, the director of energy research and analysis at UCS, doesn’t see this trend changing. “I’m not seeing much evidence that we’ll see the types of cost reductions [proponents are] talking about. I’m very skeptical about it — great if it happens, but I’m not seeing it,” he says.

Some projects in the U.S. seem to face delays and overruns at every turn. In September 2015, a South Carolina effort to build two new reactors at an existing plant was delayed for three years. In Georgia, a January 2015 filing by plant owner Southern Co. said that its additional two reactors would jump by US$700 million in cost and take an extra 18 months to build. These problems have a number of root causes, from licensing delays to simple construction errors, and no simple solution to the issue is likely to be found.

In Europe the situation is similar, with a couple of particularly egregious examples casting a pall over the industry. Construction began for a new reactor at the Finnish Olkiluoto 3 plant in 2005 but won’t finish until 2018, nine years late and more than US$5 billion over budget. A reactor in France, where nuclear is the primary source of power, is six years behind schedule and more than twice as expensive as projected.

“The history of 60 years or more of reactor building offers no evidence that costs will come down,” Ramana says. “As nuclear technology has matured costs have increased, and all the present indications are that this trend will continue.”

Nuclear plants require huge grid systems, since they’re far from energy consumers. The Financial Times estimates that would require ten thousand billion dollars be invested world-wide in electric power systems over the next 30 years.

In summary, investors aren’t going to invest in new reactors because:

• of the billions in liability after a meltdown or accident
• there may only be enough uranium left to power existing plants
• the cost per plant ties up capital too long (it can take 10 billion dollars over 10 years to build a nuclear power plant)
• the costs of decommissioning are very high
• properly dealing with waste is expensive
• There is no place to put waste — in 2009 Secretary of Energy Chu shut down Yucca mountain and there is no replacement in sight.

Nor will the USA government pay for the nuclear reactors given that public opinion is against that — 72% said no (in E&E news), they weren’t willing for the government to pay for nuclear power reactors through billions of dollars in new federal loan guarantees for new reactors.

Cembalest, an analyst at J.P. Morgan, wrote “In some ways, nuclears goose was cooked by 1992, when the cost of building a 1 GW plant rose by a factor of 5 (in real terms) from 1972” (Cembalest).

Further topics:

• Nuclear power depends on fossil fuels to exist (Ahmed 2017) ...
• Peak Uranium ...
• Nuclear power is Way too Dangerous ...
• Nuclear power plants take too long to build ...
• A crisis will harden public opinion against building new Nuclear Power Plants ...
• EROEI and decommissioning ...
• Scale ...
• Staffing ...
• Nuclear Proliferation & terrorism targets ...
• Water ...
• NIMBYism ...
• No good way to store the energy ...
• Ramping up and down quickly to balance solar & wind damages nuclear power plants ...
• Breeder reactors. You’d need 24,000 Breeder Reactors, each one a potential nuclear bomb (Mesarovic) ...

Elizabeth Warren has succeeded, I think, in framing an argument as close as anyone is going to get (in the present election cycle) to the progressive position of MMT. Warren acknowledges that she’s proposing goals and undertakings that will “cost” a lot of money. She further acknowledges that everyone asks: “How are you going to pay for it?” And she gives a very specific and simple answer: an “ultra-millionaire tax”—which she details as “two-cents on every dollar of income over $50 million.” She then goes on to list what those “two-cents” will accomplish: The cancellation of college debt; free two-year college education; universal pre-school day-care…etc.

The two-cent message is a powerful framing, I believe, because it gives people “intellectual permission” to support a significant increase in federal spending to accomplish specifically targeted, widely held social goals. By “intellectual permission” I mean this: Even if you remain skeptical and unbelieving of MMT’s message about modern fiat-currency, Warren’s two-cent formula is reasonable because (a) the government won’t be “borrowing” dollars for the spending—your biggest fear!—and (b) because the people being taxed for the spending can hardly claim any harm or hardship: one day they have $50 million in their bank account—way more than they need for even the most extravagant life-style—and the next day they have $49 million. Are they even going to notice?

While MMT will want to explain that federal spending for Warren’s proposed goals does NOT require a tax increase on anyone at all, I believe at this pivotal moment advocates would be better served to momentarily set those arguments aside and applaud those aspects of the two-cent message that are, fundamentally, compatible with MMT goals:

1. The two-cent message focuses on the federal government paying American citizens to undertake and accomplish real, specific objectives for improving the well-being of the whole society. Warren’s framing isn’t focused on “taxing the rich” but rather on accomplishing specific objectives for everyone else. This aligns with the fundamental logic of MMT: a currency-issuing sovereign government can and should pay its citizens to undertake and accomplish those things the collective well-being requires.
2. While MMT argues that tax dollars are not required to fund federal spending, MMT does argue that taxes are necessary to drive a sovereign fiat-currency—and that since taxes are necessary, the question to be asked is: Can taxes serve purposes other than funding federal spending? One purpose I believe MMT would agree with is using taxes to put some brakes on the astonishing and spiraling wealth imbalance that is straining the stability of America’s socio-economic structure. So, on that score as well, Warren’s two-cent message is a fit with MMT.

Here’s another reason to get behind the two-cent message: It may well be that MMT can never, by logic, reasoning, and relentless argument alone, succeed in altering the deeply ingrained and habitual mental models of the mainstream understanding of “money.” Another path to that end might be required, namely, for Americans first to actually experience, by whatever means necessary, the phenomenon of their federal government spending a large number of dollars to pay American citizens to accomplish a specific collective good—and seeing the benefit in that. (It’s been a long time, I believe, since we’ve had that kind of experience.) The two-cent message might be a strategy for allowing it to happen.

What’s critical, it should be emphasized, is not the spending the two-cent message makes possible, but the results. This is why Warren’s list of goals is so important. First items on the agenda should be highly visible, on-goingly newsworthy, and beneficial to both lower and middle-class families. (My vote, in this regard, is the arena of education and child-rearing: free pre-school day-care programs, forgiveness of college debt, and free college or technical training.)

In the long run, if the targeted federal spending results in real benefits that large numbers of American voters can see and experience, the political dialog—assisted by the continued MMT push to redefine the mainstream understanding of money—can transition from being focused on “where will the dollars come from” to “what are we going to accomplish”? The two-cent message, then, will transition as well: it will no longer be about paying for federal spending, but will be about creating a more equitable society. So Warren’s message might be the best strategy MMT can hope to see in the 2020 elections—and seeing her elected the best of possible outcomes.

HSBC are in the news for attempting to suppress a report into money laundering. This is no surprise as the company’s entire history, right up to the present day, is one of financing drug cartels.

HSBC are not known for their transparency. Britain’s wealthiest company, with a stock market valuation of $215billion, has enough advertising muscle in the British press to ensure that critical investigative pieces have been spiked in both the Sunday Times and the Daily Telegraph – in the latter case, causing that newspaper’s chief political commentator to resign in protest. Then last year, the bank’s friends in the Swiss government sentenced the whistleblower who exposed the bank’s massive facilitation of tax avoidance to five years in prison, the longest sentence ever demanded by the country’s public ministry for a banking data theft case. And back in 2011 HSBC was revealed to be the UK financial sector’s most enthusiastic user of tax havens, with no less than 556 subsidiary companies based in offshore jurisdictions. Tax havens, as leading expert Nicholas Shaxson notes, “are characterised by secrecy…what they are fundamentally about is escape – escape from the rules, laws, regulations of jurisdictions elsewhere. You move your money offshore and you can then escape the laws that you don’t like”. This is clearly an institution with much to hide.

So it should not have surprised anybody when, earlier this month, it was revealed that HSBC are now seeking to block the publication of a report into HSBC’s compliance with anti-money laundering laws. After all, it was only three years ago that HSBC were hit with a massive $1.9 billion fine for laundering around $1 billion on behalf of some of the world’s most vicious gangsters. According to US assistant attorney general Lanny Breuer, “from 2006 to 2010, the Sinaloa cartel in Mexico, the Norte del Valle cartel in Colombia, and other drug traffickers laundered at least $881 million in illegal narcotics trafficking proceeds through HSBC Bank USA. These traffickers didn’t have to try very hard.” This is putting it mildly; in fact HSBC went to great lengths to facilitate the drug cartels. As Matt Taibbi wrote in his definitive piece on the scandal, HSBC “ran a preposterous offshore operation in Mexico that allowed anyone to walk into any HSBC Mexico branch and open a US-dollar account (HSBC Mexico accounts had to be in pesos) via a so-called ‘Cayman Islands branch’ of HSBC Mexico. The evidence suggests customers barely had to submit a real name and address, much less explain the legitimate origins of their deposits.” The bank did have a system in place to identify ‘suspicious activity’; but it routinely flouted it. As Nafeez Ahmed has written, “By 2010, HSBC had racked up a backlog of 17,000 suspicious activity alerts that it had simply ignored. Yet the bank’s standard response when it received its next government cease-and-desist order was simply to ‘clear’ the alerts, and give assurances that everything was fine. According to former HSBC compliance officer and whistleblower Everett Stern, the bank’s executives were deliberately ignoring and violating anti-money laundering regulations.” Taibbi wrote that “In one four-year period between 2006 and 2009, an astonishing $200 trillion in wire transfers (including from high risk countries like Mexico) went through without any monitoring at all. The bank also failed to do due diligence on the purchase of an incredible $9 billion in physical US dollars from Mexico and played a key role in the so-called Black Market Peso Exchange, which allowed drug cartels in both Mexico and Colombia to convert US dollars from drug sales into pesos to be used back home. Drug agents discovered that dealers in Mexico were building special cash boxes to fit the precise dimensions of HSBC teller windows”. HSBC’s customers – cartels like Colombia’s Norte del Valle and Mexico’s Sinaloa – were at the time involved in mass murder and abuse of the most psychopathic variety, including beheadings and torture videos. The official death toll from these groups in Mexico alone is 83,000 over the past decade. That they have the capacity to carry out violence on such a massive scale is the result of the massive financial growth of their industry. And that growth was wilfully facilitated by HSBC.

Given that this has all now been established in court, were the rule of law actually applied, the bank’s Charter would have been revoked, and its directors (including former UK Trade Minister Stephen Green) would now be in jail. The reason this did not happen is that the sheer size of HSBC’s operations make it too strategically important to close down. “Had the US authorities decided to press charges”, explained Assistant Attorney General Lenny Breuer, “HSBC would almost certainly have lost its banking licence in the US, the future of the institution would have been under threat and the entire banking system would have been destabilised.” That is to say, HSBC’s wealth and power put it officially above the law. Even its $1.9 billion fine, massive though it might seem, amounted to a mere five weeks profit for the bank.

But all of this is entirely in keeping for a bank whose roots lie precisely in illegality, drug trading and massive violence.

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Little wonder, then, that wherever you look – from Afghanistan, to Kosovo, to Libya, to Mexico to Colombia, and even ‘at home’ – the policies of the world’s leading financial centres serve to boost the production, distribution and profitability of the drugs trade. And little wonder that HSBC are still keeping their ‘money laundering checks’ to themselves.

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Global finance appears to be overrun by what Susan Strange called ‘mad money’—money backed by little real collateral but having a very real capacity to increase indebtedness around the world. This is something that would need to be brought under political control and accountability in order for anything approaching justice to be possible in relation to global finance. The issue is about who controls the monetary system. Money is a crucial public good, and yet it is not under public, political, control.

With an increasingly globalized financial system that is expanding in scale and power relative to institutions of politics, economics, and law, there has developed, largely unannounced and entirely unaccountably as far as the global public is concerned, what amounts to a privatized global constitution. A set of binding legal arrangements that bypass and transcend sovereign jurisdictions and even other aspects of international law has been building up in support of the global financial system. Its transnational character is so strong that even at times of war between states, the close cooperation of its members is maintained.

The fact that financial relationships can be maintained even during times of war demonstrates that human beings have collaborative concerns that rise above the conflicts that can occur. It also serves to point up a bitter irony. Of the billions of human beings on this planet it is doubtful that very many actually desire ever to have a war, but few have any opportunity to ‘rise above’ a conflict if it is generated in their vicinity or in their name. The further a person is from the apex of the financial system, the less chance they have of escaping the effects of war when it comes. They are also the people with the least power to decide whether or when there should be a war in the first place.

A fundamental problem is that the profit-driven global financial system geared to the interests of owners of capital has been organized more quickly and completely as a normative framework for global order than any political arrangements aimed at promoting the public interest. It runs counter to the imperatives of seeking justice, ecologically sustainable productivity and peace. Its radical transformation is therefore evidently required. Because the financial system has developed something akin to a privatized global constitution, to secure conditions of social justice for the people of the world and ecological sustainability for the planet requires the constitution of a global normative order guided by public and political decision-making. The achievement of a publicly accountable and responsive constitutional order that is superordinate to the organizations of finance, as these have developed in the service of a global capitalist economy, would amount to a revolutionary transformation.

ECONOMICS, THE ENVIRONMENT AND THE PROBABILITY OF ‘DE-GROWTH’

One of the clichés much loved by business leaders and others is “blue sky thinking”. An implication of this term, it seems to me, is that there’s an infinity of possibility. Although the mainstream press has, in the past, dubbed me “Dr Gloom” and “Terrifying Tim”, I don’t discount the concept of infinite possibility. I’m an incurable optimist – when I’m not looking at the economic outlook, anyway.

However positive you are, though, if you set out on a lengthy expedition, it’s as well to take some wet weather clothing with you, because blue skies can turn dark grey pretty quickly. ‘Hoping for the best but preparing for the worst’ seems a pretty prudent way to think.

Before we address some of the financial, economic and broader issues which might darken our skies, I’d like to draw your attention to an important distinction, which is that ‘situations’ and ‘outcomes’ are different things. ‘Situations’ are circumstances calling for decisions, but, in themselves, they generally contain a multiplicity of possible results. ‘Outcomes’ are determined by the responses made to any particular set of ‘situations’.

This is important, because a lot of what I’m going to discuss here concerns ‘situations’. Many of these look pretty daunting, but the point about a multiplicity of possible ‘outcomes’ remains critical. Bad decisions turn difficult situations into malign outcomes, but wise choices can, at the very least, preclude the worst, and can even produce good outcomes from unpromising situations.

The gloomy non-science

Economics has been called “the gloomy science”. In fact, economics – as currently practised – may or may not be “gloomy”, but it isn’t a “science”. The fundamental flaw with conventional economics is that it assumes that the economy is a financial system, to be measured in dollars, pounds, euros and yen.

This, in reality, is a huge misconception. Throughout history, systems of money have come and gone. A collector might well buy a Roman coin from you, but you couldn’t use it in a café or a shop. Money is simply a human artefact, often of temporary duration, which we can create or destroy at will.

The purpose of money is the facilitation of exchange, something more convenient than barter. Its other often-claimed functions (as “a store of value” and a “unit of account”) are flawed at best. The “store of value” concept is particularly unconvincing. If somebody in a Western country dug up some banknotes buried in the garden by his or her great-grandmother, their purchasing power would be dramatically lower than when the biscuit-tin containing them was interred between the cabbages and the carrots. Measured using the broad-basis GDP deflator, the US dollar has lost 62% of its purchasing power since 1980 alone, and the pound has shed 71% of its value. Moreover, many countries change their notes and coins at frequent intervals, invalidating older versions.

Money does have important characteristics – which we’ll come to – but it’s not in any sense coterminous with a ‘real’ economy that consists of goods and services. All of these are products of the use of energy. Once you grasp this fundamental point, a ‘science’ of economics becomes a possibility, but as a branch of the laws of thermodynamics, and not, as now, as ‘the study of money’.

The energy fundamentals

As regular readers will know, whenever energy is accessed, some of that energy is always consumed in the access process. This divides the totality of energy supply into two streams – the consumed component is known here as ECoE (the Energy Cost of Energy), and the remainder is surplus energy. Because this surplus energy powers all forms of economic activity other than the supply of energy itself, it is the determinant of prosperity.

The SEEDS model calculates that, over the last twenty years, global trend ECoE has more than doubled, from 3.6% in 1998 to 7.9% last year. That’s already taken a huge bite out of our ability to grow our prosperity, and there’s no likelihood of ECoE levelling out in the foreseeable future, let alone turning back downwards.

The ECoEs of renewables are falling, just as those of fossil fuels are rising exponentially. This is a topic that we’ve discussed before, and will undoubtedly return to in the future, but it seems unlikely that a full transition to renewables, utterly vital though it is, is going to stabilise overall ECoE at much below about 10%. For context, back in the 1960s, when real economic growth was robust (and when petroleum consumption was growing by as much as 8% annually, whilst car ownership was expanding rapidly), world trend ECoE was less than 2%.

There are two reasons – one obvious, one perhaps less so – why an understanding of ECoE is critical to the environmental debate.

Obviously, if we continue to tie our economic fortunes to fossil fuels, the relentless rise in their ECoEs is going to carry on making us poorer, so there’s a compelling economic (as well as environmental) case for transition to renewables.

Less obviously, whilst prosperity is a function of surplus (aggregate less-ECoE) energy, climate-harming emissions are tied to total (surplus plus ECoE) energy. Essentially, we need to reduce our emissions from fossil fuels at a rate which at least matches the rate at which their ECoEs are rising if we’re to stand any chance at all of overcoming climate risk.

It’s a dispiriting thought that, whilst energy-based economics could make a powerful contribution to the case for environmental action, conventional, money-fixated economics can only interact negatively, by telling us how much it’s going to “cost”. Unfortunately, mainstream economics can’t really tell us the cost of not transitioning.

These “costs”, to be sure, are dauntingly large numbers. IRENA – the International Renewable Energy Agency – has costed transition at between $95 trillion and $110tn. These equate to between 619 and 721 Apollo programmes at the current-equivalent cost ($153bn) of putting a man on the Moon.

Moreover, the Americans of the 1960s had a choice about whether or not to fund a space programme. In economic as well as in environmental terms, there is no choice at all about our imperative need to transition.

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First, there is a terrific YouTube channel, Mentour Pilot, that I watch, which is hosted by a current European 737 captain. It is not ‘sound bite video’ and is an investment in time but it is thorough and he is a very good presenter. I will try to link in some of his videos.

I wrote this piece for Facebook, a few weeks back. I thought it might be a useful waypoint for the journey the commercial aircraft world is going on, for the rest of this year.

The first Boeing success in passenger jets was the 707, in the late 50s. That was followed by the 727, once ubiquitous as a short haul airliner. The 737 followed in the late 60s. The point here is that all three jets had essentially the same cross section. The 737 had the same engines as the 727 but only two rather than three. They were models of the legendary JT8D, much longer than wide. This allowed for shorter landing gear.

The 737 is the most popular airliner in history. There is one unique feature involving the landing gear. The main gear wheels do not have an outer cover when retracted. The tires are exposed, just like a P-40 Warhawk from WW2. This is due to a design decision that was driven by a predicted need to operate from small airports with few resources. It was done to keep the jet low while on the ground, for loading and maintenance,and it did not leave room for the typical fuselage bulge (fairing) for wheel covers.

So far, 1950s cross section and low to the ground design, assisted by a jet engine that did not have a big fan in front.

The 737-400 got big fan engines. The nacelles (engine covers) are actually flat on the bottom, rather the normal circular shape, to keep the same landing gear and low profile. It works but looks a tad odd. It was a first of other compromises to come.

By 1984, Airbus had designed and began selling the main competitor to the 737, the A319/A320/A321 series. Designed later, from a clean sheet, the fuselage profile is wider. (I prefer this plane as the seats are side to side roomier.) Jet Blue is a big customer. There is a higher stance and the wheels are fully enclosed when they retract. Unlike the 737, there was room for larger, more efficient engines without resorting to tricks with the nacelles or engine placement. The cockpit is more modern. They are outselling the 737, which also still continued to sell very well. The 737 is considered to be at the end of its possible development. The A320 series is clearly not. After several generations of both planes, each sporting incremental improvements in engines and avionics, a new emphasis on even larger, more fuel efficient engines arrived.

As a side note, we enthusiasts kept wondering when or if Boeing would replace the 737 with an airplane even more modern than the Airbus competitors. Like wider, with an up to date cockpit and avionics and lighter structures like the fabulous 777 and 787. The discussion was that the Max was one iteration too much. But they sell all they can make without the unbelievable investment a new airplane would take. It is found money, living on an investment made in the late 60s. Important to understand that the 737 is a huge cash cow, funding much of the rest of the commercial division, including the development of new aircraft. Any drop in sales is a serious matter. The A320 series has the same status with Airbus.

The YouTube channel,  Mentour Pilot, explains the technicality of the changes made to the 737 to get to the Max version and what the MCAS system is. I will try to include a link below. The Max has new engines that are so much larger than the original JT8D, that they had to move them forward and upward to make them fit. It changed the center of gravity and gave a pronounced pitch up dynamic when the now more powerful thrust was applied. Excessive pitch up can be very bad, like get into a low altitude stall and crash the jet bad. At too high an nose angle the wings lose lift. No lift, no flying, just a plane dropping from the sky. And the pilot asks for that increased thrust at take off and climb, down low with little altitude to work with.

A serious development factor with the Max was to get pilots to be able to transfer from the prior generations of 737 to the Max with as minimal a training program as possible. A very big selling point. The competitor jet is more comfortable (IMO), a more modern design so you need a competitive edge. The MCAS system was the key. It allegedly made the Max fly like the older generations, preventing the higher thrust from causing a uncontrollable pitch up. One pilot stated that his transition training was 60 minutes on an IPad. Pilots stated they were not aware it was even there, running the whole time. There is no way to “turn it off”.

Things get real technical at this point but the basic system relies on a correct read from a single pitch sensor or AOA (angle of attack) sensor. The jet has two, looking like small vanes on either side of the fuselage, just below the cockpit. Focus on the fact that the safest version of MCAS, using both sensors rather than one, cost more money. And so many airlines did not order it.

Now the story starts going very badly. If the one sensor the basic system is looking at goes bad, MCAS does not know the actual nose pitch of the jet and starts to take over trying to fix a problem that isn’t there. The pilots can not turn it off. As stated, most didn’t even know it was there. Without the sensor working properly it is going to do the wrong things. In Lion Air, the sensor and system was repeatedly found faulty on prior flights. In the Ethiopian crash, there is evidence that a bird strike knocked it off the aircraft. The only thing the pilots can do is turn off the electric motor that controls the horizontal stabilizer (sets pitch or nose angle) and crank the stabilizer by hand. Again, watch the Mentour Pilot video on this.

There is evidence that pilots were reporting issues prior to the Lion Air crash and they absolutely confronted Boeing after it. I have to tell you that this reminds me of the moment after the Challenger accident when we were informed of the outcome of the Rodgers Report and there was undeniable evidence that appropriately placed people knew the infamous O-Rings were leaking all along and were worse as the temperature got colder. We were gutted.

With the Shuttle, IMO, people were allowed to redefine their jobs as “making it  fly”, not making it fly safely. The word safely got crushed out. I believe Boeing had all the evidence needed to stop this as early as a year ago, if not further back. Corporate cultures, NASA included, create lethal environments for people who scream STOP! See the Columbia accident for a repeat at NASA. It was bad enough that action wasn’t taken before the Lion Air accident. I fully believe it’s absolutely inexcusable after.

It is not a silly question to ask if Boeing Commercial Aircraft will survive this event. No Lockheed, Douglas or Convair airliners are being manufactured these days. One thing money can’t buy is trust. Airlines are cancelling 737 orders. Airbus is selling large numbers of the A320 family and has the financial backing of European countries. The A380 failure (enormous investment and far too few sales) could have taken out a company but not  a group of nations. China has a need for some 7,000 regional planes. They are working hard to develop and make their own competent aircraft and to compete internationally. They are a nation, not a private company that has to make a profit.

I (layperson that I am), do not think Boeing Commercial Aircraft will disappear but it may lose its peer status with Airbus. They will fix the Max. That being said, there are serious issues in resolving the correct training to give to pilots. The sales edge of very little training is gone. There are reports that 737 Max simulators, a very big deal in training pilots, need faults corrected in their software. Getting this model back to flying was thought to be a matter of a month or two. Now August may be the earliest qnd the Paris Air Show, where many new sales are usually announced, is nearly at hand.

Boeing has been trying to make a decision on the all new 797, which would replace 757s and 767s now ageing out of usefulness. The market is estimated at 4,000 aircraft on a global basis. Airbus is pitching an A321 variant as the right answer. Their more modern aircraft, the A321, still has room for development. Boeing has to fund, develop, and launch the 797 aircraft. At that point they will be still left with no replacement for the 737.

There is a saying that a commercial aircraft firm bets the company when developing a new airliner. Did Boeing bet the company on not developing a 737 replacement? It looks like we may find out in the next few years.

Youtube - Why does the Boeing 737MAX 8 need MCAS in the first place?

Youtube - Five questions answered about the Boeing 737MAX

Youtube - How 737 MAX 8’s design history could have influenced the Ethiopian Airlines crash

Money doesn’t grow on trees, and although people can make money out of trees, they cannot make trees out of money. This much may seem platitudinous, but it is worth keeping in mind.

What is true of trees is true of the natural world as a whole, including the human beings that are part of it. Nature is real; money is an abstraction. If money seems real that is because our institutions and practices are so deeply premised on beliefs in it. There is an important sense in which those institutionalized beliefs – in crediting it with a certain value – make money real; but it is not real in the way the natural world is real. If a bank goes bust, if a whole economy crashes, the social upheaval that follows may be immense, but life goes on – people will pick themselves up and start again (and some people, meanwhile, will likely have found a way to profit from it!). By contrast, if a species goes extinct, if an ecosystem collapses, then there is no prospect – certainly not on human timescales – of a recovery. The threat of extinction to our own species is the ultimate threat.

Extinction Rebellion has given publicity to critically important concerns of our time – the ecological crises as exemplified by dangerous climate change and biodiversity loss. But it also gives rise to some perplexity.

A circumstantial puzzle is how an apparently spontaneous social movement of protest comes to have the energetic backing of big business interests and even to receive notable support from influential sections of the corporate media.

On deeper reflection, what does it even mean to stage a rebellion against extinction? Rebellions usually involve a group of people rising up to protest or overthrow another group that wields unjust or illegitimate power over them. How can you ‘rebel’ against extinction? It is not as if you can choose to disobey the laws of nature.

The website that asserts the copyright © Extinction Rebellion, states certain demands directed at government. The moral clarity of their seemingly simple message, however, could be deceptive.

Two key demands are: “halt biodiversity loss and reduce greenhouse gas emissions to net zero by 2025.”

These may sound like goals that any ethically rational person could wholeheartedly endorse, and yet, as a recent critical study by Cory Morningstar has demonstrated, what their pursuit entails does not necessarily correspond to what people might imagine.

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Rebellion is in the air. On November 17 of last year, the “Gilet Jaunes” movement spontaneously erupted in France, in reaction to a planned tax on diesel fuel. Over 300,000 people took part in demonstrations across France, with actions ranging from blocking roundabouts to vandalizing banks, shops and luxury vehicles. As I write these words, the movement is still holding demonstrations across France every Saturday.

Almost as spontaneously, a youth movement calling itself Extinction Rebellion came into being in the UK, and held its first “Rebellion Day” on the same day that the Gilet Jaunes first shook France. This initial action, which blocked London’s five main bridges, was much smaller and lower key than the Gilet Jaunes protests, but by April 2019, non-violent civil disobedience protests brought large sections of London to a halt, and resulted in the arrest of over 1,000 demonstrators.

These movements are superficially diametrically opposed: one was provoked by measures to address climate change, the other is demanding action on climate change. However, they are united by one key detail. The policy action that the Gilet Jaunes oppose, and the policy inaction that Extinction Rebellion deride, are both the products of economists—and most specifically, the economist who was awarded the Nobel Prize in Economics for his work on Climate Change, William Nordhaus.

The Gilet Jaunes rebellion was sparked by the proposed introduction of a carbon tax on diesel fuel—and this is precisely the method that Nordhaus and most economists recommend to use to combat Climate Change.

Extinction Rebellion was sparked by the failure of policymakers to do anything substantive to prevent Climate Change, and are demanding policies that would cause net CO2 emissions to fall to zero by 2025:

Government must act now to halt biodiversity loss and reduce greenhouse gas emissions to net zero by 2025…
The truth is that the climate and ecological emergency poses an unprecedented existential threat to humanity and all life on Earth.
Rapid, unprecedented changes to many aspects of human life – energy use and supply, transport, farming and food supply, and so on – are now needed to avert global climate and ecological catastrophe.
Globally governments have been unwilling to tackle a problem of this magnitude. In 2015, the UN Paris Agreement on Climate Change was signed by world leaders to limit global warming to 2°C above pre-industrial levels. However, scientific evidence now tells us that our leaders have not taken enough action and we are still on a path to reach 3-4°C, which will be catastrophic to all life on Earth. https://rebellion.earth/the-truth/demands/, May 3rd 2019

Nordhaus agrees that man-made Climate Change is happening—he is not a “Climate Change Denialist”. However, his research actually encourages policymakers not to take the action that Extinction Rebellion demands, or anything like it. He instead recommends managing Global Warming so that the Earth’s temperature will stabilize at 4 degrees above pre-industrial levels in the mid-22nd century.

Nordhaus also argued that the policy Extinction Rebellion recommends, of restrict Global Warming to 1.5 degrees—even if it is done over the next century, rather than the next six years as Extinction Rebellion demands—would cost the global economy more than 50 trillion US dollars, while yielding benefits of well under US$5 trillion.

How is it possible that the optimal temperature for the planet is 4 degrees above pre-industrial levels—and that damages from that level of warming would amount to under 10% of global GDP—when it would also be “catastrophic to all life on Earth”? How is it possible that Global Warming of 1.5 degrees would reduce global GDP by a few trillion US dollars—less than 5% of what it would have been in the absence of Global Warming—while the policies to achieve that limit, even if executed over a century rather than just five years, would cost over ten times as much?

It isn’t. Instead, either Extinction Rebellion’s claims are vastly overblown, or Nordhaus’s estimates of the economic damages from Global Warming drastically understate the dangers.

Both are possible, of course. But categorically, Nordhaus’s estimates of the potential economic damage from Global Warming are nonsense. They are also one of the key reasons why policymakers have not taken the threat seriously. If Extinction Rebellion is going to make policymakers take Climate Change seriously, then one of their first targets must be Nordhaus and his DICE model.

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Preface. This is a book review of: Robert Bryce. 2009. Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future.

This is a brilliant book, very funny at times, a great way to sharpen your critical thinking skills, and complex ideas and principles expressed so enough anyone can understand them.

I have two main quibbles with his book. I’ve written quite a bit about energy and resources in “When trucks stop running” and energyskeptic about why nuclear power and natural gas cannot save us from the coming oil shortages — after all, natural gas and uranium are finite also.

This book came out in 2009. As far as Bryce’s promotion of nuclear power as a potential solution, perhaps he would have been less enthusiastic if he’d read the 2013 “Too Hot to Touch: The Problem of High-Level Nuclear Waste” by W. A. Alley et al., Cambridge University Press. And also the 2016 National Research Council “Lessons Learned from the Fukushima Nuclear Accident for Improving Safety and Security of U.S. Nuclear Plants: Phase 2”. As a result of this study, MIT (Massachusetts Institute of Technology) and Science Magazine concluded that a nuclear spent fuel fire at Peach Bottom in Pennsylvania could force up to 18 million people to evacuate. This is because the spent fuel is not stored under the containment vessel where the reactor is, which would keep the radioactivity from escaping, so if electric power were out for 12 to 31 days (depending on how hot the stored fuel was), the fuel from the reactor core cooling down in a nearby nuclear spent fuel pool could catch on fire and cause millions of flee from thousands of square miles of contaminated land.

Bryce on why the green economy won’t work:

There’s tremendous political appeal in “green jobs,” a “green collar economy,” and in what U.S. President Barack Obama calls a “new energy future.” We’ve repeatedly been told that if we embrace those ideas, provide more subsidies to politically favored businesses, and launch more government-funded energy research programs, then we would resolve a host of problems, including carbon dioxide emissions, global climate change, dependence on oil imports, terrorism, peak oil, wars in the Persian Gulf, and air pollution. Furthermore, we’re told that by embracing “green” energy we would also revive our struggling economy, because doing so would produce more of those vaunted “green jobs.”

These claims ignore the hard realities posed by the Four Imperatives: power density, energy density, cost, and scale.

It may be fashionable to promote wind, solar, and biofuels, but those sources fail when it comes to power density. We want energy sources that produce lots of power (which is measured in horsepower or watts) from small amounts of real estate.

And that’s the key problem with wind, solar, and biofuels: They require huge amounts of land to generate meaningful amounts of power. If a source has low power density, it invariably has higher costs, which makes it difficult for that source to scale up and provide large amounts of energy at reasonable prices.

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Preface. I’ve made a strong case in my book “When trucks stop running” and this energyskeptic website that we will eventually return to wood and a 14th century lifestyle after fossil fuels are depleted.

So if you’re curious about what that lifestyle will be like, and how coal changed everything, this is the book for you.

One point stressed several times is that in all organic economies a steady state exists. Or as economists put it, that there were just three “components essential in all material production; capital, labor, and land. The first two could be expanded as necessary to match increased demand, but the third could not, and rising pressure on this inflexible resource arrested growth and depressed the return to capital and the reward of labor.”

Then along came coal (and today oil and natural gas), which for a few centuries removed land as a limiting factor (though we’re awfully close the Malthusian limits as well, population is growing, cropland is shrinking as development builds over the best farm land near cities, which exist where they do because that was good crop land).

In today’s world, energy set the limits to growth, but in the future land once again will. So will the quality of roads, how many forests exist whose wood can be gotten to towns and cities, and so on. So if you’re in a transition town group or in other ways trying to make the future better, perhaps this book will give you some ideas.

If this world is too painful to contemplate, read some books about the Amish, which would be an ideal society for me minus the religious side of it.

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