Elephants: Myopic Fools?

As most readers are well aware, the elephant is a political symbol in the States, a symbol of a party that I once thought represented many values with which I agree. If elephants had sentience and legal standing, I’d expect them to be suing for misappropriation of their image, and for damage caused to their reputation.

This is a political-opinion post. More accurately, this is a post expressing outrage at the myopic fools in the White House and in my state’s Congressional delegation. As with any such post, balancing arguments likely exist. Please let me know what they are.

Several simple facts:

• President Bush asserts that “to reduce pressure on prices, we need to increase the supply of oil, especially oil produced here at home”.
• The EIA estimates that, through 2030, “Because oil prices are determined on the international market…any impact on average wellhead prices is expected to be insignificant”. They estimate that opening up the the OCS will ramp up to an increase in lower-48-states production by 2030 of…wait for it…200,000 barrels of oil, or almost one percent of current US petroleum consumption (20.7 million barrels).
• The EIA estimates that opening ANWR to drilling would provide an additional 2.6 billion barrels in the mean case and 4.3 billion in the best case between 2018 and 2030–or 130 days and 215 days respectively of oil consumption in that time, assuming consumption stays constant. Put in other terms, this would be about 4.5% of US consumption in that time period. They estimate that production would peak in 2028. This added production, they project, would lower oil prices by a dramatic $0.75 (mean case) to $1.44 (high-production case) per barrel of oil. Note that that’s not per gallon of gas; it’s per barrel of oil, or 0.6% to 1.15% off of the current $125/barrel price. If $4 gas went down by the same fraction, it would plummet to $3.96! My gas-rewards credit card gives me multiple times that fraction!

Everyone seems to be talking about the need to reduce dependence on foreign oil. I agree fully with the sentiment; it’s ridiculous to be funding autocratic regimes with our energy dollars, and giving them a chain by which to lead us in our dependency. It’s difficult to see, though, how decreasing our dependency on imports by a few percent improves our situation substantially. It’s difficult to see how encouraging consumption helps our economy or our national security. (“Yes, those crack dealers are bad, bad people. Tell you what…here are some coca seeds and instructions for refining the cocaine; you won’t need to buy as much. And, to tide you over until the plants grow, I’ll subsidize your purchases for a while.”)

Our vehicles don’t know whether they’re using American oil or Saudi oil, and neither does our national demand for oil. We could indeed begin drilling, and add a slight amount to global supply after a few years have passed. If we do so, we’ll have succeeded in prolonging demand for oil (consuming imported oil in the meantime), and may manage to maintain consumption at close to current levels until we find ourselves in 2030 in essentially the same situation we are now. Is this reduction of dependence on foreign oil?

We could also reduce dependence on foreign oil by exploiting oil shale in the U.S. We do have huge amounts of oil shale available. However, producing oil from shale is harder on the environment in almost every way than conventional oil drilling. One specific drawback is the extraction process’s demand for water–a scarce resource in most places that’s already the subject of numerous legal battles, and which is likely to become even more of an issue in the future.

Another possible alternative would be to focus our investment on resources that won’t make these kinds of demand on our land, and that won’t run out until the sun turns cold a few billion years from now.  We could choose to :

• Build our human capital
• Reduce our “environmental load”. This is more than just acknowledging our responsibility of stewardship; it’s reducing the risk of radical dislocations for ourselves and our descendants. (Limited fresh water in the U.S. is already an issue; problems in access to fresh water and food worldwide contribute to global instability.)
• Reduce our dependence on foreign oil, both in the relatively near term and for the foreseeable future.

Wind power is one piece of the “home-grown and sustainable” energy puzzle, along with a number of other technologies. (For a review of stuff currently being explored, see Fred Krupp’s Earth 2.0). Other promising solar, even geothermal, possibilities exist, and show tremendous promise. And yet, funding for research in these areas is comparatively minuscule. Our power grid is nearly inadequate even for its current load, and we stand to gain hugely by building capacity to move power–but we hear nothing about it from those who claim the leadership of the country. And our leaders tell us that it is imperative that we open up new drilling–to reduce the cost of oil by less then two percent.

The love for oil, and the disdain for our energy future, seem to trump even “pork-barrel politics”. My state’s senators, Brownback and Roberts, recently voted against an extension of the production tax credit for wind energy, because–as Roberts replied in an e-mail when I challenged him–that credit would have come out of subsidies for “other parts of the energy industry”, specifically refineries. Even leaving aside the benefits of wind energy overall, “my” senators betrayed their constituents’ economic interests by voting against this measure. Kansas is one of a minority of states with huge potential for wind-energy development, and thus would derive comparative advantage from the expansion of the wind industry. Our senators chose to deny Kansans this advantage in favor of subsidies to oil processors, an area in which Kansas has little if any particular advantage. I’m having trouble making sense of this decision either from a “selfish state” perspective or from the perspective of our country’s long-term well-being.

We can produce clean energy, and we can do it cheaply. We can avoid subsidizing totalitarian regimes, and reduce our vulnerability to them. We can keep our dollars circulating in the country. We can solve our transmission problems.  And, our leaders lecture us on the desperate need to drill, to reduce gas prices by four cents per gallon.

I don’t have time to write more now, and I’m too incensed at the myopic foolishness currently on display to write as well as I might. Instead, I’ll link to a couple of pieces by such “green communists” as T. Boone Pickens (who sees his personal interests aligning with national and global interest in the Pickens Plan) and Andrew Grove ( former Chairman/CEO of Intel and author of Only the Paranoid Survive).

Holcomb coal plants and their proponents

Originally posted 2008-05-02:

Wow. I’m shocked. I’m ecstatic. The Governor’s veto of the “Holcomb bill” stands! For those who don’t know, Sunflower Electric and many in the Kansas Legislature have spent much of the last months attempting to ram through one of many different versions of a bill intended to “put in his place” the Kansas Secretary of Health and Environment, and to enact a law specifically to allow Sunflower to build two large coal-fired generators. To read a blow-by-blow account of the sordid story, read a couple months of history in CEP’s blog. The drama isn’t over yet, but does seem to have taken a very positive turn!

On the issue itself, I laud the legislators who chose to “do the right thing” and vote either against one of the “Holcomb bills” or against the override of the Governor’s veto of said bills. Coal, with proper management of its emissions, will likely need to be a part of our energy mix in the near term, although energy policy must soon turn towards sustainable sources and efficient uses for our long-term well being. An excellent summary of the issues is available from CEP.

For what it’s worth, for some time I’ve taken the position that, though it seems as though the weight of credible scientific opinion is that we’re dealing with substantial anthropogenic global warming (AGW), I don’t know enough about the subject to make any bold comments. I’m still not a climate scientist, but after reading The Hot Topic I do feel comfortable saying that some of the most credible arguments against AGW have been considered, and have been adequately refuted–it’s a very readable, practical book that gives an excellent survey of the science, looks at some of the costs and benefits of adaptation and prevention (and of doing nothing), and dispels myths of both the “there’s no problem” and the “there’s no hope, the sky is falling” varieties. But, the take-home message is: we do need to act wisely for the future. The pigheaded insistence that these plants must be built, essentially as planned, no matter what, does not strike me as an especially well-considered approach to planning.

Finally, I’d sort of forgotten the kind of pressure that people voting against forcing the coal plants through might face. I’m guessing that some of those advocating for the plants do so because it seems like “the least of evils”, and though I disagree strongly with them on the wisdom of that move (and plan to use that as a negative criterion for political support), I can generally respect them nonetheless. On the other hand, Speaker of the House, Melvin Neufeld is leading the charge for the coal plants–read the linked case for a window into the methods he’s used in the past. To those standing up to the pressure…thank you!

Foolish Subsidies

Originally posted 2005-04-22.

I received an invitation several weeks ago to listen to a man from Senegal speak on U.S. farm policy and its effects on the people of his country. I’ve always considered myself more “socially responsible” than many people, but listening to him, combined with further reading, has convinced me that the United States’ current system of farm subsidies goes beyond economic foolishness. It is, in fact, a transfer of wealth from people living at a subsistence level to the people in the wealthiest layers of the wealthiest nation in the world, a transfer which harms poor farmers, contributes to unnecessary deaths, economic and environmental degradation in cotton-producing countries, and, as a final insult, increases costs to consumers of farm products. Although this is true of various products, the Senegalese speaker focused on cotton, and I’ll do the same in this article. It would be easy to blame all of this on “bought politicians” and “greedy corporations”, but that’s far too easy. Indeed, our political and economic system does bear some blame for these results, but farm subsidies make no sense from the capitalist economic view that we claim to hold! Though many politicians can be influenced by money, all the campaign contributions in the world won’t help them if they know that a certain vote on an issue will result in their loss of office. Though large corporations may profit from the current system, they’re only operating in their own interests, as we would expect them to do in a capitalist economy. All of these problems can be addressed by starting with ourselves, making sure that we ourselves consume responsibly and that we make our displeasure at farm subsidies heard!

First, let me give you a few numbers from Oxfam’s briefing “Finding the Moral Fiber”, a paper that you can find at http://tinyurl.com/7v7ns.
• In crop years 2001 and 2002, sub-Saharan countries lost an estimated combined $400 million due to U.S. subsidies
• In crop year 2002, the U.S. subsidized internal cotton production to the tune of $3.2 billion, more than the GDPs of any cotton-producing country in sub-Saharan Africa.
• In crop year 2003, the U.S. exported 76 percent of its cotton production, or 41 percent of world exports.
• The U.S. spent $14.8 billion from crop years 1998 through 2002, around two thirds of the $21.6 billion value of the cotton produced in that time.
• The top 1 percent of cotton farms receive 25 percent of subsidies, while the top 10 percent of farms receive more than half of all payments.
• Oxfam estimates that the economic loss to cotton-producing countries by U.S. subsidies in many cases exceeds the aid provided to those countries by the U.S.

So, you might ask, how can we say that subsidies to U.S. cotton producers hurt African farmers? They are, after all, separated by an ocean or two, and we aren’t forcing African farmers to send U.S. cotton producers monthly checks! The answer boils down to simple economics: as the supply of a good increases, the price will drop if the demand doesn’t increase to a similar degree. Normally, as people become willing to pay less per unit (e.g., a bale of cotton), the number of suppliers willing to sell at that price decreases, until just enough of the most efficient producers (who are able to make a profit at the lowest prices) are willing to sell a good at a given price to satisfy the demand at that price for the good (for further explanation of this, see http://tinyurl.com/czbh6). Since, according to Oxfam’s briefing, the U.S. produces cotton for about 68 cents per pound compared to Benin’s 30 cents per pound, one would expect that the U.S. would be moving toward producing less cotton, and shifting to items they’re better at producing. The subsidies keep this from happening, though: money flows from federal coffers to cotton producers, making it possible for them to sell cotton at a loss and still make a profit through subsidies. The incentive, then, is to produce as much cotton as possible, to receive as large a share of the subsidies as possible. The result: the figure cited above, in which the U.S., possibly one of the most expensive places in which to produce cotton, exports 76 percent of its production to other countries!

It seems ironic that producing more than is needed in one place can cause poverty elsewhere, but this is what is happening. As subsidized U.S. cotton finds its way onto the world market, the increased supply pushes the price of cotton down. U.S. farmers, because of the subsidies, can tolerate these low prices. A farmer in Africa, though, who receives no subsidies, who lives on a dollar a day, and whose country’s economy depends heavily on cotton exports to fund public services, including education and research, has no such cushion. If he’s forced to sell his cotton at a price even below his low cost of production, he loses his livelihood. In the U.S., we can have the joy of knowing that not only have our tax dollars ensured that we will pay more for our clothing by subsidizing expensive producers (even if clothing appears cheap on the shelves, tax-supported subsidies are ultimately paid not by “the government”, but by tax-paying citizens), but we have also succeeded in making the lives of farmers, of families, even of entire impoverished nations, worse than they had been by depriving them of their livelihoods, and of the means to improve their situations.

So, in my mind, “fair trade” isn’t about protests, as we’ve all seen at WTO meetings. It’s not about requiring a “global minimum wage” as a pretense for protectionism. In this case, fair trade is about stopping stealing from those who can’t afford it while making those who “play the system” wealthy. Let’s stop subsidizing cotton production in this country, and let those who can produce it cheaply do so. By ceasing the subsidization of cotton, we’ll pay less overall (as we include the current subsidies of expensive production) for our supply. If we stop the subsidies and allow cotton prices to return to their “natural” levels, we’ll do much to help the lives of those who truly need our help. Let your lawmakers know (you can find their contact information at http://www.congress.org/) that you can’t support this continued “reverse Robin Hood” operation of taking from the poor (and ourselves!) and giving to the rich. Join Oxfam (http://www.oxfamamerica.org/), as I have done, to stay informed. Look for ways that you can help.

So, the decisions made by our legislators and those lobbying them have had significant impacts. The decisions that each of us individually make, though, are those for which we bear the most responsibility. Every time I buy a cotton shirt, I’m making a statement. It hasn’t been a conscious one, but now I know what I’m saying. When I buy a piece of clothing, I accept the processes and the material that went into it. If I buy cotton grown in the U.S., I’m speaking. As a single consumer, I might not be speaking loudly on an individual level, but I’m in some way approving of the status quo. I want to change this—I’ve been looking for the “cotton” equivalent of TransFair USA’s “Fair Trade” food certifications, but haven’t found anything yet. Just going with silk would be another interesting alternative, but I really don’t know much about the economics behind it. At any rate, I do want to consume responsibly; suggestions are welcome. In the meantime, let’s get these subsidies moved to their rightful place–to history’s garbage heap! Please, get a postcard and write your congressional representatives, asking them to cap subsidies, to stop this ridiculous, toxic game!