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America’s Updated Energy Strategy

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by John Brian Shannon

President Obama visited the Argonne National Laboratory today in Argonne, Illinois, to give a major speech on the future of American energy. A new, USD $2 billion dollar program called the energy security trust was announced which gives focus to the administration’s plans for more renewable energy and proposes lower subsidies for fossil fuels.

Much of the resulting policy statement is based upon information supplied to the administration by the nonpartisan, Securing America’s Future Energy (SAFE) which represents senior business and former military leaders on both ends of the American political spectrum.

Here are the main points of the energy security trust – more detailed information is available by clicking here and here. And you can read the transcript of the President’s speech today in Argonne, Illinois, as compiled by the Chicago Sun-Times here.

By 2020, the President and Energy Secretary Steven Chu want the US;

  • To double the present level of U.S. renewable electricity generation
  • To double American energy productivity (by 2030)
  • To cut energy waste in the U.S. by half over the next twenty years
  • To invest in technology promoting energy efficiency & reduced waste
  • To cut net oil imports in half by the end of the decade
  • To enable safer production & cleaner electricity from natural gas
  • To promote safe & responsible oil and natural gas development
  • To assist the Nation’s truck fleets to adopt natural gas & alternative fuels
  • To improve energy efficiency through the Better Buildings Challenge program
  • To help U.S. states cut energy waste, improve efficiency & modernize grids
  • To streamline Interior Department regulations for faster project permitting
  • To work with the G20 & other fora to phase-out fossil fuel subsidies worldwide
  • To work with the IEA & others to strengthen energy security
  • To promote energy efficiency & development & deployment of clean energy via Clean Energy Ministerial & other international fora
  • To promote safe & secure nuclear power in nations pursuing nuclear energy
  • To design a responsible nuclear waste strategy for the U.S.

As the President continues to pursue his ‘all-of-the-above’ energy strategy, it should be noted that significant progress has been made. As President Obama stated in his speech today,

“We produce more oil than we have in 15 years. We import less oil than we have in 20 years. We’ve doubled the amount of renewable energy that we generate from sources like wind and solar. We have tens of thousands of good jobs to show for it.

We’re producing more natural gas than we ever have before with hundreds of thousands of good jobs to show for it. We supported the first new nuclear power plant in America since the 1970’s. And we’re sending less carbon pollution into the environment than we have in nearly 20 years. So we’re making real progress across the board.” – President Barack Obama

All of this is adding up to huge changes in the American energy sector and for the producers, consumers and investors of energy, the energy map in 2020 will bear scant resemblance to our present-day energy model. And that means that seven years from now, the air in and around large U.S. cities will be the cleaner for it.

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Infographic: Energy Security Trust -- courtesy of The White House

Infographic: Energy Security Trust — courtesy of The White House

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America: Why the High Unemployment?

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by John Brian Shannon

In 1970, of the 89,244 new cars and trucks sold in the U.S.A., 84.9% of them were built in North America, while only 15.1% of them were manufactured in other countries and shipped to this continent for purchase and registration.

In 2012, of the 14.4 million new cars and trucks sold in the U.S.A., 44.5% of them were built in North America, while imports accounted for 55.6% of registrations. Read here.

By any measure, this is an ongoing paradigm shift which directly relates to American unemployment statistics since 1970.

A total of 15.4 million car and light truck sales are expected in the U.S. for calendar year 2013 — the best year since 2007. By 2014, U.S. sales are expected to reach 16 million, with imports continuing to increase their market share in the U.S.

Since the first Model T Ford rolled off the Dearborn, MI assembly line, millions of  workers have been employed by American automakers – including some workers who worked for the same company their entire career. Fathers who worked at Ford, GM or Chrysler from their childhood until retirement, found their sons and daughters good-paying jobs with their old employers. Unemployment in the 1945 – 1975 era was generally quite low — and that, in the midst of an economically damaging Cold War which negatively affected many parts of society including the unemployment rate, not incidentally.

Generally during the post-war boom, everybody worked, everybody earned a paycheque, and almost everybody contributed to the economy. About late 1973 or early 1974 this began to profoundly change in the United States and in the Western nations generally.

Not to blame the American auto manufacturers for the Arab Oil Embargo, as the Big Three had been assured of low petroleum prices by foreign governments and several domestic administrations — hence the big, V-8 powered cars of the era and their consequently-low MPG figures were popular with both manufacturers and consumers.

But American consumers are a fickle lot. Once the gas price shot upwards in the aftermath of the Arab Oil embargo, Datsun (now Nissan), Toyota and Honda nameplates began selling as fast as the ships could deliver them from Japan.

If only the foreign vehicles were of inferior quality! But they’re not. If only they used more fuel than their U.S. equivalents. But they don’t. The corporate fuel economy average for foreign and domestic makes still favours imported vehicles. Not by the wide margin it once did — and not that GM and Ford haven’t scored impressive MPG victories in some categories, because they have.

But, to put it bluntly, many employed Americans prefer their foreign-built cars. (“And those millions of now-chronically-unemployed Americans will just have to get by.”)

It’s not just cars and trucks either. Historically, most home electronics sold in the U.S.A. including televisions, smartphones and computers were also ‘Made in the U.S.A.’  — but not these days.

Most of the clothing, plastics and extruded metals purchased in the U.S. are now manufactured in Asian and Southeast Asian nations, where countries like Indonesia rely heavily on textile exports to us and other Western nations.

Much of the American conversation these days revolves around the old austerity vs. stimulus debate which reporters and op/ed journalists are required by their respective organizations to cover.

Meanwhile the 80-ton elephant in the room is the trillions of manufacturing dollars which have transferred from the West to Asia since 1970 — and the manufacturing jobs that have gone with them.

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Excerpts from the Center for American Progress Fact Sheet/Regional Energy, National Solutions

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by John Brian Shannon

“Developing just 54 gigawatts of offshore wind in Atlantic waters would generate $200 billion in economic activity and create 43,000 permanent, well-paid technical jobs, in addition to displacing the annual output of 52 coal-fired power plants.” — Center for American Progress – Fact Sheet/Regional Energy, National Solutions

I have selected excerpts from this report, which you can read below. I suggest you read or download the entire report in PDF form, click here:

Excerpts from the Southeast: Energy efficiency and smart grid

The Southeast, a region historically dependent on fossil fuels, has become a leader in the emerging field of smart-grid technology—which is at the center of the impending wholesale modernization of our electric infrastructure. An enhanced commitment to regional smart-grid innovation, manufacturing, and deployment, coupled with a robust plan to address the region’s traditional energy efficiency shortfall, point to an economic and environmental boon. — Center for American Progress – Fact Sheet/Regional Energy, National Solutions

• The Southeast boasts more firms across the high-tech smart-grid value chain than any other region. Continuing to lead this transition offers the opportunity to create jobs across a range of skill-levels and fields; to diversify existing companies and to build new ones; to improve quality of life by connecting home, utility, renewable, and vehicle technology; and to reap the environmental and cost-saving benefits of using our resources more efficiently. — Center for American Progress – Fact Sheet/Regional Energy, National Solutions

• At the same time, addressing the region’s serious shortfall in implementing conventional energy efficiency policies provides a tremendous and complementary economic and environmental opportunity. A study by Georgia Tech and Duke University showed the potential to cut energy use across the region by 16 percent in 2030. This would result in annual consumer savings of $71 billion and lead to the creation of 520,000 jobs by 2030. — Center for American Progress – Fact Sheet/Regional Energy, National Solutions

Excerpts from the Midwest: Advanced Vehicles

The auto industry revival that is taking place in the Midwest is proof that states and the nation prosper when we make energy choices that take the American people, our economy, and our outdoor heritage forward together. Having recovered from near bankruptcy less than three years ago, the auto industry is now profitable, sales are rebounding, and fuel-economy projections have exceeded expectations. — Center for American Progress – Fact Sheet/Regional Energy, National Solutions

In addition to revitalizing American manufacturing, the deep oil savings from vehicles being built now under strong new fuel-economy standards will mean net savings to consumers of more than $54 billion a year in 2030 and will add 570,000 jobs to the economy. — Center for American Progress – Fact Sheet/Regional Energy, National Solutions

Excerpts from Mountain West: Wind and solar development and distribution

The Mountain West is experiencing firsthand the economic and environmental benefits of transitioning to low-carbon energy sources. Continuing this shift will be critical—the West is already experiencing serious damage from climate change and would face an even grimmer future if the nation turns its back on clean renewable energy in favor of a continued reliance on dirty fuels. — Center for American Progress – Fact Sheet/Regional Energy, National Solutions

• The West boasts nearly unlimited renewable energy resources—particularly wind, solar, and geothermal—that promise a brighter economic future than is possible with fossil fuels. The National Renewable Energy Laboratory identified 11,788 megawatts of nonhydro renewable energy projects either under construction or in advanced development in the region. Using the Electric Power Research Institute’s estimates of jobs per megawatt, these projects represent 71,872 jobs. — Center for American Progress – Fact Sheet/Regional Energy, National Solutions

Excerpt from the Pacific Coast: Solar power innovation and installation

The Pacific Coast and the adjoining western states are referred to as the “sun belt” for a reason. Capitalizing on that abundant solar resource is paying huge dividends for the region—providing jobs, spurring new industries, and spawning new innovative technologies. Abundant resources and aggressive renewable energy standards, including incentives for both utility-scale and small-scale rooftop solar, position the region to build on its current status as a national leader in solar energy installation and generation. — Center for American Progress – Fact Sheet/Regional Energy, National Solutions

• The solar industry in California has experienced significant growth over the past 15 years. Since 1995 the number of solar businesses grew by 171 percent, and total employment jumped by 166 percent. As a point of comparison, the total number of California businesses has grown by 70 percent, and employment has increased by 12 percent. — Center for American Progress – Fact Sheet/Regional Energy, National Solutions

To read or download the entire report in PDF form, click here.

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King Ludd is Still Dead — MY COMMENT

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by John Brian Shannon

Please read “King Ludd is Still Dead” by Kenneth Rogoff — at Project Syndicate.org.

Professor Rogoff’s excellent article has outlined the way our modern economic systems work and his statement succinctly describes the need for change to our present paradigm;

“…and the great economist Wassily Leontief worried that the pace of modern technological change is so rapid that many workers, unable to adjust, will simply become obsolete…”

Workers do become obsolete and must then train for other jobs. Which is VERY inefficient from the national economy standpoint. Not to mention lowering the quality of life for that worker and the family that worker supports.

I believe it is in our best national interest to enhance the ability of skilled workers to continue in their chosen career — rather then having their careers suddenly ended by the economic whims of a local marketplace.

Which is why economists everywhere should be proactively calling for the freedom of movement for skilled labour and semi-skilled labour to match local market demands all over the planet.

For just one telling example, take the people who work in high steel. These are the people who build skyscrapers, communications towers and bridges. These are highly skilled workers and it would be a shame for them to become unemployed, or under-employed on account of local conditions.

Such workers add to the knowledge base of a nation and for them to enter training programs to become bus drivers, painters, or insurance salesmen, is deplorable.

But this is what is happening all over America and other Western nations — and not just to the workers in high steel!

Rather than list all of the skilled occupations which face such calamities worldwide, (that would be most occupations which require skilled workers AND also suffer from the boom and bust economic cycle) suffice to say that many skilled workers can be laid off as a national economy tanks. What then?

Economists should be leading the charge in calling for an international treaty to guarantee and enhance the ability of skilled and semi-skilled labourers to go to where the work is, to live in that country with their immediate family until the project is completed, and then move on unhindered to the next project — wherever it may be in the world.

Most often, these workers will return to their home country when their own nations’ economy rebounds and they are again in demand at home.

Instead of staying in the U.S.A. and becoming bus drivers or shopping mall security guards, they will still be in top form — having kept their skills sharp in the interim and will have learned new techniques and practices from working in different jurisdictions around the planet. They will return with a sharp skill-set, positive experiences, they will be more rounded-out and their quality of life will have been enhanced.

This contributes more to the national knowledge base than allowing these people to drift into other employment, unemployment or under-employment during local economic slowdowns.

Economists should not be leading from behind on this, but should research and arrive at a common position which they should present to politicians and separately to the UN, in order to facilitate economic change for the better — change that will benefit all nations. If economists don’t impart this knowledge to political leaders, then who will?

Freedom of skilled labour to swiftly and easily move to where the work is — equals a more efficient world economy, better quality of life for those workers and their families and additional knowledge for the national skilled labour knowledge base.

John Brian Shannon

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ABOUT JOHN BRIAN SHANNON

I write about green energy, sustainable development and economics. My blogs appear in the Arabian Gazette, EcoPoint, EnergyBoom, Huffington Post, United Nations Development Programme, WACSI — and other quality publications.

“It is important to assist all levels of government and the business community to find sustainable ways forward for industry and consumers.”

Green Energy blog: http://johnbrianshannon.com
Economics blog: http://jbsnews.wordpress.com
Twitter: @JBSCanada

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Why Resource-based Economies Need Tariffs

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by John Brian Shannon

Joseph E. Stiglitz, Nobel laureate in economics and Professor at Columbia University has noted the problems inherent to resource-based economies in his recent and excellent article; “From Resource Curse to Blessing” which I urge you to read. Early into his piece, he says;

“On average, resource-rich countries have done even more poorly than countries without resources. They have grown more slowly, and with greater inequality – just the opposite of what one would expect.” — Stiglitz

As there are massive profits to be made in the resource industry, the concerns of other stakeholders are shouted-down or otherwise derailed in the name of progress. After a few years other sectors of the economy begin to drift, which allows escalation of the fundamental problems inherent to this kind of economy.

The usual solution to the inevitable slowing of a resource-based economy is to facilitate ever more extraction — in the hopes that more resource dollars will stimulate growth and compensate for the lack of progress in other sectors.

Time and time again this fails to work and to make matters worse, other sectors of the economy grow weaker in almost direct correlation with mounting resource exports. Manufacturing often takes the greatest hit.

Moreover, resource-rich countries often do not pursue sustainable growth strategies. They fail to recognize that if they do not reinvest their resource wealth into productive investments above ground, they are actually becoming poorer. Political dysfunction exacerbates the problem, as conflict over access to resource rents gives rise to corrupt and undemocratic governments. — Stiglitz

The government line on this is usually; “We should concentrate on what we do best.” Which is fine except that in so doing, the rest of the economy slowly slips toward the day when the government must then announce; ‘The majority of the resources are gone, we now must rebuild our economy from scratch.” This is when economists are finally consulted and listened to — but are then expected to solve the entire problem by the weekend, with nothing more than a magic wand and an algebraic/transcendental incantation.

Resource-based economies should commit to robust and long-term economic development throughout the economy well before such cantrip is required.

Real development requires exploring all possible linkages: training local workers, developing small and medium-size enterprises to provide inputs for mining operations and oil and gas companies, domestic processing, and integrating the natural resources into the country’s economic structure. Of course, today, these countries may not have a comparative advantage in many of these activities, and some will argue that countries should stick to their strengths. From this perspective, these countries’ comparative advantage is having other countries exploit their resources.

That is wrong. What matters is dynamic comparative advantage, or comparative advantage in the long run, which can be shaped. Forty years ago, South Korea had a comparative advantage in growing rice. Had it stuck to that strength, it would not be the industrial giant that it is today. It might be the world’s most efficient rice grower, but it would still be poor. — Stiglitz

The problem of course, is how to fund the necessary investment in the non-resource economy. And what level of funding do non-resource sectors enjoy at the present? Less than you might imagine.

Of all solutions, the simplest usually work best. Which is why a nominal export tax is a necessary ingredient to any resource-based economy to assist the national economy maintain a quantitative balance.

After all, taxing natural resources at high rates will not cause them to disappear, which means that countries whose major source of revenue is natural resources can use them to finance education, health care, development, and redistribution. — Stiglitz

There is little need for domestic resource taxes in nations where the majority of resources are exported. Such ‘recycling’ of citizen’s money adds little ‘new money’ to the economy and irritates voters, while the most efficient economic performance enhancement available comes from export tariffs and FDI.

Both export tariffs and FDI revenue streams represent new money entering the system which means unlike domestic taxation, citizens are not paying for other citizens employment programs — foreign interests will be paying that bill.

In those countries where exported resources contribute measurably to GDP, export tariffs need only be nominal to be successful. When all of the revenue generated by those tariffs is used to fund expansion of the non-resource sectors, many economic indicators will begin to show positive signs.

When resource-based economies implement a 5% to 8% export tariff on every exported tonne of coal/metals/minerals, or barrel of oil, their economies will fire on all cylinders — and with little complaint from the rapidly growing and resource-hungry nations.

John Brian Shannon

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Will the Collapse of the Western Manufacturing Base Create a Worldwide Depression?

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by John Brian Shannon

The Eastern economies have traditionally been the manufacturers and purchasers of downmarket goods in their own region, while Western economies have traditionally been the manufacturers and purchasers of upmarket goods in their particular region.

Over the past 40 years Asia has taken much of the West’s upmarket manufacturing base, so much so, that the West has lost fully 50% of the manufacturing jobs it once enjoyed previous to 1980. That is the single most important reason why there is significant unemployment, under-employment and worryingly, under-reported unemployment (people who no longer look for work) stats in the Western economies.

Which obviously leaves a big hole in the economy of the West, translating into lower Western economic performance and recessions in North America, Europe, Japan, Australia and New Zealand since the 1970′s.

The fact that many Western corporations are making huge amounts of money at this (outsourcing their manufacturing to Asia – resulting in better corporate profits due to the much lower labour rates there) is now a complete side-issue.

It has now come down to this; The once broad base of Western consumers with generous amounts of disposable income is changing to an ever-broadening base of Western consumers without much disposable income.

If things continue, soon it will impact the Eastern economies — as there won’t be enough people in the West with enough disposable income to afford much of those upmarket goods and services! Translating into reduced economic performance there.

For now, China and India are the only significant economies in the entire world which maintain a healthy growth rate. They have been the economic engines of the world since 1998. Here in the West, we have suffered two recessions since then — and that, with China and India firing on all cylinders and their admirable growth rates of at least 8% per year and sometimes much higher than that.

The U.S. growth rate was an anemic 2% last year and is expected to come in at 1.5% to 1.6% next year. The U.S has not seen any growth rate over 4% since the 1980′s. Europe and Canada have posted similar percentages over that same time-frame.

If demand for Eastern-produced goods slackens any further in the West, the Eastern economies will see recession too. At that point, with the West still mired in the fog of recession — the entire world economy will tailspin resulting in a worldwide depression. This is the fear of many economists — including economists in Asia.

Which is why I favour keeping some significant amount of manufacturing here in the West, as manufacturing produces (relatively speaking) a lot of jobs — while removing resources from the ground and shipping them to Asia produces relatively few jobs.

Oil refineries here cost 12 – 13 billion dollars, while in China they cost 1 billion dollars. No new refineries are planned for the West for obvious reasons. As much as I’d like to say otherwise, there is precious little chance of adding value to our petroleum exports when new refineries are so expensive here.

Which is why we need to find ways to add value to our other resources.There are many North American resources that are being exported away and some would say, squandered away. We need much more focus on a value-added economy. We need to add value to our diminishing resources before they leave our Western economy.

One way, is to manufacture products out of our resources — and then sell them abroad, to enhance our balance of payments, which would contribute to enhancing our GDP, thereby lowering our overall debt-to-GDP ratio. Those ratios are killing us right now in the West.

Another good way to improve our Western economic picture is to tariff all resource exports and use that money to fund infrastructure projects, which would contribute much to the economy, but only temporarily. After all those projects reach completion in about ten years, workers (consumers with disposable income) will again be unemployed or under-employed, just as they are now. What then?

Some economists have suggested a Goods and Services Tax for the U.S. economy and to use those windfall tax funds for national infrastructure programs, as was done in Canada so successfully from 1990 – 2004. I am one of those people. However, with the latest projected U.S. growth rates set to be 1.5% to 1.6% for next year, that means there is a lot of fragility in the economy and some economists say a large, useful Goods and Services Tax might stall the recovery process. A smaller tax would be much less useful, but the taxation rate could be increased as the economy builds positive momentum. Even with those limitations, it is still a good option for the U.S.

It keeps coming back to the fact that we need to add more value to our economy, especially to our export economy on a long-term sustainable basis. We need to create MORE jobs from the resources we extract and from our agriculture and forestry industries — or eventually there won’t be enough demand for Asian-produced products and when those Asian sales sag due to lack of demand in the West, it will hit the fan everywhere.

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John Brian Shannon writes about green energy, sustainable development and economics from British Columbia, Canada. His articles appear in the Arabian Gazette, EcoPoint Asia, EnergyBoom, the Huffington Post, the United Nations Development Programme – and other quality publications.

John believes it is important to assist all levels of government and the business community to find sustainable ways forward for industry and consumers.

Check out his personal blog at: http://johnbrianshannon.com
Check out his economics blog at: http://jbsnews.wordpress.com
Follow John on Twitter: https://www.twitter.com/#!/JBSCanada

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The Canadian Austerity Success Story

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by John Brian Shannon

The Canadian success story on deficit elimination, debt reduction and significantly, strengthening the economy by adding jobs and improved economic performance during troubled economic times has been well-documented.

The Canadian icon known as MacLeans Magazine featured an outstanding piece by LEAH McLAREN in the October 10, 2011 edition entitled I told you so – which covered Prime Minister of the UK, David Cameron‘s speech to a joint session of the Canadian Parliament (both the Senate and the House of Commons) where PM David Cameron made a number of positive comments regarding Canada’s economic success.

Cameron commented:

“”Canada got every major decision right” in the past few years of global market turmoil. He lauded the strength of both the Canadian banking system and our economic leaders, who, he said, “got to grips with its deficit” and were “running surpluses and paying down debt before the recession, fixing the roof while the sun was shining.”

Cameron’s admiration for Canada’s relatively peachy fiscal position stands in stark contrast to his dim view of his Eurozone neighbours. On the topic of Europe and the U.S. getting their own houses in order, Cameron said; “This is not a traditional, cyclical recession – it’s a debt crisis…”

He went on to say;

“When the fundamental problem of the level of debt and the fear of those levels, then the usual economic prescriptions cannot be applied.”" – MacLean’s Magazine.

Read the entire article here…

MacLean’s is not the only publisher to write on this topic. Canada’s Globe & Mail have also published articles discussing the Canadian economic success story of the 1990′s and early 2000′s.

A seminal article by LOUISE EGAN and RANDALL PALMER ran in the Nov 21, 2011 edition of the G&M entitled The lesson from Canada on cutting deficits – a short excerpt of which appears below. Please take the time to read and save the entire article.

“Finance officials bit their nails and nervously watched the clock. There were 30 minutes left in a bond auction aimed at funding the deficit and there was not a single bid.

Sounds like today’s Italy or Greece?

No, this was Canada in 1994.

Bids eventually came in, but that close call, along with downgrades and The Wall Street Journal calling Canada “an honorary member of the Third World,” helped the nation’s people and politicians understand how scary its budget problem was.

“There would have been a day when we would have been the Greece of today,” recalled then prime minister Jean Chrétien, a Liberal who ended up chopping cherished social programs in one of the most dramatic fiscal turnarounds ever.

“I knew we were in a bind and we had to do something,” Mr. Chrétien, 77, told Reuters in a rare interview.

Canada’s shift from pariah to fiscal darling provides lessons for Washington as lawmakers find few easy answers to the huge U.S. deficit and debt burden, and for European countries staggering under their own massive budget problems.

“Everyone wants to know how we did it,” said political economist Brian Lee Crowley, head of the Ottawa-based think tank, Macdonald-Laurier Institute, who has examined the lessons of the 1990′s.

But to win its budget wars, Canada first had to realize how dire its situation was and then dramatically shrink the size of government rather than just limit the pace of spending growth.

It would eventually oversee the biggest reduction in Canadian government spending since demobilization after the Second World War. The big cuts, and relatively small tax increases, brought a budget surplus within four years.

Canadian debt shrank to 29 per cent of gross domestic product in 2008-09 from a peak of 68 per cent in 1995-96, and the budget was in the black for 11 consecutive years until the 2008-09 recession.

For Canada, the vicious debt circle turned into a virtuous cycle that rescued a currency that had been dubbed the “northern peso.” Canada went from having the second worst fiscal position in the Group of Seven industrialized countries, behind only Italy, to easily the best.

It is far from a coincidence that the recent recession was shorter and shallower in Canada than in the United States. Indeed, by January, Canada had recovered all the jobs lost in the downturn, while the U.S. has hardly been able to dent its high unemployment.

“We used to thank God that Italy was there because we were the second worst in the G7,” said Scott Clark, associate deputy finance minister in the 1990′s.

Canada’s experience turned on its head the prevailing wisdom that spending promises were the easiest way to win elections. Politicians of all kinds and at all levels of government learned that austerity could win.”  read more…

For those unfamiliar with examples of successful austerity, Canada holds great promise. There are others to discuss in the coming days – which will illustrate austerity can actually lessen the unfavourable effects of decades of excessive spending by governments and improve the economic position of a nation.

ABOUT JOHN BRIAN SHANNON

I write about green energy, sustainable development and economics. My blogs appear in the Arabian Gazette, EcoPoint, EnergyBoom, Huffington Post, United Nations Development Programme, WACSI — and other quality publications.

“It is important to assist all levels of government and the business community to find sustainable ways forward for industry and consumers.”

Green Energy blog: http://johnbrianshannon.com
Economics blog: http://jbsnews.wordpress.com
Twitter: @JBSCanada

 

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JOBS: The Key to Capitalism’s Success

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by John Brian Shannon

As we all know, several political/economic models are in use in the early 21st century. A little refresher for you first, if your high-school political science classes didn’t especially thrill you.

The capitalist system employed by the Western nations and some other nations, is often referred to as the Free Enterprise system, the Free Market system, Wealth Accumulation, Capital Accumulation or the Open Economic model – depending on the context of a conversation. Politics can vary within capitalist systems – which are often a variant of democracy (civil rights enshrined in a constitution, the right to vote, rights to property and person and freedom of expression) form part of this model. Socialist parties represent the “left wing” and conservative “right-wing” parties are represented along with independent candidates as elected by the registered voters.

In the capitalist system, greed is the primary agent of economic change. If you want to eat, you work for money to buy your food. If you would rather drive to work than walk, you work for money to buy a car and insurance. An individual “works” to earn “profit” to purchase goods or services. The underlying premise being, that if an individual has a decent education and works “smart” and “hard” you will accumulate wealth over time. Western corporations and governments operate in a similar fashion.

So, why isn’t it working?

“It IS working!” wealthy Western individuals emphatically state.

“It IS working!” Western corporations emphatically state.

“It IS working!” Western governments emphatically state.

And in those cases, it most emphatically IS working!

But the rest of us are not. Working, that is. You know… jobs, working, making a living, paying the bills, making the rent… and all the rest of it.

You will recall my words from a previous paragraph; “An individual “works” to earn “profit” to purchase goods or services. The underlying premise being, that if an individual has a decent education and works “smart” and “hard” you will accumulate wealth over time.”

All good there. Except what happens in the capitalist system when there aren’t enough jobs?

The short answer is; A failed economic system. Ever more wealth becomes concentrated in a ever smaller percentage of the general population. You guessed it — 1% of the Western population will always agree that the Open Economic system works well for them.

For Western nations it is death by a thousand cuts and only in the interests of economic survival will our present system evolve into something very unlike the present model and it may take as long as 50 years to do so.

Let me back up a bit.

I promised you a political science refresher and here is the other half of it. The Communist system, sometimes called the Statist model, the Centralized Economic model, or the Closed Economic model, does not employ greed as the primary driver of human activity. Profit, either at the individual or corporate level is unknown and all economic activity is considered the property of the state. The only things that really matter to a communist is the national GDP and the sovereignty of the country. Of course, civil rights and personal freedoms are enshrined in the constitutions of communist countries – although at the end of the day personal rights can be and often are subjugated in the best interests of the state.

For one example of this, in the former USSR alcoholism rates were astonishingly high. But this was never reported in the Soviet media as it was thought that publicizing this knowledge would emotionally depress workers across the nation – and thereby suppress economic output. Therefore and officially, in the former USSR there was no alcoholism – and hence, the government-owned hospitals failed to devise a treatment for a disease which only occurred in the decadent West! If a citizen of the former USSR arrived at a hospital or doctor’s office for treatment of his alcoholism, he was told that he suffered from “an imaginary disease” and was counseled to stop “trying to get attention” by emulating Western behaviors. And no doubt put on some sort of watch list for good measure.

Eventually the former USSR collapsed mainly due to internal forces. However, some communist nations remain and are thriving. China has surpassed India, France, the UK, Germany, Japan and every other country except for the United States in GDP and accumulated wealth – and has done so by employing the statist economic model. According to most economics Professors, China will surpass the United States GDP by 2040. That’s 28 years from now in case you are a Chinese economist counting the days.

The main reason for the dramatic growth-driven economic performance in China is that many Western corporations have chosen to do business in China rather than the West – due to lower land and construction costs, lower labour rates, the lower costs associated with a relaxed or non-existent regulatory environment (depending on the industry and region of the country) and other cost-lowering factors associated with operating a business in China.

Beginning about 1999, U.S. corporations especially, have embraced the opportunity to lower their costs by closing their North American factories and building brand-new factories in China – sometimes with significant communist Chinese government assistance! Other western corporations too, have been closing our factories by the thousands in America and Europe and relocating their manufacturing operations to China – and on account of this economic activity, the Western economies combined are at present, 150 million jobs short of full employment. This trend of creating jobs in communist China whilst simultaneously creating higher unemployment in the Western democracies will continue as long as Western voters don’t complain too much.

By 2030, the Western democracies will be much-weakened in comparison to a still-booming China and the other Asian nations. At that time, Asia will be supplying almost all the manufactured goods for the Western economies which will by then, have lost 300 million jobs to Asia.

Also by 2030, perhaps as many as 700 million Westerners will be retired persons receiving some form of Social Security – while millions of younger people won’t be old enough to join the workforce. It will be a time when less than half of the West’s population will be employed and able to support the Western economies. From the Western point of view, this trend gets worse until 2060 when economic performance is expected to plateau in Asia.

A paradigm-shift has been taking place right under our Western noses for three decades now and we have just now begun to notice. China will soon be the dominant world power – and we handed it to them in exchange for higher profits for Western corporations.

It’s said; “He who has the gold makes the rules” – and it is shaping up to be a very different world indeed.

Follow John Brian Shannon on Twitter: https://twitter.com/#!/JBSCanada

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Another Bank Bailout – MY COMMENT

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by John Brian Shannon

MY COMMENT ON PROFESSOR PAUL KRUGMAN’S ARTICLE BEGINS…

The great sucking sound that everyone is hearing these days is the sound of capital leaving the Western economies by the billions – perhaps trillions of dollars – over the past few decades.

Money goes where the investments pay the best returns – and these days that means the BRIC countries (Brazil, Russia, India and China) and other rapidly developing economies. As uncountable billions leave the Western economies, the jobs attached to those mega-billions go with them. Is it any wonder then, that some of the weaker Western economies have been in free-fall for some time? No, it is not.

A great deal of lamenting has been gone on in recent months – but the geomacro-economy has been changing and will continue to change as it reflects the new and evolving reality, for one simple reason – “If we continue to do what we have been doing, we can continue to expect the same results.”

And what is that result, exactly?

I quote Professor Paul Krugman – arguably the leading economist alive today: “An old routine plays out in Spain, with the banks getting help while the unemployed continue to suffer.” Read Professor Krugman’s excellent article here…

Bought anything lately that ISN’T Made in China? Clothing labels or manufacturing stampings could also read Made in India, Indonesia, or any number of other fast-growing economies.

Our consumers demand lower-priced goods and services, so foreign nations have gratefully fulfilled those requirements – effectively transferring Western wealth to third-world nations in huge, glorious gobs of U.S. and European bank notes!

It is said in China these days that one must watch the sky carefully for all the Manna falling from Heaven – which is falling in the form of chunks of gold large enough to take out entire city blocks!

Lest you think this is a recent development, it all started in earnest about 1973 shortly before the Arab Oil Embargo, when oil prices suddenly shot up and Detroit’s thunderous, but thrilling V8′s became unaffordable for millions of workers in nations used to interstate highways serving distant suburbs, spirited driving on the autobahn, and long summer vacations involving hundreds of miles of travel.

Japan at the time and still to this day, exports huge numbers of cars to the West and enjoys a growing market share of (mostly) fuel-efficient vehicles – and the ones that can’t boast good fuel economy, can certainly brag about outstanding reliability and brand-loyalty.

Since the 1990′s, South Korea, China, Indonesia, India and others have also stepped up to fulfill the wants and needs of American and European consumers with everything from home appliances and personal electronics, to tools, clothing and just about anything else you might purchase. Lower labour rates and production costs in Japan, then Korea and now, China, India and Indonesia, allowed more R&D spending, better products and lower prices for consumers and business alike.

Of course, those are all great things. It has been a decades-long bonanza for consumers, businesses and even the governments of the Western world are able to lower their costs by purchasing cheaper and often, more reliable goods from Asia.

American and European corporations have gladly followed this trend and contributed mightily to those developing nations attempting to service the wants and needs of Western consumers. If you doubt me on this – just do a Google search on Apple Computer for just one of many examples of U.S. companies which have elected to have their goods manufactured in China or other rapidly growing nations, instead of the U.S. Check Apple’s stock price in 1990 (mostly U.S. production) vs 2011 (mostly Chinese production). Impressive by any standard but not unusual, in fact, this Western-inspired trend is well established and continues to this day.

One day soon, there will be no manufacturing capacity in the U.S., Canada or Europe. It is dramatically cheaper to have it all done inside the BRIC countries and export those products to the West. Costs are so low, that shipping millions of products thousands of miles across entire oceans, becomes a tiny factor of the final price paid at U.S. or European cash-registers.

The “real price” of that huge manufacturing shift continues to play out in the daily media – higher Western unemployment rates, longer welfare rolls, lower domestic production, real-estate bubbles, bank failures, bank bailouts and so far, about one decade of destroyed dreams for families and small businesses.

But, man, did I get a great deal at the mall today!

Follow John Brian Shannon on Twitter: https://twitter.com/#!/JBSCanada

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B.C. Premier Plans Liquefied Natural Gas Exports – MY COMMENT

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My comment on an article in The Huffington Post

Read the original article here

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Premier of BC, Christy Clark – hits a home-run!

Of course, it goes without saying that we should all wean ourselves off of fossil fuels, including natural gas which is (arguably) the cleanest of all the fossil fuels.

I’m hoping that one day, especially as solar, wind, geothermal and hydrogen, approach price parity with convention­al power plant fuels – that fossil fuel use will decline.

Until then, for each gigawatt of power produced by power plants in China, natural gas is many times cleaner that the fuels they are using at the moment.

Switching to natural gas benefits China’s environmen­t, but on account of the vast quantities of dirty fuel they presently burn for power, it has a world-wide (positive) effect when they switch to a much cleaner fuel.

One of the best things about LNG, in case of pipeline accident, LNG dissipates into the atmosphere instead of flowing into creeks, rivers, drinking water wells, onto pasture-la­nd and into the ocean as crude oil does during a spill event. No mass deaths of living animals such as was seen during the Exxon Valdez oil spill.

Unless ignited, (high-pres­sure LNG does burn) merely shutting off the tap and waiting for the vapours to clear, is enough to solve the problem until the pipeline can be repaired.

So much better than a crude oil pipeline to our “tourist-m­agnet” BC coastline! There is really no comparison­.

Congratula­tions, Premier Clark.

johnbrianshannon@gmail.com

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