Saturday, May 19, 2012

Our G8 Leaders Cannot Solve Our Problems

Indeed, our G8 (pronounced "great") leaders cannot even recognize what the problem is.

I read an article today on Yahoo entitled "G8 leaders back Greece in euro zone, call growth 'imperative'".

This is a bit of problem as I enumerated in the following comment on the article:

"Our G8 leaders don't get it. Growth is done. The easy oil is gone. All this unrest you are seeing in the world is the result of us hitting hard limits. Politicians and economists just don't get it."

Brief and to the point. Definitely not my usual style.

The first cogent reply was from Joe S. from Kansas City, United States where he wrote:

"Growth is not done... we just need to allow individuals to pursue their dream, but of course with some and limited oversight. If governments got out of the way, we'll have growth within months.

Consider the attack by Obama and democrats on the coal and oil industry. They killed the Keystone pipeline and his type of people are regulating the coal industry to death.

The socialists want businesses under their control and that is why they pursue an unsustainable "green" energy that requires subsidies.

That is why growth appears to be done.... socialistic concepts.

Ronald Reanan(sic) quote:
If it moves, tax it.
If it keeps moving, regulate it. And if it stops moving,
subsidize it'"

Sigh. Perhaps it is not just politicians and economists that don't get it.

Joe, I agree that this is a problem of ideology, but the ideological problem is not republican vs. democrat, free-market vs. socialist. Deficit spending will not solve this problem because creating additional financial claims on a limited pool of resources isn't going to fix anything. Cutting regulation and taxes to stimulate business isn't going to do anything because of resource limits, you can't grow what you don't have.

An aside though, funny how you should mention that Obama and the democrats are attacking the fossil fuel industry, by trying to regulate it. Perhaps the best way is for the Obama administration to cut all subsidies to the fossil fuel industry and let them compete on their own merits, just like in a true free market? Of course the Republicans would rail against that. And you are back to status quo, pinning the hopes of your economy on a non-renewable fuel source.

The economy runs on energy, without access to ever increasing energy you have cannot have a growing economy. And unfortunately due to a flaw in the foundation of classical and subsequent neo-classical economic thought our global economy must grow or die.

What is that flaw? From the times of Adam Smith, Thomas Malthus, and John Stuart Mill, economics as a system, consisted of land, labour and capital. Neoclassical economics subsumed land into capital, treating land as a subsystem of capital. The error, one that has been made worse from the transition of classical to neoclassical economics is that land is first a subsystem of economics, then a subsystem of capital.

All along we have had it exactly backwards.

The Economy is a subsystem of the Environment (land).

Without environment, which provides all externalities, you can have no economy. Thus laws governing environment (physics) take precedence over rules governing economics. And that law is the second law of thermodynamics. The easy oil that fueled economic growth is nearly gone and I say again that the unrest you are seeing, riots, political uncertainty, debt crisis, housing crisis, unemployment, food crisis, climate change, repeal of freedoms, all stems from the energy crisis.

This might have been something that could have been dealt with 30 years ago, but now it is far too late. So while those in the US continue to treat politics like a team sport, the really important decision do not get made, indeed the really important issues do not get discussed.


Michael English said...

You mentioned subsidies to oil and gas. I can't verify the number, but recently claimed "our governments give nearly $1 trillion a year of our taxpayer money to Big Oil and coal". I was blown away!

Vasper85 said...

I voted in that petition. Seems all the small government libertarians who rail against Eco-energy subsidies should be equally pissed off about oil subsidies. Oil is so cheap, they say, no one wants renewable energy, and we certainly don't any of our tax money going to it.

Oil wouldn't be nearly as competitive without the subsidies they are getting. And if you factored in full cost accounting (no more externalities, price everything) then renewables would be cheaper by a long shot.