Sustainable (under)development…or how to warm ourselves without lighting a fire!

Octavian-Dragomir Jora · 26 iunie 2008

And, in case you didn’t notice, Al Gore is one of the “most influential thinkers and scientists” today, according to the TIME Magazine. The popular title was not awarded, as in the pre-Wikipedia days of Aristotle, Descartes, Galileo or Newton, on neither a major discovery nor ground-shaking treatise, but on a small ideological documentary called “An Inconvenient Truth”. The movie methodically gathers only the arguments of the “publicly subsidized” global academia, the ones who would need a radical career change if the inexistence of “man-made global warming” is eventually proved.

Promoted as the 5th modern gospel, the central predictable thesis is that “moderation is needed”. And who else can have enough of it but the world’s governments summoned at Kyoto for the who’s, what’s, how’s of pollution and production? Gore’s Tennessee eco-socialism can be harder to grasp though for Gore of Chitila, who would rather choose between a good job at the refinery, fresh air, mellow climates and cheap tires for the second-hand Audi with no environmental taxes paid.

A Planet’s Warming

We are beyond doubt living the hottest summer of the last decades, but the vital question is whether Man is to blame for it all. Physicists, geo-physicists, climatologists, meteorologists, oceanographers, chemists, biochemists, and biologists are far from any consensus, although it looks like, under academic democracy, most would answer yes. Let us not forget though that not so long ago the same academic democracy decreed that no machine heavier than air can fly or that the Sun revolves around the Earth. The only argument of the researchers bound to the “industrialization is the cause” thesis is that “we can observe a historical correlation between increased carbon dioxide concentration in the atmosphere and higher temperatures”. But, as any high-school teen learns nowadays, correlation is not necessarily causation. The last century also saw a massive negative correlation between 1940 and 1975. And paleo-geology also brought interesting conclusions: the increase in carbon dioxide concentration in the atmosphere took place, on average, 800 years after a period of global warming. Although apparently we are in the court of natural sciences, political economy can better enlighten us on the harsh consequences that we expose ourselves as specie by adopting nonsensical eco-theses.

A Research Warming

The first answer of economics is rather petty – any researcher is more or less biased towards the interests of the grant sponsor and the results that can afford the research to continue. If we’re talking public money, we can only assume a self-perpetuating state interest in financing projects that justify its intervention in economy and the society.

A more substantial answer can be built on an actual case, the famous “Stern Review on the Economics of Climate Change 2006”, an independent report by Sir Nicolas Stern under the patronage of the British Government, also presented in Bucharest at the beginning of 2007.

Skimming through the scenarios, decades, probabilities and Celsius degrees, in the purest scare-mongering style, we get to economical forecasts and analyses. The Report compares the eventual costs of government inaction – forecasted to approximately 20% of global GDP – with those of intervention at 1%. In other words, a public policy is a bargain.

In order to avoid the loss of those 20% of global GDP, the world should release 80% less CO2 than today; carbon emissions should decrease to 75% by 2050. Considering though the current patterns of consumption and economic development, the Report fails to explain how constraints on production and consumption will not lead to a comparable loss of GDP.

A numbers warming

According to Stern, the action to “upgrade current technologies to less polluting ones” is even cheaper than the 1 percent of global GDP to be donated to world governments. And closing on that objective would only take a doubling of public funds for energy research and development, to 20 billion dollars or 0.05% of world GDP.

Although reasonably stating that low carbon technologies cannot be efficiently exploited at the current point in the learning curve, Sir Nicholas argues for substitution, ignoring the logical connection between the exploitation of current carbon intensive technologies and the future emergence of viable green technologies.

Economic logic assures us that technology cannot readily appear ex nihilo and cannot proliferate unless supported by a certain stage in capital accumulation and development. And capital cannot accumulate if arbitrarily untied from currently efficient technologies (and on what shows would have appeared the green leaders of the world if Watt’s engine had been ecologically banned at its birth?).

Capital development is the only way that leads, in time, to a refinement of technologies. It is this exact improvement that affords us, even though at a smaller scale, the possibility of thinking about less polluting technologies. If the problem of green technology were to have appeared before capitalist development, we would have probably still meditated in tune with nature on “sustainable development in a survival economy”.

A CAP Warming

The European Union already took global warming as one of its official worries, with the typical solutions of regulation and public funding. Europe though realistically plays two hands – “fighting” and, where possible, “adaptation” – according to a document recently prepared by the Commission to be pushed on the Member States. Soft adaptation solutions include changes in crop rotation and seeding times or improved habitat insulation and thermal efficiency, while hard options cover new dams, seaports, factories and communities relocation, new power generating facilities to compensate for hydro-power deficiencies.

The document proposes adding the financing objective of “fighting/adaptation to global warming” in the Common Agricultural Policy’s budget, which at 44 billion Euro is almost half the Union’s budget. The reasoning behind tying CAP and global warming in the CAP reform is the same old “reduction in income variability”.

Attentive minds have caught on, in more than 50 years, that the economic essence of the European project is free movement(s) plus agricultural romanticism. It is thus predictable that, besides reviewing its energy policy for environmental and geopolitical reasons, CO2 markets and delaying a post-Kyoto global consensus, the Union couldn’t have missed the chilling of its aristocratic farmers.

Romania’s Warming

EU’s care for its farmers should sound good for Romanian peasants, discontent with a Government that looks prepared only for a climate of ideal temperatures and benevolent atmospheric pressures. But on this summer’s drought, justice, or as much of it that can be achieved on other people’s money, seems to have sided with the Minister of Agriculture, Decebal Traian Remes. Mr. Remes has stated that the farmers’ rejection of irrigation equates with a rejection of drought compensation. Which is all good, but the historical and structural deficits in the Romanian agriculture, covered by post-revolutionary governments either fearful or interested in confusing the creation of a functional land market, have fueled the irresponsibility of Romanian agri-business. For example, just 10-12% of farmers are insured for drought, which is a good proxy for the number of them that manage agriculture as a business.

Agricultural subsidies, compensations and financing the irrigation system are already the summer scare-crows for the country’s budget. Also worrying are the contribution of agriculture to GDP, drought effects, and the food and fodder imports that will deepen the commercial deficit.

The country’s street talks of a grain harvest 60% smaller than forecast, and pensioners feverishly pray the “give us our daily bread…” verse, and, in a layman’s reflex, “…give it to us today and don’t lead us into price rises as they say on TV”.

Grain prices have already reached a four year peak in European markets, on the Paris commodity exchange and, due to the drought surrounding the Black Sea, where Ukraine, Russia and Romania line the axis of dryness. The Chicago’s Mercantile Exchange included in the price of its contracts the impact of the low yield in Eastern European harvests. And water reserves and hydro-power are coupled with agriculture.

A Cold’s Warming

Until the prophecies of Stern & Co, with drowning islands and coastal areas, are realized, we have lower debits on surface waters and related troubles. Back in the country, if Danube levels decrease they take down chances for Cernavoda’s reactors 1 and maybe 2 staying on, while also reducing output at Portile de Fier and Danube traffic. Are they all going down? No, some actually rise, like energy prices probably later in the autumn.

Although it may come out worse than ever, the energy drought has a precedent in 2003, when both Cernavoda and Portile de Fier were suspended and thermal power stations took over. At the time Hidroelectrica should have gone bankrupt, considering losses and debt, but was saved by its owner, the state, in mighty disrespect for the taxpayer’s money. This year we can only hope drought was actually included in risk management and expenses and income forecasts.

In extreme context extreme intuitions appear. An energy system that can flexibly cope with risk is a fully private one, and that can be extended to agriculture, industry and services (other than those that allegedly take care to cool down citizens’ worries by filtering out heat wave information). Intermediate states are just ersatz and public property is an aberration. Independently of global warming and more catholic than “functional” Europeans, the Romanian state has separated, in the energy system, production from distribution, as a vector of competition. It is now encouraging itself to privatize production (Hidroelectrica, Nuclearelectrica, Romgaz Medias) after it sold distribution. But to where? Quoting the controversial businessman Patriciu, until we “privatize everything”. So, rationality and correct incentives, instead of fever and cold fits.

Rescues from any crises (local, global, warming or ice ages), done on the principle of “taking from Peter and giving to Paul”, on defrauded scientific legitimacy, are all but ruinous for the civilization we aim to protect and save, whether in Copsa Mica, Amazon, Sahel or the United States. Philosophies!? Maybe. But, read as good economic judgment, philosophy can suddenly become the most pragmatic of sciences.

(This article was previously published in a slightly different Romanian version as cover story in PIATA FINANCIARA - finance&banking magazine - no. 7-8, july-august 2007)

© Institutul Ludwig von Mises - România
Opiniile exprimate de autor în acest articol nu sunt numaidecât şi ale Institutului Mises - România.

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