Saturday, October 5, 2013

We're Enmeshed in the "Spoils" Society? Think Instead of the LOW Grade Oil & Debt Society!

WaPo Neoliberal hack Robert J. Samuelson is at it again, this time condemning what he calls a "spoils society" approach ('Here Comes the Spoils Society'), which takes from the poor widdo rich 0.1 percenters  to slightly lessen some of the nation's gross inequality. According to Samuelson:

"We are, I fear, slowly moving from “the affluent society” toward a “spoils society.” In 1958, Harvard economist John Kenneth Galbraith published his bestseller, “The Affluent Society,” which profoundly influenced national thinking for decades. To the Great Depression’s survivors, post-World War II prosperity dazzled. Suburbia offered a quiet alternative to crowded and noisy cities. New technologies impressed — television, frozen foods, automatic washers and dryers. Never, it seemed, had so much been enjoyed by so many."

Unstated by Samuelson is how Galbraith deplored the excesses of a consumptive society and in particular the pernicious influence of the advertising complex which confused wants and needs. As Galbraith put it, the basis for this complex was purely to make Americans confused over what was really a need, and the luxuries (large or small) they desired. Meanwhile, the objective of Madison Avenue was to brainwash the hoi polloi into believing luxuries were really essential needs that they were obligated to satisfy via purchase. In this way, the energy depletion of resources took on a new head of steam and now, some 60 years later, we find ourselves mired in 'stuff' (55 million square feet thus far devoted to storage mods, according to a recent Denver Post piece) and having to dredge up ever more degraded forms of energy to support our unsustainable consumption.

So, let's not hesitate to note Samuelson is already off base in his adulation of 'Murica's cornucopia of goods, especially, and that Galbraith in any way extolled or endorsed it as a permanent feature. Galbreath, in fact, evinced a basic distrust of the advertising complex and its pathological ability to persuade people to spend beyond their means. As he wrote (p. 147):

"In a society where virtuosity in persuasion must keep pace with virtuosity in production, one is tempted to wonder whether the first can ever keep ahead of the second. For while production does not clearly contain within itself the seeds of its own disintegration, persuasion may."

 But, knowing Samuelson, it isn't surprising he distorts it like he did JFK's deficit spending in the early 60s. Samuelson writes:

"This explosive abundance, Galbraith argued, meant the country could afford both private wants and public needs. It could devote more to schools, roads, parks and pollution control. Economic growth became the holy grail of government policy. Production was paramount. It muted social conflict."

In fact, Galbreath implicitly questioned the excess materialism of the country in terms of producing consumer items that weren't genuinely needed and which could be projected to add to debt, if people purchased items they couldn't afford.  As he observes (p. 146):

"...we should expect that every increase in consumption will bring a further increase - possibly a more than proportional one, in consumer debt. The evidence is already impressive. ......From 1952 to 1956, total consumer debt increased from $27.4 billion to $42,5 billion or over 55%....although those were prosperous years, disposable income of individuals increased by only 21 percent."

And what, pray tell, is the consumer debt picture today? According to the site it stands at a total of $11.13 TRILLION or orders of magnitude larger than Galbreath cited by 1956. In other words, what he foresaw as the metastasizing cancer of wants converted to needs by clever advertising has come to pass. Indeed, $898.4 billion of that debt is in credit card debt while some $7.81 trillion is in home mortgages. Most of the latter owing to the American penchant to purchase way too much home, far beyond what they can afford.

Hitherto uncited, but vastly worse than the era of Galbreath's mere "21 percent increase in individual disposable income", is the fact that incomes in the U.S. have remained stagnant since 1973. This, in tandem with Americans' over-consumption (buying what they don't need), has incepted the massive debt load. It also begs the question of how any serious writer or Neoliberal hack could complain of WHY there exists a "spoils society".

Samuelson writes, on the heels of his claim that production was paramount earlier:

The “spoils society” reverses this logic. It de-emphasizes production and fuels conflict. Here’s why: There are two ways to become richer. One is to provide more goods and services; that’s economic growth. The other is to snatch someone else’s wealth or income; that’s the spoils society. In a spoils society, economic success increasingly depends on who wins countless distributional contests — not who creates wealth but who controls it. This can be contentious. Winners celebrate; losers fume.

He then complains that the country  "is losing ground to predatory behavior (grabbing existing wealth and income)" and that what was once 3% growth per year (since 1950) is now projected to be 2% or less. And this degradation of growth heralds smaller gains, so that  "more people will fight over existing income and wealth, because — as has been said — that’s where the money is. "

Samuelson, oblivious as he is to the energy factor underlying production, has no clue, not one, that the degradation of economic growth is inextricably tied to the decreasing energy return on energy invested (EROEI) of fuel sources. In other words, our energy-dependent civilization is becoming ever more impoverished as the efficiency of the energy to run it diminishes over time. As it becomes more impoverished, production becomes more costly as well as inefficient and energy-intensive at all levels. As a result, growth decreases while debt increases except for high end rentiers and labor expropriators - who prosper (and hence deserve to have their wealth redistributed). All of this was explained in detail in my earlier blog post:

As I noted therein, essentially, a nation which had become addicted to energy delivering 20 to 30 or even 40 times as much energy as it costs to extract, now faces a future with energy return 5 to 8  times less. This spells monetary-economic disaster because at the end of the day it is energy which  determines wealth of nations, money is only the medium to represent it.  Dilute the energy sources and money's value must be diluted also, what the wonks call "debasing the currency". The alteration of the EROEI fuel projections also translates to less growth. If Samuelson really knew about this fundamental underpinning of economics he wouldn't be so mystified as to why growth must diminish as high EROEI fuel sources do.  He also would be less surprised that we have now entered more into a redistributive society.  

Since assets must remain basically fixed as high EROEI energy stores plummet, it means that a fixed resource 'pie' is all we have to divide, and there is no "adding" to it. We have entered what we call a "zero sum" economy.  If the richest have more resources, then we must redistribute their excess resources and wealth  to ensure all citizens are able to meet their basic life needs. It's as simple as that. Samuelson can squawk all he wants about taking spoils, but all the foot stomping in the world will not repeal the diminishing energy future with which we are faced. At least the guy is honest about one thing, when he admits: "The promise of economic growth was oversold."

As for those who may be mesmerized by the recent report that the U.S. is now "the greatest oil producer in the world" (on account of oil shale) don't make me laugh.  If you really, truly believe that low EROEI shale oil (kerogen) provides a way out of the debt, low growth and lower production morass (and hence 'spoils society')  then I have five acres of choice beach land in Barbados to sell you for a song.

As Richard Heinberg notes (Snake Oil: How Fracking's False Promise Imperils Our Future', page 110 ):

"Kerogen is not oil. It is better thought of as an oil precursor that was insufficiently cooked by geologic processes. If we want to turn it into oil, we have to finish the process nature started: that involves heating the kerogen to a high temperature for a long time. And that in turn takes energy- lots of it, whether supplied by hydroelectricity, nuclear power plants, natural gas, or the kerogen itself. Therefore the EROEI in processing oil shale is bound to be pitifully low. According to the best study to date, by Cutler Cleveland and Peter O'Connor, the EROEI for oil shale production would be about 2:1. That tells us that oil from kerogen will be far more expensive than regular crude oil."

And oh, btw, if more expensive it is not going to solve either our lower growth problem, or our higher debt problem. As for fracking, that's no savior either. As Heinberg puts it (p. 116):

"No evidence suggests that the technology of fracking has actually raised the EROEI for natural gas production. It temporarily lowered prices but only by glutting the market."

In other words, like it or not, we are indeed enmeshed in a veritable  "spoils society"- but not out of spite or envy of those who have the "most toys" - as Samuelson asserts. But rather on account of a declining energy base for us all. And unless Neoliberals like Samuelson know where we can find another Earth to populate with plenty of resources and energy (and the least energy intensive way to get there), or know how we can downsize our current system to accommodate lower energy sources  - he better just shut up and learn to like it. Meanwhile, we need progressive and even socialist thinkers to conceive of improved ways of resource re-distribution from the hyper-rich to the struggling citizens who can now barely feed their families because of the sequester and government shutdown.

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