What I’ve Learned Covering the Military for 40 Years
Scant public interest yields ceaseless wars to nowhere
--Mark Thompson, Center for Defense Information
It turns out that my spending four years on an amusement-park midway trying to separate marks from their money was basic training for the nearly 40 years I spent reporting on the U.S. military. Both involve suckers and suckees. One just costs a lot more money, and could risk the future of United States instead of a teddy bear.
But after 15 years of covering U.S. defense for daily newspapers in Washington, and 23 more for Time magazine until last December, it’s time to share what I’ve learned. I’m gratified that the good folks at the nonpartisan Project On Government Oversight, through their Straus Military Reform Project, are providing me this weekly soapbox to comment on what I’ve come to see as the military-industrial circus.
As ringmaster, I can only say: Boy, are we being taken to the cleaners. And it’s not so much about money as it is about value. Too much of today’s U.S. fighting forces look like it came from Tiffany’s, with Walmart accounting for much of the rest. There’s too little Costco, or Amazon Prime.
There was a chance, however slight, that President Trump would blaze a new trail on U.S. national security. Instead, he has simply doubled down.
We have let the Pentagon become the engine of its own status quo.
For too long, the two political parties have had Pavlovian responses when it comes to funding the U.S. military (and make no mistake about it: military funding has trumped military strategy for decades). Democrats have long favored shrinking military spending as a share of the federal budget, while Republicans yearn for the days when it accounted for a huge chunk of U.S. government spending. Neither is the right approach. Instead of seeing the Pentagon as the way to defend against all threats, there needs to be a fresh, long-overdue accounting of what the real threats are, and which of those are best addressed by military means.
The Defense Department’s Quadrennial Defense Review, which is supposed to do just that every four years, has become an engine of the status quo. The Pentagon today is little more than a self-licking ice cream cone, dedicated in large measure to its growth and preservation. Congress is a willing accomplice, refusing to shutter unneeded military bases due to the job losses they’d mean back home. The nuclear triad remains a persistent Cold War relic (even former defense secretary Bill Perry wants to scrap it), with backers of subs, bombers and ICBMs embracing one another against their real threat: a hard-nosed calculus on the continuing wisdom of maintaining thousands of nuclear weapons on hair-trigger alert.
Unfortunately, it’s getting worse as partisan enmity grows. It’s quaint to recall the early congressional hearings I covered (Where have you gone, Barry Goldwater?), when lawmakers would solemnly declare that “politics stops at the water’s edge.” The political opposition’s reactions to Jimmy Carter’s failed raid to rescue U.S. hostages held in Iran in 1980 that killed eight U.S. troops, and to the loss of 241 U.S. troops on Ronald Reagan’s peacekeeping mission in Beirut in 1983, was tempered.
But such grim events have been replaced by Hillary Clinton’s Benghazi and Donald Trump’s Jan. 29 special-ops raid in Yemen. Rancid rancor by both sides cheapens the sacrifice of the five Americans who died. It only adds a confusing welter of new rules designed to ensure they aren’t repeated. Yet mistakes are a part of every military operation, and an unwillingness to acknowledge that fact, and act accordingly, leads to pol-mil paralysis. It’s amazing that the deaths of Glen Doherty, William “Ryan” Owens, Sean Smith, Chris Stevens and Tyrone Woods seem to have generated more acrimony and second-guessing than the wars in Afghanistan and Iraq, in which 6,908 U.S. troops have died.
There is today a fundamental disconnect between the nation and its wars. We saw it in President Obama’s persistent leeriness when it came to the use of military force, and his successor’s preoccupation with spending and symbolism instead of strategy. In his speech to Congress Feb. 28, Trump mentioned the heroism of Navy SEAL Owens, but didn’t say where he died (Yemen). Nor did he mention Afghanistan, Iraq or Syria, where nearly 15,000 U.S. troops are fighting what Trump boldly declared is “radical Islamic terrorism.”
But he did declare he is seeking “one of the largest increases in national defense spending in American history.” His $54 billion boost would represent a 10% hike, and push the Pentagon spending, already well beyond the Cold War average used to keep the now-defunct Soviet Union at bay—even higher.
“We are going to have very soon the finest equipment in the world,” Trump said from the deck of the yet-to-be-commissioned carrier Gerald R. Ford on Thursday in Hampton, Va. “We’re going to start winning again.” What’s surprising is Trump’s apparent ignorance that the U.S. military has had, pound-for-pound, the world’s finest weapons since World War II. What’s stunning is his apparent belief that better weapons lead inevitably to victory. There is a long list of foes that knows better.
It’s long past time for a tough look at what U.S. taxpayers are getting for the $2 billion they spend on their military and veterans every day. It would have been great if Trump had been willing to scrub the Pentagon budget and reshape it for the 21st Century. But the U.S. has been unwilling to do that ever since the Cold War ended more than 25 years ago. Instead, it simply shrunk its existing military, then turned on a cash gusher following 9/11.
I know many veterans who are angered that their sacrifice, and that of buddies no longer around, have been squandered in Afghanistan and Iraq.
I recall flying secretly into Baghdad in December 2003 with then-defense secretary Donald Rumsfeld. The bantam SecDef declared on that trip that the U.S. military had taken the “right approach” in training Iraqi troops, and that they were fighting “well and professionally.” Last month, Defense Secretary Jim Mattis, the fifth man to hold that job since Rumsfeld, declared in Baghdad that the U.S. training of the Iraqi military is “developing very well.” His visit, like Rumsfeld’s 14 years earlier, wasn’t announced in advance.
Even as Army Lieutenant General H.R. McMaster, Trump’s national security adviser, tries to chart a path forward in Iraq, it’s worth remembering that he earned his spurs 26 years ago as a captain in a tank battle with Iraqi forces.
If we’re going to spend—few would call it an investment — $5 trillion fighting in Iraq and Afghanistan (and Syria, and Yemen), don’t we, as Americans, deserve a better return?
The problem is that the disconnect between the nation and its wars (and war-fighters) also includes us:
By: Mark Thompson, National Security Analyst for the Center for Defense Information at Project on Government Oversight (POGO). Essay republished with kind permission of POGO.
Honest repair shops should applaud this check on the other kind
A frequent problem Oregonians face is that auto repair shops are entirely unregulated, which means that the people who trim and paint nails and cut your hair are far more regulated than the mechanics and shops that do the work that, day in and day out, determines your safety on the road and even whether you and your passengers will live or die.
Worse, when an Oregon consumer gets ripped off by a car repair shop, the repair shops often have no assets from which the consumer can recover their money. Because auto repair shops in Oregon are completely unlicensed and unregulated right now, repair shops often have no assets. So even if a consumer takes the trouble to sue the repair shop and get a judgment, there may be no way to actually recover any money from the repair shop or its owners.
Some thoughtful legislators have recognized the problem and introduced an important bill to correct this injustice, which will go a long way to improving the situation for consumers. The bill will require that repair shops get a license and, as a condition of getting the license, post a $40,000 bond. This will help make it much more likely that consumers who suffer financial losses because of a repair shop's fraud, fraudulent misrepresentations, or unlawful business practices can get their money back.
79th OREGON LEGISLATIVE ASSEMBLY--2017 Regular Session
House Bill 3322
Sponsored by Representatives EVANS, ALONSO LEON;
Representatives CLEM, MALSTROM, MEEK, NOSSE, RAYFIELD
SUMMARY The following summary is not prepared by the sponsors of the measure and is not a part of the body thereof subject to consideration by the Legislative Assembly. It is an editor's brief statement of the essential features of the measure as introduced.
Requires person that engages in business as vehicle repair shop to obtain certificate from Director of Department of Consumer and Business Services.
Specifies information, fees and other items applicant must submit to director. Permits director to specify expiration date for certificate and to renew certificate. Permits director to petition court for injunction against person that engages in business as vehicle repair shop without certificate and permits court to impose penalty of not more than $15,000 if director proves by preponderance of evidence that person did not possess certificate.
Permits department to inspect certificate holder's facility or premises for specified purposes. Permits director to suspend, revoke, refuse to renew or condition renewal of certificate under certain circumstances.
Requires certificate holder to maintain corporate surety bond or irrevocable letter of credit in specified amount. Permits person that suffered ascertainable loss of money or property as result of certificate holder's actions to bring action against certificate holder's bond or letter of credit. Specifies limits on certain recoveries against bond or letter of credit. Declares emergency, effective on passage.
A BILL FOR AN ACT Relating to vehicle repair shops; creating new provisions;
amending ORS 646A.480; and declaring an emergency.
Be It Enacted by the People of the State of Oregon:
SECTION 1. Sections 2 to 5 of this 2017 Act are added to and made a part of ORS 646A.480 to 646A.495.
(1) A person may not engage in business as a vehicle repair shop unless the person first obtains a certificate from the Department of Consumer and Business Services in accordance with this section.
(2) The Director of the Department of Consumer and Business Services, after conducting an evaluation in accordance with subsection (3) of this section, may issue a certificate to engage in business as a vehicle repair shop to an applicant that submits:
(a) An application on a form, in a format and with the contents that the department specifies by rule, which at a minimum must include:
(A) Each applicant's name and residential address;
(B) The name of any business entity that is an applicant, along with:
(i) The street address of the business entity's principal office;
(ii) The name and street address of the business entity's registered agent in this state;
(iii) The names and residential addresses of each of the business entity's directors, members, officers or partners, as appropriate; and
(iv) The state under the laws of which the business entity is incorporated or organized;
(C) The name under which the applicant will engage in business as a vehicle repair shop and the street address, including the city and county within this state, at which the applicant will engage in business;
(D) A signed affidavit from the applicant that states that the applicant will engage in business as a vehicle repair shop at the address shown in the application;
(E) A signed attestation from an authorized city or county official that states that the applicant has complied with city or county business ordinances, resolutions or regulations that apply to vehicle repair shops and that city or county land use ordinances, resolutions or regulations allow a vehicle repair shop at the location at which the applicant will engage in business; and
(F) Any other information the department requires to assess the applicant and efficiently manage the department's duties under this section;
(b) A corporate surety bond from a corporate surety that is licensed to do business within this state, or an irrevocable letter of credit from an insured institution, as defined in ORS 706.008, that the Attorney General has approved as to form and that:
(A) Runs to the benefit of the State of Oregon in the sum of $40,000 for each location at which the applicant will engage in business as a vehicle repair shop;
(B) Provides that the corporate surety or insured institution shall notify the department immediately if the corporate surety or insured institution cancels the corporate surety bond or irrevocable letter of credit and that the corporate surety or insured institution is liable under the corporate surety bond or irrevocable letter of credit until the date on which the corporate surety or insured institution cancels the corporate surety bond or irrevocable letter of credit or the date on which the department receives notice of the cancellation, whichever date is later; and
(C) Requires as a condition that the applicant engage in business as a vehicle repair shop without fraud and without making any fraudulent representations;
(c) A certificate of insurance from an insurer authorized to transact insurance in this state that:
(A) Shows the insurer's policy number;
(B) Sets a coverage limit at or above a minimum limit that the department specifies by rule; and
(C) Provides that the insurer shall notify the department immediately if the insurer cancels the applicant's policy and that the insurer remains liable under the policy until the date on which the insurer cancels the policy or the date on which the department receives notice of the cancellation, whichever date is later; and
(d) A fee in the amount of $1,100, if the applicant intends to engage in business as a vehicle repair shop in a single location, or a fee of $1,100 plus $350 for each additional location at which the applicant intends to engage in business as a vehicle repair shop.
(3) The department shall evaluate an application that an applicant submitted under subsection (2) of this section by verifying the information in the application and, if the director deems necessary, by investigating the applicant individually to verify the applicant's statements, using criteria the department specifies by rule.
(4)(a) If, after completing the evaluation described in subsection (3) of this section, the director is satisfied that the application is accurate, that the applicant has paid all fees required under this section, has provided a corporate surety bond or irrevocable letter of credit in the required amount, has provided a certificate of insurance and is otherwise eligible to receive a certificate to engage in business as a vehicle repair shop, the director shall issue a certificate with a distinctive number and with a design and other contents that the department specifies by rule. The director may also issue identification cards in the applicant's name, in the names of the directors, members, officers or partners of the business entity or in the names of the applicant's authorized employees.
(b) The director may not issue a certificate under this subsection to an applicant if the director determines that another jurisdiction has suspended or revoked a certificate or other authorization for the applicant to engage in business as a vehicle repair shop unless the applicant already possesses another certificate that the director issued under this section. If the applicant possesses a certificate the director issued under this section, the director may not deny another certificate to the applicant.
(5) The department by rule shall specify an expiration date for a certificate the director issues under this section. The department may renew a certificate if the department determines that the information in an application under this section remains current or if a certificate holder submits new information or a new application that in the director's judgment meets the criteria set forth in this section and entitles the certificate holder to a renewal. The director by rule may specify an amount for, charge and collect a fee for renewing a certificate under this subsection. The amount of the fee the director specifies under this subsection may not exceed the amount set forth in subsection (2)(d) of this section.
(6)(a) The director may petition a circuit court of this state to enjoin any person from engaging in business as a vehicle repair shop if the person does not possess a valid, current and unexpired certificate that the director issued under this section or if the person violates a provision of ORS 646A.480 to 646A.495. A single act is sufficient ground for the court to issue an injunction.
(b) In addition to issuing an injunction under paragraph (a) of this subsection, the court may assess a penalty of not more than $15,000 if the director proves by a preponderance of the evidence that a person is engaged in business as a vehicle repair shop without possessing a valid, current and unexpired certificate that the director issued under this section. The court shall direct the person to pay the penalty to the department and shall require the person to pay reasonable attorney fees and costs, including the costs the department incurred in the department's enforcement action. The department shall deposit moneys the department receives under this subsection as provided in ORS 705.165.
(1) The Department of Consumer and Business Services may inspect any facility or premises at which a person engages in business as a vehicle repair shop and the person's books and records solely to determine whether:
(a) The person possesses a valid, current and unexpired certificate that the Director of the Department of Consumer and Business Services issued under section 2 of this 2017 Act;
(b) The person is complying with the provisions of ORS 646A.480 to 646A.495; or (c) Any stolen vehicles are located at the facility or on the premises.
(2) The department may conduct an inspection under subsection (1) of this section at reasonable intervals and only during normal business hours. The department's inspection may not exceed a scope necessary to make the determinations specified in subsection (1) of this section.
(3) The department may use information from an inspection the department conducts under this section as the basis for a petition to the court under section 2(6) of this 2017 Act or may provide a prosecuting attorney with information the prosecuting attorney requires to proceed with an enforcement action under ORS 646.632 or 646.638.
(4) In addition to any other action the department may take under this section, the director may suspend, revoke or refuse to renew a certificate the director issued under section 2 of this 2017 Act or may issue an order to compel a person to comply with the provisions of ORS 646A.480 to 646A.495 or condition a renewal of the certificate on the person's compliance with the provisions of ORS 646A.480 to 646A.495.
(1) A certificate holder shall maintain a corporate surety bond or irrevocable letter of credit as provided in, and in the amounts specified in, section 2 (2)(b) of this 2017 Act at all times during which the certificate holder engages in business as a vehicle repair shop. To the extent that a corporate surety or insured institution, as defined in ORS 705.008, pays a claim from the corporate surety bond or the irrevocable letter of credit, the certificate holder shall immediately obtain a new corporate surety bond or irrevocable letter of credit or provide a corporate surety bond or irrevocable letter of credit in the amount of the claim.
(2) A certificate holder shall file the required corporate surety bond or irrevocable letter of credit with the Department of Consumer and Business Services and the department shall retain the corporate surety bond or irrevocable letter of credit in the department's office until the certificate holder no longer engages in business as a vehicle repair shop or until the corporate surety or insured institution cancels the corporate surety bond or irrevocable letter of credit.
(3)(a) Any person that suffers an ascertainable loss of money or property as a result of a certificate holder's fraudulent actions, fraudulent representations or violation of ORS 646A.480 to 646A.495 has a right of action against the corporate surety bond or irrevocable letter of credit that the certificate holder submitted to the department.
(b) A corporate surety or insured institution is liable to a person that obtains a judgment against a certificate holder in the amount of the judgment, including reasonable attorney fees and costs, up to the limit of the corporate surety's or insured institution's corporate surety bond or irrevocable letter of credit.
(c) Notwithstanding paragraph (b) of this subsection, and except for a certificate holder's retail customers, the maximum amount available to pay claims from a corporate surety bond or irrevocable letter of credit under this subsection is $20,000.
(4) If the director canceled or refused to renew a certificate the director issued under section 2 of this 2017 Act, or if a certificate holder surrenders the certificate, a corporate surety or insured institution that provided the corporate surety bond or irrevocable letter of credit required under section 2 of this 2017 Act is relieved from any liability that accrues after the date on which the department canceled or failed to renew the certificate or on which the certificate holder surrendered the certificate.
(5)(a) A certificate holder shall file the certificate of insurance required under section 2 (2)(c) of this 2017 Act with the department and the department shall retain the certificate in the department's office until the certificate holder no longer engages in business as a vehicle repair shop or until the insurer cancels the policy.
(b) A person need not file a certificate of insurance with the department if the person attests in a form the department specifies that the person does not advertise, offer to perform or perform in exchange for payment any evaluations, maintenance or repair of vehicles for members of the public.
SECTION 5. The Director of the Department of Consumer and Business Services may adopt rules necessary to carry out the provisions of sections 1 to 4 of this 2017 Act and otherwise administer the provisions of ORS 646A.480 to 646A.495.
SECTION 6. ORS 646A.480 is amended to read:
646A.480. As used in ORS 646A.480 to 646A.495:
(1) "Certificate holder" means a person that obtained a certificate that the Director of the Department of Consumer and Business Services issued under section 2 of this 2017 Act.
[(1)(a)] (2)(a) "Motor vehicle" means a self-propelled device, other than a motor home, that is used: (A) To transport persons or property upon a public highway; and (B) For personal, family or household purposes.
(b) "Motor vehicle" does not include a motor vehicle owned as part of a fleet and maintained under the terms of a maintenance contract.
[(2)] (3) "Owner" means an individual who has legal authority or apparent legal authority to make decisions concerning the maintenance or repair of a motor vehicle. [(3)]
(4) "Owner's designee" means an individual who received permission in accordance with ORS 646A.495 to make decisions concerning the repair or maintenance of a motor vehicle.
[(4)(a)] (5)(a) "Vehicle repair shop" means an individual, corporation, partnership, limited liability company or other business entity that engages in a business in which, in exchange for payment, the individual, corporation, partnership, limited liability company or other business entity advertises to and performs for any member of the public services that include evaluating [evaluates] the condition of, [maintains] maintaining or [repairs] repairing a motor vehicle.
(b) "Vehicle repair shop" does not include a motor vehicle body and frame repair shop, as defined in ORS 746.275.
(1) Sections 2 to 5 of this 2017 Act and the amendments to ORS 646A.480 by section 6 of this 2017 Act become operative January 1, 2018.
(2) The Director of the Department of Consumer and Business Services may adopt rules and take any other action before the operative date specified in subsection (1) of this section that is necessary to enable the director to exercise, on and after the operative date specified in subsection (1) of this section, all of the duties, functions and powers conferred on the director by sections 2 to 5 of this 2017 Act and the amendments to ORS 646A.480 by section 6 of this 2017 Act.
SECTION 8. This 2017 Act being necessary for the immediate preservation of the public peace, health and safety, an emergency is declared to exist, and this 2017 Act takes effect on its passage.
Writer Paul McDivitt -- @PaulMcDivitt Science and environmental writer
Originally published at Ensia
How renewable energy advocates are hurting the climate cause
Overly optimistic reports of renewables’ success are not only misleading but also counterproductive
In the wake of the 2016 presidential election, the proliferation of misinformation on social media is finally getting the attention it deserves. Or so I thought.
Scrolling through my Facebook news feed recently, I stumbled upon an article shared by Climate Central, a nonprofit news organization focused on climate science. “The World’s Renewable Energy Capacity Now Beats Out Coal,” read the headline from Co.Exist. I clicked. “The tipping point marks a major milestone in the transition to cleaner power sources,” the subhead declared from atop an aerial photo of a wind farm.
And so went most of the coverage of a new report on renewable energy markets by the International Energy Agency, a well-respected source of global energy statistics. Outlets big and small, reputable and lesser-known, specialized and general, adopted similar headlines, subheads and ledes, accompanied by photos of wind turbines and solar panels.
“Installed capacity is not really a useful metric for a lot of purposes.” –Mark Jacobson
The problem is twofold. First, capacity is a highly selective way to measure electricity, especially in the context of emissions and climate change. Capacity is defined as the maximum electric output a generator can produce under specific conditions at a moment in time — for example, how much a solar farm can generate during a sunny summer day or a wind farm when it’s really windy. But, of course, the sun doesn’t always shine or the wind always blow.
“Installed capacity is not really a useful metric for a lot of purposes,” Mark Jacobson, an engineering professor at Stanford University who studies renewable energy, told me. “When you’re asking, ‘how much is this supplying, how much is wind supplying versus coal?’ you want to look at the actual energy delivered.”
That’s commonly called generation, and is defined as the amount of electricity produced on average over a period of time, such as a year. Sure enough, if you look at generation numbers, coal still beat out renewables in 2015 by a significant margin, 39 percent to not quite 24 percent.
Second, and perhaps more importantly, most readers, and apparently many journalists, equate “renewables” with wind and solar. But the IEA’s renewables category also includes hydropower and biomass. According to the IEA, 71 percent of global renewable electricity generation in 2015 came from hydropower, 15 percent from wind, 8 percent from bioenergy and 4 percent from solar. In other words, it’s not wind and solar that have overtaken coal, it’s a basket of renewables heavily dominated by hydropower.
While growth in wind and solar installations have certainly helped push renewables’ share up, hydropower also has been growing in recent years. When you include all sources, hydropower currently generates around 16 percent of the world’s electricity; wind, almost 4 percent; biopower, 2 percent; and solar, just above 1 percent.
These two subtle forms of miscommunication, I believe, have led to some unfortunate misperceptions. A recent survey found that, on average, Americans believe that the country gets 20 percent of the total energy it consumes from wind and solar (11 percent wind, 9 percent solar).
Part of this is likely due to the common but erroneous conflation of “energy” and “electricity.” But even if you look at just electricity, the numbers for the U.S. still don’t come close to 20 percent. The U.S. Energy Information Administration’s 2015 statistics show that 4.7 percent of the country’s electricity was generated from wind, with 0.6 percent coming from solar. That’s a 14-plus percentage point difference between what Americans think and the truth.
It’s hard to blame them, with confused and confusing coverage of renewable energy statistics popping up in their social media feeds and on news outlets they’ve come to trust. On top of that, most social media sharers never even read the articles they share. According to a recent study, 59 percent of links shared on Twitter have never been clicked, underscoring the outsize influence of misleading headlines, subheads and header photos. And research has shown that misleading and clickbait headlines have a lasting effect on how those who actually read articles interpret and remember their content.
Making wind and solar seem like they’re doing better than they really are could come back to
bite them — and the climate.
“This is typical of modern information consumption,” said Arnaud Legout, co-author of the study on social media sharing, in a statement. “People form an opinion based on a summary, or a summary of summaries, without making the effort to go deeper.”
It’s understandable that environmental organizations and activists would want to build public enthusiasm for renewable energy. But making wind and solar seem like they’re doing better than they really are could come back to bite proponents — and the climate. If members of the public think we’re well on our way to throwing fossil fuels into the dustbin of history and replacing them with renewables, they’ll be less likely to demand new policies and take actions to lower their own carbon footprints. The public may even come to see wind and solar as capable of outcompeting fossil fuels on their own and therefore undeserving of government subsidies and helpful regulations.
Wind and solar have made real progress in recent years. Their costs are projected to continue to decrease, and more wind and solar farms and rooftop solar arrays will continue to pop up across the country and around the world. But if the goal is to limit warming to anywhere near the level world leaders agreed to in Paris in 2015, significant challenges remain — and pretending like everything is going great is not going to fix them.
Originally published at Ensia and republished under the terms of Creative Commons’ Attribution-NoDerivs 3.0 Unported license. Ensia an independent, nonprofit magazine presenting new perspectives on environmental challenges and solutions to a global audience, with support from the Institute on the Environment at the University of Minnesota,
This valuable book explains many of the difficulties making the achievement of 100% renewable energy uncertain. However a much stronger case can be given, indicating that present energy-affluent societies cannot be run on renewables.
We can and must shift to renewables, but there must also be dramatic reduction in energy consumption, rich world “living standards” and GDP.
There is a very strong tendency for green people to take it for granted that we can transition to 100% dependence on renewable energy sources without any significant reduction in “living standards” or the economy, and do it at low cost.
Many impressive studies and reports make this claim. I have examined several of these and written a number of detailed critiques. All make highly challengeable assumptions and most are of little or no value because they are not based on actual weather data for the regions under discussion.
The book Our Renewable Future by Richard Heinberg and David Fridley (2016) provides a detailed and valuable discussion of the scene and of the uncertainties and difficulties. It stresses that even if these are overcome there must also be major change in rich world systems and lifestyles.
But I think they do not make clear the magnitude of the challenge, and I want to argue here that there is a more effective way to show this. Only be trying to estimate the amounts of energy needed and available can we estimate how likely or unlikely it is that everything can be run on renewables. This can only be done if the issue is approached in a numerical or quantitative way, that is attempting to assess how much energy is needed in various forms, the possible sources and limits and costs, and especially what amounts of what forms would be needed to get around the intermittency and storage problems.
My detailed attempt to do this is here. It derives the conclusion that even in Australia with its highly favourable renewable energy resources it would be much too costly to have sufficient renewable capacity to run anything like the kind of society we have today. An indication of the case is given below.
For many years I have argued that the alarming and deteriorating global predicament cannot be solved unless we abandon the commitments to economic growth, the market system and a culture of individualistic competitive acquisitiveness. (For the detail see thesimplerway.info)
However most people do not hold this world view, but believe that adjustments and technical advances such as adopting renewables will be sufficient to sustain societies that are more or less like those we have today. If my view is correct we have to face up to making the most enormous and radical change imaginable, and quickly. I am arguing here that there is a much more coercive case for this view than is put in Our Renewable Future.
Two preliminary points; firstly, there is no doubt that we must shift to 100% renewable energy, as quickly as possible. In other words this is not an argument against transition to renewables. Secondly, my analyses are not confident. They set out the situation that the evidence I have seems to support, but they could be quite wrong. All assumptions and derivations are clear and easily checked and it is important that these analyses be critically examined. Those who doubt my conclusions are encouraged to try to find why they are invalid and thus help us to work towards a more confident understanding of the field.
The electricity task
There have recently been two impressive studies of the possibility of 100% renewable power supply in Australia, involving complicated modeling based on detailed weather data. The first was by Elliston, Diesendorf and MacGill (2012, 2013.) I will however deal with the second study, by Lenzen et al. (2016) which I think is based on more satisfactory assumptions. (I am listed as a co-author but played a very minor role; the significance of the study derives from the modeling carried out by the others.)
The general finding is that given the weather data for 2010,100% renewable electricity supply could have been achieved at a production cost of 20c/kWh, but probably 30.3c/kWh under typical conditions. The amount of generating capacity needed to deal with intermittency would have been 5 to 6 times average demand, and considerable use of biomass would have been needed. Most countries have far less biomass potential than Australia.
I have attempted to estimate what the difference between this production cost and a retail price is likely to be, taking into account a) the many factors left out of the study to simplify the already huge computing task, and b) the factors operating on production cost to result in the retail price. My (easily followed) derivation leads to the probably surprising conclusion that retail price would be around 70+c/kWh, or three times the present Australian retail price.
Such a price might be tolerable but it is likely to be at least quite economically disruptive, especially when added to the significant economic difficulties that lie ahead (e.g., accelerating inequality, falling productivity, skyrocketing debt, peak oil, falling ore grades, the coming robot invasion, and ecological deterioration on all sides…) High retail power prices would multiply and pyramid through the whole of the economy. More importantly a high electricity price would have very serious implications for a 100% renewable supply of total energy, because that supply would have to be heavily, indeed almost entirely based on electricity and inefficient derivatives, such a hydrogen.
100% total energy supply from renewables?
Meeting total energy demand from renewable sources is a quite different task to just meeting electricity demand. At present electricity makes up less than 20% of total energy demand in a rich country, and it is the form most easily provided by renewables.
Biomass is the only renewable form that does not directly produce electricity, and it is limited. Providing all forms of energy needed from renewables involves much more than simply scaling up the power supply system by a factor of 5. This is mainly because most of the remaining 80% of energy used and not presently in the form of electricity sets problems to do with a) the nature and number of these other forms, and b) costs and losses in switching them to electricity, c) the amount that cannot conveniently be switched, and d) the energy and dollar costs of converting electricity or biomass into these more difficult forms.
To analyse the situation well we would need a complete list of the different kinds of energy in the present total energy budget, such as how much liquid fuel is needed for what purposes, and we would need to ask about the extent to which electricity might be able to replace each of these. How might we run trucks, ships, aircraft, remote mines etc.? What might be the conversion losses and efficiencies, and what might be the ultimate total renewable system cost? Unfortunately there is little information on these issues.
Therefore the following exploration must be regarded as uncertain and indicative only. However it does illustrate the kind of analysis that is needed, and it provides a strong case that if a 100% renewable energy supply is achievable it will at best be very difficult and costly to do.
Estimating a 2050 Australian total energy budget
The approach detailed in thesimplerway.info/REcriticalreview.htm is to begin with an attempt to work out the quantities of energy in what forms might be needed in Australia by 2050, given the goal of converting all demand to renewable forms. Following is a summary of the main elements in the case; all assumptions and derivations are spelled out clearly in the full account.
My apologies for all the numbers and arithmetic following, but meaningful discussion of this issue cannot be undertaken without these. The issue is a quantitative one. My main aim here is to indicate the form or approach that a convincing case must take.
Present (2015) final energy consumption 4,130 PJ [Petajoules], electricity 810 PJ, 20% of final, transport 1603 PJ,
39% of final, population will multiply x 1.82, 2050 BAU (“business as usual”) demand is very difficult to estimate but is assumed here to continue the 1974-2017 growth rate which was proportional to population, and thus be 7,520 PJ by 2050 (this is quite debatable, and reconsidered later.)
Thus 2050 final energy demand is taken as,
Electricity, 1,472 PJ, Transport, 2,917 PJ, Remainder 3,131 PJ, Total 7,520 PJ.
How night these quantities be provided?
The two most relevant figures available are, firstly residential heating and cooling makes up about 5.6% of total Australian energy use, and industrial plus commercial energy use add to about 32% of the total. If one quarter of this second quantity is low temperature heat that need not be provided via electricity, then residential + industrial + commercial low temperature heating might add to 12% of total energy.
This would mean that 12% of the BAU target 7,530 EJ, i.e., 904 PJ, can come from solar thermal panels, reducing the remaining category to 2,227 PJ. (In the real world much heating and cooling will be carried out by heat pumps, using electricity, but the above assumption is that all is provided by solar thermal panels, unrealistically reducing the total electricity demand to be met.)
Let us now make the simplifying (but also incorrect) assumption that all of the remainder category can be provided by electricity. The resulting quantities to be supplied would be,
Electricity Biomass Hydrogen
Electricity demand 1,384 PJ 340 PJ biomass
Transport demand 765 PJ 977 PJ as ethanol, 977 PJ = 2,443 PJ biomass
Remaining 45% 2,227 PJ
Totals 4,376 PJ 2,783 PJ biomass 977 PJ
The biomass figures above are for ethanol derived from biomass. If it is assumed that the energy efficiency of this process is 40% it would require 2,783 PJ of biomass to produce. But when the amount assumed for back up of electricity generation (above) is taken into account, along with the estimate by Crawford et al., (2013) of the total possible Australian biomass energy harvest, there is a shortfall of 1,395 PJ. This would have produced 558 PJ of ethanol, so it will be assumed that this will now have to met by hydrogen, bringing that total to 1,535 PJ.
But to have 1 unit in the form of hydrogen about 1.7 units must be generated in the form of electricity (even ignoring the large energy cost embodied in hydrogen production, storage, and pumping equipment and leakage losses.)
Thus generating the hydrogen would require 2,610 PJ of electricity.
The electricity total would then become 4,376 + 2,610 = 6,986 PJ, or c. 6,940 PJ after taking the small (c. 50 PJ) hydro contribution into account.
This is about 9 times the present amount of electricity generated in Australia.
At this point the detailed account considers the effects of more optimistic assumptions, including a 30% saving due to conservation effort, but they do not seem to make a huge difference.
On the other hand it is likely that in 2050 many functions will require greatly increased energy inputs, such as mining and processing poorer ores, water desalination, denser settlements involving much high rise construction and living, and recycling higher proportions of waste.
It has recently been realized that productivity growth is significantly due to adoption of more energy intensive ways, so the quest for it will tend to raise use. Global freight and especially tourism and air traffic are expected to increase faster than population. Energy will be needed to cope with challenges to agriculture. Increasing effort will be needed to deal with generally accelerating ecological deterioration.
Above all dealing with the many effects of climate change will add very large energy costs that do not exist at resent, including defensive works such as sea walls, settlement relocation, salt water incursions into agricultural land, remedying storm damage, dealing with refugees, adapting to altered rainfall patterns (which for instance can make existing dams redundant), dealing with pest surges and algal blooms, and developing new crops for altered conditions.
Probably the greatest problem will be set by the fact that the IPCC greenhouse targets assume that very large amounts of carbon will have to be taken out of the atmosphere after 2050, which would require use of enormous amounts of energy.
But let us ignore all those factors likely to increase the amount needing to be supplied; what might be the minimum cost of energy?
My detailed discussion of the Lenzen et al. study indicates that the retail price of electricity would have to be at a minimum somewhere above 46c/kWh.
To provide 6,940 PJ/y, i.e., 1,927 billion kWh, at 46 c/kWh could cost $887 billion p.a., which is around 55% of the 2015 Australian GDP, or 28% of 2050 GDP assuming 2% economic growth. But the present rich country total expenditure on energy is usually well under 10%, and this includes taxes added on after all production and distribution costs have been totaled. (For example 40% of the price paid for petrol in Australia today is a tax added by government to the retail supply price.) If we could take out taxes we would probably find that the retail cost paid for energy in Australia today was closer to 6% of GDP.
It would obviously be impossible to pay out anything like 29% of GDP for energy. Hall and Klitgaard (2014) find that when energy expenditure remains above about 5.5% of US GDP for some time recession occurs. In other words far lower assumptions than have been made in this exercise would have to be true before the costs arrived at could be affordable. And all this is for Australia, which has possibly the most favourable renewable energy conditions in the inhabited world.
The belief that energy supply can be 100% renewable is probably the main element in the tech-fix faith held by most people, including green and left people.
They think there is no need to shift from something like present energy and resource intensive lifestyles and systems, or from an economy driven by growth and market forces. If the position arrived at in this reassessment is sound then the big global problems cannot be solved unless there is dramatic reduction in rich world per capita levels of consumption, the present economy is abandoned, there is immense cultural change away from individualistic, competitive acquisitiveness, and transition to some kind of radically Simpler Way. (That this would be workable and attractive is argued at thesimplerway.info/).
So I believe a much stronger case for such a transition can be made than is found in Our Renewable Future.
Crawford, D., T. Janovic, M. O”Connor, A. Herr, J. Raison and T. Baynes, (2013), Potential for electricity generation in Australia from Biomass in 2010, 2030, and 2050, AEMO 100% Renewable Energy Study, 4 Sept. CSIRO Report EP – 126969.
Hall, C. A. S and K. A. Klitgaard, (2014), Energy and the Wealth of Nations, Dordrecht, Springer.
Heinberg, R., and D. Fridley, (2016), Our Renewable Future, Santa Rosa California, Post Carbon Institute.
First reproduced on Resilience.org with permission, republished in OregonPEN with kind permission of the author. According to Wikipedia, Trainer's "theory of social change is called "The Simpler Way". He argues " A sustainable world order is not possible unless we move to much less production and consumption, and much less affluent lifestyles within a steady-state economic system." In The Conserver Society he outlines what such a world would look like, based around intelligent and networked eco-villages providing healthy lifestyles, work and education with much-lowered net consumption."
Ludington, Michigan, pumped hydro-electric storage facility Electric Generating Capacity: 1,872 megawatts, enough to power a community of 1.4 million people. Fuel: Lake Michigan water that is pumped uphill during periods of low electric demand and stored in a large reservoir. When demand is high, the water is released and rushes downhill, turning turbines and associated electric generators.
The essential paradox with affordable housing is that everyone is in favor of it in theory--but no one wants the value of any property they have invested in to decline.
Last fall, OregonPEN and others helped sponsor an Oregon tour for Chuck Marohn, founder of the national membership nonprofit "Strong Towns," a tiny outfit that has brought more clear thinking and profound insight into national conversation about urban planning and development in a few years than any convention center full of developers, financiers, contractors, lenders, and government officials have since 1945.
Marohn spent a few days in Portland before going to spend a day in Salem and visit towns like Newberg and Independence as well. He penned a powerful series of essays over the next few weeks, reflecting on causes and possible treatments (he would reject the idea of "cures") for the affordability crisis that the Legislature is trying to grapple with.
This series is Strong Towns at its best, iconoclastic, penetrating, deceptively simple prose, and discomfiting to sacred cows and conventional wisdom on the right, left, and center. The entire series is reprinted in this issue of OregonPEN, in hopes that some among the Legislature will read and consider a better approach to housing affordability than the current ones, which are mostly variations on a theme of trying to control a powerful automobile by stomping on the brakes and the accelerator as hard as possible while at the same time looking only at the rear-view mirror.
What's the matter with Portland?
Last week was my first experience with Portland, Oregon. We've been trying to schedule a Strong Towns event there for some time so a trip has been long overdue, but still. When I was in graduate school pursuing a degree in urban and regional planning, it seemed like one out of four lectures contained Portland as a case study and that at least half of my class intended to move there upon graduation. It has a certain lore in my mind.
From an urban design standpoint, downtown Portland didn't disappoint. It's a planner's Disneyland. Block after block of the consistently best urban form I've experienced in North America. I spent a lot of time just walking around and taking it all in. Very impressive.
And perhaps it was the unquestionable greatness of the downtown that made most everything outside of it seem really bad in comparison (although there were some bright pockets there too). Or perhaps it actually was really bad. I had three forays into the outskirts, two by automobile and one by rail, and I was struck, not only by how ordinary by North American standards most of it was, but also by how run down it felt.
We took the MAX -- Portland's light rail system -- out to neighboring city of Gresham.
Again, the urban design of each rail stop was amazing; there are clearly some brilliant people working on transportation there.
Outside of the right-of-way, however, things got really bleak. For miles along the route, within walking distance of many of these nice rail stops, the housing looked run down and neglected.
It was hard to reconcile what I was seeing with what I was hearing. I was repeatedly told that affordable housing was a huge problem. I met some neighborhood activists in Gresham, one in particular who told me that he used to live near the downtown and kept getting forced further and further out because he couldn't afford the housing. In my tour, I was shown building after building -- all very low value and some quite derelict -- with some enormous price tags attached, millions of dollars for structures a stiff wind away from being condemned.
If housing values are so high, and demand is so high, why isn't the housing stock nicer? Why were many people not maintaining their yards, keeping the paint up and doing the little things you'd expect to see in a place where modest homes were selling for prices well into six figures?
I think one possible answer to these questions gives a clue to the unaffordable housing problem facing Portland and a number of other cities. Before we get into that, however, I'd like to take some time to review -- and question -- the standard reasons given for why housing in Portland is so expensive.
1. So many people want to live here and they'll pay anything because Portland is so nice.
I'm always reflexively skeptical of this kind of thinking. I want to live here and am willing to pay high prices to do so and thus others must be making a similar decision. This reasoning can give us blinders that keeps us from realizing that different people do different things for different reasons, especially those not in our own economic strata.
“This reasoning can give us blinders that keeps us from realizing that different people do different things for different reasons, especially those not in our own economic strata.”
Case in point, there was nothing really nice about Gresham. In fact, it was not really nice at all. Why are all these people willing to pay inflated prices to live in Gresham? I don't think it is because they love living 35 minutes by train from Portland. It's not like the people I saw there were living in small, overpriced apartments because they valued the opportunity to ride the MAX into downtown, sip a local latte and eat at a food truck.
Put another way, Portland may be nice and the culture may be great for some, but there are a large number of people who are paying really high prices for sub-par housing and an experience they could get far more affordably somewhere else. While it is a happy notion for people in Portland to believe that they're so wonderful -- and I don't ridicule because, as a Minnesotan, I know everyone living here is well above average -- it doesn't make any sense as the influence of a broad economic trend.
As I've said before, I absolutely can't get enough lobster at $1 per pound. At $25 per pound, I'm more discriminating. At $50 per pound, I'll stick with hamburger. Love of something can drive a market, but only so far.
2. We are not building enough housing to meet demand.
This is the more intellectually rational argument and I heard it a lot. Essentially, there is a supply and demand curve problem. Too much demand and not enough supply thus higher prices. The answer then is to build a lot more housing and eventually....what? Reverse the Portland housing bubble and bring housing more in line with wages? Slow the increases so that people scraping by can continue to scrape by?
I don't buy this argument either. Yes, supply and demand curves are real and the demand for housing certainly drives up price, but I don't find this to be the cause of sustained massive price increases. Supply and demand curves suggest that, when prices increase, demand will decrease when supply stays constant. You can't sustain increasing demand while also sustaining increasing prices and increasing supply. You can do it for a while, but not over many, many years.
This logic would have us believe that, if Portland housing prices fell by 25%, instead of 10,000 people per year planning to move to Portland (supposedly -- more on this in a follow up post), 20,000 people or more would show up year after year until housing prices went back up to what people were willing to pay to live in such an amazing place. Maybe someone can put together a model that pretends to demonstrate this; I don't find the argument credible.
3. It's cheaper than San Francisco.
I heard this one a couple of times: people from San Francisco look at Portland as a huge bargain and are bidding up the prices. It felt like an old wives' tale, something that someone heard or perhaps even experienced once or twice that has now become legend throughout the community in complete disproportion to its actual influence.
Let's say a large percentage of the (supposedly) 10,000 people per year I was repeatedly told are moving to Portland come from San Francisco and other areas with over-inflated housing markets. The theory then is that they are influencing peak prices which is having an economic trickle down effect to all these other marginal places? Again, I think that is a comfortable theory and if I was in real estate or development I would certainly want people to believe it, but it doesn't explain high prices at the margins. Luxury condos: sure. Dilapidated hotels renting for $2,500 per month for a two bedroom: not credible. Something else is keeping the market from finding a lower equilibrium.
4. The Urban Growth Boundary creates artificial scarcity and drives up price.
This is the Randall O'Toole argument and I've thrown it in just so it's not brought up later. It's a ridiculous argument to anyone who has gotten out of the ivory tower, freed themselves of dogma and actually walked around the areas outside of Portland's downtown. There's so much space, so much underutilized property, that it's a ludicrous notion that land scarcity is part of the problem.
“The highest valued real estate in Portland is in the core downtown. That’s what the market is demanding.”
But Chuck...without greenfield development we can't build the auto-oriented, single-family homes that the market is demanding. It's such a joke. That's what it is valuing most. If it was just a matter of meeting a massive demand, you would never build single-family homes on cul-de-sacs.
The only reason that is even a lament is because a certain kind of developer with a certain kind of financing knows how to make nearly-guaranteed profits delivering it. It's a financial train wreck and, if Portland can avoid it, they will be much better off.
If there is a lack of anything -- and I am really not confident that there truly is -- it certainly is not land for development.
So what is going on? In my next article, [Distorting Housing Prices, below] I'll put forth an argument that the way Portland has done its rail investments along with the planning theories they've adopted on transit oriented development have combined with a social stickiness in housing to artificially inflate Portland's housing market in a way that is really dangerous. Those dogmatically committed to a certain set of beliefs and/or outcomes in this debate may want to skip my next few posts. If you're a planner, this could be a little depressing. The theories I outlined above are far too comforting and convenient. You've been warned.
If you have your own theory, I'd love to hear it.
Distorting Housing Prices
Two weeks ago I wrote about all the ways people explain the very high housing prices in a place like Portland, Oregon, and why I found those explanations lacking.
While Portland is nice, it's not so extraordinarily nice as to defy natural market mechanisms. Portland could build more housing, but there's no evidence that housing is not keeping up with demand at current prices. Yes, Portland is cheaper than San Francisco, but so are a lot of places that are not experiencing such huge distortions. And there is decades -- perhaps centuries -- worth of developable property within the current urban growth boundary; the UGB is not creating an artificial scarcity.
So what is going on?
There are two parts to this conversation. One is psychological and one is financial. I've chosen to deal with the financial today and will tie in the essential psychological element in a follow up.
To explain the financial, I'm going to present a hypothetical situation that I've seen in Portland as well as other bizarre housing markets like Austin, Texas (where I'll be this week) and Northern California.
Consider three adjacent parcels of identical size, shape and all other defining characteristics. One contains a single family home that was built prior to the construction of Portland's light rail line. The second is a vacant lot. The third parcel contains a condominium unit that was built along the rail corridor consistent with the theory of Transit Oriented Development (TOD), the idea of promoting increased density in areas where significant transportation investments have been made (i.e. "build it and they will come").
Let's consider a situation where the vacant lot in the middle is put up for sale. What should the asking price be? The most logical way to make that determination is to look at the adjacent properties and determine how the parcel could be developed. What is its highest and best use? We see that the single family home is valued at $200,000 while the condo building is valued at $10 million.
You could look to the left and see a single family home and deduce that, if the purchaser of the parcel was going to build a single family home consistent with the local market, they could pay up to $30,000 for your parcel and still make the math work. However, if you look to the right, you'll realize that someone buying the parcel with the intention of building a condo unit could pay 50x that much, about $1.5 million.
Of course, the sale price of the parcel is going to reflect the highest reasonable possible use.
With the TOD regulations in place encouraging the maximum use of that rail investment, that means the vacant parcel is going to sell for $1.5 million, a nice haul for the lucky individual who wound up with land near the rail line (I'm assuming there was no assessment when the rail line was built) and sold before the real estate bubble burst (more on that later).
Let's turn our attention now to that single family home. It now sits next to a vacant lot worth $1.5 million and a condo unit worth $10 million. How much is that single family home worth?
Whatever the answer is, we can clearly see that it's not worth $200,000 anymore.
With the vacant lot going for $1.5 million, all of the value of the single family home is now in the land. The home itself is essentially worthless, a scrape off building that actually lowers the value of the property due to the demolition costs.
The single family home in this situation is worth nearly the same as the vacant lot, $1.5 million.
In my next article, [Suspicious Economics in Portland, below] I'm going to explain how these elevated values get transmitted outside of the TOD areas, but before I finish today, I want to point out how this financial mechanism explains two unique features in cities where this is happening.
I mentioned last week that I was shocked by how nice the nice parts of Portland were and how bad the bad parts of Portland were. There wasn't a lot in between, at least not that I saw. I believe that is because the development approach I've explained today represents an all-or-nothing, binary kind of endeavor. If you owned that single family home, would you install granite counter tops? Would you put in a Jacuzzi tub? Would you do an addition to create a theater room? Of course not. You own a home that's worth over a million dollars, yet it has none of the things a million dollar home would have and the reason is simple: you would never get that money back. The house is going to get torn down whether it has granite counter tops or not. Adding them may marginally improve your life, but it doesn't change the value and thus is a bad investment.
“The land values are so high, and the building values comparatively so low, that it actually makes financial sense for the very affluent to buy the parcel, tear down the building and build their own multi-million dollar home.”
As is mowing the yard or picking up the trash, I'll note.
You see this artificial distortion creating all kinds of unnatural side effects, such as the McMansion scrape off. The land values are so high, and the building values comparatively so low, that it actually makes financial sense for the very affluent to buy the parcel, tear down the building and build their own multi-million dollar home. That kind of thing may seem normal to those that have grown accustomed to it, but historically it's an aberration.
One last thing to note: If every parcel in Portland (or Austin or Northern California) that had unnaturally elevated land values were to be redeveloped to its highest and best use—the use that would justify those property values—then Portland would need millions more people. Perhaps tens of millions. That will not happen in any kind of reasonable timeframe so what is going to happen -- what must happen -- is that, at some point, supply will exceed demand and prices will fall dramatically. Everyone who sold before the inflection will be huge winners (condo-inflated prices). Everyone who sells after will get normal single-family home prices.
It's just like a stock market bubble with all the animal spirits and irrational exuberance, except for the fact that housing prices, like wages (but unlike stocks) are sticky. More on that in a later article.
And by the way, if you're new to Strong Towns, don't start thinking that I'm anti-transit. I'm very much not. What I'm against is the build-it-and-they-will-come gambling and the market-distorting theories that go along with it. I also find immoral a system of local government finance that benefits -- by creating financial bubbles -- today's office holders and bureaucrats at the expense of tomorrow's America.
Suspicious economics in Portland
I'm hearing the frustration of many of you regarding my two articles on housing affordability in Portland (What's the matter with Portland and Distorting Housing Prices). In the history of Strong Towns, I've gotten this kind of feedback every time I've encountered a deeply held belief. And really, it's the deeply held belief -- the dogmatic adherence as if to a religious doctrine -- that raises my alarm bells.
When I'm in Portland and everyone tells me how much Portland is growing, I find it interesting. When the issue of housing affordability comes up again and again, it is always tied to the agreed upon narrative that Portland is growing and will continue to grow, world without end. When I see neighborhoods where the homes are $500,000+ yet they look like they should be $50,000, the narrative is, of course, Portland is growing. When I run into people making minimum wage working retail and they are somehow living in Portland despite paying thousands a month in rent, well....Portland is growing.
The thing that really makes me skeptical is that the "Portland is growing" narrative is just really convenient for those who hold that belief. Who would not want their choice of places to reside confirmed by hordes of people being willing to pay ever more irrational prices for housing? Of course they want to live here, Portland is growing.
And don't we kind of need to believe that? I mean, I'm going to be more willing to pay exorbitant prices for a home -- and cash out equity to make ends meet -- if I am convinced of the belief that even more irrational people will follow and take prices higher (in stock trading, we call this the greater fool theory).
"Portland is growing" is also really convenient for the local government and all of those who theorize, plan and design the systems of Portland's growth. Inflated housing prices make it tons easier to balance the annual budget; you can get used to a tax base that grows by 10% or more each year. It's fun to work with big budgets doing big projects to handle this big challenge of "Portland is growing". If we can focus on accommodating the growth that we all agree is happening -- world without end -- then we don't have to ponder very deeply the effects that our policies are having on housing affordability. High prices are obviously due to a lack of supply and so, if we want to deal with the impacts of high prices, we just continue to work harder and harder on accommodating all that growth. It's just such a comforting narrative, which is why I'm highly skeptical of it.
That and I hear the same thing in places like Austin, where I'm at today. Austin is awesome and everyone wants to be here and so, despite the laws of supply and demand and the impact that price has on reducing demand, the laws of supply and demand tell us that it is a lack of supply that is increasing price. The only way that's not an incoherent statement is if you believe that growth is a given.
Austin is growing. Portland is growing. Of course.
So I've received a number of emails on this including one yesterday with the subject line Suspicious Economics in Portland Articles. Here's what that email said:
Re: Suspicious Economics in Portland Articles
Reading your last couple of articles on Portland, I'm disappointed by the sloppy economic analysis. I say this with utmost respect for your work and Strong Towns - you've changed my mind about many things. Your analysis of supply restrictions seems to assume a fixed number of people living in Portland.
You can't sustain increasing demand while also sustaining increasing prices and increasing supply. You can do it for a while, but not over many, many years.
Portland's population has been increasing for decades now, and people and jobs are increasingly attracted to dense city centers. Both of these will move a demand curve rightward. Yes, this increases prices, and at some second-order level this might slow the growth of the demand curve, but demand has and will continue to increase. If supply is not increased commensurately, prices will continue to rise.
Then you resort to the standby that the housing market is in some sort of bubble.
Reverse the Portland housing bubble and bring housing more in line with wages?
The logic seems to be that higher prices must mean there's a bubble, but that seems silly when you look at high prices in dense cities with supply restrictions all over the world. Places with flexible supply like the sunbelt cities, Houston, or even Tokyo have (comparatively) low prices, despite huge population growth.
The answer then is to build a lot more housing and eventually....what?
Then the equilibrium point on the increasing demand curve and increasing supply curve will land at a lower (or at least slower-rising) price, and a rapidly increasing quantity. This is a much simpler argument, and it's how almost every other market for goods works, so why are you dismissing it out of hand?
See what I mean? This email is a series of very comforting assertions and beliefs. Growth is a given; it is unaffected by price. Demand is not subject to price equilibrium of the supply/demand curve, only supply is so impacted.
Chuck, it's such a simple argument, why are you dismissing it? Because it's not simple enough, it's too affirming for those who want to believe it and it doesn't adequately explain the world as I have experienced it.
In my last piece, I explained how large jumps in the development pattern -- such as those planned for Portland's many TOD sites -- dramatically distort land prices upward while unnecessarily stagnating underutilized property, land that would otherwise be improved.
In my next post, [Spiking a Rising Tide, below] I'm going to put forth my notion of how that distortion -- which is actually a simpler explanation than the entire voodoo belief system of ignoring the effect of price on demand -- is transmitted across the greater Portland area. In a subsequent post,
I'll then propose a simple set of policies that would prick Portland's housing bubble, move prices closer to their supply/demand equilibrium price point and thus restore housing affordability, albeit by negatively impacting the government's cash flow as well as the paper assets many Portlanders believe is theirs.
Spiking a Rising Tide
A wave laps up on the beach. The force of the surge pushes water up against the wet sand. The action is understandable, a rhythm that is quite predictable. Even little children find it easy to discern the areas where their feet will get wet from those places where the effort of building a sand castle won't be wasted.
Up the shore is a seawall. The waves act differently there. When the water hits the wall, it explodes upward, the force of the wave ultimately dissipated by gravity instead of friction. Kids play near the edge of the wall, but not too close (unless they want to get splashed by the mist).
Some Strong Towns readers have been frustrated with me for not acknowledging what you see as the obvious wave of growth impacting housing prices in cities like Portland and Austin. While I've said that I'm not convinced that the housing emergency in Portland in due to these causes, there is clearly a wave of demand that is putting upward pressure on price. What I've reacted to is the seawall, the self-created impediment that is dramatically forcing that wave skyward. That seawall is the city's fetish with high density development.
I've been on the road nearly all of the past two weeks and so I've not had a time to push this conversation forward at the pace many of you would like. As a makeup, today's post is going to be rather dense. As you'll see, however, the density of this post builds incrementally on what came before it; it's the next step in years of conversation we've had here. To make the point even more, this conversation is not an intellectual leap into the unknown, one that carelessly and recklessly skips over necessary iterations of development just to get to the desired end.
Last week I explained how large leaps in the development pattern -- from single family home to multi-story tower -- distorts land values and, in doing so, artificially drives up prices on lands zoned for such a leap. At the same time that a number of you were responding negatively to what I think is an obvious and hardly-even-debatable phenomenon, I was experiencing yet another example of it in San Marcos, Texas.
On a walking tour there, we strolled through blocks and blocks of gaps -- empty and underutilized lots -- just off of their core downtown. I pointed out a nice little home as an example of what the city should be striving for to fill in these gaps and then pointed to the adjacent vacant lot as the perfect place to start. That was when I was informed that the vacant lot was zoned T-5 Urban Center (2-5 story multi-family housing) and that the owner wanted $600,000 for it, making my proposed modest home financially impossible.
I asked why this land was zoned T-5 when there was so much underutilized property in the area, so much dead space. The answer was exactly what I heard in Portland and exactly what I heard in Austin: we're growing.
Supposedly there is so much demand for housing in San Marcos that T-5 zoning is needed -- all that high density development is necessary -- to meet the demand. I walked around for hours and experienced an endless amount of underutilized property, just as I had outside the cores of Portland and Austin. It was more property than would ever be utilized as T-5 and it was sitting there, high priced and waiting for the right buyer to come by and make the owner rich.
And the property owner had good reason to find this wait rational. It was reported to me that prices had been going up dramatically. There were a couple parts of town where high density development -- in this case some five story apartments -- was going on. With the land consistently going up in value and the cost to hold it minimal -- it is being taxed as raw land -- why not wait for a windfall? San Marcos is growing -- everyone knows it -- so sit back and let the growth make you rich.
This is the same thing I experienced here in my home town in a personal way over the past twenty years. My parents purchased the 80-acre Marohn homestead back when I was a little boy for something like $500 per acre. In the mid-1990's, development was taking off in the Brainerd area and raw land started to skyrocket. The narrative was that all those rich people from the Minneapolis/St. Paul area were moving up and they could afford to pay outrageous prices. Heck, they thought land was so cheap they just threw money at it.
We heard reports of land selling for $20,000 per acre. Then I, in my capacity as an engineer, worked with someone who paid the insane price of $30,000 per acre for land about a mile away from our farm. A little later, one of the old farms just up the road sold for $35,000 per acre. My parents were convinced that their much nicer property was certainly worth $40,000 per acre, at least. They still own it with the assessor having it worth six figures but with their own balance sheet valuing it in the millions.
Here's the absurd thing: there is so much land here that the price should be zero. Or, at most, the price of the land should be as if it were used for forestry, agriculture or hunting. Years ago, I did some simple math and showed some bankers that there is over 100 year's worth of supply of developed lots in the area. That excluded the raw land, land that the owners still expect to be worth millions.
John Maynard Keynes observed that wages are sticky. That is, when market conditions falter and businesses start to see profits drop, they are more apt to lay people off than they are to cut wages. People are very resistant to wage decreases because humans are wired to to be very sensitive to loss, far more than we are to gain. Freeze wages for three years and people will gripe. Cut wages for three years and they will revolt.
Land prices are subject to this same human condition. Unless forced to sell -- such as in an estate sale -- many people mentally book gains and will not sell until those gains -- or something near them -- can be realized. This is why rumors of free-spending Chinese, wealthy San Franciscans and tech workers dripping with dollars are so widespread. They are part of a cultural belief system that explain -- in an affirming way -- what we see happening.
Portland grew by 1.5% last year. These are growth rates not seen since before 2008. Just ponder that number -- 1.5% growth -- and contrast that with housing prices and rents that are growing by double digits. Portland has spent billions -- BILLIONS -- preparing for growth. They have built rail lines all over the place, built highways throughout and run thousands of miles of pipe in anticipation of growth. Yet, they can't handle 1.5% growth without blowing up housing prices?
Think of any other entity in any other realm that grows by 1.5% per year and contrast the reaction of that system with the hysteria of Portland. If this is only a 1.5% wave, it doesn't make sense. That kind of wave should roll across the sand and dissipate. Something is magnifying it.
In Portland today, there are three types places where this wave is being accommodated. The first is the core downtown, what I've called an urban planning Disneyland, where truly high demand for a unique place combine with high building costs and relative scarcity to price this area out of reach for most. The second place is in the remaining greenfield areas, where single family homes are being built in the insolvent suburban style we see all over North America. Neighborhoods are built all at one to a finished state; there is no next increment of intensity anticipated.
The third -- the spike -- is in those corridors zoned for high density, where the highest and best use is priced into the land. In these areas, the government has already made the investment -- the rail line -- and put in place the regulatory environment that has created a windfall for property owners. All those property owners need to do now is wait around until it is their turn to sell to a developer, someone ready to pay the price to build high density. In the meantime, any scarcity -- real or perceived -- just drives up the price and increases the long term payoff.
Scarcity also helps the high density developer. Assembling the land, acquiring the permits and going through the development process for a condominium tower or apartment complex involves taking on great risk over an extended period. It's best not to get too far out in front of a market -- one only growing 1.5% per year -- so that you don't get exposed if (when) there is a correction. High land prices are a bummer, but you can find good deals now and then and the high price of the finished product gives some added margin for error.
So how do we free up more raw land for development? How do we get these stagnating properties off the sidelines and into the game? How do we get developers to proceed more quickly? There is a very simple answer, but it is counter-intuitive and directly clashes with the planning profession's fetish with density.
The simple answer is downzoning.
What if along all these rail corridors and at all of these rail stops, instead of being able to build an eight-story condo unit, all a developer was allowed to build was the next increment of intensity? For most of that area, that would mean single family homes. In that case, what would happen to land prices? They would drop. They would crater, in fact. This would free up an incredible amount of land for cheap, affordable development while also taking a substantial amount of pressure off of the existing single-family neighborhoods.
But Chuck....Portland is growing (by 1.5% per year) and pretty soon all of that vacant and underutilized land is going to be built upon. Portland will be built out and we'll be pressured to extend the Urban Growth Boundary for new greenfield development. How you can possibly support single-family homes?
“There is no such thing as “built out” in a Strong Town. There is no such thing as being done.”
I'm not advocating for single family homes. I'm advocating for incremental development. Portland (and Austin and San Marcos and...) are trying to skip increments. They are trying to have a toned body without proper diet and exercise. They are trying to sprint before they have learned to crawl. They are obsessing over their theories of density and, in the process, they are stagnating their cities and leaving wide swaths of their population behind. There is no such thing as "built out" in a Strong Town. There is no such thing as being done. Cities that grow incrementally are on a continuum of improvement and so, when a block is so-called fully developed, the next increment of intensity must always be available. By right. Everywhere.
And for those of you who have suggested the last couple weeks that I'm a country bumpkin who found himself in the big city and had a sudden flash of crazy, I wrote about a floating height limit two years ago. That article also made people who have a fetish with density quite cranky with me, people who look at build-it-and-they-will-come rail investments in their cities and think the problem is the market not reacting correctly to this awesome public investment, that a little more density could sweeten the pie and get developers off the sidelines. They don't see how land speculators and developers were using the planner's zeal for density to squeeze their communities for low risk, publicly subsidized profit. The problem isn't the developer - it's the premature rail investment. Portland is an extreme example and it was that contrast that made it even more visible to me.
I know there is a lot to unpack here and I'll try -- despite an insanely busy schedule this week -- to be attentive to your comments and feedback, but let me address one final thing before signing off on this one. A comment by @Funktapus last week that received a really high number of upvotes included these rhetorical questions:
Suppose you're right and Portland has invested in transit oriented development, which by some voodoo has jacked up housing costs everywhere, snowballing the demand for more transit oriented development. What's the worst case scenario if growth abruptly halts? We are left with a bunch of high quality, sustainable, resilient neighborhoods with falling rent? That's not exactly a bad thing.
To be clear: I don't think the demand is for transit oriented development, per se. That's just the only development our fetish with density will allow us to consider in these places. You start with that given and @Funktapus's proposition becomes a self-reinforcing one. I don't start there.
Still, the worst case is we spend a couple of decades needlessly squeezing the poorest of Portland's residents further and further to the margins. We appease our guilt and anxiety over this problem by distorting the housing market further with rent controls and inclusionary zoning, things that, if they have worked at all (and I'm highly skeptical), have only worked on the margins. Planners get paid and have fun spouting Jane Jacobs while acting like Robert Moses. Developers and bankers get paid, of course. Corporations that can work at the scale demanded by Portland's development approach also do well while the small, incremental developer is squeezed out (that's okay - she can go be a barista as they are in high demand).
And after decades of squeezing, economic distortions so great that even middle class and upper middle class people find it hard to make it, the growth stops and all that inflated land adjusts back to normal prices. Hundreds of billions of dollars of wealth are lost, many decent and hardworking people are thrust into extreme financial distress and -- to make matters worse -- at the time of greatest need, the city (which is dependent on the artificially high land values for a large part of its revenue) struggles just to make their debt payments, let alone do anything to make life better for people that are suffering, the people who must -- if the place is to ever prosper again -- continue to find themselves in love with Portland, even when it isn't growing.
But yeah, at least you'll have some high density buildings to enjoy.
One of the reactions to my thoughts on Portland’s housing affordability emergency (their label) that I’ve found the most interesting is that my proposal is unworkable, Portland’s residents will never accept even small increases in density in their single-family neighborhoods. Chuck, you don’t understand the level of resistance. Better to get the most density where you can, when you can, and that is at the transit stops.
“Everywhere you turn you see Americans sacrifice their long-term interests for a short-term reward.” — Michael Lewis in Boomerang
In the Curbside Chat, I talk about the modern definition of a solutions as, “What can someone else change about what they are doing so that I don’t have to change anything about what I am doing?" We’re nearing the end of an insane election cycle where we are once again bombarded with such non-solution solutions. Benjamin Franklin never warned of a democracy where the electorate can vote themselves money, although it makes a good meme. Michael Lewis did suggest, at the end of Boomerang: Travels in the New Third World, that is precisely what we now have.
One of the key insights of Strong Towns is that our development pattern functions like a Ponzi scheme. The Suburban Experiment – development built in large blocks to a finished state – provides the illusion of wealth when everything is new and costs are low. In time, things start to go bad and the tragic truth begins to be revealed: that the long term costs of servicing and maintaining these places cannot be met by the wealth they produce. New growth and debt – mistaking insolvency for a cash flow problem – bridge the gap for a while until the growing liabilities overwhelm everything. What happens next is an open question, although we can see in places like Detroit – which got started on this experiment a couple of decades before the rest of the continent – one possible outcome.
And let me point out to the residents of Portland who believe their financial situation bears no resemblance to Detroit’s, trust me when I say that the people of 1960’s Detroit would believe the same thing about today’s Detroit. The vast majority of the land area in Portland – like practically every other city in North America – is functionally insolvent. That insolvency will come to bear at some point, and to a degree already is, so let’s stop pretending that it won’t.
I’ve said many times that the greatest challenge of this generation will be to avoid repeating the mistakes of what has come to be known as “white flight”, the abandonment of large parts of our cities by everyone except the very poor. When we concentrated poverty in our inner cities after World War II, we left people behind in neighborhoods that were largely coherent.
That was a tragedy on many levels, but it will be dwarfed by the catastrophe of abandoning poor people on the outskirts of our cities, where even during the best of times, life is despotic for people who can’t afford the high financial burn rate of such a lifestyle. Wait until those big box stores go empty, the drainage ditches and berms are overgrown with weeds and the infrastructure is no longer maintained. Again, Charlie LeDuff’s Detroit: An American Autopsy gives a firsthand account of how this is playing out in one scenario.
So please excuse me if I’m not very sympathetic to the notion that change is hard, that people who are comfortable will resist it. Of course they will. Our job as Strong Towns advocates is to find a way through that resistance, to share our message with our friends, neighbors and others in our communities, to keep bringing the conversation back to the persistent fact that our current approach is not working financially. We’re broke and so we must start thinking differently.
So I’ve suggested that all neighborhoods – those areas around our transit stops as well as the broad swatch of single family homes – should be allowed, by right, the next level of intensity in their development pattern. But no more. The ability to move to the next increment is to allow neighborhoods to mature and renew, to become antifragile by adapting over time to stress. The limit on how far of a jump can be made is an attempt to mitigate the distorting effects of our existing public investments, the build-it-and-they-will-come, winner-take-all delusion we’ve come to view as normal. It’s all about feedback loops. As Tomas Sedlacek suggests, trading growth for stability.
I want to help you think this through, to peer into the future and envision what I think – what I hope – would happen in such a system.
In the triage that will be the next generation of cities in North America – my apologies to Ed Glaeser, Richard Florida and others – there will be neighborhoods where the pipe is fixed and others where it isn’t. Where the fire department is staffed and where it is not. How do we determine which is which? Well, of course, the pipe where the rich people live will be fixed while the pipe where the poor people live will not. Let’s pretend, however, that we truly want to avoid that outcome. Let’s pretend that in enlightened places like Portland people really do care about everyone in their community (and I believe they do, in more places than just Portland).
What we should see, with my proposal (and other Strong Towns approaches), is that some neighborhoods receive a lot of incremental investment and other do not. With the high bar to development lowered – in price and in regulation – we should get a lot of Jimmy’s Pizza-scaled development. Small chaotic-but-smart stuff that seeds and reinforces a local economic ecosystem. In time, we’ll get a second generation in these places and even a third, increasing intensity in a feedback loop that mimics traditional development patterns. With each successive generation, the allowable increment climbs and so the places that people find strategic and valuable are those that will experience self-reinforcing growth.
And because it’s incremental, it doesn’t displace the way our big leaps do today; a much broader share of people share in the wealth being created. And, as we like to point out with Jimmy’s Pizza, it works at a scale that is inclusive of anyone with a dream who is willing to work hard. You know, what we Americans like to believe we are (instead of what we really are today).
In short, the system triages itself. In time, these places would (hopefully) become financially solvent, the cost of providing services easily justifiable by the tax base produced (not just the political influence). When we are forced to decide which pipe to maintain, which place to provide quality transit, where to maintain the best public safety response times, these are it. And you’ll not only have the math to back you up, you’ll have the critical mass of public support there as well.
As for those other areas….. I do not think the core of Portland will go away, although it will have to deal with the financial drag of subsidizing the transition happening on its outskirts. The rest – the neighborhoods of single family homes that reject incremental growth or are too far away from those emerging neighborhood centers to ever experience it – will go one of two ways.
Either they will wall themselves off into an affluent, yet fragile, enclave and use their political clout to try and force everyone else to continue to subsidize their preferred living arrangement. Or, their homes will go into steep decline and will eventually be used for salvage material.
Either way, we need to start framing the conversation today in terms of financial productivity. We need to drop our fetish with density, our grand dreams of converting those storage sheds and 7-11’s at each ill-conceived transit stop into a mini urban utopia, and start talking about how we build – and sustain over multiple generations – enough wealth to actually afford the places we want to inhabit.
Chuck, you don’t understand the level of resistance. No, I actually do. We need to stop talking about density and start talking about financial productivity.
Reprinted with kind permission of the author and Strong Towns, a membership organization.
The mission of Strong Towns is to support a model of development that allows America's cities, towns and neighborhoods to become financially strong and resilient. For the United States to be a prosperous country, it must have strong cities, towns and neighborhoods. Enduring prosperity for our communities cannot be artificially created from the outside but must be built from within, incrementally over time.
Bill would allow local governments to announce hearings on proposed rules via their webpages, providing better notice at a lower cost
OregonPEN was started two years ago for a number of reasons, not least of which was to help address the ongoing crisis in public funding for services for the public good. One of the ways OregonPEN proposed to address that crisis is by creating a new newspaper that would help state and local agencies and special districts be able to publish the many required public notices (over 300 statutes require publication of notices) at a fraction of the cost to publish in traditional newspapers.
Today, throughout Oregon, more than 1400 state and local governments and special districts are prisoners of monopoly newspapers that extract monopoly rents, charging hundreds or even thousands of times what it costs the publisher to deliver the notice, even as traditional newspaper circulation readership has melted down faster than ice cream in a heat wave.
There is nothing wrong with a requirement that government inform the public when it is proposing to take actions or make decisions that require or would benefit from public participation. It was a progressive idea when printed newspapers were the mass media of their day. But the world has changed dramatically since then. And now, giving notice means giving notice digitally, not in traditional newspapers.
So OregonPEN has published a new model of weekly newspaper for the digital age, providing local and transmitted news for over two years now, and OregonPEN will soon offer public and legal notices, providing governments and private individuals who have to publish a notice with a faster and better way to provide legal and public notices, and for a fraction of the cost, with the net revenue over costs going to fund public benefit programs such as Legal Aid.
Some Oregon legislators have noticed the high cost and declining utility of traditional newspapers, and they have proposed a bill to allow local governments to forego the publication of a notice about a rulemaking hearing in a traditional newspaper; instead, the local governments can publish the notice on the local government's website.
The bill is a clear sign of recognition that the age of the traditional printed newspaper as the vehicle for giving public notice is coming to an end.
79th OREGON LEGISLATIVE ASSEMBLY--2017 Regular Session
House Bill 2911
Sponsored by Representatives RESCHKE, NEARMAN; ESQUIVEL, NOSSE, Senator LINTHICUM
Authorizes local government to publish notice of public hearing regarding proposed rule on
agency’s website instead of in newspaper of general circulation.
A BILL FOR AN ACT
Relating to publication of notice of a hearing regarding a proposed rule; amending ORS 183.335.
Be It Enacted by the People of the State of Oregon:
SECTION 1. ORS 183.335 is amended to read:
183.335. (1) Prior to the adoption, amendment or repeal of any rule, the agency shall give notice
of its intended action:
(a) In the manner established by rule adopted by the agency under ORS 183.341 (4), which provides a reasonable opportunity for interested persons to be notified of the agency’s proposed action;
(b) In the bulletin referred to in ORS 183.360 at least 21 days prior to the effective date;
(c) At least 28 days before the effective date, to persons who have requested notice pursuant to
subsection (8) of this section; and
(d) Delivered only by electronic mail, at least 49 days before the effective date, to the persons
specified in subsection (15) of this section.
(2)(a) The notice required by subsection (1) of this section must include:
(A) A caption of not more than 15 words that reasonably identifies the subject matter of the
agency’s intended action. The agency shall include the caption on each separate notice, statement, certificate or other similar document related to the intended action.
(B) An objective, simple and understandable statement summarizing the subject matter and
purpose of the intended action in sufficient detail to inform a person that the person’s interests may be affected, and the time, place and manner in which interested persons may present their views on the intended action.
(b) The agency shall include with the notice of intended action given under subsection (1) of this
(A) A citation of the statutory or other legal authority relied upon and bearing upon the
promulgation of the rule;
(B) A citation of the statute or other law the rule is intended to implement;
(C) A statement of the need for the rule and a statement of how the rule is intended to meet the
(D) A list of the principal documents, reports or studies, if any, prepared by or relied upon by
the agency in considering the need for and in preparing the rule, and a statement of the location
at which those documents are available for public inspection. The list may be abbreviated if necessary, and if so abbreviated there shall be identified the location of a complete list;
(E) A statement of fiscal impact identifying state agencies, units of local government and the
public that may be economically affected by the adoption, amendment or repeal of the rule and an estimate of that economic impact on state agencies, units of local government and the public. In considering the economic effect of the proposed action on the public, the agency shall utilize available information to project any significant economic effect of that action on businesses which shall include a cost of compliance effect on small businesses affected. For an agency specified in ORS 183.530, the statement of fiscal impact shall also include a housing cost impact statement as described in ORS 183.534;
(F) If an advisory committee is not appointed under the provisions of ORS 183.333, an explanation as to why no advisory committee was used to assist the agency in drafting the rule; and
(G) A request for public comment on whether other options should be considered for achieving
the rule’s substantive goals while reducing the negative economic impact of the rule on business.
(c) The Secretary of State may omit the information submitted under paragraph (b) of this sub-
section from publication in the bulletin referred to in ORS 183.360.
(d) When providing notice of an intended action under subsection (1)(c) of this section, the
agency shall provide a copy of the rule that the agency proposes to adopt, amend or repeal, or an explanation of how the person may acquire a copy of the rule. The copy of an amended rule shall show all changes to the rule by striking through material to be deleted and underlining all new material, or by any other method that clearly shows all new and deleted material.
(3)(a) When an agency proposes to adopt, amend or repeal a rule, it shall give interested persons
reasonable opportunity to submit data or views. Opportunity for oral hearing shall be granted upon request received from 10 persons or from an association having not less than 10 members before the earliest date that the rule could become effective after the giving of notice pursuant to subsection (1) of this section. An agency holding a hearing upon a request made under this subsection shall give notice of the hearing at least 21 days before the hearing to the person who has requested the hearing, to persons who have requested notice pursuant to subsection (8) of this section and to the persons specified in subsection (15) of this section. The agency shall publish notice of the hearing in the bulletin referred to in ORS 183.360 at least 14 days before the hearing. The agency shall consider fully any written or oral submission.
(b) If an agency is required to conduct an oral hearing under paragraph (a) of this subsection, and the rule for which the hearing is to be conducted applies only to a limited geographical area within this state, or affects only a limited geographical area within this state, the hearing shall be conducted within the geographical area at the place most convenient for the majority of the residents within the geographical area. At least 14 days before a hearing conducted under this paragraph, the agency shall publish notice of the hearing in the bulletin referred to in ORS 183.360 and:
(A)(i) In a newspaper of general circulation published within the geographical area that is affected by the rule or to which the rule applies[.]; or
(ii) If a newspaper of general circulation is not published within the geographical area that is
affected by the rule or to which the rule applies, [the publication shall be made] in the newspaper
of general circulation published closest to the geographical area; or
(B) If the agency is a local government, as defined in ORS 174.116, on the agency’s website.
(c) Notwithstanding paragraph (a) of this subsection, the Department of Corrections and the State Board of Parole and Post-Prison Supervision may adopt rules limiting participation by inmates in the proposed adoption, amendment or repeal of any rule to written submissions.
(d) If requested by at least five persons before the earliest date that the rule could become effective after the agency gives notice pursuant to subsection (1) of this section, the agency shall
provide a statement that identifies the objective of the rule and a statement of how the agency will subsequently determine whether the rule is in fact accomplishing that objective.
(e) An agency that receives data or views concerning proposed rules from interested persons
shall maintain a record of the data or views submitted. The record shall contain:
(A) All written materials submitted to an agency in response to a notice of intent to adopt,
amend or repeal a rule.
(B) A recording or summary of oral submissions received at hearings held for the purpose of
receiving those submissions.
(C) Any public comment received in response to the request made under subsection (2)(b)(G) of
this section and the agency’s response to that comment.
(D) Any statements provided by the agency under paragraph (d) of this subsection.
(4) Upon request of an interested person received before the earliest date that the rule could
become effective after the giving of notice pursuant to subsection (1) of this section, the agency shall postpone the date of its intended action no less than 21 nor more than 90 days in order to allow the requesting person an opportunity to submit data, views or arguments concerning the proposed action. Nothing in this subsection shall preclude an agency from adopting a temporary rule pursuant to subsection (5) of this section.
(5) Notwithstanding subsections (1) to (4) of this section, an agency may adopt, amend or sus-
pend a rule without prior notice or hearing or upon any abbreviated notice and hearing that it finds practicable, if the agency prepares:
(a) A statement of its findings that its failure to act promptly will result in serious prejudice to
the public interest or the interest of the parties concerned and the specific reasons for its findings
(b) A citation of the statutory or other legal authority relied upon and bearing upon the
promulgation of the rule;
(c) A statement of the need for the rule and a statement of how the rule is intended to meet the
(d) A list of the principal documents, reports or studies, if any, prepared by or relied upon by
the agency in considering the need for and in preparing the rule, and a statement of the location
at which those documents are available for public inspection; and
(e) For an agency specified in ORS 183.530, a housing cost impact statement as defined in ORS
(6)(a) A rule adopted, amended or suspended under subsection (5) of this section is temporary
and may be effective for a period of not longer than 180 days. The adoption of a rule under this
subsection does not preclude the subsequent adoption of an identical rule under subsections (1) to (4) of this section.
(b) A rule temporarily suspended shall regain effectiveness upon expiration of the temporary
period of suspension unless the rule is repealed under subsections (1) to (4) of this section.
(7) Notwithstanding subsections (1) to (4) of this section, an agency may amend a rule without
prior notice or hearing if the amendment is solely for the purpose of:
(a) Changing the name of an agency by reason of a name change prescribed by law;
(b) Changing the name of a program, office or division within an agency as long as the change
in name does not have a substantive effect on the functions of the program, office or division;
(c) Correcting spelling;
(d) Correcting grammatical mistakes in a manner that does not alter the scope, application or
meaning of the rule;
(e) Correcting statutory or rule references; or
(f) Correcting addresses or telephone numbers referred to in the rules.
(8)(a) Any person may request in writing that an agency send to the person copies of the
agency’s notices of intended action issued under subsection (1) of this section. The person must
provide an address where the person elects to receive notices. The address provided may be a postal mailing address or, if the agency provides notice by electronic mail, may be an electronic mailing address.
(b) A request under this subsection must indicate that the person requests one of the following:
(A) The person may request that the agency mail paper copies of the proposed rule and other
information required by subsection (2) of this section to the postal mailing address.
(B) If the agency posts notices of intended action on a website, the person may request that the
agency mail the information required by subsection (2)(a) of this section to the postal mailing address with a reference to the website where electronic copies of the proposed rule and other information required by subsection (2) of this section are posted.
(C) The person may request that the agency electronically mail the information required by
subsection (2)(a) of this section to the electronic mailing address, and either provide electronic
copies of the proposed rule and other information required by subsection (2) of this section or provide a reference to a website where electronic copies of the proposed rule and other information required by subsection (2) of this section are posted.
(c) Upon receipt of any request under this subsection, the agency shall acknowledge the request,
establish a mailing list and maintain a record of all mailings made pursuant to the request. Agencies may establish procedures for establishing the mailing lists and keeping the mailing lists current. Agencies by rule may establish fees necessary to defray the costs of mailings and maintenance of the lists.
(d) Members of the Legislative Assembly who receive notices under subsection (15) of this section may request that an agency furnish paper copies of the notices.
(9) This section does not apply to rules establishing an effective date for a previously effective
rule or establishing a period during which a provision of a previously effective rule will apply.
(10) This section does not apply to ORS 279.835 to 279.855, 279A.140 to 279A.161, 279A.250 to
279A.290, 279A.990, 279B.050 to 279B.085, 279B.200 to 279B.240, 279B.270, 279B.275, 279B.280,
279C.360, 279C.365, 279C.370, 279C.375, 279C.380, 279C.385, 279C.500 to 279C.530, 279C.540, 279C.545, 279C.550 to 279C.570, 279C.580, 279C.585, 279C.590, 279C.600 to 279C.625, 279C.650 to 279C.670 and 279C.800 to 279C.870 relating to public contracts and purchasing.
(11)(a) Except as provided in paragraph (c) of this subsection, a rule is not valid unless adopted
in substantial compliance with the provisions of this section in effect on the date that the notice
required under subsection (1) of this section is delivered to the Secretary of State for the purpose
of publication in the bulletin referred to in ORS 183.360.
(b) In addition to all other requirements with which rule adoptions must comply, a rule is not
valid if the rule has not been submitted to the Legislative Counsel in the manner required by ORS
(c) A rule is not subject to judicial review or other challenge by reason of failing to comply with
subsection (2)(a)(A) of this section.
(12)(a) Notwithstanding the provisions of subsection (11) of this section, but subject to paragraph
(b) of this subsection, an agency may correct its failure to substantially comply with the requirements of subsections (2) and (5) of this section in adoption of a rule by an amended filing, as long as the noncompliance did not substantially prejudice the interests of persons to be affected by the rule.
(b) An agency may use an amended filing to correct a failure to include a fiscal impact statement in a notice of intended action, as required by subsection (2)(b)(E) of this section, or to correct
an inaccurate fiscal impact statement, only if the agency developed the fiscal impact statement with the assistance of an advisory committee or fiscal impact advisory committee appointed under ORS 183.333.
(13) Unless otherwise provided by statute, the adoption, amendment or repeal of a rule by an
agency need not be based upon or supported by an evidentiary record.
(14) When an agency has established a deadline for comment on a proposed rule under the pro-
visions of subsection (3)(a) of this section, the agency may not extend that deadline for another
agency or person unless the extension applies equally to all interested agencies and persons. An
agency shall not consider any submission made by another agency after the final deadline has
(15) The notices required under subsections (1) and (3) of this section must be given by the
agency to the following persons:
(a) If the proposed adoption, amendment or repeal results from legislation that was passed
within two years before notice is given under subsection (1) of this section, notice shall be given to the legislator who introduced the bill that subsequently was enacted into law, and to the chair or cochairs of all committees that reported the bill out, except for those committees whose sole action on the bill was referral to another committee.
(b) If the proposed adoption, amendment or repeal does not result from legislation that was
passed within two years before notice is given under subsection (1) of this section, notice shall be
given to the chair or cochairs of any interim or session committee with authority over the subject
matter of the rule.
(c) If notice cannot be given under paragraph (a) or (b) of this subsection, notice shall be given
to the Speaker of the House of Representatives and to the President of the Senate who are in office on the date the notice is given.
(16)(a) Upon the request of a member of the Legislative Assembly or of a person who would be
affected by a proposed adoption, amendment or repeal, the committees receiving notice under subsection (15) of this section shall review the proposed adoption, amendment or repeal for compliance with the legislation from which the proposed adoption, amendment or repeal results.
(b) The committees shall submit their comments on the proposed adoption, amendment or repeal to the agency proposing the adoption, amendment or repeal.
The new administration's budget-writing is underway, starting with the traditional GOP "Cooking of the Books" ceremony, in which the budget writers, fabulists of the first order, assume absurdly high levels of "Growth" will result from repeating the supply side playbook (cut taxes on the wealthy, cut services to everyone else) yet again, despite an unblemished record of failure every time the drill has been run.
One of OregonPEN's favorite thinkers, actuary and analyst Gail Tverberg ("Gail the Actuary) just posted an important piece, perhaps her clearest exposition yet of why the issue we need to deal with is contraction, not growth. Her blog's subtitle is "Exploring how oil limits affect the economy" and this latest essay deftly explains the relationship.
The term "dissipative structure" is unusual, technical and highly abstract. For most readers, the term "self-organizing system" might be a suitable synonym; for those who have studied systems, emergent system might also work. But despite that one bit of language difficulty, this essay is very much worth your time to read and re-read, as the future unfolds. The forces Tverberg studies operate regardless of the administration, and are as easy to reverse as the tide itself.
Reprinted with the author's kind permission from Our Finite World, where it appeared as "Oops! The Economy is Like a Self-Driving Car."
Oops! The economy is like a self-driving car
Back in 1776, Adam Smith talked about the “invisible hand” of the economy. Investopedia explains how the invisible hand works as, “In a free market economy, self-interested individuals operate through a system of mutual interdependence to promote the general benefit of society at large.”
We talk and act today as if governments and economic policy are what make the economy behave as it does. Unfortunately, Adam Smith was right; there is an invisible hand guiding the economy. Today we know that there is a physics reason for why the economy acts as it does: the economy is a dissipative structure–something we will talk more about later. First, let’s talk about how the economy really operates.
Our Economy Is Like a Self-Driving Car: Wages of Non-Elite Workers Are the Engine
Workers make goods and provide services. Non-elite workers–that is, workers without advanced education or supervisory responsibilities–play a special role, because there are so many of them. The economy can grow (just like a self-driving car can move forward) (1) if workers can make an increasing quantity of goods and services each year, and (2) if non-elite workers can afford to buy the goods that are being produced. If these workers find fewer jobs available, or if they don’t pay sufficiently well, it is as if the engine of the self-driving car is no longer working. The car could just as well fall apart into 1,000 pieces in the driveway.
If the wages of non-elite workers are too low, they cannot afford to pay very much in taxes, so governments are adversely affected. They also cannot afford to buy capital goods such as vehicles and homes. Thus, depressed wages of non-elite workers adversely affect both businesses and governments. If these non-elite workers are getting paid well, the “make/buy loop” is closed: the people whose labor creates fairly ordinary goods and services can also afford to buy those goods and services.
Recurring Needs of Car/Economy
The economy, like a car, has recurring needs, analogous to monthly lease payments, insurance payments, and maintenance costs. These would include payments for a variety of support services, including the following:
Needless to say, the above services tend to keep rising in cost, whether or not the wages of non-elite workers keep rising to keep up with these costs.
The economy also needs to purchase a portfolio of goods on a very regular basis (weekly or monthly), or it cannot operate. These include:
Some of these goods are needed directly by the workers in the economy. Other goods are needed to make and operate the “tools” used by the workers. It is the growing use of tools that allows workers to keep becoming more productive–produce the rising quantity of goods and services that is needed to keep the economy growing. These tools are only possible through the use of energy products and other minerals of many kinds.
I have likened the necessary portfolio of goods the economy needs to ingredients in a recipe, or to chemicals needed for a particular experiment. If one of the “ingredients” is not available–probably because of prices that are too high for consumers or too low for producers–the economy needs to “make a smaller batch.” We saw this happen in the Great Recession of 2007 to 2009. Figure 1 shows that the use of several types of energy products, plus raw steel, shrank back at exactly the same time. In fact, the recent trend in coal and raw steel suggests another contraction may be ahead.
The Economy Re-Optimizes When Things Go Wrong
If you have a Global Positioning System (GPS) in your car to give you driving directions, you know that whenever you make a wrong turn, it recalculates and gives you new directions to get you back on course. The economy works in much the same way. Let’s look at an example:
Back in early 2014, I showed this graph from a presentation given by Steve Kopits. It shows that the cost of oil and gas extraction suddenly started on an upward trend, about the year 1999. Instead of costs rising at 0.9% per year, costs suddenly started to rise by an average of 10.9% per year.
When costs were rising by only 0.9% per year, it was relatively easy for oil producers to offset the cost increases by efficiency gains. Once costs started rising much more quickly, it was a sign that we had in some sense “run out” of new fields of easy-to-extract oil and gas. Instead, oil companies were forced to start accessing fields with much more expensive-to-produce oil and gas, if they wanted to replace depleting fields with new fields. There would soon be a mismatch between wages (which generally don’t rise very much) and the cost of goods made with oil, such as food grown using oil products.
Did the invisible hand sit idly by and let business as usual continue, despite this big rise in the cost of extraction of oil from new fields? I would argue that it did not. It was clear to business people around the world that there was a large amount of coal in China and India that had been bypassed because these countries had not yet become industrialized. This coal would provide a much cheaper source of energy than the oil, especially if the cost of oil appeared likely to rise. Furthermore, wages in these countries were lower as well.
The economy took the opportunity to re-optimize. Part of this re-optimization can be seen in Figure 1, shown earlier in this post. It shows that world coal supply has grown rapidly since 2000, while oil supply has grown quite slowly.
Figure 3, below, shows a different kind of shift: a shift in the way oil supplies were distributed, after 2000. We see that China, Saudi Arabia, and India are all examples of countries with big increases in oil consumption. At the same time, many of the developed countries found their oil consumption shrinking, rather than growing.
A person might wonder why Saudi Arabia’s use of oil would grow rapidly after the year 2000. The answer is simple: Saudi Arabia’s oil costs are its costs as a producer. Saudi Arabia has a lot of very old wells from which oil extraction is inexpensive–perhaps $15 per barrel. When oil prices are high and the cost of production is low, the government of an oil-exporting nation collects a huge amount of taxes. Saudi Arabia was in such a situation. As a result, it could afford to use oil for many purposes, including electricity production and increased building of highways. It was not an oil importer, so the high world oil prices did not affect the country negatively.
China’s rapid rise in oil production could take place because, even with added oil consumption, its overall cost of producing goods would remain low because of the large share of coal in its energy mix and its low wages. The huge share of coal in China’s energy mix can be seen in Figure 4, below. Figure 4 also shows the extremely rapid growth in China’s energy consumption that took place once China joined the World Trade Organization in late 2001.
India was in a similar situation to China, because it could also build its economy on cheap coal and cheap labor.
When the economy re-optimizes itself, job patterns are affected as well. Figure 5 shows the trend in labor force participation rate in the US:
Was it simply a coincidence that the US labor force participation rate started falling about the year 2000? I don’t think so. The shift in energy consumption to countries such as China and India, as oil costs rose, could be expected to reduce job availability in the US. I know several people who were laid off from the company I worked for, as their jobs (in computer technical support) were shifted overseas. These folks were not alone in seeing their jobs shipped overseas.
The World Economy Is Like a Car that Cannot Make Sharp Turns
The world economy cannot make very sharp turns, because there is a very long lead-time in making any change. New factories need to be built. For these factories to be used sufficiently to make economic sense, they need to be used over a long period.
At the same time, the products we desire to make more energy efficient, for example, automobiles, homes, and electricity generating plants, aren’t replaced very often. Because of the short life-time of incandescent light bulbs, it is possible to force a fairly rapid shift to more efficient types. But it is much more difficult to encourage a rapid change in high-cost items, which are typically used for many years. If a car owner has a big loan outstanding, the owner doesn’t want to hear that his car no longer has any value. How could he afford a new car, or pay back his loan?
A major limit on making any change is the amount of resources of a given type, available in a given year. These amounts tend to change relatively slowly, from year to year. (See Figure 1.) If more lithium, copper, oil, or any other type of resource is needed, new mines are needed. There needs to be an indication to producers that the price of these commodities will stay high enough, for a long enough period, to make this investment worthwhile. Low prices are a problem for many commodities today. In fact, production of many commodities may very well fall in the near future, because of continued low prices. This would collapse the economy.
The World Economy Can’t Go Very Far Backward, Without Collapsing
The 2007-2009 recession is an example of an attempt of the economy to shrink backward. (See Figure 1.) It didn’t go very far backward, and even the small amount of shrinkage that did occur was a huge problem. Many people lost their jobs, or were forced to take pay cuts. One of the big problems in going backward is the large amount of debt outstanding. This debt becomes impossible to repay, when the economy tries to shrink. Asset prices tend to fall as well.
Furthermore, while previous approaches, such as using horses instead of cars, may be appealing, they are extremely difficult to implement in practice. There are far fewer horses now, and there would not be places to “park” the horses in cities. Cleaning up after horses would be a problem, without businesses specializing in handling this problem.
What World Leaders Can Do to (Sort of) Fix the Economy
There are basically two things that governments can do, to try to make the economy (or car) go faster:
Both of these actions work like turbocharging a car. They have the possibility of making the economy run faster, but they have the downside of extra cost. In the case of debt, the cost is the interest that needs to be paid; also the risk of “blow-up” if the economy slows. There is a limit on how low interest rates can go, as well. Ultimately, part of the output of the economy must go to debt holders, leaving less for workers.
In the case of complexity, the problem is that there gets to be increasing wage disparity, when some employees have wages based on special training, while others do not. Also, with capital goods, some individuals are owners of capital goods, while others are not. The arrangement creates wealth disparity, besides wage disparity.
In theory, both debt and increased complexity can help the economy grow faster. However, as I noted at the beginning, it is the wages of the non-elite workers that are especially important in allowing the economy to continue to move forward. The greater the proportion of the revenue that goes to high paid employees and to bond holders, the less that is available to non-elite workers. Also, there are diminishing returns to adding debt and complexity. At some point, the cost of each of these types of turbo-charging exceeds the benefit of the process.
Why the Economy Works Like a Self-Driving Car
The reason why the economy acts like a self-driving car is because the economy is, in physics terms, a dissipative structure. It grows and changes “on its own,” using energy sources available to it. The result is exactly the same effect that Adam Smith was observing. What makes the economy behave in this way is the fact that flows of energy are available to the economy. This happens because an economy is an open system, meaning its borders are permeable to energy flows.
When there is an abundance of energy available for use (from the sun, or from burning fossil fuels, or even from food), a variety of dissipative structures self-organize. One example is hurricanes, which self-organize over warm oceans. Another example is plants and animals, which self-organize and grow from small beginnings, if they have adequate food energy, plus other necessities of life. Another example is ecosystems, consisting of a number of different kinds of plants and animals, which interact together for the common good. Even stars, including our sun, are dissipative structures.
The economy is yet another type of a dissipative structure. This is why Adam Smith noticed the effect of the invisible hand of the economy. The energy that sustains the economy comes from a variety of sources. Humans have been able to obtain energy by burning biomass for over one million years. Other long-term energy sources include solar energy that provides heat and light for gardens, and wind energy that powers sail boats. More recently, other types of energy have been added, including fossil fuels energy.
When energy supplies are very cheap and easy to obtain, it is easy to ramp up their use. With growing supplies of energy, it is possible to keep adding more and better tools for people to work with. I use the term “tools” broadly. Besides machines to enable greater production, I include things like roads and advanced education, which also are helpful in making workers more effective. The use of growing energy supplies allows growing use of tools, and this growing use of tools increasingly leverages human labor. This is why we see growing productivity; we can expect to see falling human productivity if energy supplies should start to decline. Falling productivity will tend to push the economy toward collapse.
One problem for economies is diminishing returns of resource extraction. Diminishing returns cause the economy to become less and less efficient. Once energy extraction starts to have a significant problem with diminishing returns (such as in Figure 2), it is like losing energy resources into a sinkhole. More work is necessary, without greater output in terms of goods and services. Indirectly, economic growth must suffer. This seems to be the problem that the economy has been encountering in recent years. From the invisible hand’s point of view, $100 per barrel oil is very different from $20 per barrel oil.
One characteristic of dissipative structures is that they keep re-optimizing for the overall benefit of the dissipative structure. We saw in Figures 3 and 4 how fuel use and jobs rebalance around the world. Another example of rebalancing is the way the economy uses every part of a barrel of oil. If, for example, our only goal were to maximize the number of miles driven for automobiles, it would make sense to operate cars using diesel fuel, rather than gasoline. In fact, the energy mix available to the economy includes quite a bit of gasoline and natural gas liquids. If we need to use what is available, it makes sense to use gasoline in private passenger cars, and save diesel for commercial use.
Another characteristic of dissipative structures is that they are not permanent. They grow for a while, and then collapse. Later, new similar dissipative structures may develop and indirectly replace the ones that have collapsed. In this way, the overall system is able to evolve in a way that adapts to changing conditions.
What Are the Likely Events that Would Cause the Economy to Collapse?
I modeled the system as being like a self-driving car. The thing that keeps the system operating is the continued growth of inflation-adjusted wages of non-elite workers. This analogy was chosen because in ecosystems in general, the energy return on the labor of an animal is very important. The collapse of a population of fish, or of some other animal, tends to happen when the return on the labor of that animal falls too low.
In the case of the fish, the return on the labor of the fish falls too low when nearby supplies of food disappear, and the fish must swim too far to obtain new supplies of food. The return on human labor would seem to be the inflation-adjusted wages of non-elite workers. We know that wages for many workers have been falling in recent years, because of competition from globalization, and because of replacement of human labor by advanced machines, such as computers and robots.
Besides the problem of falling wages of non-elite workers, earlier in this post I mentioned a number of other issues that make the wages of these workers go less far. These include growing government spending, and the growing costs of education and healthcare. I also mentioned the problem of rising debt, and the increased concentration of wealth, as we try to add complexity to solve problems. All of these issues make it hard for “demand”–which might also be called “affordability”–to be sufficiently great to allow commodity prices to rise to the level producers need for profitability.
Prices Play a Very Important Role in the Economy
The pricing system is the communication system of the economy, as a dissipative structure. One use of energy is to create “information.” Prices are a high level form of information.
One big area where prices come up is with respect to the whole portfolio of products needed on a regular basis, which I mentioned earlier (water, food, energy products, and mineral products). In order for the system to continue working, the prices need to be both:
Now, in 2017, prices are “sort of” affordable for consumers, but they are not high enough for producers. Oil companies will go out of business if these low prices persist.
Back in 2007 and 2008, we had the reverse problem. Prices were high enough for producers, but too high for consumers (especially non-elite workers). This is a big part of what pushed the economy into recession.
We noticed back in Figure 1 that quantities of energy products/goods tend to move up and down together. A similar phenomenon holds true for prices: commodity prices tend to rise and fall together (Figure 7). The reason this happens is because when the world economy is moving swiftly forward (higher wages, more building activity, more debt), demand tends to be high for many different types of materials at the same time. When the economy slows, prices of all of these commodities tend to fall at the same time. Inflation tends to fall as well.
If prices cannot rise high enough for producers, it is likely a sign that wages of non-elite workers are already too low. The affordability loop mentioned earlier is not being closed, so prices cannot stay up at a high enough level to maintain production.
Most Modelers Overlook the Fact that the Economy Is an Open System
Most energy models are based on one of two views of the world:
(1) fossil fuel energy supply will eventually run short, so we must use it as sparingly as possible; or
(2) we want to reduce the use of fossil fuels as quickly as possible, because of climate change.
Because of these issues, we want to leverage the fossil fuel energy we have, to as great an extent as possible, with energy that we can somehow capture from renewable sources, such as the solar energy or wind. With this view of the situation, our major objective is to create “renewables” that use fossil fuel energy as efficiently as possible. The hope is that these renewables, together with the actions of governments, will allow the economy to gradually shrink back to a level that is somehow more sustainable.
Implicit is this model is the view that the economy, and the world in general, is a closed system. Our current government and business leaders are in charge; they can make the changes they would prefer, without the invisible hand causing an unforeseen problem. Very few have realized that the economy cannot really shrink back very much; past history, as well as the nature of dissipative structures, shows that economies tend to collapse. The only economies that have at least temporarily avoided that fate have shifted toward less complexity–for example, eliminating huge government programs, such as armies–rather than yielding to the temptation to add ever more complexity, such as wind turbines and solar panels.
The real situation is that we have a here-and-now problem of too low wages for non-elite workers. Commodity prices are also too low. Intermittent renewables such as wind and solar are thought to be solutions, but it is well-known that intermittent renewables cause too-low prices for other types of electricity generation, when added to the electric grid. Thus, they are likely part of the low-price problem, not part of the solution. Temporary solutions, if there are any, are likely in the direction of cutting back on government expenditures and reducing regulation of banks. In fact, with the election of Trump and the passage of Brexit, the economy seems to again be re-optimizing.
We also know that dissipative structures do not shrink back well, at all. They tend to collapse, instead. For example, you, as a human being, are a dissipative structure. If your food intake were cut back to, say, 500 calories per day, how well would you do? If you could not get along on a very low calorie diet, how would you expect the economy to shrink back to a renewables-only level? Renewables that can be used in a shrunken economy are scarce; we don’t have a huge number of trees to cut down. We cannot maintain the electric grid without fossil fuels.
The assumption that the economy is a closed system is pretty much standard when modeling our current energy situation. This occurs because, until recently, we did not understand that the self-organizing properties of inanimate systems were as important as they are. Also, modeling of the economy as a closed system, rather than an open system, makes modeling much easier. The problem is that closed system modeling doesn’t really tell the right story.
For a discussion of some of the issues associated with this mis-modeling, see the recent academic paper, Is the increased use of biofuels the road to sustainability? Consequences of the methodological approach.
Long overdue new rule: Don't drive with a dog in your lap! Who knew?
This bill doesn't go nearly far enough, but it's a dog-gone good start. With luck it will be amended to add
1) Cats, ferrets, parrots, iguanas or all the other household pets that people with bad judgment will transport in their lap rather than in a proper carrier while driving;
2) Escalating penalties for repeated offenses, including suspension or even loss of license for people who refuse to get the message.
If people driving around with dogs or other pets outside of carriers were only a danger to themselves, that would be one thing.
But distracted drivers put people in other cars, bicyclists, pedestrians and the animals themselves at risk -- all because some drivers have such poor judgment that they forget that piloting a couple thousand pounds of metal at roadway speeds is operating a lethal weapon that requires full attention and no distractions.
Kudos to Senator Hansell.
79th OREGON LEGISLATIVE ASSEMBLY--2017 Regular Session
It's Christmas in the Capital for small-aircraft pilots, as the Governor proposes to abolish state licensing of pilots, a program that is forecast (not "forecasted," Legislative Revenue Office) to raise $200,000 each biennium and costs about $3,000 a year to collect -- with the net funds going the search and rescue operation for missing pilots.
The net result is that cities and towns across Oregon will not be reimbursed for fuel costs for search and rescue operations, which means that ordinary taxpayers will be picking up a tab that pilots formerly helped pay. Because apparently Oregon just has too darn much money, and pilots shouldn't be expected to pay for programs that are entirely for their benefit.
HB2731 early candidate for most important bill of 2017
When states with majority of electoral votes join the compact, America will finally put an end to the slavery legacy that lets losers like Trump seize the White House with minority of votes
79th OREGON LEGISLATIVE ASSEMBLY--2017 Regular Session
House Bill 2731
Sponsored by Representative CLEM
SUMMARY The following summary is not prepared by the sponsors of the measure and is not a part of the body thereof subject to consideration by the Legislative Assembly. It is an editor's brief statement of the essential features of the measure as introduced.
Enacts Interstate Compact for Agreement Among the States to Elect the President by National Popular Vote.
A BILL FOR AN ACT Relating to the Agreement Among the States to Elect the President by National Popular Vote.
Be It Enacted by the People of the State of Oregon:
SECTION 1. The Agreement Among the States to Elect the President by National Popular Vote is hereby enacted into law and entered into on behalf of this state with all other states legally joining in the compact in a form substantially as follows:
Any State of the United States and the District of Columbia may become a member of this agreement by enacting this agreement.
RIGHT OF THE PEOPLE IN MEMBER STATES
TO VOTE FOR PRESIDENT AND VICE PRESIDENT
Each member state shall conduct a statewide popular election for President and Vice President of the United States.
MANNER OF APPOINTING PRESIDENTIAL ELECTORS
IN MEMBER STATES
Prior to the time set by law for the meeting and voting by the presidential electors, the chief election official of each member state shall determine the number of votes for each presidential slate in each State of the United States and in the District of Columbia in which votes have been cast in a statewide popular election and shall add such votes together to produce a "national popular vote total" for each presidential slate.
The chief election official of each member state shall designate the presidential slate with the largest national popular vote total as the "national popular vote winner."
The presidential elector certifying official of each member state shall certify the appointment in that official's own state of the elector slate nominated in that state in association with the national popular vote winner. At least six days before the day fixed by law for the meeting and voting by the presidential electors, each member state shall make a final determination of the number of popular votes cast in the state for each presidential slate and shall communicate an official statement of such determination within 24 hours to the chief election official of each other member state.
The chief election official of each member state shall treat as conclusive an official statement containing the number of popular votes in a state for each presidential slate made by the day established by federal law for making a state's final determination conclusive as to the counting of electoral votes by Congress.
In event of a tie for the national popular vote winner, the presidential elector certifying official of each member state shall certify the appointment of the elector slate nominated in association with the presidential slate receiving the largest number of popular votes within that official's own state.
If, for any reason, the number of presidential electors nominated in a member state in association with the national popular vote winner is less than or greater than that state's number of electoral votes, the presidential candidate on the presidential slate that has been designated as the national popular vote winner shall have the power to nominate the presi- dential electors for that state and that state's presidential elector certifying official shall certify the appointment of such nominees.
The chief election official of each member state shall immediately release to the public all vote counts or statements of votes as they are determined or obtained.
This Article shall govern the appointment of presidential electors in each member state in any year in which this agreement is, on July 20, in effect in states cumulatively possessing a majority of the electoral votes.
This agreement shall take effect when states cumulatively possessing a majority of the electoral votes have enacted this agreement in substantially the same form and the enactments by such states have taken effect in each state.
Any member state may withdraw from this agreement, except that a withdrawal occurring six months or less before the end of a President's term shall not become effective until a President or Vice President shall have been qualified to serve the next term.
The chief executive of each member state shall promptly notify the chief executive of all other states of when this agreement has been enacted and has taken effect in that official's state, when the state has withdrawn from this agreement, and when this agreement takes effect generally. This agreement shall terminate if the electoral college is abolished. If any provision of this agreement is held invalid, the remaining provisions shall not be affected.
For purposes of this agreement,
"Chief executive" shall mean the Governor of a State of the United States or the Mayor of the District of Columbia;
"Elector slate" shall mean a slate of candidates who have been nominated in a state for the position of presidential elector in association with a presidential slate;
"Chief election official" shall mean the state official or body that is authorized to certify the total number of popular votes for each presidential slate;
"Presidential elector" shall mean an elector for President and Vice President of the United States;
"Presidential elector certifying official" shall mean the state official or body that is authorized to certify the appointment of the state's presidential electors;
"Presidential slate" shall mean a slate of two persons, the first of whom has been nominated as a candidate for President of the United States and the second of whom has been nominated as a candidate for Vice President of the United States, or any legal successors to such persons, regardless of whether both names appear on the ballot presented to the voter in a particular state;
"State" shall mean a State of the United States and the District of Columbia; and
"Statewide popular election" shall mean a general election in which votes are cast for presidential slates by individual voters and counted on a statewide basis.
Oregon ignored again, as six states hog 2/3 of presidential campaign events
Two-thirds (273 of 399) of the general-election campaign events in the 2016 presidential race were in just 6 states: Florida, North Carolina, Pennsylvania, Ohio, Virginia, and Michigan.
94% of the 2016 events (375 of the 399) were in 12 states (the 11 states identified earlier in the year as "battleground" states by Politico and The Hill plus Arizona). This fact validates the statement by former presidential candidate and Governor Scott Walker of Wisconsin on September 2, 2015, that “The nation as a whole is not going to elect the next president. Twelve states are.” In addition to the 12 states that received 10 or more campaign events,
14 additional states received scattered attention (1, 2, or 3 events). Eleven of these states (Georgia, Missouri, California, Washington, Texas, Mississippi, Minnesota, Indiana, Utah, New Mexico, and Connecticut) received a total of 22 Republican visits, but no Democratic visits.
Two of these states (Maine and Nebraska) were visited because those states award some of their electoral votes by congressional district. One of these states (Illinois) received a Democratic campaign event at a large park located across the river from Davenport, Iowa (the prominent media market and population center in the area and the likely motivation for the event in Illinois).
The map above and chart below show all the post-convention campaign events by the major- party presidential and vice-presidential nominees (Donald Trump, Mike Pence, Hillary Clinton, and Tim Kaine).
The count of Republican campaign events started on Friday July 22, 2016 (the day after the end of the party's convention), and the count of Democratic campaign events started on Friday July 29 (the day after the end of the party's convention). The count ended on Monday November 7, 2016 (the day before Election Day).
“Campaign events” are defined here as public events in which a candidate is soliciting the state’s voters (e.g., rallies, speeches, fairs, town hall meetings). This count of "campaign events" does not include visits to a state for the sole purpose of conducting a private fund-raising event, participating in a presidential debate or media interview in a studio, giving a speech to an organization’s national convention, attending a non-campaign event (e.g., the Al Smith Dinner in New York City), visiting the campaign's own offices in a state, or attending a private meeting.
Text, map and table from nationalpopularvote.com; data compiled by Fairvote (Fairvote.org).
A perennial problem in democratic governance: how do you compensate judges fairly.
The Founders knew that letting judicial pay be subject to the whims of the overtly political branches was a bad idea, which is why the Constitution forbids mucking with judges' pay.
Oregon is at or near the bottom in terms of paying judges. That is why the new bill, SB11, to raise judicial pay is needed--but also why it might turn into a piñata and absorb a lot of whacks from voters.
It's clear that Oregon judges lag behind the obvious comparison cases, judges in other states, but it is equally hard to argue that Oregon judges are underpaid in any absolute sense, given the state's generally smaller salaries compared nationwide.
Besides, while our judicial salaries lag those in other states, Oregon lags behind other states on countless other measures of well-being. The state's economy is in contraction because the natural resource based economy is just a fraction of its former size but no equally strong wealth-creating sector of the economy has filled the gap. Our bizarre, Rube Goldberg tax system is as stable and well-considered as a 3 a.m. White House tweet.
So taxpayer fury, fanned into a white heat crescendo by corporate anti-tax crusaders, is likely to be in abundant supply during this year's legislative session, thanks to the enormous current state revenue shortfall, approaching $2 billion, with more predicted for future sessions. This fury has a way of bursting any bounds and incinerating proposals for things that, objectively, make no difference at all to the actual tax rates beyond the sixth decimal place but that are unlucky enough to have strong symbolic potency.
And there is no more obvious symbol likely to serve as tinder and kindling for anti-tax organizing than a proposal that gives judges, including on the Oregon Tax Court, a raise while Oregon is shuttering schools and ending health coverage for the poor.
Ultimately, the solution to public pay setting is to create "set and forget" public employee pay tables that put the pay for each public job classification at a certain multiple of the state minimum wage.
Thus, for examples, instead of saying that an appellate court judge in Oregon makes $150,000, the pay for the job would be legislatively "set and forget" at the annual equivalent of 7.25 times the state hourly minimum wage. The minimum wage is indexed to inflation, so we no longer need to keep revisiting and revising pay salaries to keep up. We would take a similar approach to the salaries of trial judges, state agencies, and the Legislature itself.
Once the tables are established, the job of the Legislature would no longer include having to adjust salaries by recurrent votes that are subject to relentless demagoguery. As inflation pushes up the minimum wage, the more generous salaries available through public employment rise proportionally, but not-disproportionately. And a recurrent source of problems for public employers is resolved.
SB 11 STAFF MEASURE SUMMARY
A Dam Mess - by Chuck Marohn
Over the coming days -- and perhaps longer if things get really bad -- you're going to see plenty of stuff about the Oroville Dam in Northern California. In the ongoing natural disaster that seems to be California, drought has turned to flood and a now full reservoir is topping decades-old spillways.
While designed for the most stressful situation, they have never been tested like this. Poor maintenance of the spillways has allowed an erosion problem to expand, threatening to undermine the structure and release destructive amounts of water downstream. Local residents were repeatedly assured by public officials that there was no cause for alarm before being told to flee. It's a mess.
If Strong Towns were a propaganda machine, this would be a good time to go full blast with the hysteria. We could do a fundraiser around the existential threat posed by dams and try to make people afraid to ever go near a river. With your $5 a month pledge, we'll hold people accountable and ensure those joints are properly grouted every decade or two so that nothing like this ever happens in America again. Flash to pictures of racially-balanced families hugging each other at a FEMA camp.
Thankfully, we're not a cheap propaganda machine, yet this is a moment we should not let pass. There are some important lessons here that we need to learn, and they aren't the ones you're likely to hear.
“There is no reason to think that more money would have done anything to change the mindset that caused this problem.”
Here's what the consensus narrative is likely to be: The state of California, along with the federal government, did not properly fund the maintenance of this facility. They failed to do the proper inspections and to hold themselves accountable. If we spent more money on infrastructure (instead of being a nation of cheapskates), this kind of thing would not happen. All of that is wrong.
The type of maintenance that was needed on this structure was not costly. The trees in the spillway that are the erosion culprit could have been removed by hand decades ago when they were small. They could have been removed by chain saw and stump grinder in the last month. Not expensive. Likewise, the grouting that had been recommended was in the low six figures; chump change for any agency that wanted to prioritize basic maintenance. The reports were there recommending these actions—people in a position to know, care and take action were perfectly aware of it— but they didn't induce action. There is no reason to think that more money would have done anything to change the mindset that caused this problem.
There is actually a different set of causes here, and it has two parts.
We don't put our best minds on maintenance
Say you are running a company and you have three projects requiring equally technical skill-sets. Project #1 is really high profile. If it goes well, it will be amazing for everyone. If it doesn't, it will really make you look bad, but the company will still be okay. Project #2 is routine but still in the public eye. If it goes well, there won't be a lot of accolades but if it goes poorly, it will really damage the company's credibility. Project #3 is mundane to the extreme. If all goes well, nobody will even be aware it was done but if it should go wrong, it will destroy the company along with all pensions, equity and shareholder value.
Project #1: High upside, some downside.
Project #2: Limited upside, limited downside.
Project #3: No upside, potentially fatal downside.
Which project do you assign to your best project manager? Which of the three do you give to your worst?
Let me ask another way: Which project does your best project manager want to work on? What project does your least influential project manager get stuck with?
It's pretty obvious that Project #1 is going to attract high performers and Project #2 is going to invite those who aspire to climb the company ladder. In a three-person competition, the mundane task goes to the lowest performer. That's okay in a private company where management takes calculated risks each day, but what if we're in the public sector? And what if failure on the mundane project means hundreds of thousands of people displaced, hundreds of millions of dollars of emergency repairs, billions in property damage, the loss of water storage in a vital reservoir in a drought-prone state and, potentially, even the loss of human life?
None of this is to suggest that there aren't really smart people working on maintenance (I've worked with a lot of them and I know they're smart) but more of an observation that these people toil in the trenches in obscurity with little appreciation—let alone acclaim—for their efforts. Until something goes wrong.
“At the city level, we need to get these people out of the obscure back rooms and make them part of our day-to-day conversations.”
This is a systematic problem. In my engineering days, I worked with one wastewater system operator—a guy who maintained sewage pumps most days—who, year after year, received high marks from the state oversight organization (MPCA) and numerous "Operator of the Year" awards. Problem is, he completely faked the data he submitted—he wasn't actually doing the work— something the MPCA could have figured out with five minutes on a spreadsheet. These are critical systems, the failure of which is not only costly but can have serious environmental impacts. Our oversight is out-of-sight, out-of-mind, something we are hearing now about the Oroville Dam as well.
Can we find a way to elevate the people who do these tasks day in and day out, whose seriousness over the long term threats of failure are not dulled by their infrequent occurrence? I'm not sure, but at the city level, we need to get these people out of the obscure back rooms and make them part of our day-to-day conversations. We need to have them at the table so their voices are not passed through the filter of people with other ambitions and priorities.
Asset Management Begins at Project Selection
I was once working on sewage treatment alternatives for a small town and was faced with two options. One approach would have solved my land acquisition problem at a really nice price, but it involved a complicated mechanical system (lots of things that can break). The second approach forced me to deal with a difficult farmer who I would need to buy some land from but ended up with a simple and effective system (few moving parts). In my youth and inexperience, I pushed for the mechanical system. The more senior engineers insisted on the simple model. They were right; the city was far better off with a system they only needed to touch a few times a year that would run perfectly fine for decades without much thought.
This realization comes from the guy who, a couple weeks ago, recommended the opposite approach for Flint; one that got to lower costs by constructing a system requiring ongoing, intensive maintenance. Here's the difference: The wastewater system I worked on was for the entire community—one system everyone depended on. Break it and it goes bad in a big way (see: Flint today). The Flint water system I proposed is actually many small, independent water systems. Mess up one and it effects a small group in a place where multiple nearby experts running similar systems are there with advice and spare parts.
In the United States we're obsessed with building new things. We sometimes—begrudgingly— even stop and consider the maintenance implications when we build something new. When we do, however, it's a non-serious shout-out to people of the future who we assume will be so much better off due to our wise investment today. We really don't worry about burdening them.
The best asset management program starts with a better evaluation of whether something should be built in the first place. The data we recently presented on Lafayette, Louisiana—as a representation of the condition of most North American cities—was not presented to suggest that we couldn't maintain all that infrastructure, just that we won't. The citizens of Lafayette are not going to spend 20% of their income fixing their local infrastructure; it's just not a transaction that makes any sense, regardless of the consequences. They have built a whole lot of stuff that is not useful enough to bother maintaining.
“When we’re undertaking a project, we need to stop and consider whether what we’re building will create enough wealth and value for the community that they are going to want to rebuild it again in the future.”
And they've built so much stuff -- and continue to obsess over building more -- that they are neglecting many of their critical systems. Undoubtedly, so is your city.
That makes this a systematic failing, not an individual one. When we're undertaking a project, we need to stop and consider whether what we're building will create enough wealth and value for the community that they are going to want to rebuild it again in the future. And for cities, where these obligations last forever, that answer has to be so obvious as to not really be debatable.
And where we can't do that, then we need to plan for things to be thrown away or abandoned when we're done with them. Keep it forever or use it and discard; these should be two conscious choices with nothing in between. And if that's disturbing to you, just know that most of the places we've built actually fall into the "throw away" category.
Responding to Oroville in your city
Every local government body that does infrastructure has systems that fall into one of three categories.
Every city should have a list of the Critical infrastructure components. The odds are, if you have 1A systems—critical with lots of maintenance required—you're already paying attention. You have likely assigned some of your best people to them and given those positions some degree of prestige. Your staff is probably trying to find ways to add some backups and make those 1A systems into 2A systems. That's great management.
It's the 1B systems that are going to sneak up on you. This is the seawall in New Orleans, the spillway in Oroville. We need them to work -- they're critical -- but we can go decades, or even lifetimes, without suffering any consequence for their neglect. For these systems, we need to be very intentional about making them front and center and not allowing them to become an afterthought. This is where management—top administration and elected officials—need to shower their attention to overcome the natural tendency to have these systems fade into the background.
How has your city identified its critical infrastructure? How are these systems being maintained? How is your leadership actively working to make sure maintenance of these low-maintenance systems doesn't fade into the background?
Originally published and republished with kind permission at StrongTowns.org. Strong Towns is a national membership organization and an OregonPEN Best Investment nonprofit. The mission of Strong Towns is to support a model of development that allows America's cities, towns and neighborhoods to become financially strong and resilient. For the United States to be a prosperous country, it must have strong cities, towns and neighborhoods. Enduring prosperity for our communities cannot be artificially created from the outside but must be built from within, incrementally over time.
By Josh Hoxie
Candidate Donald Trump promised to renegotiate free trade agreements that hurt American workers. In his first week in office, he made good on that promise by withdrawing from the Trans-Pacific Partnership (TPP), a trade pact negotiated by the Obama administration.
Yet in the same week, he unleashed a torrent of policies just as bad, if not worse, for workers than the trade deal itself.
Trump was right about one thing: The TPP was a bad deal. But while he convinced his supporters that trade deals are rigged against them, he never did say who does the rigging: big business.
If we don’t get that right, American workers are still going to get hurt.
Trump supporters and progressives agree on very few issues, but opposition to free trade agreements is one of them. Both Trump and Bernie Sanders railed against the TPP during the presidential campaign, along with NAFTA and other past trade agreements they blamed for hollowing out the American manufacturing sector.
This bipartisan opposition stands in sharp contrast to the Clinton, Bush, and Obama administrations’ warm embrace of free trade. It comes, however, from two very different ideological positions.
Trump thinks the central fight on trade is between different countries. China, he says, is “stealing” our jobs. They’re “winning,” and we’re “losing.”
This jingoistic bluster resonated in former industrial centers ravaged by bad trade deals — places like Pennsylvania, Ohio, Michigan, and Wisconsin. (Never mind that most of the products with the Trump logo on it aren’t made in the United States.)
In Trump’s world, bad trade deals help foreigners steal American jobs. Yet he never acknowledges the multi-national corporations who drive those deals. They’re the ones whose stock prices go up when factories in the Midwest shut down and American workers are replaced by people in China, Mexico, or Bangladesh earning a fraction of the pay.
The problem with the TPP — the proposed pact between the U.S. and a dozen Pacific Rim countries — wasn’t that it gave more power to Japan or to Australia (or to China, which wasn’t part of the deal). The problem was that it gave more power to multi-national corporations to write the rules of trade.
Unlike Main Street businesses in your town, these corporations aren’t beholden to nation states. Their CEOs don’t care about promoting American values or contributing to civil society. If they did, they wouldn’t hide trillions of dollars’ worth of wealth in offshore tax shelters.
Trump may have spiked the TPP, but he’s still letting big businesses like these write rules that are unequivocally bad for American workers.
Consider Andy Puzder, the former fast food CEO Trump picked to lead the Department of Labor [whose nomination was since withdrawn]. Puzder proudly opposes raising the federal minimum wage, which at $7.25 an hour is currently lower than the cost of living in every major city in the country.
Or consider Trump’s recent executive order to roll back regulations on the reckless Wall Street behavior that caused the 2008 financial crisis. Or his plan to drive up the national debt by cutting taxes for corporations and the top 1 percent. The list goes on.
In opposing the TPP, Trump blocked a bad deal that could’ve had serious negative consequences for American workers. But with his appointments and policy preferences, he’s still going to let big business write the rules — on everything from their taxes to your wages.
That’s in stark contrast to the needs of working families, many of whom helped elect him. Talk about a bad deal.
Josh Hoxie directs the Project on Taxation and Opportunity at the Institute for Policy Studies. Distributed by and reprinted with permission of OtherWords.org.
Why are my Highly Educated Friends so Ignorant about Trade? - by Isabel Marlens
Trump is a catastrophe, but so was the TPP.
Since Donald Trump was elected President of the United States, I’ve found myself talking for the first time with a lot of my 20-something friends about trade agreements.
My friends didn’t vote for Donald Trump. Most are from “liberal” parts of the US. They went to good schools for 12 years, worked hard, got good grades. Many went on to top colleges and universities, places like Stanford, Yale, NYU, UCLA.
And yet most of them know almost nothing about one of the most important issues facing the world today.
Why are so many young people – even those with the “best” educations – almost completely ignorant about a huge ongoing threat to human rights, democracy and the climate? Well, I guess it’s not surprising. For years now, elite universities and neoliberal think tanks have been publishing papers which claim that increased international trade leads to poverty reduction, peace, and the spread of democracy. Politicians and CEOs – most of them graduates of these same universities – now constitute the Davos global elite, quietly pulling the strings on trade while no one is watching.
The result is that many young people are completely confused on the topic. How can the TPP be bad if Obama was for it and Trump is against it? Isn’t Trump’s loud anti-trade stance just another point against him – inextricably tied to his atrocious xenophobia and chilling position on immigration?
This widespread ignorance about trade among young voters is deeply disturbing – not least because trade agreements, and their role in hollowing out the American middle-classes, arguably made Trump’s election possible. (At the same time, Trump, a billionaire who has benefited enormously from free trade, is only likely to make their situation worse.)
But what’s most disturbing is that the ignorance of my friends has been intentionally created: trade agreements are confusing and secret by design. They are sometimes called “vampire agreements” – they grow fangs as long as they remain in darkness, but wither quickly in the light of day. Studies have shown that the more people know about trade agreements, the more likely they are to oppose them.
So as we prepare to face whatever happens next, let’s get each other informed.
Trump moves fast. During his first week in office, he officially nixed the TPP, and has announced his plan to renegotiate NAFTA — as well as to negotiate new bilateral trade deals. We will have to be vigilant. So for now, here are ten reasons that we should be glad the TPP is dead — the same ten things we should continue to watch out for — and resist — in the days ahead.
1. Secrecy. Trade agreements are drafted in secret by specially appointed “trade officials” (experts on trade and corporate law, many of whom originally worked in private corporate law firms). Although more than 400 representatives of special interests and corporations in the US alone have a seat at the table, citizens and their elected officials do not. Because the provisions of these agreements can override both democratically derived national laws and international agreements (like climate agreements), this secrecy dangerously undermines democracy. (Actually, all told, it kind of makes democracy not a thing.) Can we expect Trump to be more open and inclusive? Unlikely.
2. Investor State Dispute Settlement. Most trade agreements include a little thing called Investor State Dispute Settlement (ISDS) clauses. These give foreign corporations the right to sue any government whose laws or regulations –– such as those protecting the environment, food safety, workers’ rights or local businesses –– threaten future corporate profits. For example, the TransCanada corporation is currently using NAFTA to sue the United States for $15 billion for blocking the Keystone XL Pipeline. The arbiters who sit on these ISDS panels are corporate lawyers who can continue on the corporate payroll while the lawsuits are underway, creating a clear conflict of interest. Guess who the arbitration committees usually settle in favor of? Hint: it’s not the little guy. For example, Metalclad, a US corporation, won $16.2 million in damages from a Mexican town that refused to let the company dump its toxic waste there.
3. Regulatory chill. There is no system of precedents for ISDS suits, so countries cannot know how a tribunal will decide based on past decisions. Nothing is transparent and there is no system of appeals. Moreover, because small and developing countries have little money to pay for lawsuits or settlements, they are less likely to enact regulations to protect their environment and their people, creating a global climate of “regulatory chill.”
4. Climate. On the other hand, trade agreements are making certain that this is the only kind of chill around. The TPP in particular was touted as somehow being “good for the climate.” This could not be more wrong. It might be enough to say that in over 5,000 pages the phrase ‘climate change’ was never mentioned, but it’s also worth pointing out that the TPP:
5. Labor in ‘rich’ countries. The loss of working class jobs in countries like the US is perhaps the most well-known negative outcome of trade agreements. Indeed, global GDP has steadily risen since 1980, but labor’s share of national income in most industrialized countries has steadily declined. The reason? Trade agreements have rigged it so that it is simply impossible for companies to “compete” if they manufacture their goods in countries with decent pay or adequate labor protections. This leaves millions of people in industrialized countries jobless and struggling to survive – forced to shop at Walmart, where artificially low prices are made possible by the very rigged, exploitative system which left them without a reasonable living wage in the first place.
6. Labor in ‘poor’ countries. Does this mean that working class people in non- industrialized countries are doing great? NO! In fact, it’s exactly the opposite. The ways that bigger, richer countries use trade agreements to bully and exploit smaller, poor ones are fairly endless. But in short, the same corporations that once did their best to exploit workers in countries that now have labor protections are currently making hay in countries without them.
The TPP was famously supposed to have built-in protections for labor – “the best ever” – but they turned out to be about as strict as its built-in protections for the climate. For example, child and forced labor – slavery and child slavery – are misdemeanors. And because of the agreement’s strange legal structure, even these are practically unenforceable.
7. Regulatory harmonization. Sounds pretty, right? There’s just one problem; the landscape of harmonized regulations proposed in trade agreements doesn’t exactly create a regulatory standard of justice and sustainability around the world. Instead it promotes a global race to the bottom. For example, governments in the EU operate on something called the precautionary principle: this means that new chemicals and GMO foods cannot be sold until they are proven to be safe. In the US, they can be sold unless they have been proven to be harmful – which means that the US has approved over 400 chemicals, as well as numerous GMOs, that are illegal in Europe. In order to “ease trade,” the pending Transatlantic Trade and Investment Partnership (TTIP), between the U.S. and the European Union, would make them legal on both sides of the Atlantic, and economists say the rest of the world would have no choice but to follow suit or be left behind.
Pharmaceutical patents are another area in which regulatory harmonization is a threat. In the US, patent protection periods are exceptionally long, so pharmaceutical companies can charge more for brand-name products for a longer period of time. Harmonization would force poorer countries to adopt these long patent-protection periods, which means more people will die for lack of affordable medicines.
8. Privatization and outsourcing. We usually think that trade agreements are about goods shipped back and forth across the ocean, but in fact they also regulate services – including essential services, like water, power, waste management, public transportation, health care and education. For some time now, trade agreements have been “liberalizing” these sectors, which means systematically taking them from the hands of governments and passing them into the hands of private corporations (including foreign corporations.) As usual, this is bad news for people in poor countries, as well as for the poor in ‘rich’ countries, who can’t afford to pay for high-quality private health care, education, water, etc. Oh, and one other thing: under pending trade agreement CETA, once a service is privatized it must remain privatized forever.
9. Countries handcuffed. To top it off, trade agreements include various ‘handcuff’ clauses that make them nearly impossible to get out of once they are signed. Under CETA, for example, countries are still subject to the ISDS system for twenty years after they withdraw, leaving plenty of time for a new pro-trade administration to come in and reverse the decision to pull out. The TPP had no expiration date, and would have been virtually impossible to repeal.
10. Good for a few rich corporations. So if workers and environments are only harmed in this borderless landscape of financial opportunity, who benefits? A few multinational corporations and global banks, of course! So do the corporate lawyers who specialize in ISDS cases, and actually sit around just looking for new environmental and labor protections to challenge. In fact, they now have started a tidy side business in soliciting investors who gamble on the outcomes.
So now you know. What can you do?
The huge transnational corporations that benefit from trade agreements are also like vampires; they suck profits out of the world, concentrating wealth in fewer and fewer hands. Stop feeding them. Support your local economy in every way you can (see resources below). Funnel your money, your time, your talent, your resources – your lifeblood – into your community instead of into corporate coffers.
But most of all – since they’re not teaching us this in school, we’re going to have to teach each other. Spread the word – make sure all your friends understand the truth about trade agreements. Even if it seems like the vampires are going back underground, we’d be naïve to think they’re actually dead. As Trump negotiates bilateral trade agreements between countries, we will have to watch closely for all the same features we saw in the TPP – and be ready to resist. So shine a light on them all!
Check out these resources to learn more about ways to help people, the planet and local communities thrive:
Local Futures BALLE Institute for Local Self-Reliance
Totally Locally Bilaterals.org Transnational Institute
First published as "Why are my Highly Educated Friends so Ignorant about Trade?" and reprinted with kind permission from Local Futures: Economics of Happiness.