Some Points on Climate

This touches a number of recent climate issues—some new, some familiar.

Background

  1. The primary issue for climate change is alternative energy sources.

We’re not repealing the industrial revolution.

This shouldn’t be a partisan or a lifestyle issue

We need good science and the will to fight entrenched special interests

  1. Conservation is important for now but not the main focus

Alternative energy will do the job if we do ours.

Chevy Suburbans are not the issue—we just need to power them differently

 “Respect for nature” by primitive peoples is irrelevant (but coming from all directions!)

  1. This is a fundamentally international problem where what we do for the rest of the world is as important as what we do domestically.  We will need to spend money on parts of the world who can’t.

s11_2018_Projections

  1. The fossil fuel companies have an evil influence on progress, but outrage at what they knew 50 years ago is a distraction.

Oil isn’t unclean—we just went too far with it.

The Carter era thought the world was running out of oil in less than 50 years

               The key issue is influence of fossil fuel companies now.

  1. Conversions of coal power plants to gas are still important—they buy time

We’re up against a carbon budget limit—any saving buys time

Progress is still rapid for alternative energy technologies—even electric cars aren’t ready for everyone yet.

Coal plants, especially new ones, continue to be a problem.

  1. We should stop calling a carbon pricing a tax.

We need to stop the huge fossil fuel subsidy—$1 T per year in the US—that comes from using the atmosphere as a free carbon dump.

We need a plan to make the population whole—and earn the trust we will do it

History and politics

  1. Obama actually did quite a lot for climate

International unanimity (after many years of failure)

A process to do more in the future

Turning China around (look at China’s line on the emissions chart above)

               Seed funding for Tesla and subsidies for electric cars

Note—the US was the primary beneficiary of the Paris Agreement.  We’re not being told to stop emitting at twice the rate of anyone else!

s12_Top_FF_Emitters_percapita

  1. Trump’s effect on progress is far worse than acknowledged

Reversed progress on all environmental issues in the US

Broke international unanimity—okay for everyone including China, Japan, and Germany to backslide with coal power plants

Legitimized attacks on climate action everywhere (Australia)

Continues to block any international cooperation on any issue

Going forward

  1. The single most important action is to defeat Trump

He is a roadblock to progress by anyone’s definition.

Any of the Democratic candidates would be good—no one has a real plan yet anyway

  1. The Green New Deal delivers a necessary coalition for progress

Makes clear that the new world is a good place to be.

Unites all constituencies

Must eventually add carbon pricing.

Not yet a plan

  1. The youth climate movement is helpful but a little worrisome

Non-partisanship makes it easy to co-opt—speakers at rallies dismiss all establishment parties.

               Trump was (in part) elected by young people who thought voting didn’t matter.

  1. If we can get past Trump, then we all need to get serious about a real plan

consumption-by-source-and-sector

Needs to address our current usage

Make sure it happens–what to fix when and by whom

               Minimize the hurt (particularly for the disadvantaged)

Recognize full international responsibilities

Don’t expect climate efforts to fix everything.  Broader issues include:

Easing workforce disruptions from technology, globalization, etc. (not just from climate)

Education

Infrastructure (much more than climate)

Jobs and wages (unions, minimum wage, role of the public sector)

Racism and sexism (need rules for everywhere)

Inequality overall (need a tax plan)

Other environmental issues will still be there to be solved

A Nightmare World of Our Making

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“presidential Twitter” by osipovva is licensed under CC BY 2.0

The first Democratic debate began with a question to Warren about the economy: “Since most Americans think the economy is doing fine, why do you need all those plans for change?”  She responded by pointing out that the “great” economy was primarily benefiting only a lucky few.

Even that, however, understates the issue.  It’s not just that unemployment rates don’t tell the whole story about what it means to be working for a living.  It’s that there is so much run amok with the direction of the country that the unemployment rate doesn’t begin to stand-in for the strength of the economy or the well-being of the country overall.

For that we need to pull together many strands and formulate a picture what it would mean to have four more years of Trump—the kind of world we are making.  This note attempts to make a start.  We can be explicit about many things.  Our path of decline was clear from early on, but now we have more specifics.  We should leave no doubt about the risks we run.

In doing this, one goal is to avoid what I felt was a problem with the Clinton campaign.  Trump kept talking about change, but we didn’t get across the danger in those changes: what they would mean for ordinary daily life, for the environment, for the courts, for democracy in America.  Who’s to say if that would have made a difference, but many people were certainly surprised by what they got.  If nothing else, it would have called out the risk of non-voting.

What follows is an outline with a few supporting points and references.  As noted this is a start.

More unprecedented floods, hurricanes, temperatures, etc.

By leaving the Paris agreement we broke the international unanimity that was the best chance for progress.

               Each lost year is time we won’t get back

Disdain for science and technology in government

Non-support of research and education

Ignoring climate change technologies

Choosing big, established companies over innovators (Net Neutrality)

Xenophobia and racism encourage entrepreneurs to go elsewhere

=> Lower standard of living

=> Real threat to our military security

  • Nuclear proliferation and risk of nuclear terrorism

Encouraging nuclear proliferation by statements and actions (N. Korea vs Iran)

More players means more chance of theft or sale

Belligerence normalizes nuclear weapons

Bulletin of the Atomic Scientist sees highest risk of catastrophe ever

  • Back to the 19th century on woman’s rights

Roes vs Wade hangs by the thread of Roberts’ desire for Court legitimacy.

One more Supreme Court vacancy, and we all live in Alabama.

  • Erosion of opportunities for middle class life

Education—weakening of public education and more generations in debt

Attacks on unions

Healthcare at issue—ACA hobbled with no other proposal in view

Continued declines in good jobs for people without degrees

No recognition of the problems created by technology change

Cutting the safety net—If you don’t succeed you’re a loser

Conflicts stoked between races, ethnic groups, cultures

No interest in racial justice—to the detriment of all

Cruel and intentionally divisive Immigration policy

Major hit to both security and prosperity

Trade wars instead of alliances and international norms

New arms race already announced

Policy rooted in weakness—from fighting on all fronts

Conflict as the first choice— “Trade wars are easy.”

Other wars too?

  • Weakened environmental and other standards

Air and water

Workplace safety

Food safety

  • Bubble economy based on debt

Good times prolonged by deficit-funded stimulus

Proven recipe for cycles of boom and bust (back to the 19th century here too)

No Republican history of help during downturns

  • Undermining of democracy in the US

Increasing government by fiat (“executive order”)

Restriction of voting rights

Politicization of the Justice Department

=> Democracy is not a luxury—it made us what we are.

 

Questions for Democrats

consumption-by-source-and-sectorI’m concerned about what seems to be a kind of giddiness in the Democratic Party.  Winning control of the house was a major accomplishment, and there does seem to be a shift in national attitudes toward the liberal agenda.  But I’m worried that the feeling that everything is now possible is getting ahead of what it will take to make it so.

I’ll start with Green New Deal and Medicare For All.  In both cases there’s a lot that’s good.  We’ve succeeded in focusing attention on key problem areas that urgently need to be addressed.  But in both cases there is so much room for interpretation that it’s hard to see what will come out.  And I don’t understand what the decision process is going to be.

Climate change and healthcare are both highly technical issues.  We’ve talked here before about what it will take to put together a true national plan to address climate change.  (The chart at the start has to be addressed point-by-point.)  The current GND bill doesn’t claim to do anything like that and adds a number of other issues into the mix.  Part of that is good—for the first time we’ve succeeded in presenting action on climate change as a step forward for everyone, not as distasteful but necessary medicine.   At the same time, though, we now have a number of competing objectives for whatever will come out as plan.

However attractive those objectives may be, there is a lot more in GND than anyone will deliver.  Fighting climate change will create many jobs, but will not—by itself—solve unemployment.  If we start fighting about whose jobs get created, climate will suffer.  It’s okay that part of the planning process is political, but that can’t be the main thing.  Roosevelt had a brain trust of people driving the original New Deal.   We need something like that here, and we also need a broad-based process for contributions to the plan.  It’s not enough to let the Presidential candidates or other players chime in with soundbites.  This is a real test for our ability to govern.

Healthcare makes me nervous for similar reasons.   Medicare for All sounds very specific, but one hopes it’s not.   A literal Medical for All solution would not be a simple change and would force a premature answer to a problem that deserves careful study.   Virtually every developed country other than us has implemented some form of universal healthcare, and there is quite a lot of variety in the solutions.   We have every opportunity to make a careful and successful choice for both the overall plan and the sequence of steps to get there.

I don’t see enough of that happening.  Thus far there seems to be more concern about how to relate to Medicare than about how other countries have achieved universal coverage.  Positions of Presidential candidates seem like shots in the dark.  We should be careful to avoid making the transition harder than it has to be, we should avoid fighting battles we don’t have to, and we should certainly make sure to keep the ACA surtax!

A third and final topic is international affairs.   What’s worrisome about that one is that there is no way of avoiding competing objectives.   One of the biggest mistakes of the current administration is its zero-sum approach to the rest of the world.   We’re trying to “win” international affairs by making sure everyone else loses.  Such belligerence may sound great—defending America—but it’s a wrong model.  The world has learned the hard way that economic nationalism is self-defeating.   We need rules of engagement so that nations can participate in building shared prosperity.  The world has a real chance to succeed at that, but it’s not a given.

In particular it’s not easy for us and not easy now.  The drastic changes in the world economy are calling out for nationalism and trade wars.   “The worst thing about globalization is everything that can be blamed on it.”  Better trade rules will help some of it, as will a better safety net.  But the problems won’t go away.  Not only are we going to have to say no to tariffs (still popular despite a cost of $900,000 a job), but we may also have to spend serious money outside the US to help poorer countries fight climate change.  The only way forward is to recognize how interconnected we all are.  That applies to Trump’s Devil’s bargain with dictators too.

Both the country and the world need us to get this right.

 

 

Climate Change is Not Complicated

The reason for this note is that discussions of climate change have splintered into so many directions that the subject appears more daunting than it ought to be.  Neither the current status nor the path to success is actually hard to see.  The main things we need are commitment and a real plan.

  1. Current status

– Evidence for climate change is clear and unambiguous.

The increase in global temperature levels goes back decades, as shown in the following chart (Temperature Anomaly just means the temperature increase over 19th century levels).

noaa_temp

Further the relation of temperature and CO2 in the atmosphere is unmistakable (see the straight line below) and pushing up inexorably toward the identified 1.5 ºC danger zone:

temp_ppm

Scientists have even demonstrated (using isotopes of carbon) that the increased carbon dioxide in the atmosphere is due to burning of fossil fuels, not some natural process.  Arguments to the contrary have been largely funded by the Koch organization or the oil companies themselves and typically involve doctored data.  Accusations of conspiracy have been debunked, but are still repeated by interested parties.

– Problems are already happening.

There are two kinds of examples.   For temperature alone, as the first chart showed, we’re continuing to set new records for average global temperature.   The effect on sea ice has been dramatic, and farmers are becoming well-aware of changes in growing seasons.

Individual catastrophic events are harder to pin down, just because it’s hard to develop statistics around rare events.  However, scientists have been able to work through the statistics to show the extent to which extraordinary storms, such as hurricane Harvey, were made worse by climate change.

– Role of climate models.

We don’t need climate models to say there is a problem.  We do need climate models to assess specifically what is going to happen.  For example, we can see that glaciers in Greenland and Antarctica are melting, but we need to figure out how quickly this can happen and what the effects will be on weather and ocean currents.  Since the earth hasn’t been here before (i.e. rapid C02 increase like this has never happened), we have to try to figure it out.

A particular concern is that climate change feeds on itself to accentuate the effects of CO2.  An example is melting of permafrost in the arctic.  That releases methane, which is also a greenhouse gas and adds to the increase expected with CO2.  Climate models are extremely detailed to deal with such effects.  The modeling work is supported by a global effort to get data on what is happening now.  This is a major effort by many independent researchers worldwide to get the best possible handle on what’s coming.

– It’s going to get a lot worse unless we start acting now.

An important fact to be emphasized is that carbon dioxide in the atmosphere just adds up.  So even if we stabilize global production of carbon dioxide, things will just get worse as we add to the total.  For a few years 2014-2016 it looked like CO2 production was stabilizing, but then the trend turned worse, and last year accelerated it.  Here is the current chart.

s09_2018_FossilFuel_and_Cement_emissions_1990

As we just noted, even a stable value of CO2 emission means things are getting worse, because it is the total amount of CO2 in the atmosphere that drives temperature change.  The stable value was attractive, because it seemed to indicate that CO2 had finally peaked and might start to decline.  And the decline might mean the total CO2 could be bounded.  We’re now back to worrying about the peak, with no idea how bad things will get.

Scientists have given us a so-called carbon budget—the maximum amount of CO2 we can add to the atmosphere and still escape dangerous, irreversible changes.  Every bit we add counts against the budget.  We have to find a way to get carbon dioxide production down toward zero, and things will continue getting worse until we get all the way there.   According to the last international climate study, CO2 production needs to drop 45%  by 2030 and reach 0 by 2050 if we want to keep the temperature increase under 1.5 ºC.

– Can’t we just pull the carbon dioxide back out later?

There is currently a lot of work in progress on how to capture and store carbon dioxide.  For now, capturing carbon dioxide even in exhaust flues is expensive—it can double the cost of electricity from a coal power plant.  Pulling it out of the air is substantially harder.  Further some effects, like movement of glaciers, are hard to stop even if we pull out the carbon dioxide later.  Sea level changes are irreversible.

Earliest use of this kind of technology would be for flue-based solutions in particular industries.  That’s getting cheaper, but it’s no miracle solution.  Large-scale pulling carbon out of the air is not yet available, and the cheapest estimates for a worldwide solution would cost on the order of 10 trillion dollars annually.  Nonetheless, current climate models assume that some use of this technology (expensive or not) will be needed if we are to keep the temperature increase under 1.5 ºC.

– What about geoengineering?

This approach, which gets sporadic publicity, involves adding chemicals to the atmosphere to block the sun—cutting temperature by putting the whole world in the shade.  A number of different substances have been investigated to do this, and any of them would need to be constantly injected into the atmosphere under supervision by some international body.

As an approach this is much cheaper than carbon capture, but it is regarded as a dangerous last resort even by the people who do the research.  All photosynthesis worldwide would be affected. The closest natural phenomenon, the Mount Pinatubo volcanic eruption in 1991, resulted in a worldwide drought.  It does not address acidification of the oceans, which would continue to disrupt life in the seas.  Further it is a time bomb, as carbon dioxide concentrations would continue to build up, so that the shading and its effects would have to keep increasing, and any interruption would be catastrophic.

 

The bottom line is that there is no silver bullet here; we have to get off burning carbon.   However it’s worth pointing out that this is NOT a death sentence (as we’ll see) and it is also NOT committing us all to a grim world of scarcity.  Even today people buy Teslas because they like them—among other things they’re performance cars—not as sacrifices for the good of mankind.  That’s the right way think about the whole transition.

 

  1. What to do about it

To understand what we need to do about climate change, we first have to think about the kind of world we would be going toward.

A point worth emphasizing is that the future is electric.  If we’re getting off fossil fuels, we’re not going to have people burning stuff all over the place.  So we will be generating power by suitable technology (more on that in a minute), and electricity is the means of storing and distributing that energy.  All renewable sources today generate electricity as the common currency of power.

Since the electric grid is the core for what we need to do about energy, we have two primary tasks:  strengthening the electric grid and getting all users of energy on that grid.  Each needs to be discussed separately.

– Strengthening the electric grid

This is about generating and distributing power.   We of course need a grid that is reliable and safe, but for climate change we’ll need more.  There will have to be considerable growth in electrical power generation (since we’re taking on new roles), and we will want to optimize opportunities for renewables even in the near-term.

At present there are ongoing activities to strengthen our current patched-together national electric infrastructure, but these are long-term projects and not primarily driven by climate change.  Power generation is largely a per-state matter and is quite literally all over the map.  For climate change we have benefited from the near-term improvement of substituting natural gas for coal, but there are still many coal plants and nothing says we have optimized opportunities for renewables.  Ideally we should have a nation-wide plan for growth and modernization that would allow renewable power to be generated where appropriate and used wherever needed.

It’s also worth saying something about the longer-term picture.  Ultimately this is not a story about scarcity and conservation; it’s about alternative power.  Renewables will improve, and there will be other significant new sources of power.  Fusion power in particular has been slow to develop, but should be taken seriously.  It has had a recent impetus with higher-temperature superconductors (for the magnets that contain the fusion reaction), and current international projects target 2033 for a demo system and 2050 for commercial system deployment.  Initial systems will be heat-based, like conventional power plants, but later generation systems may generate electricity directly —a mind-boggling concept.  We have a near-term job to do in saving the planet, but there’s no reason to fear we will ultimately lack for power.

– Making electricity the universal power source

The point of departure here is the following chart showing energy use by sector and energy source.  Our task is a prioritized migration to renewably-generated electricity in all sectors, with the maximum possible bang for the near-term buck.  In this transportation is an obvious target. It is a large consumer of energy (28% of US energy usage) with negligible current penetration of renewables.  Electric cars can be a big win.

consumption-by-source-and-sector

Given the complexity of energy usage overall, the single most important step to encourage migration is to stop pretending that carbon dioxide production is free, i.e. to stop subsidizing the fossil fuel industry.

We can be pretty specific about what CO2 costs us.  We are rapidly reaching the point where each new ton of CO2 in the atomosphere is a ton that will have to be removed.  The cheapest estimates of what it takes to remove CO2 from the air (average of upper and lower bound estimates) is $163 per ton.  Multiply that by the US annual production of CO2 = 5.4 B tons, and the silent subsidy to the fossil fuel people falls out as $880 B annually.  That’s no small distortion of our economy.  Essentially a trillion dollars a year.

The usual approach to this subject goes by the name of a carbon tax, but that’s actually a misnomer.  A tax is money collected to fund some government activity, and that’s not the point here.   We’re stopping a government-funded subsidy of products that produce CO2, and any money raised should be used to mitigate the effect of fuel price increases on the population.

Because raising fossil fuel prices is regressive, balancing costs and benefits is tricky and has led to voter rejection (spurred by massive Koch campaign spending) of several carbon tax proposals.  (The yellow-vest protest in France was from something worse, a budget-balancing regressive tax masquerading as a climate measure.)  The magnitude of the silent subsidy is such that it is necessary to get this right.

One example proposal worth discussing is the Carbon Fee and Dividend from the Citizens Climate Lobby.  They start with a low fee of $15 per ton of generated CO2 at fuel production or port of entry, but raise the value $10 per year afterwards.  That money gets returned per adult with an added allowance for children.  The gradual increase is in part a low entry but it also allows for increasing maturity of competing technologies.

That proposal is now a bill in Congress, and there was a recent endorsement by a number of economists and other public figures.  It may or may not become part of the Green New Deal from the Congressional Democrats.  One way or another carbon pricing is so fundamental it just has to be fixed.

 

  1. Outline of a plan

The energy use chart from the last section says a lot about how this has to work.  Going down the chart, we can say the following:

– Transportation

Thus far this sector has had virtually no penetration of renewable energy sources, so its importance cannot be overestimated.   The only alternative is electric power, so we need incentives to finally get a non-trivial market share.  Carbon pricing will help, but we may need more. We’ve had incentives in the past to help electric car makers get into business.   Now the issue is the continuing cost of carbon.

– Industrial

The ongoing migration to natural gas shows the price sensitivity of this sector.  That trend toward gas should continue, and we need to start more movement onto the electric grid.  Carbon pricing should help here too, and there should be active discussion with industry to determine what form it should take.  Flue-based CO2 capture may also be appropriate in some cases.

– Electric power

We already noted the major contribution from this sector in the conversion from coal to natural gas.  That should continue with the non-trivial number of remaining coal plants, but we still have to get to renewables.   Everything that happens in this sector should flow out of a national plan for evolution of the power grid, as discussed before.  Coal plants and also gas-powered plants may be supplanted by renewables elsewhere.

– Residential and Commercial

We should recognize that this sector is significantly smaller and with many subsectors to be considered.  The conversion to natural gas is already well-underway and the remaining petroleum sectors (e.g. New England) may not be easy to change.  So we need to map out conversion to electric or possibly even flue-based CO2 capture.   The first step is a more detailed plan.

 

We also need to call out the need to support research, as it is an unavoidable part of the picture.  That applies both for new energy sources and storage, and to the various activities underway to understand climate change and how we will have to adapt.

 

  1. International coordination

Thus far our discussion has focused on the US, but we’re only one piece of the puzzle.  Despite the nationalist rhetoric, there is only one atmosphere for everyone.   Helping other countries helps us, and poorer countries have fewer resources.  The following chart underlines the importance of that effort—the “others” are becoming the biggest piece.

s11_2018_Projections

There are actually two points to be made.   First, the Paris Agreement included an initial arrangement between rich and poorer countries, so that progress could be made.  That codified a fund (trashed by Trump) to help poor countries meet their targets.  However the issue will continue to be contentious, and one way or another we will have to contribute.  The just-completed Polish meeting was able to end without a breakdown on this subject, but it wasn’t easy.

Second, our contribution may turn out to be more than just money.  Other countries will have energy use charts that won’t look anything like the one we’re been considering.  They may need different forms of technology to support different evolution plans.  We should use our resources to see what can be done.

In the past the US recognized a responsibility to lead this process.  In Poland, the process managed to keep going without us, but it was certainly touch and go.

The world needs our contribution to leadership. That means it is doubly important to put our own house in order .  We need to know where we’re going for ourselves, and so that we can help the rest of the world in this effort to preserve our common future.

Getting Productive with China

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This is yet another note about China. It’s hard to stop thinking about it, as our current policies are both dangerously unproductive and difficult to undo.

Let’s start by believing the worst.  Suppose the Chinese really do represent the devil incarnate—the third Reich back again for another racist attempt at world domination.  What should we be doing in that case?

The answer is clear.  The Chinese have a huge population, world-class technology, and the industrial might to back it all up.  They are a formidable adversary, and need to be confronted (as in the past) by a world united against them.  What we need are strong alliances, in the Far East and elsewhere, to counteract the threat.  That alliance must be ready to act in everyone’s interest, with partners able to trust each other’s long-term commitments and no one looking to make a few bucks off the others on the sly.

We just failed that one, so let’s back the threat down.  Suppose the Chinese threat of domination is economic, not military and political.  In that case we need to protect world-wide supply chains, so the Chinese can’t just pull the rug out from under the existing order.  And we need clear rules defining fair trade, so that it’s obvious who is a renegade.  That sounds like some version of TPP and the WTO—so the highest priority is getting those right.  (TPP can’t be too bad, since large chunks of it were taken verbatim in the new version of NAFTA.)  What it doesn’t sound like is our modern version of protectionism, where we reserve the right to do anything we like and impose it unilaterally on anyone else.

Now let’s add one more element to the picture—China is the largest most rapidly growing market in the world.  This is an item of some interest, although it doesn’t get the press it deserves.  For one thing China has just added an inconceivable number of people to the world’s middle class.  One of our grievances is that China has not opened its markets as it should.

There are two remarks to be made.   One is that China has only recently developed enough of an upper middle class to be an effective market for us.  This is a matter for emphasis now, and the maximum leverage is when the US and EU work together (each representing 18 percent of Chinese exports).   There are actually multiple reasons to be guardedly optimistic about current prospects for negotiation.

Second, the fact is that as a country we’re actually rather reluctant exporters.  Our domestic market has always been so large as to be primary.  Going forward, this is a matter of some concern.  For example we claim we want to sell cars in China and elsewhere, but we’re relaxing environmental regulations to help our manufacturers—and guarantee that the mainline production won’t be acceptable in most other countries.  Denying climate change has the same kind of effects across the board.  We can’t forget that open markets are only the first step to actually selling the stuff.  Even today the Europeans, with the same level of Chinese imports as us, have a substantially lower trade deficit.

As a next point, in formulating China policy we should at least make an attempt to think about things from their point of view.  That doesn’t justify it, but we have a large blind spot if we don’t try.   It’s a worthwhile exercise independent of whether we like their current leadership or not.

On that subject the primary factor is that China underwent some of the worst effects of western imperialism, lasting well into the twentieth century.  The Opium Wars deserve their name.  The British made fortunes with opium produced in India and sold under military protection in China.  And the rest of the West joined in.  The Chinese had expected some help in the aftermath of World War I, but were denied.

It is not surprising that the Chinese feel both suspicion and hostility toward the West, as well as a need to be fully in control of their own destiny.  In that light it is easy to imagine the attitude of the Chinese toward Trump’s initial set of demands in the trade war, expressed as terms for unconditional surrender.  It probably made Trump feel important and powerful, but it’s hard to imagine anything less likely to produce real cooperation. As for Chinese attitudes toward the South China Sea and intellectual property, we should remember the “Monroe Doctrine” and the heroes who brought British textile technology to the early US.  That’s not to say they’re right; it’s just counterproductive—and frequently delusional—to approach international cooperation as a moral crusade.

The only solid basis for relations with China (or anyone else) is shared interest—again regardless of whether we like their current leadership or not.  We’re not going to defeat them—in either military or economic terms—so it’s crazy to assume that’s the right model for policy.  (You can even go farther and say that’s it’s not even in our interest, but we don’t have to go that far here.)  They’re no more willing to capitulate than we are, so it’s a lot more productive to stay in the real world.  Mutual trust is a requirement for success.

With that we can make some suggestions:

  1. We should be negotiating rules for open markets and intellectual property protection as a matter for the WTO. As noted, there is ample basis for agreement of those subjects going forward, so there is reason for guarded optimism—meaning not just agreement but cooperation.  To be clear, the US has historically won 85% of its cases with the WTO.
  2. Technological competition with China is inevitable. They are already formidable competitors, but our strengths and weaknesses are different, so there is room for both of us in a growing world economy. Above all we should recognize and take care of our own strengths.
  3. We have work to do in preparing our economy for a world where the outside is at least as important as the domestic market. Not being the world’s biggest economy is a big change.
  4. We have even more work to do to make sure that the whole population profits from an ever more highly-integrated and highly-automated world. That’s not only a moral requirement, but the only way to defeat the parasitic demagogues who threaten to take over here and elsewhere.

Tesla as Example

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However distasteful Elon Musk seems to be, the nuttiness of Tesla’s treatment nonetheless deserves comment.

Tesla was the first (as far as I know) to figure out that current battery technology is practical to power a car.  They have also been the best thus far at figuring out how such a car can be made uniquely attractive.

This is an intensely competitive business, and they have been trying to maintain first-mover advantages in features, battery technology, and the manufacturing process.  That is a very tall order, and it involves enough risk-taking that there is no surprise that it is tough to keep commitments.  Until they reach some sort of stable state vis-à-vis their auto competitors, Tesla has to be regarded as still in a kind of startup phase.  That applies both to risks and rewards.  No one expected iPhone penetration to grow as fast as it did (I can still remember articles talking about mobile phones as a mature, saturated market), and the same kind of thing could happen with electric cars.

Unless you’re a deliberate non-believer in climate change (and these days you have to try hard), the role of electric cars can hardly be overestimated.    Transportation accounts for 28% of carbon dioxide production, and there is no one proposing to put carbon dioxide scrubbers in every car.  Tesla is trying to become the Apple of transportation, with perhaps an even bigger impact on the US economy.

How are we helping Tesla in that undertaking?  Well, we haven’t cut out the electric vehicle subsidy entirely (as the House Republicans proposed to do), but there’s no evidence we’re trying very hard either. The administration is just not interested in anything that raises even the suspicion of climate change.  A carbon tax for example.  We are minimizing Tesla’s value in its home market, while the rest of the world catches up.

As for the business community, everyone seems eager to predict the Tesla’s demise.  Certainly the traditional auto companies would like that, and Musk’s antics make it exciting for the press to think about a deserved fall of arrogance.

However as an indication of what that might mean, people should recognize that all of the core technology in the Chevy Bolt comes from South Korea.  And that story can hold for the rest of the multi-trillion-dollar investment that will be needed to combat climate change.

Open for Business at Davos

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Welcome to the United States.   We’re a great place to do business.

In America you come first!  Just look at what we’ve got:

  • Powerless unions.
  • No stupid rules for working conditions.
  • Do what you want to the environment.
  • Hire and fire as you please.
  • Healthcare plans optional.
  • Employers win all legal challenges.
  • Play states against each other for gifts.
  • Lowest taxes anywhere—the “locals” are not your problem!

You may have lost your colonies, but now there is the new America:

The land where you don’t have to care!

Shock and Awe

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It’s odd how people seem surprised at the level of corruption and outright incompetence coming from the Republican party.  We need to remember a bit.

The arrival of George W. Bush was not as traumatic as Trump’s, but then as now we got a new troupe of players (remember the neocons?) who were convinced they were geniuses, and that every other idea represented the stupid old world they were here to transcend.   That affected both the economy (government regulation does nothing good) and international relations (let’s remake the world for freedom and democracy).

It took a little while, but they were a catastrophe on all fronts.  The deregulation movement’s hands-off treatment of the economy produced a new, unregulated banking system—mortgage-backed securities—that ultimately crashed, producing the worst downturn since the great Depression.   $6T of “safe as banking” securities were wiped out.  Only the Democrats’ support of the bank bailouts kept us out of a real depression.

And of course we fought a $3T war that was justified by lies, produced no benefits to the US, and undermined US interests everywhere in the Middle East.  (ISIS was one consequence.)  Even today it’s hard to know what was really behind that war, but it is a fact that the only place in the world where people think it was anything but oil is here!

There are two other important but largely unstated points to be made about that war:

– That fact that it was unbudgeted contributed mightily to the difficulty of recovering from the crash.  In general terms governments need to act countercyclically, i.e. they should save in good times, because they need to spend in bad.   This is not rocket science, but we did exactly the opposite and in a big, untransparent way.   So recovery from the crash had to be all deficit, which made it easier for the Republican balanced-budget hypocrisy to prolong the pain.

– The result of the war was not just what was done, but also what couldn’t get done.  That affected the Middle East, where the greatest opportunity for change was for US money to grease the peace process.   That opportunity was lost forever.  ($3T would have created a true land of milk and honey!)  But that wasn’t the end of it.  That lost opportunities were here too.   Post 2008 we have found we have money for nothing, not even education.  Part of that problem has been Republican party priorities, but the fact remains we are not the first country to impoverish ourselves with a stupid war.

 

Fast forward to the present.   We’ve got a new bunch of geniuses who have no need for either information or expertise.  They’re smart!

We are now at a stage like the “shock and awe” of the Iraq war.  Reality has not yet had time to intrude on the fantasies.  But we need to remember, it can be that bad!

Where will we go from here?   The picture has a lot in common with the story just told:

– The economy

We seem to have learned nothing from 2008.  With the tax plan we are stimulating the economy at the wrong stage of the business cycle and running a deficit to do it.  Further we are removing Dodd-Frank and everything else enacted to control bad behavior.   There’s also little evidence that these people will do what it takes in case of a crash.

– War

This administration seems even more cavalier about war than Bush people.  We’ve had continuing belligerence with North Korea and Iran and a budget with an untargeted military buildup.  There’s real risk of a crazy war on impulse—with as little planning or understanding of consequences as last time.   We have to hope it won’t be nuclear.

– Russia

Russian is a constant adversary, and our buddy-buddy relationship with Putin is problematical.  Russians are proven experts in cyberwarfare, and the demonstrated impact of viruses points out the threat.  There is even a possible Russia-North Korea connection.  We stop watching them at our peril.

– Climate change

The evidence behind climate change is more than considerable.  As a risk, it is well past the point where any serious business would start paying attention to it.   We have instead decided we’re too smart to have to think.   We are risking our own future, and handcuffing our businesses that would be part of the solution.  The Chinese have taken our place and are running with it, while for us even planning is out of the question.  This is a double whammy—more heat, storms, and drought combined with loss of industrial preeminence.

Those items are not just speculation.   We’re all set to pass the economics into law.  The war rhetoric is if anything more pronounced than with the Bush administration.   For climate change this is stated and active policy.    The Russian case is a little different, but it underlines the seriousness of the dangers.  We just barely escaped with Bush; this time it looks worse.

Again we’re powerless in dealing with geniuses who can’t be bothered with facts, expertise, public opinion or anything else that gets in the way of their greatness.  We can have no confidence, for example, that Trump either understands or takes seriously the fact that a nuclear attack on North Korea will have consequences for the US even without retaliation.  Trump’s statement on deregulating Wall Street, just like his statement on leaving the Paris Accords, acknowledged no risks.

It’s all too easy to forget the past, but we’ve learned that such “genius” has consequences.  The end of this story will not be pretty.

No segment of the population—Republican or Democratic—should believe anything else.