Climate Patriotism Will Only Cause More Problems

Robert Dujarric writes in the Christian Science Monitor that the Obama administration should appeal to patriotism to get Americans motivated to kick the oil addiction. Bush tried this approach back in 2006, but his weak solution was to fund more research (a form of delay) and to prioritize ethanol (which often equates to oil hidden in fertilizers and pesticides, and has unsavory consequences for world food prices).

Dujarric notes that historically in times of war the U.S. government has successfully played the patriot card for various goals: recruiting, war bonds, rationing, etc. Sociologically this argument is dead. America today is a post-sacrifice dreamland. In an economy driven by consumption, there are no costs, only opportunities.

[This is the fluff fed to the American people through marketing, from the bully pulpit (go to war and lower taxes), and by a media that sanitizes the true human experience of war or revolution. (The photos leaked from Abu Ghraib were an exception to this taboo, and the Neda Sultan video a stark intrusion of the Real.) Little wonder our fictional visual media constantly grow more casual, visceral, celebratory, and creative in their depiction of torture and murder. The problem is less that these media motivate violence and more that they are an expression of our repressed refusal to maturely engage the ongoing violence and evil of our world, whether banal or dramatic—poverty, rapes in Congo, strip mining.]

Practically speaking Obama has been reluctant to coax or force people into cutting oil consumption. During the campaign he rejected the idea of raising gasoline taxes, which would have satisfied Dujarric's desire to make life harder for authoritarian petrocrats. And now the administration is handcuffed by the need to stimulate the economy, while the underlying fundamental problem has not been solved: the economy equals pollution. Dujarric rightly notes that the global recession has been the only effective means of slowing emissions.

But the major fault line in his argument is its appeal to a very retrograde expression of patriotism, one based on fear, hate, enemies, and "the other." Gone are the days when we can blanket lump and demonize a "foreign" people to accomplish domestic or international goals. Destabilization of regimes and democracy promotion of this stripe is dead.

If Obama wants to appeal to American patriotism, he should elevate the debate. Americans pride themselves on being the type of people who don't run from their responsibilities. And when you look at current, cumulative, and per capita emissions, Americans bear a lot of responsibility for the current crisis.

Going forward, successful nations will be defined less by whom they confront, and more by what they can construct (and how they share it). This in the end is one symbolic lesson of the falling towers of 9/11: What have we built?

Given the urgency of global warming, the situation has moved past specific battles like saving polar bears to the idea of saving civilization. But this requires that we also be civilized. To achieve this, honesty is the change people have been waiting for, not jingoism.

Quinlan: The US led us into this mess, the US will lead us out

I spoke this morning with Joseph Quinlan, Chief Market Strategist of Bank of America Capital Management here in New York. Our conversation touched on a range of issues including: the Irish economic downturn, inflation, the Fed, oil prices and the credit crunch.

Here's some of what he had to say.

On Alan Greenspan:

This is his mess. He created this and he's in some ways trying to rewrite history right now. The Fed could have prevented the housing bubble. They totally blew that.

On the interest rate approach of the Fed versus the European Central Bank (ECB):

They have different sets of problems. In the U.S., the house is on fire, and the Fed has to concentrate on getting the fire out. The ECB inflation focus is legit. Jean-Claude Trichet has to be brave enough to bring the European economy into recession, or the brink of recession, in order to get inflation under control.

On how we'll know the fire is out in the U.S.:

We need three things: stability in the housing market, oil prices down around $100/barrel, and bank write-offs need to be in the late innings. The housing market is still very much in turmoil. I think the probability is strong that oil will come down to that level. But we need the bank write-offs to be in the late innings. We need to be in the bottom of the ninth. Right now, it's maybe the bottom of the seventh.

On trans-Atlantic economic ties:

What this current downturn shows us is that all the talk of 'decoupling' the U.S. and European economies was premature. Personally, I'd like to see policy makers in Europe and the U.S. work toward creating a single capital market on a trans-Atlantic basis. But that's probably too much to ask.

On how it will all play out:

My feeling is, the U.S. led us into this mess and the U.S. will lead us out. California and Florida will be in recession for at least a year more, but nationally we should see some easing of this crisis when the bank write-offs really start being moved out of the system.

$825 Billion A Year for Oil

Energy expert Gal Luft writes today in the Miami Herald about America’s potential ruin from oil dependency. A notable point on the real price of oil to the United States:

At current oil prices, this country [the United States] sends overseas $460 billion per year to finance the daily buying of 12 million barrels of imported oil. This amount of money is about the size of our defense budget and three times the size of the ''economic stimulus'' package recently passed by Congress. But the real economic impact of oil dependence is hidden to most Americans. Energy economist Milton Copulos (who passed away this month) calculated last year that the grand total of all external costs associated with foreign oil dependence -- including the cost of oil-related defense expenditures, amortized cost of supply disruptions, and lost economic activity and tax revenues -- stands at $825 billion per year.

Luft goes on to warn:

If oil prices climb to $200, as President Hugo Chávez of Venezuela recently warned, this wealth would double again. While the value of the dollar and the U.S. economy is shrinking, OPEC's monumental wealth enables its countries unprecedented buying power. As an illustration, at current oil prices it would take OPEC just six days to buy GM and three years to buy a 20 percent voting block in every S&P 500 company. It is hard to see how such buying power amassed by oil producers would not upset the West's economic and political sovereignty. At the current rate of investment, foreign governments are likely to be increasingly willing to translate their wealth into power, dictating business practices, vetoing deals, appointing officers sympathetic to their governments, dismissing those who are critical of them and imposing Islamic laws on Western corporations.

Managing Expectations in Cambodia

Some people are playing down the potential oil and gas boom in Cambodia. The original hope of a possible $2 billion a year in additional revenue has been reduced to an initial $150 million and a possible $1 billion in several years. It is still significant for an $8 billion economy with a $1 billion annual government budget. Still, the government is trying to manage expectations.

As its violent history fades from memory, the government knows that its legitimacy will be increasingly tied to economic performance and better governance. So Cambodian leaders have an interest of not making a big deal about possible oil and gas windfalls. Some observers said that the bauxite deposits may be longer lasting as a source of growth. One Western diplomat speculated that hydroelectric may generate more revenues than oil and gas but the Mekong River area could be severely harmed from the dams.

Two types of risks emerge from the possible energy boom. The first type is the immediate effect from having a large amount of revenue injected into the economy. One effect could include the “Dutch Disease.” Although the Cambodian economy is largely dollarized, thus giving it a chance of avoiding the exchange rate effects of Dutch Disease, other problems could appear such as resources being diverted away from tradable to nontradable goods. The other related effect is the strong possibility that revenues will simply disappear into the pockets of corrupt leaders or “silly” projects, leaving the country with nothing.

The other type of risk includes the possible societal responses to poorly managed revenues. Several people I interviewed agreed that possible responses from most likely to least would be: Social unrest from failed expectations and poor management; political change or instability coming from the emergence of rival factions; and a military coup from a frustrated army.

Cambodia's Future: Norway or Nigeria?

I am in Cambodia this week researching the expected offshore oil and gas boom. The big question is: Will one of Asia’s poorest and most corrupt countries use its newfound wealth to invest in infrastructure and education or will it simply shore up its corrupt practices? Will Cambodia become a Norway or a Nigeria?

Yesterday I met a foreign energy businessman with years of experience in Cambodia. His prognosis for Cambodia’s future was optimistic. He sees Cambodia as becoming a hub for a rapidly growing region, potentially taking advantage of its central location. In terms of governance, he has witnessed several years of improvement and sees things as only getting better.

China’s recent mining disaster is clearly on the minds of businesspeople here. Not only is China's mining sector the world's most dangerous, it is also extremely corrupt. The businessman said many people, including Cambodians, are reluctant to make deals with Chinese investors and partners. He listed several risks: opacity of contracts; hidden stipulations in contracts; lack of employment opportunities for local workers (Chinese use their own contractors); corrupt practices; and outdated equipment. Although Chinese technology will improve within a decade or so, he wasn’t so sure about the other practices.

Corruption is a rotten disease that many businesses are trying to fight. This businessman’s company is partnered with an American company, meaning it must follow the Foreign Corrupt Practices Act. He said it is a lot of work to comply with these rigorous standards, but he sees corrupt practices as antithetical to profitable business for several reasons: first, it is a waste of money that is thrown away without accountability; second, bribes seem to compound and send signals that a company is willing to play a dirty game; finally, good practices are central to ethical business and a calm soul. “I am able to sleep at night,” he said.

Due to his company’s large profile in Cambodia, an international NGO recently investigated how it was able to secure large contracts. After its investigation, the NGO concluded that his company was clean. He wasn’t worried. I only wished that clean companies like that were showcased for their exemplary behavior. If businesspeople knew they had a choice to act ethically, I bet cleaner practices would catch on.

Bill Bradley on Foreign Policy

Former Senator Bill Bradley spoke this morning at the Carnegie Council about his new book The New American Story. This talk was the first we broadcast on multiple radio stations. We also filmed it for video clips that will be coming out later.

Bradley’s main point was that an old American story has taken root in the U.S. national conversation that is obscuring the original American story that values two things: a can-do attitude and telling the truth. As he says in his book, we have to embrace an “ethic of connectedness:” collective action and individual responsibility.

He gave numerous examples. Jody Williams, for example, got a few average Americans together to launch a global movement to ban landmines. She won the 1997 Nobel Peace Prize for her efforts.

The former Senator also suggested that the United States needs a fairer energy policy. If the United States were able to reach the fuel efficiency of cars driven in Europe, we would be able to eliminate oil imported from OPEC countries. He also recommended more accountability: people who buy fuel inefficient cars, such as Hummers, should be taxed and those who buy fuel efficient cars should get rebates. It’s not a tax on the rich. It's simply an incentive for efficiency.

The final question from the audience focused on foreign policy: How should the United States approach Iran and Russia? Bradley suggested more talk with Iran—after all talking to your enemies is the definition of diplomacy.

Russia seemed to be a topic close to the Senator’s heart. He slammed the expansion of NATO after the fall of the Soviet Union. Bradley recently spoke with Mikhail Gorbachev, who said U.S. officials had promised an expansion would not happen. Moreover, as Bradley put it, the key to diplomacy is not to kick a man when he is down. My professor at SAIS Michael Mandelbaum was a sharp critic of NATO expansion. You can read a transcript of him talking about it with Jim Lehrer in 1996 on NewsHour here. Here is an excerpt:

I think it [expansion] will re-divide Europe where Europe is now not divided. Second, it will poison our relations with the Russians, perhaps not irrevocably. The Russians are not going to refuse to speak to us. But already, the kind of close cooperation that we enjoyed during the Gulf War and made it possible for President Clinton to pick up the phone, ask President Yeltsin to remove Russian troops from the Baltic states, and have him exceed to his request, that kind of close cooperation is gone.

And that was how Bradley ended the talk: Think about the kind of mutual benefit we could be sharing with Russia given the world’s problems today: energy, climate change, oil. If there were more trust between these two big countries, the cooperation would benefit from their complementarities.

IEA's Nobuo Tanaka on Japanese Energy Policy

For a book chapter I am writing, I was able to get an interview with my former boss and the current head of the International Energy Agency Nobuo Tanaka. I was reading over the interview today and decided it was so insightful that it should appear in full on FG. Mr. Tanaka responded by email from the climate change talks in Bali last week.

How might Japan serve as a model for developing and developed countries in terms of energy policy and efficiency?

I want to suggest two points. The first point is consistency. Japan has been making efforts to improve its energy efficiency and use oil alternatives consistently after the 1970s oil shocks. This effort has created Japan's leading energy efficiency.

The second point is innovation. Japan has created and incorporated a mechanism to encourage innovation within its energy efficiency policy or regulation (top runner regulation, for example). This mechanism has helped Japan to achieve two goals at the same time: improve energy efficiency and industrial competency. Consistency in the application of the policy has also helped create a stable business environment to accelerate energy related innovation on the consumer side.

What is the role of Japanese public opinion in Japan's formulation of energy policy, especially nuclear energy policy?

Japanese people tend to be keen for energy security because Japan is an isolated island country with very few domestic energy resources.

This basic recognition among the people helps Japan to improve energy efficiency and increase oil alternative use (including nuclear energy use) constantly, regardless the level of oil prices.

Currently, the environment--or sustainable growth--is also on the top of the agenda for Japanese people. This is also helping Japan to make nuclear energy play a very important role.

How can Japanese energy policy help with regional cooperation?

Having realized rapid economic growth and energy demand growth as a result, Asian countries have understood their vulnerability to energy related crises, including high oil prices. And they are now very keen to learn how to improve their energy efficiency, increase the use of oil alternatives, and develop emergency preparedness measures.

Because of deep interdependence of Asian countries' economies, improving regional energy security is now a common target for all Asian countries and Asia as a whole.

Japan can support regional cooperation to solve this problem with its experience and technologies.

Furthermore, I personally expect Japanese energy industries to play a more important role in the more integrated Asian energy market if Japan adopts appropriate policies. However, there may not be much time for Japanese industries. Chinese industries, which are now fully occupied with their domestic energy demand, also will become interested in this integrated Asian energy market.

How has Japanese energy policy been affected by the international environment, such as oil prices, wars, and climate change?

First, I believe that the experience of World War II clearly has had substantial effects on Japanese energy policies, especially the focus on energy security.

Having said that, concerning consumer side energy policies such as energy efficiency and diversification of energy resources, Japan has been making efforts very constantly to ensure both, regardless of oil prices.

On the other hand, supply side energy policies (such as supporting domestic companies’ development and maintenance of oil and gas fields) have sometimes been influenced by oil prices. The restructuring of JNOC [Japan National Oil Corporation] is one example.

Finally, since the 1990s, climate change issues have been affecting energy policies. In particular, the Kyoto Protocol has had a big impact.

What is the best way for Japan to achieve energy security?

I want to suggest two points. First, Japan should reconstruct its energy policies or energy strategies by widening its range from the domestic market to the Asian region. Like the European energy market, the Asian market will be integrated as Asian economies experience deepening interdependence. Japan should reconsider how it can enhance its energy security and energy sustainability with other countries and further develop an integrated energy market in Asia.

Second, 30 years after the oil shocks, it might be a good time to review Japan’s energy policy, especially its mechanisms to accelerate innovation. There are good examples emerging in Europe and other Asian-Pacific countries, which have been developing more market-oriented measures. Japan can improve or refine its innovation mechanism by studying the experiences of others.　

But it is sometimes difficult to adopt new policies if previous ones have proved successful.

(Photo from IEA.)