The Work Now Before Us: Bracing for Cheaper World Oil Prices

© 2009

By

Blaine D. Pope, Ph.D.

High grade Iraqi oil looks like it will soon be entering the world market, in large volume, in the near future. We should therefore “brace ourselves” for temporarily cheaper oil prices in 2010. This could be problematic.

Why do I say it this way?

Historically, since the energy crisis of the 1970s, efforts at conservation have often evaporated when energy prices have gone down. Those of us who are aware of how fragile our current energy supply chain has now become should therefore remain vigilant. Many may begin to argue that the long-term crisis has abated. Nothing could be further from the truth.

We cannot afford a repeat of the “tragedy” of the 1980s, when oil prices temporarily dropped (in the wake of North Sea and Alaska fields coming on line, together will Saudi Arabia increasing its production, injecting cheap petroleum on the world market, resulting in collapsing world oil prices, and tipping the export-dependent economy of the USSR over the brink). At that time, OECD countries essentially dropped and/or mothballed plans at restructuring their economies for a lower carbon footprint (the purpose for which the International Energy Agency [IEA] was originally created). Relatively cheap oil eventually led to relatively cheap commodities, including cheap money-as-credit. This was a significant part of the foundation of the economic neoliberal movement, characterized by Reagan in the US, and Thatcher in the UK. Much of the so-called “tax-and-spend” philosophy of welfare state capitalism was gradually swept aside, in favor of a covert “borrow-and-spend” philosophy of corporatist state capitalism (ironically contributing to the economic rise in stature of the government of Communist China, through its credit instruments for the US).

But if this new foundation for the US economy was built during Reagan’s time, the “Mc Mansion” built on top of that foundation was finally erected during Clinton’s time. Financial de-regulation went into high gear, domestically and globally, during the 1990s. Most of us in the West now realize how that tragic story has ended (people in the Third World, of course, had been aware of many of these tragic issues much earlier). Most of the economic bubbles we created have now burst.

Today, in the wake of extremely high oil prices (let us not forget the painful summer of 2008) many OECD and EU countries are once again feeling the effects of a slow-onset economic crisis. As I type these very lines, reports from BBC TV depict UK and Irish governments enacting severe economic austerity measures (in the case of Ireland, it is reported as “the most severe in the nation’s history”). Greece is becoming politically very unstable, and is in the midst of violent protests, and France has been subject to on-going protests by farmers and truck drivers.

Here in the US, the long-term economic collapse of the old order and the concomitant restructuring needed for a new order (as yet not clearly defined, but which will “have” to come about if the country is to move forward) is already well underway. In all this confusion and pain, of course, there is also the usual social scapegoating. Racial, national, ethnic, and class tensions become exacerbated, as human beings compete for diminishing resources. Crimes of desperation also increase. False prophets abound (e.g., Bernard Madoff, the Bush Administration, Allan Greenspan and the Fed—to name but a few). This process of change is not a comfortable process, by any means.

During times of upheaval, times of great change, times of revolutionary change, competing interest groups in societies can typically be broken out into three simple categories: 1) those who favor the change and push for it; 2) those who opposed the change and act as obstacles to it; and 3) those in the middle who are either not sure of what to do, or are simply too ignorant and/or too ambivalent regarding the situation to meaningfully address it. We can see this pattern in terms of the current climate debate in the US. (And we can also clearly see it in the US health care / health insurance debate!)

I maintain that our current economic instability has, at its roots, the energetic resource instability we’ve been experiencing, over the past 35 years—especially in terms of petroleum supplies. We have become addicted to petroleum, which has evolved into the alpha and omega of modern, western living. This has been both a blessing and a curse. And, lest we forget, there are now a number of powerful interest groups which have evolved over time, vested in maintaining the current petroleum supply and commodity chains as they are.

We who are aware of these long-term energy-economic challenges shall have to brace ourselves.

We should not let 2010 be a repeat of the early 1980s. We should not allow society to fall asleep again, this time. The stakes are much higher now. Over the past three decades, we have been gradually spending more and more money only find and extract less and less oil from the Earth. This translates into higher prices—for everything, including the price of money (as price inflation).

This is the difficult and often not-discussed reality that we face. It’s a good news / bad news scenario, however.

The good news is that we have plenty of viable energy alternatives. The bad news is that none of them will be cheap to develop or simple to deploy on a large scale. How we choose to go about all of this will be key, of course. The role of human psychology should not be under-estimated. Let us focus on the good news, while being mindful of the bad. To paraphrase the Italian social scientist, Gramsci, “Let us maintain an optimism of the spirit, even as we maintain a pessimism of the intellect.”

The work that we have to do to restructure the “commanding heights” of both the US economy and the global economy is becoming increasingly clear. We have to restructure it for reduced carbon footprints, and reduced material through-puts. The days of US-centered (and western-centered) hyper-consumption are now drawing to a close. Deep down inside, inside our collective consciousness, many of us in the west now sense this.

It can feel quite daunting, actually.

But let us not give in to panic or despair. We must recognize that we are, collectively, grieving a kind of loss. We are grieving the end of a lifestyle, the end of an era. But let us also recognize the grief cycle for what it is, and begin to meander our way through it. Let us gather ourselves up, and face our collective grief as well as our collective future with Gramsci’s “optimism of the spirit”—otherwise known as courage. It is that courage that our grandchildren will ultimately note, ultimately remember, and ultimately have to hold on to, as they face the world we’ve created for them.

Blaine

Somalia Piracy: The Two Faces--The shipping piracy & the invasion of the Somali seas

Colleagues:

An extremely demanding work and personal schedule over the past two months has kept me from posting as often as I would otherwise like. Please have a look at the following article. It includes issues of international law, environmental justice, economic development, and military affairs, all in one. It is a complex situation; however its roots are not really so complex.

More will be said of this, later.

Blaine

***


Source: www.africanexecutive.com/modules/magazine/articles.php?article=4060#
ENVIRONMENT

Source: www.democracynow.org/2009/4/14/analysis_somalia_piracy_began_in_response


Somalia Piracy: The Two Faces
The shipping piracy & the invasion of the Somali seas

By Mohamed Abshir Waldo


Much of the world’s attention is currently focused on the Somali sea lanes. The navies of big and small powers are converging on the Somali waters in the Gulf of Aden and Indian Ocean. The recent hijacking of the Saudi oil tanker and Ukrainian MV Faina, laden with arms for Kenya, off the coast of Somalia by Somali pirates captured world media attention. War has been rightly declared against this notorious new shipping piracy. But the older and mother of all piracies in Somalia - illegal foreign fishing piracy - in the Somali seas is ignored, underlining the international community’s misunderstanding and partiality of the underlying interdependent issues involved and the impracticality of the proposed actions to find ways to effectively resolve the piracy threat.

A chorus of calls for tougher international action resulted in multi-national and unilateral Naval stampede to invade and take control of the Somali territorial and EEZ waters. The UN Security Council, a number of whose members may have ulterior motives to indirectly protect their illegal fishing fleets in the Somali Seas, passed Resolutions 1816 and 1838, giving a license to any nation who wants a piece of the Somali marine cake. Both NATO and the EU issued Orders to the same effect and Russia, Japan, India, Malaysia, Egypt, Yemen and anyone else who could afford an armed boat and its crew on the sea for a few months joined the fray.

For years, attempts made to address piracy in the world’s seas through UN resolutions have failed to pass largely because many of the member nations felt such resolutions would infringe greatly on their sovereignty and security and have been unwilling to give up control and patrol of their own waters. UN Resolutions 1816 and 1838, which were objected to by a number of West African, Caribbean and South American nations, were then tailored to apply to Somalia only, which had no strong representation at the United Nations to demand amendments to protect its sovereignty. Somali civil society objections to the Draft Resolutions were ignored.

This massive “Global Armada” invasion is carried out on the pretext to protect the busy shipping trade routes of the Gulf of Aden and Indian Ocean from Somali shipping piracy, which threatens to disrupt these international lifeline seaways. While there are two equally nasty, criminal, inhuman and exploiting gangs of pirates in Somalia, only one of them is publicized by the western media: the Somali shipping pirates attacking merchant shipping in these sea lanes, where the illegal poachers are also actively operating.

The illegal fishing piracy

The other more damaging economically, environmentally and security-wise is the massive illegal foreign fishing piracy that has been poaching and destroying Somali marine resources for the last 18 years following the collapse of the Somali regime in 1991. With its usual double standards when such matters concern Africa, the “international community” comes out in force to condemn and declare war against the Somali fishermen pirates while discreetly protecting the numerous Illegal, Unreported and Unregulated (IUU) fishing fleets from Europe, Arabia and the Far East.

Biased UN resolutions, big power orders and news reports continue to condemn the hijackings of merchant ships by Somali pirates in the Indian Ocean and the Gulf of Aden. If response to both piracy menaces was balanced and fair, these condemnations would have been justified. European Union (EU), Russia, Japan, India, Egypt and Yemen are all on this piracy campaign, mainly to cover up and protect their illegal fishing fleets in the Somali waters.

Why is the other key IUUs fishing piracy ignored? Why do the UN Resolutions, NATO Orders and EU Decrees to invade the Somali seas fail to include the protection of the Somali marine resources from IUU violations? Not only is this outrageous fishing piracy disregarded but the illegal foreign marine poachers are being encouraged to continue their loot as none of the current Resolutions, Orders and Decrees apply to the IUUs, which can now freely fish in and violate the Somali seas. Somali fishermen can no longer scare away the IUUs for fear of being labeled pirates and attacked by the foreign navies unlawfully controlling the Somali waters. Even the traditional Somali trading dhows are in panic of being mistaken for pirates.

The IUU Menace and Fish Laundering Practice

There is no doubt IUU is a serious global problem. According to the High Seas Task Force (HSTF), IUU does not respect national boundaries or sovereignty. It puts unsustainable pressure on stocks, marine life, habitats, undermines labor standards and distorts markets. “IUU fishing is detrimental to the wider marine ecosystem because it flouts rules designed to protect the marine environment which includes restrictions to harvest Juveniles, closed spawning grounds and gear modification designed to minimize by-catch on non-target species….In so doing they steal an invaluable protein source from some of the world’s poorest people and ruin the livelihoods of some legitimate fishermen. Incursions by trawlers into the inshore areas reserved for artisanal fishing can result in collision with local fishing boats, destruction of fishing gear and deaths of fishermen” says HSTF. In its report, Closing the Net: Stopping Illegal Fishing on the High Seas, HSTF puts worldwide value of IUU catches at $4 to $9 billion, large part of it from Sub-Sahara Africa, particularly Somalia.

IUUs practice fish catch laundering through mother ship factories, transshipment and re-supply at sea. “This means that vessels can remain at sea for months, refueling, re-supplying and rotating their crew. IUU fishing vessels never need to enter ports because they transfer their catches onto transport ships. Illegally caught fish are laundered by mixing with legally caught fish on board transport vessels”, writes HSTF. Apparently, fish laundering, which generates hundreds of millions dollars in the black market is not as criminal as money laundering! Countries used for Somali fish laundering include Seychelles, Mauritius and Maldives.

As EU closed much of its fishing waters for 5 to 15 years for fish regeneration; Asia over-fished its seas, international demand increases for nutritious marine products and as the fear of worldwide food shortage grows, the rich, uncontrolled and unprotected Somali seas became the target of the fishing fleets of many nations. Surveys by UN, Russian and Spanish assessors just before the collapse of the Barre Regime in 1991 estimated that 200,000 tones of fish a year could be caught by both artisanal and industrial fisheries and this is the objective of the international fishing racket

There is no doubt that the actions of the shipping pirates are reprehensible. They must be stopped. But the notorious shipping piracy is unlikely to be resolved without simultaneously attending to the fraudulent IUU piracy, too.

The Origin of the Somali Piracy War

The origin of the two piracies goes back to 1992 after the fall of the Gen. Siyad Barre regime and the disintegration of the Somali Navy and Police Coastguard services. Following severe draughts in 1974 and 1986, tens of thousands of nomads, whose livestock were wiped out by the draughts, were re-settled all along the villages on the long, 3300kms Somali coast. They developed into large fishing communities whose livelihood depended on inshore fishing. From the beginnings of the civil war in Somalia (as early as 1991/1992) illegal fishing trawlers started to trespass and fish in Somali waters, including the 12-mile inshore artisanal fishing waters. The poaching vessels encroached on the local fishermen’s grounds, competing for the abundant rock-lobster and high value pelagic fish in the warm, up-swelling 60kms deep shelf along the tip of the Horn of Africa.

The piracy war between local fishermen and IUUs started here. Local fishermen documented cases of trawlers pouring boiling water on the fishermen in canoes, their nets cut or destroyed, smaller boats crushed, killing all the occupants, and other abuses suffered as they tried to protect their national fishing turf. Later, the fishermen armed themselves. In response, many of the foreign fishing vessels armed themselves with more sophisticated weapons and began to overpower the fishermen. It was only a matter of time before the local fishermen reviewed their tactics and modernized their hardware. This cycle of warfare has been going on from 1991 to the present. It is now developing into fully fledged, two-pronged illegal fishing and shipping piracy conflicts.

According to the High Seas Task Force (HSTF), there were over 800 IUUs fishing vessels in Somali waters at one time in 2005 taking advantage of Somalia’s inability to police and control its own waters and fishing grounds. The IUUs, which are estimated take out more than $450 million in fish value out of Somalia annually, neither compensate the local fishermen, pay tax, royalties nor do they respect any conservation and environmental regulations – norms associated with regulated fishing. It is believed that IUUs from the EU alone take out of the country more than five times the value of its aid to Somalia every year.

Illegal foreign fishing trawlers which have being fishing in Somalia since 1991 are mostly owned by EU and Asian fishing companies – Italy, France, Spain, Greece, Russia, Britain, Ukraine, Japan, South Korea, Taiwan, India, Yemen, Egypt and many others. Illegal vessels captured on the Somali coast by Somali fishermen during 1991 and 1999 included Taiwanese trawlers Yue Fa No. 3 and Chian Yuein No.232, FV Shuen Kuo No.11; MV Airone, MV De Giosa Giuseppe and MV Antonietta, all 3 Italian vessels registered in Italy; MV Bahari Hindi, Kenyan registered but owned and managed by Marship Co. of Mombasa. A number of Italian registered SHIFCO vessels, Korean and Ukrainian trawlers, Indian, Egyptian and Yemeni boats were also captured by fishermen and ransoms of different sizes paid for their release. Many Spanish seiners, frequent violators of the Somali fishing grounds, managed to evade capture at various times.

According to a report in the Daily Nation of October 14, 2004, even Kenyan registered fishing vessels are known to have participated in the rape of the Somali fishing grounds. In October 2004, Mr Andrew Mwangura, Kenya Coordinator of the Seafarers Assistance Program (SAP) asked the Kenya Government to help stop illegal fishing in Somalia. “Since Somalia has been without government for more than 11 years, Kenya trawlers have been illegally fishing along the country’s territorial waters contrary to the UNCLOS and the FAO instruments, he said. SAP further reported that 19 Kenyan registered fishing vessels also operated illegally in the Somalia waters.

In arrangements with Somali warlords, new companies were formed abroad for bogus fishing licensing purposes. Jointly owned mafia Somali-European companies set up in Europe and Arabia worked closely with Somali warlords who issued them fake fishing “licenses” to any foreign fishing pirate willing to plunder the Somali marine resources. UK and Italy based African and Middle East Trading Co. (AFMET), PALMERA and UAE based SAMICO companies were some of the corrupt vehicles issuing such counterfeit licenses as well as fronting for the warlords who shared the loot.

Among technical advisors to the Mafia companies – AFMET, PALMIRA & SAMICO - were supposedly reputable firms like MacAllister Elliot & Partners of the UK. Warlords Gen. Mohamed Farah Aidiid, Gen. Mohamed Hersi Morgan, Osman Atto and Ex-President Ali Mahdi Mohamed officially and in writing gave authority to AFMET to issue fishing “licenses”, which local fishermen and marine experts call it simply a “deal between thieves”. According to Africa Analysis of November 13, 1998, AFMET alone “licensed” 43 seiners (mostly Spanish, at $30,000 per 4-month season. Spanish Pesca Nova was “licensed” by AFMET while French Cobracaf group got theirs from SAMICO at a much discounted rate of $15,000 per season per vessel.

Not to be outdone, in October 1999 Puntland Administration, gave carte blanche to another Mafia group known as PIDC, registered in Oman to fish, issue licenses and to police the Puntland coast. PIDC in turn contracted Hart Group of the UK and together they pillaged the Somali fishing grounds with vengeance, making over $20 million profit within two years. The deal was to split the profits but PIDC failed to share the spoils with Puntland administration, resulting in revocation of their licenses. Having reneged on their part of the deal, PIDC/Hart quit the country with their handsomely won chips.

...to be continued

By Mohamed Abshir Waldo
Mohammed Abshir Waldo waldo@todays.co.ke is Journalist as well as Consultant with Sandi Consulting & Associates

Harvey’s Analysis of The Rise and Decline of American Capitalism: A Green Critique of a Radical Theorist

Much human discourse on a range of social problems and challenges is often needlessly “burdened” by excessive human-centeredness. By this, I mean that many problems in the human domain are not strictly limited to what takes place in human hearts, minds, and bodies. Instead, there is the context of “context.” Specifically, there is the “environmental context” (the Mother of All Contexts!) to be considered. I therefore propose that we must willfully triangulate the typical human-to-human discourse, to include the voice of Nature, the voice of the Earth so to speak. Only by understanding that human relationship with the Earth can we properly and fully contextualize our relationships with one another.

However, many of our most brilliant minds have fallen down in this area. The example of the radical political-economist David Harvey will help to make my point.

On his web site (http://davidharvey.org ), Harvey wrote “Why the U.S. Stimulus Package is Bound To Fail” In this blog, Harvey makes note of the seemingly inexorable factors that contribute to any world power’s rise and decline. In the extended excerpt which follows, below, he notes a series recurring historical patterns (falling back on the monumental work of world-systems theorist, Giovanni Arrighi, in The Long Twentieth Century: Money, Power, and the Origins of Our Times). My critique of Harvey’s critique will follow, thereafter.

I am using a “thick description” process, wherein we hear (read) Harvey’s words in considerable detail, prior to commenting on them. I use this process so as to thicken or deepen the context in which we critique the author’s material.

We start here, with the idea of world economic power (ergo “political” power) shifting back to East Asia, after approximately two and a half centuries of western (Euro-American) economic dominance.

***
In November 2008, shortly after the election of a new President, the National Intelligence Council of the United States issued its delphic estimates on what the world would be like in 2025. Perhaps for the first time, a quasi-official body in the United States predicted that by 2025 the United States, while still a powerful if not the most powerful single player in world affairs, would no longer be dominant. The world would be multi-polar and less centered and the power of non-state actors would increase. . . .

This “unprecedented shift” has reversed the long- standing drain of wealth from East, Southeast and South Asia to Europe and North America that had been occurring since the eighteenth century (a drain that even Adam Smith had noted with regret in The Wealth of Nations but which accelerated relentlessly throughout the nineteenth century). The rise of Japan in the 1960s followed by South Korea, Taiwan, Singapore and Hong Kong in the 1970s and then the rapid growth of China after 1980 later accompanied by industrialization spurts in Indonesia, India, Vietnam, Thailand and Malaysia during the 1990s, has altered the center of gravity of capitalist development, although it has not done so smoothly (the East and South-East Asian financial crisis of 1997-8 saw wealth flow briefly but strongly back towards Wall Street and the European and Japanese banks). Economic hegemony seems to be moving towards some constellation of powers in East Asia and if crises, as we earlier argued, are moments of radical reconfigurations in capitalist development, then the fact that the United States is having to deficit finance its way out of its financial difficulties on such a huge scale and that the deficits are largely being covered by those countries with saved surpluses – Japan, China, South Korea, Taiwan and the Gulf states – suggests this may be the moment for such a shift to be consolidated.

Shifts of this sort have occurred before in the long history of capitalism. In Giovanni Arrighi’s thorough account in The Long Twentieth Century, we see hegemony shifting from the city states of Genoa and Venice in the sixteenth century to Amsterdam and the Low Countries in the seventeenth before concentrating in Britain from the late eighteenth century until the United States eventually took control after 1945. There are a number of features to these transitions that Arrighi emphasizes and which are relevant to our analysis. Each shift, Arrighi notes, occurred in the wake of a strong phase of financialization (he cites with approval Braudel’s maxim that financialization announces the autumn of some hegemonic configuration). But each shift also entailed a radical change of scale, from the small city states at the origin to the continent-wide economy of the United States in the latter half of the twentieth century. This change of scale makes sense given the capitalist rule of endless accumulation and compound growth of at least three per cent for ever. But hegemonic shifts, Arrighi argues, are not determined in advance. They depend upon the emergence of some power economically able and politically and militarily willing to take on the role of global hegemon (with its costs as well as its advantages).

The reluctance of the United States to assume that role before World War II meant an interregnum of multi-polar tensions that could not halt the drift into war (Britain was no longer in a position to assert its prior hegemonic role). Much also depends on how the past hegemon behaves as it faces up to the diminution of its former role. It can pass peaceably or belligerently into history. From this perspective the fact that the United States still holds overwhelming military power (particularly from 30,000 feet up) in a context of its declining economic and financial power and increasingly shaky cultural and moral authority, creates worrying scenarios for any future transition. Furthermore, it is not obvious that the main candidate to displace the United States, China, has the capacity or the will to assert some hegemonic role, for while its population is certainly huge enough to meet the requirements of changing scale, neither its economy nor its political authority (or even its political will) point to any easy accession to the role of global hegemon. Given the nationalist divisions that exist, the idea that some association of East Asian Powers might do the job also appears unlikely as does the possibility for a fragmented and fractious European Union or the so-called BRIC powers (Brazil, Russia, India and China) to stay on a common path for long. For this reason, the prediction that we are headed into another interregnum of multi-polar and conflictual interests and potential global instability appears plausible.

But the tectonic shift away from United States dominance and hegemony that has been under way for some time is becoming much clearer. The thesis of both excessive financialization and “debt as a principal predictor of leading world powers’ debilitation” has found popular voice in the writings of Kevin Phillips. Attempts now under way to re-build US dominance through reforms in the architecture of both the national and the global state-finance nexus appear not to be working while the exclusions imposed on much of the rest of the world in seeking to re-shape that architecture are almost certain to provoke strong oppositions if not overt economic conflicts.

But tectonic shifts of this sort do not come about as if by magic. While the historical geography of a shifting hegemony as Arrighi describes it has a clear pattern and while it is also clear from the historical record that periods of financialization precede such shifts, Arrighi does not provide any deep analysis of the processes that produce such shifts in the first place. To be sure, he cites “endless accumulation” and therefore the growth syndrome (the three per cent compound growth rule) as critical to explaining the shifts. This implies that hegemony moves from smaller (i.e. Venice) to larger (e.g. the United States) political entities over time. And it also stands to reason that hegemony has to lie with that political entity within which much of the surplus is produced (or to which much of the surplus flows in the form of tribute or imperialist extractions). With total global output standing at $45 trillion as of 2005, the US share of $15 trillion made it, as it were, the dominant and controlling share-holder in global capitalism able to dictate (as it typically does in its role as the chief shareholder in the international institutions such as a the World Bank and the IMF) global policies. The NCIS report in part based its prediction on loss of dominance but maintenance of a strong position on the falling share of global output in the US relative to the rest of the world in general and China in particular.

But as Arrighi points out, the politics of such a shift are by no means certain. ***

END of extended excerpt from Harvey

***

These “politics” are “by no means certain,” indeed. I basically agree with the fundamentals of Harvey’s analysis—as far as it goes. My only point of contention is that it does not go quite far enough. Missing entirely from Harvey’s analysis is the role of primary natural resources in providing the initial opportunity (the catalyst) for any would-be regional or global hegemon. In short, without consistent access to relatively cheap primary natural resources (e.g., iron, oil, human-beings-as-labor), there can be no sustainable, stable financial resources (as in “capital”).

In short, Harvey has fallen into the not-uncommon “humanocentric” analysis, which eliminates (or at least dis/misplaces) the central role of Nature, in large-scale and long-term political-economic processes. This is reflected in one of Harvey’s otherwise strong conclusions, as follows, when describing one of the key problems for the US:

The problem for the United States in 2008-9 is that it starts from a position of chronic indebtedness to the rest of the world (it has been borrowing at the rate of more than $2 billion a day over the last ten years or more) and this poses an economic limitation upon the size of the extra deficit that can now be incurred.

The problem for the United States is that it has greatly depleted its natural resource base—starting with energy resources, and most especially starting with petroleum. Most of that $2 billion /day loaned to the US, mentioned by Harvey, above, is to cover the direct cost of imported oil (Heinberg 2003; Klare 2004). We in the US used to have sufficient oil to meet all of our domestic needs. We don’t have it anymore (as of mid-20th century). The problem with America does not begin with the country’s banks—problematic though they may be. Nor does it begin with the housing industry—problematic though it may be. It begins with what has been underneath our feet, underneath the foundations of our highly leveraged houses. It begins in the very soil of this country, and the primary resources contained therein (Catton 1980; Hubbert 1988).

The famous geological scientist, M. King Hubbert, made note of the “inherent incompatibilities” of these two notions—natural resources (“the matter-energy system”) and financial resources, as follows:

Despite their inherent incompatibilities, these two systems during the last two centuries have had one fundamental characteristic in common, namely, exponential growth, which has made a reasonably stable coexistence possible. But, for various reasons, it is impossible for the matter-energy system to sustain exponential growth for more than a few tens of doubling, and this phase is by now almost over. The monetary system has no such constraints, and, according to one of its most fundamental rules, it must continue to grow by compound interest. This disparity between the monetary system which continues to grow exponentially and a physical system which is unable to do so leads to an increase with time in the ratio of money to the output of the physical system. This manifests itself as price inflation. A monetary alternative corresponding to a zero physical growth rate would be a zero interest rate. The result in either case would be large-scale financial instability.

(http://www.hubbertpeak.com/hubbert/monetary.htm)

This obfuscation between matter-energy systems and monetary systems is a by-product of a unidirectional, growth oriented framework. That obfuscation now infects many of our dominant paradigms on human and organizational systems, operating on all scales. This is especially apparent at the bureaucratic and political level of human activity. It is especially apparent in many of our academic departments within our universities, as well.

I am therefore now making a case for the analysis of not just what happens in the political-economic sphere, and not just what happens in the natural resources management sphere. I am instead making a case for what happens at the nexus of these two spheres. Let us recall that the Greek root word for eco-nomics and eco-logy are one in the same (management of the house/community, and knowledge of the house/community, respectively). Let us now work toward reuniting these two segregated concepts. Let us regain the necessary fundamental knowledge of the physical resources we need to manage.

This must be the new direction of all progressive politics or all critical analysis involving large-scale and long-term human events. It is unabashedly “green” in hue. It has been painfully late in coming.

Blaine


References

Catton, W. R. (1980). Overshoot: The Ecological Basis of Revolutionary Change. Urbana, IL, University of Illinois Press.

Heinberg, R. (2003). The Party's Over: Oil, War, and the Fate of Industrial Societies. Gabriola Island, BC, Canada, New Society Publishers.

Hubbert, M. K. (1988). "Two Intellectual Systems: Matter-energy and the Monetary Culture." Retrieved 15 April, 2004, from http://www.hubbertpeak.com/hubbert/monetary.htm.

Klare, M. T. (2004). Blood and Oil: The Dangers and Consequences of America's Growing Dependency on Imported Petroleum. New York, Metropolitan Books.

Africa and the Global Economic Crisis

Let me now return to a theme near and dear to my heart: political and economic development within the Continent of Africa. Since I first started working in Africa over 20 years ago, I have come to learn this: in order to understand some of what takes place within Africa, we must also transcend Africa’s geographic boundaries. By this I mean that Africa (and any of its individual states), like every other major region of the planet, is subject to global phenomena which aren’t necessarily isolated to one geographic point of origin.

The current global economic crisis is a perfect example of this.

This is a "global" phenomenon, which is currently (since post-WW II) propped up by what political economists call "dollar hegemony" (e.g., a system of post-colonial / neo-colonial control, wherein the dollar has been used to "buy influence" the world over). However, as Gramsci reminds us, in order for it to be most effective hegemony also requires the "consent of the ruled," and not simply the sheer "will of the rulers." Ergo, countries buy-in to the concept of dollar hegemony as long as their own ruling elites have something to gain by it; however, after benefits begin to outweigh costs for too much time, those some national elites begin to buy-out (e.g., dumping of dollars on world currency markets).

Once/if that happens, the great social experiment known as the United States of America will be finished (as a global hegemon, anyway). The name of the game, globally, and since the end of WW II at least, has been about propping up the value of the dollar. Remember: after the victory of WW II, the US was in a position to dictate how things would work in the global economy. The biggest issue: the most heavily traded commodity in the world--petroleum--was to be traded in US dollars, and US dollars only. In 2008, that process began to slowly change, as Euros have begun to be used for a few purchases, here and there, in the global economy. Most who have been following this trend anticipate that it will only grow.

Having said that, the still-larger issue here is the generalized, symbiotic relationship between the natural resource base and the economic base; and subsequent relationship between the economic base and the social-political base. The article below—from Inter-Press Service--is an excellent example of this.

One word of caution, focusing on the use and abuse of economic indicators. One paragraph within the article, speaking to Africa’s relative insulation form the economic crisis, reads as follows:

"Africa is expecting an average growth rate of six percent in 2009. However, the turmoil will affect those countries that depend on the export of commodities and natural resources."

As the great American writer Mark Twain once wrote (and I paraphrase), “A man standing in a bucket of boiling water with one foot, and a bucket of ice water with another foot, is ‘on average’ bathing in comfortable water.” Those Continental “average growth rates” that economist like to tout so much have to be disaggregated further; otherwise, they conceal vast income disparities between major resource exporters like South Africa and Nigeria on the one hand, their impoverished neighbors like Tanzania and Mali on the other hand.

Finally, “countries that depend on the export of commodities and natural resources” would be pretty much all of the countries of Africa! Development economics 101: the classical problem of so-called under-development is the problem of countries exporting raw, unprocessed, primary commodities. They do this precisely because they do not have the “heavy industry” to make refined products.

So, as you read the article below, consider the relationship between ecology, energy, and economics—the three E’s! Consider also, that this challenge is not restricted to Africa. Indeed, it is a global phenomenon, with local implications.

Dr. Blaine

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ECONOMY:Global Crisis Should Spell End of Laissez-Faire Doctrine
CAPE TOWN, Oct 31 (IPS) - The real question to ask about the global financial crisis is whether ‘‘it will go deep enough for the big economies to realise that the market should be controlled more. The philosophy of laissez-faire simply does not work’’.

This is the viewpoint of Sampie Terreblanche, emeritus professor of Economics at South Africa’s University of Stellenbosch, speaking at a public debate on the crisis in Cape Town. The debate was organised by the Centre for Conflict Resolution, an organisation promoting conflict resolution in Africa through training and research. Terreblanche, who is the author of ‘‘A History of Inequality in South Africa 1652-2002’’, regards the crisis as ‘‘very serious. There is no doubt that it will persist for the next couple of years.

‘‘As a result of laissez-faire, the inequality within countries and between the rich north and poor south has increased,’’ Terreblanche added. ‘‘The economy needs to be guided and not be left to its own devices.’’ According to the doctrine of laissez-faire, meaning ‘‘to leave alone’’ in French, an economy functions most ‘‘efficiently’’ without any interference of the government.

While there are concerns with regards to financial stability and inflation, it seems so far that African countries will weather the financial crisis better than others. Africa is expecting an average growth rate of six percent in 2009. However, the turmoil will affect those countries that depend on the export of commodities and natural resources. ‘‘For the past years and up until recently, oil-producing countries like Nigeria and Angola have thrived due to the escalating oil prices,’’ Jorge Maia of the Industrial Development Cooperation (IDC) said at the debate on Oct 30.

This was ‘‘until recently’’ because of the significant drop in crude oil prices as a result of the global financial turmoil. The IDC is a South African state-owned development institution that finances businesses and aims to contribute to sustainable economic growth and economic empowerment.

Crude oil prices have plunged by 60 percent in the third quarter of 2008, from 147 dollars a barrel in July to around 60 dollars three months later. ‘‘Countries that rely on oil exports, such as Nigeria and Angola, are noticing the effects of this as this development means less income,’’ Maia continued. With a production of 1.9 million barrels per day, Angola recently replaced Nigeria as Africa’s largest oil producer. Since 2006, Nigeria saw a 25 percent decline from a daily oil production of 2.5 million barrels. This weakening is, among other factors, a result of attacks from militants in the Niger Delta.

Maia told IPS that South Africa, the strongest economy on the African continent, depends heavily on the export of commodities and is therefore also taking strain as a result of the financial turmoil. The main economic sector affected is the mining industry, which contributes six percent of South Africa’s annual gross domestic product (GDP). The most important export commodities are iron ore, coal, platinum and gold. ‘‘These four products make up 75 percent of South Africa’s mining export basket and the value of all but the first has gone down -- platinum in particular,’’ said Maia. Recent mining figures show that the platinum price dropped with 21 percent in the month of October 2008. Since March 2008, when platinum reached its record price of 2 308.80 dollars an ounce, the value of this precious metal has declined with 65 percent.

This poses a problem for South Africa which harbours 80 percent of global platinum reserves. Maia emphasised that the financial crisis is not the sole cause behind the slowdown in South Africa’s mining industry. Mining companies had to cut their production as, during the first half of 2008, South Africa was hit by an electricity crisis. The country’s electricity producer ESKOM was no longer able to meet the national demand for power. Apart from South Africa’s mining industry, the construction sector, manufacturing, and retail industry are also under pressure as a result of the global credit crisis. The currency has been hit as well. ‘‘The South African rand is very vulnerable at the moment.

Besides the Icelandic kroner, it is the currency that has depreciated the sharpest since the credit crisis hit the world,’’ Maia pointed out. All of this, combined with an increasing pessimism about the economy, may result in a deceleration of South Africa’s economic growth. An overall growth of 3.4 percent is expected for 2008, which earlier this year was anticipated to be around 5 percent. In 2009, the growth for South Africa will be around 2.5 percent, Maia gauged. The slowdown in Africa’s biggest economy will have an impact on the rest of the continent. ‘‘When South Africa struggles, the rest of Africa struggles,’’ he explained. Despite the severity of the turmoil, some countries might actually benefit from the declining commodity prices, Maia noted. ‘‘While exporting countries suffer, regions that rely on the import of natural resources such as oil benefit from these developments – simply because products such as oil have become cheaper.’’

Africa is also not doing badly compared to the North America and Europe. According to the International Monetary Fund’s Economic Outlook for 2009, the overall African economy is expected to grow with 6 percent the coming year. ‘‘The U.S. economy, on the other hand, barely comes below the zero percent mark.’’ Africa is faring better as it still benefits from investments from China. According to the World Bank, the amount of Chinese direct investment in Africa amounted to 1.18 billion dollars by mid-2006. (END/2008)