Joe Costello is a great friend who helped me think through the message and policy of the Dean Campaign from its earliest days in 2003 — he emailed me this today and I asked him for permission to post to the online community — please help spread this insight any where you can.
“In the ultimate analysis, economic prosperity depends not on how brilliant a few people are, but on how large a scale you are able to produce competent people in all walks of life.”
- John Maynard Keynes
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Over the past 6 months, Mr. Keynes has been raised from the dead and looks none the better for it. “Keynesian” has become an ubiquitous adjective inflicted into all matters concerning the economy, attempting to provide legitimacy for actions that make very little sense. If Keynes recently resurrected corpse could speak on what’s being proposed in his name, he would once again say, “I agree with everything in this if ‘not’ is put in front of every statement.”
Keynes greatest legacy will be that of a free thinker who debunked the notion of economics as science, and understood the great uncertainty underlying all human endeavors. Keynes would be horrified to look at the global economy today and think his thought from seven decades ago could just be plucked and willy-nilly transferred to the present. Nonetheless, it is done with alarming frequency, even newly minted Nobel Prize winners use his name to give authority to bad ideas.
So, before Democrats try being good Democrats and destroy the reputation of Mr. Keynes, let’s think about a couple things. In the last year, the money wasted to Wall Street and the global banking system trying to pump-up the deflating financial bubble now reaches over several trillion dollars. We’re in for a much bigger tab if we continue down the same path. Now, the rest of our mega-corporations are lining up for their share. American Express has fraudulently become a bank, and of course, the auto-industry now rushes to the front of the line. While the current financial problem (lets call it a problem and not a crisis, so we might slow the looting of the American Treasury), is indeed creating great economic problems, the price of oil has also been a important culprit. Much more importantly, oil will remain a very burdensome yoke on any recovery.
A recent report by the Canadian Imperial Bank of Commerce states the obvious,
“Over the past expansion, real oil prices rose over 500%, twice the climb in real oil prices that produced the two biggest recessions in the post-war era: the 1974 recession and the double-dip recession in 1980 and 1982.”
Why did oil spike so high? Certainly the giant casino Ponzi scheme that global finance had become played a role, but more importantly we are at the end of the era of cheap oil. A recent Barclays Capital report on the global oil industry documents extreme decline in oil production in the last few years from the North Sea, Mexico, and Russia. In the past decade, Russia alone provided almost all global growth in non-OPEC oil production. Barclays concludes, “In our view, extreme non-OPEC supply weakness is not set to remain an isolated episode of 2008. The repeated difficulties faced by non-OPEC producers in responding to price signals, and the increasing scale of that failure indicates the existence of structural hurdles to growth.” Or in English, there will be less oil and it will be more expensive.
OPEC, and more specifically Saudi Arabia, are presently the only countries able to increase supply, and how much longer they will be able to do this is very questionable. How many Americans know Iraq is now the sixth largest source of imported US oil, over 6% of our imported supply. That’s very expensive oil! Yet, oil is only one of our limited resource problems in a no longer sustainable 20th century economic model. As the World Wildlife Fund states in their Living Planet Report 2008, “Over the past 35 years alone the Earth’s wildlife populations have declined by a third. Our global footprint now exceeds the world’s capacity to regenerate by about 30 per cent. If our demands on the planet continue at the same rate, by the mid-2030s we will need the equivalent of two planets to maintain our lifestyles.”
So, let us stop our mad rush to destruction in the name of saving the economy while invoking in vain, the name of poor old long dead Mr. Keynes. Let us understand the world of 2008 is not the world of 1938, and it is the depths of immorality to spend money entombing the future in a unsustainable past. Less than one million people are now employed directly in the automobile and parts industry, about .8% of the American workforce. The present automobile is a millstone around the future’s collective neck. If Detroit wants more government money, let them begin building more buses, trolleys and trains. Secondly, the majority of so-called Keynesian pump-priming, should be spent not on the parts of America’s present infrastructure that are unsustainable, but in transforming it to be much less energy and resource wasteful. America should make a goal of cutting its oil use by 50% in five years, spending money to evolve more walkable, bikeable, and transit oriented communities. This change cannot be run through DC, but they certainly must help facilitate, indeed it is imperative they do. The greater weight for change will fall on local governments, and most importantly, the citizen. If we wish to borrow something from the 30’s let’s transform Labor’s old hymn, “Which Side are You On?” Let’s ask, “What are You Doing?” How have you cut your energy consumption today?
If we really wish to honor Mr. Keynes, one of the great minds of the 20th century, let’s intern his body back to the soil, and instead lets instill in each of us his spirit, a spirit which joyously overthrew the orthodoxies of his day, challenged archaic institutions, and had little patience for foolish thinking no matter the pedigree.
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Please link to this post or email the link to friends — Joe Costello (as usual) provides real insight into how we need to think about the current financial and energy crisis. I hope to convince him to use this venue to post regularly in the future. So also please comment with your thoughts here.
Thanks for all that you do.
Joe Trippi
