Category: "Economics"

Money is not Everything, a Livable Earth is.

by Ginosar  

The Atlantic April 2012 issue has an article- What Isn't For Sale?  that may clarify some aspects why most of us, liberals or conservatives, environmentalists or the Tea Party, do not fully grasp the danger of global warming, We view almost every thing in terms of the dollar, not in the terms of massive floods, or snow-less mountains, or a dead ocean.

Michael Sandel, the author, brings up crucial points how our economic views of our society have distorted most aspects of our lives:

"..Without quite realizing it - without ever deciding to do so - we drifted from having a market economy to being a market economy.

The difference is this: a market economy is a tool - a valuable and effective tool - for organizing productive activity. A market society is a way of life in which market values seep into every aspect of human endeavor."

Over the last few years a number of articles by respectable academics, scientists, and other reputable people told us  again and again how much Climate Change, Global Warming, will cost us over time, in the future. It was a monetary assessment of future worth vs. current expenditures to reduce greenhouse gas emissions.

When people see the potential massive global damage to our Earth in mainly FUTURE economic terms, they dismiss its significance. So it will cost a little more, our growing, massive, economy can handle that. It would not be really so bad, just like inflation...

Some articles said that with the continuous rise in the global economy, the damage to our way of life would be well within a small percentage of our income, so why worry unduly now.

Add to it that most people are not aware of their deep ignorance of the complexity and interconnection of the global climatic balance. And that they truly believe they understand the forces of nature, know enough about the changing weather, and are familiar with the forces impacting cloud formation and even the vastly complex ocean systems. It is, therefore, nearly impossible to penetrate the personal firewall they have erected around themselves so that they would not have to think about the disastrous climatic change we have already entered into.



China immense impact on the global community

by Ginosar  

China is becoming the most powerful player in global events. Its economy is projected to overtake the US in less than a decade!
The US and China are the key players in a tightly woven global community and must cooperate and find common paths to help ourselves and the global community.
China is also the largest generator of greenhouse gases and also suffers considerably from global warming. Reducing GW and increasing economic growth are interwoven elements.

This is just a brief exposure of some key differences between the US and China.

China with its rapidly growing GDP of $6 Trillion is often more influential internationally than the US with its 15 Trillion GDP, a quarter of global GDP. We have by far the strongest military power in the world, but economic power is as important, or often more important, than military power. Exerting military power is not a good option in most cases.

The key reasons that China is so powerful are that it has:
1. A strong central authoritarian government that can make decisions relatively quickly
2. A government which actually care to improve the lot of its population,
3. The ability for planning and executing long term national goals
4. Immense foreign exchange reserves of over $3 Trillion; all of which allow China to achieve its goals rapidly.


The Chinese government and their private economic enterprises operate with less moral and ethical constraints than any other influential nation. This allows China to acquire vast long-term - international energy and mineral resources and exerts its economic influence with little regard to its impact on the local population or international concerns think Iran and Sudan. China's economic power is growing rapidly at 10% per year with less moral concerns or self imposed or external limits. China GDP was one trillion dollar in 2000; it is now 6 times larger! These numbers do not show the total story, since its labor costs are so much lower, China can build twice as much infrastructure and housing per dollar as the US.


Although some assessments predict that China's GDP will surpass the US in just five years, it does not seem realistic- there are always unforeseen difficulties. Serious bumps are around the corner, such as a potential housing bubble, (25 million, often expensive, housing units are unoccupied now). Also there are increasing wage demands, and their artificially low currency exchange rate which would not be tolerated for long. China is already planning to change the rate slowly.


There are a lot of negative elements in China: lack of individual freedom, severe corruption, weak rule of law, building empty cities to sustain employment, lack of environmental control, expanding arid areas due to global warming, diminishing water supplies to vast population centers, no social safety net, suppression of native minorities and more. This is all part of the picture of this vast land. However, it is important to note that most Chinese are happy to have these vast economic opportunities, fast rise in their standard of living at the cost of their political freedom.


The US has serious economic problems most of them politically generated:

1. Representative government, in which local interest prevails over national needs.
2. We have huge and growing national and private debts, totaling $50 trillion, 3 and a half times GDP.
3. We do not have a national vision nor national long term or even short term plan.
4. We let short term self-serving financial forces dictate our direction.
5. Both Democratic and Republican administrations and Congress concentrate on benefiting the financial elite, the wealthy upper few percent of the population to the detriment of the lower income half of the population.


The US richest 10 percent control some 2/3 (73%) of our net worth. The lower 90% has only 27%; this is a ratio of 24 to one on a per capita basis. Think about it, for every thousand dollar a person in the lower 90% can spend monthly, a person in the upper 10% can spend twenty four thousand dollars!

Our US government is divisive, polarized, non transparent, and unable to work for the benefit of the country. And because we generally believe that every one should be free to pursue his/her goals, essentially free from central supervision, our widely spread greed burdens the nation by economic collapse, huge national debt ($14 billions, almost equal to GDP) and immense private debts, some $35 trillions. Recently some 20% of our GDP has been generated by the non-productive financial sector, which mostly shuffled immense amount of fabricated capital from hand to hand with no productive benefit for the country but their own short-term financial wealth.


In summary, China concentrates on achieving its long term rapid national growth at the cost of individual freedom and lack of the rule of law. We concentrate on protecting the wealthy, retaining individual freedom, sustaining the rule of law at a sacrifice of our other important national needs.


The impact on morality of overpopulation:

Democracy cannot survive overpopulation. Human dignity cannot survive it. Convenience and decency cannot survive it. As you put more and more people into the world, the value of life not only declines, it disappears. It doesn't matter if someone dies. The more people there are, the less one individual matters.
Isaac Asimov


China is not constrained, nor guided by morality or ethics due largely to its vast population. The more people we have, the less we value each individual. And this is evident especially in China and India. Their population is about 1350 and 1210 millions, respectively; together over a third of the global population.

It is not surprising, therefore, that most Chinese focus on their own economic progress and ignores the suffering of others. It has been so for a long time. The current news from China is that 18 people saw and ignored the suffering of a 2 years old, severely injured girl in a car incident. They looked, did not lift a finger to help, and if you heard the driver explanation why he did not stop you would be revolted of his inhuman attitude. I am glad that a considerable debate started in China about this sad experience.


I am bringing the MORALITY ISSUE up to illustrate the great significance of China to the struggle to reduce economic suffering and global Warming. China is the key to cutting global Greenhouse gases. No effort by any other country, or a combination of countries, will make much impact compare to the impact that China has now and will increasingly have (plus the negative impacts expected from India economic and population growth.)


China is driven; it can not stand still economically. To retain political stability the central and regional governments must supply jobs and housing to the current 600 million urban population and the 200 million more poor rural people that will be moving to urban areas over the next decade.
China is obviously focusing on its own survival and growth and naturally ignores the needs of other nations. China "conforms" to Western moral standards only when it suits it or required to propagate China's own aims. China is especially reluctant to support UN effort that reduce the ability of dictatorial powers such as Syria and Iran to subdue their population by force since they have been doing it in some cases and will do it again. They are extremely concerned about the desire of some of their minorities for self determination. Up to now local rebelions are unrelated and focus on correcting local wrongs. But China leadership fears a possible coordination of these local upsets and widespread instability if they are not stopped early. This is why they clamp down on small events that to us seem so minor nad unjustified. Even if we do not like it, We must look at it from their point of view in order to coordinate better the global fight against GW. Yes, this ultimate danger to humanity is more important than achieving soon our dream of full human rights.

China's Communist leadership is working hard to improve the lives of the majority of their population, concentrating on its Han majority of 91.5%. China controls the major banks and holds the majority of foreign capital and gives just a minimal political freedom to prevent upsetting the apple cart. I admire what China leadership did after the death of Mao and his immediate successors. It understood realistically the needs of the country; the first one was reducing its rapid population growth. Under Mao China's population grew from 530 millions in 1948 to 800 millions in 1970 at a rate of 2.2%.

China long term goal has been to first achieve a zero population growth and eventually to reduce their population over the next century to some 750 millions. Wise and courageous aims. The one child policy came from that and succeeded very well to limit the growth rate to just 0.5% and cut the expected population by some 400 millions people. But despite this marvelous effort it could not cut the actual population growth - the current population is nearly three times the population of 1948!


In addition, the ability of the central government to influence local affairs, which is the key to actual developments and the rule of some level of law, is limited. Regional leaders are very powerful and influence local development by often making their own rules and even breaking national guidelines.

China not only has cheap labor in combination with low cost capital, it also does not insist on profit. Full employment is the key goal. Therefore, their competitive position borders on illegal product dumping.


In contrast, we must follow long established safety laws, environmental protection laws, pay social security taxes, income tax, sales tax, and many other requirements (which I agree with) undercutting most western industries ability to compete with an industry that ignores almost anything but current minimal salaries to a vast labor pool. Most of their product undercut substantially similar US products.


But much of China low cost products also come with big negatives: internally high pollution, and low quality and even dangerous products. It is not only that the color of a toy will fade faster but that dangerous lead paint will be used in children toys. Or dangerous chemicals will be used to modify milk products killing hundreds. Or the death of hundreds (thousands?) of children when their schools buildings collapsed on them in an earthquake because the concrete was well below specified strength- to increase builder's profits.


I will discuss this important aspect of Chinese products at another time.





Few thoughts on energy and global warming.

by Ginosar  


I have not written for months, just read and observe. It was not a satisfying experience. We are digging ourselves deeper into Global Warming trouble.

There is overwhelming scientific evidence that GW is already here and marked by air and ocean temperature rise, global glacier melting, ice sheets disappearing and by major, rapidly changing weather patterns. It is causing damage to the environment and our way of life which will be more severe every day we are continuing on our present path: - talking about Greenhouse gas curtailment but doing nothing about it.

True, China is now the largest CO2 emitter and with time India will have a larger population and will emit high amount of GHG. But the US is the path-setter in the Western world since we have emitted the most GHG to date and have the national wealth ($14 Trillion GDP) to make economic sacrifices to reduce GW.

I do not see any evidence that the US as an aggregate accepts the reality of Global Warming or plans to do anything of substance about it. Period. Even under a Democratic controlled Congress, nothing was done. Just think what will happen now under a Conservative controlled House, composed of both Republicans and many conservative Democrats. With their love of wealth, rejection of reality and fear of change, we are in deep trouble. And the president is unable to grasp the time-criticality and magnitude of GW.

And we are all so comfort oriented, we do not want to modify our easy way of life, reduce our standard of living, reduce our energy consumption, or inconvenient ourselves by even a small amount. This also applies to the environmental movement and liberals; we are not willing to accept that our very way of life is under serious and accelerating attack. We are still operating in the 9 to 5, life is good mode. We dream that we Americans are so smart and capable, wind and photovoltaic, or some future miracle technologies, will save us, so why make any sacrifice?

We do not grasp that most of our standard of living has been the gift of ample, cheap fossil fuels. It is tremendously difficult, it may be even impossible, to replace that temporary gift of nature!

So many articles are appearing continuously about the "magnificent potential" of green technology to save us from the damages of GW. They have been too optimistic and often unrealistic. Little attention is paid to the economics, the way investors look at their potential for profit vs. risk. Only private investors can make the huge financial investments needed for large scale energy systems. Governments do not have the resources for that.

Investors are cool customers; they are influenced by potential profits and are less impressed by market penetration artificially created by government subsidies. Our governments also ignore economic realities often.

We are still not accepting the time-criticality of GW. Many of the dire predictions of climate damages arrived considerably faster than predicted. Many of these processes once started are self-driven. There is no way back!

We can't act as a nation since our political leaders are limited; they are mostly lawyers without substantial experience in any things but words. Broader and deeper grasp of reality is needed; courageous thinking and actions are required. And that is not the way our Congress operates.

Our society believes that technical solutions are just around the corner and, therefore, we do not have to impose significant tax on carbon to reduce demand of fossil fuels, reduce energy use and assist development of alternative energies. Governments subsidies to specific technologies are mostly waste of our very limited financial resources. US energy sector is some one and a half trillion dollar a year. Some twenty trillions would be needed to be invested to replace much of our fossil-dependent way of life. We are already in deep borrowing and will be longer. It is not possible to continue to be economically viable with the immense waste of resources we have exhibited to date: 1. Corn-ethanol fuel, 2. Cash for Clunkers car subsidy, 3.Photvoltaic systems rebates.

Examples: It will cost California population some $50 billions to get one percent of its electricity from photovoltaic system including subsidies by the state and federal government. We can not afford this waste. At this rate the investment in electricity generation by PV for just 20% of CA electricity would be $1 Trillion. Unrealistically high. By the way, the state budget is short $20 billion for several years now.

Germany dedicated some $70 billions to generate one third percent (1/3%) of its electricity from PV while continuing to increase its coal-generated electricity beyond 50%.

Governments are generally not in the energy supply field and should instead, dictate national goals, such as reduce GHG by a certain amount by a certain date, not what is the "correct" low-carbon technology to use. Legislatures are not qualified to select technologies for the future. Their decisions are biased towards business interest. They are subjected to powerful pressure by industry, and even by too emotional environmentalists.

We never faced any thing of this nature before, and we are not mature enough to deal with it.

President Johnson was briefed on the danger of GW and made a serious statement to Congress about it, but more immediate events took over. We had time then.

The way we behave in the US, by the time we will feel significant pain from GW to wake us up, it would be too late.