peak oil, global warming and the food crisis

As usual, and similarly as in the case of global warming, after
decades of denial the political and financial elites around the globe
realized that they can no longer ignore the physics, in this case the
geology of fossil hydrocarbons. Unfortunately it seems we lost too
much time (since the oil crisis in the '70s) that could have been used
for planning a transitional period. Now we see the results of the
first combined effect of the two phenomena: the food crisis. As oil
prices have gone through the roof, grain production was affected by
droughts, and even worse, as farmers switched to biofuel production as
a result of the euroamerican stupidity to subsidize this, millions
face starvation. Unfortunately, they still don't get it, it is
technofix and market solutions time all over again.

"The International Energy Agency was fully aware of Peak Oil some ten
years ago. Their World Energy
Outlook of 1998 showed that demand would outpace supply by 2010 save
for the entry of unidentified
unconventional which was a coded message for shortage. But when a
journalist decoded it, their masters in
the OECD Governments suppressed it such that the Unidentified
Unconventional became Conventional Non-
OPEC in the next issue.
Now they change their tune as the following makes clear. Presumably
the change of position reflects the
need of the OECD Governments to have an IEA umbrella under which to
face the uncomfortable reality,
which they can no longer ignore with oil trading above $100 a barrel
and production in most countries
running at capacity. The key IEA phrase is : we should leave oil
before it leaves us"

the whole ASPO newsletter is here:
http://www.aspo-ireland.org/contentFiles/newsletterPDFs/newsletter88_200804.pdf

Where are the economists?

By Peter Pogany
Peak confirmed in spades
Mainstream economics hides behind the bush

The world is "effectively" in the throes of peak oil. Crude and
refined product prices trend upwards while markets become increasingly
sensitive to news and rumors.

Bad weather around ports, unrest in a third-world producer country or
populist grandstanding by its leader with geopolitical flourishes, a
pipeline accident, a closedown for repair, new worries about exchange
rates – any of these would be sufficient for the financial media to
report that "crude futures jump on supply concerns."

But then a single credible opinion (even if it is shrewdly calculated
and timed) can make the shadows vanish momentarily: "Crude prices
tumble. Is the oil bear market rally over? Past data support
pull-back."

What we are witnessing is heightened awareness to availability
combined with a growing potential to amplify small margins into major
gains or losses. This is what being "effectively" at the peak means –
the summary result of economic, business, technological,
institutional, and political realities upstaging the squabble over
geological uncertainties.

Economic dislocation (i.e., recession or worse) will not solve the problem.

As Keynes would remind us from beyond the grave, why would private
capital make huge commitments to building and expanding the
infrastructure for a more expensive substitute input (nonconventional
oil products) when aggregate demand is sluggish?

Perhaps public authority could help. Yes, but where would
industrialized country governments, already struggling with debt, get
the wherewithal to supply the world economy with the coveted
substitutes for conventional oil? New taxes could worsen growth
prospects (threat of deflation) and "priming the pump" (create and
spend money) could accelerate inflation. Sell national assets? (The
unattractiveness of either of these approaches does not, of course,
exclude their future application.)

The independent Energy Watch Group projects a major decline in global
oil consumption from the current level of over 80 million barrels per
day to 58 million by 2020 and 39 million by 2030 (not even half of
current consumption). Since presently observed trends exclude filling
the gap with nonexhaustible energy and green substitutes for refined
oil products, the upbeat predictions about vigorous economic growth
(accompanied by a slow but steady rise in oil consumption) during the
coming decades appear to be unrealistic. Will the straining of Middle
Eastern production capacities alter these projections, pushing out the
time of reckoning by a few years?

There is no precise answer but it is clear that already the current
generation will have to adapt to an oil-constrained world. Given all
this, wouldn't you expect to see the best and brightest of the
economics profession out there where menacing winds blow on the hectic
frontline of general human interest, fending for our civilization;
analyzing, passionately arguing, advising national governments and
international organizations, never letting the sense of urgency recede
from public consciousness?

If you entertained such expectations you would be speechless upon
looking at the Table of Contents of top journals in economics.

As robustly demonstrated by the latest editions of the American
Economic Review, Econometrica, Journal of Political Economy, Journal
of Economic Theory, Quarterly Journal of Economics, Journal of
Econometrics, Econometric Theory, Review of Economic Studies, Journal
of Business and Economic Statistics, Journal of Monetary Economics,
Games and Economic Behavior, Journal of Economic Perspectives, Review
of Economics and Statistics, European Economic Review, and
International Economic Review, the looming oil emergency did not
unfetter the wings of creativity in the highest echelons of the
profession. (Ranking of journals was borrowed from Professor W.C.
Horrace, University if Syracuse.)

Does the bulk of academe still believe in the simplistic myth that,
thanks to the never-ceasing interaction between always-ready Mr.
Backstop Technology and irresistible Ms. Unregulated Market, the world
is already pregnant with a solution to its oil predicament, that the
everlasting neediness of material goods will never ever meet
unalterable physical constraints?

Dominant neo-classically (roughly neo-liberally) flavored core
convictions in economics imply that preoccupation with "peak oil" is
nothing more than fearing fear intensified into dreading dread. But if
you insist on an answer you may get it in a form of reproach: "You
don't have enough faith in the invisible hand." What young assistant
professor aspiring for tenure would risk such an explicit reprimand
from the department chairman?

Despite its ostensible diversity and seeming contentiousness,
economics remains stuck uniformly in a Newtonian worldview of
idealized cyclicality that shows the future as a symmetric reflection
of the past. Roland Barthes' "The Death of the Author" became
applicable to the Economist. The bottom line is that if a poll were
taken across mainstream professionals (a category that excludes the
refreshingly awakened group of ecological economists), it would
probably indicate an expected decline in crude prices to the vicinity
of $45/b by 2010.

The explanation that economic science is an ideology in the service of
vested interest does not hold. Encouraging policymakers in the belief
that nibbling on the margins, moral suasion, and lofty goal setting
can substitute for never-before-seen deep policy changes and drastic
programs harms everybody, including vested interest.

The global oil issue is perhaps more imminent and directly threatening
than the "environment." But where is the "Al Gore" of peak oil? At
least now we know where not to look.

~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~

Peter Pogany is an economist and author of the book "Rethinking the
World." Other articles by Pogany on Energy Bulletin.

-BA
Article found at :
http://www.energybulletin.net/newswire.php?id=43046

The demolition of society

"To allow the market mechanism to be the sole director of the fate of
human beings and their natural environment, indeed, even of the amount
and use of purchasing power, would result in the demolition of
society. For the alleged commodity "labor power" cannot be shoved
about, used indiscriminately, or even left unused, without affecting
also the human indvidual who happens to be the bearer of this peculiar
commodity. In disposing of man's labor power the system would,
incidentally, dispose of the physical, psychological, and moral entity
"man" attached to that tag. Robbed of the protective covering of
cultural institutions, human beings would perish from the effects of
social exposure, they would die as the victims of acute social
dislocation through vice, perversion, crime, and starvation. Nature
would be reduced to its elements, neighborhoods and landscapes
defiled, military safety jeopardized, the power to produce food and
raw materials would be destroyed. Finally, the market administration
of purchasing power would periodically liquidate business enterprise,
for shortages and surfeits of money would prove as disastrous to
business as floods and droughts in primitive society. Undoubtedly,
labor, land, and money markets are essential to a market economy. But
no society could stand the effects of such a system of crude fictions
even for the shortest stretch of time unless its human and natural
substance as well as its business organization was protected against
the ravages of this satanic mill."

Polanyi, Karl (1944) The Great Transformation.

Exposed: the great GM crops myth

Major new study shows that modified soya produces 10 per cent less
food than its conventional equivalent

By Geoffrey Lean, Environment Editor, independent.co.uk
Sunday, 20 April 2008

Genetic modification actually cuts the productivity of crops, an
authoritative new study shows, undermining repeated claims that a
switch to the controversial technology is needed to solve the growing
world food crisis.

The study – carried out over the past three years at the University of
Kansas in the US grain belt – has found that GM soya produces about 10
per cent less food than its conventional equivalent, contradicting
assertions by advocates of the technology that it increases yields.

Professor Barney Gordon, of the university's department of agronomy,
said he started the research – reported in the journal Better Crops –
because many farmers who had changed over to the GM crop had "noticed
that yields are not as high as expected even under optimal
conditions". He added: "People were asking the question 'how come I
don't get as high a yield as I used to?'"

He grew a Monsanto GM soybean and an almost identical conventional
variety in the same field. The modified crop produced only 70 bushels
of grain per acre, compared with 77 bushels from the non-GM one.

The GM crop – engineered to resist Monsanto's own weedkiller, Roundup
– recovered only when he added extra manganese, leading to suggestions
that the modification hindered the crop's take-up of the essential
element from the soil. Even with the addition it brought the GM soya's
yield to equal that of the conventional one, rather than surpassing
it.

The new study confirms earlier research at the University of Nebraska,
which found that another Monsanto GM soya produced 6 per cent less
than its closest conventional relative, and 11 per cent less than the
best non-GM soya available.

The Nebraska study suggested that two factors are at work. First, it
takes time to modify a plant and, while this is being done, better
conventional ones are being developed. This is acknowledged even by
the fervently pro-GM US Department of Agriculture, which has admitted
that the time lag could lead to a "decrease" in yields.

But the fact that GM crops did worse than their near-identical non-GM
counterparts suggest that a second factor is also at work, and that
the very process of modification depresses productivity. The new
Kansas study both confirms this and suggests how it is happening.

A similar situation seems to have happened with GM cotton in the US,
where the total US crop declined even as GM technology took over. (See
graphic above.)

Monsanto said yesterday that it was surprised by the extent of the
decline found by the Kansas study, but not by the fact that the yields
had dropped. It said that the soya had not been engineered to increase
yields, and that it was now developing one that would.

Critics doubt whether the company will achieve this, saying that it
requires more complex modification. And Lester Brown, president of the
Earth Policy Institute in Washington – and who was one of the first to
predict the current food crisis – said that the physiology of plants
was now reaching the limits of the productivity that could be
achieved.

A former champion crop grower himself, he drew the comparison with
human runners. Since Roger Bannister ran the first four-minute mile
more than 50 years ago, the best time has improved only modestly .
"Despite all the advances in training, no one contemplates a
three-minute mile."

Last week the biggest study of its kind ever conducted – the
International Assessment of Agricultural Science and Technology for
Development – concluded that GM was not the answer to world hunger.

Professor Bob Watson, the director of the study and chief scientist at
the Department for Environment, Food and Rural Affairs, when asked if
GM could solve world hunger, said: "The simple answer is no."

Original article:
http://www.independent.co.uk/environment/green-living/exposed-the-great-gm-crops-myth-812179.html?service=Print

Unbewusste Entscheidungen im Gehirn

Ein Team von Wissenschaftlern entschlüsselt den neuronalen Prozess der Entscheidungsfindung

Schon etliche Sekunden bevor wir eine Entscheidung bewusst treffen, können erste Anzeichen der Absicht aus dem Gehirn ausgelesen werden. Dies zeigt eine aktuelle Studie von Wissenschaftlern des Max-Planck-Instituts für Kognitions- und Neurowissenschaften in Leipzig, der Charité - Universitätsmedizin Berlin sowie des Bernstein Zentrums für Computational Neuroscience Berlin. Die Forscher um John-Dylan Haynes haben mithilfe der Magnetresonanztomographie Veränderungen im Gehirn untersucht, die einer bewussten Entscheidung vorausgehen. "Viele Prozesse im Gehirn laufen unbewusst ab - wir wären sonst schon mit alltäglichen Aufgaben der Sinneswahrnehmung und Bewegungskoordination völlig überfordert. Von unseren Entscheidungen aber glauben wir in der Regel, dass wir sie bewusst fällen. Diese Annahme ist mit unserer Studie in Frage gestellt", sagt Haynes. (Nature Neuroscience, 13. April 2008)

Abb. Aus den grün markierten Regionen lässt sich die freie Entscheidung eines Probanden für einen linken oder rechten Knopfdruck vorhersagen. Dazu wird eine Mustererkennungssoftware darauf programmiert, aus den micro-Mustern der Hirnaktivität vorherzusagen, wie sich der Proband entscheiden wird. Der früheste Vorhersagezeitpunkt liegt sieben Sekunden vor dem "gefühlten" Zeitpunkt, zu dem sich der Proband zu entscheiden glaubt.

Bild: Prof. Dr. John-Dylan Haynes

Die Testpersonen konnten sich frei entscheiden, ob sie mit der rechten oder der linken Hand einen Knopf betätigen. Anhand einer vor ihren Augen abgespielten Buchstabenfolge sollten sie anschließend angeben, zu welchem Zeitpunkt gefühlsmäßig ihre Entscheidung gefallen war. Ziel des Experiments war es, herauszufinden, wo im Gehirn solche selbstbestimmten Entscheidungen entstehen und vor allem ob dies geschieht, bevor es uns bewusst wird. Bereits sieben Sekunden vor der bewussten Entscheidung konnten die Wissenschaftler aus der Aktivität des frontopolaren Kortex an der Stirnseite des Gehirns vorhersagen, welche Hand der Proband betätigen wird. Zwar ließ sich die Entscheidung der Probanden nicht mit Sicherheit voraussagen, die Häufigkeit richtiger Prognosen lag aber deutlich über dem Zufall. Dies deutet darauf hin, dass die Entscheidung schon zu einem gewissen Grad unbewusst angebahnt, aber noch nicht endgültig gefallen war. Nach der Vorbereitung des Entscheidungsprozesses im frontopolaren Kortex, werden die Informationen zur Ausführung der Tätigkeit und zur Festlegung des Handlungszeitpunkts in andere Hirnbereiche übermittelt.

Mit ihrer Studie untersuchten die Wissenschaftler Situationen, in denen eine Entscheidung zu einem selbst gewählten Zeitpunkt stattfindet. "Bisher hat die Forschung in der Regel Prozesse betrachtet, bei denen der Proband sich sofort entscheiden muss. Viele interessante Entscheidungen erfolgen aber in einem eigenen, selbstgewählten Tempo", erklärt Haynes. Die lange Zeitspanne, die seine Untersuchung umfasst, ist beispiellos. "Normalerweise untersucht man die Hirnaktivität einer Person, während sie eine Entscheidung trifft und nicht schon Sekunden vorher", sagt Haynes. "Dass selbstgewählte Entscheidungen vom Gehirn schon so früh angebahnt werden, hat man bisher nicht für möglich gehalten."

Schon vor über 20 Jahren ist es dem amerikanischen Neurophysiologen Benjamin Libet gelungen, ein Gehirnsignal, das sogenannte "Bereitschaftspotential" zu messen, das einer bewussten Entscheidung um einige hundert Millisekunden vorausgeht. Libets Experimente lösten eine heftige Debatte um die Willensfreiheit aus. Wenn Entscheidungsprozesse unbewusst ablaufen, so argumentierten einige Wissenschaftler, ist der freie Wille eine Illusion - das Gehirn entscheidet, nicht das "Ich". Andere hingegen bezweifelten die Aussagekraft der Daten, vor allem wegen der kurzen Zeitspanne zwischen Bereitschaftspotential und bewusster Entscheidung.

Da Haynes und seine Kollegen die Vorbereitung der Entscheidung über weit längere Zeiträume beobachteten, konnten sie diese Zweifel an Libets Experimenten nun aus dem Weg räumen. Einen endgültigen Beweis gegen die Existenz eines freien Willens sehen sie darin noch nicht. "Nach unseren Erkenntnissen werden Entscheidungen im Gehirn zwar unbewusst vorbereitet. Wir wissen aber noch nicht, wo sie endgültig getroffen werden. Vor allem wissen wir noch nicht, ob man sich entgegen einer vorgebahnten Entscheidung des Gehirns auch anders entscheiden kann", sagt Haynes.

[KW/BA]

Originalveröffentlichung:

Chun Siong Soon, Marcel Brass, Hans-Jochen Heinze & John-Dylan Haynes (2008):
Unconscious determinants of free decisions in the human brain
Nature Neuroscience, 13. April 2008

Wall Street is Really Predicated on Greed

(Commentary No. 230, April 1, 2008)

It is not I who is saying that Wall Street is really predicated on
greed, but Stephen Raphael. And who is Stephen Raphael? He is a former
member of the Board of Bear Stearns, the Wall Street bank that
collapsed last month. And where did Raphael say this? In an interview
with the Wall Street Journal, which is more or less the house journal
of Wall Street. And what was Raphael's point? It was to explain (or
was it to excuse?) the collapse of the firm. "This could happen to any
firm," he said.

Yes, indeed it could. And it did. Meanwhile, while this was happening,
the chairman of the firm, Jimmy Caynes, was nonchalantly playing
bridge in a tournament. Not too smart for a greedy banker. As a
result, he lost most of his personal fortune, and another greedy firm,
JPMorgan Chase, came in like a vulture and made a killing. Oh,
incidentally, some 14,000 employees of Bear Stearns are, or will soon
be, out of a job.

Is then capitalism nothing but greed? No, there are other things to
it, but greed plays a very big role. And greed, by definition, works
for some at the expense of others. So, some firms are going bankrupt
these days - on Wall Street, and elsewhere in the world - and others
are not. The United States as a country is going bankrupt, and others
are not. The United States doesn't call it that, but that is the truth
of it.

Is it always like this? No, not always. Just half the time. Let us
review how Wall Street and the United States got into this particular
disastrous corner. It all started out well - for Wall Street and for
the United States in 1945. The war was over. The war was won. And the
United States was the only industrial power whose factories were
intact, untouched by wartime damage. There were destroyed cities
elsewhere, and actual hunger in Europe and Asia.

The United States was set to do well, and it did do well, very well.
It could outproduce the world, and get the rewards. It made a deal
with the Soviet Union - we call it rhetorically Yalta - so that there
would be no nuclear wars that could really damage the United States.
And, at home, the big manufacturers made a deal with the big unions so
that there would be no destructive strikes to interfere with the
profitable production. Rosy times loomed, and the standard of living
went up dramatically. Actually, the years after the war proved to be
fairly rosy times for most of the world. It was the moment of the
greatest expansion of production, of profit, of population, and yes of
general welfare in the history of the capitalist world-economy. The
French called it the "thirty glorious years."

Must all good things come to an end? Well, cyclically, in the five
hundred years of the modern world-system, I fear this has always been
true. When everyone begins to cash in on economic expansion, the rate
of profit has to go down. Profit from production depends on relative
monopolization of the leading industries. But if too many countries
have steel factories or auto factories (the leading industries of the
time), there is too much competition. And, despite all the nonsensical
slogans, competition is not good for capitalists. It reduces the
profits.

And when profits get hit too hard, the world-system enters into one of
its periodic periods of stagnation. This happened circa 1970. And, in
case you hadn't noticed, things have not been rosy since then, despite
once again all the nonsensical slogans. What happens in a period of
worldwide economic stagnation? The factories begin to move out of the
erstwhile locales (like the United States, but also Germany, France,
Great Britain, and Japan) to other countries (like South Korea, India,
Brazil, and Taiwan) in search of lower costs of production. It seems
good for the new places of steel and auto production, but it means
layoffs in the old centers of production.

But runaway factories are not the whole story. What do big capitalists
do, if they want to make money, in times of lower profits from
production? They start to shift their money from productive
enterprises to financial enterprises. That is to say, they begin to
speculate. And, in a time of speculation, greed knows no limits. So we
have junk bonds and takeovers and subprime mortgages and hedge funds
and all those curious things with curious names. It seems that even
Robert Rubin, one of the really big people in the financial world,
admitted recently that he doesn't know what a "liquidity put" is.

The underlying story - from 1970 on - has been that of debt, greater
and greater debt. Corporations borrow, individuals borrow, states
borrow. They all live above their real incomes. And, if you're in a
position to borrow (it's called credit), you can live high on the hog,
as they say. But debts have a small downside. At some point, you're
expected to repay debts. If you don't, there is a "debt crisis" or a
"bankruptcy" or, if you're a country with a currency, a dramatic
decline in the exchange rate.

This is what we call a bubble. And if you blow up a balloon long
enough, no matter how good it feels, at some point the balloon bursts.
It is bursting now. And everyone is frightened, as well they might be.
When the bubble really bursts, it is really painful. The thing is, it
is usually more painful for some than for others, even if it is
painful for everyone.

At the moment, it might turn out to be most painful for the United
States - as a country, and for its capitalists, and above all for its
ordinary citizens. It seems the United States has been spending not
billions of dollars but trillions of dollars on some wars in the
Middle East it has been losing. And it seems that even the wealthiest
country in the world doesn't have in its coffers trillions of dollars.
So it has borrowed them. And it seems that its credit in 2008 is not
as good as it was in 1945. It seems that the creditors are today
reluctant to throw good money after bad. It seems that the United
States might be going bankrupt, like Bear Stearns.

Will the United States be bought out by China or by Qatar or by
Norway, or by a combination of all of them at $2 or even $10 a share?
What will happen to those very expensive toys that the United States
keeps buying, like military bases in a hundred countries, and those
airplanes and ships and superduper guns the United States constantly
orders to replace yesterday's toys? Who will feed the people on the
breadlines?

Come back next decade, and let me know.

by Immanuel Wallerstein

[Copyright by Immanuel Wallerstein, distributed by Agence Global. For
rights and permissions, including translations and posting to
non-commercial sites, and contact: rights@agenceglobal.com,
1.336.686.9002 or 1.336.286.6606. Permission is granted to download,
forward electronically, or e-mail to others, provided the essay
remains intact and the copyright note is displayed. To contact author,
write: immanuel.wallerstein@yale.edu. These commentaries, published
twice monthly, are intended to be reflections on the contemporary
world scene, as seen from the perspective not of the immediate
headlines but of the long term.]

"Whose Century is the 21st Century?"

 In 1941, Henry Luce proclaimed the twentieth century the American century. And most analysts have agreed with him ever since. Of course, the twentieth century was more than merely the American century. It was the century of the decolonization of Asia and Africa. It was the century of the flourishing of both fascism and communism as political movements. And it was the century of both the Great Depression and the incredible, unprecedented expansion of the world-economy in the 25 years after the end of the Second World War.

But nonetheless, it was the American century. The United States became the unquestioned hegemonic power in the period 1945-1970 and shaped a world-system to its liking. The United States became the premier economic producer, the dominant political force, and the cultural center of the world-system. The United States, in short, ran the show, at least for a while.

Now, the United States is in visible decline. More and more analysts are willing to say this openly, even if the official line of the U.S. establishment is to deny this vigorously, just as a certain portion of the world left insists on the continued hegemony of the United States. But clear-minded realists on all sides recognize that the U.S. star is growing dimmer. The question that underlies all serious prognostication is then, whose century is the twenty-first century?

Of course, it is only 2006, and a bit early to answer this question with any sense of certainty. But nonetheless, political leaders everywhere are making bets on the answer and shaping their policies accordingly. If we rephrase the question to ask merely what may the world look like in, for example, 2025, we may at least be able to say something intelligent.

There are basically three sets of answers to the question of what the world will look like in 2025. The first is that the United States will enjoy one last fling, a revival of power, and will continue to rule the roost in the absence of any serious military contender. The second is that China will displace the United States as the world's superpower. The third is that the world will become an arena of anarchic and relatively unpredictable multi-polar disorder. Let us examine the plausibility of each of these three predictions.

The United States on top? There are three reasons to doubt this. The first, an economic reason, is the fragility of the U.S. dollar as the sole reserve currency in the world-economy. The dollar is sustained now by massive infusions of bond purchases by Japan, China, Korea, and other countries. It is highly unlikely that this will continue. When the dollar falls dramatically, it may momentarily increase the sale of manufactured goods, but the United States will lose its command on world wealth and its ability to expand the deficit without serious immediate penalty. The standard of living will fall and there will be an influx of new reserve currencies, including the euro and the yen.

The second reason is military. Both Afghanistan and especially Iraq have demonstrated in the last few years that it is not enough to have airplanes, ships, and bombs. A nation must also have a very large land force to overcome local resistance. The United States does not have such a force, and will not have one, due to internal political reasons. Hence, it is doomed to lose such wars.

The third reason is political. Nations throughout the world are drawing the logical conclusion that they can now defy the United States politically. Take the latest instance: The Shanghai Cooperation Organization, which brings together Russia, China, and four Central Asian republics, is about to expand to include India, Pakistan, Mongolia, and Iran. Iran has been invited at the very moment that the United States is trying to organize a worldwide campaign against the regime. The Boston Globe has called this correctly "an anti-Bush alliance" and a "tectonic shift in geopolitics."

Will China then emerge on top by 2025? To be sure, China is doing quite well economically, is expanding its military force considerably, and is even beginning to play a serious political role in regions far from its borders. China will undoubtedly be much stronger in 2025; however, China faces three problems that it must overcome.

The first problem is internal. China is not politically stabilized. The one-party structure has the force of economic success and nationalist sentiment in its favor. But it faces the discontent of about half of the population that has been left behind, and the discontent of the other half about the limits on their internal political freedom.

China's second problem concerns the world-economy. The incredible expansion of consumption in China (along with that of India) will take its toll both on the world's ecology and on the possibilities of capital accumulation. Too many consumers and too many producers will have severe repercussions on worldwide profit levels.

The third problem lies with China's neighbors. Were China to accomplish the reintegration of Taiwan, help arrange the reunification of the Koreas, and come to terms (psychologically and politically) with Japan, there might be an East Asian unified geopolitical structure that could assume a hegemonic position.

All three of these problems can be overcome, but it will not be easy. And the odds that China can overcome these difficulties by 2025 are uncertain.

The last scenario is that of multi-polar anarchy and wild economic fluctuations. Given the inability of maintaining an old hegemonic power, the difficulty of establishing a new one, and the crisis in worldwide capital accumulation, this third scenario appears the most likely.

Commentary No. 186, June 1, 2006

by Immanuel Wallerstein

[Copyright by Immanuel Wallerstein, distributed by Agence Global. For rights and permissions, including translations and posting to non-commercial sites, and contact: rights@agenceglobal.com, 1.336.686.9002 or 1.336.286.6606. Permission is granted to download, forward electronically, or e-mail to others, provided the essay remains intact and the copyright note is displayed. To contact author, write: immanuel.wallerstein@yale.edu.

These commentaries, published twice monthly, are intended to be reflections on the contemporary world scene, as seen from the perspective not of the immediate headlines but of the long term.]

Roubini says: 12- to 18-month recession, cause commodity prices to slide 20% to 30%,

From Nouriel Roubini's Global EconoMonitor:

http://www.rgemonitor.com/blog/roubini/252471/

 

Estimates of $1 trillion are now a floor, not a ceiling, for the losses in this financial crisis...

As reported by the Financial Post today here is a summary of remarks I made today at an event in Toronto:  

Wall St bear may be gloomy but he's often right 
Jacqueline Thorpe,  Financial Post  Published: Wednesday, April 09, 2008

Nouriel Roubini says the United States is facing a 12- to 18-month recession that will make a mockery of the recent stock market bounce and the notion of global economic decoupling, cause commodity prices to slide 20% to 30%, and hit Canada hard.       

"I see the stock market rally as being the last leg of a sucker's rally -- essentially people believing the Fed can rescue the economy," Mr. Roubini said in an interview Wednesday. "Once the flow of market and financial news gets worse and worse, the expectation of the Fed rescuing the economy is going to be dashed, and the stock market is going to plunge much more."

Mr. Roubini, economics professor at the Stern School of Business, co-founder of economics Web site RGE Monitor and Wall Street bear extraordinaire, may sound alarming but the rest of the global economics community has spent the better part of the past two years playing catch-up to his increasingly dire prognostications.

He spoke on Wednesday at a panel discussion in Toronto, delivering his comments in a rapid-fire monotone as gloomy as his message.

 

The Economist Has No Clothes

Πολύ ενδιαφέρον άρθρο γύρω από την εξέλιξη της "επιστήμης" της οικονομίας από τα μέσα του 19ου αιώνα. Όλα ξεκίνησαν σαν μια προσπάθεια να δοθεί μια επιστημονικοφανής εμφάνιση σε κάτι που δεν είναι. Στην ουσία οι οικονομολόγοι τοθ 19ου αιώνα, όπως ο Παρετο, προσπάθησαν να αντιγράψουν την θεωρία της Φυσικής και αντικατάστησαν την ενεργεία με το utility, κ.λπ. Διάφοροι διάσημοι μαθηματικοί και φυσικοί προσπάθησαν να τους προειδοποιήσουν αλλά αγνοηθήκαν. Το παράξενο της υπόθεσης είναι ότι η προέλευση της νεοκλασικής οικονομίας από την φυσική του 19ου αιώνα ξεχάστηκε.

Unscientific assumptions in economic theory are undermining efforts to solve environmental problems

By Robert Nadeau, Scientific American, March 2008

The 19th-century creators of neoclassical economics—the theory that now serves as the basis for coordinating activities in the global market system—are credited with transforming their field into a scientific discipline. But what is not widely known is that these now legendary economists—William Stanley Jevons, Léon Walras, Maria Edgeworth and Vilfredo Pareto—developed their theories by adapting equations from 19th-century physics that eventually became obsolete. Unfortunately, it is clear that neoclassical economics has also become outdated. The theory is based on unscientific assumptions that are hindering the implementation of viable economic solutions for global warming and other menacing environmental problems.

The physical theory that the creators of neoclassical economics used as a template was conceived in response to the inability of Newtonian physics to account for the phenomena of heat, light and electricity. In 1847 German physicist Hermann von Helmholtz formulated the conservation of energy principle and postulated the existence of a field of conserved energy that fills all space and unifies these phenomena. Later in the century James Maxwell, Ludwig Boltzmann and other physicists devised better explanations for electromagnetism and thermodynamics, but in the meantime, the economists had borrowed and altered Helmholtz's equations.

The strategy the economists used was as simple as it was absurd—they substituted economic variables for physical ones. Utility (a measure of economic well-being) took the place of energy; the sum of utility and expenditure replaced potential and kinetic energy. A number of well-known mathematicians and physicists told the economists that there was absolutely no basis for making these substitutions. But the economists ignored such criticisms and proceeded to claim that they had transformed their field of study into a rigorously mathematical scientific discipline.

Strangely enough, the origins of neoclassical economics in mid-19th century physics were forgotten. Subsequent generations of mainstream economists accepted the claim that this theory is scientific. These curious developments explain why the mathematical theories used by mainstream economists are predicated on the following unscientific assumptions:

• The market system is a closed circular flow between production and consumption, with no inlets or outlets.
• Natural resources exist in a domain that is separate and distinct from a closed market system, and the economic value of these resources can be determined only by the dynamics that operate within this system.
• The costs of damage to the external natural environment by economic activities must be treated as costs that lie outside the closed market system or as costs that cannot be included in the pricing mechanisms that operate within the system.
• The external resources of nature are largely inexhaustible, and those that are not can be replaced by other resources or by technologies that minimize the use of the exhaustible resources or that rely on other resources.
• There are no biophysical limits to the growth of market systems.

If the environmental crisis did not exist, the fact that neoclassical economic theory provides a coherent basis for managing economic activities in market systems could be viewed as sufficient justification for its widespread applications. But because the crisis does exist, this theory can no longer be regarded as useful even in pragmatic or utilitarian terms because it fails to meet what must now be viewed as a fundamental requirement of any economic theory—the extent to which this theory allows economic activities to be coordinated in environmentally responsible ways on a worldwide scale. Because neoclassical economics does not even acknowledge the costs of environmental problems and the limits to economic growth, it constitutes one of the greatest barriers to combating climate change and other threats to the planet. It is imperative that economists devise new theories that will take all the realities of our global system into account.

Original Article: http://www.sciam.com/article.cfm?id=the-economist-has-no-clothes