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In the early 1980s, to Margaret Thatcher’s annoyance, union reps and managers at the steelworks in Port Talbot agreed a strategy to save the plant. As a result, Port Talbot was spared the post-industrial blight visited upon most of Britain’s ex-industrial towns. Now in private hands, and despite periodic crises, the steelworks employs some 4,000 people – a big drop from the 20,000 workers during the plant’s heyday in the 1960s. Nevertheless, those 4,000 jobs are supplemented by hundreds more sub-contractors, and together these provide the demand for local small and medium businesses.

What saved the Port Talbot plant was an agreement to implement neoliberal efficiency savings. Key among these was the sub-contracting of what we might think of as efficiency buffers – redundant capacity to cope with emergencies. For example, prior to the agreement, the steelworks employed a small army of fitters, electricians, welders and other skilled workers whose skills were only required when something went wrong. Instead of being paid a full wage – often for sitting around playing cards and drinking tea – they would be paid a retainer together with a set fee every time they were called out.

Similar arrangements were in place in the railway industry in those days too. And I personally spent shifts playing cards and drinking tea as part of the spare train crews kept on standby for sickness cover and unforeseen emergencies.

Whatever else neoliberalism was about, cutting out these “inefficiencies” lay at its heart. Companies were losing money paying people like me to sometimes sit around all day. And so, the redundancy process was enlisted to cut the workforce down to its bare minimum…

…click on the above link to read the rest of the article…

#215. The price of equilibrium

November 18, 2021

#215. The price of equilibrium

FUTURITY, REALITY AND THE COMING FINANCIAL CORRECTION

The simplest way to define the current economic and broader situation is that consensus expectations and realistically probable outcomes have become polar opposites.

One of the most predictable consequences of this disparity is a sharp fall, both in asset pricing and in the viability of forward financial commitments.

Shared by governments, businesses, the mainstream media and a large proportion of the general public, the consensus line is cornucopian, picturing a future of abundance characterised by continuing economic growth, exponential technological progress and a seamless transition from climate-harming fossil fuels to renewable energy sources (REs) such as wind and solar power.

This essentially optimistic narrative is based on a series of compounding fallacies, which we might summarise as misconceptions of capability.

Three critical realities are ignored. One of these is that the economy is an energy system, which cannot be propelled to infinite expansion by means of the human artefact of money.

A second is that the scope for technology is bounded by the laws of physics.

The third – and arguably the most important – reality ignored by the consensus narrative is that REs are unlikely to replicate the characteristics and economic value historically provided by energy from oil, natural gas and coal.

Those of us who understand the economy in energy terms have to weigh two possible courses of action. These are not mutually exclusive, but a balance does need to be found. One of these is the advocacy of reality. The other is analysis, which involves working out the probable series of events, and providing information which will be of value once the failure of the consensus narrative ushers in a new pragmatism.

…click on the above link to read the rest of the article…

Separating the self-flagellation from the greenhouse gas

November 13, 2021

Separating the self-flagellation from the greenhouse gas

Speaking to the media at the Youth4Climate event last week, Greta Thunberg berated the UK for continuing to extract oil and gas from the North Sea while pretending to be green ahead of the coming COP26 conference. Not only that, but as the originator of the industrial revolution, Britain is doubly guilty:

“Of course, the climate crisis … more or less it started in the UK since that’s where the industrial revolution started, we started to burn coal there, so of course the UK has an enormous historical responsibility when it comes to historic emissions since the climate crisis is a cumulative crisis.”

So, here’s an interesting question that Greta has probably never had to answer, and which many of my readers will probably get wrong. If we add up all of the carbon dioxide emitted by households, businesses and industries within the boundaries of what we now call the United Kingdom, when will China – currently the world’s biggest emitter of carbon dioxide – overtake? 2025? 2035? 2050?

No, in fact, China overtook the UK in cumulative carbon dioxide emissions two decades ago in 2002:

The reason for this is that China’s march to industrialisation following its admission to the World Trade Organisation, arrived just at the point when the world’s conventional oil deposits were beginning to deplete. Moreover, by December 2001, while oil was still in demand, most of the developed states had made deep cuts to their coal use. This gave China access both to its own deposits and to cheap deposits from around the world. But coal is a particularly heavy emitter of carbon dioxide, and China’s emissions from coal had already passed those of the UK – for the last time – in 1968:

…click on the above link to read the rest of the article…

A red light on the dashboard

November 5, 2021

A red light on the dashboard

On New Year’s Eve 2006-7, something unexpected happened. For most of the previous two decades, most of the pubs where I live had operated a system where they gave tickets to regular drinkers in order to limit the number of people seeking entry. This was a problem because one couldn’t secure tickets for guests. And since my relatives only stayed over for the holidays, it left us to seek out the few pubs that did not operate a ticket policy. And in most years, these pubs would be packed to the rafters.

When we set out in the last couple of hours of 2006, we fully expected the same crowds as the year before. So did the pubs, apparently, because they had hired security to control entry – something that was common for British nightclubs but rare for pubs. What none of us had anticipated though, was that the pubs would be almost empty! Nor was it just one or two pubs. Everywhere we went it was the same story. Indeed, on one occasion the security staff hired to keep the masses out tried hard to encourage us to come in. Quite simply, tens of thousands of people who had previously gone to pubs to celebrate New Year, stayed at home in 2006.

To me it was a warning sign that something unpleasant and dramatic was about to happen to the economy. It wasn’t that the beer had risen in price – although supermarket beer had long been cheaper than pub beer. It was an indicator of something much more profound. Coming on the heels of rising fuel prices and the central bank decision to begin jacking up interest rates, it was a signal that people’s standard of living had been impacted to the point that discretionary spending was being seriously curtailed.

…click on the above link to read the rest of the article…

When they say money, think energy

November 3, 2021

When they say money, think energy

The Indian government ruffled a few feathers at the COP this morning, by raising the thorny question of the £722bn they were supposed to receive to aid their transition away from fossil fuels. Because, when all is said and done, the proposed transition is all about money. Decommissioning the old fossil fuel infrastructure will not happen unless states and private investors stump up sufficient cash to pay for the materials, equipment and workforce required to do the job. And at the same time, an entirely different group of workers, materials and equipment will have to be funded to build out the new, bright green infrastructure.

To aid things along, states will also use legislation to force the hands of businesses and households. The current UK government’s decision to legislate a ban on new internal combustion engine cars from 2030, for example, has forced the car industry to switch investment toward EVs. The ban on coal power plants from 2025 may provide the more realistic example, however, because of its unforeseen consequences – such as companies closing power stations early to save on maintenance, and the threat to energy security which has now emerged. Nevertheless, it is some combination of legislation and money which will drive the process.

The same can be said, of course, for any campaigning/political issue. You can count on one hand the number of campaigns which have called for less state spending and the revoking of laws. Most often, new law and additional spending underpins demand for reform, while failing to spend and/or legislate is among the biggest sins a government can make.

…click on the above link to read the rest of the article…

The climate war won’t work

October 30, 2021

The climate war won’t work

There are, in fact, no human comparisons for the effort required to reverse the global-scale damage wrought by 300 years of industrial growth. Nevertheless, people still reach for past human endeavours to try to spur our political leaders to an action which, in truth, is far beyond them. How many times have we heard that tackling climate change requires an effort similar in scale to the Apollo moon landings or the Manhattan Project? And then there is the stubbornly undead comparison to the Second World War. Every time we think we have successfully driven a stake through the heart of this insane proposition, someone who has failed to understand what the war was really about, resurrects it and drafts it into service in the fight against climate change.

Today it is everyone’s favourite media environmentalist George Monbiot’s turn to suggest that:

“The astonishing story of how the US entered the second world war should be on everyone’s minds as Cop26 approaches.”

Monbiot gives a reasonable summary of the various measures taken by the Roosevelt Administration to mobilise the US economy for war in the wake of Pearl Harbour. Then he asks:

“So what stops the world from responding with the same decisive force to the greatest crisis humanity has ever faced? It’s not a lack of money or capacity or technology. If anything, digitisation would make such a transformation quicker and easier. It’s a problem that Roosevelt faced until Pearl Harbor: a lack of political will. Now, just as then, public hostility and indifference, encouraged by legacy industries (today, above all, fossil fuel, transport, infrastructure, meat and media), outweighs the demand for intervention…

…click on the above link to read the rest of the article…

This is not 1997

October 26, 2021

This is not 1997

Not that minimum wages are anything new. The USA introduced its Federal Minimum Wage as far back as 1938; although today each state sets its own rate. And the general consensus is that minimum wages help raise wages in general with little or no impact on employment as a whole. The broad theory being that by increasing wages at the bottom – where people’s propensity to spend is higher – we increase demand across the economy. As the economy grows, demand for labour increases and forces wages up still further. And so, demand rises and promotes further growth.Although introduced to the UK by a Labour government, the National Minimum Wage is closer to the Tory approach to economic policy. This is because it passes the costs onto someone other than the state immediately. In this case, Britain’s employers. Labour governments, in contrast, have generally sought the politically easier approach of passing costs onto future generations via public borrowing… which was often the better policy if a combination of inflation and growth served to lower the real cost of the debt even as the state’s ability to repay it became easier.

This was no doubt the outcome desired by Tony Blair and Gordon Brown when they were elected in 1997. After two decades of suppressed wages – first under James Callaghan, and then under Thatcher – and despite the deregulation of the City of London and the increasing revenues from North Sea oil and gas, it was hoped that a legal minimum wage would generate the growth needed to lift people out of poverty. In neoliberal terms, it would “make work pay.”

…click on the above link to read the rest of the article…

Closer to the edge

October 23, 2021

Closer to the edge

There may well be worse to come. With the end of the various government support schemes, redundancies have shot up once more. According to the BBC:Earlier this year when the establishment media was running fear stories about excess savings, the opening up of the economy was predicted to result in a massive consumer boom. It didn’t happen. Rather, as happened in the summer of 2020, people emerged from house arrest in need of a haircut, some new – mostly larger – clothing, and a thirst for a pint of beer down the pub. Once these desires had been sated, most returned to their homes and continued with lockdown spending habits that have now become ingrained. Not least because, while a small minority at the top may have accumulated £125bn in savings since the first lockdown, the majority of us had been running up even more debt. The people with savings were hanging onto them while the crisis continued. Everyone else was unable to consume anyway. And so, after a brief rally in July, growth fell in August. Today the UK economy is officially still 0.8 percent smaller than at the start of the pandemic.

“The number of businesses that failed in England and Wales last month was the largest since the Covid pandemic began. Company insolvencies in September totalled 1,446, increasing from 1,349 in August and 56% higher than the same month last year, data from the Insolvency Service shows…

“The Bank of England earlier this month said one third of small businesses in the UK are classed as ‘highly indebted’, where their debt levels are more than 10 times their cash balances.”

…click on the above link to read the rest of the article…

Feynman’s Law writ large

October 14, 2021

Feynman’s Law writ large

Elizabeth Holmes, Chairman and CEO of Theranos, is a living archetype for the modern age. Lauded by upmarket glossy magazines and heralded as a symbol of modern feminism, Holmes was the world’s first female tech billionaire. In the tradition of Apple’s Steve Jobs and Tesla’s Elon Musk, Holmes was a driven individual determined to push aside the bureaucrats and naysayers who stand in the way of progress. A university drop-out with no background in medicine nor tech, Holmes convinced some of America’s most powerful men – including Henry Kissinger, George Schultz and Bill Clinton – that she had succeeded where thousands had failed in developing a Star Trek-type non-invasive blood testing technology. But Holmes was closer to Elon Musk than to Steve Jobs, in that, like Musk’s hyperloops, solar roofs and Martian colonies, Holmes’ blood testing technology was a work of fantasy. Unlike Musk – so far at least – Holmes is currently on trial for fraud and faces up to twenty years in jail if convicted.

My interest here is less to do with Holmes so much as with the technicians and engineers who she employed to work on the development of a technology which all of them must have known could never work. Nevertheless, almost all of them continued to take their monthly salary in exchange for long hours and considerable effort which they knew could never pay off. John Michael Greer offers a plausible explanation for why this occurred:

“Crackpot realism is one of the downsides of the division of labor. It emerges reliably whenever two conditions are in effect. The first condition is that the task of choosing goals for an activity is assigned to one group of people and the task of finding means to achieve those goals is left to a different group of people…

…click on the above link to read the rest of the article…

Is this peak gas?

October 11, 2021

Is this peak gas?

The recent, spectacular increase in the price of gas has created a sense of crisis not seen outside the financial sector since the early 1980s. In Europe in general and the UK in particular, it has begun to expose the folly of having an economy entirely dependent upon imports; including imports of the energy that powers everything we do. The conceit, of course, was that because we have gone much further than anyone else in deploying non-renewable renewable energy-harvesting technologies (NRREHTs) we were somehow less dependent on fossil fuels when events this week show that we are, in fact, more dependent than ever.

The deeper crisis though, is economic because without growing energy we cannot have a growing economy. This is obscured to some extent by GDP figures which count the movement of bits in bank computers as real economic growth when in reality, they merely add a new mountain of unrepayable debt to an already massive mountain of unrepayable debt. In the real world where the rest of us live, nothing gets done unless there is sufficient surplus energy to power it.

Setting aside for a moment the environmental imperative to cease polluting the planet, if it were possible to stabilise our fossil fuel consumption at 2019 levels, then we have some 50 years’ worth of accessible (proven reserves) of oil; 53 years of gas; and 115 years of coal. But flatlining is something that only happens in recessions. In the economy that we have come to take for granted, year-on-year growth in energy consumption is the precondition for improvements in prosperity:

This suggests that we have far less than 50 years before we run out of oil and gas if we insist on continuing to grow the rate at which we consume it…

…click on the above link to read the rest of the article…

What then are we to become?

October 5, 2021

What then are we to become?

According to Boris Johnson, the economic dislocation which appears to be gathering pace across the UK is merely “a period of adjustment after Brexit.” In Johnson’s formulation, those who would turn the clock back are tacitly in favour of the low-pay and poor working conditions which were encouraged when the UK was a member of the European Union. There is, for example, no shortage of lorry drivers in the UK. More than 230,000 of us hold valid Heavy Goods vehicle licences. Unfortunately for those who like turkey for Christmas dinner and petrol at any time, the pay and conditions in the haulage industry are so poor that most prefer to work elsewhere. Cheap Eastern European drivers living out of their cabs and engaging in cabotage helped to paper over the cracks until the lockdowns began and some 20,000 of them opted to be quarantined at home rather than stay in the UK.

In the anti-Brexit narrative, the shortage of drivers, agricultural workers, natural gas, garden furniture and anything else which turns out to be in short supply, is the unintended consequence of an ill-conceived withdrawal from the EU. But in Johnson’s formulation, the dislocation is no more than the intended first phase of a transition from the low-paid and low-skilled economy of the past to a new, high-paid and hi-tech “global Britain.” It is not – his supporters claim – the government’s fault that these shortages are materialising now. It is the fault of employers who – despite having had five years to prepare for Brexit – have failed to train enough workers and offer them decent enough pay and conditions to retain them in their respective industries…

…click on the above link to read the rest of the article…

A crisis of affordability

September 30, 2021

A crisis of affordability

Western capitalist economies don’t really do shortages. There are a few stand alone exceptions such as a music festival or a sporting event, where demand so outstrips supply that queues form. But for the most part – as we saw last week with the eye-watering rise in wholesale gas prices – when something is in short supply the price increases; and when the price increases enough, the queues disappear.

In economics, this is the difference between demand and desire. I might, for example, desire a new sports car or a country mansion. But since I do not have anything like the discretionary income to buy these things, I do not contribute to the economic demand for them. And unless someone is going to offer them for sale at a ridiculously low price, I doubt that we are going to see queues forming any time soon. As Tom Chivers at UnHerd puts it:

“Over the long run, the market normally solves coordination problems like this, reasonably effectively. If lots of people want some resource, then the people selling that resource realise they can make more money if they raise the price. At the higher price, fewer people are willing to buy it, but the seller makes more money per unit sold. And, in theory, they can keep raising the price until the lost sales start to outweigh the gain per unit.”

When we witness queues piling up outside filling stations across the UK then, we might be correct in assuming that something – or most likely some things – are being done to artificially generate a shortage where none previously existed…

…click on the above link to read the rest of the article…

The march of folly

September 27, 2021

The march of folly

It is of some interest that people have been contrasting images of British petrol queues this weekend with the petrol queues which formed back in 1973 as a result of the OPEC oil embargo. Not least because a more accurate comparison is with the fuel protests in September 2000. That is, this weekend’s “shortages” are largely the product of a multinational oil company launching a media campaign aimed at avoiding having to improve the pay and conditions of its drivers. From past experience – including your rush to get toilet paper last March – you didn’t have to be a genius to realise that publicising a faux shortage of fuel would lead to a run on the country’s filling stations. They are, after all, just like banks in that if we all turn up at the same time, they break. And so, in a matter of hours fuel shortages became a self-fulfilling prophesy; aided by ministers taking to the airwaves to urge people not to panic.

If anything, we have become even more dependent upon just-in-time deliveries today than we were 21 years ago. And back then it only took the loss of 15 percent of deliveries to bring us to the brink of a cascading collapse. This is because the real economy fails in the same way as Liebig argued that crops fail. The absence of one component is sufficient to bring about a total failure. So, for example, in September 2000 several English hospitals ceased treating people because of a shortage of Sucher. The operating theatres were ready to go. The surgeons were in place. The patients were ready to be anaesthetised…

…click on the above link to read the rest of the article…

Crisis by design

September 24, 2021

Crisis by design

Believe it or not, British Prime Minister Boris Johnson has every right to stand before the nations of the world and lecture them on climate change. Not that Johnson himself has done much to address the crisis (indeed, given that having children is the single biggest cause of climate change at this point, Johnson’s inability to keep his willy in his pants makes him an exemplar of much that is toxic in our culture). But as the current political head of a country which has done more than most to pursue the bright green vision of a world without fossil fuels, he has every right to ask others to follow Britain’s lead.

They won’t do it, of course. US President Biden has already restated American motorists’ God-given right to cheap gasoline. Meanwhile, President Xi Jinping may be promising to cut other people’s access to coal-power, but China still consumes half of the world’s coal and shows no sign of curbing its own coal-fired growth. Germany talks a good Energiewende, but it still depends upon fossil fuels for two-thirds of its electricity, and is not pledged to end coal-fired generation until 2038.

In fact, Britain appears to be the only developed state to swallow the Big Green Lie at face value: The claim that it is entirely possible to operate a fossil fuel-based industrial economy without fossil fuels. Starting with the smallest, and easiest to transform, sector of the economy – electricity generation – we were promised not only that a seamless transition was possible, but that it would be cheap and easy. Indeed, it was precisely the promise that wind turbines and solar panels were getting cheaper which persuaded the Blair government to sign up to a policy to generate 20 percent of the UK’s electricity from renewable sources.

…click on the above link to read the rest of the article…

Wrong for a different reason

September 19, 2021

Wrong for a different reason

Alexandria Ocasio-Cortez – A well-meaning but not particularly bright left-leaning US politician – made a stir earlier this week by wearing a figure-hugging dress emblazoned with the slogan “Tax the Rich” to the prestigious 2021 Met Gala. Since the slogan was clearly political, it wasn’t long before the various political tribes took to social media to pass judgement.

“Hypocrisy!” was the charge made by the libertarian right. As Amanda L Gordon at Bloomberg explains:

“The message itself wasn’t surprising — Ocasio-Cortez has been one of the biggest supporters of raising taxes on the rich to help pay for more social services and narrowing the massive wealth gap between America’s rich and poor. But the latest setting in which AOC — as she is known — chose to express it drew attention.

“The annual event at New York’s Metropolitan Museum of Art is the haunt of celebrities, designers, billionaires and various other members of the jet set that are willing to pay $35,000 a pop for the privilege to attend.”

But, the left ask, “where better to demand that the rich pay their fair share of taxes than in a gathering of the rich themselves?” According to Hannah Selinger at the Independent, for example:

“The truth is, women have always used clothing — the most accessible medium — to express their politics. One might say that such choices in the everyday sphere have been more subtle. Ocasio-Cortez’s dress, of course, was anything but. And that was entirely appropriate for the space in which the statement was made.”

Ocasio-Cortez has also clarified that she did not pay $35,000 to attend and that the dress was borrowed for the evening:

“The time is now for childcare, healthcare, and climate action for all. Tax the Rich.

…click on the above link to read the rest of the article…

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