Wednesday, 18 February 2015


Officials both in Europe and America, The Guardian reports, are convinced “that the Russians have infiltrated, or are helping to fund, NGOs campaigning in Europe against fracking and the proposed free trade agreement between the EU and the US”. The talk, apparently, among policymakers is of “Putin’s useful idiots” inadvertently giving succour to “slick Kremlin operations aimed at dividing and enfeebling Europe”.

As somebody who has written, both here and elsewhere, about TTIP, I am left wondering how idiotic I have been. I am opposed to the general thrust of the Transatlantic trade agreement because its benefits appear far fewer than the harms it may cause. I am also opposed to fracking, and for a similar reason: the benefits of extracting fuel from the ground are clearly offset by some serious drawbacks. In taking both these positions I am on the side of people everywhere, both those who want to make an honest living from their work and those wishing to avoid the worst effects of anthropogenic climate change. If that puts me on the side of Mr Putin, then whose side are those “officials” on?

My objections to fracking can be summed up in four words - carbon capture and storage (CCS). This is the process of extracting carbon dioxide from industrial processes and depositing it in geological formations deep underground, from where (hopefully) it won’t enter the atmosphere. It is technologically challenging and expensive, as well as consuming a significant amount of additional energy.

Fracking is the opposite process. It consists of extracting carbon-rich liquids and gases from geological formations deep underground, which, when used in industrial processes, give off large quantities of carbon dioxide. This process, also, is technologically challenging and expensive, as well as consuming a significant amount of additional energy (and water).

It seems to me that if a society considers it worthwhile to go to the extraordinary trouble and expense of capturing carbon and storing it deep underground, the logical starting point is to release as little as possible of the carbon that is already captured and stored deep underground. Leaving oil and gas where they are is much, much cheaper, simpler and more effective than CCS - a sort of CCS on steroids.

This being the case, there are only two plausible justifications for fracking. The first is that we are so energy-poor that we have no alternative; the second is that someone can make a profit out of it, notwithstanding the costs to others that will subsequently occur.

The former argument is unsustainable. Alternative and renewable energy technologies have developed so rapidly in the past decade that the continued consumption of fossil fuels need only be a stop-gap, bridging to a time when almost all energy production will be renewable. How long that bridge turns out to be is a matter of political determination. Recent research suggests that a third of oil reserves, half of gas reserves and over 80 per cent of current coal reserves will have to remain underground if global warming is to be restricted to the “safe” level of 2 degrees C, so finding new, technologically challenging reserves ought to be a waste of time.

Unless, of course, there is a profit to be made, transferring a large proportion of the wealth of those untapped energy resources into the hands of financial investors who need not pay for the socially destructive consequences of their extractive activities. This is where the fracking issue coincides with TTIP, since both are driven by the neo-liberal assumption that the owners of capital have a legal and moral right to invest it in the most profitable way they can find - a right that states may not obstruct but should encourage to the greatest extent that they can.

Since the neo-liberal agenda emerged from the shadows in the 1980s the consequences of such policies have become increasingly clear. While societies are now much richer in paper terms, the distribution and availability of that wealth has caused rising inequality. In the U.S., real GDP has doubled since 1987 but real median earnings have not increased at all. Most of the benefit has gone to investors, encouraged by indirect subsidies from governments acutely aware that investor-driven corporate trading boosts GDP much faster than the real human work of making and doing.

There is plenty of evidence that the contagion of inequality is taking hold in Europe, too. Indeed, in a much reported post on his China Financial Markets blog, the economist Michael Pettis, wrote recently that:
“I am hesitant to introduce what may seem like class warfare, but if you separate those who benefitted the most from European policies before the crisis from those who befitted the least, and are now expected to pay the bulk of the adjustment costs, rather than posit a conflict between [different E.U. members] it might be far more accurate to posit a conflict between the business and financial elite on one side (along with EU officials) and workers and middle class savers on the other.”
The hesitancy is understandable, but the conclusion makes perfect sense, and in the light of it we “idiots” might legitimately question how the policy-makers and officials who have governed the west through its post-Soviet ascendancy have so effectively thrown away the huge advantage that history dealt them.

We might observe how decades of government-encouraged rent-seeking, and the response of policy-makers to the deeply destructive financial crisis that it caused, have given rise to a society so internally conflicted as to permit a renascent Russia - so recently on its knees - to revert so rapidly and so effectively to its traditionally divisive role in Europe.

And we might expect that, in view of the catalogue of profound historical errors made by western policy-makers during those decades, they would, at the very least, discontinue digging - desist, that is, from the illusion that the interests of ordinary producer/consumers and those of rent-seeking investors, multinational businesses and banks are in some way aligned.

From one “idiot” to another - is that too much to ask?

Wednesday, 4 February 2015


Greek Finance Minister Yanis Varoufakis has a plan to link his country’s debt repayments to GDP growth. On the face of it, that makes sense. Everybody knows that debts can only be repaid when money is coming in. In debt-laden Britain, credit card companies go to some lengths to reschedule loans when people simply can’t pay. When the alternative is bankruptcy and permanent default, it makes sense to be patient.

Greece’s creditors know this. The German government knows this. German people, however, like many in mainland Europe, are not used to the casino-style property market that prevails in Britain, and the casual, “telephone number” personal borrowing that goes with it. They take debt seriously, so Angela Merkel has a domestic political problem in selling any deal to a financially conservative electorate.

Deal, however, there seems likely to be, and one reason for this is that Mr Varoufakis is framing his compromise plan in conventional economic terms. By linking debt repayment to GDP growth he is effectively committing Greece to an economic development strategy designed to maximise GDP - the standard measure of an economy’s success.

One of the most interesting things to come out of the crisis in Greece, however, as commentators have noted, is the way in which unconventional economic structures have arisen to replace the system that failed. Examples include food co-ops, which reduce prices by bringing producers and consumers closer together, and in some cases eliminate cash entirely from transactions.

GDP doesn't measure real wealth such as food, but only the amount of money that changes hands. Those co-ops that have cut out the middlemen are generating less GDP, even though the total real wealth (the amount of food) is the same, and both producers and consumers are better off. And if people are collaborating to grow food for themselves, then it could be that no cash changes hands and no GDP at all is registered.

The scale may still be relatively small, but Greece has just voted overwhelmingly to bin the old way of doing things, so the emergence of innovative economic relationships that work significantly better on a human level is not something that they will necessarily want to see halted. So the question arises, will Syriza seek to bring back the middlemen in order to get GDP moving and satisfy its creditor-partners? Or is it serious about the new, collaborative, economic models, in which case holders of GDP-linked bonds may have a long wait on their hands.