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The Future of Energy

This Billy Joel song from the 1970's speculates about what may be going on in the United States in 2017.

I do not envy President Obama or anyone else who has ever held or will someday hold his job. As presidents go, he has been particularly unlucky, inheriting one hell of a mess. He has been in continual crisis mode from the day of his election, with multiple problems forcing him to do some serious multitasking: health care, recession, budget deficit, financial reform, two wars, financial reform, immigration, climate change, oil spill, and the list goes on. Confronting one problem – health care - can make another problem – budget deficit - worse, and any policies he supports are bound to anger interest groups or political factions who feel that these actions might harm them. The complexity of the problems and his limited control over legislation will cause him, like all presidents, to be judged by circumstances largely beyond his control. If the economy picks up significantly by 2012, he might get reelected. If it does not, then he is probably toast. Presidents, like all politicians, are judged by short-term results.

But if President Obama asked me (for some reason) to pick the most important issue of our time, I would answer with one word: energy. Our industrial and technological society, with its mechanized and increasingly computerized systems of production, communication, and transportation, relies completely on a steady supply of affordable energy. If the energy distribution system breaks down, we are all screwed. And if you look at my list of problems in the first paragraph, the question of whether or not we are able to keep producing and distributing affordable energy is relevant to just about every issue. So the choices that are made in this area, in my mind, are the key to humanity’s future.

A few days ago, I was listening to a podcast of the June 30 episode of “Fresh Air” on NPR. The guess was Michael Klare, a correspondent with “The Nation,” who has written extensively on the economics and politics of oil production. ( Here's a link) His basic argument was that the age of “easy oil” has ended, and we are now in the age of “tough oil.” If we are to continue with an economic system reliant on petroleum production, then a country like the United States has two options. First, we can turn to locations that still have oil that is relatively easy to access. The problem is that the known locations of “easy oil” are in places ruled by governments that the United States has considered, to say the least, “undesirable”: Venezuela, Nigeria, Saudi Arabia, Iraq, Iran, etc. This has caused the U.S. to either tolerate lousy governments (Nigeria, Saudi Arabia) or take actions to either undermine or topple them (Iraq, Iran, Venezuela, etc.). Many would argue, of course, that neither course of action has been particularly desirable.

A second course of action is politically more desirable in some ways but poses another significant problem. Large amounts of oil exist deep under the ocean, in the Arctic, or in rock known as shale. Some of this exists in the United States, in America-friendly places like Canada, or in ocean waters that are nearby or open. The problem is that the process of extracting this oil can be extremely expensive and/or dangerous due to geologic and/or geographic difficulties and hazards. The BP oil spill, of course, is the most publicized recent example of what can happen when operating in a difficult environment.

Now some would argue that as oil extraction technology improves, the costs and dangers of getting to this “tough oil” will gradually decrease. Who knows; they may be proven right. But others, including Michael Klare, would argue that it is time to begin a major push toward energy alternatives. In his mind, the dangers and potential environmental damage of getting to the tough oil are too high, and if the climate change people are right, then we need to start reducing our dependence on fossil fuels as soon as possible. But on what energy alternative(s) should we focus our investment: solar, wind, geothermal, nuclear, lithium batteries, hydrogen fuel cells, or all of the above? At the moment, the available “alternative” energy technologies are not going to meet our present demands. In addition, energy companies have invested massive amounts of money into the current infrastructure of fossil fuel extraction and distribution. The decision to shift significantly toward investment in other alternatives would make all of that previous investment seem like a waste. So instead, they assure us that technological advances will help them to keep producing plenty of fossil fuels, and the threat of climate change, of course, is either fabricated or exaggerated.

Everyone can agree on one thing. Science and technology got us into this situation, but they are also the only hope for the future prosperity of our species. The only question is whether we will come up with improved methods for maintaining the status quo or innovative new technologies that are cost efficient, sustainable over the long run, and hopefully, a whole lot cleaner. When in doubt, the natural human tendency is to maintain the status quo. The present setup, with all of its problems, is often less scary than an uncertain future. For the moment, fossil fuels still seem to be the cheapest way to go. A radical shift toward a new energy future would probably involve major sacrifices in terms of economic growth and standard of living over the short-term. But if environmentalists and some economists are right, then we have already reached a point where the long-term costs of the status quo outweigh its benefits. Unfortunately, since politicians tend to think about the next election, and voters tend to want what is best for them right now, short-term benefits seem more important than “theoretical” long-term consequences. Just ask President Obama or anyone else who has ever done his job.

My Front "Lawn"

This little song by Pete Seeger satirized the suburban culture of tract housing communities that developed in the late 1940's and 1950's. In addition to mocking conformity, it pokes fun of our desire for status and acceptance. 

The title of this post is misleading. After all, the greenish collection of plant species that covers much of our front yard does not quite qualify as a lawn. It is more of a random assemblage of weeds with some patches of grass thrown in. Now don’t get me wrong. It doesn’t look all that bad. We pay gardeners to mow the lawn once a week and to keep our flowery bushes trimmed. So as long as the weekly mowing routine has not been disrupted by rain or holidays, things look neat, trim, and somewhat green and grass-like. And so long as people only see it from a distance while driving by or pay scant attention while strolling past our home, they will not be aware of the true nature of our “lawn.” But if anyone stops and looks for some strange reason, or, heaven forbid, if guests walk onto the lawn and discover the prickly little weed balls that stick to anything that moves, then they will recognize our somewhat dried out weed farm for what it really is.

This is not entirely our fault. When we moved into the house, the plants right in front of the house were overgrown, and the previous owners had clearly done little in the way of lawn care. So we have managed to plant some new plants, keep trim the previous inhabitants, and lay out some of those brick thingies to create a separation between “lawn” and plants. But I have not been willing to pay the cost in terms of labor or money to rip out the accumulated plant life of several decades and lay down a new lawn. So I try to water two or three times a week to create the appearance of green grass, and we get a good deal paying those guys to hide the weeds by keeping them short.  It could be greener, but two factors keep me from watering more often. First, there is the simple fact that I have other stuff to do, and second, I know in the back of my mind that watering only encourages further weed growth. If I know that I am not doing lawn care correctly, then why do it at all?

If a bunch of money ever comes our way for some reason, then I will immediately get someone to install both a sprinkler system and a proper front lawn. Or, if we suddenly get really rich, we could just forget the current house all together and find another one with proper grass and irrigation. This fantasy that I often indulge when standing outside with a hose, however, forces me to ask a simple question. Why the hell do I care about the appearance of my “lawn”? How will green, “weedless” grass enhance my life?

I often like to pat myself on the back for being a person who does not care about the accumulation of material things and the luxury and status that they provide. I am just so damn down-to-earth and insightful, seeing right through the American delusion that happiness comes from accumulating stuff. So obviously, my desire for a nice lawn must be my innate love of nature and appreciation for beautiful things. I just want to lay down on the soft green grass, sniff my beautifully manicured flowers, and share all of this beauty with those who are fortunate enough to either pass by or visit. The only problem with that explanation is that it is largely a bunch of crap. The simple truth is that I want to make a positive impression with my home, and much of this desire, as much as I don’t want to admit it, is rooted in a desire for status.

Whenever I visit someone who has a nicer house than ours, I feel a tinge of jealousy. This only gets worse, of course, if they have a nice flat screen, a fancy kitchen, and if the place is obnoxiously clean. I feel similar emotions when I get a taste of luxury at a fancy event or during those rare occasions when we stay in a nice hotel or go to an expensive restaurant. I can’t help thinking, “Wouldn’t it be nice to do this all of the time, and wouldn’t it be cool if there were people out there who were jealous of me?” Apparently, the score is materialistic, status-loving American culture: one, Paul Swendson: zero.

It’s all a bit pathetic. I am, after all, a person who tries to keep up on current events and who has read quite a bit of history. I am well aware of the fact that I am, by any reasonable standard, already living a life of luxury. My house has running water, electricity, air conditioning, DSL, and DirecTV, so how the hell can I be bitching about my “lawn”? Fortunately, the rational part of my mind generally wins out over that whining, emotional, jealous part. This is why I don’t become a workaholic or take drastic steps toward changing my career in an effort to make more money, indulge in luxury, and show off my success. I can’t control my irrational, competitive, self-centered emotions. But I can control my behavior and recognize these emotions for what they are.

Watering our “lawn” isn’t all that bad anyway. It’s a chance to get outside and get in touch with nature for at least a few minutes a day. For a spoiled urbanite like myself, it’s the closest that I can often get to working the land as my tougher, less privileged ancestors once did. Plus, the smell of wet grass/weeds, either early in the morning or just before dark, can be a beautiful thing. Why let the sprinklers have all of the fun?

We Need Investment, not Speculation

This classic speaks for itself.

If you want to know someone’s political ideology, just ask him or her why we are in this economic mess. A conservative will be happy to complain about President Obama and his liberal, Democratic buddies. Because of these liberals, the economy is being held back by excessive taxes, regulations, and public debt. People are spooked both by the situation at the moment and by the future impact of health care reform, financial regulation, and a potential “cap and trade” energy policy. Consumers are afraid to spend, and private industry is nervous about investing in an unpredictable environment with a likely future of complicated, burdensome, government rules.

Those liberal Democrats, of course, tell a different story. They emphasize that President Obama inherited a mess left over by the previous administration that has no simple, quick fix. Years of lax regulation and shortsighted tax policies that favored the rich led to a financial implosion, massive public debt, and an average American consumer with limited purchasing power. Immediately upon entering office, the President was compelled to propose, create or inherit bank bailouts, a stimulus package, new financial regulations, and long overdue reforms of health care and energy policy. These drastic, necessary responses to a crisis have made it easy for Republicans to attack him as a promoter of big government. So for primarily political reasons, they say no to everything that he proposes. Clearly, it is unfair to blame a guy for not fixing an inherited problem when the opposition has done everything it can to block his proposed solutions.

There is something to be said for both of these perspectives. Personally, I am not very impressed by either party. Our nation clearly faces systemic political problems that cannot be blamed on any one party. Still, I also believe that we give either too much credit or blame to politicians for the economic health of the nation. To a large degree, the economy has a life of its own. Policies can matter, but political success is often a question of luck. You just hope that your political party is in charge when the economy is in an upswing and out of power during the bad times.

I am not an economist, but I am forced to discuss economic issues frequently during the course of my history classes. This has been particularly true during these last few, extraordinary years. I have tried as best I can to make sense out of this current situation, and from what I can gather, the recent financial crisis and lingering economic troubles are largely the result of the decisions of both private industry and of individual Americans. Banks and other financial institutions made a lot of bad loans, and many Americans were more than willing to take those loans to get into homes that they could in no way afford. Neither political party denies this obvious truth. Republicans, however, tend to blame the borrowers for being foolish enough to take on risky loans and the government for aggressively promoting home ownership. Democrats, on the other hand, blame financial institutions for “predatory lending” and the government for its poor regulation of banks and the real estate industry. Whatever the case, the behavior of the years preceding the crisis demonstrate a problem that runs deeper than some bad home loans.

For many years, some of the greatest minds – and many lesser ones - in America have been drawn to the financial sector. They have gone there to apply their considerable intelligence and technical expertise to two activities: speculation and financial engineering. Some have studied the stock market using complex mathematical and statistical models in an attempt to “buy low and sell high.” Others created complex financial products that they claimed could eliminate the risks from lending and investing. Pools of thousands of mortgages or other types of debt were compiled, and investors would theoretically get a consistent return from these “Mortgage Backed Securities” when borrowers made their payments. Since so many mortgages were lumped together, you could theoretically predict with some certainty how many borrowers were likely to default and therefore eliminate the risk. The problem was that the people originating the loans often did not care if the borrowers had any hope of paying. These brokers, after all, planned to quickly sell the loans to the institutions creating the pools. Home prices became inflated by all of the easy credit, housing speculation became increasingly common, the real estate industry became overgrown, and a false illusion of prosperity resulted from the “bubble,” leading people to spend beyond their actual means.

When many of these loans inevitably began to go bad, all sorts of banks and financial institutions were stuck with these financial instruments, and no one knew what they were worth because few understood them. This ultimately led to mass panic, the financial bailouts, a decline in home prices, and lingering economic hardship. Now I don’t know enough about trading in complex derivatives to give advice on what should be done in this area. My gut tells me that it should either be outlawed or heavily regulated, but what the hell do I know. I can say with some confidence, however, that there are probably more productive things that great minds can be doing than inventing complicated instruments or models for turning money into more money.

What if more money was invested into the creation of actual goods and services instead of pure speculation? What if great minds were focused on innovative products rather than revolutionary investment strategies? To my simplistic economic mind, it seems that our nation would be better off. We live in an increasingly competitive world, and the winning nations will not be the ones that have the best financial engineers who create short-term profits for their investors and themselves. Bankers play a vital role in our economy, but in the end, great innovators and entrepreneurs have played the most significant role in our nation’s prosperity. Americans either invented or played the dominant role in the development of the telephone, electric light, television, personal computer, internet, and countless other life-changing technologies that have produced massive wealth and job opportunities. So where will the next great innovations come from?

Right now, banks and many private companies are sitting on an enormous amount of money. Some of this is the result of improvements in efficiency, productivity, and efforts to scale back the quantity of goods and risky behavior from the inflated, “bubble” years. Consumers are also keeping their wallets shut somewhat due to fears about the uncertain future. In the end, productive investment from the private sector is the key to getting us out of the hole. The government is strapped, and it has historically shown little capacity to efficiently produce innovative goods and services that the public demands. If anything, politicians should be thinking of creative ideas for encouraging investment into the development of innovative products and ideas. When jobs in industries with long-term viability are created, then consumers will once again have money to spend. The trick is convincing banks and companies that it is time to start lending, investing, and expanding once again.

I recognize that the stock market and the real estate industry play vital roles in generating income, creating jobs, mobilizing capital, and improving our future prospects for retirement. It is unhealthy, however, to have an economy where too much investment goes into these potentially speculative activities. “Flipping” a house or selling stock transfers income; these actions do not produce wealth over the long haul. We need innovators who develop valuable goods and services and financial institutions that have the foresight to invest in them. Who will be the next Alexander Graham Bell, Thomas Edison, Henry Ford, or Steve Jobs? God help us if minds like these innovators get too busy analyzing the market or creating the successor to the “Collateralized Debt Obligation.”

The Meaning of the Fourth of July

This song lays out what true Americans would like our country to be.

On July 2, 1776, representatives of thirteen British colonies in North America voted to break free from British rule and form a new nation. (Five more years of fighting against the British would follow.) Two days later, a document was officially drafted that attempted to explain the reasons for this action. The date written on this “Declaration of Independence” would ultimately become the officially celebrated birthday of The United States of America, a day that Americans generally (and “creatively”) refer to as The Fourth of July. The most quoted parts of the Declaration of Independence come from its opening two paragraphs, and they have become a significant part of our national creed:

“We hold these truths to be self-evident, that all men are created equal; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed; that, whenever any form of government becomes destructive of these ends, it is the right of the people to alter or to abolish it, and to institute a new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness.”

It sounds simple enough. Governments exist to protect individual rights – a radical idea at the time – and if a government fails to perform this function, then the people have a right to get rid of it. You can make a strong case, however, that the people of the United States have spent the last 234 years struggling to determine the exact meaning of these noble words. To some Americans today, the Fourth of July is a time to celebrate the greatness of the United States, a nation that is history’s greatest embodiment of a land where all people are guaranteed their basic rights. To others, the words in the Declaration would be the first of many examples of blatant American hypocrisy.

“All men are created equal.” At least the founding fathers were somewhat honest in only referring to men. After all, women in early American history had the legal and political rights of children. Still, the founders could have been more honest by saying, “all property-holding, white men are created equal.” Black slaves had no rights, Native Americans were viewed as obstacles to settlement that needed to be displaced, and in many states, people without property could not vote. This was hardly the embodiment of a democratic, freedom loving society where all were created equal.

Of course, concepts like “equality” and “rights” are vague and tricky to define. If you ask Americans today of various political persuasions how they define these words, you are likely to get a variety of answers. Does “equality” refer to the distribution of goods, or is it limited to equality of opportunity? Do all humans have a right to basic needs like a college education, health care coverage, and housing, or are these reserved to those who can afford them? I wonder how the founding fathers would have answered these questions. Given the fact that Thomas Jefferson, the primary author of the Declaration of Independence, was both a slaveholder and plantation owner, it is clear that his views on equality and human rights were not particularly radical. It is difficult to generalize, however. After all, the founders were a collection of opinionated individuals, not a single entity with one point of view.

In a sense, the American Revolution did not end when the British decided to stop fighting. Instead, the revolution has been an ongoing process. Displacing the British was only part one. When the British were gone, the truly difficult questions had to be answered. What system of government would this new nation have? What policies would it follow? Who would rule this new nation? On the surface, the answers seemed easy. We would have a government free from Britain that protected individual rights, and Americans would rule themselves. Americans, however, both then and now, have never agreed with one another on everything. We have always been a society divided by ethnicity, race, gender, age, social class, religion, and political ideology. These divisions that existed in colonial times did not magically disappear once the British were gone. Even during the Revolutionary War, Americans who fought for the patriot cause had various motivations for doing so, and they had different visions for this new nation’s future. The revolutionary concepts of freedom, liberty, and equality were defined in a wide variety of ways.

Too often, particularly on the Fourth of July, we Americans mythologize those first patriots who founded our nation. In comparison to those glorious people of the past, our country today can seem pretty lousy. But when you take a closer look at the past, you will see that they were not all that different from us. If anything, their society was much worse. Over the course of the last 234 years, our country has expanded voting rights, abolished slavery, established better work conditions, and improved its attitudes toward and treatment of ethnic minorities, women, children, homosexuals, and the disabled. There is obviously still a long way to go, but progress has clearly been made. Many people and events, of course, have played a role in these social changes, but the principles laid out in the Declaration of Independence have been a significant, consistent, revolutionary force.

The United States does not live up to its noble ideals. No nation ever does. So Americans should not simply rest on their laurels every Fourth of July and celebrate how great we are. Ideals should not be confused with reality. This does not mean, however, that we should all become cynical and depressed because our country falls so woefully short. The United States, in spite of all of its weaknesses and problems, has taken steps over the course of its history toward more closely realizing its creed. A recognition that revolutions never really end, and that progress is possible, should inspire all Americans to push our nation closer to those ideals that we claim to believe.