Monday, December 28, 2009

Economic Recovery or Continued Addiction?

I recently came across a commentary written by Brian McLaren about the concept of economic recovery. He brings up some interesting questions about what we mean by the term “recovery”. When a drug addict hits rock bottom and starts on the path to recovery, we usually mean that this person is reforming their ways, learning from their past mistakes and moving forward to a better life without their former addiction. We don’t mean that they are trying to reestablish their more tolerable state of drug dependency similar to what they were experiencing a few months before hitting rock bottom.

Yet when we talk about economic recovery, there is disappointingly little talk in the national media about learning from our past mistakes and moving forward to a better life without the former addiction to the illusory phantom wealth from complex risky financial mechanisms, excessive debt,and unsustainable speculative bubbles. Instead, the goal of economic recovery seems to be to return to how things were a few years ago before the bubble bursts, plus or minus a few minor regulation changes. It has become a call to get back to our former addictive economic high without addressing the root problems with our addictions, with the hope that we won’t end up back in the gutter again next time. Brian McLaren goes on to discuss some of the addictions we need to face and recover from: material greed, weapons, carbon fuels, quick and easy answers, etc. This struck me as an interesting way to frame these discussions in the national debate.

Tuesday, December 8, 2009

A Green 2010 Conference and the Status of the Green Economy

I recently attended the “Green 2010” conference at the Cary Institute of Ecosystem Studies in Millbrook NY. It was the latest in a series of regular conferences dealing with the status of the “Green Economy” in upstate New York. The conference as a whole shed some interesting light on the current status of green jobs, education, and attitudes that probably apply across much of the nation.

The first observation was that the conference was well attended – a sellout crowd of about 150 people by my estimate. The crowd consisted of a wide spectrum of ages, from high school students to senior citizens. Certainly there was a strong interest in the green economy, which should not come as a surprise given the current state of the rest of the economy in upstate NY. There were several non-profit organizations trying their best to bring green jobs, and solar technology in particular, into the area. Given that there are many groups trying to do the same thing all across the country, you have to wonder how much any given area can rely on this as a big driver of future growth in their local economy. While the dream of becoming a national center for green technology is not realistic in most cases, it can be argued that the transformation to a non-carbon economy will have such a pervasive impact on society in the next few decades that there will be plenty of work to go around. The goal is to not be left out entirely.

There was a good deal of progress in education and training for green technology jobs in the community colleges and local trade school institutions. Unfortunately, even the people running these programs had to admit that at this time there were very few jobs available for the graduates of such programs. The region already has more people trained to install solar panels than the job market can support.

Clearly the most discouraging comments had to do with environmental education in general. Everyone was used to hearing that students in America were falling well behind other advanced countries in terms of math and science education. I terms of knowledge about the environment though, we are falling behind many thirds world countries too. I’m talking about very basic knowledge here – such as explaining the steps necessary for water in the ocean to end up falling as rain on the land. The majority of American grade school students could not answer this properly. Worse yet, the racial gap within American society on this topic seemed to be even bigger than with other subjects. White and Asian groups did comparatively well, but black and Hispanic groups really struggled. This racial difference even showed up in graduate studies. Based on the lack of minorities getting PhDs in environmental studies, this seemed to be one of the most segregated of all major subjects in our universities. Indeed, I took a quick informal look around at the conference attendees and found two African Americans, no Hispanics, and no Asians. The excellent work of Van Jones notwithstanding, environmental issues often seem to remain a narrow and almost cliquish concern of the white middle and upper classes. There is much work to been done.

Wednesday, December 2, 2009

What Are Our New Big Mega-Projects?

A recent article in the NY times commented on the lack of any big mega-projects being undertaken. The article points out that in the past we had “The Erie Canal and the transcontinental railroad.. the Hoover Dam, the Interstate System, the subway networks in San Francisco and Washington, the Big Dig in Boston ... and the list abruptly stops. For the first time in memory, the nation has no outsize public works project under way.” Such big projects, the article suggests, can have transformative effects and create significant long term improvement for the economy.

Ok, an interesting observation. But do we really have no big mega-projects under development at this time? Or are the current really big projects just somewhat different than those of the past? I would argue that the biggest development project for the last decade was the build-out of the Internet. This required enormous investments in effort and money, generated significant wealth, and is having an incredibly transformative effect on our economy and our society. I will argue that the long term transformative impact of the Internet and related technologies will transform society much greater than the transcontinental railroad or the interstate highway system. It was government funded, at least at the beginning, though private funds have taken over the still on-going build-out. The current focus now seems to be shifting to the phase of integrating the rest of our communication and business structures into the Internet infrastructure. This is also different form the past mega-projects in that it is global in scope.

What other major mega-projects are now underway? It could be argued that transforming our health care system is one such project. This also suggests another big scientific mega-project that we are in the middle of – understanding and learning how to manipulate genomes. Understanding how DNA operates and controls living organisms, and how to manipulate it is certainly a major effort that will eventually have long lasting economic and social transformative effects on our society.

If we want to focus on more physical projects though, the biggest mega-project we have just started is clearly the transformation of our energy system away from a fossil fuel based system to one that is based on less carbon intensive and more renewable fuels and overall greatly improved efficiency. Government has an important role to play in this, but like the Internet, private funding will eventually have to provide most of the funding. I’d like to think of this as the great physical mega-project of the next 20 years for our society. Its effect on the economy and our society are likely to be profound. It's something we can rally around that should be generating much more enthusiasm and pride than a comparatively limited project like the transcontinental railroad ever could.

Tuesday, December 1, 2009

Difference Between Capitalism and Free Markets

When people discuss the characteristics and possible reforms of capitalism and free markets, they have a tendency to use these two terms interchangeably. In reality the two are quite different things. Let me explain.

Capitalism is defined as a system of ownership of the means of production, specifically the non-labor means of production, which includes factories, tools, equipment, etc. In a capitalistic organization, these means of production are privately owned. Labor is paid a wage for their efforts, and any profits go to the owners of the capital.

A free market system is simply defined as one in which everyone is able to freely sell their goods and services with prices determined by supply and demand.

It is possible to have capitalism without a free market in specific situations. Examples include organizations that have an effective monopoly on a market – they can prevent competition from entering the market and can set prices to maximize their own profits instead of being restricted by supply and demand. Another example is the awarding of government no-bid contracts to capitalistic organizations.

It is also possible to have a free market that does not involve capitalism. Examples include the traditional farmers market or co-ops competing with each other. In both cases, the clear distinction between owners and workers that is characteristic of capitalism is gone, yet there is still a free market competition that sets prices based on supply and demand.

It’s important to keep these distinctions in mind when discussing future economic possibilities. It is possible to reform some of the major problems of capitalism while maintaining the benefits of a healthy free market, and vice versa.