The Coal Economy

I’m probably going to be reading and writing about China, the environment, and energy policy for what remains of the semester…so I thought I might use this forum to offer periodically some speculations on various related things.

So In his latest “We Can Solve It” email, The Man Himself Al Gore sums up current US energy policy with aplomb (a quality notoriously absent from his 2000 presidential bid.) He says: “We’re borrowing money from China to buy oil from the Persian Gulf to burn it in ways that destroy the future of human civilization.” Word. But we don’t want oil stealing the limelight!

Of course US foreign policy has been driven by considerations of oil at least since World War I (before that it was cotton) but oil is not the source of most of the energy that you and I use. Coal is. Furthermore, the trade that we’ve built with China over the past few decades is also coal powered.

Now consider the fact that China now produces more greenhouse gases then any other country, having recently overtaken the US for that dubious distinction. While per-capita energy use in China is very low, this is because the majority of China’s outrageously large population are farmers who don’t use much energy. Most of the energy used in China comes from coal and goes towards the industrial sector. Coal has fueled Chinese development — it’s primarily used to power the extraction of steel and other minerals as well as the manufacture of consumer goods for US and European markets. These activities bring in enough revenue for the PRC to have billions laying around to lend the US. The other source of revenue is the 25% income tax on Foreign Direct Investment, mostly levied upon corporations who also want to produce things for export.

So when China lends us money, it’s because our consumption is the source of their revenue. They need us to stay afloat. American mass consumerism depends on electricity that is also primarily powered by coal. So, what we have is a vast system for extracting and burning coal — they extract it and burn it so as to make and sell stuff to us; we extract it and burn it so as to buy things from them. The very fact that I can type this post (on my Made-in-Taiwan laptop) and you can read it (presumably on yours) is predicated upon this relationship.

In light of this thought, check out this ad from “We Can Solve It”:

Like I said in my previous post, we’re all familiar with what happens when you elect representatives of the oil industry to high political office. It’s bad. So I’d be in favor of “breaking big oil’s lock on the government.” But if you agree with my above statement that the Chinese and US economy are linked inexorably through coal production and consumption, then in order to stop pumping carbon into the atmosphere we would have to stop (and retool) the whole machine. We would have to stop the global economy and change out its rusty old engine.

Besides the fact that this would be catastrophic to our daily lives, both here and in China, it’s also completely impossible for governments to undergo such an action.

I’m currently interning at an outfit whose goal is to use the market and a growing network of business/civil society folk around the world to try to fix the problem not by lobbying government per se but by promoting investment in renewable energy, which is a very dynamic industry right now. It’s exciting stuff. But I don’t believe this tactic will be very effective, simply because it’s grounded in the very market ideology that created the problem.


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5 Responses to “The Coal Economy”

  1. David Says:

    Yeah, the current market really doesn’t look like it’ll give in to the environmental movement, considering it’s run by really short-sighted people. The argument that always slays me any time a government measure comes up that would put new financial requirements on companies–say, environmental regulations, compulsory health care options, or even basic inspections to make sure the cold cuts you’re making don’t kill anybody (a big issue in Canada right now)–the corporate line is always, “well, that would cost millions of jobs.” And we hear that and think about how losing millions of jobs would kill our economy, and decide that whatever measure we were going to take isn’t worth killing our standard of living.

    Give me a break.

    It’s a really petty argument on their part. Here’s the thing: let’s assume for the moment, completely conservatively, that a company’s CEO is making 300 times as much as the lowest paid employee. The CEO determines that the most efficient way to keep the company afloat is to cut costs, which is to fire employees. But! If he (almost always a he) took a tick off that salary and made, say, 299 times what his lowliest employees make, he just saved one of their jobs! Now let’s say he scaled back his pay to a mere 100 times the minimum (insulting though he may find it, it’s still a lot!), and the rest of management got scaled back accordingly, they would save hundreds to thousands of jobs in their company, keeping them competitive and adaptable, and able to take on responsible measures for their workforce, for the environment, for their consumers, et cetera.

    But the current market doesn’t value innovation. It values towing the same line that helped corporations break the unions, and since they won that battle so convincingly no-one will stand up to them anymore. And so they cry “such and such measure will cost AMERICANS their jobs!”

    So yes, I totally agree with you, the current market has to change if we are going to see any of the change we are “hoping” for.

  2. William Bruntrager Says:

    Reminds me of Vonnegut:

    A guy with the gambling sickness loses his shirt every night in a poker game. Somebody tells him that the game is crooked, rigged to send him to the poorhouse. And he says, haggardly, ”I know, I know. But it’s the only game in town.”

    I’m sorry markets don’t work perfectly, in particular when dealing with cross-national externalities. And I agree that you will have a really hard time convincing corporations to invest in renewable energy if they can’t make a profit by doing so. But self-interest is the only game in town.

    That won’t change whether we are talking about politics or markets. I guess my only defense of markets is that in the market, people say “You have a right to your property. How can I convince you to give it to me?” whereas in politics people say “My group wants what that group has. How can I use the government to get their stuff for us?”

    You could view politician as trying to answer the market actor’s question in another way. Capitalists care about getting stuff, now how its done. One way capitalists get stuff is via peaceful trading. Another is coerced giving.

    This is why it is nonsense to say that “even Wall Streets capitalists are in favor of government intervention when it suits them.” Of course they are! They never wanted capitalism on principle. They wanted money. However, in politics the peaceful option is excluded by definition. If I were interested in giving you my stuff, you wouldn’t need government to take it from me.

    Perhaps I’m ranting and getting off-topic. Here’s my point: for any problem, even the problem of climate change, the first-best solution is better defined property rights and well-functioning markets. I’ll allow that government intervention could, in theory, enforce some of the effects that would be present under a free market but aren’t present now. But I would argue that in practice, you are going to end up with the government doing more harm than good.

  3. tripinchina Says:

    When you’re dealing with something as complex and ubiquitous as the atmosphere, which permeates all of us during every second of our lives, you’re going to have a hell of a time coming up with strictly defined property rights!

    But you knew I was going to say that.

    As you know, one of my problems with the market system is that it doesn’t sufficiently account for so-called “externalities” — since the effects of any given trade are not taken into account (except as they effect profit margin). Capitalism appears to work — but only assuming certain shared costs that linger in the background because they don’t really concern government or business. In the course of modern history capitalists have repressed entire societies while preaching liberty, burned coal like mad while preaching green…etc. etc.

    What I’m pretty much always saying is that we’re all connected. Hence it’s not acceptable to pass the horrendous and unexamined costs of modern capitalism down to the next generation (or to the current generation of poor folks, who also tend to be non-white, funnily enough.)

    On a more philosophical note, internal/external is a great example of a false dualism, the very kind used to prop up ideology.

  4. Andy Lubershane Says:

    Hey Thomas!

    I agree with William’s post on one key point: “Self-interest is the only game in town”. The only way to change the whole system for the better is by convincing people that it is in their self-interest to do so. That means getting the American public to the point where our politicians are forced to respond to the climate crisis with strict legislation. But as you know, the opinions of the American public are easily swayed by any threats of losing jobs or having to make sacrifices. I agree that public policy can, should and MUST be a part of the solution. I just don’t see how to get there from here, where corporations run the show.

    That’s why I think corporations have to be convinced that it is in their self-interest to become more sustainable. I just started a book called “Natural Capitalism”, the thesis of which is basically the foundation of my company. In essence, the book says that the conditions of the market are changing. Even without government regulation, we are coming to the end of the age where raw materials and energy were the cheapest part of running a business. Companies used to buy raw materials and throw them away without thinking – but with the rise in the price of these materials, the system will have to change. As the availability of raw materials and cheap energy begins to peak and decline (peak oil, metals, etc.), along with the environment’s ability to soak up the toxic runoff of human activities, the line between industrial systems and natural systems that has been drawn artificially for two hundred years is beginning to blur. No longer can businesses just take and take and take and dump and dump and dump without running up against some very real, financial disincentives. Successful businesses will recognize that in order to remain competitive in the new market, they will have to make much more smarter, efficient use of resources and begin recycling more and more of the non-renewable resources (including toxic environmental filters) that they use – simply in order to remain competitive.

    Now, I believe (like you) that without the government’s help, this transformation will most likely not happen in time to save our civilization from some of the worst effects of climate change, peak oil, and other environmental disasters. That’s why the government absolutely needs to get involved in putting a price on externalities. But I do think that very soon, the price on many of those externalities is going to start rising on its own.

    Let’s hope so, anyway.

  5. tripinchina Says:

    Andy —

    If there’s any term (besides “development”) that’s more ridiculous than “externality” it’s gotta be “natural resource”. Total nonsense. Why? Because we are part of nature!

    Corporate capitalism (which is essentially the same as government) won’t ever budge toward sustainability and solve the problem because it *is* the problem.

    Here’s my reasoning:

    Ecological systems that contribute as much as they’ve taken away from the biosphere tend to succeed — wasteful or harmful systems tend to decline. That’s Nature. The idea of being able to “get something for nothing” and hence “cheat” the biosphere is ludicrous. You always get what you pay for.

    However, in capitalist society everyone seeks to get as much value as they can for themselves while contributing as little as possible, which is unsustainable. So even ignoring the effects that rampant capitalist expansion has had on nature and human beings (systematic social stratification, environmental disaster, mass consumerism) we still see that it is theoretically untenable.

    I’d advise you to read Paul Hawken’s newest book “Blessed Unrest” after your done with “Natural Capitalism”. He’s come a lot farther down the radical road since “NC”. Great book.


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